Power Lunch - Sam Bankman-Fried in Court, Elon Musk on the hot seat 1/3/23

Episode Date: January 3, 2023

FTX CEO appears in court to face 8 criminal charges. Tesla shares continue to tumble. What does Elon Musk need to do to get his “main” company back on track. Plus, Wall St. analysts busy naming their top picks for 2023. We trade some of those names. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to the first power lunch of 2023. Glad you could join us. Kelly will be along in just a minute. I'm Tyler Matheson. We are watching two big names in the news today. First, Sam Bankman-Fried will be arranged shortly in this New York City courthouse. He's appearing in person to face charges on eight criminal counts. He's expected to plead not guilty. We will take you through it as it happens. And Tesla's slide is the stock story of the day, as it has been for many days in recent months. down another 13% today after it missed barely delivery estimates for the fourth quarter, down more than 70% from its 52-week high. We're going to talk to a former Tesla board member about what Elon Musk needs to do to get Tesla back on track. Forget about Twitter.

But first, Kelly, give us a check on the market. Sounds good. Hi, Tyler. Hi, hi, everybody. Happy New Year. Not so much for the markets, though we're starting off with much of what we saw one year ago. In fact, the S&P is about 1,000 points lower than it was back then. Kicked off 2022 in the red, so far kicking off 2023 that way as well.

Dow's down 142. It's about halved its earlier declines. The NASDAQ still down nearly 1%. And that's despite some decent gains. Amazon, alphabet, meta, all higher today. Meta by almost 4%. But Apple is weighing big time on tech and on the Dow and across the market. It's continuing its slide down 15% in a month, about 4% today.

And there's concerns that some of its products are seeing less in demand. BNP Paribah, for instance, downgrading the name to hold. Keep a very close eye on Apple under 125. And as Tyler mentioned, the big story we are watching at this hour, Sam Bagman Fried appearing in court. In fact, let's get to Kate Rooney right now to explain what we're expecting to happen inside that courthouse. Kate? Hey there, Kelly. So the former FTX CEO, Sam Bankman Fried, has entered that courthouse in Lower Manhattan. I'm told by a source familiar with the matter that Bankman Fried today plans to please. not guilty today at court. He's being charged with eight counts of fraud there in the lower

district, the lower Manhattan. Prosecutors say that he used FTCX customer funds to backstop his hedge fund Alameda by property and make political donations, among other things. He was released on a $250 million bond and since then, Beckman Fried has been on house arrest at his parents' home in Palo Alto. That bond is secured in part by his parents' property that you're seeing here. His legal team this morning requested that the court redact the names and any identifying information about two other people who still need to co-sign that bond. The deadline to do that is Thursday. They said in recent weeks that Bankman Freed's parents have become the target of intense media scrutiny, harassment, and threats,

and have received what they call the steady stream of threatening correspondence. They say they're serious cause for concern that the two additional people would face similar intrusions on their privacy as well as threats and harassment if their identities are disclosed. And while they don't need to post that entire bail amount guys as parents and these other people, these other anonymous people here, are on the hook if Bankrupt Fried either fails to show up to any of these court dates or attempts to flee the country. The U.S. Attorney for the Southern District of New York, meanwhile, just announcing an FTX task force for this investigation. The group will rely on the office's asset forfeiture and cyber capabilities to recover billions of dollars that are still missing. when it comes to victim assets, they called it an all-hands-on-deck moment.

Back to you guys. How important is it, Kate, to know who those two co-signers were here? And what are some of the best conspiracy theories you've heard? So there's a lot of intrigue behind it. I'm not sure of what it tells us as far as, you know, customer assets and what goes on here for the future of FTCS and the $8 billion that's still at stake here. I think it's more of just the intrigue of who these people are and what kind of assets they have. to make a court comfortable that they do have $250 million to post if for some reason, yeah, there doesn't show up, or decides to flee.

He told Andrew Ross Sorkin, Sam Begwood-Fried, did, that he had about $100,000 in liquid assets. His parents' house worth about $4 million. So that doesn't quite get you to the $250 million amount that they would need to feel comfortable as far as collateral. There are some conspiracy theories out there. We don't have any solid names yet, but I think there's a lot of intrigue. if those names will actually be redacted. So we'll get that.

And then in terms of the not guilty plea that we are expecting, it's really similar, Kelly, to what he said publicly. He's argued that he did not commit fraud. He's said that repeatedly in interviews. Meanwhile, his top lieutenants, you had Caroline Ellison, who's the CEO of Alameda, and then his co-founder of FTCS pleading guilty, cooperating with investigators.

So it really pegs him on one side against some of the other FTCX executives who have said that they knowingly committed fraud, and have copped to it. So it'll be interesting to see what we get out of court today. Absolutely. Kate, for now, thank you. We appreciate it. Our Kate, Rune.

All right, Kate, thank you. Let's bring in Danny Savalos, legal analyst for NBC News, and joining us remotely, Caitlin Long, founder and CEO of Custodia Bank. Danny, welcome. Good to have you with us. I presume that this hearing that Bankman Freed is about to go into is going to be relatively short. They typically are. What is going to happen, and then what is going to happen next to him?

It's going to be very quick. He's going to plead not guilty. In fact, the court is pretty much not even set up to take a guilty plea at this stage, at this appearance. They'll also address bond, which is the federal system uses a bond system. And as we've heard about Bankman Freed, he has friends that appears in very high places because his parents, no surprise, parents frequently would put up the value of their house. But to make up that extra, you're going to need some pretty impressive property. And then what happens after that is pre-trial services. has to look to see that you really have that property that you're putting up. They kind of do a mini audit of what exactly these donors, I guess, for lack of a better term, actually own. How much does he have to put up, remind us? It's a $250 million bond, but in the federal system, you may not even have to put in an actual penny or cryptocurrency or whatever. You just need to post usually property in the amount.

Sam Bickman-Fried literally just entered his not guilty plea, exactly as you were saying, that they wouldn't even be set up to handle anything other than that at this moment. But the significance? Yeah, it would be crazy for a defendant like Sam Bankman-free to even try to enter a guilty plea at this stage because you're giving up really one of your main bartering pieces with the government. If he does end up pleading guilty, it will be through negotiation. Just as it appears reportedly, he negotiated his return from the Muhammad's waiving extradition. It appears in exchange, and this is just based on reports I've read,

that the government agreed to allow him to run. remain out pending trial. Now, a lot of people were shocked that he was allowed to remain out, but this is not what is in the federal system called a presumption case. There are no guns, no drugs, even in these massive financial fraud cases, there is a possibility. And in fact, under federal statutes that address this, a presumption that a defendant like Sam Bankman-Fried should be able to get out pending trial. Let's just go back to Kate for some context on this not guilty plea. Kate, what can you tell us? Yeah, Kelly, so we are getting word. His lawyer is saying just now at the hearing that San Bank McMudfried is pleading not guilty to all counts here,

as we mentioned earlier. There are eight counts here, including fraud, money laundering, and wire fraud as well. But we have the official San Bank McFreed pleading not guilty to all counts. It's very interesting, Danny. I assume that they can mitigate the flight risk here in a variety of means, presuming he does make bond and get released. But one thing that is very difficult to mitigate is the risk that this individual may pose to himself. Not only to himself, but he also arguably would have been a flight risk because where'd they find him in the Bahamas?

I mean, this is something that courts would look at very closely. But if the government was already on board with him being released and because the Bail Reform Act essentially requires the court to set a bond that is not so unreasonable, but that is reasonable enough that the defendant can make that bond. Now, you look at this number, it scarcely feels reasonable to the rest of us mortals, but apparently when you're dealing with Sam Bankman-Fried and whoever his wealthy friends are, $250 million is apparently doable as a bond. But again, not putting up the actual cash. Instead, it's property, usually, that makes this. Caitlin, let me turn to you, and let's turn the corner and talk a little bit

about crypto. We know that FTX is gone. Bluey, out of here, done. Is Bitcoin in a similar state of extremists? Oh, heavens no. You can see that not just from the price action, but also from the activity on the blockchain itself. I looked this morning at stablecoin on chain volumes, and they've actually gone up since the early November explosion of FTX. So what does that tell you? It tells you this technology is alive and well. and still functioning just fine on today, which happens to be the 13th birthday of Bitcoin,

the 13th anniversary of the first Bitcoin's mind in the Genesis block. Well, happy lucky 13th to Bitcoin. I don't mean to pick a brawl with you here, Caitlin, but it seems to me that I find it difficult to believe that cryptocurrency and Bitcoin maybe in particular hasn't been bruised badly by this event and the decline in value that has taken place over the last 12 months or so. Sure. The technology itself is completely immune to all this. You're absolutely right.

The secondary market has been hurt, no question. But as I've mentioned before, good riddance to all the grifters and the outright criminals who are being purged from this space by market forces. It wasn't the regulators who got these guys. Are they? Oh, sure. Yes, there have been a series of Chapter 11 filings. And we see this every four years in Bitcoin. And 2022 certainly is the one that's attracted more PR, but we had a spectacular, more important

failure in 2014. And then another one in 2018. And then four years later, here we've had the slew of these. The one in 2014 was much more significant to Bitcoin itself because it wasn't decentralized. This two shall pass good riddance. And I look forward. to what I think is coming, which is that a clean slate of regulated players who are actually required to be solvent and are required to segregate customer assets, those players are coming. It's just like what happened with the tech stock bubble bursting two decades ago. You didn't really see, you know, Amazon existed, but Facebook didn't, Google didn't, and the players that emerged as Phoenixes from the ashes of that were much, much stronger.

That's going to happen here as well. Caitlin, quick extra question that kind of relates back to Sam Bankman-Fried and his bail. How angry are people in the industry at him right now? Oh, gosh, very, because he stole money, it appears, from customers and used it as your reporters said earlier to buy property and to pay off politicians. trying to gain legitimacy, good old 1950s Vegas mobster tactics, trying to gain legitimacy, while legitimate players like my company, Custodia Bank, have literally been begging to become federally regulated and the regulators have been paralyzed. You had outright criminal

scamming people and good riddance to all of them. This industry is livid at the players who stole money from consumers because the honest ones like us who've been waiting to get, begging to get regulated, haven't been let through yet, but we will rise from the Phoenix. There are white knights from this industry who have blank slates, who will bring this technology forward to its next chapter. Interesting argument, making the comparison back to 2000 and the crash of the internet stocks when you found out when the tide went out, who was wearing no bathing suit. Danny, how does he pay his legal fees if he's only got 100 grand in the bank, if we are to believe that? He is probably going to have to go back to those friendly people who are kind enough to put up his bond,

because every person in the federal system charged with a crime does have the right to legal counsel. That could be the public defender's office. That could be a CJA court-appointed attorney. But you make a very good point for a case of this complexity. That $100,000 that he has, if he has that, would not be enough for a legal defense of the caliber he's going to need to defend this case. because in the federal system, these document-intensive, money-intensive cases, money laundering, a very complex crime. I just defended a federal money laundering case a matter of weeks ago. Incredibly complicated.

This is not like robbery or drugs. He's going to need not just lawyers, but forensic accountants and a host of other pretrial services before he gets to trial. It's going to make Ozark look simple. Yes, exactly right. Yes. Follow the money, as they say. Danny, Caitlin, thank you both very much. Danny Savalos.

and Caitlin Long. Still ahead here on Power Lodge, the Tesla Tumble continues by another 13% drop today. Its market cap is down to $337 billion. We'll dig into Elon Musk's tangled web and see what needs to change. And when you think of cutting-edge technology, you probably don't think of deer. But AI, drones, and semi-autonomous tractors are key to the company's future. We've got those details coming up on Power Lodge. Welcome back, everybody. Tesla shares down nearly 15% today following some disappointing delivery numbers for Wall Street analysts. Q4 deliveries totaling just 405,000. That compares with the average estimate of around 427,000. Despite the miss, those numbers do represent 40% growth year over year. Sounds decent, but it's clearly not enough for investors.

Since the overall for the year, the company delivered 1.31 million vehicles or thereabouts, just. missing the estimates of 1.3 million. One issue affecting those numbers, record high lithium prices. Pippa Stevens has more on that. Pippa? That's right, Kelly. Raw material costs surged in 2022, with lithiums rapid rise getting a lot of attention. The metal more than doubled last year, gaining 150 percent, according to data from benchmark mineral intelligence. Over the last three years, it's now up more than 800 percent. Now, prices have eased slightly in recent weeks, notably in China, as consumers run down inventories. But the slight downturn is within the backdrop of what some say is still a very tight market

that's struggling to keep pace with surging demand from EVs. And it's not just lithium prices. Other raw materials like cobalt, graphite, and nickel are facing their own challenges. This price spike has impacted automakers, prompting them to raise vehicle prices for consumers. Companies are also looking to ink deals with upstream suppliers in an effort to secure materials. Today, Tesla announced an amended agreement with Piedmont lithium, which will see the miner provide Tesla with lithium sourced in Quebec, starting in the second half of this year, both stocks down sharply. Kelly? I'll pick it up. Pippa. Thank you very much. On the other side of the

Musk ecosystem, SpaceX may be getting some good news. The rocket maker raising $750 million, according to correspondence obtained by CNBC.c.com's Laura Kalladne got the scoop on the story. Laura, what have we learned? Well, we know so far is that SpaceX is currently raising $750 million at a valuation around $137 billion. And Andreessen Horowitz, which is one of the most influential firms in Silicon Valley, is expected to be either leading or at least involved in the deal. So what does this mean in terms of its growth, SpaceX's growth? What will this fuel? Well, SpaceX hasn't commented on the fundraising.

But we know that they're working on expanding their Starlink satellite internet coverage. And we know that they've been delayed and still are developing their Starship super heavy program, which is part of NASA's effort to get astronauts back to the moon. And, of course, Elon Musk has this dream of putting Man on Mars. So you can imagine where some of the Capitol will go trying to get that Starship program ahead and Starlink expansion. That's fascinating, especially at a time like this, Laura, thank you. As Musk's ecosystem grows, his actions could have greater ripple effects. Let's bring in Steve Wesley for more.

He's former Tesla board member, founder, a managing partner of the Wesley group. Steve, it's good to have you. Let me just quickly start with what Laura just reported. It is pretty astonishing that SpaceX hasn't suffered the same fate as Tesla itself as Twitter. What does it tell you about the Elon Musk effect? Well, look, a lot of people are saying they barely missed numbers for this. The fact remains, they sold 405,000 units. That's an enormous number, heading to one.

$13.31 million. That is 40% growth. No other auto company in the world is growing that quickly. Additionally, they're the most profitable auto company out there with 16% gross margins that compares to about 5% or 6% for Volkswagen General Motors or Ford. They're doing pretty darn well. But make no mistake, share price off 65% for the year. That's not good. But I think a lot of that is due to two things. One, all of the havoc with Twitter, and also the fact that Elon himself sold $23 billion shares this year alone. That put downward pressure on. But if you look forward next year, put some of the intrigue behind us. I think Tesla's looking at an awfully strong 2023. So let me ask you, Steve. I don't know whether you continue to speak with Elon Musk privately,

but if you were to talk to him privately right now about Tesla and what he needs to do, to write the stock? What would you tell him? Well, first, I don't speak with Elon, so I have no insight information here. But here's what I'd say. I've known Elon for 25 years. You're a brilliant innovator. You have literally helped to create the electric vehicle industry. Virtually every company in the world is going all electric. Stay focused. You're the king of the hill now. Don't let anybody take that away from you. Here are the three things investors need to look at. One, Tesla needs to continue to grow internationally. Already, they're doing a great job of that. They've surpassed the Volkswagen

Gulf is the number one selling vehicle in Europe, gas or electric. International growth has been stunning. Keep the profitability lead. Tesla's doing two things none of the other automakers are able to do. One is drive the cost-down cost of batteries faster than anybody else. They were the first to take battery production in-house. It's given them a real cost advantage. Second, And nobody is driving more revenues from what's called over-the-air software. That's 95% gross margins. That's great news. They also need to win the trucking wars.

They're bringing the Tesla semi-demar market now. Tesla cyber truck comes out in July sometime in early Q3. If they do well there at all, that's going to be a spectacular year for 2023. Real advice. Stay focused. Continue to bring in top management. the move that was announced this week, bringing Tom June in the best operating executives from the country,

the person who really made Tesla China hum into the U.S. He may be the heir apparent to be the new CEO at Tesla. So that kind of answers the second question, Steve, about whether he needs to bring in new management. I guess the first question I was going to ask if you know him personally is do you think he's the kind of person who's simply uncomfortable with success? And if he feels like he has to be kind of close to the edge to really get going on something.

And we've seen this, you know, the really dark days of Tesla when it was almost like he was his most alive. And now here he is in this kind of kamikaze run with Twitter. And is it just his personality? It's just his personality. He's a surging person. He is driven. He is irascible.

He is volatile. But he also gets stuff done. And he's a visionary. He's probably not a lot different than Steve Jobs or a lot of others. But the real issue here is he's done something to basically create the EV industry that nobody else had done before. People said it was impossible. 1.3 million units sold this year is a huge number. Just to put that in context, General Motors will sell barely 50,000 EV units this year, a Ford Auto Company, barely 70,000.

So you've got Tesla sitting on top, 1.3 million units sold, BYD out of China at 1 million, so Chinese in second place, and Volkswagen down at 500,000. are running away with it. They just need to stay on top. That requires focus. Even Elon has said he's stretched. That's why they're starting to bring in single. So the obvious question here, as you said a moment ago, Tesla is the fastest growing, most profitable automaker in the world. If the company is so good, why is the stock so bad? We're getting three reasons. One, Elon has sold $23 billion worth of his own shares. That puts huge downward pressure on the stock price, but that's not going to continue on to 2023. Second, there's been just too much turmoil at Twitter. I think they'll turn that down

quite a bit in 2023. Third, the market softening in general. But when the market softens, what do you look to? You look for the best brand, the most profitable company that's growing fastest. There's going to be huge consolidation in the industry. And I think people will flock to the blue chip names. Tesla is king of the hill. We'll see if they can stay that way. Steve, thank you for your insights. Really helpful today. We appreciate it greatly. Steve Wesley, happy New Year, my friend. And still to come, the 2023 Power Playbook. There was a lot that didn't work last year, to put it mildly,

but could some beaten up consumer-related names be set to bounce? We'll examine that one. Plus Wall Street back in the office, analysts naming a ton of top picks, biotech, restaurants, FinTech. The apparent focus here, we will trade some of those calls in today's three stock lunch. There you got them. Tripoli, Merck, PayPal. Welcome back to Power Lunch. I'm Bertha Coombs, and here's your CNBC News update at this hour.

Thousands lining the streets of Brazil as a funeral procession took soccer grape Paley to his final resting place. The procession follows a 24-hour wake that drew thousands more mourners, including the country's president. The three-time World Cup winner died last week at the age of 82 following a long battle with cancer. From one soccer grade to another, Christiana Rer, Ronaldo officially introduced by Al Nasser after the Portugal Star transferred to play in the Saudi Pro League. Now, get this. This will certainly solve his wounds from not winning the World Cup. New details confirm that Ronaldo will be guaranteed $75 million per year with the chance to make over $200 million through commercial agreements with the club. And the London Zoo is counting more than 14,000 animals.

in its annual stock take. Keepers count every single animal in residence and note down any new additions. After about a week, the information is shared with zoos around the world to help manage worldwide conservation breeding programs for endangered species. That, as Tyler, you know,

they are counting the birds in Central Park. 123 years, the Audubon Society has been doing that. The number of birds or the number of species? The number of birds and species in Central Park. It goes on every year holiday time. Wow. I wonder what the margin of error is on the number of birds in Central Park. Bertha, thank you.

Ahead on Power Launch, folks. Do investors dream of electric deer, deer ending 2022, outperforming its competitor, the catalyst, autonomous farming. The details on that story coming up. Plus, Shopify defying the corporate norm, banning nearly all meetings within the company, That'll be a fun one. And Ackman's Food Fight, the controversial fund manager picking a fight with one of Warren Buffett's favorite companies.

We'll be right back with the details. A little less than 90 minutes left in the trading day, this first trading day of the new year. We want to get you caught up on the markets, the stocks, the bonds, the commodities, and whatever else makes sense. Let's begin with Bob Pisani on the markets, which have been sinking throughout the day. Happy New Year, Bob. Happy New Year, old friend. And yet, you wouldn't believe this. There are more stocks advancing than there are declining in the markets today.

Why? Well, it's a start of the new year, but when you've got Tesla and Apple, you put these two together, this is 9% of the market capitalization of the S&P 500, about 6% for Apple, 3% or so for Tesla. You put that together. And you have these stocks down like this, you're not going to have the stock market up very easily. Elsewhere, though, other tech-oriented stocks, tech-oriented stocks like Alphabet and Amazon, didn't have a good year, particularly last year, are generally up today. And so other groups are kind of up or split today. So, For example, we had very good years comparatively for health care stocks and for consumer staples last year. Health care is generally being sold off today. So United Health is a big drag on the Dow Jones Industrial Average. Lily is also a drag pharma has had generally a good year comparatively. And consumer staples like Johnson & Johnson and Walmart are doing very well, even though they had a pretty good year last year. So this is a very difficult day to figure out. One thing that's not, though, oil and natural gas stocks.

Nat gas is collapsing. It's near a 52-week low. It's been pretty warm over in Europe. I think that's primarily the region. But some of these smaller Nat gas companies like Permian, range resources, Comstock, look at the 7, 8, 9 percent declines. Even APA, which is one of the big giants in the exploration production field down about 7 percent today. Finally, just want to note Tesla here. I mean, I don't know, I don't think we've ever seen a destruction of wealth like this. This was a $600 billion market cap, roughly, $620 or something like that. beginning of December, now it's $330 billion. We're talking, Tyler, about $300 billion in wealth lost in one month. I don't think anything's ever come close to that one. Tyler, we were just talking, Bob,

the company performing reasonably well, missing estimates by a bit, but nothing, but still very, very profitable. Bob Bizani, thanks. And that's enough to sell off the 13% on that. That tells you something. It really does. Small miss, 13%. Absolutely. Well, let's move. Thanks, Bob. Let's move with the bond market yields are falling in tandem with stocks. Rick Sandelli, tracking the action force from Chicago. Rick, I'm going to begin, if you would indulge me, with a question. What did you learn from the bond market last year and what's the bond market telling you right now? I think what we learned from the bond market last year is that despite the aggressive path of the Federal Reserve, the yield curve has different characteristics between long and short

maturities, and that's very important. And what I've learned so far is that at the end of the year, real lack of buyers, while it ended very quickly today. Buyers showed up again, and that makes sense because buying and Treasury, Tyler, is going against the grain. And if you look at one week of tens, you can clearly see we've jumped back to levels we haven't seen since around the 27th. The last several days of the year, it was all about sellers in light volume. And you can see, we haven't actually closed about 4% since the 9th of November,

almost two months. And boon yields, even more aggressive drop in yield. after they had a big run-up towards the end of last year, as you see on that chart. And finally, if you consider, the dollar index gave up so much ground from 114 in September. But it's still the best beginning of any year in over 20 years. And, of course, we think the Fed's going to be done at some point this year. It's going to be interesting to see how the dollar index fares around that psychological level of 100.

Back to you. All right, Rick, thank you very much. Oil, meantime, closing for the day. Big drop today down more than 3%. $77 a barrel right now. Weak economic numbers from China leading to demand concerns. The dollar also rising, which is generally negative for the oil prices. Rick just mentioned about the rise in the dollar.

That is a recipe for a 3% drop in oil, as you see. Well, actually 4.36% today, down 350 at 7676. Our next guest is preparing for more market volatility in the new year, but he's looking for opportunity in beaten down names with earnings. It says you can expect them to bounce after a tough year and a tough year it was. Let's bring in Mike Binger. He's gradient investments president. So I sort of answered the question I was going to begin with, which is what is your outlook for 2023 in the market?

Since you think it's going to be volatile, okay. Let me phrase the question differently. What part of the year is going to be better for equities? The first half or the second half and why? I think the second half, and here's why we're thinking that, and this is what keeps us positive, is there's still a lot of consumers that are working and spending, and the supply chain seems to have fixed itself. So I think inflation will continue to ease throughout the year. A lot of forecasts have 2023 earnings being down.

I think a lot of expenses are going to be cut and they're actually going to be up. That'll be a big positive as people realize that throughout the year. And then finally, you know, sentiment coming into 23 is about as negative as it was positive coming into 22. So a lot of the bad news is priced in. It's already expected. So if we get anything incrementally positive, I think that's going to be a big sentiment changer and a big catalyst for the market. Mike, we're going to interrupt here because we have a little breaking. Stay with us.

We have a little breaking news from the House of Representatives. Elon Moy has the story. Elon. Well, Tyler, despite a historic second. of voting. California Republican Kevin McCarthy still does not have the votes he needs to become Speaker of the House. He needs 218 votes in order to get that title. That means he could only lose four Republican votes. And currently there are seven Republicans who are voting for Ohio Republican Jim Jordan to become Speaker instead. Now Jordan has been a staunch ally of Kevin

McCarthy even going so far as to say that he is a fighter and that he came in with Kevin. However, right now Kevin McCarthy does not have the votes he needs to become Speaker of the House. The vote is still ongoing. We will update you when we find out what happens after this vote is over and what will happen next. So Elon, does Jordan not want to be the Speaker of the House? And if he really doesn't want it, why doesn't he direct those seven individuals who are voting for him to vote for McCarthy?

Yeah, that's actually what he's trying to do. That's actually what he's trying to do, Tyler. In fact, he gave the nominating speech for Kevin McCarthy during the second round of voting, encouraging Republicans to stand together and saying that the divisions between Republicans are not as great as the divisions between Republicans and Democrats. He said that Kevin McCarthy, along with himself, would ensure that another $1.7 trillion omnibus spending bill would not be passed again. That's been a big concern of conservatives here, what they see as wasteful government spending. But again, those few Republicans still holding fast and saying that they will not vote for Kevin McCarthy and looking for anybody else. The Democrat Hakeem Jeffries, the leader of the Democrats in the House, got more votes on the first ballot than Mr. McCarthy did.

How big an embarrassment is this for the GOP in the House? Well, certainly this is not how Kevin McCarthy would like to start what he hopes will be his term as Speaker. This is the first time in 100 years. They've had to go to a second ballot. It was expected that this would happen. But the question was whether or not some of these hard-lying conservatives would make good on their threats. It seems as if they are, at least at this point. And the question will be that even if he does become Speaker, how will he be able to work with these Republicans who stood so firmly against him to get anything passed, especially must-pass legislation, such as a bill to increase the debt ceiling and continuing to fund the government.

So no matter what happens today, this is going to set the dynamic for what governing in the House looks like going forward. All right, Elon. Thanks very much. Elon Moy, staying on top of it there in the House of Representatives. Let's go back to Mike Binger, if we might, with a couple of more questions. You say the second half of the year are likely to be better than the first half. Let me just in light of what we're watching down in Washington. Is Washington and policy figuring into your investment thesis or your investment strategy at all for 2023? or do you expect Washington will be a non-factor? No, it's not really factoring into our analysis,

especially after the November midterms, because I feel we're in gridlock right now. And in my opinion, the markets like gridlock, corporations like gridlock, because they feel they can plan their businesses out into the future and drive some initiatives, and they don't have to worry about regulation or government getting in their way. So no.

Yeah, I think I agree with you, by the way, not that matters what I think. I think it'll be a lot more investigative. and legislating. Michael Binger, we owe you one. Thanks for being patient with us there as we went to breaking news. We do appreciate it. Up next, Deere's headlights trained on autonomous farming. The company betting big on robotics and investors are bullish. That is next on Power Lunch for the new year. Welcome back. You can expect to see lots of cool gadgets coming out of the Consumer Electronics show in Vegas this week, some of which can revolutionize farming. Sima Modi is here to talk about

tractors and technology. Cima. Kelly, from robots, drones to satellites. Deere's chief technology officer, Jamie Hinman, says he's in the final stages of picking a partner to build out a geospatial map of farms that its customers can use to better identify weed killers and monitor the performance of crops. Now, think about this. If you're growing a crop like corn, you're sitting on thousands of acres, that's a lot of land.

Deere is using robotics and artificial intelligence embedded. in its tractors and spraying devices to collect data that can then be viewed by their customer at home. So this screen you'll see here shows that 75% of its farm has not been sprayed with herbicides. So farmers can then be much more targeted, right? And as DRCATO told us, it can save farmers money. There's so much friction in getting that data from the field into the cloud where they can do something useful with it. We've got a growing world population, but a shrinking rural population. And so we have to feed more people, but we have to do it with less labor on the farm. It's one of the reasons Wall Street has been bullish on this name. Longtime investor, Mario

Gobelli, he remains optimistic on the stock, even given the 20% gain we've seen in John Deere over the past one year. However, DA Davidson, analysts there point to the war in Ukraine. They say, guys, if Ukraine's corn comes back online, that would create a short-term shock, sending prices down with it. And as you guys know, one of the main reasons farmers are sitting on record profits right now is because prices remain elevated from two years ago. Absolutely. I was going to say deer wants to be valued like a tech company, but I don't know if anyone wants that anymore these days. It would be valued like deer. But let's switch gears to talk China, big market for them, obviously. And what are they saying that the

rest of us can glean for how China is doing these days? Yeah. Jamie, along with many others, say that the reopening in China will be good for the agriculture equipment space. He says they're a big buyer of corn and other ag equipment, agriculture commodities as well as equipment, but they're also a big seller as well. The big concern for John Deere, and this is a big challenge has been supply chain, right, over the past year. And he's betting that as China reopens, that will actually normalize some of the supply chain issues that they've been dealing with.

So that actually could be a near-term tailwind for the company over time. Would be nice, maybe a little deflationary after it's inflationary anyway. Seema, thank you very much. Yeah. Happy New Year, Seema. Thank you. All righty. Still to come, today's three-stock lunch, Wall Street, betting big on biotech, FinTech,

restaurants. We'll be right back. Welcome back to Power Lunch. We just got some breaking news. The judge proposing a start date for the Sam Bankman-free trial, October 2nd. That's the latest on that front. Obviously, he just entered as not guilty plea a short time ago. October 2nd is when that trial will begin.

Mark it down. Switching gear is a long-standing food fight re-emerging over the weekend. As investor, Bill Ackman resumes his fight against Coca-Cola and Pets. Pepsie. Acman tweeting, quote, Coca-Cola and Pepsi have caused more harm to global health than likely any other company. Just look at the correlation between diabetes, obesity, and soft drink consumption. It is remarkable that the plaintiff's bar has not yet won a massive judgment against them. He goes on to say neither company is as profitable as their earnings suggest because of the social issues caused by their products and says society for now is bearing those costs. Ackman says he has no position long or short in either company.

He's been raising the issue since at least 2015 when he said his biggest problem with Warren Buffett was Berkshire's large steak in Coke, Tyler. All righty. Time now for today's three stock lunch, first of the year. Rounding up three big calls for 2023 and three key sectors, starting with food, where Baird named Yum and Chipotle top picks as recession-resistant names with strong consumer traffic and growth prospects. In pharmaceuticals, Wells Fargo naming Merck, the Dow's second best performer last year, as its top pick for the year, saying its pipeline could support shares breaking out even more.

and in FinTech, truest upgrading PayPal to buy, saying after a tough 2022, investors are too negative on PayPal's long-term growth prospects. Let's trade them all with Delano Siporu, New Street Advisor, CEO, and a CNBC contributor. Delano, welcome. Glad to have you with us. Why don't we start, let's start with Chipotle, shall we? Hi, Tyler, happy New Year, yes. You know, Chipotle is one that I own, and if you look at it right now, the current price earnings ratio might seem a little bit high and less attractive at this point. But I think there's

still a case to be made on the growth side of things. If you look at what they did last year and we're following up the end of 2022, they grew incredibly on the earnings per share side. And the consensus is for more growth, roughly around 29 percent on the street for growth on the earnings per share side of Chipotle. So I think that will compress the multiple a little bit. So you'll be buying a little bit better there if you're buying during the year. I think the risk on this trade is inflation, labor costs, something that they've been doing well at so far. If you look at the past numbers. The margins have expanded or stayed flat relatively. So I like Chipotle. And that's one that I would continue holding here, especially as we look into a potentially

recessionary period in 2023. And Delano, that brings us to Merck. If people only just held a Merck portfolio, they would have had a great 2022. Yes, exactly right, Kelly. This is actually one I do not hold, so it wasn't a great to not be having it as part of the portfolio. I lean more when looking at United Healthcare and Johnson & Johnson is the peer play in the health sector. But there is a big case we made for Merck is something that, you know, investors should be holding. If you look at how they've beaten profit and revenue and exceeded our projections for the last several quarters, and that's one thing that's strong. If you look at the valuation, 14 times earnings, especially for stock that, as you mentioned, it's performed really, really strong. There's still

opportunities for growth and there's still good value here in this stock. And I think it'd be one that investors would bode well to hold for this year. Well, let's go to our last name, and that is PayPal. It's struggled through 2022. Yes, Tyler, and this is one I actually have been holding and it fell off a cliff to begin the year. And if you look at it, that pretends an opportunity, presents an opportunity. One, they've actually been on the earnings and sales front, you know, consistently have been performing strong on that front over the past four quarters.

If you look at the growth sector, I think if you look at the growth for the company, I think that's a big thing. And Venmo, the transactions are still going to be applied on the platform. Right now, it's trading obviously very, very much more favorably down from the 30 times forward earnings to about 14 times. So I think if they streamline operations become a little bit more cost-effective and discipline, there's an opportunity

for the back half the year for growth to come back into play and PayPal would be a name to own in that area. All right. Delano, thank you very much. Dona Sapporo. We appreciate it. Thank you, Tyler and Kelly. You bet. After the break, let's touch base offline. The newest hot topic in corporate America should meetings

be canceled. One company's doing it. That's next. Welcome back to Power Lunch. Time for some Stories catching our eye. Human resources at Shopify may soon receive a flood of resumes because according to reports, the company is cutting back on meetings. They want employees to purge their calendars of any recurring meeting with more than two people. Big meetings. 50 or more people can only be once a week and only on Thursday. The thinking here is that a meeting with 10 people say eliminates the productivity they could be doing in the same amount of time on creative work.

I don't feel over-meeting here. I think we are, you know, you're But we're uniquely fortunate that way. I think we've stripped out a lot of meetings. I don't think there's as many as there used to be. You know, but the real, so you think about this with companies who are afraid they're becoming, you know, to set in their ways and their calendars are filled with meetings. But sometimes, I don't know, I'm coming around to this idea that maybe that's what running a company is at a certain point. It's all just meetings about what to do about this. I mean, how can you deputize any individual to do that much?

Yeah, I used to hate the meetings that prepared for the meeting. Yeah. You know, the ones, we need a meeting to get ready for the meeting in two days. I get it, but it just kind of seems. I've had a few of those. Yeah, I've had a few of those. So off to a sort of limping start in the market today on the Dow. And as Bob Bazani pointed out with the S&P, when you have Tesla and Apple,

which are something like 9% of the S&P down the way they are today, it's very hard for the broader index to make any kind of progress. And we had a lot of news this past hour, Sam Bankman-Fried among them, pleading not guilty on all. all eight counts in federal court. The judge proposing, as Kelly just reported, the trial date of October 2nd, 2023, expects that trial to last about four weeks.

But obviously, money laundering or any kind of financial trials, those get very, very complicated. Oh, sure, and I thought you raised an excellent question about who's going to pay his legal bills. Yeah. If he's only got $100,000 in the bank, that would last about maybe a couple of days. Yeah, maybe an hour, maybe not.

Yeah. We're also following, of course, what's happening over there in the House. Kevin McCarthy, now this is somewhat unprecedented the past hundred years or so to not have this immediate vote go down and hand him the speakership. And the Democrat, Hakeem Jeffrey, is getting more votes on the first tally. I didn't, we weren't watching the second tally than did Mr. McCarthy. Thanks for watching Power Lunch for a new year.