Power Lunch - Rally On, Coinbase Cuts and a Trilateral Summit 1/10/23

Episode Date: January 10, 2023

Stocks are higher again today, with small gains for the averages but some big individual movers. We’ll highlight the day’s biggest gainers, and tell you where to invest in this market. Plus, Coinbase shares are building on their recent rally, despite the company announcing it’s cutting nearly 20% of its staff. We’ve got the latest details. And, President Biden is meeting with Prime Minister Trudeau of Canada, and President Obrador of Mexico today. We’ll tell you what’s at stake. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome everybody to Power Lunch, along with Kelly Evans. I'm Tyler Matheson. Here's what's ahead on a busy Tuesday. Climate change, two words that everybody is talking about today. President Biden discussing it at the North American Summit. Fed Chair J. Powell talking about the Fed's role in fighting it. And lots of people talking about the news that the ozone layer may in fact be get this healing. Plus, we'll talk to an analyst who has ideas on how to make money off of our clean future. And forget the CPI, the PPI, the PMI, all the data points. We've got our eyes squarely fixed on the American consumer. We will look at some alternative economic indicators that may paint a different picture of the economy than what the Fed and the markets seem to be focused on. Kelly?

Very much looking forward to that. Tyler. Thanks. Hi, everybody. Let's look at stocks in the green right now, although we were slightly negative earlier on. The Dow up 114, a third of a percent. The NASDAQ up three quarters of 1%. so we're seeing some big movers there. Check out, for instance, Warner Brothers Discovery. It's up for the eighth straight day now of 30% this year. Wow, talk about a turnaround for WBD. Bank of America, even adding the stock to its U.S. one list. You can credit a lot of deal-making hopes for a little bit of the rebounding there. Now, Coinbase also building on its recent rally, they're now cutting another 20% of staff. Seven months after making a similar cut the first time around at Wall Street cheering that event. And we turn now to the big news event happening. this hour. President Biden meeting with the Prime Minister of Canada, Trudeau, and President

Obrador of Mexico. Let's go to Kayla Taushy for a look at what's on the table. Kayla. Kelly, the three leaders are in the same room for the first time in 14 months, during which time migration has ballooned, the economy has softened. And of course, there is a lot of uncertainty across the board. U.S. Mexico and Canada today announcing some concrete policy actions to try to tackle some of those issues, setting up a website, an in-person processing center for migrants, coordinating supply chains for semiconductors and critical minerals, and also establishing some clean energy policies. But there's also some tension behind the scenes, long-simmering trade disputes on agriculture, dairy energy auto manufacturing, with each country staking out its own position.

While those specific disputes will also enter the discussions alongside some of these more macro issues, officials say don't expect a breakthrough. Kelly? Wow. We also know climate. Kayla will play a big role here. What kind of role? Well, it's one of the three cornerstone issues that's on the table for these leaders alongside migration and trade. Already the Allies have announced a goal to cut methane emissions and waste by 15% over the next seven years to develop a clean hydrogen market in North America and also to install electric vehicle chargers along the international borders.

But the challenge that the leaders are already facing is how to pursue these goals in a way that each country can create jobs and bring business back to its own companies without the other allies crying foul. That's what's led to some of the trade disputes that they're currently discussing, and it's been a really difficult situation for them to navigate since the USMCA.

Kelly? Sure. Kayla, thank you. As North American leaders discuss, climate as part of their summit this week. Federal Reserve Chair Jay Powell noting in his remarks today that the central bank should not be in the business of litigating climate issues. Here's what he had to say. Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools, for example, to promote a greener economy or to achieve other climate-based goals. So as the chair deflects to political leaders to address the issue, the United Nations out with the report today on some improvements in the ozone layer. Diana Oleg is here with more in the latest day.

And what's happening and how? Well, Kelly, the United Nations announcing that the ozone layer will, in fact, be healed in 43 years. And that's thanks to the Montreal Protocol back in 1987 when literally every nation in the world agreed to stop producing what they call chloro-floral carbons, if I said that, right? This is chlorine and bromine that were commonly used in aerosols and refrigerants. So great news for the ozone layer. But that does nothing for global warming. fight against it. What it really does, though, is it sets a precedent. It says, okay, if we have this type of regulation and agreement, we can actually fight something and heal it, like the ozone

layer. We need to do more when it comes to global warming. And I'll tell you, we are nowhere even close when it comes to global warming. In fact, World Resources Institute just put out a study saying that of all the sectors that we talk about, they are so far away when it comes to power, buildings, industry, transport, forest and land, and food and agriculture. They are not acting nearly fast enough to get us to that 1.5 degrees Celsius of global warming that is the goal of the Paris Agreement, Kelly. I guess the positive thing here is the proof, I suppose, if you can call it that, that enlightened policy can cause change in the environment so that if you take what was done with the Montreal Accords or the Montreal protocols and apply a similar

model to addressing greenhouse gases and global warming, you could have a similar result, right? Exactly. And that's what we're talking about. The issue, though, is that, you know, we saw a lot of progress at COP 26 and again at COP 27, but not nearly enough to get us there. And, you know, we talk about all kinds of technology and solar issues and a lot about the solar industry. And I want to use that as an example, because when you look at how far solar has come, for example, from 2019, to 21. Solar generation grew by 47% and wind by 31%. But because total electricity generation also continues to increase, the share of electricity from zero carbon power sources has experienced no change whatsoever. So zero net result from that. So as we talk about moving toward

cleaner fuels, cleaner energy, cleaner technology, cleaner ag, it seems like we need to go farther and we need to get more policy and actually probably more regulation involved as they did with the Montreal Protocol. In layman's terms, why is the hole in the ozone layer important to us? Well, it's important. I'm not a scientist on this, but from what I've read, look, it is protective and it has to do with heating, et cetera, from the atmosphere. But again, it is not global warming, and it's not directly correlated to the fight against global warming. And so we really need to put the focus there when it comes to global greenhouse gas emissions. That is what is coming from the earth, not necessarily protecting, whether it's, you know, from the sun, et cetera, or greenhouse emissions going up into the ozone layer. It's really that we need to reduce our own emissions here on Earth because that is what is warming us.

And at the same time, Diana, we have all this chaos out in California. What can you tell us there about the climate conditions? Well, it's all directly related. Look, when we talk about climate change so much, people tend to think about sea level rise, right? They talk about more intense hurricanes. But really, one of the most devastating effects of global warming is the amount of rainfall. And we've talked about this in our rising risk series a lot. It's that as the earth warms, the clouds can hold more moisture.

And that's why you're seeing so many of these devastating rains are up in the mountains when you hear four feet of snow up around Tahoe. That's just abnormal. You're seeing these deluges, whether it was in New Jersey, a couple of. of years ago. And what we're seeing now, that again is all tied to global warming and the fact that we're seeing much higher levels of precipitation. So this atmospheric river thing is, is, do we call it a new thing or just a more common phenomenon? I think more common phenomenon, especially when you see again with so much more precipitation in these rivers and one after the other, kind of like we kept seeing hurricanes one after the other after the other in record

numbers. And the last eight years have been the highest records of heat of global warming. in history. Wow. Diana, for now, thank you very much. We appreciate it. Our day on Oleg. All right. And with climate change in focus, Wells Fargo,

looking at how the U.S. could generate its energy by 2050 and which stocks could benefit big time. Let's bring in Neil Carlton. He's equity analyst at Wells Fargo. Neil, welcome. Good to have you with us. As the world and America transitions to electrified cars, you're going to need to generate more power to power those cars.

where is that power going to come from? Who has the pole position on that? Is it renewables? Is it nuclear? Is it net gas? What? Yeah, hi, Tyler. So I think it has to be all of the above, at least in the near term.

So every year, we run a generation outlook that takes a look at what the mix will look like by 2050, keeping in mind the industry has a zero carbon goal by 2050. So what is it going to look like? Renewables are all likely going to be a big part of the equation. We see them growing from about 15% of power generation to well above 50% by 2050. Now, renewables, as you know, have some limitations around storage. The sun doesn't always shine. The wind doesn't always blow.

So we need to backstop that with other sources. And in the report this year, one thing that we highlighted, that we think nuclear is going to play a bigger role relative to what we would have told you a year ago. Now, I don't want to- Why is that, Neil? Well, yes, to be clear, this is more about the extending the life of our existing assets. One year ago, we feared that a third to 50% of our nuclear fleet, for economic reasons, could be retired over the next 20 to 30 years. What happened since then? The inflation reduction act. There was a production tax credit for nuclear that runs from 2024 through 2023 that provides a floor on earnings.

We think it's likely that this tax credit will be extended over time again. So this creates tremendous value for the existing assets that are in the ground and the owners of those assets. We also think there could be some new nuclear in the future, small modular reactors. However, this technology has yet to be really commercialized, so we're not counting on that. So the story here really is the existing nuclear fleet we think will last longer. Does the revealed precariousness, let me put it that way, of energy supplies through net gas and oil and other conventional means that has been exposed by the war in Ukraine, does that play into the nuclear narrative in any way?

It helps. During the 2010s, natural gas prices really important. influence power prices. And during the teens, with that gas being low, that depressed power prices. And that's why we really fear for many of these nuclear units, their ability to generate reasonable returns to stay alive. Right now, power prices, or they have been quite elevated, and that's very helpful. But again, the important point to remember is that even if natural gas prices

were to decline, the nuclear producers now have a floor on their earnings, which gives them more certainty with which to make investment. Neil, the rub on nuclear in the U.S. has always been that these big projects are a complete boondoggle. They cost way too much. They never get off the ground. We've never managed to achieve anything like what France has. Do you think we can change our stripes overnight, no matter what the need is?

I mean, New York is banning or thinking about banning nat gas hookups and apartments, we're going to need electricity sources from somewhere. So the need is there, but it's not clear that this can well adapt to the U.S. Yeah, so nuclear, nuclear currently provides about 20% of our power output. We think that's actually going to remain fairly static with renewables and advanced storage filling the gas. But I think it's important that nuclear can remain static. To your question, we have a long history of big nuclear development that's resulted in project delays and cost overruns. I don't think we change our stripes anytime soon.

I think that's too much risk for most utilities to take on. Where there is a chance is small modular reactors, not these big nuclear facilities. If we can commercialize those and do it in a way that reduces the risk, that could be additive. Right now we're still in sort of the feasibility area. So that's more of a 2030s and beyond story. Yeah, it is. Still, like you said, the need, if we were ever going to try to get there, we're going to try to get there now. I think for sure. Neil, appreciate your time today. Thank you so much.

Thank you. Neil Calton, a developing story in the crypto world. Kate Rooney brings us the news. Kate, what's happening? Hey, Kelly. So digital currency group is putting out a lengthy shareholder letter just now defending some of its business practices as the crypto company comes under fire from others in the industry. It's the latest in a battle playing out between high-profile crypto executives on one side. You've got the Winklevoss twins who now run the exchange, Gemini. And on the other side, you've got Barry Silbert. He's the founder and CEO of DCG, Digital Currency Group.

That's also the parent company of Grayskill Bitcoin Trust, which is publicly traded. Silbert says in the five-page letter, he's looking to address some of the speculation about DCG. He says some of which is reasonable and some that is completely baseless and false. He goes through the business model and some of the lending relationships with subsidiaries, including Genesis. He says loans were always structured at an arm's length basis. and were priced at prevailing market interest rates. Just this morning, Cameron Winklevass, who I mentioned, tweeted an open letter to DCG's board calling for the removal of Barry Silbert as CEO.

He accused him of fraud in making false statements to his exchange and to the public. DCG had responded earlier calling those comments malicious, false, and defamatory. They also said it's another desperate and unconstructive publicity stunt from Cameron Winklevoss to deflect blame from himself and, Gemini. At the core of this issue here, Kelly and Tyler, is this Gemini earned interest-bearing account that had really relied on lending on the back end that happened through DCG and one of the subsidiaries there. That lending arm has now shut down. There's customer money from Gemini locked up there. And Gemini is now being sued by some of its own customers in a class action lawsuit.

So the latest in that saga playing out there, Kelly. Yeah, it's been, you know, as complicated as it is, It's pretty clear how everybody feels about the matter, and it's getting more pointed as we go. Kate, thanks so much, our Kate Rooney. Coming up, Biogen getting a boost from the FDA decision to approve its new Alzheimer's drug. We'll speak to the FDA commissioner about that and about their halting more trials of cutting edge drugs. Plus, everyone looking forward to Thursday's CPI report to tell us about the state of inflation and the economy, but we're looking at some alternative indicators that might get you an even better picture of what's going on. Power lunch.

I'll be right back. Welcome back to Power Lunch. Let's turn now to the big health care conference in San Francisco. Meg Terrell is standing by with the commissioner of the FDA. Plenty of news on that front. Meg. Absolutely, Kelly. Dr. Caleb, thanks so much for being with us.

Hey, it's great to be with you. So I want to start by asking you about the news Friday night, the accelerated approval of a new drug for Alzheimer's disease from biogen and Aci. How would you characterize considering how many millions of patients have Alzheimer's disease right now and there's been absolutely nothing for them for so long, where this field stands in terms of solutions. Well, as you allude to, it's been so depressing that you have such a serious disease growing rapidly

because we're living longer and affecting so many people and their families. Now we have a treatment which lowers the risk of progression of the deterioration and your ability to think and calculate and all the things that are important to life. Now, it's not a cure for the disease. It just slows the rate of progression according to the clinical trials. So there's new hope.

It's very exciting. We've got a lot more data that needs to come in, though, before we'll know the full extent of the benefits and exactly who should get the treatment and what the risks are in the long term. But there's a lot of reason for optimism. So the situation right now is this drug is approved, but unfortunately very few people will probably be able to access it because Medicare is not covering drugs that target amyloid that are approved. in the current situation. A lot of people interpreted that decision from CMS as sort of a rebuke of the FDA's approval of the previous Alzheimer's drug. How did you interpret it?

Well, I know the people like to talk about, you know, contests and competition and rebuke and all that. This is just, you know, the FDA has a mission, safe and effective. The CMS has a mission reasonable and necessary. And the AguHelm approval, the first drug for Alzheimer's suit, was approved on this accelerated pathway, you know, had limited data. And this led to a lot of good discussions with CMS. So I think as it relates to laconamab, the new one that was just approved, I would stay tuned. There's going to be a lot of going on with that.

And also remember that the company just submitted their data for full approval, not the accelerated approval. That's going to be coming up. So I don't expect the CMS policy to be a totally fixed policy. We have a lot of communication, and I think they'll reach a good spot. It is important for me to always point. FDA has a mission. We don't tell CMS what to do.

CMS doesn't tell us what to do. I liken it to a relay race where we need to make the baton handoff a lot smoother. That's not a new problem, but this has really brought it to public attention. I don't think that's a bad thing. I want to ask you also about COVID. Of course, where we are right now, There's continued discussion around what should happen with the vaccines. We know there's a meeting later this month to talk about updating them potentially or how that should happen.

We talked with Regenoron CEO earlier today about a new antibody drug they have, which they think could stand up better against variants. The FDA moved so incredibly quickly during the emergency phase of the pandemic. It seems unreasonable to ask that it could continue to do that. But is the urgency still there around COVID? And how are you looking at that? Well, we're losing, you know, hundreds of people a day. the United States of COVID. So there's still a lot of urgency, was still in a state of emergency. We'll respond quickly. There's a lot going on in the industry, both, you know, in the vaccine

area, in the antiviral area, in the therapeutic antibody area. All this is moving. Of course, it would help if we could have more government funding to stimulate this, but so far we've been unsuccessful with Congress and getting that to move along. But yeah, we're ready. And helping the industry think through this. But as always, we need good data. There are a lot of great ideas, and just like in all of drug and therapeutic development, most things don't work,

and so you have to prove that it really works before you move forward. Tyler? Dr. Caleb, the story of the vaccines for COVID and the speed with which they came to market is one of the great sort of miracles of medicine and science and commerce over my lifetime, I suppose.

But at the same time, I wonder if you feel that, and I've been vaccinated five times, I believe, I wonder if you feel that some of the efficacy of the vaccines was slightly oversold. In other words, a lot of people, when they think of vaccines, think that they are going to be inoculated from getting a disease, whether it's polio or measles or chickenpox or smallpox or whatever it is. This was a different kind of vaccine. It didn't seem to inoculate as many people as maybe we were led to believe against. getting the disease, but rather against getting a severe variant of the disease. Could you comment on that? Well, I think that's a great question.

And I think we look back to the beginning. Of course, I was not in the FDA at the time. I was on the outside. Initially, it actually did protect against infection to a fairly large extent. But over time, that impact wore off. And then as new variants came, the protection against infection per se became left. And so I think it's fair to say that communicating with 320 million people is hard to do, and maybe that communication could have been better.

What's really important, I mean, remember I'm a cardiologist, I'm used to dealing with life and death. In my experience, not dying is probably one of the most important things that we have. And beyond that, not getting sick enough to have to go into the hospital is really important. Every update that we've done with the booster has further protected against the risk of being dead, being dead or being in the hospital. That's the most important thing. While people focus on infection, understandably, we need to really bring our attention to the fact

that if you wanna stay alive and be around for the next holiday, you don't wanna go in the hospital and burden the health system or be terribly sick, best thing you can do is to get your updated vaccine. I didn't know you were- Also wanna mention, that doesn't mean, I'm sorry, go ahead. No, I was gonna ask you, it just occurred to me, I did not know that you were a cardiologist,

and I have to ask you, as you watched and reflect on what happened Monday before last in Cincinnati with the Buffalo Bill's ball player. How did you feel as a cardiologist knowing what the outcome was and knowing how quickly people responded and knowing the life-saving abilities of CPR must have affected you? Oh, I just felt tremendously proud of all the things we've accomplished together in the profession and, you know, in the technology. You know, I'm 71 years old, so when I started my career, we were just really beginning to use defibrillation,

and now we have these devices which are all over the country. So literally, in that case of commosio cordis, which was an obvious case, and I used to see that maybe five or six times a year. I ran intensive care units, flew on helicopters and picked people up. And when people get that blow to the chest, just due to bad luck,

it's at the right point in the cycle of the electrocardiogram. Your heart stops, it fibrolates so it can't beat. Give a shock, the person's back to life, otherwise they'd be dead. And I think the team that was on the field, it was amazing. But it's actually a true story. Why don't I go into cardiology? I was working as an ordely in a hospital, thinking about going into medicine. I saw someone get defibrillated, and I thought, wow, this is amazing that you could save

a life like this and now look at all the things that we can do. So it's very exciting. We need to have more defibrillators around. It's still really the leading cause of death, is sudden death, not from a blow like that, but due to heart attacks, due to intrinsic disease. Dr. Cald also, I want to put in my plug here. We need to get linoleoxone out there too because opioid overdose is very similar in the way it happens. Dr. Caleb, thank you. And Meg, thank you, forgive me for asking, sneaking in the that last question. It was just, I was just overcome when I heard that he was a cardiologist, and I beg your indulgence there. Thank you both very much for a very interesting interview.

Meg Terrell and Dr. Caleb. All right, still to come, we will dive deeper into the health care area. First, you'll hear from the CEO of Medtronic in today's working lunch. And Sarat Sethi joins us to explain why pharmacies could be a good value play. We'll be right back. Welcome back. Let's get over to the bond market where we've seen such major action lately. Rick Santelli with the latest, Rick. Yes, we had a three-year note auction. It went very well. Usually short maturities are a little more difficult to push on to investors

because of how closely they follow the Fed. So that is very enlightening. Look at the intraday of two-year-no yields. You could see right around one Eastern rates dropped a bit. But here's something else interesting. Let's do a double. Here's a two-day-of-toos. Today, the yields didn't quite take out yesterday's highs,

but you noticed a two-day-of-tens they did. Now, even though it's subtle, there's more. steepening dynamic to the markets today, and long-dated treasuries seem to be finding more sellers, something to pay close attention to. And if you look at tens minus boons, that spread is the tightest it's been since October of 2020, let's call it 27 months. And finally, here's the dollar index going back to Jobs Friday. We can see how the market dropped, just like it did in interest rates, but there's not a lot of bids coming back in the dollar index, something to pay attention to, especially if we close under the 103 mark.

Kelly, back to you. Rick, thank you. Let's check on stocks right now as well. The major average is slightly higher. The NASDAQ leaning away. Russell 2,000 small caps as well. That's where we're seeing the action. The NASDAQ up nearly 1%.

The Dow up 131. Let's get to Contessa Brewer now for a CNBC News Update, Contessa. Hi there, Kelly. A federal agency is considering a ban on gas stoves because of their link to health issues, including childhood asthma. In an interview with Bloomberg, the Consumer Product Safety Commissioner, called Gas stoves, a hidden hazard, but said there's no plan to ban them. at this moment. Still, the commissioner says any option remains on the table if products are dangerous.

A new report shows 12% of childhood asthma cases can be tied to gas stove use. That's shocking. Climate-induced extreme weather caused at least $165 billion in damage in the United States in 2022, according to a federal report. The year was not the hottest on record, but it marked the most billion-dollar weather catastrophes in history at 18. Those catastrophes led to 474 deaths in this nation last year. And multiple reports say shortstop Carlos Correa is nearing a six-year, $200 million contract with the twins after Correa's deal with San Francisco Giants fell apart over injury concerns. And then there were follow-up talks with the Mets, those fizzled out. So Correa will stay in Minnesota, and he could earn upwards of two.

$270 million over 10 years if he remains healthy. And for these athletes, Tyler, Kelly, that's always the goal. All right, Contessa, thank you very much, Contessa Brewer. Ahead on Power Lunch, do Powell and the markets see the same things consumers are seeing? No one can seem to agree on how bad things might get for the economy. So we're going to take a look at some alternate indicators when Power Lunch comes right back. Welcome back. Yesterday, we spoke about the growing divide between how the Fed, markets, and consumers view this economy.

How do we know when we've hit a recession? Economists point you to that specific data to indicate when that's officially set in. The market reacts to those early warning signs, and with just a snap of your fingers, you get market turmoil. But a lot of times consumers, they're kind of left on the sidelines. They feel the pain, too, well before the recession gong is struck. So we decided to take a look at some alternate economic indicators, see what they're telling us right now about the real economy. For instance, more and more Americans are relying on credit cards to get by, even for everyday expenses. 35% are carrying that debt month to month, plus we have buy now, pay later.

A new technology meant to help make big ticket items more affordable, but Klarna reporting more than half of the top 100 items its users buy are actually grocery and household goods. Meanwhile, Alianz and Morgan Stanley see 401K contributions shrinking. Vanguard, even reporting significant hardship withdrawals. Here to discuss is Marshall Lux. He's a senior fellow at Harvard University and the University of Pennsylvania's Wharton School. He's also been a financial services consultant

for more than 30 years and was formerly Chief Risk Officer for Chase Big. Marshall, welcome. What do you like to watch to try to figure out how much pain consumers are really feeling? First, thanks for having me. And believe it or not, I'm an optimist.

So with that all said, let me give you what I think is the tale of two cities. First is the average, despite what people are saying about the work for talent, the average pay increases about four and a half percent. If you compare that to the inflation number, people are earning less, not more. Three out of ten Americans say they have no savings. They have no emergency savings or living paycheck. paycheck. We talked about Buy Now Pay Later.

I'd love to go on your show another time and tell you why I think it's a dreadful product when offered by Fentex. It's unregulated. Is it, Marshall, let me just stop you there because one thing I wonder this cycle, some of the data points you've mentioned, you know, we've heard before. They've been true cycle to cycle. Something like By Now Pay Later hasn't existed before. So when I watch people looking, for instance, at charge off rates and all the rest of it, you wonder, are we capturing some of the new technology that's maybe stretching consumers more than we realized, buy now pay later being one example?

Yeah, I mean, by now pay later, to my mind, is financial dynamite. It's the most common I could go on with this forever, but I don't have the time. It's the most common forum is four payments or more. Truth in Lending Laws apply to five payments. Coincidence, I don't think so. Technology has enabled people to stack. So a large number of people have five, ten products that they're just simply, hard to keep track of. And if you look at the common websites, they say we may or may not report you to credit bureaus. We're not sure. The bureaus don't know what to do. Where does Marshall,

this reliance on debt, whether it's through by now, pay later, or rising credit card balances being carried month and month? Where does that ultimately lead us as an economy, as a society? It leads to tremendous distress. I mean, the average consumer is going to see their mortgage payments this year up 34%. It also means that, I mean, the jumps that you're seeing are unbelievable, considering the credit cards. But that can't be true, Marshall, because 34% of people did not take out new mortgages this year at higher rates. No, but their mortgages are adjustable, right? So as interest rates rise, the amount that they're going to pay simply increases.

And in fact, in the real world... So those with adjustable rate mortgages will see their rates go up 34% year over year. I buy that. But if I had a fixed rate mortgage at 2.8% or 3.2%, the rise in interest rates, presuming I didn't do anything like move is going to be a non-factor for me, right? It's a non-factor for you, but it does mean that the unintended consequences, you're probably not moving to a larger home, right? Right.

Right. Because if you move to a larger home, you're going to get another fixed rate or maybe an adjustable rate, which is why that you're seeing that the number of, of listings of new homes is down 24%. And the number of people taking houses off the market is up 75%. Well, I sure buy that because I mean, you sit there and you go, wow,

why would I ever move if I'm going to have to now take my very low mortgage and flip it into something that's twice as high? Marshall Lux, thank you very much. We appreciate your time. Sure, my pleasure. Have you see again soon. All right.

Still to come. John Ford will bring us his interview with the CEO of Medtronic in today's working lunch. We never stop working. Medical technology having a bit of a tough run, inflation, labor shortage, squeezing profits, and elected procedures are below pre-COVID levels. This week, John Ford brings us up close to the CEO who's trying to balance costs, cuts, and growth investments at a company we all know about. Yeah, Tyler.

Jeff Martha is CEO of Medtronic, a medical device company with $100 billion. market cap. Since the stock hit all-time highs a year and a half ago, supply chain disruptions, currency headwinds have been a drag on progress. In response, executives are shifting capital investment to higher margin in businesses like a valve replacement alternative to open heart surgery. But cost cuts are also coming. A year and a half ago, Jeff told me about his own experience with the toll financial shifts can take on families. When he was a teenager, his dad's business failed. Then one day, just over 15 years ago, he was. on his way to his child's birthday party when he got a call in a reorg, his job was being eliminated.

Well, I wouldn't recommend the path I chose. The path I chose there was to keep it to myself. I didn't tell my wife. I didn't tell my family. I just, because I had reminitions of my own father's failings in that area. He went bankrupt and it just really was a business bankruptcy that turned into a personal bankruptcy, that created all kinds of chaos, divorce. It was just bad. But he's still my idol. But I know it really changed him. And I was thinking about that.

And I thought, I can fix this. I will fix this. And I kept it to myself. And in many ways, I got lucky. In his case, Lucky meant getting invited to interview with Omar Ishrak at GE Health Care. he had been a GE Capital, Ishrak would precede him as CEO of Medtronic. And today at the J.P. Morgan Healthcare Conference, Martha told me he's trying to make sure Medtronic gets the most out of a reorganization that centralized operations to drive efficiency.

At the same time, he wants to fuel growth by investing in high margin areas. Things like, you know, heart valve replacements, minimally invasive techniques to replace heart valves. You mentioned diabetes. Another one that's a hot. topic here at the conference this year is new therapies for atrial fibrillation atrial fibrillation has caused over a half a roughly a half a million hospital admissions last year in the u.s. alone and the medical technology is getting to the point where in some cases it's even considered the frontline therapy for atrial fibrillation you know ahead of current drugs so these are the areas robotic surgery is another one where we're prioritized these are very large patient pools

around the world where technology has a big impact in improving the efficacy, improving access, right? Medtronic does have some self-inflicted wounds here. The diabetes unit had quality control problems and is in turnaround mode after getting a warning letter from the FDA about a year ago. But Jeff believes this balanced approach is the way to grow earnings and eventually get margins back up, guys. Does cost cuts mean staff reductions of the sort that he got caught in a decade or so ago? They haven't said, but initially with the reorg back in 2021, there were some head count reductions. And at JPM yesterday, they did say they're working on both variable and fixed costs.

And that often means there would be some headcount reduction. I'm sure his story is going to resonate with a lot of people who are going through these rounds of costs cuts, rounds of layoffs, one after another, after another. But tell your spouse. Yeah, don't keep it a secret. That doesn't sound like a good recipe. John Ford, thank you. Thank you. Up next, with growing economic uncertainty, the path ahead could look perilous for investors. What should you buy now? We're going value hunting with Sarat Setti. Stay with us.

Welcome back to Power Lunch, everybody. Our next year says the market is looking for companies with solid cash flows and says those with resilient earnings, selling at reasonable values will do better in this environment. Let's go value hunting with Sarat Sethi, managing partner and portfolio manager at DCLA, also a CNBC contributor. Let's start, maybe with your first name CVS, why do you like it? So this is a self-up story, Tyler. If you look at the stock, it trades at 10 times earnings, it's comps trade at 17. You've got two things going here. One is they're restructuring the stores up front,

and the other one is the merger with Aetna. I think the combination of the two will give them the operating leverage. They need the earnings growth that you're going to get that not many other companies are really going to have in a downturn. And at 10 times earnings and a 3% dividend yield, I think you've got a lot more upside here than downside in terms of cash flow and capturing the earnings resilience. I think of them increasingly as a health care delivery and payments company that has a store attached to it.

Am I wrong? You are absolutely correct. And that's where they're kind of trying to do everything. They're trying to get people to go to the store and then kind of do the combination of delivery. And now if you look, they're trying to make an acquisition to get more into the physician side. That is a little bit of an overhang, too, on the stock. But at 10 times earnings, you're getting paid to actually wait for them to do something, and then that could be accruitive to earnings.

How many times? I do like that whole kind of. Yeah, no, I was just, I'm sorry, Sarat. I was saying to Tyler how many times we heard people with CVS being a recent pick. Tell me about EIFS, not as familiar, Edison. So Edison trades at 14 times earnings. The average utility stock trades at 18, and what you've got here is earnings growth about 5 to 7 percent on the distribution and transmission side.

That is regulated. So that's pretty much what we would say in the bag, plus a 4% dividend yield. In an environment today, when you can get, you know, five to seven earnings plus 4%, you're looking at high single digits to 11% on a return. And an overhang here is that, you know, it's been almost four years since you've had those severe storms out in California. So people are still a little bit scared to invest. But once that, you know, once we get to the fifth year, you don't have the payments going forward, which are already built into earnings. So again, a stock that has resilient earnings in a volatile market where, you know, where can you expect growth, especially when you see what's going on with the Fed and other companies kind of cutting back on earnings. What about the argument of why be in stocks at all

when you can get 4% on, you know, a CD in a very uncertain environment? So I think one of the things that's changed is there is an alternative and you can get CDs and you can get even treasuries and corporate bonds, the question is what is your risk tolerance and what is your profile? What are your objectives? If you're a long-term investor, you know, over time the 30-year or 10-year returns have been high single digits and sometimes even double digits. We don't think that's going to happen, but high single-digits is a lot better than 4%. Four percent's good if you are retired or you're looking for capital preservation. You're keeping up with inflation, but you're growing. So a combination of the two in a diversified portfolio

absolutely makes sense at this point. So, you know, take some little risk on the equity side, look at some of these companies like a CVS Addison and some of the other value plays, marry that with bonds and you can have a diversified portfolio that actually gives you some downside protection in an environment where we're going to get some pretty good volatile earnings surprises coming up. Mary stocks and bonds for this kind of year that we're heading into. Surat, thank you so much. We really appreciate it. Exactly. Sirot Setti. We're going to look under the microscope next at some of the hot jobs for there. Are there hot jobs for 2023? I bet there are. Dom's going to find him. Stick around. It's time. It's time for the return of under the microscope.

Today, Dominic Chu is looking at some of the top jobs for 2023. I hope they're going to be right, Dom. So this is all very subjective, right? So there's all kinds of different criteria. People have different characteristics for what they think is a good job. So this is according to research done by U.S. News and World Report. Early in the year, we know that the job market is relatively tight still, but what are the top jobs? Where do you want to work in 2023? Well, it turns out there are a plethora of factors. The ones that we want to focus on here for this particular study revolve around things like work-life balance and whatnot. So if you take a look at some of those criteria, they are important. You see median salary, always something to consider, right, how much money are we going to make? And then what the unemployment rate is,

just how stable our job could be. And then the expected growth, will we see more people entering the field, but we have a lot more people kind of populating that particular industry, and then the stress level. We want to find that balance, right? We want challenges, but not so much as to overwhelm us. And then the last criteria there, that work-life balance that's so important. Among the top 10, we've kind of put up the top five over here. Number five goes to information security analyst.

Number four is a physician's assistant. Number three is a medical and health services manager. Number two, a nurse practitioner. I've seen a couple of those this flu season. And then number one, a software developer. So if you kind of take on balance, those particular criteria, those are the ones that kind of factor into this particular move here. And that's the reason why a lot more people are emphasizing the work-life balance,

as opposed to just straight up, hey, here's the money, here's where I got to make it, and this is what I got to do to you. These are high-skilled jobs, though. These are not just coming off the street out of the cold and become a physician assistant. For many of these, you need a bachelor's degree. at the very least, but you don't need to be a Ph.E. or MD to be a nurse practitioner, so you can get that experience for health care and whatnot, but you don't necessarily need an advanced degree. What's curious about this, though, if you look at some of the other

top jobs out there, number 10 is actually a per se dentist, so one that you actually need an advanced degree in medicine to actually go and do those types of things. The other thing that strikes me is a lot of these jobs, you can't work remote. And when we look at different recruit surveys right now of what candidates are looking for. They want jobs where you can work from home. Can't do that for a dent. Well, maybe you could be a traveling, you can't do that for a nurse practitioner, you know, all the rest of it. Okay, so here's what I would say. I looked at the top 10. And by the way, I've put the rest of the top 10 on my Twitter feed because we couldn't put them up on the wall. All top 10 are in there. Thematically speaking, of the top 10, five are in health care-related

fields. Four are in technology, as we see up there. And there's one. in finance, a financial advisor type that also makes the top 10. I've had some interactions with the medical establishment, and mine have been all telemed lately. So there is a case where, and that person was at home, I think. I've also seen a nurse practitioner more than I've seen a doctor in the last two years. All right. I'm going to come back to have you back. It's nice to see you, sir.

Dom, thank you. Thanks for watching. Power Lunch, everybody.