Power Lunch - Zero Rate Cuts?, Boeing Whistleblower 4/17/24

Episode Date: April 17, 2024

Markets continue to grapple with the possibility of zero rate interest cuts this year. We’ll get the latest read on the economy from the Beige Book, and tell you all you need to know.Plus, a Boeing whistleblower is testifying on Capitol Hill today. He says the company is putting out defective airplanes. We’ll talk to a $BA shareholder about this latest block eye for the company. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

All right, welcome to Power Lunch, everybody. Alongside Leslie, welcome Leslie. Welcome to all of you. I'm Tyler Matheson. Coming up, stocks mostly lower today as an awful April continues. The Dowdown 5% so far this month haven't had that kind of decline in quite a while. And while the Fed might not be coming to the rescue, markets grappling with the possibility now of zero rate cuts this year. We're about to get the latest read on the economy from the wonderful aptly titled beige book. It's certainly an important day, Tyler. Plus a Boeing whistleblower testifying on Capitol Hill. He says Boeing is putting out defective airplanes and it should stop Dreamliner production. We'll talk to a Boeing shareholder about this latest black eye for the company.

But first, let's get a check on the markets today. As Tyler mentioned, kind of a mixed day here. The Dow getting somewhat of a bid to the upside up just less than 1%. The S&P up about 3 tenths of 1%. and the NASDAQ, or I'm sorry, down three-tenths of 1%, the NASDAQ down about two-thirds of 1% today. And here's another look at how bad April has been for the Dow. This is the 13th trading day of the month. That's 10 sessions in the red and only two up days, including a 1% gain yesterday.

So maybe that's unlucky 13. Hopefully things turn around from here. But despite the recent stock sell-off, our next guest, isn't too concerned and thinks the markets have been long overdue for a correction. He says, now is the time to buy into some major artificial intelligence names. Let's bring in Keith Fitzgerald, principal of the Fitzgerald group. Keith, thanks for being here. So where within AI? Do you think there's opportunity amid this pullback? Well, that's an interesting question, because there's clearly lots of opportunity. For me, this is, do you want to buy the needle or the haystack time? I'm still going to stick with

the haystack. So it's the AMD and the invidias of the world because you're talking about 70, 80, 90 percent market share in the GPU and CPU market. So you've said that the markets were long overdue for a pullback. At these levels, though, do you think there is still more downside? Would you wait to be putting money to work? Or do you think that now is kind of an appropriate floor for further upside from here? Well, you know, of course, trading being the way it is, the moment I say there's a floor, it's going to go to zero tomorrow. So, you know, no, I don't think there's a floor in.

I think that the Middle East has clearly got the potential to royal markets. So this is where you change your tactics. where you slow down your buying, where you be a little more careful about how you buy, when you buy. But the fact is you want to continue to play to win because that's how you actually do win. Let me ask you about Apple and your hypothesis that the developers conference that is coming along, I believe it is May or early June, could be a 2007 moment for this company, i.e. the moment when the iPhone was introduced. Why do you say that and what will be the cause or the catalyst for that iPhone moment?

Thank you for asking, Tyler. So I think that what we're doing to find out is that Apple is, A, a lot farther along in the AI space than people realize it. And I see that anecdotally by the way it speech recognition works, by how it processes things. We have both Apple and Microsoft equipment in our offices. The Apple stuff is routinely faster, better and more accurate than the Microsoft AI. But the critical piece for me is I think we may learn, if I'm correct in my hypothesis, that Apple actually puts AI on board. The big jump is that, going to be that it doesn't have to go to the web. It doesn't have to get degenerative engines. So I think the operating system could see something substantially deeper and burrowed in farther that's going to be beneficial for Apple. So I will then be able to communicate with my computer, with my iPhone in a way that might be a quantum leap forward from what I'm accustomed to now? That's kind of what I think is coming. You know, again, if you remember how Steve Jobs released the iPhone, he was very coy about it. He says, do you want something that's going to do

X, Y, and Z, and everybody said, oh, my goodness. And then boom, there it was. That's very much Apple's MO, and I just am hearing all the familiar shades, all the tech experts, all the anecdotal evidence leads me to believe that we could be on the cusp of that. What about within the chip space? It seems like you are a fan of AMD. Is that right? AMD and Invidia both.

And why those two specifically? Well, again, because dominant market share, absolute excellence in terms of what they do, and customers are buying every chip they're making for the foreseeable future. They simply can't get enough. And whenever you've got a product like that where customers have to buy because they want to or vice versa, that's something you want to pay attention to as an investor. So let's talk about, are you at all chilled by the slight chill, the breeze that has come into Nvidia shares in recent days?

Well, you know, yes, I mean, I'm a little concerned, but I wouldn't be very good at my job if I were chilled, frankly, Tyler. Why. You know, companies like Amazon, Microsoft, Apple, I mean, any of the big names that we chase today, particularly in the tech space, have all had pullbacks over the years. I mean, people forget, but Amazon lost 90 plus percent of its value back in the dot-com crash. So, you know, this is familiar territory. This is deja vu all over again. The markets have simply backed away from it because of all the leverage, lots of other things roiling the markets. But no, it doesn't disturb the long-term investment case as far as I'm concerned. Keith, I'm going to ask you to

stick around while we go immediately to Steve Leesman, who has been pouring through the beige book from the Fed and is still awake to tell about us. Steve. Come on, Tyler. There's nothing more exciting than the Bayesbook. And I want to tell you, this is an interesting page book for the following reason. I'm going to read you a bunch of the anecdotal reports that come from the 12 Federal Reserve Bank Districts, and they certainly sound at odds with some of the economic data that we've been talking about. Economic data has been strong. These comments are very modest. And economic activity, according to the Bayesian book expanded only slightly, a little bit, pretty much the way it was last month.

10 to the 12 districts report, slight or modest growth, which was up from 8 in the prior report. So a bit of an acceleration there, but at a very modest rate. Consumer spending, however, quote, barely increased. You remember we got that really strong retail sales report on Monday. There was weakness in discretionary spending. Consumers' price sensitivity remained elevated, meant they were shying away from higher prices. Auto spending was up because of better inventories and incentives. ostensibly prices coming down. The economic outlook was cautiously optimistic among those who were

surveyed. Employment rose at a slight pace. That's at odds with the strong employment reports we've had. Nine districts, nine to the 12, that is, reported slow to modest increases in jobs. Labor supply was seen improving. However, we've had this persistent commentary throughout the entire post-pandemic period even before it of shortages of qualified applicants. Labor demand and supply were seen remaining relatively stable. Price increases us to the important part were modest running at about the same pace as last report. Remember, we've been talking about slower sluggish inflation, not coming down while it was stable, according to the Bayesbook. There were some shipping delays noted due to the Red Sea tensions and the Baltimore Bridge

collapsed, but not seen as a really acute issue there. There were sharp increases in insurance rates that we have seen in the inflation report. And the ability this is an important one to pass along cost increases to consumers has weakened, and that has put pressure on profit margins. inflation was expected to hold steady, and there was some upside risks seen by manufacturers to inflation on both the input and output costs. So interesting, Tyler, there was a study recently done by the Cleveland Fed. So the base book does a pretty good job of predicting recessions, not much about whether or not inflation is half a point, higher or lower, or GDP is, but it does a pretty good job

of signaling in the language whether or not there's a recession coming. This obviously is not a recessionary call, but it is or it does sound and feel weaker than the other economic data we've been talking about. And is that the surprise in this report if there is a surprise? It is to me. And I know you were joking about the base book, but I find this report to be very helpful in kind of understanding two things. One is where the economy is going and what's actually going on, but also what the Fed is hearing from their contacts. We do get a little behind the scenes look here because Fed officials do meet with businesses all around the country all the time. And so this is what they're hearing here. And they're hearing a story of a

somewhat weaker economy than the story being told by the day. Yeah, no, I don't mean to dis dis the beige book at all. No, no, no, you should dis the beige book, Todd. No, it's valuable. I just love, I'm just endlessly. They need a better color. I'm endlessly amused. It's called the beige book.

It's beige. Maybe we need to be like a yellow book or something. We have one of those. It was the green book. Keith, any thoughts here on the beige book? And how do you like beige, Keith? Well, beige is a great color as far as I'm concerned. And that was about as succinct a rundown as I have ever heard on the beige book.

My hat's off to Steve. I couldn't have done that. But I think Steve raises a very interesting point by highlighting the difference between recent data and the beige book. So the markets have accelerated faster than the headlines and data points like that can keep up. So really the message is do we or don't we believe the data points? And if so, which ones? I'm going to go with the CEOs and the companies every single day because I think the Fed's data is rearward looking, whereas I think CEOs who are in charge of making money for their shareholders are forward-looking.

Now, Keith, I did pick up on one thing that Steve mentioned, and that was this idea that inflation has kind of gotten to this point where it's becoming more and more difficult for companies to pass those price increases onto the customers without losing them, losing that volume. And we are actually going to play a soundbite from an interview I did this morning with a restaurant CEO who said that same thing, that we're kind of reaching this inflection point. And I'm curious as we're getting into kind of the peak of earning season in the next few. weeks, do you expect to see that translate into margins as well? You know, that's a very, very interesting question. If you're talking about things like Pepsi cans or Fritos or chips or those kinds of things, yeah, I expect the consumers to begin to push back because they're reaching their limit. They've had it with what's happening to their wallets.

But if you're talking about things like tech or you're talking about missiles or you're talking about health care, no, because those things are relatively margined in different insurance companies and the amount of money sloshing around the system makes those things relatively price insensitive, even though the consumers wind up paying more. All right, Keith, thank you very much, Keith Fitzgerald. But Steve, let me give you one final opportunity to tie it off for us. Well, I think Leslie raised a really profound economic theory right there, which is that prices can't go up if you can't raise prices.

We may be at the tail end here of the ability of companies to pass along those prices. I would watch profit margins. I think that's really what Leslie is getting at right there. profit margins have remained relatively robust in the post-pandemic period here. And there is room for them to come down, companies to remain very profitable still, but not necessarily for profits to rise as much. It could cause companies to begin to try to cut back and pay costs in order to keep profit margins up because companies will always try to defend their profit margins before they end up reducing them.

So it's something to watch for. It's a transition period here coming off a period of high-in-fifference. where companies did reasonably well. And this is going to be a more challenging environment, I think, for the corporate world, if prices are going to be more difficult for them to pass along higher input prices. All right, Steve, thank you very much. Steve Leasman, we appreciate your time. And coming up, three big stories out of China, the White House ramping up tariff threats,

luxury brand LVMH seeing growth concerns there. And Apple, considering a move now to Indonesia over some China worries of its own. We'll discuss all of this when Power Luncheon. Richard. Welcome back everybody to power lunch. President Biden wants to triple tariffs on Chinese steel. Tim Cook says Apple will look into manufacturing in Indonesia, potentially diversifying outside of China, and LVMH earnings hurt by weak Chinese demand. See the theme? We've got a trio of reporters on all angles of this China story, and we're going to begin with Megan Kassela and the steel tariffs. Megan. Hey, Tyler. So President Biden is just now about to start speaking to the U.S.

United Steelworkers in Pittsburgh, and he's going to be unveiling a series of trade moves against China. He wants to triple tariffs on all steel and aluminum imported from China. He'll be launching an investigation into Chinese subsidies into its shipbuilding industry, and he's pledging to work with Mexico to cut down on Chinese efforts to evade tariffs that are already in place. Now, the Biden administration says this will not drive up prices for businesses or consumers, arguing instead that it would actually be more harmful to allow China to keep overproducing. We want to get ahead of that curve in this case, take action that we don't think is going to have much inflationary impact at all, given the magnitudes involved.

But if we don't take action, we're putting at risk one of our most critical sectors. Now, President Biden has also argued that his policies are less inflationary than those of Donald Trump, who's been calling for tariffs on all imports from China. But at the same time, Biden has to have to be. has left in place nearly all of Trump's Section 301 tariffs on China. And as a result, the Tax Foundation has some new analysis, showing that Biden has now collected far more revenue from those tariffs than Trump ever did. And guys, economists largely agree that those tariffs serve as a tax on consumers,

no matter who imposes them. Guys. So how likely, a tripling of tariffs, did I hear you say, and how likely is it that he'll be able to do that? Slightly more than a tripling. So the average tariff on steel and aluminum from China right now is about 7.5%. They want to pull that up to 25%. And it appears quite likely they can. Biden's trade office has been reviewing Trump's tariffs for several years now for about two years now.

Once they're done that review, they will follow Biden's direction. They will triple those tariffs or more than triple them. That's likely to happen. And the U.S. chair is going to follow Biden's direction. They say it could be a matter of weeks from now when we see that kick into gear. Megan, thanks very much. Megan Cassella reporting. Apple continuing to look at possibilities from manufacturing outside of China.

We've heard about India. Next stop, could be Indonesia. Steve Kovac, joining us now with more on that story. Steve. Hey there. So, yeah, he was in Indonesia today and some comments came out after he met with the president there. Just, you know, saying he's going to look at investment in the country. They don't really do much there yet. I will also note he was in Vietnam and met with the prime minister of Vietnam yesterday. They already do some manufacturing there, things like AirPods and things like that. Similar comments there. And then we expect him potentially to go to India tomorrow for, very similar meetings. And why is this happening? This is a theme we've been seeing play out with Apple. There he is right now in Indonesia. We've been seeing this theme play out for the last

year to 18 months or so as we just saw all those problems that COVID shutdowns in China caused for Apple supply chain, not to mention just straight up sales in China, which were down 13% in the December quarter. This is Apple diversifying away from China, both on the sales front and on the manufacturing front, we got a report just a couple days ago that iPhone production has doubled in India, for example. So it's not going to be a panacea for Apple here to start opening up more manufacturing centers. The vast, vast, vast, vast majority of manufacturing is still happening in China, and that's going to be the case for some time.

But we often hear Tim Cook say, and I guarantee when I talk to him in a couple weeks after earnings, he's going to say this again, that these emerging markets are growing very rapidly. China has its own human rights concerns, but doesn't Indonesia too? That is another, and India does as well. I mean, not to mention India, accusations of state-sponsored assassinations, for example. So that is another issue that Apple continues to face, not just in China, but Apple is very good about putting out its ideals, you know, for the environment, human rights and so on and so forth. But they also have to do business in these countries that don't necessarily line up with these ideals. And we've seen different instances where they've had to compromise on those values.

The most notable one was fall of 22 when there were protests at a Foxcon factory workers trying to escape, getting beaten down by security forces to keep them in. Apple was largely silent on that and didn't even say anything against the violence there. So there have been so many instances, or several instances, rather, where, yeah, they have to kind of compromise on those values in order to do business in these countries. So it's not without controversy. So then in diversifying the supply chain, I understand the need to do that. Why diversifying in these specific places, I know that there are probably more expensive manufacturing hubs elsewhere that may not come with those geopolitical risks that may not come with those human rights risks as well. Is Apple considering those at all?

There's so many reasons. So, I mean, I'll go back to what Tim Cook has told me in the past about India. India is as a rapidly growing middle class, a very educated middle class. They're kind of approaching this also the largest population in the world. So not only a huge manufacturing and job opportunity there, but also potential customers. That said, Apple products are too expensive for most Indians to buy right now. But again, I'll point to that growing middle class as a reason why they see opportunity there. Yeah, very, very difficult balance nonetheless.

So Steve, thanks for breaking it down for us. Interesting story. All right, next stop on our little virtual China tour, lagging luxury, LVMH, saying its growth is slowing because of a slowdown in luxury spending by Chinese consumers. Robert Frank has those details for us. Hi, Robert. Tyler, LVMH reported a 6% decline in sales for Asia X Japan. So that's mainly China on the call, LVMH saying if you include spending by Chinese tourists outside of China, sales for China in total actually. increased 10%. So a lot of that buying was by the Chinese who were spending in Japan where sales

jumped 32%. That was in large part thanks to the weaker yen. So that shift in Chinese buying, rather than an overall decline in Chinese spending, was the main reason that that stock was up today and what would otherwise be a fairly weak quarter. You look at those numbers, LVMH total sales, up only 3%. Wine and Spirits, down 12%. Jewelry and watches. That includes Tiffany down. 2% and then its core fashion leather goods sales up a little bit 2%. Now, as we all know, China had once been the big growth engine for luxury. That was the big hope. But now its market share is actually shrinking. China accounted for about 23% of global luxury sales this year. That was down from 33% before the pandemic. So guys, you know, on the face of it, this is a very weak report,

very weak for China. But when you include Japan, it wasn't so bad. And overall, we're not not seeing China rebound to where it was pre-pandemic, but the decline hasn't been as fast as some people had feared. And that's why we're seeing the stock react the way it did. Yeah, it's still striking to see those figures you provided about how Chinese consumers comprised about a third of the luxury spending before the pandemic. And that's dropped so significantly now. I'm curious if there are other markets that are making up that difference in particular that have seen a surge in luxury spending in that time period? Well, the U.S. was the new China for years.

You know, until the end of last year, the U.S. was making up that difference. And LVMH had shifted a lot of its sort of marketing power and spend to the U.S. as its hope. Now we're seeing the U.S. really struggle, especially on that aspirational end. So the lower price products at Tiffany, for instance, that's where they really struggled. On the call today, they said that perhaps there's. seeing signs that that aspirational consumer may start coming back in the second and third quarter. I don't know what evidence they have of that, but that was another reason why this stock was up

about 3% today despite these weak results. Interesting. Robert, Frank, thank you very much. After the break, Silicon Valley's cutthroat workplace is making a return. Staff rankings are surging in popularity with companies. Details in Tech Tech next. The practice of stack ranking employees might be making a comeback in Silicon Valley. Kate Rooney joins us now with the latest for today's tech check. Hey Kate. Hey, Leslie. So after massive waves of tech layoffs, employees may have thought their jobs were a little safer.

That might not be the case at this point with new forms of stack ranking making a comeback. This is where you rank employees on a bell curve and then cut the bottom portion of those. It was made famous by the late Jack Welch, the former CEO of GE. it's sometimes called rank and yank. Tech companies have been bringing it back in different forms as a means to keep headcount in check during these new years of efficiency. And heading into earnings discipline

and cost discipline is really a big theme in what investors want to see across tech. So names like Amazon, Alphabet, Meta, have all cut double-digit percentages of their workforce. After over-hiring during the pandemic, they all use some sort of employee rating system. The information also reporting

that Shopify is now using a numeric rating system, then only those whose scores increase in a review period are eligible for raises, according to the report, which Shopify executives are pushing back on. The return of what some see is a more cutthroat internal rating system does signal a shift, though, in tech company culture. So back in the pandemic, they overhired, and they were fiercely competing for talent. And then came the end of zero interest rate that really changed the hiring landscape dramatically. Companies started laying off thousands of workers. You can see in that chart there, the layoffs really peaking early last year. Tech companies now need to prove that efficiency, and they've been

awarded for some of the cost discipline in layoffs. Not just big tech, though. You've got Coinbase Square, PayPal, all of those companies have gone through sort of the same structure of layoffs, and you've seen it reflected in the stock price. There used to be, I'm going to attribute this to Jack Welch, and I may be doing so incorrectly, that there was a feeling that you culled the weakest 10 or 15 percent of the herd every year. Is that what? where these tech companies seem to be going? It does seem to be that strategy that instead of going through these rounds of layoffs, this almost pruning of the workforce.

And it's seen as in some ways a meritocracy. There are people out there that like this and say that's the fair way to do it. You also hear about something called a PIP, a performance improvement plan. So that's common in tech. If you hear it. I know, Tyler, hopefully you're not on a PIP right now. But it's where it's kind of seen as like the Grim Reaper coming. It's the signal that you're probably going to get laid off.

but we'll give you the opportunity and say, all right, here's your opportunity to go and improve your performance, but it's seen as a negative in tech. And Leslie, this might resonate covering the banking sector, but I've talked to folks who say, you know, this also happens in banking. Yeah. Goldman Sachs, for example, if you're not a top performer, you're not going to get that bonus and you're probably going to be let go. But it's less explicit. These tech companies have implemented these new systems and ways to rate people. And it's easier to kind of prove and quantify in finance. a top trader, it's easy to say, okay, listen, you're looking at the P&L, Leslie's bringing in the most as far as trading. Kate's kind of underperforming. We're going to get rid of Kate.

Whereas in engineering, it's a little bit more subjective, and it's a lot more team-oriented. So the downside of some of the stack ranking can, it can often be less collaborative, has been the negative commentary around it. And there's been studies out there that prove that it's not effective. So kind of a divisive topic. So Leslie, what do you think? Give Kate 11 on a scale of 10? I think 11 and a half. 11 and a half on a scale of 10. Thanks, guys. Way to go, Kate.

Thanks, Kate. All right, let's go over to Sima Modi, who's also an 11 on a scale of 10 for a CNBC news update. I would say so myself, Tyler. Here's a news update. Iran's president putting Israel on warning today. During a speech at the country's annual army parade, he said that the, quote, "'Tiniest invasion by Israel would bring a massive and harsh response. Israel is weighing retaliation against Iran following a weekend drone and missile attack.

And that potential retaliation is overshadowing a meeting of G7 foreign ministers in Capri. The escalation of tensions is expected to dominate the agenda over the next three days. Israel told its allies today it will make its own decisions despite Western calls for restraint. Secretary of State Anthony Blinken arrived in Italy this afternoon for the talks. Finally, actor Hugh Grant settled a privacy case with Rupert Murdoch owned British tabloid the Sun for what he called an enormous amount of money. Grant claimed the publication used private investigators to tap his phone, bug his car, and break into his house. Grant said today he didn't want to settle the case, but felt he sort of had to because a trial was likely to be very expensive.

Tyler, back to you. All right, Seema, thank you very much. Boeing's whistleblower testifying before the Senate, the allegations are troubling, but with a management change already underway, what other risks could Boeing stock face. We'll ask a Boeing shareholder for his take next. Welcome back, a Boeing whistleblower on Capitol Hill today detailing problems he sees in the company's manufacturing process. In a rush to address its bottlenecks in production, Boeing hit problems, pushing pieces together with excessive force to make him appear that the gaps don't exist even though they exist. The gap didn't actually go away, and this made result in premature fatigue failure.

effectively they are putting out defective airplanes. We are now getting reaction to that testimony. Let's get to fill a bow. Leslie, we have a statement from the FAA because it wasn't just Boeing that was blasted on Capitol Hill today during this two-hour hearing looking at the safety culture and the manufacturing process of Boeing. It was also the FAA with not only the whistleblower but others saying, look, the FAA is not doing its job. Now we are hearing from the FAA, the administration saying FAA is, administrator Mike Whitaker made it clear, quote, this won't be back to business as usual for Boeing,

end quote. The company must commit to real and profound improvements, and we will hold them accountable every step of the way. We will continue our aggressive oversight of Boeing and ensure the company comprehensively addresses the findings of our recent audit and the recommendations from our expert ODA panel. ODA is, by the way, the process for approving aircraft that is used in this country, although we should point out that the FAA has actually been ticketing every single Dreamliner that has come off the line since 2020. So there is pushback from both Boeing as well as the FAA regarding the allegations that we've heard over the last week from this whistleblower that, look, things are not being made the right way at the plant in South Carolina when it comes to

the Dreamliner. By the way, guys, we think we will probably also get a statement from Boeing at some point pushing back on a lot of the testimony that we heard today, which was very damaging. Guys, we'll send it back to you. All right, Phil, Phil LeBow reporting. Let's get some reaction from Tony Bankroft, the Boeing shareholder and portfolio manager at Gubelli funds. He manages the Gubelli Commercial Aerospace and Defense ETF, which has Boeing as its second largest position.

That would suggest, Tony, that you are confident that Boeing is a place to be, a place to put money and is creating building safe aircraft. Thanks, Tyler. It's great to be back. You know, Boeing is one of our large positions in our Cabley commercial airspace and defense, ETF, GECAD. I think the bottom line up front is the customers most impacted, the people most impacted and most exposed to the safety of Boeing aircraft are the airlines. And they, as we've seen with United this morning and other airlines making comments that they can't buy enough, they can't buy enough Boeing aircraft. max 787, triple seven. The FAA and Boeing went through a process in 2020 to 22 to work on this gap issue and the fit-up force that they had the hearing on this morning. And I think they came up with a solution

and those planes are flying perfectly fine. And in general, aviation is still the safest form aerospace is still a safest form of travel. And, you know, the FAA has not had. a crash-related death since 2009 with a Colgan flights. That's the 10 to 12- Who has not? The FAA, FAA aircraft, right? FAA aircraft since 2009, haven't had a crash-related fatality. What is the FAA aircraft?

Because I think back of the 737 Max 8s that did crash. Right, so the 730, so the FAA is all aircraft, the fleet of aircraft that fly within the United States. So it's the goal standard of travel, of travel. of transport, right? That's 10 to 12 billion people have had safe flying in the last 15 years. When you hear a whistleblower or the testimony like you heard there, how do you process it? How do you put it into the algorithm that brings you to an investment decision about a company? Do you look at it as an isolated opinion? Do you look at it as, wow, how do you process it? I mean, I'd say, again, that this, the testimony that happened this morning, particularly with the engineer and the QA personnel, talking about the triple seven and V87, you know, those two aircraft have some of the foremost, you know, safety, safety records, you know, in history, in commercial travel and cargo travel.

The plane's been the workhorse, those two planes have been the workhorse throughout, throughout COVID. the S-7-A-7 was flying multiple type of flights throughout that time. And I just, I think, you know, Boeing makes, they make safe aircraft. That's just the reality of it. And I think the data has pretty much proven that. Have you heard much in your channel checks about how the public feels about flying Boeing? Because, you know, there are means circling out there about, you know, concerns surrounding safety and people not wanting or, you know, discovering that the plane that they have a ticket,

for is a Boeing aircraft. And has there been any sort of, you know, boycotting or, you know, distaste about flying Boeing that you think will ultimately trickle down? You know, again, 51% of the FAA fleet is a Boeing aircraft, right? So, you know, 20, some percent is airbus. So you're pretty much going to be flying, you know, probability states you're going to be flying in a Boeing plane, which, you know, goes on every day. You know, commercial travel is up. up on a year-over-year basis and it's really close to pre-pandemic levels. And I just think that, you know, people maybe might focus on this. It's sort of like the whiteboard, the huge whiteboard.

That's perfectly clean except a little black dot. But the reality is that we're flying safely every day, you know, and the airlines and Boeing are doing that. I take your point that Boeing is building safe aircraft, but the one where the door blew off was not a safe aircraft. Sure. And, you know, statistically, incidents are going to happen. Unfortunately, in this case, and thank goodness, no one died or was injured in any amount. That, you know, I think things happen. I mean, aviation is dynamic. Of course, aviation and putting together complex planes that are highly variable is, you know, it's part of the manufacturing process. And there are going to be errors. And I think Boeing's been focused on that. And I, you know, I think the FAAs just put out that they're going to be focused going forward, and they'll come to a resolution to moving forward.

Is, in your view, as a shareholder, the change in the leadership of the company, a good move? You know, I think, you know, CEO Calhoun was probably going to retire in and around the time that he's going to at the end of the year. I think, you know, he came into a tough situation and really focused on... He seems to have owned the problem. He owned the problem, and I think going forward, You know, Boeing is a great opportunity here as, you know, as a portfolio manager to own it. And, you know, the backdrop, the fundamentals of the industry, you know, commercial travel is set to outpace. You know, global GDP has done that for the last 20 years, and all things being equal will continue to do that.

And Boeing's well positioned to, you know, to benefit from that. Tony, great to see you. Thanks so much time. Tony Bankroll. Thank you, Tony. Coming up, the juicy details. We'll get a little on the ground inside. from a consumer-facing CEO on the impact of stubborn inflation.

We're back to you. Welcome back. This morning I attended General Atlantic's Investor Summit in New York City. The firm with $83 billion in assets under management showcase some of its portfolio companies, including Joe and the Juice. The juice bar, coffee bar, and sandwich concept has 360 stores in 18 markets worldwide, including its hometown of Copenhagen. So I asked the CEO how they were weathering inflationary pressures right now. We've been fortunate that we have been able to pass on the raw material increases that we have seen to our guests.

But we're also really aware that we're probably coming to the exception point now, that how much more can we pass through? But the margins that we saw prior to the inflation pressures and to where we are today, we have managed to keep. He said inflationary pressures in the U.S. are particularly challenging thanks to both wage pressure and commodity prices. And that's saying a lot because the company was born in Denmark, which has historically had the highest median wage in Europe, Tyler.

But his comments there speaks to what we were discussing earlier with Steve Leesman about this inflection point as to the fact that these companies have been able and have been pushing through price increases. They may be hitting a resistance point. Exactly. And that's something that's really interesting. Are these things in New York? These Joe and the Jews?

New York and California. There's actually two very close to the New York Stock Exchange. Was that right? I haven't been there. Like within a block of the New York Stock Exchange. Yeah. They look good. Yeah.

And they open early. He said 6 a.m. We're going to start doing. So for those early risers, we need a cup of coffee. All right. Thanks, Leslie. Coming up. Plains, trucks, travelers will trade United.

J.B. Hunt. Travelers Insurance in three stock lunch next. Time for this. Today's three-stock launch here with our trade. Scott Nations, President of Nations Indexes. Let's begin, shall we, with Travelers, seeing its biggest sell-off in four years after the insurer announced a profit miss. Contessa's in the wings here.

She's listening because she's the insurance queen. What's your trade on Travelers? Travelers is a buy, even though you're right, Tyler. It's the worst performer in the Dow today. Spent much of the morning as the worst performer in the S&P missed earnings, core per share earnings $4.69 versus $4.90, which is what was expected. But they beat on revenues. So what was the problem? Well, catastrophic losses were up a third by a third year over year. The ratios are attractive, and so it's a buy. Inflation is going to hurt on the claim side,

but it does wonders. Higher rates do wonders for their investment portfolio. Most importantly, This is just a really well-run company that's going to really figure it out. So it's a buy. We get to buy it at about a 7% discount to where it closed yesterday. So traveling to the upside there. Up next, speaking of travel, shares of J.B. Hunt under pressure after the trucking firm missed estimates for the first quarter, results due to weaker demand. This is an ugly intraday stock chart here.

Scott, what's your trade? Yeah, unfortunately, J.B. Hunt is a sell. there the company that was tag teaming with Travelers is the worst name in the S&P for most of the day. Earnings per share at a buck 22 versus a $1.50 estimate and a $1.89 from a year ago. Rates received have just collapsed for trucking companies down 6.5% year over year, down 2.5% year to date. So revenue is falling as diesel prices increase by 3.5% and they are still struggling to find drivers. The forward PE now 23 and a half. So this is this is not a bargain by any measure. And investors don't have to be along for the ride in a space. It's just really, really tough right now. All right. Let's move on to United Airlines, which is moving the other way today. Soaring carrier forecast stronger than expected earnings said issues at Boeing will not cause significant losses. Your take on UAL?

UAL. UAL is a buy, even though it's the best performer in the S&P today, up 16%, just a few moments ago. And you pointed out the forward guidance. They're now guiding full year EPS to be between $9 and $11 a share. The midpoint of that is above consensus estimates of $967. They said they lost $200 million because of the groundings of their $737,000. 9, but they have many more alternatives when it comes to juggling equipment and routes than somebody than somebody like, say, Southwest. So they're in a better situation. They may have capacity problems this summer, nice problem to have. The forward PE is microscopic, and they expect, the market expects robust EPS growth next year and the following year. This business can be incredibly cyclical, but the valuation makes it very compelling.

All right, Scott, thank you very much. We appreciate your time today. Thanks. Thanks. And remember, you can always hear us on your podcast. Be sure to follow and listen to Power Lunch on your favorite streaming service. We'll be right back. Welcome back.

The numbers are in, and Monday night's WNBA draft was a slam dunk for TV ratings, a record 2.45 million viewers tuned in to ESPN to see Iowa superstar Caitlin Clark and others get drafted as interest in women's hoops grows. We'll get more on that tomorrow when we talk to WNBA Commissioner Kathy Engelbert. She'll be joining us from our CNBC Changemakers event in New York City. To learn more about Changemakers, scan the QR code on your screen or visit cnbc events.com slash changemakers. All right. now to a more serious basketball story. The NBA has issued a lifetime ban to the Toronto Raptors Jonte Porter for violating the league's gambling rules. Contessa Brewer is here with the details.

Contessa. So Tyler and Leslie, what we found out is that the Raptors forward, Jonte Porter, allegedly bet not only on basketball, but also on his own team. Draft Kings had said that prop bets for Porter for a couple dates earlier in the year were the biggest winners that day. The NBA said a league investigation found that Porter violated league rules by disclosing confidential information to sports betters by limiting his own participation in one or more games for betting purposes and betting on NBA games. The league says Porter intentionally limited his play against Sacramento, March 20th, claiming he was sick. What's more, he allegedly told someone ahead of time who then used that information to make an $80,000 parlay bet. It was not paid. NBA

Commissioner Adam Silver previously had called a lifetime ban the ultimate extreme option at his disposal for discipline. Clearly he felt like it was necessarily here. This is the first time an NBA player has received a lifetime ban for gambling. I can't think of this. I can't think of another player who's received that other than Pete Rose, and he was then a manager. And Pete Rose had gone on the record to say he was not gambling on the Reds. On the Reds. Right. Exactly. But there's been other show a tani you've got um issues about iowa colleges and the temple betting irregularities and all of this i think combines to bring a level of attention and scrutiny on the legalized sports gaitonnie has been cleared though by the investigation it was his interpreter was his interpreter who was

used it was betting heavily but there's still all of these questions surrounding like and in fact the commissioner is quoted today saying what we need to take more look at the kinds of bets they're available i mean you can see in a prop that guy could say i'm not playing tonight so tells a friend and the friend bets he's going to have wonderful. We clearly need four more minutes for this. All right. Thanks for watching. Thank you.

The Queen of Gambling. Thank you. And insurance. And insurance. Thanks for watching, Power Lunch. Closing bells starts right now.