Power Lunch - Signs of deflation, preventing future energy shocks and get ready for a volatile summer 6/9/22

Episode Date: June 9, 2022

Most restaurants say they’re dealing with rising prices but the CEO of Wingstop says the opposite is happening. He explains why his business is facing deflation. Plus, should the U.S. invoke the Defense Production Act to help prevent future energy shocks? The CEO of an energy company explains what Washington has to do to lower oil prices. And stocks to get you through a volatile summer. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. I'm Tyler Matheson. Glad you could join us on spring Thursday. Here's what's ahead. Signs of deflation. Yes, deflation. Most restaurant brands say they are wrestling with rising prices, but the CEO of Wingstops says, no, we're not happening. The opposite's happening, and he'll explain exactly why. Plus, should the U.S. invoke the Defense Production Act to support the oil and gas industry? We'll talk to an energy CEO about the best way to lower prices and prevent future shocks. But first, Casimam Modi, who's in today for Kelly. Sima. Thank you for having me, Tyler. Stocks are treading water ahead of tomorrow's key inflation report.

The Dow off the worst levels of the session, but down 106 points, S&P 500, lower by a half a percentage point. NASDA composite now below 12,000, trading down by 8 tenths of 1%. On this down day, shares of Tesla are trading higher. UBS upgrading the stock to buy, saying shares can rally more than 50% from current levels. We will trade that stock later in today's three-stock lunch. Shares of Ali and Signet are both higher on strong earnings and choppy trading in the treasury market with the yield on the 10-year yield remaining above 3%. Ty?

All right, thanks, Seema. Tomorrow's CPI report could help answer a key question for investors, and that is, has inflation? peak. The debate around inflation leading to tumultuous trading in May. The S&P on May 20th briefly fell from 20 percent from its recent 52-week highs. That's technically a bare market. Boy, it has felt that way, whether it's technically that or not. The Dow saw its longest weekly losing streak since 1923 before rallying back at months end, and our next guest expects more volatility into the summer. He's Mark Lushini, Chief Investment Strategist at Jannie Montgomery Scott. Mark, welcome. Good to see you. Let's look ahead to tomorrow's inflation number.

Are you expecting signs that inflation either has or is soon to peak? I am, Tyler. I think we've seen several indicators here recently that suggest we're set up to see that occur and hopefully continue to on in the coming months because that will obviously be so important to the Fed's reaction function ultimately to how it responds to it. But, I mean, by all accounts, we know that goods pricing has started to deflate. you mentioned chicken wings, for instance, but other items in the good sector, namely accessories, furnishing, clothing items, and so on. You know, the poster child for a couple of reports in

retail, such as Target, reporting that they're going to have to mark down prices, Walmart the same, all suggest that that spike that we had seen, which had a meaningful contribution to overall headline inflation, resulting from everybody buying capital goods, core goods, if you will, has rolled over rather severely. And hopefully that accompanied by used car prices falling will contribute to a slowdown in that headline number. So if we get that kind of a rolling over of inflation and we avoid a recession,

which I think you believe we are going to do, what does that imply for the kinds of stocks and investments I should make? Well, Tyler, importantly, that does have ramifications sectorally because we've seen, of course, a couple of sectors, namely energy lead by a lot up about 60% year-to-date. Utilities, at least as through the end of May, was the only other sector that was positive on a year-to-date basis. But resource companies, particularly in the materials sector, have also done reasonably well. And I would expect that to continue.

If we can continue to see positive economic momentum, like you suggested, we believe we're likely to see, and if, in fact, inflation does abate somewhat, we're not suggesting it plummets from here, but at least recede off of its boil. That should allow for corporate earnings to continue to produce positive gains, and therefore that's a setup for equities to continue to catch a bid. We like, again, energy, we like basic materials. We also like health care as a very valuation attractive sector and one that has a defensive growth characteristic to it.

Those that we would tend to stay away from, or at least underweight, would be areas like real estate, for instance, parts of the technology, sector that are really dependent, particularly hardware, on seeing a robust economic growth on a U.S. and global basis. But there's still room for the broad equity markets, I think, to resume their advance deeper into the year, even if we have to go through a challenging summer to get there. We know, Mark, that inflation is top of mind. I want to get your take on the jobs picture, because this morning, jobless claims above $229,000. That was much higher than expected, and it comes after that very strong jobs report in May.

I'm curious, yes, of course, we're going to watch that CPI report tomorrow, but how does this jobs picture change Jerome Powell's calculus going into next week's Fed meeting? Well, importantly, as you mentioned, of course, weekly job claims, with the exception being last week where it did dip on a week over week basis have been starting to trend a little bit higher. And that is a leading indicator, if you will, of the labor market, more so than the actual jobs report, which is a lagging indicator, of course. At the same time, though, of course, we got a recent Jolt survey that showed 11.4 million job openings, which is almost two times that at the number of unemployed in the United States. So I think what's going to concern the

Fed is not only the tightness of the labor market with just a 3.6% unemployment rate, but to what degree perhaps those number of unfilled jobs at 11.4 million start to work off, because I think nirvana for them would be able to, would be able to be trim inflation somewhat while at the same time without seeing the unemployment rate rise. And they could do that, if you will, threading that needle by taking down the number of unfilled jobs because employers simply are reducing the capacity that they thought that they would need if, in fact, we are seeing a downshift in economic activity while still positive is not recessionary in nature. All right, Mark, thank you very much.

We have to leave it there. Mark Lushini, we appreciate it. Jannie Montgomery Scott, Chief Investment Strategist. Thanks again. All right, inflation seems to be everywhere you look. But wing stop actually saying chicken wing prices are in deflation. You heard that right, deflation. Kate Rogers, joining us now along with the CEO of that company. Kate, take it away. Seema, thanks so much. And Michael Skipporg, thank you for joining us today. Great to see you. Great to see you. Thanks for having me, Kate. So Seema just mentioned deflation that you're experiencing. We don't hear that every day. Bone-in wing prices, about half of what they were last year. How does this put you at a competitive advantage in this market? That's right. It puts us in a really unique spot. Wings hit an all-time

high in 2021 at $3.22 a pound. Fast forward to today, we're at $1.63 a pound. The cash flows for our brand partners, our franchisees are really strong. And it really puts us in a unique place to where, other brands that are navigating inflation who might likely have to take price in order to manage their margins, we can actually lean into the deflation that we're enjoying in our business and potentially give that back to a value-sensitive consumer in the form of value. That would allow us to continue to grow our business and drive top-line growth. Tell us more about what that looks like. Are you discounting at all yet for consumers as a result?

Will that be an option in the future? What's the value proposition for a consumer to come to Wingstop versus a Chipotle, a Dillon? dominoes of Papa Johns. Yeah, we've actually been able to navigate multiple economic cycles. 2021 marked our 18th consecutive year of positive same store sales growth. And so as we think about that playbook that's allowed us to navigate some of those cycles, we lean into value and value in the form of bundles. And we have a bundle that's out there right now called a boneless meal deal,

which is at a 1599 price point, 20 boneless swings, four flavors, two dips, and a large French fry that can feed two to three people. And so as guests engage with our brand, they see that as meaningful value. And when they engage with Wingstop, it's not like other QSR brands who have an average frequency of, call it four to five times a week. That can be where you see consumers pull back. Our average frequency is once a month or three times a quarter. And so guests will almost feel like they've earned that indulgent occasion with Wingstop. And that bundle is associated value in their minds. And so it allows us to retain those visits and continue to drive top line growth. And delivery is so important to your business model in particular. Are you experiencing any

hurdles with driver shortages? We're just talking about that in the last hour of programming. And also are people pulling back at all as delivery does get more expensive and they start to evaluate where they want to spend their money? That's right. Today, delivery represents roughly 25% of our business. And today, we haven't really seen a pullback. And we haven't seen issues with the performance of driver availability. We leverage third-party delivery provider, a partnership there to provide that service, and we haven't seen any performance issues today. Let me just jump back to what I think you were saying as you talked about the fall in prices from $3 plus a pound to something less $167 or $169. I can't remember. But did I hear you clearly say that among the

things you would consider would be to cut prices, not to raise them, cut them back to maybe where they were, or is the strategy not necessarily to cut prices, but to create other kinds of value packages where your dollars in continue, but you give the customer more? That's right. I think it would be more likely in the form of presenting guests with value, what they perceive as value. That's both in a price point, as well as how guests engage with Wingstop. It's cooked to order. We make our ranch and blue cheese from scratch every day in the restaurant. We hand cut our fries from potatoes in the restaurant daily. So there's both a quality element as well as a price element that consumers are sensitive to when they think about

being more discerning with how they spend their dollar. And so we'll present a compelling offer that we believe we've been able to demonstrate in the past and deliver an occasion for guests that retains that business. I think there are a lot of restaurant owners who would be envious of your situation, the fact that you're seeing deflation when it comes to chicken. But given that your stock is down about 51% so far this year, we're entering this period where we're not really sure the exact path of this economy, whether it's a soft, hard landing. Are you thinking about scaling back the number of restaurants you open in the coming months? It's a great question. And actually, our situation is almost the opposite of that. We're 98% franchised. And as you think about our business, the unit economics for our brand partners, our franchisees, their sales are up over 30% over the last.

few years. And as food costs is down in that sweet spot for our model, their cash flows are as strong as they've ever been. And so the demand for unit growth from our franchisees is really strong. And in fact, gave us confidence to increase our unit outlook for 2022 to be over 220 restaurants that we expect to open this year. And Michael, it's Kate again. I know you said franchisees obviously feeling confident in terms of reinvesting some of the money they're making back into the business and opening up new locations, but I'm sure they have concerns, as do all operators in this environment. What's the top concern you hear from operators today? Is it labor? Is it fuel prices? It's supply chain. Tell us what they're saying. It's actually a really unique spot for us to be in. The biggest thing

they're talking to us about is how do I get access to more territory to develop more restaurants. We run a very lean operating model, a lean labor profile. You can run a wingstop with three to four team members. And so we're in a very unique position as it relates to navigating challenges around labor. And then as I mentioned before, the strength of the unit economic model is really strong. And so it's really about being opportunistic in their mind and continuing to grow with our brand. Great, Michael. We will leave it there. Thanks so much for joining us. Great to see you. Great to see you. Thank you. Tyler, Seema. I am now very hungry. Thank you, Kate Rogers. All right, coming up, Chinese tech stocks roaring back the K-Web ETF outperforming the NASDAQ 100 quarter to date.

So why sentiment is taking a turn? Plus, nearly every member of the Energy Index has hit a new 52-week high over the past three months. We'll talk to a high-profile energy CEO about output where prices are heading and how maybe even to get them a little lower. As we head to a break, check on travel stocks. Seema, wake up here. There we go. They're down. They're down.

There you seem. Led by Carnivals. Did you know Carnivals, once again, the worst performer on the S&P 500 this year? Is that right? Tough. Tough year. There you go. Another 7% today. We'll be right back. Welcome back to Power Lunch. I'm Dominic Chu. We want to get you a check on what's happening right now with shares of meta platforms at this hour, trading near its lows of the session on its first official day with the M-E-T-A meta-ticker. Remember, as we look back over the last year, that stock has fallen from a market cap of around $1.1 trillion at one point at its highs last September to just over $500 billion these days.

still hovering right around 12% from its April low and down 40% on a year-to-date basis. Those meta shares, though, again, down 3.5% near session low, SEMA. I'll send things back over to you. Down 42% over the year. Don, thank you. Chinese internet stocks have been soaring this week on hopes for an easing of regulations in the tech sector. Take a look at this.

The K-Web ETF up 9% so far this week, even with a pullback today, Chinese tech stocks are on track for their best week since January. of 2021. The rebound in these beaten down Chinese names follows better than expected economic data overnight on the trade front and this growing expectation that China will unveil some type of monetary and fiscal policy, which Bernstein analysts say, will in turn help technology and real estate companies in China outperform. Also lifting sentiment, Bloomberg reporting this morning that Chinese officials are in talks to revive and financials IPO. With this week's gains, the K-Web China internet

ETF is now outperforming the triple-Qs, which of course houses the big U.S. tech companies here. But we have seen these type of bounces before. So the critical question really is whether China loosens its zero-COVID policy and gives its economy the stimulus that it really needs to

recover, Tyler. My guess, Seema, is that China is going to become increasingly interested in stimulating its economy. They've got to get back to some high level of growth, Are they going to have an unemployment problem? Really? I mean, this zero COVID policy has just created a lot of havoc on the ground in China, right?

I mean, it's impacted the employment story for sure, earnings as well. So at some point, they have to say, we need to give our economy the economic medicine that we need in order to stimulate the economy and ensure that we remain one of these powerful nations in Asia. So, yes, that's the expectation. And they have all these graduates coming out of universities who are going to need jobs and not simple menial ones. But it's a tough, it takes some fortitude, Hutzva to put money into Chinese Internet stocks, right? It does, right? Because the volatility that we have seen in this subsector within China, within technology, it's not for the calm-minded. Thank you for saying, Hutzpah. I was going through all other ones, and I was thinking inappropriate, inappropriate, inappropriate, inappropriate.

All right, up next, the crypto power player will weigh in, a crypto power, will weigh in on how rising rates are impacting the price of Bitcoin. And as we head to the break, throughout the month of June, we celebrate Pride Month. Here is New York Times columnist and CNBC contributor, James Stewart. When I was coming at age, the conventional wisdom was that half, if not more, of all career fields were closed off to someone who was known to be gay. And I always took the assumption that, you know, well, that may be true, but I'm not going to limit myself. I'll cross that bridge when I come to it. Be ambitious. Think big. Do not assume that you are going to be cut off from the opportunity simply because you are part of a sexual minority. Well, investing heavyweights

offering their best ideas at the annual Sone conference today. Crypto, a big focus. Leslie Picker joins us now with more on what FTX founder Sam Bankman-Fried had to say. Hi, Leslie. Hey, Tyler. Yeah, it was an interesting fireside chat with Stripes Patrick Collison. He was interviewing FTX's Sam Bankman-Fried. The conversation kicked off with a discussion on how the macro changes are impacting the price of Bitcoin, especially rising interest rates. High real rates are very likely to be bad for crypto. And the reason is basically that crypto is an investable asset. And high real rates means that there is less money sort of sloshing around.

and thus less money that one could use to buy things, like for instance, the Bitcoin. Bankman Freed added that what's triggered, quote, a cascade of selling in both Bitcoin and equities. Collison also asked him about why inflation isn't seen as a positive for Bitcoin. To that, Bankman Freed had an interesting response. He said inflation has actually been going up for a long time alongside Bitcoin. And what's changed this year, he said, is that formal indicators like CPI have finally started to reflect what's actually been happening. And in reaction, we've seen changes in monetary policy. And that is why you've seen a sell-off in Bitcoin. Bankman Freed said, quote, the real change this year is not increased inflation. It's decreased expectations

of future inflation. So I haven't really heard that argument before, guys, but I thought it was an interesting and introspective way to kind of think about the correlation between Bitcoin, inflation, and monetary policy. I wonder where he sees the decreased expectations of future inflation. Yeah, well, he didn't go extrapolate into where exactly he sees that, but it's interesting given just where everybody else is in the market in looking ahead. I mean, there are other presentations today that have basically said we expect inflation to be around for a very long time. So obviously you've got two different schools of thought there, but Bankman Freed in the camp that there are decreased expectations for future inflation,

which I would assume he thinks is pretty bullish for Bitcoin. I would guess so. Leslie, thanks very much. Leslie Picker. All right, let's get to Frank Holland for a CNBC News Update. Hi, Frank. Hey there, Seema. Here's your CNBC News Update for this hour. Within the last hour, Philadelphia officials announcing the arrest of two men who will be facing murder charges for the deaths of two bystanders during last Saturday's shooting in a busy entertainment district. The city's DA says the video shows the suspects fired randomly into a crowd after they heard gunshots down the block. A Downing Street spokesperson says the UK is deeply concerned by today's death sentences for two British citizens and a Moroccan.

They were convicted of being mercenaries fighting on behalf of Ukraine in a court operated by Russian-back rebels in the self-proclaimed Donnex People's Republic. And as the January 6th committee prepares for its primetime hearing tonight with promises of major revelations, the top Republican in the House says it is unlike any other committee in American history. In fact, it is the most political and least legitimate committee in American history. It has permanently damaged the House and divided this country. And let's be honest, it is a smokescreen for Democrats to push the radical agenda. Complete coverage of that hearing with Shepard Smith tonight, starting at 8 Eastern here on CNBC. C-Men Tyler, back over to you.

All right, Frank, thank you very much. And ahead on Power Lunch, Crude's endless climb oil sitting around $120 a barrel. National gas prices nearing $5 on average. How much higher can they go? Plus, we've got this T, the three T's of the market today. We are hitting Tesla, Take 2, and Target in the three-stock lunch. Power Lunch, we'll be right back. 90 minutes left in trade and we want to get you caught up on the market, stocks, bonds, commodities,

and as gas heads to $5 a gallon, what are some ways to lower prices? Let's start with a check on markets. Dow currently down a half a percent, S&P 500 lower by three quarters of 1%. The NASDAX seeing the brunt of the losses down nearly 1% back below 12,000. New economy and old, both trading lower today. Check out the basic materials, whether it's steel, lithium, gold, There you see Newport mining right there, down 3%. Media and streaming services also falling.

Warner Brothers, Discovery, Paramount Global, and Netflix also trading down by around 3.5%. Now to the bond market, 10-year yield above 3% ahead of tomorrow's CPI report. Let's get over to Rick Santelli, who has been tracking the action. Rick, where do we go from here? You know, most likely price down yields up, Although, as you look at an intraday 30 chart, what you'll notice is everything changed right around one Eastern. That's when the results of the auction came out, and believe me, it was best of breed.

We had threes, we had tens, but 30s is where investors showed up, and they showed up aggressively, as you see the rates drop there. And if you go and look at a 10-year chart back to Memorial Day, you can see rates have just continued to creep up. And the Moday operandi going into next week's Fed meeting, most likely, you'll see. that continue. And we had a meeting today. The ECB had a meeting today. And if you look at a Boone chart, the last time Boone yields were negative was on the 7th of March. The 7th of March. So look at what has happened since then. We see it's been aggressive. In just that short period of time, we've covered over 140 basis points. They closed at an eight-year fresh high today. But the currency, the currency didn't quite make it. A two-day of the euro versus the dollar. The euro was

up because the ECB is much more hawkish. They did a reverse burden of proof here. Instead of inflation having to go higher to tighten, it now needs to go lower for them not to tighten. So the euro started to move lower after about an hour, and once it traded under yesterday's low price, it really dropped aggressively. And the dollar index, well, it responded with a three-week high

as the euro looks like it's going to close at a three-week low. Yeah, perhaps we don't get Euro dollar parity with what Christine Lagarde said today. Rick, thank you. Oil closing for the day, holding close to $122 a barrel near that three-month high but falling slightly on news of a new lockdown in China.

Natural gas and gasoline futures both higher today as well. Gas prices nearing $5 a gallon nationally right now. And while that's bad for consumers, it has been good news for energy stocks. Nearly every stock in that sector has hit a new high within the last few months, and most are trading just off. 52-week high. Let's get an insider's take on crude's climb and if there is any sign of relief.

We have Matt Gallagher. He's on the boards of Pioneer Natural Resources and Chesapeake Energy. He's also the founder, president, and CEO of Green Lake Energy, a private company that explores, drills and produces oil and gas primarily in West Texas. Matt, it's a pleasure to have you on today. Hi, Seaman. It's great to be here. Thanks for having me. So you say the crucial issue is not just for the U.S. to produce more oil, but to take significant action, what exactly are you calling for? Well, look, it's time to have a blunt and honest, an adult conversation with the American people. We are in the middle of an energy crisis here.

The good news is we have the resources and the capabilities to stem that crisis. But we need regulatory and policy certainty. You mentioned the high gas prices across the country right now. When you look at policy and policy matters, the state of Georgia is done. deficient in fossil fuels, yet it has the lowest gasoline price across the country. On the flip side, California has the highest gasoline price in the country, but sits on the treasure trove of resources. So policy really matters. We need some policy stability, and we need to do our part. We need to continue to get to work and drill wells, and that's what we're doing.

You're actually saying that the Defense Production Act should be used by President Biden. What do you think that would actually look like? Well, we can get incremental rigs from here. But when you look at the last two years since the pandemic, the service sector has had to cannibalize its equipment. And of course, we know labor is tight as well. But even if we get those rigs, we can't get the steel to put in the ground to produce these wells. 20% of the steel that we imported came from Russia and Ukraine. That was offline overnight. So we need, we could use help on these big infrastructure projects, take away the steel tariffs, build more LNG plants, build pipelines so that we can input cheap energy, affordable, abundant energy to our economy and to our

allies. When you say we need to have an adult conversation in this country and we need to deploy, for example, the Defense Production Act, is that another way of basically saying that the country needs to adopt a little, a kind of little bit of everything approach to energy and that we need to do more drilling, we need to lay more pipelines, we need to build or repair more refineries, we need to invest in more LNG export ports. Is that really what you're saying? And we have to have that adult conversation in light of commitments or the desires we have to wean ourselves from fossil fuels and decarbonize the economy? That's right, Tyler. That's the crux of it right there. If it was a multiple choice exam, we would fill in the all of the above bubble. We need innovation on renewables. We need to continue to decarbonize the industry and the energy sector. But along the way, over the next decade to two, we need continued investment in these infrastructure projects to provide reliable energy to the American people and our allies, for that matter, and to do that.

do that, we have to have a more pragmatic conversation and we have to talk about the tradeoffs. We've grown production in crude oil north of 90% since the year 2000 and we've reduced our United States greenhouse gas emissions by 18%. So we can make improvements on our industry along the way while we are supportive of the transition. So it can't be in either or. It needs to be in all of the above. And right now... So what's the obstacle to? to having that adult conversation because my sense, I may be full of you know what, but my sense is that there are a lot

of reasonable environmental leaning people who would say I get that and I can buy that. But somehow that just never breaks through. In other words, I get the idea that we're not gonna flip the light switch like this and move from a carbon heavy economy to a carbon-free economy that it's going to be transitional and that we do need a kind of all of the above.

But the conversation just never takes off because everybody's so stuck in their own political positions. I don't know. You're right. There's some there's some polarization out there. I do think it's on the edges of both sides. But it's vocal edges, right? It's loud edges. Those edges have gotten louder and have kind of stolen the air out of the conversation. but we work very well with a lot of the environmental groups, and some of them have been very helpful, spending a lot of money on satellites, for example, to identify methane emissions and leaks

that sooner than we did historically in the Permian Basin, and now we're catching up. So you're working in conjunction to improve and have a common goal. So I think talking about the common goals and not getting too far off on a single metric and getting polarized, so I think people are coming back. back to the conversation.

And a good friend of mine, Maynard Holt says, to save the world, we have to save the conversation. And I think that we need to engage. We need to lift each other up and see where we can drive solutions. And it's an all of the above approach. And, Matt, I think a lot of people would agree with you. I'm just curious, given the board seats you hold, Pioneer Natural Resources, Chesapeake Energy, what type of conversations are you having with those two companies about trying to push this type of agenda forward and pushing that need for the,

conversation in Washington, even with those who may not agree with their plans to expand? Well, I think at both companies, it's leading by example and trying to be the best we can be with the assets and the amazing resources. Those two companies have amassed. They both have the ability to make an impact on the global scale and for sure at the local scale and the domestic scale. So with those companies, it's leading by example. So then when we walk in, we engage with the state of Texas and the local communities. Also in Pennsylvania, we contributed through our natural taxes, billions of dollars to state and local taxes, which helps education dramatically.

And then a large partnership with the Permian Strategic Partnership, addressing labor needs and education and health care. So it's engaging in leading by example on your assets. Yeah. No, this has been really interesting. Good points all around. Matt, thank you for joining us today. Matt Gallagher. Appreciate it. Thank you, Seema. Thanks, Tyler. You bet. All right, after the break, CNBC's CFO Council surveys reveal while most companies are preparing for a recession, few will cut down on cybersecurity costs. We've got the details of that next. And as we head to a break, this month, we offer financial planning tips to help you protect your portfolio.

Here's our senior personal finance correspondent, Sharon Epperson. Here's a tip for your money, your future. To analyze your personal cash flow, take your monthly income after taxes. That's your monthly inflow. Then add up your monthly expenses, rent or mortgage, credit card, auto loan payments, all committed and discretionary expenses. That's your monthly outflow. Your monthly inflow minus your monthly outflow is your personal cash flow,

and that number tells you if you're living within your means to prevent you from taking withdrawals from your investments to pay expenses. For CNBC, I'm Shee. Sharon Epperson. Yes, folks, it has been a rough year even for cyber stocks, but they have been making a comeback recently. The hack ETF, that's a good one, though still down 20% this year, has rebounded, 8% in the past month. Frank Holland now has more on cybersecurity and why many people consider it to be recession-proof, Frank. Hey, here there, Tyler and SEMA. You know, cybersecurity certainly on the mind of corporate financial decision makers. Take a look. Sixty-eight percent of CFOs say their company is spending more in

cybersecurity to protect their data and protect their networks, with 46% saying their company is either more vulnerable or just as vulnerable as it was last year. Now, that commitment to spending coming as more than 85% of CFOs see a recession coming next year. More than two-thirds believe it'll happen in the first half of next year, none seeing a big economic downturn in 2024. Interesting there. Now, this survey taken between May 12th and June the 6th. Remember, on May 11th, CPI, it came in at 8.3% near a 40-year high. Also, NBC reported that Russia was preparing for a long war in Ukraine. And then on May 10th, just two days before we started our survey,

Fed President Rafael Bostic said supply chain issues were easing, but the Fed achieving that, quote-unquote, soft landing, raising rates to slow inflation without causing a recession, he said that would be difficult. And while CFO said cybersecurity spending is up, they do not see it as the biggest risk to their business. That still remains inflation, more than 40% concerned about rising prices.

with only 5% flagging cyber threats along with the war in Ukraine. Those two things often tied together. Frank, you mentioned that most CFOs are forecasting a recession for 20, 23. Were any of them bullish on the economy? Sad to say none of them were bullish on the economy. Actually, the remaining CFOs, they saw a recession coming this year. So a lot of these financial decision makers forecasting a lot of troubling times coming up ahead, but again, still willing to spend on cybersecurity.

That's a good sign. Yeah. Frank, thank you. Thank you. All right, Target is raising its dividend by 20% looking to potentially attract income investors following a big drop in the past few weeks. Like Target, there are other stocks out there that consistently raise their dividends and beat the market over the long term. CNBC Pro ran a screen in the S&P for dividend growth of more than 7% beating the index in the past five years, a yield of at least 2%, and a dividend payout ratio of less than 50%. Some of the names that came up on this dividend elite list include NRG Energy, Morgan Stanley, NetApp, Regions Financial, and Tiro Price. For more names, you can head to CNBC.com slash pro.

Interesting. You don't want you think of Morgan Stanley as a dividend payer, but I guess they've been screened 2%. There we go. Silicon, a Microsoft launch, the tech giant looking beyond hardware and betting on video game streaming. What does this mean for publishers like TV? Take-Two Interactive. We will discuss in the three-stock lunch next. Time for today's three-stock lunch. Today, it is all about the three T's. Their Tesla, Take-2 Interactive, and Target. First up, Tesla shares rising after getting upgraded to a buy at UBS. Take-2 Interactive, also upgraded to overweight at JPMorgan, and Target raising its dividend by 20%

despite the ongoing margin pressure. Let's bring in Mark Travis' president and CEO of Intrepid Capital. Mark, great to have you on. Let's start with Tesla, UBS, reiterating an $1,100 price target. Some would say, hey, that's crazy. The stock is down 28% so far this year, but it's actually in line with other technology companies. What do you think? Yeah, well, it's hard to, you know, vote against God in terms of Elon Musk and his value creation. You know, I just marvel looking at my Bloomberg.

The market cap's gone from $75 billion. at the end of 19 to three quarters of a billion here now five years later. You know, it's a wonderful product. Everybody knows that it has one loves it. I think it's not really for the average man at the price points where they are. And, you know, I would just tend to sit and watch this price. I wouldn't go short just because it has a cult-like following. One of the points I would make, too, is if you saw the Wall Street over the weekend,

they profiled two women that went from New Orleans to Chicago and back. And honestly, how hard it was to find charging stations. And secondarily, the comment was we spent more time charging than we did sleeping. So, you know, as an old farmer in this area says T equal M, time equal money, if you don't mind sitting around waiting three hours to have your vehicle charge, it's probably not bad. But I have a feeling a lot of Americans are happier even at, you know, $5 a gallon. of gas filling up within five minutes and off they go. So we'll see with Tesla, but it's

certainly been a interesting story at this point. Let's go next to Take Two Interactive. Yeah, you know, Trevor, it's kind of a lockdown story as all the gaming stocks were over 2020. And then as we've kind of come unlocked, they kind of, you know, trade it off. Just like you mentioned, Tesla being off, you know, 25, 30 percent, take two is as well. I think Strauss Zelnik's done a great job there. Great gaming franchises now they've integrated Zinga. They can do it mobily. So I joke now that the people I see out of my truck texting while they drive can play mobile games while they drive.

So you might want to double shoulder harness in your vehicle. You probably do that on your Tesla. Yeah. Yeah, well, maybe with an auto driver, they can do one of a take-toes games. We'll see how that goes. I want to know where you live. All right, Target. Under a lot of scrutiny, dividend raise, even though it's been seeing this ongoing margin pressure, mismanagement of inventory.

But you like the stock. Tell us why, Mark. Well, for the simple reason for years, occasionally, you know, I'm blessed to be married to a CPA. So I never look at my checkbook. But any time I did, I swear every third entry was to Target. You know, they sell really a value proposition to everybody in terms of clothing, groceries. They've got CVS pharmacies embedded in them. They developed an Omni Channel to compete with Amazon.

And I think the true test of a lot of businesses is really the free cash flow generation. And if you contrast, for example, targets valuation at eight times enterprise value to pre-tax cash flow versus, I want to say it's $59. times for Tesla and the fact that they've got the free cash flow to pay a dividend, I think will keep investors out of trouble. The other thing I would say to investors is you really need probably a five-year window if you're going to commit money to the equity market. I wouldn't commit equity money, a money to the equity market. I was going to pay my property tax bill in November, but maybe my student loan with hopes that

it's maybe paid off and you don't have to worry about it. So, you know, I think their dividend rates attractive. in this environment. Yeah, especially in this environment. I was going to say, Target at 155 a share forward price to earnings ratio of 16 times. Mark, appreciate you joining us today. Thank you. All righty. Live and Let By, PGA, the latest drama facing the world of golf. Power launch will be right back. We'll talk about that in a second. We've got some news out of the Federal Reserve that could hint that inflation may finally be taking a toll on the consumer along with the drop in the stock market. U.S. household wealth declined for the first time in two years in the first quarter of 2022.

The drop was driven by a $3 trillion fall in value for stocks. Still, the report showed household balance sheets overall remained healthy through the first three months of the year, some $32.5 trillion above pre-pandemic level. And speaking of wealth, the great golf saga taking a new turn today, and the Saudi-backed golf tour tease off. Dominic Chu has been following all the twists and turns of this story, Dom. So much drama, and it took an even bigger turn today, guys. So what happened was the PGA tour announced earlier today

that they will be suspending the 17 members who are now competing from the PGA tour in this inaugural live-golf tournament today just outside of London in the UK. Now, the tour is saying that these players are no longer eligible to compete in any PGA Tour events for the foreseeable future or even the President's Cup competition. In a memo to players, Commissioner Jay Monaghan of the PGA Tour said, quote, these players have made their choice for their own financial-based reasons.

Meanwhile, Live Golf fired back with its own statement, saying, quote, today's announcement by the PGA Tour is vindictive and it deepens the divide between the tour and its members. It's troubling that the tour and organization dedicated to creating opportunities for golfers to play the game is the entity blocking golfers from playing. Now remember, Live Golf still has not really secured any major TV contracts, major U.S. ones anyway, so fans that want to watch have to go through online channels like YouTube, Facebook, or DeZone. Now, currently about 100,000 people are tuned in on YouTube right now. So as we watch this development play out, remember, this is the first example. We have a small sample set. This is the only one we've seen.

But people are going to be gauging whether or not there's any kind of a dent that LiveGolf can make in the PGA tour and its influence based upon what's happening this week with the field of 48 players it currently has. They don't have a TV agreement in the United States. They don't have major sponsors in the United States. They can work that up. But let me ask you this. There are non-PGA tour events that. pros play around the world. Correct. And they get exemptions to do so. How do they, how do they get that? They do. No, so prior to this, there could be exemptions made. Now remember, Colin Morikawa

won the DP World Tour. He was the highest graded golfer in the European tour, in essence, for that. Now, an American golfer got the exemptions to play in some of these events to do it. In the past, they've been able to get these exemptions on a case-by-case basis. Which they are given by the PGA. Correct. They have to be, they have to be given permission to go and do these things. But when it comes to a rival golf league that is trying to come into play right now, that is where apparently the tour has drawn the line. It is also where the European tour has drawn lines. So there is this kind of challenging to the establishment of the game of golf right now that's happening. And a lot of these things, the battle lines are still in the process of being drawn right now.

And is this type of drama rare for this tournament? I mean, it seems a story. This is the first I've seen in my golfing career of any kind of drama of this variety at all. Tyler, and I think you feel the same way. The PGA tour has been the PGA tour for years. Nothing like this. Very, and a lot of major tournament winners up on that list of 17. Major winners, yes. Tom 2, thanks very much.

And thank you for watching Power Lunch.