Power Lunch - Strong earnings reignite the market rally 1/22/25

Episode Date: January 22, 2025

The S&P 500 hit an all-time high again today, as tech stocks rally on AI optimism and President Trump’s 2nd term in office. We’ll cover all of the angles for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch, everybody. Big money, huge companies, stock soaring, and it's all about Stargate. But our question about Stargate is, what exactly is Stargate? And why should you care? We're going to dive into the story. Plus, will it create jobs because we need them, especially in manufacturing? We're going to show you why we say that. And holy squid games, Kelly, Netflix investors printing money today.

We'll compare the move to the billion-dollar. that blockbuster video made years ago. And yes, we said blockbuster video. Netflix double the subscriber count that was expected. It's just an amazing story, Brian, thanks. Speaking of Stargate, that optimism is boosting tech stocks today with the NASDAQ up 1.3%. The S&P 500 up 0.7, but it's getting to the 6,100 level for the first time, 10 points off it now, and the Dow for its part contributing about a quarter percent today. Oracle is a huge beneficiary of this whole Stargate project. The stock is up 15 percent, pretty much. much in two days now, making it its best two-day stretch in more than three years. Microsoft

Nvidia, they're directly involved in the project. Those stocks are hired today as well. And Amazon now says it's buying 600 acres in Ohio for its own data center. Also check out CRH. It's a British building materials company, but they could be the biggest beneficiary of this global cement craze, says RBC. As more data centers need to be built and more infrastructure and materials, Brian, need to come in and support that. The stock is up one and a half percent. All right. We have got obviously a lot to do, but we're going to begin with Stargate. And no, not the 1994, pretty underrated sci-fi movie starring Kurt Russell and I think it's Jude Law. Anyway, James Spader. Thank you very much, Steve Kovac.

This Stargate is a supposed $500 billion infrastructure project around artificial intelligence. Now, it was formally announced by President Trump today, but let's be fair. This project has been at least partially in the works for a while. It's going to be, and there's going to be a lot involved. It's going to be built by and funded by and financed by and occupied by companies like Oracle, Nvidia, Microsoft, its Open AI Arm, Arm Holdings, and its big investor, SoftBank. Now, SoftBank's founder, Maslioshi's son, at the White House today. So why are these and so many other stocks moving higher on this news, which may not even entirely be that new?

Steve Kovac, the aforementioned. You're not to break it down. Also joining us for the entire hour, our friend, Surat Setti, managing partner at DC, L.A. Great to have you on. Surat, we're going to get to your 90s movie trivia in just a moment. But, Steve, is this project brand new? I don't think it is. No, and so huge numbers, right?

$100 billion, maybe $500 billion. That's all great. All these promises of spending. But we've been hearing about this spending for months and months now. We already knew these companies were all poised to announce all these kind of big AI infrastructure projects. That includes the Stargate project that was just announced yesterday. Trump got to put his own flavor on it and give the backing of it. But again, this has all been in the works for a long time now.

And by the way, Elon Musk, who is one of Trump's confidants, best friends, reportedly getting a spot in the West Wing and office near President Trump. he kind of poo-pooed this idea saying that SoftBank, who is going to be one of the funders of this, doesn't actually have the money to really do what they want to do. And by the way, Andrew Ross Sorkin had Satya Nadella from Microsoft on Squabox this morning, kind of talking about this. Where is all this money coming from and whether or not that money actually exists? Here's what Nadella said. Look, all I know is I'm good for my $80 billion.

I'm going to spend $80 billion dollars building out Azure. customers can count on Microsoft with open AI models being there everywhere in the world. Okay, so let's do some perspective here, guys, because that 80 billion, 40 billion of that has already been designated for the United States. We knew Microsoft is going to be spending this kind of money. And by the way, this isn't necessarily for Stargate. This is also for its just owned Azure data centers and things like that. And by the way, Microsoft is kind of the loser in a way of this because they're losing their grip

on OpenAI. Part of this deal, part of the Stargate deal is that they no longer the exclusive cloud provider for Open AI. That means OpenAI has to go to Microsoft first and say, you know, we need this data capacity for what we want to do. And Microsoft can say, we don't, we can't serve you. You have to go to another place. That's why we saw Sam Altman standing up there yesterday with Massey Osher Son, why we saw him standing up there with Larry Ellison of Oracle. It's because he needs this data capacity that Microsoft can no longer provide for the last year. We've heard from Sight and Nodela saying things like we don't have enough capacity to meet the demand. Now we're seeing that inaction right here. We're seeing Open AI spread its platform out beyond Microsoft.

Microsoft still has access to the technology. Wait a minute. Big problem for Microsoft. The shares are up nearly 4% today. We'll get into that in a second. Some view this as a win-win. But Stargate itself is a supercomputer. It meant to just have, you know, it could have a million GPUs. And it's meant to just keep us ahead in the AI race. That's exactly what it is. And it's very similar to what we've already. This is nothing new or novel, by the way. Elon Musk built the colossus supercomputer out there in Memphis, Tennessee. In record time, he scooped up all those Nvidia GPUs, raised a boatload of money to do this.

We're seeing the same kind of spending, same kind of fundraising coming from these very wealthy companies in order to make that happen. And this is how they compete. And by the way, now Musk is subtly behind. He only has the one data center. Here come 10. And really what this is saying is there's so much ahead of us that every company can participate in this if you have the technology and you have the wherewithal. And the money.

Yeah, Microsoft is 80 billion. But what's to say, you know, soft banks are going to go raise more money. You're going to get LPs to add more money. I don't think capital is the issue here. It's the question of who gets there first and how fast you can. Can I ask a dumb question? What is the return on investment for the private sector with this big supercomputer startgate initiative? Because if it were company by company and I would understand.

It's a competitive arms race. Fine. When they're all working together, what is the goal? Well, then the goal is who are you going to sell this to? Who are you going to sell the processing power to? And that's where, you know, what companies want the fastest processing, whether it's themselves or some of their competitors or some of the large industry, whether you're in energy, is it Chevron or some of the other big boys?

Well, don't front run the rundown here, Sirot. We're going to get that in just one second. Steve, I want to go back to you very quickly because we know that this is not all entirely new, as you just laid out. But you heard Satchanadella say. on CNBC, I'm good for my 80 billion. I think, and we're going to editorialize a bit here, and this is Sarat, it's why you're here.

You can jump in. I think why these stocks, and there's more of them, two of them we're showing, are moving, is because when you have the president of the United States with a full faith and credit of the United States Treasury saying, we're all in, you don't have to worry about the capital because it's not about the 80 billion. It's about the taxpayer backing this, at least theoretically.

Yeah, and let me just like yes and that, too. So so much of this investment already planned. By the way, this is, again, not a surprise that they were going to spend tens of billions of dollars. The Microsoft sort of OpenAI supercomputer, let's build it in Texas, that was already planned. For SoftBank to be involved and take this? That is new. That is new. But what we're not saying.

And then, by the way, who are some of the other winners here? Now that Open AI is open for business, for lack of a better term here, that's because they can go to Amazon all of a sudden. They can go to Oracle. Why are we seeing all these winners? By the way, we're not talking about NVIDIA. Satya and Adela last year said when they built these data centers, about half of the cost goes towards compute. That means Nvidia.

That means HP Enterprises. That means super microcomputer. All the guts of these data centers. And then the other half is the land, the construction, and things like that. So that's where the money is going, really. And the one thing you want to make sure is, like, you're not playing favorites here, right? It was Microsoft who was in there first. And if you want to look at it as a capital market, why are they the only one?

And now you're getting all the other competitors in there as well. Well, sit tight. We're not done with this conversation. And by the way, to me, the story may just be Oracle because that stock is a ripet. All right. So we're going to, let's bring in another voice into this conversation. Talk about sort of the Microsoft impact on this because they're not the only ones involved. A lot of software angles.

Michael Turin, senior equity analysts at Wells Fargo covering software. Michael, thank you very much for joining us. Is this really just a, it's not just a Microsoft story. And if not, what does it mean for Microsoft and who else might it be relevant from an investment angle to? Yeah, I mean, it's certainly not just the Microsoft story, but it's interesting that when investors have been growing fatigued around Microsoft of what we think is the long time. Cloud took five to seven years to reach critical mass. AI is moving faster, but we're entering years three since chat GPT took the world about.

Storm and Azure AI is now a $10 billion plus business. You know, what's clear is no one's blinking in terms of spend at this point. All of the technologies we speak to are convinced this is a major shift in technology that the bigger risk is not participating. Yeah. Fall in mind. And Microsoft is taking advantage of the opening out of relationships. They've had this helped and establish leadership position.

Michael, I think, yeah, I was just going to say, I think your note really put kind of a finger on it today as well. For those who initially, it was so. surprising, right? We have this bigot, splashy Stargate announcement. Oh, by the way, OpenAI is no longer exclusively going to use Microsoft. You sort of say, well, wait a minute, what's that about? And then you look at Microsoft shares, and to your point, the shares are higher because now maybe they can just, they get their right of first refusal. And maybe that's a really important point to make here. So they can say to Open AI, we don't want those workloads. Maybe those

are not as consistent. Maybe those are not as profitable for us. Now we can maybe reduce our Cappex spend a little bit. So, and now we can go to other partners as well. So that's what we're why you see this is kind of a win-win. Yeah, two important factors. One is the relationship is in place until 2030, meaning Microsoft gets access to all of the IP advancement that OpenAI is embarking towards, and it's likely the games remain to give again. So that piece is important, and then the right of personal portion of that is also very

important because it means that Microsoft gets a look at what they're using their infrastructure for. If it's the training purposes, those are super-intensive upfront uses of the capacity that Microsoft might have other needs for. So their ability to evaluate and shift towards inference or other uses of the use and especially what we'll need to. I think it's important. It seems like the biggest bottleneck everyone is expecting to face with all the types of capacity in jail. So Microsoft and OpenEI, I think, is somewhat acknowledging that by saying we're opening this up, where necessary. But Microsoft's having that first refusal point, I think is very important.

So, Rod, I know Michael does not cover Oracle, so I don't want to ask him about Oracle. Does cover Salesforce. Maybe they're involved somehow. Are you shocked at this Oracle? The Oracle stock has been like the Nvidia of 2025 so far. I mean, or I thought Oracle was like a boring old database company. And we own Oracle, so for full disclosure. I didn't randomly bring that up. I know, you know that. But Oracle has changed their whole business around, right? It's not just the old databases.

They're using AI. They're using analytics. And they have the ability to do all this. So I think as a partner, you're using complementary companies in Oracle is one of them. And they're going to be a beneficiary of this. And they were, and the stock was up 40% last year, too. So they've turned their business around. And I think as a partner, that's where they're going to benefit.

I wonder just kind of quickly on this as well. We talked about arm holdings. that's a little bit more under the radar. That was such a lackluster IPO, and now that stock is up 45% since Jan 1. Right. And Arm has the royalties that they're going to get on some of these chips being used.

And really what you're saying is Nvidia, Arm, even AMD, it's such a big market at this point that you're already paying for the future, but these companies are making real products and the demand is so big. So all the discussion that we had, you know, with Nvidia about wait a second,

are we going to be double ordering, etc. For today, that's being put at rest because now you've got future orders down the road. Yeah, and I doubt Masaushi's son is on United, so he's probably on Air Son. And that might be the most valuable trip he's ever taken going to the White House. Of course. Because SoftBank is also chair. He's also chair of arm holdings. They're the majority owner of a stock that's up 45% this year and 16% today on that announcement. Going to the White House, come out with a couple billion. Oh yeah, more than a couple. That market cap is probably up.

Michael Turin, you're out there, Wells Fargo Software Equity Research Analyst, Michael. Thank you very much to appreciate that. Moving along, our next guest says the partnership this big will need a significant amount of power, computing power and electric power. Actually, it could be good, he says, for the Bitcoin mining industry. Brett Noblock is head of digital asset research at Cantor Fitzgerald. Hope I got that name right, Brett. So just before I dive into the Bitcoin angle here, what is the power need that you foresee?

because we're hearing reports that to power something that could have a million GPUs, do you have to get nuclear involved? Does Texas have the capability for that? The issue with nuclear over the short term, it takes a while, right? There's a couple companies out there that I don't cover that are maybe 10 years out, but you've seen what Microsoft is doing with Three Mile Island, even that's five years out. This project is going to spend $500 billion over the next five years. You're not going to get nuclear before that. So the question is, where do you get the power that you're going to spend $500 billion on?

If you kind of run the math on AI data centers, it's $12 million a megawatt of just CAPX to build it. And that does include the GPUs, which is, you know, looking at Blackwell's, say, somewhere's around $30 million a megawatt. So $500,000, you're going to need anywhere from 12 to 14 gigawatts. And that's the crux of the issue, right? You can spend all this money on GPUs. But if you look at the data center industry in the U.S., it's only 21 gigawatts, and that's what's been built over 25 years.

And of those 21 gigawatts of data center capacity, the power density on those racks is maybe less than 20 kilowatts. Okay. And that's the crux of the issue is Blackwells need 60 kilowatts, if not more. So you can't use legacy data center. So all that power you can't use, so you need 12 to 14 gigawatts of new power. And that's where the miners come in, right? Exactly. Exactly. And I'm curious if you can kind of rattle off a bunch of publicly traded names, whether they're the miners or elsewhere in your coverage space you see moving today or potentially being direct beneficiaries.

Yeah, I think if you look at this project, they want power at scale. And that's what the miners have done very well is connect to the grid. You know, one is Riot. Riot has a gigawatt site in Horsicana. It's about an hour from Dallas. Starboard recently took a stake, wanting them to push into AI. They came out yesterday, said, we're going to stop our Bitcoin mining development and evaluate this opportunity. And that's one that we really like off the back of it is because we don't think any AI optionality is priced into the shares. And then if you look at Iron, another Texas-based miner, they have a 1.4 gigawatts site going to be energized in April of next year. That is arguably going to be the biggest site, single site from a pure power perspective. you know, and when you're looking at this project, like where they can get the power, you know, those are two areas where they can get the power. And from the mining perspective, it's very advantageous for them to go in this market

because institutional investors, what they're going to pay for a Bitcoin mining business on a profit multiple basis versus a data center rate type of multiple is night and day different. You also have a buy on Terrell Wolf. I know Paul Prager has been a guest on with me, with you. We've talked about it as well. I want to put these numbers in a perspective, Surat, because we're talking about. about electricity, it's confusing. Okay. We all have seen the movie Back to the Future, where he gets hit with the lightning and they time, 1.21 gigawatts. Okay, that's what he's, the professor sends him back in time

on 1.2 gigawatts. Brett here is talking about 14 and 21 gigawatts. What does that mean? Well, roughly, a gigawatt is about a million homes, very roughly, okay? Called 750,000 homes. So what Brett is talking about is 10 to 15 million homes worth of electricity that we need to build these things that. So let me ask you, Sarat, as an investor, what happens if we just don't have that power? Well, you're going to... What happens if none of this gets built? You're going to have, you know, electricity prices are going to be extremely volatile at this point. So whoever's paying the highest is going to get it, and we know what that causes, too.

So I think a lot of this is going to happen. It's just going to take a little longer than we think. it is. So we need to be careful and not kind of run into some of these things because everything needs to work accordingly. Yeah, very quickly, Brett, like, so we know Microsoft, we don't know if Three Mile Island, the new plant formerly known as Three Mile Island is going to reopen, but if it does, Microsoft is going to pay somewhere between $100 and $130 per megawatt hour, okay? Put that in perspective, that's about four times the average utility cost for power. Basically, they'll pay anything to have that power if they turn that nuclear plant back on.

assuming we get all the stuff from iron and Terowulf and others, are they just going to print money because somebody's going to come in and pay whatever they want for that power? Well, it's a market, right? Right now we're in a constrained power environment, and those with power are the miners. You look at Terawolf, they just signed a deal with Core 42, which is owned by G42, which is backed by MGX, which is a part of Stargate. So you can indirectly say Terawolf is going to be providing compute power for OpenAI.

the market's missing that. But in this point in time, the rate's probably going to go higher, just because if you want to plug in Blackwells today, you don't have many options. So you're going to pay, I would say, well, north of $100 to $130 a kilowatt hour or megawatt hour for that access. And, you know, that is a very attractive proposition for these miners. That's a fascinating angle, Brett. Appreciate you bringing it to us today. Thanks for your time. Right, no block with Cantra Fitzgerald. All right, so we've got a lot more to do here on Power Lunch. And after the break, is Mega Cap a trap?

Yes, the S&B hitting an all-time high, big names. They have been delivering. But investor fears not disappeared a lot more to talk about what could be a mega trap ahead. It's a trap. All right, welcome back to Power Lunch. Earnings growth versus macro concerns. It's kind of the balance. Act that many investors are focused on as we continue through earnings season. Netflix,

you might remember them from the top of such shows as this one. They had an amazing earnings number last night, and Netflix stock is soaring today. You're printing money and they're leading the S&P 500. Now across the macro market, the Dow, the NASDAQ and the S&P, they're all on track to post gains, largely thanks to a big boost from some tech names. Let's talk all about it. We've still got our friend Sir Rott SETI here. Joining us now is FBB Capital Farm. Director of Research, Mike Bailey, and of course, Surat. Mike, you're nodding, you're smiling. Netflix is great, and I'm not taking anything away from Netflix.

Is Netflix, though, representative of the macro market? I don't think so. It is a bit of an outlier. So, you know, great company. We own it at our firm, and they're exceeding investor expectations. That's great. However, if you put that in the context of everything else, really, there's a few company-specific things that are helping,

Netflix out. So we congratulate them. It's great. It's a good position. But you've got to stay diversified. You got to make sure you own a little bit of everything. Not every company is going to have just massive blowout quarters like Netflix. You want to own a little bit of some more moderate risk return type of names as well. But it's a good company. It is an example of a broader theme in tech we're seeing, which is general underlying growth. Economy is doing pretty well. People have jobs out there buying things. That trickles down to even a lot of the tech companies as far as some of the growth we're seeing. So good to see it. And It seems like we've got some more on the way.

So I think that's an interesting question. We were debating last hour, Mike, whether you should be going into small caps or not primarily because the argument is, you know, the valuation is cheaper, the S&P is overpriced, and how does that kind of jive with you? Yeah, good question. I think in general, we would probably stick with larger cap companies. I think the real critical piece for us is their earnings growth.

You know, if you were to break out every company, you know, that's out there and say, okay, who has the greatest opportunity to meet or exceed what investors, are looking for as far as growth. At this point, at this point, large cap really grabs our attention. Small caps, absolutely, they're trading a little bit cheaper. If there's some type of short economic cycle and then a recovery, absolutely, that's a good way to play it. But if you want to own things longer term, if you want to really have high conviction that these companies can set a goal and exceed it, at this point, large caps seem like a much better place to play for us.

Well, I don't want to have low conviction. Sarat, I will say, I want to have high conviction. I don't want to have low conviction. You get my point. We talk, Saran, about all the same names all the time, right? And I don't mean just this show. I mean, because they're performing, there are any companies we're missing? It's got to be, I mean, there's thousands of companies out there. There are a lot of companies you're missing because where we focus on is the, you know, 10 stocks. Well, the 10 stocks that make up 50% of the market. And that's the one that most people are either invested in or interested in, but you can look outside that universe, and there are plenty of other companies out there. You know, in the energy patch, you can look at

a Schombardier, which is selling it nine times earnings and has a 3% dividend yield. So a company like that, which has 5% to 7% earnings growth, if not more. I've heard of them. Yeah, I was going to say. Mike, any that you would mention? Yeah, I definitely agree. I think a lot of the excitement is kind of sucked up into those top 10 names of the S&P 500. There's some great names there, but there's plenty more after you go down the list.

I know some other things where you are getting nice growth. There are companies that can meet or exceed. It's a little bit down the list. Eli Lilly, for example, so a drug company has nothing to do with AI, and that's totally fine. It's growing two to three times faster than the broader market as far as earnings and trading just a little bit of a higher premium. So that's something that looks very interesting. We can stick with the AI theme, but just kind of diversify even more. You can look at speaking of energy, for example, Next Terra.

So it's utility. It's getting involved in a lot of the wind and solar, a lot of that stuff, is going to power some of these new data centers. trading a big discount. Some investors are worried. Companies like this with wind and solar may have some challenges with the new administration. This company in particular,

same multiple as Trump 1.0, same earnings growth rate. Next year, did very well in the first Trump administration. So a lot of names out there beyond the top 10 that look pretty compelling. Well, next era, Mike, do you worry?

I mean, given that they're the biggest renewables producer in the United States, that there is a, you know, there's a Trump there. Not really. I mean, I think it's really about what are the expectations? So I think the company has set very reasonable goals. They're looking at high single-digit earnings growth. And that's what they did in Trump 1.0. I think that's

very reasonable. Could it be a little bit faster if they have better regulations, maybe? But I think that, again, setting a reasonable goal and really executing on that, there may be some noise and certainly some political issues coming out there. But again, I think they've done a very prudent job of laying out some of their projects. They've got a good ability to do that. And companies like that trading way cheaper than the S&P, basically with S&P-type growth, It's a pretty compelling idea. Again, you can own the mega caps and that's fine. You can also work your way down the list and own some things.

Very nice growth. Could be a little choppy with some of the political noise, but I think we'll be pretty compelling as you look over the next few years. Mike Bailey, FB Capital Partners. Mike, really appreciate your views. Still smiling. We love it. Mike, thanks very much, Surat. You're going to stick with us the whole hour, right?

I am. Because now you can't leave. I can't leave. I'm glued to the chair. Literally, we actually. You have glued me to the chair. Bloomingdale's is closing its flagship store in San Francisco. It's just the latest hit for the Bay Area and we'll have more details ahead on Power Lunch.

Welcome back to Power Lunch with the NASDAQ leading the way today up 1.3% on the back of real strength across the chip and tech sector. Also, don't overlook a new high for the S&P 500. We get 6,100 for the first time. And all of this with yields ticking back up. The 10-year rising above 4.6%. We had a 20-year auction last hour. Rick Santelli in Chicago. with all the details. Rick? Yeah, it was a very solid 20-year auction, and we're going to learn something by short maturities. Let's put twos, tens, and thirties all on the same chart going back towards

the 17th. And what you'll notice is that two years have taken the lead. That implies, at least according to many of my sources, and my own opinion, too, that it's telling us there's going to be less easy. Now, that might sound like something we all know already, but it really is. reflected in the market as the short end is taken over. And over the last session or two, what we've also noticed is if you look at the 2's 10 spread, when the 2s over took, of course, it affected the yield curve, bringing it down, flattening it, taking some of the steepness way. But the last couple of sessions, it has been going sideways. Put all that together and then add in. 4.57 is held. That was the settlement for 10-year for 2024. We have

It's held it. All of that, many traders believe interest rates have turned the corner. And they're going to be doing a little bit more towards the upside. We never traded below that four and a half level. And we consider that we had some dramatic moves in tens and thirties, not that many sessions ago. If we touched 5% in the 30, then it came back down and consolidated. With all that in mind, what we really need to pay attention to here in the next couple of days is how next week's auctions are going to affect the psyche of investors as yields seem to have hit a bottom in early 2025. Brian, back to you. Rick, thank you very much. All right, on deck, a very serious story. Why is everybody suddenly so sick? Former FDA commissioner, Scott Gottlieb,

joins us on that and more next. Welcome back to Power Lunch. I'm Angelica Peoples with your CNBC News Update. Nashville police say a 17-year-old opened fire today in the cafeteria of a local school, killing a female student before taking his own life. According to authorities, one other students suffered a graze and is in stable condition. Police say there is no longer any danger at the school and a SWAT team has cleared the building. The British Defense Secretary told the UK Parliament today, the Royal Navy tracked a Russian spy ship earlier this week that passed through UK waters. He said the ship is used for intelligence and mapping critical infrastructure on the seafloor and promised a response to ensure Russian ships and aircraft cannot operate in secrecy near UK or NATO territory. And the NBA postponed tonight's

game between the Pelicans and Milwaukee Bucks in New Orleans after a historic winter storm dumped about a foot of snow in the city. Because of its subtropical location, New Orleans doesn't have a lot of snow removal equipment on hand, meaning that a number of main highways and roads surrounding the city are shut down for safety reasons. Kelly, back over to you. Angelica, thank you very much, Angelica Peoples. And take a look at chairs of Moderna, which are rallying yet again today. Analysts excited by a $590 million investment from HHS to develop a bird flu vaccine. But that comes after months of uncertainty around the future of this space. The past three months, Moderna's down 26 percent. Pfizer down 8 percent, J&J around 12.

One reason could be HHS pick, RFK Jr., an open critic of the vaccine industry. Could the entire drug-making space be facing an overall? Here on set to try to answer that is Dr. Scott Gottlieb, former FDA commissioner and a CNBC contributor. It's great to have you here. Welcome. Anything you'd say on Moderna specifically? Well, look, there's concern that the existing vaccine that they have stockpiled for H5N1 bird flu might not be effective against the current strain. The current strain that's circulating right now is a mutation. It's different than the strain that the vaccine was developed against. So there's an effort to try to develop new vaccines and potentially stockpile them. I think it's an open question whether the administration would actually go forward and stockpile a new vaccine, but certainly moving forward with the development, I think is prudent.

Have humans, have Americans yet taken a bird flu vaccine? Is this something novel or have we been here before? Yeah, so we haven't distributed the vaccine. So the vaccine, there's an old vaccine stockpiled right now. And there's some discussion about whether or not should be forward deployed to dairy workers because they've been in contact with cows that have been infected. This epidemic has been in dairy cattle in the United States. But the decision was made by CDC not to deploy that vaccine, not to offer to the dairy workers, again,

because it was concerned it might not be that effective against this new strain. Can they work quickly to try to try to, to try to, develop a one that is the fact like with the flu vaccine we know sometimes it works sometimes it doesn't but a lot of people get it every year yeah there's a number of these vaccines are in advanced development right now including by Pfizer the company i'm on the border they have a bird flu vaccine in development moderna obviously is going to move ahead snowy has one so there is an effort to try to develop new vaccines that are more closely formulated to this current strain on a serious note i tweet this out a friend of mine and if you're watching i love you uh diagnosed stage street breast cancer yesterday

Okay, close family members of mine have had it. Another buddy of mine just had a stroke. He's nonverbal now. Buddy of mine was in a hospital for three days, just got out yesterday or two days ago, RSV pneumonia. I know I'm getting older. I know we're all getting older.

Is it just me or is everybody sick? Like the level of RSV pneumonia, all this stuff going around, strokes, breast cancer, New York Times said a story on breast cancer, spiking, doctor, can you give us an answer as to why? because you know where I'm going with this. A lot of people point to COVID and maybe even the COVID vaccine because they don't know. What is it?

Yeah, look, we don't know is the answer. Some cancers are going up, you're right. Colon cancer in particular, the incidence has been going up, particularly in young people. Right. So we don't understand that. Some people believe it's related to changes in the U.S. diet. As far as the infectious disease that's going around, we have had a difficult season with flu, with COVID, with RSV. Those rates look like they're coming down across most of the country.

Right now with the exception of norovirus, which is still going up. The strain of norovirus that's circulating right now is a new strain. So a lot of people probably don't have baseline immunity to it. And that's why you've seen so many people getting it and so many people getting sick. That's about the incidence of norovirus right now is probably 2x what it was in the last five years in prior season. So there is more of that going around right now. Let me ask a difficult question.

Did we hurt ourselves in some ways by avoiding stuff for so long that now these superbugs have been created? Otherwise, I'm just not sure what's going on. Yeah, well, with the flu season, RSV and COVID this year, the levels of infection weren't out of proportion to what we've seen from the historical norm going back maybe 10 years. There was a rebound after COVID because people were sequestered and a lot of these pathogens didn't circulate. I think we've worked through that and we're getting back to more of a normal baseline for these kinds of seasonal viruses.

Sir, what would you ask a doctor? So, question, you know, after COVID would. I'm not saying everybody did, but people got vaccinated, and then there was a pushback against vaccination. Are you seeing now people going back to get more vaccines? Are they kind of saying, hey, I'm not taking anything more? Are we seeing any data about that? The data that we're seeing is that vaccination rates are going down, particularly for the childhood immunizations. You look at measles, mumps, and rebella, you look at pertussis.

And in fact, we've seen growing outbreaks of those infections. And I think we're right at a tipping point, particularly with the MMR vaccine, which is what concerns me, the measles, mumps, and rebella vaccine, where we're getting to vaccinate. that is sufficiently low, that if we lose another maybe 5% in terms of the percentage of kids who are vaccinated, we could see larger, more distributed outbreaks. And so that does concern me a lot. We've seen a growing anti-vax sentiment, a lot of it from COVID. I think I've long said I felt the mandates during COVID were wrong, particularly the OSHA mandate, mandating that people who had to choose between a vaccine and staying employed. And I think that's stoked an anti-vax backlash

that we're now working through. And I want to give you, I'm sorry to Rob Saur. I want to give you a lot of credit, doctor, because you're here. You're not hiding. You're answering some tough questions. And I think when you have people that are going to the hospital because all these weird neuroviruses and all this crap is going around and breast cancer rates, the New York Times did a story on about how breast cancer rates are soaring. And, you know, I dealt with it. I'm not going to go into how, but it was damn close to my family, very close. And I had my own challenges. I think a lot of people, how do we re- how do we reinvigorate confidence in medical science and vaccines? How do we tell people, they made mistakes? We know we did, but it's going to be okay down the road.

How do we do that? Yeah, look, I think, and you're right, a lot of this is a post-COVID, you know, fallout for mistakes that were made. I think during COVID, and I wrote a book about this, I think public health officials weren't always upfront and very candid with the public. I think that there was a fear that if you, if the messaging was too complex, the public wouldn't understand. So to try to instigate the actions that you wanted, wear masks, get your vaccine, they oversimplified the messages and didn't give sort of a fulsome explanation of the pros and cons.

I think the issues around the seasonal viruses that are going around are different than the issues around cancer. We don't understand why cancer rates are going up for certain cancers, not every cancer. But for certain cancers. Coulin cancer, a lot of young men and then breast cancer. It's getting it in younger cohorts. And you're catching me on a bad. Also, I have a good, like I said, a good friend yesterday diagnosed stage three.

You know who you are if you're watching. I love you and you're going to be fine. But it's a scary thing. It's very scary. And the issues with the seasonal viruses aren't out of proportion for what we'd expect, with the exception of norovirus. The issues around the cancer are a separate clinical issue. I was just going to ask if there's a final coda for the affected stocks vaccine.

stocks and so forth as RFK takes office there? Look, he's been very clear about his intention to try to reduce the utilization of certain vaccines. He's skeptical of the MMR vaccine, the pertussis vaccine. He's talked about polio. I think for the companies that manufacture vaccines, particularly those childhood immunizations, there could be some pressure. These aren't, for the most part, these aren't big products for a lot of these companies.

They're specialty pharma type products and margins aren't great. There's exceptions, including the NUMCO vaccine, which, you know, is made by Pfizer. But I worry that if there's enough pressure and if these companies get opened up to liability again, you could see companies starting to pull out of this segment, particularly around the MMR and the pertussis vaccine. It's predominantly Sinoffi and Merck in a lot of those vaccines. Well, imagine if they felt concern about liability and therefore didn't provide or gave any indication of pulling back, which might then lend more people to not get us very... And that's the challenge we face. I think that is the challenge that these vaccines save a lot,

a lot, a lot, a lot, a lot, a lot, a lot of lives. And we need collective action. But if there are people that have had adverse effects, and the data does seem like there is, okay, and if these companies are suited in oblivion, then it's this impossible balance. The other thing is you get into a negative loop, because there will be no more investing into vaccine.

That's my point. The private sector, so the public sector would then have to do, which we know what happens when that happens. Right, right, exactly. And look, we've seen over the last two decades, really, a real renaissance and vaccines. When I was FDA back in the early 2000s, a lot of manufacturers had pulled out of this segment.

Congress passed the liability shield in the 1980s. Companies started to get back into making novel vaccines against pathogens that we previously didn't have vaccines for. So there's been a lot of innovation over the last 20 years. We have vaccines against HPV. We're on track to maybe eliminate cervical cancer in his country. So you want to see that innovation continue. Absolutely.

Dr. Gottlieb, thanks. We really appreciate your time today, Scott Gottlieb. All right. to really change gears after the break. Another sign, San Francisco, one of America's. Great cities, formerly great cities, still struggling. You've got to hear this story. Back to me.

Time now for our three-stock lunch where we trade on some of the big movers on their day of earnings and our trader today. Sarat Setti. Hi, good to see you. How you've been? Been here all hour. All right. We're going to start with this.

Netflix hitting an all-time high. Blockbuster video earnings. By way, Blockbuster could have bought the company. Netflix for 50. million dollars in the year 2000. File that under another mistake blockbuster video made. What do you make about Netflix? Every metric, they just exceeded cash flow in terms of subscriptions.

They're going to raise prices. So they're doing everything right. The stock is reflecting that. It is the premier streaming play, and rightly so deserves where it has to be. So you can still buy it? You can still own it here for that. I would not buy it at these levels because I think it's fairly valued as one of those stocks like in the top 10. So I think on a pullback, which it does happen on a Netflix,

when the market pulls back, it's got a high beta. That's when you would add to it, but not at these lows. On down day. Let's go to Johnson and Johnson then, which is lower, despite having fourth quarter sales and profits top Wall Street estimates. And that was thanks to strong sales for its cancer treatments, but again, stocks down two and a half percent. I mean, this is where if Dr. Gottlie was here, we would talk about the overhang on the whole farmer's sector. This stock is now trading at 13 and a half times earnings, historically traded between 16 and 17. It has a AAA balance sheet, 300% dividend yield. It's going to grow earnings 5% to 7%.

It is just out of favor, just as most of the other stocks in there are. We own it, we like it, but it is, until you see a catalyst in the sector, I don't know what will happen. But as a value-slash-biased investor, I like a company like this. Okay. Finally, Travelers, they posted a record-breaking fourth quarter, net income increase of 28% year-over-year. But I'm not sure insurance. I mean, people, they got strong views on insurers, too, these days. Is Sarrot? Yeah, I mean, this is, look, earnings again, very strong. What you have is a great tailwind that they're going to be raising prices for insurance. And whether it's for hurricanes or fires, et cetera, they're going to be making more money in the future. The question will come, will they be some type of regulatory pressure in terms of how high you raise your prices? But again, this company did very well. And earnings were spectacular. I have a whole thing where I want to own. I think everyone should own the stuff that they hate paying for. Just you capture both sides. You have to pay your insurance bill. You have to be.

pay whatever it is. By gas. Yeah, by gas. They own all, like, I think all the pension funds, just own all the fossil fuel companies. By every streaming service. Just recycle your cash dollars. Or utilities, if you have an EV. That's right. Which are fine. You know, we hate to part with that money. Get it on the other side. That's what I think. Surrod, thanks. I remember you can always catch our podcast. Just find it on any platform you listen to. Search for Power Lunch. And we'll be right back. All right. We're going to wrap it up with this. We want to end on a high note.

Okay, there's Macy's stock. We're showing that they own Bloomingdale's. And I'm doing this out of love. I love San Francisco. We all love it. It's a great American city. Yesterday, Macy's, which owns Bloomingdale, announced that the Bloomingdale's, the Westfield Town Center, the biggest mall in San Francisco,

is shutting down. Okay? Now, I was, if you remember, a year and a half ago, not even quite, I was in this mall. That's video I shot. Okay?

Not a lot of people there. That's Sunday afternoon. There's no one there. Is this a Bloomingdale's problem or a San Francisco problem? It's a San Francisco problem. It's a San Francisco. problem, I think, and it's just people say at San Francisco coming back. I sure hope so. But the announcement of the closure yesterday is not a good sign.

Have you been there lately, Sirot? I have not been there lately, but, you know, it's also endemic to companies like Macy's where if you're not going to get, if the city is not going to get a lot of traffic, the stores, that's not going to a lot of traffic. And they're cutting and they're doing a lot of things at Macy's itself. So I think you've got two separate things going there. And it's hard. Again, we don't know. I think the question is, is this a Bloomingdale's Macy's problem or is a San Francisco problem? Is it a good one?

Combo of both, in that sense. I can assure you the rest of my video is walking around that mall and I'll post it later on, there's no one in the entire mall. Good point. Much less. By the way, Michael Coors yesterday also announced for shutting down. There are other malls that do well, so it's not just a mall issue. No, I think it's a San Francisco issue.

It's also a work from home question. As we're now starting to see a lot of company, I think Amazon is back to five days a week. Obviously Trump's pushing in that direction, but it's not all of the tech world for sure. No, no. It's financial services also. And I think it's fair to say, we want St. St.mrs. Go to win. Of course. That's it. They have a new mayor. We'll see if they so. So I feel like we need like a final stock ticker from you or something. So you were to ask a question. What else do you want to look at? Look, there are other companies in financial services that you can buy, like a Morgan Stanley or Blackstone or things like that too.

There are other companies that do well other than the top 10. Doesn't mean you can't own them, but you can own others. Sirrod, thanks. Closing bell starts now.