Power Lunch - Trust the rally?, Apple & Tesla’s hold on the market & a power player in the defense industry. 10/18/22

Episode Date: October 18, 2022

Wall Street is in rally mode. But can the move higher be trusted? Plus, why Apple & Tesla may hold the key to this market. And, a power player in the defense industry: Lockheed Martin’s CFO Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

I'm just going to fill the hour that way, folks. Welcome to Power Lunch, everybody. Along with Contessa Brewer, I'm Tyler Matheson. Glad you could be with us today. Here's what's ahead. Profits are powering Wall Street for a second consecutive day. The earnings apocalypse that many feared is so far missing in action. But can this rally really be trusted?

We'll talk to someone and get a perspective there. Plus, Lockheed Martin tops expectations. The stock surging today gaining 22% this year. That trounces the 20% percent. drop in the S&P 500. The CFO will be along very shortly to give us a peek into 2023 and even as the threat of recession. Contessa, Lou. Well, hello, Tyler and hello, everybody.

A broad rally. All 11 S&P sectors are higher. The Dow up 652 points at its highest right now, up 416 or 1.4%. The S&P 500 is up 1.5% in the NASDAQ composite, up 1 in a third. In the last 30 minutes, Twitter shares popped on a report. the company is locking employee stock accounts in, quote, anticipation of a deal. And Salesforce is the best performing Dow stock this afternoon. David Faber, the first to report that activist investor Starboard has taken a stake in the enterprise software company, citing a significant opportunity.

There you see Salesforce up 5%. And Faber also reporting, Dan Loeb's third point has built a sizable position in Colgate, Palm Olive, saying there's hidden value in its pet food. subsidiary. You see that company up almost a full percentage. And Goldman Sachs up about 3% after the bank topped analyst's expectations on strong bond trading results. Tyler. All right, Contessa, as stocks move higher on earnings optimism, Wall Street Stroud, are just questioning its sustainability, the market rally, that is, according to BTIG. History says to fade this rally. Bank of America notes that the market won't bottom until the first half of next year. That's their opinion. And UBS says, we don't believe the conditions are in place

for a sustained rally. So can this move higher be trusted? Let's talk to Randy Warren, chief investment officer with Warren Financial Services. Welcome, Randy. Can it be trusted? Good afternoon. Well, you know, I really love this rally, but at the same time, I don't really trust it. But, you know, you have to be a little flexible because at the end of the day, every new market starts with a fair market rally. So you've got to be a little bit flexible here, but you also have to be very careful. We're bumping along the bottom. And it's just hard to imagine that the market's going to make a lot of extra progress when the Fed still has a lot of work to do in terms of raising rates even further than they have so far. If you don't trust

these rallies right now, what would make you change your mind and say, okay, this is the sustainable rally that we want, that the bottom is in? Yeah, one of the keys here is holding this 3,600 level on the S&P. If we keep on making new lows, that's just going to, that's obviously going to be bad news for the rally. It's just not going to happen, and we're going to have to wait even longer. But if we can hold somewhere, and I'm not a precise person who says 3,600 is the number, but, you know, you need to basically hold this area that we're in in the S&P 500 and say, this is the low. we're bumping along the bottom. And, you know, as you were saying earlier, the earnings look pretty good. They're coming in already. And so there's a possibility that the stock market and the bond market may

start to look past the recession that we're in and may start to look past what the Fed is planning to do in November and December. Randy, if you don't trust the rally, then how do you use what you do trust to inform your strategy? Yeah, it's really tough right now because you can look at all the fundamentals of the companies and so much has been wrecked this year. You know, if you want to look at, you know, revenue growth and earnings growth and all the different, you know, metrics that we typically look at. Instead, you really have to pick carefully. You have to pick strong companies that are going to for sure be there when the new rally begins. You know, stocks like Lockheed that you were just talking about in Salesforce, Lockheed being one of our top.

10 and things like Tesla, Nvidia, Airbnb, these are great companies, and they're for sure going to be there when the next rally begins. So if you're holding the high-quality stocks, even if they're, you know, you want some value, you want some growth, you know, but you need to hold those high-quality companies that have good management and that you can count on to be there when the rally really begins and the bear market is over and a real new bull market takes over. So you say great companies that are still great, but stocks are beaten down like Costco, Home Depot, Chipotle, among others. Are there others? Oh, yeah. There's an endless list of stocks that are beaten down. I mean, you can go with Apple for sure. I mean, you know, we were buying Apple

as much as a month or two ago and we're still buying more Apple, adding to positions. You know, Now, if one of our clients already has a bunch of Apple, we're not adding to it. But if anybody was a little bit light on Apple, it's like, hey, let's add a little bit more Apple. It's cheap right now. That's where people need to really think in terms of being a shopper. You know, stocks are on sale. They're 20, 25%, 35% off, depending on what stock you're looking at.

And if, you know, if you went to the store and the stuff you wanted to buy was 30% off, you'd be pretty happy. Yeah. So I know that only makes people happy who are buyers now and not hold a, you know, holders for the, you know, but when you get a good entry point like this, you really want to ride this into the next three years. Randy, you have given us a perfect segue to our next segment where we're going to talk a little bit more about Apple. Thanks for being with us today. Randy Warren. My pleasure. Thank you. And in fact, Apple and Tesla have been losing trade so far

this year with both stocks down double digits. That is not stopping individual investors from piling in. Our next guest wrote an article about it in today's Wall Street Journal looking at the stocks are still so popular. And what that signals about the rest of the market, Gunjin Banerjee, is lead writer for Wall Street Journal markets live and a CNBC contributor. It's great to see you today, Gengen. I want to just read the line from your article. Many individual investors have ramped up purchases of Tesla despite its 38 percent decline this year. You write despite, is it really because of its 38 percent decline? To Randy's point, it's on sale? So it's interesting, Contessa. On the one hand, you've seen a lot of investors dump things that have taken a big hit this year. Think some of those growth stocks, right? A lot of people have abandoned those trades. What we've seen with Tesla, on the other hand, is you have these really enthusiastic individual investors doubling down on it and buying the dip in Tesla. What was surprising to me is that they've ramped up purchases in the stock. It's been the fourth most popular stocker ETF for individuals.

investors to buy this year up from 12th last year. So despite all these calls for a sharply different market environment, right? Yields are at the highest level since the financial crisis. People all of a sudden, you know, have other places to park their cash. There's been an offending of the U.S. stock market with tech growth taking a huge hit. But what we've seen among individual investors is they have hung on to stocks like Tesla, Apple, other tech stocks. and increase their purchases of them. So you say that Tesla is the fourth most popular stock or exchange-traded purchase among individual investors. Apple is the most popular. Give me a sense of what is the draw for Apple. And I don't

know, Gunjin, I'm always curious whether with individual investors, they're buying what they know, and they know what Tesla makes, they know what the company's about. They certainly know what Apple's about because a lot of us have Apple incorporated into our daily lives. Think about during COVID-19, the initial market crash. These stocks kind of became the safety trades for a lot of investors. When everything else was going down, it seemed like Apple, Tesla, the NASDAQ, were the only things going up that really became the safety trade. And I think a lot of investors still think of them that way. And Apple and Tesla, they are some of the biggest companies in the market. But their importance to the market really transcends their size because, as you

mentioned, there's stocks that people know and really believe in. You know, both of these stocks, Apple has become an economic bellwether of sorts. Tesla has become a gauge of broader investor sentiment of the market itself. So I think these stocks have just become favorites among individual investors with incredibly excited, enthusiastic bases that are still hanging on. You know, Gunjin, there's often the feeling that when individual investors swarm into the market, it's a time to sell. And when they swarm out, it's a time to buy. Can you infer from that sort of old saw anything about these two stocks? In other words, that with the amount of individual investor enthusiasm for them, it might be a counterintuitive sign. So I don't believe in, you know, the dumb money, smart money stereotypes out there. And I think they've really been proven wrong over the past two years where individual investors in several cases have come out looking a lot smarter than many would have anticipated based on those stereotypes. But I will say I have had investors tell me that they think that, you know, the rush into Apple into Tesla is a sign that, you know, the broad market and even those two stocks are still in a bubble. They think it's a bad sign for the broader market that they've kept going up given, you know, this jumping yields that we've had, the fact that

so many people are calling for this different market environment. You know, I had one investor tell me, I think Apple and Tesla will kind of be the last shoes to drop. I think it's going to mean pain for the broader market when he said they eventually do fall. Yeah, I'm kind of with you on the smart money, dumb money thing. Because the smart money, if you're thinking of a smart money meaning hedge fund managers. They haven't done very well lately at all, at all. Gungeon, thank you so much. And congratulations once again on your Loeb Award. It's the highest award in business journalism. And Gungeon was part of a team at the journal who won it a couple of weeks ago. Congrats. All righty, coming up. Thank you so much. You got it. Coming up, Lockheed Martin, having its

best day since March 2020, beating expectations, boosting its buyback. The stock easily outperforming the broader market this year. Can the run continue? Contessa, I almost call you, Tesla. The CFO is next to the power watching. It's my new name. It's your name. Cont Tesla. Plus Netflix rallying about 30% over the past three months.

A look at whether earnings will power the stock even higher. And before the break, this tease goes on and on and on and on. I'm just going down the tubes with it. Ally Financial down 4% at CFO is stepping down, and J.P. Morgan cuts its price target to 34 from 39. There we go, Contesla. shares of Lockheed Martin soaring after the company posted strong quarterly results before the bell, beating earnings per share estimates, boosting a share buybacks by $14 billion, hiking its dividend by 7%. CNBC's Morgan Brennan joins us now. So Morgan, here's the stock having its best day since 2020. What do you think investors are most optimistic about here?

I think there's a confluence of things here, but I'm going to start with three words, and that's 14. billion dollars. Analysts have been waiting all year to see something like this from the defense contractor, especially in the wake of that scuttled aerojet rocket-dine deal earlier in the year. Increased share repurchase plan at doubles buybacks for 2022. It continues those repurchases over the next few years. Now you couple that with an earnings beat, the fact that it maintained current year guidance, and that despite flattish sales and pressure on margins next year, free cash flow expectations that are going to remain intact. I think that's part of the reason that you are seeing. these shares trade higher. Also worth noting, the demand for the weapons that Lockheed makes remains

robust. It's actually growing, as you might expect, given the geopolitical climate right now. And that's really evidence for the backlog, which swelled to $140 billion. The last thing I'll say on this is that defense stocks, they're largely considered defensive, in part because those backlogs tend to translate to future sales. So here to talk about all of this a little bit more exclusively. I want to bring in Jay Malave, the CFO of Lockheed Martin, fresh off of the earnings call just a little while ago. Jay, it's great to have you on Power Lunch. Thanks for being here. Thanks, Morgan. It's great to be here as well. So one of the things that you and I have discussed and certainly came up on the call today, the fact that you are forecasting for sales to be flattish in

in 2023, but that you expect a return to top line growth in 2024. Supply chain continuing to be the culprit here. Where is that pain most acute? What is it going to take to see some of those pressures ease? Yeah, great question. You know, it's part of what we saw here in 2022. You may recall back in the second quarter, we lowered our sales forecast by about $750 million, and that was due to declines that we saw. Supply chain created declines on the F-35 program, the F-16 program, and a few of other programs that we have in our backlog. We expect that pressure to really continue through 2023, but we do expect a rebound in 2024. And so those are predominantly the issues that we face.

What we've seen here in 22 is really extending out to 2023 as well. Okay. So the demand for weapons we just touched on it that Lockheed makes, whether it is the javelin missiles that you make with Raytheon that are being sent to Ukraine right now, the High Mars launcher that is actually being used with great success on the battlefield there as well, also the fact that allies are raising defense budgets. How does that factor into the outlook over the next couple of years? Well, it's certainly gotten better.

If you think about where the defense outlook was a year ago versus where it is today, it's substantially better. You know, as you mentioned, Morgan, our backlog grew here in the third quarter. We expected to grow again in the fourth quarter, and we expect even orders and backlog again in 2023 to grow as well. And so we'll start converting on that backlog starting in 2024, and then in 25 and 26 and beyond, we expect continued growth. And so that's where we are today. today and that's what the outlook looks like. International sales, about a third of overall revenue.

There's a lot of focus in the media and certainly on the hill right now where Saudi Arabia is concerned on the heels of that OPEC plus oil cut just a couple weeks ago. Some talk that maybe we could see some curtailing of weapon sales to that country. On one hand, on the other hand, as I mentioned, you do have these rising defense budgets among allies. So how is Lockheed navigating those potential foreign military sales right now? Well, you know, for foreign military sales, we take our lead from the U.S. government. Those policy decisions are really outside of our hands, and we just follow the government's

lead on where and when to make those sales. And in many cases, we also sell defensive products, so, you know, there's an opportunity to continue to sell those types of products. But again, that's a decision that ultimately is a policy decision that the U.S. government will make and we'll follow that lead. You know, if I heard you right, sir, I gather demand is strong, and you expect it to continue that way, but you cited earlier the supply chain bottlenecks that caused you to revise downward your sales estimates earlier this year.

So the question is, can you meet the demand going forward? Will you be able to execute to meet the demand? We believe that we can. You know, between now and 2024, that gives us time to continue to work with our supply chain. We have anywhere between up to 500 people at our supply chain today to help them with their operations and improve to the level of production levels that we need. Between now, that'll give us 15 months before, you know, we're getting to 2024. And we're investing ahead of need as well. And so whether it's test equipment, assembly equipment, all of the elements that are required to

start delivering at these ramp incremental ramp rates in 2024 and 2025, we believe we can meet that. We have sufficient time for it. And Jay, it's Contessa. I just, I'm curious about the problem of chips. and given the switch from the Biden administration on chips in China, how that might affect your process moving forward? Well, certainly it's a watch item for us. We've been fortunate this year. We really haven't seen a significant impact due to electronic components. Ours have been, to be honest, some of our platforms have been more of the structural parts of the aircrafts,

the platform that have really driven the delays for us. So so far right now, electronic components have holding in there pretty well. We've got a pretty good line of sight for the next 12 to 24 months there. And speaking of China, it is the so-called pacing threat, as the Department of Defense would put it. Just last week, we had the National Security Strategy that was unveiled to, which focuses heavily on China. Looking at Lockheed Martin's R&D and Kappex spending, $4 billion expected to be spent in 2023, how much of that is going towards countering another major power on the global stage? What does that mean in terms of new technologies that are being developed?

Well, significant amount of our IR&D is being spent really in those areas. We have 14 technology roadmaps we're spending most of our independent research and development on. And so we spend north of $1.5 billion on R&D, and about 80% of that is going towards these technology roadmaps, which is really modernizing the capabilities for the U.S. warfighter. And so when we talk about being ready in 21st century security, that's really where our spend is going. As far as Cap-X, it's a similar story. About 75% of that is really going towards the new products and the capabilities associated with delivering a higher capability to our customers.

All right, Jay Malave, thanks for joining us here on Power Lunch. The CFO of Lockheed Martin, with those shares up almost 9% right now. Tyler? And Morgan, thank you for bringing him to us. We appreciate it. Good to have you here with us. All right, ahead on the show, the crock of Wall Street, to look inside one of the largest crypto heists in history.

Nearly 120,000 Bitcoin stolen. We've got the details coming up. Plus, rolling into EVs, Rolls-Royce, unveiling its first ever. Electric vehicle, and it's got quite a price tag. Up next, a crispy team-up. McDonald's adding a new item to its menu, and shares of Krispy Cream are moving higher. This one will be interesting.

We'll be right back. Welcome back, everybody. Shares of Krispy Cream, the stock up 2% after soaring as much as 6%. sugar high early in the session. Following news of a partnership with McDonald's, the fast food chain is going to sell crispy creams at nine locations in Kentucky starting on October 26. This marks the latest of McDonald's menu experiments following a growing trend across the country to attract customers, but you'll have to go to Kentucky to do it. Let's get to Bertha Coombs for the CNBC News Update. Might be worth it, Bertha.

I love that, donuts to dollars. Hiler, here's what's happening at this hour. A Virginia man has been arrested in connection with the deaths of four people in a Washington, D.C. suburb. Police say the suspect lived with the victims who include a recently married couple and their teenage daughter. Three of the four victims were shot to death. The German government has fired its cybersecurity chief over alleged ties to Russian intelligence. German media reporting a security group he co-founded included a company founded by a former Russian intelligence agent. The group rejects the connection as absurd. And if you've ever thought mosquitoes make a bee line for you, well, now there's proof.

A study finds a major species of mosquitoes is drawn to people with high levels of certain odor-producing chemicals on their skin. I could have told you that. The research may be used to develop ways to manipulate a person's skin and make it smell less appealing to mosquitoes. I am the human pest trip. If you go out with me in the woods, I am the one who's going to attract all the mosquitoes, and you'll be fine. We should do an experiment because usually that's me, Bertha.

And so, like, let's go for a walk in the woods together and see who gets more mosquito bites. Although I don't want to brag about my skin producing an odor. Like, that's not really the kind of thing that I... My wife can join you on that walk because I'll be sitting in the same place out back and she will be getting eaten alive and I'm... Lucky you. Just... You know, it's unfair, I guess. You just were born that way.

head on Power Lunch. For the past few quarters, Netflix's subpar subscriber numbers hitting the stock and really stoking investor fears. This time around, the company is hyper-focused on keeping that number from free falling, taking steps to offer cheaper ad-supported options to users and woo shareholders. As a result, the stock coming off its best quarter since 2018. Is the Netflix fix in? We will be right back. That's nice. The Netflix. Power lunch. All right, 90 minutes left in the trading day, almost exactly, and we want to get you caught up on the market, stocks, bonds, commodities, and Netflix earnings that are on deck. Let's begin with Christina Parson-Evelas at NASDAQ. Hi, Christina. Oh, hi, Tyler. We've got a second day of green, but markets are really just clinging on to those gains down from the highs of the morning.

All three major indices, though, are tracking for their first monthly gains since July. Today's reversal, though, fell in step with yields moving higher. For example, the 10-year treasury note just above 4%. And the better than feared earnings really helping momentum right now. Goldman Sachs up, what, look at that, up to O's up 2.8% right now after topping earnings and sales estimates, but did post a 43% drop in profit. Other financial names on the S&P 500 like Bank of America, Morgan Stanley, Charles Schwab moving up in sympathy. But it's not the case for ally financial. Its CFO is stepping down and Morgan Stanley cutting its price target for the company to $34 a share down from $39.

Homebuilder's sentiment in single-family home. actually fell sharply in October. Higher rates are to blame, but the 30-year mortgage dips slightly today, and that's helping names like Lenar and KB home up over 2%. And are you thinking of that vacation? Because I am travel names trending higher today, especially the cruise lines like Royal Caribbean, Norwegian.

Look at that, Norwegian, up 9%. There was a bullish note from Bank of America just yesterday talking about consumer spending and how it was up 10% year-over-year in September and early October, which bodes pretty well for the consumer-facing travel sector. And lastly, biotech and farmer names like Moderna, Novavax, pulling back today after recent outperformance.

The bounce in skepticism still high at this point. I know trust is pretty much what, the word of the day today, Tyler? Yeah, that's right. Are you going to trust this rally or not? Christina, I always trust you. Oh, thank you. Likewise. Thank you.

All right. Now onto the bond market. Another trustworthy soul there. Rick Santelli, 10-year yield, aiming to close over 4. Talk us through it, Rick. Yes, you know, this looks to be the third session, but let's start out on the shorter maturities, shall we, Tyler? Look at a three day of two year, and I pick three day because we all know Friday wasn't

a very good day. Rates popped. We had an inflation week of data, and equities were down. But a lot's changed since then. Look at the trajectory of the short maturities, kind of easing back in a concave look. Now, contrasts that with a three-day of 10-year knowing Friday, Monday. Tuesday, all first times above 4% going all the way back to 2008. You see it on the chart there.

And technicians a bit disappointed. Many thought we'd see a much bigger popping yields and a bigger drop in prices as we had that close. But technicians aren't going to challenge that. It's a big technical move, and many are short the market looking for higher interest rates with tight stops. One thing that you don't need to worry about is an aggressive bid. for the European seven year. They brought 1.8 billion equivalent seven years in Europe today. The yield was barely over 1%, 1.04,

and basically nobody showed up. The bid to cover was basically one, which means for every dollar's worth of securities, a dollar's worth of investment showed up. The weakest on record. Now, if we look at what's going on with regard to Fed Fund Futures, the pivot's still in April of 23,

which means price to go all the way down until you get to that month. It's implying a run rate of right around 4.90% and we're hovering five ticks above historic low. And the historic low means the most fed. And finally, the dollar index. It's hovering near on change. But what's noteworthy here is it's only two cents below. It's fresh 20-year high close, which was on September 27.

Tyler, back to you. Rick, thank you very much, Rick Santelli. Oil closing for the day, which it does pretty much around this hour most days. It's down 8% over the week off again today. Pippa Stevens, covering it for us at the commodity desk. Pippa. Hey, Tyler, the tumble continues with energy prices extending yesterday's losses. Although WTI is closing about $2 off its worst levels of the session,

geopolitics are exacerbating an already uncertain supply versus demand picture. And this is especially true when it comes to the spat between the U.S. and Saudi Arabia regarding OPEC's output cut. As JPMorgan put it, global energy markets have become exceedingly complex, resulting in a vicious leap of high volatility and low liquidity. WTI is down 2.7% at 8313, with Brent down about 1.5% at 9028. But it is once again natural gas. That's the big mover in the U.S. prices down 4%.

But in Europe, the contract tumbling 14.5%. It's now trading right around 111 euros per megawatt. back in August, it traded around 340 euros, so it's down more than 60% since. Now, much of that is thanks to gas and storage building at a much faster than anticipated rate. Stocks are now 92% full, helped by mild temperatures and strong renewables production. Tyler? Pippa, thank you very much. Let's move on now to talk about the shares of Netflix.

They are trading lower ahead of earnings later this afternoon. But coming off a big gain yesterday, and an even bigger one, Over the past three months, our next guest has an outperform rating on the stock and a $325 price target. Here with what he expects from Netflix results is Jason Helstein, Oppenheimer, head of Internet research. Jason, welcome. Good to have you with us. Tell us what you're expecting Netflix to say today. And I guess the number that most people watch closest is net ads.

Correct. I mean, they got it for a million. We think, you know, the streets there could it be a little better, a little worse? I actually think this quarter doesn't matter, truly more the update that they give you as they've been leaking on information on the new ad tier product, right? So that it's basically coming in, you know, a dollar below Disney. We've seen some data that suggests churn should get better in the fourth quarter. So I think it's more if they're assuming a guide for the fourth quarter, we're at 5.3 net ads, 5.3 million for the fourth quarter. quarter, the streets are 3.9. So we're definitely more bullish in the street there. But really,

it's how we see the story evolving over the next 12 months is kind of why we have the outperform rating. Do the net ads go up so much in the fourth quarter because of ads? Because of that ad-driven tier? Again, it's not because of ads. It's by bringing a lower price tier. It should reduce churn, right? Or people kind of canceling. Secondly, we think their content slate should And with all of the competitors who launched Paramount Plus as well as Peacock, there was just a flood of content to get those services kind of up and running. And so we think it's just been a few challenging quarters for Netflix on the content side. We think fourth quarter should get a bit more normalized. So I think some of its seasonality, you usually add more sub in the fourth quarter.

we think the comparisons versus competitors get easier. And then bringing the lower price new tier should reduce churn. And then we have done our own work that suggests there are customers, you know, who will rejoin Netflix at a lower price or who have never been Netflix subscribers who will join. We didn't see it on the competition list, but Amazon clearly competition. And they have just announced this is just crossing that they're going to have a new football game from the NFL on Black Friday, next year. Netflix doesn't have live sports and live streaming.

Is that a huge hurdle when you're looking at the competition? I don't think so. I mean, Netflix has never had sports. And if you think about Amazon, in most countries, the content was a nice add-on when you were already paying them for the prime shipping service. clearly bringing sports will help them, you know, as you get that marginal customer who says, I don't know if I'm going to get the value out of prime or in certain international countries where the prime offering may not be as robust or as fast as it is in the U.S. or parts of Western Europe.

So, you know, look, I understand why Amazon's doing it, but that's not what I'd be worried about with Netflix. I just think the other non-sports-oriented competitors lost a lot of money on launching their streaming services this year, and they're going to have to be more rational. And, you know, basically, unless they're going to start pulling shows off of linear TV to put them on their streaming services, I think you're going to see a more level playing field with content next year. Can we get you to switch stocks here a little bit over to Twitter, which I know is one you cover? the reports are now that Twitter has basically told its employees that stocks they own in their own retirement or their personal sort of company stock accounts are frozen, presumably in anticipation of the completion of the sale of the company to Tesla's chief.

Elon Musk. Elon Musk. Elon Musk. Elon Musk. Whatever. So what is your sense of the timeline on this deal closing? Is it, is it, is it, three days? Is it five days? What is it? I mean, we don't have any special insight here. It's, I guess, really up to the judge. And that's what's control on the timeline. And obviously, Mr. Musk has been unpredictable up to this point. So does he try, you know, some, you know, ninth inning move here? But really hard to predict. It does seem like the judge wants this to kind of get resolved because. What would a ninth inning move mean? He's going to buy the company?

What are you suggesting with a ninth inning move, Jason? Well, just, you know, I mean, again, Mr. Musk's kind of behavior in the situation has not been predictable, right? Like, what, you know, when he's come out with different things that he's wanted more information, objected to. Now, again, I'm kind of a public observer to this, you know, and it does seem like he is capitulating and understands that, you know, he's going to end up buying the company. and the sooner he moves on with it, the better the company will be. Because right now, you know, employees, they've probably lost employees. They've not wanted to leave to Loo, sorry. And I think advertisers are not particularly focused on Twitter as an ad platform

while it's in limbo here. So I do think the fundamentals of the company have been hurt, the longer this takes to close. Jason, thank you very much. And we appreciate your flexibility there. Jason Helstein. suddenly come a look at inside one of the largest crypto laundering schemes in history, how it happened and the fallout next. Plus, Deutsche Bank calling Microsoft the best house on the block ahead of its earnings.

We'll trade that name when Power Lunch returns. Welcome back to Power Lent. In 2016, 120,000 Bitcoin were stolen in a massive hack. It's kicked off a years-long investigation and recovery effort by the Department of Justice. Amon Javors has been digging into the eccentric characters at the center of this. and has more on this. Hey, Amen. Contessa, that's right. This is a crypto-whodunit story that starts with a mysterious hack of the cryptocurrency exchange BitFenex back in 2016. Now, no one has been charged with that hack, but the years-long investigation to find the stolen crypto led the feds to a young married couple right here in Manhattan,

Heather Morgan, an aspiring rapper, and her husband, Ilya Lichtenstein, shared hundreds of bizarre videos on social media that make it hard to imagine that this couple, could be charged with conspiring to launder billions of dollars worth of Bitcoin. Videos of Heather on social media give us a peek into the private life of a mystery woman, accused of a multi-billion dollar crime. I made this really dope orange bala clava, which is inspired by Joe Exotic. On TikTok, she posts videos showing off art projects where her medium was taxidermil. It's a camel school pretty dope, right? And shows off quirky talents like using chopsticks to eat with her toes.

People also discovered Razel Khan, Heather's alter ego, a satirical rapper serving up rhymes and videos she describes as something between an acid trip and a delightful nightmare that combines her fearless entrepreneurial spirit and hacker mindset. Your fish, your password, all your bonds transferred. Motherf-Bee's living on the coast that's east. That's super, super weird story. I can imagine that in the future there will be movies about it. All of a sudden I hear this voice rapping, a female voice and I look over on stage as he was on the microphone and it's Heather. She just picked up the mic and started rapping in front of the crowd.

In this music video, dedicated to misfits and hackers, she calls herself another name. Come real hard, crocodile-o-w-w-w- To see these people acting the way they are and just being so open about their lifestyle and stuff. It was just fascinating to me. Honestly, I could only laugh. You just keep filming me expecting something to happen. What do you want me to do? You want me to just like shove something up my ass and do a little dance? And the fact that so much bizarre content about them was available to gawk out on social media help the story go viral. I'm obsessed with Heather Morgan. Her story is wild. Please go down this rabbit hole. You will not be disappointed.

Now, Heather and her husband, who goes by the nickname Dutch, are innocent until proven guilty. And there's a status hearing on their case coming up in November. So the end of this story is still to be written. But what we know so far is both strange and fascinating, guys. Oh, that's an understatement. So, Amen, despite the crypto theft that we have read about, we're told crypto's traceable. How hard is it to spend, or untraceable? How hard is it to spend billions in stolen Bitcoin?

Well, look, that was the challenge here that this couple allegedly had, right? A lot of people still have this idea that cryptocurrency is great for criminals because it's untraceable. Actually, it turns out that's not really true. The DOJ can track cryptocurrency. It's just a question of matching up the wallets that they see out in the blockchain with the real-life people who control the keyboards. That's the trick for law enforcement, but they can do that by sending subpoenas and requesting documents from all sorts of legitimate businesses. So the moment a criminal tries to actually spend this money in the real world, that is a clue and a lead for law enforcement to find. And that's what we found in this documentary, which, by the way, you can check out the full crocodile of Wall Street documentary right now over at YouTube.com slash CNBC.

I have a sense, Amon, that you spent a little, you saw some very interesting video. You screened some very interesting video. We watched a lot of those videos, Tyler. It was a lot of work. I'm sure it was. Amon Javers, thank you for that story. We appreciate it. You can watch more about this heist in that special episode, any special episode of America.

American greed airing tonight at 10 p.m. Eastern. Up next, clothing cars, consumer electronics, we'll trade three big calls in today's three stock lunch. There are the names. The drinks are ready. They will be served after this. Let's get to Steve Kovag now for a market flash. Steve. Hey there, Tyler. Yeah, Apple shares are turning negative after being up as much as 3% earlier today. I had this report from the information saying Apple is cutting some production of the iPhone 14 plus. Now, this is the last version of the iPhone 14 that went on sale. About 10 days ago, it's the regular version of the 14 with a bigger screen. I reach out to Apple for comment.

I haven't heard back yet. But look, this is something we've been hearing, Tyler, for the last couple weeks since the iPhone 14 went on sale. This idea that the regular iPhone 14 line isn't selling as well, and people are actually going for the pro line, which are more expensive. And most analysts are saying this can help Apple reach its revenue goals for the iPhone, even if unit sales are flat, guys. All right. Thank you very much for that, Kovac. Time for three-stock lunch, and today we trade some of Wall Street's biggest calls. Target, Jeffrey's upgrading the big box retailer to buy, saying that there's margin improvement there.

Carvana, Wed Bush says the company won't be able to maintain enough cash, downgrades it to neutral. And Microsoft, heading into earnings next week, Deutsche Bank says it's the best house on the block. Let's bring in Bill Stone, chief investment officer at the Glenview Trust Company. Hey there, Bill, let's start with Target. Yeah, I mean, I like the stock. Actually, we own it. I think it's, you know, again, short-term stocks down 30% year-to-date. And really because of what hit a lot of retailers, which is that just got caught with too much inventory as things changed coming out of, I think, coming out of COVID, but as really things, you know, changed out of the patterns from consumers, obviously you're coming into what we think is probably a tougher economy here.

and maybe recession next year. But we think they're a survivor. So, you know, they'll probably have less competition coming out of said recession. And they do have the wherewithal to compete against what you really have to compete against, which is Walmart and Amazon. And on top of that, selling for about 13 times 2024 earnings and a 2.8% dividend yield. So I think it's worth a go. Carvana, the other side is a sell down 92% year-to-date.

this is a very special situation, isn't it? Yeah, I mean, you want to like it because it's a super interesting space that if they could possibly disrupt the used car business via an online platform, there is probably a lot of money to be made. The problem is they're not making money, and they probably won't make money for at least the next two years. And that's caused them because they burn a lot of cash to be a worry that they're going to have problems funding, and they might have to issue more stock, which will dilute current

shareholders, which is why the stock's down 90% already. All right. And our final name, Microsoft. What do you make of it? Well, you know, you said the analyst said best house on the block. And I mean, it's hard to disagree with. So two phenomenal businesses, really. So one is the cloud.

They're one of, let's call it three major players, but really it's primarily Amazon and Microsoft. And it's really changing the way we do business. And it's just going to contain a spread to more areas. I give the example of, you know, be able to turn gaming into a space where you can charge monthly, you know, monthly fees, all that kind of thing. Secondarily, their productivity suite, which is what all of us would kind of call, among other things, you know, kind of office suite. You know, there's been companies like Google that gave away those tools and still couldn't displace Microsoft and they've been able to raise their prices. So it is really hard to get negative on this company, particularly, again, at 30% off where it was at one point.

doesn't love a sale. Thank you, Bill Stone. Appreciate that. Thank you. And we finished all three of those. All right, after the break, Rolls Royce unveils its first ever electric vehicle and it's keeping true to its brand. It's going to be the most expensive EV on the market. We'll be back in two. Rolls Royce becoming the latest car brand to give in to these challenging times, rolling out its first electric model today. Robert Frank joins us now with that story. Hi, Robert. Tyler, it is called and it's a two-door with a range of 320 miles, 0 to 60 and 4.4 seconds. Price tag, a whopping $413,000. That is the most expensive EV on the market.

But the price doesn't seem to be deterring wealthy rolls buyers right now. The company's CEO telling us buyers are rushing to place orders even before the actual launch. Initial customer order is very pleasing. We have even seen here, also from the United States, far over 300 clients who visit us here over the last two weeks and who have seen Spectre here. They're all deposited already. Guys, some really cool features. The grill lights up with 32 LEDs and that famous spirit of ecstasy hood ornament on the Rolls Royce. That was also given a modern makeover.

Now, the first delivery is starting the fourth quarter of 2023. This follows a record year for Rolls Royce. Last year, they delivered over 5,500 cars. Gaius? Wow. That is a beautiful car, I must say, Robert. It is a lovely one to look at. The waiting list will be long, I suspect.

It will be. Given that the current waiting list for other cars is over a year long, this one could be even longer. Yeah, absolutely. Robert, thank you very much, Robert Frank, reporting. All right, folks, we've got a gain of 250 points or so on the Dow. Yeah, the real question today, can you trust this rally? We've had some competing opinions about that today.

Thank you so much for joining us for those conversations right here on Power Lunch. Closing bell starts right now.