Jack welcome to barrons roundtable where we get behind the headlines and prepare you for the week ahead. Im jack otter. Coming up, higher rates for longer, thats what the Federal Reserve signaled this week. Ill ask jack ablin what stocks investors ought to own. Then, new obesity drugs have the numbers going down on the scale, but it could be making Health Insurance more expensive for all americans. And later, the sphere is here. Well take a look at how you can make money off a Brand New Entertainment venue in las vegas. We begin, as always, with three things investors ought to be thinking about right now. Stocks down sharply for the week on the latest news of the fed. Investors are now looking ahead to next weeks key economic data. Then the Housing Market urn pressure. Mortgage rates remain above 7 , and existing home sales are nearing a 13year low as homeowners happening on to their properties, but investors can find attacktive yields. And finally, rocket labs stock hitting a taking a hit. Well look at at the companys prospects. On the round table, ben levisohnings, carlton english and jay con sonnenshein. So jacob sonnenshein. Jay powells comments really spooked investors this week, ben. Yeah. You could say that the market is fed up. They were expecting no rate hikes, and they didnt get a rate hike, but they were also expecting the fed to signal that the cuts would start next year and that there would be about four cuts. The fed actually has two. And that combinedded with some comments powell made about maybe a soft landing not being the base case, that was a problem for the market, and it really did sell it off. I think if youre looking for a Silver Lining, the market looks very oversold right now. Sentiment is way down, and the number of stocks that are trading above the 50day moving average is down to about 20 , and that could be a bullish sign going forward. Jack just because its so contrarian. A lot of headwinds, ben. The uaw strike, probably a Government Shutdown and then the economy refuses to play to the tune the that jay powell wants, the jobless claim numbers just came out, and theyre lower than in a long time, so that job market keeps on moving ahead. And then the market suddenly less enamored of ipos. Yeah, the i ipo was interesting because we had three big ones, arm, instacart and klaviyo, i had to look at all o. All the stocks after a great first day, they came down quite a bit. None of them are below the ipo price yet with, but theyre all below where they closed that first day. And that would seem as nice as it was to have u e pos finally, were not back to the market where people are gung ho about things. Jack whats available to spook markets further next week . Pce, which is the feds favorite inflation gauge. Its supposed to rise went 2 month over month. 2. If it comes in at that number or lower, i think the market will be happy. But if it comes this in hotter than expected, we could see more selling again. Jack carlton, these higher rates, both the 2year and the 10year hitting highs or recent highs. Not very good for the Housing Market. No. So we have seen that translate into a 13year low on existing home sales. Now, higher rates definitely make it more expensive for buyers to get a new home, and you also have to think about it this way, if you were someone who also a supply problem, if you were someone who got a mortgage at a 3 rate, youre not going to sell your home and try to get a mortgage at a 7 or 8 rate. So we have this huge supply problem which is actually pushing up housing prices to more than on average 400,000, up about 4 from the same time last year. Jack a supply which demand thing. The only good news here is you can take the other side of the trade. We had rick reared on, hes guying mortgagebacked securities rick reider and theres a lot of other areas as well. The simplest thing would be a money market fund, a yield of about 5 . You could take a page from Warren Buffetts playbook which is to buy the ultra shortterm treasuries, 3month, one fund is an etf, vil. Now, another way to get in there is to look at utilities. Theyre one of the less loved sec editors of the s p 500 sectors of the s p 500. Yields around 3. 3 so, no, youre not beating treasuries, but you do have room for capital appreciation. Three stocks we like, american power, center point and night source. Jack all righty. Jacob, after a failed rocket lab mission, that stock got hammered. You think its gone so far, there may be an opportunity. Yeah. First of all, the stock fell as much as about 17 on the week after the launch failure. It does kind of make sense because you were expecting somewhere around 10 launches this year, and so that would be roughly not exactly about 10 of the companys revenue. And so the net loss could really widen for the year. The stock is down by 17 . If the company can make the fix, then that revenue comes back into the picture, and the stock backs back to where it was before. By i also think but i also think longer term, this companys been around since 2006, a few years after spacex was founded. So this company has the systems and the integrated products and services to be able to increase revenue per launch, to be able to participate in more launches every year globally, and theyre going to reach profit if about maybe in two years, but i think its possible even next year. Jack you mentioned spacex, elon musks company, still the big kahuna in space. What separates those two companies . So spacex has the number one, the the first mover advantage, right . Theyve been at it for a few years longer, and they also do slightly bigger rockets, so their revenue per launch is a little bit higher, and and theyve been doing hundreds of launches per year. But i do the think as rocket lab scales up in terms of revenue and really gets leverage on its costs to produce a launch, its going to get to profitability. Its at a 2 billion market cap now. I think in a the few years youre talking maybe 47, but in a downside scenario, its still pretty good. Jack and you cant buy spacex directly. A few mutual funds might give you access, but rocket lab . Yes. Jon cc the Federal Reserve was more hawkish than expected, dragging down stocks and causing a surge in bond yields. Ill ask cio jack ablin what investors should be buying in a high rate economy ne you got this. Lets go. Gobble gobble. Ive seen bigger legs on a turkey rude. Who are you . Im an investor in a fund that helps advance innovative sports tech like this Smart Fitness mirror. Im also mr. Leg day. 1989 anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. I go through a lot of pants. Before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. psst psst ahhh with flonase, allergies dont have to be scary. Spray Flonase Sensimist daily for nondrowsy long lasting relief in a scent free, gentle mist. Flonase all good. Also, try our allergy headache and nighttime pills. [ applause ] the day you get your clearchoice dental implants makes every day a confident day. A neverhidemysmile day. A lifeoftheparty day. A takeontheworld day. A believeinmyself day. A flashmynewteeth day. Because your clearchoice day is the day you get your confidence back for good. A clearchoice day changes every day. Schedule a free consultation. Jack the Federal Reserve may have paused its Hiking Campaign this month, but that doesnt mean its the last hike. Jay powell signaling rates will stay higher for longer, and some investors are pricing in another hike before the years end. Joining me now is Crescent CapitalFounding Partner jack ab a lin are. Thanks for coming by. Thanks for the invitation. Jack just to give readers and viewers some context, youre an independent advisely firm, you guys manage over 40 billion. Lets start with the higher for longer concept. Youve been looking at a very specific consequence of that which is that companies that have been borrowing at ultralow rates are over the coming years going to have to pay a lot more, and thats not going to be easy. I originally thought this was going to be a 2023 firestorm. What i realized when i started getting into these maturity schedules, its really more of a gail force wind for the next few years. If you look, for example, at Investment Grade borrowers, we have about a 1. 44 trillion many maturities coming due over the next four years refinanced at rates anywhere between 22. 5 higher than current coupon. And so part of the thought was, well, if rates could come down between now and then, that burden may not be as bad, but it looks like this higher for longer is going to make that phenomenon worse. Jack so investors ought to be thinking can the companies in my portfolio afford these higher rates. Thats it. And its not just the corporate market, its it is also real estate, its other a markets. And thats, i think, one of the issues thats mostly going to put a dividing line between heavy borrowers and companies that dont borrow e very much. Jack so give us some ideas of sectors, companies that you like this in that environment. Sure. So we like High Quality Companies, and we like High Quality Companies that have and grow dividends. So, for example, microsoft, great high quality company. Yes, its only a 1 dividend yield, but 1 dividend yield, but its growing at about 6 per year. Certainly well ahead of inflation. Johnson and johnson, same thing. High quality company, 3 dividend yield growing also at around 6 annually. We like chevron. I think everyones heard of chevron. 3. 6 dividend yield, growing its dividend a little more than 6 . And then mccormack spice company. Not, you know, well known, but everyone knows who they are. 2 . I think theyre growing their dividend in excess of 8 . Jack and everyones got a shelf full of those little red bottles. Thats right. We love it when you throw it away before you use them all. [laughter] jon if youre not buying the individual securities, theres an etf as well or, right . Thats right. Vig is a high quality dividend growers from vanguard. Its pretty low, you know, low cost. What else do we like . You know, a lot of the small cap names. I think its ijr. And here i think we have to really make a distinction in small cap. It turns out that if you look ae russell 2000 as their small cap index. Jack sure. But what we have found is nearly a quarter of the russell 2000 cant cover their Interest Payments with their current earnings. Jack jim grant calls those zombie companies. Thats what it is. So if those Debt Service Payments go up, its just going to make things worse certainly over time. What we would recommend is investors look at the s p 600 as they corrupt the index, its going to be comprising much Higher Quality companies. And so you avoid a lot of those pitfalls. Jack and small caps have had a tough run. That index has gone almost no nowhere in five years. They look cheap, maybe its the time. They do look cheap. The problem with small caps is really is access to capital. In an environment where not only are rates going up, but banks and other lenders are starting to tighten their lending standards, you know, it would advantage the large cap High Quality Companies where everyones tripping over themselves, for example, to eleven money to apple, but if youre lend money to apple, but if youre autozone, they may not answer your calls. Jack all right. Jack, thanks so much for coming by. Obesity drugs are seen as revolutionary for the health care industry, but it could be costing every american more even if youre not taking the medication. My relationship with my credit cards wasnt good. I got into debt in college, and no matter how much i paid, it followed me everywhere. The high interest. I felt trapped. Debt debt debt debt so i broke up with my Credit Card Debt and consolidated it into a low rate personal loan from sofi. I finally feel like a grownup. Break up with bad Credit Card Debt. Get a personal loan with low fixed rates and borrow up to 100k. Go to sofi. Com to view your rate. Sofi get your money right. Shingles. The rash can feel like an intense Burning Sensation and last for weeks. It can make your workday feel impossible. The virus that causes shingles is likely already inside of you. 50 years or older . Ask your doctor about shingles. Salonpas, makers of powerful pain relief patches for 89 years. Believes in continuous improvement. Like rounded corners that resist peeling, with an array of active ingredients. And sizes to relieve your pain. Salonpas. Its good medicine. se fue la luz pero todavia tenemos wifi para hacer las tareas. ¿y eso es algo bueno . Wifi y estudiar. Buenisimo. Wifi y pedir una pizza online seria buenisimo. Presentamos storm ready wifi. Solo de xfinity. Ahora puedes mantener una conexion confiable durante apagones, con datos celulares ilimitados y bateria de respaldo de hasta 4 horas para mantenerte conectado. Obtenlo solo con xfinity. El hogar del 10g network. Enterate mas hoy. Jack ing obesity drugs are threatening to raise the cost of health care for everyone. The hefty price are having a Ripple Effect through the industry from insurers to private companies and government programs. Its the cover story on barrons week, and carlton, these drugs have incredible potential. Its a huge addressable market. Apparently, half of hollywood is taking them. But theres some complications as a well. Give us an overview. As you point out, about 40 of u. S. Adults are obese, and apparently youre a reader of the gossip pages where there is speculation that maybe people that dont fit in that classification are also taking some of these drugs. A jpmorgan analyst estimated by 2030, the amount spent on these treatments will be about 50 billion which you can kind of imagine when you look at the cost of one of these drugs being about 16,000 a year. Jack wow. So the maybe Silver Lining is that if people lose weight, then you have fewer complications such as diabetes, heart failure, etc. So medicare, Insurance Companies will save a little bit of money on that side. That would be the hope. [laughter] so there was a paper out by usc that said that the savings for medicare would be about 700 billion over 30 years. But the challenge with that is right now you have a dynamic of people are taking these expensive drugs, and you have people that have not had, have not had those drugs, still getting diabetes, heart disease. So you have these huge, huge costs on the Health Insurance industry right now, and then you also have, you know, looking forward i mean some of these will still persist even if people are taking the drugs. So the savings might not be that big. Could make an impact, i think people are getting a little too excited. Jack its a longterm impact as to thosed opposed to the immediate cost. A lot of people are wondering, will my Company Health plan cover this . Super expensive drugs right now, and when you look at it, you know, the person taking the drug isnt the only one footing the bill, right . All premiums go up. So in short, companies are going to be looking at this, does it make sense for our employee plan to offer it. You have one company thinking, well, maybe before putting someone on the drug you do something like, say, okay, you have to meet certain requirements. You have to try a 3month diet and exercise plan, maybe meet certain b mixer requirements before you to go on bmi requirements that could start to be a deterrent for getting people on the drug which would keep costs down for the insurers possibly. Theres a lot of pushpull here. Jon seems like theyre raising the bar. What are the implications for medicare benefits . Again, this could look to get much more expensive. Right now medicare is not covering the cost of obesityrelated drugs because the thinking is this is a lifestyle situation, not exactly an illness. But if they were to, it would be a huge burden for medicare. The new england journal of medicine estimates in that if 10 of participants took the drug, it would cost about 26 billion a year which is about onefifth of the cost of all drugs in medicare. Jack wow. So, ben, novo nordisk, eli lilly standing to make literally hundreds of billions of dollars on this. Is that all priced into the stock right now . I would have said it was until about a week ago, and novo nordisk had become the most valuable stock in europe. Lilly is up a ton. Both stocks have pulled back, and if youre the kind who likes to buy the dip and a momentum investor, probably would be a pretty decent time to go in and pick these up. But if youre thinking very long term the, i think you have to worry that a lot of the good news is priced into these stocks at this point. You hear analysts talk about really being only two stocks in pharma that you can own and thats novo and lilly, and i think at some point you do have to worry about competitors, prices under pressure a little bit and maybe just not as profitable as a people think, and then the stocks would be priced kind of to perfection. Jack got it. You would think that the Health Insurance stocks might get hit. They have not been. Jack and they probably figure if they do cover it, theyll just pass the prices on to the rest or of us. Maybe. Jack another interesting dynamic, those companies that are trying to cure diseases that this might alleviate are getting hammered hard. Insulin pump makers, sleep apnea devices, Liver Disease drug makers. Amidst all the records, are there any bargains to be had . A lot of stocks are down double digits. Intuitive surgical is down about 17 since then. I was talking to an analyst for intuitive surgical, is and he was saying that that he shes probably he thinks probably 2 or less that the procedures that their goods and services are exposed to are bariatric surgery, so this might be a buying opportunity for intuitive. For dex com, they sell devices to type i and type ii the diabetes folks. With type i, those people still need their devices. Thats number one. Number two, the company did talk about for all people with diabetes, they might be trying Weight Loss Solutions as well as continuing to have their device. So dexcoming being down double digit ises might be a buying opportunity. Jack all right. You guys have some investment ideas, and ben will tell us how to bet on the las vegas sphere. Tech cracked windshield on your new car . Bring it to safelite. My customer was enjoying her new car, when her windshield cracked. [gasp] customer my car tech vo she didnt take it to the dealer. She scheduled with safelite. We have the latest technology for the newest vehicles. And we do more replacements and recalibrations than anyone else. Customer thank you so much. Tech dont wait schedule now. Pop music singers safelite repair, safelite replace. [coughing] when caroline has a cough she takes robitussin. So, she can have those one on ones again. Hey jim hey can we talk about your yoga breaks . Sure. Get fast, powerful cough relief with robitussin, and find your voice. Robitussin tourists tourists that turn into scientists. Tourist taking photos that are analyzed by ai. So researchers can help life underwater flourish. Agerelated Macular Degeneration may lead to severe vision loss and if youre taking a multivitamin alone, you may be missing a critical piece. Preservision. Preservision areds 2 contains the only clinically proven nutrient formula recommended by the National Eye Institute to help reduce the risk of moderate to advanced amd progression. Preservision is backed by 20 years of clinical studies. So ask your doctor about adding preservision and fill in a missing piece of your plan. Like i did with preservision. Now with ocusorb better absorbing nutrients. Jack ben, a very cool concert venue about to open in las vegas, and we have town an investment angle. Of course. The sphere is a gigantic music venue. It is twice as tall as the statue of liberty, it holds 20,000 people, and it has a massive screen. Actually, on the outside of the sphere where they project stuff but if also on the inside. And its very cool. Its going to open next week with u2 coming on on the 29th of september, and theyre going to be there for 25 the shows. I always thought in vegas was for liberace or even britney spears, but here comes u2. [laughter] im old enough when they played at red rocks and had sunday bloody sunday and bono waving the flag, but now theyre at the sphere. The stock hasnt done great. It cost 2. 6 billion to build this thing. The stock has a value of about 11. 3 billion 1. 3 billion. My colleague, andrew berry, thinks its the undervalued. There are plans to build more spheres, and this could be a very big business. Its part of the dolan empire, and theres discount that just keeps these stocks under pressure, but this one looks like a good opportunity. Jack jim dolan is not quite his dad, but theres some other parts of the em ooh pyre that we think might be good guys buys as well. Msg entertainment owns Madison Square garden, thats, you know, its the also an undervalued business. This is some things that they could do by selling stuff that would make the stock perhaps worth america but i find the more interesting one to be Madison Square garden sports. They own the new york rangers and new york knicks. And theyre worth about 8. 1 billion combined. The stock, though, trades for just 4. 3 billion. Again, dolan discount. Jack actionable ideas, carlton, what do you have . After the banking turmoil this spring, taking a look at western alliance is one of the most beaten up during march and april. It has been on a bit of a rebound. Also still trades pretty cheaply at about 5. 7 times price to earning, historical average has been about 9 . You get a 3 dividend yield and also everyones concerned about credit quality going into a possible recession or downturn the, but loan book looks healthy. Jack jacob . Its boring, but colgate pal microsoft palmolive. Theyve been much higher than that that relative to the market before. The company is talking about price increases this year, but as that goes down, volume of goods comes back up, sales growth is going to be okay. Youre going to get a little bit of profit Margin Expansion with costs moderating a little bit. You might get 8 earnings per share growth and a growing dividend. Jack and thats the kind of product that people buy. Even in bad times. All right, thanks, guys. To to read more, check out this weeks edition of barrons. Com. Dont forget to follow us on x, formerly known as twitter. And thats all for us. Well see you next week on a barrons roundtable. Hi, margarita. Good to see you. Go to church. Rachel bye, everybody. Maria