Power Lunch - Power Lunch 11/15/22

Episode Date: November 15, 2022

CNBC’s Tyler Mathisen, Melissa Lee 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 https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Here is what is ahead. The resilient shopper, Walmart, raises its profit forecast. Home Depot's revenue growth stronger than expected. And a new survey from MasterCard predicting a Black Friday spending will be in full force in stores and online. We'll have those details. But is the consumer actually strong enough to drive sales of RVs? The Winnebago CEO is here to discuss the growing outdoor recreational industry and whether rising rates in a slowing economy will dent future demand. All right.

Morgan Brennan, thank you very much. All right, so we are keeping a close eye on these headlines, this AP story citing a U.S. official about a Russian missile or Russian missiles that crossed into Poland, potentially killing somebody. Those headlines, and again, there's a lot we don't know, folks. We're going to confirm everything. Those headlines taking the market down in the last 30 minutes or so. So again, the Dow, it is down to 82. It was up 450 at one point today.

Got the S&B, the NASDAQ positive. NASDAQ still up a percent. So market's not reacting too strongly, but you do have a senior spokesperson for the Polish government saying they are convening a national security meeting. Again, a lot happening now. It is very fluid. We'll get you more as we know it here on CNBC. Treasury yields down as bonds are getting bought as well. And this is Morgan's space.

The defense stocks, they're moving higher right now. I think Morgan, it's not hard to put two and two together if you've got a potential even accident with a NATO member and a Russian missile. as AP is reporting, you're going to get a bit on the defense stocks. As AP is reporting, I will tell you just a few moments ago, I got off the phone with senior defense officials. Defense Department, Department of Defense here in the U.S. is assessing the situation. It is my understanding that we are going to be seeing a press briefing in the next hour and that this is being looked at closely. It's also my understanding that, I think according to the Ukrainians, they've seen the largest number of missile strikes there today.

So a very fluid situation. A lot of details yet to come. We're keeping a close eye on this as AP is making, reporting from a senior intelligence official that this was Russian missiles striking in Poland. But I expect we can get more information as this hour unfold. So Morgan, awesome work because you're basically confirming that the defense department is saying they know something. If they're going to have a press briefing about it, they're not saying it's not happening. So that's an important sort of... But we don't know the details.

We don't necessarily know if it's missile strikes. We don't know if it's actually Russian missiles that have accidentally crossed into Poland, whether it's Ukrainian or whether it's a different situation altogether. It's very fluid. And that's what people, investors out there, have to realize, and I know you're on Twitter and everybody's going crazy about it. But the reality is you've got to confirm the stories.

There are pictures going around, whatever, until we get official confirmation from the government of Poland, which, by the way, is confirmed to be convinced, a national security meeting. So the government of Poland is obviously very concerned about this as well. There are also reports in Hungarian newspapers about the possibility of another pipeline being shut off due to an electricity issue. So again, there's a lot happening right now. And we're going to bring it to you, but only when we actually get you, you know, the facts. That's right. And I would also just note that since Russia did invade Ukraine earlier this year, this has always been one

of the key concerns, the fact that you have Poland and other NATO countries that are flanking Ukraine and that any kind of acceleration in any kind of strikes or warfare could have the potential to spill over. And that is when it starts to raise the alarm bells around NATO, the U.S. and our allies potentially getting involved in what that could look like. But we also know, and I know from my conversations with defense officials over these months, that and the State Department's been the lead on this, that those diplomatic lines of communication have been in full force and have been open.

And the other, you know, if we're seeming to get confirmation about the actual incident, if the reports are accurate, again, it's a big if, that it does not appear that this was any kind of a strategic target. It looks like this missile, again, waiting to get confirmation or missiles hit a farm. So, and I only bring that up in a sense that it looks like what we're hearing from the senior U.S. officials, at least confirming the missile, if the accuracy of the location is, is indeed correct. This is not, this may not be an escalation if it was indeed a Russian missile. It could simply be a tragic. Now, I hate to say accident because they're at war, so it's not an accident that they're firing missiles off. But I think you get my point in the difference. So again, there's a lot, there's a lot happening here. I think the reports that are surfacing so far are referencing these as stray missiles, but again, it is a fluid situation and we need to see what comes out of this. And we will be awaiting some more confirmation and more insight, including from the Department of Defense over the next hour.

Yeah, and I know we're going to move on, but just from a final sense of timing, I want to put everybody's calendar into perspective here, too. What's today's date? The 14th, 15th of November. Thank you, Gino, 15th of November. The EU sanctions, the full sanctions on Russian oil, where they're going to basically make it impossible to ship Russian oil by ship by outlawing insurance transactions.

Those do not go into effect until December 5th. But that's not that far off, Morgan. So there's been a lot of. concern. I'm not tying the two together. I'm simply piecing the energy markets together. That will there be some kind of escalation by Putin if they fear that these sanctions, which, by the way, are not enforced yet, and there's been some chatter in Italy and other places that maybe they should back off them, will they go in? And if so, will there be some kind of retaliation by Russian oil producers, Vladimir Putin? And by the way, if that wasn't enough, the OPEC meeting

is actually on a Sunday. That is December 4th in Vienna, Austria. So you've got the OPEC meeting on Sunday the 4th, and the full EU sanctions kicking in on Russian oil, which could take Morgan, by some estimates, either 850,000 to 1.5 million barrels a day off most of the global market. They could probably make a lot of that up by selling it to India and China, as they have been already. But I haven't spoken of anyone who does not think there is some kind of, do you hear that as well? I was worried that might just be in my own head, that there was some kind of reaction to those potential sanctions. Either way, a big developing story right now. Which, of course, puts the G20 meeting in focus as well when you're talking about getting key countries on board where this conflict with Ukraine and Russia is concerned, China, India being in focus because of that oil piece of the puzzle. Well, I tell you what, Morgan, I know we're just fill-ins. We're just right now. but I'm really glad that our defense expert is here. Yeah. Seriously, I am.

Sadly. Well, we are going to be talking about that more as the hour unfolds here. We get more information, more confirmation, more headlines, more detail, more clarity around this. We will be bringing you a guest in just a short while. In the meantime, we're going to focus on something else that the market is focused on right now. That is a clearer picture of the consumer that is emerging, given the retail earnings we're starting to get. Walmart, the large. US retailer surpassing Wall Street profit estimates and raising its outlook despite rising inflation.

The company announcing a $20 billion buyback. This is a sign of confidence in the future. Potentially, Walmart's bloated inventories also improving up 12.4% in the third quarter. That was compared to a 26% increase in the second. The stock surging, it is up 7% right now. And it's having its best day since March 2020. It's, I think, a key part of why you're seeing major averages continue to hang onto some of their gains right now. Home Depot shares are also higher. The housing slump didn't hurt its results. The company reported a 6% rise in revenue.

It reaffirmed its outlook. Customers spent an average of 8.8% more per transaction, but the number of transactions fell more than 4%. So this is that inflation dynamic we've been talking about. You shopped less, but you spend more. All right. So these results come ahead of the holiday shopping. Our next guest says that is going to be strong. Steve Sadov is the senior advisor at MasterCard and has the results of the new MasterCard spending

survey. Steve, it's great to see you. And I guess walk me through those results. What are we expecting come next Friday, Black Friday? Morgan, it looks like it's going to be a strong holiday season. You can start to see it from the Walmart results to date. The holiday Black Friday forecast is for plus 50. 15%. It's going to be a in-store as well as online. In-store is back. The holiday forecast for the

full season is for a plus 7%. That's reflecting continued strength on the part of the consumer. But it is a little bit slower than we were seeing earlier in the summer. You saw double-digit growth. You're seeing about a 10% growth in the month of October. So we're starting to see the lower end of the market slow down. But overall, we're seeing a very healthy consumer. I would describe this and Brian and I've talked about this a lot in the past. Right now we're a reversion to the norm. A year ago, there was no discounting going on. There was an inventory. Right now, there's obviously a lot of excess inventory in the system because of the supply chain. You're starting to see it clearing out. I would expect to see a lot of door busters. You're going to see department stores very

active on Black Friday. The excess inventory is being clear. You're seeing it in electronics, apparel in certain categories. The consumer wants experiences, so the consumer remains strong. But the categories that we're not performing well early in the pandemic are the ones that you're starting to see do really well in the current environment. And Steve, as you know, we have talked many times, online, offline. I've got a lovely spouse who works at the consumer products business. So we talk about this around the dinner table, and I know that Christmas was planned back in May. So what are we hearing for next year? We had not enough stuff.

Now we have too much stuff. They're going to have to clear it out, right? For seasonal issues, whatever, maybe heavy discounting. But what about next spring? I'm sure you're already looking at that. We went from too much to not enough and back and forth. Where do we go in six months? I think use this term reversion to the norm.

We're in a more normalized period. inflation is tracking, let's call it in that 7-8% growth rate. The consumer has slowed, and retailers and brands are planning very cautiously as we go into next year. They understand they had to fix the supply chain problems. We had too much of some things, not enough of others. I think as we go into 23, the expectations are for a little bit slower consumer environment. Inflation is still out there. So when we're seeing 7, 8% growth forecast for the holiday season, you're going to continue

to see inflation affecting it. But I expect to see a relatively robust number going into next year. But again, the lower end of the market is stretched. I would expect to see the higher end markets stay up doing reasonably well. Well, Steve, it's a little off topic, I guess. And if you can't comment and I understand, we're going to talk about it. I think more with Steve Leesman in a few minutes. the New York Fed had data today that shows that household debt is at a record high in the United States.

A lot of that's mortgage, but credit card debt is at $930 billion. It is up huge from just a couple of years ago. Not only is the balance or the balance is higher, but as we know, those, if they're not locked in, you know, some, you know, some APR gift that you get. That means not only is your balance higher, but your interest payment is higher, that doesn't sound like good news for the middle class when it comes to spending. People are seemingly getting tapped out on their credit. Well, I'm not going to comment on the credit balances. I think that the savings rate clearly has slowed.

You had a big savings increase during the pandemic. That slowed dramatically. The lower end of the market has eaten into their savings. They're suffering. I think that they're having a much tougher time. and you're seeing trading down going, you know, you heard it from Walmart, that the higher, the $100,000 income consumer is trading down to Walmart. This is a period of time when you'll see the Walmarts of the world, the dollar stores,

the TJXs, all of those are going to perform well. The lower end of the market, the lower end consumer to what you're saying, Brian, is going to feel the pain relative to their savings. The higher end of the market, I think, is going to continue to hold up very well. That's always been tied much more to the stock market. The stock market's been resilient. It's still at a very high level. But I would think that the lower end of the market,

that consumer is going to have a tougher time as we go into the next year. Yeah. Amazing. Some of the numbers on what they call revolving debt, which is a majority credit card. Steve Sadov, really appreciate your views. It could be a really interesting holiday season. Steve, thank you very much.

All right. Meantime, a new development in the crumbling crypto space. This time around BlockFi. Kate Rooney has more. Kate, what have we learned? Hey, Brian. BlockFi reportedly preparing for bankruptcy. This is a lending company that San Bank Medfreyed and FTCX had agreed to bail out to buy earlier this year.

And it is the latest collateral damage we're seeing from FTX's collapse. This report today coming from the Wall Street Journal, no comment from BlockFi. We did reach out to the company. It comes, though, is that company, BlockFi halts customer withdrawals in a blog post yesterday, said, rumors that a majority of Block F5's assets are custodied at FTCS are false, but they do have what they called significant exposure to FTCX. Flashback to the summer guys, Sam Bingman-Fried was looking to bail this company out after major crypto companies ran into issues with lending counterparties.

We saw cascading liquidations at the time, and FTX had agreed to buy this company at a maximum price of $240 million. The New Jersey-based company was worth $4.8 million. $8 billion earlier this year. It had also gotten a $400 million credit facility from FTX at the time. Sam Bigman-Fried also tweeting last hour, he is now the former CEO of FTX, talked about the potential errors at his two companies, Alameda, the hedge fund, had more assets, he says, than liabilities.

He also said they had a margin position on FTX International. Then he says FTX U.S. had enough to repay customers, but as he put it, not everyone necessarily agrees with this. So we are getting some updates from Bankman-Fried lawyers for FTCX overnight, saying in a filing that it has roughly a million creditors when the crypto company filed its bare-bones paperwork last week. FTCS said it could have more than 100,000 creditors. We do expect to get a full list of its 50 biggest by Friday.

But we'll bring you the latest updates as we get them. Back to you guys. Fast and flowing. Kate, thank you. Speaking of, Department of Defense Press Secretary, Ryder holds a briefing at the Pentagon right now and saying, we are aware of press reports. We don't have any info at this time looking into this and we'll provide an update. The Polish government will hold a meeting later today around 5 p.m. Eastern. So we will continue to monitor that, bring you any other headlines as they come.

All right. Thank you, Morgan. Coming up, inflation does seem to be cooling a bit. Wholesale prices rising at a slower pace than expected what that means for the Fed's hiking strategy and maybe how it changes should you invest. Plus, Taiwan's semiconductor surging after Berkshire Hathaway. Yeah, that Berkshire Hathaway said it bought more than $4 billion of the stock in the third quarter. Should you? We'll trade it. Today's three-stock lunches we had to break. Take a look at some of the stocks, hitting new 52E kies today, the original Fang, diamond back energy pests, oil company operating big in Guyana. And Cummins, they make engines. It's all about the fossil fuels today. We're back right up for this.

Welcome back to Power Lunch. Is inflation finally easing new PPI data coming in lower than expected, rising only 0.2% versus the 0.4% estimate. October's number is 8% higher year over year, though. Let's put that in perspective, shall we? That number is a decline from September's 8.4%. But here to break down what all of this means, Steve Leesman, on set with us. It's great to see you. Good to see you, Morgan. It was a good number. And there were a bunch of things to like about it. The 0.8% decline was one of the biggest ones. I think we have on record for this PPI series, which doesn't go back all that far, but goes back into 2012.

Look up the chain intermediate goods. We're also declining, so the pipeline pressure is easing. I think this goes along with the consumer price index. It's not necessarily all that additive to it. Here's what we want to look for. This is one month's worth of data. The Fed has said very, consistently, we see several months worth of data. So you can start the countdown now maybe to three months ahead of time and maybe come the new year when that third report comes in if we get three in a row, maybe. Joker's wild.

Exactly, exactly. I guess that would be a three of a kind, which doesn't be the royal flush, right? Just remember that, or even a full house. I was thinking more by the game show. Oh, right. But how much does PPI translate to CPI and some of the other key inflation readings that the Fed watches so closely. And I ask that because there's the goods piece of the puzzle,

as you were just touching on. And there's the stickier services piece of the puzzle, which the Fed seems very focused on. Right. So inside PPI services is this thing called trade, and that is a proxy for margins of retail and wholesale companies. That's come down a lot. And one of the things that Lael Brainer, the Fed vice chair, has talked about and others as well,

is this notion that high profit margins have been a piece of the inflation puzzle. So this is good news. and bad news for investors in the following way. If inflation comes down, that's good news. But if it comes down in part because margins are being compressed, it means it kind of changes the investment thesis from a stock perspective. From a stock perspective, if part of the thing is, as these prices have come up, companies have been able to make more money, not less. I have a base, I think I got a a C-minus in economics 101 in college. So I need some help with this, Steve. So we've heard a badge of honor for some people. Yeah, but I talk about oil and gas. We've heard some things about windfall profits.

I don't know if you've heard anything about this. And then I look across a lot of industries, and I realize if you have nearly unlimited demand and a nearly unlimited supply of cheap or free money, generally what happens to profit margins across any industry? Yeah. They will go up. A lot, right? I mean, nobody had to discount the last couple years, did they? Right. So what, what matters in this regard, Brian, is how competitive markets are. Because one of the rules of economics had you maybe not gotten a C-minus, not to rub it in or anything, is that a higher than normal rate of return should not stand in a competitive market. There are questions about how competitive the United States is. So let me ask you this question. What town do you live in?

I live in central New Jersey. Okay. How close is the nearest Home Depot? Two and a half miles? What happened to your local hardware store? Well, some of go. It actually just got sold. It is still opera. I mean, they struggle. I don't want to pick on Home Depot. No, I agree.

There's also a lows. There's also a low. There's also a low. There's also a lows. All right. Okay, so you have that. But how competitive is a place if you go further out? On a pricing perspective, they're not.

You don't really. Now, Home Depot tries to maintain its margin by keeping prices low. However, depends on how competitive the economy is. But if you have a situation where, profits are outsized, and you have the ability to get into the business and compete them. They should be competed away. Now, somebody laughed at me in the last show when I said that companies will lower prices. Wait, the last show is the exchange.

No, not the last show. I'm sorry, two shows ago. Stephanie Link looked at me like I was out of my mind when I said companies will indeed lower prices. She thinks that's not possible. I think she has an argument that maybe they're going to hold on to their profits and their margins. Well, how sticky is wage inflation? wage inflation can be very sticky, and that's another issue, but the Fed is looking for, so what you need is a tandem here.

You need prices to come down. You also need the labor market slack to happen. If that can happen, you know, together over a three-month period, we can perhaps have some easing or a situation of a pause by the Federal Reserve. Understood. But it sounds like if there's margin compression, has to be a piece of this puzzle, essentially, which is what you're suggesting, that stocks may have to fall further before that actually happens. Right.

But if that happens before there's a lower with a lower funds rate, that could offset it a little bit. Understood. It's a difficult calculus. That's why we spent. It's TV-friendly this conversation. For 15 hours a day. Steve Leesman, thank you. Is it that long?

It's that long. It's 15 hours of live programming. And you do about 12 of them. Sometimes. And it depends, 5 a.m. 5 p.m., you know. They're going to hate me in the back if I keep talking, so I'm just going to shut up now. No, because we're following a lot of developing stories. So actually, it was fantastic.

All right. So, is the market reacting, overreacting. We know it's reacting. but is it overreacting? Today's lighter than expected PPI like it did with the CPI last week. David Speak, why don't you stick around for this? Steve, David, speak, as president, CIO of Guidestone Capital Management, which has over 18 billion in assets. It's like, David, every 10th of a percent on some, you know, inflation data because the price of socks went down and the market goes up 500 points. Is that the right way to look at it?

Well, I've got two numbers for you, Brian. And you guys have already covered a lot of this. 2% and 3.7%, 2% being the Fed's target for core inflation, which were a long way from, and 3.7% being the current unemployment rate. Neither of those are consistent with what we're seeing in the equity markets, in the bond market right now. The markets are way ahead in themselves. It takes 12 to 13 months for Fed policy to have a meaningful impact on inflation. Now, obviously, inflation is going to come down gradually, But as you were also talking about, profit margins are going to compress because costs are up.

And what the Fed is trying to do is reduce consumer demand. That's going to bring revenues down. That means margins compress. That means earnings estimates come down. That means stock prices are still too high. That also leads to a recession. And so all of these things lead us to believe that the market is way too focused on this mythical Fed pivot that we don't think we're anywhere near hitting. Well, I guess the question is, David, if we knew that profit margins were going to come down because it just made sense because they couldn't stay where they were because, you know, it's oil.

By the way, we get a lot of talk about oil and gas profits. Profits in almost every industry ex-hospitality were either at or near records because you had unlimited pricing power, because of almost unlimited demand from the consumer who is flushed with cash from cheap money and stimulus. I mean, that's a fact. If you believe margins are going to come down, the only question for stock investors, kind of to Steve's earlier point is, has the markets downturn this year adequately reflected those earnings and margin decline expectations? Absolutely, unequivocably, not. When you look at what's happened here today, no, it's all been multiple compression. It's because interest rates are going up. Let me give you a comparison, Brian. We go back to the pre-pandemic high in February of 2020.

We're trading at 18% above that level today with much higher Fed funds rates, a much higher 10-year interest rate, much higher inflation, and a much worse outlook for earnings and economic growth. It makes no sense. The market has yet to price in recession, and that's why we haven't seen credit spreads widen. That's why a lot of the things that normally we see going into recession hasn't occurred. The market doesn't believe a recession is coming. That's the key in our mind. And if profit margin you're going to contract, if the Fed is going to be successful at raising the unemployment rate and really taking the consumer out at the knee, which is what they need to do to bring inflation down, we're going to have a recession. And we're going to have lower earnings. We think earnings growth today, which is estimated at 5.5% next year is likely to be down as much as 10%. That is not reflected in stock process. David, Speaker, Guidestone Capital. David, appreciate it. Thank you very much.

You got. Well, let's get to the breaking news of the hour. The Associated Press reporting Russian missiles have crossed into Poland, killing two people. Let's bring in Colonel Jack Jacobs, retired general NBC news and MSNBC military analyst. Thank you for being with us and at such short notice. Still a very developing situation. We do not have confirmation of these headlines that we've just brought to our viewers, Colonel Jacobs. But if, in fact, we have seen, we have seen Russian missiles cross over. into Poland, accidental or not, what would that mean now for this conflict and whether it now spills toward, elicits a reaction from NATO?

Well, it should elicit a reaction from NATO, but because NATO is disinclined to get decisively engaged itself in the conflict, except indirectly by sending weapons, material, intelligence, and so on to the Ukrainians, the great likelihood is. is that there will be some strong protest, a denial from Russia. And then NATO will put some more economic sanctions on selected individuals and entities inside Russia. Otherwise, it's difficult to envision how NATO would get so exercised about it that it would now want to be physically engaged in a conflict with Russia on Ukrainian soil. So it is my understanding that we are actually seeing perhaps based on some conversations

I've had the largest barrage of Russian missile strikes on Ukraine to date. What does that signal about where we are at in this conflict more broadly right now, as we've seen Ukrainians retake Kurson just last week? Well, it's very interesting. You should mention that because it tells a great deal about what the capabilities of Russian military establishment, what their capabilities are. We saw the Russian forces not be able to organize themselves, use their various capabilities on the ground and in the air in order to overwhelm the Ukrainians. And then ultimately, after concentrating more on the east and subsequently

the south and not doing very well there, ultimately withdrawing to the other side of the river. The Russian capability is not focused on ground troops, which they obviously cannot employ any great success. But they do have an enormous capability in indirect fire. This is artillery, both short range and long range, and missiles. Some of which are theirs, many of which they're now purchasing elsewhere because they've used up a lot of their stockpile. But that is their default capability. That is just send lots of indirect fire, fire indiscriminately. Sometimes they're precision guided at specific targets, but by and large, using it as a terror weapon in order to bring the Ukrainians and, in an ancillary way, NATO to heal.

And that's what they'll continue to do because they can't do it on the ground. Colonel, if we do get the, again, and I want to be clear with our audience, okay, there are, we know that Poland has said they're convening an emergency national security meeting. We know the AP has reported citing senior U.S. officials that a Russian missile or missiles did land into Poland just on the border over Ukraine and potentially killed a couple of people. Once we get confirmation of that, assuming we do, what is the proper response, if anything, by Poland? Well, they don't have a proper response because they're not going to go to war over Ukraine, even if they themselves have been attacked. They're not going to go to war by themselves.

They would have to invoke section five and bring all of NATO into the conflict, and all of NATO is probably not interested in doing that. And thus the result, the most likely event is that there'll be more sanctions, not that NATO is going to get involved physically in the battle, even though, even though Poland itself was attacked. They'll attempt to get all of NATO involved, but there'll be a lot of resistance, particularly from Germany, France, Italy, and particularly the United States. Well, with the sanctions, we're going to bring in another voice in just one second, Colonel. One more to you, which is we know the full sanctions on Russian oil, which is being done basically by effectively outlawing insurance on shipments of Russian oil cargoes at sea. No one's going to put a supertanker with $500 million of oil uninsured on the water. Those kick in on December 5th.

We already have extensive sanctions against Russia and its financial institutions imports in the United States. what other sanctions that you know of are there that could work because we know that right now we have not actually, it appears, done a whole lot to starve Russia of the revenue that they need? Well, there are two things that are possible, and we've been reluctant to do it, and that is, first of all, to take them off the SWIFT system all ago. The banking system. Yeah, the whole take them off the entire banking system. We've been reluctant to do that, but that's one thing that we could do.

The second thing, and we've been reluctant to do this too, is to punish those countries that ignore the sanctions. And that might include some of our own allies, and we've been reluctant to do that too. But if this does indicate a wider spreading of the war such that our allies become embroiled in it, they will demand that we support that. And we probably would support it under those circumstances. But we've been reluctant to take them off the banking system. And as a result, the sanctions have not been nearly as effective as they have. otherwise would have been.

As this story continues to unfold and develop, as we have senior White House officials saying they cannot confirm the reports yet, the Pentagon saying that it's looking into these reports. Let's bring in Demetri Alperovich, Silverado Policy Accelerator founder and a former special advisor to the Defense Department. Dimitri, if I'm not mistaken, you're also an advisor to the State Department, correct? What can you tell us about what is unfolding right now? and any knowledge you might have?

Yeah, absolutely. So it appears that a couple of missiles have been, have landed in Poland. They appear to be Russians, although there's not confirmation of that. It is possible that these might be Ukrainian air defense missiles that have been launched in order to intercept the Russian missiles and may have gotten off course. So we're waiting for confirmation of that. The most likely scenario is that these are Russian potentially cruise missiles that have been targeted at the border towns in Ukraine that went off course.

horse and hit Poland and potentially killed two people on the ground there. This urban development, but I agree with your other guests that this is not going to be a cause for war, and everyone is going to be focused on how do you de-escalate the situation and how do you make sure that this doesn't happen again? So potentially we're going to be focused on providing more air defense systems to Poland. They have several Patriot batteries already and are getting some new short-ranger. defense systems as well, but potentially they'll be demanding more of those to put on the border to make sure that any of these missiles that are flying over the border would be intercepted in the future.

Yeah, I would imagine that acquisition by Poland of those weapon systems, though, is going to take a little bit of time. So in terms of de-escalation, in these key moments, these key hours, right now as we do get more information, what does that look like in the more immediate term? Well, first, they're going to, of course, try to ascertain whose missile this was, and that may not be necessarily easy because, of course, both countries are using some of the same systems. We know, for example, that the Russians are using their S-300 air defense systems as ground-to-ground and ground-to-ground attack mode, essentially launching those missiles to attack Ukraine. Ukraine, of course, uses S-300 as well to defend against that. So it may not be possible to ascertain quickly. If it's a caliber cruise missile, that's going to be very clear because Russia is the only one that possesses those.

So it's going to take a little bit of time to figure that out. But, you know, if it is proven to be a Russian missile, I presume that there will be a demand from Poland for Russia to apologize for this act and potentially provide compensation. And we'll see what the Russian response to that is going to be. Okay. We appreciate you both joining us and joining us on such short notice as this story continues to unfold. Thank you. And just getting a check on the markets right now because unbelievably, Brian, the major averages are higher. And the Dow has actually even just ticked slightly higher is basically sitting at the flat line despite the conversation that we are having.

Yeah, because again, and I want to be very clear, and I think we've made it clear, nothing. And Dimitri, actually, nothing is confirmed. The U.S. government has not confirmed. Much. No. And if it, and if it is a situation, as the conversation we just had would suggest, where these are, in fact, it's an incident involving Russian missiles in a NATO ally, Poland. It is very unlikely this is a situation where anybody's going to go to war and that conflict is going to escalate and involve more players. And it could even be, to be, to be, Ukrainian missile. There's pictures on the internet. But again, folks, these pictures could be something else. Remember that. This is happening all the time now.

So we're working to get confirmation at the highest levels. AP, citing a government source is what we've got. And we know the Polish government is convening an emergency meeting. That's what we have. It's probably why the markets have come back just a touch. Can I say that power lunch returns right after this? You sure can. Thank you.

We're back right after this. We're just going to get a quick check on the market for you with 90 minutes left in the trading day. Stocks, bonds, commodities, the CEO of Winnebago. But let's start with the market specifically. The Dow has just turned positive again, albeit barely, up about 45 points right now. It has dipped, it started the day, up several hundred points, dipped lower, and is now back near the flat line. The S&P is at 3989, so it's slipped back below that 4,000 level that we saw earlier in the trading session, up about 8 tenths of 1%.

And the NASDAQ is your big performer today, up nearly 1.5%. It is communication services and tech stocks and consumer discretionary that are really, leading the charge even as we see or because we see the yield on the tenure under a little bit of pressure this morning, this afternoon as well. It's morning in Guam. Well, I usually anchor in the morning, so I'm... You too? It's like slip of the tongue, right? So it's all good. All right, let's move out a little bit and have some fun. Talk to a company that has a good read on the consumer and the economy. That is Winnebago. They're holding their investor day today and they're also making a push to electric RVs, recreational vehicles.

Winnebago, of course, you know, they're a motorhome manufacturer, they got New Mar, they've got Chris Craft, recently reporting better than expected quarterly numbers, but did see slowing sales in one key segment. Shares of Winnebago down about 20% so far this year, but up about 8% over the past month as well. Here in a first on the CBC interview is Michael Happy,

he is the CEO of Winnebago. And Michael, listen, as a boater, as somebody who used to own a motorhome, home, I get your products. I got it. They're fun, but they're also mostly discretionary. And some of them can be quite expensive. How are you seeing the U.S. consumer right now? Well, we're certainly seeing a normalization of demand after two record years of retail as consumers flock to the outdoors. And there's no doubt that the macroeconomic headwinds and certainly some softening consumer sentiment with recent conditions is beginning to have an impact on some of the sales

on our side. But we still continue to see consumers engaged in the outdoors and, you know, waiting to make that investment in the future. Yeah, because if I'm going for like a 40-foot custom Newmar, I mean, we're talking the price of a house in many towns. How does the financing market impact your business? You know, we see the retail financing side of our business right now. in terms of consumer demand being relatively stable. The consumer credit scores are solid, and the retail finance companies are still lending. We have a product range from a $25,000 travel trailer

to a $1.7 million motorhome, and we also have two boat brands for people that want to get out on the water. So the breadth and diversity of our product line really helps us during these tricky times. Michael, just to dig into what you said about kind of this return to pre-pandemic normal, what are the signs that you see suggesting that it's pre-pandemic normal, and what would you be looking for to suggest that we were actually, that it was signaling an economic slowdown? What's the difference between those two, I guess, metrics from your standpoint where the consumer is concerned?

Well, I would say in terms of net consumer participation in the outdoors, the new normal is higher than pre-pandemic. Now, economic conditions in our industries are turning, you know, towards what they were before COVID, sand some changes in things like gas prices and interest rates, which are not immaterial, things we track closely. But, you know, our company really tries to innovate and draw new customers into the outdoors as best we can.

And we are seeing that. We're seeing a diversity of a first-time buyer that is just, younger, more diverse than we've ever seen before, which I think bodes well from a secular demand standpoint down the road. Well, that seems like the right segue to ask you about this electric RV. What are some of the details around it? How quickly will it make its way out to the marketplace? And what does that price point look like versus the more traditional gasoline powered? Yeah, we introduced our first concept version of this ERV. back in January of 2022, and we've really spent the rest of this calendar year continuing to develop the product.

We're putting the product now in the hands of some of our consumers who we trust most to give us some feedback during the rest of the development process, and we'll have some new news in January of 23 about specific timing in terms of a launch. You will see the price of the ERV be a little bit more expensive than a traditional ICE version, But the great benefit of these products is the ability to live off the grid without a power source and enjoy the outdoors. Be closer to that biking trail, that hiking trail, and still feel good about your impact on the outdoors. Michael, next time we're going to do this interview, it's going to be on like a 35-foot launch GT. Can we make that happen? Oh, that would be amazing.

I love it. You know your products. That's a great crisscraft boat, and we'll absolutely make. that happen. Chris Kraft, legendary, legendary brand. Michael, appreciate you joining us. Thank you very much. All right. Coming up, follow the funds. Some of the newest 13F filings show at the big hedge funds are buying right now, or at least did six weeks ago. We're going to trade some of those names. Next. Welcome back. Today, we are tracking some Wall Street's heaviest hitters. Warren Buffett's Berkshire Hathaway purchased a $4.1 billion stake in Taiwan semiconductor. Daniel Loeb's third point built a

$265 million stake in Bath and Body Works, and Bill Akman's Pershing Square increased its stake in Canadian Pacific Railway, which is valued at roughly a billion dollars at the end of September. Should you follow? Let's ask Victoria Green. She's founding partner in CIO at G-squared private wealth. Victoria, great to have you on. Let's start with Taiwan Semiconductor. Yeah, that's a buy for me. I think when Warren Buffett sees value in a growth stock, it's something to pay attention to, look, they have this 53% or better gross margin, and mantra, I feel like the next five years I'll be able to grow that. And if you look at it trading in about a 13 times PE down about 28% on the year before the buy was announced,

it really is an attractive stock. Now, there are headwinds. I think you realize when Buffett starts to build a position in the stock, he's not looking to make a quick buck in the next week or month. It may be a year or two before it pays dividends. Be patient. It's got 40% of its revenues from smartphones, so it may face some headwind. Well-run company, largest tipmaker in the world. It's a buy for me. All right. Next up is a bath and body works. You're laughing. Why are you laughing? I just can't get on board with it. I mean, it finally finished the spinoff last year with Elbrands and Victoria's Secret. It's a specialty retailer. It's burning free cash flow. If you look at it as cash on hand has dwindled the last three quarters versus a debt at $6 billion.

Just not something I'm getting on board with. It's sales are 5% lower. It's expected to be 7% lower in Q3. does not attack that's attractive. It's stuck in this trading range, $30 to $40, down trend's attack. I just don't see the catalyst story behind the stock, other than maybe it's cheap, but it might be cheap for a reason. All right. Final name, Canadian Pacific. Yeah, railroad's a great play, and especially during difficult times, especially they're very exposed to grain, and Canadian grain exports are up about 7% on the year, and they should complete their merger with Kansas City, Southern, and Q1,

and that's expected to generate about $300 million in synergies. So we see this as a well-grown company, very strong pathway to solid earnings, continued growth in earnings. I think their runway for 23 is intact and able to support revenue and earnings growth. So we look at the stock as a great place to be. Yes, it's gotten a little expensive, but we think it could continue to rise because it's such a quality stock with recurring revenues. So right now in this environment, I still see them as a song by.

All right. We like it. Two and one. Victoria Green, thank you. All right, up next. And we got the lab. We got the bath and bodywork chuckle there. All right, as Americans pile up debt again, a key interest rate is hitting an all-time high under the microscope with Dominic Chu is next. Oh, hi, welcome back to Power Lunch. Interest rates on credit card debt are high, but some store credit cards are even higher. Dominic Chu joining us now with the details. Hi, Dom. So this is interesting because when it comes to credit cards, we all know that the interest rates are high.

But when it comes to store brand credit cards, meaning the ones that you get directly from your either furniture store or electronics retailer, those interest rates have actually hit a record high right now. According to credit cards.com, they looked at a study of all those credit cards out there, store brand retail oriented and whatnot, and retail credit card interest rates are now pushing 27%. Now, that's a huge deal because it does represent a record high, one of the after effects of the Fed raising interest rates. but it's having a more profound effect on this specific part of the market for those consumers who take out credit card debt with regard to just individual retail outlets or stores. Now, one of the things that it's done is push the costs of that interest up significantly for a lot of people who take out that kind of debt. Now, according to their study, they looked at a number of assumptions and looked at the total debt that people carry. The rising rates right now account for about $1.6 billion of new additional interest charges, based upon those borrowers who just pay off the minimum amount on their credit cards every single month.

That's a big deal because it is costing consumers a heck of a lot more money. One of the things to keep a close eye on, though, is some of the stats around it. For store-only cards on average APRs of those average percentage rates, it's 28%. For retail co-branded credit cards, it's around 25%. And general-purpose credit cards, those that don't have a necessarily store affiliation, are just around 22.5%. percent as well. But what it goes more to tell you a little bit about is this notion that as we talk about the Federal Reserve and its numbers that say that more and more households are taking on consumer debt, one of the reasons, yes, is rising rates, but also use of certain types of credit cards,

and that's the reason why it's so key, because for certain types of those cards, those consumers may feel more of a pinch. And this is all critical as we head into that all-important holiday shopping season where promotions for credit card openings could be more in play. Yeah, to your point, it's a key time. And the great irony here is that as folks' savings begins to draw down, maybe they'd start spending more because it is an inflationary environment, those rates on their cards are going to continue to go up and it becomes somewhat of a cycle. One of those important points to look at is from the consumer side of things, there are a lot of reasons why people open up these store brand credit cards to begin with. Oftentimes it's because

they come with no interest, you know, or just no interest at all for some of these types of products, assuming that you pay them off in full. One of the things that you have to keep a close eye on right now is whether if you open these cards that you pay off the balances before the interest-free period expires, because many of them will actually go back and retroactively assess you interest for the balances, even if you just paid it off right after the balance, the point was over. So that's something to keep a close eye on. sneaky.

Just watch out when you open credit cards. Especially 28% APR and store branded? Some of them, by the way, push up north of 30. Just so you know. All right. Another way to watch your wallet. Dom Chu, thank you. All right, just want to wrap up the end of the show, folks.

So with the news that's out there, by the way, social media, Twitter, everything else, we've reported on it. I want to be clear what we know, what we don't. AP is reported that a senior U.S. official, here we go. AP has reported that a senior U.S. official has cited a Russian missile potentially landing in Poland. Again, the story's going around like wildfire. There's a lot more that we don't know than we know in the U.S. government, Morgan, and you, by the way, speaking with them on the phone, they have not confirmed anything.

This is a situation that is being assessed. It is a fluid situation. We do know, based on NBC reporting now that a senior administration official does say the U.S., they can confirm that something. has hit Poland. They do not know what that is. It's not confirmed that it was a Russian missile, and that is why we continue to watch this. A lot we don't know. Closing bell will pick up a story and more now.