Power Lunch - Two power players, trading the best stocks in the worst sectors and the Bed Bath & Beyond debacle. 8/31/22

Episode Date: August 31, 2022

The head of the Port of Savannah tells us whether the shipping bottlenecks are easing and what that might mean for inflation in the months ahead. Plus, the head of Redfin says the housing market is rapidly slowing and tells us which real estate markets are cooling the most. And, what’s driving the dive in Bed Bath & Beyond shares. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. I'm Contessa Brewer and for Kelly Evans today and here's what's ahead. Two power players. First, the head of the Port of Savannah. He'll tell us whether bottlenecks are starting to ease and what that means for inflation as we head into September. Second, the CEO of Redfin. He's warning of a rapidly slowing housing market with deals being canceled at the highest rate since the start of the pandemic. Are we in a housing recession? How long will that last? First, to Tyler and a check on the markets. All right, Contessa, welcome to you and welcome everybody. Stocks are just off-session lows. The Dow right now, down 146 points. The S&P 500 down 14.

And as you see there on the screen in front of you, the NASDAQ composite down 33. The industrials leading the way lower, as you see there, materials, the worst-performing sector in the S&P 500, dragged lower by Mosaic, the fertilizer company, DuPont, and Sealed Air. Oil, now on track for its third straight monthly declassies. That would be its longest monthly losing streak since 2020. The drop reflects possible concerns about a recession as the Fed hikes interest rates. And the Fed's inflation fight may have just gotten a bit harder.

Today's ADP report showed that annual pay rose 7.6% year over year in August. This is the first month that ADP has released wage data as they sort of tweaked and redid their formula. Separately, the Cleveland Fed President Loretta Loretta, Retta Mester said it would be a mistake to declare victory over the inflation beast too soon. So with the S&P 500 down more than 3% in August and a Fed meeting looming in September, how should investors be positioned? Let's find out from Courtney Garcia, senior wealth advisor with Payne Capital Management. Courtney, always good to have you with us.

My pleasure. Ms. Mester, President Mester says inflation is not tamed. Do you agree? or have we seen the worst of it at the very least? Yeah, I think we're really continuing to see signs that inflation likely has peaked. Just most recently, we did get the PCE numbers out, and it is showing that inflation is starting to come down. When you look at either the total number or the core PCE, we're starting to see those figures

come down just as the CPI has over the previous months. So I think the question is, is it coming down enough that the Fed is going to start to reduce interest rates? And that's really what the markets are so focused on right now. We had a nice month there where the Fed wasn't meeting and markets were doing fantastic. Now that's coming back into focus again, and every little data point, the next one being Friday when we get the jobs report out, is really what the markets are going to be looking for. Every detail that's going to indicate what they're going to be doing later this month and later this the rest of the year. So I'll probably see some choppy trading between now and then.

So I asked a guest yesterday, and I'd like to ask you if I might. Immediately, it would seem that the market over the past several days has been reacting to Chair Powell's speech on Friday where he basically promised to keep fighting inflation by raising interest rates. So the market is concerned about rising interest rates. But my feeling is that it goes beyond that. What typically follows a rapid, dramatic rise in interest rates? What typically follows is recession.

And I wonder whether you agree that that is. is a worry and that that is being reflected in the rather sharp decline off of the rebound in stocks lately. That's definitely the worry, right? And these things go hand in hand because the fear is that if inflation isn't tamed, the Fed is going to raise interest rates to the point that it's going to force us into recession, right? So inflation doesn't come down.

The answer in a lot of people's minds is recession unless we're able to get that soft landing where they're able to bring this down without driving the economy there. And I do still think that's possible. I don't think that we are necessarily going to be into a deeper session. I do think it's possible for them to bring down inflation as long as labor still stays strong, right? And you kind of want that Goldilocks scenario where you need labor to come down enough that the Fed, they said over and over again, that's one of the things they're looking at to make sure they can bring interest. I'll just tie it off before Contessa jumps in by saying that no two recessions are the same.

I mean, the recession and the financial crisis was of different causation, different sort of extremity, I guess, as a way as that. The recession, such as it was in 2020, caused by the pandemic. If there's a recession this year or later, it will be caused by something else, contestant. Well, and the whole point about jobs here is that if there are not enough people participating in the workforce to fill the job openings, and again, we've seen those job openings increase at this point, then how do you manage the rising wage inflation that is a contributor here to underlying inflation. Something has to be done about how many workers we have versus how many workers we need. And that's not something that the Fed is really in a position to do at this point. All that being said, and to Tyler's

point about whether recession is looming because of this aggressive rate hiking that's going on, do you think that there are some companies that are better positioned to pay returns on the investment no matter what comes down the pike? Yes. Yeah. And I think that's really where you want to make sure you're not in some of your longer duration assets. So things like some of your big technology companies have been the things that you've seen just over the last several days here have been selling off a lot more than others. And I think you want to make sure that you have a lot of those companies that are paying good cash flow. They have pricing power. And they're going to have demand whether we go into recession or not. Because either way, we are facing a slowing economy, whether that means a recession or

just a slower economy, we are facing that. And you want to make sure you have those companies who are going to benefit from that. So I have on here that you like Ford, Alta, Beauty, and Eli, Do those three companies have a common theme? They do. Yeah, and I think all of those things you're going to look at is these are things that are likely going to have demand moving forward, kind of regardless of where things are going. Take Ulta, for example, the beauty sector is really going to benefit from the fact that people are still getting out and traveling. They're going back to work. They're going back to events. They're going back to school. And what I like about them is they have a really wide array of products. So I can go get my mascara. I get at the drugstore, and I can get my foundation. I might have had to go to North.

for. And so that also brings in a wide array of customers of different income sources, which makes them a little less susceptible as inflation is affecting different income levels more than others. They're getting that whole gamut, which actually make them a little bit more insulated there, which I like. You put on your nice makeup, you go ride your Ford Bronco, right? That's the whole, that's the linkage, right, Courtney? All right. Thanks a lot. Courtney Garcia. We appreciate it. Thanks for having me. A big contributor to inflation has been the bottlenecks that we've seen in the supply chain, bottlenecks at the shipping ports, for instance. Wait times for container ships and congestion have begun to ease across the country,

but some ports like Savannah are still seeing long wait times for cargo ships to enter a berth and be unloaded. The head of Savannah's ports has volume hit its peak in July, and now traffic is declining. Let's bring in Griff Lynch, the executive director for the Georgia Port Authority. It's good to see you today. Give us a picture of the way that the scenario is changing. for you at the Port of Savannah. Sure. Thank you for having us. We appreciate it.

In Savannah, I think the market is changing over the last year or two to where we are today. We have had 44 vessels that anchor as a peak. Today we sit at 39 and that number is coming down. We look out what's on the water, what's coming to us over the next six weeks. It is declining. So we see volumes normalizing over the next several weeks to maximum two months. And then on screen, we have a note here that the retailers have already begun ordering early for holidays, likely to try and overcome whatever supply chain issues they've been experiencing over the last couple years. How does that factor into what you normally seeing heading into September?

You know, I think what we would normally have seen in September would be our peak just beginning and the peak season would run through September to October. The truth is, we've been running at peak for the last two and a half years. but this particular year that we had peak really arrived. The peak means that it's holiday goods started arriving in June. So I don't think anyone's going to have any issues with getting to the goods they want to buy for the holiday. However, I think the challenge is really more about are the goods going to be bought. The products, the retailers are slashing their prices and they've got inventory buildup, both at the port and at the warehousing side of things.

So let's talk a little bit about your expansions. I know you have increased capacity in a variety of ways, both in terms of the number of births you have, your ability to transfer to rail. Tell us a little bit about that and also about whether you can find enough workers to do the work that needs to be done and how much more are you having to pay them

than you did say two years ago. Sure, Tyler, thank you. If you look behind me, what you're seeing is our main truck gate. We handle approximately 16,000 truck moves a day here. Wow. This is the single largest, yeah, single largest container terminal in the Western Hemisphere. So we have right now, as I speak, $1 billion in projects expanding our facilities. While we do have vessels at anchor, the good news is when the vessel arrives at the dock, we're extremely fluid, turn times for the trucks.

The trucks are in and out, 30 minutes to 60 minutes max. So that's going really well. And as you mentioned, our Mason, our Mason MegaRail, a massive, rail facility that we just completed is now open for business. And we can serve as 70% of the nation's population right through this port. So we're investing. And I would say one other thing, on our birthing side in the vessel backup that you see in Savannah, it's more a kind of pardon the interruption moment because a year and a half ago, we took that one of our births down to renovate it, revamp it, and make it bigger for bigger ships that are now calling here. So in seven,

eight months, that project is completed. Had we had that complete already, we wouldn't have any of these vessel wait times. So that's one of those things we wish we had done earlier, but here we are. As far as the workforce goes, I would say like everywhere, it's a challenge across the nation right now. And it depends on the skilled labor that we're looking for. At the GPA, the Georgia Ports Authority, we don't have any issues hiring folks. We pay a very good salary, and the people we have are doing a great job. I'm just curious how the labor issues on the West Coast ports are playing into the volume you're seeing now, the increased volume you're getting in Savannah. Sure. You know, you have to really look back over the last two decades, contest.

If you think about going back to the year 2000, every single time there's been a West Coast expiry of their contract, their labor contract, we've seen a dramatic uptick in volume. And what's happened is that volume hasn't gone back. We are actually the fastest growing port over the last 15 years. And the East Coast is outpacing the West Coast in market share. So the West Coast, when you think about Trans-Pacific cargo, the cargo coming from Asia, if you look back 10 years, the West Coast had about 70%, maybe 71, 72% market share. And the East Coast and Gulf were in the 20s.

Today, the West Coast has 58% and we're in the 35% to 40% range. So that shift has been going on for a long time. This year, there's another negotiation going on, and you're absolutely right. Cargo is being diverted to the East Coast. So we are seeing an increase in volume. July was up 18%. August is going to be an all-time record for us to be the first time. We handle 300,000 containers in one month, which is just incredible.

Well, listen, Griff, the real headline here that's going to have a lot of the operators and the heads of logistics for various companies, breathing a sigh of relief is congestion beginning to ease. Thank you so much for joining us today. Griffith. Thank you. Already coming up, our restaurant trade series continues with a look at the payment processors. They still expect you to pay, Contessa, when you go to a restaurant toast easily outperforming visa and block this month.

But is it the best long-term bed? You know, if you find the best dinner date, somebody else can pay. Somebody else picks it up. I like that. All right, there shares of Bed Bath and Beyond. Bed Bath and Beyond Belief. The company cratering those shares, cutting jobs, closing stores, securing new financing, but is it enough to struggle to fix this struggling business?

Before the break, Walmart owned Sam's Club raising its annual membership fee for the first time in nine years to $50 from 40 for club members get ready. More power. Right Friday. Welcome back, folks. Time for our Power Lunch Cookbook series where we highlight Overlook Stocks, in the restaurant business. And we all know that you can't dine out without paying the check.

Somebody has to. So today, we're going to talk about the payment players like Visa, Toast, Square, which is owned by the parent company Block. Here to help us trade them, Dan Dolev. He's managing director and senior analyst at Missouho and has some of the best position named for us today. You know, I see on your list that

none of them are the big incumbents like MasterCard or Visa. Why do you move elsewhere and not have them on your buy list? Well, we have, hey, great to be on the show again, Tyler. Like, we've downgraded Visa earlier in the year. Our concern is more about the low-term cash-to-card, expiration of the cash-to-card movement. And basically what it means is that two-thirds of the growth of Visa is being threatened because we've sort of reached post-COVID, a cash-to-card kind of like point where there's not that much more

to convert. Remember that cash-to-card drives two-thirds of growth. So, you know, there's better place to play if you want payments than the networks. And I think that playing some of those companies that offer services aid to restaurants or retail, those are the better places to play. So when you say cash-to-card, you just mean the transition from people using cash to using their credit card instead? Yeah, most people don't know that, but about two-thirds of the revenue growth for Visa historically, exactly two-thirds, comes from basically people using more card in year one than they used in year zero. And what happened during COVID, we're now at like maybe 70, 80 percent penetration of cash to card in the U.S., which means that like the runway

for converting cash to card and generating that 9 percent, 10 percent growth over time is more, I would say, challenged of being put in question. That's a very important point that most people don't appreciate. So take us through some of these payment companies that you do like, And you mentioned specifically that one of the edges they have is that they provide services to the merchant, I believe that's what you said, services to the merchant as well as convenience to the diner or the payer. And I'm notably curious that on your list is Robin Hood, which I think of as a stock trading platform, not a payments platform. Correct. And Robin Hood is a stock trading platform. They're mostly on the stock side and on the trading, et cetera.

you know, consumers, P2P, et cetera. But the ones that are very important in the category that you're talking about, and I think that's a great point. There's toast. We're neutral in toast. The reason we are is because we are worried that the transition from online to in-person to pre-COVID level is going to shrink their take rates. So they're basically, they benefited greatly from the, they make more money on online ordering

versus in-person because of the credit debit mix. And when the credit debit mix goes back to pre-COVID levels, because they don't make much money on credit, make more money on debit, which is where the online ordering comes from, that's causing the shrinkage. However, they are doing a great job. They're upselling really well. They're growing GMV really well. They have like 60-something thousand locations. I think from all the names and payments that we cover, they're probably doing the best job in restaurants. That's followed by Clover, which is owned by FISA.

Not that many people know FISA. it's a legacy player. Clover is a massive success in restaurants and retail. That's sort of a branded point of sale. And of course, you mentioned Square, which is a very important merchant acquire. They're also a big share gainer, although I heard it in restaurants they're not doing as well. Also, I want to ask you about PayPal here because you have a buy rating on it, a $118 price target where right now it's sitting at about, oh, $9266 or something like that. When you're looking at PayPal, isn't the perception than it's losing market share in the payment space? It's a great question, and I think that's the difference between, you know, the stock price today

and probably something north of our price target. And we've done some work that actually proved that historically, actually in 2021, they outgrew e-com by a thousand basis points. That's, you know, 10 percentage points. They outgrew them. In early 2022, despite the fact that they have more exposure to discretionary goods, but now services are doing better, they still grew in line with e-com. So the fact is that they're actually growing in line to outperforming e-com.

But once, you know, perceptions die hard, and the issue they have is 100% perception and too high of the cost basis. Now, with Elliott management coming in, cutting costs, they have 30,000 people. Like, I don't understand why they need 30,000 people at PayPal. They can probably do the same with fewer people. That's a great, great, great, great value, slash growth name that I think is going to go way higher than where it is today. I don't want to put words in your mouth, but I kind of do.

It sounds to me like you like PayPal a lot, but that FISA, the owner of Clover, is kind of the sleeper that you like, that you really like. Fiserve is the hidden gem. It's the diamond and the rough. I don't have any other. I'm going to leave it right there. That's a button, right? That's a mic drop moment.

Dan Doliv. Thank you, man. Thank you. We have heard from multiple restaurant owners this week about the impact of wage inflation. Junior cheesecake owner Alan Rosen tells us he's fully staffed, but those rising wages are taking a serious toll. Inflation has greatly impacted our bottom line. The cost of goods across the board have all risen dramatically over the past two years in change. Additionally, as we all know, the labor shortage led to a high level.

higher hourly wage, higher salary workers, but we are fully employed here at juniors currently. Back to the issue of whether wage inflation is something that can be tackled by the aggressive moves that the Fed is taking, or is this an issue that, you know, I was talking to a very highly placed source today who said the problem really is that in order to add more people to the workforce in the United States of America, we need more immigration. You cannot create new humans who are ready to go just like that, what you need to do is figure out a responsible immigration policy that allows these companies to hire who they need. I guess the way the feds sort of the knock-on effect of higher interest rates is the idea that it slows the economy,

a slower economy with less turnover means that you probably don't sell as much, and then you probably don't need as many people so the wages come down. That would be the transmission mechanism, them I would guess. But anyhow, coming up, Bed Bath and Beyond Saving, the controversial meme stock cannot seem to escape the harsh glare of the spotlight. Laying off 20% of its staff closing stores, could this get worse? Or is this the start of something better? Plus, planting a seed for hydrogen powered cars. Bosch makes a major investment in hydrogen fuel cells. Those details still ahead. Welcome back to Power Lunch, Bad Beth and Beyond shares plunge after issuing strategic business update. The company is now taking aggressive action, but look, investors seem to want more.

Courtney Reagan has that breakdown for us. All right, what do they want? Courtney? Oh, Contessa, it's hard to say. There were a lot of details in this. And frankly, Bedbath and Beyond stock action really follows fundamentals with all the Reddit traders. But today's response does seem a little bit more likely correlated to what we heard from the company. So shares initially fell 19% as an SEC filing revealed a 12 million share proposed offering. And then the stock fell further on the rest of the details when they came out. The retailer has secured $500 million in new financing, including a new more than $1 billion revolving line of credit and $375 million first in last out facility. It's welcome news because the company had just $108 million in cash and $1.4 billion in long-term debt obligations at the end of its first.

quarter, it also had a 23% drop in same store sales. Now, Bedbeth and Beyond says that second quarter comp sales are down 26% at this point. $325 million in free cash flow was also used in the quarter. The retailer is closing 150 more stores and cutting 20% of corporate and supply chain jobs. It's part of a $250 million cost-cutting plan. It's also lowering its planned capital expenditures as well. And while previous activists running, Cohen wanted Bed Bath and Beyond to sell its better performing by-bye baby. The company says that's not happening. However, much of former CEO Mark Tritton's private label merchandise plans are in fact getting scrapped. They're killing three of nine newly created private label brands.

They're lowering the rest of their private label merchandise by about 20% to replace it with national brand goods. So bringing back some of what Tritton got rid of. Still no permanent CEO. It did name two new presidents, one of Bedbath and Beyond and one for Bye Bye Baby, as it eliminates its chief operating officer and chief stores officer roles. So, Tyler, there's a lot of fixing still to be done, and they threw an awful lot at us today in the strategic update. A lot of moving parts and a lot of cost cuts to come. Thank you very much, Courtney. Let's go over to Sima Modi now for a CNBC News update. Cima.

Tyler, good afternoon. A judge has rejected a plea deal that would have meant no prison time for the operator of a limousine company. involved in a crash that killed 20 people in upstate New York. The judge says the plea agreement was fundamentally flawed. The 2018 crash was blamed on faulty brakes. It was the deadliest U.S. transportation accident in a decade. An excessive heat alert for San Francisco and the entire Bay Area has been extended. The region is expected to get some of its highest temperatures of the year, possibly upper

90s along the coast and well into triple digits inland. The worst of the heat is expected from Saturday morning through Tuesday evening. And near Houston, an historic battleship has been moved for a much-needed overhaul. The USS, Texas, saw action in both World Wars. More recently, it had been turned into a museum. Repairs to its leaky hull are among the goals of a $35 million restoration. Tyler, I'll send it back to you. All right, Seema, thank you very much, and we have a news alert out of Washington,

and Aman Javers has it. Tyler, that's right. The Attorney General of the District of Columbia says he is suing Bill. billionaire micro strategy CEO Michael Saylor for non-payment of taxes, alleging that the billionaire tech executive has lived in the District of Columbia for more than a decade, but has never paid any D.C. income taxes. He also says he's suing Sailor's company, Micro Strategy, which is located just across the river in suburban Virginia, for, quote, conspiring to help him evade taxes, he legally owes on hundreds of millions of dollars he's earned

while living in D.C. The suit alleges that Sailor illegally avoided more than $25 million, in D.C. taxes by pretending to be a resident of other jurisdictions with lower personal income taxes. The AG says Sailor lives in a 7,000 square foot penthouse on the Georgetown waterfront and has docked at least two of his luxury yachts in the district for long periods of time. The AG says that the complaint includes detailed allegations that Sailor was physically present in D.C. for most of each year, despite claiming to be a Florida resident, including allegations detailing flight logs from Micro Strategies Corporate Jet and location tags. social media posts. The whistleblower's complaint also alleges that Sailor openly bragged to friends

and acquaintances about evading D.C. taxes and encouraged others to follow his example. The AG alleges here that Saylor avoided paying more than $25 million in D.C. income taxes, and he alleges that Microstrategor as a company actively conspired with Saylor to enable the fraud, including by filing inaccurate W-2s with the address of his property in Florida rather than his home in D.C. and we've reached out to Microstrategy for its comments on this allegation, and we'll bring those to you as soon as we have them. Tyler? All right. Thank you very much, Amon Javers, for that news break. Ahead on Power Lunch, Homestick.

The housing downturn continues more firms' warning of a recession or at least a serious decline in housing. The CEO of Redfin will weigh in. Plus, finding diamonds in the rough will trade the best performing names in the worst performing sectors in today's three stock lunch. Less than 90 minutes to the first. the closing bell, we want you to get to get you caught up on the markets on stocks, bonds, commodities, and a housing recession. Let's begin with Bob Bassani at the New York Stock Exchange, where stocks now, Bob, are near session lows. Yes, we're essentially at the session lows.

Down 23 is in a big wish down for the S&P, but there's no bid at all in the market. There has not been for, frankly, almost two weeks, not just the last Friday, but for several weeks now, we've been in a downtrend, essentially. Let me just show you some things moving here. Curious that energy stocks are generally on the upside most of the day, even though oil is below 90. Now, oil's down, but it's not down enough to get everybody excited about oil as a proxy for inflation is really moving down dramatically. So that's a problem. It's down but not down enough to get people excited.

At the same time, some growth proxies are down modestly today. So you watch metals and mining stocks, for example. You watch a stock like Freeport McMaran. That's been moving down in the last few days. That's gotten people a little more encouraged because that's what the Fed wants to see. as a proxy for growth, a little bit lower growth prospects. Another proxy for growth are semiconductors. They've also been generally very weak in the market.

So there was a certain extent. That is good news if you want to see that. If you want to see some kind of signs of weakness and growth. At the same time today, big cap tech, other sectors of big cap tech, generally have been holding up pretty well, alphabet, Microsoft, Apple just went negative. It was positive earlier. Amazon a little bit weaker down about 1%. So where are we?

There's no bit in the market now. I'm sorry, it's maybe the end of August, but there are some macro concerns that are out there. Look at the S&P 500. We have essentially been in a downtrend for two weeks. There's been one up day where we were up about 60 points in the S&P. And other than that, look at that. That's straight down essentially for the last couple of weeks. So we've got a buyer strike going on.

What we need is some better evidence of the jobs report on Friday. Believe it or not, I hate to say this, but the Bulls really won a week of report. We're looking for $300,000. and Contessa, I think a lot of people would be very happy if it was 200,000, and the market may even rally on that. And I know that is topsy-turvy logic. We want strong jobs growth, but the market really wants them sign. The Fed's medicine is working. Back to you. Bob Pisani, thank you for that. Let's go to the bond market now, where the two-year yield hit a 15-year high earlier in the session, a bit of pullback. Just yesterday, I tossed to you here, Rick, saying, hey, we saw a 14-year high. Boy, we're seeing a lot of movement here.

Yes, we continue to creep up, and Bob's got a great point to think that the central bank strategy of choice globally has put investors in a mode where they're hoping for negative economic outcomes. You can't make this stuff up. And look at a two-year note yield for how much it's been flying up. It continues. This could be the fourth session in a row of higher yields, which means it all started. That chart shows you on Friday when Jackson Hull Symposium and the Speaker, our chairman, really said, no, no, no, believe me, we're going to stay solid on inflation fighting. And if you look at the month for a 10-year, we started out the month at 265 basis points, which means we're up 47. That two-year you just looked at is up 56 basis points for the month of August.

And get this, boon yields are up 11 out of 12. Sessions. As we continue to move, and these Fed Fund futures, 38 and a half basis points lower for the month, bringing more Fed in and finally the dollar index. It's only three-eighths of a cent from 20-year highs. Contessa, August has been a big month for yields. Back to you. Well, I guess we'll buckle up for September. Thank you, Rick. Oil closing for the day and the month following below $90 a barrel. Pippa Stevens is at the CNBC Commodity Desk. Hi, Pippa. Hey, Contessa, and what a month it's been for energy. Let's run through the numbers. WTI is down more than 9% for August, making it the worst month of the year as recession fears way. The contract is also down for a third straight month for the first time in more than two years. Global benchmark Brent crude dropping 12% for August. Now, take a look at gasoline futures down 26% on the month. That is the worst month in more than two years as well. And moving Over to natural gas, it is up roughly 11% for August on track for its fifth positive month in the last six. Now, over in Europe, prices have pulled back from records, but that contract is still up more than 30% for August. And as we've been discussing, that's cost electricity prices to surge with August now the most expensive month on record for power. Meantime, Russia's

gas problem also halting flows via the Nord Stream 1 today, citing maintenance. The key pipe which runs through the Baltic. C is expected to be offline, Contessa, through September 3rd. Back to you. But thank you very much for that. And now to the cooling housing market, mortgage demand is 23% lower this week than the same week a year ago. According to Redfin, 16% of purchase agreements fell through in July and prices down 6% from June's record. Joining me now is Housing Power Player Glenn Kelman, CEO of Red and Fid. It's great to see you today, Glenn. Power player now. Listen, if CNBC calls you a power player, you indeed are a power player. I heard a realtor friend of mine say that sellers think that it's last year and buyers

think that it's next year. Is there any indication that these two groups who have a vested interest in buying and selling homes are going to get on the same page? Haltingly, whenever the market changes, it's really hard to put deals together because you're absolutely right that the buyers are looking at the headlines. about what's going to happen in the future and the sellers are thinking about the home down the street that sold for a song four months ago or eight months ago. So during this period, there's going to be plenty of online activity, plenty of touring, but not as many deals. Okay, so I want to ask you about

the fact that these contracts are falling through. You say nationwide, 63,000 home purchase agreements fell through in July, 16% of homes. Why? What's leading buyers to say, yes, we'll buy, and then no, we won't? Well, some of it is economic uncertainty where their portfolio has gotten waxed in the stock market or they're worried about their job. But much of it is that they're just reading the same headlines that you and I are discussing now, that they see that prices are falling, that time is on their side. If they pull out of this deal, they'll be able to get a better one in two or three months. And some of those numbers are truly shocking if you look at Jacksonville, Las Vegas, San Antonio,

New Orleans, more than one in four contracts is being canceled once you've got a deal at hand. Are you seeing a pandemic hot spots for housing now coming under more strain than other, I don't know, steadier locations? It's a combination. So a place like Boise off 40% in sales. So it just went boom and then it went bust. There's so little volume there that when all these Californians come streaming in, it just sends the housing market haywire. But we're also seeing real softness in California. Prices are down in the San Francisco Bay Area. They didn't go up that much during the pandemic,

and so they don't have as much room to give up. And then in Southern California, you're also seeing really soft demand. Sales are off 40% in San Diego, which is unusual. Traditionally, that's been a pandemic destination. And you describe this softness to what exactly? Obviously, it's rising rates as a part of it.

the other ideas are what? Well, some housing demand was pulled forward during the pandemic. So a bunch of people who were going to move, got in gear and did it in 2020 and 2021. So I don't know that activity is really that low. It's just low compared to incredible highs. It's a tough comp right now. What about the traffic on your site? I mean, are you seeing a lot of buyer traffic and interest?

Well, there it's a tale of two markets. So the buyers have come back because they're being drawn in by lower prices. It was truly dreadful in May and June. And now in July and August, it's been stronger. But there's been less listing demand. There are so many sellers who have decided to wait this out. If they don't have to sell, they're not going to sell. When we saw inventory shoot through the roof and the great financial crisis, that was under

duress. These people had mortgages that were due and they couldn't pay them. Right now, there's so much equity in the market that people are able to wait it out and they will. Very quickly, when people cancel contracts, how do they do that? What are they citing to get out of it? Well, they might say the appraisal came in low. They might say that they found something in the inspection that they don't like.

There's all sorts of ways to get out of a deal if you don't want to do it. Sometimes people are walking away from their escrow money. We saw that more in the great financial crisis, where prices dropped so precipitously that people said, even though I don't have an out, you can just keep my earnest money. And I'm going to go shopping elsewhere. Right now, I think they're just using the inspection contingency and the financing contingency. Glenn Kelman of Redfin, power player. Thank you for your time.

Power shirt, man. Love that. Thank you. It's a Charlie Brown shirt. It's pretty good, though. Bumblebee. All right. Engineering firm Bosch, investing $200 million in a hydrogen fuel cell plant in South Carolina.

The aim, hydrogen-powered cars. That story is next. Welcome back to Power Lunch, everybody. There is growing optimism around the future of hydrogen-powered cars. And today, Bosch is making a big investment in a South Carolina plant. Phil LeBow has the details. Hi, Phil. Tyler will eventually get to hydrogen fuel cell cars at some point in the future.

But near term, most of the investment will go towards commercial vehicles, talking about hydrogen fuel-cell powered semi-trucks. To that end, Bosch announcing that it will be investing and opening a hydrogen fuel cell plant in Anderson, South Carolina, pumping $200 million into this plant, creating 350 jobs. Production is expected to start in 2026. Hydrogen fuel cell semis are really where the investment is when it comes to hydrogen. Look at Nicola. They are already testing out their hydrogen fuel cell semis that they expect to go into production and into commercial service. next year, already testing them in Los Angeles. And one other note, as long as we're talking about future power sources for vehicles, North Carolina is where Toyota plans to open an EV battery production facility.

They made that announcement a while ago, but today they said we're going to triple the investment in that facility, and they're going to bump that up, triple the investment up to $3.9 billion. Production starts 2025. So lots happening in terms of this next generation. of EVs and fuel cell vehicles. All right, so what's holding back the development of these hydrogen cars? Well, it's going to take a while for the infrastructure,

and that's why you see it on the commercial side, because it's easy to see a fleet of operators saying, let's put in a hydrogen pump here that we can fuel up all of our semis. You can't really do that on the commercial side for you and I with hydrogen fuel cell cars. It'll be there eventually, but way down the road, 15, 20 years from now. All right. Phil LeBeau, thank you very much. Appreciate it. Up next, today's three-stock lunch, and we're running through the best-performing names in the worst-performing sectors. Power lunch will be right back.

All right. Time for today's three-stock lunch. We are trading some of the best-performing names in some of the worst-performing sectors, tech and telecom. Electronic Arts, down 3% in 22, outperforming the S&P, which is down 16%. Solar Edge, that stock, down 2%. And T-Mobile shares up nearly 25% year to date. Todd Gordon is New Age wealth advisors founder and a CNBC contributor. So what we're doing here is we're cherry-picking the best house in a bad neighborhood, I suppose. Let's start with T-Mobile, which compared with a couple of its competitors is lighting the house on fire. It sure is, Tyler. And unfortunately, I hold AT&T and Team Verizon.

I don't hold T-Mobile. I like it. You know, it's been a great chart. They raised their guidance last year. They're picking up new customers where Verizon AT&T and near that. You know, and this deal with Starlink, I think, is really amazing. You know, I don't know about you, but I'm kind of thinking 5G is a big disappointment. So many dead zones in the Starlink deal that they announced is really going to make up for that.

It's not a high bandwidth kind of thing, Tyler, but you'll be able to do text and voice calls. So I think it's interesting. So Ken Starlink pick it up and really distribute. You know, it looks like they're going into beta next year. And it's unclear if T-Mobile is going to offer simple go to those other carriers. So don't hold it, but I'm certainly interesting in adding. It doesn't pay a dividend, so it'd have to be a gross stock. Yeah, it's beyond me why in this modern day and age there's any spot in any city where you can't get cell phone service.

It seems ridiculous. I'm with you. What about solar? Contested drive. Oh, go ahead. Sorry. Like taking the train to New York City. Two hours away from the biggest city of the world, I can't get service to call C&BC on the way.

You and I are probably living in the same town. Well, you were in the quiet car and you were trying to make that call. That's why you deserved it. Okay, okay. All right. I understood. Solar Edge. Talk to us about what you like about this stock. Yeah, the last earnings were good. They beat EPS estimates. Their margins dropped quite a bit, about 35% year on year. I don't own it. I like the industry.

I actually owe their biggest competitor end phase. I think it's a much better stock. They obviously have an allegation from some patent infringements. The valuation of Solar Edge is more compelling than N-phase, but it comes at a premium because of how the two products differentiate yourselves. I think N-phase is growing faster on top line. They have better margins. N-phase product, there's no single point of failure

where they put these little microinverters through all the different panels where Solar Edge puts it in one location, and it kind of feeds them in, so that one goes, it's a problem. You know, N-phase broke out of the consolidation that's been in place since 2020, where Sol Edge failed. So I like N-FACE better. Electronic Arts, you hold it, right? I do.

Yep. Yeah, it's a great stock. You know, they've been shopping themselves, Tyler, to be a buyout. You know, there's a few potential shoppers. They recovered nicely post-COVID. They've been consolidating around the 145 highs. There's a concern across the whole industry of slowdown post, you know, pandemic. deal with Amazon seeds have gone quiet.

You know, there's big open interest in the September options coming up around the 150 call strike compared to all the other options. So maybe something will happen. But, you know, they have a stronghold and all the sports gamings like Madden and FIFA soccer, NHL. They did a share buyback. So I hold it. It's kind of quiet right now. It might move higher. Todd, thank you.

Great to see you. Up next, if household debt is rising, why are credit scores at an all-time high? Find out when we go under the microscope next. Well, with all the talk of inflation and a possible recession, you might think credit scores are suffering, but it's not the case. Dom Chu here to explain why that is. So, Contessa, Tyler, what if I were to tell you that at no point on record have Americans been more creditworthy than they are right now, even with the inflationary threat and everything else happening in the economy? Well, so the folks at Fair Isaac, you know them as FICO. They do these FICO scores, all right?

Right now, the national average FICO score is 716 record high. It's unchanged from last year when it was also a record high, but it's the first time over the course of the last decade that scores have not gone up since the Great Financial Crisis. That's an interesting point to watch. It leveled out, by the way, at around 686 in the wake of the Great Financial Crisis. Now, as for how those scores break down, At one point here, you can see over the last 10 years, we had a number of folks out there with credit scores in that 750 to 850 range.

That's really, really good. Right now, you can see the blue line there. Roughly half of all Americans have a credit score somewhere between 750 to 850. That's much more than it was just a decade ago. So that's the key thing here. The interesting part is total utilization of credit, which is how much debt you have versus how much debt. how much total credit you have available has ticked higher. So it could be a warning sign about the future right now as people kind of use credit.

And that damages your credit score. If you use more of your available credit, you have more debt. How do we quickly, how do we explain this increase? So this could be a lot of the savings that were built up during the, during the pandemic and everything else. But those same things are getting drawn down and people using more credit. Tom, thank you. You're welcome, guys. And thank you for watching PowerLund.