Power Lunch - S&P 500 tries for 10th straight winning day as traders hope trade deals come soon 5/5/25

Episode Date: May 5, 2025

The S&P 500 was little changed Monday afternoon, clawing back most of its losses from earlier in the session, as investors monitored the latest developments on global trade. We’ll cover all of the angles for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch, everybody. Happy Monday. I am Brian Sullivan here at the Milken Institute Global Conference in Beverly Hills, California, were some of the biggest names in business, politics, health care, sports, and everything, all gathering. Really at a crucial time, Kelly, everybody's money. You know, I heard it was $25,000 a ticket, Brian, to attend Milken. I don't know if we can confirm that, but it just goes to show that just how high demand that event is. I'm Kelly Evans. Yes? It's the entry level ticket. Entry level. All right. I am holding down the fort here in CNBC headquarters. Let's start with a quick check on the markets. The Dow has turned positive, folks, but the S&P is still in the red, and we're watching because it's been coming off a nine-session win streak, but it's down 13, so it looks like it would break it.

A lot could still happen today. The NASDAQ is down about a quarter percent. Some individual movers were watching in the media and entertainment space. Those companies are off their worst levels, but still Netflix's down one and a half percent after the president plans to put up. 100% tariff on movies shot outside the U.S. And Skechers, which makes nearly all of its products elsewhere, is soaring 24% today as it's being taken private by 3G Capital for about $9 billion. And Brian Oil, big story today, down to 57.

I think we touched maybe 56 or lower. It's down 20% year-to-date. Yeah, and I'll get to one in a second. I want to comment very quickly on those movie tariffs. I mean, obviously here at Beverly Hills, Kelly, this is the capital. of the American movie industry. I was out last night in Hollywood when the headlines came out.

I'm going to tell you something. There were people that were in the entertainment business around me. They don't know what's going on. They don't know what the tariffs mean, where they're going to go, who they're going to impact. The headline literally came like the biggest plot twist in history. Yeah. No, and the president now perhaps he says

there's going to be a meeting of film executives at the White House to discuss. There's so many questions that people have about how this would be implemented. Yeah, I know. By the way, a lot of the Trump people and a lot of the film executives are in this hotel right now. Maybe they should go off to a private room, figure it out. All right, let's get more now on oil.

You said oil prices were down. Oh, here's the news. OPEC adding more barrels of oil to the market than originally planned. Over the weekend, the group putting another 400,000 barrels into supply. They were supposed to meet today. They actually made this decision at the end of last week. Now, that additional supply concern is raising some concerns about a possible, market share battle. In other words, just try to sell more oil at lower prices. OPEC, my sources,

people I'm talking to are saying, not the case right now, but it's something to watch. What's the upside? Well, lower oil prices should help gasoline prices. Kelly keep coming down around America. AAA reporting 25 states, half, now have an average gas price below three bucks a gallon. And here in sunny California, it's come down to 478 a gallon from 535. five a gallon one year ago, although in Beverly Hills still above six bucks. Nobody's complaining. It's not the only oil-related story out there with the weekend Bloomberg reporting. Shell may be exploring a possible deal to buy or merge with BP. The report is that Shell may be in the early stages of looking at a buyout or something else related to BP. Of course, nothing may

ultimately happen. Remember, Kelly, on March 25th, I interviewed the CEO of Shell and he insisted that right now they are more interested in buying back their own stock, but he did not close the door on a possible deal. Listen. That doesn't mean we will not look at inorganic opportunities, but the bar is very high for inorganic, because the alternative is to plow some of that capital back into our own shares, which trade at an attractive free cash flow yield,

and whose risk that we really understand and we can control. And that's always the balance we're looking at. Now that was directly after I asked him, why don't you just buy BP? That was on March 25th. So the chatter obviously has been out there. Kelly, any deal, if it's done, and it may not happen, would give Shell land back in the Permian basis of Texas. BP has assets there, but Shell does not. So by doing a deal, they would get back in to Permian.

Yeah, still much is being made of the fact that we might be below that break-even price where a lot of those producers in the Permian and elsewhere can be profitable. So we'll see where that goes. Brian, we'll leave it there for the moment. Got some breaking news from OpenAI. Kate Rooney in San Francisco with more for us. Kate, what's happening? Hi, Kelly. So we're getting an update on this company's corporate structure. Open AI, of course, started as a nonprofit. It's been in this drawn-out process of converting to a for-profit after a major funding round and then spinning off that original nonprofit. So we have an update here. This is going to be changing the company's nonprofit. They say will retain control and oversight of the company.

It's going to retain a large ownership stake in the public benefit corporation. They also say this decision was made after hearing from civic leaders and engaging what they call destructive. Disructive, excuse me, constructive dialogue with the offices of the Attorney General and of Delaware and the Attorney General of California, which needed to sign off on this process. A statement here from the chair of the board, Brett Taylor, thanking both offices, says they look forward to continuing important conversations to make sure they can effectively pursue the mission of ensuring artificial general. intelligence benefits all of humanity. We also have a letter here from Sam Altman, the CEO of Open AI, saying Open AI is not a normal company and never will be. The mission he talks about here is really about AI safety. We're getting some details to CEO Sam Altman and Brett Taylor are hosting a call with media right now. So we're going to get a little bit more context of how

this came about. But this company, one of the most highly valued private companies in the world at this point, backed by SoftBank. And Elon Musk, one of the co-founders, has been suing to block this conversion. So there's been a lot of attention on this company, on this unique corporate structure. And we do have a big change here. We're going to get a little more detail on how this came about and why, but just wanted to bring you that news, guys. Right. This transition is at the heart of the dispute. Go ahead, Bri. No, no. Well, first off, Elon Musk was here last night. So I wish he was here right now. Maybe he is. We could ask him because he's obviously been feuding with Sam Malman, but I guess my confusion, Kelly, maybe you answer Kate can. Does this make them more

for-profit or more not-for-profit? In my view, my initial reading, we just got this blog post, so we'll get a little bit more context. It probably puts them more in the nonprofit bucket. They're going to have oversight, continued oversight from the nonprofit. So it's not going to be what investors were hoping for, which was just a cut-and-dry traditional for-profit company, like you'd see publicly traded on one of the stock exchanges, it's still going to have this nuanced structure, which a lot of the investors push back on. They want to just see the traditional kind of boring for-profit structure.

That's not going to be happening. They are still going to be controlled by this overarching nonprofit. But the concern here is safety. I mean, this technology has been compared to nuclear energy where it can do insane amounts of destruction. And there's a lot of people worried about that at the same time. It's got immense value. It's got all of this upside.

and what it can do for humanity, like solving diseases and curing cancer, there are these two poles and these two sides of the argument that Open AI has really needed to juggle here. And so this comes from the deep concerns that some people in Silicon Valley and elsewhere have about AI safety. All right, Kate, thank you very much. Like I said, if Elon Musk just happens to walk by, I'm going to try to get some, well, not right now. Well, not right now. Give me, I'm going to do the show and then I'm going to go try to find Elon. Okay. Okay.

Let us know. Exactly. do this. All right, some of the biggest money managers in the world are right here in the Beverly Hills Hilton for the Milken Institute Global Conference. A big week for your money as well, because it's not just this conference. You got the Federal Reserve meeting tomorrow and then making the interest rate decision on Wednesday. We're in the middle of really a pretty good run for stocks coming off an absolutely lousy start to April. So let's get some opening insight from our leadoff panel now collectively. They help manage nearly $800 billion.

That's real money even for here. George Maris is Global Equity, CIO Principal Global Investors, and Kevin Justice, is head of investment management at Nationwide. And I'm told, a new face to CNBC. Thank you, Brian. Good to have you both on. George, let me ask you this. Terrible start to the month.

Unbelievable rally back. If we finish higher for the S&B 500 today, it'll be, I think, a 10-day wind streak, the longest at about 20 years. Your guys both kind of work on the insurance. side, your job is preservation of capital for the most part. What are your clients saying right now? What are they worried about right now? So I think interestingly, our clients are highlighting the fact that this is an interesting opportunity to make money. Given a lot of the dislocations we've seen over the last month, there's a lot of securities out there that are

still down 25, 30 percent on no fundamental change whatsoever, just on market factor rotation. And so there is actually an interest in our clients on how to use this period of dislocation to make more money. Even though the market's rallied hard, it hasn't rallied everywhere. So it's created a substantial opportunity. And Kevin, you've said you've got some data that your clients are actually net buyers, not net sellers. That's right, Brian. We're seeing retail investors buy on the dip. And historically, we haven't seen that.

Institutions tend to buy the dip better than retail investors. But retail investors are setting a motion aside and really buying on the dip and seizing an opportunity. the 8, 10, 12% down period we had a few weeks ago. Retail investors were coming in and coming in pretty strong. That's really good for their long-term retirement savings. Why is it good? I mean, markets can continue to go down from here. They can.

And they have. If we offered you the shirt you have on at a 10 or 15% discount, I think it was a pretty good deal. For some reason, we don't like to buy stocks when they're on sale. But if you're saving for 20, 30, 40, 50 years for your retirement and your longevity and maybe to leave something to your errors, whether you get the 12 versus 15 right right now, right right now really doesn't matter in the long term. And investors are doing a great job buying

stocks at a discount for the last three or four weeks. You sound a little bit like Warren Buffett, who on Saturday was talking about this downturn and said, well, it's not really anything. It's just investing. Now, that's easy to say if you've got $330 billion in cash and you've been and you're worth a couple billion bucks. That said, George, most of your clients probably are not Warren Buffett. It's scary when stocks go down. It is scary. But I think when people have been condition to and why do we see hedge funds become very short is a different time horizon. Hedge funds have a very short time horizon. We're seeing market structure, algorithmic traders, systematic traders, sometimes days,

sometimes weeks at most a month, where you have a lot of retail folks who are sitting there who believe in the long-term trends that they're seeing and are willing to buy now because they see the next five, 10, 20 years in a much more attractive way. And a lot of those, by the way, those hedge funds and algorithmic traders, they're here in this room right now, is that one of the reasons that markets are are whipsawing as fast as they are. And I try to explain that to people as well and say, listen, this isn't 20 years ago. Okay, we're not calling EF Hutton and selling five shares of IBM. You could sell a billion dollars in a stock in the less than the blink of an eye. So should we be prepared? And say no, if it's not true, for markets to move up and down

faster than ever. I think without question, markets are going to be way more volatile, they are now relative to where they were 10, 20 years ago, then they will be going forward. Market structure has just changed. 20 years ago, it was a bunch of long-only mutual fund managers, long-short hedge funds that traded on fundamentals. Today, it's folks that are trading on stochastics, on mathematical factors. The fact that we have trillions of dollars that trade in options on zero-date deliveries is insane, and it creates this incredible short-term volatility that is, obviously, that is

I think somewhat separated from long-term fundamentals. Yeah, I think, Kevin, I know it's not your world necessarily, but I'm sure you have a view. Warren Buffett also called all these derivatives like weapons of mass destruction, financial weapons of mass destruction, because they can, they can be very good. It can make stocks go up more, but they can also make stocks go down more. How do you manage your world and not get distracted by all this stuff? So those tools can definitely accelerate the velocity of market movements, right? That's the risk inherent in them.

Warren Buffett also said at the recent meeting, though, that you don't need a high IQ to be a great investor. You need a calm and stable temperament. And so we constantly remind ourselves to pay attention to fundamentals, to valuations, and hold true to a long-term plan. For retail investors especially, stay true to your long-term plan,

develop a plan with a financial advisor and stay true to long-term. But it matters how close you are to retirement. Let's be clear. If you're my parents, they're gonna have a very different view on what to do than a 42-year-old. Absolutely.

We're encouraging that younger workforce to really invest in their retirement vehicles, savings plans, IRAs, et cetera, and build that nest egg. Take the equity exposure there. We're talking about pre-retirees. We're definitely looking for volatility dampening tools. Things like annuities, guaranteed income

and retirement plans, can be great solution to help bolster that, reduce the volatility and bolster the value of your account in periods like this. Well, I'll be doing a panel tomorrow with a guy named Peyton Manning, who I guess works for you guys nationwide. So we'll see what happens. Wonderful.

He's going to pound him. Like a defense in line. He does. I'm actually, it'll be fun. It's going to be 500 pounds of interest, I hope. Kevin Justice, at most that's me. George Maris, really appreciate you guys. Thanks for kicking things off.

Thank you, Brian. Thank you. Brian, what are you going to talk to Peyton about? Retirement. Retirement. I know he's trying to figure out, he's trying to figure out how to make it work for him and his fans. family, but we will extend it past him, obviously a very successful guy, into what we should

all be doing. That'll be here. That's going to be one of the fun ones. We do serious panels, and then we have some ones that are just more star power and fun. I'm looking forward to that tomorrow afternoon. Might need a highlight or two from that, I think, to play on the show later on. Brian, thanks. After the break, just when we thought tariff tensions may have been easing, the tit for tat continues. The president now targeting the global film industry. We'll get a unique perspective on the terror front from Milken when power lunch returns. Your next guest here at the Milken Global Conference is one of the world's big thinkers. His books and articles may make you agree.

They may make you question something or they might even make you angry, but they always make you think. And his latest thesis is no exception. He writes that in some ways, the Trump administration now is a little bit like when COVID hit, at least when it comes to a disruption. Neil Ferguson, Sir Neil now, is senior fellow at the Hoover Institution of Stanford University, a founder of the University of Austin, and recently knighted Sir Neil. Right. In my mind, every night I am, but then I wake up.

How is not the medical side, obviously, I want to make that clear, but how is Trump 25 like the early days of COVID as it pertains to the economy? So let me just make clear. I want President Trump's second administration to succeed. I would have been distinctly unhappy if Kamala Harris had become president. So that's point one. Point two, the tariffs that the president unveiled on April 2nd were one of the biggest shocks, one of the biggest man-made shocks to the economic system since this time five years ago,

when the new virus that came from Wuhan caused the global economy to shut that. It's not as big and it's not necessarily as lasting. But if you look at the impact it has had on trade, particularly also on passenger traffic, I mean, look at the passenger flights from Canada. We haven't seen a decline in Europe like that since five years ago. So I think it's worth recognizing, even although markets are in a somewhat more optimistic mood than they were the week after Liberation Day, that we're still in the midst of a dramatic shock. Brian, the average US tariff rate is definitely.

10 times what it was last year. That is a huge increase in tariffs and implicitly also attacks on consumers. It's a big shot. If I were to pull most of these really smart women and behind us here, they would probably say, well, the tariffs are disruption, but it's the length of time that they're on

that might matter more than the raw amount of the tariff itself. Would you agree with that? I think it's also the uncertainty about where they land. And we are in the midst of a frantic negotiation to try to come up with trade deals within that 90-day limit

that the president set when he paused everything on April 9th. And the truth is nobody knows where this lands. The Japanese are negotiating. They wanted to get away from even the 10% based tariff. They've just been told no, I gather. So there's uncertainty. There's also massive uncertainty, Brian, about China.

Because the U.S.-China trade relationship has effectively been ended. This is not just a tariff, it's an embargo. And so that embargo could last for who knows how long. Markets were telling themselves last week, somehow this all gets done. Scott Besant waves a magic wand, and much of this goes away. I am struggling to find evidence that that outcome is the base case. My expectation is that the tariffs last.

Us or China. Well, the Chinese are probably feeling more relative pain because they're so reliant on exports, But they have a system which is essentially opinion proof. It's a one-party state with a surveillance system that makes it any kind of political opposition virtually impossible. So he doesn't have to, Xi Jinping does not need to worry about opinion polls or midterms. Donald Trump and the Republican Party has to already be worrying that this economy may not go into recession, but it's clearly going to slow. Every economist you talk to knows the growth rate is going down to 1% and a significant proportion of economists are expecting a recession.

Donald Trump may not be worried about that. He sounds very bullish in his interviews, but if I'm sitting in the House of Representatives, if I'm in the Senate as a Republican, then I have to worry about that. Literally Ted Cruz walked by us as you were talking. I should have pulled him into the conversation. The president will say he's trying to do something

about our national debt. You've written a lot about debts and deficits and the role they play in a nation's superpower, status. What have you learned and what does our debt level tell you about the future of the United States? At the beginning of this year, Brian, I published a piece saying that Ferguson's law applies. And Ferguson's law states that if a great power is spending more on interest payments than on defense, it won't be great for very much longer. The U.S. crossed that threshold last year. And although President Trump's increasing revenue somewhat with his tariffs, that's clearly true,

He's also about to pass a great big, beautiful bill that not only extends the 2017 tax cuts, but it also adds some more for good measure, and he's increasing defense spending. I don't see a way in which the deficit isn't bigger in 2025 than it was in 2024, and that also means that the debt burden grows, and unless interest rates come crashing down, which they haven't yet done, that means that interest payments are going up. So that is a really major problem for a superpower that it is, in a game of chicken with another superpower. So, let's talk interest rates.

Because you nailed it, as usual, Sir Neil. When the tariffs first hit and the markets collapse, crashed, is not too strong of a word. Also, borrowing costs crashed. About a nine-day period, a 10-year yield, I think we'd like 3.5%. And I said to my wife, I said, well, I guess it's bad, but the one upside is borrowing costs and debt costs may come down. The bond market then had one of the biggest reversals, like, stock market in the history of modern finance, and now you're looking at a bond,

for three or whatever, on the 10-year, why isn't the bond market bringing rates down more? So this is the single biggest thing to worry about, and what you have to think about is not, why I asked you, not just yields, don't just look at the 10-year yield, look at the dollar. So in the happy story that it's 1985 all over again when we were mere boys, and it's the Plaza Accord, not only is the Mar-a-Lago Accord, the dollar goes down, but so do rates. You know, yields are going to come down and if we're all going to live happily ever after, weak dollar, lower rates, market rips. That's the 1980s story.

The problem is, as I have been pointing out to people in the administration, it could be in 1971, the dollar goes down, but yields don't come down because of inflation expectations, because the deficit doesn't look great, then it's a very much less pretty picture. That's why we have to watch both yields and the dollar. This is the critical relationship in markets today, because what we saw after Liberation Day was scary. It's scary. If President Trump hadn't paused the reciprocal tariffs, I think we would have had a bond

market crisis, and that could have got very ugly indeed. Wow. I'm going to leave it there, even though we could probably go off another half hour, because I'd love to know what that bond market crisis may look like. I hope we... It may go away, but it may go away because there's a recession. away for the wrong reasons. So Sir Neil Ferguson of Ferguson's law, always appreciate your views. Thank you. Kelly, it's probably why you launch your show

every day, looking at yields, looking at the dollar. Those are the things that matter right now. I echo what you said. Always love hearing from Sir Ferguson, who always makes us think. Brian, thanks. Coming up, the end of an era, Warren Buffett handing over the role of Berkshire Hathaway CEO, another famous fund manager weighing in. That's nice. Welcome back to Power. Lange, legendary investor Warren Buffett, surprising everybody this weekend when he ended the Berkshire Hathaway annual meeting by announcing that he was recommending to the board that Greg Abel take over as CEO of the company at the start of 2026. You're looking now at the standing ovation right after he made the announcement that went on for quite some time. The board unanimously voted in favor of Buffett's suggestion yesterday. He will still be the chairman after he steps down as CEO at the end of this year. As you can imagine many across the investing world offering their praise for his iconic career, including Pershing Square's Bill Ackman. Buffett's been one of my most important heroes, certainly in business, and I would say in life, I wouldn't bet against Berkshire.

Well, joining us now for more as Smead Capital Management CEO, Cole Smead. His Smead Value Fund owns Berkshire stock, and Barbara Goodstein of R360, an investing community that had roughly 25% of its members at the annual meeting. Barbara, welcome. So they were in this room when this announcement was made. They were, and they were just thrilled with the whole meeting. I was told that it was like a combination of a classroom and a Bruce Springsteen concert. The room was electric, and the ovation was described as spine tingling.

And these are people who have been investing with Buffett and following him for a very, very long time. So what do they think now about this transition and about the company post his leadership and involvement, which may be technically not right now, but is coming? Well, they're not only investing with him. they're all learning from him. We had a member that flew in literally from Taiwan because he follows him and he wants to continue learning and he runs the highest performing hedge fund in Asia.

Wow. So they're literally following him and looking at his examples and they're just emulating what he's done and what he will continue to do. Cole, what I appreciate about Berkshire and Buffett is that what they're doing is accessible to anyone. You know, they're not using sophisticated options

and, I mean, they don't use options, But it's basically a buy-and-hold strategy of, like, minimal diversification and being opportunistic with the right price and the right time. But when they bought Apple in whatever year that was, I mean, anybody out there could have done the same thing. And a lot of people didn't. They haven't had all successes. Obviously, there was IBM at the time, which is why people were a little bit concerned about their kind of stock picking prowess in the tech world. But, you know, anyone can copy what he's done. They just haven't managed to do so quite as successfully.

Yeah, to your point, Kelly, as Buffett said often, you don't need that high of an IQ to be a great investor. It needs to be at a certain level, but the smarter you are, there's an inverse relationship to your investment success. So two things that really stood out to me at the meeting. First off, this is not like a meeting in the 1990s or even in the early 2000s where Buffett, the quality of the audience has been diluted over the years because it's a lot more people looking for life advice, which Buffett gave out great life advice. it just wasn't as much a true investor community like the Aquans of the world, like you mentioned. Two questions that really stood out to me. Buffett talked about what we just saw in the markets was not that big of a deal. And based on what we can see in retail investors and what we're seeing in markets,

it was a big deal to most people. And he said, if you think 15%, going down 15%, is that big of a worry, you need to change your investment philosophy. There's a lot of people that need to do that. The second thing, and this is an open question, I think this is maybe the question of the next five years is Buffett said a great business is one that needs no capital. And on the idea of the AI CAP-X spent, he kind of got to that question, and he left it as an open question of whether that spend is going to be valuable. I only say it because that's very contentious in the S&P 500 today.

That would ruin the S&P returns if Buffett is right that it's a question. Right. Because market participants are treating it like it's a certainty. No, it's a great point. And Barbara, I mean, I think they'd prefer C's case. candy where it just throws off profits that you can reinvest or reallocate elsewhere and you can just raise prices year after year. What else do you think makes his success so unique? Or is it something that should be broadly imitable? Well, I think there are challenges underneath as well,

and that's what we're going to wait to see. So his success is unique because he's a tremendous stock picker. And one of the questions we have is Greg Abel going to be the future stock picker because that isn't historically his background. So we're looking at. at that, and then we're also looking at what's going to happen with some of the underlying companies that they're holding. So Warren Buffett was very articulate about the changes that they've made in Geico, how they've implemented telematics and made it more aggressive and brought it up to speed, but they have other questions and other subsidiaries like Northern Railroad, and there are other railroads that have all implemented precision scheduling and Northern Railroad hasn't. So

there are challenges along the way in all of the subsidiaries and some questions. about who's going to be doing the core allocations. Are any of your clients selling at this point, capturing profits after this run? No, I don't think anybody's selling. Everybody has great confidence in him. And the best thing that Warren Buffett has done, he's a great teacher. And part of being a great teacher on investments is planning succession. And that is something that's very important to our members, because they're also planning for their own succession.

These are people that have built businesses, sold businesses, transferred businesses. So Warren Buffett is leading by example once again. See, Cole, they want the life advice. It's true. It's just that he's adapted his own personal estate quite a few times. And so I think you have to stay curious and be willing to adapt. I mean, just like, just think of what, you know, Sir Ferguson just said on your show. He said this is like 71 potentially.

And in 72 to 74, in that bare market, interest rates went up, which, Kelly, and you're in my lifetime, the bare markets we've always seen is where interest rates decline. Right. And we're now in a period of time where you could have a stock bear market and the bond market might not really get that much help from that. And so, again, you have to be adaptive. You have to be curious. And here's the one thing I do know based on what Buffett's done in his life. You can't look like other investors.

And I think there's just a lot of investors that want to be broadly diversified. You pointed out that Berkshire has been much narrower. And I don't even think people really understand a lot of the things Buffett has said, even though it's a very fun event to go to. And it's a blessing to be taught by him. No, it is. And by the way, Bill had a great post about this. Bill's to me to encourage people to go read it. And your podcast named after Charlie, a book with legs.

I was late coming in because I'm listening to the guests talk about the American Southwest. And anyway, so whether they're intellectual or business followers. And to follow them that, Kelly, we get to, you know, he said, be interested in who you associate with. Why I love the podcast is because I get to associate with incredible people. Kyle's book, you just mentioned, is great. You know, Wilbur Ross, his book was incredible. The people get to associate with and think about it. It's like Munger said, he said, I got to meet Ben Franklin.

I got to read his book. And that's what you can do as a learner and a student lifelong. Yeah, I dare anyone to try to hold themselves to this standard that Franklin, with his daily checklist. Anyway, thank you both so much for joining us today. Cole Smead with Smead Capital and Barbara Goodstein of R360. Let's get to the news update. Courtney Reagan.

What's the latest? Hi, Kelly. Well, the Army is pausing helicopter training flights around the Pentagon after two passenger planes were forced to abort landings last week at Reagan, Washington National Airport. That's according to Reuters. The landings were called off because of a nearby Black Hawk helicopter. The Army has only recently begun gradually resuming flights in the airspace near Reagan since January's mid-air collision between an Army helicopter and a regional jet. They killed 67 people. Attorneys general from 17 states are suing the Trump administration to stop the implementation of an executive order that scales back wind energy developments. The order in question pauses approvals,

permits, and loans for all wind energy projects. President Trump signed it on his first day in office. And it's the end of an era for Skype. Microsoft is shutting down the video calling app today after 21 years in operation. The service revolutionized online communication when it debuted because it offered free, high-quality voice and video calls and allowed people to easily connect over long distances. I think it's the first thing I used when I tried to call from up on a vacation back to the U.S. Kelly, back over to you. So many end of an era segments here today. Courtney, thank you.

Thanks. Meantime, a health check on health care. The XLV ETF coming off its second straight negative month. One name in that group also coming off its second negative month, and that's Abbott Labs. Still up 17% for the year, but it could snap a five-day wind street today. We'll hear from the CEO at Milken next. All right welcome back to the Milken Global Conference right here in Los Angeles, California. And let's talk about health care and health care spending with so much focus on debts and deficits.

The huge numbers around medical spending are coming in more focus now. The federal government reporting that the following for 2023 Medicare spending, now $1.03 trillion up 8% Medicaid spending, $871 billion. Your private health insurance costs soaring 11.5% to $1.5 trillion. And you're out of pockets now at $5.5 billion. dollars, do the math, folks. That's over three trillion in health care spending in 2023 or about $10,000 for every man, woman, and child in America. And yet some of our health outcomes are not nearly what they should be. How do we fix that kind of problem? Robert Ford,

CEO of Health Care and Farmer Giant Abbott Labs, speaking about that very issue today here at the conference. Robert really appreciate you coming on CNBC. Those are big numbers, $3 trillion. They are. Yeah. We want everyone to get the best quality care. But it's How do we be less sick? So we have better outcomes, better health care, but spend less. Is that possible? No, everybody says that, right? Better outcomes, spend less, more access, and nobody's going to go through any pain.

We've got to change. We've got to change how we're doing things. I think we've been talking about preventative care for decades, and I think that really that's the focus where we've got to go. We've got to move the spend from taking care of the problem to preventing the problem. But I think now consumers are demanding that. consumers are willing to spend and invest in their healthcare. We saw that coming out of COVID, and they're wanting to do that.

And when you think about prevention, it's about behavior change, right? How does one change their behavior? Listen, do I know bagel, cream cheese and OJ in the morning? It's not good for me. I know that. But how can I get that information so that I can get confronted with it and make changes in my behavior? And that's what I think the key is, is how do you transform that information for consumers? You're a smart guy.

So I know you've heard this a million times. There's a group of people watching or listening right now that will say, ah, there's the cynics. They'll say, does the health industry in America really want us to get healthier when there is a big, big pharma wants to treat illness, not fix it? Yeah, listen, I don't, I get the cynics, I get that. You could probably say that across a variety of different industries. We're in the business of helping people get healthy and stay healthy. One of the things that Abbott has been doing actually is we're going to address problems, medical problems. that exist, but we're also looking at a place in the industry that we usually don't spend a lot of time in, which is healthy people that want to stay healthy.

So we've been making investments in that area. So, you know, in the cynics, you got to back it up, right? So we've developed technologies that are helping to do that. One product that we've launched recently is called Lingo, and it's directed towards people that want to understand what happened, you know, when they eat their mood and how that influence their health. And that came from a failure, actually. It was like a technology problem that turned into one of your biggest products. Yeah, so that's Libre, which is a continuous glucose monitor for people with diabetes. And when we launched that, what we started to see is people that didn't have diabetes were using the product to get better insight on their health. Again, on the theme of being preventative.

So we then developed a whole new system just for that population. Well, you said something really interesting when we were talking before the interview. A lot of people I see once a year here at this conference. And a lot of people are, they've lost a lot of weight. And a lot of people will just be honest that they're on the shot. Zepbound, GOP-1s, OZemPEC, whatever it is. You made a critical point you said, that's great. But watch out for muscle loss, because that's a lot of the weight,

and you guys have a drink to help counter that. Yeah, so one of the challenges when you have that kind of weight loss is that you're also going to lose muscle. And muscle is important. Muscle health is important. So we saw that as a need. So we developed, we're a leader in Newark. We developed a nutritional drink that's heavy in protein, heavy in fiber, and heavy in HMB to help preserve muscle mass.

Yeah, and that's critical. So a lot of people are losing weight on these drugs. They're not yours, but your message to them is just be careful about what kind of weight you're losing. It's not all created equally. Yeah, these are great drugs. I mean, it's incredible what they're doing, but at the same time you have to treat your health more holistically and look at all aspects of it, right? Yeah, and it's an important point. I noticed an audience here that a lot of people can afford to pay outside of insurance. But to your point, hopefully we can fix some of these outcomes before we get to that.

Robert Ford's CEO of Abbott Labs, stock's been up 17% over a number of years. So thank you for joining us. Thanks, Brian. Great to be here. Thank you. Kelly. Brian, great stuff. Really appreciate that.

Treasury yields are holding steady as Wall Street awaits the Fed's latest rate decision on Wednesday. Rick Santelli has more after a break. Welcome back to Power Lunch. It's Rick Santelli here live on CMEHQ. And if we look at some of the data that was released at 10 o'clock Eastern today, well, it was one of the main reasons we saw markets move up, whether it was equities or interest rates. And the main driver was prices paid.

Now, all four metrics were pretty good sequentially higher than last month. But 65.1 in prices paid was the highest going back to Dees of 22. And as you look at two year and 10 year, you can see the immediate response in the marketplace yields popped. And when yields pop based on what is a hook into still stubborn pricing action, what you saw was December Fed Fund Futures selling off. All Fed Fund futures sold off, but we want to concentrate on the last contract of the year. Because as it moves lower, it's implying there's going to be less easing.

And if you open the chart up to April, you'll see that we're basically at a one-month low should it close at this point. And we want to be very cognizant of that because we know in the past Fed Fund Futures might build in a lot more activity than actual reality shows as time moves on. And finally, if we consider right now the yield curve at 51 and change, what underscores is that what all yields moving up, we are seeing a little bit of steepening. Bear steepening is always a positive for the economy because not only was prices paid up, but all the other metrics, three out of four, were in expansion territory.

Power Lunch will return after a very short break. Welcome back to Power Lunch and take a quick look at the S&P 500, which is near session highs and only down about eight points. If it turns positive, it would extend its winning streak to 10 straight sessions. And we're up about 10% over that period of time. Highly unusual and a big rebound from the Liberation Day lows.

We'll be right back. Welcome back. Check out chairs of Southwest Airlines on pace for their 10th straight day of gains. So kind of along with the broader S&P. And that they're up 27% in that period of time. The best 10-day period since June of 2020, rival United also up big, climbing 30% in the past month. But the company United, that is, is doing a change with some turbulent.

in New Jersey, canceling 35 daily round trips from Newark Airport amid staffing shortages. Philip O is tracking the story for us on why this is happening. And Phil, the fury about this is only growing, and more and more people are alarmed about whether they should be flying in and out of this airport. Well, they're alarmed because this has been going on for some time, Kelly, and it really is a ridiculous situation that should be resolved and hopefully will be resolved in the weeks and months to come. Let me give you some perspective on the cancellations and delays today.

really ramped up over the weekend. And yes, there is weather in the area. So this is adding to the 75 cancellation, 122 delayed flights today. Look at the average arrival delay, four hours, almost four hours. Again, weather is making this a little bit worse today. But this doesn't gloss over the fact that it's a bad situation at Newark. Why? You've got a number of things happening here. One, one of the runways there is down and under construction. So you've got only two runways for air traffic. You also have air traffic controllers staffing, which we've talked about over the last couple of weeks here. And then you've got airline flight schedules. It's not a slot controlled airport. The FAA doesn't come out and say, United, you get this many flights,

XYZ airline, you get this many flights. And as a result, the airlines can, to a certain extent, police themselves. And that doesn't help the situation at all. The Port Authority, which is overseeing the Newark Airport, Newark Liberty says, we continue. to urge the FAA to address ongoing staffing shortages and accelerate long overdue technology upgrades that continue to cause delays in the nation's busiest air corridor. Here is the Secretary of Transportation expressing his frustration with the situation. This is too big of a part of our economy to see it go down because America hasn't made the investments, that these controllers can use the best equipment in the world, not, you know,

1980s equipment. unacceptable. Take a look at shares of United. They have canceled 35 daily flights. They started doing this on Friday. Scott Kirby has said, look, we've got to manage our schedule as much as possible and taken out 10% of the flights, Kelly, just makes it untenable for them to, you know, to have the level of flights that they were going to have before. I hope they can get a real long-term solution. Phil Vanks. And thanks for watching Power Lunch.