Power Lunch - Stocks Fall on Strong Inflation Data, Power Player 4/10/24

Episode Date: April 10, 2024

Stocks are falling after March inflation data came in hotter than expected, likely pushing off interest rate cuts by the Federal Reserve that investors have been anticipating. We’ll break down what it means for you & your money. Plus, we’ll get a view from the top. Billionaire Tilman Fertitta will join us to weigh in on the hot CPI print and the state of the consumer. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Alongside Deirdre Bosa, I'm Tyler Matheson. Welcome to Power Lunch. Stocks are a little bit lower, really more than a little bit, down 480 points, 1 and a quarter percent. After CPI came in slightly, slightly, slightly hotter than expected. The Dowdown, as I mentioned, nearly 500 points right now. We're going to go to Steve Leesman now with the Fed Minutes. Tyler, thank you, Minutes to the Federal Reserve's March meeting show. There was general agreement that the Fed policy rate was at the peak, and almost all. all judged it would be appropriate to reduce rates if the economy evolved as expected. Hold that thought because they later go on to say that participants did not see it as appropriate

to reduce the rates if they weren't confident that inflation was falling towards its 2% target. A lot of that is in the statement. What we see in these minutes is the beginning of a debate between hawks and doves over how to think about the inflation numbers that had come out above expectations two months in a row before this meeting. And so what you have is a wing of hawks that we've now heard publicly saying things like the recent inflation reports had reduced participants overall confidence that inflation was indeed moving towards the 2% target. Some saw these inflation increases as broad. They were concerned about it and argued they should not be discounted as the market did at the

time as well as some members of the Fed. They noted geopolitical risks that could, for example, increase inflation by hurting the supply chain and also noted financial conditions becoming less restrictive. Several said that the primary source of disinflation was improving in the supply chain and that that could moderate over time. Now there, of course, were doves at the meeting that were less inclined to be concerned about the recent inflation numbers. They blamed that issue we've talked about, residual seasonality. That is the tendency of some prices to rise at the beginning of the year. They said they expected core non-housing services inflation, that number that Fed Chair Powell has pointed to, to decline over time as the labor market moved into better balance and wage growth moderated. Some of them were upbeat on productivity.

Overall, they agreed that this unevenness they were seeing was anticipated and part of what they had expected, but there were disagreements over what to do with. A couple other points, there was consensus that policy was in a good place to either remain high for a long time or go down as the economy increase. There was no talk about rate hikes that I could see in the minutes here. The risks to the dual mandate were seen moving into better balance. Just a couple quick notes here on the balance sheet. The staff advised the committee to take a cautious approach to further runoff of the balance sheet. That meant maybe slow it down. The majority of participants felt it was prudent to slow the.

balance she'd runoff, quote, fairly soon. And it was talk about having the pace of the runoff, which is now $95 billion a month. So cutting that number in half. Tyler? It feels like there's a pretty big window in those five words, if economy evolves as expected. That's really the big window there, isn't it? You know, Tyler, sometimes when things get a little squirly, it's the, what you consider to be the day rigour parts of a contract that become the operative parts of a contract. If things don't evolve

as we expect, that's where we're at right now, Tyler. This part of if the economy doesn't, you know, evolves as expected. It is not evolving as expected we learn today, especially because of that March number. And the hawks seem to, and their caution in the March meeting

looks to have been the more appropriate approach. I guess there's a question as to whether Powell, the Fed Chair, looks to be in the little bit more doveish, a little bit more inclined to see the two months of inflation as a bump in the road. Well, it turned out at least there's a couple of extra bumps out there than you thought before they started the pavement project. A couple of, the big infrastructure spent. All right, a couple of more bumps in the road, Lindsey P. Egeza, chief economist at Steefell. Steve, stick around as we bring Lindsay in. I guess my question of you is to react to what we've heard from the Fed, what we've seen this morning in the Fed,

numbers. But the overall question here, did the Fed err in not raising interest rates higher than they are today? Did they need to go an extra increment or two to bring inflation down reliably? Well, I think that's the big question. Is this the appropriate terminal level? Or with the Fed hyper-focused on achieving that soft landing, did they fall short of achieving that sufficiently restricted level in order to control inflation. Well, as you know, we were longstanding that the Fed needed to raise rates up to 6 percent and perhaps higher if we continued to see inflation behave in an unruly manner. So I do think that the Fed was so focused on trying to achieve this delicate balance that the Fed historically does not have a great track record in achieving that they did stop short. And unfortunately now,

what we're left with is inflation reversing course, still double what the Fed's 2% target is. And the committee now is losing, I think, a lot of credibility in the marketplace by sitting on the sideline not reacting to three consecutive months of inflation reversing course. It's notable. We're talking credibility again. Lindsay, is there a path that you see where the next move could actually be a hike instead of a cut? Well, I think of inflation remains at these levels, with the core leveling off at about 4%. I do think that the base case is for the Fed still likely to give us one or two rate cuts. This is a committee, after all, desperate to provide relief.

But without more meaningful improvement in inflation, after one or maybe two rate cuts in the second half of the year, I would expect a second round pause, a prolonged pause. That being said, if inflation does continue to gain momentum, so now we're talking about the core pushing above 4%, I think in this scenario, the Fed may be willing to re-engage with one or two additional rate hikes, but it would have to be a meaningful increase and on a sustained basis. How about that, Steve Leasman, if I can turn back to you.

We're in, I guess, what you would call that higher for longer phase. But Lindsay is addressing the question of maybe we didn't go high enough. I want to just address something Lindsay said. And Lindsay is my friend, so hopefully this doesn't come on too strong. But, Lindsay, how can the Fed lose credibility in a market that itself has no credibility when it comes to predicting the Fed? The market took off and decided there were six rate cuts coming from absolutely nothing said by the Federal Reserve. The Federal Reserve, I think, stuck to its guns amid that kind of essentially strong pricing the other way by the market and went back down to three rate cuts and now they're back down to two. so I don't think the market has any particular monopoly on the truth or credibility when it comes to the outlook here.

It's been wrong, and I think maybe the Fed is right here to kind of wade, and I guess wading is the best way to think about it, with its mark the way it is. Theoretically, the Federal Reserve believes it is restrictive. That's the theory. If you look at what they believe the long-run neutral rate is, even if you believe it's a little higher, they think they're exerting restraint. maybe the problem the Fed had was not necessarily not raising high enough, but talking about cutting quick enough. I just think the market itself lacks a certain credibility when it comes to

judging the Federal Reserve. And I would agree with that. But remember, the Fed lost a tremendous amount of credibility being unfashionably late to the inflation taming party. They then, to your point, regained that credibility by pushing against the market. And the market was consistently reminded of the old adage, don't fight the Fed. But now we're in a different period. We're in a new period where inflation is rising and the Fed is twiddling its thumbs sitting on the sideline hoping for inflation to reverse course. And that's where I'm now concerned that they may begin to lose that credibility that they had previously established by pushing back against investors, hoping for multiple rate cuts beginning in the first quarter. You know, Steve, they call

economics the dismal science and not without reason. But Fed policy is as much to me art as it is science. I think that's right. And I am even for a reporter on the dismal science, I guess you could call it naively upbeat on a routine basis. But in any event, it's just my general dissonny disposition. It is true. They do not know key elements. In fact, I was just talking to a Georgetown class about this this morning, a graduate class where I was lecturing and saying, look, this is not rocket science, Tyler. It's actually harder because you can send a rocket to the moon and you know how far the moon is. You know the speed of the rocket. But if you want to know what is the neutral interest rate that is essentially the one that

will keep the economy from accelerating at a pace that is not inflationary, you only know that after you've essentially passed the moon. It's only know you've gotten there. You don't know the speed of the rocket. You don't know how fast it can travel, how fast it should travel. And you know what's how far. You don't even know how far the moon is. But if you talk about rocket science, we have a precise number on that.

The Fed is feeling its way into this, and it needs to be very careful. And I think humble here, what's so interesting right now is we have this interesting debate between the scientists who think, you know what, we need to slow this rocket down a little bit more. And the other folks who say, you know what, we're okay. We're on the right path. Right. And there's this idea, right, what you're referring to, Steve, is how will the economy respond? couldn't overheat. And Lindsay, I wonder where credibility comes into play here. We've got jobs data. We've got economic strength that some can say is proof that higher rates aren't actually

as restrictive as many have thought, and you don't need to cut. Absolutely. The economy accelerating beyond expectations is still very spendy consumer, a tight labor market, maybe not as tight as it was, but still a tight labor market. This further justifies not only the Fed holding rates at the current level, but potentially underscoring the notion that the Fed could have raised rates higher. And to the point that monetary policy is so qualitative, I think that further justifies the Fed erring on the side of caution raising rates higher than arguably they think is the bare minimum. The risk is not that the Fed raises rates too high in a cycle.

They can reverse course quite quickly. The risk is always that the Fed does not raise rates high enough to get ahead of inflation and restore price stability. And I think the latter is where we find ourselves right now. Tyler, can I just quickly apologize to rocket scientists that I did not mean to denigrate their profession or debase the fabulous work that they do? Certainly not in the week we had a solar eclipse.

I know you mean well. Exactly. I'm going to ask you to stick around, Steve, for just a minute. Lindsay, we're going to excuse you from class. It was nothing you said or did. We love you. We're going to let you get on with your day. as we bring in Rick Santelli from Chicago,

I'm told you want to react, Rick, to a couple of things you just heard. Go ahead. Yeah. When Steve said the market is wrong, all as I could think of is the only entities that aren't correct in this equation about what the Fed may or may not do other than the fact that the Fed's track record, whether keeping rates too low too long, starting to raise them too late,

or not understanding the durability of inflation or the fact that no matter how high they raise interest rates, they're not going to be able to counteract horrible government policies that have helped fuel inflation. But the Fed Fund Futures contract is misunderstood, misquoted, and every economist, I don't care how high up they are, what institution they work for, they're not correct. Fed Fund Futures is not accurate beyond the next meeting

and only when you get close. And if I recall, if I look now, it doesn't have what, priced in for June. And even though July is well down the road, it doesn't have one priced in there either. The contract was never designed to be telling you what's going to happen meeting, meeting, meeting down the road. This is something that's grown up because the market was slow for so many years and the Fed did so little for so many years. But that is the flaw. Markets aren't wrong. That's like saying when the Fed kept interest rates too low, which was wrong, that you should have gotten more interest. It was wrong. But you should.

didn't. The markets give you and take away whatever the closing price is. It's never wrong because you can get a check. Try getting a check out of the Fed. Oh, you can't because they're in arrears trillions of dollars. I rest my case. And the 10-year note auction today was deplorably weak. And even though it's a reopening, it does underscore that there's many traders out there paying close attention and really not listening to some of the economist's interpretation of how they read the tea leaves and a marketplace of Fed Fund futures never designed to be a crystal ball. Steve, I would guess that you want to respond. First thing I want to say is Rick is my favorite rocket scientist when it comes to the bond

market and all things that have a yield on them. I think that's the first thing I would say. I would generally agree with him, but I didn't take my comment about the six rate cuts from just the Fed Fund's futures markets. look at how the two year is priced right now at 490, which by the way is actually much more aggressive. Look at where it was priced previously. What is that telling you that over the period of time on a daily basis, the average of the overnight rate will be X over time. So that is telling you right now that the market sees the Fed as more restrictive over time.

Before when it was down lower, it was telling you it would be lower and there would be some cuts built in as well as the forecast of economists. My issue is not, is the market right or wrong? I don't actually think the market gets it wrong because I don't think the market. Let me just say, let me finish the market was wrong. Let me let me finish the thought though, Rick, real quick, which is. In bold letters. Yeah, the market is, is can price it wrong, but my interest is not that that that happened. It's how the Fed is communicating such that the market prices in that eventuality.

That to me actually, Rick, who cares? What do you mean? Who cares? The Fed is guesswork. It gives fodder for many that don't really understand the market movement. Are you out of your mind? Traders have to live or die. Traders have to live or die by what they trade, by what they trade.

You think that those guys know the future any better than anybody. They don't, but they're trading. But my friend, they are certainly. They are certainly, Rick, trading. and the emperor's been naked for a decade. Steve? I don't need to show you a chart, Rick, and then we'll come back to you.

Go, Steve. I don't need to show you a chart, Rick, to show that the market and your trader friends out there trade on every verb, every adjective, every period, every comma, spoken by the Federal Reserve. So my question is this. And I know traders have trade on full moons,

new moons, and where Jupiter is in the sky. And they're big traders, huge heads. So what does that mean? Well, I don't know what it means, Rick, but my point is that if you're arguing, if you're arguing that it doesn't matter what the Fed says, I think we're living in different realities. I didn't say it doesn't matter. I'm saying that when the Fed talks, it doesn't mean that they're going to get the market

right. It doesn't mean that the market is going to pay attention. And it's certainly, and here's another thing. QT, QT, embedded in these minutes is another surrender, okay? Because the Fed understands that the Treasury is sweating bullets, but that the Fed doesn't lower rates doesn't ease the cost of servicing the debt. So now what they're doing, they're going into the QT mode. And you know what? The QT mode should exist and it should stay because they should be nervous that if they keep it in the $7 trillion, the next time we run into a problem, which

is probably right around the corner, what are we going to do? Goose it up to $11 trillion? Where do we draw the line? My interest, Rick, is in getting policy right for the greatest aggregate good. My interest is monitoring the market. It's the only reality we really have. So my question becomes, when the market prices it wrong, how did the Fed miscommunicate or communicate? There's no wrong pricing. There's no wrong pricing. What's wrong?

Are the next two meetings showing any easy? The next meeting is the only one that is a valid representation. They did previously. And what did we learn today? Do we learn something new today? If the Cubs get a better pitcher in staff, or if the Cubs get a new Roger Maris, does it not change their chances for a World Series? He does.

What, are you going to be stagnant all the time? No, come on, Steve. You got to change. You got to change, Rick, as things. I guess we got to go, Rick. But perhaps we'll continue this at another time. All right, we do have to leave it there, gentlemen. I think we will.

Doggone it. We will. And sooner than the next eclipse. Rick Santelli, Steve Leasman. Do we think rocket scientists have as heated? After that, rocket scientists are okay. Yeah. They're fine.

It came out all right. Still ahead on the show, we will still be watching. Markets, of course, the Dow still lower, but off session lows. It's down about 450 points. The S&P lower by around 50 points. On the positive side of the S&P GE-Vernova, on the negative side, Decker's, outdoor lower after getting a downgrade at Truis. That is your power check. We'll be right back.

News alert out of Washington, Emily Wilkins, live. in D.C. with more action on the hill, Emily. Hey, Tyler. Well, yes, a key federal government surveillance program is in danger of not being able to be reauthorized in time. The Federal Intelligence Surveillance Act was supposed to get a move through the House this week. There was a key procedural vote today, and that procedural vote has just failed with about 19 Republicans voting against it despite leadership asking to move it forward. Now, this bill that the House had teed up, it had a number of reforms and changes in it to this government.

surveillance program. Some of them that big tech companies have actually been pushing for to try and give their consumers more transparency. But there were debates over whether or not there should be warrants as a part of the bill. And overall, it went down, especially after former President Trump tweeted today to kill the program. So at this point, it looks like they're just going to have to do a simple reauthorization of the program. There is bipartisan support for the program, bipartisan support for the changes. But these procedural votes, they were really only going to go on Republican votes, and this is what happens when you have the narrow majority that you do in the House. And it's just another sign that Speaker Mike Johnson is in trouble when it comes to his

conference and the amount of support that he has. Of course, as you remember, Marjorie Taylor Green filed that motion to oust him. She has not sort of triggered that motion yet and actually putting it into play. But Green and Johnson did meet today, and she emerged from the meeting saying that she still has every intention of eventually moving to Ouse Johnson. And we'll just have to see exactly what happens here for the federal surveillance program. The clock is ticking. Congress has until April 19th. And that needs to get through not only the House chamber, but also the Senate chamber. So a lot of work ahead of them today, Tyler.

Interesting times. You can have bipartisan support, as you say. But if you have a faction that is not part of that bipartisan support in this Congress, you can't get much done. Emily Wilkins, thanks very much. At D.C. President Biden making comments on the economy. Megan Cascella with the details. Megan. Hey, Tyler, President Biden commented just moments ago on today's inflation report, saying that it could delay the Fed's path toward rate cuts,

but suggesting that his path on the economy is still the right one. Let's listen to this. I'm my prediction that before the year is out to be a rate cut. This may delay it a month or so. I'm not sure of that. We don't know what the Fed is going to do for certain. But look, we have dramatically reduced inflation from 9% down by, close to 3%. We're in a situation where we're a better situation than we were when we took

office, where inflation was skyrocketing, and we have a plan to deal with it. Now, Biden and Japanese Prime Minister Fumio Kishita were also asked about the Nippon deal, their potential takeover of U.S. deal. Kishita said that there was government procedures moving forward, but that they were hoping to cement a win-win there. Biden, meanwhile, saying that he was standing by his word to the workers, suggesting that. the deal still would not move forward unless and until the steelworkers got on board. Finally, on China, Biden also told reporters that he was in communication with China. He would continue to improve communication there and that he would be having, quote,

personal talks with Chinese President Xi whenever he wanted to. Tyler. All right. Thank you very much. We appreciate it. Megan, very much from the North Lawn of the White House. Yep, and we're still watching markets closely. The major averages are all still in the red after that hotter than expected inflation data. Joining me now for more is Michael Clarefield, portfolio manager at Clearbridge Investment. Michael, thanks for being with us. You saw some of that heated debate

before the break between Rick and Steve. And your notes, I'm reading, surprised that investors continue to be caught off guard, talking about the consensus for rate cuts. Who's at fault here? Is the feds giving mixed signals? Is the market not pricing this correctly?

What's going on in our market's resilient? I mean, I had a guest last hour who said that they should be down way more today. Yeah, I think we are surprised that investors continue to be surprised, right? We've been playing this game now for almost a year and a half of when's the Fed going to start to cut and it keeps getting delayed. And I think the reason people keep getting it wrong is largely because the reference point is the last 10 years, the 10 years maybe after the great financial crisis, when interest

rates were abnormally low. And if you look back over a long period of time, right, what's unusual is not where interest rates are now, you know, 4.5%, 5%, it's not particularly high based on any long-term history. What's unusual is where we were in the 2010s. And I think people got habituated to that, such that when rates moved higher, they expected them to go back down again. But the world's changed a little bit, right? You had COVID, you had many trillions of dollars stimulus, you have the energy transition, you have less trade with China, all these things that could just be leading to a world that is a higher inflation world than we were in for the last 15 years.

So are you saying that the 10-year yield isn't the appropriate metric to look at anymore? What is? No, no, no. I think that the 10-year yield is the appropriate metric. I think, though, that everybody's conversation is when's it about to go down because they think it's unusually high. We're saying we don't have a crystal ball. We're no better forecast in the future than anybody else. But instead of just waiting for the next cut, we're trying to embrace the idea that maybe we're in a higher interest rate environment for the next many years than we have been for the last 15. You've got three areas where inflation is notably sticky. One is energy right now. Number two is rents. Number three are services inflation. Yeah. I guess the question, I'll go back to what I asked, Lindsay Piazza, in the prior. segment, did the Fed err in not raising rates higher than they are today to go that extra mile

to ring inflation out of the system? You know, I think the jury's to allow on that one. The Fed was clearly late to the game in raising rates. True. But then a raise very aggressively. It did. And I think now we're at a level where probably patience continues to make sense, right? We're not at this 8 or 9 percent rate. We're at a 3.5 or 4 percent rate. You know, and I think you can't just look at inflation in a vacuum because... Does it surprise you that this last mile on inflation is being as stubborn to navigate as it seems to be? I'm not a PhD economist. So when I take a step back, it doesn't see that. Neither am I, and I opine all the time. So, you know, what's interesting is I think we all see the headlines about what's happened with wages, right? UPS raised wages, what was

40% last summer, and the car companies are raising wages. So I'm sort of surprised that people keep thinking the rates are, that inflation is going to drop back down so much. much when we all experience it every day. Wages actually outstripping inflation right now. Absolutely. But, you know, that's a double-edged sword, right? That's not good for inflation and interest rates and investors, but it's good for workers. And so we're seeing that in a more robust and resilient economy. And exactly, like you said, a more resilient economy. So what matters more for equities? What do you do here? If you don't get perhaps as many rate cuts, but you have a strong economy, how does that play out? Yes, I think that's one of the things

that people are, that's been tough for people to make sense. We're so used to that the idea that if earnings continue to grow because the economy is resilient, that's going to be great for stocks. But we have this other headwind now, which is interest rates. And so I think what we're trying to do is take advantage of areas where there's been less attention that have maybe been overlooked. And there were several sectors last year where they started to discount higher rates and underperforming. And there's opportunities today. So, for example, we like consumer staples here, right? Inflation continues to be more sticking than we'd like.

We focus on companies with the ability to do. We like dividends. You like dividends. Dividends are critical. Dividends are critical in a world of higher interest rates and higher inflation because the only way you can keep up with the higher cost of living is if your cash flows are growing in excess of that. So you can find high quality dividend growers that are growing their dividends 8, 9, 10% a year. And that's well ahead of inflation of year. And so your purchasing powers continue to grow. And we think that's critical. And so we think dividends have been overlooked for a long time. And in a higher interest rate, higher inflation environment, they're going to be important. And you really want to focus on companies with the ability to to grow dividends in excess. We have to leave it there, but Nestle, Sempra, and Enbridge are among your choices. Exactly. Michael Clarfeld of Clearbridge. Thank you very much. My pleasure. Thank you. All right. Copper prices climbing to a 2024 high.

The start of the medal's second bull run this century. Details next. We'll be right back. All welcome back to Power Launch, everybody. Markets broadly lower today. As you see there, we're looking at S&P Energy. All 11 S&P 500 sectors, they are lower right now, but the least back. of that group is energy down only slightly. It's been a hot sector so far, up 15%, 16, almost 17. Pippa Stevens, looking at the names and numbers for us. Pippa.

And I just now had a turnaround. It's actually the only positive sector across the S&P. And today, across the entire S&P 500, there were only three new multi-year highs, and you guessed it. They were all energy. And so last night, Barclays actually initiated coverage on U.S. Integrated's and the E&Ps with a positive rating. And they essentially said that these companies have done what investors demand it and more. They even said, quote, we believe the sector offers a better value proposition than ever before. They pointed to this change in business model from growth to return and now value over volumes. They also said that the sector generates about 7% of cash flow across the S&P, but it's only about the 3% waiting. We had this other chart that shows the

return on average capital employed. You can see that spike there. So they are getting a lot more for every dollar they spend, and yet they're waiting, is still around historical lows. And so Barclay said the big players, the exons and the Chevrons of the world, they can benefit from all of their businesses and not just focused on one sector of energy, and then also that they have, you know, the size will help them be more efficient. Right. Seems like a second quarter theme emerging in these early days. Pippa, Stephen, thank you very much.

Let's get over to Julia Borson for CNBC News Update. Julia. Dear Dear, President Biden says he's considering an Australian request to drop U.S. prosecution of WikiLeaks founder Julian Assange. Assange's lawyer called the news today, quote, encouraging. Australia's parliament recently passed a measure calling for Assange's return to his native country. The U.S. is currently trying to extradite him on criminal charges over WikiLeaks release of troves of U.S. military records and diplomatic cables. U.S. Capitol Police have hired three attorneys to investigate threats to members of Congress. They will also assist in prosecuting suspects. The New York Times first reported this news.

No, Capitol Police say they had more than 8,000 threat assessment cases last year. Officials think the numbers are growing because people think they're anonymous online. And a dire warning today from the United Nations Climate Chief, he says humanity has only two years left to, quote, the world by making dramatic changes to reduce heat-trapping greenhouse gas emissions. He also called on voters to raise their voices ahead of crucial elections this year. Dear to back over to you. Julia, that is a dire warning. Thank you for bringing us that ahead.

We will get a view from the top. Billionaire Tillman Furtita will weigh in on CPI and the consumer. That's next. All right. Welcome back, everybody, to power launch. Stocks reacting to today's higher than expected inflation number, the Dow, S&P, and NASDAQ, all off 1% this afternoon. And his fears of higher prices and interest rates creep back up.

Let's turn now to someone with a strong pulse on the consumer economy, as well as real estate, restauranting. Tillman Fertita, Chairman of Landry's, the name behind Del Frisco's, Mastro Steakhouse, Rainforest Cafe, Baba Gumps, and much more. In addition to the Golden Nugget Hotel and Casino Empire and the NBA's Houston Rockets, Tillman Fertita, welcome. Good to have you with us. I have to begin with this.

I had your beloved University of Houston. Houston, in my brackets, at least two out of three of them, I'm so sorry they didn't win. I'm sorry, too, Tyler, because I had them also, but when you're all-American gets hurt during the tournament, that's what happens. He was a heck of a player, and he went out with a bad ankle there in, I forget whether it was the semifinal or whatever, but it was a tough game. Anyhow, let's talk inflation and how you're feeling it across your business. Wages are up, even more than inflation.

How are you feeling it? And do you think in any sense inflation is coming under control? Inflation is definitely coming under control, but it's not coming fast enough. And if you go back and look at all the times I've been on here in the last couple of years, and I always kept saying, Tyler, that if we don't get a hold of this labor inflation, we're going to continue to have a problem. And the problem is there's not enough workers in the workforce, so we're still all fighting for workers, and therefore it's continuing to cause wages to go up. And that's the big problem out there. Are there not enough workers or not enough legal workers or not enough workers who want to do the jobs that are on offer? I think it's all the above. You have to remember, we let these people in the country, but then we tell us. then they cannot work because they don't have the papers to work. And that's where I have the biggest

problem with immigration is if you're going to let them in and you're going to turn them loose in a city, why not immediately give them a piece of paper that allows them to work? So all these people that are running all over New York don't have any right to work and we're supporting them in the United States of America and the city of New York, which I'm in right now. makes a lot of sense to enable people who are here to work perhaps I'm no expert on immigration. So I skate on very thin ice here to allow them to work pending whatever judicial proceedings may be against them or whatever. You're saying it perfectly, Tyler. You're saying it perfectly. Tim, and I just want to go back to your inflation point. Yes, the number show us that it's coming under control, though it may be sticky.

But there's been this sort of discussion that people aren't feeling that way. seeing higher mortgage rates, gas prices. What does foot traffic look like in your restaurant businesses? Is that at odds with the data? Everything is not 21 and 22. 23 slow down a little bit. That's all retail. That's restaurant. Your foot traffic is down a little bit, but because of inflation and prices, our same store sales aren't off very much at all. But the high end is still feeling it. And I think it's going to continue to feel it until we get, you can't charge $75 and $80 for a prime steak. But yet, because the herds are still small, that is what you're having to pay. So until we get our arms around the beef industry, especially, there's a lot of other proteins that are starting to come down.

But beef is the one that still has us totally locked up, especially the higher-end beef. Are you finding, let's switch to real estate a little bit, and obviously interest rates are a factor in the real estate market, maybe even a big factor. I don't know how big for you, but you've made a couple of very large and signature acquisitions. The montage out in Laguna Beach, one of the most beautiful properties that I know of anywhere, as well as, is it River Oaks in Houston? Big, big purchases there as well. What are you seeing in commercial real estate? Why are you buying, what you're buying. You know, that's, Tyler, that's really interesting. And I'm going to tell you how I was able to buy those because they were two assets that cost over a billion dollars and where it's hard to go out for a commercial real estate player or even the REITs to borrow money right now to do this and the amount of equity that it takes. I did those in the private wealth areas of large, financial institutions. And therefore, I have the ability to do it because I'm able to borrow the money cheaper than commercial real estate because most people that are doing deals,

those size, that size are not individuals. And so where my big company is not done that way, I had no problem because there's such huge trophy assets and personally guaranteeing and borrow them and borrowing the money and private wealth. You're borrowing on your own reconstitably. cognizance there, basically, right? I mean, hey, just like they might let me out on bail here on law and reconnaissance. Tillman, you have a wide portfolio, so let me ask you about the sports aspect as well. We just had the NCAA finals. And the women, in terms of viewership, kind of blew the men's final out of the water.

And there's a lot of talk, even where I am in San Francisco, usually, about women's sports rights gaining. How are they looking to you? Are you thinking of that side of the business increasingly? You know, I just came from our NBA meetings, and one of the topics was the growth in women's sports and that there could be a lot of growth there in the years to come, because they're starting to develop these stars that are becoming huge stars. And all sports is still star-driven, especially in basketball, women's and men. It's even more so than other sports because you see them. You see their personalities.

They don't have a helmet on. They don't have a hat on. And there are such close-ups of them on the court. So in any sport that you can really recognize the player, it's a huge advantage. But you're dead on women's sports, I think you're going to see huge growth in in the years to come. Would you like to get a WNBA team in Houston? and there have been reports that you're courting the NHL about a team there. Comments?

I love sports. Sports is a religion for all cities. We would like to work to get in an NHL team in Houston. I'm working on it. And I would consider definitely. I think it's a great topic with the growth of women's sports to talk about at WN. NBA team in Houston also today. Okay. On that note, I have to say

go Leafs, go. I just have to. So you put it out there and you got me. Hey, and you're turning around the rockets, man. They've come a long way from where they were a few years ago. Tillman Fertita, thanks. Thank you guys. Stillhead, we'll get a live report from the site of New York City's largest

office to residential real estate conversion ever. Could this be a solution to America's housing crisis? We'll be right back. Welcome back to Power Lunch. It is now time for some technical support. focusing on earnings as a number of major banks and financial institutions. They get set to report Q1 results. Our chart is today is Bill Srisullo, chief market strategist with Bell Curve Trading. First up, let's start with the XLF. This is how most traders and portfolio managers play

the financial space. What did the chart say about this one? Yeah, Deirdre, I think this is really important because financials report at the beginning of the earnings season. You look at the names on deck over the next couple of days, J.P. Morgan, Wells Fargo, BlackRock City, they're going I'm going to give you a very good idea of not only just the sector, but the broader market and the economy. So I want to start wide with the XLF, ETF, Exchange, Traded Fund that most portfolio managers and traders use to get exposure to the sector. So the first thing is you've got to think about what time frame do you want to look at. And there's two key timeframes driving the U.S. equity markets right now.

One is off the late October lows. And then the secondly and the most critical is off the March 2020 lows, the pandemic lows. So when we zoom out and look at a bigger picture, we look at the XLF. You can see you put a critical low in here, March 2020, right around $17. Now, the next thing we focus on is where is fair value or the bulk of trade activity that's taken place since those critical pandemic lows. And here it takes place right around 33, 34. Most people, when they look at a chart, their eye goes to the low and the high.

The most important thing to understand is where it's fair value, because how can you buy cheap and sell rich unless you know where fair value is? And that's not a subjective or ephemeral concept. It's simply where the bulk of the money has been invested over that time period. So you've got the low at 17, fair value at 33, 34. These moves tend to be symmetric around fair value. So you're going to see another 17 to the upside, and that should get just somewhere around $45 to $50. So I still think there's big upside here, but the shorter term trend from October is basically complete. So we're looking for a pullback that we want to buy and then move to $49.50.

So that's broad. Let's go a little narrower and talk about some individual names. You mentioned J.P. Morgan. Company reports Friday. You say that this is arguably the most important name in the sector. Why? Yeah. I mean, huge financial services company, not just relevant to that sector, but also the economy. And I think a really good tell in terms of what the broader market is going to do here. So, again, we go back to this critical low March 2020. We bottomed around, you know, 7580. Again, we try to find where is fair value off that critical low?

Where is the bulk of dollars that's been invested in J.P. Morgan since those March 2020 lows? And it's right in here. You know, it's around one 50, low 150s, high 140s. And you can see that that's about $73. here, and then you're going to put on another 73, and I think J.P. Morgan ends up going to 220, 225 before it's over. These March 2020 curves are really driving the equity markets across the board. There will be a pullback because the October move is done. We want to buy that for this move to 220, 225. We've got enough time for just one more, probably. Wells Fargo.

What is this chart telling us? Okay. Let me see. Okay. Wells Fargo. Again, same thing. Critical low in the 2020, a little bit later in the year, around 20 bucks. Fair value is right around 45. That's $25 there. We should get 25 to the upside. Take you somewhere to around 65.70. So we're still good upside there. We're going to squeeze one more in because we are looking at the broader sell off today, S&P 500. Yeah. To me, if you're looking at the S, this is the most important, short. for all the people watching the show to look at. This is going to guide you in the bigger picture.

Low $2,200. Fair value comes right in here around $4,000. The projection is up to $5,7006,000. So I still think there's big upside across the board. And for what it's worth, NASDAQ $123,000, $47,050. So still big ups. We got to the most important one. That was quick, Bill.

Thank you so much. Stay with us. We'll be right back. All right, losses beginning to accelerate. Excession lows were down about 580. We're very close to there right now, down 560. It's going to be a very interesting final hour of trading. The news was this morning's inflation news that came in hotter than expected.

I think we have as well, Deirdre, a couple of the S&P winners and losers so far in trading today. Can we put those up? There are some gainers, GE, Vernova. I think that's the energy subsidiary of GE, up 4%. Axon Enterprise Constellation Energy. Invita. Invita. Defying gravity is what a guest in the last hour. And there are some laggards at Decker's, Extra Space, Invesco, and Caesars. Thanks for watching, Power Lunch, everybody.