Power Lunch - Starting To Cool?, CEOs Sound Off 12/7/23

Episode Date: December 7, 2023

There’s a big jobs report on deck tomorrow, as the labor market is showing signs that it’s starting to cool. We’ll discuss what to expect, and what it could mean for markets.Plus, we’ve had some big CEO interviews on CNBC this week. We’ll hear from the head execs of AMD, Amazon & ExxonMobil, and get our trader’s take on the stocks in Three Stock Lunch. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome and good afternoon, everybody. Everybody, welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Coming up, we're getting ready for the jobs report tomorrow. Some signs this week that the jobs market may be starting to cool just a bit. So what to expect tomorrow and what it could mean, Kelly, for the markets. Plus, some big CEOs on CNBC in the past 24 hours. We'll hear highlights from AMD's Lisa Sue, Amazon's Andy Jassy and Exxon's Darren Woods. And we'll get our traders take on those stocks coming up in three-stock lunch. First, let's get a check on the markets. where you can see the Dow close to session highs up 88 points today, and it's the laggard. The S&P up 8 tenths to 4586, and the NASDAQ surging 1.3%. Kind of calm bond yields are helping the tenure around 411 last check. And shares of Walgreens' boots are leading the Dow, up 7% on track for their best day since March of 2020. The stock is still down nearly 40% this year, though. It's worst year ever. And that's given the stock a very attractive 8% dividend yield.

You can see it higher, in fact, even than the stock moved today. And the big drug companies are mostly lower today. The White House once again targeting drug outfits saying Big Pharma makes record profits while Americans struggle to afford the drugs they need. Let's bring in Bertha Coombs to explain exactly what the Biden administration is proposing. Yeah, in some ways it's like doubling down on the Inflation Reduction Act, the price negotiation part of that. The Biden administration is asserting the right of the government to seize drug patents of high. price drugs that were developed with taxpayer funding.

Now the 1980 by Dole Act paved the way for universities and small companies to commercialize discoveries made with federal funding, from cell gene therapies and medical technology to things like Google and some quantum computing. Now the White House aims to use the March in provision of that law to take on high drug prices. Cancer patients have repeatedly petitioned the government to use that March in provision on Estella's extanty. That's a prostate cancer treatment with a list price of more than $150,000.

The government has repeatedly refused. They say they should allow others to produce it to bring more competition. While the bipartisan law allows March in when a patent is allowed to lay dormant, it's never been used to break a drug patent on the basis of price. Senator Elizabeth Warren applauds the move

saying it's time to use that tool to bring down costs. When there's no competition in a market, then that falls hard on people who need that drug. It also falls hard on taxpayers who end up paying for it through other government programs. And Marcheon has been in the law for a long time. Pharma, the pharmaceutical industry group, well, basically they argue that March in was never intended to be a government price-setting policy. And to do so will set back research by more than that. So how would this march in work in a practical case? In other words, there is a drug that was developed in part with federal money, is now being

sold at a very high, some would say, unattainable price for consumers. The government would march in and say, what? Unless you lower the price to X, we are going to take the patent rights of that drug and collect the profits from it. How does it work? Ostensibly, that's how they were. would work. They didn't give an exact example of that. But, you know, I was joking with someone joking with you earlier that this is going to be the full lawsuit employment act. There's certainly

going to be litigation on this because you have patent law that works. And have they decided to do it or have they decided to think about doing it? They have proposed this. They're going to take comments on this and then issue the final rule later. You know, at the moment, it's really about just communicating that they are looking at every way possible. to reduce drug prices. Very, very interesting in the pre-political year, obviously. Indeed. Lowering drug prices is a very potent political issue.

Bertha Coombs, thank you. All right, let's turn now to the potential companies that could become targets of this new plan and discuss whether the government can really enforce those march-in rights. Joining us now, Jared Holtz, health care equity strategist at Missouho and Evan Seagerman, biotech analysts at BMO or BMO Capital Markets. Welcome to both of you. Jared, let me start with you. I think I just described sort of the process that could be at work here. And on the one hand, you would say, well, how could the government get away with doing that? Coming in and asserting that we're going to take over this patent, if that's what they're saying they're going to do, unless you lower the price. On the other hand, there is a sympathetic side to this that says, well, how? If I, the taxpayer, have paid to develop a

up this medicine, paid a lot of money, if my tax money is gone to that, and now the pharmaceutical company is charging $140,000 for a treatment of a prostate cancer drug. That doesn't feel right to me. And they get to keep all the profits? I'm getting stiffed at both ends. Tyler, thanks for having me. I appreciate it. I think this is a little bit of a slippery slope, obviously for large cap pharma and biotech. These marching rights, though, on the positive end of the spectrum, are not really limited to this one sector. I think it's much broader.

It's going to go into the technology industry and many others. Technology defense, whatever. Yeah. Sure. So it's much broader in scale than just this one industry group, you know, which I think is good because we're always talking about how pharma seems. to be the target of the government every other week. You know, as I look across, you know, the space with respect to large-cap pharmaceuticals

and biotech, not really sure that there are that many drugs that have been co-founded or co-developed with material government funding. And if that's right, maybe the list of drugs that the government is going to go after, in this case, in order to secure the patents back. is not going to be so vast. And if that's true, you know, maybe this is not a huge issue, but to birth this point earlier, it obviously adds onto the IRA,

and from a political standpoint, it's clear where the government's out here. Evan, let me ask you, is this essentially, and Jared just said it seems pretty political to him, is this essentially political theater that's going on here, number one, and number two, it would occur to me that one of the targets here, or a possible one would be Pfizer and Moderna, whose COVID vaccines were heavily financed by the taxpayer.

Well, there's a few questions there. First of all, as a political theater, we are heading into an election year. So I'm sure there's some more posturing around drug pricing. Biden got the win against the pharma sector with the IRA. And this is kind of continuing that theme. In terms of Pfizer and Moderna, I think, you know, Pfizer, I don't know if they actually took much funding up front. It was just some pre-funded contracts. But really, you know, the NIH does have a role in helping see these technologies, but these pharmaceutical companies put up billions of dollars at risk to actually develop the drugs. You don't want the NIH developing drugs. They'll never get anything done.

And then who's most at risk in terms of potential research and development? Maybe there's some companies that come to mind, maybe biotechs, broadly speaking. How would you be thinking through this as an investor? Well, if this were to actually happen, I think the entire sector could be at risk because who knows at what level the NIH or kind of the margin rights would apply? Would it be some early technology like the basis of MRNA for the vaccines? Would it be part of an antibody drug conjugate? So it could be widely applicable, probably in the specialty therapeutic space. I think cancer drug manufacturers, inflammation drug manufacturers, so maybe AV, potentially Merck, Bristol.

And so what should those companies then do? What is anyone going to do other than wait for more details? And would we expect the Supreme Court to get involved at some point or no? I mean, I don't know if the Supreme Court gets involved, but I'm sure if this went through, there would be several lawsuits. I think the companies need to keep doing what they're doing. This is only a proposal. This isn't actually necessarily going to happen.

But it really takes into account whether or not, you know, these companies want to use the NIH and kind of funding and research from the NIA. NIH to help, you know, bring forward some of their R&D efforts. They may kind of choose not to use that, do their own stuff internally, and take them out completely, which would be a shame because there's a lot of good research coming out of the NIH. Jared, are there companies that you follow that you think would be more vulnerable to this? Should it happen? Well, you mentioned Pfizer and Moderna earlier. I think those are two that come to mind right away, given the vaccine funding over the past several years for COVID, really have to go and look and do the work on the discrete line items,

company by company, to see, you know, where the NIH has been funding. But I really don't expect it to be overly material. You know, my view at this point is it's more of a storyline, another negative narrative to add to the IRA in front of an election year, which is already possibly confounding and complicating a sector that has been, you know, not the best to say the least over the past year or so. Yeah, indeed. And Jared, just put a point on it, then, does this make it uninvestable for 2024 until we get some clarity?

It seems like pharma is as out of favor as it's been as a category, obviously, other than a couple that have been involved in the obesity space that we've spoken about at length all year. You know, the multiples are very low at multi-year lows. The stock prices are at multi-year lows. So I'm really not sure what takes the category. higher other than, you know, a value trade, which is, you know, goes across industry groups. You know, hopefully at some point that this narrative quiets down, but given the fact that the Democrats seem hell bent on, you know, introducing new complexities into the sector, and then you've got the GOP, on the other hand, that has been, you know, fairly active in terms of, you know, how they've been politicizing the companies.

is it seems like the setup is not easy going into next year. Does the CVS, you know, do the moves that they are making, maybe responding to cost plus drugs and all the rest of it in the prescription drug space? Is that another headwind for this sector? Is it a tailwind if it finally? How should we be thinking through that as well real quickly? I think we want visibility. I think the street wants to have some sort of clarity on how companies are making money,

what the P&Ls are looking like and how they're derived. And to me, that's a net positive, even if it means you might see a little bit of degradation in terms of earnings. The stocks are already trading so low. I feel like better visibility in this case might be a positive. I think that makes a lot of sense. Gentlemen, thank you both. We appreciate it today. Jared Holtz and Evan Seagerman.

And still to come, jobs report on deck tomorrow. Major Fed decision next week. Investors hoping the data could put an end to any future hikes. We will get insight from the CEO of ZipRecruiter. Plus, some major CEOs sounding off on our network lately. Amazon's Jassy, ExxonMobil's Darren Woods, AMD's, Lisa Sue, will give you the highlights in three-stock lunch coming up. Welcome back to Power Lunch, everybody, as we count down to the November jobs report. I know you're all doing this at home.

It comes out tomorrow. Tomorrow morning, in fact, at 8.30. Data this week show a cooler labor market. These are the sort of contextual numbers that we look at. Private payrolls up by $103,000. But that missed estimates for November, which were about $30,000 higher than that, if I'm recall it correctly. Initial jobless claims out today, little change, $220,000. Continuing claims did hit the highest level in two years, despite these numbers.

Our next guest says we could be in for an upside surprise tomorrow. Ian Siegel is the CEO of ZipRecruiter or leading online employment marketplace. Mr. Siegel, welcome. Good to have you with us. Why do you say an upside surprise tomorrow when some of the other numbers do tend to indicate a slightly, slightly cooler job market? Well, to be very clear, if you look just at ZipRecruiter job posting data, what you will see is that it continues to decline, just like it has persistently declined for the last 18 months. We're all the way back to where we were pre-COVID, and we're continuing to fall from there. However, the end of the year is a really unpredictable time to predict what the BLS will say when it comes out with its jobs report, because there is so much seasonal hiring at this time of year.

and often a single job posting can, in fact, be used to hire 100 or hundreds of individuals to fill a role for the next few months. The seasonal hiring is, I guess, reasonably strong in retail, but maybe even stronger in service-oriented businesses, restaurants, hotels, etc. Yeah, I think the real upside surprise that everyone is experiencing right now is that consumers continue to spend in their productivity. particularly interested in spending on experiences. So whether you're talking about restaurants or event venues or any sort of tourist opportunity, those are areas where a lot of money is still going into the economy. And as a result, businesses are forced to staff. Do you see this as a time where the Federal Reserve needs to be mindful? They've had their focus has been sort of laser focus on keeping inflation down.

Is now the time that they need to start glancing in the mirrors and seeing where the employment market is? I mean, I'm going to say I sure hope so. If you look at where we are relative to a year ago, you've seen wages begin to flatten in new ZipRecruiter job postings. You see the number of new job postings that have a signing bonus as part of what they're offering down 25% from a year ago. go in ZipRecruiter surveys of our employers, they're telling us that over half of them

have lowered the salary of at least one position that they're currently advertising for. So it definitely seems like the work the Fed has done has served its purpose. I think we'd all like to see interest rates stabilize and ultimately decline. I think we know where the strongest sort of sectors are like health care, education, tourism, hotels, restaurants, and so on and so forth. But I want to ask a different kind of question, and that is this, if I'm advertising for a job, and I do not include in the description of that job, the option to spend some of the time remotely,

how much of a disadvantage competitively am I putting myself in? I mean, a massive disadvantage. The world has fundamentally changed, and it's been long enough that I'm going to say, this is forever now. So clearly it's a hot topic to discuss whether or not we should compel people to go back to work. But the currently employed people are voting with their feet. And what you see is higher satisfaction amongst those who are working for companies that allow some sort of hybrid work style, you see that job postings that say they can be done remote get three times as many applicants as those that insist on an in-office work policy.

this is a sea change in what we have experienced over time. And if you even compare the number of job postings on Ziprocuter today with a year ago, you'll see that there's four times as many job openings that offer either hybrid or fully remote work in the job description. So this is working its way through our economy. Any advantage will be taken by employers. Remote is key here. So Brian, Kareem, Nikki, you all can go home. You can work remotely.

Okay, get on out of here. That sounds good. Ian Siegel, thank you very much. We appreciate your time. Thanks for having me. I just saw a sea of arms going. They're out of here. They're all going, but you had to stay.

Mr. Gibb has to, I mean, not Mr. Steadicam, has to stay. Stocks are rising today with the NASDAQ jumping more than 1% to be positive for the week. The question is will tomorrow's job support give the green light for this rally to continue or not? Mark Lashini has some answers. He's chief investment strategist of Janney Montgomery. Scott. Mark, what do you think? think? Well, you just heard from ZipRecruiter? What's your spiny sense telling you?

Well, I would have to say, given the fact that we've seen some slowing in all the data, the aforementioned guests had talked about it. Of course, we've noted the same. It would be surprising to see a particularly strong jobs report. In fact, that might unnerved investors who have kind of bid on the fact that bad news is good because it more likely than not feeds the narrative that has obviously undertaken the rally in equity prices that continues to put the Fed on hold, if not even bring forward the prospects of rate cuts coming sometime in early 2024. So, you know, I think we've seen some diminution in the pace of a job creation. I still think it'll be positive nonetheless. The shock on the other side would be a negative

report, which would be equally unnerving and perhaps pull forward the thoughts that perhaps the risk of a recession is near and present. But I expect the number is probably going to be around consensus, 180,000 or so plus or minus. And that should be sufficient to keep the inertia behind the economy and at the same time not be so strong as to worry investors that the Federal Reserve is going to have to stay higher for longer or, in fact, re-option, if you will, a rate hike in one of their forthcoming meetings. A lot of talk about the rotation from the Magnificent Seven to elsewhere, even if today's a bit of a countertrend move in that regard. What would you say about that? It set us up nicely for 2024. Does it become ahead?

for market gains? I don't think it's a headwind. You know, obviously, if we see this rotation is going to have an influence on the capitalization weighted S&P 500 because those magnificent seven represent almost 30% of the index. But that doesn't mean that other sectors cannot perform. And so when we look at the broadening of the participation, particularly among industrials, financials to name a couple, that are more sizable in terms of the percentage weighting in the S&P 500, You know, there's a lot of opportunity there to sort of nest around and find, you know, stocks or at a sector level, participate more broadly in what might be some leadership coming out of the equal weighted S&P 500.

Still, however, much is going to depend on the evolution, the economy, and the key there is the job market. So, yes, it is encouraging. It's also encouraging to see small caps participating. Of course, Tista season here as we embark on the prospects of a Santa Claus rally and the January effect that's now been pulled forward into December. But nonetheless, if it continues after the first of the year, then I think we need to obviously respect its move, and the possible aversion of recession means it could continue. Quick thumbnails on two stocks you like, which I would call defensive growth. Not all that dissimilar in terms of our take on that, Tyler.

Republic services, you know, waste cycling company, you know, next to waste management, the biggest in the industry, about $50 billion. up a lot this year, up a NASDAQ-like return so far. But nonetheless, a nice growth profile associated with it. And garbage tends to be a counter-cyclical business. Now they're getting into other areas that is more green-related and as a consequence, a little more cyclical in nature through their acquisition of U.S. ecology.

But we think its prospects remain right in an industry that's almost a duopoly. All right. And 15 seconds on Medtronic. Well, as the aforementioned guests on health care talked about, nobody's liked health care now for quite some time. And it's reflected in Medtronic's valuation of 15 times, but it has a 3.5% dividend yield. And I think the prospects ultimately because of the secular effect of aging demographics is going to work ultimately to its favor. So high-quality company that can be bought with a handsome yield and tuck it away until there comes a bid back into health care,

particularly if, in fact, we do see some slowdown in economic growth in 2024. All right. Mark Machini, always good to see you, sir. Thank you, Tyler. Thank you. And further ahead, a drought forming for disruptors. Private investors always looking for the next top company to go public, but with growing uncertainty around the IPO market, cash could be drying up. We'll talk about that.

Plus, Mexico beating out China to become the United States top trading partner. A sign of manufacturing moving away from Asia will discuss when Power Lunch returns. Welcome back to Power Lunch, everybody. We've been talking about the jobs report due out tomorrow and the potential market reaction to it. Let's go to Rick Santelli in Chicago for the bond picture ahead of that jobs number.

Hi, Rick. Yes, Tyler, I have a feeling tomorrow's going to be quite a busy day, and I'll tell you exactly why in a second. But first, look at a two-year note yield chart from this morning. What you could see clearly is the high yield for the session was established right as jobless claims were hitting around 830 East. which makes perfect sense because they were so well-behaved, especially in front of the Big Jobs Report tomorrow.

And if you open a 10-year chart up to about the second week in August, yesterday we closed a bit under that August 31st significant low, which is 411. So we closed to 410. That pushed the comp back from the end of August to about the second week. So technically a four-month low yield close. Now, let's go to the whiteboard, shall we? I updated this chart we used a couple of weeks ago, when we talked about the neckline of that head and shoulders, and we did the measurement,

which said that we should be basically reaching an objective around 411. And we did. That's basically we're hovering it now. But here's the point. If you don't use what we call hit days, the 31st, you take that out, the 19th, when you made your pass at 5%, and, well, tomorrow is the big day for the cycle, so you don't include that either. So what you have is you have 34 days, trading days, not including holidays, were hit days, a perfect cycle, which did the complete journey from 411 up to 5% back down to 411. With the cycle complete, if you were a trader, what that means is whatever trend develops on a nice size move tomorrow, go with it.

It doesn't tell you it's going to reverse. It just tells you a new cycle is going to begin. Kelly, back to you. All right. Rick, thank you. Rick Santelli, more geopolitical tension for oil markets to worry about today. A border dispute between Venezuela and Guyana, for one. Pippa Stevens here to explain.

First, this sounded like social media rumors, and now it looks a little more substantive. Yes, and so the first thing here to note is that disputes around this Esikiba region in Guyana, which is about two-thirds of the country, date back to the 19th century with the current borders currently drawn in 1890. Now, of course, in 2015, this region took on vastly new importance, both economically and from an energy standpoint, after. Exxon discovered that reserve of 11 billion barrels of oil. So the reason why we're talking about it right now is that over the weekend,

Venezuela and President Maduro held a national referendum asking if Venezuela should incorporate that region of Guyana into Venezuela. And the government says that 95% of voters said, yes, it should. There has been some questions around the validity of the numbers that Maduro has published, but the overwhelming response was that it should be annexed into Venezuela. And so, you know, this region is so important from, an economic standpoint as well. When last year, Guyana's economy grew by more than 60%,

which was the highest worldwide, according to the IMF. And so it is so oil-rich and so important. And Exxon, of course, is one of the key players here. And with some threat around the production there, David Faber, did ask CEO Darren Woods earlier today what this means, and here's what Wood said. I'd put it in the context of what's been happening now for many, many years. frankly before we even started our first production out in Guyana, which is there's been a border

dispute. Venice Wade has had the dispute is going through the International Court of Justice. There's an arbitration process that's happening. And so it is a matter between nation states and the international community. We've all seen what happens when nation's sovereties are challenged and unilateral actions taken. I think the world and outside's community have grown pretty sensitive to that. So my expectation is there's more support, more broad support in the international community to make sure that the right process are followed to resolve this dispute. Now, Schrenner Parker, who is the head of Latin America at Rassett Energy, told me that the reality is that the chances of coming to an actual armed conflict are pretty low. This is just saber-rattling

and Bluster and Maduro trying to drum up support, both within his party and with the electorate. Also, there's some technical regions in Esquibo that make it difficult in the sense that it's deep jungle. And the only road that goes from Venezuela to Guyana passes through Brazil. And Brazilian President Lula has said he does not want armed conflict in South America. So very complicated here. So I know you're well versed in Guyana of Venezuela history. But does the border dispute predate the discovery of this large oil find? I presume it does.

It does. And there was already a case in the International Court of Justice. As Woods referred. Exactly. But it's taken on vastly new importance recently just because of all that oil and also because they can actually access it. Venezuela also has huge amounts of oil reserves. They say even more than Saudi Arabia, but they can't access it. And they're, you know, they're- They can't access because they're such a mess, right?

They've suffered under it. So Maduro says that it's thanks to the sanctions, but honestly, the sanctions just exacerbated issues that were already there. We're talking about years and years. of corruption. Misuse, corruption, bad maintenance, the whole thing. Exactly. They're sitting on a pile of oil, but at any rate.

Pippa, thank you for your history lesson. We appreciate it. Let's get over to Kate Rooney for a CNBC News update. Kate. Hey there, Tyler. So concerns are growing over the humanitarian crisis in Gaza as Israel ramps up its military campaign. And the White House says the two sides are nowhere close to another temporary ceasefire.

It comes as an estimated 138 people are being held captive. by Hamas. The Pentagon says the U.S. has resumed drone flights over Gaza to help search for those hostages. Republicans took a procedural step today to authorize their impeachment inquiry into President Biden. They released the text of the pending inquiry. It still does need to go to a vote and be formally approved, which isn't likely to happen until next Wednesday at the earliest. House Republicans accuse the president and his family of having improper business dealings when he served as vice president. The White House calls those allegations baseless. And at this hour, 82 years ago, the surprise Japanese attack on Pearl Harbor

thrust America into World War II. The naval base held a ceremony today to honor the more than 2400 people killed that day. Hundreds of Japanese bombers hit the Pearl Harbor Naval Shipyard and sunk or damaged 21 ships in the U.S. Pacific Fleet. Tyler, back over to you. All right. Thank you very much. Kate. And as we head to the break, let's get a quick power check on the positive side. Walgreen's Boots Alliance higher after announcing expanded COVID-19 and treatment offerings on the negative. Generac down amid a class action lawsuit from those impacted by the stock's recent drop. That is your power check for this hour. We'll be right back. Time for today's three stock lunch. Today we focus on three widely held companies whose CEOs

all spoke on our network over the past couple of days. And we're going to start with AMD. The CEO there, Su talking about the growth of AI and its potential. Take a listen. AI market over the last, you know, year has just exploded, right? I mean, chat GPT, you know, has, you know, really kind of changed our perspective for what Gen AI can do. So we originally thought the total market for, for data center AI accelerators would be about 350 billion as we got into 2027. And now we think it's going to be over 400 billion. All right. here with his trade on AMD as David Traynor, CEO of New Constructs. What do you think of AMD and why? Hi, Tyler. We think AMD is obviously feeling the cyclical pressures of all the other chip

companies, but the difference here is that the stock price is already pricing in a huge rebound. It's pricing in that margins will triple and that the company will grow revenues at 15% compounded annually for the next 15 years. So we think all the good news is priced in. We would pass on buying AMD at this point. All right. Pass. What about Amazon? CEO Andy Jassy telling Mad Money's Jim Kramer, he's seeing a very resilient consumer. Take a listen. Consumers are still spending. They're being careful about what they spend on and they're looking for bargains and deals wherever they can and wherever they can trade down on price. They're trying to do so. And it's really why if you looked at what we did in our holiday season, you know, it's always

important to save customers money, particularly during the holidays, and especially in this type of economy. And so we, you know, in our prime big deals day, which was our exclusive event for prime members to kick off the holidays, we had tens of millions of deals. And it was by far the best kickoff event that we ever did. Well, there you go. David, what about this? Wouldn't you pick it up? No, we wouldn't, Kelly. And look, I'm a big user. I love Amazon. It's a great product. But those deals come out of cost. Most people don't recognize that Amazon is actually a very unprofitable business. We show that they have burned $175 billion of the last five years. And you can see this on the balance sheet as debt's gone up dramatically over the last 10 years.

That's how they funded the losses. And the stock price is implying a drastically more profitable future. Margins will double and the company will grow revenues at 15% compounded annually for 30 years. So it's in some ways even more expensive than AMD. So look, I love Amazon as a consumer. And I think all consumers should love companies. that are losing money, giving you such good deals. I mean, it seems too good to be true because it is too good to be true. So, yes, we would pass on Amazon. But they report profits. I mean,

and they make money in their cloud division and so forth. But that's, I guess, your point would be they're actually using that money to subsidize losses in other businesses. And it only partially subsidized losses. And like, Tyler, you know, you know, I mean, companies report making money all the time, but they don't really make money. Yes. We can't trust the adjusted numbers. We can't trust the gap numbers. You got to do additional diligence if you really want to understand fundamentals. That's just the bottom line. And yeah, when you do that work and you pay attention to the balance sheet in particular for Amazon, it's a much more capital-intensive business, including Amazon Web Services, Tyler. It's a very capital-intensive businesses.

They've got all the service, so no one else needs one. I was amazed to learn last week that apart from the U.S. Postal Service, the largest package delivery company in the country is Amazon. It's not UPS, it's not FedEx, it's Amazon. All right, last up, ExxonMobil, CEO Darren Woods, telling David Faber, he likes the long-term picture for energy despite the drop in oil prices this week. Listen. We don't get too focused on the short-term dynamics in the marketplace. We tend to look more longer term at the fundamentals,

and I'd say over that longer term, generally speaking, it's a depletion business. We see every barrel of oil that the world produces is one less barrel available. And so that depletion business requires constant reinvest. to maintain, if not grow, the supply. And so we tend to look at that longer term. And I'd say investment into that replacing that depletion is on the light side. It has been historically, continues to be on the light side. So our view is over the longer. It's in medium term. The market's going to remain fairly tight. Let's talk Exxon mobile, David. What do you think?

We like it. We agree very much with the CEO. I think, look, the ESG kind of movement really moved a lot of capital away from oil and gas and fossil fuels. And I think we're all coming to the conclusion that the decarbonization of the world is going to happen, but it's a long way off, 15, 20, maybe 30 years. In the meantime, people are going to go for the cheapest source of fuel. And I think over the next 20 to 30 years, a lot of the major energy distributors today will be shifting with the market away from fossil fuels to other alternative lower carbon fuels, but regardless, they'll be the same companies. They're in the business of distributing power. They're the best in the world at it, and they have excellent access to current,

low-cost fuels. Plus, my favorite, Tyler, Exxon is cheap, right? It's trading as if his profits permanently declined by 30%. We like that. All right, David, thanks. Appreciate your analysis today. David, Traynor, thank you. Coming up, the nearshoring boom, corporations from Tesla to AT&T are investing billions in a new manufacturing capacity in Mexico. That also means billions not being invested in China. We'll get a live report from south of the border when power lunch returns. Welcome back. Foreign investment into Mexico booming this year as some companies turn their backs on Asia. U.S. Treasury Secretary Janet Yellen visiting Mexico today, saying for the collaboration between the U.S. and that country will benefit both economies.

Frank Holland live now in Monterey with more. Hi, Frank. Hey there, Tyler. You know, Mexico is estimated to have 30. billion dollars in Greenfield foreign direct investment this year as part of that near-shoring boom. That's money from outside the country to build new manufacturing and other facilities. So we actually visited Lego just a short time ago. It's one of the companies investing in Mexico and really leaning in with plans to double production at their site here, with every single block made going directly into the U.S. Tesla, Foxconn and Unilever, they're just some of the companies that are moving production or expanding production in Mexico this year.

The 19% tariffs on Chinese goods and supply chain reliability, they're both key factors for the supply chain shift. In every sector, we're having these discussions around reshuffling the total supply chain and making sure that it is de-risk. Because what we're talking about here is it's not only a cost topic, it's a de-risking of supply chains with everything we learned over the past period. Another factor is making nearshoring attractive is less expensive labor. So estimates vary, but according to new data from Alex partners, workers on average make $6.50 an hour in China compared to $482 an hour in Mexico.

However, we spoke with several manufacturers here in the Monterey, Mexico area. They say some of that advantage being lessened by the Mexican government announcing a 20% increase to the minimum wage for 2024. Tyler, back over to you. How much do they think that would affect their competitiveness? I mean, I assume they're very worried about that. You know, certainly worried about that, but right now the bigger issue is the rise in the peso compared to the dollar. The peso's risen double digits compared to the dollar over the last year.

So, of course, that makes imports from Mexico a bit more expensive. I spoke to one contract manufacturer. He said there is a sweet spot where the peso isn't completely devalued making their imports. Their inputs more expensive, but it also doesn't make the things that they send out too expensive. They're really trying to find the balance right now. they're not trying so hard to compete when it comes to cost. It's really about reliability of the supply chain,

but the manufacturers we spoke with, they certainly hope to see some softening in the peso over the next year. All right, Frank Holland, thanks very much. Monterey, Mexico. We appreciate it. Thank you. CNBC's Disruptor 50 Index continues to outpace the broader averages. It's up 28% this year,

but could a dry market for dealmaking shorten the list of disruptors for 2024? We'll discuss when Power Lunch returns. Welcome back. CNBC is now starting to take submissions for our next Disruptor 50 list. But the environment for startups, it's a little different this year than in lists fast. Julia Borsden is here to explain. Well, Kelly, right now it's a rough market for startups. The third quarter saw the lowest overall venture deal value in six years and the lowest number of deals in three years.

With USBC funding this year on pace to set a nine-year low. Plus, companies that are managing to raise funds increasingly are doing so at lower valuation. The number of down rounds in the third quarter climb to a 10-year high, with 26.4% of rounds completed year-to-date done at a flat or reduced valuation. Now, lack of access to capital means more companies are going out of business. Carter reported that 87 of the startups on his platform that had raised at least $10 million had shut down this year as of October. That's twice the number of companies that shut down in that same category for all of last year. And now, after only 27 companies went public in the third quarter, there is a pile up of companies waiting to go public. 75, according to Pitchbook, including some big names such as Stripe and Chime.

And as we look ahead to our next list, it's worth pointing out that our first 11 lists have identified some outperformers. Our Disruptor 50 index, companies that have gone public from our Disruptor 50 list, is up 28% year-to-date versus the S&P 500's 19% gains. So now we are looking for private company nominations for the 12th annual Disruptor 50 list, which will debut in the spring. To learn more, scan that QR code on your screen or go to CNBC.com slash disruptors. What is the classic description of a disruptor for this contest or competition? Well, what I have to say is when I founded this list 12 years ago, the idea was to look at how technology is disrupting every single industry. So what we see every year is companies not just, sort of stereotypical tech industries. Yes, we have a lot of AI. Open AI is the number one company

on the list last year. We also see companies in the ag tech space, in logistics, even in retail. So there are all sorts of different ways people are using technology to disrupt their respective industries. The companies do have to be private. They're usually venture-backed, and the ideas to find the fastest growing and most disruptive companies. So really ones that are prompting change in their industries. And you said the number of the deals, the number of deals, are down, the number of companies are going public are down, what do rising, and the number of bankruptcies are up, what do rising interest rates have to do with all that? They have a lot to do with it. I was actually talking with my colleague Bertha Coombs about the biotech space, because

two areas which have remained relatively resilient, relative to some other categories, are AI-based companies, no surprise, but also biotech in the life sciences field. And she was saying that rising interest rates have hurt that category, because it, those are so cost-intensive. Those types of companies are so cost-intensive. You're not just launching an app. And we have seen that negative impact throughout the space. But also remember, we had that Silicon Valley Bank implosion this year.

So that has had an impact as well. And overall concerns about the economy. So there have been so many different factors that have put pressure on this market. But a lot of investors have said this is a great time to get in because valuations have come down. All right. Julia, great to have you in the house. It's great to be here. Appreciate it.

Excited to see who's on this. So many headlines to get to so little time left. We will power through as many as we can in closing time. Power lunch is back in two. Welcome back, everybody. Two and a half minutes in the show and several good stories to talk about today. Starting with Moody's reportedly advising staff at its Chinese offices to work from home ahead of its cut to the outlook for the nation's credit rating. Employee's sources told the financial times the move was prompted by fears the Beijing regime could somehow retaliate.

Moody's lowered its outlook for China's rating to negative from stable on Tuesday. There haven't been any repercussions that we know of just yet. They haven't shut down offices. They haven't targeted employees. But it tells you a lot about what it's like to do business. It tells you a lot. Indeed. All right, the labor picture isn't quite as rosy in the garden state. Right here, New Jersey's unemployment rate rising faster than any other states. And yet there aren't enough able or willing folks to fill the jobs that are actually available. It's that there are, I guess, sort of people just don't want to take the jobs that are out there, not qualified for the jobs that are out there. So they're sitting on the sidelines employment or unemployment going higher. Maybe it's just a quirk and things will kind of level back out, but this is uncomfortable territory to find ourselves. We're also getting more details on what might have gone down at OpenAI before Sam Altman's surprise firing last month.

And a new interview with the Wall Street Journal, former board member Helen Toner, says they fired Altman to strengthen OpenAI and make it more able to achieve its mission. The journal reporting a critical paper she wrote in October may have angered Sam causing tension between the two. And apparently there was a lot of behind-the-back conversations that were going on in this very small board of four people. And I gather that some of the people who had these behind-the-back conversations felt as though Altman was not accurately representing what they had said. Right. Hence the break in, quote, trust that has been described here. Indeed. And so they still have to figure out the board situation, the company structure, and all the rest of it. On to GameStop, granting chairman and CEO Ryan Cohen, even more access to the remote control, including the ability to use company cash to buy other stocks.

Company cash can now be used to buy equities instead of just short-term debt, and Cohen is also in charge of the investments. Wedbush's Michael Pacter called this decision inane and, I wouldn't even insane, inane and alarming. And $600 million for John Rom. That's what they're saying, to join the lift tour. To join the lift tour, and he may do it. I thought they were going to make in peace and going to go putt around, but I guess not. All right, we got to run. Thanks for watching Power Lung.

Closing bell starts right now.