Power Lunch - Power Lunch 12/30/22

Episode Date: December 30, 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.

Bad happy New Year's Eve, Eve, and welcome to Power Lunch, everybody. I am Brian Sullivan, in for Tyler. Maybe you're sipping a mimosa or whatever. Here's what's ahead from the Fed to emerging markets to maybe a generational opportunity and fixed income. We have got your ultimate 2023 Playbook. Plus, YouTube gets in on the NFL. Apple gets into soccer. And an NBA team sells for a new record.

Oh, by the way, our exclusive reveal of the best cities in America for the stock market this year and the worst. Can you guess it's the big power city index reveal and it is ahead. We'll get to that, but let's get a check on the markets. Kelly Evans, what are you doing here? Let's do it. We're getting ready for New Year's Eve, Eve, everybody. Welcome to Power Lunch. I have a lot of the bad news to run through, so bear with me.

First of all, it's a down day. The Dow's down 300 points. The S&P is down 1%. Could be one of the highest number of 1% drops we've ever had in December. The NASDAX down 1.1%. And the S&P at this level below 3812 will post a 20% drop for the whole year. year. The worst year since 2008 for all the major averages, snapping a three-year win streak. The Dow, by the way, off less than 10 percent, so it's the outperformer, the NASDAQ down by 33%.

Energy, the outperformer, the only happy thing we can talk about, up 58% this year on pace for its best year ever. Communication services, which is boring but has the exciting names, Alphabet, Netflix, and meta, it's the worst of the group, down 41% and breaking its three-year win streak, Brian. All right. Well, just a couple of hours left in the training. year, and we have tried to work hard this year to get you prepared for next year. But now it's time to kick it up a notch with the ultimate power playbook, what to expect from the year ahead. On the key macro market fronts, we got Steve Leasman on the Fed, Cimamodi tracking emerging markets, and Christina Portsenevolos taking a look at what some may think is the generational opportunity

in fixed income, but let us start with Steve and the Federal Reserve. Steve. Hey, Brian, thanks. The Fed is going to be hiking and holding next year while it cuts. balance sheet deeply. But with the question of how much rates eventually rise, a matter of strong debate, the only certainty is the Fed's going to be a source of ongoing volatility for the stock and bond markets in 2023. The market has the Fed price to hit its peak rate in June at just under 5%. Then gradually, they're priced in an easing over the year towards 460. In both February and March, there's upwards of a 60% probability of 25 base point hikes in each month. That brings the funds rate to 488. But disagreements over the outlook.

They start in May where it gets interesting. The market trades with a 7% chance of a 25 base point cut, a 40% chance of no change, another 40% chance of a 25 base point hike, and a small probability of a 50 basis point hike. That pricing reflects the broader debate for 2023 on growth, recession, and the outlook for inflation. What's less debated, the Fed's plan to reduce its balance sheet. That's supposed to come down by about $1.1 trillion next year to around $7.4 trillion. that should have more of an impact on stocks and bonds as the year goes by. Kelly? Wow. Steve, thank you. Emerging markets, meanwhile, set to end their worst year since 08. Do investors see a path forward there? Sima Modi has more. Seema.

Well, Kelly, with the exception of Europe, international stocks didn't fare any better than the S&P 500. For next year, there is growing consensus, though, around a China rebound. City turning more bullish, Evercore ISIs, ISIs, Neil Wang, saying he does not see Beijing backped, on its reopening plans despite rising COVID cases. J.B. Morgan, expecting the China rebound to fuel emerging markets, projecting a 14% gain next year. Now, the outperformance of China and the emerging world could hinge really on the direction of the dollar, investor Jeffrey Gunluck telling CNBC earlier this month that the USDA has already peaked in that it should continue to weaken going into next year. A commodity-linked markets like in Latin America faring better than the rest of the world this year.

Hedge fund investor Will Landers at BTG Pactual telling me, He's less constructive, though, on Brazil, citing the uncertainty around the new president, Lula's leadership, but he still is a buyer of names like Brazilian bank, Itao, and car rental company, localiza. He's also overweight I-shares Mexico E-TF, EWD, on this bet that more companies will diversify their supply chain and sort of near-shore operations to Mexico and other countries like India, Brian. Yeah, it's going to be crazy looking around the world with everything that is going on, particularly with energy prices. Simomodi very quickly. Is that kind of the focus? Is energy going to be the thing? Not that I care about energy or anything. No, I think you're exactly right. It's clearly played a role in driving number of markets, including Mexico, Peru, and Brazil this year. That's why those three markets are outperforming,

emerging markets in general. So it really hinges on oil and other energy prices, whether they move higher or lower. That could play a big role in whether these countries outperform next year. Seema, thank you very much. All right. So as the third part of the trifecta, for the last decade, bonds have been anything but sexy for most fund managers. But some are expected. a big resurgence in the year ahead. Christina Parts de Nevelas with this story. Christina. Fixed income yields have been so low and it's been so tough for bond investors to find value. But a new Bank of America Fund Manager survey shows investors are actually overweight bonds relative to any other asset class for the first time since 2009. So why is this happening? Well, yields mean higher interest payments.

And those yields like we saw Steve talk about are expected to stay high as the Fed has signaled no immediate pivot until inflation falls and the labor market weakens. And you've got many experts right now. You know, they're suggesting some bonds in the first half of next year. Some suggesting short duration given the Fed uncertainty like the I-Share short treasury bond ETF that you're seeing on your screen, while city analysts say don't miss out in the explosion of corporate bond ETF options like IG and LQD, also seeing that on your screen screen. Well, how about Munis, wasn't it?

We still think the fundamentals are pretty solid for most municipalities. and we think that the incomes are good at the state and local level still. So we think that there's strong fundamental metals. We do like municipal bonds here. Bonds and ETFs that track bonds may not be as exciting as crypto or big tech, but they could offer stability as we head into an uncertain 2023. No, it's, it's, you know, I was going to say they're sexy again. I don't know if we could say.

Boring is the new sex. Bonds are sexy again. Yeah. I mean, you guys don't see if you know what I'm talking about. We just got the. stats in, Steve, for the bond market. The biggest increase in, I think, the 10-year yield, let's see, 13% increase there. 10-year treasury yield closes, yeah, up by the most in, by the biggest annual increase since at least 1953. Yeah, it was a rough year. And you remember

there was a moment there. I guess it was in November when things were, when the 10-year was falling and then it turned around. And I think a big sort of somewhat underweighted story, I'd say, was the turnaround in Europe and the turnaround in Japan. And I think that's a new factor for the Fed. I wonder how they're going to be factoring that into their monetary policy in that they are now getting help on the serious help on the inflation fretting front from overseas.

And I think that's going to play a factor. I also think, as I said earlier, that you're going to get to a place where reducing this balance sheet is going to be having a more profound effect and it's had so far. So all of that may mean the Fed can do a little bit less here. Maybe it should do a little bit less because of that. But the question is when the Fed recognizes that's the case. Maybe we'll call it the Justin Timberlake market.

We're bringing sexy back. No, don't shake your head. Look, I seem a smile. Christina, come on. I mean, you know what I'm getting at. Hey, 5% return with some tax benefits. If you're buying direct from the Treasury on your state tax, like that 5%, maybe the new 25%, Christina. Exactly, which is why maybe it's best to focus on more short-term duration, three months, even less than a year. The returns are anywhere between 3 and 5 percent, like you mentioned. But the point is that a lot of the bond experts I spoke to are still suggesting that you should stick to short duration, you know, shorter term lengths as well, just for the

first half of the year. Bank of America One report, they were actually suggesting bonds over equities for the entire first half of the year and then pivoting to that regular 60-40 ratio that we're supposed. supposed to have in our portfolio, but has seemed to have failed for many just over the last year. And the only, Sima, the only fly in the ointment here is we're all sort of gushing over bonds is if rates do go higher. I mean, listen, we're all reminded this year, oh, yeah, just what they print on the yield is not exactly going to be what you pocket in returns. And China is a factor here as well. It's not just all about the Fed. I'm really curious to see as that reopening proceeds

if that boost global GDP and helps send yields higher and all the rest of it. And if it's inflationary and if it sends oil prices higher, how does that, you know, what the Fed does next. So sure, a lot of different factors to be considered. I would point out, still on average emerging market debt yielding 5 to 7 percent. So still getting a better rate overseas than you are here in the U.S. despite the run-up we've seen in yields this year. So that's something to consider as well. Steve, what's the biggest thing on the leasman rate? Brian, I want to make one point real quick, which is that these corporate bonds are interesting. Emerging market debt is interesting. But you have to make a case that these bonds are mispriced

relative to the market and the risk that's out there. If what Kelly suggested comes true and the rates go higher, there's going to be risk. Next year, I think, is a year of reckoning. It's a year of reckoning of businesses and countries that have lived and prospered at very low rates to next year, they're not going to have those low rates with which to prosper. And we're going to see separate the women from the girls and the men from the boys when it comes to financial foundation and basics. here and it's going to be an interesting year.

Not everybody's going to make it through that gauntlet next year. I do worry about commercial real estate, Steve, to your point, right? Some of these big giant empty buildings in New York and San Francisco is a lot of debt that was issued to pay for these buildings, which are now sitting empty. Yeah. To that, may I just chime in for that? That's why the prediction for a lot of default rates are expected to double. I think it was just Moody's on Wednesday.

I was reporting about that, and they are thinking that it's going to go from 2.9. to 4.9% to 4.9% for global default rates around the globe. So that's to your point. And another cautionary point for everyone salivating over bond yields. Maybe, hopefully you don't have to worry about for treasuries this year, but for a lot of other places, you know, tread carefully. Thank you all. We appreciate it today. Steve Leasman, Sima Modi, Christina, parts in nevertheless. Let's stick with the question, though. Our next guest says bonds should be part of your portfolio. David Spika is president of Guidestone Capital Management. All right, David, make your pitch. Well, let's think about it. For 13 years, we were told, don't fight.

the Fed. And that meant the Fed with lowering interest rates, flood the market with liquidity. So to get a decent yield, we had to go out on the risk curve and buy equities. And that worked. Now the Fed is raising interest rates. They're draining liquidity out of the market. Why are we fighting the Fed? Let's go to the part of the market that the Fed is favoring today, short-term high-quality bonds. You can get 4% in money market. You can get 4.5% to 5% in high-quality short-duration bonds. We absolutely think that's an excellent place to be. especially when you consider that the market probably has another 10 to 15% downside from here. Wow. So let's go back to, you know, it sounds kind of easy to say, but high quality short-term corporate bonds.

I mean, this is not something, you know, someone sitting at home who could otherwise, you know, be in and out of ETFs or whatever. This is not as easy to execute. No, I think that the average investors should be buying bond funds. There's lots and lots of really good quality bond funds out there where you can get the yield. you'll benefit when rates eventually start to fall, which will happen once we go under recession. However, this higher for longer posture of the Fed could keep rates elevated for a while. And what Steve Leasman said made a lot of sense, this higher interest rate environment is going to have a dramatic impact on sovereigns, on corporates, on equities across the world. And if I can sit in high-quality bond fund earning 5% while the rest of the financial markets continue to suffer volatility,

that's a pretty good place to be. Let's talk about some stock picks and some opportunity heading into the new year. One of the names you like is Stryker, not Ted Stryker, but Stryker, the medical device company. Yeah, the companies that we like Brian are companies that have good earnings visibility and have somewhat of a recession-proof business model. Strykers are good example of that, trading in a rich valuation, but of course right now you're going to pay a premium for safety. But Stryker produces reconstructive joint and spine products.

Great opportunity with the growing aging population in the world and the fact that people are needing more and more of these sorts of treatments. A great place to be a consistent double-digit grower that's going to fare well in a volatile environment. You like Humana as well. David, health care obviously names like Mark and the Dow, these were a standout this year. Does that continue? Is that a safe place to be? Well, you call them health care, but let's think about this. These aren't companies that have exposure to damage.

drug prices or regulations on drug prices. Humana is a very, very high quality insurer. They have the opportunity in 23 to raise their premiums while kicking costs down, which is positive for their margins. They're one of the leaders in Medicare Advantage. And again, a very consistent double-digit earnings grower. When earnings are scarce, investors pay up for earnings visibility, and that's where you get in a company like Humana.

Play the Justin Timberlake music because what is it? Bringing boring back. health care, bombs. The Justin Timberlake Market. Coyant it. Thank you, David Spieco. We appreciate it. Happy New Year.

All right, coming up, as China and Macau reopened their doors to millions of Chinese gamblers, is 2023 the year to place a bet on the casino stocks. Plus, the Power City indexes are back, our big reveal for the top three cities in America for the stock market, and the mayor of that Power City will join us. And by the way, here's maybe a hint as we had to break. I look at the big S&P winners and losers this year. Your winners, notice a trend, Occidental, Hess, Marathon, Exxon, and your losers for the year, Generac, Match Group, Align Tech, SVB Financial,

and Tesla got 65%. We're back after this. All right, welcome back. In this overall lousy year for the stock market, you're probably wondering, what American cities did the best and the worst in the stock market. Well, we know through what's called our Power City Indexes. Now, we haven't done them in a while, so if they're new to you, here's a quick recap. We built stock indexes with the 11 or 12 biggest market cap companies across 37 different cities and metro areas.

Chicago, New York, L.A., Houston, Philly, etc., but also places like Silicon Valley and San Francisco, they're close, but they're distinct areas for business. Now, we equal weight all 11 or 12 stocks, and then we simply follow them and average them up for the year. And quick two notes before anybody gets all jumping. Number one, some companies may be headquartered just outside an actual city, but still in the metro area like Downers Grove versus Chicago. We get it. That's in Chicago. And two, these are made for fun and a little friendly competition.

They're not actual investable indexes or ETFs. So, though, hey, you never know. All right, so let's go. Now, this year, obviously, a really bizarre year for the markets and for the Power City indexes as well. Only two cities actually had a positive year and one just barely. Now, we're going to walk you through the top three cities for the stock market this year. But before we do that, we want to start the year with the Razzie of the year, if you will. The worst city for the stock market.

City we talked a lot about yesterday for all the wrong reasons. And the Womp Wump Award goes to San Francisco. Francisco, all 12 of its stocks and its PCI, they fell. Look at that. The average return was a decline of 54%. Every stock dropped. You had huge drops in Twilio, Octa, DoorDash, et cetera. By the way, this is only San Francisco. Silicon Valley is a separate index, and they actually came in the second worst. Sorry, San Fran. All right, enough bad news. Now to the good news. All right, Let's count them down. The top cities for the stock market this year.

Coming in at number three, the capital of car racing, Indianapolis. Power City Index posted a loss of just over 6%. But even with the loss of 6%, that made it the third best performer. Eli Lilly had a big year, followed by Calumet specialty products, Kelly's favorite company, and Allison Transmissions. The second best city for the stock market this year, my mom's hometown, Gateway to the West, St. Louis. double-digit gains by Reinsurance Group of America,

Amdocs and post-holdings, helping mitigate losses in stocks like proficient in Corr and Maine. Look at that. Reinsurance Group, St. Louis, squeaking out a 0.2% gain, but a gain nonetheless, you go, St. Louis. And now it's time for the big winner. This should not be hard.

Houston. Kelly, present it. Come on. Show him the hat, everybody. Houston gets the draft hat coming down. That's right. Now, I thought Brian just rigged this so he could talk to Tillman-Fortita about it, but it turns out they've done that all on their own merits. There we go.

Houston is the top sitting. I mean, this wasn't hard. No, it was obvious, guys. But we're blocking the returns here. All right. Because we're both, like, tall. Back to you. No, no, no.

Look at this. Average gain of 12 percent. Almost every stock in Houston was up. A big energy story. Huge gains in Occidental ExxonMobil, Schlumberzay, now knows SLB and more. Had a couple losses. Crown Castle. So what are you doing? Down 34%? Lionel Basel, down 10%. But overall, Kelly, Houston.

Applaus to them. H-Town. There we go. Let's bring in the mayor of Houston, Sylvester Turner, who we can also see is applauding. Mayor Turner, congratulations. I'm frequently in your spine city for all the right reasons. Congratulations. But on a serious note, I mean, listen, it's an uncertain economy. This has got a matter for the economy. How do you see? see Houston doing right now? Well, you know, I'm very proud of where this city is, but I'm even proud of where the city is going. We have diversified our economy over the last 20 years. And quite frankly, you all know, we're known as the energy capital of the world, but now we're focused on leading an energy transition. So that area is really growing. But at the same time, when it comes to

life sciences, health care, you all have been talking about it. your program, the Texas Medical Center, the largest in the world right here in the city of Houston. They're looking at expanding by 20 to 25 percent. And the focus is now not just on medical services, but entering into that commercial sector as well. I'm very excited about that. The port trade, we have the largest port in the United States in terms of foreign tonnage. And in almost every category, the port of Houston has been exceeded. preceding previous expectations. So proud of what's happening on that front.

So a lot of good things. More Fortune 500 companies are moving into the city of Houston, NRG, Axion, Hewlett-Packer are all here. And then what's happening at the spaceport in the energy in the city of Houston is just growing by leaps and bounds. So intuitive machine, Axion, colonelonautics, they'll be a bit of building, creating jobs. So when you look at jobs, capital, all of those things are looking good in the city. Mayor Turner, I have to imagine that, you know, a lot of people think this is a difficult

award, right? It's fossil fuels are supposed to be going away and all the rest of it. Now, I think the energy crisis year has reminded us how much we need and are grateful for this industry to kind of get us through the energy crunch. But you have to be thinking long term about what happens if people really start to push this stuff to the sidelines. Well, and we are. And we put forth what we call our resilient Houston plan and even our climate action plan. But we are not demonizing our energy sector. We're working in collaboration with them. So the focus right now is to build clean tech, climate tech companies in the city working with Green Town Labs that has expanded to Houston from the East Coast. And they have exceeded their expectations on the construction of these companies. We're focusing

on clean hydrogen. We're focusing on carbon capture utilization and storage, thermal energy, all working in collaboration with the energy sector. Mayor, let me just ask you one more question. You know, yesterday we were talking about a lot of the social issues, cities like San Francisco face. And I'm curious what you are trying to do to make sure that, and again, I haven't been to Houston, Brian can speak more to this than I can. You've what? You've never been to Houston? I probably been at some. Mayor Turner, we got to remedy this.

I've been to sitting a plane for you, right? I'm sitting in a plane for you. I've been to Dallas. But listen, I was just going to say quality of life issues. You know, we, we're in New York. We're dealing with some of the same stuff. Quality of life issues, is there a clear plan for Houston to make sure that it's not just, you know, when your fortunes turned the other way, much like happened with tech in San Francisco, you know, how do you keep the city safe and clean and resilient for everybody? Well, let me just say, even in terms of public safety, I wouldn't, I would, I would not, numbers in.

in terms of crime in almost every violent crime category is down in comparison to last year. When you talk about homelessness in the city of Houston, I know there's a lot of conversation about the East Coast and the West Coast, but the city of Houston is leading the way nationally on the reduction of homelessness in our city. We have less than 3,000 people who are homeless, not just in Houston, but in the region. And we're working on reducing that even more. When it comes to green space, our focus is on parks and green space, quality of life. So we are laser focus and not just focusing on energy and life sciences, but on the things that also matter to people.

The arts, that represents the soul of our city. And that's first off, Mary, that's why we got to get Kelly. Next time Tyler Mathis is on vacation, we're taking power lunch on the road. I know a guy that owns a nice hotel called the Post Oak and about 700 restaurants. And, you know, it's got amazing museums. It's got amazing restaurants. It's got a world-class zoo. I took my 7-year-old last year to the zoo.

It's not, people think it's like these refineries. Yes, they have refineries. But it's not like you fly into Houston. It's like New Jersey. It's just all turnpike. No, it's not. Mayor, there's one other thing when I think of Houston. I unfortunately do think of these.

and it's the horrible hurricane that hit and the overbuilding and the sort of the concrete knock that that the city got back then. Have you turned a corner on that? I mean, how do you re-engineer a city that built and expand it so quickly to make it more resilient in the future to storms? And we are re-engineering. It's not about building out. It's now about building up. And it's about building a city that's highly resilient. We were built on the Bayou City back in 1836. So we were built on the Bayou City. And now is how do we live with water and how do we do it in such a way that we don't sacrifice the quality of life or people who live in our city, businesses that are doing business in our city, and how do we continue to attract folk?

So when you look at what's happening, that's why the action plan has come into existence. Very quickly before you go, Mayor Turner, from a business perspective, in a given month, roughly, not holding you to do it, but roughly, how many CEOs do you hear from that say they might like to move from somewhere else to Houston? I hear from them on a regular basis, and I'm on conference calls, Microsoft team calls, or Zoom calls all the time. And we have been very successful in encouraging companies to come to the city to change the principal headquarters like NRG, Hewlett-Packard, AXEM.

All of these companies have decided that Houston is the best place for them as we move into the future. Well, your NRG is a little sort. spot. They're stealing them from central New Jersey near where I live. They're leaving New Jersey and coming to Houston, but they're already naming half the things there anyway. Mayor, Sylvester Turner, really appreciate your time. Congratulations. Top City for the stock market. Happy New Year. It's going to be Happy New Year. Houston. Happy New Year, Brian. Happy New Year. Thank you, Mayor. We really, really appreciate it.

Where's the online? Do you have online the whole list of people want to find out here? Houston has the Internet? No. Do you have the list online if they wanted to wear in my city for Baltimore? Baltimore. Denver. No, but that's it. I think you just gave me a homework assignment, Evans. I know your dad's a college professor, but come on. Okay. Yeah, I should do that, though. We should rank the whole power city indexes. Yeah, absolutely. San Francisco terrible. Silicon Valley's second worst. Baltimore was third worst. I can't tell you that. Under Armour. Right, exactly. Right. Only 11 stocks. We can probably guess the extremes, but it's the ones in the middle. They're rather interesting.

Yeah, I don't think this year was hard to figure out. We used to do these all the time. Let's bring it. Wait, we've got to bring them back, right? And we got to get you to Houston. This is ridiculous. I've been to a lot of parts of Texas. I just for some reason haven't been to Houston. Parts is parts. Big state, by the way. Still to come. For 2023, the cards are dealt, and it's time to inspect your hand. Casinos have some good news, some bad news. Good news is China's lockdown easing could be a boom for Macau. Bad news, recession risks could hurt Vegas. It's now the time to up the ante or fold. Plus our three-stock new year, our trader lays out two buys into sell for 2023 in a special edition of three-stock lunch.

And here's a look at this year's Dow winners. Chevron, Merck, Travelers, and Amgen. By the way, Caterpillar was number five. That's interesting. But Chevron leading the way up 52%. Go Houston. Well, is that California? Anyway, we'll be right back.

Welcome back to Power Lunch. Here's what's happening at this hour. Add Britain and France to the growing list of nations requiring COVID testing for travelers from China. Visitors arriving from China must provide a negative COVID test less than 48 hours old. Neither country has set a start date for the new testing rules. Meantam, the world continues to wait for.

news on the health of a 95-year-old retired Pope Benedict. The Vatican says he remains in stable condition and was able to rest comfortably overnight and participate in a private mass in his room. And in Kiev, volunteers have been preparing a Soviet-era holiday salad for Ukrainian troops on the front lines. It's a New Year's treat that is not meant for vegetarians. This particular batch includes 2,200 pounds of sausage and gallons of mayonnaise. The volunteers are trying to beat their production from last year. Now, when they were able to send seven tons of the festive salad to to hungry soldiers. Brian? Love it. Volunteers, what do they say? Not paid, not because they're worthless, but because they're priceless. Yeah, exactly. I'd never heard that, but that's a great way

to put it. There we go. And you've never been to Houston. And I was just hoping you weren't going to say anything about the mayonnaise in that. I don't want to get back in that miracle whip fight like it's Twitter ablaze. All right, all ahead on power lunch. The game is a foot. It was a big year for the sports business world, billion spent buying teams, selling teams, and streaming rights, but is the sports spree just getting started? Ruin Capital founder and CEO George Pine will join us next. We'll be right back. Welcome back to Power Lunch. One lesson we learned from the financial crisis was that sports valuations rarely fall, even in the worst of economic times. 2023 could put that to the test. A tech giant has spent billions to get into the sports streaming business. We just had an

NBA team sold for a record $4 billion. And one of the few companies to have raised money lately, billions of it, was a sports licensing company fanatics. So can it keep going or will this time be different? George Pine is founder and CEO of Bruin Capital, a global sports and entertainment company. George, it is great to see you. And do you think the industry can hold up this time around as well? Oh, great to see you, Kelly, and happy New Year's.

But absolutely, you know, sports for 30 years has grown a double-digit cager. So it's been a very resilient class. If you look at last year, I mean, recently the Phoenix Suns at a $4 billion valuation. Chelsea, $3.1 billion is amazing. The Denver Broncos, sounds crazy as it sounds, probably at $4.65 billion was a steal. It's $2 billion. And as you mentioned. Sorry.

No, but it's true. I mean, George, this is, I guess, the point. And we have seen in the UK, they saw things wobble a little bit with that kind of disastrous auction for Premier. You're like really great in 2018. But now that we're reaching a point of max saturation and we're starting to see different big tech devices, streaming platforms get down on this game, the audiences aren't going to be what they once were. I don't know. Do you think that these valuations will be justified?

If legacy cable goes away, like Alex Sherman, you know, sources have been reporting in five to seven years time, could we actually see the value of these sports rights start to fall? And what would that mean for all of these big acquisitions? You know, I don't think so. One, you have a scarcity. There's only a limited number of these premium brands. And two, I think the lifetime value of the consumer and data is going to unlock a whole new category of value. And sports are still the only things that grab big audiences and engage people in a very passionate way.

So I don't think there's any evidence to suggest that that's going to happen. It's possible because there will be a change in the way media is consumed. But we don't see any evidence of it. And, of course, you just saw the NFL with YouTube a break a new record in terms of what the value of that. those rights are. So we haven't seen any evidence. And this is a question we've been answering for 15 or 20 years. Yeah. And by the way, George, randomly, I sat next to a guy on a plane. He was a fan of yours fan of fan of CNBC's of Charlie Besser. So he says, hello, by the way, in Chicago-based. You guys know each other. So there you go. In a sports sports. Yeah, good man.

That's it. Yes. And he was talking to me about how great pickleball is. Oh, no. No, seriously. And pro league. So I asked that for a reason. It wasn't just random, which is a lot of sports on the Ascension, George. Do you see some sports that are on the decline? Where is their work to be done? Not everything can boom. Yeah, you know, it's a good question. I mean, obviously, in the major sports,

baseball is probably the most challenged with 162 games and an older demographic. One of the sports on the rise is women's sports, particularly in the Euro, European Women's Championships, was an amazing success story. You know, I kind of like the, National Women's Soccer League here in the United States. So I think women's soccer globally is on the upside.

Baseball probably has the most head wins, but are still strong. Baseball. Is there any fix for baseball? The purest will tell you, we got to have 162 games. Otherwise, all the records don't matter. But at some point, do you just say that was the old baseball? The new baseball is going to be 85 games in a season and no game longer than three hours, unless it goes to extra innings?

What's the fix? I think you've got to look at those things, shortening the season, bringing in new elements to the game, maybe shorter games, maybe seven innings versus nine. We saw them experiment with that in COVID. It went quite well.

So you definitely have that pull between the purists and the reality on the ground that young people today sitting in one place for four hours watching something is unlikely. So you have to adapt your game for the future. And I'm sure those are the things.

things. You look at the things baseball is putting in for pace of play. They're looking at shortening the game and other innovations. And kind of implicit in what you said about baseball, makes me wonder about your view of Apple. I mean, they've signed the MLB deal. They've signed, I think, the MLS deal. And I don't see people exactly like, you know, trying to rush into men's soccer right now. Maybe I'm wrong. Maybe that will change and pay off. Are they making the right moves? And should they decide, you know what? Pickleball. That's what we're going to be the platform of pickleball. It's the future. It's booming. I know it is.

I think for Apple is a good move and for Major League Soccer. Look, the young generation, the growth move is in streaming. The problem is the money is in the old media. So MLS was able to find a partner that check the box financially, depending on how you look at it, they double or tripled their rights fee. And they've got a partner now that can take them places that they couldn't otherwise go through streaming and the younger demographic. And the demographic of the MLS really matches Apple.

And so what's new in sports, you have YouTube and Google coming in the NFL, you have Amazon and trench in the NFL, and now Apple with MLS. So you're seeing new players coming in that bring a new demographic to the sports properties. George Pine, real pleasure, by the way. And a shout out. We've talked about it before to your brother, Jim. I went to hockey, Virginia Tech at the same time. One of the best centers in college football history is brother Jim Pine.

Dynastic family over here. Unbelievable. Yeah. Go Hokies. Go Hokies. Frank Bimper and the Virginia Czech Hokies. See, he's going to be back on the show every week now. Yes, he is. Except Tyler's a cavalier. Oh, don't start some drama. That's a problem. All right.

Is Macau bracing for a boom? COVID restrictions in China finally lifting, but there could be some bad cards hidden in the deck. We'll talk about it coming up. All right, welcome back. Kind of a mixed year for the casino sector. You got to grappled all kinds of things like big restrictions in China against just a wide open and booming Las Vegas. So what's going to happen next year? Contessa Brewer is here with that. Contessa.

Hi there, Brian. Casino companies are getting ready for a new year with big changes. Macau, the world's gaming capital, borders have reopened, concessions have been renewed, and billions in new investment have been promised. All this should be the fuel for the mother of all pandemic rebounds, but the COVID surge across China is reigning in expectations for an immediate boost in tourism. still is a virtue for Las Vegas Sands, wind resorts, Melco, and MGM resorts. Secondly, what recession?

Casino companies across the United States are doing a booming business in spite of inflation that seems to have affected other areas of consumer spending. Boyd, Bally's, Penn, and Red Rock are watching their regional and local casinos for cracks in the business.

Third, Las Vegas on steroids. This has been a record-setting year for profits on this trip. 2020 could propel Sin City to new highs, a packed convention calendar, entertainment, I mean, Adele, hello, and sports, the highlight, of course, F1 in the fall. MGM and Caesars are the biggest operators on the strip. Watch those bottom lines. Finally, gambling is expanding. Chicago's getting its first casino. New York City licenses will be given out. Texas is very seriously considering legalizing sports gambling. But concerns over

problem gambling pose new hurdles. for the likes of Fan duel, owned by Flutter in the UK, Draft Kings, and Bet MGM. 2020 will be an exciting year in gaming. You can bet on that. Kelly, Brian. Yeah, and those casinos hoping. Mark Douglas, Brian, last hour was saying he thinks F1 will be the biggest Vegas event ever. I've already booked my travel.

Are you serious? 100%. There used to be a Vegas. There was one year. I think it was 70, 1980, 79. I think KK. Rosberg won the race, I think. I'm a big fan. You weren't even born then.

Even Kelly's or even Contessa's dog like that segment. You saw that. Contessa, thank you. Contessa Brewer. Coming up, New Year's stock resolutions. What to buy, what to sell, and a special edition of three stock lunch. And as we had to break, here's a look at this year's biggest Dow losers. Intel, Salesforce, Disney, and 3M.

It's the worst year for Disney. Here you go. Speaking of that era, worst year since 1974. We're back in a moment. Welcome back. It's time for today's three stocks. lunch. So let's take a look at two potential buys and one to sell investors should consider staying away from in the new year. Craig Johnson is with us today. He's the chief market technician

at Piper Sandler. There he is. And look at our three fun champagne bottles today now that we know whether or not they are actual champagne. Anyway, Craig, let's start with Rockwell Automation. You think it's a buy. Why? Yeah, Kelly, thanks. So if you look at the theme that's happening across the world at this point time. It's a reshoring theme. And if you look at a stock like Rockwell Automation, you can clearly see on the chart that we're making a pretty nice bottoming setup in here. Now, the stock is down 27% year to date, but you're up 35% off the lows. And I think this stock is only just starting to work as you're starting to see a move back above your 50 and 200-day moving average and potential breakout back to the old highs. So that was one that I'd be a buyer in here.

All right. Next up is Energy Name E-O-G Resources. Greg, love having you on, by the way, happy New Year, my man. What do you see in EOG? Happy New Year, Brian, and I'm glad you're talking about the energy names. You do a great job covering them. So if you look at EOG, it's been a very consistent and steady performer in here. You're back above your 200-day moving average. You can see from the chart, you're back above a nice trendline support in here. And from our perspective, any short-term pullback should be opportunities to be buying the shares of EOG. All right. There you go. The final name, semiconductor stock, Micron Benetub. one lately. What do you do? So, you know, Kelly, I think 2023 is all going to be about talking about

this market, X the technology sector. And certainly if you compare the two other stocks, we've got two micron in here at this point, you can see that micron is still making a series of lower lows and lower highs. And it looks like it's very close to be breaking below those September lows. So from our perspective, I don't think the bottom is made here yet. And this is a stock that I think you've got to continue to reduce. And well, frankly, you have a little bit more time to take any tax losses at this point in time, too. Yeah, and if you're right about that, then it doesn't make me feel that great about the rest of the market.

What are you thinking in terms of positioning? Well, I think at this point in time, when I look at our relative strength work, clearly technology, consumer cyclicals are both in total return declines at this point in time in our work. I would tell you that I think this is going to be a market ahead where you still got 17 to 18 percent upside in 2023, but it is going to be coming from not necessarily,

consumer and not necessarily tech, but I think energy is going to do well. I think industrials are going to do well and also financials. So it's going to be a market that's going to be X-fang, ex-tech, but certainly there is good opportunities. It's always five o'clock somewhere when you look at the charts. All right. You mentioned a couple of them earlier. Craig, we'll leave it there. Thanks so much. Happy New Year. We appreciate it. Happy New Year. Craig Johnson. All right. All ahead from artificial intelligence writing for you to transitory, proving to be the most mocked word of the year. Our top stories of the year is next.

All right, we want to end the show in the year for this show with a look at what we thought was the story of the year. Mine is basic. I mean, it's not the energy crisis in Europe. I think that's big enough. It's going to continue. This year's story, I think, was inflation. It's coming down.

That's the good news. But still inflation has been sticky. It was proven to not be transitory. I know people are talking about it coming down. It's coming down a little bit. But for a lot of families, food costs are out of control. cost still out of control, energy costs still out of control. So inflation, good luck everybody next year. And let's hope these wage gains make up for it because inflation, once it's here,

is really, really hard to get rid of it. Can I give a wonky spin on this? My word of the year in that bucket would be demand-driven inflation. Can we all finally agree that this wasn't a supply chain-driven story? It was a Fed stimulus. Fed fiscal government, $10 trillion of stimulus. nominal GDP grew 10% last year, inflation surging, asset prices up, price of everything up, and then the Fed turned and hit the brakes big time. And now that is the biggest story. Well, don't give away too much. We have a 6 p.m. show tonight somehow.

And we have a poll. We asked on Twitter. And by the way, it's still up and live. Check it out. What is the main cause of inflation? A lot of people and I had four options. We're going to unveil the results coming up tonight. A lot of people said, why didn't you put in corporate greed?

Corporations have always been greedy. Yeah, yeah. That's not going to get you in nine. percent CPI. No, no. They'll be, they'll be greedy when they have the liquidity environment to take advantage of, sure, in the same way that, you know, anybody would, but no. And yeah, it's, I feel it's part of a reason, perhaps, but like most companies mostly are increasing profits by shrinking sizes. By the way, speaking of that, I went to a fast food restaurant. I will not name a chain. I got a chicken sandwich. I thought it was a joke. Like, I got a slider. A slider, yeah. It was like,

they must have shrunk in by, I can't. I can't, because I can't prove that it was smaller. It was like literally a little bigger than a silver dollar. What did it start with? I can't say it. Okay. We'll leave that alone. But we take it. Listen, we have all experienced it that shrinkflation.

Because I don't know if they shrunk it or maybe they just put mine in the dryer before I ate it. And by the way, it tasted like that too. All right. Let's talk about my story of the year. And it actually wasn't even demand-driven inflation. Okay. I'm calling it the chat GPT phenomenon. Brian, you know about chat.

Oh, yeah. Yeah. I mean, listen, we're always. We're all kind of sick of hearing about it. But this is what, this came on the scene in such a quiet way, just the last couple of months. We had the image AI generators earlier this year. Now you have these text generators that are so easy to use. You have people saying we shouldn't have even released these into the wild because they're going to pollute the internet in the future.

This only reflects the internet up through the year 2021. People watching, if you don't know what I'm talking about, Google at ChatGPT, Google Playground, sign up for an account, use it. It will blow your mind. You'll have to know this is what your kids will be doing to write letters, write their papers. Write their papers. Absolutely. Very quickly. A bunch of interviews, Goldman Sachs Energy Conference. I have to go to Miami next week.

Twist my arm. We got Chesapeake, Sun Run, Shaneer, and Pioneer all coming up next week in Miami. We got the 6 p.m. show tonight with Tilman Fertita. Oh, watch out. That's a way to end. Water down. Thank you for watching Power Lunch, everybody.