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tv   The Exchange  CNBC  July 22, 2021 1:00pm-2:00pm EDT

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chick this summer at the shack it's propelled for double digits >> farmer jim? >> stevie wonder stevie weiss is right about qualcomm get on that right now. >> all right, steve. >> so josh does do fundamental work i'm going with freeport which i added to during the show today >> all right great stuff. thanks for watching. "the exchange" starts now. thank you, scott i'm kelly evans. here's what's ahead this hour. bitcoin's wild ride as the rebound in prices continues. we'll speak with the ceo of grayscale about the recent price swings, the fed's concern about stable coins and the grayscale push to become an etf. plus, a blue chip check from american express to intel to apple, even microsoft. some big numbers of the dow making headlines and making moves. the news of the trade on all of them straight ahead.
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the ceo of alaska airlines joins us about earnings and the state of travel and the future of travel across the u.s dom chu is here with the latest. >> the travel and leisure stocks reopening trade helping bounce off the lows from monday the markets are taking a breather the dow, call it flat on the day so far just a tiny bit to the down side the s&p 500, 4360 the last tray there. almost right at the flat line. the nasdaq outperforming only up by 0.2%. 14,656 the last trade there. as for some of the companies in the news so far today, one thing these companies have in common, microsoft, oracle, alphabet, all up fractionically or decently on the day. i get to put four stars up here. each of these companies hit a record high in trading so far today. the megacap technology trade you were just talking about, even
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components of the dow doing well in today's trade and domino's pizza, the best performing stock in the s&p 500, up 14% year to date. brings the total up 39 why? they came out with a better than expected report on earnings and revenues and their comparable sales continue to go higher in the u.s. what's driving it? new menu items i don't know if you've tried the cheeseburger pizza or chicken taco pida. >> do they shave some gluten fre stuff? >> a 13% move is a huge one per dominos which is almost 40% year to date. dom, thank you speaking of big moves. the price of bitcoin is rebounding from monday's big drop below 30k it's on pace for his third positive wake and institutional interest is still strong jpmorgan is going to let wealth management clients access crypto coins. my next guest is the ceo of
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grayscale which is moveing to turn the trust into an etf the space is getting more crowded as global x filed its own application for a bitcoin etf. let's bring in the ceo of grayscale. it's great to have you are you surprised the s.e.c. hasn't figured this out yet? >> thanks for having me. kelly, we've been in active dialogue with the s.e.c. dating back to 2016 they've remained highly engaged with the industry and market participants like grayscale. we continue to believe that an etf is really a matter of when, not a matter of if, and certainly over time as the market matures we'll see those moves toward bitcoin etfs, including the conversion of gbtc to an etf. >> you've made moves with bnt mellon to set this up. you are the first, the biggest mover in this space. so big that whether you're trading at a premium, it's set to be one of the biggest movers of the price itself. you're huge in this space.
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what happens as others, including well-known names like kathy woods also file etfs and presumably could all be available on the market? >> well, we don't believe a rising tide will solve those the grayscale team is hard at work on getting ready for an etf conversion working with trusted longstanding service providers like bny is just one more step on our path towards becoming an etf and ultimately, we believe the digital system will continue to mature and not only bitcoin etf but etfs based on other digital assets as well >> what do you think the biggest attraction is for a bitcoin etf? kind of tax efficiency, if you're buying the underlying itself as opposed to trading with the etf you might run into issues there or the clunkiness of buying and selling, it still takes awhile, not aess to execute in bigger sizes? who has the biggest interest in access to these bitcoin etf products >> i think it krael speaks to
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the heart of what we're doing at grayscale. crypto, although it's super developed and is attracting interest from wall street and retail investors alike, accessing crypto remains a challenge. where to buy it, how to transfer it, store it and safe keep it. investors looking to either grayscale products or eventually etfs will really give them that familiar and ease of accessibility around an asset whose characteristic may look and feel a lot different than the way they may access stocks, bonds, etfs and other investment products >> do you think stable coins present a systemic risk to bitcoin and one who may frustrate those who watch bitcoin sort of in its first initiations now fall subject to either leverage or shadow banking or whatever you want to call it to the kind of yield games if you want to even go that far that are attracting people into the space for those yield products but now are creating a lot of concern about their viability and may even prompt the fed to intervene and replace them with some kind of
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central bank digital coin? >> well, what we're hearing from our clients now is a trend toward diversification within their crypto portfolios. and so while a few maybe a couple years of ago you would have asked me this question, everyone's first foray into this asset class was bitcoin or etherium now looking at stable coins, the confluence of digital assets, along with gaming or file storage and so i think a lot of investors are getting excited about all of the new and differentiated use cases popping up around digital assets and stable coins are no exception to that rule either >> one final question just about bitcoin and ethereum themselves. you talk about how important your products are into the flow. what does demand look like you're trading at a big discount right now. what would remedy that situation, and kind of what do you foresee as the major drivers
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of price action as we get into the back half of the year? >> you're referring to the grayscale bitcoin trust gbtc is trading at a discount today. we see them stepping into it at a discount the reason they're doing so is because they have a long-term conviction for their bitcoin exposure and capital deployed at a discount will allow them to control their own more bitcoin if they were deploying that capital into the market. ultimately we think the product will trend back toward its net asset value and when gbtc converts to an etf in that format there will be arbitrage mechanisms built into those products that will arbitrage away any discounts or premiums and see the product trade close to net asset value >> we wait for the next moves from the s.e.c. perhaps as they look to resolve all the outstanding questions about crypto michael, thanks for your time today. we really appreciate it. >> thank you
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now from the vanguard to the old guard, let's get a check on some of the biggest blue chips in the news today. next week is the busiest week of earnings season but we'll hear from a few dow components this week one of them is the best performer in the index in 2021 it's american express. goldman sachs is on its heels. axp is up year to date can it hold on to the gains? moving on to another dow stock, microsoft reports tuesday after the bell it's up 28% this year. there's a new street high price target on the stock today but we'll get into all of that in a moment next up is intel the company announcing a partnership with an indian company to provide 4g and 5g networks there as the company works to regain its footing under the new ceo. the stock is hanging on to a 12% gain this year it also reports tonight. and finally, apple it reports next tuesday but get this, it's actually trailing intel this year. shares are only up 11% since
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january but some on the street are anticipating strong results next week. they expect solid demand for iphones and macs and hiked the price target to 175 today. here to drill down on all of these stocks, let's welcome in cnbc's own jon fortt, gina sanchez and todd gordon for trading analysis.com and also a cnbc contributor great to have you guys all here. let's kick thing offs with american express, todd how can they stay ahead of the pack >> the stock looks great i think they have a good valuation. trading 22 times forward earnings they beat expectations handily the last two quarters. kelly, they restructured their platinum card and that's preferred by travelers obviously as the economy is reopening and hopefully the delta variant doesn't gain more momentum they should see a boom in that travel department. also changed their benefits rewards on the travel card i expect axp's performance to continue >> do you think they have to be
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looking over their shoulder at the payments innovation that's taking place >> well, i do think they have been for a while and things like the cabbage acquisition allow them entree into that space but more, it is just surging that corecustomer and probably not taking their eye off the ball too much with all the fintech hype some of it is long-term important but not all of it. >> gina, would you be a buyer of axp here >> they have a lot of tailwinds that are the just broad with regard to the reopening. everything about what they're doing in terms of making their forays into further fintech ventures or just servicing their core business, all of those are benefiting from the fact that the economy, even with the delta variant is still reopening and we're seeing such increased demand that axp has to benefit >> incredible to look at that chart. just straight line up and to the right year to date let's move along and talk about
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microsoft which is hitting its own all-time high after a vote of confidence over at citi the firm hiking its price target from $3.10 to $378 microsoft at 284 it's a new street high it's citi's favorite in mega cap software also the third best performer of the blue chips and best performing tech company in the dow. what are your thoughts on this one, thawed? >> how do you not like microsoft? look at a chart. i'll go to the technicals for a second look at the chart. it just goes straight up not a trading stock. of you just hold it. technology led by microsoft has been rotating in since mid-may tech comes back and it's being led by software. watch that microsoft is hitting on all cylinders. it's got productivity with office cloud computing with azure, i.t. budgets are coming back, the corporates are spending and the work from home trend is here to stay people need stronger machines and more capabilities that perform their tasks.
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fundamentally, free cash flow microsoft on a quarterly basis was anywhere from 8 to $12 billion. they just bumped up to $17 billion last quarter so really strong move there. looking -- thinking of making about $1.90 per share up 30% year over year microsoft is another stock you hold >> anything that could change the huddle mentality when they report next week >> well, you know, you look at the two largest segments two laenget segments are cloud computing and gaming, surprisingly those make up 30-plus percent each of the revenue. so that's really where you have to look for the outlook for microsoft. and i think it's going to be hard for them to stumble just because so many things came up they were already on a trend to grow that cloud computing segment and then the pandemic hit and work from home and now this hybrid work model is starting to take root. business continuity became an issue and all of those things play right to microsoft's core strengths. so, you know, if you are
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watching these earnings you are watching what they are saying about cloud and gaming >> this is relatively uncontroversial, jon, i'd like to talk about one that's a little more controversial. intel. they are on deck to report its earnings in a few hours. huge moment of truth for the ceo gelsinger. what do you think expectations are going into results this afternoon? >> i'm not sure it's a moment of truth. it's important especially to see how margins are doing and color around supply in chips but we've got to remember, investors have to remember that also on monday, intel will be talking about process technology and the fabs and sort of their vision technologically going forward. now a lot of investors are waiting until november sort of the analyst meeting to form their opinions about where the stock goes from here this technology piece that we're getting over the next few days, partly in the earnings commentary and partly on monday is important for anybody trying to get ahead of whatever is coming i'm going to be talking to pat
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gelsinger today. you can see it tomorrow for insight on that, too that's particularly important here got to remember, they are up against a bunch of stuff not only the chip issues overall but tough competition from amd and nvidia and this foundry strategy a lot of people have doubts about investors want to hear details around that plan and that it's going to work. >> todd, last week it was interesting to watch reports about intel looking at global foundries and in jon's interview with the ceo he said, no he's emphatically. investors thought about the deal even speculatively weren't really thrilled. thought it may be a distraction, margin diluted, might be another costly way of having to double down on this new strategy. from a trader's perspective, what do you think about the stock? >> from a trading point of view, it's dead money, specifically in the semis. so the stock was trading at $55 back in may of 2018. that's where it is now you compare that to the semiconductor holders smh from
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105 up to 255 right now. the global foundries is interesting. it's on the table for $30 billion. this will allow them to compete or attempt to compete with taiwan semiconductor which i hold and interestingly, global foundries just relocated headquarters 20 minutes from here i'm in saratoga springs. they're in malta apple took all of their business away from intel with the new m1 and m1 chips partly made by taiwan this will allow them to compete. so i think they have to do the deal to get back in the game >> a quick word on intel >> i agree lido advisers owns intel it's the least favorite of our holdings because nvidia is a strong competitor and taiwan semi on the foundries. they have to make that play if they'll stay in the game >> our least favorite. tough. if you look at -- let's talk about some apple even though we're talking about intel and the less than growing terms, apple is trailing intel
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in its performance year to date. the earnings coming out next week, gina i'll start with you. are investors okay giving it this pause is it kind of the pause that refreshes or are earnings themselves seen as a bit of a headwind here? >> it's a big question because they've gone so long in their product cycle. what you're seeing is this demand for legacy phones that's actually helping string out this cycle, this kind of iphone 12 cycle. and that is going to benefit them we own apple in our portfolio and so we still think that there's something there. but it's a story that has been not as strong and the price reflects that. >> and jon, what would you add about apple and what, you know, it's in a weird way a transition year they've done quite well from pandemic demand like some other stocks you'd put in that basket. the question is, where are they heading now? >> they've had such a strong 2020 that in a way you have to
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look beyond the year to date on apple to get a sense hough it's done if you're comparing it to apple or microsoft or whatever but i think particularly when it comes to the transition to the m1 chip, they haven't transitioned their entire line yet but adobe just announced some major products including premiere that are now native on m1 that's going to be important for demand so how apple talks about that rollout to the extent that they do to the extent they're cautious about the flooding in china where so much of the assembly for the iphone takes place. it's interesting they haven't yet updated the iphone se. perhaps to make sure they have enough chips to make higher margin phones. all of that kind of color commentary they have around chip supply and the timing of their launches later in the year will be important and then put alongside that, the refreshes in the apple watch and air pods which have been such big moneymakers for them it's going to be a big fall and potentially a big fall for apple because they set themselves up well so far with the iphone 12
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and 5g >> apple, love it? >> love it largest holding in my portfolio besides nvidia for individual stock holdings totally agree with jon this 5g supercycle is beginning to materialize the revenues up 50% year over year anecdotally, i was on the beach on long beach island two weeks ago. on the 5g phone, i was getting 2 gigabyte download. i'm paying for business internet we could live stream from the beach. this 5g -- this is real. they are generating massive amounts of free cash flow and plowing that into stock buybacks they could produce free cash flow next year going into share buybacks the gross margins are 37%, 39% they just pumped up to 42.5% so the margin is getting better i know the stock is underperforming but look what it's done over the last five
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years. another one like microsoft you just have to own it. >> now we need to see you on the beach and compare the quality of the signal >> i'm in. >> thank you all very much coming up -- are munis the big money play one strategist says they're the best bet for high net worth investors looking for a tax haven. plus, shares of alaska air trading higher after reporting a smaller than expect second quarter loss we'll speak with the ceo about the quarter, covid and the airline's plan to add more flights in the second half of the year stay with us >> this is "the exchange" on cnbc ♪♪
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welcome back the prospect of higher taxes is pushing many high net worth investors into muni bonds. municipal tax exempt bond funds saw record inflows of $57 billion in the first half of the year that figure is nearly $10 billion higher than the previous six-month record set in 2019 my next guest says we should expect it to continue. joining me is dave rosenberg from rosenberg research. we don't talk to you about munis that much. it's nice to take a different
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tack here although they'll ask you about rates more broadly how attractive are they for investors? >> well, i think that the premise of the report i published was a relative value trade because nothing is trading at any of these levels, including the stock market that, if interest rates, i'm talking about in the treasury market, were as low as they are right now. we went through all the different parts of what's called scrap products high yield and investment grade corporates, asset backs, mortgage backs, credit cards, the whole gamut. and we found that in the muni space, it's actually the only part of the nontreasury segment of the bond market that's trading at interest rate spreads off the government bond market that's higher than they've been in the past. so it was really more a relative value trade that they are basically trading off treasuries much more attractively than all
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their competitors in the credit space. >> is there concern? right now it seems like, if anything, state and local governments are flush with cash. i keep seeing headlines about california and new jersey and they are returning money to taxpayers and all this stuff is there some longer term concern? i don't know if munis are typically a concern but concern about the soundness of the funds, is that why the spread would be higher? >> well, i think a lot of it, kelly, was because the muni market got absolutely smoked during the pandemic and in the aftermath. everybody thought that the housing market was going to implode, that municipal, state and local government revenues were going to tank and so we found out since that when you consider where they get a lot of their revenues from property taxes look at what home prices are doing. we've got the housing data today. resale pliss up more than 20%. it's just going so much
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stronger people talk about, look, you are buying equities right now because everybody is talking about how strong the profit streams are. look at the revenue streams. they are bringing that in on top of that, there was a huge gift from joe biden in march because part of the fiscal package was that $350 billion of federal government transfers to state and local governments. and at the same time it's interesting to see that there's still holding the line on costs. so that even as the economy has come back, when you look at employment in state and local, and it's a very labor intensive part of the economy and employment is still down more than 5% from where it was prepandemic, so if you're looking at state and local governments as you would a corporation in terms of the revenues they're bringing in benchmarked against the cost, their income statement is looking phenomenal >> interesting >> i just don't think it's fully priced in. when you measure where their spreads are compared to other parts of the spread product
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market i still think this has a way to go >> let me does you one final question, but maybe you could kind of be of interest in muni investors and investing public more broadly. do you think the ten-year benchmark yield should be down near around 1.2% for a considerable period of time? >>. >> i actually along with scott mainered and others when it got to 1.75 on the ten year i was in my daily saying this is overdone and we'll get down toward 1s%, which we almost did. so do i think that bond yields should be where they are right now? i know people will say inflation is too high, but i think inflation is going to come down more than people think next year but i think more to the case on the 10-year. the real rate will go more negative because i think actually, third quarter gdp growth will come in close to zero i'm looking at a consensus that's still 7%. nothing i can do is going to get me close to 7% third quarter
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growth so i think that as the economic surprise indices come down, you'll find the 10-year treasury note yield probably is going to go back and retest those lows of last week if not go lower. i'm quite bullish on the treasury market right now. >> all right, dave, thank you for your perspective dave rosenberg with rosenberg research coming up -- this stock is trading at an all-time high after delivering an earnings beat plus, the meme stocks are on the move we'll show you the latest trading aconnd hti aow the shorts are faring. we're back in a moment
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unleash your potential. uipath. reboot work. welcome back to "the exchange." the dow has gone negative again. it's barely hanging on there fluctuating back and forth at the moment. the s&p up 4 points. tech and health care are leading the pack as you might imagine. financials and energy are lagging. there's the sector picture tack up 0.6% financials look much more notable decliner with a 1% drop. for the individual movers, texas instrumtss down after earn,s results beat estimates but the company is still worried about the global chip shortage and they don't know how long it could last that's nearly a 5% drop for txn. csx is moving higher shares up 4%
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chipotle is extending its record run following tuesday's big earnings beat. up 14.5% just this week trading at an all-time high. the best week since last april let's get to rahel solomon for a cnbc news update >> here's what's happening at this hour. the northern california wildfires have crossed state lines into nevada prompting new evacuation orders for residents in the area. more than 1200 firefighters are battling the fire that's already consumed 200 square miles of forests. massive flooding continues in central china as local officials raise the death toll there to 33. then tens of thousands are still being evacuated while rescue teams are being sent in. on the news as the heavy rain rages on in china, officials are estimating nearly 3 million people are still affected and the economic losses could reach $200 million first energy has agreed to a $230 million penalty for bribing
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two former politicians this is according to charges released today the ohio-based electric company is accused of paying millions in kickbacks to help pass a $1 billion bailout. and guinea is pulling out of the tokyo olympics over concerns of a resurgence of covid variants it means five athletes from the african nation will miss the games. guinea joins north korea as the only other country to withdraw >> kickoff is tomorrow night at this point, the opening ceremonies shares of alaska air are climbing after the company expected stronger than expected results. a 1.5% gain. we'll talk to the ceo about the numbers and travel demand and more in an exclusive interview ghafr isreak don't go anywhere.
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welcome back shares of alaska air moving higher after the company reported a smaller than expected loss and beat revenue expectations the stock outperformed some of its biggest peers including united, delta and jetblue. for more on the results and future of air travel let's bring in ceo ben minicucci with our own phil lebeau. phil >> kelly, thank you. ben, the spike in the stock in
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the middle of the day came during your analyst conference call i think it's when you said you expect to be fully back to levels beyond 2019 sooner than expected paint a picture for the second half of this year if you could and are you worried about any impact from the delta variant slowing down the growth that you're seeing? >> well, yeah, thanks, phil. thanks for having me yeah it was a great second quarter and i have to give credit to the people of alaska airlines it's just a great performance. we were close to break even. we beat the industry on pretax margins in the second quarter. and as we look beyond, the third quarter looks strong we're projecting double-digit pretax profits in the third quarter. single high digits in the fourth quarter. and i mean the question on the delta variant, the question is we don't know. what we're seeing right now is no impact to our forward looking bookings but one thing that we've done at alaska has really been prudent how we deploy capacity
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we're trying to match capacity and demand so we're going to watch this delta variant closely and hopefully our momentum will continue strong toward the second half of the year. >> ben, to meet that added demand you announced today you'll be bringing back ten airbus aircraft to meet that need for more passengers, more flights. i'm curious, during the pandemic, we saw a number of cities, say boise, say austin, texas, other places in the western half of the u.s. became very popular you've added flights to those cities does that continue do you think that lasts or do you look at that as saying that was unique to the period we were in because of the pandemic >> you know, phil, i think that's not just unique to the pandemic we've added 50 new markets since march of 2020. and i think people are just hungry to go to sun destinations and outdoor destinations we're back to over 30 flights a
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day from our west coast hubs we added boise and austin. we increased flights to tampa. we've expanded cancun and jackson hole is another one we've added that's doing extremely well so we're bullish on those sun destinations and outdoor destinations, and we're so uniquely positioned here in the pacific northwest and the west coast to go to those destinations >> ben, it's kelly here in the studio thanks for joining us. just have a question about the mask mandate still in place. how much of a concern are airline incidents to you as a ceo, dealing with flight attendants we've talked to a lot who have a lot of morale and safety concerns and a lot of executives don't want the mandate to become a lightning rod for issues itself with delta on the rise it seems that could continue for some time. how are you likely to handle this in the months ahead >> yeah, it's a great question i was just -- just poked my head into a recurrent training beside me and we just talked about
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that we're fortunate we have fantastic flight attendants who deal with the issue in a kind, caring fashion but i think the answer to the question is, we'll wait and see i hope science and data dictate the outcome of the mask mandate. i think what the industry has shown is that the air on board an airplane is extremely safe. it gets recirculated the hepa filters the air flows from top to bottom we're hopeful as an industry that as this gets reviewed, science and data will tick date the outcome of whether masks continue or not. >> ben, you mentioned going and taking a look and poking your head into the flight attendant training seminar how is staffing going? a number of the carriers have said we ramped up service so quickly we just did not have the staffing that we needed. as we were bringing back flights. are you concerned about staffing and being able to find the talant t talent that you need for the second half of this year and
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going into next year >> great question, phil. first, i'll start by saying our operations team have done a fantastic job. in terms of on-time performance and completion rates we were near the top of the industry our operations team did a great job. in terms of staffing, we have seen some issues and some places across the country, i think a lot of companies, our industry is feeling some of the shortage. in particular for seattle, it's a hot labor market here in seattle. so the area we're seeing the most constraint is at the entry level labor area particularly for our ramps so we've got a lot of mitigations in place i feel confident we'll get through it but i think we have to see what happens in the fourth quarter. as the stimulus effect goes away, the unemployment goes away, i think the labor market will find its water level. so i think we're going to be waiting it just a little bit to see where this thing lands before we make any huge structural changes >> all right >> ben minicucci, ceo of alaska
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airlines joining us. kelly, if you were listening to their conference call today when they said we expect to be back above the 2019 levels sooner than expected, they were expecting next summer, sooner, that's when the stock moved higher so i think a lot of people are watching that stock today and the commentary from ben and his team >> it's a great point. when there's not a lot of great news to look forward to on that front lately, it's especially welcome. thank you so much. phil below with the ceo of alaska air some of the meme stocks are lower but all bouncing back. we'll get the movers and the impact on the shorts next. at 2:00 p.m. eastern time, we're doing a special report on esg movement we'll talk to some of the biggest players in the space the rise of green washing and how to regulate it all we're back in a moment
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the moves and the hits that means the short sellers are taking >> goetting into this meme mani definitely ain't for the faint of heart we're seeing the share price of amc down 5%. gamestop down just up over 3%. other reddit favorites like context logic, blackberry also lower. these are a few i was able to pick right now despite the volatility and pressure from the online reddit crowd, aka apes as they call themselves online, many short sellers are still locked in for the ride over 13% of game stop float is short. these are numbers showing that a large group of investors are still betting the stock price will fall. amc's float that sees double-digit shorts and over 22% of bed bath and beyond is shorted. so what does this mean for the short sellers? and do they stand to lose a lot should they realize their losses well, in 2021 alone, gme shorts
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so gamestop, are down $6.3 billion in market to market losses agone, they have to realize them for amc almost $4 billion of potential losses and bed bath and beyond, they could face a shortfall of about a billion dollars in realized losses so the volatility for gme, amc continues as the drive to push these stocks higher stems from short selling practices like the use of dark pools and naked short chicago is short sellers that don't register their stocks as borrowed. so joining the meme mania from either side of the trade means substantial risks should not be ignored. >> that's a great point. come over if you please. the question also is not just how the trade bears out but can the trade fundamentally change the dynamics for these companies? we've seen amc where they're trying to do share offering ofs to shore up their future >> trying to that's the key, right? trying they weren't successful the last time >> how is it shaking out >> resistance from shareholders. with amc, they're probably in a
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more dire position financially than gme going forward, gamestop gamestop said they have a turn around plan. they want to focus on online sales. they want to be as ryan cohen said the amazon of gaming. and so for them, that could be a potential if they actually get that plan in place they are still facing about $445 million in just their leases so they have a heavy, heavy physical footprint they'll have to reduce. amc, the problem is where do we see that company, let's say, 12 months from now when we really factor in how much people are going into the movie theaters. especially with the simultaneous showing. >> you have people looking at box office figures saying they're not on the rapid upswing. >> have you been to a movie theater lately >> i'm not the best gauge. >> i went to see "f9" and it was completely empty on a tuesday evening, which is cheap night. >> not only because it's cheap n night. >> but if you're not going to get that excitement now, that
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can't portend well we'll see you in a moment as well 2:00 stocks trying to eke out a third straight day of gains after monday's sell-off. we'll get the names one st ll nis f a says are poedor ray,ext. don't go anywhere. ♪ someone once told me, that i should get used to people staring. so i did. it's okay, you can stare. when you're a two-time gold medalist, it comes with the territory.
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welcome back a mixed picture for stocks today but all three averages are higher for the week. recouping monday's sell-off declines and now within 1% of record highs tech leading the pack today with microsoft and alphabet hitting all-time highs my next guest says don't chase the growth stock bounce. buy into the beaten down stocks instead. my next guest is here. david, at the top of the program, people were glowing about microsoft and why should they not stick with names like that that appear to be perennial google, facebook, microsoft and apple. they've done extraordinarily well in looking forward to the next 6 to 12 months they don't think that will be what drives the portfolio upside you've had a rolling correction over the last six months or the last two or three months, more specifically we think a lot of the groups that have corrected are poised
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to be the next leg up. it will drive them for the next six months we would be buying into the weakness of financials we think the group is very well positioned to do well. the stocks just gave back about a third of their gains >> david, didn't we speak about this a little while back when this was all predicated on interest rates going back up i don't know if you heard dave rosenberg, but he thinks they won't be >> we think the financials will do well. if interest rates do go up, and we actually fully expect them to go up over the next six months, we think financial also do well. the economy is strong. the delta covid virus will not derail the economy so we think you'll have strong overall economic growth. the employment numbers will get progressively better inflation is out there and rates are going to start to move up. the fedwill have to address this but rates are at an exceptionally low level. right now you could borrow money from the government for 30 years at 1.8%.
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that's absurd to be investing money for that period of time with that low a rate we think can you do better in a lot of stock dividend pairs have had a significant correction we think that's a great place to put money rather than in either these high growth, high p/e stocks or bonds. >> you think a company like microsoft should be called a value stock? >> when we bought it a few years ago, it was a value stock. now it's pretty fully priced we still own it because we think their prospects are very good but we're far less enthusiastic about it today than we've been it's cheaper than a lot of technology companies it's not a value stock right now. there are some technology companies that still fall into the value realm. cisco is a very good company we think it's a second derivative reopening play, 16, 17 times earnings. pfizer is a technology company at a reasonable valuation. so there are companies out there that meet that criteria but by
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and large we think technology is pretty expensive >> david katz, thank you for your take. we appreciate it david katz with matrix advisers. some of the companies in esg etfs like big oil, for instance, don't seem like they would fit the bill we'ldiin ts emg l g tohisein disconnect next. ♪ ♪ ♪ digital transformation has failed to take off. because it hasn't removed the endless mundane work we all hate. ♪ ♪ ♪ automation can solve that by taking on repetitive tasks for us. unleash your potential.
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welcome back to "the exchange." as we get ready for our power lunch special in just a moment, we first want to show you some of the biggest funds in etfs in this space, and this is the alphabet soup. you have things like the vanguard social index fund, ticker vftax it's up about 16% this year. it's top holdings. this is where people get upset on the top holdings including apple, microsoft and facebook. we'll talk about the g with companies like facebook. esgu is up 15% similar performance. top holdings, apple, microsoft, amazon and alphabet. alphabet raises governance the pernases has a five-star
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morning star rating. microsoft, comcast and cme and the small cap etf is up 13% in 2021 you can see the disparity based on small and so forth. bright horizons and toro are top holdings gamestop also makes the cut. we'll delve more into this in just a moment. that does it for "the exchange." i'll see with you tyler mathison for a cnbc special report, the esg revolution, which starts right now. kelly, thank you very much and welcome, everybody, to this special edition of "power lunch. the esg revolution along with kelly evans, i'm tyler mathison there's an investment movement under way on wall street money is pouring in to socially responsible sectors and stocks but there's also a lot of
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confusion and controversy. and questions about its actual impact this hour we're going to break down the issues. we're going to look at the e, environmental, and why there is so much focus on sustainable investing and the issues that are coming to light when we talk about things like being carbon neutral. the s, social. how is it changing corporate america's behavior and how do you define what being socially responsible really is and, g, the governance, with a focus on red flags, kelly, in the boardroom. >> and, tyler, we begin with the numbers. they're big and they're expected to get bigger. some call this the most important investing trend in decades. what are investors chasing, and are their bets paying off? kristina partsinevelos takes a look >> reporter: money pours into stocks that get good environmental, social and governance grades. for the first quarter of this year sustainable funds climbed 19% hitting nearly $2 trillion that's a record. the number of sustainable funds
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has almost quadrupled in the past decade. in the united states alone there are roughly 400 funds available. but an acronym worth trillions and yet no standard definition around the globe environmental, social, and governance, esg is a framework for assessing how a company performs in areas like climate change, labor standards, or racial inequality. with at least 30 esg data providers around the world, the ratings used for esg indexes are almost comecically varied. morningstar. in governance there's barely an agreement on what it means one ratings firm's opinion is of no guidance at all in guessing what another's will be but some argue esg scores bring returns. s&p analyzed etfs and mutual funds with more than $250 million in assets under management it found that from march 5, 2020, the day the w.h.o. declared covid-19 a pandemic, to
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march 5, 2021, 19 of those funds performed better than the s&p 500. the big question is, does esg change the practices of companies? a study published in may by the european corporate government institute shows it's unclear the authors found increased esg investment in companies did not lead the recipients of those funds to reduce pollution, improve work place safety or increase racial diversity on their boards so a direct change or not, the mind-set of an entire generation of investors is no doubt changing >> kristina, one of the other questions people have first and foremost about funds is the cost in other words, when people are buying access to what oftentimes is very similar to index funds and, like you say, raises questions how much difference they're really making, are they also losing performance in the former funds because they carry higher than, say, an index fund? >> reporter: true. but that's what the study that wa

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