Power Lunch - The End Of A Road Trip, Russia Myth Busting, And Is The Economy Running Too Hot? 8/5/22

Episode Date: August 5, 2022

The jobs report blowing away Wall Street’s expectations. Renewing fears the economy could be running too hot. Former New Orleans Mayor Marc Morial weighs in. Plus, Yales’s Jeffrey Sonnenfeld says the demise of Russia’s economy could be imminent, and breaks down the biggest myths about the energy superpower. And, our Power House Road Trip comes to an end. We arrive in Los Angeles to where homes still have massive price tags. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Thank you very much, John. Welcome to Power Lunch, everybody. I'm left with that last thought there that people are no longer just staying home and vacuuming. They're actually getting out this summer. Welcome to Power Lunch. I'm Tyler Matheson. Big jobs Friday, and we got a big jobs number. 528,000 jobs added to the economy in July. That was more than double what had been estimated. The unemployment rate falling now to 3.5 percent, lower even than pre-pandemic. Average hourly earnings jumping 5.2 percent. from last year. At least for today, recession fears, it seems, taking a backseat to inflation worries yet again and more rate hikes possibly coming from the Fed. That's why we're seeing stocks mixed after this blockbuster jobs number that for the economy, at least, Bob Pazani, is good news. Yeah, it's good news for the economy and it's hard for people to understand that the stock

market is a discounting mechanism. So it looks six months ahead. The reason we're down today is there's concerns that while we're not in any recession now, it doesn't appear to be so, maybe down the road the Fed will be forced to be even more aggressive than a lot of investors want and they may induce a recession. This is the way the stock market thinks. It's a forward-looking mechanism. So if you look at it, the selling pressure is really very modest today. The volume is not very heavy. People are not looking to get out. In fact, the worst print was right at the open. We were a route to break 4,100 on the S&P 500. That didn't happen. We've rallied and essentially held on fairly well here. Dow's a little bit weak here, but some of the selling has been in the

NASDAQ, but even here, I would say, very modest declines overall. One of the reasons the S&P has held up is because values doing very well. Oil stocks have generally held up. Now, oil's been all over the place today, 87 to 91. Right now, it's slightly on the upside, but you see some of the big material names like Freeport MacMaran rallying back and some of the well-known oil companies like APA, Devon, Occidental, and Chevron all doing well. That's That's one reason the overall market's holding up. Another reason has been 10-year yields are popping. We were up 18 basis points in the 10-year.

And when you get something like that, usually you're going to see bank stocks rallying. That's the second leg that's holding the market up. JP Morgan and some of the big super regional banks like 5th 3rd, Zions and Wells Fargo, all moving to the upside. As for the key rally in the last, oh, since mid-June, tech stocks, mega-cap tech? Well, they're down, but they're not down much.

and there is no aggressive selling here. I look at the volumes in these every day. Apple, Micron, Nvidia, LAM research. You know, Nvidia's up 20% in a month. And yet when I look at the volume today, yes, we're down, but there's nobody looking to get out in any big droves. Very, very modest selling pressure.

Finally, consumer discretionary's got a little bit of pressure on. Tesla's out. Of course, we had Elon talking about some things yesterday, delaying that cyber truck that everybody's so interested in. So a little bit of individual stock story there. Overall, though, I'd have to say, inflation was much stronger, wage inflation, much stronger than the Bulls anticipated. That is not good news for the Bull case and yet still hopes out there that we can avoid some kind of

serious recession down the road. The Goldilocks scenario is still alive, but it's under a lot of pressure today. Guys, back to you. Among the interesting things you said there, Bob, one that caught my ear was this. Here you get a good jobs number. Interest rates go up. The fear then is that with a good jobs number and high inflation, high wage growth, Fed will continue to raise interest rates and therefore and thereby induce a recession. And that's why stocks are as mixed as they are. Did I hear you right? Right. Right. Yes. And this is the problem with explaining this to people who don't know how the stock market works. A head kind of explodes. Wait a minute. This is good news, right, Bob, because we're not in recession. The economy's good. The consumer is good. But why is the

stock market down. Well, it is good news, but the stock market looks down the road, and it's concerned about the fact that the Federal Reserve officials who've been out screaming this week, we're going to keep raising rates, are right. They are going to keep raising rates. And they're going to keep raising rates so aggressively down the road they're going to create recession, recession. And that makes everybody a little bit crazy. We'll call it an inflession. Thank you very much. Bob. Appreciate it. Bobazzani. We're also seeing a big reaction in the bond market. Yields jumping today after falling to four-month-month-month- lows earlier this week. Rick Santelli in Chicago for us. Rick, did the bond market guess wrong on

this jobs report? And once again, as we end up the week, I always love to ask you, what did we learn this week? You know, I don't think the bond market really responded in any type of fashion that could be considered wrong. Let's look at a week to date of two year. Okay, at 323, where we're trading right now, we're up 34 basis points on the week. And if you look at tens, Bob's right. We're up 17 basis points on the week at 282. But think about that. Tens are up half as much as twos. So on weak numbers we flatten or invert more, on strong numbers we invert more.

What is that telling us? What it's telling me is the market's still right. It's putting pressure on the short maturities because of the implications for the Fed, and the long end still sees the same thing. As a matter of fact, on that week-to-date chart, 285 was the high win. We only took it out by a smidge. That's very important. Look at a week today to the dollar index.

Because the Fed's getting more aggressive, potentially, the dollar index popped nicely. And there's the center of attraction January Fed Fund futures of 23. They're currently down 18 basis points on the day. When they go down, they put more Fed in. And that really is at the crux of the matter. And it's all the same everywhere.

everywhere. Boone yields moved 11 bases points higher. Guilt yields moved 13 bases points higher. Italian yields moved a dozen bases points higher. And if Europe is watching us that closely, we better watch them. As we heard Bailey say when he raised rates on

Thursday, UK, in his opinion, is already in a recession. Back to you, Tyler. All right, Rick, on that note, have a great weekend, sir. The latest read on jobs in America adding to the volatility on Wall Street investors now, of course, trying to figure out what a stronger than expected labor market means for the Fed's rate tightening. Well, we just

sort of teed up that conversation. And now the question, how should you invest in these tricky times? Let's bring in Megan's shoe. She's head of investment strategy at Wilmington Trust. Welcome back, Megan. Good to see you. Thanks, Tyler. Nice to see you too. I see in some of my notes your commentary. I want to get you to explain it a little bit. You are a little bit above your normal cash position, but you have switched from a little bit from value to growth, and you have added to technology. On the face of it, those things seem a little counterintuitive or positive to one another. Yeah. So at the asset class level, we have definitely taken down risk pretty steadily throughout the year, our last and most recent step, taking down some

emerging market exposure, so that across the board we're neutral to actually. And I think that that just really speaks to the uncertainty that we see going forward. You know, the key inflationary problem that we've had all along has been pressure from both the supply side and the demand side. And the good news is that when we look at oil prices, commodity prices, supply chains, goods purchases coming down, signs that the supply side is improving. But today's labor market report, the strong wage data, it really still gives concern that the demand side will remain too strong, that the Fed will have to keep its foot on the break, continue hiking, and really kind of undo a lot of the optimism that the market's baked in over the last couple of weeks that the Fed rate hike cycle will be ending earlier than maybe we thought

before. So while we're neutral to equities, you know, at the level of where we were, we've certainly moved a lot just today in terms of the 10-year treasury yield, we still see some upside rate risk, and that's why we're modestly underweight to investment-grade fixed income and holding our defensive allocation in cash. But the rotation into growth is really a function of three pillars that we look across when we're making factor decisions, valuation, momentum, and the economic environment. And when it comes to the growth versus value trade-off, valuation is much more attractive by our signals for growth stocks. Momentum has certainly improved over the last week,

month or so. And then when it comes to the economy, I would say best case scenario, we're moving towards a below trend growth or even potentially recessionary scenario. And in that case, looking for companies that are providing their own growth is going to be better than those typicals. Educate me a little bit because folks who are in your business often will use the phrases you just did, we are neutral on equities. What does that mean in practice, in a practical sense? Yeah. Well, the most important thing for an investor and a diversified investor long-term in nature is really coming up with that strategic asset allocation, which is based off of your risk tolerance. So whenever we talk about neutral, we're talking about that long versus that long-term

strategic asset allocation and an overweight or an underweight or a neutral stance, really, just speaks to our view of that asset class over a shorter time horizon. We use nine to 12 months. So, you know, right now we're kind of hugging, hugging our strategic benchmark, seeing a lot of uncertainty, not wanting to wade in and chase this rally, but also being respectful of the market and the really strong bounce from a technical perspective, you know, up 11% in just a matter of weeks and that's, you know, you don't want to totally ignore what the market's telling you. Yeah. So in other words, if my comfort point, my normal baseline portfolio is 60% equities and 40% fixed income, let's say, a lot of eye bonds in there right now, neutral to equities would

mean you'd be right on your normal 60%, right? That's right, yeah. And that strategic asset allocation is still the most important thing for long-term investors to get right. It really speaks to their risk tolerance, how much tolerance they have for drawdown at any given point in time. And then we try to add some alpha where we can by looking shorter term and trying to anticipate where the market's going. Megan, always good to see you. Thanks for being with us. Thanks for having me. You bet. Megan Shoe, Wilmington Trust.

All right, for more on this job's report in the economy, let's bring in Mark Morial, former mayor of New Orleans and the president and CEO of the National Urban League. Mark, welcome. Very good to see you. I'm going to walk out here, and I know you can dive down into these numbers with me. We've talked about the headline number. It's very much bigger than people expected, but there are a couple of things I know of particular sensitivity to you, and one would be declining labor force participation among black workers. Why is that? First of all, Ty, I love the Cleveland Brown's tie there. I don't know if you've changed your loyalties, but it is sharp. Here's the point.

Black workers like any other worker can become discouraged. They're in the workforce. They're seeking jobs, and then they drop out, and they may go a month or two without putting in a new application for work. Remember, the unemployment numbers measure only those who've sought. employment in the last month versus those who've been hired in the last month. Important to understand the statistics here. And it's also crucial to look at this U6 number, which identifies those who are working part-time who'd like to work full-time.

But notwithstanding this sort of bouncing around in the labor force participation rate, and I might also add that sometimes this report doesn't capture the number of people who've decided to join the gig economy, the Uber, the DoorDash, those sorts of things, the lift. But there are other gig opportunities that may not fully be captured when you look at this jobs report. The inequality remains the two-to-one ratio between black and white unemployed. But, Ty, this is an outstanding report because it not only beat analyst expectations, because here's the punctuation point. And that is that employment has just...

just about come back to pre-pandemic levels. And what does that mean from a historical perspective? It means that this has been one of the fastest post-recession recoveries in modern American history. I mean, we had double-digit unemployment two years ago. We were bleeding jobs, and now it appears as though the economy has almost fully come back to equilibrium. I believe you're exactly right. I think the 22 million jobs lost have all been regained. there is a soft spot.

I want to come back to the question of workers being discouraged. Why would workers be discouraged or potential workers be discouraged in the face of such a robust job market and rising incomes? I would think they would be discouraged in a shrinking labor market where incomes were falling and layoffs were high. And that's not happening. Well, I think it's also important to note that the decline in the labor force participation rate, while there is not necessarily significant, and we may see this number bounce around over the next several months as optimism is restored to the economy and the prospect for job creation become stronger. But sometimes you have skills mismatches. Sometimes you have geographic mismatches. Sometimes in some markets, the jobs may be. only jobs that require higher skills. In some places, it may be an abundance of lower wage, lower skilled jobs. So it's tough to look at national figures and really drill down, for example, as to what's happening in either a Toledo or a Tallahassee or in a Baltimore or in a Boston.

We can't fully tell. So I think the important thing about the labor force participation for people to understand is that one of the things that this also takes into effect is those that have become a little bit older, have now retired or who no longer have an interest in full-time employment, younger workers or young mothers who may be grappling with the challenges of child care. So we've got to look at this number, but the discouraged worker is always a factor. And I think it would be great for CNBC to get out on the road sometimes. Maybe we need to go talk to some of these workers and find out, well, you took 60 days, you look for a job, then that third month you said, you know what, I'm not going to look this month because I couldn't

find anything I liked or I wanted to. Sometimes that behavior is very rash. You know, I want to, enough of this jobs talk. You and I are roughly the same, of the same generation. And I would love to hear your reflections on the basketball player I grew up with an idolized Bill Russell, who passed. away last weekend. He was one of the great pioneers, one of the greatest players of all time. He played in a tough city for a black man to play in in the 50s and 60s. Here's the thing about Bill Russell that I want people to really focus on. As the greatest basketball player of that generation, he was not the highest score.

No. Bill Russell was not the highest score. He was a great rebounder, a great defender, and a great team player. And this is a lesson to anyone who studies leadership. Bill Russell, who ultimately became a player coach of the Boston Celtics, also had an incredible partner in Red Arbac, a team around him. And he was a principled man refusing to play in Lexington, Kentucky, in 1961, when the black players were refused service at the hotel in Lexington, standing with Muhammad Ali in 1967 at a time when that was a controversy of move for the greatest basketball player, a Boston Celtic, a champion, if you will, an all-star.

Great risk he was willing to take. But he also, you have to remember, Bill Russell was also measured in his commentary, not prone to hot or high rhetoric, but very principled in what he stood for. And, you know, I am just, you know, for our general. generation tie, he was the greatest. And no team before or since has matched the success of the Bill Russell Boston Saints winning 11 championships in 13 years. I'll stake my two cents on it. None ever will. No one will ever win 11 championships in any of the four major North American Sports. No, a great, a great, great, great player, a great, a great black man, a great American,

and a great leader. Great leader and great teammate. First black head coach in the NBA. Mark Morial, always good to see. Thanks, Ty. Thank you, Matt. All right, CNBC diving even deeper into that jobs report on what it means for the economy. We had a special report tonight at 6 p.m. Eastern, inside jobs. Get it, inside jobs, hosted by Amon Javvers. Be sure to watch and then stick around for the news with Shepard Smith, which will have a very special guest host tonight. Coming up, we have crisscross the country on our second annual power lunch road trip. to get a read on real estate across the United States.

There we are. Look at the bus. We went to Raleigh, okay, and New York, Cleveland, Boise, today. Los Angeles, folks. What does the housing market look like in L.A.? We'll talk to a local realtor there. Plus, Tesla, shares falling, 5%.

Even after a mostly positive shareholder meeting, Elon Musk even reassured investors that company would be fine without him someday. We do have a very talented team here, so I think Tesla would continue to do very well, even if I was kidnapped by aliens, or went back to my home planet, maybe. All right, let's take a quick look at the markets right now. The Dow Industrial is fundamentally flat, up 10 points. The S&P, sort of ditto, a third of a percent, and NASDAQ, down 94 points now at 12, 6, 25. That's three-quarters of a lot. of a percent lower. So a rare, flattish day for stocks as we round out the first week of August. All right, what a trip. It's, what a long, strange trip it's been. Welcome back to Power Lunch. We are arriving in the final stop. In our Powerhouse Road trip, we're visiting six cities this

summer for a look at how the housing market is changing. We have arrived in beautiful Los Angeles. According to Zillow, the median home price there is a little over 900,000. Top five in the country. but the market still seems pretty hot. Inventory down 12% year over year, 74% of homes sold, are going above listing price up 14% year over year for more. Let's bring in Stephanie Vitaco. She's a real estate broker with Equity Union real estate. We're a little tight on time, Stephanie. You say, or my notes say you say, that you think the market out there sort of peaked in March-ish. Does that mean that sellers are still trying to get those March numbers or are they being a little more flexible? So I think they're starting to be a little more flexible.

I'm in the San Fernando Valley, which is a suburb of Los Angeles. And in 2021, the prices were just insane. I think we experienced over 20% appreciation. We've definitely seen since March deceleration and stabilization. So if someone is looking or hoping to get what that one neighbor got at the very peak, which now appears to be March, that's not going to happen any longer. But if they're realistic for the price of their location, the condition, the square footage, they will still sell. There are still plenty of buyers out there. You know, I have always felt that it is the buyers who set the price in the market, not the sellers.

Because the sellers can say whatever the hell they want the house to be. but if you don't have a buyer willing to pay it, you're not going to get it, right? Wrong. No, that's absolutely true. And what was happening? I mean, we got really spoiled there. The past two years have been an artificial market. As long as I've been doing this, I've never seen anything like it. We were used to getting 10, 20, 30 offers on a property. Now we're back to the condition matters a whole lot more. The floor plan matters a whole lot more. Viers are being picky and they can be picky. So they want to just make sure that they're getting a fair value. They got used to just getting at a crazy bidding war. Now, if we get an offer, we treat it like

gold. And if we get multiple offers, which now means maybe two offers, not 15 offers. Very interesting. So the number of offers have come down. Sellers are having to be a little more realistic on pricing. And I guess implicit in that is that houses may be staying on the market a little longer. Stephanie, we've got to leave it there. Alas, I could talk all day on real estate. We appreciate your time. We'll see you soon, I hope. Thank you. Stephanie Vitaco. Appreciate it. All let's go to Bertha Coombs. She's got a news update. Bertha. Hey, good afternoon, Tyler. Here's the update for this hour.

At a bill signing today, President Biden took the opportunity to tout July's strong employment report. He also spoke about the importance of passing the budget reconciliation package that's set for a vote tomorrow in the Senate. I know people will hear today's extraordinary jobs report and say they don't see it, they don't feel it in their own lives. In short, this bill is a game changer for working families in our economy. I look forward to the Senate taking up this legislation and passing it as soon as possible. The Department of Defense denying D.C. Mayor Muriel Bowser's request for the National Guard to assist with the influx of migrants bused to that city from Texas. According to a letter reviewed by NBC, Texas Governor Greg Abbott has been highly critical of the Biden administration's border policies and began busing migrants to D.C. in April.

And in Iceland, a spectacular volcano eruption, just 15 miles from the country's capital city is drawing a lot of spectators. Look at that. They're coming to the site despite a call from officials to avoid the area due to the possibility of poisonous gases. But I got to say, Tyler, that just makes me think, man, I really got to book a trip to Iceland one of these days. I was just going to say, I think I have two friends who are there now. They were coming back from Ireland. They're going to stop in Iceland. What a time to be there. I want to go there.

Everybody says it's just a spectacular place to visit. Bertha, have a great weekend. You too. All right, see you. Ahead on Power Launch, Tesla holding its annual shareholder meeting, paving the way for a big stock split. We'll discuss the biggest takeaways from that. Plus, speaking of shareholders, nearly 400 companies have been targeted by shareholder activists so far this year. So why are we saying this ramp up?

We'll discuss all of that and more when Power Lunch comes right back to you. We've got about 90 minutes left in this first trading week of August. We want to get you caught up on the markets, stocks, bonds, and commodities, and Tesla falls after its shareholder meeting. We'll tell you what the always colorful Elon Musk had to say. But first, let's check on the markets. the jobs report whip-sewing stocks today, that now was down 237 points at the low. The S&P and NASDAQ staying firmly in negative territory.

You see basically minor changes there. The industrials roughly flat. The others down a little bit more in percentage terms. Shares of lift popping on a big earnings beat with ridership at its highest levels since before the pandemic. So there's a charity on top. The 10-year yield jumping as high as 2.87% today. The low on Tuesday was 2.52.

But remember, two months ago, it hit a high of 3.48. Big swings in the bond market reacting to the jobs report and the possibility that the Fed will continue to keep its foot on the monetary breaks, so to speak. Speaking of wild moves, oil closing for the day, bouncing back a little after a down week. Let's talk to Pippa Stevens at the commodity desk. Hey, Pippa. Hey, Tyler. Just barely in the green today, but not enough to push WTI back.

above 90 and not enough to erase those heavy losses from earlier in the week. A potential slowdown in demand remains front and center. WTI is up half of 1% at $89. It's down nearly 10% on the week. Brent crude falling almost 14% for the week right now at 9483. Now next week we'll get monthly reports from the International Energy Agency, the EIA and OPEC. Now the market will be closely watching these since there's a growing divergence between. demand forecasts for the back half of the year. So this will provide a look at how energy agencies are modeling the forward-looking supply demand balance.

Now turning to energy stocks, which are catching a bid today, it's the best sector, led higher by EOG resources. The company's revenue almost doubled quarter over quarter to $7.4 billion. And one final stock to mention is Sunrun up at 7% right now after Barclay's initiated coverage with an overrate rating. Tyler. All right. Thank you very much.

Pippa Stevens. Elon Musk making headlines, as he always does, and as always with his remarks at the company shareholder meeting last night, Tim Higgins is a technology reporter at the Wall Street Journal as well as a CNBC contributor. Tim, he never disappoints. He even joked on Twitter, apparently, that he had more children born in the second quarter than lucid had cars made. One might question Mr. Musk's lucidity there, but whatever, the company seems to be

doing well, the stock is coming back. What are the challenges ahead for Tesla? Well, the challenges are, I think the challenges for the auto industry in general, and that's where the economy is going. And listening to Elon yesterday, he seems pretty bullish. Yes, he sees a mild recession perhaps lasting 18 months, but he thinks that the market has reached peak inflation. And if he can understand where his costs are going to be, and he understands where his sales are going to be, he thinks he's got six months to a year worth of of orders already in the books, he can kind of look out to the future and see where the company is going to be, which kind of explains why he's talking about that continued growth, that

March to 20 million vehicles sold on an annual basis by 2030, and kind of hinting that by years end, he's going to announce where that next gigafactory is going to be located, maybe Canada, maybe eastern U.S. He's got to expand his production capacity to get anywhere close to 20 million vehicles. He's missed targets before, but forgive him. He's done plenty well. Yeah, absolutely. I mean, the factory in California outside of San Francisco is really, you know, brim full of production at this point. It's really hard to imagine getting more there. They've got the factories in Germany and Texas that they really need to start ramping off. That has been burning cash, as he has said earlier this year. And, you know, really one of those

things we saw Tesla kind of early on, one of the first couple of, companies to say they were concerned about with macroeconomics, cutting the workforce and kind of doubling down on trying to ensure they were going to have supply of those important battery cells that those electric cars need. Right. Let's talk about the stock split. We understand from basic math that it means nothing in the short run in terms of the company's valuation. The company is worth what the company is worth no matter how many stock shares are out there. But in the longer run, what does it mean to that company and to investors generally, the split?

Well, it should help retail investors, at least the argument is that it would help retail investors get into that stock. Of course, Tesla has benefited from that fever, that kind of excitement among small-time investors over the last few years, buying into the vision that Elon Musk is selling about the future of the car and the future of solar panels and all these things. And also with the stock split, you tend to see a run up in the stock. So, you know, investors are expecting, you know, some movement there. And also there's, you know, market rumors about the idea that maybe their junk bond status is going to be shed and they're going to get investment grade. And that would help them in the investment community as well.

So it's one of those kind of another pivot point for the stock and for the company is they get kind of moved from being that teenager out there trying to prove themselves into becoming more of an adult company. Tim, always great to see you. Always clearly put. We appreciate it. Tim Higgins. Thank you. Up next, many claim Russia is the leader. When Russia invaded Ukraine in February, the U.S. and the world vowed to hit back at Russia through financial means to cripple its economy. Now Russia would like you to believe its economy is doing just fine, but a new study from Yale contradicts those claims.

Our next guest, along with a team of his fellow Yale experts, debunked some of the myths about the effects of sanctions on that Russian economy. Let's bring in Yale School of Management's Jeffrey Sondonfeld. Jeff, good to see you. You have nine myths here. This study boils up to, it boils down to this. Russia is in trouble on the verge potentially of imploding. Let's take, you have nine myths. I want to bear down on three of them.

Let's start with this one. Russia is making up for lost Western business and imports by replacing them with imports from Asia. Why is that a myth and untrue? Putin's trying to pretend that they can, you know, pivot east for energy sales, which of course is not true. And they're trying to pretend that all the companies that left, this historic 1,200 companies, multinational companies that left, aren't hurting them because they can substitute the imports from China. Well, not only have their imports into Russia, as we've seen, plummeted by more than 50%, but in fact, taking a look at China's own data, they have their customs data as public. and it's pretty reliable.

It's what they're sending into Russia from China has also plummeted more than 50%. You know, they like to create this myth of bellicose self-reliance, long Russian tradition of saying they invented electricity and, you know, and airplanes and automobiles and sliced bread. But the fact is they're not self-reliant is they are, you know, pulling about 25% of their GDP is from imports. And when you look at their two major experts, which is oil and gas, it's not as easy as just flipping a switch and saying, okay, we will send that unbought or unpurchased gas and oil from Europe and switch it to India and China. And oh, by the way, sell it at a 35% discount. There isn't the infrastructure to get that product to

those places. Myth number two, Russian domestic consumption and consumer health remain strong. Why a myth? That's also a myth, is that we're seeing that. We're seeing that. that just what are people buying? There are malls everywhere. We have photographs. We have actually people on the ground in Russia and elsewhere, in Moscow and elsewhere, that the stores are shuttered, malls are closed. Of course, largely the Western businesses that left, which is 12%, if you believe Russia's

numbers, merely 12% of the workforce, which is 5 million people right there. But we know that even taking their numbers, the indirect employment there, is about three times that. So we're looking about 40% of the people out of work, the mayor of Moscow, I don't know how he's doing these days, but back in April, he admitted he, even by then, he had hundreds of thousands of people unemployed out on the streets. So there's massive unemployment. You look at sales of critical areas such as, oh, you know, parts that they need for Apple supplies or industrial equipment. They can't get this. Yeah. Let's look at the final myth, and then we'll talk we'll wrap it up. Putin says he's running a budget surplus thanks to high energy prices.

True or false? No, he's he's running a deficit and nobody's going to fund that deficit because it's uninvestable to put money into into Russia. In fact, of those companies who pulled out, we found the more dramatically they pulled out, the better Wall Street actually celebrated them. So doing well and doing good, we're consistent with each other. Does Russia need to sell its gas to Germany even more than Germany needs to buy it? Good for you. That's something that a lot of journalists missed for a while because Putin was trying to create the opposite smokescreen. The idea that he is this great global energies are is running out of gas. That myth is crazy. Is Russia needs to sell about 85, 86% of their gas into Europe. But in fact, Europe only needed at most,

43% of their gas. And now the U.S. supplies more gas to Europe than Russia did at its peak. And Norway substituting, as they now develop the process to transfer liquid gas back into gasified energy, is they're going to be able to take a lot from Algeria and other places in the world. So this won't be a problem. And this is going to be done by the end of this calendar year. So, yeah, Russia is very dependent. They're like a vassal state in a feudal system and a mercantile system. Finally and quickly, Putin loves to brag about the strength of the ruble. True or just a bunch of fertilizer?

You know that's fertilizer. One of their key products is, no, it's ridiculous. It's not an open-traded currency. You can't sell your ruples for dollars or anything. So it's a set price. closed and in fact, there is actually no volume of trading in Rupils. All right, Jeff, we've got to leave it there. Thanks very much for being with us today.

Always good to see you, sir. Thank you. Thank you. Still to come, three-stock launch running through the biggest movers of the day. We will be right back. Time for today's three-stock launch. We're going to take a look at three of the days, biggest movers and tell you how to trade them right now.

Draft Kings up almost 13 percent today as the company reports a narrow than expected loss and boosts its full year revenue outlook as we head into, yes, football season. Warner Brothers Discovery down 17% after reporting a big loss. Also announced plans to merge its streaming service with HBO Max. That's Discovery Plus and HBO Plus, basically.

And Beyond Meat, up nearly 23%, despite slashing its revenue outlook and announcing layoffs. We got three glasses. Let's bring in Lee Munson. He's CIO at Portfolio Wealth Advisors. Let's kick things off with Draft Kings. Talk us through it.

There was a time when I thought it was Draft King and Fan Dules, and that was about it in this space. It's not that way anymore at all. There's a lot of competition, and I don't think that's what the core issue is. Now, we understand that Draft Kings, there's good news. You know, if I was trading this stock, I'd probably take some money off the table right now,

and all of this is on the hope that we're going to have a better football season and all this kind of nonsense. Tyler, the court issue isn't just competition, isn't just the cost of getting people to come onto the platform. But you're dealing with a casino wagering structure that doesn't have food and entertainment to sell to make some actual profits. I don't see profits. I don't believe that the total addressable market by 2030 is really going to quadruple from where it is now. And just listen to the CEO from Draft Kings about a month ago. I was just listening to a radio interview where he was lamenting how New York State,

where they want to grow and make a lot of money, that the state regulators are just preventing them from making profits. So remember, it's the one part of the casino that's highly regulated. States want to take all the profits. And I think I'm just going to pass on this. I'd rather roll the dice on a craps table. All right. Let's move on to Warner Brothers Discovery,

which, of course, had a rough, rough week. They did a lot of taking some merger-related costs, some staffing cuts, administrative shuffles. What do you think? You know, I love this stock back when it was Viacom after the Hong Kong whale. Remember how it like got crushed because that guy was over leverage and committing fraud? You know, I was buying it maybe in the high 30s back when it was Viacom. I cut my losses.

Not Viacom. Warner Brothers was not Viacom. No. And so when you're looking at streaming, okay, what we have to remember is you're dealing with a battle between owning HBO Max and Discovery, all-a-cart and having it be separate from everything else. I don't think I want to own HBO Max, you know, just alone. I want to have discovery. They're talking about making a profit next year.

They're talking about, in 2024, they're talking about maybe making a billion dollars. I don't know that's going to happen. What I can tell you, if a company just wants to work on making money, and they just want to work on raising the price, I think that's a better deal than Viacom. I think it's a better deal than Netflix. And I think it's a better deal than the other streamings out there. And so that's why I might want to take a chance on it.

But you have to remember, we're going to have four more messy quarters. And so this is the one for value players that want to make some cash. I think this is the play. All right. Let's move on to Beyond Meat. That's the final one for the day. Beyond Meat. Okay, I have to tell you, I'm a vegan.

I'm one of those weirdos that just eats plants. But what Beyond Meat's issue is, even though I own the stock for full disclosure, and I was buying it recently here in the 30s, Beyond Meat is overextending what they want to do with this thing about beef jerky. I don't think people want to slip into a slim gym are necessarily the first audience I would like to meet. Okay? So the bottom line is they showed last year that they can make a 30% gross margin. Now it's negative. Why?

Because they're spending too much on hiring people like the Kardashians. to try to be spokespeople and all this stuff. So if Ethan, the CEO, can get back to basics. Just like with Warner Brothers, try to make a profit, raise the money, see who your core fans are. I think beyond me can be a profitable company. But right now, it just doesn't have what it takes. I still think that if you believe in the addressable market, which I do,

this still has a chance to make some money. I think you nibble at it. Buy a little see where it goes. All right, Lee, thank you very much. We drained those glasses beautifully. Thank you, my friend. Appreciate it. Thank you. After the break, the boardroom boxing ring.

Companies dealing with a surge of activist investors, that story is. Shares of Pinterest and PayPal, both double digits this week following their earnings reports. But both stocks are still down more than 65% from their recent highs. They have one more thing in common. Activist investor Elliott Management taking stakes in both companies. Leslie Picker joins us now with a look at why shareholder activism seems to be pay. kicking up lately. This isn't the only place either, is it, Leslie? It is certainly not, Tyler. Activism saw a slight uptick in the first half of the year,

but still well off the highs of the pre-pandemic era. 390 companies were targeted, about 7% above the first six months of 2021, according to Insightha, which tracks activist activity. The second half of the year appears to be ripe with activity as well as you mentioned, Elliot confirming stakes in Pinterest and PayPal this week alone. and the ecosystem is buzzing with bankers and advisors to companies and activists alike telling me that they're expecting an unprecedented second half. I think we're already setting ourselves up for a good year, but if it continues at this pace, it's likely to be a record year for activism.

And I predict that unless there's some major event on the back end of the year, notably something macro or something that disrupts the markets, there should be a pretty significant amount of the activity in the back end of the year. Markets are a key driver here, of course, with valuation stabilizing in recent weeks and for many companies at lower levels, that's especially true of kind of that growthy tech area. There's also a rule change coming down the pike in September that may favor activists as well as it pertains to something called the universal proxy. In essence, experts believe this could allow activists to get at least one or two board seats

where in prior instances they may have risked getting none, Tyler. Let's transition here. Jamie Diamond, talking economy, recession. say? Yeah, he spoke with our Boston affiliate and he shed some light on his thoughts on whether two consecutive quarters of GDP constitute a recession. Take a listen. Right now the American climate is kind of strong. And a recession of technical terms of recession of shrinking GDP. I'm not sure I even believe those numbers, by the way, because they're so distorted coming out of COVID, supply chains. You know, unemployment is still going up. I don't think I've ever seen

a recession where employment was getting stronger, not weaker. Jobs are plentiful, wages are going up. So people have more money. They're spending more money. They have more money than they had pre-COVID. They're spending 10% more than last year, 35% more than pre-COVID. That doesn't sign where such will be currently.

Mr. Diamond, Leslie, gets the last word there. Thanks, everybody. Thanks, Leslie. Thanks for watching, Power Lunch. Closing bell right now.