Transcripts For CNBC The 20240703

And on the eve of the iphone Product Launch tomorrow and well look at the implications and insta cart aint worth what it once was and its valuation a fraction of what it was, and is that bullish for investors who get in now . That plus the latest on arm which is reportedly seeing Strong Demand ahead of its offering later this week and chinas economic problems should come as a surprise to no one says derek scissors. Weve had 14 years to see this coming. The question is where does he see things going from here and what does he see for u. S. Companies like apple and tesla. First, lets get the latest on the markets. Some green. Some green, but were off the best levels of the session and the bulls might take solace because the medium term has been a very interesting story for the markets and losing some steam and we have all lost steam in just the intraday session, as well. The s p 500, the more broader measure, 4479 sitting almost on top of the rolling basis and some traders tend to use the level as perhaps indicators of trends. So its sitting right at a critical level right now up about onehalf of 1 or 22 points. At the highs of the session we were up about 33 points and even at the lows of the session we were up about ten. That gives you an idea of the trading range so far today and tilting in the middle of that and generally positive. The dow industrials up onequarter of a percent and the nasdaq composite up 97 points to 13,855. More on that independnasdaq tra just a bit. Cryptocurrencies, specifically bitcoin because were seeing levels right now at 25,100 and change that are just at the low end of the range that weve seen since midjune and you can see thats the upper end and the lower end is where were sitting at right now. What i want to point out is what analysts and traders are looking at and that is the crossing of the 50day average price on a moving basis down toward the 200 day or longer term price. Some folks may look at this and say maybe this is a change in the direction overall in the market, a change in trend to the down side, but bitcoin prices trying to hold on to the 25,000 level depending on which indicator you look at. It did dip briefly below that at one point today. On the stockspecific side, watch oracle shares right now and theyre reporteding after the closing bell today. Artificial intelligence and the Oracle Cloud Infrastructure and right now its up threequarters of 1 and the Options Market is pricing in a roughly 4. 5 to 5 move in the stock up or down and just to give you context thats historically what has been over the last eight quarters worth of reports and then the semiconductors and qualcomm youll get to in just a bit, kelly, i know this and thats one of the only bright spots in the semiconductors today and advanced micro, kla corp and nvidia were some of the bigger laggards containing the mediumterm downtrend in some of the chip stocks. Ill send things back over to you. Thank you very much. Dom chu. Staying with semi, qualcomm shares are jumper more than 4 after apple renewed a deal for modems. Apple was using its intomorrowly developed modem and risks are growing for apple, tensions with china, emergence of ai and weak consumer demand for devices. Joining me now is laura martin, senior internet and analyst at needham and steve kovac is with us, as well. Welcome to you both. Laura, it doesnt seem like this i dont know, the apple shares arent moving up on this. The larger questions are still probably just china and demand. Agreed 100 . It looks like maybe biden is trying to thaw relationships with china. Thats best for apple and disney who have big operations in china. Each of them are about 20 of their revenue on apples side and 20 of theme park revenue for disney. So it would be really great if we didnt go to war figuratively or literally with china. Its interesting you say that because obviously the president has been in vietnam. He was just in india. Lately hes been corralling allies like korea and japan to form this. It looks like unfortunately, the u. S. Is preparing for a more tense future with china. It has these agreements with india to build out its own i dont want to call it a builtin road, but to push back a little bit, but where and how shouldwe read the signals that we think the administration and maybe its the trip and more to come is trying to thaw things . I think what theyre trying to say is theyll make these countries choose. Theyll put them in a position that, look, if you want to the do business with the u. S. Which is 20 of global gdp you need to be friendly with the u. S. So theyre want going to allow them to take chinas side. So i think that negotiates from a position of strength because both china and america understand that theyre worth more together than opposed to one another. So i think thats what theyre trying to do is get these traditional, regional allies of china into the u. S. Basket of closer relations. One more and then i want to bring in steve. One leg of the stool seems to be china and another weak, consumer demand and maybe you can add to that. What do you think some of the biggest concerns are for you with the stock . So, yeah, definitely the china demand which would nearterm threaten 20 of the revenue now that apple isnt allowed to bring offices to china and more importantly to me, this generative ai and Large Language Models and almost every business will have to integrate generative ai to lower its cost and to drive its revenue and of course, meta and apple will do that for themselves and who will make money are the arms dealers in the cloud. Thats eight of the u. S. , amazon and googles three language models withal fabbet and open ai. So those will be the backbone of American Business in my opinion in the next ten years and they get the benefit of charging, say a 30 tax on every revenue dollar, every business in america. True. Apple does not. Thats really interesting. So, steve, one of the things that made me think twice is the investor i follow wrote in the past week or so about how bullish he is on, kid you not, apples new headset. Unlike the meta offering which is sealed off from the world and more of a pure vr offering. Apples is more ar and augmented reality and it simulates your eyes so if you and i are talking, you can feel like youre talking to me, so is apple with this headset potentially going to be able to capitalize on the next wave for product demand much like it has for the iphone for the past 15 years. If they do, kelly, it will take a long time. I used the vision pro when apple unveiled it this summer in june. Look, its very similar in theory, in concept and just not in execution as what meta has. They have their own pro headset that feature, if you go down by the specs and what they can do and apple, cuted it about thor and the visuals is better and having the sense of presence in the room and its also 3500 bucks. Its not coming out until next year and this will be inskredibly limited availability, u. S. Only, apple stores only before they expand from there. If it does take off it will take quite a bit and it will not be with the first version, kelly. These events are typically a bearish catalyst for apple and suppliers for some period of time. I think we saw apple shares up about a percent. I dont know where were at now, but look, this always happens before an iphone event, buy the rumors, sell the news type of thing, but the real thing i think everyone watching now should be watching out for is whether or not the rumors about a price increase actually takes place. Like we said at the top of the segment. Tim cook actually told me that himself last month that demand for the Iphone Smartphones are just falling and do they feel they can raise prices on the pro phones . We know people are willing to pay more for the pro phones. Last year they couldnt make enough of the pro phones to sell to people so maybe they can carry that over this year. So that will be the thing to watch more so anything than the gadgets can do themselves. Shares go nowhere in the past three months and steve, one reason why i launched an iphone event is because it was eastern. Ill be here 24 hours and live in cupertino, well have full coverage of the event and laura, stay right there. The fact that the standoff between disney and charter has come to an end kind of expected this, didnt you . Just in time for monday night football and disney shares rebounding from the lowest close in nearly a decade and the real question is what were the terms and concessions. What do we know so far . Disney and charter announcing what they call a transformational agreement. What sources tell me is a modern melding of linear tv and digital distribution that sets a precedent and gives a huge boost to the reach of disney with ads. The ads for disney will be included in spectrum tv select video packages, not for free, but what they kull a wholesale arrangement guaranteed for all of spectrum video subscribers and espn will be included in certain video packages and when it launches its Consumer Service it will include an offer for select customers. Plus, charter says they will sell all of disneys d to c services to its broadbandonly customers. While it wont impact the higher profile channels and it is upon droing xd and other channels and that is far outweighed by new compensation for disney and the upside for having ads on disney and chart heras a new value to obtain business subscribers and its seen as a winwin as both of these partners in this new video ecosystem or are trying to figure out how to attract or retain subscribers. Lets see if you think it is a winwin. Whats your initial response as we continue to awaiting for thor details. I agree with Julie Bernstein perfectly meaning that i think this is great for disney because it lets them keep 70 of espns revenue come from the charter fees and plus they have 30 advertising and it helps them keep their 15 million house espn sft big win for disney gives them compet of advantage and what it does is send us back to the linear tv ecosystem. Well continue to decline and great for chrter, but great for disney, as well. Julia, forgive me, do we know including any of the disney bundles, thats one thing charter wanted was that people who were charter subscribers would get ak sus to hulu or espn . Is that in here now . That was the key piece of this, kelly, is that disney said if youre going to get disney for your subscribers youll have to pay extra. They want to offer that for free and what they arranged here is theyre paying a wholesale fee to disney for disney . If youre a charter subscriber, you will get access to disney with ads for a wholesale fee that charter is paying. So what that means is that disney is going to get many more people who are going to be watching disney , and therefore exposed to their advertising and then also disney gets the wholesale fee. Its not the retail fee, and it is also not nothing which is what charter was offering. Some traders and investors were thinking it could go that route. So theres no extra cost to charter subscribers . So this is all a part from what i understand, of the negotiation. Every time theres one of these negotiations charter has to pay a little bit more to disney, and by the way, they are paying more for the channels that theyre keeping and they will not pay for disney, but they are paying a rate increase and theyll be paying a wholesale fee and able to include disney for ads with customers. Of course, kelly, we know these paid tvs and companies that offer a paid tv do increase prices every once in a and this is part of that equation. I think the Central Point is exactly as youed. I think well see annual declines and does that mean disney as vulnerable in the sense that hey, does this give them stronger ground to stand on for a while . I think is a melting ice cube and this is way more important that disney kept espn because it is really important for Warner Brothers and paramount that the linear tv bundle dissolves slowly and not quickly, but yes, this now means we have another ten years of Free Cash Flow from the linear tv bundle which gives those companies more content and the ability to spend more content to compete with netflix and youtube videogenerated content. Its become an economy, so competition is anything, so you of the the revenue stream coming from charter and comcast because it gives you more money to invest in content and try to retain attention. And we see disney shares up about a percent and with the debt load they have to your point, that cash flow becomes all the more crucial. Well leave it there for now. Thank you both very, very much today. We appreciate it, Julia Boorstin and laura martin. Still to come, signs of life for chinas economy and are all of the worries about the looming collapse overblown . Well debate that. Is it time to look past the cpi print . Well look at which inflation data is most moving the markets and whether it matters as much to fed officials now as it did earlier in this year. As we go to break, lets get a look at stocks and the dow is underperforming with the 75point gain and the nasdaq up threequarters of a percent and even the russell is in the green and the tenyear yield is up after 4 30. Were back after this. This is the exchange on cnbc. 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. Its a big week for cpi ahead and the fed wont care about the data and the other says you shouldnt care either. What does matter for investors here . Joining me is david bonnsan and brian weinstein, america an stanleys head of fixed income. Welcome to both of you. All right, david. What are you following, then . Football . What matters for investors . Well, unfortunately, football doesnt party for investors, but it certainly mattered last night for this cowboy fan. In terms of what the fed will do, i think that the fed is falling markets. Markets are not falling the fed, and i think it is a fait accompli that they will pause again at the end of september. Futures are still indicating a sort of a junk ball ahead of the november meeting and the odds are weighted towards no new movement and at this point the cpi issues are very, very clear and Oil Prices May very well bring headline levels higher, but the Shelter Housing number that has been so distorted, so lagged and so wrong for so long and thats coming down and the fed knows it. Obviously, rents are going to come down eachven more and bria you say the cpi doesnt matter like the fed did. We have to wait and see what theyve accomplished and the numbers will move around a bit and the exciting part is over, and watching every single number, theyve told us, right . They want to pause and they want to watch it, and i think deep down they dont want to do any more. Time will tell and the market will force their hand and not for a while. So are both of you saying hotter than expected cpi number . I would argue that Inflation Expectations in the consumer sentiment, and if they jumped to 5 and even then, brian, what do you think . Theyve been anchored and they havent done much and sure, there could be reasons why the fed would want to do more. Im surprised that they havent pointed us away from the month to month cpi data and they should probably tell us now, but i dont think that even the hot number here will force it. Is it jobs what becomes the tier 1. I think what we need to look at is the more forwardlooking data and the claims have been well behaved and rental information is coming out and theres reason to believe in softness out there, but yeah, i think moving away from every single months cpi number and every single months employment number is the thing that will change the next meeting and its time to do that. What would you say is the more important data points to follow . One of them, i dont want to be cynical amount and the fact that were going into an elections year and i just dont believe that the fed has to be raising rates in the Election Year and kelly, thats not a partisan comment. It could be either party in office, and its simply it could be per seved as putting a thumb on the scale with the national politics. They didnt touch rates all of 2016 when their dot plot said they were going to raise rates four times, and so you go back to 94 and the heat that greenspan took in those midterms when they were raising rates in the middle of that first bill clinton term, they mostly stayed out of the politics sense and i think hiking rates when theyre already at 550 basis points going into Election Year, its just very unlikely. So let me translate this also to, david obviously follows bonds more. Im sorry, david, youre more of of a stocks guy. I looked at the list and the fact that you followed kenview jumped out at me because kenvoi, t the owner are tylenol broke below the ipo price and has been getting attention ahead of the week that weve been having. Why do you think this is an area of opportunity . We already owned it. It just didnt exist because we owned a Johnson Johnson and it was the third of the Johnson Johnson Balance Sheet was this Consumer Products division, and so now we have a separated entity that has a lower multiple and a higher dividend yield and like you mentioned, tylenol, bandaid, shampoo and all of these wonderful, Consumer Products that we believe in, and we believe its at a multiple opportunity that will do well. It sold off last week because a lot of people got kenview at a 7 discount in the spinoff that j j, did, so they were taking dwant amg of free money and it reprices, resets and we think ken view is a long hold and when you look at some of the valuations and high tech and that kind of things. Lets talk bonds and i see the tenyear inching back and to quote your commends from the company. This the buy of a life time . I dont want to play pol tux, who is going to cut spenting for the rest of the year and some parties want to cut taxes and we have a high one to start and we are so used to it being so low, but why not take a twoiyear treasury or a money market fund. At these rates . Yeah. You are comfortable in the short end and not for the long end. The opportunity of a life time and things will slow. Look at the shape of the yield curve. The fed eased a hundred bases points and took ussa five and a half to four and a half. If the fed continued to hike rates while slowing things down and being hawkish and having a different view, but i think were early still and we could see higher rates especially in the 20s and 30s. Do you ever get into fights internally . Everyone has a view and 50 50 proposition and this one of the rare times when times are aligned and yes, we fight about it all of the time and i am more confident than usual that its going higher over the next six to 12 months. I think a lot of married couples are having similar discussions. Thank you both for your time today and your thoughts on the market. Tomorrow dont miss the unveiling of the National Adviser 100 list. We will speak with the head of this years top firm. I dont even know who it is. It will be a reveal for me, too. It will be right here at 1 00 p. M. For the full list go to krshgs nbc. Com fa100. Coming up, instacut slashing the valuation, and its bad news for the ipo market actually good news for investors . Well talk about that ahead. As we go to break, here is the dow heat map with 3m leading the way and dells underperforming, as well and up a quarter percent withos mt major averages is in the green. The exchange is back after this. 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Lets create ai that transforms business with watsonx. Ibm. Lets create. Welcome back to the exchange and here is your cnbc news update at this hour. The moroccan government reported more than 2600 people are now confirmed dead and more than 2500 people injured after a devastating earthquake hit the country last week. International aid has mobilized to help teams from Doctors Without Borders are in morocco helping to determine the needs of the earthquake victim and work with local authorities. The uk government has deployed 60 search and rescue teams to extract people from the rubble in very tough mountainous areas. Moderna announced a deal with german drug develop immatichs to develop cancer vaccines. They used im matics to develop mrna cancer vaccines, the same type of vaccine that was used to fight covid. A backup plan and spare parts are headed to india to pick up canadian Prime Minister Justin Trudeau who is stranded with his delegation after a summit. The Prime Minister will either fly home on the backup or wait for the broken one to be repaired. Kelly, back to you. . A number of jokes im sure theyll come up with about that, and we hope he gets home safely. Tyler, see you soon. Tyler matheson. Companies with high exposure to china have been underperforming the market since early last year according to Piper Sandler and things will only get worse and well talk about that next. Want only is the iphone being barred from entity, during a recent government meeting, teslas were banned from being nearby. Chinas exposure doesnt concern adam jonas who just upgraded tesla to overweight today and named it a top pick saying the super computer doge oweo will be ggt iv abiesdrernd shares are surging 10 today. A whole lot more when we come back. Welcome back to the exchange. Chinas economy is finally showing signs of life after months of dismal data. Its cpi eked out a tenth of 1 gain year on year. Social credit showed a gauge of gdp, but it will take a lot more than that to right the ship according to my next guests. While the economy may be better now than in 2022 there are multiple serious problem ahead while Piper Sandler said beijing is ramping up the made in China Campaign is an enormous red flag for certain u. S. Industries in particular. Joining me now is derek scissors asia economist along with nancy lazar at Piper Sandler. Let me start with you because the autos piece of this is starting to get more attention and what are chinas ambitions here and does it pose a potential problem for tesla. China is trying to become selfsufficient, quite frankly, no different than what were trying to do in the United States and were both trying to be less dependent on one another. The bottom line is china is done driving multinational earnings as theyve been doing say for the past 20 years. The transition actually started the last cycle, but its obviously intensifying here as we moved through 2023 into 2024. So the message to u. S. Companies in china is tread lightly. They want to become selfsufficient and that means using less u. S. Products and they would continue to be a major headwind to multinationals. This is getting more attention. The journal is leading how byd is the biggest carmaker and the vehicles are showing up everywhere and is there a difference with the competitive market where they have an edge and to put it bluntly and the risk that china floods the market with its products and pipeline. Thats not new. Theyve done it with steel and solar panels and they need something to, no pun intended, drive growth and they seem to have chosen evs and batteries and theyve been investing in those sectors very, very aggressively and so its a real risk to the western auto industry. China is subsidizing those industries and theyre able to charge less for their prices and china has figured it out and some of the western companies that are highlighting how expensive it is to build these new autos and then we have the uaw settlement and are they going to increase wages significantly and so it does create quite the predicament for western companies. That, to me, is what the real focus should be by western governments and companies right now. What is chinas goal in the auto sector and not so much what chinas gdp will do over the next couple of quarters and theyll keep the economy, and this, to me, is a major issue. Thats really fascinating. Derek, maybe given your long track record covering this, you can add your own opinion about what you think about autos in particular and they wrote an article about china saying have we reached peak pessimism and his conclusion wasnt necessarily no. He kind of said maybe it gets better or maybe there is a crisis coming and one of the few positives he could cite was the auto market which is ironic. I think nancy put her finger on it, and you have as well. There is a story here that gets conflated with chinas actual performance and the story here is the chinese have actually moved up the Technology Ladder and not that theyre at the top, but they moved up and theyre competing with western multinationals and theyre frightened and the fact that theyre frighten side relevant and it doesnt mean chinas economy is collapsing and it means their prospects in china are dimming and on the econ side, straight econ and you said it at the outset. I think were seeing a turn in the economy and it will be better in the second half of the year than the first half. It is already better than last year so people are talking about a crisis and that doesnt make much sense and you should have been talking about it last year. My answer is to whether weve reached china pessimism is no. The chinese economy will be slower and weaker than it is and that is almost a guarantee unless you see a short policy reversal. Maybe, maybe even probably, longterm pessimism, this is just the start, derek, given that, if you were consulting with the governor and tack a starbuck, its not in an area thats nationally sensitive and you can decide to be there or not. What would your advice be. The coor is open for starbucks not like it was with other ump companies and you have to say the nationalism matters and you can sell a lot to Chinese Government and then theyll offend you each though coffee doesnt matter much. How nice do you want to be with the Chinese Government. Thats a great point and what theyve struggled with for the last couple of years. Autos is one area that you might be warning about and semiconductors have the biggest revenue exposure and tech, broadly speaking has somewhere around 15 and you mentioned Companies Like micron and the past, pharmaceuticals and what are the vulnerabilities have the stocks priced this in . I would Warn Companies that china will no longer be a driver of growth. They will be a headwind to your earnings and revenues and as eric suggests they can turn you off just like that if you do something that offends them. Its not a capitalist country and its not a western country and for some reason i dont think the west has embraced that yet, particularly many, many of the ceos who just view china as the big driver of the revenues and earnings. I also agree strongly that china is done, not just sick likely and secularly driving growth and they have declining population and the government knows this. They know they cant ease aggressively and they cant ease more bubbles and then theyll create more busts and beijing is using casually and cautiously the currency thats at risk of declining on the down side and thats an embarrassment to the leadership. They want that rmb to have a global reservelike platform and at the end of the day they will lose that support. So cyclically, a little bit better growth. Secularly, theyre done. I have so many more questions. Well bring it back for a reprisal. Thank you both for your clear thoughts on this matter. We appreciate it. Derek scissors and nancy lazar. It will be on the agenda on september 28th. Register by scanning the qr code on screen or head over to cnbc events. Com. Coming up instacarts ipo roadshow is under way and the Company Wants a valuation of around 9 billion which is 25 of what it was like two years ago. Good or bad news for new investors . Well talk about that. Plus, jefferies is upgrading stainquart quasi rival doordash and why he says ads are the y ke to their earnings growth. Thats next here on the exchange. The biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . Businesses need 5g solutions today. Thats why they choose tmobile for business. Mlb partners with tmobile to not only enhance the fan experience, but to advance how the game is played. Aaa relies on tmobiles network to stay connected nationwide, so they can help get their members back on the road. And were helping pano ai innovate, to stop the spread of wildfires. Nows the time to see what americas largest 5g network can do for your business. music nows the time to see what americas largest 5g network the walking tree is said to change its entire location in pursuit of sunlight where could reinvention take your business . Accenture. Let there be change. is your brokerage leaving you out in the rain . are you missing out on access to ipos . switch to sofi invest to get stocks, etfs, and access to ipos before they trade on an exchange. See what ipos are available today at sofi. Com ipo. Sofi. Get your money right. Welcome back. Instacart kicks off its roadshow today targeting a valuation thats just a quarter of its worth during a 2021 fundraising round in what could be a bleak sign for tech ipos this year. Deidre bosa join us for todays tech check. Listen, i love it. I love it, because for everybody else outside of the ipo world and the bankers, the public investor is going to get this at a much more decent valuation. Right. Theyre not buying it at the peak. At least we know that, right . It was valued at nearly 40 million. Ive been looking at this list, 38 investors in that round, many of them firsttime new investors and a lot of follow on, as well and the sequoia that will make money from this because they were there in the early rounds, but this is interesting because if you look back at the ipos of 2019 and 2021 when we saw those big booms and you really we look back now and the retail investors, they bought them at the peak and this is a renaissance ipo and etf and it tells you that if you bought a lot of the names over the last few years on their ipo dates when they saw that pop, they would have lost money by now and certainly underperformed some of the major indeckxes. Im with you, kelly. This could be a positive Retail Development and to get into a household name like instacart, but it is now only investable to that. Real quick, because were about to speak to more analysts. Would you consider doordash a rival for instacart . Its hard to say. They both do delivery. They have larger basket sizes because its groceries versus deliveries. Doordash is moving into groceries and its building up its advertising model and insta cart is already there and its trying to be more like doordash in terms of offering ecommerce goods on their platform. So that is seen as the closest comp, but i will say that instacart at least its at the top range of the pricing and its offered at a discount to doordash. So doordash is still the more interesting play. Deirdre, thank you very much. Our deirdre bosa. Sticking with the topic, doordash shares are jumping because it is from underperform to hold citing underappreciated tailwinds. Joining me is john calantoni. In some ways instacart wants to emulate doordash. Yeah. Thanks for having me. Yeah, so our Analysis Shows two things and the advertising business is just Getting Started and the underlying performance of economics is Getting Better and will continue to get better, and you know, i think one of the things that did give us more confidence around reviewing economics and it was the insta cart disclosures from the ipo where they showed that the pure play grocery business can be profitable, can have a large advertising business, and that gave us more confidence to assume better profitability for doordashs own grocery business and it is a major swing factor in driving our increased ebitda assumptions. Thats really interesting and it strikes me as not a close sign that for instacart it has underperformed at a time the company is trying to go public and it can still make money on these transactions and what is growth like these days . From what i understand door dashs growth is better than instacart. Theyre not 30 and its not cloud computing. Yeah. I mean, one of the things that doordash has done better than we expected is theyve been able to deliver sustained growth in their core, underlying u. S. Restaurant Delivery Business and its been in the midteens according to our assumptions which is very important because that business actually delivers over 1 00 of the companys totl profitability, but i think what theyve been able to do is layer things on top of the restaurant, u. S. Restaurant Delivery Business including International Restaurant delivery and grocery and convenience, and one of our concerns was that these new businesses, it would be more difficult it would be difficult for them to make them profitable and i think that what the instacart disclosure has shown us is that they could potentially be profitable over the long term and so if the businesses that are delivering more of your future growth are seeing improved profitability, then i think that is a positive for the overall profitability of the company. No, thats really look, its perfectly timed for the discussion that well be having on insta cart as my groceries are on their way to the house from costco, as we speak. You mentioned advertising, and i want to dri drill down quickly before you go. How important is Something Like advertising on the model of a doordash or instacart moving forward . How big can that really be for them . The advertising business is very vital to the profitability of the company. Advertising comes through at very high, incremental margins and if they can drive a large advertising business, then that is really a positive for improvement for the company over time. We think it doesnt need to be, it doesnt need to be amazon levels of profit penetration for this Business Model to work. We were assuming less than 2 penetration of gross bookings from the Electronics Business over time and despite that we have ebitda estimates that are 2 ahead of consensus. Interesting. I think the grocery and convenience business is actually where we see advertising penetration being highest and thats largely because it has more exposure to interprice customers, and cpg customers and they have a larger advertising budget and again, thats another thing that we learned from the insta cart disclosures. I would take advertising and please, give me some idea for dinner and well take it. John, well leave it there, and thank you for joining us today and i love the paint color, by the way. John with jefferies. Still to come, shares of exxon are up more than 155 since activist firm engine number 1 first sent that letter to shareholders and its more than doubled over crude oil at the same time. We will speak to Jennifer Grancio about where theyre seeing opportunities next when the exchange comes next. 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 . 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Shares of exxon have nearly doubled since hedge fund activist Hedge Fund Engine nub 1 successfully sent three of its nominees to the oil giants board. The san franciscobased fund was just six months old at the time, launching a campaign to turn exxon away from fossil fuels and shifting its focus to more esg. So more than two years on has its involvement made a noticeable difference beyond the share price . Lets ask our next guest. Joining us from josh browns futureproof conference Jennifer Grancio engine number 1 ceo with our very own bob pisani. Welcome to both of you. Bob . Kelly, good to see you as always. Beautiful huntington beach, california. Jennifer grancio is the ceo of engine number 1. Thanks for joining us. A couple months ago a little bit of news here. Engine number 1 announced you were selling your etf business, youre going to be going with it to tcw, the big asset manager. What was behind that move . What was the decision there . If you think about engine number 1 and everything we set out to do, we have an alt business and an etf business. From a proof of concept business the active funds like net z and sub have done very well. So theres an opportunity to be acquired and scale the business, which is terrific. You need scale. To grow an etf business. And tcw is looking to really underwrite their active equity and their etf business. And when is that deal going to close . Hopefully very soon. Youre going to go with them . I am. Youre going to be managing the etf business, the whole thing you became famous for. And you became famous for taking on exxon, getting board seats out there, making a difference to them. But what everyones noticed is since then theres been no big new campaigns, no big proxy fights from you, no picking on some other people at this point. Whats changed . Is there some change in strategy going on . I would say our change or strategy pardon me has been very consistent since the beginning. Exxon was an opportunity to release value. Somebody had to be an activist. So we had to go in to drive change and put new people on the board. A lot of the work that weve done since then, hostile activists just wasnt the right tool to pull out of the toolbox. Weve done very constructive work. Coke and republic services, for example, just a little while ago, announced a relationship where republic is a waste company, theyre doing more highquality recycled content. Coke needs recycled content. And we matchmake and weve driven value in both companies. So youre not abandoning the sort of quasiactivist stance but the hostile proxy thing is not the way you want to go anymore, is that the point . Many times being very active investors but not being hostile is the right way to go. So we have a couple of your etfs that are out there youre still managing the transform climate etf. These are companies benefiting from the Energy Transition to net zero carbon emissions. Youve got the transform supply chain etf for companies for supply chain transformation. Explain how this all comes together as part of a package to try to help change the world. Yeah, thank you. If you think of the average portfolio today, the average portfolio is so heavy megatech. What these products do, both transform supply chain and net z on the Energy Transition is they let you take some out of your car and invest it in these trends p. And these are enormous trends. If you think about Energy Transition were investing 5 trillion a year. And theres a complicated interconnected system of big Public Companies. And the ones that win are going to create huge value. Thats what net z does. Supply chain unfortunately the worlds deglobalizing. Weve put everything far away and then supply chains totally broke. So were seeing a huge trend of manufacturers moving back to the u. S. And theres a lot of value that can be created for investors. Now, engine number 1 has a private capital fund too. In july you announced you were going to put 780 million into valle. Thats a brazilian base metal maker. Through its private capital arm. You have a 3 stake right now. Whats the object of this investment . This is a lot different. Now youre directly involvementing in a 3 of a very Large Company right now. If you think about what engine number 1 does, on the etf business weve been able to focus on Public Companies and realizing value in Public Companies as we go through the Energy Transformation and these huge changes. But if you think about the Energy Transformation, like we are very short some of the materials. So were going to electrify everything. We need a lot more minerals and materials that go into electrification. So on the private and alt side of our business the vale snichlt a big one that helps unlock that bottleneck. What i like about you is youre not worried about tech. Industrial companies are out there, theyre leading the way in the decarbonization business, reindustrialization of america. Thats kind of what youre emphasizing, right . Absolutely. People need those industrials and they need to play these big trends in their portfolios. Jennifer grancio, ceo of engine number 1. Well look to you for more etfs. Shes not going away, i want to note, kelly. Shes going into the etf business at tcw, now different kind of company. Kelly, back to you. And thank you for bringing that to my attention. Its been fascinating. Jennifer, thank you. And to bob as well. Bob pisani. That does it for the exchange, everybody. Next on power lunch the irs is using ai to catch tax cheats. Well talk about the implications. Tyles ttg adrgeinrey. Ill join him on the other side of this break. N. What do you mean . These straps are mindblowing they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. And you are . Im an investor. In invesco qqq, a fund that gives me access to. Nasdaq 100 innovations like. Wearable training optimization tech. Uh, how long are you. Im done. Im okay. sirens [due at target in 5 ] copy that. Make a hard left down the alley. 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 afternoon, everybody and welcome to power lunch. Alongside kelly evans im tyler mathisen. Coming up, a contrarian take on the markets right now. Were going to hear from someone who says bad news really is bad news. And the fed is reinflating the nasdaq bubble. Plus where are the jobs . In the suburbs is where you will find them. Restaurant chains finding workers where they live. And is it all part of a shift in the job market with the employer regaining the upper hand . Kelly . Feels like it, tyler. Thanks. Hi, everybody. Lets first gets a check on the markets. Dows up 95 but underperforming today with the s p up nearly 2 3 of 1 and the nasdaq up more than 1 as were seeing kind of a restrengthening back toward the levels we were at on the open as we move through the