Power Lunch - Power Lunch 12/23/22

Episode Date: December 23, 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.

Welcome everybody to Power Lunge for a Friday. I'm Tyler Matheson. Here's what's ahead this hour. Stocks are bouncing back today after yesterday's big decline. What everyone wants to know is will Santa bring a rally to Wall Street next week? We're going to dig in into the where, into where the markets are now and where they are headed in the new year. And car trouble, big declines, big, big, big declines for the automakers so far in December. So is the economic reality, the possibility of a recession slamming the brakes on what was once a dream? market, Kelly, for the auto industry. But first, why don't you check out the market? Let's check them out. Tyler, thank you. Hi, everybody, because the NASDAQ is, well,

here's the one week changes. Nasdaq is in the red today and in the red for the week, down 2.3%. Look at the S&P, though, the Dow, they're hanging on to gains today, and the Dow actually could be up half a percent for the week. So nothing too crazy, but we are seeing at least a little bit of a more positive feel. Speaking of more positive feel, let's look over at energy as oil gets back near $80 a barrel. Energy is the best performance. sector today by far. I mean, look at these year-to-date changes as well. APA up 5% today, 75% this year, HESA up 4% today, 90% this year. Flipside is solar energy taking a hit. End phase solar edge and first solar are all lower. We'll have more on that group coming up.

First go, let's go to Bob Bassani with more on the markets as we close out the penultimate week of the year, Bob. That's right. Oh, I love it when you say penultimate and you speak Latin. That's a great line. Here's what's important. You see those energy? stocks she showed you, those were the three big movers on the S&P. All of them are energy stocks today, the biggest movers. But more importantly, bank stocks are rallying a little bit this week. Remember this awful month of December they had? Goldman Sachs Financial Conference was a disaster. We had new lows in Comerica, for example. But this week, they've started to stabilize and banks in energy are doing better. So fifth, third, Huntington, Comerica, Key Corp, these are what I call super regional

banks. They're now stabilized after just an awful three weeks in December. Big Cap Tech also. also stabilizing today, of course, the big story yesterday. Micron is a bellwether for general tech demand down last yesterday. And Viti is still not bouncing, though. That's a little disturbing. Apple and Microsoft a little bit weaker, but it's really the semiconductor stocks that are people have been watching, been on a downtrend for really the last three or four weeks. For the week, for the S&P, kind of flat, it's we're down maybe a half a percent, but down about six percent for the month of December. That is very unusual. December is normally an up month. Maybe we'll just get it in the next couple of days. Of course, this is the start of the

Santa Claus rally. You know all about this. It's the last five days of the old year, the first two of the new year, the average gain over those seven trading days, 1.3%. Here's the point about this, Kelly. I like this indicator because it actually works. 80% of the time we're up in the next seven trading days. That's pretty good. That's statistically unusual. The 20% of the time it doesn't work where we're down in the next seven days, January tends to be a down month. And then, and the S&P tends to be underperforming, not necessarily down, but underperforming for the rest of the year. Kelly? Well, I'll pick it up, Bob.

Thank you very much. So as stocks look for some footing today, what's ahead for the market? And as rates keep rising, does the Fed risk doing too much, holding them too high, too long? Both of our guests feel the market is still a bit risky. One says you may want to hide out in safe places until the ingredients for a new bull market in risk assets emerge. And our other guest says focus on quality. Let's explore both perspectives with Ron Insana, a CNBC senior analyst and commentator. He's also a senior advisor to Schroeder's North America.

Megan Shue is head of investment strategy at Wilmington Trust. Welcome to both of you, Ron. I'll begin with you. The possibility of a recession, rising interest rates, and spotiness in earnings doesn't sound like a recipe for putting all your chips in to the market at this point. Yeah, and I think, Taylor, it's, you know, the policy risks, whether here or in China or in other parts of the world, Europe and the UK are, I think, still ever present. And so the forecast for 2023 is cloudy with a chance of meatheads.

Somebody's going to make a mistake and keep us on our toes for probably the first six months of next year. Because inflation, all the data that we saw this morning is still coming down, but the Fed is insistent on raising rates. We've had five months of positive inflation moves directionally. And as you saw this morning, that PCE deflator was also actually softer than has anticipated. So I think it's going to be, I think it's still going to be rough for several months going forward. Megan, I don't know whether you would categorize it's going to be rough for several months going forward, but you do say it's too early to lean into equities. But if you're going to lean just a little bit, you say focus on quality. What does quality mean?

Yeah, Tyler, thanks for having me. And I do think that while it might be too late to sell, I think it's also too late to really be aggressive and buy into this. I think the next couple of weeks or even months could be a little bit choppy. So, you know, don't necessarily add to equity exposure, but we're looking to upgrade our equity exposure. And it's really interesting because we like quality. So what is quality? It's high profitability. It's earning stability. It's low leverage. Interestingly, what has really worked this year has been value. And if you look at, the correlation between quality and profitability and value, it tends to be negatively correlated. So we think we're going to see a bit of a rotation into the start of the year and seeing more flows and more outperformance of that higher quality, higher profitability, which also tends to be more correlated with technology and growth stocks. Ron, this may be neither here nor there, but it's everywhere. What are your thoughts about the Fed pivot here?

How is this all going to play out? I don't know, Kelly. They're telling us it's not going to happen, right? I mean, they're telling us not only are they going to raise rates three more times, but they're going to hold rates throughout 2023 at somewhere around 5 percent, as far as Fed funds are concerned. And that I guess, irrespective of whether or not we make progress on inflation, they're going to view that as transitory and keep rates high.

And I know David Tepper talked about this yesterday on Squawk Box. As much as David believes the Fed and others believe the Fed, they will at some juncture be forced to pivot. There's almost no reason for us to have a recession. What's going to force them? Ron, what would force that? Well, I think if the recession gets too deep, I mean, you know, a couple of the areas where their policy is absolutely irrelevant is in the labor market because we're short people, period, end of story. And in the housing market, we're still short supply. And so they've already created a recession in housing. leading economic indicators, something Lizanne Saunders brought up today on Twitter, been down nine months in a row.

We've never not had a recession when we've seen that. So I think if the pain gets deep enough, they'll be forced to change. And again, right now, inflation is running in the direction that they want, and it's annualizing at about 2.3%. So that's core PCE, by the way, which is what they look at most closely. But if you hold that view, Ron, how can you possibly think the stock market's going to do anything but basically had lower from here. Oh, I mean, I think the risk is sideways to lower,

which is my view is, you know, just camp out in six-month T-bills until you get the opportunity to back up the truck, whether that's $3,000 or $3,300 on the S&P. That's where I would agree with David Tepper. Listen, he's managing $20 or $30 billion or $40 billion more than I am. But intellectually, I think we're on the same page in that regard. I don't see a bull market, a cyclical or secular bull market

starting until the Fed pivots or until you and Kelly Hartung show up at a jet-sgate. on TV again. I think that would be another opportunity to to take note. Were you really on? No, I was not. But you did go. I did. In the rain, in the pouring cold rain. Saw the only three points on the jet side of the JETS. Megan, football talk aside. Let's talk about where you see quality, where you find it. And I was curious that you mentioned technology because I was thinking earlier this week about Micron and how the semis.

have been have been hurt and if you want earning stability earnings growth i go boy my current got clobbered yeah yeah so i mean there's different parts of technology semiconductors tend to be the most cyclical they're probably going to continue to see a little bit of pain but i would also expect them to bounce first on the other side of this i think we're looking at other parts of technology i mean if you think of payment processors um like the credit card companies those technically fall into the technology category I think stable part of the technology sector, as well as cloud. We do still like the profile for clouds. Certainly earnings have come down. But if you look at the earnings for some of those companies versus other more cyclical parts of the market, they are still looking, you know,

from that quality perspective, much more favorable. And I think, you know, one other point, we talk a lot about the equity market, but we also have become more constructive on fixed income. We have an overweight to fixed income, specifically in municipal bonds. I'd be watching those in 2023. They had the largest outflows ever in 2022, and the supply demand fundamentals look much more favorable as we move into next year. So I'm thinking we're going to see a nice bounce back in that part of the market, which would reward the diversified investor. It's been such a tough year, both of you. We're going to say goodbye here.

But I think about it's been a bad year for bonds. It's been a bad year for stocks. And we'll see what happened. It's been a great year for commodities. either. And one thing that was just said, you know, listen, New Jersey triple tax-free munity bonds are yielding 4%. That's an 8% tax equivalent yield roughly. I would agree. That's an interesting place to be. Megan, Ron, have a great holiday weekend. We'll see in the new year. Thank you, too. You bet. Now to Meta, agreeing to pay nearly three quarters of a billion dollars to settle charges.

Remember the Cambridge Analytica debacle? As if they didn't have, they're like the Wells Fargo of technology. As if they didn't have enough problems, this year, Steve Kovac here is on set with us with more. Steve? Yeah, Kelly, so that $725 million fine was the result of a class action privacy lawsuit claiming META handed over user data to Cambridge Analytica. Now, back in 2018, we learned Cambridge Analytica had access to 87 million users' data. But look, that's just the latest shuffle for META and the rest of the mega-cap tech names. Talk about stocks having a bad year, Tyler.

Let's go on a roller coaster ride. meta was up 24% last year, down 65% so far this year. Alphabet ended up last year, 67% down 39% so far this year. That's on pace for its worse since 08. Apple also on pace for its worst year since 08, up 33% last year, down 25% so far this year. You guys get the idea where I'm going with this. So what happened? Well, it's unique for each name.

Apple's struggling to meet iPhone demand due to COVID lockdowns in China. meta investors souring on the billions lost on Mark Zuckerberg's Metaverse experiment, and Amazon overbuilding warehouse capacity and overhiring during the pandemic. And yet it's some of these big tech names that analysts see as bright spots in what could be a really dark 2023 for the market. Baird analysts naming meta, Amazon, and Alphabet as top picks for 2023, predicting a bounce back from the sell-off this year. And several analysts, including Morgan Stanley, naming Microsoft as their top pick next year. Meanwhile, there's a little hope buried in all this bad news for big tech.

The theory in Silicon Valley that this downturn will give new startups a chance to rise like we've seen in previous recession, guys. Maybe seven years from now. Yeah, exactly. Yeah, no, there's a lot of, we just heard Megan Shoe say that if you pick the right pocket in technology, it may be a year for it if you have steady earnings and. And that's Microsoft. That's, you know, Microsoft has their customers locked up. They're growing. They see IT spend as maybe moderating a little bit, but still people need their cloud spending and so forth.

They're facing these foreign exchange headwinds. That's supposed to moderate about halfway through the year. So there are bright spots in there for names like Microsoft, for sure. All right, Steve, thank you very much. Thanks, guys. Merry Christmas. All right, happy. Have a good weekend.

All right, coming up, remember when you simply could not find a car if you needed to buy one. That would have been me. And if you did, you'd be lucky to pay only the sticker price. Well, times have changed very quickly. We'll talk about the roadblocks for auto stocks. And if recession fears have you wanting to cling to safety and a dividend check, we're going to look at one group where you may be able to find both. That would be health care reits.

Ventus, for example, paying a 4% yield and outperforming the market this year. Power Lunch will be right back with that and more. Welcome back to Power Lunch. It's been a challenging year for auto stocks. Just look at these names. And the last month alone, they've seen big losses. Tesla, Ford, GM, and CarMax all down more than 15%. Now, as interest rates keep rising, vehicle affordability is also becoming a major issue.

According to Cox Automotive, the average monthly payment for a new car hit a record high in November at $762. Here to lay out the road ahead for the auto industry is Michelle Krebs, executive analyst at Cox Automotive. Michelle, great to see you. How bad is it going to get next year for the auto industry? Well, I think it actually will be a little bit better. The auto industry has sort of been in a recession for the last few years, largely based on supply. We had the chip shortage that stopped production and then caused inventory shortages. We are seeing that improve, but it's improving at a time that we're having the economic headwinds.

So it'll be marginally better next year, but still not what we were used to a few years ago. make a good point that we all talk about it as if, you know, they were making it rain because the prices were up and there were shortages, but the actual amount of car sold was down. So even the good times weren't necessarily that good. And if we're coming to the flip side of that now, where we pulled forward demand, the prices are now falling. Maybe they have excess inventory. What happens then?

Well, one of the interesting things we're seeing is that people who have money are paying cash for vehicles to not pay the interest rates. But we, you know, certainly affordability is one of the top issues next year. It's been an issue and it just keeps getting more challenging, especially for, you know, normal buyers, people that might not have perfect credit. A lot of them have taken themselves out of the market altogether. The math just doesn't work. So there's a smaller pool of people who will be able to afford new vehicles. If that's true, Michelle, then you have to wonder where these stocks are headed. So they've got a couple of challenges.

You know, like the likes of Ford and GM are trying to spend billions to reinvent themselves as electric car makers while at the same time potentially seeing auto price deflation. Should we look at this from the stocks point of view? Or do you think this is more of a consumer story where the consumer got overextended and their exposure to some of these high auto prices, they could end up underwater on these vehicle. I mean, they are underwater. I guess the moment the vehicles leave the lot, but now, especially if those prices are under more pressure, I don't know if we start talking about repossessions or that kind of thing. You know, we are seeing repossessions and delinquencies increase a bit,

but we're still not back to high levels. That is less of a concern for us. I think it's, I don't comment on stocks. I'm not a financial analyst, but you're right. The automakers are following these two paths. They're aggressively moving into electrification. At the same time, they've got to keep the sales up and the revenue coming in because that's what's funding their move into electrification. Are we going to see the return of incentives to buyers? That's a good question. I think we will, but I think it'll be. it'll vary. Because one of the things that we're seeing with inventory is we're seeing more inventory build up from the domestic automakers, and we're still seeing shortages from companies like Toyota, Kia, Subaru, Honda in particular. So it's not the same thing across the board. But I think probably if you're in the market for a full-size pickup truck next year and the inventory keeps building

as we've been seeing, there will be some incentives there. Let's talk a little bit about Tesla, are they trying, I don't know whether you know this, as you say, you're not a stock analyst, and I'm not asking a stock-related question. Are they feeling pressure to meet sales forecasts and get cars out the door fast? Do you know? It seems like that. This week, Tesla announced some discounting. Yes. I think we've been a lot of question about is demand weakening. They certainly are being challenged. Yes, they're the dominant player by a. long shot. But, you know, they used to have 100% of the market. They can't have that because everybody else is getting into the game. So we are seeing, you know, companies like Hyundai,

Kia, Ford, GM introduced new EVs to the market and every little bit of that nibbles away at Tesla's share. And some of those cars, as I've been in the market recently, have been, are really nicely styled. I mean, they're really good looking. Some of those EVs, I'm thinking of the Kia and a Hyundai as well. And by EV standards, they're a little less expensive. But EVs in general are quite expensive, and that's one of the impediments to EV adoption. But we will see more affordable ones.

At least that's what we're promised. Yeah, or as that Toyota executive was saying, maybe they're not for everybody. We'll see. Michelle, thanks so much for your time today. We appreciate you joining us. Thank you. Michelle, Brett.

All righty. Ahead on Power Lunch, YouTube, paying north of $2 billion for the Sunday ticket, the NFL package. But does the deal fall a few yards short of being totally worth it? We will check the scoreboard plus a three-stocking lunch. We've made our list. We've checked it twice. And now our trader will tell you which stocks have been naughty or nice. We've got a Christmas edition of three-stock lunch coming up.

Time now for our ETF tracker. This week, we're looking at clean energy because they're seeing outflow. of about $57 million in the week through yesterday. At work here, macro factors, nothing stock-specific. The market volatility hurting names and rising interest rates would often threaten growth names, of course, weighing it here as well. And recession fears, it's really a lot of these different issues. Let's see how it's playing out with some specific funds this week.

The big one in the space, the Investco Solar, ETF, ticker T-A-N or Tan. Well, that one, take a look, is down about 4.5%. Even bigger losses for Alps Clean Energy Fund, down 7%. and Invesco's Clean Energy Fund down more than 10%. All of the data comes from our partners at Track Insight. More info available on the FT Wilshire ETF Hub. Let's get to Bertha Coombs now for the CNBC News Update. Bertha.

Hi, Kelly, here's what's happening at this hour. Even the deep south isn't getting spared from this week's chilling winter storm in Atlanta. There's no snow, but heavy winds are knocking trees down, at least one piercing through the roof of a home. Many others have hit power lines, knocking out power to tens of thousands of people from Texas to Maine. Nearly a million and a half homes and businesses right now have lost power. Around Chicago, dangerous winds are making the temperature feel like 30 to 40 degrees below zero.

Gusses are whipping up the Chicago River and making roads and airplane runways treacherous. Over 700 flights have been canceled flying into and out of Chicago. airports across the country, nearly 4,500 flights have now been scrubbed. It's a rough Christmas commute. And Russian authorities are demolishing a historic drama theater in the occupied city of Maripol. An exiled Ukrainian local official accuses them of trying to destroy evidence of war crimes from a Russian attack in March that allegedly killed hundreds of civilians. Tyler, back over there. All right, Bertha, thank you very much. Up next, reet between the lines. Get it? All right, we got housing, office, commercial, and other reeds. They've been

struggling amid recession fears, higher rates, and the hybrid workplace. But health care and hospital reeds, they could be a recession-proof dividend play. We'll explore that next on Power Lunch. All right, we got about 90 minutes left in the trading day. Let's get you caught up on the markets, the stocks, the bonds, the commodities, the whole thing. And one area of the market that could hold up in a recession. We'll tell you about that in just a minute and pay you while you. wait for the economy to recover. Let's begin with a check on stocks at this hour. The Dow is holding on to gains. Energy and industrials are leading that index higher by about a quarter of a percent. The NASDAQ, however, turning lower on the day just a little bit and down 2 percent this week.

It has, as you know, been a bit of a volatile week, to say it, put it mildly. Rick Centellie's tracking the action on bonds in Chicago. Chili Chicago, isn't it, Rick? Yes, oh boy, it's chili. I was worried. worried my hand was going to stick on the doorknob this morning. Listen, in Chicago and across the country, the bond market association recommended an early close. So the bond market closed at one Eastern, but that doesn't dispense the notion of how aggressive a week it's been for bonds. Look at a week of 10-year note yields. Close just a whisker under three and three quarters. What did they closed last week? Just a bit under three and a half. That's a big week. As a matter of fact,

it looks like a one-month high as you look at a one-month chart. And Boond yields had a huge week as well. They are hovering at 11-year high yields, which means the spread between our tens and the boons in Europe has gotten much closer together. As you see on that chart, that's a two-week chart. It's just been a huge move. It's moved into 134. It was hovering at 170, just nine sessions ago, which means if it is below 132, another couple basis points, that would be the most narrow. The closest have been in 26. months. You want to watch that trade. And the dollar, well, the dollar's down eight and a half percent from its November, excuse me, September 27th, high close at 114 and change. But it's still

up 9 percent year to date. Tyler, back to you. And happy holidays, happy Hanukkah. Merry Christmas. Same to you, Rick. Thanks very much. And stay warm out there in Chicago, my friend. All righty, let's check on energy futures right now. Why not look at energy? Because it's cold out there. You got to have energy. Oil, higher. today, 2% higher, almost 3% higher, nosing up toward $80 a barrel. 7.61 is the number right now. Up 7% this week, right around 80 a barrel. But look at the move in that gas, down more than 20% this week. There you see it, week to date. It's worst week in nearly nine years. Traders are looking past this weekend's bad weather

and ahead to warmer weather that is expected next week and into January. Please, please, please, warmer weather. As a result of high inflation and rising interest rates, REITs, REITs have been hit hard this year, but their luck could be turning around as we head into the new year. Could be. Our next guest says REITs are defensive in a recessionary environment, particularly within the health care space. So joining us now, Jonathan Peterson, managing director at Jeffries. You know, when I think of REITs and I think of office building REITs or shopping center REITs, they're not exactly what I would want to be holding maybe right now in a more fragile economy. But health care, people go to the doctor, no matter what, people are, the aging population is seeing more people go into assisted living

type reits and so forth. This is where you see the sweet spot. Yeah, yeah, no, I think that's right. I think the reed sector, and I cover the reed sector overall, I think it's at an interesting crossroads. I mean, interest rates have risen this year. That's been felt by the reed sector overall. You know, you look at how cap rates have potentially moved to the 10 years up about 150 basis points since the spring. You put that as your denominator on real estate value, take the net operating income divided by a cap rate. You increase that 150 basis points and, you know, the value of real estate's down about 25, 30 percent year to date. We think that's basically priced into the reed sector because that's about how much they're down so far this year. So, but we are, you know,

I think as we flip the page to next year, you know, we do start to be a little. more concerned about the macro, you know, the macro environment. You know, before I get to health care, I think there's, you know, a few things to focus on, like, I think three types of real estate. I mean, one, those with strong, you know, structural demand tailwinds like data centers, cell towers, warehouse rates, others are those with like long duration leases, like some of the net lease guys. And then those that are more tied to defensive property types like healthcare or life sciences portfolios. Those tend to hold up a lot better in downturns. I mean, like you said, people still go to the doctor when they get sick. Doesn't really matter what J. Powell is doing.

But within the health care sector, there's actually a few different, you know, subtypes of properties. Well, let's look at a couple of names, if we might, and take me to a subtype and give me a name and why you would make the case for it, why you like it. Absolutely. Yeah, one subsector that we like a lot is private-paced senior living facilities. So think of these as like, you know, homes that people choose to live in. They pay out of their own pocket. There's not the government. So Ventas in Well Tower are two of the largest names there.

Ventos, we like a little bit better. More attractive valuation, about a 14 and a half times FFO multiple versus Well Tower 18 times. These guys are benefiting from the post-pandemic recovery. We think no matter what happens, that will continue into next year. And then another property type that we like within there is medical office buildings. So it's not hospitals, but a lot of these are a gym. to hospitals and kind of benefit from those trends. Again, we'll say it again, you still go to the doctor when you're in a recession.

So healthcare reality, ticker HR is a name that we like a lot in that space. You know, the company's been under pressure this year with interest rates rising. They also merged with one of their largest peers, which put a little bit of a weight on valuation. But we think they have the best portfolio of medical office buildings, mostly adjacent to hospitals, which is where you have pricing power. And you have a 7.6% dividend yield right now, which we think we think. think is a steel in this environment. 7.6% in yield. Wow, that's really amazing. So these are buildings that would be owned by REITs as a, I think, when I think of medical office buildings, I think of

doctors banding together and or big medical practices owning those buildings. But a lot of them are owned by REITs. Yeah, so you have a combination of two. So the REITs will own them. Sometimes the health system that owns the hospital will lease the space so they can use it as overflow, overflow space for outpatient services. But you also think about your surgeon, like an orthopedic surgeon. You're going to go to their office. You're going to get a consultation. When you have your knee surgery, your hip surgery, you're going to go over to the hospital.

That physician, that surgeon, wants to have its doctor's space right next door to the hospital. So it's kind of a seamless move back and forth. And so that's where you get that pricing power. The location matters a lot, as it does with a lot of things in real estate. Anywhere you wouldn't want to be, want to have exposure, John? Yeah, I think, you know, within the reed space, I probably would be avoiding things like office space, malls, you know, just generally retail is, you know, there's just some structural headwinds. Obviously, you know, work from home creates, you know, certainly creates some headwinds that are hard to get in front of. The valuations are cheap, but it's just kind of lacks a catalyst from where we're at right now.

But the health care has got the REIT stuff. How about that? There you go. There's another pun for you. John Peterson, thanks very much. We appreciate your time today. Thanks for having me.

Happy holidays. Same to you, sir. Up next, a dream ticket or a nightmare. YouTube paying $2 billion a year for the NFL Sunday ticket. Will it turn out to be money well spent? Plus, not a very merry Christmas for the supply chain. Why this year's troubles could continue in 2023, Power Lunch will be right back. Welcome back to Power Lunch.

The NFL and Google, officially announcing the completion of the deal for NFL Sunday ticket. So what is Google actually getting and for how much? Under the existing agreement, DirecTV paid $1.5 billion annually, and it's estimated they had about 1.5 million subscribers. The base price around $80 a month, not including the dish installation and add-ons. Now, Google is paying $2 billion for the rights, likely to be offered as a standalone as well as an add-on to the existing YouTube TV package that starts at $65 a month. It's not yet announced how much the add-on or the standalone will cost. So who, who will be? wins in this deal. My next guess is maybe Google, but the consumer, not so much. Let's bring in

Sean McNulty. He's a correspondent for the angler. Sean, it's great to have you. Welcome back. Great to be here. Thanks again. So you ran some great math that basically said at two and a half billion a year, what the NFL wanted, you know, YouTube would have to charge like $800 per season to break even. So if they paid $2 billion, maybe that figures more like $600. No matter how you slice it, they're going to lose money unless, according to some analysts, They add about 1.6 million new YouTube TV subscribers. So that's kind of the tradeoff they're hoping to make here. Lose a little on the front end, bring in new subscribers, and maybe make it up that way.

Yeah, but you actually don't even have to have the YouTube TV bundle. You can be a cord cutter and still subscribe through YouTube primetime channels. So that's not even that much of an incentive in this. And the NFL, a virtual conference yesterday, and said, you know, YouTube has their freedom to price this however they want. So it's traditionally been this big ticket item, but there's no reason they couldn't maybe think, okay, what if we did 100 or 150, will we get that many more people in the door to make up for that money again? So that's really going to be the key is what are they going to price this as? Are they going to revolutionize what Sunday ticket is for

the consumer, which obviously we don't know yet, but that's a big question. And then, you know, clearly, what is the appetite for out-of-market games? It's been, you know, on DirecTV, about 1.5 to million people, you know, who wants to watch how many people are on the road and want to watch their home team or whatever it is. But also remember, you have Sunday night football, Monday night football, and Thursday night football, which are not included in this, nor are the NFL network games, which still have a few games a year. So it's not a comprehensive fix for the out of market fans. That's one of the things that stuck out to me here. I did not know this, but that Sunday ticket does not include Sunday night football. It doesn't include

Monday night football. It doesn't include Thursday. And it doesn't include like last weekend NFL network had a Saturday triple header, which they have usually at the end of the season after the college games are done. That's not in here. So I don't get that, number one. And then the other thing is, if I really want to know what's going on all around the league, I've got the red zone that I can watch. Now, I guess that requires a cable subscription, but, and it's owned by the NFL.

So I don't know. I mean, I'm not all that allured by the idea of watching some, a random Seattle, Las Vegas game out of market, you know? Yeah, if you're a Seattle fan who lives in, you know, Kansas City, it's great. Yeah, sure, sure. You know, your guess is as good as mine. It hasn't been large. But you're not going to make $2 billion off of those guys and women.

Exactly, exactly. And, you know, this is going through YouTube. So presumably you're getting a younger demographic. And, you know, the promise with streaming has always been one price for everything. And when a younger demographic shows up and sees exactly what you're saying, seeing, Tyler, they may be like, you want to charge me how much for this? Not to mention, you know, once you go beyond your direct-to-consumer this way, you know, password sharing becomes a much larger issue, which at a high-price tag, you know, it's really hard to see how this math

really pays out other than a lost leader to just get in business with the NFL and also grow their their YouTube primetime channels business. And as you said, initially, Kelly, maybe add some YouTube TV bundle subscribers. But even YouTube TV doesn't have a huge margin. So, you know, and it's only going down cable. That business is declining, as we all know, it's a sector. So it's really hard to see how this makes out other than it's a lost leader and Google has a lot of money and a lot of people kind of been saying that. Sean, what's the bigger picture here as well? So so far we've reported on escalating prices paid for these packages by basically big tech players. Alex Sherman was on with us.

You know, executives he's spoken to have said legacy TV could be going away in five to seven. years. And the NBA deal could be the last big one for sports rights. And then we could start to see the pool of players dwindle to just a few names. You know, you get rid of Legacy TV. That gets rid of a lot. And the prices start to come down. What is your sense of the significance of these deals and whether that kind of trend shift is likely? Yeah, who has the biggest pockets? I mean, the NBA, as you say, is coming up. Their deal will probably be set this year, early 2024. That begins in the 2025-26 season. And that's going to be the next thing. Everything else is set. NFL is set through early 2030s. NHL is a new deal. MLB is some deals in there. So this is the

last big one that's out there. And the NBA has always traditionally been, you know, focused on a younger demographic. So you could really see them making a bigger play, a bigger splash in this digital world, which will be, as you said, the players are not going to be, you know, CBS or other elements of that. It's going to be, you're going to have Amazon, certainly would be very attractive. They've invested a lot in these sports, right? ESPN Plus could be a big move for Iger to make at Disney to give that service a real,

ownable franchise, whether that's just a Monday night franchise or Wednesday night franchise, whatever it might be. But it is going to be our Apple TV, who certainly was in the lead for this Sunday ticket deal for many months, seemingly, and just passed on it. So they have a sports bag of money line around that they could probably invest in the NBA and send them a nice job.

check. So yeah, you're right. It's these digital tech companies that are probably going to lead the way in sports. And the NBA is really, I would say, probably going to be the one league that's going to make a bigger leap into this, in this terrain. Yeah. Yeah. Just don't mess with Ernie Johnson, Barclay and Jack. That's all I care about. I agree by the way. They renewed those guys, too. So, yeah, I know. They have to be a deal. Don't mess with that. Just leave that one. We've got to get them all for the stock draft. You know, it's so fun. Sean, you too. Your friend Ryan Fitzpatrick. Yes, besties.

We'll text me on it. You have the same sweaters. Sean, thanks so much. We appreciate it. Merry Christmas. All right. The trading day before Christmas Eve and all through the market, not a ticker was stirring except for these.

We've got stocks hung by the chimney with care. With hopes, our trader, we'll gift you some picks for the new year. Three stock lunch is now. It's time for today's three stock lunch. Only this time it's a three stocking lunch. Here with three gifts hung by the chimney is Santa. David Wagner,

aptest capital portfolio man. You needed a Santa hat. David, you went with your NASCAR lift today. I know I did. I told my traitor I should wear the one. He told me not to. I told you, Brad. For our first gift, you brought us a pair of, let's call them socks.

Maybe not exciting and fun, but practical. You could always use it. Tell us about the stock, ChemEd. Why does it fit that bill, David? Yeah, Chemet is a fairly unknown and under the radar. company. They are conglomerator action, so they own two business, one being VTOS, which is the number one hospice player in the United States. And the second business is going to be rotor rudder, which is the number one player in a very fragmented plumbing market. And I think that the market

much underappreciates the plumbing business itself. Just look at the water restoration division of this side, which has been one of the largest growth drivers for the company. And not only that, it has turned Kemet into more than just a GDP plus a market share game type of business. So just think about it this way. If you have some type of a plumbing problem. And you go on to Google and you type in, hey, I need a plumber. The first company that's going to come up, well, it's probably going to be roto-rooter because this is a very fragmented market with a lot of mom and pop shops that don't have the scale to actually leverage the technological aspect of this part of the business. And not only that, you're probably going to be a

price taker in this type of situation too, because, hey, you don't have Uncle Eddie on speed dial to help you dispose of some waste into your local sewer. So you couple that competitive moat with a company that has bought back, what, 20% of its shares outstanding over the last 10 years and grown its dividend at a 10% kegger also over the last decade. So yeah, I really like KMED right now. It's kind of my sock type of company because I do think that the market's going to reward stable businesses with great capital allocation policies into the future. All right, let's go to a gift that is kind of a shiny new toy, a little bit more frivolous, a little bit more extravagant. And this is Pool Corporation, which is in a business

its name would suggest. Absolutely. I'd start by mentioning, what did Clark Griswold want to spend his Christmas bonus on in Christmas vacation? It was a pool. So I definitely like a pool here right now. And even though it might have been kind of a jelly of the month club type of stock given its performance for the year, it has gotten very, very cheap to a point where I can't ignore its valuation anymore. It's trading basically at two standard deviations below its historical 10-year averages on basically every single metric. So I do understand why there has been an overhang in the stock over the last 12 months. It's kind of gotten caught up in the slowing housing demand theme.

A couple of the fact that probably entered this year with a very egregious valuation. But I do think that the market is naively focusing on the near-term headwinds when they should be focusing on the longer-term growth opportunities. And the fact that the majority of this company's businesses, from a revenue perspective, come from the services side, not the new build side. So therefore, you know, if there is some type of slowdown or downturn in construction, pool should be somewhat insulated in my mind. So I do like it at this valuation.

And I like it even better, you know, where it is at $300. Okay, let's end with the lump of cold. David, why are you down on Fidelity National Information Services? Yeah, so, you know, Kelly, I think a lot of people right now are focused on Christmas, but they're overlooking my favorite holiday, and it happens to be observed today. It's called Festivist. So I'm going to take a page out of Frank Costanza's playbook, and I'm going to air my grievances on FIS,

and I'll tell you, I've got a lot of bone to pick with these people. You know, what I've learned in my career is that the worst thing that a management team can do is lose the faith and trust of market participants. And over the last year and a half, that's exactly what FIS has done. Lost the faith of investors. And yes, it may be recognized in current valuations. And I would probably give Stephanie, who's the new CEO, some credit that I think she has taken, you know, some correct steps in acknowledging these problems and leading the company in a different direction. They've done a lot of cost reductions and just recently announced, you know, a strategic review that could put a floor in the stock. But, hey, that doesn't mean that this stock is out of the

penalty box right now. While I'm hopeful that, you know, for the name, there could be an investable story around margins and free cash flow. I think the path to a re-rating in the near future is very much unlikely. So those are my errors of grievances on FIS. They're getting cold this year. I don't like them in the near future. All right, Grinch. David, thanks for playing. It's great to see you. We appreciate it very, very much. David Wagner. Happy Festus. All right, same to you. All right, new year old problems coming up, why you shouldn't expect supply chain worries to just simply vanish in 2023. We'll explain. supply chain, maybe the phrase of the year for 2022, probably was in 2021 as well. And according to a new

CNBC survey, it may stay in the vocabulary for quite a while longer. CNBC talked to the people who run the logistics for companies who are members of some of the world's largest trade associations and joining us now with some of the results, CNBC senior editor Lorraine Lorraine, welcome. Thanks, Tyler. So the participants in this survey are the managers of the companies of the associations like the NRF, the American Apparel Association, and 61% of the respondents told us their supply chain is not operating normally, and 32% said it is. And so the big question that we asked them is, well, when will it return to normal? And their answers were dour. 22% said they were unsure, 19% said 2023, and 30% said 2024. But another 29% said they expect

the supply chain to go back to normal in or after 2025 or not at all. Now, the participants said the biggest challenge is facing the supply chains is the availability of raw materials, poor congestion, lack of skilled workers, dwindling warehouse space, terminal rules on picking up the containers, and the canceled salinks. And the tight warehouse space that we've seen is the result of the bloated inventories and discounts are expected because 46% of our respondents said they're seeing, softening demand for their products. And so we took a deeper dive into this and 57% said goods range from agriculture like nuts, tires, RVs, cabinets and furniture. Apparel came in 25% followed by home goods, accessories, and footwear. So let's bear down here a little bit.

Do some of these folks who are in the supply chain business or the logistics business, what do they think of what government is doing, the Biden administration is doing to help make things better, if anything? Well, we pose that question saying, like, do they have a handle of the challenges? And 59% told us they believe that the Biden administration does not have a handle on the supply chain or the challenges that they're facing. Is it up to the Biden administration to solve the supply chain problems? Or is it really, I mean, maybe they can be helpful, but really it sounds like it's a problem

endemic to the companies themselves. A lot of it's also infrastructure-based. So when we peel down the problems, it's the railroads. It's the tunnels. It's the roads. It's the lack of space and the lack of ability to move the product along. Lori Ann, have a good holiday weekend. And to everyone watching as well, oh, where's my ho-ho-ho hat?

Look at you ladies in red here. Yeah, we got Tyler. We got the spirit here. Have a wonderful Christmas. You too. Great end to Hanukkah, everybody. Well, we'll see in the next in the new year. I'm off next week. Yes. Closing bell starts out.