Transcripts For CNBC Squawk 20240703

Ivy zelman is here to talk about that. Instacart raising its price after the successful arm ipo. On stocks, we are weaker and the losses are accelerating in the last few moments. Were down a percent on the s p, putting in jeopardy the gains for the week. The nasdaqs down about 1. 4 . Whats working today is a little more defensive. Its the health care and Utilities Group which is bucking the overall trend, higher stocks, on the back of a little better Economic Data. What we got this morning, Industrial Production was better, but we did have Lower Consumer confidence from university of michigan. Interesting to see us lose some ground even as yields are coming down as well. Lets begin in michigan as the uaw goes on strike. Our phil lebeau is on the ground with the latest. Good morning again, phil. Good morning, carl. I have a lot of people asking me just how much of an impact this strike is having on production and the availability of vehicles. Think about this. 15 of the u. S. Production for the big three is now shut down. 15 of what they build in the united states, not canada, is not happening because of the strike. That means certain models at these plants not operating for final assembly, theres limited supply out there. The chevy colorado build in missouri, 35 days. Ford bronco, build at the Michigan Assembly plant, 37day supply, according to cox automotive. Jeep wrangler, 82 days. For a point of reference, normal supply for a vehicle is about 65, maybe 70 days. Earlier today we talked with gm Ceo Mary Barra about the state of negotiations or lack of negotiations and heres what she had to say. I think the key in any of this is to get to the table, talk through the issues. Thats what weve been working to do since this began. We are have over 1,000 demands. You have to work through each of those. Thats part of the process. Mary barra expressing frustration. Shares of general motors, keep in mind, it has offered a 20 wage hike over the life of this next contract, which is going to stretch out for 4 1 2 years. Thats the story this morning, carl. And the feeling is, because we dont have negotiations taking place today, were going to see this strike go for at least a little while here. Whether its a couple of days, couple of weeks remains to be seen. Were also going to hear from the president. President biden expected to address the strike this hour. Well take you there live. What is the white houses involvement been thus far and potentially in these negotiations . I thought it was interesting when mark field said, are we going to have a biden that supports unions or a biden worried about american inflation and wants to get this fixed . Thats a great question. Gene sperling was appointed by the white house to be a leeiais between the big three and uaw. Hes been in contact with the united autoworkers leadership as well as the leadership for ford, gm and stellantis. Other than that, guys, we have no indication just how much pressure the white house is putting on the uaw as well as the automakers to get this resolved. There have been conversations this week by the president with the uaw president as well as executives from the automakers, but beyond that, its hard to gauge how much pressure the white house is actually putting on both sides to get this resolved. Phil, well wait for the president. When he does, well bring to you live. The strike includes about 13,000 autoworkers. More lines could be on the line. 106,000 total Union Workers who could be affected, but the suppliers will also be under pressure. The American Automotive policy council estimates each automaker Assembly Plant job supports about seven other supplier jobs. Thats almost 900,000 workers. Our next guest is keeping an eye on that and facing the biggest impact, including dana, magna and lear. Joining us is dan levy. Thanks for the time. On the big three and those shares, were they primed for todays news . Hi, thank you, carl and sara, for hosting me. Yes. You know, i would say in the last month, what weve seen is a steady rise in the rhetoric and tension. People in the automotive world have known there was this type of setup but it entered the broader public. Weve seen stocks sort of holding in, theyve been beaten up in the last month already. This was already somewhat being priced in. So, what happens from here . Whats priced in as far as how long it will last, how widespread it might get . Yeah. I would say the feedback that we get from investors is look, it remains to be seen how long this strike will last. Generally the feedback we get is that this will ultimately be a transitory impact. The units that are lost will eventually be rebuilt. Really the key question is the amount of cost that the automakers are going to take on as a result of the new contract. Thats really what people are looking at. Generally for ford and gm, theyre looking at call it at least a couple billion dollars of incremental cost for contacts for this year, going to do 11 to 12 billion of pretax profit. Gm will be something in the 13 to 14 billion range. So, people are generally looking at it in terms of the amount of incremental costs that will be absorbed annually. Im not asking you to mediate here, but i am curious to know where you think the point of maximum pain would be, at least on wages. Would 40 over the term of the contract be crippling . We dont think it will go that high. We think more realistic scenario is we end up at 25 to 30 . Its hard to say where this ultimately goes. Theres ultimate theres various negotiation points. You know, what weve published in the past is something in the 25 range would be similar to other labor negotiations that weve seen. Thats the basis for roughly 2 billion of at least incremental costs being absorbed. Again, hard to say. This is in the context of multiple negotiation points in terms of inflation adjustments, in terms of product allocations, et cetera. But wages are likely to be higher than whats offered by the oems, at least what were assuming in our research. Have you changed already the models for margins and profitability . You know, were assuming some of these costs in our numbers already. We assume that if its just a couple billion dollars, that there are offsets. Gm earlier this year has talked about a couple billion dollars of cost saves that theyve generated. We assume part of this is a proactive measure to address some of the higher labor costs theyre going to be taking on. Anything more than that would be an incremental headwind to our numbers. So, i was going to ask, can they offset it with higher prices that consumers pay for autos or are we seeing enough weakness in Consumer Spending where they dont have that kind of lever to pull . We think prices are unlikely to go up. Theres probably go to be some price declines. Really, prices have not cracked from, you know, the highs weve seen. When you layer on inflation interest costs, the monthly cost to the consumer is quite high. Youre dealing with Monthly Payments in excess of 700 a month to the consumer. So, you are going to see some price normalization. The automakers will try to hold on to as much of the price. We dont think this goes back anywhere near precovid levels but there will be some price normalization to unlock more volume once we clear out of the pentup demand weve had from the last few years. Dan, just to consider some of the more extreme scenarios, for example, moving production out of the country to mexico, lets say, if, in fact, negotiations dont go anywhere, i just wonder, american manufacturers are in a period where theyre bringing back production because theyve been burned by unreliable supply chains. Does that mean the bar is higher to go to that extreme . The bar is going to be higher. This is a key point weve raised in our research. The question actually is going to be around the ev transition. We know evs are far less labor intense than combustion vehicles. Youre looking at roughly 30 to 40 less labor content in an ev versus an i. C. E. Vehicle. As it is, the legacy automakers are struggling with the transition. Theres a significant cost disadvantage versus tesla. When you factor in they now have to transition to evs, this is another consideration that needs to be managed. Thats why theres another tension point in these negotiations. I imagine thats something that has to be addressed here. Definitely explains not just the action in tesla this week and this year, but the market cap overall. Dan, appreciate the help. Great to have you. Dan levy at barclays. We are waiting for the president to speak about the strike this hour. When he does speak, well bring it to you live. Why yesterdays Market Reaction to the European Central Bank Interest Rate Decision is a prelude to what could be ahead here at home for the fed. Plus, oil, highest since november this morning. The impact for consumers at the pump and the feds inflation fight. The great unbundling of disney. Is bob iger getting ready to sell abc and is it the right move . All that and more when squawk on the street comes right back. Down almost 200 points now on the dow. Active investing and disciplined Risk Management are needed most. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. birds chirping go. And go and go and go. but what if you. Stop . You work hard, its time for a bank thatll work hard for you. Everbank brings security and a guarantee that youll earn a yield in the top 5 of competitive accounts. Going, thats what got you where you want to be. Were the partners for your next move. Everbank. Advantage, you. Welcome back. What should you expect when the fed signals its done raising rates . Thats the subject of a new note by our next guest predicting when that day comes, well see longterm yields fall and 30year Mortgage Rates decline by 150 basis points or more. Joining us now is fund struck managing partner tom lee. Tom, doesnt feel like thats where were headed. Even if theyre done raising rates, theyre not going to signal that next week, are they . Sara, next week would be a tall order. I do think by november theyll have enough datapoints to feel that way. It is what we saw with the ecb and how markets reacted, a pretty big deal that once a central bank feels that theyve reached a point where the data is sufficient for them to reach their last hike, its going to take a lot of uncertainty out of the bond market. We saw that yesterday across all the regions in europe and all the term structures of europe. That would trigger a risk rally. Its akin to 1992. I think theres a lot of folks here who think once the fed says theyre done, they think the stock market continues to go down. I think its the opposite reaction will take place. But a lot of people that i talked to think thats the wrong reaction because its not as if when the fed stops raising rates, theyll cut rates. Theyll still trim the Balance Sheet and plan to keep rates at this high, restrictive level for a long time. Yes, but i think investors who have that view are anchoring around a Business Cycle concept of fed cycles. We know the fed is fighting a very different war today. Theyre fighting a war on inflation and the restrictive rate theyre targeting is a real rate that helps contain and prevent inflation from flaring up. If they keep rates here, at 5. 5 and year over year inflation next year drops to 6. 5, which one can model pretty easily, thats a huge restriction. I think they want to keep higher for longer real rates. The effect on the Mortgage Market would be pretty dramatic as well. You referenced it earlier. The excess spread today on a 30year mortgage to the tenyear is close to 300 basis points. Historically that number is somewhere somewhere between 1. 5 to 1. 7 percentage points. Even if the tenyear stays flat, Mortgage Rates could drop 1. 5 . There have been some joke this is week about what would happen if Mortgage Rates got above high yield. Thats never happened. It would be amazing if it did. I do wonder, tom, price action wise on a. I. Names. Nvidias quarter was stellar. Same with oracle. Adobe is down four today. Is that a function of being tired about the story . Carl, it could be. Were seeing a sizeable correction in a. I. Names because that was the only game in town for most of the year, but we are also in a period of rough markets. Since august its been a game of inches. I dont know if people want to have that much risk in august and september i think once the market reattains its uptrend and riskon mode, i think a. I. Will be places people come back to because theres real growth there. Im not surprised. This is a riskoff environment at the moment. You dont buy the argument that the fiscal picture is becoming increasingly important for investors, the fact that we have a deficit that was double where it was supposed to be, especially during this growth period, where unemployment is low and theres so much supply and issuance that has to take place and thats keeping upward pressure on yields as well . Sara, it is pretty puzzling that were in an expansion with high nominal gdp. Those should actually cause a deficit to shrink. That would be what economic history says. Youre right, its puzzling the deficits double this year. The bond market complaining about it . I would say i would feel more convinced about that if the dollar was coincidentally weakening. The dollar has actually been pretty strong. So, it doesnt feel to me like theres someone saying they dont want to fund the deficit here. I guess. But Dollar Strength follows yield strength often. Well, if youre worried about fiscal deficits and the funding you know, the ability for the government to fund, i would associate that with a weaker currency. All right. Thats fair. Were also getting weaker Economic Data overseas. Tom, its a good discussion. Thank you for joining with us some of your calls and your predictions, especially on Mortgage Rates. That stood out. Thank you. Still to come, upside surprises out of china overnight have crude touching the highest levels of the year. Back above 90 today. Thats up next. Plus, watch schwab falling after they said asset earnings in august were down 23 from a year ago. The stock is down 4 . Stay with us. Every day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to use predictive monitoring to address operations issues . We can help with that. Can we provide health care virtually anywhere . We can help with that, too. Is it possible to survey foot traffic across all of our locations . Yeah absolutely. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. Welcome back. Tensions between the u. S. And china have Companies Looking elsewhere for production facilities. Whos benefiting the most . Our seema mody at post 9 with a look at that. Good morning. Good morning. The ongoing issues in china leading to this reshoring boom were seeing in mexico. Its finally showing up in the data. Its being led by the automotive industry. Tesla setting up a 15 billion giga attacker to. General motors, ford. Comments with heavyduty trucks. More capital flowing into mexico is fueling crossborder shipments, Freight Transportation Company rxo says volumes have grown about 30 year over year. One of the benefits of doing business there is lower costs. Manufacturing labor is cheaper in china and its been that way for more than eight years. Mexicos government has also been pitching companies on a new corridor that would rival the panama canal, seen asone way to accelerate trade with the u. S. And bring more business to southern states. Crime, specifically cargo theft, remains a key risk for foreign companies. Experts also point to the countrys political back drop with a president ial election coming up next year. So far thats not impacting market sentiment. The etf outperforming other emerging markets, up 21 this year. The currency, the peso, has been strong as well. Youve been wondering about this theme and asking the analysts about whether the production shifts. I mean, its just if youre going to do it at home, right, its going to cost you, but are you going to pay up for what youre getting in return, that is reliability, american workers, more control. Right. The geographical proximity to the u. S. Cannot be overstated when it comes to a country like mexico. Its not just the automotive industry. Weve seen a number of industrials, including john deere earlier this summer, moving a specific plant from iowa to mexico because of a tight u. S. Labor market. Were watching this uaw strike. Well see if that how that plays into the reshoring efforts for that industry as well. By the way, private equity and venture capital, weve seen a surge in investment in mexico as they try to play a bigger role in logistics and infrastructure. It would be a political problem, though, if these Union Strikes lead to workers leaving the u. S. On that note, three weeks ago the uaw president said that stellantis is threatening to move production to mexico. Well see how this story plays out. Thank you, seema. Staying overseas, new data from that china contributing to the move from china moving to the mood higher in crude. Pippa stevens is looking at that for us. As we reach some key levels. Yeah, thats right. Wti is off the highs of the day after earlier topping 91 for the First Time Since last november. And it is still here on track for a third positive week. Now, that data out of china showing better than expected retail sales and Industrial Production numbers certainly helping things because china is the Worlds Largest crude importer. Worries around their slowing economy have been an overhang for oil. But whats really stoking the recent optimism is growing calls that there will be supply deficits for the rest of the year. We heard from opec and the iea this week, both of which are expecting shortfalls. After months on the sidelines, weve seen heavy hedge fund buying, which is also pushing shorts to the exits. Still with wti up 20 in the last two months, it could be due for a pullback, especially, carl and sara, since its now in overbought territory. Its Pretty Amazing here, going for three straight weeks higher. 10 out of 12. I know theres been a lot of discussion about the Spare Capacity that opec plus and the alliance has, but its not like our own rig counts been on fire either, pippa. We saw last week for the first time one new rig added after 12 weeks of declines. Thats something to watch there. I think overall if you look beneath the production numbers, we have to watch specific markets, especially diesel because we are seeing prices rapidly rising there. Heating oil futures, which is a proxy for diesel, up 30 in the last two months. This really is a hidden tax on the consumer since diesel is the workhorse of the economy and how all of our goods are transported and fuels manufacturing. So, that certainly is an area to watch here. Of course, crude is the key impact on the inflation numbers, so a lot to watch with wti at 90 bucks. Not just here, brent too. The acceleration overseas is something to watch. Pippa stevens watching the energy complex. Watching disney as well. Stocks hovering close to the 2014 lows. A number of the companys assets, including abc, attracting attention from investors. Is that a good move for bob iger and shareholders . The streets been weighing in on that. Were watching arm on day two of trading. Closed 25 higher yesterday. Its been up and down today. Sharply higher premarket. Gave up the gains. Went negative. Now is up almost a percent. Pretty well received by the market. This is dr. Arnold t. Petsworth, hes the owner of petsworth vetworld. Business was steady, but then an influx of new fourlegged friends changed everything. Dr. Petsworth welcomed these new patients. The only problem . More appointments meant he needed more space. Thats when dr. Petsworth turned to his American Express business card, which offers flexible spending limits that adapt with his business. He used his card to furnish a new exam room, and everyone was happy. Built for dr. Petsworth business. Built for your business. Amex business. Time for a news update with courtney reagan. Good morning. Good morning. People in parts of new england are preparing for hurricane lee to bring Tropical Storm conditions to the coast as early as this afternoon. Lee is currently a category 1 storm thats not expected to gain strength as it approaches the coast. Forecasters warn its expected to be a large and dangerous storm when it reaches new england and atlantic canada. Today marks the 60th anniversary of the 1963 kkk bombing on an Alabama Church that killed four black girls. Supreme Court Justice Brown Jackson will give the keynote speech this morning in remembrance of the girls lives. The 16th Street Baptist Church was targeted by the kkk because it was the center of the black community in birmingham and a site of large meetings during the civil rights movement. Sculptor and painter Fernando Botero has died. Tackled political toings. His works have been featured in exhibitions across the globe. He was 91 years old. Carl, back to you. Thank you very much. Deal news of the day, not necessarily news, but disney receiving an offer from abc and other networks by byron allen. Also reports theyve received an offer from regional station nexstar. Would a deal make sense for disney . Wells fargo thinks maybe. Joining us is steven kale. Loved your note. Interesting to hear you say that within certain parameters this deal could work . Yeah, i think so. Thanks for having me on, carl. Our sense is disney almost has a good bank and bad bank at this point. Streaming is its future, its strongest asset next to the parks. Its the way they monetize all the good content. Thats the good bank. The linear business is something disney has clearly signaled is going to be in decline. Theyre not going to necessarily protect it. If they can sort of move some of that lower negative Growth Business off the books into a better or more logical operator, we think thats good for the stock. Is it a better argument for what nexstar could do in terms of getting into the top local markets or a better comment about what the break of value of the disney equity is . I think its a little bit of both. From nexstars perspective, broadcast is what they do. Theyre a really well run company, great management team. Theyve had a strong history of success in buying broadcast assets and doing accretive acquisitions. No doubt they could take abc and continue to monetize that really well. We think that adding to some of their terminal growth and probably rerates that company over time. For disney, im not sure abc or some of the linear nets do much, breakup analysis. These are assets that trade below disneys multiple. The breakup at disney are probably some of the bigger and juicier things like the parks or espn. What is the right multiple for abc, the broadcast stocks traded pretty low multiples these days, dont they . Yeah, thats right, sara. We had in our note last night is they traded at about 6. 5 times twoyear enterprise value to ebitda on a forward basis. We think a National Network like abc which has the broadest reach and viewership of any network out there, the Big Broadcast networks tend to do that. Has a lot of sports that come from espn. So, we think that would probably transact at a higher multiple, Something Like eight times enterprise value to ebitda. Some have written this morning that abc, according to some, is losing some relevance. Obviously the cable providers are getting tired of paying for content that at least subscribers dont need necessarily. So, would you expect the field to the degree there is one to be very deep . I think what i would recognize is there is a monetization issue in linear. Thats the reason disney is looking to potentially divest these assets. We make no mistake about that. We tend to prefer companies with stronger growth and the Public Markets tend to prefer companies with stronger growth. Abc and assets like it still have a lot of relevance in the National Distribution frameworks, sports leagues like to ensure that even if theyre going to be on streaming, theyre also on something thats free to air. Weve seen the nfl make that as a linchpin of a lot of the deals its done. We think abc will have important valuable content for a long, long time. Maybe not exclusively. But it will be there. In the hands of a company thats focused on abc and broadcast overall, its probably worth more than under a broader content company like disney. If they go forward with this deal, does that mean theyre all in play . Nat geo, fx, some other properties . I think the reason we see this as a bullish sign at disney, as you recall when david faber was interviewing bob iger over the summer, he contented some nonespn linear assets could be available. Now were starting to see some News Headlines suggesting some real discussions are happening, some real offer is potentially are being made. I think for disneys investors it it shows under new management theres a lot going on at disney, between new partnerships, divesting some of this stuff, a lot of the costs they tried to take out of dtc or prices going up. Disney is feeling catalyst rich than it was more recently. We did Pay Attention to the monday night football ratings this week, best of the espn era. Finally the notion they would trim subtargets. Is that pretty much baked in . It is. I dont think thats a surprise to anyone. Bob iger effectively said those subtargets were not where the company was headed towards any longer. In february they get sell side analyst. I think they would have subsignificantly below that. I dont see that as a Material Change in the way anyone thinks about that business. So, whats with the stock . Despite the fact you said its catalyst rich and theres a lot going on and you look very favorably on these deals and the fact that theyre willing to shake things up, hasnt really done that much. Stocks still down year to date, still underperforming. What are you hearing from investors . Certainly you cant decouple disneys stock price from the earnings trajectory. Between a bit of a slowdown in orlando parks and between a slower pace of growth at directtoconsumer and maybe the entire streaming market, and a faster pace at decline of the earning estimates have come down for disney. Thats why the stock has been as difficult as it has. I think disney is as simple as getting back to positive earnings revisions and positive growth. Thats why shedding some of these kind of ball and chain type linear assets hopefully makes that process a little easier going forward. Steven, everybody should take a look at your piece today, overweight 110. Well see where we get. Good to see you given. Steve cahill of wells. Thanks, carl. Instacart looking to use the arm ipo to get a leg up in the markets. Set to raise its own listing price. New details next. Speaking of food delivery, dash gets a downgrade at moffett on the back of student loan concerns. Rg o93. Still above where it is this morning at 80 and change. As were just off a session lows. Dows down 175. 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Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. Dow and s p have bounced a bit this morning. The nasdaq still near the intraday lows. Meta, amazon and microsoft not helping. All down around 2 or more. Adobe also under pressure despite better results. Nvidia and apple also weakening today. Lets get to instacart, upping the target for its range for upcoming ipo following the success of arm yesterday. Thats what deirdre bosa is watching today on techcheck. Call arm the goldilocks ipo. It went as well as Company Bankers and mas son could have hoped. The first pop was strong but not too strong. It indicated good demand from investors but did not reeve too much money on the table. That bodes well for others in the pipeline, like instacart, which filed an amended ipo prospectus ahead of next week on the heels of that arm successful listing. Its raised its price targeting a fully diluted valuation up to 10 billion. As we said, a far cry from that 39 billion valuation it saw a few years ago, which means there will be big winners big losers in this thing. In arms ipo there was just one winner or loser to be had, that was softbank and masa son. Instacart has nearly 100 investors over ten rounds of equity financing. The ones that got in early, like seq sequoia, angel. They first invested in instacarts series a funding round in 2013 which valued the startup at just 25 million. For sequoia, one of the values most prestige yoes could represent a return of nearly 400 . On the losing side, the latest stage investors, especially the ones that came in during that peak 2021 round. They include big Institutional Investors Like Fidelity and t. Rowe price. Tiger was the most active investors at peak valuation startups in 2021. For them the ipo amounts to a down round and puts them under water on this investment. The biggest individual winner would be founder apoorva mehta, and garry tan, sam altman and aaron levie were early investors and they stand to profit. Arm was a positive signal for the market, but instacart is a venturebacked company. So, its going to have, perhaps, more important implications for other startups that may be looking at a down round ipo. I did not know that about sam altman. Very interesting. Hes always in every story these days. Deirdre it seems that way. And if they hold, i guess the question some are asking is how this should be ultimately valued in the market as a public company. Is it a its not a grocery stock. Is it a tech stock, an advertising stock . It has all of these different revenue businesses. Because its been all over the map in terms of private valuation, its hard to tell where its going to shake out. Yeah. So, we looked at this and asked the exact same questions. Is this an advertising company, a Grocery Company . Turns out its being valued like a Gig Economy Company on the lower end. Its priced its priced to sales multiple is more in line with doordash and uber than a grocer like a krogers or albertsons. Grew the top line by 30 . There was a note from bernstein, they said the valuation is reasonable and could even be considered conservative if you think that youre going to have a lower but reasonable longer term growth rate. Remember, this company, which is very interesting, is actually profitable, largely thanks to that advertising business, which it has over a doordash and uber. It also has bigger basket sizes which is important when youre comparing companies in the gig economy. Yeah. The times did a great piece yesterday how its not about delivery but software and advertising. I keep thinking back long ago, you probably remember when aswat told us about grocery delivery and told us the margins in grocery are so thin he didnt think delivery as a model would work out over the long term. The chart of dash could help argue that. Yeah. And i think thats right. Thats why theyve been looking for different revenue, more importantly, different profitability stream. The thing instacart introduced first is this advertising business, which the prospectus, the s1 showed us its growing quickly and a significant part of the business. When you think about amazon and aws, ecommerce, logistics, not a great business. The margins are not good. Aws, a cloud business, the margins are much, much better. That has helped pay for a lot of the experimental stuff. At a very different scale, mind you. Advertising could help pay for some of the less desirable margins in grocery delivery. Yeah, definitely the same kind of story. Definitely rhymes. Well see what happens next week. Dee, thanks. Deirdre bosa. Meantime, new data shows home purchases fell through at the highest rate in nearly a year as the Mortgage Rate demand stalls at a 27year high. Whats that telling us about the Housing Market . Well talk to one of the most influential voices in housing. Ivy zelman in a moment. Networks got you covered. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. Good night hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. Lets take a look at the state of the Housing Market. Lennar down 40 saying it sees a 9 decrease in average sales price of home deliveries. As a redfin shows home purchases fell through at the highest rate in nearly a year. Whats that all telling us about the state of the Housing Market. Joining us is zelman executive, ivy zelman. Welcome back. Good to see you. Thank you very much, sara, for having me. I appreciate it. Whats the takeaway from lennar . For a while about these stocks it was all about the low supply that was keeping things strong. Actually, its really more the Strong Demand keeping things going. And the builders are offering incentives. Mortgage rate buydowns and arguably a net price decrease and better value than existing. With respect to lennar, all the stocks are selling off. Ive been doing this for 30 years and to see the stocks actually go up when the tenyear is backed up as much as it has has been somewhat shocking. In all fairness with the economy as strong as it is and wage growth great and we see household formations, we still see Strong Demand despite rates rising. Their decline in home price was due to their focus going down in home price. I think the fundamental quarter was very strong. You think its worries about margins on prices . I think its just overall worries about the backup in rates and the impact it has on affordability. The market is starting to appreciate that affordability is under pressure. I mean, think about everything going on pressure. Inflation is hurting the wallet. I think its waking up to that. Are these stocks, would you say, hard to touch in an environment like this where Mortgage Rates have gone up so high . I think you have to be a stock picker in the market and recognize builders gaining share and generate strong returns that have Balance Sheets that are rock solid. If you want to be a contrarian and assume theres no soft landing, its really a bet on the economy. Everyone has a different view on that. Understanding the direction of the economy is not my job, but if you are more bullish that we can have a soft landing or powell will orchestrate what hes intending to do, you do want to buy Home Building stocks, the best ones in the space. Ivy, i wonder how youre thinking of geographic dispersion right now. I read about the risk of oversupply in multifamily in the southeast, where things have been on fire, and then people like marc benioff trying to boost the image of cities like san francisco. What do you think is not well understood right now . I think the sunbelt generally has been where everyone is gone, whether Single Family or multifamily and this tremendous amount of supply with regard to multifamily and backlog and completions or backlog at the highest level since the 70s. I think youre seeing multifamily is seeing pressure and occupancy. Rent growth has decelerated although positive. We actually had one of the public reits say this past quarter was down 1. 4 . Were seeing slowing and i think the sunbelt markets are seeing more Competitive Pressure because of all the leases and supplies the southeast would continue this trend were now seeing for the longer term. Talking to diane olick and what you think Institutional Investors are doing. Are they looking to offload and take profits . I think the Institutional Investors have pulled back, and thinking about the frenzy and it was the sexiest girl in town for a while and everybody had to be build for rent and multifamily and the capital chasing, you cant pencil a return now. Think about the cost of capital, sara, and how much the overall returns will be pressured even as you see the fundamentals will not see a reacceleration in rent growth. Rent growth during the pandemic when it surged historically, operators would do flips and we saw rent growth in the high Single Digits and low double digits. The numbers just dont pencil. I dont see them offloading. I think theres a buyer strike as theres really not a transaction. I think everyone is waiting and its difficult to understand how much values have declined. Experts say down an average 15 , 20 , but whats the true market without really sellers willing to capitulate at todays values . Its a tough market. Finally, ivy, you have a big housing summit next week. I wanted to ask what youre hoping to learn particularly around Climate Change and the impact on the Housing Market. Is this something investors should be paying more attention to . We have our 16th annual summit. Well be back in person. We actually have, for the first time, a climate panel. Obviously theres been so much weve all experienced with excessive heat. We see flooding killing people around the world, and we have experts that will discuss all aspects. I think the opportunity is to really increase awareness, so one of our guests at Climate Central will give you interactive weather maps. We have a gentleman from wharton who will talk about the industry, which we all are watching, thats failing us, we have someone from yale, a gentleman who runs a Climate Center to talk about human psychology. Why are people so complacent . Why arent they doing more given how much risk we see out there . We have a really Interesting Company called eip thats a coalition of investors from all industries and Energy Real Estate and they will be working ways to pragmatically improve decarbonization. It sounds fascinating especially the psychology part. Ivy, thank you. Always good to check in with you. Ivy zelman. Up next, what the ubs ceo told me about his succession plan. The stock has been a big winner so far this year on the back of absorbing Credit Suisse next. Every day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to use predictive monitoring to address operations issues . We can help with that. Can we provide health care virtually anywhere . We can help with that, too. Is it possible to survey foot traffic across all of our locations . Yeah absolutely. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. The one thing we can never get more of is time. Or. Can we . This is watsonx orchestrate ai designed to multiply productivity by automating tasks. When you watsonx your business, you can build Digital Skills to help Human Resources spend less time generating offer letters, writing job reqs, and managing schedules. And spend more time on humans. Lets create more time for your business. With watsonx orchestrate. Ibm. Lets create. Ubs making a little bit of a buzz this morning with succession. Remember, this indpgrininauguraf Credit Suisse and i asked how long they plan to stay there. I think that i need to finish the job and my commitment is to finish the job and for sure that means staying until the end of 2026, but i cant think about when i go three months after starting. But we did get an answer and that was the first time he said end of 2026. We talked a lot about the task ahead. They came off this great quarter that everyone was excited about. 29 billion of it was the negative goodwill from the purchase. So he played down the whole deal of the century thing, said its not a present, its a price, the whole Credit Suisse acquisition. He has big growth plans that we talked about in the u. S. And particularly in asia. Interesting. Kind of takes us back to the beginning of the week where it was all about presentations here about how deposits are stable, delinquencies rising but stable. Most of the criticism from the Bank Executives was about regulation. They are making a lot of noise about the basel three end game rules and i think well hear a lot more about that as well. Jamie dimoning to regulators, do you want to make us uninvestable . It would wreck profitability of banks. Were watching the fed meeting next week. No change expected but what will powell say about some of the risks now which are a little more complicated as inflation comes down not all the way and the economy weakens a bit. Its really interesting the dispersion of views. Morgan stanley today again just trimmed their cpi and core cpi forecast for this year and next, says the disinflation narrative is happening even faster. Theyve been in the dovish camp. We did have sticky data points on inflation this week like wholesale inflation and core cpi which were hotter than expected. Next week will be busy. Lets get to the judge. Carl, thanks so much. Welcome to the the halftime report. Im scott wapner. Front and center this hour the state of stocks, the economy, your money. Big questions about all three. And the Investment Committee on the case for us today. Joining me for the hour joe terranova, jenny harrington, jim lebenthal, Capital Wealth Planning kevin simpson, the cio, and he is with us at post 9. Lets check the markets. We have cross currents. We are red across the board. Joe, i have the vix at more than a threeyear low, oil the highest level of the year this week, yields are up today. Theres taiwan sem