Power Lunch - Recession risk, confusing market and the end of work from home? 9/15/22

Episode Date: September 15, 2022

Will the Fed’s aggressive rate hiking strategy cause the economy to crack? s====Plus, a market veteran says this is the most confusing market she’s ever seen but there’s a strategy to get investors through the uncertainty. And, is this the beginning of the end of work from home? Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Brian, thank you very much, along with Contessa Brewer. I'm Tyler Matheson. Welcome everybody. Here's what's ahead on Power Lunch. Recession warning, will the Fed's aggressive strategy to raise interest rates cause the economy to crack? That's what Starwood Capital's chairman and CEO. Barry Sternlich told CNBC this morning, and according to him, it could happen soon. Look at why the Fed's fight against inflation is growing more confusing. Plus, the end of work from home, question mark. How far will employers go? to get their workers back to the office full-time. Contessa. Recession fears keeping a lid on the gains. The Dow up 142 points at its high, down 190. It's session lows. We're yo-yoing all over the place. You can see right now the Dow's barely in the positive.

S&P 500, up half of a percent. The NASDAQ composite is up three quarters of a percent. Financial stocks are higher this afternoon as yields rise. There you're seeing Goldman Sachs up 1.79 percent. J.P. Morgan Chase up two and a third, as is Bank of America. Energy stocks are lower. Valero, Phillips 66, Baker Hughes, all down roughly 4%. Shares of railroad stocks are mostly higher after a last-minute labor deal was reached. And strike averted. All right, the Fed's aggressive fight against inflation is at the center of the biggest debate on Wall Street. But the data-dependent Central Bank has a big problem on its hands because the data are confusing. Today we learned that initial jobless claims fell last week to the lowest level in three months.

And overall retail sales rebounded in August. This follows the hotter than expected inflation report Tuesday that showed rising prices could be stickier than previously thought. But we also saw industrial production fall in manufacturing activity in the New York and Philadelphia Regents contract. And we're hearing now from a growing number of high-profile business figures that an aggressive Fed could spell trouble. Ray Dalio, Bridgewater Guy, says higher interest rates to quash inflation could tank stocks 20%. Elon Musk and Kathy Wood are warning of deflation. And Barry Sternlich on Squawk Box today said CEO confidence is miserable and the economy is breaking hard. Now that inflation arrived and actually is headed down, they are raising rates too aggressively.

This will be the fifth rate raise rate rise this year. steepest increase in rates in history. So is the Fed being too aggressive and is a hard landing, maybe a very hard landing ahead? Joining us now, Rubila Faruqi, chief U.S. economist at high-frequency economics, and Peter Bookbar, chief investment officer at Bleakley Financial Group, CNBC contributor. Rubila, let me start with you. Do you agree with what some of these business leaders are saying in that being as aggressive as it is, the Fed is courting a recession?

and maybe a serious one? The Fed is, good afternoon, great to be with you. The Fed is actually in a very tough, tough spot right now. You know, you are seeing slowing momentum in the economy, but inflation is too high. And the message is really on inflation and inflation expectations. So, you know, what we saw in the CPI data, we didn't really see any, you know,

we saw an improvement on the headline, but we didn't see an improvement on the poor figures. And what we're seeing on service inflation, rents inflation, it really doesn't lead the Fed. with a lot of choices, especially coming against the backdrop of a labor market that remains extremely strong and wage growth that is also elevated. Should we be surprised, Peter? I'm going to get your broad thoughts in a moment, but should we be surprised that individuals who make a living investing and who have made a very nice living

investing in a low interest rate environment, including investing in real estate, would be alarmed at the rate of increase in interest rates and alarmed that the Fed may push it too high for too long. Yes, I guess I get your point in sort of talking their book. But on the other hand, you know, they do have their finger on the pulse of things, so they see what's going on real time. I mean, there's no way you get out of this inflationary environment in a painless way. There's no way you get the most aggressive monetary tightening in 40 years in response to the highest inflation of 40 years in a painless way. It's just a matter of how much pain that you have to sustain.

How much more does the stock market have to go down? What's the extent of the recession going to be? And it's really tough to answer the questions. The question, though, for the Fed is that, okay, they're going to go 75 next week. That's probably a lock. It's what they then do there after because next week's rate height is going to take. the Fed funds rate above the previous peak of the rate hiking cycle back in 2018, and that would be only the second time in 40 years that a rate hiking cycle is taking you above the previous

peak, which tells me that we're now entering and now playing a real game of chicken with the economy and this very short rise in interest rates. And just imagine being a small business that borrowed money going into this year, floating rate, you did not budget a 300 plus basis. point increase in interest rates and what that would do to your interest expense, at the same time your cash flows are shrinking because it was slowing economy. Yeah, no, I get you exactly on that, but I guess I want to come back before I turn it over to Contessa for a moment, to your point where you said this is taking rates above the prior cyclical peak in rates. Can't you argue, though, that the situation is just completely different? You're talking about, you're not talking

about inflation at 2% or less, you're now talking about inflation at 8% so that the idea here is that, well, of course they're going to raise rates above the prior cyclical peak. Oh, I agree. I'm not disagreeing with what they're trying to do, but look what broke in the fourth quarter of 2018 at a Fed funds rate of 200 quarter to two and a half. I mean, the world freaked out over a very short time frame, and here we are about to go well above that with debt levels that are well above that with the economy and markets more more sensitive today on cheap money than it was then. And that's my point about getting into dangerous territory. But you're working. The inflation levels at 40-year highs is forcing them to do this.

Well, Peter, I'll just mention you sent out several notes today that run through a bunch of data points on retail sales, on manufacturing, on the Business Roundtable CEO Outlook Survey and the way that that's dropped. Rebella, when you're looking at the data and gaming out this risk of recession looming, do you think that that's a greater risk for the overall economy and where we are than inflation to keep running as hot as it has been? I think the risk to- I'm sorry.

Ruebla, go ahead. I think the risk of recession, the risk of a policy mistake are pretty high. You know, as we're discussing this, after September 300-based basis. points of tightening in the pipeline. So what are we thinking about growth? We're thinking about positive growth in the third quarter. We have no idea. We cannot say with any level of confidence what happens in the fourth quarter because we are seeing slowing and momentum in household spending. That is what drives this economy. And, you know, we have to see how the consumer reacts. We also have to see, you know, our estimates right now are not showing a substantial enough,

you know, clear and compelling evidence of a slowdown in inflation. That means the Fed, has to remain, you know, has to maintain this policy stance, but the risk to the economy is pretty substantial, not something that we can actually gauge right now. But, you know, I do think, you know, they haven't had much success in the past. Every rate hiking, most rate hiking cycles have ended in recession. And I think we are heading in that similar situation. To be honest, I think Fed officials are very sensitive, even though the message is very strong on inflation, they're very sensitive to what's happening in the economy. The 300 basis points of rate hikes in the pipeline, I do think that they want to step back. I'm not sure that the

inflation data is going to allow them to. So I'm curious because we heard Barry Sternlich say, all right, well, listen, these are lagging indicators that they're considering at this point. Just call up the CEO of Walmart and ask him what's happening with inflation and consumer demand and consumer sentiment because he's got a more current finger on the pulse of the consumer than CPI data might indicate. Is that realistic, Rabila? Is it realistic for the Fed? to consider what CEOs are seeing day of? They are looking at, they're looking at a range of factors.

But I think the labor market and wage growth and inflation expectations, even though longer term inflation expectations are well anchored, I think the drift up is something that they're very concerned about. And that is where their focus is, to get that labor market rebalanced

to bring that demand lower. And we're not really seeing that, right? I mean, look at the claims numbers, look at labor market, look at job growth. We're not really seeing, and you're right, they are lagging indicators. But this is a Fed that, you know, if we extrapolate inflation, we don't really see it coming back quickly to 2%. And that is what the aim is. And that's what they're going to continue to do. Rabila Faruqi and Peter Bookfar, thank you both for joining us.

We really appreciate the perspective. So all of this economic confusion is also causing some real dismay for investors. Our next guest calls it the most complex investing environment in her nearly 40 years in the business. Here to explain and tell us how to navigate it is Nancy Tangler, C-I-O and CEO of Leffler-Tangler Investments. It's great to see you. 40 years is a long time. You're coming at this with a lot of market perspective at this point. I was very interested to read that you say, in this environment, it's important to find reliable growers.

Why is that? give me some perspective about where we are and how you go about choosing. You have no idea how long 40 years is. You started when you were five. I wish. Thanks, Tyler. I can always count on you. So I think it's important to remember that when growth is slowing and we know growth

is slowing and it's about slow further, that investors then turn their attention to companies that can produce reliable growth. And many of those companies happily are also, dividend payers and are growing their dividends. And I've been managing money in equity income strategies since the mid-1980s. So this isn't a fad for me. It doesn't always work, but dividend growth is, in our view, one of the best ways to generate excess return above inflation.

So you want companies that have very high quality management. It's great if they are in the sweet spot of the secular narratives that are driving this economy, like productivity improvements via technology, like robotics. because, you know, wages and workers are, wages are rising and workers are hard to find. But in general, you want to, this is not the time where you swing for the fences. This is where you look for reliable companies

with strong management teams that can navigate and navigate the currents. And we saw some really good earnings reports in the third quarter, but they've been overshadowed by all the other noise. Let's talk a little bit about what the esteemed Ray Dalio said in print. I guess he was in printer in an interview.

view, that the market could go down 20% if interest rates rise on the path that the Fed seems to be signaling. Do you agree that that kind of further decline from this level is possible or likely? Well, anything's possible, of course. I'm not convinced it's likely. You know, you've heard Jim Paulson talk about the time to buy stocks is when inflation is peaking. And he's right about that. And then if you look further and you go back and analyze the last 13, 11 to 13 recessions, what you'll see is that more than half the time, stocks have been up in the recessionary period, and almost in every instance, 12 months later, they're up a lot. So I think it's important, again, this is why dividend payers are so important to a portfolio, because they do provide protection in a declining

market, and they provide return, hopefully faster than inflation. So I'm not a good market prognosticator. I get it directionally where it's going, but I find that a lot of these predictions usually don't come to pass and that it's somewhere in between. I think we've seen the lows. That's my view. Interesting. But it's just instinct, Tyler. Okay. And, you know, you're very right.

An awful lot of prognostications do not come to pass. Yep. Some of mine, too. Well, no, of course. I mean, that's the nature of the game. We have a lot of people on. We fill a lot of air time. We have 700 guests a week on CNBC globally.

and you're going to hear a lot of talk. Let's talk about a couple of the stocks you do, like EOG energy company, Chipotle, a different kind of energy, I suppose, L3 Harris Technologies. I almost said something different. Target. Take your pick. Which one do you like there? All of them, obviously.

Yeah, I mean, EOG resources is easy. They're in the gnat gas and crude oil space. They've had tremendous dividend in growth, something over 68 percent, I think, five-year annualized. And that's because, like all of these companies, they've changed their investment strategy to a capital allocation strategy. And so they've grown the dividend. They've had a buck 50, a buck 80, a $2, and a $1 special dividend just in the last year, this on top of their $3 regular dividend. So that's a great stock to put in the portfolio and just let it do the work for you.

In terms of target, I mean, it's well above the lows we saw in June. This is one of the best managed retailers in the in the world, frankly. Dividend was raised about 20% last quarter and it generates a 2.6% yield. So you're getting paid to wait for the consumer to stabilize and normalize. And then CMG just has proven they have pricing power. They continue to raise prices. They continue to beat on earnings. And they've got they're in the sweet spot of the digital narrative.

And that's where you want to be. All right. Nancy, always great to see you. Thank you for your time. Thank you. Nancy Tangler. All right, coming up, retail sales rose in August, but some discretionary categories saw pullbacks

for which retailers are best positioned for a potential slowdown. Plus, how streaming is changing sports as the NFL makes its big Amazon debut tonight. And before the break, a look at Netflix, which is moving higher, on an upgrade to outperform at Evercore ISI. Finally, some good news for Netflix. The analyst says the stock could rally more than 30, percent as it rolls out its ad-supported service. More power to you in two minutes.

All right, welcome back to power lunch. While the overall retail sales number came in better than expected, largely boosted by a big jump in auto sales, and there were noticeable declines on some discretionary spending, receipts from stores that sell home furnishings, electronics, appliances, health care products, they all fell. And my next guest says we're headed for more trouble. Let's bring in Gerald Storch. He's CEO of Storch advisors and the former toys are us CEO. Mr. Storch, welcome back. Where's the trouble coming and where's it coming from? Look, when you see what people are spending money on, they're spending it on food at grocery stores and they're spending it to do work on their homes themselves. That's not what people do

when times are good. So basically, we're looking at high inflation. We're looking at a serious situation where the problem was created by fiscal policy, by supply chain issues, by energy issues, by employment issues, and by monetary policy. And the only thing we're addressing is the feds addressing monetary policy. So all they can do is keep raising rates until they drive a stake to the heart of the American consumer. And that's exactly what's happening right now. Should we have any surprise that one of the reasons the number came in better than expected was a jump in auto sales. The price of cars, new cars, is so high right now that it alone, could drive retail sales higher?

First of all, there's a lot of pent up demand because cars simply haven't been available. Secondly, that increase was 6.7%. I bet the price of a car has gone up by more than that. Look, these go to the lot to see. And there's no negotiating. You pay the sticker price now, right? So that's no surprise at all.

It has nothing to do with what's going on underneath it all, which is that prices are right. Look at grocery prices are up double digits still, right? So people are using their money to do what they have to do first, the must have. Meanwhile, apparel, even though it looked a little better during the back to school season than it has, still one of the worst numbers on the page is app. Department stores, same thing. So when we get to the fall, I think you're going to be in a world of hurt, people like Gap, you know, big trouble right now on the horizon on the horizon for these companies.

I want to mention that you are listing out five reasons why we're in this problem, as you see it. Fiscal, excessive government spending, you say, supply chain, energy, employment, because there's still a short. of workers for many of these companies and monetary, these loose central bank policies. We just heard Nancy Tengler talk about Target and how she likes the strong management there. If we're in such a difficult position because of factors way outside of the company's control, can they risks be managed by strong leaders, by strong corporate teams? Contessa, I totally agree. I think they can be.

And it's the value-based retailers that's going to thrive. you know, Target and Walmart, they certainly had very tough springs. But that was that, that was left over as a hangover from what happened last fall when they bought too much trying to, trying to get, you know, product through the supply chain and not knowing what to buy or how much to buy. They're, they're smarter than that. So they're going to be a good shape in the fall, and they represent value. People like Costco, again, still year in and year out, a perennial outperformer with the consumer. And, of course, the dollar store, dollar general, dollar tree. I think they're so well positioned. And you can't leave out the home stores. If you

If you look at these numbers, one of the big surprises is it doesn't seem to matter what's happening. People are spending at the home centers, and that's in these numbers, very clear. It's an open book exam. So you're going to see great sales at a home dupo and lows when they report. Let's look at a couple of problem children that you point out, Gap and Coals. Well, look, you know, apparel has, you know, it's just, it's been sort of the off cycle for apparel for years and years and years. There's been deflationary pressures in apparel prices, so even the units have held up sometimes. the average price has not. That's going to continue. There's so much clearance apparel out there.

So they're heading into a storm that just isn't good. It's true people bought more apparel for a little while when there was a reopening. But they're kind of done with that. When you look at what's happening with sales, it's really not working anywhere but luxury. And it's sort of been a surprise how well luxury is held up. But luxury is highly correlated with the stock market. There have been ups and downs there. The stock market continues down. Even luxury is going to follow. All right. Jerry, always good to see you. Thank you again. My pleasure. We appreciate it. After the break, a rail deal, a potentially devastating railroad strike averted. President Biden announcing a deal hours before the deadline.

It comes as labor tensions across the country rise. We'll have the latest development next. Plus, you must return to office. Tesla's mandatory return to office. Not going so smoothly, and the company's CEO may even be tracking employee whereabouts. Power lunch will be right back. A strike by railroad workers that could have had a crippling effect on the economy was averted for now. Kayla Taoshey joins us with the latest on the deal and what the president and the administration have to say about that today.

Hi, Kayla. Hi, contestant. The Biden administration and labor leaders are hailing this deal as a win clinched overnight after 20 hours of negotiating. The deal raises pay for workers in these 12 unions. It caps health care costs. And it relaxes a very restrictive absentee policy that it was at the center of this debate with workers complaining that they could be fired simply for going to an unexpected doctor's appointment. That was the real issue that negotiators were hammering through for hours. And earlier today, I asked the Labor Secretary himself, why did that one issue take 20 hours to figure out? Really, what it was, it was mostly language.

And it was how do you write this? And, you know, as a layperson, you might read something and think that, oh, that seems good. But in the law or in the label law, it means something completely different. So that's really where we were. And most of the issues predict all of the issues, for the most part, were non-monetary, which was kind of at the end of the day when you think about that. It didn't cost the carriers or anything. It didn't really cost the workers anything unless they didn't get some of the language they've received.

So here's the specific language they agreed on. voluntary assigned days off for members working in through freight service, one additional paid day off, time off for preventative medical care, and attendance exemptions for hospitalizations and surgery. Already some union chat boards are lining up with criticism of the deal, suggesting that one day paid off is laughable and that what they really wanted was paid sick leave, not more unpaid days. Even so, Secretary Walsh said that unions would spend the next four to six weeks talking about the deal with rank and file members, fielding questions, and trying to get them to a yes on this deal. But when I asked him specifically Tyler and Contessa, if they would definitively sign on, he would not go that far.

Okay, so they have some time, six weeks or so, to try and coax their members into voting for this. In the meantime, is there anything else that the administration feels like it should be doing with those rank and file members? Well, certainly they feel like the president has been publicly talking up the need to respect union workers in at least three appearances just this week, talking about union workers being highly skilled, needing more credit than they are currently getting. So the administration has gone out there publicly in supporting that group. And now it's up to leadership. But I should also mention that even though there is a deal for rail workers, negotiations for port workers have stalled. You have 15,000 nurses that have walked out of the job. So there are other industries that probably need some attention now, guys.

Kayla, thank you for that. All right. Let's get to Seema Modi, who's right over there for a CNBC News update. Hi, Sima. Hey, Tyler, here's what's happening at this hour. President Biden planning to meet tomorrow with family members of WNBA star Brittany Griner and Michigan Executive Paul Whelan, both of whom remain jailed in Russia. The meetings will be the first face-to-face encounters between Biden and the families.

Ursula van der Leyen, the head of the European Commission, has flown to Kiev to meet Ukrainian President Zelensky. Van der Leyen says supporting Ukraine has come at a high cost, but our freedom and international peace are priceless. And customs officially have reportedly built a database with personal info from electronic devices seized at airports in broader crossings. This, according to the Washington Post, the data can be accessed by customs officials without a warrant. Infro from as many as tens of thousands of devices per year are being added to the database, according to this report. Contessa and Tyler. Wow.

Curious, curious story there. Seema, thank you very much. Ahead on Power Launch, it's the NFL's big Amazon debuted this evening. If ratings are strong, it could mark a major shift in sports streaming and could impact the big money circulating the league both internally and externally. Plus, one of the big six casinos in Macau. Contessa knows about it. At risk of losing its spot, that name when Power Lunch returns.

And Tess is here to tell you about. That's my full reason. Just about 90 minutes left in the trading day, we want to get you caught up on the markets, on stocks and bonds, commodities, and return into the office. First, let's get a check on the markets note. The Dow is essentially flat at this point. You're seeing bigger losses now on the S&P 500 down half a percent. The NASDAQ composite down nearly a percent on the day.

United Health, JPMorgan Chase, Goldman Sachs, some of the biggest gainers on the Dow there. You're seeing United Health up 3.5%. The biggest laggards of the day, Microsoft down 2 and a quarter, you've got Salesforce down 2 and a half, and IBM off a percent and a half. Adobe shares hitting a 52-week low after making a $20 billion acquisition of Figma and issuing disappointing fourth quarter guidance. Humana shares are rising after it raised earnings and revenue. revenue guidance up. Wow, look at that, almost 9% on the day. It says it's seeing lower medical costs. Now let's go to the bond market and Rick Santelli tracking the move higher in the yields. Hi, Rick. Hi, Contessa. It's been a wild few sessions in the treasuries and indeed all sovereign and corporate rates across the globe. And as you consider 213,000 today for initial jobless

claims, that was the lowest level in what? 15 weeks since the end of May. So there was some good news. Retail sales was a mixed blessing and ultimately we're on pace for the sixth highest yield close in a row for two-year no-eels. But let's look at the last three since CPI and you can clearly see how we continue to escalate after that big run-up that we had when CPI was released. But it's much different the further down the curve you go. If you look at a three-day of 10-year note yields, what jumps out at you is the high watermark there yesterday, intraday was 3.48 percent. but it closed lower. Because 3.48% if you open the chart up to June, you'd find it was the mid-June high.

I will show that every day until we close above it, which will be a big technical green light for more selling. Boondiels, same scenario. Look at their mid-June high. It was 1.77. What was their high today? 1.77. We want to keep a close eye in tomorrow's market in Europe.

And finally, when it comes to the dollar index, the one, onshore and offshore, today are at fresh two-year lows against the green back. Contessa, back to you. Rick Santelli, thank you very much. Oil closing for the day, falling back toward $85 a barrel. And Pippa Stevens is at the CNBC Commodity Desk. Now, hi Pippa. Hello, Contessa. Energy prices are tumbling today as the seesaw between gains and losses

continues. WTI down more than 3 percent with Brent right around 90-87. This is a far cry from the more than $130 per barrel. oil traded at back in March. But Brokridge PVM noting that Brent seems to have found a floor around the $90 level where it will continue to find support. City adding that there are, quote, massive uncertainties heading into winter as additional sanctions against Russia kick in. But it is natural gas that is the relative underperformer today. It had a huge gain yesterday on the heels of that potential rail strike, which could have boosted demand as utilities swapped coal for gas. The contract, though, giving back those gains now down 9% after the railroads and

labor unions reached a tentative deal. On the heels of these declines, energy stocks are down about 2.3%. Every component is in the red Contessa, apart from APA. Back to you. All right, Pippa, thank you for that. And offices across the country, including ours, are welcoming back workers who in some cases haven't been here in two and a half years. But there's some real tension here between the workers who want to stay home and the bosses who insist they come back in person. That might be especially difficult when the boss is the richest man in the world. Laura Kuladne is writing about it on CNBC.com. Tesla struggles with Elon Musk's strict return to office policy.

And Laura joins us now. All right. So how is it struggling with the policies? So Tesla at Elon Musk's request, you know, at his mandate, rolled out this very strict return to office policy on the last. day of May. He just suddenly said, you have to be here minimum 40 hours a week and anything less is phoning it in. So people who had been authorized to work remotely suddenly had to change their lives around. And the hard part about it since then has been that Tesla didn't build in enough new work spaces to accommodate everybody being present all the time together. So you're seeing

employees go out to their cars to take work calls. There aren't enough basic supplies like dongles and chargers or slow Wi-Fi. Probably the most serious effect of the policy is that some people who are designated, you know, to work from home as much as needed or work remotely were dismissed when they said they couldn't relocate to meet the new attendance requirement. I do feel like I need to explain for everybody that dongles are the little attachments that help you plug in your earphones to your cell phone. Dongle is an actual term. When you're talking about saying to employees, you must be back, we don't care whether you have to go sit in the broom closet. How are they even monitoring whether those employees

are coming back in and doing what they're supposed to do for their 40 hours? You know, I spoke with several employees in Stau extensive documentation, including these reports that are going all the way up to Elon Musk that show at a granular level, what is the rate of absenteeism every day across the company. And they're doing this by tracking people's badging in to the various facilities so they know if you're, you know, on location. It seems like not everybody is tracked to the same level. Like Elon's direct reports aren't showing up in those reports on absenteeism. So if your company gives you an air tag, be very skeptical.

It's not quite at that level, but right, the badging into the Tesla facilities. Laura Kalladne, thank you very much. If you'd like to read Laura's article on Tesla, you can visit cnbc.com. Let's talk a little bit more about this, not just Elon Musk, other CEOs, including Tim Cook, Jamie Diamond. and they've expressed their desire to get most employees back to the office, most, if not all of the time, while saying employees have resisted the idea. For more on this tug of war, let's talk to Jim Stewart of the New York Times. Jim also a CNBC contributor, and he joins us via the phone.

Hi, Jim, how are you? I'm great, thank you. What's the Times doing, by the way? It's such an interesting issue. The Times is asking everybody to be back three days a week. And the guild, which represents a lot of the reporters, has balked and said, oh, we're not coming in. So there are something like 1,300 guild members this week who are not going into the office.

I'm not in the guild, you know, but I'm not, I haven't been going in this week either. I just don't want to get in the middle of the fight. Yeah. Wise, as always, we're sort of on a three-day-a-week plan as well here, Tuesday, Wednesday, and Thursday in. and Fridays and Mondays optional. That sounds pretty reasonable. Yeah, I can't object to that. And I have to say from personal experience and in the reporting business, it is helpful to be with your colleagues. I would say like two big stories I did in the last few years came through chance encounters with fellow reporters. One of them led to this

to my book, which is coming out in February. And it was all just because of a random encounter in the office that, you know, wouldn't have happened. I'm going to be in there periodically. But, of course, I only live 10 minutes away, so it's not a huge deal. It's not a big thing. You know, we hear from Tim Cook. We hear from Jamie Diamond. They seem to be saying the same things.

We need you here. Collaboration is a lifeblood of our business. I think that I would, you know, trust him. I look, I'm not a banker. I did work in a law firm in another life. And there I would say collaboration also was very important. And, you know, I would take them at their word that, yeah, you know, they need people in there. Now, I do feel, you know, that we've learned a lot from the pandemic, one of which is that you can't trust people to make some judgments.

Like, it doesn't have to be five days a week, 40 hours a week. It doesn't have to be that regimented. So there is a lot of room, I think, for flexibility. You know, Jim, I'm skeptical, Tyler, and I've told our bosses this. part of it is that I think you can't put the genie back in the bottle. The other thing is, if you look at productivity, and we know that productivity was sustained during work from home, that it necessarily dives if people have to go home to manage their life

rather than incorporating work into life at home. And the third thing, and I'm not reading anybody talking about this, but all these companies, Apple, Starbucks, J.P. Morgan Chase, Goldman Sachs, have very well-publicized commitments to climate initiatives. I want to know about this conflict between being concerned about the environmental impact and forcing your workers to undertake, in many cases, significant commuting challenges in order to just have collaboration and chance encounters in the office. Well, yeah, I think that last point is honestly not something I had pondered,

but is a great point. I mean, again, here in Midtown Manhattan, which is, you know, the center of a huge workforce, they're trying to put in congestion pricing to, you know, reduce the amount of transportation vehicles coming into the city. And that's completely inconsistent with going back to the old get everybody into the office all the time. And because a lot of them don't use mass transit. So I think that's a good question. I mean, that's a really good point. I think also, though, the whole balance of power here has shown.

shifted, that the idea that there's this, like, top-down management that orders the workforce, what to do, it has really been challenged in the pandemic in a way that I never would have grant possible. And I think shrewd managers are going to realize that there is room for more flexibility here. I mean, again, to see the personal example, if I'm hibernating and writing a story, I mean, I've done all the reporting, I've had the ideas, I've been to the story meetings, all I'm doing is hibernating and writing. I'm better off at home. I mean, there are so-called writing rooms in the times where people would go in there,

close the door, put a do not disturb sign on there, and vanish for the entire day. Now, they don't need to be in the office. And I'm sure there are similar situations. Maybe somebody's writing a report, they're doing a research thing or whatever, where it's actually beneficial to be a way and more productive. Agree. Can't argue with that? Agreed.

All right. I guess we're all the choir then. Thanks for preaching, Jim. Jim, thanks very much. Good to see you or good to not see you, but hear you. Up next, ESPN, no gambling Disney CEO, giving a strong statement regarding his network and placing bets. We'll be right back with more. A new era of the NFL and streaming begins tonight. Football fans wanting to watch the Chargers play the Chiefs. It's a big game. We'll have to do it on Amazon Prime Video. Our friend Al Michaels leading the broadcast, Julia Borsden, joins us now with more on the game and the new way of watching. Well, Tyler, the NFL is going into tonight's big game on the heels of first week gains. Ratings for the first week are up 5% over last year with the best opening weekend for the NFL since 20,

Now, tonight is the first of 15 regular season games that NFL is going to be airing on Amazon Prime video. The question is how many people stream to tune in? Amazon has warned of some ratings growing pains. Initial viewership is expected to drop dramatically from the 16 million people who tuned into Fox Thursday games last year, though over time, the NFL expects viewership on streaming to exceed that of linear TV. We're not obsessed about the number. We think it'll be lower, but we have full confidence in Amazon that that number will grow. And given the trends in digital, I think these digital numbers will at one point, I can't tell you when, will merge with the same viewership of television. That's just the growth of digital that we all see. Now the question is which tech company, which streamer snags the rights to NFL Sunday ticket and NFL media. Both of those rights are up for grabs. Apple, Disney's ESPN, Pl, plus Google's YouTube and Amazon Prime are all in talks, according to sources familiar. Now, Roll app tells us, though, that the NFL's app that just launched for the start of the season,

NFL Plus is off to a good start and part of a broader push to bring the NFL direct to consumers. And in the world that I cover, Julia, gambling, I've heard about all of those companies, Apple, Amazon, ESPN, and whether there's interest in them really becoming gambling companies with their interest in. sports. ESPN number one sports network. It seems like there's an obvious overplay there. Well, an obvious opportunity, but Disney CEO Bob Chepak just today said that he didn't want Disney ESPN to be a sports book itself. He wanted them to partner with a sports book. And he did understand the opportunity, but it didn't make sense for Disney or ESPN to itself do that gambling business. It'll be interesting to see which of these companies they may team up with.

Contessa. Julia, thank you for that. And coming up, Apple dethroning Tesla as the number one most shorted stock, according to S3. A headline like this, is it a warning to stay away or go long? That's next. Welcome back to Power Lunch. S3 partners releasing its latest list of the biggest short bets on Wall Street. Sliding into the top spot is Apple. Number two was the longtime leader, Tesla and Microsoft coming in third place.

Here to help us trade them is Jeff Mills. He's the CEO of Bryn-Mar Trust and a CNBC contributor. Jeff, it's good to talk to you. Let's kick things off with Apple. Yeah, hi, Contessa. So Apple is a stock that we own, but I don't feel particularly good about the prospects near term. We do have the chart here. Look at this channel from fall of 2020 through earlier this year. It was really kind of trading within that band. It broke below it, recently retested the bottom of that band and failed. So I would be looking to about 150. I think if it breaks below that level, you could see kind of a swift move lower. So that setup worries me a little bit. And then just from evaluation standpoint, you know, at almost. 25 times forward earnings. It hasn't really been this expensive, really in the 10 years prior to COVID. And even if earnings expectations stay where they are in the out year, so looking out to 2024, it's still trading at 23 times earnings. So not particularly cheap. And I think the crux of

this story really is the slowing consumer. I think it has to create some headwinds for Apple earnings. We saw retail sales today. We know the story about credit card debt continuing to rise. So some stress evident in the consumer there. And we've gotten some warnings on the hardware side. You know, whether it's HP, Nvidia, C-Gate, and iPhone is still 50% of Apple's sales. So I think you see some pressure on earnings there. The valuation is where it is. And then I describe the chart. So near term, I think there could be more downside.

So I'm hearing you say, Jeff, that you think the shorts are right on Apple. Are they right on Tesla? You know, Tyler, Tesla's been a stock that I've been wrong about over and over again. So maybe I'm a good contra indicator there. And I'm very familiar with the bear case. You know, the competition is rising. Maybe Elon Musk is distracted. that he's doing too many things.

The stock is expensive, but I do think there's some good here with Tesla. So one year ago, this was a stock trading at 150 times forward earnings. Now it's trading at 57 times forward. So the valuation is clearly better. It's basically as cheap as the stock has ever been. And then it does have a margin advantage when compared to the likes of GM for some of the old incumbents. But for me, this is a stock that it's very hard to be long, but it's also very hard to be short. I just took a look at the daily standard deviation for Tesla versus the market.

And it has four times the daily volatility. So it's as dangerous it gets if you time it wrong. All right. This is a yes, no question. Microsoft. I think short term, no. More downside just based on the chart. All right.

Def Mills, thank you very much for that. Already, still to come, Wins big trouble in China. A no win situation is the company at risk of losing its spot in Macau. We'll be right back. Contessa will tell. Wynn resorts. Shares moving higher after an upgrade from Credit Suisse, which pointed out the Vegas boom in a doubling of available space. And there you can see it's up seven and a half percent right now. Gambling industry insiders say, though, Wynn could face a serious threat in Macau because of a new competitor on the scene. A bit of a surprise. Genting Group operates resorts world casinos here in the United States, London, and elsewhere. And it's making a play for a casino license in Macau. Now, six concessions. seven bidders. And the government has laid out some really serious priorities that require significant capital investment at a time when profits have turned to losses. My sources say that Genting may

be targeting perceived weakness in Wynn's bid, that its balance sheet losses in its leadership team. I mean, Genting is an Asian company with lots of entertainment experience outside of gaming, which the Macau government says it wants. And there's a series of requirements for this concession renewal, Each one is ranked. It's given a score. So you've got Genting as the surprise bidder. You would think that for Wynn to lose this concession, it would have to submit the seventh worst bid.

That seems... Would that mean that when would not be represented in Macau? So what it means is that first the gaming licenses would move to another concessionee. And then the operations, Wynn would have to work it out. Is it worthwhile for them to keep just retail, just entertainment? probably not. Would they have to then work with whoever wins the concession? In other words, they could have their hotel, but it would be retail and entertainment. It would not be gaming. And even then, that's at least the concessions are land that is conceded by the people of Macau.

The people of Macau own that land, not win. Very interesting. Wow. Some jeopardy there. But the company says, by the way, they don't do anything second rate. All right. Good. Thanks for watching Power Lunch, everybody. Closing bell. It starts right now.