Power Lunch - Washington & Wall St., and a ‘Musk-See’ Interview 5/16/23

Episode Date: May 16, 2023

Senate hearings are underway on Capitol Hill to discuss exactly what went wrong with Silicon Valley Bank, and what could go wrong with AI too.And the FTC is flexing its muscle yet again, suing to block the major pharma merger between Amgen and Horizon Therapeutics. We’ve got it all covered for you.Plus, we’ve got a big interview coming up on CNBC: David Faber is sitting down with Elon Musk after Tesla’s annual shareholder meeting. We’ll get you ready for that as well. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Tyler Matheson, coming up, the intersection of Washington and Wall Street. Senate hearings today on what went wrong at Silicon Valley Bank and what could go wrong with artificial intelligence. Plus, the FTC flexing its muscles again suing to block a major pharma merger. Plus, a big interview coming up on CNBC later today. David Faber sitting down with Elon Musk after the company's shareholder meeting. We'll get you ready for that. Kelly, plus a lot more.

Very much looking forward to it. Tyler, thanks. Hi there, let's get a check on the markets. The Dow's down 223 points right now. The S&P down 9 to 41.26. The Dow, by the way, still 30 points below its break-even for the year. So it's in the red as of this moment. The NASDAQ still up a quarter percent, helped by gains once again in NVIDia and some of the other semi-stocks AMD at 5 percent today.

Home Depot is weighing on the Dow. Although it's off the worst levels of the day, this, of course, after its earnings and disappointing guidance, will have more in a second. Shares are only down 1.5 percent right now, still down about 10. percent year to date. And check out Etsy, falling after Morgan Stanley cut its price target, saying it'll be hard for Etsy to grow sales and profit margins at the same time. Their new price target is $74 a share. And the stock right now, Tyler, is below 92, down 6.5%. All right, Kelly, thanks very much. You know, economic headwinds coming home to roost.

Home Depot, as Kelly just mentioned, reporting a big miss, revealing some potential cracks in the economy's foundation, specifically a slowdown in consumer demand. This, along with retail sales coming in a little bit lower than expected, though they were positive. Courtney Reagan has more on all this. Hi, Courtney. Hi, Tyler. So he was Home Depot's first earnings decline since May of 2020. And disappointing revenue, that marks actually the biggest miss in more than 20 years for the company.

It was also the second straight quarter of comparable sales declines. Before we saw that last quarter, the last negative number was 12 years ago. Lumber deflation took a two percentage points off of sales. and cold, wet weather also hurt that metric. But CEO Ted Decker called out, quote, broad-based pressure, which CFO, Richard McPhail tells me, includes softness and big-ticket discretionary items, things like patio sets, grills, and appliances,

with potentially some pull forward of demand and homeowners shifting to smaller projects instead of bigger ones like flooring, kitchen, and bath. More broadly, though, McPhail notes a shift from goods to services, saying homeowners have healthy balance sheets, but there's an impact of tighter monetary policy and credit conditions. On the call, he attributed the Silicon Valley bank failure to hurting consumer psyche, particularly in the month of March when it happened.

McPhail doesn't, quote, think it's a trade-down economy, but said it's more of a situation where our customers who are financially healthy are choosing to defer larger projects or larger discretionary purchases. A lot going down under the hood sort of these Home Depot results, Ty. Yeah, and I think how you began by emphasizing how rare this kind of miss was for Home Depot. They've been a stalwart for years and years and years. So stick around for just a minute, Courtney. Elsewhere on the consumer front, retail sales higher in April, up less though than expected,

as inflation seems to be having an impact on spending. Let's talk more about what this means for the economy with Peter Bookvar, Bleakley Financial, CIO and also a CNBC contributor. Let me go back, though, first to Home Depot. I am assuming that Home Depot's numbers are. not inflation adjusted, so that if they are projecting that sales revenues are actually going to be down three to five percent, that is in an environment where prices are actually going up.

So the sales decline, then, to me, is even greater than the numbers would suggest. Correct. And one thing that Home Depot did not mention is the pace of turnover in existing home sales is near the lowest in 10 years. So when you think about just moving to another existing home, well, chances are you're going to paint the walls, you're going to change the carpet, maybe you'll switch out some of the kitchen cabinets.

Well, that's not happening. And I think that that is also one missing piece to the customer transactions and the same store sales that they're not now seeing. Peter, if I could point out one interesting thought, though, to that, is the age of the existing home stock, which Home Depot always points to saying, Look, the average house is 40 years old.

And so if you're not moving, if these existing home sales aren't happening, you're not creating new housing, you have to fix where you are. Right. But we did, but two, what they also said was that a lot of money was spent the last couple of years. Right. Pull forward, sure. Yeah, taking care of a lot of that stuff. So, you know, that's one thing with a kitchen or a bathroom. It's going to be another 10 to 20 years before you redo that.

So, yes, to your point about pull forward, I think that's clear. I mean, go ahead. I was just going to say, if anything, it's impressive that the stock hasn't done worse. I mean, we talked to the CEO of Trex yesterday. Just 1%. Yeah. I mean, the Trex stock is up 35% year-to-date. Florida decor is up 35% in your date.

Some of this is a 2022 effect, but there are still pockets here where the stocks are holding up, okay, maybe people are taking the long view. I don't know. Well, I think it's that. And also think that people don't want to miss the Fed has done hiking interest rate rally of anything interest rate sensitive. Now, I think the home builders are rallying because the reduced pace of, existing home sales is shifting things to new construction and new home sales that have now a third of the overall market. But I think that it's, you know, that, that ALGA that says, okay,

Fed's done raising interest rates, let's buy home building and anything related to interest rates. Courtney, let me come back to something that our friend Tillman Fertita said when he was with us last Thursday. I'm sure you're watching CNBC 100% of the time at home show. You definitely saw it. But he said, hey, listen, when you look back at that, the earnings from the first quarter. They appear to be, have been pretty good. But remember, you're making a comparison to a year ago when we were still at the tail of COVID. He says, look to second quarter and then third quarter where he perceives a slowing of the economy. These retail sales numbers that come out for what? I guess it was the month of April, right?

Right. Those would suggest exactly that, that the wind is a little bit out of the consumer sales, right? Yeah, I think that that is a good point. And I think when we're thinking about different retailers, you also have to think about the calendar in a different way, too, just to sort of be a little nuanced about the conversation because we started out talking about Home Depot. The spring selling season is going to be way more important for a Home Depot,

say, than a Macy's, where the back half of the year is going to be very important for them. So I think that there are some nuances as well in the timing, but I take Tillman's point. Yeah. One quick final point before we just close the retail discussion. It wasn't just Home Depot, and you're absolutely right, Tyler, about the real retail sales effect. Peter, I'm sure you saw this, down three to four percent year on year, declining real sales, increasing claims and continuing claims.

I mean, this is not a good recipe. Right. We see how this is now heading towards. Yeah. And also within retail, people are spending more on food, beauty, drug stores, and travel, leisure, hospitality, and just pulling back dramatically on discretionary stuff. Yeah, goods, they spent, they bought a lot of the last couple of years, but that's also tends to be the higher ticket stuff that they're pulling back from.

And we're seeing higher delinquency rates and autos and credit cards. So there's a clear trend here that we need to keep an eye on. All right. Peter, you're going to stick around. Courtney, thank you very much for your reporting. We appreciate it. Let's move to shares of Horizon Therapeutics now, which are down sharply after the FTC is suing to block its takeover by Amgen for nearly $28 billion. They're down about 15 percent.

Amgen down one and a half percent. And you can just add this. to the growing list of mergers that are cabashed, either in or could be in the same position facing government opposition, Microsoft Activision the biggest, but also Spirit and JetBlue, T-Mobile and Ryan Reynolds MintMobile, among others. And shares of C-Gen are down 5% today on worries its takeover by Pfizer for $43 billion could also catch the eye regulators. And Pfizer could use the boost.

Its stock is down 27% this year, the worst of any stock over $100 billion in market cap. Now, obviously, there's a huge business impact here, and we'll get to that. But let's also start with the human toll. Horizon is working on treatments for rare diseases. Would those treatments get developed more quickly and easily if Amgen took over or not? Let's ask Michael Yee. He's managing director with Jeffries, Michael. What's the implication here for the drug pipelines? Right. Good to see you. I mean, I think there's two important implications. First is that the acquisition of Horizon is supposed to benefit this drug because of the large infrastructure that Amgen employs both here in the U.S.

and globally where Horizon was not expected to be able to have the capabilities to market this drug outside of the United States. And secondly, with the resources and R&D capabilities of Amgen and the huge pipeline, to be able to further develop that drug and other drugs at Horizon. So that being said, you know, if there were a case to be made that this would benefit patients to move forward, why do you think it would be, on what basis could it be blocked? Well, I think we are very clear with both notes out today that this transaction should go through and will go through and that the FTC behind Lena Khan is making the efforts very aggressively to deter at any cost biopharma acquisitions. This is a platform that they ran on that the case which is laid out, we believe, in Amgen as a release out, has to do with bundling and all sorts of past.

behavior and somehow tying that to future behavior of which Horizon and Amgen have agreed not to bundle and not to do anything that will harm the consumer. So we believe that this transaction will go through. However, the FTC has just been very aggressive. They're being very aggressive. And I assume you think this is going to chill the M&A market in biopharma. We do in the short term. You know, I think you bring up a good point. You see the XBI down today a little bit. But importantly, we believe that this would slow and make people consider whether or not they would go ahead with larger transactions. You'll note that this deal is about a $30 billion deal, the Pfizer-C-Jet, about $43 billion. However, think about this, Tyler. These companies still need

to fill pipelines. There's still IRA risk in the future from any of these big companies. So small and mid-cap companies or drugs that are not yet on the market would still be a positive beneficiary and still make a lot of sense for these big pharma still acquire. So we're still on the page, but there are still going to be M&A, that this deal will go through and that this is not going to have a longer-term effect. Well, Michael Yee, thank you for joining us. We appreciate it talking about the toll there. If we could call it, what about the business impact, Peter? I mean, I guess to put it more broadly as well, this is hardly just about health care and pharma. we are seeing an administration that almost feels like they don't want any deal-making to happen.

What will the ramifications be? Right. Originally, the FTC would block a horizontal merger because they don't want you to get too big. Now they're blocking vertically integrated mergers and mergers of a company buying a business where they're not even in that business yet on fears that that company would dominate that new business. So if I'm the CEO thinking, okay, I'm going to make an announcement, I got to go through months, maybe years

of the regulatory process and then have Lena Con just strike it down, I'm just not going to bother. And it's going to freeze any type of M&A that can be suspect. I don't mean to interrupt, but is there a case in which dealmaking

or combinations have been bad for markets, bad for the economy, is there a case to be made that all of these combinations just result in, you know, five big tech companies and are bad for business or bad for everybody? We've learned that the economy is so dynamic, technology changes so fast that to think that somebody can dominate a particular area for that long, I just think is not realistic. And technology is the perfect example.

I mean, the government went after Microsoft when they had an 85% market share thinking they're the dominant player and we know what happened since. So I think that there's a tremendous amount of overreach here that is just freezing behavior. And it's that the FTC just wants us all to stay in our individual silos forever, and there'll be no change, and we're all going to be stuck in this, and not believing in some sort of progress or technological innovation that creates its own competitors constantly. Yeah. All right, Peter, thank you very much. Thanks.

All right, thank you. Peter Bookbar. Coming up is the worst over for regional banks. We should throw you that one, too, Peter. The KRE is up 3% this week, but obviously down quite a bit for the year. Overall, the tide seeming to calm for the moment. but what comes next? Some firms like Morgan Stanley say a short squeeze could be ahead for the group.

Others think more declines could come. Plus Open AIs Sam Altman testifying before the Senate as the surging popularity of Chad GPT and other AI platforms triggers a debate over the possibilities and the perils of AI. We will wrap up the key takeaways there. And as we had to break with the Dowdown almost 260 points, a quick power check on the positive side, AMD today. Dan Loeb's third point took out a new position in that name,

along with Alphabet and Alibaba, according to filings. Shares are up 5% on the negative side paramount. Few bearish takes from Wall Street today, including a price target cut at Parkleys. Those shares of para down 5%. Power lunch is back after this. Welcome back to Power Lunch, some quiet from the regional banks lately. The sector about flat over the past week,

and the CEO of SVB is testifying today on Capitol Hill, blaming Fed rate hikes and negative social media sentiment, among other things, for starting a bank run that led to the eventual failure of his company. But Bank of America is starting to get selectively bullish on the industry. Resuming coverage of Western Alliance and First Horizon at Buy is the dust starting to settle here. Joining us for more on his call, Ibrahim Punawala is B of A securities analyst. It's good to see you, Ibrahim. Welcome.

Hey, Cathy, thanks for hanging me. So this is a tough area, but we have seen quite a bit of investor interests. Michael Burry, even Sheila Bear the other day, told us she thought maybe some of the regional banks could even be buying opportunities. So tell us what triggered your buy calls here. Sure, and I think, as you mentioned, it is a tough area and the outlook for the banks and regional banks were tough stuff coming into the year, right? You knew margins were going to be under pressure, growth was slowing down, we are all worried about an economic recession at some point in the next 6 to 12 months. So I think it was a tough backdrop. What you've seen following the SVB failure is this concern around just deposit flight. It does feel things have stabilized,

little bit. What's not stabilized and what's going to play itself out over the next quarter or two, and I think what investors are trying to figure out is how does the deposit base at these regional banks reprise over the next quarter or two. And I think you're solving for that, you're solving for the macroeconomic outlook. And as we move further away from the last Fed rate hike, have a better sense of just what the economic downturn is going to look like, I think there should be some stability that returns to the sector over the next few quarters. Let's talk about the two banks that you have just reinstituted coverage on at buy ratings. One is Western Alliance.

Take that one first and then First Horizon. What do you like about these banks and why do you think they are worth putting money into? Sure. So let's start with Western Alliance. And I think the distinction we made and we called this out in the report was when you look at the banks that have failed 80, 90 percent of their deposit base uninsured, When you look at Western Alliance today, about 80% of their deposit base is actually insured. So it's the reverse when you think about just the coverage and from deposit insurance. Beyond that, what we would also call out is, unlike some of the other banks, this bank was extremely profitable.

So coming into the year, Western Alliance had a return on tangible equity north of 25%. As a result, their ability to absorb higher funding costs is much better than what we've seen with some of the other banks. it's much better than a lot of the other regional banks. So yes, they've been in the eye of the storm, and I think management team, and we've seen this over the last two months, has done a decent job navigating all of this. And when we look at the stock trading at about 40% discount

to tangible book, there is a disconnect, and we like the risk reward. So it's not out of the woods. I think we need some sense of stability, but you have a bank that's highly profitable, a management team that's done a good job navigating this last couple of months. And when we look at the outlook, I think the risk is skewed to the upside with Western Alliance.

All right. Ibrahim, thanks for your time today. We appreciate it. Thank you. Ibrahim Punawala. All right, the other big hearing today in Washington focusing on AI and Deirdre Boza is following that one for us. Hi, Deidre. Hey, Tyler.

Well, you know, this time around, we've seen many tech hearings over the years. This felt way less combative and a lot more collaborative. Sam Altman, the CEO of Open AI and lawmakers, they seem on the same page a lot of the time in terms of the opportunity. in terms of the opportunity, but also the dangers of AI. And they seem to understand that the stakes are very, very high here. Within the first, let's call it 15, 20 minutes of that hearing, generative AI was compared to the first cell phone, the creation of the internet, the Industrial Revolution,

the printing press, and the atomic bomb. They talked about nightmare scenarios. And Sam Altman talked a lot about how he thinks regulation will have to go hand in hand with responsibility from companies, as well as public education on this. So it was a lot in there, guys, but it was a very different kind of tech hearing than the one we've become accustomed to

over the last decade or so. It was more sort of fact-finding and learning than accusatory, right? Yeah, exactly. And they seemed, you know, the lawmakers wanted to learn and Sam Altman had a lot of these questions because this is really early, right?

This is not reactive like we've seen with social media when we've seen all of the unintended consequences come out and try to put Pandora back into the box. That's not the case with AI. This is all coming out right now. lawmakers are trying to be early. In terms of actual concrete legislation, didn't hear a lot with regards to that. Again, this is early. So I think that they're trying to understand it before they put in sort of those harder guardrails. You know, take, let's go back a couple of years ago when

people were saying about blockchain, that it was going to be bigger than the internet. It was going to make all of these revolutionaries. And maybe it has. Maybe it will. I don't know. And now many people are saying the same thing about AI. Can you draw any comparisons between the two here in terms of how disruptive and explosive AI will be compared with blockchain, which was so last year, so 2020. Yeah, I think with blockchain, we haven't seen actual impacts, actual use cases from it, even though the promise is still there. And many people here in Silicon Valley would tell you that that remains intact,

even if the rise and fall of different cryptocurrencies and blockchain businesses, generative AI is far different because this has already been, changing the way that we search, the way that we view Netflix, the way that our social media is delivered to us. It's already been happening behind the scenes to great effect. Generative AI, of course, is now putting artificial intelligence in the hands of consumers to do tasks that previously could only be done by a human. So it's doing things, and we're seeing that impact day by day. We're seeing business models rise and fall on the back of it, which is different than blockchain. Absolutely.

Gotcha. Dear Dr. Thanks. Further ahead on the show, a drive-thru here at CNBC headquarters. You know, I can name about five drive-thrus. I'd like this. This might be one of them, though, some show-and-tell with Robert Frank, alongside the CEO of Bentley. That's coming up in just a couple of minutes. We'll be outside. Beautiful day for it. Chick-fil-A in your new bent. Exactly. Maybe we take it for a spin, go picks him up. We're back after that. Welcome back, everybody. Let's get a check on the bond market with yields right. 355 on the tenure I thought I saw, Rick. What's going on? Yes, yields are definitely starting to move up a bit.

And one of the reasons, of course, well, let's start out with the very short maturities. Let's look at a one-month bill. One-month bill hovering just ahead of 550 on yields. And you can see there, these are historic moves. All the rest of the TBA market is doing well. That one, of course, stands out because many are using it to handicap the debt ceiling issues. But one of the main reasons deals are going up is because all the countries around the globe that are experiencing inflation, especially in last 24 hours, the story is how sticky they appear to be.

Look at it, two-day of two-year note yields. You could see at 8.30 Eastern, they shot up a bit. Retail sales hasn't had a great year, but it did rebound a bit, and the most recent day to push yields up a bit. If you look at a two-year going back towards early April, you could clearly see we're moving towards some of the highest yields of the month. And one thing you want to pay particularly close attention to is how that 10-year note yields, closes right around that 357 area.

Many traders think that's a significant technical pivot. Kelly, Tyler, back to you. All right, Rick, thank you very much. Oil is slightly lower on the day, but today we are learning more on what's happening with Russian oil exports, and they are up. Pippa Stevens has the details. Yeah, so the bottom line here is that they have remained incredibly resilient, hitting 8.3 million barrels per day in April, according to data released today by the

International Energy Agency. And not only is that the highest sin. the invasion last year, but that's actually significantly higher than 2021 when the country averaged 7.7 million barrels, sorry, 7.5 million barrels in exports per day. Now, the bulk of this is going to China and India, with each country getting more than 2 million barrels per day of Russian crude, so that's more than 80 percent there. And it does really speak to this reorder of global energy flows, because India specifically, back in 2021, they only got 100,000 barrels per day of Russian oil, and now they're getting more than 2 million.

barrels per day. So that is finding a buyer. And as the IEA said, this is oftentimes at expense of fellow OPEC plus members. Where else is the oil going besides China and India? Who else is not participating in the sanctions? So Turkey is one country. And so these are countries that are not abiding by the price caps. However, we do also have to look at the revenue Russia is getting. So the revenue was down 27 percent year over year in April. And so the thinking is that over time, if energy prices stay lower with that oil still on the market, then that will ultimately hurt Russia over the longer term. However, right now, you know, they're still finding buyers and they still are bringing in money, but it's the longer term question. If prices do stay here, that will ultimately

cripple their economy or so say the people who are in favor of the sanctions. While creating stripe within OPEC, PIPA, thank you for now. Pippa Stevens. Over to Contessa Brewer now for the CNBC News Update. Contessa? Kelly, thank you. A federal appeals court put a ruling on hold that would strike down a part of the Affordable Care Act, it affects preventive care like vaccines and screenings for cancer, diabetes, and HIV. It's estimated the decision affects 150 million people. The Biden administration asked for the stay as it appeals the March 30th ruling. The Republican-controlled North Carolina legislature will vote soon on overriding the governor's veto of a 12-week abortion ban. The state Senate will consider the override first, and if it

passes there, it heads to the North Carolina House. The final decision could come down to just one Republican vote. North Carolina's current cutoff for abortions is 20 weeks. The 12-week ban, of course, is less restrictive than the six-week bans. Other conservative states recently have passed. The 76th edition of the Cannes Film Festival is underway in the French Riviera. Stars, producers, and directors hit the red carpet today to kick off the judging of 21 films competing for the festival's top prize. It comes amid the writer's strike in Hollywood with some organizers expressing support

for the striking screenwriters back in the United States. Kelly, Tyler? Contessa, thank you. Condessa Brewer. All right, an important programming note for you. Be sure to tune into David Faber's big interview with Elon Musk. It is tonight. It's a special broadcast 6 p.m. Eastern Time. That will be Faber and Musk.

You don't want to miss it. Up next on the show, we will talk with one Tesla analyst, about what he'd like to hear from the company's CEO tonight. Stay with us. Welcome back to PowerLunch. Shares of Tesla trading higher today ahead of its annual shareholder meeting later today. Investors eager to hear about product developments and other changes. And of course, don't miss David Faber's interview with Elon Musk later today immediately after.

That special CNBC presentation will start at 6 p.m. sharp. George Janorikas of Canacore Genuity Capital Markets joins us now. He's got a buy rating on Tesla and hoping to hear who. or what Tesla's biggest long-term threat is in that interview. George, welcome. Good to have you with us. What do you think of Tesla? They've done a lot of price cutting.

Now they're putting some price increases back in. What is it done to demand? And what does the competitive outlook look like in the U.S., particularly, for Tesla? Well, thanks for having me on. With regards to Tesla, over the last several months, before recently, they had famously cut prices over and over again trying to find outward demand and supply meet. And finally, we think that they've met some sort of equilibrium because a couple of weeks ago, they decided to start raising prices and geographies across the world.

And so we think that's a pretty good sign as to how their demand is trending currently. So we seem to have found bottom. And we think that probably will be a message that Elon Musk sends to his investors at the AGM later on today. Talk me through what the strategy here is. Is Musk sacrificing margin and profit for share, or is it that simple or what? We think he has a long-term vision where he's sacrificing near-term profits for long-term profits. We call it the Razor-Raser-Blaid model.

He's selling vehicles today, you know, at a low 20s-ish. gross margin, give or take, depending on the quarter. And over time, we think that he expects to increase the penetration of his self-driving software. Today, that self-driving software sells for $15,000 per unit. So essentially, as he increases the penetration of that software, which we think is about in high single digits globally, he'll be able to more than double margins on his vehicles. And that's something that he talked about. He's talked about a lot over the years. We're incredibly bullish on the long-term prospects of autonomy. And it's just going to take a while before the software gets to a place where people feel comfortable deploying it and ordering it

paying a hefty sum for it. It is. I confess, I own a Tesla and I use part of the autopilot, but the adaptation is going to be tricky, particularly for that step up, where it is really full autopilot. What it does now is it keeps you in a lane. And you've got to trust that little thing. Man, you've got to trust. And it's, it's, it's, there are times when I don't trust it. But let me, let me change to another topic. And that is the need for Tesla to come out to refresh its line of cars and to add this truck. Do they need to do that urgently? Well, look, the cyber truck will start in small volumes later this year. We expect an update on something regarding the cyber truck at the event tonight. It's an incredibly compelling vehicle. It's controversial,

no doubt about it. And I've been vetoed in my family with getting one. My wife won't let us have it just because it's not for her. But if you see it in person, which I did at their recent investor day, it's remarkable. And I suspect that over the next several years, they'll sell a lot of those vehicles. We don't know exactly what the pricing is going to be when they release it to the public soon. But suffice to say, when you see it in person, when you see what it's capable of, when you experience what it can drive like, it's incredibly compelling. And not only that, but I think even more importantly from a volume perspective is the next-gen vehicle platform. Now, they kind of hinted at this at their recent

investor day. It's going to take a result in a step down in pricing. And when this gets deployed, and we don't know exactly what's going to look like, is it going to be more enabled for autonomy, structured for autonomy, it's going to really accelerate EV penetration across the world. George, quickly, why do you think Musk is giving such a high profile interview? He's always playing three-dimensional chess. He's been quoted more impressed lately a little bit. What is it all about, do you think? What would you ask him? That's a great question.

I wish I can get into his brain personally. Look, I would ask him if I had the opportunity what he thinks Tesla's biggest long-term threat is. Is it traditional auto manufacturers? Is it Chinese EV-O-EMs? Is it large-cap tech companies that can compete against him in autonomous driving and AI? Or maybe it's the lack of available materials to make the vehicles and batteries he wants to make. I think it's probably Chinese EV-O-EMs and large-cap tech companies in AI. That I think would kind of give us some insight into how he thinks about the company long term.

Interesting point. George, thanks for your time today. Thanks for having me. George Danericus, that interview, 6 p.m. Eastern. Coming up, Expedia among the top performers on the S&P today, shares are up about half a percent after an upgrade to buy at Gordon Haskett. We'll trade some of the big movers of the day in three-stock lunch. And Bentley Motors is coming off its best sales year ever.

We'll ask the CEO about the strength of the luxury consumer and more. Maybe we'll take a test drive. This is right outside the building, Ty. Yeah, look at that. Ready for you, Kel. We're back after this. Welcome back, everybody. We've got a handful of stories we want to get to quickly today. First, the Wall Street Journal highlighting the disappearing white-collar job. Economists and corporate executives are warning recent layoffs and roles among white-collar industries may never return. And that advancements in tech and AI may lead to a permanent shift in hiring.

What's interesting, Ty, is that we've seen these sort of big tech layoffs at the same time as the rise of AI. So are we conflating the two or is something truly a foot here? I think there's going to be a move away from white collar jobs and away from four-year college degrees and towards jobs where you actually learn how to do something, or make something, whether it's carpentry or whatever. I think that's, boy, those kinds of skills, AI is not going to replace a good carpenter. And you know what's nice supposed to talk? Like if you're a carpenter or a plumber, you don't have to check email at 10 p.m. necessarily. Maybe if you have your own business. I mean, okay, if you're a plumber, you might get an overnight call, but sometimes if you're just working during the day and during the week, you're done, you leave. You can go to the beach or whatever.

I'm sure AI can make a carpenter a better carpenter or a plumber, but it's not going to replace the plumber or the carpenter. All right, BlackRock calling employees back to the office at least four days a week, telling the staff the firm has found benefits from working together in person. Get that. All right, the policy will go into effect in September on the 11th with the flexibility to work from home one day a week. Wall Street and banking firms have been some of the more aggressive. of businesses in pushing the return to office, but overall that drive has stalled. About 58% of companies let employees work a portion of their week from home. According to Scoop Technologies, the number of companies that require employees to be in the office full-time has actually declined to 42% from 49% three months ago. Salesforce had said that after they went to that kind of nobody has to be in the office, productivity slumped and they're like, maybe we actually need to be in the office. I expect more of that. This one's kind of obvious, but a record number of people think it's a terrible time to buy a house. Nearly eight and ten Americans, according to Gallup, think it's a bad time.

It's the highest level since the survey began in 1978, but obviously prices are way high and there's nothing to buy. Prices are high? Why move? Why trade a 3% mortgage for a 6% mortgage? Yeah. Let's move on. All right. As we head to break, CNBC celebrating Asian American and Pacific Islander heritage throughout May, sharing stories of business leaders in their community. here's Zhu Yi-Wong, CEO of Ola-Clax. Asians in general, we have this attitude of gratitude. And that's because we took time, we took energy, we really want to be where we are.

And with that said, we feel like this is the right moment for us to not only see ourselves as value at, but also help others in that space. Push yourself as hard as you can and as far as you can because regrets in life are never about failures, but about things you wanted to do and never did. It is time for three stock lunch. We've got some big movers on today's menu.

First up, Home Depot shares down just over 1%. A really minor decline after the company reported a slowdown in sales in their first quarter. Home Depot beat on EPS estimates, but it is the first time the brand has posted in earnings decline in more than three years. Here with our trade, Scott Nation's president of Nations, indexes? What is your take Scott on Home Depot, which you call the most important retailer in the

market? It is, but unfortunately, Tyler, it's a hold to a sell somewhere in the middle of that. The results and the guidance both disappointed. The decline in revenue, they ascribed to falling lumber prices. Lumber prices over the past 52 weeks down 56%. But they can't really get that to translate into really bigger increases in EPS. Part of the problem, is the trend is to smaller projects. So I guess that despite what their tagline says, doers aren't getting more done, they're just doing a little bit less. Forward PE of 18 indicates that it's not a bargain by any measure. So again, it's a hold to a sell. A hold to a sell. What about Capital One? Is this a diamond in the rough?

The shares are a little off their highs up 3% after Berkshire Hathaway took a new stake last month. Yeah, this is a buy, and it's not just because we're going to tag along with Berkshire. Hathaway. It's a lucrative business. The stock is down 20% over the past three months so we can get to buy it at a relative bargain. I imagine that's one of the things that Berkshire was looking at. They are beating the bank turmoil, but that's one of the reasons the stock got punished so we can take advantage of that. Forward PE is only 6.8. It's less than seven, and price to cash flow is less than three. So you can understand why Berkshire Hathaway loves it. And it's just that just makes a whole lot of A good business, a profitable business, at a bargain, it's a buy.

Let's move on to Expedia. Share seeing a nearly 3% boost on the heels and upgrade from the Wall Street firm Gordon Haskett. They believe the stock has been overlooked and has overlooked tailwinds in terms of near-term drivers for growth. What do you think of Expedia? Yeah, this is a buy as well. Travel is going to be ferocious and they're going to hit on all cylinders. It's down 19% over the last three months, 60% of the last 15 months. But again, it's been overlooked forward PE of less than 10.

Earnings growth over the next three years is expected to be really impressive. So Expedia is a buy. All right, Scott, thank you very much. We appreciate it. Scott Nation. Thanks, thanks. Less than 10 times forward earnings. Interesting.

Let's get a check on markets as we head to break, shall we? Now, SAC, still hanging on to about a 22-point gain. S&P is down 12 to 4, 412. Dow's down 238 and negative for the year. And if you've ever wanted to take a ride into Bentley, well, this is your chance. Come along with us, won't you? Right after this break.

Power Lodge is back in tune. You can hear me, it's an amazing thing, because we're outside. We've come outside where we're here. We've broken out. With the CEO of Bentley, which put up the best numbers in the, what, 103-year history of the company

last year, and it still is going strong. My wife just came back from a few days in Naples, Florida. She says in some neighborhoods, they won't even let you in. unless you have that car behind you. Sounds like a good neighborhood. So Robert, why don't you carry on here?

Adrian Hallmark, thank you so much for joining us. You guys have had just incredible sales. We're talking a lot about the consumer right now. Are they strong? Are they weak? Your buyers, are they still buying? Are you see any change in terms of how they're spending or whether they're ordering your cars right now?

So the order intake rate in the US is like most of our markets at the moment. It's really strong. We can see some changes in the marketplace, but more on the secondary level. residual values instead of being crazy and above retail like they were, they're now normalizing, but the demand is really strong still. What's incredible about Bentley is your volume of production last year was up about 4%, but your profits were up 82%,

which means you're making so much more per car. How are you increasing your margins per car? Is it just price increases? No, there's about a 40% difference between the price of one of our cars average four years ago and today. in today. Only about 9% of that is pricing, the rest is content. So customers are choosing one of the 62 colors, the 43 leathers that we offer, and lots of options. So it's a total shift in the configuration of the vehicle, and they're buying the top models, like this speed version of the GT, rather than the base version. So they're doing their custom stitching,

they want pink colors their own. This car is one of the last W12, so that's a 12-cylinder engine. You're going to go to all EV in 2030. Is that what you're going to customers really want from Bentley? But do they want the roar? Do they want the roar? Well, see if we can make a battery roar, but let's see about it. So I think there's two different factors. First of all, we do talk to our customers. We haven't made this decision without talking to customers first. Five years ago, only 14% of customers said that they would consider a Bentley Electric in the next five years. Two years ago, it was 62% of Bentley owners. 62. And we get the next survey this year, we think it will be higher in the 70 plus percent.

But there aren't many of these 12 cylinders left to sell. This is the last. So how many more orders will you take for this before they're all gone? So globally, we launched this model 20 years ago, the GT, with a 12 cylinder engine. We finished building 12 cylinders in spring next year. There's about 1,500 12 cylinders worldwide in all models, that's it. They're already almost sold and it will be the end of a great era. So Tyler, you want to get it soon. What is your big, is this your biggest cell of the SUV? It is. I remember when you came out with it, I think I got had the pleasure of driving it and one of the security gentlemen up there was

asleep when I came back in, I couldn't get back in. But anyhow, that's your biggest seller. It is 45% of sales. And what would this car retail for? Around 300 to 400,000 dollars depending on again on specification. On what you've what you've loaded it up with. Would you ever pursue the spin? I mean, Ferrari's spin out from Fiat, I think it was. It's been one of the most successful spinouts of all time. Would that ever be a Bentley template to follow from Volkswagen?

I think Porsche's IPO last year, which is also the most successful IPO of the year, obviously did a lot of good for the company. It hasn't changed the value of the group share so much, but for Porsche, it's been fantastic. But there's no plans for separation of the group. Our strength is when we together, and we get huge benefits. benefits and being one conglomerate. And you're also a window into wealth around the world. What are you seeing in China right now with the reopen?

Are those wealthy consumers really coming back in the market? Or as we're seeing some suggestions, is a little more subdued than some people expected? For us, so far, so good. If we look at before COVID, we were running at about 150 orders a month. After the first wave of COVID, 300 orders a month, and the last couple of months, it's been higher than that. So it went down, but it's bounced back massively. So this year today is phenomenal for us. Are you going to move before you move sort of all electric in 2030?

Is there a transition engine style that you're going to use like a plug-in hybrid or what? Yeah. So we will. We'll partly electrify every power train. They'll have a lot more power than today's cars. But that will be in the next two to four years where that happens. And then successively we'll launch one car in 26th. And then what every year until 2030,

and then we're fully electric? You can make your cars carbon neutral. Can you make your factories? Already has been since 2018. And so is the dealer network in America, Europe, including the UK, and will be globally carbon neutral retailers by the end of 24.

Can we take it to Chick-fil-A? Yeah, let's do it. Are you gonna get in a car and go? Yeah, I think we're gonna drive up. I guess I better move out of the way there. You're gonna drive away here. I'm going, I'm coming. What did we say something wrong?

What was it? They'll get to drive it. I think the color is so attractive. The color is awesome. The color is really pretty. I've seen a lot of these on the road. How many of these do you sell a year, this particular model? So of the GT convertible, it's about 2,000 cars a year.

You think Robert's going to be able to know how to start it? Does he know? We're going to find out here in a minute. Just watch your toe. Oh, listen to that. Watch your toes. You're going to miss this. As Trace Atkins sings, you're going to miss this.

There it goes. You're going to miss that sound. All right. Be good. Have fun, kids. Bring it back by midnight. Okay. Easy. Oh, my gosh. Whoa, man. That is awesome stuff right there. Adrian, it's been great having you with us. Continued, good luck with Bentley with the brand.

Thank you. And good fortune, as many of your customers have already had. Good fortune. All right, that'll do it for Power Lunch. We are going to wrap it up here as the Bentley. I don't know where they're gone, but they're out of here.