Power Lunch - The Real Economy, Big Tech’s Shopping Spree and a Bet on Twitter. 8/1/22

Episode Date: August 1, 2022

The state of the economy is crucial to every public company. But there are so many conflicting signals. We listen to what CEOs are saying, seeing what Big Tech companies reported and following the big money to find the real state of the economy. Plus, with tech valuations hit hard, could heavyweights like Microsoft, Amazon and Google be ready to go on a buying binge. And David Einhorn thinks Twitter has the upper hand in its legal battle with Elon Musk and he’s putting his money on it. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Contessa Brewer, along with Tyler Matheson, and here's what's ahead. How's the economy doing? Well, that depends on who you ask. We're looking at it from three distinct points of view to find the real state of things right now. And could big tech be about to go on a big buying spree? We'll tell you what could be on the shopping list from Microsoft, Google, and Amazon as valuations drop. Tyler. And welcome, Contessa. Welcome everybody. Markets right now. Stocks a little bit lower across the board. The S&P 500, the worst performer today in percentage terms, still not too bad. These are modest declines. Considering July was the best month for that index in a year and a half. Why didn't it feel that way?

It just didn't, frankly, I guess because June was so bad. Boeing helping to keep the Dow aloft right now. The company avoided a strike at three of its manufacturing plants with a late-night offer and getting FAA approval for delivery of its dreamliner. Global payments leading the S&S. P, the company reporting a loss for the quarter, but saying it has agreed to buy the competitor Evo payments, that stock up 18% in the past month. And the biggest losers on the day, they are travel stocks, Royal Caribbean, hit the hardest as it tries to raise another $900 million. Well,

every stock in every industry, dependent one way or another on what happens to the U.S. economy over the next few weeks and months, the Fed, the inflation, factor, consumer spending, it all matters greatly to your investment. So we've got our reporters looking at the economy from all angles to tell us what's really going on. Steve Leesman is listening to CEOs, Steve Covac, on what we're seeing from Big Tech, and Bob Pisani following the money on Wall Street. Steve Leesman, we begin with you. Thanks, Tyler. The message from the C-suite is more mixed and even more nuanced and somewhat upbeat than the predictions of recession. that we're getting. While Walmart and Best Buy have offered sobering negative views, there were a host of

other CEOs we've had in our air who have found the consumer spending just fine. If you look at the business itself, it's smoking, it's doing really well. We're seeing good activity across both the consumer and commercial portfolios, and I think that really bodes well for the environment we're in right now. The summer has been a blockbuster. Our forward bookings into the fall look very strong. We see steady recovery in business travel. Erding's overall up a decent 7.7% compared with a year ago, and revenues up 12% both running ahead of expectations. All S&P industry sectors are beating on revenue and 7 of 11 are beating on earnings. Goldman Sachs writing in a commentary this morning, management guidance is consistent

with continued revenue growth in Q3 and full year CAPEX expectations have actually ed slightly higher since the start of earnings season. Meanwhile, several CEOs, telling CNBC that the job market remains tight, suggesting they're not about to let their workers go, and that could help keeping the slowdown from getting worse, guys? You know, as we look back to the earnings, they go back up to the prior quarter, better than. But those CEOs that you quoted there, they are pretty bullish looking ahead. Others maybe not so much, though, I sense. I think that's right, Tyler.

It is definitely a mix. You have, you know, for example, Walmart was out there with a very, with a somewhat negative view, Costco with a very positive view. Best Buy with a negative view, Apple with a positive view. So there's a mix out there. I think you want to be careful not to over, not to exaggerate any single anecdote out there. There are definitely problems with the low-income consumer, but middle and high-income consumers. And then that whole separate travel and entertainment bucket that we've been talking about seems to have a life of its own.

It has a mixture. I mean, you've got Royal Caribbean going way down and not in trouble as a company, but troubled as a stock. And you've got Marriott's CEO seeing, looking at it from the other side. All right, Steve, thanks a lot. Let's zoom in on now on Big Tech. Many of the biggest companies reported results, and they paint a picture of the economy and demand that wasn't that pretty. Steve Kovac joins us now for more on that. Hi, Steve. Hey, Katas. Yeah, not pretty indeed. So we heard over the last week from Apple, Alphabet, Microsoft, Amazon, and Meta. and all these companies warning on weak spots throughout the economy. Our Jennifer Elias reporting earlier this week that Alphabet CEO, Sunderper Chai, told employees to double down on productivity.

And that's echoing what we've heard from executives at META and Microsoft in recent weeks. I even asked Apple CEO Tim Cook about this last week and hiring, and he's telling me he's going to be deliberate in hiring due to inflation. The message here, do more with what you already got. Microsoft told us about cost cutting in small and medium. in businesses, a sign more bite tightening could be to come. Also warning of, quote, deteriorating PC market that started in June. But Apple told the opposite story saying demand is still strong for the high-end consumer, with Apple expecting iPhone sales to keep growing despite the tough

environment. Meanwhile, all companies, with the exception of Amazon, warning of a softening advertising market. Microsoft alone said it took $100 million hit last quarter due to that ad market softening, and meta continues to struggle competing for ad dollars against TikTok. And finally, execs from all these companies saying foreign exchange headwinds will continue into next year, and this will hurt growth for things like Apple services business and Microsoft's Azure Cloud. And we're already seeing guys some price increases from these tech companies, and more could be coming. And meta also is suffering because when it tries to compete with TikTok, some of its best-known

users, a.k.a. the Kardashians, fight back in a big, big way. But that being said, are the big guys saying that they're better positioned to whether whatever comes? I mean, if the small companies are cutting costs, is that looming for the big guys, too? No, contest. I may have painted a really dower picture of the economy, but the tech companies all say, we're going to do pretty well and weather the storm pretty well. In fact, they're saying we're going to grow. Maybe not grow as much as they would like or people had anticipated, but they're going to be able to throughout this really tough environment. Meanwhile, like I was saying from Microsoft, it's the smaller and medium businesses that are really cutting back. So when I look at hearing comments from

Microsoft execs about cutting back on IT spend on their small and medium businesses, you just got to start to wonder, where else are they cutting back, Contessa? That's a great point. Thanks, Steve. Thanks. All righty, what are the big traders betting will happen next with the economy? Bob Bazani is following the fund flows. Hey, Bob. Tyler, July was a very active month for traders. Some investors were betting on an economic slowdown, and interestingly, they were using bonds. So we have some preliminary fund flow data for ETFs that indicate some very sizable inflows into bond funds of all types, including Treasury bond funds, corporate bond funds like LQD. That's the largest corporate bond fund out there for ETFs.

Even high-yield saw inflows like the I-Share's broad, high-yield corporate ETF that's also there on that list. equity inflows kind of flattished recently, but as technology has rallied in July, there have been notable inflows into gross stocks and to do funds like the pro shares ultra NASDAQ 100. It's a mouthful, but it provides two times the gain. So if the triple Q's the NASDAQ is up 1%, it's up 2%. Very popular ETF right now. There's also been inflows into defensive ways to play the market. Kind of the opposite of this, dividend paying ETFs, like the Invesco, high dividend, low volatility,

That's SPHD. Now that invests in high dividend payers, obviously, like Chevron and Ultria, that have relatively low volatility. Finally, there's been a whole spate of single-stock ETFs launched in July. So, for example, you can now bet against Tesla. TSLQ is the symbol here. Just launched a while. It provides the inverse of Tesla every day. Guys, these single-stock ETFs are going to be a very big story in the second half of the year.

We're likely going to see dozens of them launched around the most active. and volatile stocks. So we'll have a lot of other things to be covering in the next four or five months. I had not heard of these at all. So why would you buy a single stock ETF when you could go and simply buy the single stock? Right. These are leverage generally. So they provide usually one or two times the upside or one or two times the downside. So suppose you want to bet against Tesla, for example, you think it's going to be going down. You can buy these essentially short ETS for a single stock now. And rather than going out and dealing with the options market or paying for that, you can buy it. It's a convenience trade, essentially, Tyler.

You're betting one way or another against an individual stock, and you don't have to have the issues about going out and buying put or call options essentially on them. And obviously, there's some issues out there about how big these will get. And they do reset every single day. So that's a major problem for investors to understand. They reset every day, so they only get one or two times leverage or inverse on a single day. After that, it can start diverging. And that's where I think there's going to be some problems with consumers understanding what these products are. I can hear John Bogle rolling in his grave.

Rolling over. Oh, yeah. That's a very good observation. He always said he didn't like that. Yeah. Thank you. Bob, thank you. So what does all this mean for your investments?

Our next guest says the markets are likely finishing a period of short covering. and thinks the next few months will offer some buying opportunities. Let's bring in Jerry Castellini, President and Chief Investment Officer with Castle Arc Management. Jerry, good to see you. Do you think inflation is peaking, and do you think American consumers think it's peaking? So two questions.

The first question is very much so, and it's not an opinion. If you break inflation into services and goods versus food and energy, the service good side is rolling over. The forward implied tips number has gone from the low threes into the mid-2s. So for the most part, the markets are adjusting to or absorbing, if you will, this now deceleration in pricing. And to be honest, I think you have separate food and energy simply because it doesn't have the same impact in the financial markets. It may not have the same impact in the financial markets, but I would,

willing to guarantee you that more Americans look at what they're paying at the grocery store and at the pump and use that as the gauge of inflation. Tyler, you're dead right. And I think you've hit on it. The investors look at core because we feel more tethered to that. But there's no question that the collapse in consumer sentiment has been tied one to one to this. What you're saying is every day you walk into the grocery store. And those probably explain that. But think about both of the those food and energy. Oil's already at $100. For it to continue to be accelerating on inflation level, it'd have to get to 150 very quickly. And that's something that the markets aren't pricing

right now. Instead, what we're seeing is gas prices dropping. People may be readjusting the way they buy food when they're at the grocery store to account for higher prices. And so with that being said, where do you see some opportunities for growth? If you're investing right now, if you think the inflation has peaked, where do you put your money? Yeah, so three basic areas. The first thing is, there's no question you shouldn't hedge the inflation question, right? You shouldn't ignore and believe we're at all going back to the 2010 decade. It's not likely. It's not possible. So you should own the stocks that have the highest correlation and the most likely part of the CPI going up, which is energy. Just own these big

Exxon, Slumberger, Southwest Energy. Own those kinds of names simply because of the cheapest stocks in the market today. If the price of oil stays just around here, most of these companies will be continuing to flood their shareholders with share-by-backs and higher dividends. Hold that on one side. And on the other side, I think after nine months of getting obliterated in technology, when you described this a couple of minutes ago about what the company's reported, doesn't that give you a little more confidence that you're buying some of these stocks at very attractive prices? So it's that kind of barbell approach, I think, that gives you that top opportunity. And, Jerry, you also say consumer, too. You're recommending Ulta Beauty, Nike, and a company

that I cover closely, Las Vegas Sands, which, by the way, has just come out of a complete, shutdown in Macau, where pre-pandemic, it got some 65% of its revenue. It's sold out of Las Vegas, which has seen this massive rebound. It is relying pretty much solely right now on the rebound in Singapore. Why do you like that stock when it comes to consumer investments? Quite simply because there's two sets of consumers in the world that matter, and it's the American consumer and the Chinese consumer. And you'd be odd. If you remember how, soon we came out from a stock market perspective in 2020. Give China a six, nine month head start on this and don't be surprised at how the name like Las Vegas Sands behaves

because it will front run coming out of the lockdowns. And like you said, Singapore's already in business and doing fine. So you actually own a great call option there. I was on a call with an investor. I respect a great deal last week. And he described basically a barbell approach. So count it two for the barbells. I mean, he was saying on the one hand, by the great chevrons and Exxons and Slum Berges, and on the other hand, leave some room for what could potentially be a 10-bagger, something that maybe isn't as commonplace as an Nvidia or a Microsoft, but something a little more, a little more, a little more, a little more roar in the tank. Well, that's my, that's my southwestern area. That could be a 10-bagger.

That could be a 10-bag. All right. kids. Fantastic, Jerry. Good to see you, man. You bet. Jerry Castellini. Appreciate it. Coming up, tech valuations have come back down to earth this year.

Could that mean some of the tech heavyweight could pick up some bargains? We'll tell you where they could look. Plus, David Einhorn buying shares of Twitter. He thinks the company has a good shot in its lawsuit versus Elon Musk. And he sees big upside. If it does, we'll have that story and a lot more coming right up on. Power Lunch. All right.

Welcome back to Power Lunch, everybody. It's no secret that tech valuations have fallen back down to Earth in 2022. So could that mean that some companies are ripe for a takeover? Our next guest says the big three, Microsoft, Amazon, and Alphabet could go on a shopping spree. Joining us now with what could be on their list is Mark Muddler. He's senior research analyst at Bernstein. Mark, welcome. You know, some would say Microsoft has already been on a bit of a buying spree. They bought a healthcare company last week.

They bought a gaming company a few months back. Do you continue to think that they are in the market? And if so, what for? So it's a great question. You're absolutely right. Microsoft has been shopping. The new management, newer management team, Satya Nadella, Amy Hood, increased significantly the amount that the company was acquiring.

They've been constantly looking at possible acquisition. And they started buying more and more and proving out that they were a successful serial acquirer. And then they bought CERNA, I'm sorry, they bought nuance in the healthcare space. They bought Activision in the gaming space. And they're likely to continue to more. What are they going to do? First of, I think that it's going to be a lot more small acquisitions because the company

is looking to easily add on. There's a whole build versus buy decision. and they're looking where they can to be able to buy the assets, especially at a good price, that they can add on that can accelerate their coming to market. You're seeing a lot of that already within the AI and cloud space where they're making acquisitions there. You see them in the gaming space as they're buying game studios.

Microsoft has aspirations with Microsoft GameBass to be the Netflix of gaming, in which it'll be a subscription model. You'll have access to a wide depth and breadth of games. you'll be able to play it across multiple devices. And so they need to own a lot more first-party games, which will also monetize by in-game purchases. They need to buy a lot more game studios to keep adding, and likely they continue to acquire beyond Activision,

but likely much smaller ones in the space. So let's move on to Amazon, which has some restraints around it, I would think, because of concern over government coming in and saying, hey, no, wait a minute, you've got an antitrust problem here. They've recently bought a health care company. Where do you, and they've been active in buying content for their video service and beefing up Amazon Prime with sports deals.

Where do you think they could be active? So all three, Microsoft, Amazon, and Google are being very careful about the regulatory issues and the possibility of the regulators giving issues. You see it with Activision at Microsoft that is going to take. likely a year and a half for that deal to close. But Amazon and Google are even more concerned than Microsoft is for a lot of historical reasons. Amazon, look, they've got a broad base in terms of where they're acquiring. They've been buying a lot on the entertainment side.

They want to keep adding to Prime. They want to be able to make it more powerful. They're spending a lot of money in that space. They're spending in health care. We've seen Microsoft buy that with nuance. We've seen Oracle with CERN. So healthcare is a key area for all of these vendors. They're going to continue to buy in cloud, but probably spend less than Microsoft has been.

But everyone has their eyes open to look what could be the next adjacent market they can move into. So with any of these three, it could be someone we expect or it could be something radically different as they keep looking for the next pillar of growth for the businesses. You know, when you're looking at Metaverse, when you're looking at entertainment and content creation. You mentioned gaming meaning video gaming. I'm curious about gaming meaning gambling and whether these companies, all three, you know, we know that there's some interest in sports, whether that leads them toward this path toward sports gambling as that market explodes in the United States. It's an interesting question. I suspect they would rather be the platform that the sports gambling is run on, then be the sports gambling company.

And the reason is it creates a whole host of new issues from a regulatory point of view, from an investor point of view, et cetera, et cetera. To an extent they all want to be the plumbing that everything else runs on, and that's a great area that they would go into. I think it's unlikely that they would make meaningful investments to be able to offer more than the technology that you would build some form of a a gambling platform on top of it. And it's interesting the Biden administration's opposition to some of these big mergers in the way that the regulatory overhang has to factor into whatever happens next.

Mark, thank you so much for your perspective. We appreciate it. Up next, what's in the cards for? I keep bringing it up. I'm so interested. What's in the cards for casinos? Gambling stocks, getting good news out of the United States and bad numbers from China. Details next. Plus, these names are not. names led the bounce back from the market bottom. But should you bet that there's more room to run? We'll trade them in today's three-stock lunch. We're back in two. Welcome back to Power Lunch. You can add Massachusetts to the growing list of U.S. states that will allow mobile sports betting following a late-night deal reached in the legislature. And there's no ban on advertising, so you will

see lots of ads around Fenway Park. Now, Draft Kings is based in Massachusetts already. The stock on the rise today. Also based in Massachusetts, Wynn resorts, Penn, and MGM, which all have sports betting businesses. We'll keep an eye on them as well. And then, of course, Wynn has a big focus in Macau, Las Vegas Sands. We were just talking about that. They're bouncing off of their session lows and shaking off. When I say weak, it is a massive overstatement or understatement. Listen, the numbers came in from Macau for July. They have 1.6 percent of of 2019 gaming revenues. Stiefel said, quote,

we didn't think the market could get any worse. We were wrong. It's been really troubling. Yeah. Yeah. All right, so what we know now is that the United States has this massive appetite for gambling. The consumers in Las Vegas are still going there spending.

Gas prices and food prices have not discouraged them at all. They keep setting, and we just got June gaming revenue numbers. The Las Vegas strip set another monthly record, months in a row. It's been like 16 months where every month they were seeing a new record set for what was earned on the strip

in terms of gaming. How about those casinos, the big ones? You reported from one, I think it was a, God, I can't even remember that. Was it a win in Massachusetts? That then wasn't a win? Yeah, Encore Boston Harbor. They switched the name of it

because of the scandal involving the founder, Steve Wend. Okay. So Encore Boston Harbor. Is it doing well? Yes, it's outperforming any single property that Wynn owns in Macau, which is a total about face. Remember, Macau. Was the cash cow? The Macau? Yes, it was. Six to seven times the size of Las Vegas, but because of those COVID restrictions, it's really crapped out, so to speak. And so what you're

seeing is these companies are relying on their other properties to keep them afloat in Macau. All right. Well, we'll talk more about that. I am sure. Let's get to Frank Holland meantime for a CNBC News update. Frank. Hey there, Tyler and Contessa. This is your CNBC News update for this hour. President Biden tested positive for COVID again this morning and will continue to isolate as he deals with a rebound case that is seen in a small percentage of patients treated with Paxlovid. His doctor says today's positive result is as could be anticipated and the president feels well. Meanwhile, COVID continues to complicate vote counting in the Senate. Republican John Cornyn is the latest member of the chamber to test positive.

He says he's doing fine as he isolates. Cornyn's absence gives Democrats some cushion as they try to pass a big tax and spending bill and the evenly divided Senate. But the Texan says if CDC guidance allows, he will be back to vote against the measure if the vote is held this weekend. However, that is unlikely. And here's some very remarkable video. A group of beachgoers in Maryland spotted a shark struggling after getting caught in a fishing line. They managed to get it on the sand and a man used a pair of pliers to get the large hook out of that shark's mouth and then set it free. into the waves. Not sure if I'll get that close, Tyler. Just not sure.

Whoa. Good Samaritans on the sharks. The sharks are coming in. We were out last month, folks, and point lookout in Long Island, and the sharks were coming in close, in part because the baitfish, the waters are cleaner, and the baitfish are coming in close. That's why we're seeing dolphins in New York Harbor. Frank, thank you very much. Frank Holland, down there in Maryland. Wow. All right, ahead on Power Lunch, a cyber scan, cyber threats on the rise, but the stocks are lower for the year. We'll speak to the CEO of Checkpoint Software on the disconnect and once ahead for the industry. Plus Twitter's Greenlight hedge fund, Greenlight Capital, weighing in on must-bewed with Twitter as it takes a big stake in the battle. We'll discuss

that next. 90 minutes left in the trading day and we want to get you caught up on the markets, the stocks, bonds, commodities, and the CEO of Checkpoint Software on the rise in cybercrime. But let's begin with the markets now. Stocks are now all lower across the board. You've got the Dowell off 0.2%, the S&P off, a third of a percent, and the NASDAQ composite off a quarter percentage point, the worst than the bunch. It's down, as you can see here. All right, let's move on to consumer staples, discretionary, and industrials. The only sectors higher, energy leading those declines now. And within the staples, Colgate, Procter, and Gamble, and Kimberly Clark now are the leaders at this point. Look, you can see the consumer staples up more than a percent. We're seeing

moves higher in some of the low-end retail names as well, including Burlington, Five Below, Ollie's, and Bigwats. And now let's look to the bond market where yields are falling to kick off the new month. And Rick Santelli is tracking the action at the CME. Rick. Hi, Contessa. Indeed, if you look at every maturity outside of two-year and three-year yields are falling, but the short maturity is still stubborn, most associated with the Fed. Look at a two-day of two-year You can see we're higher in yield today by about two and a half three basis points. What was the catalyst? Well, construction spending was the weakest in, what, about two and a half years?

Minus 1.1 percent, a real shock there. And, of course, prices paid, though, on the good news side, dropped 18 and a half points. That's historic in and of itself. And, of course, that helped the longer Treasury parts of the curve. Look at a two-day of 10-year, 10-year-down-f basis points. 30-year bonds are off eight basis points, so that means the curve is flattening, kind of a stagflation width there. Flatest in 22 years, as you see this August, twos versus tens, hovering just around minus 30 basis points.

Now, that's not the real recession spread, but many like to look at it. The real recession spread three months to 10 year. There's a one-year chart of it. Look at how it's dropping like a rock, and basically it is the flattest right now in two and a half years, where the other spreads the most inverted in 22 years. And finally, booned yields overseas. 9 out of 10 sessions, they close their yields lower than the preceding session. They're at 3.5-month low yields, under 80 basis points.

And they are really a poster child for all that seems to be going wrong with regard to energy in the economy in Europe. Contessa, back to you. Rick, thank you very much for that. Appreciate it. The energy complex seeing big losses today across the board, crude sitting well below 100 bucks The barrel Pippa Stevens has those numbers for us. Pippa. Hey, Contessa, that is right.

Heavy losses for oil today on the back of weak manufacturing data out of China. This is accelerating demand loss fears, which have ramped up in recent weeks. Of course, both WTI and Brent are coming off a second losing month. Goldman's Jeff Curry, though, reiterating his call for Brent to hit 130 per barrel by the end of this year. He said this morning on Squawk Box that the market is missing a key point. And that's that while demand growth is slowing, it's not contracting and supply remains tight, all of which supports prices in the back half of the year. Let's check on closing levels.

WTI down 5% at 9370, burn crude at 99, 99 for a loss of 3.8%. And energy stocks are following oil lower in the group is the worst performing S&P sector. A number of companies will provide quarterly updates this week, including Devin, Diamondback, and Transocean, all of which are on deck for today, Contessa, after the market closes. Pippa, thank you for that. Checkpoint Technologies reported second quarter results this morning, beating estimates with a 2% gain. And yet, shares of the cybersecurity solutions company are down today, almost 5% now.

Let's bring in Gil Chavad. He's the founder and CEO of Checkpoint Software Technologies. Gil, it's great to see you today. Here you've got earnings coming in with revenues 9% above last year's second quarter. You've got subscriptions up 14%. That's all really good news. So where are these headwinds coming in? Where are investors not buying into the story that you're telling?

First, I wish I knew to analyze the stock market. Maybe I'll be in your seat, and it's great to be here. But I think overall we did a very good result. The demand for cybersecurity, we see it as healthy and continues. And unfortunately, also the need for cybersecurity is increasing, and the number of attacks keep rising. in a very alarming face. You said on the call that you're seeing a lot of the use of your system coming in through

out-of-country extortion, through other states using ransomware attacks and things of that nature, and then this geopolitical threat. So where do you see demand going at a time when, and we just heard this from Microsoft and Google, that some of their smaller companies are having to cut costs? First, the demand is high, and again, every customer that I meet with large or small is actually indicating the silvery is an area that they still want to invest. Second, my advice to people is not necessarily to spend more money, actually to do the right thing. To consolidate solution is focused on solutions that are preventing the attacks. You know, a huge part of our industry is about detecting that you've already been breached.

And that's too late. I think we need to invest in prevention, in stopping the attack before it hits. And versus, again, I mean, they can go on and on. There's a lot of advice they can give to people, and not all of it is about just spend more. Where is your growth happening? I mean, are you fully exposed in markets like the United States? Are you getting more growth now in emerging markets? We are all over the world.

The first half of the year was actually very, very good in the Americas. We had to improve some. I mean, the biggest market that we are selling forever is in the U.S. But I think in the last year we did recover and we did invest a lot in the U.S. and the first half of the year we saw very, very healthy growth in the demand in the U.S. for us. But it's U.S., Europe, and Asia, that's the free major markets. It's all across all sectors. Actually, the last quarter, our small business sector grew very, very fast.

It's still relatively small, but that was the fastest growth. sector, but also equally speaking in the large businesses, which is the bigger part of our business. Two quick questions, if I might. One is this. My sense is that the reported number of attacks is underreported and that companies and governments don't want to say just how much they are being tweaked and attacked. Am I right or wrong about that? I think you're probably right. I think, by the way, not everybody knows about all the attacks. Remember, we are stopping most of the attacks. I mean, a typical organization is being attacked about a thousand times every week. There are certain sectors that are being attacked more than 2,000 times a week. And the good news is that we are

stopping all of the attack. And again, unlike the physical world when you're saying, I'm being attacked that's, you know, that happens once every few years. Here we are being attacked many, many, many times every single day. Yeah, I think if you look at the banking sector, I've talked to executives there, and they say we're getting attacked practically every second. They're testing our defenses practically every second. How has the nature of the attacks changed over the past two years?

Oh, the attacks are becoming four more sophisticated. What we call fifth generation, gen 5 cyber attacks are becoming now a daily thing. We are seeing, I mean, the tools that have been developed, sometimes by nation-state organization are leaking to the internet and a year or two later, they are the tools that every kid or every criminal group is using.

Things like ransom, I mean, I've seen 30% increase in total attack, 59% in ransomware. Let me squeeze one more in quickly, if I might. When you go to bed at night, who or what do you worry about most? Do you worry most about organized criminals? Do you worry most about Russia, Iran, China,

North Korea? Who's the biggest specter out there? All of them. And I think there's a very little distinction because, again, it's the same tool used by everyone, and governments are using criminal group to help them, and criminal group are using the tools that are developed by governments. And I mean, we've seen, now with Costa Rica being extortioned by a criminal organization, it's all over. All of the above. A, B, C, and D. Thanks very much, Gil. We appreciate it. Thank you very much. Thank you.

All right. Still to come, there's a lot at stake over the fight between Twitter and Elon Musk, especially the firms taking stakes in Twitter. We will discuss the latest fund to back the social media giant. Welcome back to Power Lunch, everybody. Shares of Twitter falling today, despite a big name investor taking its side in the battle with Elon Musk. Leslie Picker joins us now with the details. Hey, Leslie.

Hey, Tyler. David Einhorn taking a stake in Twitter. with a bet that its takeover by Elon Musk will close. Einhorn's Greenlight Capital took a new stake in the social media company during the second quarter in an average price point of 3724 per share. In a letter to investors, he didn't disclose the size of the holding, although we might get a better sense of that when 13 Fs are filed in two weeks' time. But he noted that the price point provides $17 per share upside if the deal closes

and he believes it would trade down $17 if it broke apart. So Einhorn staking his bet in merger arbitrage fashion on the findings of the Delaware Chancery Court. He's handicapping the odds of any other buyer wiggling out of a deal like this to be less than 5%, joking that it's the same proportion of bots that might be on Twitter's platform. Remember, Musk is claiming that he believes that figure is far higher. Einhorn said that the widely held belief right now is that Musk is above the law, though, which explains why Twitter shares are trading so far below the deal, value of 5420 per share. However, he thinks that the court can't let Musk off the hook or it would

invite many more buyer's remorse suits in the future. He said the risk reward as a result is favorable that the chancellor presiding over this case will respect precedent and quote, protect the sanctity of the court. In other words, he's betting that this deal will close, guys. Einhorn's letter, I'm told, wasn't just about Twitter. He also discussed inflation. Where did stand on that issue, Leslie? So it's interesting, Tyler, because when I think about inflation and when I first started hearing that word pop up several years ago from big investors, it was Einhorn that really called that attention in a big way as a result of all the stimulus that was going into the system, both

on the fiscal side and monetary policy side. So I always like to tune in to see what he has to say on that front in these quarterly letters. And this one, he did say that he believes that we are in a bare market, that inflation has begun to create an economic slowdown, leaving less for discretionary purchases. So all of that, he believes, is happening real time in the economy. He did say that falling commodity prices appear to be leading to an economic consensus that inflation is under control, but he believes that it's actually transitory disinflation. It may not stick just because the markets are saying

that, you know, commodity prices are lower. There are so many prevalent forces of the economy that seem more permanent than that. Well, that's fascinating. Yeah, very interesting. Leslie, thank you. Appreciate it. Thank you. Up next, today's three-stock lunch will run through the names that led the comeback since the lows

and analysts think they might have more room to run. Time for today's three-stock lunch. We're looking at names that have led the market on the way down and could be leaders in a possible rebound. Stocks that dropped more than 20 percent from the start of the year to the market bottom on June 16th, but have rallied more than 10 percent and still, more than 20% upside. That's according to analyst targets. Names like General Motors, Wells Fargo, and Disney. Could these stocks continue to rise coming off the market's best month since 2020? Let's bring in Carter Worth, founder and CEO of Worth charting for his trades.

Hey, it's good to see you, Carter. All right, let's start here with General Motors. What is this, a catch-up trade to Ford? In many ways, that's right. If you think about just what you started with, which is how far they've come off their lows. I mean, Ford is up 44% General Motors up 20. Now, while they are not, of course, 100% correlated, they do tend to do somewhat of the same thing. And so just that simple pairs trade, we think, makes a lot of sense. But General Motors down 55% from its peak over the past two years.

That's an incredible sell-off versus the S&P down 25. And so the rebound potential, I think, has room to run. Do I take a sip of Wells Fargo? Do I chug it? Do I pass? Yeah, well, that's right. It's ever thus, right? So the thing about Wells Fargo is, to my eye, anyway, is more of what I would characterize as a pair of twos. It's not particularly bearish. It's not particularly bullish. It's sort of fair money, dull money, right? It's not a big hand to play. Now, relative to the BKX index, it does exhibit characteristics that are desirable. But in and of itself, consider this, that basically this is trading where it was in 2008.

Yikes, that's not great. And what's the magic of Disney's stock here, Carter? You know, to my eye, Disney is very similar to General Motors. In fact, it's peak, the trough decline at 55% is virtually identical. And it, too, has ricocheted more than the market. And so things like this, while they're high risk, they are high reward. They're so far below trend. And the question is, are there bounces finished?

And whereas many stocks, I think, have expended too much energy. Something like Disney, I don't think so. Why has Disney been so punished, Carter? Well, and this has nothing to do with charts, but two things. One, of course, you're not operating the business that you want to operate during a pandemic. Right. And then they took on a mountain of debt, a mountain of debt. In the Fox acquisition.

And just, yes. So debt is a retardant of growth, right? And so is it always and forever going to have a lower multiple than the great Disney of years going by probably? Carter Worth, thank you very much. And for the full results of the stock screener with all the names that could lead the market rally, head on over to CNBC.com slash pro. All righty. Is Apple's newest bond offering a sign that things may not be as bad as people fear?

Plus shares of Devon Energy reopening just now after reporting earnings. The company beating on both the top and the bottom line, raising its 2020 production forecast by 3%. We'll talk about the improved outlook. It's due to better than expected well performance year to date. Company scheduled to release results after the close today. Apple is already one of the best capitalized companies in the world, but Tim Cook must think now is a good time to raise even more money.

Dom 2 joins us with the latest details. Hey, Dom. All right, so Tyler contested, the reason why it's interesting is because Apple earlier this morning made a regulatory filing, basically a placeholder one, an initial prospectus that says that they are going to offer a four-part bond offering, sell various maturities worth of bonds. And they didn't say the number or amount. They didn't say anything else. But take a look at interest rates over the course of just the last several weeks here, right?

Because at the cycle highs so far, we're talking about 3.48 percent, that would was the high in terms of where we saw right there. And now we're closer to about 2.6. So interest rates have come back a good amount. People have been buying up not just government debt, but corporate investment-grade bonds as well. If you take a look at one ETF that tracks it, this is the I-Shares-IBOx corporate bond ETF, ticker LQD.

Of course, it's lost 15% of its value over the last year. But look at that kind of gradual uptick that we're seeing just in the last, maybe a couple of months or so since the lows. So as people have been returning back to the market, buying up some of the appetite for that high quality debt, there is an opportunity for some companies who have good balance sheets like Apple to perhaps raise money. Now, this is what's going to happen. I mentioned before what's kind of going on. It will be a four-part bond offering. It will be seven, 10, 30, and 40-year maturities. And the size and pricing has not yet been disclosed. Basically, they put a placeholder

prospectus in there. Not going to tell you how much they're going to do or at what size or rate they're going to do it at. But it's being run as it has been in the past by Goldman Sachs, B of A and J.P. Morgan. What's interesting about this is you mentioned, Tyler, the massive amount of money that they have and how well capitalized they are. As of their last quarterly report, which we just got, you know, about a week ago, right, this past week, we're talking $179.3 billion. Now, this is what's traditionally been called cash for Apple. It includes cash, marketable securities, short-term investments, that sort of thing. But it totals about $179 billion. Why would they do this? because oftentimes some of that money is not just liquid cash.

In fact, out of that 179 billion guys, this past quarter, only about $28 billion of it was actually cash and short-term investments. So that's an idea for kind of how things are shaping out. Others are following suit, issuing big bonds? Well, this is a big one only because Apple, because they have done it in the past, and over the course of the last several years, they've done anywhere from $5, $6 billion to $14, $15, $20 billion in offerings.

Do they really need the money? No, but they're going to... Is it better to describe that then not as their cash? hoard but as their liquidity position or their war chest if you will right something like that but cash and stock buybacks and dividends all right thank you stock buybacks and appreciate it and thank you for watching power line