Power Lunch - Secret Real Estate Buys, The Future of Bitcoin & Apple Watch Import Ban 1/17/24

Episode Date: January 17, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. ���Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Dominic Chu, I'm Tyler Matheson. Coming up, the Fed releasing the beige book, Steve Leasman is pouring over it for a read on the strength of the economy, getting forecast from the districts around the country. This morning, we've got a stronger than expected retail sales report, Dom. And that is sending stocks lower today, fears the Fed won't be so quick to cut interest rates if the consumer and the broader economy remains strong. So here's where the markets do stand right now. You can see right now the S&P 500 down about one full percent. the Dow Industrial is down one half of 1% the NASDAQ composite, pacing the losses down almost 1.5% as well.

Software names dragging the NASDAQ, including CrowdStrike, Z-Scaler, Fortinet, which was hit with its third downgrade from analysts over the past two days. Chip names also lower on semiconductor NXPI, Intel among the names getting hit, as you can see there, right across the screen, across the board for the biggest chip names out there, Tyler.

All righty, and demonstrating this interest rate theme, the worst performing sector in the S&P 500 today is real estate down 2.5% as a group. And there are some of the names in that group. One group gaining today would be health insurance, including United Health, which is keeping the Dow from being down even more. We begin with the markets. Stocks head lower as yields track higher. Despite that strong retail sales number, our next guest is not so sure about the health of consumers, that it's as strong as some people think.

so. What does it all mean as Wall Street tries to digest and predict what the Fed might do next? Let's bring in Jim Tierney, CIO concentrated U.S. growth with Alliance Bernstein. Jim, welcome. Good to have you with us. Why are you worried about consumers? What are you seeing that's troubling you? Seeing a lot of different things. First and foremost, you look at MasterCard's spending pulse data about holiday season spending was only up 3%. A year ago, it was up 7%. So that's a real deceleration. We've seen all the banks report their credit card spending and decelerated from the third quarter. And then you'll look at one-off companies, whether it's Nike, whether it's Berberi, whether it's Hugo Boss. They're talking about a weaker consumer. So despite the December government

reading of stronger retail sales, we're seeing some signs of weakness here. How is the market going to handle what may well be slower economic growth this year? When you look at last year's nominal GDP of about 7%, this year is going to come in around half that, probably 3.5%. So I think that there's a real mismatch in terms of earnings expectations for double-digit earnings growth versus a slower revenue growth environment. So my guess is that earnings estimates for the overall market have to come down. And so then the question for investors is, what do you do here? I think what you're looking for is companies that can bust through that, that have real good secular growth prospects. What's interesting here, Jim, if you take a look at the overall picture that we're talking about, is this idea that with the consumer spending picture, the retail sales data coming in strong.

I think Bespoke was out with a note earlier today saying it's the sixth straight time that we've seen a better than expected report on retail sales. And at the same time, you've got reports that 56 million Americans have been in credit cards. debt for at least a year, maybe longer. How exactly does that story then play out? We've been seeing consumer strength driving things for a while, shaking off some of the negative headlines. That's been one of those head scratches for me for the past year, where credit card debt has been going straight up, pent-up savings has been going down. Basically, the consumer feels like they're out over their skis, yet everybody says, don't worry about it. But sooner or later, that chicken has to come home to Roos, and I think we're at that point right now. So again, you need a very differentiated

company that has real secular growth to bust through a slower consumer spending environment, because as we all know, the consumer is driving GDP ultimately. Let's talk about some of the stocks you like and some of the sectors you like. I see three on your nice list, not the naughty list, Aptive, Amazon, and CDW. Why those? So you look at Aptive and Aptive is a stock that's really been beaten up in the last year, quite frankly. Everybody's worried about the EV slowdown, and certainly that is happening. But we've been underproducing cars globally for the last couple of years. So there's certainly a catch-up as cars don't last indefinitely. And the buyer of a car does want more of their safety and infotainment systems in a car. So I think there's real secular growth there and a

little bit of a cyclical trade. You look at Amazon. The reason Amazon did so well last year is they dramatically beat earnings expectations as they reigned in cost growth. The announcements that we saw last week in terms of with Twitch and with Prime Video are just another step in terms of controlling costs. So I think Amazon earnings are going to beat expectations as we go through 2024. And then you'll get CDW. CDW is a company that sells hardware as well as software. Hardware was very weak last year. This year it's going to be a lot stronger as we cycle the weakness in 2023, and we saw that with the fourth quarter IDC numbers that came out. So I think all three companies are well positioned from an earnings growth perspective,

and certainly CDW and active, particularly so from a valuation perspective. All right. Jim, just hold those thoughts for a second here, because we want to get out to Steve Leesman for the headlines from that big Fed-Begbook report. Steve, what can you tell us about the American economy? Little or no change in economic activity in the Beigebook since the prior. Facebook, which noted slowing economic activity. Three districts reported modest growth, one reported a moderate decline. The others were about unchanged. But there was good news on the consumer front, Dominic. Consumers met holiday spending expectations in most districts, exceeded it in three districts,

and one of those was New York, which was highlighted as having very strong retail sales, as well, several districts noted increased leisure travel. So that's the good news. Nearly all districts, however, reported decline in manufacturing activity. And high interest rates were sent to be limiting auto sales as well as real estate deals. On the other side, the prospects of falling rates, according to the sources that were talking to the Federal Reserve, was a source of optimism. Among the risks off the office market, a weak weakening demand, and the 2024 election cycle were cited as sources of economic uncertainty. The outlook for firms were positive.

on the issue of the labor market. Seven districts reported little or no change in employment. Job growth was described as modest to moderate. So you are getting that cooling the Fed has been looking for in the job market. In fact, all districts cite one or more signs of a cooling labor market. So that's going to be good news to the Fed. And wage growth was characterized as moderate to modest in four of the districts. Half of the district report a slight or modest increase in prices. Five said price increases have some. subsided. That's good news. Interesting comment here. Profit margins reported under pressure as consumers push back on price increases. And so it looked like some of the retailers out there were having a little trouble, Dominic. And maybe we've seen some of that and some of the earnings reports,

some of the guidance that we've gotten. And it's also, by the way, showing up in some of the data that we're looking at that profit margins are under pressure as consumers bulk at some of the high prices out there. Dominic? Steve, seeing the balance of consumer-oriented data that you've looked at over the course of the last several weeks and maybe even months at this point, is it in your mind a sign that the American consumer is in fact in a state where they are declining right now, or are they going to hold up like they have over the last couple of years since COVID? I think they're slowing, but I've got to say, Dominic, each one of these consumer spending reports comes out and my, you know, my right eyebrow goes up a notch and then it goes up another knots.

That's curious. I mean, they just keep kind of keeping on. The data shows it's definitely slowed, but it isn't slow. When you look at the NRF Christmas accounting, how the holiday sales went, it's 3.8%. It's exactly back to the number we had in 2019. So you don't have much of a slowing. And one of the things that's going to happen, Dominic, is that the fourth quarter numbers, I'm seeing them go up a little bit in terms of GDP. And that creates a better launching point for consumer spending for the first quarter. So you're going to have that flatter first quarter growth. In any event, we don't seem to be getting growth below potential. Consumer keeps on keeping on and hanging in and doing about potential, even a little bit better than potential growth the last quarter.

Very interesting. Steve, thank you very much. Let's go back to Jim Tierney, get his. reactions to what he just heard from Steve in terms of what you heard about the consumer. And what jumped out at me was the idea that 10 of the districts basically reported moderating prices or moderating inflation. And Steve concluded there with a statement that in some cases, companies are facing margin pressure because consumers are pushing back against higher prices. That sounds like a bit of a win against inflation, which would argue, I guess, for rate reduction sooner rather than later.

There are certainly two implications there. The one is what's going to happen with rates. The second is what happens with margins and earnings. And as Steve said, yes, there are wage increases. They're maybe not as high as they were, but the ability to get prices coming down. So I think margins are more likely to be under pressure, whereas the market's assuming the broader index and the broader economy is and companies are going to get margin gains in 2024. To me, that's the big disconnect. I'd expect more margin pressure on corporate America.

All right, Jim, thank you very much. Appreciate it. Jim Tierney. Thanks again. So we've got the beige book on top of this morning's retail sales data. And let's get to Rick Santelli to digest it all for us and how it's playing out in the bond. market in the bond report hi Rick hi Tyler indeed we saw strong retail sales but there was another aspect as you heard Steve discuss the beige book once again

manufacturing underscored being weak utilization rates today were basically the lowest in over two years and we also had a 20 year bond auction a reopening and it was very weak investors did not show up look at a two day of 20 year and all long maturities are very similar. The reason I draw attention to this chart other than the fact that rates have gone up since the auction ended is the fact that as we sit at 443 in a 20 year, yesterday's high in that security was 443. Now let's look at a short maturity. Look at two year for two days. Yesterday's high was four and a quarter. It's currently trading 436. It's 11 basis points above yesterday's high yield. That speaks volumes about what's going on today. Short

maturities after retail sales was strong have been leading rates higher. It makes sense. We're kind of pulling back on when the Fed is going to ease. It's all about the Fed and short maturities today. Tens, 20s, and 30s are on pace. The next chart shows to close at five-week high yields. And finally, we could talk about inflation like the last guest or what Steve was discussing regarding disinflationary pressures. But let's learn a lesson from the UK. So many similar comments coming out, except for today, we see that their CPI and their PPI pop higher.

It's not linear. There's a lesson to be learned. Look at a two-day of 10-year guilds. They closed at 398 today, almost got to 4%. They were up 20 basis points. They haven't closed above 4% in over six weeks. Dominic, back to you. Rick, one quick follow-up here as we watch the context around these bond auctions.

Is there an indication right now, you know, given break-even rates, inflation expectations, that we are seeing a bit of a balance, that the expectations are ticking slightly higher? And if so, what's the driving force behind the uptick that we're seeing, modest as it is in the beginning right now for some of those so-called break-even rates? Well, you know, I think that there is some sticky inflation, And whether it's break-even rates or how much it's going to cost to service our debt or the fact that a 10-year intraday yield was at 376 not long ago as we are looking to close around 411,

I think all of those converge on a notion that especially long-dated treasury yields are multifaceted. There's a lot of moving parts here. And as much as we can discuss disinflation being exported from China or disinflation when you look at various companies and what's going on with consumer sentiment. Ultimately, there is a pressure to the upside in yields, mostly in mid and long maturities and the break-evens.

They haven't reflected it in a large way yet, but I would say that most of the comments, especially some of the comments recently from the likes of Goldman Sachs, are worried about debt and servicing the debt, and it seems to be bubbling through on those long maturities and how they've been trading in 2024. All right. Rick Santelli with the last.

latest on the Treasury auctions. Thank you very much coming up on the show. We've got a key victory for the Justice Department. A federal judge is blocking JetBlue from buying Spirit Airlines, sending those shares of Spirit down dramatically. After the break, we're going to discuss this decision as well as the DOJ's antitrust strategy for the coming year ahead. Plus, Jamie Diamond has few words to share about Bitcoin, but those few words do say a lot. We'll explain in today's technical support. Power lunch is back after this. Welcome back to power lunch. Shares of JetBlue and Spirit Airlines are sharply lower again today, following yesterday's

ruling by the Department of Justice to block their proposed merger. A federal judge said the deal would have hindered competition and led to higher airfares. So here to discuss that and the overall deal-making landscape antitrust is Doha Mecki, principal deputy assistant attorney general for the antitrust division of the Department of Justice. And of course, our own airlines reporter, Philo is joining us. us for the conversation as well. Thank you both for being here. Doha, I wonder if you might maybe just entertain us for a moment here with regard to some late breaking news that we're having. It says, according to a Bloomberg report, that Apple is going to face U.S. antitrust scrutiny and a

possible lawsuit as soon as the month of March. This according to sources familiar within the particular moves of the DOJ. I wonder if you could tell us a little bit about what exactly the Department of Justice is looking towards with regard to Apple specifically and maybe Big Tech in general. Well, Dom, I appreciate you're having me and I appreciate the question, but as a Justice Department official, I can neither confirm nor deny the existence of any investigation. And so unfortunately, I won't be able to talk to you about those reports today. All right. One quick follow-up on that. Is there a sense right now that the Department of Justice is taking more of an interest right now in those big technology companies given some of the headlines that we've seen over the course

of the last year with regard to artificial intelligence and everything else? It's a great question, and I appreciate it. So certainly this administration has prioritized restoring competition to markets across the entire U.S. economy, including big tech. As you know, we just finished a trial late last year involving Google Search and Google Search advertising markets, and we filed a case in early 2023. alleging that Google maintained its monopoly illegally in certain digital advertising technologies. So certainly we're active on that beat, but we're active across the entire U.S. economy.

And I think Google Search is the most important case about the Internet since the advent of the Internet. And I think it's really a case about the future, including foundation models and other interesting products and services in the artificial intelligence space. All right, Doha, let's pivot you back to the news that is of the record. on the record and at hand here and that's the airline industry. Why exactly was, what exactly was the main thrust behind why the Justice Department really wanted to oppose this? I ask because there's a, there's a narrative out there among analysts that Spirit Airlines, if it were, to stay economically viable, could help that story that the DOJ is putting

forth. But what happens if some of these airlines no longer exist in the future? what exactly does that do to the competitive landscape, especially for airfares and consumer prices? You know, this case was really about the fact that competition between JetBlue and Spirit is meaningful. And I think that's reflected in the judge's opinion. In addition to that competition, the court amply found evidence that Spirit helps competition across the board and brings airline prices down for the entire industry. And so that means that the existence of Spirit and its effect on the market,

helps all consumers in the United States, regardless of whether you fly Spirit or not. I'm aware of reports around the continued financial viability of Spirit. And ultimately, I think that's up to Spirit. But I will say that the companies made those arguments in federal court, and ultimately our judge did not find that persuasive. Instead, he found that Spirit is a product that helps families who otherwise wouldn't be able to go on vacation. It helps the college student who wouldn't be able to come home but for Spirit's prices.

And ultimately this victory is about all of them. This is about the American consumer and the ways that they benefit from vibrant and open markets, including in the airline industry. And so the judge was not persuaded and the argument was made in the pleadings that the cure might result in the death of the patient, i.e. Spirit Airlines. Also, again, I think ultimately that's up to spirit, but I think rockiness in the airline industry is just a fact of life. Certainly there are exogenous factors and macro trends that all of the airlines are experiencing

collectively. And so, you know, in any potential merger, we're always thinking about the facts that are relevant to that merger and applying the law to those facts. And here, the fact was that Spirit was still exerting competitive pressure on JetBlue and other airlines. I want to bring in our airline expert Phil LeBow for a question or two. Phil. Doha, my question for you is, what does this say about the proposed merger between or the acquisition of Hawaiian Airlines by Alaska Airlines? Are you reviewing that right now? And when do you expect the DOJ to say, yeah, we're going to fight this or we got no issue here?

I appreciate the question, but again, I can't confirm or deny the existence of any investigation. And I would say without talking about any particular company, for every merger that comes before us, we're always thinking about what is the competition at stake in that particular merger. And we do a sober assessment of the facts, and again, apply the law to those facts. Well, let me ask the question that everybody on Wall Street seems to be asking. When it comes to airlines, we're not talking about other mergers, but when we're talking about airlines, Joe Biden's administration has zero interest in seeing any more consolidation. Is that an accurate statement?

You know, I think that those sweeping statements are more emotional than fact-based. But it is true that the president is a champion of competition and markets and issued an executive order in July 2021 that declared that it was the policy of the Biden administration to vigorously defend competition across all industries. And so, again, we're going to think about the facts and the law and every single merger that comes before us. But thinking about airlines more broadly, there's no question that airline consolidation has been a challenge. We've seen prices go up. And so I would remind everyone that JetBlue itself has complained about consolidation in this industry for a very long time. And as we noted when we announced this merger challenge way back in March, we agree with JetBlue's diagnosis. but ultimately don't agree with its cure.

The answer for competition is not consolidation, its competition. And Doha, we've talked a little bit about big technology. We've talked a little bit about airlines. I'd like to pivot you one more time, if we could, here, to what's happening in health care. There's been a lot more conversations these days about the merger and acquisition story within health care biotechnology specifically.

Can you take us through what the Department of Justice's stance is on scrutinizing or not scrutinizing health care and biotech-related deals? You know, health care is 20% of U.S. GDP. It is critical for open access to health care services that the Justice Department continue to police competition in those markets. And I think we've taken note of rampant consolidation in the provider, the payer space, and certainly in certain pharmacological and biotechnology products. And it is imperative.

It is imperative for the health of all Americans that we police, mergers, and also anti-competitive conduct in those markets. All right. Doha Mekke with the Justice Department. Thank you so much. And of course, our own Phil LeBoe. Thank you both. Thank you for having me.

You're very welcome. Further ahead, starting this month, real estate buyers in New York City who cloak their purchases with LLCs will have to reveal the true names of their owners, a law designed to crack down on money laundering. But instead, it is making some wealthy residents. quite nervous, we'll explain after day. Welcome back to Power Lunch.

The solar ETF tan falling more than 3% today. These stocks often are affected by moves and interest rates, but several of the names in the news business today are in the particular headlines. Pippa Stevens has those details. Yes, so three key movers to watch here. The first is Solar Edge. Barclays downgraded that name to underweight, cut its price target to $50, which is about 28% below where the stock is currently

trading. Basically, they said that there is a very, you know, rough road to recovery ahead. And they pit Solar Edge against the competitor N-phase. And Barclay said that Solar Edge is less well-off because N-phase has a better mix of product offerings, most especially its battery product. And so they said that going forward, Solar Edge looks, N-phase is in a better position looking ahead. Moving over to Sunpower. Yesterday, that company announced its plan to restructure. It's temporary credit waivers expire at the end of the week. And Morgan Stanley said that they're probably going to have to raise money, regardless of what happens with those credit waivers. They've been really in battle.

They're based in California where demand was pulled forward under the prior net energy metering at 2.0. Now it's in 3.0, and so they've seen a slowdown in demand there. And then finally, not quite solar, but lithium player Albemarle, also announcing that it's cutting costs, it's reducing jobs and also delaying some spending as they suffer from. Very low lithium prices were down more than 80% in the last year. What on Sunpower there, weren't they a muscular stock not that long ago and now they're quite low? We put that chart back up. It was $2 or something like that? Yeah, so they have suffered a lot because they are so focused in California.

And once again, we had that shift in policy from NEM 2.0 to NM 3.0. And so a lot of that demand was pulled forward into last year. And so looking forward, their sales environment is less certain. Also, they've traditionally specialized in a loan versus least. model. And when you have higher rates, the lease model is much more favorable than the loan model. And so customers were potentially more likely to go to one of their competitors that have potentially, you know, a better rate. A better rate. All right, Pippa, thanks very much. Pippa Stevens. Let's get to Julia Borson now for a CNBC news update. Julia.

Hi, Tyler. A New York judge is threatening to throw Donald Trump out of the courtroom in his defamation trial. The warning came after he ignored warnings to stay quiet during writer E. Gene Carroll's testimony. The jury is deciding how much the former president will be ordered to pay Carol for remarks he made about her after she came forward accusing him of sexual abuse. Chinese researchers reportedly isolated and mapped the virus that causes COVID-19 in December of 2019, at least two weeks before Beijing first went public with details of the deadly virus. According to the Wall Street Journal report, the researchers uploaded a nearly complete sequence of the virus on a U.S. run database at the same time Chinese officials called the outbreak a viral pneumonia of unknown cause.

In California, Governor Gavin Newsom says he won't sign off on a ban on tackle football for kids 12 and under. A Democratic lawmaker introduced the proposal over safety concerns about concussions. It hasn't passed the state assembly yet. But Governor Newsom said he would veto it if it ends up on his desk because he thinks it's a step too far. Back over to you. All righty. After the break, Samsung promising a new AI phone powered by Qualcomm, a revelation that could create a major challenge to the chip leader in Vidia. Tech Check is next. CryptoWatch is sponsored by Gracegale.

Welcome back to power. Lunchtime for today's Tech Check. Samsung holding a phone event today, showcasing new models, including what's being called an AI phone. Deirdre Bosa joins us now from San Francisco for today's tech check. Is it really an AI phone or can our existing phones just handle AI? Deirdre? Maybe we should call it an AI-enabled phone because a lot of the features, they don't feel particularly new. We've seen them before, especially if you've been playing around with BART or chat GPT. But the key difference here is that the process is mostly happening on the phone, through chips on the phone that are powered by Qualcomm's most advanced chips. called Snapdragon. And you can do some kind of familiar things like search, language translation,

photo editing and processing. There's also message composition and note creation. But this is sort of the next iteration of generative AI that a lot of the folks here in Silicon Valley and tech are looking to this year. AI on the hardware. Right now it takes place mostly in the cloud through cloud computing. But this is a technology called edge technology that actually takes place through very powerful chips on the smartphone. And Apple is looking into something like this as well. So would this enable me? You talked about note taking, which seems really interesting to me. Would I then be able to sit in a college lecture or at a speech and hold my phone open, record the thing, and it's going to take notes and distill the content?

Tyler, you could even have just pick up your phone and get a call from a professor and the phone would be capable of taking notes and the distilling that phone conversation that you had. So that's sort of where it's going next. But again, you can kind of do this already through different apps, through your desktop, through things like chat, GPT. But the key is this is all going to be integrated on the phone. And that's sort of one of the big questions going forward is, are we going to be going to a separate app or a separate website to do these generative AI tasks?

Or is it just going to be built into the existing user experience? And Samsung, obviously, which has this massive presence, it's either Samsung or Android, I.O. versus Apple and iOS, there's a huge installed user base. So this could kind of just be integrated seamlessly. And that's what Samsung is showing in its unpacked event today. All right, Deirdre, you mentioned Snapdragon. That is very much a Qualcomm product. How much focus is there on Qualcomm becoming the next derivative play or direct play on ArtCol. artificial intelligence for chips? Yeah, well, that's a good question because Qualcomm hasn't really had its moment to shine quite yet in the artificial intelligence arms race. But this is its chance. So like you said, those snap dragon chips, they're going to be powering sort of edge AI on these

new Samsung phone. So it could be a potential contender. I know before the break, you said could it be the next Nvidia? Invidia is invidia. Still by far and away the leader. But there could be some room for sort of the AI proposition to broaden to other chipmakers then Qualcomm could be a good candidate. So one of the things that has, I think, held back the uptake on new phone models

is that most of the improvements that have come along have been incremental, a better camera, whatever, a clearer screen. Is this potentially a game changer? It could be. I don't know if Samsung's iteration, its version of an AI phone is going to be a game changer, but you kind of look at how the different tech companies have done things. Samsung has typically done it first. Remember the foldable phone, which has caught on in some circles. But the real moment that Wall Street is kind of anxious for is Apple.

Can Apple do this? And will that sort of create a renewed upgrade cycle? And Morgan Stanley was out with a note recently that believes that, you know, we could see an AI-enabled iPhone this year. And that would greatly help Apple's fundamentals, right? At a time when the smartphone market is saturated, could that cause people to upgrade the same? Yeah, this could make me want to want it. You know, that's really the whole art of it there.

Dieter Bosa, thank you. All right. Still to come on the show, the Home Secret Home. Many of New York's elite prefer to keep their real estate purchases and their holdings in the shadows for the most part to protect their privacy. But now the city wants to bring them into the light. That story is coming up next. Welcome back to Power Lunch.

New York City is beginning to crack down on secret real estate purchases. Robert Frank joins us now to explain what is secret about them and why would you want to keep it secrets? Yeah, Dom, this is a big change. New York's governor signing a law that would shine more light on secret LLCs that are used in real estate. The new law requires LLCs in New York to report the true state of their owners, their dates of birth, their business address, and all that information. The law is aimed at curbing the use of anonymous LLCs to hide the true ownership of real estate, often used for money laundering or taxis. evasion. An estimated 37% of all the apartments in Manhattan are owned or purchased by LLCs. They will now have to disclose their true owners. Now, the real estate lobby, not surprisingly, they fought hard against this law saying it jeopardized the safety and the identity of wealthy

property owners. The governor granted a major concession to them, so rather than making these names public, they will only be available to law enforcement. Now, the change mirrors a new federal law That took effect on January 1st. That's called the Corporate Transparency Act. It requires every LLC limited partnership or other private entity in the U.S. to disclose their true ownership to Treasury. More than 30 million businesses and partnerships will have to file this to Treasury, including family offices.

Now, the fine for not complying could be up to $10,000 or two years of jail time. So a lot of work here for the attorneys and the accountants making sure people comply. 30 million returns. How were nefarious owners using real estate to launder money? That's number one. And will this approach work? So in Miami, for instance, they discovered that a lot of Venezuelan fraudsters, corruption, beneficiaries were basically buying Miami real estate in some secret name and moving money illegally offshore into the U.S. to save it, basically. And no one knew who they were.

So the money would be moved into an LLC account. That's right. And you could never figure out who in New York. We had a lot of Russians buying real estate. It turned out they were using it to avoid sanctions because you couldn't figure out who the real owner was. Will this work? Will this take care of it? The precedent is not good.

So in 2016, Treasury imposed an order that said, if you buy real estate through an LLC, you have to disclose the owner. but they were using title insurance as the vehicle. So the fraudsters just said, look, we won't use a mortgage. We won't use title insurance. So if you bought it with cash and didn't get title insurance, you could just avoid the whole requirement of the beneficial owner.

So the bad actors typically find a way around these things, whereas the law-abiding citizens just have a lot more bureaucracy and cost. But maybe this will be different. All right, Robert, thank you very much. The always interesting, Jamie Diamond, weighing in on banks, China, crypto. After the break, we'll get some technical support to help break down his comments and how you should invest around them. That's when we return in two minutes. Welcome back to Power Lunch, everybody.

Time now for some technical support. Our charges today is Craig Johnson, and we're going to do something special today. You may have heard a great wide-ranging interview with J.P. Morgan's CEO, Jamie Diamond, earlier today. So he'll set up all of our topics. First up, let's listen to Diamond's thought on China. Anyone who is looking to invest in there has to be a little worried. So, and, you know, the risk reward has changed dramatically. You know, and of course, you know, it's coming like J.P. Morgan, I always say,

when it comes to foreign policy, Blinken decides, and the president, you know, I salute. I'm an American patriot, but they want us there. They're not asking American companies to leave. And, you know, being a premier bank in China helps us educate the government. It helps us educate the world about China. We bank, I'm going to say, a thousand multin national. nationals in China. So we're obviously going to be very careful and the laws have changed and we have to change with the laws both in China and America. We're actively doing that.

All right, a pretty benign view there, Craig, on China. How would you play it? Well, let's just take a look at the chart that we've got here. This long-term chart of China suggests it's been in this long-term downtrend for an extended period of time. And when we look at this chart, we can also see that all we're doing is just consolidating down here, Tyler. We're not doing anything. We're below the 50, the 200-day moving averages. And this looks like, sort of to us, this is not the best place to be if we're trying to make money. China does not appear to be working. And the downtrend is still very much intact here for Kweb.

And the biggest holdings inside of here, like Tencent and Baba, these other names, they also look like they're breaking down, ready to take another leg lower. So nothing in this chart says by. Nothing in this chart says by. I'd rather buy here in the U.S. There's a lot better looking charts here in the U.S. All right. Next up, let's listen to what Jamie Diamond had to say about Bitcoin this morning. maybe for the last time ever.

Now, my last statement, the last time I'd ever talk about Bitcoin is I defend your right to do Bitcoin. I think, you know, it's okay. I don't want to tell you what to do. So my personal advice was to be don't get involved, but I don't want to tell anyone of you what to do is a free country. It's a free country. It's a free country, Craig. We know what he thinks of Bitcoin, but a lot of people have made a lot of money in it lately. Tyler, I'll tell you, I'll take the opposite trade of Damien,

Jamie Diamond on Bitcoin and cryptocurrencies. From my perspective, if people want to trade them, they can trade them. I think there's a lot of opportunities here. I look at the chart here of Bitcoin, and we've made a huge looking base here on cryptocurrencies. And at this point in time, we've broken back above this sort of resistance level and this level, and we're setting ourselves for the next leg up. We've got to keep in mind what they just said the other week. We got approval. We're now starting to get Bitcoin ETFs, spot ETFs. That's going to ultimately be a drive. for cryptocurrency. It's going to be a pickup and demand. And you can use these kind of products to exchange. I think a lot of countries around the world that lack banking can use cryptocurrencies.

And that's where I think Bitcoin will ultimately continue to keep working. All right. Well, Jamie Diamond on line six for Mr. Johnson here. I'll take that call all day long. All right. Lastly, Diamond seems a little worried about the U.S. economy. Let's listen. I think it's a mistake to assume that everything's hunky dory. And, And when stock markets are up, it's kind of like this little drug we all feel. Like it's just great. But remember, we've had so much fiscal monetary stimulation. So I'm a little more on the cautious side that we are facing a lot of things in 24 or 25.

All right, concerns on the horizon for the next two years. What does that say about his company, J.P. Morgan, if he thinks the economy is less than hunky-dory. Yeah. So from my perspective, I look at all the bank stocks at this point in time. I'm a little more constructive on the bank stocks, Tyler, than we've been in a while. And as I look at Lake J.P. Morgan is done well. It's performed well. You can see how we've been making these series of higher highs and higher lows on the charts. And we've kind of made this nice upward trending channel. I will tell you, though, City Group has outperformed J.P. Morgan coming off of the October lows of last year. But I do think as we move forward into 2024 with rate cuts expected from the Fed, we will see the financial stocks do well.

The yield curve. Two to ten spread is very close to inverting into a positive sloping curve for the first time we've seen in a while. That should be positive for financials. Should be a positive for the banks and JPMorgan stock, too. This is one I would continue to keep buying. All right, Greg. He'll call you now and say, what a great guy you are. I'm sure you will. He'd be happy to hear those positive comments on the stock. Craig Johnson. Thanks, man. Appreciate it. Tom. Thank you. All right. So we got more Power Lunch campaign. Let's keep it right here. We'll be back in two minutes.

Welcome back to Powell and some breaking news right now on the fight over the Apple Watch. Pippa Stevens has those details for us. Pippa. Hey, Dom. Well, Apple lost an appeal on the watch case today. That means the ban on Apple. Importing watches that read blood, oxygen levels will remain in place. Now, the appeal is ongoing, but this means Apple cannot sell the Apple Watch 9 and Ultra 2 for the time being. Those shares down about three quarters of 1%. Dom?

All right, Pippa Stevens, thank you very much for that tie. It just seems to be development here because the U.S. Appeals Court had already said that they were going to side with the International Trade Commission over this. So it seems like just a formality. And incremental change, but formality. But nevertheless, not great news for Apple. Not at all. So we've got just about three minutes left in the show and several more stories that you need to know about. Baby boomers dominate the housing market only nearly $19 trillion worth of U.S. real estate by 2040.

That's me, baby. That's me. The population of a boomer. Not 80-plus-year-olds, because that's not what you are. Well, not there, yes. Some economists have predicted that a silver tsunami of aging Americans will leave millions of homes up for grabs. Most Gen Z years will be in their prime home buying years at this crescendo. So Tyler, this might solve the housing problem or will it?

I'm not sure this necessarily. We want all of those people from Brooklyn to come out and take. What happens when those houses off are. It might be institutional buyers, though. That may be institutionalized at the time they buy. There you go. All right. Airbnb is hoping to help solve the nation's growing home.

portability crisis, the company forming a new housing council of experts to advise Airbnb on how it can throw its considerable weight behind initiatives to increase the housing supply. I'm not exactly sure what they have in mind here, but... What a paradigm changer, because for those landlords who could make more money short-term renting out their house rather than leasing it out long-term, that threw the whole tizzy into the dynamic for housing. Well, yeah, and certainly that's one of the reason behind some of the bans that have taken place in some cities, you can't do those short-term rentals. Well, Americans may be living longer, but they are spending less time in good health. The estimated average proportion of life spent in good health declined to 83.6%

in 2021. The decrease of time spent in good health is partly because medical advances are catching and treating diseases that would once have killed us, but it's also because of the rising prevalence, often among younger people of conditions like obesity, diabetes, and substance use-related disorders. So time in good health is declining? Is that what the... There's a balance between quantity and quality is the big deal. I see. So that's just longevity. You can live long, but if it's not good, then why would you want to do it?

All right. Biden administration unveiling proposed changes to big banks over draft fees. President Biden calling some fees exploitation. Since 2000, Americans have paid an estimated $280 billion in such bank fees. I'll tell you what I'm seeing a lot, and maybe you can confirm this. And that is merchants applying 2%, 3%, 4%. surcharges if you use a credit card to fight back at the banks that are charging that vigorish. And the other way to spin that is to give you the 5% discount if you pay for cash.

Exactly, that's kind of thing. So I think it's definitely a certain. There's something's coming here. I'm telling you, because the prevalence of these surcharges is really something. All right. And imagine now, if you will, the Dallas Cowboys or Philadelphia Eagles, what if they were publicly traded? And they had to disclose the financial impact of getting knocked out of the play. That's what's happening to English soccer club, Manchester United, cutting its annual revenue and profit forecast after getting knocked out of the Champions League in the group stage, not even making the knockout round transparency in sports.

As a Giants fan, my heart bleeds for the Cowboys and the Eagles. As a Niners fan, I'm still watching the playoffs. Oh, they're my pick to go all the way. Thanks for watching Power Lunch, everybody.