Power Lunch - Rally Roadblock?, Sticker Shock 01/23/24

Episode Date: January 23, 2024

The market rally is hitting a roadblock today, as earnings really start to roll in. Will that be what kills the rally, or will strong results actually add another log to the fire? We’ll discuss.Plus, home prices are so high, realtors are increasingly glossing over the eye-popping total costs – highlighting the down or monthly payment instead. Will it help woo more buyers? Well ask an expert. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Launch, everybody. Alongside Contessa Brewer, I'm Tyler Matheson. Coming up, the market rally hitting a bit of a roadblock today as earnings really start to roll in. Will that be what kills the rally or will strong earnings add another log to the fire? Plus, real estate sticker shock, home prices so high that realtors are increasingly glossing over the eye-popping total cost, highlighting instead what you might pay for a down payment or perhaps the monthly payment. Will it work to woo more buyers first? Let's get a check now on the markets. The Dow falling after closing above 38,000 for the first time. It's off by a third of a percent right now. You can see the S&P 500 is up a tenth of a percent in the NASDAQ composite. Up 0.17 percent. 3M, a big drag on the Dow after reporting lower sales for the fourth quarter.

And guidance for 2024 didn't quite meet what analysts were expecting, Tyler. All right. On the other hand, we have Verizon, which is higher after beating S&S. estimates and reporting a jump in wireless and broadband customers. There you see, Verizon up nearly 6% at 4188. We start with the market. Stocks pulling back a little bit today as the rally hits a bit of a wall while earnings ramp up. Will earnings kill the rally or will they be strong enough to keep it going? Our market guests expects an expansion of the rally in the year ahead. He's Kevin Mon, President and Chief Investment Officer at Henion and Walsh Asset Management. Kevin,

always good to see you. And you, Charlie? So far, earnings, how would you? characterize them? I believe that the market is actually feeding off of earnings right now. Absente any Fed beatings, they're looking to digest these earnings reports to see if, in fact, the Fed's forecast economic slowdown is going to come to fruition. I would also argue that if we have a weak earnings season, that could actually provide additional fuel to this ball market rally because it ties into the notion that they're going to have to cut interest rates to help prevent this economic slowdown from leading into an economic recession. But if they, if If they cut rates because they're worried about an economic slowdown.

Yes. Is that good for stocks? It ultimately is good for stocks. Ultimately, but in the short run... For the next six months, I believe there's going to be additional volatility as this pace of economic slowdown starts to set in. The Fed is forecasting economic growth to slow to 1.4% this year and stay below 2% all the way through the end of 20206. So they're going to have to step in and start cutting interest rates, but not until the second half of this year. Let's look where we are.

We're only 10% of the companies in the S&P 500 have reported so far. 62% have beat consensus expectations in terms of earnings per share. The five-year average is 77%. So we're below that. And the consensus is that we're going to get 12% earnings growth this year. Is that too high, given what we're seeing so far? I do believe that that 12% earnings growth forecast does have to come in a little bit. As it stands right now, fourth quarter S&P 500 are expected to decline, not increase, but

declined by 1% 7% year over year. That would mark the fourth quarter out of the last five quarters where earnings growth have declined over the last five years. That fits right into this notion that the economy is slower. Does it even matter? Because half the time, I swear, I cover earnings, a company that just knocks it out of the park. And you know what happens?

The shares decline. Are investors paying attention to earnings? They certainly weren't last year. All they were focused on was the Fed guessing game. When is the Fed going to cut interest rates? How much are they going to continue to keep interest rates at these current levels? Now they're starting to pay attention because they want to understand if this forecast for an economic slowdown is real. And it is.

The next two quarters will mark an economic slowdown. The Fed will have to step in, and that creates the opportunities in post-dust. But you don't see them stepping in until the second half of the year or sort of May-ish, June-ish? I believe it will take two consecutive quarters of a slow-term. economy for the Fed to feel comfortable cutting interest rates. That brings a second half. Slowing or negative? Slowing. Slowing. Not dipping into the classic definition of negative. Not into recession. If it does, they may have to step in even sooner. Shrinkage. Let's talk a little bit about the idea that this year, to the extent that there is a rally is going to be a

rally that is broader than what we saw last year. You call it a rally of the rest. Yes. So I believe 2024 will be an expansion of the rally from 2023 or a rally of the rest, if you will, beyond just those seven large-cap technology stocks that accounted for 62% of the S&P 500s gained last year. But to get to that point, we do need the Fed to start cutting interest rates. We need inflation continue to moderate. And that rally is going to expand just beyond those technology stocks into areas of the markets that haven't recovered just yet. For instance, you really like AI and cybersecurity right now. Are there specific companies within those sectors? There are. I believe what's been lost in the AI race is the critical

importance of cybersecurity, the glue that holds the technology puzzle together. In fact, it's even more important now with the proliferation of AI. Certain names that we hold within smart trust include CrowdStrike, Fortinette, or even CyberArk. It's these types of companies that are going to provide the software to help thwart cyber attacks that are forecasted to account for over $10.5 trillion dollars of cybercrime costs by the end of 2025. What are you looking at in biotech? Biotech, we believe the pace of M&A activity is only going to increase. Those companies that have drugs in either level two or level three approval status from the FDA and are focused on providing some groundbreaking innovative healthcare treatments in the fields of immunologies, gene editing, gene splicing, we think are ripe for takeovers.

Kevin, it's great to have you with us in studio today. Thanks for making the trick. My pleasure. Tonight for today's three stock lunch, three big names making news today as three CEOs and one other businessman that you might recognize. recognize, join CNBC to talk business here with our trades, Victoria Green, founding partner and chief investment officer with G-squared private wealth. Great to see you, Victoria. Up first we have Procter & Gamble. The company reported second quarter earnings, and here's CEO John Mueller discussing the state of the consumer right now. Things are going very well from a consumer standpoint, as I mentioned, volumes strengthening. There are, of course, challenges

in the world that we live in. But the team are. has done a great job executing our integrated growth strategy to overcome those challenges, and I expect the same will continue. What's your trade on P&G? P&G is a buy for me. Now, I have to tell everybody here, it is a staple, so I'm not expecting like an explosion up 100% the rest of this year, but I like the staple on how it's positioned right now. They saw an expansion of 8 out of 10 of their lines of business either stayed the same or grew

in Q4, and they are dealing with a little bit of a China pro-proper. problem, but who is it? And they're selling it to everybody else, and they're selling it higher prices. So they had sales volume growth and they had margin expansion. That's a great place to be. They're expected to buyback $5 to $6 billion in share authorization buybacks for this year, as well as a 244 yield. I like this company as a place to be steady, any growth. Again, it's a staple. So, you know, if you're expecting AI type returns in a staple, you might have to reset that. But I think it's a really good place to get your total return this year. Yeah, yeah. Don't get giddy on it, but maybe it's a good buy-and-hold solution.

to you. Let's talk about United Airlines. The shares are moving up a little bit today. Here's CEO Scott Kirby discussing how UAO will be impacted from the fallout on those Boeing 736 max issues. We're early in the planning process, so we'll see. But it probably means that we change the order book some. There's alternative airplanes instead of max tens, at least for the next few years. And it probably means we don't grow quite as fast as we were hoping. We're still going to be in absolute the fastest growing airline in the history of of world aviation, but we're not going to grow quite as fast as we otherwise would have, because the reality is Boeing isn't going to be able to deliver us all the airplanes on the

time frame. They're going to be the fastest growing airline in all of aviation history, says the CEO, shares up about 7 percent today. Your trade here. I'm selling it here. Take your profit if you've got it. I don't think it's going to hit those 2018-2019-90s highs. I don't even see it retesting the 57 high.

They have a new labor agreement, which is great, but they're going to. going to see labor go up 40% over the next four years. And labor and fuel are the vast majority of their costs. We are seeing some issue with growing, you know, airplane tickets coming down. Yes, they're continuing to grow their volumes. But a lot of that growth didn't come for the United States. A lot of it came from Asia. And I think that trend's going to renormalize. So I just don't buy that they're not going to have more problems with the max, especially the max nine. I do not see the FAA fast tracking, getting those back. If anything, the FAA is going to move slower with all the problems

that Max has had. And United has a pretty big Boeing relationship. It was fascinating. That's the first time the CEO's kind of publicly spat with Boeing. Everything else has been very collegial and behind the scenes. So we'll have to see if they really do try to pivot to Airbus if they're staying Boeing. But I just don't trust

this airline right here. Rockest cheers, Victoria, from adolescent boys everywhere. Wrestling on Netflix, it's reportedly paying $5 billion to bring WWE Raw to its platform. Also, TKO Group, which owns the WWE, is putting Dwayne the Rock Johnson on its board. Here's TKO Group, CEO, Ari Emanuel, and The Rock.

Yeah, celebrity on CNBC on the importance of this deal. I think that this is an important step for them in their Avod service and in their subscription service. So I think live is important for them. When it comes to Netflix, I'm excited about it to 52 weeks live. That's a lot of Rock raising the eyebrow every week. for Netflix. I love it. Victoria, Netflix reports results.

I wish I could raise an eyebrow. I wish I could do the other than Ibrel. You got to lay off the, if you're like me, you just lay off the Botox and all of a sudden your eyebrows are back to moving around like they're supposed to. You know what I'm saying? It's been a little while. Less than two hours from now, we look for Netflix earnings. What's your trade on Netflix?

Netflix is a vibe for me. I've loved this stuff for over a year. I think what they're doing is phenomenal. They keep expanding their offering with their ad-based. tier at $7. They've got their basic tier at 15. Oh, you want to add a family user. They're at eight. I mean, Netflix is just well positioned. And they're going to continue to get more and more ad revenue. If they move more into gaming and live events, which are two opportunities for growth, this could be huge. Now, they need to execute on doing live events and streaming live events

well. But it's a great way to potentially getting into that lucrative sports marketing and the sports market and live TV area they don't have. But their content is phenomenal. Their original content versus what they've got license is a great balance in their programming. So I see them continuing to expand free cash flow. I see them getting 9 to 10 million new users. And while their average revenue per user may fall a little bit in Q4, it's better than the $0 per revenue they had with all the freeloaders. So I think we should be prepared that may fall a little bit.

But general revenue and free cash flow growth, I think their runway is phenomenal. And I love to stop going into earnings this afternoon. And really, this kind of content, this live content, hooks in a younger demographic that grew up on Netflix. I mean, for sports, I'm saying, they're hooking in the younger demographics. You're talking about gaming as in video gaming,

but it raises the specter of what's the crossover with sports gambling as well? Because we know WWE had already made a play to get a gambling license. It didn't work out for them last year when they made a big hooplau about it. But the potential is there. Absolutely. And they're trying so hard to also. get young users away from YouTube. YouTube is obviously a huge competition for them and the whole

Gen X, Gen Zs that watch everything on YouTube. So the more you can do live where you may be attracting viewers that we're only, we're using a different channel. I think that's huge because live is one of the only kind of sports is one of the only protected, I would say, live entertainment that that's really got a huge amount of value to young customers. And I may debate if WWE is technically a sport or not, but that that is above my pay grade. But it's a it's a whole in there for sure. The gaming regulators thought no, which is why they didn't get the licensing Colorado. Okay, Victoria,

here it goes. Thank you very much for joining me today. Oh, there's the raised eyebrow. Got it right there. Oh, sharing a lot there. All right, coming up, Alphabet Nixing, its Moonshot factory will explain why the company is cutting staff at its laboratory, technology

lab, excuse me, in today's tech check. That is after the break. Plus, it's been a surreal time for semis. The AI rush, boosting names like invidia and others. Despite all the hype, not all the chip makers have been benefiting nameless Texas instruments. That story ahead on PowerLuck. Sometimes you just got to own it. You do. You just kind of go with it. Hi, welcome back to Power Launch, everybody. Time now for Tech Check. We've been talking a lot about

layoffs at big technology firms. More cuts could be coming to Google at a very specific area of the company. Dia Dabosa has the details. Hi, Dee. So layoffs this time are happening at X, not to be confused with the company, formerly noticed Twitter. This is Google's Moonshot Factory. Its mission is, and I'm quoting from the website here, to pursue things that sound undoable, but if done, could redefine humanity. So that has included everything from self-driving cars to internet balloons, to ocean preservation. Some of the divisions and projects within it are called Wing, Waymo, which our audience is probably familiar with, Brain, Verily, and Loon. That's the internet balloon one that was eventually

shut down. But you only have to look at this chart. at Cashburn at this other bets division. So when a project graduates from X, they go into other bets within the alpha bet structure. It has six billion in operating losses in 2022 on just over $1 billion in revenue. So there's been a lot of pressure over the years from Wall Street to cut those losses. And in times like this, where Wall Street is looking for efficiency and is more unforgiving for projects that aren't directly tied to the generative AI hype cycle, the Moonshot Factory feels more of a nice to have than a need to have, right? But it all raises the question, Tyler and Contessa, where is that other revenue stream going to

come from if the core advertising business, which has been so lucrative in Google's history, where does that come from? And a lot of folks say cloud has had a lot more early success. Go ahead. Deirdre, I think it's amazing, but we had talked. before about these layoffs, are there more coming? When you look at how you get a return on the investment you're making, I mean, are humans, like, irrelevant at this point in the big technology of the future? You are kind of pointing to something interesting that has come out of this year's

layoffs, and that is the excuse before was, you know, Wall Street demands it, we need to be more efficient, whereas this round of layoffs this year, it's more like the machines made me do it. AI is leading to these layoffs because they need a different kind of workforce. But to answer your question are more coming? Probably. It was only last week we were talking about Sundar Pichai's memo that he sent to all alphabet staffers saying more are coming because we need to get ready for this generative AI shift. And when you think about the Moonshot project, verily, it's a sort of life sciences unit. That maybe seems less appealing, less palatable, versus some of the AI projects that they want to shift resources.

Is this sort of X corner of alphabet? Is it effectively a venture capital arm or is it venture capital with an even sort of higher long shot quotient to it? And we were talking, I think it was yesterday about how so many of the technology companies have venture capital arms. I mean, Comcast, our parent, has a big venture capital arm. Yeah, a corporate venture capital arm. This is, yeah, I think that that's a good analogy, but it's almost like venture capital on steroids. That's what I was thinking. That's what I was thinking.

The mission is to solve humanity's greatest problem. So, yes, and the losses are so huge. I mean, $6 billion in losses in 2022 alone. I think it was $20 billion in losses over a five-year period. I'd be happy to take some of that money. I'm happy. They can fund me. And I'll go for a lot less than $6 billion.

Can you solve ocean preservation? Can you put self-driving cars on the road? Got it done. Bigger problems in minutes. Check. Got it. All right. If you do that, then I'm sure they're happy to pay.

Have them direct a little bit. Give me a call. Call me. I'm here. Google. Thanks. Hey, Google. I'll tell them.

All right. Thanks, Deirdre. Up next, Bitcoin, coming back to Earth, maybe like my co-anchor as well. The cryptocurrency tumbling about 20% from its highs following its ETF approvals. We'll get details next. bond yields rising today as stocks take a breather from the record rally. Let's get to Rick Santelli

in Chicago. He's got the action from the bond market. Hello, Rick. Hi, Contessa. Indeed. We had a two-year note auction today. 60 billion. We've never auctioned off more than 60 billion all during the COVID years. We did have auctions in 2021 at that amount. Tomorrow, 61 billion fives. We've never auctioned off more than 61 billion fives, but similar to two-year in the period between January and October 2021. We did issue $61 billion. We've just never issued anymore. So today we had a good start to the first leg of $162 billion in three, five, and seven years supply. As you look at that two-year note yield chart, what you can see that yields have moved down since 1 o'clock Eastern when the B was the grade above average I gave for the first leg.

And if you open the chart up, these are going to be the highest yield close in a two-year, a fresh high yield close going back to the 18th of December. And all these yields being so firm in 2024 have moved a long way to keep the dollar index quite buoyant. It's up on the year settled last year around 101. Here we are on our way to 104, similar to a two year and other maturities in the Treasury complex. The dollar index right now should have closed here

would be the highest yield close since the 12th of Ds, a little over a month. And many believe that the yield curve, which today is de-inverting just a smidge has been hanging. So 20 minus 20 to about minus 28 seems to be the range. Traders are paying closest attention to. That's twos versus tens. Tyler, back to you. Rick Santelli, thank you very much. Bitcoin coming off, and we do mean coming off, the euphoria of its big ETF milestone, down 16% since the 10th of January. So who's doing the selling? Kate Rooney knows. Hi, Kate.

Hey, Tyler. Yeah, so part of the crypto selling we've seen lately, it has to do with this loss and enthusiasm around that ETF launch, but leverage is also a big factor here, and it's an increasingly dominant force in these markets. Analysts over at GlassNode point out the buildup in Bitcoin leverage and open interest between January 9th and 11th. That was when the ETF speculation peaked. Prices neared $49,000 at that point. And then that was followed by this wipeout in some of those positions. Prices fell and you saw this Bitcoin sell off over that weekend. The world's largest cryptocurrency dropped to its lowest level since December this week. That has been disappointing for a lot of crypto investors, hoping these ETFs would unleash a flood of new

interest from traditional investors and institutional investors and therefore boost prices. But the opposite has happened, at least in the near term. Bitcoin's roughly 15% off of where it was trading when those funds launched and it's emerging as really what you would call a sell the news event, popular in the hedge fund world, which, which some investors did worry about heading into this ETF approval. Crypto-related stocks like Coinbase, for example, they're also getting hit this week. JPMorgan downgraded Coinbase, at least, saying today that they think a key catalyst for the crypto industry in those Bitcoin ETFs has been what they called overestimated by the

crypto community. They acknowledge that Coinbase they think is a dominant US exchange and a leader in the space, but they think the catalyst in those Bitcoin ETFs, they say that has pushed the ecosystem out of its winter. They say it's still going to disappoint market participants. Jay Pumorian does expect the ETF enthusiasm to further deflate, as they described, it driving prices lower, along with lower ancillary revenue opportunities for firms like Coinbase. Back over you guys.

Where were these wet blankets before the ETF approval came along? You didn't hear a lot of people saying, oh, this ETF approval. It's going to go down from here, Bitcoin is, because it's over bought. That's a great point, Tyler. Hindsight is 2020, at least in the analyst community. You're now hearing a lot more of a bearish sentiment ahead of this news. It was a lot about the potential of institutional investors.

Now the reality is hitting your scene and hearing a way more bearish tone out of the cell side, at least when it comes to Coinbase and some of those names. I will say, though, all of the bearishness you're hearing on some of the crypto-related stocks comes after this massive run-up last year. So stock, take Coinbase, for example, was up 400% last year. So there is that to take into account. That yes, there is a bearishness, but part of it has to do with valuation. Can you think of many, if any, who predicted a 15, 20% sell off after the approval of ETFs?

There were some that did say, you know, buyer beware. There is the buy the news, sell the rumor risk that, you know, especially in cryptocurrency markets. So absolutely there, that was being said, you know, we said it on. They were out there. They were out there. There were firms who said, yes, we're excited, but you've got to be careful, and now that's coming to fruition. So a couple of the Wall Street firms did get ahead of this, but now you're hearing a bit more wet blankets out there, as you said, Tyler.

Chicken's roosting, that metaphor there, chickens are roosting. All right, Kate, thanks. Let's get to Bertha Coombs now for a CNBC news update. Hi, Bertha. Hi, it's Contessa. Washington's federal appeals court has rejected Donald Trump's request to reconsider a gag order in his federal election. case today. The former president's attorneys asked the court to examine the gag order after a three-judge panel had upheld while narrowing the restrictions on his speech. The judge, the judge said

Trump's election case imposed that order back in the fall in response to concerns from special counsel Jack Smith's team that the former president's history of making controversial comments could taint the case. Turkish legislators began debating a long-delayed bill to approve Sweden's accession to NATO. If lawmakers ratified the membership bid, the Turkish president is expected to sign it into law within days, leaving Hungary as the only member state that has yet to approve Sweden.

And Charles Osgood, the longtime host of CBS Sunday morning and CBS Radio's Osgoode files, has died. Osgood spent 45 years at CBS before he retired back in September of 2016. He was known for his way with words and love of poetry and music. His family said he died today from dementia at his home in New Jersey. Osgood was 91 years old. And I have to say, he was one of my all-time favorites. I just loved him.

Yeah, he really was a, had a marvelous way with words. His poems, his rhyming was really clever. And he left a really indelible mark on Sunday morning and on CBS News. Our sympathies to the family. Bertha, thank you. After the break, reeling in the buyers on reels. And if you get the references here, you're a lot hipper than I. With home prices still sky high in parts of the country like New Jersey,

many real estate agents are trying new social media marketing plays to get buyers off the sidelines. Power Lunch will be right back. Welcome back to Power Lunch. High mortgage rates have kept many buyers on the sidelines. many would-be sellers are sitting in homes. They just don't want to let go at bargain prices. Some experts predict that home prices might surge more as mortgage rates decline. With this standoff between buyers and sellers, real estate agents are finding they've got to get creative to protect their own personal bottom line. On social media, they are accentuating the positive,

as usual, and downplaying the negative. For example, in New Jersey, we spotted agents highlighting the down payment or the monthly payment rather than the full selling price of the home. Ralph DiBagnara is a real estate and branding expert, and president of Home Qualified, joins us now in the studio. Does it work? Like if you just say, look at what your monthly payment is and forget about how much it costs over 30 years. It at least gets them off the sideline to explore. And I believe that's what real estate agents are trying to do it. Hey, at least look at what the market looks like now. And according to real estate agents, it's always a good time to buy. Sure.

But, yeah, I think they're using those practices, especially through social media, to bring people in to say, hey, at least take a look. Is the breaking down of the mortgage payment per month factoring in where the rates are right now? I mean, are you having to balance? Like, if you wait longer and home prices sore, you could actually pay more even if your mortgage rate goes down a little bit. What realtors are highlighting and finance experts are highlighting is that if prices rise in June or July when we think the Fed's going to cut rates, right? Then home prices will, if the rates come down, home prices will go with it. So if it's a higher price, you're better of refinancing that home at a later date. And I think that's what they're highlighting, right?

Like, buy the home now at a lower price and refinance it at a lower rate when rates come down. You can always refinance. You're not going to be able to lower the price on the home once they go that way. So I believe that, you know, if you see anything, it'll be a 10 to 15% raise in prices. So. And rates come down. Well, that's the way bonds are. When bond rates come down, the price of the bond or the value of the bond goes up. And that's really what a mortgage is.

Exactly. Yeah, exactly. I mean, I think you're on to this. I mean, or realtors are on to the real estate agents are onto this. It's the idea that people buy the payment. They buy the monthly payment. Because if you looked, if you were going to take out a $500,000 mortgage and pay it off, over 30 years, you're not just going to pay $500,000.

You're going to pay $1.4 million or something like that. And you'd say, hell with that. I'm not paying that kind of amount of money for that house. But if I reduce it to the monthly payment and the down payment, that makes it much more palatable thing for me. Your payments, you get every single month, right? And that's what people look like. You're right.

Nobody's looking at what it's going to cost me over time. So that monthly payment. And other things are the fact that we take. It's like a car payment. I buy a $60,000 car. I'm not, maybe I'm not looking at the price of the car. carbon, I'm looking at the price of the monthly. Every single time. And some other things are factoring into that now, and it's not being talked about enough, but I think you'll see it more prevalent over

time, is that insurance costs are way up over the last year, and that's become a huge problem. And now taxes, because home prices are up so much over the last couple of years, are now being reassessed, and taxes. And taxes are higher for property taxes. So these are things that obviously factored to the monthly payment that we're not highlighting that need to be looked at by buyers. I've actually heard that insurance costs are so high that in some places, for instance, in Florida, it's killing deals because people then take a look at what their monthly payment is going to be for insurance and I'm like, I'm out. I can't swing that. I'm curious. The last time we saw mortgage rates at this level, we didn't have social media. We didn't have the ability to storytell

like you didn't have a house as part of this narrative with a beginning, middle, and end. And the costs of producing it now are so low compared to what they were back then. Does it make it easier to sell homes even when the market is difficult? It definitely helps. You know, a lot of what you're seeing now is people showing before and afters on homes. Hey, you can use renovation loans or renovation to make this house what you want it to be. Or relocations become a huge thing, right? This is how much a $300,000 house, you know, what a $300,000 house looks like in Texas

compared to what $300,000 gets you here. So relocate to Texas or Florida or Tennessee and you can get a lot more for your money. So before we didn't know what that was. We thought it, but we didn't really know it. And now social media is making that present where we can see, visually see, hey, if I move states, taxes are lower. I get a lot more. I get a pool. I get 4,700 square feet as opposed to 2,700 square feet, whatever it is, if you're in Fort Worth as opposed to Bergen County.

And these are things that weren't present before. How tough is it for real estate agents, mortgage agents, title people? Like, what is the market like right now if you're working in this industry? It's tough. You know, this is probably the toughest year that all of those. people have seen maybe ever because they're new to the business, but it's definitely the toughest year since 2007 or eight in a different way. You know, there was a report that came out last week, obviously that last year, 2023 was the least amount of homes sold since 2010. Now, I think that

number is obviously skewed because it's a different market where there was a surplus of homes then, and now there's a shortage of homes. So that definitely played into it, but that doesn't help people who are in the business that are doing a lot less business because there's a lot of things. If I'm a seller, give me the three things I must do today. I get my house ready to sell, to price it right, whatever, to market it, whatever. Sellers have to be realistic about where prices are today because of affordability, right? Interest rates are higher, taxes are higher, insurance is higher. So I think price your house the way it should be priced today and that word should have been priced a year ago,

where you could have got a bidding more for 30 and 40 houses. If you look at most markets last year, New Jersey not being one of them, or New York not being one of them, but in most markets, prices were down last year overall. So I think that you have to look, as a seller, you have to be realistic about where prices is. Price and right. Price and right, correct. You have to stage it? You have to stage the house?

I don't know that you necessarily need to stage it, but I think that there are little things you can do to make sure at least this presentable, curb appeal, that the landscaping looks right, that the kitchen and the bathrooms are at least presentable. These are what people want to see when they walk into a home. Where do you think prices are going to go up the most, which states, and where do you think we might actually see a decline?

And the states where you can't build a lot, like New York, New Jersey, California, most places in California, most places that you can't build, you're going to see prices rise the most because you can't create inventory. So in cities and states that you create inventory in, you're going to see prices rise, right? And a lot of the states, you know, the South has had a boom, right? Tennessee, South Carolina, North Carolina, even Florida,

you're seeing prices come down a little bit because you can create inventory. So I think so you're not land constraint. Not land constraint. You're not in northern New Jersey or my town, MacLare, where there's just not a lot of buildable space. part of your backyard. If you want to help people build, I could. Yeah, I could. I could. I could. I could run out the shed in the backyard. Ralph, thank you so much for joining us. We appreciate your perspective on the real estate market. Thanks. Good to see you, man. All right, coming up. Shining bright solar energy stocks on the rise for a change after a bullish call at Truist seeing, quote, meaningful, meaningful upside for 2024 after a brutal sell-off in the space last year. We will get the key details when Power Lunch returns. Welcome back, everybody, to Power Lunch. We got too many good stories in the energy. space to choose just one. So we're going to do a kind of power rundown with Pippa Stevens. We've got three topics here. First up, natural gas prices down 13% in a week. What's happening?

It's got cold here. Why do you think gas prices would go up? Well, yeah, so usually frigid temperatures would mean a jump in not gas prices, but the boost we saw earlier this year were short-lived. And there are three key charts that explain why. The first is December heating degree days. It was the warmest December on record in North America. And so people weren't cranking up the heat and demand for gnat gas stalled. That means that more gas than usual was heading into storage. Right now, inventory is about 11.2% above the five-year average, as you see on that chart there. And then finally, U.S. production is hovering around record levels. About 15% of that is associated gas or gas that's produced alongside oil, so it isn't sensitive to declining gnat gas prices. And then also some are talking about the coming wave of demand from LNG,

meaning producers also don't want to seed market share right now and cut output at a time when there could be a big demand jump coming, so that's why these prices have been under pressure. We appreciate the explanation. Okay, for our second topic, PICPA, we're going to take a look at the solar names rallying today. Canadian solar gets an influx of cash. What's happening here?

Yes, so Canadian solar subsidiary recurrent energy got a $500 million investment from Black Rock's Climate Infrastructure Fund for 20% stake. Now, Canadian solar is a vertically integrated company, meaning they manufacture solar hardware and also develop solar projects, which is what recurrent does. Pavel Mocanov from Raymond James noting the BlackRock Fund is all about infrastructure, and so they invested in the subsidiary because they do not want manufacturing exposure. Renewable project development typically has stable cash flow streams, while manufacturing can be more risky.

This also fits into BlackRock's larger infrastructure push after the firm, bought global infrastructure partners last week for $12.5 billion. Sinova and NFE is also in the green today after Truist upgraded both stocks to a buy rating, saying that we're going to have a resale installer reset. All right, let's move on to the last one, which is plug power, also rallying on hopes for some old-fashioned green energy time, this time from the government. Yes, so that stock is surging after the embattled company said this morning that it's now producing liquid green hydrogen at its Georgia facility.

The timeline had been pushed back several times, and this was an overhang on the stock since the company was spending a lot buying hydrogen from third parties. In the business update this morning, Plug Power also said it's getting closer to a $1.6 billion loan from the Department of Energy, which would be used to build out six other facilities. On the call, executives also emphasized efforts to reduce cash burn and improve margins, saying they need to reset. This comes after the company announced that up to that up to one, billion at the market equity offering last week, shares still down about 80% over the last year.

Are these facilities that they're borrowing for? Are they also hydrogen facilities? Yes. So the idea is to make green hydrogen, liquid green hydrogen. That's when you have an electrolyzer machine, which splits the atom into the hydrogen and the water. And so up until now, they make fuel cells and they were providing to companies like Amazon. And they would have to actually buy the hydrogen on the open market to supply the fuel cells. And there's only two hydrogen producers, air products, and Lindy. And so they were spending a lot of money, especially this past fall, buying that hydrogen. So now they can supply it themselves. That's the idea. All right. Cool. Pippa, thanks. Still ahead. Shares of Texas instruments just a little bit higher

ahead of its earnings this afternoon, guiding five straight quarters of year-over-year declines is the chipmaker due for a change of fortune. We'll tell you what you need to know on Power Lunch returns. Texas Instruments on deck to report Q-4. for earnings after the bell shares up about a third of a percent right now. Christina Pritzenevolos joins us with what to expect. So Texas Instruments has set the bar pretty low because management has guided revenue down for five straight quarters with year-over-year declines. So it's no wonder the stock became the most popular chip short in the second half of

2023. Although many analysts right now are actually betting that the company is near a bottom for this particular analog name. But few right now actually agree it's a buy. And that's why the stock is underperforming. You can see the SMH and the same. stocks year to date thus far. And there are several reasons for this buying hesitation. You've got continued weakness in industrial and in automotive. You have mobilized microchip, for example,

warning of an EB slowdown and double ordering happening at customers, so that could impact Texas instrument. Then you also have possible cuts to fab utilization rates, which is really just a measure of output for chips, and that's because of weak demand, and increased possible capital expenditures. Both of those two things would hit gross margins. And then lastly, some pricing pressure in personal electronics from competition in China, which does not bode well for Texas instruments either. That's why I'd like to point out that all chips are not created equal. There is a discrepancy between the compute chips, aka those AI names like Marbell and Vida AMD, up 14 to 20 percent year-to-date, or even super microchip, the maker of power-efficient

servers, which is soaring this year up over 55 percent. And then you compare it to the analog names, like On. NXPI. instrument, which is a little bit positive. NXPI on or both negative this year, you can see on your screen. So there's a difference between the groups. What about Super Micro? That's up 38% in the past week. Yeah, so that's an excellent, I would almost call it the Midas touch of Nvidia because it's a large partner of NVIDIA. Super Micro makes these really big, powerful, or power-efficient servers, storage units, as well as switchers. And so that is... They're not a chip company. Well, it's part... They build the infrastructure for the chips,

and that is important, especially when you're doing these complicated AI tasks, because it uses so much energy. The other thing is the stock really jumped us within the last week is they pre-announced just last Thursday. They pre-announced revenue for Q2 that was much higher than consensus. So that bodes well for a lot of these AI names and also bodes well for Dell and HPE

because it competes directly with it. And so you've seen the stock not only run up this year, but also run up last year because it's an AI play that may be slightly overlooked. Everybody wants to hear about Nvidia. What do you hear about Nvidia? In other words, the stock has just been on a round. rampage. The gossips, especially, that's what we want.

The gossip. Who was the CEO was over dancing at Chinese New Year? Yeah, and he'll be dancing somewhere else next week, too. So there's some gossip. But no, no, he's not gossip. He's going to, they're in a quiet period right now, so they're not sharing any information, but they are going to be, there's going to be a few smaller announcements just within the coming days. But specifically with NVIDIA, you saw the run-up because meta really put forward, hey, you've got a name drop now.

It's like saying, I have six homes. Well, oh, I have 600,000 GPUs. And that really helps a name like NVIDIA, and it shows that the demand is still there, despite the concerns that there'll be a slowdown maybe in Q3. The lead times for getting these chips is still, you know, reported it at 39 weeks for some companies. Backlog, yeah. Yeah, huge backlog. So that puts them in the top spot for now until we see AMD come in and start to steal market share and stuff. Christina, thank you.

Thank you. Thank you. Good to see it. Yeah, likewise. Still ahead. Lucky number 13. Oppenheimer, securing a baker's dozen nominations for this year's Oscars. We'll discuss that and much more when Power Lunch returns.

We've got a little more than two minutes left in the program. Several more stories we want to tell you about. Number one is 2024 Oscar nominations out today. Oppenheimer in front with 13 picks, including Best Picture. Barbie trailed behind with eight nominations, but surprising to many, Greta Gerwig was not nominated for Best Director, nor Margot Robbie for Best Actress. And when it comes to production, Netflix came out on top as the most decorated streamer,

producer, producer. 18 nominations. Apple received 13. This tells you about the changing business. It's not the studios, per se. It's these studios, Netflix, Apple, they are the studios. Well, and they're getting big name stars to go into really serious, deep movie. You know, and the quality that you are seeing on streamers is really remarkable. Well, we'll have to wait and see how all that shakes out.

They got the money. Johnson and Johnson has reached a tentative agreement to settle an investigation into the marketing of its talcum-based baby powder. The deal includes 42 states and Washington, D.C., with J&J, set to pay nearly $700 million to settle the claims, although they continue to insist that their talc does not cause cancer. I will say one thing to factor in here is that usually in these kinds of situations, insurers end up being on the hook.

They ultimately fit the bill here. Their liability coverage kicks in. Interesting. All righty. The world's top hedge funds raked in record profits last year amid a resurgence. in stock markets. A new analysis shows the 20 leading fund managers made $67 billion in investor profits in 2023, up from $65 billion in 2021, included among the best performers were Christopher Hans TCI, Ken Griffin's Citadel and Andreas Halverson's Viking. The company's

doing well in bull markets. They did not have a good 2022, relatively speaking. And Alibaba co-founders, Jack Ma and Josai have picked up more than $200 million worth of company shares between them in recent months, according to a regulatory filing and the New York Times. Alibaba shares down roughly 21% since the planned spinoff of its cloud business was canceled. All right. Thanks for watching Power Lunch, everybody.