Power Lunch - Power Lunch 11/29/23

Episode Date: November 29, 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.

Welcome to Power Lunch alongside Kelly Evans. I'm Dominic Chu. Today we are remembering Charlie Munker, the legendary investor best known as Warren Buffett's partner. We'll look at some of his best wisdom for investing, for life in general, and just everything he meant to Wall Street. Also, Mark Cuban making some major moves, quitting his job, so to speak, selling his team. He's going to spend more time with his family, but he may also have bigger plans as well, Kelly. Interesting. Looking forward to that. Let's check the markets, which are near recession highs at the moment. Dow's up 13. And it's leading the way today. The S&Ps up 10 points for a quarter percent gain and the NASDAQ trailing, but still up 19. Shares of General Motors are also popping today by about 10 percent. This after the company detailed the impact of those labor deals, saying they'll have enough cash. And as if to prove it, they're raising their dividend and buying back $10 billion worth of shares. And a huge deal brewing in the health insurance space. The Wall Street Journal reporting Cigna and Humana are in talks to combine. You can see big intraday moves in those stocks, which are both negative Cigna by almost 8% now, Humana by 3.5%. More on that later on. But we have to start by reflecting on the life and impact of investing legend Charlie Munger. Warren Buffett's longtime business partner and the vice chair of Berkshire Hathaway. Indeed, here on set, is someone who has observed Munger at many meetings

and is a legendary investor himself, Mario Gubelli, the chair and CEO of Gamco investors. And we all brought, we got the almanac here. You've got a copy of it. You've got to be here. Kelly Domit. I feel like that guy Tom Hanks and Castro. I'm back on set here. I love it.

I love the fact that you have the original almanac right there. Well, we have it, but it was a gift in 2009 from someone. Yeah, it's going for it. So I brought in, I do have a copy, but my cat attacked it a couple years ago. So I don't think I could sell it for the $75 it's going for online these days. That's not the same as my dog ate my homework. Yeah, I know. similar. It's just one of those small things in life. Well, what happened is that I met Warren

because I knew of Warren, because when I went to study under Graham and Dodd, Roger Murray succeeded him at Columbia. Warren had studied under Ben Graham. Then he covered and owned a piece of a company in New York City called Pinkertons. And I followed the detective agency companies, Wacken Hood, Pinkertons, and Burns. And so you learned about what he did about taxes. You learned about what he did about cash flow. And then fast forward. somewhere around a quarter of a century ago, not that long ago, 25 years ago, I would be invited to the annual meetings by Alice Schroeder. And then when she was no longer doing it, we've been doing that for 15 years. So I actually found one of the cards as a shareholder.

You can hold it up again. I did not, I did not, I did not buy the shares of Berkshire Hathaway for clients until we had our open-end fund, which was started somewhere in the mid-80s. Wow. So we bought it at $3,000. and we have done significantly well. But what the lessons from Charlie was that when you go to the meetings, when you go to the meetings, what happens is that they have a little cartoon video. But Charlie's always in one of those.

So it's always an interesting scene that he sets. And then the second part is obviously when Warren goes around after the business part, they ask questions. And the audience asks questions and occasionally Warren would turn around. Charlie, do you have anything to add? And then he would say something very crypt and interesting. Yeah. So sometimes he'd also say, I have nothing to add.

So what you mentioned, obviously, you've been shareholders or on behalf of clients since the 80s. Any moves you'd make with Berkshire? I mean, they haven't obviously been as active in recent years. They've been doing a lot more with their investment managers and the deputies now and things like that. Well, they bought a company that we owned that was quite important in the insurance business. And that was about $8 or $9 or $10 billion that kind of forget. But when you look at the portfolio, when you look at the portfolio, and you say, okay, there's 1.4 million shares of Berkshire that sells at $550,000, and what is it going to have his book value next year? We think it's going to be higher than that, higher than the $550,000.

But Apple is extraordinary interest. Here's a guy that maybe would have before Charlie, he would say, you know, tech, eh, seize candy was high tech to warn. or the blue-chip stamps or the stamp book that they had. But independent of that, that is a significant amount of value in the company. So now you're Warren and you know that the way to make money is to, that, you know, they've adopted is a good business, good management, and a reasonable price. And so instead of buying something that you can liquidate and make money, like the old story of a cigar butt, that is buy it and then liquidated to get

the cash back, among other things. That's what he did. Charlie had a great sense of humor. Has it informed your investment? We talked about what you did way back when. But as Berkshire has evolved, do you think a lot of the people who followed the Ben Graham and the Valley Investing, do you think they've evolved as well? Well, there's no question that basically when I was started, when Warren started, he'd have to go to Washington, D.C. to go to the SEC files to get data. When I started, you'd go to the New York Stock Exchange, you get microfish. Today, you're in the future. You're going to gather the data with AI. So gathering the data is going to become different. The second part is that you, you know, if I went on and looked about what

Kelly Evans has done, what's a history and so on, or Dom, yeah, I would have to double check it. We've done that before. I've asked for speeches to prepare, for example, a governor of Nevada. he's now the president of UNR. And so it's a lot of facts that need to be checked. But over time, that's going to evolve. The second part is how do you handle the value of a franchise, which is the goodwill or the value of a business on the books? That has historically now as part of Ben Graham.

And so you evolve certain type of dynamics. So we've got some headlines coming out. We're going to go from the microeconomic company specific stuff to Steve Leesman right now, who's got details from the Fed's beige book results. Steve, this is the look anecdotally at the U.S. economy. So what is the Fed and its member banks? What are they saying about the U.S. economy? Yeah, something that really animates the Fed these days.

I'll talk about that in a second. They said economic activity slowed with four districts reporting modest growth. Two districts saying growth was flat and slightly down, but six districts said there were slight declines in economic activity. Just so everybody knows, this is the six weeks ending about, mid-November here. So this is a report from the fourth quarter, not the third quarter, where we got that strong growth. Retail sales were mixed with declines in durables like furniture and appliances. It sounds like that was very housing-related. Consumers showing more price

sensitivity. That's important for the inflation outlook as to whether consumers are pushing back on price increases. Travel and tourism was generally healthy. Manufacturers' outlook, though, it did weaken. Currently, it's mixed, but the outlook weakened. And demand for business loans declined particularly for real estate. Consumer credit, though, remained healthy. A lot of talk about that, though some banks noted a, quote, slight uptick into consumer delinquencies. Not a big uptick, a slight one. Overall, the economic outlook for the next six to 12 months diminished compared to the prior report. On to the important aspect of the labor outlook, demand for labor continued to ease. According to the reports from the districts, more applicants were available,

retention improved, and there were reductions in headcounts, both through layoffs and attrition. It was a very different report that we had, say, during the very, very strong labor markets we have. Labor market, however, still set to be tight for skilled workers. We do hear that from small businesses. And the important aspect of wage growth, it was said to be modest to moderate in many districts reporting an easing in wage pressure, another good sign for the Fed that's fight against inflation. Overall, on inflation, price increases largely moderated, though obviously prices remain elevated. Most districts expect price increases to moderate into next year.

Dom, the way the Fed is running the show right now, they're kind of in a holding pattern, looking for a reason to go either way. And so as you heard from my interview this morning with Richmond Fed President Tom Barkin, they're relying more and more on anecdotes like this. This suggests that the economy is moving in the way that they want, which is a slowing economy after that breakneck number we got this morning of 5.2% growth in the third quarter. Most economists I see now looking at more like a 2% range for growth. It also implies to a certain degree that the scales are balanced from a rate perspective.

They're looking for something to tip it either way. So those anecdotes are important, Steve. Thank you very much. We'll talk to you later on. Let's get some more market reaction to the beige book and the state of the economy and markets with Mario Cabelli, who's still on set with us here. You heard the beige book. It sounds like it's okay. Come on, Steve did a good job.

But when you step back and say, okay, what is the world like for investing? Forget about short-termism in the market, which is dominant because of a variety of things. things. Basically, the International Monetary Fund says there's $110 trillion of, trillion dollars of global GDP. The United States is 25 percent. China's 17. Europe is about 17, 18, a lower number. So what's going on in China? What's going to, the implications of that on the global marketplace? What's going on the United States? You break the U.S. down, consumer's 70 percent plus or minus. Then you got industrial, then you've got government spending and blah, blah, blah. The consumer's net worth, when you get the numbers, given the rally in the month of November, given the elevated housing prices,

that's going to be at least $150 trillion. Ten years ago, ten years ago, not ten weeks ago, it was $75 trillion. The consumer debt has gone from 14 to 20, up six, but the net worth is up 75. You have an income disparity, and that's why what the Screen Actors go, what the UAW did, and what others are doing to try to raise wage parity and help pay the bill. of electricity, housing, food, that has a major, in quotes, regressive impact. So from our end, you know, this recession, we've gone through so many cycles. So the consumer's okay, autos, UAW is on strike.

That's recovering. Car sales will be out this week. SARS are going to be around $15.5 million. It's easily adjusted in annual rates. So blah, blah, blah. The industrial sector has, every company you talk to in Midwest, I'm reshoring. whether it's put in Mexico or in the Midwest, and both are happening. You've got the Chips Act, you got the IRA Act, you got the IIA Act,

all of which are coming together. So while you're having the Fed try to reduce aggregate demand, the amount of money that's being put into the system by the government is completely opposite. They're also reducing the amount of money that they have on their balance sheet by $95 billion a month. That's a trillion dollars a year. So you're going to have some tightening, and there's a lot of trade. That's the way we see it. So tradeoffs is one thing then.

If you're talking about the same kind of push into the economy, macro-wise, that you're talking about from all the stimulus that's going into the system, at the same time money is getting taken out or tightened by the central bank and its actions, right? It implies then that there's a level or an equilibrium that has been reached. No, no, that it's going to be reached. That's going to be reached. I'm not saying it's there yet because the banks themselves have some issues going back to FASB without getting into accounting.

dynamics about the banks on health and maturity, the fact that the 10 years dropped from 5 to 4.30, you know, puts a little extra value on their balance sheet, so it reduces the amount of negative elements on the balance sheet on a mark-to-market basis. So I don't know what's going to happen. That's not the relevant point. For me, that's all short-termism. Okay, when I started a business, the Dow was 1,000. Wow. 10 years later, I was a sell-side analyst. 10 years later, it was a thousand. Today is 35,000. 40 years now, 40 years for now when we get together, don't be short term, it's going to be a million. That's an 8.2% Kega. Right now, if you look at the numbers for the last 100 years, it was 10-2.

Do you worry about what Munger said at the meeting this year that he thinks, you know, maybe the next three to five years feel a little more challenge? Yes, of course. You have to think that way, and that's great. And on the other side of the coin, you've got you, look, four years ago, if we were here, and I was, Wuhan? What's that? Russia invading? What are you kidding? The bank's having a crisis again? The mid-east crisis? Well, that you wouldn't have dismissed as much. And then you have a food crisis, an energy crisis, a water crisis, and all sorts of challenges on a global basis. So what's different? Right. And so within that framework, if I look at the data for the next X number of years, so it stays flat. You can make a lot of money in the markets by looking at that, by doing it. simple things like buying specific stocks. So let's get right into that because you're at your trade.

You're an analyst. You pick stocks. You look at their balance sheets and income statements. What is the opportunity right now? Where is it? Are there a specific area? Is it still media? You love media in the past.

We agree. Let's start off with a simple A. You talked a little bit about Miriam Adelson selling some of the family money to maybe because they were worried about Macau. Who knows? They're buying a baseball team. Is it a basketball team? Mark Cuban's company.

So here I want to bring you the Atlanta Braves. Publicly traded, $36, B-A-T-R-K, $61 million shares, and multiply that as $2 billion. We think it's worth a lot more. I think you'll make, and John Malone and Greg Maffa will probably monetize it in some fashion. So batter up. Secondly, the baseball, because of the growth in the Hispanic market,

the growth of Hispanic players, the fact that you have a pitch clock, much like we have here, you've got to buy it. So you got to buy a baseball team called the Atlanta Braves. And then if you want to buy a basketball team, I think Jimmy Dolan, besides being beat up by politicians in New York, is doing a good job.

His venture capital play of the sphere has worked for him. Okay? How he monetizes that is work in progress, but it is really a technical delight. The stock is selling at $171,000, where $24 million shares, the Dolans control it. The sphere stock, you like? No, this is the medicine square.

Sports. M-S-G-S-G-S-M-S-Masins-Square Garden Sports. You're getting the Rangers, you're getting the NICS. And, you know, the NICS did okay last night. They got a game coming against Detroit. We'll see, but that's not relevant. So those are two things. Then agriculture.

The American farmer works as Fannie Off 24 hours a day, plants, fence-to-fense. There's a company that is relisting from the Milan Exchange to the New York Stock Exchange at the end of the month called Case, at the December. Case New Holland, C-N-H-I. The guide that runs at Scott Vine came out of Polaris in the United States, and the stock is 10. 1.3 billion shares, 13 billion market cap. John Deere is selling at $2,360 with a couple hundred million shares, 300 million shares of 288. I forget the number.

Bottom line, we think you're going to double your money. Short term, however, the stock is the listing, and certain entities in Milan, the European markets can't own it. I remember. I mean, for those people who weren't familiar with the stock that Marvie just talked about, they make heavy machinery. It's the stuff that it's John Deere type stuff. It's a farm equipment, basically. Well, it's Case New Holland.

The old Ford machinery, the old Case New Holland, when I was a rookie analyst, I'd go visit them in Racine, Wisconsin. They'd then relocated down a what he called at Place Houston. But going back to one more dynamic. Advertise, you asked me about it. You've got to have a tsunami in political advertising in 2024. I'm asking every viewer to contribute to their favorite politician because they're going to spend it on my advertising on broadcasting stations. He's got an Instagram, including CNBC.

So, you know, Brian, if he's listening, Comcast will do well. But what TV stations will benefit? Tegna, T-E-G-N-A, has been buying stock back. They're down under 200 million shares. That's a 3.2 billion market cap. the regulators turned down a deal to be bought at $23 for some, they did it in a very interesting way. I think that the stock's around 15. You're going to make 50% in two years.

Mario is coming armed with a slew of stock picks. I own about three or four hundred of them. I got a lot of losers, too, which ones you want to hear about? We got to bring you back when we have like an hour to talk about stock picks overall. I would be delighted to do it. Great to see you all. Thank you so much, Mario. And good to be on the show.

Thank you. Thank you for sharing your reflections, too, about Charlie. We really appreciate it today. Mario Gabley. Coming up, we'll talk shares of Foot Locker jumping as the company's results, not quite as bad as feared. In our journey around the retail ecosystem, we'll look at some stores inside them all.

But FL right now, 16%. And as we had to break, Rovers also up. The Pet Care Company agreeing to be taken private by Blackstone for $11 a share, or $2.3 billion. And it's trading almost at that level with a 28% pop. We'll be right back. All right, welcome back to Power Lunches. You just saw there are stocks at session highs right now.

Meanwhile, the 10-year yield falling below the 4.3% mark. You just heard Mario Gabelli referring to that for the first time, by the way, since September. So let's get out to Rick Santelli in Chicago for more on that bond trade. Rick. You know, it's all true. Yes, we touch four and a quarter. But the real story today isn't that part of the curve. It's the short end.

But let's show twos and tens together. Here's a three-day chart. Staircasing yields lower. But the two-year and the three-year notes are definitely leading the charge. Look at a two- and three-year note on one chart. They're comping back to July, hook in the tens and thirties. As Dom pointed out, they're comping around mid-September. And they continue to comp in mid-September,

and they will for a while, considering where we were at in the second and third week of September. But the point here is that this notion that the Fed is, done and inflation is peaked and continues to move lower is the driving force of this trade. And it's pick and choose. Today we saw the price index one-tenth higher at 3.6, but the core price one-tenth lower. And of course, nobody mentioned the higher only talking about the lower. So I guess there's a bit of Roar Shack in everybody's interpretation of the Fed and the markets. But as you look at twos versus tens, realize that in two sessions, since Monday's close, It's de-inverted by about 13 basis points.

That is huge. We need to continue to monitor that, of course. And remember that tomorrow we have personal consumption expenditures, deflators, core deflators, income in spending. Give us many more clues as to whether the Fed's page book, interpretation of the Fed will continue to prove to be correct. Kelly, back to you. Rick, thank you very much, Rick Santelli.

Further ahead, we'll talk about whether Mark Cuban is cashing out the billionaire leaving Shark Tank, selling his majority stake in the Mavs, and who knows what's next? Details when Power Lunch returns, Dow's up 150. Welcome back. Disney's CEO Bob Iger is sitting down with Andrew Ross Sorkin at Deal Book, and let's listen in. We're about to get a phone call from Susan Arnold. He was on the board. Chairman of the board. Chairman of the board.

Was. And you think that that call might be asking you back. and you say to Willow Bay, your wife, what? Well, I was aware that Susan Arnold, the then chairman, wanted to talk to me, and I got a sense that the board was making a decision to make a change at the CEO level at Disney, and that they might ask me to step back again. And you say to her? And I said to Willow, I'm getting this call.

It's possible that I could get asked back. She immediately said, well, maybe not. Maybe she just might, they may want your advice. She didn't think you were getting the call for that. She wasn't sure. And I said, well, what if I get asked? And interesting, until maybe a day or two before, first of all, I was not seeking to return to Disney at all.

And until a day or two before, I was not anticipating I ever would. And so I asked, well, what do you think? And she said, well, they might not ask you, but if they do, she thought I had to say yes. And I asked why. And she quickly reminded me what I already knew. She said you ran the company for over 15 years. You've been at the company or you were at the company for almost 50 years.

You kind of owe it to the company. If the board wants you back because they obviously don't feel they have an alternative, at least not at that moment, then you owe it to them to say yes. Okay. It was very quick. And I realized as I heard her words, she was absolutely right. Okay. What does she say now?

I haven't talked to her about it. What does she say now? You know, we, interesting, maybe surprise you. I don't bring that much work home with me. I like to leave the job at the office when I can. But you didn't think it was going to be like this. In her work. No, we've had conversations about it being much more challenging than I expected.

I felt that from the beginning when I came back. But I'm not daunted by it. It's just a lot more work, nor is she daunted on my behalf. You said that you didn't want to come back. But, you know, there's been a lot of reporting that you never really wanted to leave. And even people now say, well, is he really going to leave in two years from now again? That you were frustrated. You were frustrated with Bob JPEC.

That reporting is completely inaccurate, completely. I had been CEO for about 15 years. I said I started the company in 1974 at ABC. It had been around a long time. There were plenty of things in the world that I was interested in that I either wanted to do or wanted to learn more about. I had not really had a day off, and I don't even remember. And I was thoroughly enthusiastic. Plus, I felt that I had accomplished so much during my former tenure,

including opening the Disneyland in Shanghai and going to the streaming business very successfully. And it wasn't about being bored. It wasn't about lack of challenge. It was just the time was ready. But fair to say you were frustrated. You were watching this company. I'm frustrated about what? Meaning from the outside? On the outside.

You're now having, you were asking me about whether you wanted to leave in the beginning. The answers I did, which is why I left. Okay, but now you're on the outside. Right. And you're watching. Busy, doing other things. You're doing other things, but Bob Chapex in that role. Yes.

And you were thinking what? I was disappointed in what I was seeing both during the transition period when I was still there and while I was out. But I really worked hard at distancing myself from it. because, one, I couldn't do anything about it. In a way, it wasn't my business at all, really. It was his business to run. And, again, I was not happy with what I was seeing. I worked hard to build the company into what it was over that long period of time.

I was proud of those accomplishments. It hurts when something that you've put your heart and soul into and you care about so much is going through a difficult time. Okay, so let's then talk about succession, because there's a lot of people in this room, business leaders, to think about their own succession, other types of succession. What was your mistake then? To the degree you think that Bob Chappek was a mistake,

and I assume you imagine it's maybe one of your biggest. Well, first of all, I'm not the only one that may have considered a mistake. The board obviously had its issues with Bob. But you knew him well. I've tried really, he worked for me for quite a long time. I've tried hard to conduct my own post-mortem, just so that we as a couple,

Don't do it again. You know, what do we do wrong? And we've discovered certain things that perhaps we could have done better, but there were also a lot of unknowables and I really I don't want to get into any of the... But is there a lesson for you in terms of who you're supposed to listen to in terms of You know, it was interesting when when the vice president was talking about there's no job that really trains you for this job In many respects, that's true at Disney too. It's a it's a large very complex company that's in the public eye all the time. There's interest from just about every sector of society in Disney. And it takes a certain type to be able to not only compartmentalize when it comes to managing issues and problems, but I think it takes a certain constitution, a tremendous amount of energy, a tremendous amount of patience, the ability to communicate on multiple

subjects, sometimes back to back to back to back to back. And I think that, you know, when we, when we make the decision again and the succession... Yeah, we'll be different this time. The succession process at Disney, first of all, is robust right now. It hasn't, it didn't... But was it not robust the first time? It was, but I think we're approaching it differently. And I just don't want to, it's just not something I feel, other than saying that we're aggressively pursuing succession, there's nothing, no more detail that I want to give. Do you think in two years you really will step down? Given the list of things that I have to do, yeah, I'm definitely going to stay.

Well, you could say given the list of things you have to do. No, we're attacking each one of them. I'm confident we will do so successfully. Let's talk about that list for a second, because one of the things you did, and I want to get your thinking and just understanding how you think about it, you went on television over the summer from Sun Valley, and you put out a lot of things on the table. You said, you know, we're thinking about selling ABC in the linear channels.

We're thinking about finding a partner for ESPN. We're in the midst of trying to figure out with Hulu. You've now resolved that. You talked about some of the creative channels. You put everything out there. And by the way, the folks at ABC just up this way almost had a heart attack when they heard all of this. What was your thinking in terms of just take us inside the thinking of saying that all allowed? A lot of CEOs try to wait until they have.

each deal done? I've spent a year since I came back fixing a lot of problems that the company has had and dealing with a lot of challenges, some that were brought on by decisions that were made by my predecessor, some that are just basically the result of a tremendous amount of disruption in the world and in our business, including dealing with the business model that those linear channels have rested on and have succeeded on top of for decades. And sometimes when I'm looking for kind of a reaction to my own thought process, I like to test that process in public, particularly in ways that I might be able to actually get a reaction from the investment community. So my thought was at the time that I would essentially be public with some of that thought process.

I think what I said about the media networks at the time was that everything was on the table. and they might not be core to our company. I think I went that far. And that was a means of my saying to Wall Street or the investment community that our heads were not in the sand about the challenges that those businesses were having. I did not want to get accused

as being kind of an old media executive. We're a company that had already shown an ability to basically adapt to new circumstances. So I wanted, one, convey that, and two, see what the reaction would be. Would it be applauded? Would it not? I did not say they were for sale.

The coverage of what I said said they were for sale. There's a theme here, by the way, a little bit, just in terms of what is being written about us and what is being, and what is accurate. No, it is not for sale. But like all of our assets, we constantly are evaluating what is their value to the company today. What could the value be tomorrow? Is it a growth business? Is it a business that is going to contract? There's been a big question about the linear channels and whether they're with keeping.

we've discovered in this process which has been unbelievably rigorous at the company and involves a number of executives who are managing those businesses we've determined a few things one that they can be run more efficiently with some difficult choices you mentioned cutting over seven billion dollars in cost we can do that second they can be run in partnership with those businesses that sit atop the new business model which is streaming and they there are a means of aggregating audience, of amortizing cost, of basically aggregating audience, reaching more and different people. And so we actually, through this process of being more public about what might happen or what

could happen, and really rolling up our sleeves and figuring out, is this something we should do? Should they be divested? Should they be kept? If they are kept, how should they be run? And actually, they're being run much more efficiently today than they were in July when I made those comments. Let me ask you a different question.

You ultimately bought Hulu from Comcast. But you said the following. You said there are seven or eight platforms in the stream business alone that are in general entertainment. That's a tough business to being competitively. And it's not our strongest suit. When I came back to the company and the company had been through a difficult time, partially because of COVID, and the balance she wasn't as strong then. It is much stronger now than I would have liked it to have been.

I asked the question, do we write Comcast a check for which? It could be $9 billion, or should we consider selling it to them? Is the business unique enough, valuable enough to us long term for us to write them the check and buy the whole thing or the opposite? And I created a rigorous process to determine what is the right answer to that question. I worried that there was, in general entertainment programming, unlike Disney and Pixar and Marvel, that it's not as differentiated, maybe not as valuable, but then through this process determined that owning the whole thing had real value because partnering that business with

the other branded streaming business, Disney Plus, could actually create a huge opportunity for us and thus we decided to keep it better than sell it. Let me ask you about that IP. You just mentioned Pixar and Marvel and so many of these other things. Very recently, as you've seen, because you get the box office numbers every weekend, a number of these films have not performed. They have not performed the way they used to. People question the creative magic at Disney. You can look at the marvels. I'm curious why you think that disappointed. You could look at Wish. Indiana Jones. What do you think what's happened? What's Well, I think you have to look at it a couple of ways. First of all, I think the movie business is

changing, actually. Box office today is about 75% of what it was pre-COVID. I think we have condition the audience to expect that these films will be on streaming platforms relatively quickly and that the experience of accessing them and watching them in the home is better than it ever was. One, easier to access in terms of the technology. Two, just the visuals, you know, better sets in your living room than before. And a bargain when you think about it, streaming Disney plus you can get for $7 a month. That's a lot cheaper than taking your whole family to a film. So I think the bar is now raised in terms of quality about what gets people out of their homes into movie theaters. Some of it is just being part of basically the social wave. Certainly

Barbie and Oppenheimer did that for two other studios. And so I think that's one thing. Second, in our particular case, and specifically about those films, some of those films, they were not as good. They were not as high in quality. Not everyone that you mentioned as some of their predecessors, our films, and as they should have been, particularly in this environment. Why do you think that was? Well, The Marvel's was shot during COVID. There wasn't as much supervision on the set, so to speak, where we have executives there, really looking over what's being done day after day after day.

And that was a result of mostly of COVID, but at the same time, we increased our output tremendously to feed the streaming platforms. Too much, by the way. Mistake. Definite mistake. Quality needs attention to deliver quality. It's not, doesn't happen by accident, and the quantity, in our case, diluted quality, and Marvel suffered greatly from that. So there are different reasons, and I'm the first, I've been very public about it, saying, and I would say right now my number one priority is to help the studio turn around creatively.

Now, let's also put it in perspective. We set the bar so high. Year after year after year, we had the best performance in the business, probably for a decade. And I'm not sure another studio will ever achieve some of the numbers that we achieved with multiple... I mean, we got to the point where if a film didn't do a billion dollars in global box office, we were disappointed. That's an unbelievably high standard. And I think we have to get more realistic. A couple of the films you mentioned, by the way, which is interesting about kind of the New World Order, did okay at the box office.

Elemental is a good example, about 500 million at the box office. By the way, to some studios, that would be a gigantic hit. When Disney has a $500 million film, it's a failure, which is interesting. But then it went on Disney Plus and had massive consumption. So that says something. Maybe people didn't perceive it was the kind of film they needed to see in the theaters, but they certainly, when they discovered it on Disney Plus enjoyed it. Let me ask you about this about franchises and the value of IP.

I don't think actually most people have ever read this letter, so I'm going to read it aloud if I could. This was a letter written in 1966 by Walt Disney, the man. himself. It was two months before dying from lung cancer. He was this heavy smoker. And he wrote this to shareholders about what he said makes us tick here at the Disney organization. He said, many people have asked, why don't you make another Mary Poppins? Well, by nature, I'm a born experimenter. To this day, I don't believe in sequels. I can't follow popular cycles. I have to move on to new things. There are many new worlds to conquer. As a matter of fact, people have been asking us to make sequels ever since Mickey

Mouse first became a star. We have bowed only on one occasion, The cry to repeat ourselves. Back in the 30s, the three little pigs was an enormous hit, and the cry went out, give us more pigs. I could not see how we could possibly top pigs with pigs. But we tried, and I doubt whether any one of you reading this can name the other cartoons in which the pigs appeared. We didn't make the same mistake with Snow White.

When it was a huge hit, the shout went up for more dwarfs, top dwarfs with dwarfs, why try? Right now, we're not thinking about making another Mary Poppins. We never will. perhaps there will be other ventures with equal critical and financial success, but we know we cannot hit a home run with the bases loaded every time we go to the plate. We also know the only way we can even get to first base is by constantly going about and continuing to swing. What would Walt think now? I'm going to talk to him later. Maybe I'll let you know.

I actually think about that a lot. We, about five years ago, we put Walt. We put Walt. office back together again. It's taken of everything, including the order of the books on the shelves. And we decided kind of as out of respect for him, we would just return it to what it looked like. Then interesting, you mentioned he was a smoker. It's filled with ashtrays. Wherever you go, there's an ashtray.

And every once in a while, I go in, not to smoke, by the way, I don't smoke, but I go into his office just to sort of feel the presence. I know that sounds a little weird, but it's kind of a nice way to relax and appreciate the legacy of the company. And the first thing you really realize if you study Walt is that Walt was unbelievable at adapting to change. First of the, he loved technology. He loved to use technology. And he also knew that the world was not a static place.

That was true for his team parks. That was true for his movies, for television, everything that he did. He was a true innovator. An innovator is someone who never stands still. Now, when that quote, I think you at one point read it to me, and I think we had just done a sequel to Mary Poppins. Wow, this is good timing. I think I don't want to apologize for making sequels. Some of them have done extraordinarily well, and they've been good films, too.

I think there has to be a reason to make them. You have to have a good story. And often the story doesn't hold up to, not as strong as the original story, that can be a problem. But it just has to have a reason. You have to have a reason to make it beyond commerce. There has to be an artistic reason to make it. And we've made too many. It doesn't mean we're not going to continue to make them.

We're making a number of them now, right? As a matter of fact, including to some of our best films, but we will only greenlight a sequel if we believe the story that the creators want to tell is worth it. Do you think then you can make originals, or do you think that the franchise game is still the... All right, folks, that was Disney CEO Bob Eiger speaking with our Andrew Ross Sorkin at the Deal Book event.

We'll be monitoring those comments. We'll have much more on power lunch when we come back after this break. Welcome back. It's time for the next installment of our Econ ecosystem series. We've hit the big box stores and the mall operators.

Today we're going inside the mall for a look at the apparel retailers. Morgan Stanley's out with a new note saying Black Friday foot traffic was sluggish, as expected, given the cautious holiday outlook, retailers issued earlier this year. American Eagle, Gap, Nordstrom, Victoria's Secret, all up following the holiday, but which names make Morgan Stanley's list of Black Friday winners?

Let's ask Alex Straten, equity analyst over at Morgan Stanley, the expert on the topic. So let's just start off with a big, bold question. Who won and who lost over this holiday shopping weekend? Yeah, I mean, getting right to it, I would say the winners or the outperformers and the laggers, as we saw them. And granted, this is a more limited data set. But on the winners front, we had Airy, which is a part of the American Eagle portfolio. We had gap the banner within the broader gap portfolio. Hollister, which sits within Abercrombie. And then Old Navy, those are the ones that we saw as winners. And the way that we measure that, to be clear,

is that all four had higher line counts despite either unchanged or even lower promotional levels. So what that means is they were able to garner the attention of the consumer without sacrificing margin. So that's how we characterize it as winners can be subjective. I think on the other hand, there were some laggards per the data in our check. And that included American Eagle, Nordstrom, Pink, and Torid. And really, it's the same type of methodology. And these two, this group really fell into camps. They either had lower traffic on similar promotions compared to last year. or they had unchanged traffic on higher promotions. So effectively, it's can you drive traffic

and how much does that hurt your bottom line as you're doing it? And so I will say this only reflects a single day. Holiday shopping is becoming less concentrated around single days. So it's not a perfect gauge of quarter to date performance of holiday performance and aggregate. We have a lot to go.

We have eight of the 10 largest stopping days ahead of us in the season. So there's much more to go from here. Alex, there's an argument to be made that consumer balance sheets, right now are perhaps not as strong as they were a year or so ago because of the dissipation of stimulus money, that sort of thing. On the other hand, comparisons may be easier for some retailers given bloated inventory levels from last year, which have righted themselves this time around. On balance, does it mean that we're net net okay? Or does it mean that maybe these

retailers have stuff left to do for the rest of the season? Yeah, I mean, it's a great point on where the consumer stands. And I think this is the first time in a number of years because I've been a little bit more optimistic heading into holiday. But I caveat that as cautiously optimistic. And what that means is we do not expect strong demand or a change in fundamentals for our retailers. Our businesses are continuing to operate and probably will in the fourth quarter at both sales and profitability levels that are below pre-COVID trend on average. But really, my more optimistic forecast is, a function of a pretty low bar. Our retailers have set a low bar throughout the year and for the fourth quarter so far in the third quarter earnings season. They've planned inventory and hiring conservatively from the statistics that we look at. And they're going to benefit from a favorable calendar this year that I think people tend to overlook historically. So when I take that all together, it does feel like the market sentiment could be too bearish on these stocks for what, you know, to use your words, could be an okay holiday. This could really, I mean, lead to a

a January rally in my space, which, if you might remember, is very similar to the dynamic we witnessed last year on a late inflexion in holiday trend. One more quick question, Alex, about, I think if you cover Coles or some of these other with big card businesses, really significant, what is the disruption of Buy Now, Pay Later going to mean for the viability of those card businesses going forward? Sure. So the card business is such a tricky subject in my space because there's such limited disclosure. But for some of them, there is real risk around it. We did some work about three or four years ago that suggested that the flow through to EBIT could be almost 100% of the credit card revenue. That means it could wipe out some of our businesses, EBIT that they

generate. Now, that might not be the case. They are very cagey around what information they give, and it seems like they have a little bit better of a handle on it as they dove in. So I think that's a key unknown in the space that many investors are debating. And there's not a great answer. I wish I had a better answer for you. But it's a key unknown and overhang given how limited the disclosure is. Yeah, absolutely. Alex, thanks. We appreciate your time today. Thanks for having me. Well, technical support is coming up next. We'll check out the charts. So keep it right here. Power Lunch is back after this. Welcome back to Power Lunch. It's time for our technical support today. And we are looking at three

names in the news and here to chart them is Craig Johnson. He's Piper Sandler's chief market technician. Welcome to you. Thank you for having me back. Appreciate it. Three good stories here. Let's start with General Motors. A lot of news today on the share buyback. Shares are up 10%. What do you see? I think this is a stock that's going to take some more time. When you look at the shares of General Motors, all you're doing is having a pretty good relief rally back up to the 50 and 200-day moving averages. And that's all it is is just a relief rally. More time required from my perspective on the stock. More time. So you're not, okay. Now we see there those, what of those lines that you're following are the moving averages? Yeah. So we're following the moving averages right here. We're at the

sort of resistance level right here. And then we've got another support level right here. All we've seen, Kelly, is a move back up into this sort of area here. I would not expect that this stock would do anything more than perhaps fail here and roll back over. There's certainly challenges to be had. The share buyback is clearly helping. But from my perspective, there's better stocks to buy than this at this point in time. In autos? Not necessarily in autos. But Tesla, I would say, looks more constructive.

But I would say some of the retailers that you were just discussing, like Amber Carambi and Fitch, great-looking charts. Really? Still continue to look quite constructive. All right. So let's go elsewhere in the news. We got some stuff on Cigna and Humana, maybe getting together to try to compete with the 800-pound gorilla, which is United Health when it comes to just about everything,

health insurance. So is UNH, Dow component, heavy, heavy influence on the market, a stock that you would buy or sell now? At this point in time, I'm going to put that as a hold also. The reason I am is because when I look at this chart, you're just sitting here consolidating. I would be a buyer if we could finally break out above that sort of resistance level at $550. Dom, I'd be a buyer at that point in time. But as a technician, I want to see the confirmation. I want to see the breakout.

I want to see a pickup in volume as we go and do that. So an entry stop at $5.50, you said. Correct. Okay. So I'm going to be waiting for that. That's a couple of years we're going back, really, that it's been moving sideways. So it's been, they've been hitting the ceiling multiple times. They have.

And what's interesting is they're doing a lot better than a lot of the other health care stocks. We got our health care conference happening right now in New York, and there's just a lot of those companies. They're still trending lower. And at this point in time, this is a pretty good relative outperformer. It's true. But not breaking out quite yet. Yeah. I know that sector was supposed to be kind of the place to hide this year.

Now they just want to hide, I think, if they've been in it. All right, let's talk. Acta had a massive hack, some customer data exposed. What's the damage or what's the opportunity? Well, at this point in time, looking at the chart of AQa, we've got our support levels and we've got our resistance levels. It looks like another relief rally just sort of coming into play for Acta. This is one of these names where we're back up to the moving averages right here, and we need to get back through this. I like the fact we've had the higher low get made.

But again, not trending as strongly, not putting up as good relative performance as I would like as other parts of the market at this point in time. So as I continue to watch, ACTA, it's going to be one of these names that needs more time to ultimately sort of break through these levels and take out some of these prior high levels in here. All right. So we've gotten through the three names in the news. Correct. Let's go because I know Kelly likes going big picture. It's almost like now that we're here and we have this two and a half minutes with I want to ask about NVIDIA. He mentioned Tesla.

No doubt. So, Mag 7. Sure. I mean, you think they're all going to run? So I think the market is entering a period of time. By the way, let me step back and say, we have a 4825 year-end price objective. We think that we're going to get there. So that's like another 5% from here.

Another 5% to go. We're watching 10-year bond yields just starting to break down. We broke through an important resistance level at 433 today. We're now trading down to perhaps a 200-day moving average in a couple weeks. Which is? That's going to be right around. 397. Oh, wow. You think we could do that at the next couple of weeks go below four? Absolutely. Wow. Non-consensus call by all means. We can see that work its way down there.

Well, after the action the last couple days, people are starting to rethink that. Correct. And there's a lot of individuals that are sort of mispositioned. As equities are working, rates are coming down. Stocks are working and working well. Kelly, what's going to really work well, I think is going to be financials. And I think as you look forward into 2024, we're going to be bringing out our 2024 outlook next week. So hopefully I can come back and bring some of those pieces out. If you're picking financials, we're going to want to hear that for sure. But financials, that's not enough to power the market. If you look at the broader S&P 500, financials are not very heavily weighted at all. So with the outlook for the S&P, chart-wise, longer term, can this

extend into the first half of 2024. Equities can definitely work into the first half of 2024. But the magnificent seven's companies, they may need to take a little bit of a break, maybe enter some sort of high-level trading range and this consolidates sideways. And in that sort of scenario, Dom, we can start to see the financials start to pick up in performance. Financials are important to the market. They have to at least participate for equity markets to work. And I think you're going to start to see the yield curve starting the shift. And you're going to start to see with the rates coming down, a lot of those mid-cap banks, which make up a lot of the Russell 2000 index. That's what I was going to ask.

Balance sheets are healthier. You think the Russell 2000 can finally start to, you know, correct. I definitely think that the Russell 2000 can step into the game. And I definitely think that the mid-small caps are going to have a great year next year. It's been challenging this year. I know this again. This is not consensus. No. I hope you're

right. This all sounds great. It sounds like, you know. Everybody's been focused on the MAG 7, but this market is broadening out. We got buy signals last week With our breathwork and new high indicators, this market's ready to go. Craig, thank you very much, man. Thank you. Thanks for watching, Power Lunch, everybody.

Closing bell starts right now.