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tv   The Exchange  CNBC  July 11, 2022 1:00pm-2:00pm EDT

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>> thank you. steve wyche? i understand jim being upset if you and your ivy league friends couldn't get in either, would ruffle your feathers. my final trade is shorting the xl left, takes protection out against financial holdings when they report the end of this week. >> joe? america, value, growth, doesn't matter. special teams, mark. i hope you will all join in a few hours, that doesn't care. the exchange begins right now. hi, everybody, i'm kelly evans, and here is what is ahead. across the economy, we are starting to see signs of a slowdown and that might not be a bad thing. what goldman says the strong job report shows a significant slowdown is happening. one analyst says restaurants want the recession, he will explain and give us the
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stocks to watch. we will also look at all the ways the twitter elon musk saga could begin. this idea may be the recession is more in play, slowdown, leading to the bed for government bonds, but to kelly's point, we are down across the board. to give you an idea of how things are shaking out, the s&p 500 is down about 37 points pick up a high today, still down but around 19 points. it will give you the idea of the trading range, a little more to the middle and lower and, the outperform are down one third of 1%. 240 alas, 11,004 12, down 222 points are roughly 2%. what is driving that nasdaq is
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weakness in key names letter tied to the most important sectors in the s&p 500. among the worst performers, consumer dissection every, technology down a little under 1%. i will throw an energy up and down side, however, these four sectors make up over half of the entire s&p 500 so the consumer discretionary is driving the downside today. one of the big reasons baez a call today by an analyst, downgraded meta-platforms to an outright cell and no price target by the way, she says at this level, you are better off taking money from here to fund other, better positions you see down the line. this platform trade she says short-term -wise, there are not a lot of reasons to be positive on the stock. you guys will be
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talking more about this but the meta platform is a big reason comms services are underperforming. >> we will speak to her in power lunch, appreciate it. although the jobs report was strong on the surface, goldman sachs says there's no data slowdown is underway. jobless claims arising, job openings are arising in the employment and manufacturing services have fallen to contractionary levels. but they are also saying, this is the slowdown we need right now. what is the rest of the street saying about the economy? steve? >> thanks, the strong jobs report is making it difficult for forecasters to say we are in a recession right now but economists, along with goldman, they continue to see an extended period of below trend
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growth with high inflation and that extends into 2024. up 3% in 2022 in march to just 1.7% now. gdp at 1.3% next year and 1.5 and 2024. all of those are below potential growth of 1.8%. on a quarterly basis, the average of 17 forecasters below 1% with only four forecasters saying we get another quarter of negative growth. gdp bounces back in the third but continues to run below trend for the rest of the year and early into next back they see a rebound of 4% or above, j.p. morgan, just 1%. all of this comes along with higher inflation, force inflation and seen a point higher compared to march this
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year and have a point higher for next year pickett still doesn't come down to the 2% target into 2024. most economists look at the strong jobs number and say we can't say it's a recession just now but they are not ruling it out for the months ahead and they say there is a higher probability of it. >> i thought the fed survey was interesting, a lot of points that will be pertinent for the economy in general. u.s. consumers see a 40% chance of recession, the highest since april 2020. there one year inflation expectation rose to 6.8% but then they dropped to 6%. they also said their outlook for household finances, a lot of new information here that normally wouldn't be so cuba is in at a time like this.
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>> i think they will be heartened to come down, those are the ones we used to adjust policy and the average american, even though it's not a good thing is thinking there's a higher chance of unemployment, the fed might be gratified there too, the job market is not quite as hot, to keep wage and wage negotiations down. they are concerned higher wages get embedded in the contracts and that would propel inflation down the road. >> there was also some moderation and spending plans but it fell from 9% to 8 1/2%, so we are still talking about pretty strong. >> you have low unemployment, very good job growth, it is the issue of how much growth is out there and whether or not we had a going negative, a technical recession, i just don't think
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right now, you and i have had the pleasure to talking to the head of the mbr on the show. i don't think he would call a recession with these job numbers right here. >> not the criteria they look at but the labor market is clearly fine for now. thanks, we will leave it there. so household with the recession growing, how do you invest? economics. what is your thinking? my thinking is more positive then you will hear for most people. i think the one thing you should keep in the back your mind is often, when we go the new these directions like in 2011 and 2018, 2014, something very much in common. you get to an emotional extreme.
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really, what i'm saying is the markets get undervalued, everyone does the numbers differently, that's where i come down, it's undervalued and the second thing, you get widespread pessimism. ordinarily, that is followed by a move up in stocks. it doesn't come right away but it comes in time. the annual average rate of return when you get to emotional extremes of this magnitude is about 18% of her six month period. with that in mind, i have to remain positive but a lot of this includes assumptions, i'm fine on interest rates, but the real key going forward, the shift is going to be a focus on earnings. >> so glad you said that, we hear from j.p. morgan, so you think the market
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is clearly undervalued because of your view on earnings, so you think the estimates will be fine? we are not going to have a big reevaluation on that front? >> you asked the right question and i wish i have the right answer. i will say this, going back, if i used my assumption on what the economy is going to do in the later point of 2022 and 23, carries a within an implication that those earnings will hold out. we are talking about roughly 9% this year, maybe 8% this year, those growth rates in earnings will hold together, as long as the economy holds together. believe me, it is very tough to keep optimistic about earnings. >> what gives you that confidence?
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a lot of people said, well, fisher, we hear from different pockets, the estimates have to come down or there will be a reset, why do you think that will not take place and it's okay to take at face value the earning estimates that are giving us 15, 16 multiple on the s&p right now? you can't take them at face value because we have been through. like this before. keep in mind, we are undervalued quite a bit, we are talking about upsides for stocks of 6% plus between now and the end of 2022, i've got room for bringing the earnings estimates down and i think they will come down i just don't think they will come down so much that i have to give up on a positive
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outlook, a guardedly positive outlook for 2022 and in 2023, i don't think they will get that much of a down river vision. take a look at what the markets did last week and when you look at concessionary consumer services, there is a message there. things might start to shift away from the very defensive sectors. >> that is the debate we have been having, those folks who want to jump out of the defense of trade. i don't know if i would categorize that cyclical, and some your favorites are lowe's, apple, google, is that right? >> it's not so much the names, those are names from those set errors, which are consumer discretionary technology and communication services. we got a look last week at the
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kinds of things we are going to perform if we see a rebound or turn. those are the ones that are going to work. you will not have staples and utilities in healthcare in real estate. emotional extremes, you can get a turn and when you get a turn, you go back to the economically sensitive and those of the sectors in stocks i am talking about. >> as that term happening even if the fed does a 75 basis point rate hike this month? yes, that's all built into the market pick 75 now, 50 in september, a couple increases is november, december and february and that is that in its built into the market, not only into the fed fund futures but it's also built into our forecast for longer-term interest rates will stay between three and 320,
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and that is all built into the market, that is already there, i don't worry about that one bit. >> thanks for your time. coming up, elon musk telling twitter he no longer intends to buy the company about what will actually happen next? we will walk you through several possibilities. are we starting to see signs of a cooldown in the housing market? the numbers and one contrarian call. you just heard hugh speaking about big movers in the nasdaq, meta, netflix and apple moving down today, apple the best relative performer. netflix down 3.5%, facebook almost 4%. we will be back in a moment. this is "the exchange" on
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the dow is down 29 points, the best performer in the market , down 1.6% today. the gaming stocks plummeting after macau close casinos for the first time in two years
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because of covid-19, all of the casinos will be shut for a week as the authorities continue to struggle to fight the coronavirus outbreak there. the chinese tech stocks are also sliding, also the government is finding tech companies for antimonopoly regulations and failing to disclose transactions. ali baba, down more than 10%. one bright spot, merrick, one of the best performers today, special teams and continued speculation, getting closer to acquiring see jen for $40 billion, it is expected to close, up 1.5%, up 20% this year. also on the move, twitter, shares her sliding nearly 9%,
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33 1/2 dollars a share, after elon musk says he wants to terminate his deal to buy the company saying they are not being truthful about bots and fake accounts but twitter is not going down without a fight and will take must to court to enforce the $44 billion deal. how does this end? is there a way he could walk away paying nothing, or forced images or force him to take over error he could go ahead with the deal or another buyer comes along. joining us now, alex sherman. what you think will happen here? you can ask me that. ideal related to elon musk? there's no way i could really tell you what will happen at this point. it does seem like we are headed to court. i will throw that out there. twitter has come out and already made a statement, saying it intends to sue what's called specific performance, this is the legal term du jour,
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meaning they already signed a contract for elon musk to buy twitter for $44 billion in twitter intends he buys twitter for $44 billion. is trying to back out of that but it takes two to terminate, even though musk says he wants out. it's not as simple as elon musk saying i will pay 1 million billion-dollar break free, thank you. twitter would have to also sign off on the and they have not. >> either musk wins and doesn't have to do anything, or he has to pay the billion-dollar breakup fee or $44 billion to take over this company. because those are extreme outcomes that seem not to be ideal for anyone involved, is there a possibility of a settlement here at the end with
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him or someone else buying the company at a lower price? there are two things i would say are settled. one, there is a negotiated deal where elon musk says i will pay you something more than $1 billion, which is the break fee, i don't know what that number would be. it would have to be high enough that the board could argue that it did not breach its own fiduciary duty to accept the settlement rather than pushing the case for elon musk to buy the company at $44 billion. if you take a look at where twitter is today, twitter is valued more than $10 billion less. almost 20. so, in order to say look, there's a risk of winning, of losing, whatever that would be, they would argue to investors to say that is the right course of action. both parties decided, do you
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know what the best thing to do is here? we will lower the price, still reach a deal, whatever that number is. some number in between where twitter is today and where twitter was trading where the deal was consummated. the market went down, snap is down 50% from the day that deal was signed, so whatever that number may be, that kind of seems like there would be a win for elon musk again, if twitter feels like they are on solid legal footing, they could sue and demand he by the company but then you end up with an owner who conceivably doesn't want to own the company, what does that mean for the future of twitter? that seems a messy. >> the whole point is to try to enforce, it gets messy. in the early stages of this,
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where there are other real suitors out there, people who thought, i wanted twitter and maybe this is my chance to take a bite at the apple. >> now, that adds a layer of confusion or messias here because if there was another buyer, that would be an obvious next move, particularly if the buyer was willing to pay some sort of premium. that buyer would have to be more reliable than elon musk and twitter must have known that. elon musk has a track record of being an unreliable buyer through his tweet saying he would take tesla private and that never happened and there were punishments for that. obviously, they knew they may be dealing with an unreliable buyer, it's still worth it even if he doesn't come through because we feel we are on strong enough legal footing, we
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could sue. if there was another buyer, they probably would've gone that route several months ago. >> do you think there are teams of people devoted to get elon musk, like they are so furious he is acting this way in public and is making a mockery out of the rule of law? >> i would have to imagine the leadership think so and elon musk probably think so as well. you certainly thumbs his nose at the fcc whenever he gets the chance to and is not shy about it. this is an existential question for government, what happens if someone doesn't care about regulations like this? you can only find someone so much money if they are the wealthiest man in the world. fines won't change a person's behavior when i have that type of money so i'm sure they are scratching their collective head to figure out if there's anything else they can do here. cnbc alex sherman reporting. starbucks down 15% since
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howard schultz returned to the company as ceo, now five bold names to reinvent the chain. we have the details ahead. the biggest market player you never heard of, managing more money than all behead shuns combined. take a look at the dow heat map, evenly split as we are near session highs, still down a couple of points but boeing, disney and nike are waiting on the index while merck is leading the way. we will be back after this. who depends on it. solving today's challenges while creating future opportunities. it takes balance. cla - cpas, consultants, and wealth advisors. we'll get you there.
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welcome back to "the exchange" , time for show and tell , we are talking shares of cosco, up more than 20% how he is digesting calls for an economic slowdown, i had. >> everybody has a different way of explaining recession, income, what are you able to buy, there are recession, buying gas and making house payments. for people with higher income levels, >> they have not been immune to pressures, a number of items but they did say the dollar 50 hotdog and soda combo will not change.
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good afternoon, everyone, here is your update at this hour, one dad and five others are wounded after a shooting at a kansas city bar where off- duty officers were working security, details on what caused the disturbance but all three officers returned fire when the shooting record. nasa is set to refer images from the $10 billion space telescope with president biden doing the honor. the event will be live streamed in the images will be available on nasa's website, the chief says these will be the deepest images of our universe that have ever been taken. the real housewives of salt lake city pleading guilty in her fraud case. shaw changed her plea to guilty in a fraud scheme that prosecutors said preyed on the elderly. she faces amounts to mom penalty of 14 years in prison. tonight on the news,
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funeral will be tomorrow but the investigation into the shooting continues, new details on the former prime minister's assassination at 7:00 eastern. new signs the housing market is starting to call but market is starting to call but mortgage rates have fallen nu zillow down 4% today but one analyst is upgrading stock, expecting it to outperform, we will examine that case. "the exchange" is back in a few. r skin. at fidelity, your dedicated advisor will work with you on a comprehensive wealth plan across your full financial picture. a plan with tax-smart investing strategies designed to help you keep more of what you earn. this is the planning effect. what if you were a global energy company? with operations in scotland, technologists in india, and customers all on different systems. you need to pull it together.
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sitting on a very strong deficit on inventory, put pressure on prices. >> if you are thinking about selling, definitely sell now, why aren't we seeing the rush of people behaving that way? >> the reason inventory is not because of a slowdown in buying, that is why you are seeing inventory levels grow, look at the number of homes
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hitting the market, they are at the levels they have been, more type taking place, the other reason behind it is, a rise in inventory as a detractor, if you look at the 3% interest rate , selling buying a 6% interest rate, a deterrent and making the transaction. >> to that point, the doubling to levels we haven't seen in 15 or 20 years has been surprisingly not that big, is that because there's still a lot of cash buyers or institutional buyers or this
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trade down affect you were describing? >> you will see a but i think it will take some time. you will see varied affect and timing across the country, areas like san francisco, yours in the markets turn. boise, austin, starting to see some of that. and markets like florida that are some of the hottest markets in the country, you have massive inventory deficits. you are seeing that activity, but to some degree, those markets are becoming unaffordable so you see those aspects there as well. >> one of the biggest debates is what to do with homebuilders when some are trading at 2 1/2 to 4 times earnings, not that you are an analyst but what you make of the fundamental demand story for new homes in the next six, 12, 18 months at this point? >> we have had an unfair supply for the last 10 years, i think there is still demand out there
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and we are still 54% short on supply, so i think there's still room for growth in terms of building in the market that you are starting to see that landscape shift here over the last few months, certainly. >> it doesn't paint a picture of me a market falling off the cliff, maybe something i should mention is this point you have made about credit scores, which are dropping. >> the reason you are saying credit scores dropping, this is on the lending aspect of the market is when you see rates fall like you have, you see hi byars russian, they are the ones refinancing the mouse early on and as rates began to rise, other borrowers step away from the market, so it's just secular behavior. but if you look at the health of the mortgage market, the average credi score is still
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above 750, it's the strongest we've ever seen it. from the perspective of the strength and stability from homeowners, and is the strongest we have ever seen. >> we appreciate it. andy walden. speaking of housing, let's take a look at zillow, down today despite wedbush upgrading and raising its price target to 41. shares are currently just under 34. the analyst say it leaves them in a interesting position with the cash balance sheet that could lead to share buybacks. they have the time and the cash to get it right. zillow has had a tough year, down 39% prickett still down 71% from its all-time high and its market cap is down 8 billion, down from 25 billion in
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october 2021. still ahead, we will take you inside the $6 trillion world of family offices. they sound cozy and manage more money than hedge funds and they don't have to follow all the rules. dual lingo down 12%, telethon and a quick look at the dow, it turned positive for a drop, fighting for a 13 point gain right now. we are back after this.
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is this like " cribs?" >> maybe not that exciting but we launch the series today with an interview and big article because they are larger than all the hedge funds in the world and they are competing directly with venture capital and wealth management firms. family offices now manage 6 trillion in assets. that is more than 4 trillion in hedge funds. there is about 10,000 family offices around the world, up tenfold from the early 2000's. more wealth at the top and a shift away for families with at least $100 million or more in assets. they are also shifting away and how they invest, away from publicly traded stocks and hedge funds and more towards direct investments. they are buying companies out rate without a middleman. they recently bought half of the 2 1/2 billion dollar digital consulting firm, found that family offices have a
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third of their assets and equity, 20% in private equity but by far fastest-growing segment. of course leading to calls for regulation after the $20 billion congress is sponsoring bills to report their size, their positions and executives to the sec, they don't pose a risk for additional investors, the regulation would not have prevented the blowup and you can read our investor interviews on cnc be pro, that is out today. i understand on the one hand, people go, it's my family money, i can do whatever i want with it.
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on the other hand, if these are just hedge funds acting as family offices, it seems like they are using a cozy term to skirted the realities of what we are doing. how do we know? >> how many investors are affected, regardless of their size, and they can impact a lot of sectors of the market because of the $6 trillion. if they are not endangering regular retail investors, the fcc might argue that they should not be regulated. other say, given they can do whatever they want, they can leverage as much as they want, they can do things and not report any of it. >> has the term family office become a misnomer? we know wealthy individuals who have a quote unquote family office but is that term what we think of it or is it an old term being used to apply to a typical range of investment activities and the like?
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>> these are global investment advisors but basically, they are dressed in the cloak of a family office but they are hiring the top talent on wall street, managing billions of dollars, across the globe, if you took the family office name off them, you would say this is a global investment company. they don't have to report anything. that's also why it's important to tell our viewers, what they are doing with their money and where they see opportunities that other investors could also payback. >> we follow the money and this is where we are finding it today. it's been a tough year for restaurant stocks, they've been hit by inflation, now recession. mcdonald holding up better than ants former, aaa, we will speak
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with an analyst who says that is the scenario restaurant investors need right now. starbucks new interim ceo, he has pnsla to remake the company he made in the first place. stock is down since he took over, we have what howard schultz has in store for starbucks, next on "the exchange" . do you have a life insurance policy you no longer need? now you can sell your policy - even a term policy - for an immediate cash payment. we thought we had planned carefully for our retirement. but we quickly realized we needed a way to supplement our income. if you have $100,000 or more of life insurance, you may qualify to sell your policy. don't cancel or let your policy lapse without finding out what it's worth.
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restaurant stocks have been under a lot of pressure this year have there have been rising food prices to the labor shortage, whether it's chipotle, wendy's, shake shack, all down double digits, the restaurant should hope things could be good for the sector. we are covering restaurants at web bush. people have been tweeting how you can possibly say this, so what is the thesis here? thanks for having me, restaurants need to reset. when you look at restaurants, you know, just as a sector by itself, you can really understand why they would be doing what they are doing. we have 18% cost inflation, double digit labor inflation,
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we can't have sales with what we need in any environment to grow. ultimately, what restaurant investors as a recession, lower food costs, labor costs, i mean, look at 2008 220 10 period, that is exactly what happened. >> it's not that restaurants want a recession, ants inflations are so bad, sometimes that's the best they can hope for right now? >> that's the only solution at this point, you can have this ongoing inflation, we don't see if it goes away even if food costs normalize. how long can it take? groceries are even higher than that. we really do need a reset here. >> again, i love this comments the macro argument we are having but some say that reset
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is happening organically and things can go up to the men and they are going to correct, explain why you think that might not place on its own? the expectation of a recession is actually showing up already, right? seen things like we have feed costs that tend to be leading indicators of overall food costs peaking in and having come down along with the overall commodity complex and things like copper, gas, et cetera. >> there are early signs that inflation need to be based on expectation in the recession, and so hopefully --? i know you're not trying to make the call yourself whether we'll actually be in one or what month or what time, but what would you say when priced into the restaurant stocks? can you own them here or do you have to wait >> i think it's having to be
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skewed toward reward and the sentiment is -- you know, and they're covering the space the situation situation, even in a financial crisis, the valuations dropped and they're right under 14 times right now in terms of p-e and the very low 20s right now, around 20.8 p-e so i think if we're not at trough value within the valuation, we're there, again, that's barring liquidity crisis that results in a sell-off. >> sure. >> you know, blind sell-off, but you know, that few day is where they are in restaurants. they tend to happen before the last round of earnings revisions take place >> great point important point as an entry point. so wendy's i can see being on the list, even a wingstop. why dine equity? why would that be especially
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attractive here? >> dine, they own ihop and applebee's and a complete franchise forecast they generate over 10% free cash flow right now so they can buy a ton of stock the balance sheet is certainly much better than they would carry. applebee's is stable and some would argue a low percentage grower top line versus a contracting story for years and years. >> right >> so that story has transformed dramatically, and so i think that's a name at 10%+ free cash yield and the investors can make bigger mistakes out there. >> and they have it's been balance sheet transformation post covid that a lot of people like myself would have thought thanks for the call. nick setyan of web bush.
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shares of starbucks are down 10% with howard schulze back to turn things around and kate rogers has more >> howard schulze has the company's next chapter he has been meeting with companies and suppliers and said in the record, it's clear we're living in a changing world where societal pressures are colliding. starbucks business as it is built today is not set up to satisfy the evolving behaviors and needs of our partners or customers. to modernize the starbucks experience schulze tells partners he's introducing a new set of principles to guide the process. they are safety, welcoming and kindness in stores advancement and opportunity for partners, well-being for one another and communities, shared power and shared accountability and shared success
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the programs will be reveal in the weeks to come. new programs under schultz like wage hikes and additional training did not immediately extend to the unionized stores and those benefits needed to be added into contracts with the stores since they organized. this comes after a weekend of workers on strike in buffalo and seeking injunkctive relief for fired workers. >> also awkward they had to pull the breakfast sandwich because food was one of his big things and i don't know exactly what the deal is there. how are the unions responding to this >> pretty rich to put out a letter like this on a day after coming after a weekend of strikes and they sent over a statement in part thousands of workers are organizing to make it a better company to work. if howard schultz was better at imagining and the unethical
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union busting campaign and work with us. they are clearly not happy and continuing their fight there, but again, he did suspend the dividend when he did take over in april remember they were investing about a billion there ares in wage hikes and they did institute wage hikes and training which was one big sticking point for the union stores and it needs to be negotiated into these contracts with the union organized stores so kind of a messy situation >> thank you very much, our kate rogers >> speaking of messy situations, europe is caught between a rock and a hard place they want to go green, but they have to keep the lights on yi nl tell you what they're sangow and what stocks could benefit. stay with us ♪ ♪ new crepe corrector lotion only from gold bond. champion your skin. (vo) this is more than just a building. it's billion-dollar views. perfectly located. an inspiration.
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♪ ♪ europe is facing a potential energy crisis trying to provide power to heat homes and cool them while also fighting climate change program lawmakers
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officially classifying nuclear energy as greens pippa stephens is here for why it could be a boost for uranium stocks >> this green classification is a huge win for nuclear power because it falls under the eu's taxonomy which decides what is sustainable economic activities. owe so nuclear's inclusion opens the door for hundred of billion of there ares from sustainability-focused investors. it has a fair share of critics and it comes as europe's energy crunch forces the bloc to look for alternatives including nuclear power. usc telling me the demand outlook has shirted from just a few months ago so far that hasn't translated to gains for uranium stocks they're sharply lower for 2022 camco and next gen energy are feeling mixed.
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arthur hyde says these stocks have been unfairly hit by action and independent cycles he's maximum bullish right now give then sea change for nuclear power since russia's invasion. >> you feel like it has to be so we'll watch to see if the stocks catch up pippa, thank you very much our pippa stephens that does it for us. we'll look at one area that could be a tipping point that's next on "power lurnch. i'll see you there and we will welcome you over here to "power lunch" in just a moment, kelly. welcome, everybody i'm tyler matheson, here's what's ahead a top analyst says sell. sell meta, the estimates are too high and competition is intensifying and it may take a long time to payoff and we have the call of th


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