Power Lunch - Trial and Error, High-End Holding Up? 12/1/23

Episode Date: December 1, 2023

Pfizer’s effort to join the weight-loss drug craze just hit a major setback. Patients are quitting its trial after experiencing unpleasant side effects. We’ll bring you the details, and the stock reaction.Plus, our Retail Ecosystem series concludes with a look at luxury stocks. Is the high-end consumer still buying, or spending money elsewhere on things like experiences? We’ll ask an industry insider. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everyone. Good Friday afternoon. Welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us. Coming up, Pfizer's effort to join the weight loss drug parade faces a major setback. Patients quitting the trial after experiencing some very unpleasant side effects. We will have the details in the stock reaction there. Plus, we conclude our series on the retail ecosystem with a look at luxury stocks. Yesterday, we talked about the struggling dollar store. So is the high-end consumer still buying or spending that money elsewhere? on experiences instead of stuck. Kelly. Well, first let's get a check on the markets as we start December with green arrows. The Dow hitting a new 52-week high today and just a couple hundred points from its all-time high. Speaking of all-time highs, check out gold, cracking above $2,000 an ounce and powering higher still.

And today we heard from Fed Chair Powell saying talk of rate cuts is premature, leaving open the door to more hikes, but generally signaling that the Fed may be. done. Is this the setup for the rally to continue in December? Let's bring in Bob Pisani. Bob? You know, after an extraordinary November, think about this up nearly 9%. The setup for December in early 2024 is exceptionally strong. So here's the setup. First, December is the third best month of the year. But what's different about this particular December is that it's a pre-election year. And December pre-election years are much stronger than the other December. They're up 2.9%. on average. That's twice a typical December. The first part of the month tends to be the

weakest due to tax laws selling the second half of the month is where most of the gains will typically occur. It's not just the seasonals that are strong. The macro backdrop is really strong. Look what's been going on here. Interest rates have been dropping. Inflation continues to moderate. The GDP growth numbers were solid. Unemployment is still low. Folks, we call that Goldilocks. No wonder Wall Street is so bullish. Almost every Wall Street strategist this week is expecting high stock prices in 2024. Many are expecting the S&P to end 2024 to 5,000 or above. That'd be a gain of about 10% even from here. So what we really need now is new information. Remember, folks, that's the way the market works. Efficient market hypothesis. Goldilocks is already priced in. We need more.

It's been very heartening, Kelly, to hear positive comments the last two days from both Salesforce and from Ulta, both of whom had very good guidance. That's exactly what we need. We need more of that kind of new information. But for the moment, Kelly, let's just enjoy the positive backdrop. It doesn't get much better than this right now. I just want to show you the S&P 500. You mentioned Powell said premature to say when policy might ease. He didn't push back against what Waller said, though. He didn't say, oh, forget it. There's no chance. You people are daydreaming. We're not going to be cutting. He didn't push back on that. And I think that's partly why the market's been rallying so much. He's got to be really, really insisted. And he's got to be really insistent.

didn't do that. And I think that's what's helping the market today. I'd be curious your take, Bob, on the kind of inherent contradiction of all of this, where usually when the Fed's done, it's because the business cycle is over. So how long can stocks stay positive in that situation? Yeah, the problem is the market is anticipating right now that we're going to have some kind of extended business cycle. And a lot of people are saying, well, gee, this is the way the market acts when things are right in the middle are coming out. And it's, it's. not. We're pretty long in the tooth right now. I mean, good heavens, it wouldn't be surprising to see some kind of slowdown. What I'm concerned about is the valuations are very high. We're at 19 times

forward earnings. Anytime the historic average is 17, when you get 19 to 20, it's very hard for the market to stay up for that long because that's a lot to pay for a future stream of earnings. Usually, either the market comes down or the earnings start going up. And right now, the bulls are really anticipating that the earnings numbers are going to go up, but we're already anticipating 10% growth. It's already priced into the market. We better have a heck of a good year, or the market's going to stall out sometime in the next few months. All right. Bob, thank you. We appreciate it. Bob Pisani. So let's talk a little bit more about whether the rally is going to continue. Our next guest says, yes, but there are a few things that need to happen for the rally to persevere.

Let's bring in CNBC contributor, Surat SETI. He's managing partner with the DCLA. he's our guest host for the hour. Good to have you with us. As always, love having our first minute on our Fridays with you. Thank you. So you're basically in the Pazani camp that provided we get good information, positive data points throughout the month of December. It's pretty good sailing from here till the end of the year at least.

Yeah, what's interesting now is, you know, the market really started rallying when the data came in positively, when inflation was coming down, when earnings were going up. I mean, historically, the markets have discounted that before, and we'd be sitting there and the markets are going up and, you know, rates were going up and wondering why it was going on. But this time it was reactive to what's going on. So I think the market needs to be fed continually positive information, which means rates can't go up from here, which also means that if rates go down, it has to be for the right reason.

It can't be because now the Fed, if Powell had said, well, rates are going to go down because we see a slowdown. You might have seen a very different reaction from the market because then it's sell now, buy later, because we don't know what's really slowing down. The consumer, we know, is holding up, even though it is slowing. You're seeing that in some of the data for some of the retail stocks. That's 60% of our economy. So we are going there, but valuation is going to be really important, and rates are going to be really important.

Employment's going to be really important. And also we're also talking about a static world, and we know that's not going to happen. So if something happens geopolitically in the next day, a few weeks, you know, we were in a period of time where every Friday the market sold off just because we didn't know what was going to. So now that's been discounted too. So Bob's right. There's a lot of good information that's been discounted in the market,

but we have to be careful because you do get some data points. Do you think the Fed is almost most of the way to threading this needle toward a soft land? Or are you a little skeptical? I'm a little skeptical because they were late to the party to begin. And there's still a lot of tightening to move through the system, right? Exactly. We haven't really seen the full effect. And we do know that inflation is there.

We're discounting this part that inflation is coming back to a low number. It's going to be hard to see when wages are already up this high, rents already up this high. Supply chains are all duplicative. We're not, you know, we're de-globalization. So I think there's a fine line there, too, as to how much it's either going to slow down or we're going to have deflation in the system. That's the thing you want sort of that beautiful outcome where the inflation rate falls, but the business cycle keeps going. Right. And I, you know, and maybe it'll happen this time.

Look at the ISM number this morning. I mean, it's been awful. This is the worst, the longest ISM losing streak. It was below 50 again. Yeah, it was like the 15th straight month. And it got even worse and the dispersion of it increased. And so it feels like I can understand those to say, you know what? Manufacturing was just in a post-pandemic reset and it's going to be different this time.

Okay, maybe. Maybe. But this is not favorable historicals. So I think the key there is then when you own stocks, know what you own. And just be very careful of valuation. because is it sustainable? Because if you're looking for the Fed to cut, is it going to be for the right reasons?

Right. Yeah, no, that's the trillion-dollar question. Are the sexy stocks like Invidia going to hold up? So that's like something we talk about with our clients all the time. So you think about... Because people ask me. It's like, remember 20 years ago, CMGI, or whatever these, you know, safeguard scientific.

They were these stocks that didn't do anything or make anything or make any money, certainly. But, Invidia makes plenty of money. Well, 20 years ago, Cisco made a lot of money, too. Yeah, yeah, yeah. You know, the multiples compressed by 80%. Yeah. Invidia is a great company. It needs to grow.

We own it. It's one of our largest positions. But it needs to grow 30% a year for it to sustain its valuation. And that means no competition coming in. That means, you know, people are going to still buy there. They're going to pay the same prices at the same margins, and demand is going to increase, and no competition comes in. I think you can own it.

You just have to be careful as the side. Sizing is really important because these size of your holding within your portfolio because it's a very volatile stock. And if you look back historically, even go back a couple of years, when Invidia has misstepped, the stock doesn't correct 5 to 10 percent. It's 20 to 30 percent. So you need to be prepared, but it can also do that on the upside. But on the upside, it's pretty much baked in.

We're expecting 20 to 30 percent earnings growth on an, you know, and that is basically, Kelly, to your point, the economy needs to be where it is. So if some of their largest customers like the Microsofts or the Amazon, Amazon or some of the others say, hey, we're slowing down our spending because demand is slowing down. That's just going to have a whole. So there's probably no more visible stock that I can think of right now than Invidia. Apple, I suppose, is equally visible. Microsoft.

These are all visible stocks. Microsoft, these are all visible stocks. Is there an invisible stock that you own that you think has higher than sort of market average prospects? So the way I look at it is to say, what are the areas being. kind of a value biased investor. What are the areas that have been totally out of favor? Like, who is not looking at commodities at this point, right? So we talk about copper companies like a Freeport

where you don't, haven't had a factory built in 10 years. So, you know, I'm not saying that's going to be next Nvidia, but you want to look at a company like that. Or you want to look like a Cleveland Cliffs, right? You want to look at the steel industry, not just because Cleveland Cliffs not focused on commercial, they're focused on other things. So that's just one sector.

Look at health care. Look at a company like Thermo Fisher, which did great. What Fisher? Thermal Fisher, TMO. All these three companies we own, so full disclosure. Thermo Fisher, one of the best companies out there. They make all the products that go into all the healthcare companies.

It's the beakers, et cetera. They call for flat earnings for the next year. But after that, trajectory is going to go up again. Fabulous management team. It's a stock that we want to hold for many years, but now the opportunity to buy it again. So kind of look at the fallen angels, compounders over time, that you can actually add to your portfolio

when some of the others have done really well. Yeah, very interesting. So, Rod, thanks very much. We're going to have a pleasure of your company for the rest of the hour. We'll bring you in. You'll get to play in our sandbox. In our sandbox. I look forward to it, Kelly. The weight loss drug market being dominated by Eli Lilly and Novo Nordisk. Now Pfizer's attempted entry into that market suffering a setback. Angelica Peoples brings us that story.

Angelica? Hey, Kelly. Yeah, Pfizer today announcing that it will not advance its experimental twice a day weight loss pill into phase three trials because that drug had such a high rate of side effects. And while Pfizer says the drug, Danubegran, met its goal of delivering weight loss of up to 13 percent, more than 70 percent of participants reported nausea, nearly half-experienced vomiting, and a quarter of participants experienced diarrhea. That led to about 50 percent of the drug dropping out of the study early versus just 40 percent on the placebo. And Pfizer deciding that those results mean the drug in its current form won't be competitive enough against some of the other treatments,

already out there or in the pipeline. Now, Pfizer does have a reformulated once-a-day pill that they're working on, but we're not supposed to get data on that until the first half of next year. Investors not liking today's news with shares of Pfizer off about 5%. It's a pretty big problem for them, Angelica. I mean, I actually was surprised that 40% of people on the placebo dropped out of the trial as well. But at a time when we're learning more and more about the efficacy of the leading candidates, what does Pfizer do now?

Yeah, and really quick with the placebo arm, something that is really interesting. And I saw an analyst note saying that maybe people are looking at these other approved drugs and going for those, you know, they're not losing weight on placebo, so let's drop out. But that's something that we're going to want to hear more from Pfizer on. And Pfizer does have that once-a-day formulation that they are working on. So they're going to continue studying that, and they should have results next year, and that'll inform the path forward. But this is certainly a setback for them. We also wanted to ask you, Angelica, about Europe's drug regulator looking for more data from Lilly and Novo Nordisk about their weight loss drugs.

What can you tell us? Yeah, so European regulators have been looking into reports of suicidal ideation, basically thoughts of suicide, in people who are taking GLP-1s, both for weight loss and also for diabetes. And it's something that we haven't heard a whole lot about. They've been looking at this since the summer, but today saying that they're asking for more data from the companies. Now, we reached out to Novo Nordisk and Eli Lilly and don't have a good sense of what exactly the regulator over there is looking for, but it's something that we're going to stay on top of as they continue this pursuit. Yeah. All right. Thank you very much. Angelica, we appreciate it. Coming up, folks, Tesla delivering its first cyber trucks and doing another test fire at the

windows. This time they didn't break. And we will talk Tesla and all the auto news of the day. That is next on Power Lunch. That's cyber truck. Look at that guy. He has a really poor fastball. He just really can't throw. Welcome back to Power Lunch. Three big stories impacting the auto world today. So we're going behind the wheel for a power rundown with Philaubo, who is here to break it all down. We'll start with the Biden administration proposing new rules for EV battery supply chains to qualify for tax breaks.

File this under the wonky but important, Phil. It is important, Kelly, because starting January 1st, we start. to see the ability for auto companies when they're selling vehicles through their dealers, or if it's direct, people will be able to take those tax credits, breaks, immediately at the dealership, as opposed to putting it on their tax form at the end of the year, which is how you currently do it. And there's going to be greater focus on these tax credits, and because more vehicles are being manufactured and batteries are being manufactured, some of the rules that they're going to be putting into place, they're not putting the proposals out there. And you're going to gradually see the

percentages increase both in terms of components as well as critical minerals. And I think we've got an explanation for how much is expected in 2024 when the vehicles are being manufactured. And the first is 60% for components. And then for the critical minerals, U.S. or free trade partners, 50%. You guys understand what the bottom line is here. The Biden administration desperately wants to make sure the EVs are built and we move the supply chain away from China, which is where most, of the supply chain has been based over the last several years. All right. Let's talk auto sales, Phil, if we might. The sales for November rising for the key foreign automakers. Honda leading the charge, interestingly, all this despite high interest rates

for auto loans. Pricing, it is, as most people know, still elevated. What is driving this momentum in the face, by the way, of auto strikes that the residuals of which were still at play? Yeah, I think the bottom line is this, Tyler. You still see strong demand out there, low unemployment, and I wouldn't say pent up demand, but there's still a lot of really old vehicles that are being driven by people. The average age is over 12 years here in the U.S. right now. That's the average age of the vehicle that is out on the road. I know a number of people who have 15-year-old vehicles, and at some point you make the decision, I got to buy something new. And increasingly, and I've heard this from dealers in the last week,

when people are coming in, yeah, there's some interest in EVs. You know what they really want? hybrids, red hot right now. And that's why you see strong numbers from the Asian automakers who have traditionally been the leaders when it comes to gas electric hybrid vehicles. So, Ra, jump in. Phil, it's interesting also is when you look at what GM said a couple of days ago, right? I mean, as soon as they agreed with their unions, they bought back 10, oh, they're buying back 10 billion stars. They have probably seen something as well, right? I mean, and for them, it's not just the hybrids, but it's the big trucks. It's the SUVs.

Oh, absolutely. And Sarat, look, there is no argument, and nobody will give you an argument, that GM and Ford are killing it when it comes to internal combustion engine vehicles, SUVs, and pickup trucks. Absolutely killing it. The profits that they're making on those vehicles. And so I've heard a lot of people sit here and say, well, shouldn't they have done something else with the $10 billion instead of buying back shares? Part of the job of the board is to make sure that when you've got a lot of cash, what are you doing if you think the stock is undervalued? And you know, they did the accelerated stock repurchase. That meant taking basically 17% of the GM shares off the street. Maybe not that day, but it'll happen very quickly here. And I think the board sat there and said, we're so undervalued and people are not giving us credit for what we have. Let's put this cash to use. And also the part of oil prices coming down, too.

So the consumer is actually using their car a lot more than when oil was over $100. So you have a combination, you have a tailwind behind the auto stocks. And they trade. I mean, GMT is at five times earnings. Who is the hybrid leader? I get the idea that hybrids are a real sweet spot because they solve at least part of the way the environmental issues that come with internal combustion engines. They get very good mileage, many of them, close to 50, some above. And they have a range that the electric vehicles cannot beat on one tank of gas.

So who's leading the way here? And why haven't the American companies... Pardon? Well, that's not true. Ford is one of the leading hybrid players. And that's part of the pivot that Jim Farley is making. So Ford has been a big player in hybrids and plans to do even more. But in terms of who is traditionally led, look who brought us the Prius way back when. Toyota. And let me give you one point of reference, Tyler. I was talking with the dealer about the new Camry. 60 miles a gallon. Wow. 60 miles a gallon for the new Camry hybrid. But who wouldn't be interested in that? If you're interested in a sedan, and I know there are a lot of people to say, I don't want a sedan, I want an SUV a crossover, whatever. That's a heck of a selling point. Yeah, 60 miles a gallon.

That's, yeah. I'm thinking about it. You don't have to go to the gas station very often with that kind of thing. Let's talk cyber truck, Phil, before we let you go. Some cautious commentary, obviously, around the price tag and maybe the range. What did it, I must say at the big event last night? And how important is the halo effect that the brand and the sales? stock might get, even if the sales are not huge right from the gate. I think the halo effect is huge.

And the cyber truck does exactly what you want for a halo vehicle. We hear this a lot in the auto industry. Realistically, you don't see too many true halo vehicles. And the idea being the shine off of that vehicle makes people say, wow, I got to check out what's going on with that vehicle and by extension other vehicles by a particular automaker. And that's what the cyber truck does. Look, anybody who has seen it up in person says the same thing, which is, it's so unusual, so polarizing, I got to check it out. And I don't know if you've noticed this, guys, go online and check out the pictures of people who are going into the Tesla galleries. Long lines of people. Now, are all those people going to buy a cyber truck? Probably not.

I think a lot of people who have reservations are not going to go and buy it. I know somebody yesterday who said, I'm not going to go follow through on the prices that they're offering, But you know what? They're interested in Tesla's. And that's the true value of a halo vehicle. Indeed. No matter what happens with the baseball and through the window and the bullets and, yeah, all the rest of it. They should bring it to a shooting range. Try it. I'm just saying. Anyway, Phil, thank you. We appreciate it. Our Philo bow. Check out shares of Alta Beauty surging today. One of the best stocks in the S&P may be the best on strong earnings on pace for its best day and week since May of 2020. 22 it's of 10%. We'll trade it coming up in three-stock lunch. Power lunch will be right back. Welcome back, everybody. Stock's continuing their gains today on hopes the Fed may be done raising

interest rates, even though Fed Chair Jay Powell tried to pour a little water on that line of thinking. So how's the bond market reacting to Powell's comments? Let's find out from Rick Santelli in Chicago. Rick. Tyler, he did try to pour a little water on it, but I think most investors thought only a couple of drops. It was over in a few minutes. Let's get back to buying stocks and buying treasuries, because we're looking at, obviously, we finish a historic month with rate drops, but a historic week as well. Two-year-note yields, currently at 455, we're down 40, 40, 40, zero basis points on the week. Now, granted, we had an auction, and there's a bit of a rollover effect there, but still, that is huge.

And tens currently at 421, down 26 basis points on the week. Was it weak PMIs? Was it a higher price is paid? You know what? I think it's that the Fed is done, and this is catching on fire. The higher stocks go, the more we see treasuries being bought. And technicals don't underestimate it. Quickly, let's go to the whiteboard. If you look at 10-year notes, we had that neckline that we've talked about with the head and shoulders.

You see the pattern here, head and shoulders. I always like when there's a kissback. That kissback was perfect in the way it worked. And in terms of objectives, well, if you measure out from the neckline down and then take it down again right around 411, which was the closing level for the last day of August. If it measured out perfect, that's where it should go as long as you get a solid close under four and a quarter. And that really looks assured at the moment. Remember, there's no real auctions of coupons next week. You know, anything beyond a two year. That's the week after when we have

three, tens, and thirties. Death is probably what reverses some of this. But for the moment, certainly looks like everything's green and pretty much all markets. Kelly, back to you. The everything rally they're calling it, I think. Thank you very much. That's the power of Chair Powell House. Let's get to Bertha Coombs for a CNBC News update, Bertha. Hey, Kelly. White House spokesman John Kirby placed the blame squarely on Hamas this afternoon for the collapse of the temporary truce with Israel. He said Hamas failed to produce a list of hostages that would have enabled the pause to be extended. He also, directed a previous tally of American hostages that have been released so far down from six to four.

The death toll from a massive landslide in Alaska has reached five after authorities recovered the body of one of the two people declared missing. A 12-year-old boy still has not been found. The landslide was brought on by a strong storm last week. Alaskan officials say it was 450 feet wide. And SpaceX launched a rocket today, carrying South Korea's first spy satellite. It's the first of five spy satellites on Musk's companies list that they're sending to space under a contract with the country. It comes after North Korea claimed to send its own spy satellite into orbit for the first time last month. Quite a week for Elon Musk this week, Hilly.

As ever. Bertha, thank you very much, Bertha Coombs. Coming up in the lap of luxury, the final installment of our econ ecosystem concludes with a peak into luxury goods. Should expectations remain low for high-priced items this holiday? We'll discuss when Power Lunch returns. All right, welcome back. It's time for the final installment of our Econ ecosystem series. Yesterday, we took a look at discount retailers.

Today, we're going the other side, luxury side of things. Since the pandemic, consumer spending on luxury goods at record numbers, but now that may not be the case as some luxury retailers are beginning to feel a little bit of pain as sales slow and financial conditions tighten. Here to discuss this, Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group. Is this what you're seeing, that the high-end customer is pulling back just a little bit, either because they've had their fill of goods or they're feeling a little skittish? It's been a moderation of spending across all income levels,

even the high-end consumers. And whether it's because of the volatility in the stock market, whether it's the macro issues that have been around, it's all over. And you still don't have the Chinese coming out and traveling to spend. Visas are beginning to increase, but we need more of that. The American consumer under pressure, and that feel-good factor needs to be there. At this Uber high-end, like the Hermes,

you are still seeing continued double-digit growth. But the aspirational consumer is more challenged. So the domestic markets alone are not. strong enough to support these luxury brands? What you really need are Chinese tourists coming into Venice or New York or San Francisco or London? You need that also, but keep in mind, these luxury goods numbers are still much higher than 2019. You're talking about sales that are 50% greater than 2019, but the year-on-year increases are now beginning to moderate from when you're up nearly 40% plus in 2020-2020,

Then you're up in the 20s, then 11%. And now next year is looking like it could be a 6% figure. Surratt, I don't take you as a guy who's doing a lot of luxury stocks in your investment portfolio typically. But they have been a stalwart performer in years past. Does the weakness now tell you anything more macro that you can take away from it? So I think the interesting part, and I love to get your take on, like a stock like ST Lauder, right? We watch that for years. It's always been expensive.

It's still expensive. It still trades it 40 times earnings. Wow. Even after. But even after, it's down, double-ditch. it's a plus more. So where does like an investor, you know, how do you think about that? Because is this the point you get in and earnings catch up?

Are earnings now non-cyclical? So how do you look at that? I think Estée Lauder is unique, given the situation that it has, where it was so tied to China. China slowed down. Now a lot of the Chinese are buying higher-end goods than just cosmetics. And there needs some more newness and innovation at Estée. You think about the others, like an LVMH, who frankly is only up mid-single digits that this. year, that's an opportunity because of the wide birth that they have, whether it's in hospitality,

whether it's in fashion and leather goods, or whether it's in Sephora and travel retail. That's the opportunity in my mind. Well, that then ties into also as the consumer moves away from buying hard goods to experiences. So you want to be in the retail company that actually is able to be there, like an LNVH, because as more people are traveling, they're going to concerts, they're going to all different things, they want to stay. You've got the hybrid workforce. So what are those?

So LNVH is one of those. Any other companies? And experiences create memories. Everyone's looking for that memory after you didn't have it during the pandemic. Look at what RH has done with restaurants. People are remembering when they go to that restaurant and have that experience. Something even different in terms of a Tommy Bahama, that Marlin bar, you remember that experience that's there. So I think capturing whether it's LVMH with hotels, whether it is a restoration, an RH with restaurants, it creates the difference.

Yeah, that's actually something. We were going to ask you about Sarat as well, is how do you capitalize on that from an investment point of view, whether it's flying around the world, seeing the Taylor Swift concert. The Beyonce movie comes out today. What do you think the obvious plays are there? So I think there is, on the travel side, you want to own some of the global airlines. So like a delta that trades at single digits multiples because those flights going globally are just full. And the beauty of a delta is it's just not, it's not focused on Asia, kind of like a United is, which is much more exposure. You have South America, you have Europe and Europe.

there as well. And then the other way to play it is also, you know, cars, right? People are driving. They're going to more places we talked about that before. So that whole sector during COVID was just crushed. So I think you kind of do that. And then you look at restaurants and hotels. Yeah, I would say you know, hotel companies are probably doing pretty well. The hotel companies, like the Marriots of the world, that people are now using points. They're combined them with their credit cards. American Express, one of our biggest holdings, right? The millennials are all focused on experience. And they're using the platinum card. And they're using the platinum card. And they're using these cards to say, hey, I want the best experience and I'll pay for it.

Because if I don't go on my trip, who am I going to call? Call American Express. So if you look at that stock and it's up about 15% for the year, but it's only trades at 15 times earnings. Wow. So, you know, that's a company and they don't have any credit issues either, right? So what are these millennials buying, Dana, that apart from experience is going to see the Beyonce debut, Beyonce debut of the movie or whatever, what are they buying?

And from whom? Well, you look at the product innovation out there, and there's, and there's, a lot. Look at Decker's overall. Look at on running. Is Decker's Ugs? Yes, it is. It's Ogg's and it's Hoka. Hoka's on its way to being a $2 billion brand. You would never have known Hoka three years

ago. And now? I wouldn't know. It's very popular. So I think that's what And Oggers are back. My son bought a pair of eggs yesterday for his birthday. I think Kelly is a couple of them. She changed out of them. It's amazing, though, in contrast to all birds. You know, you think

there's some of these companies who can't quite make it to that next level, but the one on success, some of the other. So those are examples where you think the goods are still attractive in what's been more of an experiential market. And then you think about other new items out there that's gaining attraction. I mean, you take a look, for example, at everything that we're seeing out of, I mean, tapestry's doing some new things at Coach, where they're continuing to show sales increases, which is encouraging. You'll get something like an Abercrombie. We'll get that Abercrombie and Fitch brand. It's worked. And then also you think about the high end.

We were talking about that. Neiman Marcus talked about the slowdown that they've been seeing in the moderation where they're having to do collaborations and pop-ups to encourage their customer to come in and buy something that you won't find anywhere else. Interesting. So that makes the retail experience more of a literal experience. What do you do during the day? Do you go shopping?

What do you do? I do that on the weekends. You do that on the weekends? Yes. During the day, I'm in meetings. You're in meetings and your crunching numbers and your reading reports. I'm talking, but I do these shopping tours all around the country during the day during the holiday season because I don't believe you can sit in the office and know what's happening. You got to have.

Where are you going this weekend? This weekend? I'll be in New Jersey and I'll also be in Manhattan. Really? Yes. Oh, cool. Want to join? You know, we should talk.

Okay. We should talk. We can grade the retailers. Yeah. All right. Dana Telsey, thanks very much. We appreciate it. Still to come, the COP 28 climate change conference has begun.

corporations, banks, and investors of all sizes vying to cash in on the transition to clean energy will tell you where the money is still flowing when power lunch returns. Welcome back. Tackling climate change has proven to be a multi-trillion dollar task and all sorts of corporations and investors want to be part of that solution and make some money in the process. Diana Oleg is here with a look at what's at stake as COP 28 kicks off, Diana. That's right. Kelly, representatives from nearly 200 governments are at COP. trying to ramp up their response to climate change, which mostly means in the form of money.

That's why representatives from corporations, big banks, investment funds are there, too, trying to get in on that cash, opportunities in the clean energy transition, infrastructure, climate tech, and resilience. I spoke with the executive director of Bill Gates's breakthrough energy, who is in Dubai now about that. It's an opportunity to connect companies with finance partners and industry partners. and we're looking to make deals to accelerate clean energy into the marketplace. Just this morning, breakthrough announced an investment of just over a quarter of a billion dollars with the European Investment Bank for its first two European projects.

One of those is funding Danish energy company Orsted's e-methanol production facility to provide green fuel for the shipping industry. That's what we're hoping for from this COP, is that it will be a real opportunity for the private sector, to take a step forward together towards addressing this incredibly challenging but important topic. Also this morning, the COP leadership, that is the UAE, launched a new $30 billion climate-focused investment vehicle, which will be the world's largest private investment fund for climate. It aims to mobilize $250 billion globally by 2030.

And Kelly, just a note, I will be in Dubai on Monday to kick off our live coverage of the COP. We'll have breaking news of the day and lots and lots OCEO interviews. It's interesting. I think some would find it ironic, some would somewhere critical of the idea that a petro state would be hosting cop. Yeah, critical to say the least. That has been going on for the last several months with a lot of people speaking up against it. It is being held by the UAE, which is one of the largest oil producing nations. And the head of it is the CEO of Adnock, one of the largest petroleum. you know, the state-run petroleum industry there, but he has been adamant that he is looking at clean energy transition and that there's been criticism. There's been some reports that he's

been making some side deals on the side, but he says that is not the case, and he's all about the clean energy transition, but no question. It has been controversial. All right. Well, we look forward to your reporting next week from over in that part of the world. Diane Oleg, thank you. Meantime, Bitcoin inching back up towards $40,000 after a strong November posting a 9% gain last month. Can it hit 40K by Christmas? We'll ask a trader in a fresh three-stock lunch, and we'll do that after a quick break. All right, time for today's three-stock lunch. We're going to take a closer look at three movers. First up is Alta. The stock gained about 12 percent earlier in the session after the beauty products retailer reported third quarter

earnings that beat analyst's expectations. But that stock is year-to-date up about 1 percent, basically flat. Here with the trades, Boris Schlossberg, BKS, at Man. but also a CNBC contributor. Your thoughts on Ulta, which sort of next to Nvidia gets as much talk as any stock on CNBC, it seems. Well, you know, because it's a great company, very, very unique retail product, in a sense that it acts as a supermarket for beauty products,

which is very attractive to female consumers. But it also has a salon business, so it really intensified their relationship with a consumer, and then it has a great online to store business, so it really creates that habitual sales. So it's very hard to beat that model. clearly, I think, a long-term growth model. The main risk to this business, in my opinion, is actually macro, not micro.

It's basically a question of whether the labor markets remain buoyant, and the female consumer continues to have more disposable income, and that should really help its growth. I think overall, three or five years down the road, this is going to be a very, very strong winner, even if it has some little bit of turbulence. So Boris says by, what say you've said, Saran? So I think one of the things, Boris, to watch for there.

We've owned the stock in the past is when things slow down, the beta of Alta is much. larger than the market. And given kind of we're going into Christmas and the consumer slowing down, I mean, you're right. If we, if employment stays where it is and wages don't come down, I think it would be a great stock. But I would be a little scared here just going, because you've already got the run. You've got some short covering in here. I think the opportunity is when it kind of pulls back. All right. Let's move along. Go ahead. Go ahead, Boris. Sorry, I was going to agree. You've got to basically stomach the turns in the stock.

The long term, it's going to be a great buy. Let's see if you guys agree about Paramount. Those shares are on the rise on reports that's talking to Apple about bundling streaming services. The stock's up 9% for us. You like it? No. Paramount has been a disaster from every angle you can look at it. It's, you know, cable business is dying because the only thing people are willing to pay for on live is sports and news. They don't have that.

It's direct-to-consumer businesses a bleat because they're not even a second best. They're basically an afterthought for most people as far as the product goes. But it's not as short. It's not as short because it has a very storied asset library. And clearly it's worth more than its parts, or the parts are worth more than the whole. It's just a question of whether the management is going to be willing to give up control. There is, you know, if a white knight comes in, it's definitely going to be worth quite a lot more money than it's trading for now.

So if you're a punter, yeah, it could be a great, you know, could be a great trade. It's definitely, I think, not as an investment at this point. I completely agree with you. I think this is tradable at this point. What's going to happen, in our view, very similar to what Boris is saying is basically going to get consolidation. And at what price you're going to get consolidation because you're not paying for eyeballs like you were two years ago, right?

It was back then, it was, hey, streaming, Disney was doing this, Peacock was doing this. It's actually a negative value, even though the parent company of Comcast. I mean, Peacock's losing billions of dollars, you know, every year. So I do think you either get a strategic investor in here that can kind of like, it could be an Apple, it could be a Disney, it could be, you know, somebody there. It could be combining with a peacock, who know, you know, and then you kind of spin these off. But it's all about cash flows. And the market's not, it's great cash flows, but you're not getting any value because

the question is it is a depleting asset over time, you know, because it doesn't have live entertainment. It doesn't have something like that. Go ahead, Boris. I see you nodding. I totally agree with that. Everything he's saying is absolutely correct. I think it's great as part of something.

it's terrible as a standalone business right now. Very interesting. All right, let's talk Bitcoin, shall we? 39,000 as the latest inflationary commentary leads to more bets that rate hikes are over. Boris, your take on Bitcoin, the asset that the late Charlie Munger love to hate. The asset never quits. Does cat have nine lives? Does Bitcoin have three acts in its story?

I mean, I think if you look at the history, yes, every wave down has been followed by a wave up. Although a last wave has seen so much wealth destruction that I think the appetite on retail is really muted at this point. Ironically enough, I think there's two reasons why Bitcoin is going to do well. And one of them is very ironic. It's when it becomes de-digitized. It's if Bitcoin becomes securitized as a Bitcoin ETF that's very fungible, it's very easy to trade for a regular retail investor, then I think it's actually going to get a lot of flow.

And that would be very, very supportive. The second reason is really sovereign debt. It's basically a bet on the fact that we're going to have some sovereign debt price. If we see failed 30-year auctions, if the T-Bill auctions actually have higher yields when the Fed cuts rates, which is a sign of risk premium that the investors are willing to pay, that's when I think you're going to see Bitcoin really, really start to take off. You're already starting to see gold take off. These are all bets against sovereign debt, basically, in my opinion. So, yeah, definitely a possibility.

The fact that it's been very quiet rally right now is probably very technically positive. So that's my idea. So I think we're going to agree on this one, too. I think Bitcoin is like the new gold. But I'm more of a firm believer in crypto and blockchain. So I think that's how I would rather play to find companies that are using blockchain or crypto and not just one of the coins. Just not the asset.

Yeah, not the asset. It's actually the technology, the blockchain behind it, which I think is going to be here to stay. But I do think Boris is right in terms of a Bitcoin or a gold. It's a hedge in your portfolio. It's what if those rates? I mean, at that point, we're not going to have S&P 5,000. So you're going to have other things going on in your portfolio. So it's a diversification.

Interesting. That speaks the everything rally today. That was more fun than your normal three-stock lunch because we had you guys both talking back. Let's do it again. Let's do it again. Absolutely. Boris, thank you. Have a great weekend, sir.

Bye-bye. Coming up, why earn it when you can just inherit it? We'll discuss the great wealth transfer underway and much more when power lunch comes right back. Welcome back. Just about three minutes left in the show today and several more headlines. Let's get right to it, starting with the news that Goldman Sachs could be facing a mass exodus of employees, according to the New York Post, as its year-end bonus pool is reportedly much more shallow than the bank originally thought. Managers at Goldman are preparing their teams reportedly for disappointing bonuses this holiday season.

Sorat, you think there's some truth to this? If there is, I don't know where they're going to go. Because you're seeing all the banks going to do it. It's not like the banks... You could go private credit. Private credit, right? But you have to kind of leave. it's not like you're going to go leave to another bank. Just, you know, when you saw what happened.

It's not the competition for talent. Right, the competition of talent. It's not like the M&A activity is booming. Capital markets are slowed down. So what are we talking about in terms of operations? Do you like the stock of Goldman's? I like Morgan Stanley a lot better because it's got 60% wealth management. I think Goldman's still trying to have some issues.

They need capital markets to work. But my view is if capital markets works, I'll rather be Morgan Stanley because they're not getting valued at all for that. Interesting. Well, let's move on. The Financial Times reporting, the Panera bread has confidentially filed to go public once again. It's been in.

It's been out. It was last publicly traded back in 2017 before JAB Holdings took it private in a $7.5 billion deal. This one has been, you know, JAB refashioning its portfolio, crispy cream, Obon Pan Pan was one of its holdings. What do they do here? Panera is a great brand. And as people come back more to the office, that's probably a good way to do it. The question is, what is the balance sheet going to look like?

Like for us, when we look at these companies to say, if you're going to load these with high debt, it's going to be very hard to get the operating leverage that you really need. The financial, then it becomes a financial play. I think if it comes out clean, and it depends on what it trades at, but I think it's a great brand. I'm trying to see if they have any detail about, you know, what would have happened when it went private and then it's going,

but you're right, that would make it a much different story now in these times. New billionaires are getting rich via inheritance, more than ever before as the great wealth transfer gets underway. According to UBS's 2023 billionaire ambitions report, who knew that existed, 53 errors inherited a total of $151 billion this year. That's more than the $141 billion brought in by new self-made entrepreneurs. Apparently, this is the first time that's ever happened since they started doing this back in 2015. Well, I think the unicorns are no longer unicorns, so you didn't see that going anymore. So it'll be interesting to see how much of that dropped. And then also, you know, how much of this

was non-U.S. versus U.S., right? Because we have very different estate laws in our country. Now, obviously, lawyers make a lot of money doing this as we know. But in other parts of the world, it's easier to inherit than it is. Can you imagine inheriting more than a billion dollars? I don't know if that sets you up for a great life, honestly. Let's try and squeeze one more in here. More and more high schools across America starting to offer financial literacy courses, but only seven states received an A grade for the Center for Financial Literacy's latest high school report card, meaning they require students to take at least one semester long personal finance course.

Four states got an F for having virtually no requirements. California, Connecticut, Massachusetts, and South Dakota, and Washington, D.C. got an F. My home state of Virginia got an A. I'm happy to say. You don't have to take a course. Just watch CNBC all day long. Watch CNBC. We'll teach you.

Surat, great to have you with us, as always. Come back soon. Thank you for watching Power Lunch, everybody. Closing bell starts right now.