Power Lunch - Tech Titans, and Cost Conundrum 4/11/23

Episode Date: April 11, 2023

The Nasdaq is falling again today, on pace for its 5th drop in 6 sessions. We’ll take a closer look at 2 tech titans off to a rough start in April: Apple & Tesla.Plus, the markets are awaiting tomorrow’s big CPI print. If it shows inflation cooling, could the Fed press pause on rate hikes? Could stocks sinks if keeps hiking? We’ll weigh all the scenarios. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Launch alongside Kelly Evans. I'm Tyler Matheson. And coming up today, the NASDA falling again on pace for a fifth drop in six sessions. We're going to take a closer look at two of the biggest tech names, Apple and Tesla. Tesla down nearly 9% already in April after a hot start to the year. Indeed. Plus, the markets are waiting for that CPI report tomorrow morning. If it shows cooling inflation, could the Fed press pause? But what if it's hot and they have to keep going? How much would that sink stocks? We're going to look. look and game out all the scenarios. Let's get a check on these markets, though, first. With the Dow at new session highs pretty much after some interesting comments from Austin Goolsby in the past hour, maybe showing a little more openness, or he's been typically considered somewhat more douged, but kind of reiterated his concern about the banking system. The S&P's up a third of a percent. The NASDAQ still down by 10. All right. Let's check in with Christina Partsen-Evelas, who is in studio for a look at some of the movers. Welcome, Christina.

Thank you, Tyler. Unfortunately, the NASDAQ's on a roll for five days in the right out of six. The Dow is the only consistent in in inancy right now over the last week or so, up about 1%. If you got worries about inflation, which the CPI report is out tomorrow and then the start of bank earnings on Friday. And the banks, speaking of them, are certainly taking a bearish tone on the economy. Wells Fargo calling for a 10% correction in the S&P 500 over the next three to six months. Wall City is worried about a credit crunch due to tightening financial conditions post-Silicon Valley Bank fallout. Let's talk about some names, though. Heavyweight Microsoft, you can see shares down 2% after.

after UBS trimmed its estimates for Microsoft Cloud Service, Azure. They say migration to the product has been pretty slow, so that's part of the reason why they downgraded the stock. CarMax shares, though, surging higher after earnings nearly doubled estimates. So it was at 44 cents a share versus the 24 cents estimate. That's the biggest earnings beat since late 2009. But unfortunately, it's not necessarily because of demand, but because of cost cuts. Shares are up 10 percent, and the year of efficiency continues.

Lastly, shares of snowflakes selling off. We got a downgrade for a Midwest boutique. But there was also a recent company or company insiders, I should say, including the co-founder selling stock. And it was only revealed with the SEC yesterday. Insidered selling is sometimes seen as a bearer signal for the stock. And that's why contributing to the selloff down 5%. All right, Christina, thank you very much.

Christina parts in avalus. All right, focusing in now on the tech trade, the NASDAQ has been the center of outperformance this year, up 15%. But something seems to have changed in just the past week, as the index now, as Christina pointed out, pacing for its fifth negative day in six. Components like Tesla up more than 50 percent despite having to cut prices, but down more than 10 percent so far in April. While mega caps like Apple up more than 20 percent this year, but slumping recently. So has the positive sentiment on growth and tech this year peaked for now at least. Let's bring in Bernstein senior analyst Tony Sakhanagi for his tech.

tech take. Tony, as always, good to have you with us. I'll start with that general question. Is tech and growth, are they taking a breather? Good afternoon, Tyler. I think they are. We've had a spectacular tech run-up year-to-date, as you mentioned. And when we look at technology valuations, they're trading at collectively at about a 40% premium to the market. The historical premium for tech is about a 25% premium to the market. And yet tech earnings this year are actually supposed to grow more slowly, and revenue is supposed to be more slow than the broader market. So you have elevated valuations and you have expectations for weak or relative growth for technology. And I think as we get into earnings,

investors are processing that and pausing and saying, look, does it continue to make sense in an environment where the macro is questionable and where we have relatively elevated valuations? And and some questions about the relative growth rate. So that's the, that's the broad sort of 50,000 foot view. Let's bear down on a couple of stocks that you follow that are very popular in a lot of people's portfolios. They probably own them if they own mutual funds. They certainly own them if they own index funds. Let's start with Apple and your thoughts there. Sure. So, you know, Apple is an incredible company and has a, you know, a dominant consumer. franchise. As an investor recently, very articulately said, they have a monopoly on the most

important thing or nearly the most important thing in most people's lives. And that's a pretty powerful franchise. That said, if we look at Apple's valuation, it's trading at about 28 times this year's earnings. You know, the market's a little bit, around 20%. So we're looking at a 40% premium, which is about the highest premium that Apple has ever traded at. And this year, consensus expects revenues and earnings to go down. Apple had a spectacular last few years. I think this year and potentially next year will be digestion years. So you have the same dynamic that's happening in the overall market, which is you have Apple at nearly its peak relative valuation of all time, and yet you're going to have more muted growth this year. And so I think investors are

are trying to assess that trade-off. So, Tony, this is such an interesting point because obviously one of the reasons why people were in tech was this idea that you want to be with the growers in a lower growth environment and that kind of thing. Is it possible that tech's just going to take the year off and then go back into revenue growth leadership or earnings growth leadership? Because this year they're just kind of catching up to the downside like they led on the upside post-pandemic. So if people stick with the stocks, will they be roarded over the next 24 to 36 months, even if they're not in the near term? Right. Well, I think it's a great question, Kelly. And you're right. So for this year, tech earnings and revenue growth are supposed to be below the market.

For next year, they're supposed to be above the market. But what's interesting to me is when we look out five years and we look at tech earnings growth over the next five years, it's about a 2% premium to the market. Historically, the five-year growth rate for tech is at a 4% premium to the market. So again, when we look out near term, the next year and longer term, over the market, over the next five years, earnings and revenue expectations for tech are more muted, yet we have these elevated valuations. And that is something that does concern me as we look beyond just the near-term trade on technology. Yeah, sure. So obviously, Apple is kind of a unique case because of the

hardware component and pandemic demand. Let's broaden it out a little bit, though. I mean, I don't know if you want to speak to Amazon, but, you know, across mega-cap tech, do you think that they all are going to follow the same kind of patterns or not here? Well, I think that's a really big question for the market going forward. What we've seen historically is that technology market leaders change every decade or two decades. When we look at the 10 largest technology stocks by market cap at the peak of the bubble, 1999, 2000, only one of them is in the top 10 today, and that's Microsoft.

All the others are no longer great stocks. and seven of the 10 largest stocks at the peak of the tech bubble, they've never gotten back to their peak valuations more than 20 years ago, which reflects sort of how dynamic tech is. So that's the real question is when we look at the growth rates, the expected growth rates for Amazon, for Microsoft, for Google, for Facebook, for Apple going forward, they're dramatically lower over the next two years than they were over the last three or four years. And that begs the question of whether they will be able to sort of, sort of cyclically improve or readjust their business models to have sustained growth.

Historically, that has been difficult for large-cap tech to sustain leadership over 10, 20, 30-year periods. We don't want to let you go without getting a quick, and I do have to underline quick thought on Tesla. All I see as I drive around northern New Jersey are Tesla's. I mean, they are everywhere. But if you look under the hood or in the case of Tesla, the frunk, because it really doesn't have a hood per se, you seem concerned about some of the numbers.

specifically about market share declines in the U.S. and even maybe more notably in China. Correct. Yeah, so look, Tesla is a great company and had, I think, a first mover advantage in the electric vehicle market. And so they've grown tremendously to their credit. And they're still growing tremendously. But their goal is to grow at 50%. Last year, they grew a little under 40. this first quarter, their deliveries were up 36%. And they're starting to grow more slowly because we are seeing more competition, and we are seeing market share losses as more EVs enter the market. This year, we expect 180 new electric vehicles to debut globally in terms of new offerings.

And that heightens the competition, and Tuft doesn't really have anything new this year. So we're seeing pressure on their growth rate, and the company is responding by lowering prices. Tony, always great to hear from you. Thank you for your time and sharing it with us today. We appreciate it. Thank you, Tyler. Tony Sakanagi. Let's take a look now at United Health.

As everyone looks forward to earning season with the big banks, well, an even bigger company reports on Friday. And a big day for United Health, which is one of now the largest market cap companies in the United States. $483 billion, in fact. It's bigger than JPM and City combined. And it's had the largest impact on the Dow, which is a price-weighted index.

Healthcare as a group has more weight in the S&P than the financials. Joining us now to preview the stock. John Ransom is managing director of healthcare equity research at Raymond James. John, it's good to see you. And first of all, you know, healthcare is not exactly a cyclical type of trade. So we don't look to United Healthcare maybe as a bellwether or is a tell for the rest of the space. Or do we? What's at stake here?

This group, the difference between the volatility and earnings and the volatility in stock price is quite remarkable. United Healthcare never misses. So you can dial in 13 to 16% EPS growth for the next three years, and they really won't miss that very unlikely. But what is volatile is the price that people decide to pay for? That jumps around quite a bit. And what we found is that we think investors generally overreact to regulatory fears, and when they drive the multiple down, that's the time to buy it. So as you know, we upgraded it last week because there were some perceived regulatory fears and Medicare advantage that got a lot better. And so that was a clearing of it. And this is frankly one less thing for people who worry about. Sure. So, you know, I can't help but think when I listen to the certainty about it,

that that that must be the end of the certainty. This Friday they're going to miss or something, right? How long can trends and streaks like this really continue? Or is that what happens if you're effectively, you know, government utility to some extent? Well, we did this analysis a couple years ago. And we calculated that not. 90% of the growth in United is either the 4% from capital deployment, either M&A or share buybacks or a combination. And the other part comes from Medicare Advantage. So if United Health is going to get in trouble, it's going to be because they miss in Medicare Advantage for some reason or the government moves their cheese. But absent those two facts, that's 90% of the story.

And they're just coming off a year where they spent $21 billion in M&A, and that's going to be a cold spring probably for 24 and beyond. And then, like I said, we did have some concerns about Medicare Advantage rulemaking, but the rules got better than what was feared when the stock was dropping. I don't think many people know that United Health is the third largest Dow component. I don't think many people understand that its price in the 500s in that price weighted index gives it incredible influence on what the Dow does in any given day. I'd like to hear you comment about that, number one. And number two, answer a kind of sophomore economics question or finance question. Is this a stock that might split?

You know, I don't think professional investors spend a ton of time thinking about the Dow because it is price-weighted. There's not a lot of money index to us. So they spend a lot more time thinking about the S&P than the Dow. So I'll leave that to people who focus on the Dow. In terms of a price split, I think that's actually a good idea because, you know, at the margin, you could get more retail interest if the stock was, you know, 10 times lower than it is today. So, yeah, it is, as weird as it is, it is hard to think in terms of $30 in earnings and $500

in stock price. People would much rather think about $100 stock price, you know, in numbers that are one-fourth or one-fifth that size. So I think that's actually a good thought. We've not heard anything about that from the company, but it wouldn't surprise us. You made me feel so good there, John. I had a good thought. It really makes me happy.

You did. Thank you, John. Appreciate it. John Ransom. All right. Thank you. I'm going to keep that streak going with good thoughts. Speaking of the health space, shares of WW, the former Weight Watchers,

they're soaring today all on hopes that weight loss drugs will usher in a new era for the company. Meanwhile, shares a Moderna falling after the company updates the markets on several of its vaccines. Health and money. Two of the big topics there ahead on Power Lunch. A huge shift in the health and weight loss space. The growing popularity of drugs like OZemPEC for weight loss could upend the billion-dollar diet industry. The shift pushing companies to hunt for deals in order to stay relevant. WW, better known as Weight Watchers, soaring nearly 50 percent today after coming.

completing its acquisition of a telehealth company, and Goldman Sachs upgrading that stock to buy and putting a price target that's more than twice the current price. The FDA taking notice of the sudden popularity of these weight-lost drugs, and Meg Terrell sat down with the FDA commissioner. Very interesting, Meg. It was very interesting. We talked about a lot of things.

I visited their headquarters at Silver Spring, Maryland. Dr. Robert Caleb is actually a cardiologist by training, and so I did ask him about this moment we're seeing with these medicines from Novo Nordisk and Eli Lillardis. Here's what he had to say about them. This is one of a growing number of classes of drugs that are dealing with the axis between our gut and our brain. And I think a lot of things that we thought were willpower before.

We're now coming to understand that our bellies are signaling our brain and vice versa through endocrine pathways. So I have great hope for this class of drugs, but we have a saying at FDA, you've heard it. And God we trust. all others must bring data. And so there is already a lot of data around these medicines, obviously, that help them get onto the market.

But one of the trials that the commissioner is particularly looking forward to seeing is one that's going to read out this summer. Novo Nordist's Wagovi, that's the drug approved for obesity. They're actually looking to see if helping lose that weight can translate into protecting people against heart attacks and strokes. And that will be an incredibly important study for, A, the societal question of who should be getting these medicines, and will we start to pay for them in a bigger way? reimburse for them in the United States.

Asking for a friend here, can I go to my doctor, no, can someone go to their doctor and say, I want Wagovi or I want Mungaro? You could, of course. For weight loss. Yes. For weight loss, you know, and it is approved for specific folks. Wagovi, particularly for people with certain BMI's and certain health conditions. And the others for type 2 diabetes.

Mungaro is only approved for type 2 diabetes. Of course, they can be used. But you can be prescribed off-label, can't you? Exactly. I asked Dr. Kalef how he thinks about the, the off-label use of these medicines because we hear about them a lot. And he said the FDA's job is not to get in between a doctor and the patient. Off-label use is something that is allowed if a doctor thinks it's appropriate. Where he did warn is these cases where we've heard about people ordering

these online from unauthorized sellers compounded versions of these. And he said fraud use for weight loss is something people should be very careful about. You just don't know about the safety of these kinds of things. So where does that leave us then? I mean, one of the things we often talk about is how are we going to know about long-term side effects for things that, my understanding, is people have to take pretty much forever? I mean, what is the exit point? And obviously, we can't run lifelong studies on this and then let people start. I mean, so it's going to kind of be an experiment playing out in real time. Yeah, that is something we talked about as well. And folks can see the whole interview at cnbc.com. You know, he was saying we should have the data system

set up to really track this well, using electronic health records. We don't have that system in the United States like they do in the UK. and in Israel. He is confident we will see any signals that might pop up. And he says, of course, the safety could turn out to be better than we expect. He also took issue with the idea that you might have to take these forever. He thought perhaps with more study and behavioral interventions, and that's where the WW Weight Watchers idea comes in, maybe people won't need to take the drugs forever, but we have to see. Very interesting. All right, let's turn to Moderna, obviously, that stock lower. One of the worst in the S&P today, it's down of about 3% though, so not huge.

It just had this setback for its experimental flu vaccine. At the same time, they are trying to offer vaccines for a variety of other treatments, cancer, heart disease, other conditions. So how much of a headwind? And what is the novelty and the reason why this flu vaccine didn't kind of work here? Yeah. So flu is one of the areas Moderna is trying to go next with its MRNA technology. There's been a lot of skepticism that they'll be able to be better than the current seasonal flu vaccines. And they had yet another sort of data set back today at their vaccines day where they said this phase three trial that they're running in the northern hemisphere didn't have enough cases accrued to be able to have an early efficacy readout to say, hey, this looks a lot better than current flu vaccines.

They did look at the immune response generated by this vaccine, though, and that looked pretty good. They showed superiority compared with an existing flu vaccine against influenza A, which is the more common form of flu, and non-inferiority against influenza B, which was actually better than what they saw in a study they did in the southern hemisphere. However, you know, the fact that there is this sort of delay is another thing stacking up against analysts who already are sort of skeptical about how big this market's going to be for Moderna. All right. Meg, thank you very much. Thank you. We appreciate it.

All right, further ahead on the program, the NFL unveiling pricing for the Sunday ticket on YouTube. We will share the details on that. Plus, speaking of prices, Bitcoin crossing $30,000. What's leading the climb higher? We'll be back with that and more on Power Lunch. Welcome back to Power Lunch, everybody. Bond yields slightly higher today as we await the CPI tomorrow. Rick Santelli joins us now from Chicago with the details.

Rick. Yes, and short maturity is leading the way as we go in front of CPI and PPI over the next two sessions. Could two data points be any more important? I don't think so. And if you look at a two-year, we're hovering at the highest yields. Well, basically since April began, the 3rd of April, the first trading day. Ten-year-note yields, by the way, are hovering at the highest level since the 4th of April. And if you open that chart up for twos, you can see that the high watermark, the high yield,

close is a bit over 5% of 507. That is the 8th of March. And what's notable here is only two maturities took out their fall high yield closes. The two year note and the three year note and neither are anywhere near those levels now as you see on that chart. Three months to tens, the real recession spread. You could see it there for two days. It's knocking against minus 160, which of course would be a historic inversion as you see a 40 year chart. And finally, when it comes to CPI tomorrow, uniformly everybody seems to be talking about year-over-year core. And letting us know that it may not be a linear type situation, except for it is a linear

situation. The high watermark was 6.6% in September of last year. Okay? That was the highest level since 1982. September 6.6, October, 6.3. November was 6.0, December 5.7, January 5.6, and our last read in February is 5.5. Lower every month. Let's see what it looks like. Tomorrow, Kelly, back to you. Rick, before we let you go, what did you think of Austin Goolsby's comments last hour? Peter Bukvar says we might have a dissenter on our hands. Well, you know, I guess better late than never is when I thought. I would say pretty much that I'm looking at the butt side of the.

the horse as it runs away from the barn when it comes to what our central bank has already done. Rick Santelli, thank you very much, joining us from Chicago. Oil is trading, it says oil trading closing for the day, Pippa. I can't read that sentence. What happened with oil? Trading closing. It is a tongue twister, but it is in the green again today ahead of tomorrow's key inflation report.

Now, we did just get the short-term energy outlook from the EIA. That is a widely followed report. And they actually see WTI averaging 7924 this year. So that's about more than $2 below where we currently are. And they said that forecast could be revised lower based on ongoing fallout from those banking issues. Now, turning to Nat Gas, it did just now turn lower, although that fall is that big. Oh, now it's higher again. Volatility always, you know, when these markets are closing, you never know what's going to happen.

So higher again today after that 9% boost yesterday. And the strength is lifting energy stocks, best sector again today. Now, two names to point out. The first is New Fortress Energy. This is an LNG play. It's up another 5% today and now up more than 10% over the last two sessions. That follows a bullish note from Deutsche Bank, which initiated coverage with a buy rating. Also, range resources is on the move following an upgrade to overweight over at Wells Fargo. Now, one other quick thing to note. So yesterday we talked about Exxon and PXD. Today we're getting more merger news in the broader commodity complex. That is, of course, yes. So Glenn, Gold deal? Or is it copper? Well, okay, so that was the punchline. Glenn Coors sweetened its deal for tech resources, and then Newman raised its bid for Newcrest. Newcrest, of course, known for gold and tech known for coal. But as Kelly beat me do it, do it, both have a lot of very valuable copper assets, and copper is the key to electrification.

But are people making too much of that exposure? I mean, should just put this way, why did both these companies traditionally say we're gold companies, but we have copper exposure. I mean, it still feels to me like the bull market right now currently is gold. Maybe yes, copper for the next 10 years. But I don't think this could have gotten done if gold wasn't also doing as well as it is right now. Yeah, for sure. I think the main driver is still the goal. But I think the excitement factor is the copper. And when you're trying to pitch this and trying to say, we're a future, we're a forward-looking company, you know, mining, is that really forward-looking? That's not exactly the first thing you think of. So if you're emphasizing the copper element and saying

electrification, you need us. I think that's what kind of gets people excited. Yeah. I haven't this much excitement and commodities and M&A talk in quite some time. Pippa, thanks. All right, Pippa, let's get to Bertha Coombs now for a CNBC News Update. Hey, Tyler, here's what's happening at this hour. Apple is set to launch its first retail stores in India next week. The tech giant announcing today its Apple BKC store will be open April 18th in Mumbai, and a second brick and mortar location will open two days later in the nation's capital of Delhi.

Walmart, meantime, has decided to close. four stores in Chicago. The retailer which opened its first location in the Windy City 17 years ago says the decision did not come lightly, but that the stores have never been profitable since opening, losing tens of millions of dollars a year, with annual losses nearly doubling in the past five years. And YouTube TV unveiling today the price for its NFL Sunday ticket package. If you're already a YouTube TV subscriber, you can buy the package for $349 for non-subscribers. It will cost you $449. YouTube TV became the newest home to Sunday ticket in December,

paying roughly $2 billion for those rights. And at about $450, that's about $26 a game for the 17 game season. I guess that's okay. Yeah, I think it's still a loss leader maybe, but they probably think it's worth it. Bertha, thanks. Ahead on Power Lunch, the IRS is on The Hunt. It's planned for spending $80 billion in new funding.

Cracked out on the wealthy, on large companies, and on tax evaders. The details when we come back. Welcome back to Power Lunch. You got a little less than 90 minutes left in the trading day, and the Dow is pretty much at session highs up 183. The S&P is up 13 points to 4123, and the NASDAQ is down again. Could be the fifth down session of the past six, although it's only a three-point decline. Bob Bassani, we'll see if they can turn things around here in the NASDAQ for the close.

Yeah, the important thing is we're getting a bit of a breakout. I want to show you the S&P, 4124, that was the old closing high a week ago. We're knocking on the door to that. And the reason we're doing so well is a very broad rally. We're seeing cyclical stocks break out and defensive stocks. Tech is down, but not much. And that's why the market keeps advancing. So there we talked about these cyclical stocks, which were a mess a week ago,

and have been bouncing, Caterpillar, Dover, New Corps, Mosaic, all coming off the low. These are classic deep cyclicals. At the same time, we're also seeing consumer cyclical stocks do better. So I've been pointing out housing-related stocks in the last few days are starting to peak out. Not new highs, but in an uptrend, Horton, Lenara, Whirlpool, Mohawk Industries, all doing better. At the same time, we're seeing defensive stocks like health care and consumer staple stocks also contribute. So McCormick, General Mills, Kimberly Clark, Proctongebble, all these stocks are up more than 10% in the last. few weeks. So combined defensive stocks, combined with cyclical names, you've got a little rally.

And at the same time, remember, Tyler, tech down today, but not that much. So you get a gentle move up in the S&P 500. Tyler, about to you. Thank you very much. Investors are gearing up for a critical CPI report. That comes out tomorrow morning. Inflation expected to drop to 5.2% year over year in March from 6% in February. So if inflation eases, might the Fed take a pause or is another quarter point rate hike ahead? Phil Orlando is chief equity strategist at Federated Hermes. Phil, welcome. Good to have you with us.

I see that the nominal number is supposed to fall to 5.2 percent from 6 percent. But as Rick Santelli pointed out, the core inflation number, there's an expectation that it may rise from 5.5 to 5.6. Who knows what it does? why would there be such a disconnect between what overall inflation and the core which strips out energy and food? Why would there be such a disconnect? Well, Tyler, first of all, thank you very much for having me back on. But I think you just answered the question. The composition of nominal and core CPI are just that.

They're different. You don't have the volatility of the food and energy prices involved in the nominal number. The Federal Reserve, I think, is looking at all of the. metrics. And the thing that really resonates with us is that Powell and this Fed have really been dug in on trying to get the inflation genie back on the bottle. You go back and look at what the Federal Reserve has done over the last eight rate hiking cycles over the last half century. In every instance, they took the Fed funds rate to a level above the nominal CPI year on year number. got the upper band of the Fed funds right now sitting at 5%. As you pointed out, the nominal CPI

sitting at 6%. So you look at those two numbers and you say, okay, May 3rd's coming. The market has priced in a 70% chance of another quarter point rate hike by the Fed. That makes perfect sense. But suppose tomorrow's number falls, you know, falls off a cliff. Suppose that number drops down to 5% or below 5%. Then the Fed's got a little bit of a conundrum. I, I, I I think the May 3rd meeting, they're probably going to hike again based upon the dynamic we just laid out. But maybe that's the last. Maybe they're done then, particularly in light of some of the reading I've been doing about the way banks are paring back on loans, that they're not making the kinds of.

And that's tricky because that leads potentially to not just a little blip of a recession, but maybe something deeper, more profound. Well, you look at where the street is in terms of economic growth right now. They're quarterly GDP forecast. The consensus has negative GDP in the second and third quarters. Our forecast here at Federated, we've got negative GDP prints in the third and the fourth quarters. We think this first quarter, quarter that is going to be reported in a couple of weeks, is going to be the high water mark for the year.

But you're right. How bad or not bad will the tighter lending standards and the banking crisis emanate to over the course of the year in terms of revenues and earnings? To some degree, we're going to be looking towards this first quarter earnings season, which is going to start this Friday, and not just the numbers, but probably the guidance. What are company management seeing in terms of how are they tightening their lending standards? what are their loan loss provision is going to look like. So there's a lot of open questions right now that we'll have better information and better answers to over the course of the next couple of weeks. But we may not have a perfect answer right now, right today. Yeah.

And that said, I think it was Goldman today, Phil, gaming out scenarios for the CPI report in the morning where they said, if it prints over 6%, the market falls 2%. If it's under 4.5 or 4.6, we rally 2%. I mean, we all kind of know the contours here, but what would you say to people about positioning and the influence that this print will likely have? What would be kind of a happy print and a not-so-happy one? Yeah, I don't disagree with directionally Goldman's assessment in terms of the read-through on what's the Fed going to do from a policy standpoint. From a positioning standpoint, you know, in the markets, I think you've got to go into tomorrow's number, you know, look in to play defense.

I mean, Bopasani talked about that a little bit a moment ago. We're playing defense right here because of the uncertainty associated with all of these different moving parts. So you've got, you know, more stable demand categories, health care, energy, staples, utilities that are cheap. They've got very good dividend yields. And they're likely to continue to do well regardless of how good or how bad this metric tomorrow comes out and what the Fed does. and how good or how bad earning season is. So our point of view is let's play defense here a little bit until we've got some clarity on what a couple of these moving parts are.

Sure. And I imagine that's going to be more than just inflation, jobless claims in particular over the next month or two, things like that. Phil, thanks so much for your time today. We appreciate it. Kelly, thanks for having me back. You got it, Phil Orlando. Still to come, the IRS gearing up for a major crackdown on the wealthy

and on corporate America. We've got those details next. And as we had to break, take a look at CarMax on pace for its best day since November, a 10% pop after its earnings report this morning, overcoming a host of challenges like falling used car prices, consumer confidence, inflation, and higher interest rates. We're back after this. Welcome back, everybody. $80 billion in new funding.

That's what the IRS is getting. So how's the money going to be used? Let's get to Robert Frank with the details to borrow the old line. Willie Sutton, you know, they rob banks because that's where the money is, and it sounds like that's what's happening here. It is where the money is. And if you're a high-end taxpayer, you've basically had an audit holiday for the last seven to ten years. Auto rates have plunged 90 percent for those very top earners.

The IRS now has 7,000 enforcement agents that they're going to hire over the next two years. That's a lot of enforcement agents. They're going to be very well trained, especially in the sophisticated tax strategies that the wealthy are using now. And the IRS in laying out this plan specifically pointed to partnerships and pass-throughs as the area. And it's incredible. They said that the number of pass-throughs has increased by a third over the past 10 years. There are now 4 million pass-through entities in the U.S. And if you look at those pass-throughs over 5 million, so those used by the wealth, that's increased 75%.

And so it's almost become a shadow tax system where people are using shells and interlocking webs of pass-throughs and LLCs. I wouldn't say to hide income, but certainly to minimize their taxes. It makes it a lot harder to follow. Harder to follow. So is there a possibility that these 7200 agents will not be hired? Well, they're going to try. And the question is, number one, can they be hired? Will they have the right skills?

And number two, will they collect the amount that's expected? They expect that the CBO estimates about $180 billion in added revenue over the next 10 years. If you think about the tax gap right now, the amount of unpaid taxes, it's around $400 billion a year. In taxes, it should be collected. collected that aren't. They're only hoping to get an average of 18 billion of that with this new group. So on the one hand, it's a low bar. On the other hand, they're big questions over whether they can do that, whether they can actually find the people who are avoiding taxes and collect it. And by the way,

not impact those who make less than $400,000 a year. Right, right. What's the statute of limitations, broadly speaking? See, for everyone who's listening to this and going, okay, you know, is this all about proactively going forward? or are we talking about clawing back some of the stuff, and if so, from how many years? They can go back. Typically, they can go back two to three years. Typically, if you've had three years ago, if you did something a little pushing the edge,

unless they audit you this year, you're probably safe. But they can go back even further if they think they have a criminal or serious case. And what about for corporate America? Because we mentioned, and we focus a lot on the wealthy individuals, but what is the aspect of this for companies that people should be on the alert about? The three areas are wealthy individuals,

individuals, high-income people, and companies. And they're going to hire a whole set of accountants because actually corporate accounting is very similar now to high-net-worth individual accounting who behave like institutions. So companies, although the revenue amounts aren't as great and the lack of compliance is not as great with companies, that's going to be a big focus. And they're going to start using technology, data, artificial intelligence to look at which companies, let's say, among their peers sort of stand out for their aggressive tax treatment and then go after those companies.

All right. Some would say a long overdue move, perhaps. Robert, thank you so much. Somebody's got to collect that money, right? Exactly. Robert Frank. All right. Up next, a world win for World Pool, the company getting an upgrade to buy from Goldman.

We will trade that name and others in today's three-stock lunch. We're right back. Welcome back, everybody, and it's time for three-stock lunch. On today's menu, we have Disney getting a buy rating, they're Guggenheim reiterating, I should say, on the entertainment company. But saying the questions still remain, they adjusted their price target to 130 from 140. Disney shares are down fractionally. Caterpillar, a trending stock has been all over the place, a big laggard last week,

but leading the doubt both yesterday and today. And Whirlpool, getting a buy rating from Goldman Sachs, making it one of the best stocks in the S&P. They say now's a good entry point. For more on how to trade these three, let's bring in Victoria Green, chief investment officer with G-squared private wealth. Victoria, it's good to see you. And let's start with Disney. What would you do with the shares here?

I think one thing is you need to be prepared to ignore the noise on this stock. I'm a buyer of Disney at these levels. I think that they're about to break out. They're bumping right against their 200 day. I see them leap-bogging in front of it because their content is so strong. Disney Plus has grown to 165 million subscribers, and they only started really offering that since 2019. And if you look at what they have coming out this year in the theatrical releases,

you've got Indiana Jones, you've got Guardians of the Galaxy, you've got Little Mermaid. So some of this is you need to ignore the noise, realize the stock is trading about 25 to 30 percent below average price target on the street, and look to be a buyer of it coming off these lows. Well, let's go to Caterpillar. What do you think there? I don't think enough bad news is priced in yet. I don't think this is a terrible stock. I just think it's at risk. If they miss again on EPS, it was very forgiving for a Q4 miss. But if you look at it, they could be right for a slowdown. They're very economically sensitive. Oil and gas aberrations have slowed down marginally. We're off about 30 rigs. If you look at the Baker Hughes Oil and Gas recount for about 751 versus 784 of a peak in December. So you're 30 rigs less. If you have a slowdown in construction and you have a little bit of a slowdown, the stock is not priced for that. You could see it turning back close to those October lows at the 160s. This isn't necessarily a cheap stock. And I see it at risk for any type of miss, any type of bad guidance is going to continue to knock this stock off and keep this downtrend intact. Very interesting. All right. So what about Whirlpool then, which is popping on this upgrade? I agree with Goldman Sachs. I think this is a stock you need to like and get behind.

They're coming off their 52-week lows. You know, they are a very cheap stock. They're trading about eight times forward estimate of PE. And if you look at what they're doing, they're doing cost cutting. They're taking out about 500 million out. They're streamlining. They're focusing on higher quality brands. And they've also really focused on getting out the discounting, getting their supply chain work through. And so I see the stock is on the rise. And I see it as a cheap way to get some foothold. into the consumer discretionary that may not be ads discretionary. Because if you think about it, when your washer and dryer goes out or your fridge goes out,

a lot of times you don't have a lot of option other than to replace it. So there is kind of a necessity to some of their products that will see them be able to weather any contraction a little bit better. So what market are we in Victoria where Caterpillar may still struggle, but Whirlpool can do okay? It's all about how their price. You know, price is what you get, values what you pay. Or price is what you pay, values what you get. Oh, my God, I messed that one up. But look, you got to think about how they're priced.

And I think Caterpillar is a little bit expensive. And Whirlpool is coming off of a very extended period of underperformance. And I think could actually get a little bit of a pickup because the bad news was priced in. If you look at Caterpillar, I don't think the bad news is priced in. They didn't actually beat on EPS and Q4, but the markets were willing to forgive it because of backlog and what it looks like this year. But with the IMF downgrading global growth from 2.8 to 2.5 percent, I think Caterpillar is more at risk and more sensitive and not.

priced in for bad news, whereas World Bulls cheat. Real quick, final question, Victoria, do you kind of go with the crowd on the thesis that big banks are going to do great, small ones are going to struggle? Or would you approach the financials at all differently as the earnings season is about to get underway here? I think you've got to approach it like you would a hand grenade. They're all a little bit dangerous right now. If you look at dealmaking, that dried up in Q1. So the big banks are going to see revenues from that drying up, even if they had deposit flows. Net interest income may not be as strong as we're looking at hopefully trading pictures.

up to the difference between the deal making and investment banking. But I don't think anybody is immune to some of these pressures the banks are under. And the fact that they need to start paying more on deposits because they're seeing all these deposits go to money markets and treasuries and high-yield savings accounts, I think that's just maybe going to pressure big banks better than small banks, but I'm not sure they're immune to some of these stresses. True. No, it's a great point. All right, Victoria, we appreciate your thoughts today.

Thanks for your time. Thanks, guys. Victoria Green. Up next, crypto on the move, 30K,000. Bitcoin, a big ether upgrade on the books. And we'll talk about some of the stocks exposed as well. Power Lunch, back after that. Welcome back to Power Lunch. Take a look at Bitcoin. A huge comeback story this year, up 82 percent and topping $30,000 for the first time since last June. Obviously, outperforming almost all other asset classes. But by the way, it's not just Bitcoin. Ether has

also been on a run tomorrow. They apparently have this upgrade that's going on to the ether chain Chappellea, they're calling it. They say that some of the changes made to ether even last year and have reduced energy usage quite substantially. And it's lifting stocks like Coinbase, by the way, which are also rallying and having a pretty good session up 6% micro strategy, obviously, which has a huge Bitcoin portfolio as well. And outperforming gold, although many lumping them together in terms of the sentiment. If you go back to that chart that showed the year to date on Bitcoin, if we could do that, there is a jump there right in, in, in, in, early March where the SVB and signature bank issues came in.

There it is. You see it? Boom. That's where, I mean, it was higher from January into early March. But that last sort of jump is, I think, related to people who were afraid of fiat currency. Well, and the irony that with Bitcoin, it was originally getting your current, your crypto off of the exchanges that was the concern. And then all of a sudden, in early March, it was getting your dollars out of the banking system.

Right, right. The main worry. And so I think that gave him a second way. So here it is up another thousand dollars today. And again, the Fed stuff, too. I mean, when we're talking about rate cuts and all the rest of it, off we go. And we mentioned earlier that this is an important day for football fans. Football never goes away.

It's never out of season. Google announcing the prices for NFL Sunday ticket, $449 for the season. YouTube TV subscribers will get $100 off that amount if you subscribe to that product. You can save another $100 by getting in early Google paying roughly $2 billion a year. for rights to Sunday ticket, so it will need somewhere around 5 million subscribers to break even on that product. There was a time when Sunday ticket was really, really novel. I think Red Zone has taken away a good bit of that novelty. And that's part of this deal, possibly. Would they say $40 more, you can get them both? Yeah. But Red Zone is a great product. Red So it's a great product.

And I'm not sure I want to pay all that much to watch the Bears and the Cardinals. Who's your are you still a Washington commander? No, I'm a Giants fan. I'm a Giants fan. Good. Thanks for watching, Power Line. Closing bell starts right now.