Power Lunch - S&P 500 shakes off tariff fears 2/19/25

Episode Date: February 19, 2025

The S&P 500 climbed to a fresh record today, as stocks remain resilient despite President Trump’s threat of more tariffs and a continuously cautious Fed. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, welcome to Power Lunch alongside Kelly. I'm Brian. Right now we are seeing stocks down just a little bit. In fact, well, mixed, the S&P is up with the Dow and the NASDAQ are lower, Kelly. It's because we have something happening right now. The Fed Minutes, Steve Leasman, is there. Steve, what can you tell us? Minutes from the December for the January meeting are replete with mentions of concern,

both to the upside and the downside for the economy from potential policies from the Trump administration. The committee says that it's well positioned to take time to assess. the evolving outlook. The Fed wants to see further inflation progress before making additional adjustments to the funds target as long as the economy remains near maximum employment. Quote, there's a high

degree of uncertainty made it appropriate for the committee to take a careful approach. Trade and immigration policies were cited as having the potential to hinder the disinflation process. Business contacts were telling the Fed they, quote, would attempt to pass

on to consumers, hire input costs arising from potential tariffs. They were also reporting an increase in uncertainty generally from changes coming to federal government policies. However, they were also expressing optimism in the economic outlook for the potential easing of government regulations and tax policies. So both upside and downside potential effects seen by the Fed from their business contacts about changes in policy. Some were concerned it may be difficult to distinguish. This is a line we've heard before the significance between persistent and temporary policy changes from new government policies, as in changes to the inflation rate. More favorable regulatory environment was seen as an upside

risk for growth. Now, here's the key here. Many still wanted additional evidence of continued disinflation to support the view that inflation was headed towards the 2% target. Inflation was still expected to head there, but progress was seen as potentially uneven. They cited easing nominal. Wage growth, anchored inflation. expectations, and also reduced business spending, or, sorry, pricing power. The committee saw notable progress towards price stability, but inflation was somewhat elevated. A few noting the Fed funds rate, quote, may not be far above its neutral level. Guys, I'll leave it there for now, but there's a lot to digest here. But I think reading these minutes, you really get the flavor

that the Fed is watching what's happening, say, just down the street from here at the White House and in Congress for how those policies are going to affect the U.S. economy. You said a lot to digest, so let's just stay on the food theme, shall we, Steve, because you got the entree, you got a couple of sides, maybe an appetizer and a dessert. If you were to frame these minutes and really the Fed's thinking now in those terms, what would be the entree? What would be the main thing that we should be talking about with the Federal Reserve right now and now I'm hungry, but the show's called Power Lunch.

You know, Brian, it's interesting. and I'm thinking about this on the fly. Now, you always ask these interesting questions here. I feel like I just walked into a restaurant that somebody recommended to me might be good, but I'm still waiting for the food to be served. And so I am reserving judgment about the restaurant about whether or not I'm going to eat a lot,

eat a little, am I going to pay a lot or pay a little. I don't think the Fed knows what kind of entree is going to be served from this administration, and it doesn't know the later, shall we say, gastronomic effects on the economy just to take it a little bit further. Am I going to be taken a thumbs later on or am I going to sleep well? I like that. I like the idea that we shut me up for it, my friend. We might have a little inflation indigestion as they would say. All right, let's add to the conversation. Let me just add to it because we might get a

serving of tax cuts and deregulation. We might get a serving of just tariffs. We might get servings of all of it. It could be like one of those Thanksgiving dinners, or it could be, you know, I don't know, maybe just a bite on the road. I feel like we should bring in our current guests and like Gordon Ramsey into the conversation now to talk. We got Tom Porcelli. He is chief of U.S. economist named after a mushroom also. We can go on with this forever. And David Spika, he has chief market strategies at Turtle Creek wealth advisors. Tom, of course, with PGM. We got Steve as well. So you got the food theme going here, Tom. Did you guys plan that by the other?

Because we didn't. I never plan anything. And Kelly's like, he's insane, but she gets it at home too. I mean, the back and forth on it was really priced. Well, that's why I know I can do it with Steve and you, by the way. So how would you frame that? Because I think the Fed, on a more serious note, is a little bit confusing right now. That's why I brought that up.

We actually, with tariffs, with taxes, we don't know what's going to happen. Yeah. And I think, well, just like you're confused, I think the market is a little confused. And so the Fed should be a little confused, too, right? I mean, this sort of on again, off again, idea as it relates to terrorists, I think is really sort of pushing the Fed to the sideline. So I think it's prudent for them to step to the sideline, sort of wait and see where we go from an inflation perspective. I think the minutes, as Steve pointed out, I think they're right to sort of highlight, hey, maybe there's this sort of, you know, we really want to see inflation sort of drift lower. But I would just caution, though, while I have a lot of sympathy for that view, I think we cannot forget that tariffs are attacks.

And if all of a sudden you do see these tariffs come on, I get it. knee-jerk reaction will be, hey, let's worry about inflation. But I think you actually have to really worry about growth, too. And so I don't think the reaction function from this Fed is necessarily going to be, hey, let's raise rates if you do get sort of, you know, say, aggressive tariffs. I think actually what the reaction function would be is, hey, rates are still meaningfully restrictive, as Powell has said. Let's let that sort of do some of the work. And then let's just sit back and wait and see if you actually do get the growth hit. So the growth part of it, I think, is being as being underpriced. Do you think people are also waiting to see, I mean, I don't know how big of an impact it could have, the federal government layoffs.

Like if you start getting a job support with the headline isn't so great, maybe it's for that reason. I don't know if you get that combination of things, consumer spending hit. Yeah, look, I think at the end of the day, sort of we know that that's waiting for us now. So I think you can sort of, you know, you'll make that adjustment. I think actually the thing we have to wonder about is, you know, how many of those folks will actually want getting another job in the interim period. So I don't know that it's something that the Fed would necessarily have to react to from a, you know, because it's a negative shock. Because I think that it's sort of unclear to me that these folks will actually want to being sort of unemployed for some lengthy period of time. Circle back to that. But David, in the meantime, what do you think the markets should do with this?

I don't think the market is going to do much with this, Kelly. This is really just a confirmation of what we've already known. There were a couple of phrases in those minutes that really stood out to me. There is a high degree of uncertainty that necessitates a careful approach, which is exactly where we've been with this. And the second thing is a lot of the Fed committee members don't think we're far from the neutral right. So if we're, say, 25 or 50 basis points from the neutral right, which we believe we are, there's no need to hurry. The Fed's going to take their time. They're going to watch incoming data. They're going to see the impact of tariffs and other things before they do anything.

And there's no rush to cut rates materially at this point. Does that make you less positive on the market? Or does that change the kind of stocks you invest in? No, not at all, Kelly. we've been of the belief that rates were going to stay higher for longer and the Fed was not going to do much this year. So we've really been focusing on companies with visible earnings growth. And if you look at what happened in 23 and 24, the markets rallied on very little earnings growth because inflation was falling. However, we're not going to see that kind of decline in inflation this year, nor are we going to see the Fed stimulus.

So we've got to focus on earnings. Earnings growth is the key. The expectation now is about 10% for the year. I don't know if we get that, but at the end of the day, earnings. growth and earning visibility is critical, and that's where we need to be. So Steve Leesman, if we are waiting for some clarity, we're waiting for clarity on tariffs, waiting for clarity on taxes, we could have a government shutdown in March. If all this kind of continues this way, the Federal Reserve that I've got to imagine the next few

meetings is also, even if they don't want to wait, I feel like what you're saying is they're going to have to. I think that's right, Brian, and I want to take it a step further and get Tom's take on this and maybe even Kelly as well. I think waiting is now official policy. It was kind of like an idea that was floated before, but reading these minutes, and David pointed out the caution, the uncertainty, and Brian, you'd like to drive cars. There's forward, there's drive, and there's reverse. There's also neutral. Neutral is a gear here, and that's the gear the Federal Reserve is, and it's time to start thinking about what it would take to get the Fed out of neutral. And that is really where we're at now.

It's figuring out the reaction function of getting the Fed to go either in reverse or drive or some other gear here. But neutral is now official policy. Tom, you agree? Yeah, I do. I think Steve is spot on. And here's the problem, I think, again, that I think is being underappreciated. We're all waiting for this, you know, where we're going to go into driver in reverse to use Steve's... from a food to a driving metaphor.

There's a lot going on here, man. You guys really have my head. It's like the door dash of shows. I don't know where we're headed. I think here's the problem. I think you're just creating or keeping in place this big cloud of uncertainty. And if you think back on Trump 1.0 and what happened from a CAPEX perspective on the back of the first round of tariffs, you really started to see CAPX really start to soften up.

And by the way, they had in place this benefit, right? this immediate depreciation benefit from the first tax cuts, and yet they still slowed capital expenditures down. If you think about the small business sector, right, everyone's talking about all of the sort of animal spirits in that space, just keep in mind what happened after the Trump 1.0 tariffs. You started to see that really sort of fade, and so did job growth in that space. So I think the longer you keep this uncertainty in place, I think the more effect you will have on the growth side of the inflation, even more so than maybe the inflation side, which again, I think is. But David, here's the weird thing. I think this kind of goes to Kelly's point at the top,

which is that the market, we've been told, hates uncertainty. I mean, how many times you hear that? But the S&P 500 is higher this year. So even in a time of great uncertainty, the market's not soaring. I want to make that very clear, but we're not falling either. Yeah, don't forget, Brian, there's still a little liquidity out there. There's a lot of cash on the sideline. People are looking for good entry points. You're going to see money buying the dips. And the other thing that I want to stress again is we've got to get past this belief that only monetary policy drive stock prices. We've got to get back to the fundamental drivers of the economy and of stock prices, and that's earnings growth. And once we can adjust to that, a normalized rate environment and focused on earnings growth, I think the market will do fine.

Now, that doesn't mean we don't have some volatility between here and then. But at the end of the day, that's what we need. We need a healthy normal environment with normalized rates and with earnings, not monetary, policy. policy driving stock prices. By the way, a quick little mention here, the officials did discuss slowing or ending QT in the light of the debt ceiling issue. So we're not seeing a huge reaction rates or anything like that, but just another little storyline to keep an eye on.

Gentlemen, thanks. Appreciate it today. Steve Leesman, Tom Borcelli and David Speak up. Intel shares are lower today after its best session in nearly five years yesterday. That came amid reports it could be broken up in two. But we'll speak with an analyst who says that's a very bad idea for the company and shareholders. Power lunch, you'll be right back.

Welcome back and take a look at Intel, which is giving up 6% today and is actually one of the worst performers on the S&P. After it's 16% gain yesterday on reports they could sell parts of the business, kind of break itself up, and that would go to Broadcom and Taiwan semi. The shares are up 28% for the year, but our next guest insists a U.S.-based foundry business simply wouldn't work even with billions of dollars of grants from the government. The number one foundry out there is TSM, and they literally gain share every year. In our opinion, and we've written about this, what the U.S. government should do is just give it all the TSM, have them build fabs in the U.S. Otherwise, you're just spinning your wheels. You're just wasting money. Ha ha, prophetic remarks.

Christopher Danyl is back with us on what he thinks of this rumored takeover deal. He's a semi-analyst city. I mean, that sort of sounds like what they're doing, Chris, is. being like, here, Taiwan semi, you deal with this. And Broadcom, you can have the better piece. Yeah, well, first of all, I'm super embarrassed to be wearing the same shirt this time that I won in the last way to update my wardrobe. But yeah, I mean, we've been saying this for a while. If you want to chop intel in half, the analogy I would use is like building a house, right?

When you're building a semiconductor, it takes a few months. There's a lot of different steps. You want the design people to talk to the manufacturing people building a house. You want your architect, ideally, to talk to your contractor. And it's the same thing with making a semiconductor. So if they want to spend off non-core businesses like Altero or mobile or whatever, that's fine, no big deal. But as far as splitting the core businesses, not going to work. And again, we continue to believe that TSM is the best foundry out there.

They're building factories in Phoenix and Arizona in the U.S. Just give them the money and call it a day. Many of our viewers and listeners, Chris, got rich for years just buying Intel stock. It was one of the legendary American companies, Andy Grove and his whole team for decades. Just Intel inside. We all knew the jingle. A lot of people still think that way. Oh, the stock's down by, you know, two-thirds, but that makes it a good value.

Is Intel a good value? So I like where you're going. I still think Intel is one of the great manufacturing companies out there. That's manufacturing processors, not chips for other folks. This foundry unit for Intel is literally losing billions every quarter. If they got rid of the foundry, the merchant foundry business and focused on manufacturing, I think you're back to the Intel of old. You've got a path to $3 or $4 in earnings, $50 or $60 stock.

It's not complicated. It's just this foundry effort is sinking them. So I totally agree with you. I think there is value there, but you need someone to be able to extract. the value. We actually think that Pat Gelsinger was pretty close to extracting that value. And you know, by the end of this year, it looks like Intel can get at least close to the competition. Now that he's gone, now that they've had some defections and there's no, you know, CEO there yet, that's in danger. That's interesting because a lot of people thought, well, you know, he's had

his chance. And now you say, listen, you know, without him there, what's the path forward? I mean, can the market resolve this, Chris? Does the U.S. government need to be involved? ought to be involved? That's a great question. So, you know, I'm a taxpayer. We're all taxpayers. I want my taxes to get used efficiently. I agree that, you know,

having a leading edge foundry, leading edge manufacturing in the U.S. is a good idea. I also think that I want my money used efficiently. Intel's proven for 20 years. They cannot do leading edge foundry. They've also proven for 50 years. They can do leading edge processors. Let them do the leading edge processors.

TSM, you do the leading edge foundry. I really don't think it's any more complicated than that. Well, and in the meantime, for the other stakeholders who hear this and might think, well, maybe there's other suitors or other ideas. I guess they'll have their chance. Chris, for now, we'll leave it there. Appreciate you joining us today. Anytime.

Chris Danalee. All right, coming up, why you are probably not alone if your home heating bill, Skyrocket. Plus, this mystery stock is soaring today on news. It could save you a trip to the doctor's office. I just wanted to pause for really dramatic effect. We're back right up. We're in the chairs. We got here.

That means. It's amazing. So let's talk about some of the news and stories that you may be talking about, or at least you should be. All right, first up, another storm may hit parts the East Coast over the next couple of days, adding to what has been just a rough winter across much of America. It's been super cold everywhere, and it may get worse. The National Weather Service issuing extreme cold warnings.

More than 32 million people in 11 states could be, Kelly, 45 degrees lower than normal. It's crazy. Just keep going out. Not 4.5. I'm going crazy. I'm losing my mind. She's losing her mind, and we don't want that. And it's going to be, it's going to snow like a half a foot in Norfolk, Virginia.

Wow. They saw that. So crazy. Along with this cold weather, weather's going down, Kelly. Bills are going up. A lot of you, we know, getting stuck with higher utility bills. It's price of natural gas.

It's the cost of delivery. It's both because it's not just, when people say, what is the reason for this? Well, it's a lot colder this year. You've had to really jack. We looked at our own bill after we were talking about this this morning. Mine doubled. Did it double?

Well, it was like a makeup for the equal payment plan, but the Sullivan family bill this month doubled from last year. Yeah. Because it's seven degrees colder or six degrees colder than it was last year, and we were just using more heat. So now the Sullivan family's going to be in sweaters. Right. So maybe nothing to fair. Maybe it's just, but it's another drip, drip, drip, drip, drip, drip, drip.

We're now, okay, and it's extra cold. Now the heating comes up. It's another squeeze on people. Boston everywhere where they just, they, it's expensive. Sorry. Extremely. Meanwhile, people down in warm Texas, well, normally warm, and around the country are talking about this one. There are accusations that the Texas lottery was rigged for a major draw.

This is back in 2023. The former head of the lottery commission is now being accused, though he denies wrongdoing. An investigation found they, are you ready for this? I'm ready. A European-based syndicate bought every single number combination possible to win the $95 million prize for just about $26 million, bought $26 million tickets each with a distinct number. How do you do that? That's where the accusations come in, a lawsuit alleging a series of rule changes over the years, it possible. Wouldn't that take years to just get a ticket with every number combination?

It feels like something a lot of hedge fund got so I tried to do. But it was European, someone or other. If you can do that, you're doing the powerball. They were probably maybe testing it for a $2 billion prize. I don't know if the similar rule changes would apply and make something like that possible, but in this case, they reaped quite a windfall. Speaking of windfall, shares of Hems and hers are jumping to 20 percent today to an all-time high. They've had a series of recent moves. Brian, I mean, look at this move. 190 percent. year to date. Now they're rolling out home lab testing, they say. This is blood pricks, essentially, right? They're saying these tests will help identify risks earlier, and the company will use the data to accelerate the development of AI-powered health care.

Okay, so basically, draw your own blood at home, send it to us. We're going to use all your DNA, collect it anonymously to make us ourselves richer. So it sounds a lot like a... Well, listen, whatever it sounds like, the question is how much uptake might there be? People are really eager to avoid those trips to the doctor's office. You and I know it's impossible to schedule. It's expensive. You've got to Quest Diagnostics for $35 and get a bunch of work done. Those places are not easy to deal with.

You walk in. It's some random building. No one can tell you what to do. You're standing there trying and you're like, am I? Like, it's a horrible experience. Okay. So you're going to go for the home health prick. I don't know if I would.

I can't get out of this chair. All right, quickly, the federal government, the national, I guess the federal highway safe transportation, whacked New York City's congestion pricing. If you're not familiar with this, New York City Institute, a new thing, nine bucks, under 60th Street. You get an extra tax coming from New York

to New York, which you never had. You may not care. You may live in Iowa or Chicago, L.A., and be like, we don't care what happens in New York. I get it, except if this worked, it probably would have come to your town, which is why you care about an hour ago. The federal government said, no, no, no.

You got to kill the plan, which is also going to kill New York City. transit budget because this money was a huge part of that. Just anecdotally, if you're wondering what impact, it's had only went into effect, what, the turn of the year, so it's been maybe six weeks. From our friends that makeup, this is affecting traffic in New Jersey as well, like all the backup going in at rush hour. Friend of ours used to take her an hour and 40 minutes to get to work, now takes her 50. That's how big an impact. What's a window?

For her, that's what congestion pricing has done. It has had actually a huge impact in some areas. You can get into the city from Hacazek. You get to Midtown, 30 minutes. That was another one. Yeah. Well, the federal government said, no, thanks. So now there's probably going to be another.

I don't know. Do New York City now sue over the federal government not allowing this? New York City needed the money. New Jersey hated it. So the whole thing is now, what are they? It's all, it's all snafu. Food bar? Yes, it is.

Like this chair. Still ahead. The Doge Bros. They keep whacking away of what they close. blame is government waste. But here's kind of a novel thought. What if there's actually a way to cut hundreds of billions without laying anybody off? We'll talk about it. Coming up. Welcome back to Power Lunch. I'm Angelica Peebles with your CNBC News Update. Israel says negotiations on the second phase of its ceasefire with Hamas will begin this week. Israeli

officials say the two sides will discuss releasing the remaining Hamas hostages and Palestinian detainees in Israeli jails. The talks were set to begin earlier this month, but had been delayed over concerns of the agreement falling apart. The Vatican says the Pope has made slight improvement as he receives treatment for double pneumonia. The 88-year-old has been hospitalized since last Friday for breathing difficulties. Italy's Prime Minister visited with him today and said he was alert and responsive and made jokes with her. All of his public engagements are canceled through Sunday. And dozens of Democratic senators are urging Secretary of State Marco Rubio to work with Congress

to renew a nuclear weapons pact with Russia. The current agreement expires in February of next year. The lawmakers wrote the letter to the Trump administration this week as the U.S. held high-level talks with Russia and Saudi Arabia. Brian, back over to you. All right. Thank you very much. All right.

So, folks, you may hate what the so-called doge bros are doing and how they're kind of poking around government spending. And by the way, scaring the heck out of many with government workers or their families. And you can argue this is not the right way to go about cutting some government waste or fraud or abuse. but there is no doubt that waste and fraud is a huge problem in the government. We know that because the government itself admits it. As I posted to social media recently, a 2024 report for the government accountability office

indicates that the feds lose about $230 to $520 billion per year, just a fraud in the years 2018 to 2022. Yep, some of that includes COVID-related spending and fraud around things like PPP loans. But a lot of that also was before COVID, which means the government itself admits it is losing maybe a trillion of your tax dollars every couple of years and it doesn't know on what. So whatever side of the political aisle you may be on, it shouldn't be political to want the government to not send your money. And it's your money to fraudsters and crooks. Let's bring in Maya McGuinness, president of the committee for responsible budget. I posted this story.

I'm not taking anybody's side. I don't know what's actually going on in D.C. You hear the stuff. I was there, whatever. That said, Maya, it's like, we have to be intellectually honest enough to admit that the federal government is simply not a good steward

of our tax dollars. Well, sort of like you said, the low-hanging fruit of where you can fine savings is getting rid of all of the fraud that you can. And this is a huge amount, hundreds of billions of dollars a year, not entirely surprising when you're talking about a federal budget that is $7 trillion. And there is very bad coordination. There is very bad oversight. There is very bad auditing and communication between the variety of programs. So we see that there's huge inefficiencies and huge fraud, particularly, as you pointed out, during COVID. There are a number

programs for fraud was very, very high at that period. But yes, this is the no-brainer, right? We in D.C. can fight about anything, but this is the no-brainer that we want to squeeze all the savings out of this area first in the budget. Not going to fix the fiscal situation, but it's certainly the right place to start. Yeah, and I don't see why, now maybe it's just because the way they're going about it. We talked to the Secretary of Energy. They said, some of these Doge people, they've been cleared. We know who they are. People are going to believe what they're going to believe, but we should all agree, Maya, that sending, I don't know, 50 billion to Russian gangsters or whatever because they've infiltrated

some system or created some fake unemployment, whatever it might be, all the examples that exist in real life, that 50 billion is better served going to veterans, going to teachers, going to food safety. Why has this become so political? Going to reduce the debt? Because I have to point out that right now, one of the biggest demands on all of any savings who could find would be bringing our huge deficit. and debt down. First, we know D.C. is amazingly polarized. The country's polarized. We can fight about anything. I think it's obvious that the doge-like effort, the effort of finding all the savings that you can and improving the efficiency of the federal government is an incredibly

useful task. However, I think there's disagreements about how things are going right now and that you really want to target where your savings are. You want to take the time to evaluate and assess before you go in and kind of do across-the-board cuts. And so you want to, find the specific areas of waste, and you want to get rid of them. There are a couple problems. Most of these issues are in millions. And in order to get our fiscal house in order, we need to save trillion. So you're going to have to squeeze out every little bit of it. And again, we have these outdated programs where our communications between federal and state governments, different agencies, different programs is terrible. And one of, I think, the best ways that we

can improve this right now is a technological overhaul, which, in fact, the Doge folks are particularly suited to be figuring out. But if you just go back to the pandemic, we had a situation where our unemployment benefits, we couldn't even communicate between federal and state government. So we overpaid people. Many people were making more during the pandemic than they did normally because we couldn't figure it out because our computers were so outdated. Those, again, I agree, those are no-brainers of things that we should be improving. And waste is never the best use of our dollars, for sure. And like you said, Maya, hopefully this kind of committee, their knowledge, that would be a great thing to tackle. I mean, it's frustrating to see.

so much go to waste and fraud because the other areas like Medicaid are hugely controversial. Controversial, that's where we've seen a really big increase in spending over the last couple of years. But the president, I want to play this clip last night, just ruled out essentially making any cuts there. Take a listen. Social security won't be touched. Other than if it's fraud or something we're going to find it's going to be strengthened,

but won't be touched. Medicare, Medicaid, none of that stuff is going to be touched. Nothing. You don't have to. Social Security, Medicaid. Medicaid, he said, none of that stuff is going to be touched. Right. So then this is where I get concerned. So I'm all in on the idea that we need doge-like efforts to really increase efficiencies. But where I become concerned is if it starts to take

away the reality that we are actually going to have to make major programmatic changes. First, our fiscal situation is really bad. Every warning light that could be blinking is our debt, our deficits, our interest payments, our trust funds in Social Security and Medicare that are becoming insolvent. Second, no matter how much we, waste, fraud, and abuse we find, you cannot fix the problem without looking at these biggest programs. And if you take Social Security, Medicare, and Medicaid off of the table, you have taken more than half of the budget off the table. If you add interest payments, it becomes even more difficult. And if you don't touch Social Security and Medicare, both of those programs have

trust funds that are headed towards insolvency. We will see across the board provider and benefit cuts, which leaves seniors incredibly vulnerable. So that's the wrong message completely. I think we need a much different approach. It's just leveling with the country that we can't borrow $2 trillion a year. We need to look at all parts of the budget, and we should do it as efficiently as possible, but we're going to have to make some programmatic changes. Social Security and Medicare and Medicaid have to be on the table. I mean, let's be honest, both parties are guilty. They're not right. Both parties are so guilty. The Republicans are like, what are you talking about? We don't know anything about it. You know, they say stuff. The reality is six of the ten richest

counties in America are around Washington, D.C. Kelly and I are both from rural Virginia, went to high school there. An hour and a half west of D.C. used to be apple trees. Now it's McMansions because D.C. Five lane, six. You've been to Front Royal? Yeah. Oh, yeah.

Right? A lot of people, you don't even, Maya's like, front Royal. That's six. Yeah. So it's all, everything's moving out that way because all the money is moved. I don't think it's a wrong thing, whether this is the right way to go about it. I know, probably not, but I don't know. But Maya, we should be asking these hard questions.

And there is a lot of fraud that takes place to federal government. Absolutely. And there's also from the federal government. They admit that. It's not my opinion. That's the federal government admitting it. And there's industries that are built on taking advantage of $7 trillion and how that's going to work. If we really want to look at efficiencies, we need to figure out how to improve the way our health care system works. We need to improve how we do national security defense procurement, all important priorities, but we can do this better. And so there are so many ways to wring out the savings. But I just want to go back to my basic truth, which are we're not going to fix. the overall budget unless you look at all these programs too. Look at waste first, but we can't delay on these other programs because every year we wait, it becomes more difficult to fix those trust funds, which are going to be insolvent in roughly a decade. We should be looking at everything. We should have Doge approaches on all parts of the budget, but we should do it in a targeted, careful way and take the time to evaluate it. So we're getting these solutions right. I don't think this is a go fast break. No, and we got to go, Maya.

I think it's under promise over deliver. It's amazing because the government just hires consultants to consultants. They have consultants who consult to the consultants hundreds of billions a year and nobody says anything. It's a very busy, and Maya McGinnis, we got to leave it there. We'll bring you back on. I have a feeling, Kelly, this discussion, this debate is not going away. I just want them to fix the bad stuff so we don't have to cut the goods. And Front Royal got to mention. 66 to 81, I meant. The devastating wildfires in California and other natural disasters, likely to further drive up insurance costs across the country, not the only industry either that's

likely to take a financial hit. More after a break. Welcome back and take a quick look at this intraday markets chart. After the minutes, not right after, we're about 45 minutes passed. The Dow briefly turned positive. We have been down about 240 points at the low of the day just after 1 p.m. Then we went into the green. We're down seven right now. Could be because there were some additional context around the Fed's plans for further rate cuts or not. But honestly, there wasn't too much to read into it. We'll just keep an eye on this. The ending QT, though, the winding down, I think That might have been, you brought that up. They said if the debt ceiling becomes more of an issue, that could be a measure they take.

And I always look to the bond market for a tell here. And we saw a little bit of a move in yields, but not a major one. But the move in the Dow is more significant. Well, here's a ship that is certainly too soon to calculate the total cost of those devastating California wildfires. One thing is pretty clear, though, the cost of insurance will go up. And that may impact the cost of housing in many parts of America, not just L.A. Diana Oleg explains the continuing series of the rising risk to the economy. from climate change.

The losses from the California wildfires may seem unimaginable now, but they were already part of a calculation that climate risk experts have been modeling recently as they attempt to measure the effects of climate change on home values. So you're saying that at least 20% of U.S. homes are going to be devalued in some way because of climate change? And that's correct. Dave Burt was one of the few to predict the risks in the subprime. mortgage market over a decade ago, and he made a lot of money betting against those risky loans.

He sees a similar pattern emerging now with climate change. As growing climate risk forces the insurance industry to reprice higher, home values will drop, because when the cost of owning a home rises, its value falls. In the past, insurers have not increased prices because of these increasing weather events. That's all falling apart now. The correction, he says, will be severe. We think that those 20% of markets could be down 30% over the next five years. In value. In value, which is very similar to the 2007-2012 great recession experience.

And he's not alone. This at Treasury Secretary Bessence confirmation hearing. I think that the most immediate danger of a major economic collapse is going to come through the insurance industry, where you can't get mortgages, you can't sell properties at value. Burt's prediction covers certain areas over the next five years, but others say the risk is much broader. By 2050, 85, 84% of all U.S. homes may see some drop in value, totaling $1.47 trillion in losses,

according to a new analysis by First Street, a climate risk firm. Growing climate-related disaster risk has accelerated much more rapidly. Ben Keyes is a professor of real estate and finance at the Wharton School. That's going to accelerate the process of a revaluation where there's a disconnect between buyers and sellers, and ultimately assets are going to have to find a new equilibrium in order to clear the market. And foreclosures add to that. After Hurricane Sandy in 2012, foreclosures rose by 46%. And after the 2008 floods in Ames, Iowa, they jumped 144%. The mortgage market is not unaware of these rising risks.

Fannie Mae declined an interview request for this story, but we spoke with their chief climate officer two years ago on the same subject, as the mortgage giant was beginning to study climate risk in underwriting. The amount of climate change is not necessarily always priced into the market, and consumers aren't really aware of what that's going to do to insurance premiums forward. The decisions that Fannie and Freddie make are guiding the mortgage market away from pricing climate risks directly. And in the meantime, Dave Burt is betting again. That can be either avoiding the most at-risk securities. It can also be hedging with mortgage credit derivatives.

Rising insurance costs will be the main factor in home price declines, but not the only one some communities might increase taxes to pay for resilience measures. Maintenance and energy costs may also go up. Despite all of this, last Friday, the Trump administration ordered FEMA staff to stop immediately implementation of the federal flood risk management standard. Now, this is the standard that ensures that public buildings, including schools, as well as bridges, roads, utilities, and other infrastructure that are damaged in a flood will be rebuilt in a way that would make them less vulnerable to future flooding. That's all gone away. Back to you guys. Important conversation and an important piece. Diana, thank. Thank you.

And meanwhile, check out chairs of Solar Edge, which are surging more than 30% just today. It's on pace for its best day ever, back to the IPO a decade ago. What does our trader think of this pattern? We'll ask next in three-stock lunch. Welcome back. It's time for three-stock lunch, and we're going to look at three-earnings movers and give you some insight on how to trade the names around those moves. Here with our trades is Jay Woods. He's chief global strategist at Freedom Capital Markets. Jay, good to see you again. And let's start with Walmart ahead of the company's fourth quarter results, which are, I believe, Thursday. Yep, expected out tomorrow morning. It's always a biggie. The stock is still up, you know, 9, 20% over the past couple months, fractionally higher today.

What's your take on the shares? Yeah, up 83% over the last 52 weeks, 15% year-to-date. The stock is a juggernaut. It's the bellwether for all retail stocks. It's a stock like an Apple, as Jim Kramer says. You want to just hold it for the long term, not traded. But we're here to talk about trading. The stock is slightly overbought. That doesn't mean the trend is going to change. It's been overbought several times during this run. But let's look forward on any weakness where we want to enter the stock

because over the long term, it's still a great name to buy. So any dip you want to look to the 95-96 level, that 50-day moving average has been that nice line in the sand. It's risen that for well over 12 months now. So if it does come in a little weak, even though they've gone up four times in a row eight or the last 10, I think it would be a good opportunity to buy. I trimmed it on this run to have cash on the sidelines.

We could see a mean reversion into some of these beaten down retailers like dollar cheery, dollar general if there's weakness here. But long term, buy it, put it away. Don't look at it. But if it does dip, it could be a buying opportunity yet again. If it does. Jay, we do anything with the solar edge, $300 stock two years ago, $20 stock right now. The shorts superly heavily shorted getting their faces ripped off today.

As the stock was up 60% at one point, now it's only up. 18%? But is anything core that's changed that actually makes you want to own this stock? Hey, they've done some great cost-cutting measures, free cash flow positive this quarter. Some things are, you know, looking good. But where did it open today? It opened around 23 or peaked around 23, and now it's starting to fade. I think short-term, if you own this stock, I would sell this stock. I would fade the rally. You may have a little more leg to this one, maybe back to 24. When you look at analyst coverage, two buys 26 holds and six cells average price target 1380 over the next couple days we should

see that target increase that could lead to more of a little bit of a rally but over the long term what is the tailwind how are the clouds going to recede over this stock it's not going to be from this administration they still have a long way to go to get back to those levels so it's been a great year up 57 percent year to date but if you own it i would fade it and if it rallies a little bit more i would probably sell it until proven otherwise uh I would wait another quarter before getting into this name saying all is clear. Fating solar edge. Let's move to Bumble then, where those shares are dropping more than 25% today

after they provided weaker than expected guidance for the upcoming quarter. Feels like I can't imagine a lot of technicians looking at this and saying, yeah, it's time to pick it up. Well, yeah, I would definitely swipe left and avoid this stock over the long term, but I'm looking where there could be potential opportunity. Right now the stock is down roughly 26, 27%, I haven't looked in a second. But what did it do? It did this back in August. It had a week quarter. The fearful thing is subscriber growth has gone down. User growth is going down. But we have technical levels that give us an actual advantage from a risk reward setup. Watch 550 and below. The lowest intraday 480 back in August.

It held, it rallied into the next quarter. There's big news not a lot of people are talking about. Their CEO is coming back. Whitney Wolf Hurd is returning. CEO and founder. She comes back in March. She's not coming back to just let things lie like they are. So I think you have a positive catalyst there, a risk-reward setup that is potentially good. Yes, it's stung investors for a long time, but this could be the time that you may want to swipe right and see this stock rally back to 750. So risk-reward, if this gets down to $5.50 or lower, I think it's worth taking a shot. He said swipe left, swipe right, and stung. I think you got all the, like you tweeted, you got all the puns in there, Jay. Don't worry. I try. You got them all. I don't think anybody's dating. Maybe nobody's dating anymore.

I don't think they're using Bumble or Tinder or whatever anyway. It's all there, but it's there. It could provide to be a good snapback rally over the next quarter once the CEO change comes. Well, there's no doubt Bumble's been a hive activity today. We're back right after this. Hive. All you got a higher Dow right now. So, yeah, markets coming back a little bit.

Maybe on those QT, maybe who knows? I actually don't have any idea. By the way, across current, we're just getting word out of the Washington Post that the president is looking for 8% budget cuts at the Pentagon. So those defense stocks, many of them are still fractionally higher. But again, this is the tug of war we see in markets every other. Perfect. Morgan Brennan coming up. Indeed.

We'll see you tomorrow here on Power Lunch.