Power Lunch - The Robinhood CEO, Buffett’s Big Bets and why Playing Defense in this Market is your Best Offense. 5/17/22

Episode Date: May 17, 2022

The Robinhood CEO discusses his strategy for growth and how he plans to fend off the growing competition. Plus, getting defensive. That’s the strategy our market guest is using amid the extreme volatility. He shares 3 stock picks he says will protect your portfolio from any downside. And, Warren Buffett buys into beaten down Citigroup. Should you? A long time trader weighs in. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch for a Tuesday. I'm Tyler Matheson, and here's what's ahead. We got the CEO of Robin Hood. Now, that stock, of course, cratering, users trading less, the company laying off workers, so are new products enough to kickstart growth? We'll ask the CEO about his plan to shore up investor confidence. How about Buffett? Warren Buffett's big bets from City to Paramount to Chevron. If the world's most respected investor is buying into these stocks or into stocks, should you? But first, welcome to Julia Borseton, who's in for Kelly Evans. Hi, Julia. Hi, Tyler. Will stocks are near session highs at this hour. The Dow and S&P are up more than 1%. The NASDAQ outperforming the others with a gain of more than 2%. But Walmart falling 10%, the biggest decliner of the Dow after an earnings miss and a soft profit forecast. Boeing, the best performer on the index, up about 6%. And energy is on pace for a sixth straight day of gains. Exxon, Chevron, and Valero,

just some of the names in that sector hitting 52-week highs in today's session. Tyler? Julia, today's rally offering investors some relief to the relentless selling that has gripped the market in recent days and weeks. Our next guest says your best offense, though, in this environment is a good defense. He's got some picks that could offer some downside protection. Let's bring in Kevin Mon, president and CEO of Henin and Walsh management. Kevin, welcome back. Good to see you.

We're going to talk a little more about Buffett, but if Buffett is buying, Should I be buying? Of course, he's always, he's the definition of an optimist because he's a long-term investor and he's 89 or 90 years old. That's pretty optimistic. It is. And I think if you look back to this past weekend and some of those exciting game sevens in both basketball and hockey, what we learn is that sometimes, as you correctly pointed out, Tyler, the best offense is a good defense. And that package also applies to a investing, particularly in a year that's marked by such heightened and sustained levels of volatility. Consider this stat, Tyler. Of the first 92 trading days of this year, 30 of those days have been marked by a move either up or down by more than 1.5%. That's 33% of the time, or one in every three trading days, we've seen a move by 1.5% or more. So rightly so, investors have become unnerved. So what do investors need to do in this type of environment to stay invested in equity so that they don't miss out on the potential recovery if when that happens, but also give themselves some downside protection to help whether these bouts of volatility.

And we think dividend paying more defensive equities are certainly worthy of consideration. You say that you expect the Fed to turn a little less aggressive after a couple of 50 basis point hikes here. maybe late in the summer, early in the fall. Why do you think that? We know there's five remaining FOMC meetings this year, Tyler. They've all been telegraphed 250 basis points hike in June and July. There is no meeting in August and then they meet and get in September. At that point in time, being data dependent as they are, we anticipate that they'll see more slowing earnings growth, a slower economy, and certain inflationary pressure starting to subside. As a result, I would not be surprised to see them raised by just 25 basis point in September

and perhaps increase the pace of their balance sheet reductions at that point in time. So if, in fact, the Fed terms less hawkish than many currently believe, that could actually help support stock price growth potential during the second half of this year. Kevin, in light of that outlook, what are some of the names that you'd recommend right now? Excellent question, Julie. And I'll turn to our defensive 50 equities trust here at Smart Trust, where we look to identify those dividend paying stocks that have a history about performing each time the stock market experience of pullback. Three names that I'd like to highlight. Starts with the largest chocolate provider in our country, that being Hershey, with a trailing 12-month

yield of 1.5%. Staying in the consumer staple sector, I also like General Mills with a trailing 12-month yield of 2.8 percent, with products that we all know and use each day. such as Cheerios, you'll play yogurt, and of course, Haganas ice cream. Now I'm going to turn to the utility sector and talk about Nysource with a trailing 12-month dividend yield of 2.8% themselves.

Nysource is one of the largest distribution companies as it relates to natural gas in our country and also electrical utility provider. We believe consumer staples and utilities, especially that paid dividends, are worthy of consideration. And just a quick final question. here about those consumer staples. If you think about General Mills and Hershey, those are products that are sold at Walmart. We got a lot of caution from Walmart's earnings today.

What do you make of that? Are you concerned at all about those inflationary pressures? The one thing I took as a positive from Wall Street's earnings from release this morning was the strength of the consumer or the relative strength of the consumer, given that they'd be on the top line with respect to revenues. What was concerning with respect to Walmart's earnings announcements was there problems with supply chain related issues and across labor course, which are having impact on their profit margins. Hopefully this is just a Walmart issue and not more endemic of the overall retail sales, which were relatively strong reported earlier this morning. Yeah, that's certainly something we're going to be watching across the rest of those retailers

this week. Kevin, thanks so much for joining us. And our three-stock lunch is focused on Warren Buffett. The Oracle's shaking up Berkshire Hathaway's portfolio with some bold new bets. That includes new $3 billion stake in Citigroup, more than $2 billion invested in Paramount Global and more shares of Chevron, bringing his total stake to nearly $26 billion. Here to trade these names is Jeff Mills. He's chief investment officer at Bryn Mard Trust and a CNBC contributor. Jeff, let's kick things off with City. What is your play here? Yeah, hi, Julia. So City is interesting, and Tyler alluded to it in the previous segment, but it is all about time horizon. I know it's cliche, but especially when a stock is cheap like City is.

trading at seven times forward. It has a yield of 4%. And even from a technical perspective, the stock is held in pretty well around that $40 to $50 level. So I do think that if you have a multi-year time horizon, it's a very reasonable entry point for stock like city. I'm just concerned on more of a cyclical basis, a shorter term basis, say over the next two to four quarters, and it all has to do with my macro outlook. You know, the Fed, we all know, is hiking into an economy that was already slowing down. So I think you want to do your best to a avoid areas of the market that are overly cyclical. And for banks, it really hasn't been an earnings problem yet. It's been a multiple compression issue. I just think you're going to have a difficult

time seeing bank multiples re-rate in a significant way in the near term. I look at high yield spreads, for example. They're still reasonably tight. As credit starts to deteriorate, you usually see pressure on bank multiples. If the economy starts to slow, then you could see pressure on earnings as well. So I think it's a good long-term story. I just don't think it's for this market. Let's take a look at a second one, and that is the media firm Paramount Global, 2.6 billion Buffett put into it. What makes Paramount a standout in the streaming wars vis-a-vis a Netflix or a Disney Plus or a Hulu or whatever? Yeah, hi, Tyler. Yeah, I think it's interesting, and it kind of speaks to Buffett's style generally.

And, you know, at 13 times forward earnings, I think the downside is somewhat limited here. So potentially he's looking at valuation. but then also the core businesses remain reasonably stable if you look at the last earnings report. So fundamentals good there. And then huge growth in the direct-to-consumer business. You know, the subscriber growth has been really strong. I think DTC revenues are up something like over 80% year-on-year. And I think the content story is very good for a company like Paramount. You mentioned Netflix. I will be the first one to raise my hand and say, I got that story very, very wrong. and I think there was a lot of fear that built up around that earnings report that streaming growth was dead.

I think Disney sort of dispelled that rumor after they reported. And I think there's still growth there. I think Paramount will be able to capitalize. And just from a technical perspective, this is stock that's bounced off $28 three times. So as with City, I don't know that there's a terrible amount of downside to the stock from here. Well, my question then is for their final name, Chevron, is trading around an all-time high. How much more room is there to run for that? this stock? Yeah, all-time high price, but still not a crazy multiple, you know, looking at 11

times forward. So a little bit surprising there. And I would say energy is really the only sector for me that I guess is a little bit opposite to my antipsical, my anticyclical trade generally. Energy is consensus. It is overbought and Chevron is no different. It's 26% above its 200-day moving average. But I would be buying weakness because I think there's idio-sincratic issue in the commodity space. I think oil prices will generally remain high. I think supply was tight already. And then obviously with Russia and Ukraine, I think that perpetuates that issue. So that's going to continue. The price is reasonable, even though it's at an all-time high from a valuation standpoint. So I think you can buy on weakness with a name like Chevron or really anything in the energy space

right now. And we see Chevron shares up about 1% today. And we have a bonus stock in our three-stock lunch today. Buffett exiting his decades-long stake in Wells Fargo. What's your take on this one? Yeah, so I would put it in the same bucket as city, really, but then obviously Wells Fargo, it's a higher risk situation, right? I think that management needs to prove that it can execute here. There's potentially more upside, but in an environment where I don't think the macro backdrop is your friend, I would rather be moving into financials that are more stable, tried and true execution, like a city, like a JP Morgan, versus the risk of a Wells Fargo. Jeff Mills, thanks so much for joining us for our three-stock lunch plus

bonus. Already coming up, airline stocks are higher after United raises its revenue forecast, but the industry is facing a number of challenges. We'll take a look at which carriers can avoid getting stung by higher jet fuel costs. And speaking of challenges, the CEO of Robin Hood faces many a falling stock price, fewer active users, will ask him where he's finding growth in the short term and how he plans to stay an independent company in the long term. It is a power lunch exclusive. You won't want to miss. We'll be right back. Welcome back to Power Lunch.

As the airline industry recovers from the pandemic, it's facing a host of issues from rising ticket prices to surging jet fuel costs, inflation. Now hostile bids are on the table as well. United CEO, Scott Kirby, sounded upbeat as he spoke to Squawk Box earlier today as airlines, the airline's revenue beat forecasts.

We were out of the tunnel. You know, we were in this long, dark tunnel going through COVID. We're out of the tunnel. You know, even with fuel prices up $10 million year over year, we're going to be almost to 2019 profitability levels. And we got the triple sevens. Like there's all these good things that are happening. Well, the optimism from United comes as JetBlue launches a hostile takeover bid now for Spirit Airlines.

Spirit Air CEO Ted Christie was here with us yesterday and expressed his concerns and frustrations. The reason that we view the JetBlue deal as problematic is the antithesis to the way we look at the Frontier deal. These are two like-minded, low-cost businesses. They're looking to expand and drive more stimulation with lower fares. This is not a discussion about capacity constraint and higher fares, which is what we're hearing out of the JetBlue camp. All right.

For more on this in the state of the airlines, let's bring in Gordon Bethune, former chairman and CEO of Continental Airlines and a CNBC contributor, and Jamie Baker, senior airline analyst at J. P. Morgan. Mr. Bethune, welcome to both of you. Mr. Bethune, let me begin with you. What do you see happening in the airline business? I mean, obviously there is a bounce back from the pandemic, but now

there are rising jet fuel prices. There's war in Europe. There are still labor shortages. And now we have a hostile bid on the table for frontier. What is the state of the airline business from where you sit? But, Tyler, you're 100% on.

The problem is that all this is happening in a steep recovery, which can absorb some of these macro changes you're seeing, especially like in fuel. At the same time, things like JetBlue and Spirit make a lot of strategic sense when you start looking at the business long term because they need to get their size to be competitive in the coming years as United and others add to their fleet and become mega-meaguerriers from what they are today. So there's a lot of upside and growth. And you've got to say there's a lot of pin up the man. And leisure traffic, as you know, is a canary in the mine shaft. It's the first thing to go. And it's really, really strong because it's been pinned up for so long. So is JetBlue's bid for Spirit then really a defensive play rather than an offensive play?

In other words, if they don't go out and get scale, they're not going to be able to compete with the airlines like United American Delta that do have scale? I think, I think, Tyler, it's defensive and it's strategic as well. They need scale. And to get the scale they need, which is like another 150 airplanes, they're not for sale. And in the short term, you're not going to be able to do it. While companies like United, they've announced 500 new airplanes in the next five years. So the seawall is coming at you.

You need the scale to compete. We've got to do it. Jamie, let's bring you in here. What's your prediction with this? JetBlue bid. What do you think the chances are that that deal happens and what's your prediction for consolidation in the space? Well, look, there have been deals in the past that were born of absolute necessity. If we roll back to the post-9-11 environment, putting America West and U.S. Air together, both of those franchises might have failed without M&A. We're not in that kind

of situation right now. Would it benefit the industry to see further consolidation? Our answer is yes. Is it absolutely necessary in order to, you know, achieve some of the price targets that we have for the names that we follow? No. We do ascribe a reasonably high probability of regulatory passage to either of the two deals that are on the table right now. Jamie, I'm sorry we're going to have to interrupt, and Mr. Bethune, we're going to have to interrupt because we want to bring to our audience some headlines from Fed Chair Jerome Powell. He's speaking right now at a Wall Street Journal conference, and Mr. Powell says that 50 basis point hikes or a half percentage point are on the table if the economy performs as expected. He says uncertainty about the economy's future

limits guidance, and he adds that the markets have priced in a significant path of rate hikes, that financial conditions have tightened significantly. The 10-year, there you see it, moving a little higher, rising to session highs. As Mr. Powell continues to speak, there's the two-year, and so it's about 30 basis points away from the 10, which is now at 297-3. I guess what Mr. Powell is saying, Julia, in effect, is we don't have the visibility on the economy, but we know we're going to be raising rates here for at least a way. while, we'll take it as it comes to us as the data comes in.

I mean, and what's interesting is that this plays into this broader conversation, even about the airlines and this question of what the consumer is going to be looking like, what kind of inflation the consumer is going to be reckoning with and how they might impact spending on all of these different things. The consumer's going to be looking a lot more tired if it's a summer of $5 a gallon gasoline. Yes, absolutely. And you're driving back and forth to the Jersey Shore or wherever your choice beach is. but it's going to be an interesting, interesting summer.

What did you say? A control room? All right, we'll go one more question for Jamie. I'm sorry to break it up this way. So do you agree, Jamie, that the big guys have the clearest path moving forward and that the JetBlue deal is actually one that JetBlue has to do to remain competitive? I think there is relevant. and scope that JetBlue would achieve if they can close the deal with Spirit.

But to your earlier question, yes, we think the big guys are kind of in the league right now. I mean, this was a subject that came up at an aviation conference in Dublin last week. Pre-COVID, if you had asked me whether there was a scenario where American would be guiding to a profit and spirit would be guiding to a loss, that would have sounded really counterintuitive. at one point. And I'm not picking on either of those franchises, but it just goes to show you how much change has taken place within the domestic airline dynamic. Jamie, thanks very much. Mr. Bethune, thank you. As always, it's good to see you both. We appreciate it. Good to see you, Gordon. I see you. And coming up, CNBC's new Disruptor 50 list,

after the break, we'll lay out the industries and companies that are leading the pack, plus DoorDash, failing to deliver gains this year. The CEO's plans for the future in today's working lunch. And during May, we're celebrating Asian-American and Pacific Islander heritage and featuring some of our CNBC teammates and contributors. Here is CNBC video producer, Dean Milar. My parents taught me at an early age

the value of education and hard work. Being the only Asian kid in the room in most of my classes, I didn't have much of a choice but strive to be the best that I can be. working alongside my parents at their restaurant really inspired me and motivated me to be my best. And those are the values that have always stuck with me throughout my education and my professional career. And I hope to pass that down to my daughter someday. Welcome back to Power Lunch. The Disruptor 50 list is out.

Over 1,400 nominees this year. And of the 50 companies we picked, the number one company on the list is Flexport. It's a logistics company that's battling the global supply chain crisis by tracking in street. streamlining the movement of cargo across ships, planes, trucks, and rail. Second is Brex, a FinTech company offering financial services to startups. Number three, lineage logistics. It uses a proprietary freezing process to improve food supply chains. Number four is graphic design platform Canva, and number five is Guild Education.

Logistics is the top category on the list, with 10 companies total, and FinTech is in the second spot with nine companies on the list. including eight-time disruptor, Stripe. Web 3 is also well represented among the newcomers on the list in particular, including blockchain.com. You can see the full list at cnbc.com slash disruptors. And Tyler, there's a lot more content there.

Without going into mind-numbing detail, how do you end up on this list and how do you get into the top five? It's not just revenue growth, is it? It's not just revenue growth. It's a size of addressable market. It's the traction that you already have. have with customers. So you may have doubled your revenue size in the past year and even

tripled it. But if you're not at a certain scale, it's hard to get into the top five. We do take nominations from venture capital investors, nominating their own companies, are also the companies themselves. But there's a breakdown of all the quantitative and qualitative analysis on CBC.com. How do you get named a disruptor? What do you have to do to disrupt? Well, the question really is how these private companies are challenging the status quo. Are these companies introducing new business models? Are they forcing the other established public giants to change the way they do business?

Like here's, we've got a new freezing technique on food. That's their disruptive quality that would catapult them. Julia, thanks. Good to have you here. All right, let's get to Seema Modi now for a CNBC News update. Seema. Tyler, good afternoon. President Biden concedes he can't do much to toughen gun regulations with executive action.

And he says he will keep trying to get Congress to do more about. but acknowledges it, well, it's going to be very difficult. Speaking to reporters in Buffalo today, after visiting the scene of Saturday's supermarket massacre, he said America needs to face what he called the reality the country has a problem with domestic terrorism that is, quote, real. An administration official tells Reuters that the U.S. is considering a move to block Russia from paying U.S. bondholders as a deadline approaches. That would bring the Kremlin closer to a default. But the official says, quote, I don't have a decision to preview at the moment.

this time. And as Sky News reports, a conservative member of the UK Parliament has been arrested on suspicion of rape and sexual assault crimes over a seven-year period through 2002 to 2009. The party has asked the unnamed member to stay away from Parliament as the investigation continues. Tie back to you. All right. Thank you very much, Seema. Ahead on Power Lunch, battered brokers wants a disruptor now facing major disfunctions. Robin Hood hit by stock market volatility. the crypto sell-off and sinking customer approval. So does the company have a plan to move forward? The CEO sits down with our own Kate Rooney next. We'll be right back. We have 90 minutes left in the trading day. And we want to get you caught up on the markets,

stocks, bonds, and commodities. And a big interview is coming up with Robin Hood, CEO Vlad Tenev. But first, a check on stocks at this hour. Major averages are higher. The NASDAQ leading the way up about one and a half percent. Financials are the best performing sector today. City Group jumping after Warren Buffett disclosed a $3 billion stake in the company. Wells Fargo higher as well, even though Buffett exited his stake in that company. Walmart is getting hammered after its results, warning about the impact of inflation on its customers. Home Depot, though, is higher after a strong quarter. Target and lows, they both report their results tomorrow. Moving on to commodities, oil is down slightly today, holding around the $113 per barrel mark, but that's still close to the high. level in nearly two months. Energy stocks hired today and are continuing strong gains recently. And moving on to the bond market, the 10-year yield rising today's investors jumped into stocks and out of bonds. Also, comments from bed chair Jay Powell speaking this hour, this may be the key comment. We need to see clear and convincing evidence inflation is coming down. If we don't see that,

we'll have to move more aggressively. But the tenure at 10.96 is still down sharply. from its peak of 3.17 last Monday. Now turning to Robin Hood, which has seen its stock sink 70% in the last six months. And as crypto gets crushed and stocks swing wildly, is the Robin Hood user still training? Let's go down to West Palm Beach, where our Kate Rooney is with Robin Hood CEO, Vlad Tenev,

for an exclusive interview. All right, thanks, Julia. Vlad, it's great to see you in person. You just got offstage. We're here at the Permissionless Conference, which is a crypto conference, and we'll get to some of the news you had out today, but it is good to see you. Thanks for joining us.

Yeah, thanks for having me. It's good to see you too. Of course. Well, I want to start with the markets. Crypto is getting crushed. Stocks are down, and individual traders are just trading a lot less than they were, say, a year ago, for example. How are you looking to growth and where are you looking for growth in the near term? What should shareholders know? If they're trying to be confident in investing in Robin Hood, what does shareholders need to know about the future of the company?

Well, from the very beginning, Kate, we started Robin Hood with the idea, that we should challenge the status quo. Brokruages were charging expensive commissions. They had account minimums. And Robin Hood came in there and changed the entire business model. And you kind of see the same thing happening in crypto right now. You see lots of companies charging customers high fees, it being kind of the realm of early adopters.

And I think with this product in particular, we have the opportunity to do that again, to challenge the status quo and make, something that was accessible to only a select view, accessible to a much broader mass market audience. And that gets us very excited. And so the product you're announcing today essentially lets users hold their own cryptocurrency and NFTs. It really puts you in direct competition with Coinbase, for one, among other startups, but you're doing this no-fee model that you just mentioned.

How can Robin Hood afford that? Are you subsidizing the fees? And what does the revenue look like here on the back end? Well, I think it's it. Yeah, it's a question that's a couple of steps ahead. So our primary objective is to give customers a great product, right, to give them the opportunity to not just trade through the centralized exchange of Robinhood, but also keep complete control and custody over their keys and will help them access decentralized exchanges and swap coins. The revenue model, once we deliver a product that we think customers will really, really love, it looks really good. The revenue model takes care of itself, but our focus is on just making sure that, you know, this is the way for our customers to access Web3 and maintain self-custody going forward.

And so your customers are going to plug into other exchanges. You mentioned in the release, something about earning yield on stable coins, for example. There was a huge, huge incident last week with Tara and Luna. That really collapsed. Are you worried at all about the liability for Robin Hood? If you connect a customer to, say, a decentralized exchange that goes through a hack, How did you get your regulators comfortable with that? Well, the way we think about it is it's not unique to crypto.

I mean, there's certainly lots of projects. Not all of them are going to succeed, but you have incidents like that happening in the traditional equities markets. You see it happening in currencies historically. And I think it can be tempting to be wrapped up in what's happening week by week. But you look at all the protocols that are popular today. Some of them have been really successful. You see the companies behind them or the Dow's at this conference.

They were all largely built during crypto winner. So when everyone says, oh, crypto is over. That was fun while it lasted. People put their heads down and they build and they build these great products. And that's what we're excited to do. I think now is actually the best time to build. Got it. And Julia Borson back in the studio has got a question for you, Vlad.

Thank you, Kate. And thank you, Vlad, for joining us. Vlad, there's no question that Robin Hood dramatically disrupted the financial services industry and brought in so many new traders to the market. But my question is, you know, a year after you were number one on the disruptor 50 list, here you are now. You have a lot of the incumbent banks changing their offerings. And you have consumers whose behavior is just fundamentally different than it was a year or two years ago.

How concerned are you about competing with the giants as? they tried to copy what you've been doing? Well, we feel very confident. I couldn't be more confident in the future than I am now. And I'll tell you, Robin Hood this past quarter, you've seen all the new products that we've been rolling out. And it's not just Robin Hood 3, the Web 3 wallet, but things like stock lending, the 1% APY on your uninvested cash that we announced last week, you know, we see opportunities to

serve our customers and pass back more value and challenge the status quo in all market environments. And I think this, it's a very exciting challenge for us in the company. We want to make sure to serve customers well in high inflation environments, low inflation environments, every opportunity we get. And you'll see us continuing to do that. And by speaking of competition, we had Sam Beckman-Fried, the CEO of FTX buying a 7.6% stake in Robin Hood. Did he approach you about this first? How did you find out that he was going to take a stake in Robin Hood? And does it make you worried at all from a competitive standpoint?

No, I wouldn't say it makes me worried from a competitive standpoint. I mean, we have, we're a public company. We have lots of shareholders. We're a company that is all about democratizing access to public markets and cryptocurrencies. So happy to have shareholders involved in the company. Did he call you up? What was, have you ever met Sam in person? I have met Sam.

I mean, we've shared some similar investors when we're private companies. Smart guy, yeah. So I've spoken to him over the years. Got it. And speaking of big name investors, Warren Buffett and Charlie Munger have been among your loudest critics.

I don't know if we've ever gotten a response directly from you when it comes to what they've said at some of the annual meetings. Most recently, Charlie Munger said that Robin Hood was, quote, unraveling for its design. disgusting behavior and that God is getting just. Tough words from a well-named investor, well-known investor. What's your response to that? So if Warren Buffett and Charlie Munger were

getting started today, I have no doubt that they'd be Robin Hood customers. You think they'd be using the platform? I have no doubt. That's how, if they were getting started today, for sure. And what's the investing behavior? We've talked a little bit about the slowdown in trading behavior, how are investors handling what may very well be their first bear market? Yeah, I mean, we're seeing, we have lots of different types of investors on the platform. So first timers, obviously, is what we've been talking about. But we have lots of advanced investors as well. So customers coming to Robin Hood for our competitive crypto offerings, customers that actively trade options. And, you know, during this time, I think it's a great

opportunity for us to get closer to their needs, understand them, and build great products for them. So a couple of things that I've announced in the recent past, hyper-extended hours trading, which allows customers to take advantage of a longer trading date, as well as the eventual goal of making equities markets 24-7. These are all examples of us kind of catering to a big and important audience for us, which is those active, more advanced investors. I want to ask you about employee morale as well. We had Coinbase this morning saying it's slowing down hiring. Robin Hood cut about a tenth of its workforce. I'm sure that was a tough decision.

But I wonder in terms of how you're keeping employee morale up, how you're keeping customers, I mean employees at the company, when their net worth may be cut in half from where it was a year ago. I wonder if you can tell us a little bit about how it is and how your discussions have gone with employees internally at Robin Hood, who may just be feeling down about where the stock price is right now. Yeah, the way we like to think about it is Robin Hood needs to to go through market cycles and prove that we're a company that has very, very exceptional cost

discipline. So it's about cost discipline. We obviously know that when, you know, the Fed is sending stimulus and the markets are going up and interest rates are low, that things are great and it lifts all boats. But I think it's the companies that exercise that discipline and show that they can stand the test of time through rough market conditions. That really separate. separates companies. And that's our goal. I think we've been cost discipline from the very, very beginning. And this is just an opportunity for us to display that excellence over and over again.

Got it. Well, a lot has happened since the IPO. We appreciate you sitting down with us. Tyler, I'll send it back to you in the studio. All right, Kate, thank you very much. Kate, we thank you and Vlad Tenev. Coming up, we are getting our working lunch delivered today. Yes, John Ford brings us his interview with the CEO of

of DoorDash. Plus, home, costly home. Costs continue to climb for home builders, sinking sentiment details when power lunch returns. Well, this day it's home stock darlings are feeling the heat now, testing the strategy and resolve of their leaders. And today, John Ford brings us up close with the CEO of a tech company that's continually to expand its services portfolio, even though sentiment has turned negative. This is a company I patronize, or maybe I should put it this way, My son patronizes. Many of us do, Ty. Yes, Tony Shue is co-founder and CEO of DoorDash,

a company now trading below its 2020 IPO price, done more than 70% from its November highs. I first met Tony four years ago, when DoorDash was just another hot startup in a surging gig economy. And even back then, he struck me as having an unusually methodical, pragmatic approach to his role in the enterprise, sorry, restaurant ecosystem.

And that's partly because he told me he and his parents worked for a time in other people's restaurants. I was born to classic immigrants, and my family moved to this country with $300 or less in our bank account. My dad was getting his Ph.D. at the University of Illinois and working full-time as a waiter. And my mom, to support the family, worked multiple jobs. But she was really working multiple jobs,

one of which was in a restaurant, so that she could save up enough money to afford the medical education to get back her license because she had effectively lost her license moving from China where she was a doctor in Eastern Medicine, but when she emigrated to the U.S., that license was no longer recognized. And so she was saving up money in the various jobs,

both to put food on the table and support the family, but also to never give up on her dream. Tony's taking the long view on today's market too. I had a working lunch with him just last week in Manhattan, sit down, not delivery, And he talked about the ways DoorDash is trying to help delivery drivers cope with high gas prices and help young employees deal with gut-wrenching market and help restaurants innovate with the flexibility that technology brings.

He shared similar ideas this month on CNBC after earnings. During the pandemic, we saw restaurants get very inventive and creative, selling different types of food from the same kitchen. You know, a Chinese restaurant selling now Mexican food and many versions of this. In fact, we've seen tens of thousands of these types of opportunities, these virtual brands and stores rise on the platform literally from zero just a couple years ago. We also saw new innovation, you know, where restaurants are now shipping some of their foods, whether it's frozen foods from places like Lumanades and their great delicious deep dish pizza in Chicago, you know, to Carlos Bakery, you know, and they're amazingly delicious

cookies. I mean, to other restaurants who are now recognizing they're not just a place that sells food, but a place that sells merchandise. So with labor costs high, consumer budgets tight, as we saw today in Walmart's earnings, a lot of restaurant customers could use the extra sales. And now that the hype is faded from a lot of pandemic names, we'll see whether Tony can effectively roll up his sleeves and pull away from competitors in local commerce and logistics.

I think it's not so much about delivery as it is about marketing and some things like ghost kitchens that are going to determine whether this model works longer term. But my question really is how much he thinks that consumers are going to want to keep spending at the same levels they were before inflation was so high? And whether he thinks that when it comes to ordering takeout, that might be the first thing to go. Well, a big part of what he's doing is share of wallets. See, it's not just about restaurants. It's also convenient stores. So getting something from Walgreens, getting medicines, for example. Now they got this thing called double dash, where you put in your order and then do you want, not fries with that, but do you want ice cream

with that. They map out the route using data so that the driver can also pick up something else for you. So if those things catch on and it's not just about ordering out, but it's also about convenience stores, it's also about groceries. There you go. So it can be pickup, it's not just delivery from restaurants anymore. If I need some Aleve cream to put on my aching Achilles, I can call them and do it. What are their arrangements with restaurants? Do they sign up restaurants to use their service or what? I do. They do. And part of what they've done during the pandemic is roll out a new pricing structure,

where it's not just, here's how much it is. You've got to have us deliver it. Now you can order something on DoorDash and pick it up yourself, right? And so it's good for the restaurant. It's good for you if you want to pay a little bit less. And, you know, their argument in part is that the interface is convenient enough for the people who subscribe and use DoorDash a lot. They'd rather use an interface they know than go to each individual restaurant.

If those plays work out, then DoorDash could end up being a different kind of model than a lot of investors might have expected. And ultimately about consumer loyalty to that interface and that system. They already have your credit card saved, so that makes it easier. John, thanks so much. Thank you. And Home Builder Settlement hitting a two-year low. We'll explain the growing impact inflation is having on the industry. You can now listen to Power Lunch on the go.

Look for us on your favorite podcast app and follow our Power Lunch podcast. We want to show you the markets as we come. back to air here. The industrials, NASDAQ and S&P are at session highs. And the Dow just about 40 points off its highs of the day. Materials and financials continuing to lead stocks today, consumer staples, still the only sector lower. But there you see nearly a 2% gain for the S&P, and a better than that one for NASDAQ. Julia? And one of the sectors that is higher, homebuilders. This is despite a very weak reading of homebuilder sentiment. Let's get to to our Diana O'Leck for more on that report. Diana? Well, Julia, it was much wider than

expected, a drop in Home Builder's sentiment in May, down and outsized eight points to 69 on the NIHB Wells Fargo Index. This is the fifth straight monthly drop and the lowest reading since June of 2020. The street was looking for 75. Now, of the index's three components, current sales conditions fell eight points to 78. Sales expectations in the next six months dropped 10 points. to 63 and buyer traffic fell nine points to 52. Now, it's all a combination of rising mortgage rates and rising building material costs. The average rate on the 30-year fixed jumped from 4.88% at the start of April to a high of 5.64% in the first week of May. And that's according to Mortgage News Daily. NHB's chief economist Robert Dietz said the housing market is facing growing challenges.

Building material costs are up 19% from a year ago, and he added that less than half of new and existing homes are affordable for the typical family today. All right, so why are the builder stocks up? Well, probably because they've just been so beaten down. The home building ETF is off about 28% year-to-date, so as the rest of the market rises, they are along for the ride. Back to you guys. All right, Diana, thank you very much. Diana Olek reporting. Up next, is there a catch-up trade happening among small caps?

We're looking to the charts for answers to that one. We'll be right back. Small-cap stocks may be sending an important market message right now, and Dom Chu has received it. I've received at least some inklings of it, guys. So here's what we're talking about. First of all, nobody knows exactly how this story is going to play out. But we've seen enough damage in the market so far,

where if those small-cap stocks start to do something, it might actually tell you something important. So if you look over the course of the past year, 12 months, things started off pretty smooth around the beginning, but as the year progressed, you can kind of see that gap in performance has widened out. The orange line is the Russell 2000, rather the S&P 500, the white line is the Russell 2000.

So that gap in performance has kind of been widening out over the course of the last year. Now, if you take a look at a year-to-date chart, things have gotten a little narrower. All of a sudden, the performance gap is not quite, as big, they were actually tracking pretty closely in the early part of this year. And now you're starting to see a little bit more of a pickup here. And if I show you a one-week chart, this is where the kind of journey of a thousand miles starts with a single step kind of line, right? Because what you're

seeing here is, again, tracking fairly closely here. And then all of a sudden, that white line, which is the Russell 2000, is starting to outperform the large-cap market. So those small-cap stocks, generally speaking, the conventional wisdom is there are a lot more sensitive to slowdowns in the economy, inflationary pressures, rising interest rates. But if those stories start to resolve themselves, maybe those small caps are telling you something a little bit more about a recovery that could be taking place right now, or at least a diminishing fear of recession that's imminent in the U.S. economy sometime soon. And but what about the fear of inflation and the question of whether these small cap companies are as equipped to manage inflationary?

pressure is how pricing power is the larger one. So there's no doubt, Julia. I mean, that's been the pervasive narrative, right? That interest rates and inflation are the huge driver of things, which is why that underperformance has been so huge. But if there were a scenario to play out where that recessionary fear is not quite as huge out there, maybe those small cap companies don't have to fear inflation as much going forward, or maybe can see interest rates start to play less of a story. We'll see what happens. All right, Don, thank you very much. You've got an interesting insight there.

Julie, it's been great being with you the last couple of days. It's great to be here. Congratulations on the Disruptor 50. And to you all, thank you very much for watching Power Lunch.