Power Lunch - Stocks rally on big bank earnings 10/17/22

Episode Date: October 17, 2022

Markets jump to start the week, after strong earnings from Bank of America and others. B of A CEO Brian Moynihan weighs in on the company’s quarter. Xi Jinping gets set for another term as China’s President. What will it mean for U.S.-China relations. And kids are still playing Roblox. The stock jumps, is it a buy? Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, good afternoon, everybody, and welcome to Power Lunch. I'm Tyler Matheson, along with Contessa Brewer, and we've got solid gains on Wall Street today. The Dow getting back over 30,000. How about that? Earning season so far, not turning out as bad as expected. Bank of America reporting better than expected results. The stock higher by 5%. The company CEO Brian Moynihan is about to join us right here on Power Lunch. Plus, China's Communist Party National Congress taking place, Xi Jinping laying out aggressive. targets for economic growth. Would those ambitions have to come, though, at the expense of U.S. technology, what it all means for U.S.-China relations, Contessa? All right, Tyler, good to see you. Good to see you, everybody. I'm Contessa Brewer. Stock starting this week again with strong gains. Tyler mentioned the Dow's back above the 30,000 mark, up 2.1% S&P 500, up 2.85% right now. And the NASDAQ composite, the big winner today, up 3.5%. Financials among the leaders, helped by those Bank of America earnings, Bank of New York, also up 5%. Right now, 5.5% following their strong results.

Software names among the best performers in the NASDAQ 100. You've got octa, oh, and wait, look at here are the casinos right now. Caesar's up 7%. Draft Kings, the same MGM resorts, up 5 in a third. Those coming off of the conferences with some big gains. We were there last week, Tyler, and the takeaway much more optimistic than what a lot of the investors in the audience has. predicted. All right, look at those gains today on a green day for the markets. Contessa, thank you.

Bank of America helping to spark today's market rally, beating estimates on some key numbers, including net interest income, which means the bank is making more money thanks to rising interest rates. Now, for more on the company's quarter, let's bring in Bank of America's CEO Brian Moynihan, along with our Sarah Eisen. Sarah and Brian. Thank you very much, Tyler. And Brian, good afternoon. Thank you for joining us. fresh off these results that the market appears to like very much. Stocks up 6.3%. How much of a driver do you think rising rates are for your business right now?

Well, Sarah, thank you for having us. And, you know, in the end of the day, the banks make about more than half their money through the balance sheet. And that's a difference between the spreads we lend money at and pay our depositors. And as rates rise up, our zero interest deposits, which are a core part of our franchise and our low interest checking, obviously become more valuable. And that's where you saw the strong gain in NIH, not only year every year, but also late quarter up over a billion plus from second quarter to the third quarter. And we told people would be up over a billion in the fourth quarter, a billion a quarter. And that's the earnings power coming back as the rate structure comes off the floor.

It was at for a couple of years during the pandemic. Yeah, that guidance people appeared to like as well. So what level of rates do you need to see, Brian, to get expanding, operating leverage and margins. Well, the level of rates is going to be determined by what the Fed's doing to take out monetary accommodation. So you have to back up. And we're working against an economy, which, you know, is still solid now in terms of

customer activity and what we're seeing. But our experts in Candace Browning Platt's research team, who often hear on your show, you have this, the third quarter is still positive. They had the fourth quarter, the first quarter, the second quarter, the third quarter next year, is all slightly negative. And it comes back to positive. And that they have a rate structure gets up to about 5%. So we don't need a rate structure.

We're in this much money today with the current rate structure, and some of that's still to kick in. But the reality is if the rate structure is there because inflation's gone too far and they can't get under control, that has other issues in balance. So you've got to be careful what you wish for in the world that we're in financial services. So our job is to meet anything, be prepared for everything. But the good news is the consumers and the commercial activity still remains very solid, deep into the post-pandemic era.

No, I think your comments on the consumer are really important, Brian, and they stand in contrast to what it feels like following the markets lately and in other industries. So what are you seeing right now that's giving you so much confidence to talk about a strong consumer? So if we back up, we have 60 million consumer households. We have 35 million Americans' core checking accounts where the money comes in from getting paid

and they distribute to pay their bills. and we have their, you know, 35 million plus credit cards and all the other things that come with that. And so if you look at that spending for the third quarter of 2022 versus the third quarter of 2021, it was up about 10%. And transactions were up 5.5% or so. As we look at the first couple weeks, October, it's still up 10%. Now, that's a tail of a little bit you've got to be careful because earlier in the year it was growing faster. And as the, you know, the environment's changed, they've slowed down a little bit, but still much faster. So if you think about maybe 2017 or 18, it might have grown up 5 or 6%.

It's still growing faster, which shows the consumer has money to spend. So number one, they're spending. Number two, they have as much money in their accounts today as they did at the end of September as they did at the end of August. And that's interesting because most people believe they're spending it down and you don't see that yet. Now, is there stress for certain consumers out there? No question. But they're employed and earning money.

And their account balances of Bank of America continue to be flat August of September. For cohorts, they had 2 to 5,000 before the pandemic, an average of 3,400, they're sitting with 13,000 in account, and it's not going down. It continues to be flattish, and it was growing early in a year and now is flat. That means they have money to spend. And then on top of that, they're employed, and you can see the unemployment numbers are still very low. So you put that together. The current environment consumers is quite good and strong.

When you go to the credit side of it, they have plenty of credit availability in our charge-offs and our credit delinquencies are still way below. They were pre-pendemic. But even if you look at the best five-year averages across the last, you know, 30 years, they're still below that. And so that means the consumer, because they're employed, they're paying their bills. That's sort of basic stuff. Where it goes in the future, we're not reflecting on today as much as talking about what we see today. And then you go to the commercial, it's the same.

Chargeoffs, low, and commercial, continued improvement in reserve, criticized loans or non-performers, all good stuff, because the environment is still strong. Now, are we dealing with issues all over the place? Absolutely. Are we dealing with a higher rate structure? It will drag the economy. That's what the Fed's trying to do. But right now, as you see the third quarter in the first part of October, the consumer's hanging in there. It's just interesting because your counterpart over at J.P. Morgan, Jamie Diamond, says that we're headed for a hurricane.

And even your stock is down almost as much as the market before today. It was down more than the market on worries about a turn in the credit cycle and the economy. So it feels like even though what you're saying is good now, a lot worse is to come, potentially into next year. Yeah, Sarah, so our reserves that we put up this quarter are built on a 5% unemployment in the fourth quarter of 22 and a 5.5% employment all during 23. That's how conservative in the reserve building. We put up those reserves already. So the idea is that the way the rules work and accounting works and everything, you're putting up based on scenarios. And our scenarios weighted 40% to very adverse scenarios, which have high inflation and high unemployment built in.

And when you average those together, the reserves built on 5.5% unemployment. So we are prepared for the hurricane. We're prepared for whatever happens next. But the idea is we did that by what we call response growth across the last decade. So how we distributed between commercial lending and consumer lending, how we built capital, how we built reserves, how we have in a commercial lending, you know, multiple guardrails on how big a portfolio can become relative, real estate exposure, all that stuff. So that's how you build a company's durable.

And I think the banking industry overall is very durable right now. You've seen it through some interesting times in the last 24, 36 months. and the durability is supplied. And that's what's unique about the U.S. is we have a very durable, strong banking system, which is a buffer to some of these things that could go wrong. And they may go wrong, and they will go wrong. But the reality is we're all starting from a pretty good place.

So you don't deny that there's a hurricane coming, as Jamie Diamond predicts? Well, I start off by saying our core estimates are negative GDP growth for the fourth quarter, first quarter, second quarter, and third quarter. But it's a modest shallow and comes out towards the end of next year. a company by 5.5% unemployment. But that's what we built a company to sustain. And today we put up $7 billion plus in earnings, year-over-year growth. And so the environment is manageable if you're wise how you manage it,

and that's what we do. We're always prepared for the next thing, hopefully, and we continue to ask ourselves that question every day. What do you think about loan growth? How much longer can we actually see growth here from consumers and commercial? Well, we saw this quarter because the stress test results that you've reported on, and a surprise embedded them. We tamped the brakes a little bit on some loan growth,

especially in the large corporate business because we had to get our capital back up. And now we have capital at the end of the third quarter, equal to what we need in the first quarter of 24. So we're in great shape, and then we're going to drive through that so we can open the things. So you're seeing strong loan growth year-over-year,

12, 15 percent, those types of numbers. That's not going to do. It's going to move back to be more in line with the big single digits we've had. And if you look at it, the originations, and we put that in the earnings package where people can look at. The earnings originations for whether it's credit cards or home equities,

the FICO scores are $760, the loan to value of the portfolio on the mortgage side is very low. We are originating strong credit and we'll continue to do that. Is the demand going to change if we get more recessionary environment, which is what our economists predict and what the economy predict. You're going to see loan demand shift down a little bit, but that's already happened to some degree. It's line usage actually came down a little bit this quarter. But our job, my teammates' jobs, our job of Bank of America's a drive-through that, get new clients and get more done with them. under responsible growth. So as you mentioned, clearly the regulators are making you hold back more capital,

like what we're saying with J.P. Morgan and others. Do you have any timing on that to hold the timing of holding back buybacks and dividends and that use of cash, given some of the regulatory requirements? We bought back shares this quarter, I mean third quarter, and we'll plan to buyback shares in the fourth quarter because we already at the levels we need for the first quarter of 2024. So not only that we absorb the stress capital buffer results. We've also put up enough capital this quarter 11% against the 10.9 requirement beginning in 2024.

So we don't need to go build any capital. We may want to build a little more buffer. So this quarter we bought back shares and we'll continue, meaning third quarter and we'll buy them a fourth quarter and we'll continue to buy them back. But our capital's first use as support the organic growth of our clients and their efforts and then we use it to pay dividends and then we use it to buy back stock and we're already doing it. So this isn't like we have to build anything. We're past the minimums we need out there a year ahead in the future,

and frankly, those minimums shouldn't change. Ryan Moynihan, thank you so much for taking the time today on earnings day. Appreciate the conversation. Thank you. CEO of Bank of America with the stock, Tyler, and Contessa up about 6% on those better results. All right, Sarah, thank you very much. Thank you very much for bringing Mr. Moynihan to us, Sarah Eisen. We appreciate it.

All right, to react to what we just heard from the bank. of America's CEO, Brian Moynihan. Let's bring in David Conrad, large-cap bank analysts with KPW, a Stiefel company. David, welcome. Good to have you with us. I just heard, the most important thing I heard there, apart from a blizzard of numbers, an amazing guy has so much stuff in his head, was that he is predicting negative GDP for four consecutive quarters. This quarter, the first three of next year. And unemployment at 5%. Do what, what is your reaction? to that? And what is your reaction to the idea that he has that we're going to be able to manage through that and make nice money along the way? Yeah, I don't think that forecast is too far out of

bounds. I mean, I think we, you know, the Fed has raised rates so quickly. We still have to kind of digest that in the economy. So you'd expect, you know, going into next year a meaningful downturn and slow down the economy. I think what's interesting about Bank of America, though, is I do think they can weather that. Brian has done an excellent job since the great financial crisis of really de-risking Bank of America. So we view them is really one of the highest credit quality banks. And so, you know, I think in terms of concerns that investors may have on credit quality, I think Bank of America stacks up well.

You know, the flip side of that argument, though, is if we are in that kind of economy, the Fed may pivot and start to cut rates as their dot-ploc suggests later, later next year. And then some of this momentum we're getting from the net interest income may turn into a headwin as we work through next year. And in fact, on that net interest income, we heard him say that, you know, he's optimistic about next year. Given that, when do you think it peaks? And when do you think depositors are going to see rates ticking up? Yeah, Bank of America really maintained low deposit costs this quarter. And you can maybe argue they're over-earning a little bit on that. And so we would anticipate perhaps even a doubling of deposit costs relative to the hike

and interest rates next quarter. And so we are kind of at an elevated level. I think first quarter, fourth quarter, they gave really strong guidance. I think first quarter next year will also be pretty strong. And then I think it's, you know, quarter over quarter gets to be a little bit tougher sledding as lagging deposit costs catch up and then perhaps the Fed cutting later next year. So we would look for, and our estimates kind of have the first quarterish as kind of a peaking level plus or minus going forward. I think it gets much tougher sliding. Let's look at two things here with our final question, David. One is the numbers that B of A put up today.

And as I read it, they were generally better than what you had anticipated in lots of different subcategories of performance. So walk me through that. and why you think they did better. And then let's look at tomorrow and Goldman Sachs and what you expect there in light then of the B of A numbers today. Obviously different companies. Yeah, correct.

Yeah, Bank of America is actually one of our top trading ideas going long into the quarter. We thought they were going to have a really strong quarter. And to your point, they surpassed our expectations. As Brian said, their guidance was about 900 million quarter of order growth and net interest income. we were a little bit under a billion. They came in about a billion three growth.

So really strong growth. Really the key here is the deposit base. So what we call is a deposit beta, which is kind of the pass through the Fed increase, we are expecting that to be around 27% rising costs relative to the Fed funds. And it was actually pretty low at 20%. So that was really the key driver in the quarter. We expect that to creep up as we move into next year.

but right now, really strong deposit controls. What do you think on Goldman tomorrow? You know, I think Goldman, you know, it'll be a more challenging quarter than Banking America's they don't have the net interest income. Right. If you think about Morgan Stanley, I thought the street was too high on investment banking revenues, which created kind of a red tape for Morgan when they printed. They actually came in better than us, but below the street.

And so I think tomorrow investment banking numbers may be a little bit heavy relative to consensus estimates for Goldman. David, thank you very much for walking us through the numbers and giving us your opinions. We appreciate it. David Conrad. Thank you. Well, how nice it was today to walk into the studio and see a sea of green on that heat map. But coming up, one analyst says, one strategy says, hey, you can't be fooled by that.

You have to sell the bear rallies and buy contrarian stocks. He explains his strategy next. Plus China abruptly delaying its GDP release today, adding to a growing list of challenges for global investors and companies trying to gauge the nation's economy. We'll take a look at the China conundrum. And as we head to break, take a look at shares of cloud flare. The stock upgraded to overweight at Wells Fargo, the analysts noting an increased focus on consolidation, an uptick in demand, and the prospect for positive free cash flow this year. You're watching Power Lunch. Welcome back to Power Lunch.

Tech stocks bouncing back today after falling to a fresh 52 week low last week. But your next guest says investors should sell bare rallies in tech and growth stocks until the Fed gets closer to a, oh, I love this word, a policy pivot. So with rate hikes expected to last into 2023, where does he find value now? Let's bring in Bill Smead, Chief Investment Officer at Smead Capital Management. Bill, it's good to talk to you. All right, this sort of contrarian view. you. Tell me what your thesis is about selling into bear rallies. Well, first off, we took a look at the last five decades, the 10 largest cap stocks, asked the question, how did they do if you equally waited them in the following 10 years against the S&P? And in four straight decades, you

underperform the S&P if you owned the 10 largest cap stocks. And in two of the four cases, you lost money. So the moral of the story is when there is a financial euphoria episode, it's very difficult to put Humpty Dumpty back together again when they fall off. And just just take a look and see what's gone on so far. And by the way, bear market rallies typically include extremely violent upmoves. So the people that are excited about the turnaround last week and the Binaup move, they're basically doing what, that's why they call them sucker rallies, because they just look so enticing that it lures you. I'm pretty sure that's what I just said. Look at all of the green on the heat map. That's

me. There I am. Okay, so given that, can you give me some specific examples of your contrarian stocks that you would suggest people take a look at? Well, it's wonderful to be on the show the same half an hour, Brian Moynihan, we bought his stock in 2012 early in the year and have owned it since then. And he's done a marvelous job. But if you listen to what he said about how they made their money, we've entered a decade where Main Street wins and Wall Street loses, right? They weren't doing any IPOs. They weren't having much investment banking. Wall Street is not doing so well at the moment. Goldman's rearranging the deck chairs. That's struggle. On the other hand, if you're a waitress or a custodian or a cook or a carpet or a plumber

or electrician, you got more work than you know what to do with. And they're paying you way more for it. So the have-nots are going to win for 10 years. Is that why you like Simon Property, too? Yeah. We know that business is better at the Class A malls today. And it was at the best point in 2019. And the stocks are at bare market lows.

Simon's dropped from 172 down to where it is. And we also, on Maestridge, which is they've just gotten pummeled. And the reports we get is the stores are doing better, better. Retail stores are doing quite well. I guess I just heard something that got my attention in that is that the have-nots of the economy are going to do well over the next decade. A lot of people might say it's about bloody time that they did. Amen, Tyler. Amen. But it also affects the kinds of stocks that you want to invest in if your thesis is correct.

Absolutely. You know that we've harped for years about how powerful these 92 million millennials will be when they get married, have kids and form households. I went to a wedding Saturday. I think more people have gotten married this year than any year for 10 years. And that will be true next year because they couldn't necessarily get the venue they wanted this year. So they're getting married next year. And so what flows from that is buying houses, buying cars, having children, soccer shoes. I think Contessa can tell us all about that circuit.

And what that means is necessity spending rather than the new Apple device, Chipotle, craft beer, exotic travel as a single person. You know the story. Yeah, yeah. The best stock of the next 30 years might be a company, a psychiatric company. company that's going to treat 55-year-old Bored to Tears millennials who have gone to every exotic place in the world before they were 40. Hey, Bill, before we let you go, we got to ask you, because you own a 2% stake in Continental Resources, what do you make of Harold Hems' deal to pick up this deal for Continental

and take it private? Valuation of $27,0.74 and 28 cents a share. Yeah, we were told when he made. his original non-binding offer that the independent board members were going to ask for the input from the minority shareholders. We happen to be the largest minority shareholders. And unless our phones and our mail and our computers don't work, we have not been contacted. So they have just run a process that they laid out to us and they haven't contacted us. So if anybody asks, We think that 7428 is low.

We said at 70, we thought because he doesn't like the way the stock is treated in the open market, he was trying to steal the company. And now he did a process that they laid out to us and they haven't asked us. I'd like them to ask Devin Energy what they'd be willing to pay for. Is there going to be a lawsuit coming? Oh, I don't know about those things. I didn't go to law school. I'm Bill Smead of Smead Capital Management. Thank you for that.

Harold Ham, not John Ham, just to be clear here. Did I say John? No. Oh. I'm just... It could have, because, you know, I also was very optimistic about that green heat map. Yeah. Sucker rally.

All right. Thank you very much, Bill Smead. And coming up, MasterCard, looking to bring crypto to the masses. We will tell you about their new plan and why it could spell trouble for names like Coinbase, plus a big user uptake, a big activist bet. And what's old is new again. We've got the trade on Roblox, Splunk. and Fox. Some funky names there in today's three stock for lunch. We'll be back in two minutes

with stocks firmly in the green. The NASDAQ up nearly three and a half percent, folks. Welcome back to Power Lunch shares of Coinbase popping more than 10 percent today, even as it faces some potential new competition. MasterCard is moving in on its turf. Kate Rooney joins us now with more details. Hi, Kate. Hi, Contest. That's right. MasterCard, and now potentially the banks adding to some more competition in crypto this morning. MasterCard announcing a program that lets banks quickly offer crypto trading to their clients. The payments giant will act as what they're calling a bridge between Paxos, that's a company that PayPal, also uses to offer a similar service and financial institutions.

This MasterCard program will help with regulatory compliance and security, which are some of the big reasons banks have largely avoided crypto, at least, on the consumer side. The company's chief digital officer, Yorne Lampert, telling me that despite Bitcoin losing about half of its value this year, they're still seeing demand for buying crypto. 65% of respondents in a MasterCard survey say they'd prefer to get exposure, though, through their traditional banks. He also told me this crypto winter, as some are calling the bear market right now, doesn't mark the end of the asset class. And as more regulation and security gets established, some of the industry's current issues may be resolved and give consumers a little bit more confidence. MasterCard says

a number of banks have already signed up. They did decline to say which ones, but if Wall Street embraces this partnership model. It might mean a lot more competition for crypto exchanges like Coinbase, which has lost about 70% of its value since January. But as you mentioned, higher today though. Broader market factors here, though. Contestant Tyler back to you. Oh, that detail about which banks have signed up. That's the one that I want. Kate, I know you're working on it. We're waiting on it. All right. Thank you. Let's go to our friend Brian Sullivan, who has the CNBC News Update for us. Hi, Brian. Hi, Contest. Thank you very much. Here is your CNBC News Update at this hour. the U.S. Coast Guard intercepting an overcrowded migrant boat off the coast of southern Florida on Sunday.

A migrant submitted sea for seven days, and they were without food or water for the last two. The Coast Guard transferred the 96 Haitians, one Bahamian and one Ugandan, to Bahamian authorities. The Flash star Ezra Miller pleading not guilty to burglary charges in a Vermont court. The actor is accused of breaking into a home in early May and stealing several bottles of alcohol. Miller faces a maximum of 26 years in prison for the burglary and petty larceny charges. And starting today, low cost over-the-counter hearing aids are available at retailers around America without a prescription and without a medical exam. The FDA approved the update back in August for individuals who mild to mild the moderate hearing loss. White House is touting that this could potentially save Americans thousands of dollars.

Tyler, all right, Brian, thanks very much. Appreciate it. A head on power lunch. Yeah, that last graph. It's a little excessive, wasn't it? The China trade, President Xi, expected to be nominated for a third term. With a lot hanging in the balance, we are going to take a look at what's at stake for U.S. business. Plus, speaking of elections, we're talking business on the ballot.

Do consumers want corporations to get involved in political issues, or should they just stay in their lane? We have a nut results of a new survey here. And taking a look at the NASDAQ heat map right here. Here it is, the one with lots of green on it, and screens like Mercado Libre, Tesla and Z Scalar. Are we going to look at it? No, we're not looking at it. Forget what I said.

Maybe later in the show. That's a tease for you. Come right back. 90 minutes left at the trading day. We want to get you caught up on the markets, bonds, stocks, commodities, everything, and the future of China and U.S. relations. Let's begin with Bob Pazani at the New York Stock Exchange with more on this rally, Bob. And Tyler, this is pretty wild, actually.

We've moved 170 points on the S&P since the open on 3rd. Thursday. That's 5%. And that includes a lousy day on Friday. So risk on again today. What's risk on? You want to watch semiconductors, Kathy Woods-Arc stuff, transportation stocks. So here you see some of these big semiconductors moving today. And video was, what, 108 on Thursday? It was almost 120 here today. So we're talking about almost a 10% move, 8% perhaps. Micron and Vance Micro also strong today. Speculative tech, same situation. Some of these stocks have moved 10% in the last few days, even with the lousy day on Friday. So Twilio was 62 on Thursday. You see 68 today, that's a 10% move. Roku was 48. Now it's 53 or so, so there's another 10% move. Same with DocuSign as well.

Want to keep an eye on the metal stocks. That's another risk on group. The key story here, though, is that this has been mostly in a trading range for the last two or three months. It's nice to see the move up. But Freeport, for example, that's been $26 to $30, really, for for three months now. So again, trading at the higher end of the recent range. I think what's mattered here is the banks have helped improve the overall outlook for the early earnings reporters. Remember FedEx? That seemed like a long time ago. Some of the early ones were really disappointing. J.P. Morgan was terrific? What was J.P. Morgan? 103 or so on Wednesday at the close? That's right. 116 now. Look at that big, big move up for some of those bank stocks, Bank of America, also helping

today. So remember, guys, we were, what, 3669 or so on the S&P 500, on the close, somewhere around Thursday or so. Now, of course, we are above that Thursday close. Guys, back to you. Hi, Bob, thank you very much. Let's go to the bond market now as stocks rise, money also moving into bonds, and that is sending yields lower. The tenure once again hanging around 4% after hitting that level several times last week. And that is where the bonds sit right now. There you see it, write at four on the button right there, the 10-year note. All right, oil is closing for the day, and like most everything else, it too is higher. Pippa Stevens is at the commodity desk with more. Hey, Pippa. Hey, Tyler, oil just now giving back its earlier gains tumbling into negative territory.

Earlier in the day, some optimism stemmed from China holding rates steady, which could ultimately boost demand for crude and petroleum products. But on the other side, recession fears remain front and center, and that is weighing on oil. But the much bigger mover is natural gas, tumbling more than 6 percent, and at one point breaking below six bucks and hitting a three-month low. This comes after eight straight down weeks. Now, mild temperatures has meant lower demand, leading to two weeks of record inventory builds. Now, energy stocks broadly are in the green today, but two names I did want to mention. First up is Continental Resource. Founder Harold Ham is taking the company private.

Continental's board approved the deal after Ham sweetened his offer, which he first gave back in June. And Arcaga Energy surging 53% today after BP said it will buy the renewable natural gas company for $4.1 billion. Contessa. All right, Pippa, thank you for that. Coming up, Disney has come under fire this year for speaking out on political issues and sometimes for not speaking out. Up next, we'll take a look at what people want companies to do and to say when it comes to politics. Plus, more people are playing roadblocks, strong September number, sending the stock up 20% today. Look at that.

Should you join in on the fun? Our traders take coming up in three-stock lunch. Election Day, three weeks. We continue now to look at the potential impact politics we'll have on business and the other way around. Today, Elon Moy looks at what role Americans want businesses to play in politics, if any. Elon. Yeah, Tyler, well, the public is really divided on that question. A new poll out today from Gallup and Bentley University found that 52% of Americans believe businesses should not be weighing in on the latest headlines. Forty-eight percent think they should. Perhaps unsurprisingly, that split follows party lines, Republicans against Democrats in favor, and that can put companies in treacherous waters. aligning profitability and shareholder return and some of these more positive contributions are not are not necessarily mutually exclusive but we recognize that they're fraught with

you know controversy the good news for businesses is that there are issues on which both sides clearly agree 88% of americans say businesses should focus on long-term benefits and not just short-term profits. 91% think companies should operate sustainably, and 92% want them to invest time and money in local communities. So guys, Americans not only believe that business can be a force for good, they actually think that businesses are more effective than Uncle Sam in making that change. So, Elon, what are companies supposed to do if half their customers believe they should stay quiet, and the other half want them to speak out or take a stance on some political, quote, issue of the day?

Are they stuck? Yeah, so the advice that we got from the Bentley University President Brancreit was that they should avoid the extremes on either side. They should try to define their values and operate from what he called the reason center. I think the challenge for companies is that that center appears to be shifting. It's in flux right now. And so I think that's what's really interesting about the survey is that they try to define where that solid ground is. Where are the issues in which there is agreements? So businesses can start to position from there.

And then we'll see what the results of the survey are over time. Bentley and Gallup do intend to continue doing this for a couple of years. If people think that they are more effective at changing than the government, it occurs to me, Alon, that part of the reason is because in companies there's a boss. And even if you have consensus with a board and whatever, it's easier to get things done if there's a decision-making process in place as opposed to 400 lawmakers trying to do it by consensus. And then on long-term benefits, you know, that would be easier if the companies didn't have to report quarterly earnings. That's what, you know. Well, yeah, or they didn't do forecasting or predicting what they're going to make. I mean, they do manage to the quarter.

Anyhow, Elon, thank you. Appreciate it. I had time for three-stock lunch, and we're looking at three of the biggest movers today, getting our traders take on where they're heading next. As the markets continue to rise, the NASDAQ is up nearly three and a half percent. Look at that. the Dow up 2%. You've got the S&P 500 up almost 3% as well. Time for today's three-stock lunch and today's focus. Some big movers. Splunk up 6%

today on news that activist investor Starboard has about a 5% stake in the software maker. Fox is down about 8% on news. Rupert Murdoch is exploring the idea of recombining Fox and News Corp. And then Roblox, up 21% on Strong September metrics. Let's trade those names now with Lee Munson, president and CIO with portfolio wealth advisors. Good to see you today. Lee, first up, Splunk. Splunk, you know, it's going to be a hard pass, but let me tell you why. Cisco offered $20 billion for this earlier this year, and that's, you know, 40% higher than it was that it is today. You know, after that, they got some new management in. Another PE firm earlier came in with 7.5% stakes at, oh, you know, and remember, here's what the deal with companies like this.

P-E like private equity firms like to come in and they like say, hey, let's get you on a subscription model in the cloud and your valuations will go up while I'll make money. That's not happening. So now we have Starboard coming in with a 5% activist stake. Their focus is more on let's just cut costs and try to get this thing to go up short term. But they've been around for 19 years, this company's Splunk. They're not making a lot of money. It's a highly competitive environment.

So I think for investors to look at this, you're really not investing in this company. You really should do all your research on Starboard and think, do you want to invest with those guys? For me, it's not my cup of tea. I think that that's an old model of trying to go to subscription to the cloud. I think it's too high competitive. I want to buy something else. Let's move on to Fox, shall we, Lee?

And explain what a combination of Fox and News Corp would look like. What would the two companies resemble? Well, honestly, I think it would resemble what it looked like 10 years ago. I think we forget that 10 years ago they had that phone hacking scandal in the UK, and they realized a few bad actors could bankrupt the whole ship. I think this was going to be a positive. Now, I'm going to tell you right up front, I don't want to buy it today. I would rather wait for the third inning to see if these cuts happen.

We can get profits going, and key people don't leave. But I think it's actually very important for them to recombine because we live in a highly competitive media environment with streaming and social media and all these things. So they will have a chance to remember that word a few years ago, Omni Channel. They're going to be able to cross-sell all of their content between Fox and News. So I think it's the right thing to do. My problem is that really it's being sold more as a cost-cutting measure, and I'm very afraid of defections that can ruin the soup by combining it.

So let the bold take a shot on it. I'm going to wait and see. Next name, Roblox. Want to play? I do. Guys, I am biased. Everybody who's watching, my kid loves this stock. He wanted to buy it. So I'm a little bit biased on the stock, but I think it's a great speculative stock. Does it check all the boxes? Not really because it doesn't make money, but I still want to bet a little bit and buy some. I'll tell you why. There's nothing broken with the company versus the last two firms we talked about, right? The issue is the valuation, which I agree is kind of hard to nail down. But we had these September matrix come in and we found out that they've, All the kids are staying. You know, I would love to buy Minecraft for Microsoft. It was a standalone company, but this is that standalone company.

It's for, you know, younger kids. It's where they get to create. It's where they get to make their own environments. And people are willing to pay for that. So I think if you really want to speculate and you want to do something that, you know, if we get out of this bare market and people start spending more, that's going to be the case. The thing that's holding it back is just the general environment right now. Because, you know, parents have less money.

Kids have a little less money. and I think you get over, you can have a lot of leverage on the upside. So I'm in. All right, you're in on Roblox. It's like a babysitter. You just buy it and keep feeding you in. Lee Munson, thank you. Coming up, China's President Xi tumbling down on the country's recent shift away from rapid growth

and saying that it will focus on self-sufficiency, especially in technology. We'll take a look at what China's future means for our business here at home. And we teased it earlier. It's finally here. NASDAQ 100 EatMap. And there you've got it. Macardo Libre, a data dog, Netflix, leading there, among others, will be right back. All right, welcome back to power launch.

We turn now to Asia, where President Xi, Xi, Jinping, widely expected to receive an unprecedented third term as general secretary. And in a fiery overnight speech, he touted China's increased attention on national security and reuniting Taiwan, while also doubling down on zero COVID and the strategy that he's been following there. But before the speech began, China unexpectedly delayed indefinitely the release of its much-watched GDP numbers set for tomorrow morning. So what are they worried about? And what's next for China? Joining us now, Andy Rothman, investment strategist at the Matthews Asia Fund.

Andy, welcome. Good to have you with us. Let's talk about Xi's speech. Then we'll get to the question of the GDP non-release and what, if anything, it signals. Xi sounded on the one hand sort of expectable, but on the other, maybe a little more bellicose with respect to Taiwan than was expected. Am I reading it right? I would read it differently, actually. I read the entire 64-page speech last night, so you don't have to. Thank you. And it wasn't fiery or bellicose at all, in my view. In fact, what he said about Taiwan was pretty much the same thing that he and previous Chinese leaders have been saying about Taiwan, that peaceful unification is their goal, but they're warning other countries, particularly the United States, to stay out of the way.

So I think that he is relaxed and confident and not looking for trouble over Taiwan. So nothing particularly new there. I guess I was struck the number of times he mentioned national security. I'm told it was more than 50 times. The response in the room to references to the ultimate destiny that China will, not just May, will eventually be reunited with. with Taiwan. Right. Eventually is the key word. I think my view that the party is willing to wait forever for that, as long as there aren't moves to take Taiwan away from its current de facto independence towards formal de jure

independence. But if you read the speech, to me it came off as one focusing primarily on economic development. There was a lot of language up front about the importance of growth, the importance of bringing more people into the middle class, and even things like, Total factor productivity improvements, hardly a Marxist concept. You know, it's interesting, though, because we know that the China GDP numbers have been delayed. Our reporter, our CNBC correspondent in China tells us the sense is that it may be that those who are responsible for publishing that report didn't want to embarrass Xi Jinping right now.

I want to be even more specific when they're talking about this reunification, how the special administrative regions fall into that? How does Hong Kong and Macau fit into that? When we know right now there is a tight wire rope, especially where COVID policy goes and democratic freedoms to adhere to Beijing and still maintain some independence? Great questions. Let's start with the economy first. I'm not sure why the economic numbers, which are supposed to come out tomorrow or tonight, our time, were postponed. But we already know that the economy in China is very weak right now. And it's weak primarily because households and corporates are afraid to spend, afraid to hire

because of lockdowns and fear of more lockdowns. So the most important thing for the Chinese economy is for a change in the zero COVID policy. And I think that's going to happen after the party Congress wraps up at the end of this week. So what I'm suggesting is that investors follow carefully two milestones. The first is a change in rhetoric. I'm expecting the party to start talking more about how Chinese people have to get prepared to live with COVID like the rest of the world. And that means getting vaccinated and getting your parents and grandparents to get vaccinated.

So on that front. And then the second, sorry, and then the second milestone to watch is the number of vaccinations going into arms. That has to start coming up. So that zero COVID policy is affecting much of China's economy, as you mentioned. The sector that I cover gaming and gambling, Macau is just crushed because of the COVID restrictions right now. The estimate is the six licensees, the six casino companies operating there. three of which are American, are losing $1.5 billion per quarter. Tell me a little bit about how you think this policy affects U.S. companies in the U.S. economy. Well, I think this is having primarily an impact on the Chinese domestic economy, not on our economy. China's end of global

supply chains has actually held up quite well. But there's no doubt that because of zero COVID, the Chinese economy is on an unsustainable path right now. But that's why, I believe that the Chinese government and Communist Party leadership, which has always turned to pragmatism, to course correct and fix mistakes, is going to have to do that because they can see as clearly as I can that otherwise the economy is going to continue to struggle. So I expect that we are going to see a pickup in vaccinations and that after the winter flu season is over, I expect the end of lockdowns, which has been the main barrier to grow. It's great to talk to you. Thank you so much for your perspective.

Maybe there will be a pivot in China. Amazing. Thank you for watching Powerlund. The closing bell starts right now.