Power Lunch - The market rally gains steam, tech takes off and what a bottle of bourbon is telling us about inflation. 8/12/22

Episode Date: August 12, 2022

Tech stocks making a comeback. The sector rallying 20% off the June lows with Amazon, Netflix and Apple all up more than 30 percent. Our market pro has a list of stocks to own over the short, medium and longer terms. Plus, what a bottle of bourbon is telling us about inflation. And we’ll talk to the analyst behind the $1 price target on Bed Bath & Beyond. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Kelly, thank you very much and welcome everybody to Power Lunch. I'm Tyler Matheson. Here's what's ahead on a busy Friday. A big tech reversal. The sector rallying 20% since those June lows. Apple up about 30%. Amazon, 35, Netflix, 40%. This hour, the tech names to own in the short, medium, and longer terms. Plus, inflation in a bottle. The costs to make bourbon are soaring from corn to manufacturing to distribution. The president's of Mixtr's will join us to say why prices could head even higher next year. Kelly. Tyler, thank you. Hi, everybody. Guess what? The market's not only on track for a positive week, but for its fourth straight for the S&P. That's the longest weekly win streak since November of 2021. The Dow right now up just shy of 300 points. The S&P up 50. That's 1.2%. The NASDAQ

up 1.5%. It has been leading the way since the lows. Or really so have the small-cap Russell 2000s, we should say. Up 1 and a half percent today. Four. 4.4% as well for the week. A strong performance here. They're back over the 2000 mark. The chip stocks higher as well. Every stock in the Vanek Semi ETF, she said higher. On semis now up 8% applied materials, 5%. Terradine, a little short of that. And alternative energy plays with solid gains. EV go up almost 17%. Charge point up 14%. Plug power up more than 6% tie. All right. Thanks very much, Kelly. Inflation concerns easing just a bit this week.

following the CPI and PPI reports. And today we learned that consumer expectations for inflation over the next year ticked down to 5% last month from 5.2%. Our next guest, writing about peak prices in a new CNBC op-ed piece, redefining the word transitory. Ron Insana is a CNBC senior analyst and a commentator. He's also a senior advisor to Schroeder's North America. And also with us, CNBC contributor Michael Farr,

Chief Market Strategist at High Tower Advisors. Welcome, gentlemen. It's good to have you back together again. Ron, let me begin with your theories on inflation. You say, transitory is a word that you can safely use again, but maybe the meaning is a little different. You know, Tyler, I went on the Webinarian dictionary, and I think it's interesting with the fact that it's not a duration,

but it also means not perfect. And I think that's a fairly important distinction here. Ron, I'm going to interrupt you because we're having a little trouble with your audio. We're going to try and get it fixed. It was breaking up. I thought it was me, but it was, well, obviously, something has gone down. Michael, how are you? I'm terrific, Tyler.

Thank you very much. I thought it was me, too. Yeah, I thought it was me. I hope we get that fixed. Something wrong in my hearing. It's a good piece. You know, Ron's got a good piece coming out, and it's important. So I hope we get that.

Yeah. Do you think that this was the week that was, this was the week that inflation was, in other words, that its back was broken? It's one piece of datum. So that would be great to say that it's peaking. I think, you know, that it's saying the forest fire is not raging quite as torridly as it was before, and the temperatures aren't quite as hot, but you still have a forest fire. And I think on the Fed side, Tyler, the Fed has basically said that they've changed three of the eight spark plugs so far, and they still have work to do. And markets are so desperate for this awful sort of period to be over with that we're rocketing and we're rolling. And I don't think we're listening to the Fed quite closely enough.

So it might be beginning to roll over. But this notion of transitory that Ron's going to talk about is an important. concept, but I think it's going to be a long time still coming. I think it's too early to pop the Champ campaign courts. We're not listening to the Fed closely enough. How could we listen better? Or what are we missing in the, what's getting lost in the translation? Well, I think that we've wanted to hear this pivot, right, Tyler. We wanted to hear Jay Powell say that the economy's slowing enough and the Fed's going to start to stop raising rates. And then maybe there are even economists out there talking about when the Fed is going to start easing. We've had three Fed

governors come out, including Barkin from Richmond, saying 2% is still the target. The PCE deflator number is 4.8% still. That's X food and energy. So we're a long way. We've still got to fall by more than 50% to get anywhere near the Fed's target. So another 50 basis point hike or 75 five-basis-point hike. It worries me that these Fed governors are sort of floating this 50-bases point hike out there. Mr. Chairman, Jay Powell, my dear friend, if you want to listen to one thing, please, if you just raise 50 basis points in September, expect the stock market to rally 5 percent. That's going to be the sign that you're willing to put your money or less of your money where your mouth is in taming inflation. I'm not sure that's what you want. So I would stick

with it as long as you're going to be. you are still concerned about. So you would, you would, am I hearing you say go another 75 here? Absolutely. Okay. Let me, let me turn, let me turn back. Let me turn back to Ron because Ron, we've been talking about you constantly since you left us a moment ago. You've been, we said nice things. We said nice things. So make the case, make the case here on, on, on, on the transitory 2.0. Shall I put it that way. Yes, so Tyler, you know, that I've going back quite a number of months, I've been suggesting this is much more like a post-war environment than it is like the 1970s and 80s. And I think right now we're starting to see a lot of

indicators that indeed inflation is a passing phase, if you will. Transitory doesn't mean two months, and it never did. It could easily mean a year or two. If you look at the post-war environment, 1947 to 50 or 1918 to 1920, we had bursts of inflation that fell back to normal or below normal in the post-war years. And I think in many ways, we're starting to see not just commodity prices falling, not just home prices falling, and shipping cost plunging. I was talking to a luxury RV manufacturer the other day. He's getting parts.

They're coming in on time. And he's able to negotiate with some of his vendors on pricing. That's something we've not heard throughout this entire cycle. And I think we're going to see this become a more common phenomenon in the weeks and months ahead. And I do think, as we see from consumers as well, they're betting that inflation is coming down. So entrenched consumer psychology with respect to inflation is not the problem that the Fed feared. And so I really think that, you know, in prior periods, it must have felt just as bad to go through two or three years of this. We've only been through one year of elevated inflation.

And everyone thought it was a secular phenomenon. I still don't. All right. Let me ask you one further thought here. It looks like, we're now in the fourth, what looks like is going to conclude the fourth consecutive week of gains for equities. Do you think this in more benign inflation environment, if I may use that word, is going to help lift equities as we move into the fourth quarter of the year, those third quarter earning statements and through the elections? Yeah, I think, you know, getting past the midterms may very well be important. I think one thing that might surprise the markets is the Democrats are no longer doing as badly as feared,

according to the latest polls, either in the House or in the Senate. Now, you know, I wouldn't call for a secular bull market here yet, Tyler, with respect to equities, obviously there have been opportunity sets that have presented themselves with beaten down shares in some very, very interesting areas, but you don't get a secular bull market until the Fed stops. I'm not looking for a pivot. I'm not looking for them to cut rates. I'm just hoping at some juncture. they recognize the reality of future inflation and slow things down a bit. Ron, it was great to get you back on there.

And Michael Farr, fantastic to see you. We'll do it again soon, guys. Thanks. Thanks, Tyler. Thanks. Now, after getting slammed for a large chunk of the year, tech is certainly having its moment in the sun. Since the end of the market closed on June 16th, the NASDAQ is up 21%.

Same for the tech sector, the XLK, 21%. And some individual names that had been tossed aside by investors have come roaring back. Apple is up 31%, Amazon is up 36%, Netflix up 42% and meta 11% for its part. Let's bring in James Chuck Muck. He's partner and portfolio manager at Clockwise Capital. I mean, wow, did people miss the rally, James? I think a lot of investors did. But the way that we've been on your show talking about it is that,

During times of economic uncertainty, the money will ultimately go where there is the highest degree of confidence in the sustainability of the growth curves. What we saw in the first half of this year was a big questioning of that sustainability as growth rates came down because so much demand was pulled forward. But I think what got missed was that, yes, demand was pulled forward, but the growth rates simply just reverted back to their original pre-COVID growth curves. and they are here to stay for the best in class companies for the cloud first companies for the true platforms of the of the tech world we think that the opportunity continues to remain bright and we continue to be very long and bullish would you be a buyer of meta of facebook here james meta is actually one that uh we're uh going to possibly revisit as we get closer to the end of the year once you fully anniversary the the apple privacy changes um obviously it looks interesting at a lower valuation

But right now, it's certainly not anywhere near the top of the list for companies that we want to own. But Spotify and Uber, those are names. If people want to say, okay, what are some names that still could have, you know, near-term runway? Though they're down, I think, about 40 and 20 percent respectively still from January. Sure. I mean, we basically put it into three buckets, short, medium, and long term. Because right now, the name of the game for any investor is duration management. And you have to be so agile with the duration of your portfolio,

because macro factors can change in a split second. So with that said, looking at the short term on a risk-adjusted basis, we really like Amazon. We've talked about that on your show, still see that as a $225 stock at least. In the medium term, we like the cloud-first companies, like the crowd strikes, like the snowflakes. And then longer term, we think that the Uber,

spot, Airbnb, these are companies that we own in our portfolio, very confident in them, at least triple from the current levels. Obviously, we have the macro recession overhang that continue to monitor and you have to be cognizant of. But that being said, you know, those stocks that you just mentioned that have gotten depressed the most, you have the room for multiple expansion and I think earnings power that's fully not being given credit for right now in the market. James, I guess the question as well for those who are looking at these valuations is, are we going to see a reset of the reset? You know, we've had this kind of rip-roaring comeback. Is there

going to be in a shoe, is the same shoe going to drop? Yeah, I mean, I don't want to say that the bottom is fully in because that's a dangerous thing to say, but we're operating kind of as such. Obviously, as things do run up, we are hedging our positions. Things have run up very fast and very steep. So we are looking to add options to hedge out those positions and trim where we can. But on balance, our buys, continues to remain long, we're net long. And those companies, like I said, on the platform, cloud first, and best in class, like some of the names that we mentioned, we're not, we will be long-term shareholders.

And we think the prices that you see now won't come by again for a long time. James, thank you very, very much. Good to have you back. James Chuck Muck with Clockwise Capital. All righty, coming up, what a bottle of bourbon tells us about inflation from From corn to wheat to labor to glass, the head of Mictors breaks down his current costs and what he expects next year. Plus, Bed Bath & Beyond's stock surge doesn't make any sense to one analyst. We'll talk to that person about his $1 price target for Bed Bath and Beyond.

Before the break, a look at shares of Rocket Lab up 18% today, 30% for the week, following upbeat guidance on revenue. More power lunch is next. lunch, can the real state of inflation be found in a bottle of bourbon? Michter's distillery breaking down their current production costs and what they expect to pay next year, starting with agricultural inputs. Let's take a look. Corn prices, up 57% already from January 2020. Barley and rye grain prices already being quoted up 60, 40 to 60% for next year, respectively. After harvesting, the aging and bottling process, also more expensive. Glass prices up 53% from 2020, barrel prices, 7 to 10% higher,

and you move on to the finished product. Mictors also ships wine made in Italy back to the U.S. Those costs up 163% while wait times to ship product from Kentucky to Europe. Well, those have more than doubled. And labor shortage means it's harder to get bottles from warehouses to shelves. A third of products don't get picked up on busy days, and wait times have tripled.

Altogether, you've got a product that costs more, takes longer to market, a recipe for higher prices. For more on the cost, pressures he's facing, let's bring in the president of Mictor's distillery, Joe Malioko. Joe, welcome. Good to have you with us. Thank you so much for having me on, Tyler. After hearing that, I think you need a drink. I think you need to drink.

I think we all need a drink. And when we began by saying if the secret to inflation can lie in a bottle of bourbon, I said, well, I'm willing to explain. explore that possibility. So let's talk about what you've had to do with your final retail prices in light of these input costs going up so much. Yeah, I mean, you know, even though the July year-over-year CPI index was 8.5 percent, you know, what we're really seeing is a lot of cost items for us are going up way, way, way beyond that issue. You just, you know, was so well outlined. I work between mixtors, which makes bourbon lie American whiskeys in

Louisville, Kentucky, and Chatham imports its parent company in Manhattan, which sells mescal, gin, imports wine, and we're just seeing tremendous increases I can never seen. You know, I think, I think, you know, part of it's COVID, part of it is this tragic conflict in, you know, Russia and the Ukraine. You know, so much of the world's grain actually gets exported. Well, that's what I, forgive me for interrupting, Joe, but that's what I wanted to bear down on. How much of these cost increases are directly or inferentially attributable to what's been going on in Ukraine? And we can't ignore the fact that a lot of grain, whether it's corn, whether it's wheat, or whether it's barley, comes out of either Ukraine or Russia.

Yeah, no, that's very true. I mean, you know, some of the figures that I've seen, roughly about 30% of the world's wheat is exported. Global exports are from Russia and Ukraine. Something like 17% of global corn exports go through Russia and Ukraine. And, you know, one of the things that's happened, you know, outlined how, you know, our corn prices of sort, our organic wheat prices, making a resource organic grain,

organic wheat from Idaho for our farmers. Jen, we were hit with an all at once price increase is 69%. Now, the guy we work with is a great guy, and we were able to negotiate down from that. But, you know, with corn and wheat prices going up so much, what's also happened is other grains, you know, not necessarily because of the war directly, have gone up. You know, a lot of people seeing wheat prices go up so much, and corn prices go up so much have actually started to switch. barley crops as well as as as as well as rye crops to wheat and to corn and the results is that you know a lot of distillers in kentucky you've been told brace yourself you know as you indicated we're being told that uh you know right prices in 2023 could go up anywhere from 56 to 68

uh you know use rye and rye and rye risky obviously also and bourbon um and then we've also been told that barley which is used in a lot of distillation a lot of different stuff that barley could go up next year, 37 to 47%. So we're seeing some tremendous increases. And then there's all this other stuff. So, Joe, does that then, when you see the headlines this week, you know, CPI flat and PPI down and all the rest of it, I mean, do you just think to yourself, it doesn't matter? Because you as a company, sound like you're clearly going to still be raising prices into next year just based on what you're already experiencing.

Yeah, you know, look, we kind of have to. you know, obviously, you know, people have to live. So labor costs are going up and, you know, all these other costs. I mean, our glass costs, you know, glass suppliers never used to have a freight surcharge. They started that in 2021. They never used to have an energy charge. They started that in 2022. The net effect is some of our glass has gone up 53%.

You know, so like everybody else, you know, in the industry, we're facing, you know, inflationary pressures. And, you know, the solution is to raise prices. We had a price increase on mixtres this summer. You know, we've increased prices on our wine and our other products. And it's just something that you have to do nowadays. And the good news for the industry is that, you know, the brands that are, you know, good brands have been able to take price quite successfully. People understand the times we're living in and strong brands performing quite well. Two quick questions.

Roughly how much did you have to raise prices on the spirits and wine? The wine prices on Santa Marina, our wine, we raised it fairly substantially, probably about, you know, probably in the vicinity of that 7,8%, probably in the midter's range, probably more depending on the type, anywhere from, you know, 5 to 10%. So, you know, maybe not quite keeping up with inflation, but, you know, attempting to. So enough to help, hopefully, help blunt some of the wrong. rising input costs. We've been talking a lot here over the last day and a half about what parts of inflation are sticky, in other words, likely to persist. Obviously, agricultural commodity prices can yo-yo a great deal, okay, go up and down. But there must be portions of these price increases that you've experienced, like what you're having to pay for labor, that they're not

going to fall back. You're absolutely right. You know, there's, you're, there's certain commodity prices, you know, things like, you know, things like the grains, you know, hopefully, you know, hopefully this conflict ends. Again, it's a tragic conflict. Hopefully the conflict ends and, you know, things get a little more normal in grain rates. But, you know, like you said, you know, labor costs, you know, those are going to keep going up. We don't expect those to go down. You know, I'm not so sure that glass prices are going to go down. Yeah. Because I'm not sure that energy prices are, you know, a lot of energy gets used to make glass and, you know, I'm not sure that's going to go down.

Joe, thank you so much for your insights today. It really breaks down in an individual product, how prices have gone higher. And my famous weekend exhortation to everyone is inject liquidity. Have a good weekend, my friend, Joe Malioko of Mixtr's. Thank you so much, Tyler and Kelly. Thank you so much. Still ahead on the show, the $1 billion Florida man, Ken Griffin, spending over a billion dollars on Florida real estate in just the past two years.

we will lay out his big bet. As we had to break, check out some of this week's tech winners as the group makes its turnaround. The rally driving money into popular tech ETFs, we have those details next. Time now for our ETF tracker report. This week we focus on tech as those funds brought in more than $500 million of net inflows. The biggest driver is the continuation of tech's recent rally. NASDAQ up more than 20% from the June lows. And we've seen big moves in big names.

Amazon up 30% in a month, meta, 8%. This week, new data show inflation may have peaked, and that has further given a boost to these names. Among the specific ETF seeing the biggest inflows, technology select spider, vanguard information technology, and I shares U.S. Technology ETF. The data come from our partners at Track Insight. For more information, you can find it on the F.T. Wilshire ETF hub. Let's get to Frank Holland now. We're a CNBC News Update. Hi, Frank. Why, you're there, Tyler. Here's your CNBC News update at this hour.

Former President Donald Trump has until about a half an hour from now to officially signal whether he will contest. U.S. Attorney General Merrick Garland's move to release FBI documents over the search of his Mar-Lago residents. In a statement on his truth social network late Thursday, Trump said he would not oppose the release of documents. The FBI removed 11 sets of classified documents, including some marked us. top secret and meant to only be available in special government facilities, according to documents reviewed by the Wall Street Journal. A ship approached Ukraine to pick up wheat for hungry people in Ethiopia in the first food delivery to Africa under a UN-brokered plan to unblock grain trapped by Russia's war in Ukraine and bring relief to some of the millions worldwide on the brink of starvation.

And one month after 4,000 beagles were rescued from a Virginia rescue lab, those pups, they have a variety of animal shelters all across the country. They're now awaiting adoption. The dogs were being sent to California, Wyoming, Florida, and Massachusetts, in the hopes of finding their forever homes after living in some very deplorable conditions. Those dogs are so cute. That's the very latest. Very nice pups.

I had a beagle one I was growing up. Thank you, Frank. A head on power launch, bed, bath, and beware. We'll speak to an analyst who says not to buy into this stocks rally, Kelly. Plus consumer dissection. We're breaking down the discretionary names, making comeback from the June lows. That's today's three-stock lunch. Welcome back to Power Lunch.

90 minutes left in the trading day and the week, and it's a strong one. It's been four strong ones. In fact, let's get caught up across the markets on stocks, bonds, commodities, and bed, bath, and beware. We'll start with a check on stocks, which are higher across the board today, the fourth week in a row of gains for the S&P, which is up almost 3% since Monday, at least 2%, 2.5% gains for all three major averages. Now, the NASDAQ in particular has been on fire. It's up more than 20% today from its June 16th lows. And the chip stocks, which had been to drag earlier,

now leading the way with On Semi, the best performer in the S&P, up more than 7%. We spoke with the CEO on the show yesterday. Optimism about that New Hampshire plant, the new one about the potential effect of the Chips Act, that apparently is helping to lift this whole group. Meanwhile, get a check on bond yields as stocks are rising. What are those private?

I don't know what word to use them these days, Rick, those bond yields doing. Well, I'll tell you what, if you look at bond yields, what you'll notice is that they're all slightly higher on the week. But it's mixed on the session. Two year and three year, no yields are a bit higher. The rest of the curves lower. But let's look at some June 1st charts. This is Fed Fund Futures for December. What I want you to notice is at a current price, 9656.5, it's implying an end-of-year rate of 3.435.

Remember that number because if you consider the next chart, this is June 1st chart of two-year note yields. They topped out on the 14th of June with all Treasury yields. And what do they top out at? What is that maximum distance for that two year? 3.43, exactly the same. And 10 years on the 14th also, 3.47, their high yield closed. So if you want to know the terminal rate, maybe that's why the market's been rallying. As a matter of fact, so you have the 14th.

rates peak, the 15th, the Fed raised rates, three quarters of a point. On the 16th, the NASDAG bottomed, on the 17th, the S&P, and the Dow bottomed. And if you look at Boone, they bottomed on the 21st of June. All of this makes perfect sense. And if you look at the dollar index, this chart starts on the 14th of June. On the 21st, right around the 21st, it started to make a big B-line higher. But what's interesting is, on the 16th, is when when it made its last low at 103.63. Why am I giving you all this history? Because it's pretty clear.

The markets think there's a peak. And on the peak, they're starting to not only give stocks a big boost, but interest rates are still unable to reach their mid-June peaks. What does this mean? Well, by time everybody agrees that maybe there is actually a pivot on the way, all the good trades are going to be gone. Kelly, back to you. But what kind of pivot will the next one be?

That was masterful, Rick. I love the connections. Thank you very much. Our Rick Santelli, let's turn to oil now. Closing for the day and week, Pippa Stevens has the latest. Pippa? Hello, Kelly. It is down on the day with Brent back below 100.

Although both Brent and WTI are on track for a weekly gain, natural gas and gasoline futures also advancing on the week, Arbob posting a third positive week in four, which doesn't necessarily bode well for the direction of prices. the pump. Now since we've been talking about the energy crunch in Europe, take a look at this chart. It shows the soaring cost of power in France and Germany. You can see just how quickly those prices have risen. The drought you were talking about last hour playing a big part here. Rivers are drying up leading to a reduction in hydropower. Waterways are also used to cool nuclear plants and to

transport commodities. And this of course comes as the block tries to move away from Russian fuel. Now elsewhere in the energy space, the House debate on the Inflation Reduction Act is underway, and we are seeing gains across green energy stocks. Lithium players, Albemarle-Livant Lithium Americas and Piedmont Lithium all on the move. Piedmont lithium up 20% actually. And then solar names Maxion and Scholl's technologies in the green with hydrogen stocks, Kelly, plug power, and bloom energy also rising. And thank you for making those connections, Pippa, with the energy situation in Europe, and we wait to see still what the ramifications will be here. All right, bed, bath, and beyond.

Buy or beware. Shares of the company surging about 150% since the start of the month, but our next guest says, don't buy into the hype or the rally. Joining us is Anthony Chakumba. He's the managing director at Loop Capital. He has a $1 price target on the stock. Anthony, first of all, what do you think accounts for this latest bout of retail enthusiasm? I think this is another mean stock driven short squeeze.

The short interest in Bed Bath & Beyond was quite high. And so, you know, I think that, you know, it's a usual cast of characters, the Wall Street beds crowd, you know, pushing the stock up. There certainly are no fundamental reasons for the move that we've seen. If anything, the fundamental picture has actually gotten worse over the last several weeks. And maybe that's what sparked the increase in short interest. you think the stock is a short, basically, but can the retail army spoil the result of that trade for you? Well, you know, I think it goes back to that old saying, you know, the market can

remain irrational longer than you and I can remain solid. I mean, you know, I could certainly see this continuing in the short term, but in the near, but in the long term, you know, the stock price is going to have to reflect the fundamentals of the business and the funeramails of this business are terrible and only getting worse. So let's just call this bed, bath, and bye, right? I mean, that's kind of what we're talking about here, B, B, B, B, B.Y. Their debt picture is extremely serious, isn't it? I mean, they've got a lot coming due, maybe not so much next year, but the year after, is it 2024? That's correct. So they have about $300 million, a little less than $300 million of debt that comes due in 2024, and then they've got other debt maturities in 2034 and 2044. But I'm less worried about the debt, I'm more worried about their liquidity position. It's really deteriorating it very fast, right? They're down to about $100 million in cash. They already have drawn $200 million in their credit

facility. You know, that's what I'm more concerned about, particularly if the suppliers lose faith and start, you know, basically giving them more onerous terms. Well, that's the, that's a key question, because if the vendors see that they don't have cash, are the vendors going to require more money up front to give them the laundry baskets and knives and plates and and linens that they do. I mean, that really is a $64,000 question. To give you a little bit of history here, I mean, that's what did in Circuit City. Circuit City, you know, at the time that they went bankrupt, I mean, they were struggling, but not nearly as bad as bad, as Beth and Beyond is. They also had a lot less debt, but the vendors just lost faith and they ended up in a death spiral. And that's the

scenario that I believe we could see with Bedbeth and beyond. What, if anything, could avoid that scenario? So look, the only Hail Mary pass that I see at this point is if they raise equity, if they are able to basically sell a bunch of new stock and pay down debt and essentially, you know, forestall their demise. We saw GameStop do it. We saw AMC do it. The problem with that is that it would be incredibly diluted to their existing shareholders. And by the way, you know, they're going to need to raise a lot of cash. I mean, we're talking to probably at least $500 million, at least enough to repay the $200 million that they have outstanding on their asset-based credit facility and the $284 million

that's coming due in 2024. Shouldn't they do that right now then at this moment with the stock where it is? Well, two things. First off, it's a lot easier said than done. The other thing is that, you know, when GameStop and particularly, did it. I mean, the stock price was was significantly higher, significantly higher. So, I mean, let's give you some numbers here. Let's just say the stock was at $20 and they issued $500 million of stock. That would be 25 million new shares issued. They only have 80 billion shares outstanding

right now. So that would be a ton of dilution to their existing shareholders. Well, again, if you're describing an existential crisis, then perhaps nothing's too far-fetched. We appreciate the thought experiment either way, Anthony, and for your conviction. Thank you for joining us. Thanks for having me. Anthony Chakumba of Loop Capital Markets. And tonight, speaking of which, we have a CNBC special, the return of the retail trader. Dominic Chu digging into all angles of this revival we are seeing begins at 6 p.m.

Eastern time on CNBC. And between mansions, personal land and corporate properties, Ken Griffin has spent over a billion dollars on and in Florida. Robert Frank is live outside of Ken's Star Island mansion. Robert. Well, Tyler, they are the two magic words right now for Florida real estate brokers, Ken Griffin. He's spent over half billion dollars on land over here on Star Island. And in Palm Beach, we'll take you inside his record-breaking buying binge and what it means for Florida real estate. Well, we've heard a lot about millionaires and billionaires moving to Florida to Florida to Florida.

of the zero state income tax and the weather, but no one has made a bigger bet on Florida than Ken Griffin. Robert Frank convinced the bosses he had to be there in person to report this story. He is clearly a very persuasive man. Robert. Well, Tyler, we have never seen a shopping spree in real estate quite like this with Ken Griffin and Citadel. Now, behind me is Star Island. That's where Ken Griffin has purchased four properties for a total of $175 million. He's going to put all those properties together, tear down the houses, and build a brand new home. Similar story up in Palm Beach, where he spent over $450 million to assemble 25 acres. That's larger, by the way, than Marlago just down the street.

He's going to build a new 44,000 square foot home there. Meanwhile, Citadel, which is moving its headquarters from Illinois to Miami, they have spent over 600,000. million dollars here in Miami. That's for empty land, temporary office space, and leases. So add all that together between Ken Griffin and Citadel over $1 billion in South Florida. Brokers say all that spending is starting to ripple through the real estate market. Prior to the Citadel relocation news, I did think that we were going to see a plateau as to the number of financial institutions, hedge funds, tech companies moving down. here but after that announcement it's really soaring again you talk about wealth migration

taxpayers with over 23 billion dollars worth of income have moved to florida in 2020 that's the latest year available but after this citadel announcement brokers say that migration shows no signs of slowing guys so you need a huge house in west in palm beach in that area which is what an hour north of miami need one of the store who else who else lives on Star Island. It is a large mecca of money. Money and fame, Tyler. You got Diddy. You got Gloria Estefan. You got A-Rod. J-Lo used to live there too, but well, we know what happened. And right now, though, Ken Griffin is really the king of Star Island, and it's exclusive. It's only an 18-minute drive to his new headquarters across the bay on Brickle. So it's a perfect location.

And, you know, what brokers say is that once Ken Griffin started buying on Star Island, prices there went up for everything. There's a new listing for $90 million. And on Brickle, where Citadel is going to be based, the commercial space there is now going, in some cases, for higher rent per square foot than even in Manhattan. So they are having an impact. All right, Robert Frank. Thank you very much.

Big, big change. Big change. Still to come, safe for consumption. trading some of the best performing stocks in the best performing sector since the June lows. That's in our three-stock lunch. There's a peak. And let's take a peek at the markets right now at session highs, moving higher led by the NASDAQ with a one and three-quarters percent gain, similar for the wrestle. All major averages about to close out with more than two and a half percent gains for the week, the fourth straight week for the S&P 500. First such stretch since November.

Stay with us. Welcome back. Want to take your attention to shares of DoorDash, which are higher. higher on the session after the company strikes a partnership with META, the Facebook parent, to deliver items sold on Facebook Marketplace. The program has already launched in several U.S. cities. Dash shares are coming well off their lows of the day. They're up now by about a half a percent. All right. Time for today's three stock launched the consumer discretionary sector, best performing since the June lows. Up 26 percent as a group. Some of the top performing stocks in the sector are Ford of 43 percent, Starbucks, 24, and Penn Entertainment with 40% gain. So let's take a look at those names with Scott Nations, President and CIO of Nations shares.

First up, Scott, is Ford. What do we think of it after its recent rise? Tyler, Ford is a buy. It's going to be the leader in the EV space, even though we love to talk about Tesla. They just reopened the order book for their lightning F-150 vehicle. They just opened it yesterday. They had to close that because they were trying to align supply and demand. So they're going to sell more of those at a higher price. They're going to raise the price anywhere between $6,000 of vehicle and $8,500 a vehicle. That's wonderful for a vehicle. It was already immensely profitable.

They struck a couple of important strategic deals to help their supply chain. And they're going to end up making 100 times more EVs this year than Lucid, even though their market cap is only double. that of Lucid and with a forward PE for Ford of eight versus a forward PE of 60 for Tesla, Ford is not only going to be a leader, you're going to be able to bite at a bargain. I mean, Tyler, it may be sexy to own Tesla stock. It's going to be profitable to own Ford stock. All right.

That's the Ford view. What about Starbucks? Starbucks is a little bit different situation, Kelly. Affordable luxury, maybe not so much. in-store traffic was down just over 4% in June. And Starbucks has a problem. Are they going to raise prices to maintain margins? Or they're going to take a hit on margins and a hit on the bottom line?

And they're not alone in the space. Duncan is making a big push in the pumpkin space coming this fall. That's not really a flavor profile I like, but a lot of people do. And so Starbucks isn't going to have it to themselves. The company is wonderfully managed, but with a P.E. of 28, this is a hold. I would not be selling, but I wouldn't be adding to anything if I already owned. All right. All right.

Let's move on to the last one, which is Penn National Gaming or Penn Entertainment. Penn Entertainment now. Yeah, it's up a ton today in sympathy with the parent of Draft Kings. But customer acquisition for all of these names is still a tremendous problem. And I think the problem for Penn Entertainment is they're trying to solve customer acquisition as a technology problem. rather than a sales problem, they've missed earnings four quarters in a row. Earnings estimates four quarters in a row. So it's kind of a fool me once sort of thing for Penn Entertainment.

This is a sell. It's wallowed to get off the bottom, and I would sell it here. All right, Scott, thank you very much. We appreciate your opinions on those three stocks, Ford, Starbucks, and Penn Entertainment. And we'll take a look at some other key stories under our microscope. That's next. Don't go anywhere. Welcome back to Power Lunch. As we close out this week, we want to put a couple of other stories that have caught our eye today under the microscope.

Starting with this big intraday move in Peloton, the shares are searching 15%. This is on job cuts. They're closing a significant number of retail stores, cutting almost 800 jobs, and raising prices on some equipment. For instance, tie the Peloton bike going up by $500 to almost $2,500. As some people know, I have had an I tore my Achilles, so I've just gotten back on my Peloton. I wonder whether in these 780 jobs, some instructors will lose their jobs. They have resisted doing that all along. I would hope it's just corporate staff, right, or maybe related to the store closings, maybe some retail position.

And wasn't it not long ago that they cut the price on some of their bikes? Maybe it wasn't the particular bike plus that is now subject to price increases, that they had cut prices on those things and raised the subscription price. which I have noticed, by the way. I wonder where this company will be a year from now. Their liquidity issue, there's a big liquidity issue there. I am impressed you're back on the bike this quickly. I'm back on the bike.

Not going the way I used to, but I'm back on the bike. That is no means to. I missed it. I mean, it is a good economical in terms of time used way to exercise. All right, let's take a look at shares of Stitch Fix. Where are you? You're right there. Up 42% in a month, still down 80% from highs.

the company may be the victim of box fatigue. At one point, subscription clothing services were all the rage in retail. In May, Nordstrom announced it was closing down the trunk club. Maybe post-pandemic people are happy to get back into stores. I think subscriptions, I mean, I think subscription models have kind of maxed out. Yes. I'm cutting subscriptions. Well, we all hate the idea of having to pay monthly for something where we don't know

where that finish line is going to be. And more and more things have turned in that direction. Interestingly, though, as well, the box services themselves, some of these kits have proven unsustainable. They're unprofitable or they're, you know, the classic, we could call it the Uber problem, right? Here's a product everyone likes at one price or service point, but once you have to start making money,

a little bit different story and they can't keep it going. And then also, I think after the novelty has worn off a little bit, then your desire to spend wears off. We had one of the meal service companies that would send us boxes. Yeah. And they always said, they always said, oh, this recipe, it only take 20 minutes. So it starts to finish.

No, it always took 45 minutes start to finish. And it kind of, well, oh, well. I thought it always, they came out well, but I always got complaints at home that there wasn't enough food. And that's no way to make money in the long run. It's been a great week. It has. Nice to be with you.

I will see you next week. I'll see you next week. Thanks for watching Power Lunch. Closing bell starts right now.