Power Lunch - Risk-On Returns, and Promise & Problems 2/17/23

Episode Date: February 17, 2023

Stocks are lower today, but the risk rally is back on! Bitcoin is up 10% this week, while growth names are outperforming value as retail traders pour money back in. We’ll explain what it means for markets. Plus, as AI permeates the world of technology, chat bots are being put to the test – to often hilarious & terrifying results. Did the rollouts get rushed, or are these normal growing pains? We’ll debate. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon and welcome everybody to Power Lunch, along with Kelly Evans. I'm Tyler Matheson. Coming up, stocks are lower today, but the risk on rally is back for now. Bitcoin up 10% this week. Growth outperforming value as the retail traders pour money back in what this all means for the markets. Plus the promise and the problems with AI. Chatbots being put to the test with results that are often hilarious and terrifying all at once. Did these rollouts get too rushed or are these normal growing pains for any? new and transformational technology. Before that, though, a quick check on the markets, as you see the NASDAQ, the biggest decline are down 1.2% today, but well off the lows. Well, the NASDAQ is still up for the week, and the growth trade is back in vogue, at least for now. Let's bring in

Kate Rooney to talk a little bit more about that. Hi, Kate. Hey, Tyler. So crypto and some of these high growth stocks have been some of the biggest winners this week. One key factor you've got to look at here inflows from individual investors. So names like Coinbase and micro strategy tend to attract what we call retail traders. These companies see relatively low interest. Meanwhile, from institutional buyers who, aside from hedge funds, tend to trade less frequency. So some new data from Vanda research this week shows the highest level of inflows ever from this retail cohort. Net inflows topped $1.5 billion. That's a new record, according to Vanda. Coinbase will, was among the most popular names there. Chris Brenler over at DA Davidson downgraded Coinbase this

week after it pretty much doubled this year in the face of what he told me was objectively bad news. There were a lot of regulatory crackdowns out of D.C. this week. Analysts also note that short covering is extending some of this rally. Coinbase has about 24% of the float or essentially available shares out there. Sold short, micro strategy, 34%. Silvergate, a whopping 73%. 3% and despite tanking yesterday that crypto bank is still up double digits on the week guys. Vanda also points to what they call FOMO driving this fear of missing out. They saw more buying on days when the S&P was actually up indicating that people are chasing momentum versus any sort of dip buying or bargain hunting when stocks are down. They don't see this group running out of steam anytime soon.

They say they've still got plenty of dry powder parked in money market funds that could still be deployed. We talked about crypto a little bit, guys. Finally, Bitcoin. It's seen its own sort of resilience of about 12% of the week. And it's seen the opposite dynamic. Barclays points out a boom in trading volume, mostly from institutional buyers, while retail actually sits on the sideline here. Back to you. All right. Thanks very much. Kate Rooney. So as more individual investors come into the market and buy up growth stock, should you follow the crowd? Let's bring in David Speaker, president of Guidestone Capital Management. And Ron Insana, he's a CNBC senior analyst. and co-CEO of contrast capital partners.

David, let me begin with you. I think the answer to the question we posed in the intro there, for you, at least, is no. You say equities are too rich, given the EPS estimate declines and the declines that you see ahead. More downside coming. In midst of the largest decline in M2 or money supply history and the fact that the Fed policy acts with a lag, we expect a U.S. recession in the second half of the year. So what should I do? bonds are a great place to be right now, Tyler.

We've got yields we haven't seen since the mid-2000s since the aughts, and it's a great place to be. Now, when the Fed was flooding the market with liquidity, we had to go out on the risk curve. We had to own equities because you couldn't make money in the safer parts of the market. But today, with the Fed sucking all that liquidity back out, taking M2 out of the market, bonds are very attractive. All that said, I do think growth stocks are due for a rebound. given their underperformance last year, growth stocks are going to perform better when interest rates

are stable to falling, which will happen as the market starts to price in the recession. And they also tend to do better in slowing economic times because investors tend to pay up for growth when growth becomes scarce. So for a barbell strategy, own some growth equities and own some short-term bonds, I think you're in good shape. And so growth, even though you say more downside is ahead. Well, we're long-term investors, Tyler. I'm not going to try and tell anybody don't time the market.

We're in the midst of a 16% rally right now that I would not have predicted. Inflation is still very hot. The Fed still has their pedal to the metal. The market has not priced in what will be much lower earnings. And so when you bail out of the market, you're going to miss those bare market rallies. So I think you need to have equity exposure, but you want to be invested in high-quality companies that can withstand a high-inflationary environment. and that will benefit from the trends we're seeing right now.

Ron, what do you think of what David just said? Yeah, I think we're close. I mean, I would go more specifically towards, you know, just stock selection based on not just recession resistance and inflation resistance, but just really focusing in on high quality. I do agree, although at the very, very short end of the Treasury spectrum, that people should be playing there

when you've got the six-month bill and the one-year bill now yielding more than 5 percent, that's pretty much a steel at this point. And so that seems like a safe place to park fund. I just think the market's going to be extremely choppy. I don't see any real direction over the next several months that's meaningful. And again, as we've discussed many times over the last several months, you do not get a secular bull market in stocks while the Fed Reserve is still tightening policy.

So speaking of that, what are your thoughts on the latest we're hearing from Fed officials, Ron? Because we have now a couple of them calling for maybe going 50 if they were voting members. Bank of America just changed its forecast for June from a pause to a 25, basis point rate hike. And the market seems to be going along with that. Yeah, I'm in favor of duct tape in this environment. I wish we could get some people to stop speaking about and changing their minds literally on a weekly basis, whether it's Jim Bullard, Larry Summers, or whomever we've spoken about in the past. Now we've got Larry saying that the Fed's going to hit the brakes really, really hard. You know, then two weeks ago, he was saying we could have a Wiley coyote moment.

Then the week before that, it was inflation was going to accelerate. I think there are a lot of officials and ex-officials who are speaking far too much in an environment that I don't think we know quite enough about. I think even, and I'll admit that I was wrong with to an extent on inflation in so far as it's stickier in shelter. It's stickier in services than we thought, even though it's decelerating mildly, not coming down fast enough. So I think everybody's putting a finger in the wind and making comments that probably don't make sense in this environment. I wonder if we need like a vix of Fed speak. Exactly. And David. There's a lot of all.

Right. David, maybe you can weigh on this. When the Fed speak starts to get erratic, is that itself telling us something about being at a turning point? Yeah, I think that may be part of the point, but they're also kind of in quicksand right now. The Fed's credibility is on the line. Jerome Powell is still suffering from his transitory comments in 2021. And so if the Fed decides, hey, let's go ahead. We went back to 25 basis points. Let's go back to 50 this meeting. They're going to really lose a lot of credibility. They also, one of the things you're seeing now is a lot of people are saying, you know what, the Fed's not going to go to 2%. They're going to be happy and they're going to declare victory at 3%. Maybe they do. But again, that hurts their credibility because they have been pounding the table on that 2% core inflation number for a long time. So I think the Fed credibility is a big factor here. Jerome Powell's legacy is at stake. And I think a lot of this chatter you're seeing maybe are certain Fed members trying to get out of the way of that terrain that's coming down the track at them. You know, Ron, you say you like six-month-and-one-year bills at 5%. If you like them, you must, if you live in a high-tax state, love munis right now.

Yeah, I mean, if you can get the proper yields and the proper protections, you know, in certain jurisdictions where you're triple tax-free, you're insured, and you're getting somewhere, you know, nor, or you're getting a tax-equivalent yield of 5%, I should say, then, yeah, I think so. But you have to be pretty selective, and you have to make sure also that with respect to something like general obligation bonds versus bonds that have dedicated revenues coming towards them. I think you need a little expert help there when you get into the muni market because it is really, it's different state by state and it's different tax bracket by tax bracket. But yeah, generally speaking, I would say it's also an interesting area in which to be mining

some yield. David, let's close with a comment or two on invidia, L'Oreal, and Humana, an eclectic group of stocks you like right here. Well, again, this kind of goes back to that barbell strategy on our reference Tyler. You've got Invita, which with their GPUs is a big player in AI and autonomous vehicles and gaming. The stock was down dramatically last year to rally so far this year, but one of those tech names we think will do well. And then L'O.L. and Humana are both very recession-resistant stocks, which will do well in a weaker economic environment. It's interesting cosmetics do very well

in a weak environment. In fact, Loria saw 5% earnings growth, or revenue growth, I should say, in 2008. So between that and humanity and insurer, I think you've got a good place to be in this environment. I think when you're wearing nice makeup, AI works much, much better. So I can see how the two work together. Gentlemen, thanks very much. We appreciate it. David Speaker, Ron Insana. Thanks, guys.

Have a good weekend. All right, coming up, we've talked a lot about the potential of AI, but as chatbots roll out, more people are finding hilarious and occasionally troubling responses. So does it mean we've gotten ahead of ourselves, or is this still amazing technology? technology, just showing a couple of funny flaws. We'll talk about that when we return. Welcome back. Microsoft's Bing ChatGPT launched last week. Remember, we covered it here on the show. And users rushed to try it out. But now screenshots of maniacal, creepy messages are flooding the internet. New York Times columnist Kevin Roos had a conversation with Bing that left him

deeply unsettled. The messages included gaslighting, manipulation, confessing its love to him, and even trying to break up his marriage. Our next guest says, despite all of that, the Bing chat is still good for Microsoft's business. Let's bring in Alex Cantrowitz, founder of big technology and a CNBC contributor. Alex, you've been having your own Bing experiments. Or do we call her Sydney, as she's, I guess, review. Or is Sydney at war with Bing? I mean, I can't keep up with the drama.

And the funny thing is, I think this is great for business. I think in a way, it's kind of the point Ben Thompson was making that feeling like you're talking to a person might be a feature and not a bug. Absolutely. I think this is great for Microsoft. It's great for the business. we're talking about Bing. When was the last time we talked about Bing?

You know, it's been ages. And this is going to demonstrate that Microsoft, A, has AI capability, B, put Bing back on the map. And C, just elevated it as a pop culture phenomenon in a way that that brand has not been associated with for a very long time. So I think it's really good for Microsoft.

So what about the sort of disturbing, I mean, obviously, when you thought about it, well, last time we talked about Bing, it was Crosby. But at any rate, I read some of the, I read some, some of the chain of messages in the New York Times story today. And they, and they seem to run off the rails a bit. If I get that as part of my experience, how long am I likely to stay with Bing or chat GBT? GPT? Yeah, let me stick up for the AI here, right? Which is a weird thing to do,

but I'm going to do it against Kevin Ruse, right? If you tell the AI to be in a shadow world or to be a devious version of itself, and it delivers that for you, is the product really not performing? Like, should you be creeped out if you encourage this bot to live its shadow self, and it does? And in fact, it was a fascinating conversation.

I mean, Kevin stayed on the line with this thing for two hours talking to it. He couldn't let go. I mean, of course, he was doing it for research purposes, but every person I've talked to you had this experience is the same. Everyone's going back and watching the movie, her and doing it also.

But Alex, here, And again, I think that itself is a huge use case here. It's obvious. And even if they're putting guardrails on it, whatever. But there's something I don't want people to overlook. So an analyst in Washington, D.C., was messing around with Bing and trying to figure out if his daughter had, I think, a snowday. And he said to Bing, based on what you know about me, is my daughter, does my daughter have a snow day or a late day? Some question like that.

And it wrote back, yes, at the high school, you know, here's the phone number to call and here's the policy they follow it. Like, it was everything we would ever hoped a virtual personal assistant could be. So, you know, there's use cases here. It's already revealing that is likely to make Bing an essential tool. And the question is, can Google keep up? I think Google can keep up. Obviously, Google's been reticent to play a ball because it sees some of these problems. But I think, you know, this is something that's really gone on notice.

Bing is clearing the field for Google because all these objections that people would have to Google's technology, They're seeing it first with Bing, and Microsoft is still standing. And I think Google is taking very careful notes about this situation. They're going to say we had to do something. Nobody got mad when it was happening with Microsoft. Here's our version. And maybe now they can actually have this second mover advantage go in and actually release their product, which I think is better.

How are these products going to change our lives over the next five years? We're going to start talking to computers in Arlington. Up until now, we've been talking to computers in their language. Of course, we first started with code, then we started with keywords that might trigger some form of computer result. That, again, is all about how we speak in the way that they want to communicate. Now they're coming closer to us, right? So I think it's going to enhance the way that we interact with computing. It will have some weird and scary implications.

There's no doubt there's a downside to this. But I think more broadly, it will bring us in touch with this very powerful. powerful technology that we've always had around us, and it's going to mesh it in our lives in a way that it's never been before. And I think that there's a lot of good to be had here. I'm personally more optimistic than pessimistic about it. I think our radars are up, and we know when this thing is built up. You know, you said that you think Google's technology is superior, and let's go back to the GAF from a couple weeks ago. A lot of people in our audience have been buying shares on the sell-off and make the case for why you think their technology is

superior or for the investor who's watching, Google Microsoft seem like obvious examples here. Are there other companies that come to mind who are going to be an important part of this next wave? Well, in terms of Google's technology being superior, I'm just talking from the basis of conversations I've had with people inside Google. I've spoken with Blake Lemoyne, the Google engineer who thought this thing was sentient. Of course, it's a bit of a distraction. But I've also spoken with Lambda, which is the chatbot that Google is making on the inside. I spoke with with their first product manager who said it was basically at chat GPT level a few years ago. And I only expected to be enhanced. So that's why I think Google's is probably better.

Now, in terms of are there any other challengers, I think the thing to watch here is that this is going to end up being platform technology. So developers are going to be able to build their own applications using technology from Microsoft from OpenAI. And we never really know exactly what they're going to build. And I think that's something to be excited for because somebody, you know, sitting in their basement right now could use this technology to create some pretty impressive interactions and and very maybe that's the next big company very quickly how are in the case of Microsoft and Google how are they going to make money at this what's the so yeah so Bing I mean there was a story today about how Bing is going to try to sell ads on this type of stuff I think that's

weird like I joke that you know it tried to break up Kevin Ruse's marriage in your times columnist Maybe they would, you know, throw an ad in for a divorce lawyer to make sure that, you know, it can find love with him. But, yeah, you can think about ads. You can think about, you know, APIs that people can use this stuff. And you can also think of the shine that it adds to enterprise software, enterprise cloud support like you have with Azure or Google Cloud Services. Do you think that there is an earnings risk to Google? I mean, so many people are using Bing, are using ChatGPT.

Are we peeling away? because Google's current search platform is one of the most powerful advertising businesses ever built. Do you think there's an earnings risk here? Well, the question is, you know, what happens if this is something that gets like 2% of Google share? Well, 2% of Google share is actually a lot of money. And so you might have that force coming into a collision with the fact that Google has taken so much of advertising spend moving from other platforms to digital that it doesn't have that much more to grow. or it can't sustain the growth rates that it has. And we've seen that in the last few quarters. So I think, you know, I don't want to say that this is going to kill Google's business,

but can it gobble up some of the growth, no doubt. All right. Alex, great to have you today. Thanks so much. Alex Cantrawith. Thank you. Interesting stuff. Interesting future ahead. And ahead on this very interesting show, Meta versus Employees. The company reportedly giving thousands of workers subpar reviews. We'll discuss that. plus solar stuck in the shade. Why multiple CEOs are warning of a slowdown in that space. We'll be right back with more.

Welcome back to Power Launch, everybody. Let's get a check on the markets now. The Dow down a little bit. It had turned positive briefly. The S&P 500 is lower by about a half of, well, the Dow is actually higher there right now by 1.14%. SP 500, a little bit lower. Ditto, the NASDAQ, off 112 points. Chips leading technology lower.

In Video, we mentioned it a moment. or so ago, down nearly 4%, but up more than 45% this year. Earnings come out with Navidia next week. Energy, the worst performing sector today. Oil prices moving lower by 3%. U.S. stockpiles showing crude inventories at their highest in nearly two years, and there you see that translating into negative numbers against those measures. And keep an eye on shares of World Wrestling Entertainment.

CEO Vince McMahon looking to get as much as 9 billion. in a potential sale of the company. This according to Bloomberg, for context, the stock's current market value is between 6 and 7 billion, WWE, up 30 percent so far this year as that company weighs a sale. And now let's turn to the bond market as yields are rising the 10 year to its highest level of the year. W.W.E star Rick Santelli joins us now. Rick. Hey, Tyler. You know, it's very fascinating because right now a 10-year note is down about four basis points on the day, and it's hovering at 382, which means it's only up now eight basis points on the week. It was up 14 to 15 earlier, and that's the point.

Since it's down from yesterday's yields, yesterday's yields were the highest yield closed since December 30th, were in the right zip code for the highest yields of the year, but we have turned down a bit. And really, the canary in the coal mine was two-year note yields actually this morning. They missed their COVID post-high yield closed by one basis point from an intraday basis, which was 471 high today, 472 is that key close, and that backed up everything. So the two years closed, but the 10 years, you look at this chart, their October high was 424. We're still a ways away from that. There's still many that believe, if you open the chart up back to 2008,

that the high that we made in October, that was the highest since 2008, is going to remain there, which means the yield curve will remain inverted. And finally, while we talk about rates, maybe we should pay a little attention to the dollar index, it's closing at a six-week high today, should it stay at current levels. And of course, it pretty much is on pace with the 10-year note yield.

Both are moving hand-in-hand. Kelly, back to you. Thank you, Rick. Time now for our weekly ETF tracker. And this week, we're looking at metals and mining ETFs. They've seen outflows about $86 million for the week through yesterday, rising interest rates leading to a drop the price of those commodities, strong dollar a headwind. Gold currently near its lows of the

year, and as we've discussed earlier, money's been going into those riskier growth stocks. You can see ETFs in that space and metals and mining, that is, are all lower for the week, whether it's gold, platinum, or strategic materials. Here are the red arrows. We're talking about the gold miners down four and a half percent, almost that amount for rare earths, which has been such a strong play. Platinum as well, two and a half percent drop. The data all comes from our partners at Track Insight. More info available on the F.T. Wilshire ETF hub. Let's get over to Frank Holland now. for the CNBC News Update. Frank? Hey there, Kelly. Here's what going on at this hour in Germany for the Munich Security Conference.

Vice President Kamala Harris met today with French President Amal Emmanuel Macron to discuss the West support for Ukraine. She also spoke exclusively to NBC News about Washington's relationship with Beijing. We will maintain the perspective that we have in terms of what should be the relationship between China and the United States. that is not going to change, but surely and certainly that balloon was not helpful, which is why we shot it down. The Biden administration is defending its response to the toxic freight train derailment in Ohio two weeks ago, saying it has mobilized a robust multi-agency effort to support people in that area.

But one GOP congressman from the state wants more information on testing plans, saying the community must be able to trust their air, water, and soil is safe. And in an effort to catch the culprits, the NYPD has released security camera video of four people stealing everything in sight after getting into a Javanchet store by smashing the front door window with a hammer. You're seeing the alleged culprits right here, Kelly. Back over here. Wow. Frank, thank you very much. Ahead on Power Lunch, some key earnings movers in another deluxe version of three-stock lunch. You've got AutoNation soaring 10% today.

Is vehicle demand improving you've seen car prices lately? Plus full stream ahead. New reports show this could be the year. Streaming overtakes traditional TV. We've got details and the fallout coming up on Power Lodge. Welcome back, everybody. We're going to try something new with three stock lunch. Three key stock stories on our radar today. Our team of reporters will give us the news and the moves of the stocks. And then our trader, Heather Brilliant, president and CEO at Diamond Hill Capital Management, will give us her trade. Seema, let's start with you. You've got John Deere. I do, and the stock is up 7%, Tyler. Lower fertilizer and energy prices, really helping farmers in the past quarter spend more on ag equipment. John Deere's biggest business, precision ag grew sales by 55% year over year. However, costs are going up as well.

CFO, Josh Jepson, telling me that spending on research and development is up 14% versus last year, just shy of $2.1 billion, and that mergers and acquisitions will remain key to its broader strategy as Deere continues to bet on artificial intelligence. intelligence, robots, and machine learning. He says because of the labor shortage, farmers want more. Tech-enabled equipment that makes them more efficient when they're planting and harvesting. Now, one cost for concern is pricing. After two years of price increases, he says prices will likely come down towards the back half of this year as inflationary pressures subside. But that's not stopping the stock from moving higher, Tyler. Heather, what do you think of deer? Thank you, Seema, by the way. Heather. I think deer is a great example of a company that has tremendous competitive advantages. And investors like us at Diamond Hill with a long-term perspective can see in this quarterly report some of those strengths coming through.

They were able to raise prices twice as much as they saw cost increases, I should say. And it's a cyclical business, so there will be bumps in the road. But this quarter is a really great example of the long-term advantages they face with their dealer network and their focus on technology. All right. Dear shares, as we mentioned, up 7% today. Let's get to Auto Nation also soaring after results. Philibault has these details. What are we learning about this wacky auto market, Phil? Not a whole lot from this report, Kelly.

Look, nothing's really changed, and that's not the reason the stock is up almost 10% today. It's up because they beat on the top of the bottom line, and on an adjusted basis, they had record fourth quarter revenues. In terms of revenue, what you're looking at is new car revenue, not a surprise here, down 8%, used or up 8%, used revenue, used models, down 8%, but it's the aftermarket services, up 7% the revenue there. Remember, they get half of their revenue, generally speaking, most auto dealership groups, get half of their revenue,

the business, on the service part of the business. That's where they're really going to make most of their money. And not surprisingly, you're seeing all of the major auto stocks. We're talking about Auto Nation, Penske, Group 1, all at or near 52 week, and really all time highs, guys. Heather, what's the trade? Do you like AutoNation? Kind of an under the radar stock. Yeah, it is. It's, you know, they think there's some really interesting things about the company, and certainly I think the average selling price has really bolstered these results. They bought back 25% of their shares over the last 12 months, which is a really impressive feat as well. Overall, they seem to be doing a great job on operational skill, capital allocation,

and the valuation isn't overly demanding, but given all of the trends and unknowns, we're really, we're not chasing it up here. All right. Well, let's move on to Moderna, which is falling on some mixed results for its flu vaccine. Meg Trell has the story. Meg. Hey, Tyler. Well, the question for Moderna, of course, is can it take its incredibly powerful MRNA technology and apply that to things beyond the COVID vaccine? They've had some good results in personalized cancer vaccines and RSV vaccines. Now they're trying with seasonal flu. These were late-stage data looking at the immune response and the safety of their seasonal flu vaccine candidate. And essentially, they found it met the study. goals on the more common form of flu called influenza A, but it didn't meet the study goals in terms of the immune response for influenza B. Now, they are tweaking it to update it, but that does essentially look like a mixed result there. Tolerability is very important here as well, what it feels like to actually take the shot. And there, investors are focusing on the fact that there were

more side effects, even though they were low grade with the Moderna vaccine compared with the more standard seasonal flu shot. Moderna did say, though, they have an efficacy study reading out by the end of the first quarter a little ahead of expectations. And when I spoke with Moderna's president, Dr. Stephen Hogue, he said that is really the data set that is going to matter potentially going forward. However, the stock down more than 4% on these sort of mixed results. Yeah, mixed results, more results to come, it would appear. Heather, what's your thought about Moderna? We really like to look at everything with a valuation lens. And at $64 billion of approximately their enterprise value, they're going to generate around $7 billion in revenue in 2024, depending on

your estimates of some of these pipeline names, that's nine times sales. At this valuation, despite the potential long-term benefits of their pipeline programs, we're not a buyer. Too expensive. Too expensive, yeah. There's so much success that has to go right to justify these prices. All right, Heather, thank you very much for your time today. Heather, brilliant. We'll have you back. Thanks. Solar stocks down over the past month, even as we've seen a lot of risk gone, what's causing the slowdown, we'll ask. And as we had to break during February, we're celebrating Black Heritage through the stories of some of our CNBC teammates, contributors, and leaders in business. Here is Deborah Lee, former BET,

CEO and leading women defined founder. Growing up in the segregated South, emphasized to me at a young age the importance of being an African-American woman. I've always been very proud of my heritage, proud of our history, proud of all we've accomplished. And one of my greatest desires life was to be successful and to be able to give back to my community. I'm very proud of being able to do that. And I hope it has had an impact on the rest of the world. Welcome back to Power Lunch. cautious comments from solar executives.

Pippa Stevens here with the details on the stocks. Have been under pressure too, Pippa. Yeah, that's right. Dropping over the last month on signs that there could be a growth slowdown ahead. First, we heard from Enphase's CEO who said he expects the U.S. market to be slightly lower in Q1 relative to Q4. But then Solar Edge took it a step further with CFO Ronan Fire telling me he is, quote, not very optimistic about U.S. market growth and expects it to be flat this year. Now, Resi Solar is coming off a record 2022, and we're only six weeks into the year. But Wood McKenzie forecast rooftop installations to be as much as 10% lower this year.

higher rates and California's new NEM 3.0 policy among the factors weighing. Now, longer term, both NFA's and Solar Edge are doubling down on the U.S. with plans to build domestic manufacturing facilities. And in the meantime, they say things are still looking good in Europe. But, you know, this industry has really like hinged on this dramatic growth profile. So signs that could be cracking. How reactive are these companies to the price of oil or the price of natural gas? In other words, I would guess that people would be inclined to do these installations when natural gas prices are very high or they fear that they're going to be very high.

Yeah, that's right. And electricity prices are still up. And that gas has come down. But as we've talked about, we haven't really seen that reflected in utility bills yet. And who knows, you know, when and if we might. And so that has been a key growth, you know, reason for solar is people wanting to lower their monthly bills. But then now with rising interest rates, that creates, you know, another higher cost because then their financing, are higher or more limited. And so that counteracts some of the benefits from those lower.

What's that California rule you referred to? It sounds arcane. I don't want the whole thing, but give me a little bit. Well, it's very complicated, but at the most simplest, it's NEM 3.0. And so this changes the amount that you're credited for power you send back to the grid. And so it's going to increase the payback period for solar system. So while it might have taken, you know, five years to have that system pay for itself, now it could you know, maybe closer to 10 years. Interesting. Yes.

So that policy in California, of course, is the leader in solar. And so if other states look to them as an example, we could have more NEM-3-0-type policies emerge. Very interesting. Yeah. All right, Pippa, thanks. Great. Have a great weekend.

All right, Netflix's Sports Fix, the streaming platform, showing some success with recent sports documentaries, but will it eventually need to bet on live televised sports? We'll be right back to discuss that and more. Welcome back to Power Lunch, everybody. While streaming services are battling for live sports, Netflix, choosing to embrace sports documentaries. This week, it debuted a new series called Full Swing, focusing on men's pro golf, which follows recent documentaries on tennis and Formula One Auto Racing.

This comes as time spent watching digital video is set now to surpass traditional television for the first time ever this year. according to a new forecast out this week from insider intelligence, daily TV time is expected to drop to under three hours or 175 minutes, and digital video time devices will climb to just over three hours or 191 minutes. Here to discuss the changing media landscape, Sean McNulty, contributor at the Ancler and Todd Spangler, New York Digital Editor at Variety. Sean, let me begin with you and let's start with Netflix and whether it needs. needs or is equipped to get into the live sports broadcasting market, which depends so heavily

on advertising, which is not something Netflix natively knows that much about. Yeah, they just started. And Microsoft is their partner. So the bigger issue with Netflix's, you know, and they've said this, you know, they prefer to own not to rent. And with sports, you are renting. You do not own the rights. You have them for a few years, but as we've all seen in a few years, those rights can shift. So that doesn't fit their business. model. Number two, they prefer global. They don't really buy things in certain territories with few exceptions. So those two things don't make sports very attractive. Obviously, time zones, you know, the Super Bowl plays here at a certain time. They're a global company of 231 million

subscribers. The mass is hard to make. And as you said, advertising, you have to make some of that money back. And, you know, Amazon's paying a billion dollars. We don't know how much they're making back in advertising. And Netflix, this is a new business for them. So there's not a lot going for them in terms of, that makes sense. And sometimes, you know, their playbook. Sometimes these things, I think, are lost leaders, as in the case of Amazon, for example. And, and, oh, by the way, there's simply, Sean, aren't that many truly global sports, are there?

Apart from football, soccer, Formula One, I suppose you could call a global sport, tennis, but it's a niche play. Yeah, tennis and golf and, you know, and those sports make their money by selling off region by region, especially F1. So to sell to a global partner would be a huge check that, you know, even IPL rights, which was talked about with cricket rights in India last year, you know, that was just for India in the Southeast Asia more or less. It wasn't global for some people. So it just, it's hard to make the math work and it's hard for make it for the leagues to work to have that global partner, you know, and few people have the scale

globally that can even do it, which would be Netflix, Amazon, and maybe Apple, you could argue. Do you think, Todd, they're going to get dragged into this at some point? Do I think Netflix is going to be dragged into it? Yeah. Yeah, look, I mean, you never say never, right? And Netflix has been careful to couch their comments when they've been asked about sports rights. Ted Sarandos has said, look, we're not anti-sports. We're pro-profit.

So what they're saying is right now, you know, based on their subscriber levels, based on their content spending, you know, they can't punch an NFL size hole in their content budget. Now, as, you know, as you guys mentioned earlier, increasingly people are watching everything on TV over streaming. And, you know, as that continues to progress, right? Netflix needs to at least consider bringing live sports onto the service. And they're doing a, you know, a live Chris Rock special or they've done that. And, you know, so they're not averse to live.

They just need the agonomous to make sense. And right now, spending a lot of money on sports rights, you know, as has been mentioned, there's the time zone aspect. Netflix is a global service and they look to monetize their content globally. And, you know, and they get unexpected hits like Squid Game, which was a South Korean drama. They didn't, it came out of left field. It was out of nowhere and it became this massive. worldwide hit. So you can't really do that with a live sports property.

Let's talk a little bit, Todd, if we might follow through on that thought about streaming and what it could mean for sports, because there are so many streamers out there, whether it's Amazon, Apple, potentially Netflix, Peacock, Paramount Plus, all of whom are going to have some bite of some sports somewhere. So I have the viewer who have been accustomed to getting things through a cable bundle, am now going to have to, or am I not, subscribe potentially to multiple streaming services in order to get all of the sports I want. So that begs the question. At some point, is there going to be a re-bundling of the streamers for the sports fan like me and for the home improvement fan like my wife or whatever? Talk me through it. Yeah, we are

seeing, you know, Amazon wants to become kind of this next generation cable TV provider. They're selling, you know, all-a-card channels, basically, as part of the Prime Service. So, yeah, they want to be that next generation aggregator of content. You know, Comcast, with their streaming play, is making a similar bet in a way. But, but yeah, I mean, look, you're seeing the disaggregation of the pay TV bundle. Right. That has been. then, you know, this blessing and a curse for consumers because, look, you get all or most of what you want on one bill. But if you happen to not want, you know, your local regional sports network, you're paying for that anyway, maybe, depending on what type of tier you're taking. So you're seeing those sports rights getting parceled out to Amazon, to YouTube, to Apple.

And what that means is, you know, you're going to have to cobble together different services. So, yeah, the consumer is going to be stuck with this situation where if you want a particular sport and it's not in your particular package, you're going to have to maybe get something else. Yeah. Yeah. Kelly, do you know everything you subscribe to? We are a little careful. You're careful. We're careful.

But trying to unsubscribe from disqualify. from Disney Plus with the price hike, Sean was almost as hard as trying to cancel cable. I mean, it was, I had to remember my login. I had to go from my computer to the TV to then use my phone to, you know, there's churn, but it was difficult. And we go through seasons of life where we care more and then we care less about keeping on top of all of these subscriptions. And I'm sure that's like most people. Yeah, 100%. And, you know, look, MLB, a lot, majorly baseball has five different digital deals. This came up last year when the Yankees

with the home run judges' home run. It was this week was on, this game's on, yes, this game's on Apple TV, this game, you know. And as Yankee fans were, even the, I think the mayor, the attorney general's like, what is going on here? So the fans are losing. And Tyler, you mentioned regional sports networks. This is going to be the big story for 2023

because Diamond Sports Group owned by Sinclair is essentially signal they're going to go bankrupt restructure, and all those deals are going to be negated, and that's the Badway Sports Network. That's like 19 different sports networks. That model's gone in the toilet with cord cutting. So as a fan, you're only going to have a harder time finding your team, and the winners in sports will be, at least domestically, the ones that can offer that product to you that is one-stop shopping. If you're a Yankee fan, here you go. If you're a Clippers, the Clippers do this, the NBA team in L.A.

They have Clipper Vision. It's 71 games, most of the games of the year, one, you know, streaming service in L.A. one price, there you go. And they gave you five or six different feeds of the game. So this is the future of sports. We're just going to have a real tough time. There'll be a lot of pain there before we get to that point, I think. I'm going to make it my project this weekend to find out all of the things I subscribe to and pay $499 and $999 and ESPN Plus. And if you decide to cancel any, I want you to tell me how easy that process is.

Gentlemen, we'll have you back again soon. Sean McNulty, Todd Spangler. We appreciate your time today. Thank you. Thank you. And coming up here on Power Lunch. More Power Lunch is next. Welcome back, everybody. It's the time of year for those employee reviews. And according to the Wall Street Journal,

thousands of workers at Facebook's parent meta got subpar ratings. Sources say it could signal more job cuts might be on the way. A bonus metric also reportedly getting cut. About 11,000 workers were already laid off at Meta, joining a host of other tech giants to lay people off, including Amazon, Alphabet, Microsoft, and more. And it sounds, Tyler, like at Meta, for instance, some of these other companies, they didn't have a great process for those layoffs last time around.

So maybe this is an effort to professionalize it. Well, obviously, you need to document performance, and this certainly would be part of it. The thing that astounds me here is that apparently they're done with their annual review process, and it's really what the second week of February. We won't be done here until, well, I don't know what, because nobody likes to do them. Nobody likes to receive them. I read somewhere that this is kind of a return to the way Mark Zuckerberg used to manage. He was known to be a hard taskmaster.

He told people sometimes what they didn't want to hear as a motivational tool. And in this case, potentially as a way to document. Stressful, though. Must be very unnerving. Like we said, nobody likes these to begin with. And to know now it has this added significance. Not fun. Nobody likes doing them.

Nobody, I forget what ours were called. But at any way. There's always a fancy name. There was some fancy name. All right, Amazon, the latest company now ordering workers to return to the office the majority of the time. CNBC.com technology reporter Annie Palmer reports the tech giant is telling employees to work in the office at least three days a week. Now, this doesn't start until May 1 when the weather would be real nice. This is a reversal from its previous policy with left it up to managers to decide on the work schedule. CEO Andy Jassy says this change will create opportunities for workers to brainstorm ideas and to innovate.

Shares of Amazon down about 37% over the past year, as you see there. This is what more and more companies obviously are doing. They're asking people to come back. Big fights. People just don't want to do it. A little bit of freedom. They've tasted it. They don't want to come back.

And now the fact that everyone's having to do it at the same time. I mean, you see the traffic, you see the headaches, and the people got the glimpse. I mean, if you're doing your job for three years without, you know, needing to come in all the time, you're kind of like, have I made my point? And if technology companies as capable as Amazon are mandating it, absolutely. It's got to be happening everywhere else. Hey, everybody, have a great long weekend. We'll see you Tuesday. Thanks for watching Power Lone.