Power Lunch - Rally Resuming & Selling Stolen 3/12/24

Episode Date: March 12, 2024

The rally on Wall Street is resuming – especially for tech stocks – after this morning’s CPI report fell in line with expectations. With that out of the way, can anything stop the market momentum? Plus, we’ve heard a lot about organized retail theft. Our Courtney Regan was on-site as law enforcement raided and broke up an organized ring, which would steal from stores and resell online. We’ll take a deeper look at her investigation, “Selling Stolen.”  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch alongside Courtney Reagan. I'm Tyler Mathes. Glad you could join us. The rally resuming, especially for tech stocks after this morning's CPI report, in line with expectations. With CPI out of the way, at least for now, can anything stop this market momentum, court? Plus, we've heard a lot about organized retail theft. I was there as law enforcement rated and broke up organized rings after rings after rings, which would steal from stores and then resell online. we have some amazing video to show you. But first, let's get a quick check on the markets here at about 2 o'clock, as Tyler said, the markets more or less shrugging off that CPI report that came in line, but still hot, I would say.

NASDAQ composite again leading the way up by 1%. S&P 500 higher by 9 tenths of a percent and the Dow Jones Industrial average higher by about 6 tenths of a percent. Shares of Nvidia bouncing back strongly today. Yesterday, we told you the stock had fallen 10 percent from the peak that it had hit. on Friday morning at $974 a share. So right now just to touch over 900. Meta also rebounding today, getting back much of the ground had lost yesterday when former

President Donald Trump called it an enemy of the people. Let's bring in a friend of everyone. Michael Santoli now for more on today's market reaction to the CPI. Hi, Mike. Hey, Tyler. Yeah, I mean, the core CPI was just slightly warmer than expected. And the market did have a little bit of a wobble on that. general, though, it didn't change the overall story, which is the components of CPI that are moving

in the right direction lower seem to translate better into the Fed's preferred PCE inflation measure. Now, bond yields have ticked a little bit higher today, so it's not as if we're completely dismissing the CPI. And anybody who thought that inflation was going to be sticky around these levels probably found something to work with in this number. But I would interpret it more as the market has other priorities here, which is continually kind of flowing toward that AI trade. and having those two-day cool-off in Nvidia and meta treated as a buying opportunity. So we'll see. I think below the surface, the market has been attempting to cool off a little bit. Very hot start to the year. You obviously got the momentum trade really overdone in the short term.

We'll see if that has to have another refresh. But there are more stocks down than up today. Small caps are lower. So I guess you'd have to say the headline indexes are benefiting from that same familiar group of mega-cap growth leaders. the rest of the market is still in wait and sea mode. Remember, we have PPI, wholesale inflation, as well as the Fed meeting next week. All right, Mike Santoli, thanks very much. As we stick with this theme, our next guest says sticky services inflation is a problem that the Fed just can't shake, but he doesn't think today's CPI report changes the Fed's plan to start cutting rates sometime this summer.

Jason Pride is chief investment officer of private clients at Glenmead. Jason, welcome. My notes indicate that you think many of the most important market. in the economy macro-wise are moving back towards normal. What does that mean for equities then? Well, thanks for having me on, Tyler. Look, we are getting, we've been through a fairly long period of abnormal that started with the great financial crisis, went through, we had, you know, Brexit, we had European debt crisis, we had a pandemic, we had a long period of near zero percent interest rates and inflation below 2 percent, actually averaging about one to one and a half percent.

This has been a really long, unusual stretch of time that the markets and economy have been through. And the latest, say, year, year and a half is actually looking more normal than we have seen since the great financial crisis. So I think that's something that investors can begin to be more constructive about, particularly as we proceed through the rest of 2024, which we think is probably the last mile in that transition back to normal. Does that return to normalcy augur well for equities? So it can eventually augur well for equities. I think our starting points a little bit high in terms of valuations. And this inflation reading that you mentioned a second ago, look, it's the last mile of any effort, right? If you're going for a run, last mile is obviously the hardest mile for you to get through in a run.

Well, that's probably about the same for the Fed in getting inflation down to their target level. They made a lot of good progress down from 9 to 10% down to, say, 3, 4% that we're kind of bumping around in right now. To get down to 2 is going to take a little bit more effort. And I think that's what we've got to work through in 2024. It's been quite a long race. If you've ever run a marathon, the last 6 miles are actually really hard to get through. I don't do marathons. It's 5 miles stretches.

But I would like to ask you about your thought about services, staying sicky. I know that the airline prices were higher and the CPI report. But if you've been to an airport, demand is sort of unrelenting. I mean, the lines are incredible. It seems every time you go, whether it's a key weekend or not, how much trouble is that for the Fed when you're looking at the price of services? So I wouldn't say it's an alarming trouble, but something they're going to have to push against as we go through the 2024. When you pull apart CPI, you know, food and energy was actually effectively down and has been for the past three months. so have core goods, shelters holding high, but we know what's going on there.

It's that other thing, this core services excluding shelter that's actually been so sticky in nature. And the fact that we're still running in like six, six and a half percent range, look, I think the Fed would like to see that number settle in at four, right? Four number would probably mean core CPI or overall CPI's probably in that two to three percent range. Four is a sustainable number. Six, six and a half is not what they would like to see in terms of core.

or shelter X services. I think it's very much underpinned by wage costs in that equation. And until we get a little bit more constraint in the labor market, we're probably going to be facing tougher numbers there, which makes it's what makes it so sticky and hard to deal with. It's kind of like that gum on the bottom of your shoe. You're a little wary of the magnificent seven and it's ilk. Where do you like?

What sectors do you like right now? So we've been advocates of playing the field over following and chasing the darlings. It's, you know, sometimes when you go to the betting track, which unfortunately the market kind of is like sometimes, you'll notice that the darlings end up being overpriced or the odds are just not in your favor. At this point in time, those Mag 7 are at such high levels that it basically bakes in some really good expectations over the next five to 10 years. So outside of that, look, the rest of the 500, 493 stocks is a full, you know,

to play in. Small capitalization securities is a very interesting area where valuations are a lot lower. And if you go abroad, you can find good opportunities, one of which that we've had in place for a while. It's now really paying off as Japan. You like small caps, you like some consumer staples and health care. What part of health care? That's obviously a very broad area from the hospital companies to the insurers, to the farmers to the biotechs where? Right. And look, with consumer and staples and health care, and I am not the stock picker for our organization, but the general idea is to target stability in an environment

that is still a little bit more economically uncertain and to favor the portions of the stable market or the stable portions of the market that are more reasonable in valuation. So health care can encompass both pharmaceuticals as well as health care services, both of which are reasonable and priced to us at this point in time. All right, Jason, thank you very much. Great to see you, sir. Jason Pride. Appreciate it.

Thank you, Tyler. Well, Bon Yields rising along with stocks today on that CPI report. Let's get over to Rick Santelli at the CBO for more. Hi, Rick. Good to see you. Yes, it's great to be on it. Again, with a very special guest. We have Jerome Snyder, managing director of the short end of PIMCO.

Jerome, welcome. Well, I'll start out with CPI this morning. I brought it out at 830 Eastern. it definitely was on the warm side, and it really does underscore how tricky it is what we call the last mile, meaning as the Fed gets close to their first ease, how does today's CPI affect that decision-making process? Yeah, well, at PIPCO, we don't necessarily think it affects the situation for June. That probably still remains in play. But the focus on the last miles, we term it at PIMCO, is really a focal point for investors and the Fed as well.

We see inflation moving from a good sector to obviously concerns about rent, to concerns about wage pressures, longer term. And a lot of these things are in flux. And ultimately, the equation doesn't necessarily mean that you're going to get back to that 2% threshold for the Fed as quickly as suggested. So while the Fed might ultimately react to this downward trend in June, the longer term trajectory of rates might somewhat be in question at this point in time. And so a more muted view of how the Fed thinks about it is going to probably be in the cards for the near term for 2024. The real question ultimately comes is what happens in 2025 as you get a confluence of wage pressures, earnings coming from the corporate sector. Now let me stop me right there. When it comes to wage pressures,

we all know, as we've seen strikes, and there's going to be more strikes. Longshoremen are talking about it. These things are going up. But there's certain aspects of the economy where there's sticky inflation that no matter what the Fed does with interest rates, it's not going to make a lot of difference. Well, I think ultimately focusing on the wage pressures is important. When you dissect it, there's going to be some technical industries which will contribute to the upward momentum in wage pressures, even though you might have the broad-based service sector of employment continue to stabilize out of the COVID-impleasure. environment. More importantly, though, when we think about these opportunity sets, it means we're in a

period of stickier inflation, growth, which is somewhat still lower than expected, especially compared to 2003, and a multitude of events, including geopolitical, that the Fed may or may not necessarily take a new... It sounds a bit stagflationary, but embedded in that very inverted yield curve, that to your note, as they start to ease, could afford some opportunities. Your thoughts? Yeah, we ultimately believe that there are some opportunities through the dispersion, through the active management in this regard and really focus on the opportunity for being defensive, lower volatility and fixed income, finding opportunities within that zero to five years sector, having some income and some diversification along the way, even though corporate bonds might be

relatively tight, diversify away from that. From that, we want to really remind investors simply don't be late for dinner. And what we mean by that is move out of the money market funds, add a little bit of interest rate exposure to help counteract some of the forthcoming yield declines, which ultimately means price appreciation in bonds. So don't try to overly time it. There's going to be a handoff between money markets with juicy rates and juicy rates that still remain in two-year maturities. Okay. And finally, let's do one more pass. When I look at what's going on with the Fed, my big issue remains supply. Supply is the outlier that could affect longer-term rates. Very quickly, do you think that we should be paying extraordinary close attention to these auctions

the way we have on the long end? Today is a case at point where you want to ultimately understand where the demand side is coming from. And that demand side is really a function of term premium. Inflation expectations, supply forthcoming. That's a longer term. It's a secular view over the next three to five years. And ultimately, investors are going to demand a certain amount of premium that may not necessarily be there today. We focus at PEMCO on being at the intermediate to shorter part of the yield curve

as the opportunity set right now that might ultimately change as the yield curve changes as we get to more normalized pricing policies from the Fed. Excellent. Jerome, you know your stuff, buddy. Thank you for joining me today. Tyler, back to you. All right, thank you very much, Rick. New data just released from the Treasury Department. How much money we are paying in interest on the national debt. It's a lot. Megan Kisela is in Washington with the answer. Megan? It is a lot, Tyler. We're actually paying more than ever. The cost of paying interest on the national debt hit a record for the month of February last month. New Treasury data shows us that the government spent $76 billion on insurance. in February. That's up 67% from a year ago as the deficit grows and rates continue to rise.

Interest payments really drove overall spending for the month, which also set a record for the month of February. It came in 8% above a year ago at $567 billion. On the revenue side, we saw a smaller climb. It was up just 3% versus a year ago. So as a result, that deficit just keeps growing wider. The deficit last month was 13% higher than it was the same month a year ago. So big picture, guys, the budget just keeps growing. For the fiscal year, so far we saw both revenue and spending set records in February, just like we saw them hit the month before. Guys.

All right, Megan, thank you very much. Megan Kassela reporting. All righty, coming up, the clock ticking toward a potential ban of TikTok. The latest next on that. Plus, the new EU antitrust rules have been in place for less than 10 days, and already Apple is pushing back and testing the limits. We'll discuss that one next. Apple folding to pressure in Europe and very quickly, Steve Kovac joins us now to explain what happened.

We were just talking about this and the fine that they may be facing. So what's going on now? Yeah, so it's so complicated, but it's been not even a week since the Digital Markets Act and the EU went into effect. And we're already seeing Apple kind of cave to this pressure. The latest one today is they're going to allow European users to download apps straight from the web. That is huge for Apple. If you've ever used an iPhone, which everyone here has, you go through the app store. You go through the app store only. Now, part of this thing, they allowed other third-party app stores on, but they said, no, no, no, we can't allow you to download apps straight from the Internet because that would just create some security problems and so on and so forth.

But again, we had Marguerite Vestiger from the European Commission on yesterday, and she even said, we're looking into whether or not Apple's idea for complying with our new law is, in fact, in compliance with this new law. And as this pressure sort of mounts, you know, we're seeing these backtracking and changes already before any kind of formal punishment can come down. Last week, also they, you know, they quickly reversed the decision to boot Epic Games off of the app store. About 48 hours after it became public, they booted them. Oh, no, they're back now. And so we're really seeing how meaty this digital markets act can be, especially against Apple, which has been so resistant to all these changes. What could be the financial implications for Apple? What are they losing by diverting away from the app store for the downloads?

Well, this is what investors need to pay attention to because this could ripple off, you know, throughout the world. Right now it's the deal. Yeah, ripple likes to other markets is my second question. So here's the real thing. They collect these fees. Obviously, we know we talk about that. The fees are less if people take advantage or if the developers take advantage of these new rules, but they're still charging fees. They're just Apple is.

and new kinds of fees. So one example, this is the one that's driving everyone nuts. It's called the core technology fee. So if I'm an app maker and I decide I don't want my app in the app store, I want it in a third-party app store, or I just want people to download it straight from the internet, I have to pay Apple 50 cents euro cents every time someone downloads my app. It doesn't matter if the app is free or not.

They call that a core technology fee. It is driving Spotify, Epic, even small developers, just up a wall. It's what the EC is looking into whether or not that is in compliance with it. Also coming any day now, we're expecting here in the United States, the Department of Justice, to sue Apple in this big antitrust case, on the same grounds and covering a lot of the same topics as what the EU is already doing. So what we're seeing now is an experiment of how Apple could maybe operate here in the U.S. in a few years. These fees that Apple would charge would be only to download the app to an Apple product.

Right. Right. Right. Right. Can Apple make the argument and maybe they do that, well, you wouldn't get this business but for the platform that we've provided. That's literally their argument. That is.

We've given them the tool to download your app. That is exactly their argument. Because of that, you should pay us a little carriage. And that's what they've said to Spotify throughout this whole battle. Spotify, you are the number one music service in the world. A large part of that is due to our platform. you pay us, you only pay us $100, this is Apple speaking, you only pay us $100 a year to have access to our platform, you know, the least you can do is if you do want to take advantage of some of these

in-app payment tools and so forth is pay us a cut. Spotify, of course, says no way, Jose, we're not doing that. So it is incredibly complicated, but it is incredibly interesting to see Apple cave to pressure before they get some kind of formal mandate or directive to do it. Because what's at risk, not just app store profits, but fine. That $2 billion dollar fine that they got last week, separate case from the Digital Markets Act, but the DMA, up to 10% of global revenue, so for Apple, that's nearly $40 billion in fines they could be facing. They can't just eat that. That is not something they could just brush off like they have with so many other fines.

And again, coming to the U.S. soon, so many of these issues are going to be brought up, the platform power. Just what you described is likely going to be kind of the thrust. of the DOJ's case against Apple, using their market power to kind of force these fees and so forth. All right. Steve, thank you very much. Appreciate it. All right, House members briefed on the potential TikTok ban. A vote now set for tomorrow. This is moving fast. Emily Wilkins tracking this developing story. Emily. Hey, Tyler. Well, yes, House members just met with members of the FBI, Department of Justice, and the Office of the Director of National Intelligence about some of their concerns over the TikTok bill. We heard from Mike Gallagher, who's the chair for the select committee on the Chinese Communist Party, that it was a substantial discussion.

He has a lot of confidence going in tomorrow that this bill is going to pass the House. And really, the ball has moved from the House to the Senate now. That's where all the really big questions are. And we talk to some senators today, and we are hearing a lot of support for what the bill is trying to do. But we're also hearing a lot of concerns at the same point about some of the specifics in the bill. I mean, number one, senators just realize that this is indeed a popular act. They want to make sure that they're really clear on what it could mean for them politically about if they take that app away. There are also concerns about freedom of speech and just being able to make sure that those who want to post online and can say things are able to do so.

And then, of course, there's an issue that has snagged some other TikTok banning legislation in the past. And that's about exactly how targeted it is on TikTok. And the question, does this legislation punish a single company without kind of having any retrospective? on there without setting sort of wider standards. And of course, lawmakers who are supportive of this legislation say, you know, this isn't a free speech violation where this is not about TikTok. This is about TikTok and bite dance. And this is about the ability for American data to not be in the hands of the Chinese Communist Party. TikTok is launching a lobbying effort on the hill here today, as well as through their app again. They're encouraging their users to call members of Congress and state their concerns about this legislation.

They also have a number of YouTube, sorry, rather TikTok users who are on the hill today talking with lawmakers. They're really stressing the small business, those who make a living off of TikTok and would have that taken away potentially if this bill is passed and if TikTok is not able to divest from bite dance and find a different home. Tyler? I'm curious. We talked a little bit about you and I, but yesterday we talked a little bit about this. there are other Chinese app providers, whether it's Sheehan or other shopping, that collect data on American users that are owned by Chinese entities. What insulates them from this kind of legislation? Why is the focus so much on TikTok and not on other providers that may also collect data

and be owned by Chinese entities that are subject to the Chinese government? It's a good question. And when we've asked lawmakers about this, a lot of them have come back to TikTok's algorithm. The one that really decides which video you're going to see next, what you're watching, as well as what content you watch next. All of those things are concerns. It's a little bit different to have an app where you're being fed a stream of videos, say that an app where you're going online and say buying a new dress or buying a new skirt.

And lawmakers have acknowledged, you know, there is some data that, of course, is getting through. but they don't see as the same level of data and the same level of information and concerns that they have with TikTok at this point. All right. Thanks very much. We appreciate that. Emily, thank you. Well, further ahead, Sam Altman, making sure not to put the cart before the horse, the importance of locking down strong power grid before moving forward with AI development. Power lunch, we'll be right back. Energy stocks lagging over the past year, but if you look under the hood, one subgroup is outperforming. Pippa Stevens here with more. but tell us which one it is.

We're talking about the refiners. So the big three are Marathon Petroleum, Valero, and Phillips 66. All three have been marching to any records and hit another set of record highs today. All three of them, not 52-week highs, but all-time highs. And so part of that is thanks to a dip in utilization rates. So it's normal for utilization to drop during the winter when demand is lower. But we have a chart here where you can see that yellow line is 2024. So it is lower than in recent memory.

And at one point it had dropped below, as set a new five-year low. It's down about 11% so far this year. Part of that is thanks to the outage at the BP's Whiting Refinery in Indiana, as well as colder temperatures along the Gulf Coast. Remember, they are about 50% of our refining capacity, and they don't weatherize their units because they're not used to cold temperatures, and some of them are running in excess of 700 degrees, so when it's cold outside, you have to pare back your operations.

So that, of course, is pushing up prices at the pump, as we are all aware. The national average is now 3. 39. That's up about 28 cents in the so-few. far this year, according to AAA, and now we are heading in to the summer driving season. So one thing to watch there, and the refiners continue to benefit here because we are pumping a record 13.3 million barrels per day, but if you can't convert it into usable fuel, it's useless. You know, we're not putting oil in our bathtubs. Exactly. You have to have that. What are you going to do with it? I guess you put it, send it to Cushing or you send it to some

storage facility. Yeah, exactly. And then there, you know, it has to be refined into the end product. And for a long time, refiners have kind of been seen as not having, you know, a future given this predicted slowdown in gasoline, slowdown in fossil fuel demand. And so as a result, we've seen capacity drop a lot since 2019. And new refiners are not coming online, which is what is supporting these margins, at least for the time being. Good stuff as always, Pippa Stevens. Thank you. Let's get over to Kate Rune. She's got a CNBC News update for us this hour, Kate. Hey there, Courtney. Scott Peterson was in court this afternoon, nearly two decades after his high profile conviction. for the murder of his pregnant wife.

He appeared virtually for a hearing today with the Los Angeles Innocence Project. The non-profits lawyers claim there is new evidence to suggest Scott was falsely convicted in the 2002 death of his wife, Lacey Peterson, and their unborn son. The White House, meanwhile, announced the details this afternoon of a new military aid package

for Ukraine officials said it would total $300 million and include artillery rounds to keep Ukraine's guns firing for a short period as the country fends off the ongoing Russian invasion it comes, as the president pushes Republicans to stop blocking billions of dollars in funding for Keev. And Roku disclosed a data breach affecting more than 15,000 users. The streaming company said usernames and credit card details were stolen in a third-party

leak and then sold. The unauthorized users then signed in, tried to buy subscriptions and hardware. Roku says it required all effective users to reset their passwords, guys. Back over to you. All right. Thank you very much. Kate, we appreciate it. Still to come inside the shadowy world of organized retail crime

as CNBC gets exclusive access to how thieves steal millions of dollars in items that end up on sale online. We'll be right back. Organized crime rings targeting the country's retailers are prompting an aggressive nationwide crackdown by law enforcement. And as CNBC exclusive, we go inside the criminal police investigations targeting the theft rings who set up thriving businesses to steal and sell online. Here's our investigation, selling stolen.

It's a chilly, clear morning in the picturesque foothills of San Diego County as we head to a suspected crime scene. A convoy of law enforcement vehicles is about to descend on an unlikely place. A mansion complete with its own vineyard and chapel rented out as a wedding venue and Airbnb. Police believe it's also the headquarters for a lucrative theft ring, or items stolen from Alta Beauty Supply, and other retailers are being resold on Amazon. As we pull up, authorities tell us they have the suspected ringleader in handcuffs. What are we looking for? There they are right there.

And it's happening everywhere. For months, we got exclusive access to the California Highway Patrol watching up close how it fights organized retail crime, which, including external theft, totaled $40.5 billion in the U.S., according to the National. Retail Federation's most recent estimate. On another day in another California city, we see more truckloads of what police say is stolen clothing, mostly from T.J. Max. We have a search warrant for the resident. Come up with your hands up now. I think people feel like it's hopeless. I want the retailers and the victims of this to know that that's not true.

Hands on your head. Retailers specifically pointing to theft as a growing problem in recent years include Target, Foot Locker, Walgreens, and Alta. But, Few quantify the impact or offer many details, raising questions in the industry about whether retailers are using the attention around theft to cover their own operational missteps. At the mansion, the woman in custody is Michelle Mack. According to the search warrant, she's in charge, giving a group of a dozen women across the country a list of retail stores to target along with the retail merchandise. Those Alta Beauty products then ending up on an Amazon digital storefront called the online makeup store at deep discounts. The search warrant

alleges Mac has sold nearly $8 million worth of merchandise on the platform since 2012. The next morning, a team from Alta unloads the hall along with CHP officers, sorting and carefully organizing everything. Most of it, $387,000 in stolen items from Alta, according to authorities, but also some items from Sephora, Victoria's Secret, Bath and Body Works, Sunglass Hut, and Lenscrafters. And these boxes of manila envelopes? They were being mailed to customers who ordered from the online makeup store who now aren't getting anything. Like Donna Washburn, who says she bought her daughter a $42 makeup item for Christmas. Did it ever occur to you that buying a product off of Amazon, you could be buying a product that was stolen? No, never.

You put in the trust in a store like that, that they're checking these things. As for Michelle Mack, California Attorney General Ra Bonta announced she and her husband Kenneth are facing charges of conspiracy, grand theft, and receipt of stolen property. The Macs have pled not guilty. This Amazon Marketplace site called the online makeup store that was stealing the stolen goods year after year. We asked Lisa Lebruno, senior executive vice president of the Retail Industry Leaders Association, how this could happen. So if you're Amazon, should you have had some kind of an algorithm that flagged it? This is not just about Amazon. There's other online marketplaces who serve as fences for the sale of stolen product.

But I don't see the online marketplaces raising their hand and saying, we acknowledge that this is dirty money. Retail CEOs have been largely mum about organized retail crime. But Alta Beauty CEO Dave Kimball spoke to us in an exclusive interview about the issue. We're absolutely fed up with it. I mean, it's impacting the experience that we work so hard to deliver for our team. These situations, they're not fun. They're threatening, they're intimidating. They can be traumatic. What do you think in this case, as we're speaking of in California, that Amazon could have done

to know that these were stolen goods? What I would say more broadly is there is technology available. There's use of advanced analytics and data capabilities to try, to understand behaviors that are indicative of reselling stolen goods. Are you shocked by the sheer volume that one ring could have been doing over more than a decade? Unfortunately, I'm not that shocked because we've seen it in other parts of the country. The magnitude of this one is significant. I do believe that the marketplaces and online distribution of stolen goods is part of the problem.

This is not some individual that, you know, bought too many lipsticks and they want to reseller. Amazon declined an on-camera interview, but told us it was, quote, untrue that the company is profiting from the sale of stolen goods. The spokesperson said we invest more than $1 billion annually and employ thousands of people to fight fraud. The company also said it uses sophisticated detection and prevention solutions, allowing us to quickly spot a range of organized retail crime schemes. Amazon acknowledged in this case, we did. not receive signals to identify the seller was engaged in selling stolen goods. As far as T.J. Max, the company tells us it's laser focused on fighting retail crime in its stores. And for more on our story, please go to cnbc.com.

We have a wonderful digital write-up from my partner, Gabrielle von Rouge. We have longer form videos because this was just a snippet of the story. But we've got a wonderful 17-minute version. You have to click on NC. What do, I think the executive there from Ulta partly hit on that. What do the retailers that are being victimized by this say about the earnestness of the resellers like Amazon in trying to combat this crime? Do they believe that Amazon is doing enough or not? So to be totally honest, this is really kind of a first-of-a-kind interview.

A lot of retail CEOs are not giving many details or talking much about organized retail crime. The ones that talk about it only sort of say that it's happening. And so I can use the example really of only Dave Kimball, the CEO of all. to hear who did say right at the end, he does believe that online marketplaces are part of the problem for this. And he says, I hope that everyone takes a hard look at what's going on, using all the tools that are available to make sure that you're not selling stolen goods. In this particular case, this was a third-party marketplace seller that did all of her own shipping of the items and simply would just use the Amazon model that allows to pay Amazon for hosting her site.

So Amazon never touched the product. They never saw it. saw the product, others might point to it and say, yes, but how are you able to sell prestige beauty items at such a deep discount for more than a decade? And that's where some of those questions do come into play. It sounds like the thieves are part of a loose but centrally organized confederation. The thieves would go into an Ulta in, let's say, Abilene, Texas. I don't know. There's an Alta in. They scoop up the stuff and they ship them out to the woman in the mansion in California. She repackages it and sells it to the unsuspecting customer in Des Moines. Yes. So we have more details on this exactly in the online story and in the longer version.

But she is sort of the ringleader. She would give a shopping list, more or less, to individuals throughout the country and states as far away as Ohio and say, I want these products from these stores. And those individuals would get compensated by cash. Exactly. She would pay them to do that. And then they would ship them to her. And she would be the one running the business, which from the photos that the police provided to us as we were on scene, but legally not allowed to actually approach it. So there's a longer version of this. A Courtney cut like a Taylor's version. You know it. It's a deep cut. It's a deep cut online. I encourage everyone to take a look. All right. Sounds cool. Thank you.

All right. Still ahead. Powering AI won't be an easy feat. That's why Sam Altman is already thinking about what's needed. To scale the technology, we'll get some insight from one of the energy names he's backing when Power Lunch returned. Welcome back to Power Lunch. One side effect of the AI boom. the huge amount of power it takes to run these systems. That's a hot topic this week at the South by Southwest conference taking place in Austin. CNBC's McKenzie Seagalus is live at Texas with a look at how one of AI's biggest names is looking to solve this problem. Hi, McKenzie. What have you found?

Hey, Courtney. So, you know, I lived in Austin and South by Southwest is by far the best time to be in the city because it's when you get the inside track on the tech that will hit the mainstream in six months from now. This year, the hottest topic, of course, is AI. a lot of people are talking about the energy problems that it presents. I spoke with the CEO of ACHLO, one of two power companies chaired by OpenAI CEO, Sam Altman. One of the things when we think about what it takes to scale AI and where it goes, obviously you need chips, that's a big part of it, but then you need energy to power all those chips, and you need it in massive amounts.

And you want it to be something that's extraordinarily scalable, that matches well with what the demand looks like. In other words, AI compute is going to be something that's 24-7. You just need the power always. So Acoe is all about nuclear power because it's inherently reliable, very clean, and extremely scalable. And this is why Silicon Valley has been pumping money

into nuclear energy for years. Bezos and Gates are two other big supporters of nuclear power. Plus, there's talk that Altman could take Acklo public through his spec so we can look out for that as well. We'll also be waiting for some of the more novel AI applications

being discussed here at South by Southwest this week. One example I have to bring up now. South Korean developers debuted an app called Solink where you can talk to a dead loved one. That's literally right out of a black mirror episode, guys. Oh, I like, I sort of pringed at that.

I was like, oh, I don't know how I feel about it. You should have seen Courtney perk up when you mention that. She had her head buried in something over there. I was like, oh, I don't know about that. So how much power does it take to power AI? I mean, that's a great question. And like, we're talking

about an age of AI before LLMs are integrated into search engines. Once that happens, it's really going to go through the roof in terms of what's needed to electrify AI. The bottom line is that data center rents are spiking up almost 16 percent from 2022 to last year. And we're not even talking about electrifying vehicles across the U.S. I think that the bottom line here is that more power is needed and nuclear is a good source for that. It is very interesting. And I know you said, you know, Sam Altman sort of has an interest in this directly. And so that is a fascinating part of the story to continue to follow that link together. McKenzie, thank you so much.

We'll still ahead. Oracle shares are up 12% following a third quarter earnings speed. Our three stock lunch trader will give us her thoughts on that name. Plus, of course, two more. And as we celebrate women's heritage month, we're sharing the stories of some of our newly named CNBC changemakers, an annual list of 50 women who are innovating and transforming business. Here's Element Biosciences CEO and co-founder, Molly. When change makers can challenge the status quo, they will met adversity.

So I think that change maker will have to be driven by a profound higher purpose to bring great benefits to human society. Only then the change makers can motivate themselves and transcend these kind of adversity into motivation. Welcome back, welcome back to Power Lunch. Time for today's three stock lunch. Here with our trades, Victoria Green, founding partner, chief investment officer with G-squared, private wealth. Victoria, good to see you up. First is Oracle. Best day in more than two years.

I'm having my best day more than two years. I'll tell you that. Shares are soaring on better than expected quarterly earnings. Your trade here. Hope you're having your best day in two years, Victoria. Absolutely. I mean, I'm struggling well with the time change still. Not going to lie.

That Monday morning hurt a little bit. But look, Oracle for me, is. absolutely a buy. It's just breaking out to new highs. It's finally leaping above. We've seen this time and time again with some of these tech AI stocks. It's finally the market is realizing the value they have and all of their databases and all of the cloud service. They're going to try to compete with AWS and Azure and they're going to get there. They've got an $80 billion backlog. They can sell as much as they can build on some of their database and cloud systems. So for me, I see Oracle continuing to push up, just breaking out. And I think you can still

get on board and get some upside with them. Okay, so maybe there's still room to run for you. If you're not an Oracle yet, according to Victoria, up next is 3M, hiring outsider Bill Brown, the former head at L3 Harris Technologies, as his next CEO. That stock up today on the news. Victoria, what's your trade on 3M? I am Zelda Rip. I'm sorry.

This is still a turnaround story. There are so many headwinds to this company. And yes, I do applaud. It's a 120-year-old conglomerate. They're bringing in an outsider. He's probably going to do well, but he has a lot to get through. They have two lawsuits that they're trying to finalize settling. They're going to have to put aside more to protect their debt rating.

They're spinning off their health care systems. This likely potentially 3M looks a little bit like GE, where they may have to continue to break apart and streamline, which they've talked about potentially having to focus on new lines and call others. And the other problem is they have a China problem. 43% of their revenues are international, and 25 of that comes from Asia PAC, and it's just been soft over there.

So not only do I have litigation headwinds, and they're working on spinning off the streamlining, but they still have some of the sector headwinds everybody else is facing. So for me, I just take this up. I just don't see it hitting new highs. Well, let's move on to Southwest Airlines. The company saying it needs to cut capacity, reevaluate its financial forecast for the year. That's never usually a good sign.

Siding Boeing problems, by the way. So what's your trade on Southwest, Victoria? I know it's down 12, 14%, but it's a sell for me. It can always go down further. I think it's much more likely it hits that 22, 25 range, maybe pushes to new lows. They're having to cut because they're getting zero max sevens. They're only getting 29 new plane deliveries. They're cutting routes.

They're freezing hiring and they're reevaluating spending. Those are fairly draconian measures that Southwest is taking. It's just not one thing. They're looking across the board. They're facing potentially rising fuel prices. They don't have the international routes that, say, a Delta and United were able to lean on. And it looks like potentially that their consumers getting a little bit pressured. And they also don't have quite the rewards and the extras.

is, you know, we pay so much for like, oh, baggage fees and those keep rising. And Southwest, as customer-friendly as they are, it also limits the revenues to plane tickets, basically, which cuts off more revenue growth streams that other airlines have been able to lean on. For me, I just think Southwest is a little too exposed here, and airlines are also exposed because you can't just build an airplane in a few months. The backlog is years. Yeah, absolutely true. Victoria, thank you very much.

We appreciate it there. Thanks, guys. You bet. Coming up, Oscar ratings just jumped to a four-year high. So was it Ryan Gosling's Ken or G? Or Oppenheimer's seven wins? We will discuss that one when we come back. We only got about 90 seconds left in the show.

Let's see how much popcorn we can feed you here in that time. ABC's telecast of the 96 Academy Awards. 19 and a half million viewers on Sunday. That was the most watched Oscars ceremony post-pandemic. The bump is largely credited to the Barbenheimer rivalry that dominated box offices last summer. But Ryan Gosling's performance of I'm Just Ken surely had people excited to tune in.

I think it was the fact that Barbie and Oppenheimer were such big hits. People had actually seen some of the movies that were on offer. Absolutely. And I thought that Emily Blunt and Brian Gosling's back and forth with each other when they were presenting an award. That was very funny.

Very funny, very clever. The I'm Just Ken performance was funny to me watching from afar. It seemed like the celebrities were rolling in the audience about it. Yeah, in person. It must have been. even better. Well, Coles is teaming up with the owner of Babies Are Us to bring baby gear furniture

and more to approximately 200 of its U.S. stores at least to start. The retailer struck a licensing deal with W.HP. Global, a brand management firm with a portfolio that includes bonobos, Joe's jeans, Anne Klein and others. Terms of the agreement were not disclosed. I spoke briefly with the Cole's CEO, Tom Kingsbury, and really his first interview since he's taken the job over a year ago, and he said this was really all about connecting with our younger consumers, trying to, I think, bring them in right for the journey and then have it continue through. Is it going to be like a store within a store? Store within a store and it is a licensing agreement.

They will own the inventory polls. All right, Gordon, thank you very much. And thank you for watching Power Lunch. Closing bell starts right now. See what tomorrow.