Power Lunch - Rates Rise Ahead of CPI, Playing Gold to the Upside 02/11/25

Episode Date: February 11, 2025

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And welcome to Power Lunch. We collectively are Brian and Kelly, and we dive right into your money and highlight some rather shocking comments from a big DC CEO that should have every taxpayer asking, what did he just say? Ooh, we are also watching two big stocks with big winning streaks. Meta is going for a 17th straight session. It's turned positive. It's up half a percent today. Invitya has also been up six days in a row and is looking to make it seven, but is fractionally lower right now. Coke reporting better than expected results thanks to higher prices. CFOs saying that was driven by intense inflationary pricing and a handful of markets experiencing, get this, currency devaluations. The stock is now on pace for its best day in nearly three years. I've no idea what you just said, but it sounds interesting.

And shrinkflation. That's like a smaller package. Well, anyway, President Trump. We're saying we should all do less coke. Drink less coke. There's a lot of places we could go there. The president meantime signing an executive order loosening the enforcement of the government. the 1977 law banning bribery of foreign officials. This directs the Justice Department to pause prosecutions under the Act

and come up with new enforcement guidelines. What does it mean for American companies? Does it make them more competitive overseas? Is bribery the cost of doing business in parts of the world? Joining us to discuss, Michelle Crusoe Cabrera is here. She's CEO of MCC Global Enterprises and a CNBC contributor alongside our senior Washington correspondent, Aymn Javvers. Amon, let's just start with you.

Is this official now? It is official. The president signed it last night. And the argument here from the White House is that the Foreign Corrupt Practices Act, which was passed, as you say, back in 1977, and really enforced aggressively, you know, since 2005, that that law basically makes an unfair advantage for competitors to American companies. That is, American companies are hamstrung because they're not able to do deals with governments around the world to get those big infrastructure projects, oil and gas deals and all that kind of thing. And so they're saying here that they want to scale that back. They're going to pause enforcement for a while and try to write new guidelines. And what they're saying in the exact text of the executive order that the president signed is that the law was systematically and to a steadily increasing degree stretched beyond proper bounds and abused in a manner that harms the interests of the United States. They're talking economic interests and national security interests, Kelly.

And Michelle, this raises the larger question about, you see a headline that says we're going to relax the foreign bribery law and you think, well, what does that? that mean exactly for American companies and for the people working abroad? So when they passed this law, it was controversial for the very reasons that Eamon talked about where a lot of business executives said it's going to make us uncompetitive overseas because a lot of countries actually pay bribes. In Germany, it was legal until 1999 to list bribes on your expense reports and make them tax deductible. Wow. Okay? So the biggest issue, and I think why it's really coming to a head now, is because in places like Africa, where we're trying to secure critical materials, the supply chain for critical materials, American companies

won't go there because there's so much corruption in Africa, but China has gone there. And they have managed to control the entire supply chain. And so when companies won't go there because they're worried about getting prosecuted, you actually end up ceding that ground to other countries. And let's have, let's have a, what do they call it, a grown-up conversation, okay? Because bribing anybody is a bad thing. Nobody's endorsing bribing anybody, but I will say this. In my previous life, I was a commodities trader that would do business in some places that were not so keen. Okay? And I can just tell you that some of these people in some of these countries would ask for things that were not necessarily part of the deal. The reality is,

Michelle, as you have traveled around the world, we all have. You know, and it's an ugly, dirty secret, but the reality is that a lot of people in Congo, to your point, they want something before they can come in. I'm not saying bribery is a part of business, but I'm not not saying that. Yeah, so two things. So one thing about the Foreign Corrupt Briborough Practices Act is the second there is an indication of something. The law gives the regulators the right to look at every single business unit you have in every single country. So if you go back to Walmart in 2012 when they got accused of bribing Mexican officials to speed up the construction of Walmart in Mexico, you covered that story. I covered that story for you guys. Seven years,

Years later, the investigation was over. They had to pay more than $100 million in fines, a huge legal bill, and they had found bribery in India, in China, in Brazil, elsewhere. So once that happens, a lot of companies say, okay, you know, the cost is way too high, and that's what it's designed to do, is to deter it. The other point I would make, though, is that things aren't necessarily better. Congo, for example, to your point, where we get a lot of cobalt, there's an amazing book called Cobalt Red.

It's about how we get cobalt out of Africa. It will keep you awake at night for a month if you read this book. There it is. And the U.S., not being present in Africa has actually been very detrimental for the people there, children who are working in slave-like conditions, digging with their fingernails underground. I mean, it's pretty brutal. So they've got to come up with a better structure that makes it so we can have influence in some way. that isn't about bribing like China does, but somewhere in between.

Well, Aiman, but you know the optics. Trump eases foreign bribery rules is a pretty damn good headline. I mean, it's like everyone's thinking, well, of course, this is a terrible idea. We don't want to ease anything related to the word bribery. Yeah, I mean, look, there's two questions here, Brian. One is, you know, ultimately, is this going to be effective, right? Is this going to do what the Trump administration wants it to do? You look at compliance departments for American companies, you know, across, you know, every stock.

Are they going to send a memo around to their teams overseas and say, hey, fellas, let's start bribing some guys. The Trump administration says it's okay, right? I mean, I think clearly, you know, these compliance departments are going to pump the brakes and say, wait a second, this could be changed in the next administration, right? This law stays on the books. Congress is not repealing the law. They're pausing enforcement. We don't know what that means. We don't know what the new guidance is going to be.

And we don't know who's going to win the next election. So it doesn't make sense for us to upend our practices of decades in order to take advantage of what might be a very narrow window here. And then the broader moral question is, what is the role of the United States in global ethics and global stability, right? Do we as the United States have a role to play in anti-corruption around the world, or are we just in the muck with everybody else? And, you know, we can sling as well as anybody else can. I mean, that's sort of the philosophical question at the heart here. This law was intended to be sort of the ultimate drain-in-the-swamp kind of effort, which is the United States is going to use its economic might around the world

to try to lower the amount of global corruption. Now, you could throw up your hands and say, well, that failed, or it didn't work, or there was blowback for us that we don't like. But that's sort of the central moral tension that they're wrestling with here at the White House. I don't disagree with anything that Eamon just said. What I would add is that there's a new national security concern. related to, for example, the securing of critical materials, which is why I think that this is coming more to the forefront now. Exactly, because you mentioned cobalt, and you think of the EV supply chain, as we're undergoing this...

And your phone, anything electronic you pick up. Exactly. Could they have done something to try to emphasize that aspect of it, to say, if this is related to the supply chain of such and the other, then, you know, instead of a blanket move? I think that's what it is about the new guidelines that they're going to come up with. But to Aeman's point, it's a law, right? And if the administration... administration changes somewhere down the road, you now have a new set of rules like we're potentially seeing now. So what do you do? Well, what many would probably argue and maybe are arguing now is you just don't simply do business in the countries where you have to bribe people to get in. I understand that thinking. And if that's what we decide as a nation, that's great. But to

your also point, first off, the Congo is about the fall to Rwandan rebels. That's a whole huge story that nobody's even talking about. But that said, if you tried to open up a business or do business and say, Myanmar today, I can guarantee you 100%. They're going to ask you for a bribe, period, hard stop. So you decide we're either going to be in that country and get the minerals to make this or we're not. It's a complicated story. Yeah, it's not easy.

Yeah, guys, appreciate it. Michelle Crusoe Cabrera. Actually, stick around. Amen, thank you as well. Amen, Javers. All right, so let's kind of pivot, but stay on the topic of your money because there's a huge debate slash fight

going on around Washington, D.C. right now. And it has to do with how your tax dollars are being spent because an important thing. I mean, lots of important things are said on CNBC, but this was really important yesterday. And I think you might have missed it. Okay. In the 11 o'clock Eastern Time Hour, the CEO of easterly government properties said this about government spending on buildings. Now, there's a fourth lab that's going to be built, built in Denver. And the government has said that they want to build it and own it themselves.

Well, that's great. What we just learned is that for them to construct it is 3.2 times greater than what we could build it for. So we could instantly save the government $80 million just bringing that public-private partnership together. All right, that was kind of a quick comment from the CEO there. But if you missed it, he said his company could build a building effectively for one-third of what the government would spend on the same building. your tax dollars, maybe overpaying massively for brick and mortar. That caught my ear, so I posted on basically that comment to Twitter slash X, which then got reposted by a guy named Elon Musk, who added, quote,

while your tax dollars are being torched. And because of that retweet, I think, thank you, I guess. Over 12 million of you have now read that post, and I've gotten some very colorful comments. Thank you. Let's continue the conversation. Pierre DeVas is the managing partner of, real estate law firm, Romer Debaugh, and we still have MCC on set. Pierre, did I mask

your last name? You did, but it's all right. How do you pronounce it? Debas. Debaugh. Wasn't that far off? I fringed it up. All right, Pierre. Was that crazy what he said, or do you think it really is three times the cost to build the same building? You know, look, since January 20th, Doge has done an excellent job of highlighting government waste and excessive spending and probably a lack of accountability on how taxpayers' monies have been spent. This is a prime example. I think, what he said is spot on, and I'm not surprised in the least bit. We knew real estate would be on the top of the agenda for how to cut back government spending. Let's be honest, the pandemic next month's will be five-year anniversary's inception of the pandemic. Office buildings in D.C. are over 90%

vacant. People are still working fully remote. If you ask me, the whole workforce manipulated the working remote, the whole scenario that took place from COVID. It's arguably one the greatest scams in modern debt, right? Okay, hold on now. We got it. You said a lot. I did. You're not more productive working from home. Hold on, hold on. First off, we don't know if the Doge people are doing a good job. We don't even know who they are.

We know who's something about it. I asked the Secretary of Energy about it. He was on the record saying, we got their security clearance, but they're working for free. We don't know who these people are what they're doing in there, poking around. So it's hard. We can't quite say that. We don't know. Maybe they're bad, evil-doers.

What's interesting to me as well is they're going through line item by litem and fighting things like, okay, we sent X amount to Liberia. But you're now talking about real estate. That's right. In order to unpack that and what Brian's talking about, they're going to have to know more than just how much was spent on those buildings. It needs to be why was it more, you know, more than market rate? And we have real estate, you know, people in the government themselves who understand this.

Is it because of union involvement? What are the reasons why it's more? There's really only two reasons, right? Union involvement and the security concerns. Clearly, the government as a tenant, has heightened security concerns as opposed to a private company. But at the end of the day, chances are the government is outsourcing the needs, their security needs themselves, and paying that separately. So I don't really know of a logical explanation why it could be three-outes. And then as a landlord, like, as a real estate lawyer, right, we handle commercial leasing.

Landlords will look at the quality of a tenant in making a business decision. The government, long-term leases, will argue the most stable tenant in town. They're usually not the ones to get ripped off or have a premium because they're viewed to be high risk. So I think that there's certainly an area of manipulation taking place in this topic. I'll just say government workers are not incentivized the way private workers are, right? Private sector employees get incentivized by higher pay, if they perform well, et cetera. government workers don't necessarily have those same incentives. They're on a certain structure.

They're going to get paid the same no matter what. And so they are less inclined to try to make things move faster, et cetera. So that's going to add to the cost. Pure lack of efficiency. Well, okay. So it's not really a debate, I guess. We've got to be the other side of this. I would say this.

To your point, though, okay, and I'm not, let's leave out the union stuff, separate argument, okay? If the government wants to build a building in a specific way for our taxpayer protection, how do I know that a private firm will do the same thing? I'm trying to justify the added costs. You see what I'm saying? I don't know. You put out an RFP or a request for the proposal. You get a bid.

You know, I mean, there's a way that this gets done where you can compare various companies that would build it for whatever price, you know, and under whatever, you know, parameters. Because this guy, Darrell Crate, who, by the way, who's, I think his brother actually worked in the Trump. campaign. I want to make that very clear, the CEO of Easterly Corporation, and they lease out buildings to the federal government. He was praising the cost cuts in that interview. And you can go back and watch it. That's part of the 11 o'clock show Money Movers. But he was praising it, he was praising it, Michelle, and saying, just give it to us. We'll build it for less. He was talking his book for sure.

He was talking, his book and his building. Okay. Selling your services. So let's be clear on that. Yeah. You know. Does anybody have a better, Kelly? No, I'm up here what we're going to say. No, I would say I think that the bidding process has to be revamped. You have to look at the bidding process and how to make it more efficient. Where are we bidding out these contracts? Are there any relation to the government or is there any conflict of interest that arise between those being contracted out and the government's situation?

And I think you have to expand upon that. In reality, competition is the most important thing in establishing fair pricing. And we have to do a better job of ensuring that more companies are having the ability to bid on these projects. We'll end it there. I will say this. I was in D.C. and Thursday and Friday of last. week and it was grim. It was very empty. It was bizarre. Almost now I'm a got a little New York City bias, but it was a little weird. Haven't they called people back now though or is that not

picking up yet? Didn't they have 60 days? They had to buy a certain day. I don't know if that's the exact number. It's only been a few weeks. But there is a shocking amount of construction happening in DC at the same time a lot of buildings are sitting empty. As just an observer, neutral observer who by the way has a lot of friends who work for the federal government. They're all very good people, hard workers. It's a weird dichotomy, you got this empty building and across the street, they're building some kind of a new building. It's just... And by the way, just as a coda to all of this from Jason Furman himself, who worked in the Obama administration, he did a study of the Biden administration

kind of infrastructure bill and found because that massive spending drove up the cost of a lot of these materials. In real terms, the amount of spending on infrastructure was down 17 percent and was lower than any year from 2003 to 2020. So again, part of the problem sometimes when you have a single entity driving all of this as you get these distortions in the market, which I thought was interesting. Pierre de Boss, thank you. Thank you. Michelle, thank you.

Always a pleasure. And lots more show to come. After the break, Fed Chair Jay Powell getting grilled by Congress, we'll wrap the key takeaways next. Well, welcome back. Fedhead Jay Powell telling Congress he is in no rush to cut borrowing costs. This comes, of course, after the Federal Reserve sharply cut interest rates last fall, but the bond market moved in a totally different direction.

actually raising interest rates. That aside, your next guest says that may not be the story. His take is that the United States could go a decade with maybe no recession. In other words, the roaring 20s could slide right into the roaring 30s. Let's talk about it all with Ed Yardini. He is president of Yardini Research. I love the optimism. Ed, you think it's possible we just let the good times roll right into the 2030s.

Well, look, Brian, I think the economy just demonstrated its resilience, right? Over the past three years, we've had the most widely anticipated recession of all times that didn't happen. It was a no-show recession. And I think it demonstrated that even with the Fed raising interest rates aggressively, with some of the geopolitical issues that challenged the global economy, despite all that, the economy grew. There was no recession. And I think we have to kind of take that into consideration that maybe this economy really is resilient.

We just had some upward revisions in the labor market that showed that the labor market has actually been very strong and resilient. Unemployment rate remains around 4%. So so far, so good. But here's the dirty secret. We're learning this in Germany, right? And the German economy is not good, costs are higher. But their stock market is well outperforming ours this year can show the disconnect between economies and stock markets. So if our economy, Ed, remains strong, and we all hope it does, does that necessarily mean the stock market will also remain strong?

Well, Germany has a lot of conflicting developments. Their economy looks pretty weak. They're competing with China. China's literally eating their lunch when it comes to car production. So they've also got a really messed up transition from fossil fuels to clean energy. We have our own challenges, but overall, the economy is doing extremely well, and I think it's going to generate earnings that will drive the market higher. I wouldn't really want to see the market go higher in valuation because valuation is already stretched. But I think valuations at current levels actually can be justified if investors are kind of looking at the economy the way I am, and that is it's just proved its resilience.

Why can it continue to be resilient and grow? And if that's the case, we could be looking at a fairly long period of economic growth, earnings growth, and that's good for the market. Ed, that was going to be exactly my question. The pushback that I hear for people is not about the stock market broadly, because you can look around and say, look, there's things happening in AI. There's innovation. But it's about the MAG 7 in particular, you know, whose valuation isn't that wild, but they just think, you know, everyone's in one boat. They're in the S&P 500. They're in the mega caps.

There's no more buyers left. and, you know, we're going to mean revert, and we started to see that in January. Well, look, I have really no problem with this concentration issue that people are worrying about, that there's, you know, the magnificent suburb account for 30% of the market cap of the S&P 500. There's lots of other stock markets around the world where a handful of companies really account for most of the market cap of their markets. In our situation, these are credible companies. I mean, they don't have a lot of debt.

They're generating a lot of cash flow. They are able to buy smaller companies with the technologies that they can leverage up and make them world-class technologies. So I don't really have a problem with that. I also don't have a problem with the Magnificent 7 resting for a while and for some kind of regrouping where investors put more money in the S&P 493, which on a relative basis are cheaper. And they'll probably get a lot more benefit of AI than even the Magnificent 7. But you wouldn't see a reason to, you know, avoid the S&P, kind of the classic, you know, to kind of double down on small caps or go international or whatever. Well, I've been recommending an investment strategy of stay home as opposed to go global since 2010.

I mean, at some point I will probably overstay my welcome, but it just has worked for a very, very long period of time. As Brian said, Europe, at least on a short-term basis, has outperformed. But I think the trend is America continues to be a much more diversified, much stronger, much more resilient economy than most others. And I think that's what's reflected in the stock market. You know, I also just wanted to ask you. I thought it was interesting that you kind of talk about ignoring Washington. And this week, it feels like the market is ignoring Washington. We've had a myriad developments that you could say are cause for concern.

And they're just kind of being shrugged off. And one thing people have said is, look, if they're trying to. to shrink the federal workforce or put more of those people into the more productive private sector, like that's the trend to focus on in the longer run. Is that how you come at this? Absolutely. Absolutely. And it's consistent with the idea that, you know, pay attention to the economy itself. Look how it's, you know, the headlines with all due respect to what you do and what I do, you know, we tend to focus the macroeconomic policies, monetary policy, fiscal policy, just spent a couple of hours watching the Fed chair in Congress.

But the reality is the rest of us working stiffs are doing an amazing job of keeping the economy going despite Washington. And so, yeah, my conclusion is that, first of all, when it comes to investing, don't let your politics get in the way. The market goes up and has done well, whether it's Democrats or Republicans. And again, I think it's because the stock market, the private economy, the private sector continues to perform extremely well despite Washington. And I think that's an important thing to consider when you're investing. All right.

Ed Yari Denny, looking ahead to the roaring 30s. Thanks so much, Ed. We appreciate your time today. We also have gold breaking out to new highs, and our next guest has a way to trade it. Market Navigator tackles that one next. Welcome back to Power Lunch. Gold is all the rage lately as its performance just keeps going, a record high yesterday, although it's taking a bit of a breather today. We're nearly $3,000 an ounce. Yet one options trader thinks it's going higher still as trade wars stay center stage.

He's looking for a substitute for the commodity itself, though. Let's get Tony Zhang in here to explain. He's the chief strategist at Options Play. I mean, Tony, gold's been working pretty well. Welcome. Yeah, that's exactly right. The breakout here above that $2,800. 2,800 double top is a pretty significant bullish signal here for gold. We've had multiple double top breakouts here throughout this last year and this year. And this is really what I believe will propel gold up to 3,000 and potentially even higher here, especially on the back of, you know, the tariff and trade wars that we continue to be in at the moment. So we're showing a chart of Newmont Corporation. Would you also be playing this to the upside? Yeah, I actually think

newmont represents one of the best ways to play the upside in gold here. You know, mining stocks generally represent a leverage play on gold itself. And I think Newmont at the moment represents actually one of the best value plays within the metals and mining industry at the moment, trading at about 11 times forward earnings. It's trading at a discount relative to the industry, despite the fact that both growth and profitability metrics is actually exceeding the industry itself. You're looking at EPS growth that's north of 35%. You're looking at. at revenue growth that's in the 17, 18%, which is nearly double what the industry median is.

And it trades at a discount relative to the industry. So I think from that perspective, this is really something that this is a stock that's undervalued, especially since net margins have recovered back from last year where they had a loss. You know, net margins recovered north of 20% here right now, which is well ahead of the industry median as well. So for those reasons, I think the stock is well undervalued. So you're bullish on gold itself. You like Newmont for a play here. Anything else in the space or anything you'd stay away from?

You know, you look at Barrett Gold that's trading at a substantially higher valuation. So I think those are some of the ones that I would stay away from and looking for more undervalued place here, especially in this market environment of higher interest rates. I prefer to look for value. On top of the technical breakout here for Newmont, you broke out above $44, which is an important resistance level. And it broke out while outperforming the S&P 500, which leads me to believe there's also some accumulation. from an institutional perspective. So those are the things that I like here specifically about Newmont.

We're showing a rather complicated trade, an option trade that you're putting on, but would you also just recommend shares? Absolutely. You absolutely can just outright buy the shares. But from my perspective, you know, implied volatility on options are extremely elevated for Newmont mining about 98 percentile. And that's why I'm choosing to sell options here to take advantage of that elevated implied volatility. I'm going out to the March 28th weekly expiration, and I'm looking at selling an at-the-money put, a $46 put, and against that buying back a $43 put, and what that does

is it limits my total risk on this particular trade just to $185 per contract. I'm going to collect about $115 per contract on this type of structure, and this allows me to basically take a neutral to bullish view here on new mining. So even if the stock doesn't move from now to, you know, at the March 28th expiration, I can collect $115 per contract, which represents about 3% of the stock's value. So, you know, if you buy the shares and the stock doesn't move, you're not going to be able to make money on that trip. Right. If it moves lower, all bets are off. But some ways to think about this potential continuation and the rally. Tony, thanks so much. Appreciate it today. Thank you so much. Tony Shang. Over to you, Brian.

All right, on deck. A stock that your next guest says you need to own, really because we're all just getting older. Welcome back to Power Lunch. I'm Bertha Coombs with your CNBC News Update. New York City Mayor Eric Adams praising the Justice Department today for calling on prosecutors to drop his criminal corruption case. He also pledged to regain the trust of voters ahead of the city's upcoming election. The DOJ said the case was interfering with Adams' ability to aid the Trump administration's crackdown on illegal immigration. Author Salman Rushdie took the stand today to testify against the man charged with trying to kill him on stage during an event in New York in 2022. Rushdie showed his injuries and described the attack, which blinded him in one eye, saying he thought he was going to die.

Haiti Mitar has pleaded not guilty to attempted murder and assault. And a judge has ordered federal agencies to restore public health web pages and data sets taken offline to comply with President Trump's recent executive order on gender identity. Agencies must make the change by the end of the day today. The judge issuing a temporary restraining order to keep information online while a lawsuit brought by a doctor's advocacy group challenges the decision to remove the information is pending. Back over to you. Bertha, thank you very much.

Bertha Coombs. It's time for today's three-stock lunch and we're all hungry. But we're doing something a little different. Our trader, Ellen Hazen. Is it Hazen, Ellen? Hayson, thank you, from FL Putnam Investment Management. It's all the way down from Boston and here on set with us, welcome. So you've got, you're saying, we just talked to Ed about, you don't have to be too scared of the Mag 7, but you're saying you could still maybe try to

look elsewhere for some opportunities. So let's start with, what are you looking for? First of all, Kelly, thanks for having me on. When we look at stocks, we're looking for quality, and we measure that a few different ways. One of the most important ways is high return on invested capital. That really shows how much company is generating. gross profit and high returns going forward. We're also looking for low leverage, so something under two times debt to EBITDA. We're looking for high gross margins. And we're looking for high earnings quality.

So free cash flow conversion is a key measure that we use. Do the MAG7 screen well on those? They do screen well on those, yeah. So the reason that we are looking beyond the MAG7 right now is because we see the market broadening out a little bit. If you look year to date, the tech sector, so the S5 tech is the worst performing sector of all the sectors, right? So after a phenomenal 2003 and 24, it's time for the market's broadened out.

The last thing that we're looking at in addition to free cash flow conversion, though, is increasing earnings estimates. That helps us with the timing. So we're looking for companies where earnings estimates are continuing to increase. And that's the thing that these stocks have in common. All right. So that brings us to some names that we don't often talk about. But that explanation is exactly why. The first one is ACOM, ACM-Y. A-COM is sort of a mid-cap company.

It's $14, $15 billion in market cap, but they're an engineering and construction and design company, and they're very exposed to infrastructure build. So with the Inflation Reduction Act and with the infrastructure bill, there should be a lot of money spent on that. Will that change with the new administration? Difficult to say, but none of that changes the reality that we really need to invest in our infrastructure in this country. So there's two reasons that I like the stock. Number one is that there's a tailwind. You're going to see 50 to 20 percent earnings growth, 15 to 20 percent.

revenue growth, so very, very strong growth. Estimates keep going up. But number two is that ACOM has consciously pivoted their business model to be less capital intensive than it used to be. And yet the multiple is the same multiple as you had for the last five years. So the market hasn't really recognized that. What about our infrastructure? Because as we get older, we need things.

Knees, hips. We're becoming robotic. Two, yes. Stryker. Not Ted Stricker. Thank you for getting it. So you're exactly right. And maybe you're aging.

I certainly hope that I'm not. But, you know, we can agree to disagree on that one. Very rapidly. With Stryker, look, you're paying for quality. It's a high quality medical device company with knee replacements and hip replacements. They do a lot of robotic surgery. They're gaining market share. And you have this demographic tailwind that's going to continue to benefit the company

in terms of top line growth as we go forward. The caveat or the catalyst, sorry, there is that during COVID, their gross margins went down by almost 300 basis points as a lot of procedures stopped. The volumes weren't there. And so we really think that the gross margins can get back to where they were before COVID. So that's going to be an earnings tailwind. It's not cheap. It's high 20s on a multiple, but it's really high quality. And sometimes you have to pay up for quality.

Meantime, if you're one of those who thinks we're going to have more and more deal activity this year with the new administration and so forth, Evercore is a name that you think screens well for a lot of the reasons. that you mentioned, and maybe there's a catalyst. It's already up 50% over the past year, though. Well, it started off this past year very cheap, and that's another case where the estimates are going up. So, again, that helps us with the timing there. But if you look at mergers and acquisitions volumes,

they're healthy, they're okay, but they're down something like 30% from 2001 levels. So we think there's a long way to go up. And then on top of that, a lot of people look at M&A volumes as a percentage of GDP, US GDP, or global GDP. And if you look at it on that basis, it's down even more. Yeah. So we think there's scope for rebound as companies face the threats of tariffs, of trying to find enough labor of immigration and of artificial intelligence and a lot of other things. They are going to continue to do more mergers and acquisitions. And Evercourt is trading at 14 times earnings for an investment bank that's hardly leveraged at all. I think it's a deal. All right. And go to dumpling daughter.

We were talking about food. We were talking about food up in Boston. Our friend Nadia who came on at Dumpling Daughter. My buddy Chris Coombs, that do is ducks have. you guys might say up in Boston. Exactly. Yeah, Dumpling Daughters in my hometown of Weston. So A-Com, Stryker, Evercore, and Dumpling Daughter. There's our three and a half picks for the show. Ellen, thanks very much. Ellen Beaziris with Ethel Putnam. All right, well, coming up, it's not exactly Lou Gehrig,

but if something happens today, it could end one of the greatest, if not maybe the greatest, stock runs in history. There you go. Enough talk about dumplings. The Dow, by the way, looking pretty tasty. It is at record highs, or I should say higher today. The Dow is up 3 tenths of 1%. 155 points.

Not a huge gain, Kelly, but the Dow is up. Look at the S&P, which is now also turned positive. The NASDAQ was down 1% earlier. It's only down about a tenth of a percent now. Earlier today, we had a big congressional press conference slash Q&A session with Fed Chair J. Powell. And he said that the Fed is not in any rush to cut interest rates any further. Let's bring in our friend

Rick Sandellie, Rick, kind of a fascinating statement from Jay Powell and the Fed because the Fed did cut rates and acted like they certainly were in a hurry last year. I don't know what's changed. Oh, they absolutely did in a huge way.

No doubt about it. I'll give you a couple of counterpoints. How many in this room or in any room in September? They cut 50 basis points in mid-September. Thought Trump would be president or thought that Deep Seek would be pushing Nvidia off to stage right. How many? Or the next chart. How about the next chart?

This is a chart of year-over-year CPI Corps, which is going to be out tomorrow at 830 Eastern, which our last look was 3.2%. On the left side, it's under 2% pre-COVID. On the right side, it's above 3%. There's your answer. There's your answer in a chart. That's the reason the Fed is in cutting, because they've been miscalculating the sturdiness of inflation, among other things. or maybe underestimating the sturdiness of the labor market. I give them credit for making the right decision and being more flexible,

but they definitely had a head of steam to cut last fall. Now, we're going to look at three charts very quickly here, a two-day-of-two-year, ten-year and third year. And what I want you to see is the right side is higher than left side. All maturities are trading higher than yesterday's highs. The longer the maturity, the more above yesterday's high yields they traded. Okay? And why is that?

Well, because we're going into CPI, among other things, and the yield curve is steepening, what we call a bare steepening, don't want to get too much in the weeds, with prices going down, yields going up, and the yield curve steepening, that's a bare steepening. And if you look at where the yield curve, two tens was, the last time we saw CPI, the 14th of January, here's that chart, okay? It's basically watching, we've seen it flattening.

That is not a good thing, and I fully suspect that tomorrow, we're going to see the same dynamics with inflation, but I think the market's getting much more discriminating, on who they listen to. Back to you, Kelly. Rick, thank you. We appreciate it. Watching that 2's 10 spread he's been telling us to, how deep are the deep seek declines? Have the stocks dug themselves out?

One of the names also has a major business update. All those details are next. All right, something to pay attention to besides us, is meta. Their monstrous winning streak. Your money is on the line. Now, right now, Meta, which is the parent company of Facebook and Instagram, has turned,

higher was negative most of the day. If meta closes higher, it would be a 17-day win streak. Meta will not have had a down day in the current presidential administration, and our good CNBC data gurus made us smarter, and they found out this RBI. That run by Meta is the longest winning streak of any NASDAQ 100 stock going back to 1985. And Kelly, here's another RBI. If you were smart or lucky enough to buy meta on the lows that hit $88 and change in November of 2022. Just over two years ago, you're up 712 percent. Wow. Meta could have a 17-day win streak.

It's an incredible run in the past two years. Now, of course, it's hard to bottom-tick these things, but how volatile has the stock been? And to now come to this point of this many days, they said there's never been a mag-7 that's had a winning streak of more than like 12. And it's on day one. It's on 17 now. If meta finishes up today and it was negative most of the day, I was going to just slam it, and then it turned higher, so I had to change the whole copy. You'll have to wait for tomorrow.

Let's turn to another stock on a hot run recently, which is Super Micro, along with the rest of tech. It fell sharply on Deep Seek Day, we'll call it. Remember January 27th when we first found out about their new R1 model, supposedly at a fraction of the cost? On that day, Super Micro fell to $29 a share. But look at it now. We're up 40 percent from that low to almost 40 bucks, faces a big hurdle this after. No, Christina Partsenevelas is here to explain. This afternoon, it's a business update, not to be confused with an actual earnings report.

And I say business update because of all the drama that's happened with this company. They have delayed their quarterly results. They have delayed their annual report fiscally ending in 2024 this summer. And so what we're expecting today is maybe a range for earnings per share, a range for revenue. And I say that because even in November, when they provided a business update, it was a range that wasn't even audited. And so what you're seeing on your screen is just what the drama, the saga that happened with Super Micro. They had an activist investor go after them. The DOJ looked into them.

Then they lost their auditor, EY. And then they did it. But they didn't lose the auditor. The auditor quit. Ernst & Young left a firm. When an auditor quits a client like Supermicroa. It's something to pay attention. And the auditor said, and I quote, unwilling to be associated with the financial statements prepared by management,

even though management did an independent. survey of the company and they said that there was no wrongdoing. That's a big deal. There's no wrong doing. How long can it go on like this? Where instead of reporting official earnings, these are just business, is this okay by the SEC? No. And they have a deadline, especially to stay on the NASDA, by February 25th, which is the day before Nvidia earnings. And I bring that up because it's important because Super Micro is almost gives us a glimpse into Invidia because they make the servers for Invidia. So they say, hey, things are great. There's no delays with the GB200. You don't need to know the names of it, but there's going to be no delay.

with NVIDIA servers, that's going to be great news for NVIDIA. But there have been some comments about some issues. Liquid cooling is not very easy to do for a lot of these servers. Super Micro specializes in that. So if they come out tonight with a clean guide, that's a strong signal for Invinia. Not as strong as meta, but what was your top of the hit 12-day wind streak? What was the number? For Super Micro.

Yeah, but you can see today it's down about 7%. And that's just profit-taking because it's climbed so high just over the last two weeks. Traders or investors. Let's call them traders. They're clearly anticipating something. Is it that or is it momentum and risk? And here's an opportunity. An AI play, gross margins have come down.

So there's concerns about competition. The guidance we're still unsure of. There's all this drama. There's rumors in December that they were looking for a liquidity injection too. So there's still a lot of risk associated with this company. But when you have risk, you have rewards. So could be a reflection of the retailer or just certain traders looking for that reward. I'll be curious what we hear tonight.

That for sure. What time? Can we expect to see one? Just after 4 p.m. Eastern. Okay. What time is that in Montreal? 4 p.m. Everyone, I'm from Montreal.

Catsop. You have to say it like that. They do the 24. Correct, yeah. So 16. And you guys are on the metric system. I love that you bring up that I'm Canadian. I'm Canadian.

You love to bring up that I'm Canadian. Just don't make us come up there. That's all I'm saying. Oh, that's the 50. It's never going to happen. Just saying. You said never. Never.

Never. Never. Never. Never. Never. Never. All right. Oh, here we go.

This is an opportunity for Brian to show my branch. To hear more French. Follow our podcast and hear what Super Micro does. We'll be right back. Welcome back. As we mentioned a bit of a U-turn today. We started the morning with stocks in the red dominated by trade war concern headlines. And we've shrugged that off.

The S&P up 6 now. The Dow up 137, that's near session high. NASDAQ. As we've seen since Jan 1, honestly, tech remains under pressure one of the weaker parts of the market. It's not a disaster. Meta's still higher, but the NASDAQ is down at 10 or 2. Also watching European natural gas prices. A little bit of a brief respite today, Kelly, but these natural gas prices are soaring. Forget about what the number means, 56, 57. If you do the conversion, they're paying about 17 to 18 bucks per unit. We're paying

$3.30, $3.30. Paying five to six times what we're paying. You may not care about European natural gas prices, but if you care about Nvidia and Super Micro and the AI Data Center build-out, we're paying, gas prices matter. European energy is a disaster. That's why France, with its nuclear power, has an opportunity. They're trying to gather capital, and the tone of this whole AI summit they're having now is much more about how they're going to compete in the AI race

and not just about how they're going to recommend it. And they can do it because they've got, I think they pronounce it nuclear. I don't think they do. Thanks for watching Power Lunch, everybody. Closing bell starts right now. Nuclear.