tv The Exchange CNBC August 23, 2023 1:00pm-2:00pm EDT
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that didn't stop at the dispensary on the way to the set. i'm going with freeport. copper's turning i like it here i think it rebounds. >> good stuff. joey >> fleetcore flt. >> liz >> lots of currency volatility out there. i don't think it's ending. and what's good for that is gold >> all right see you on the bell. "the exchange" is now. thank you very much, scott, and welcome to "the exchange." i'm kelly evans and here's what's ahead can nvidia beat expectations when it reports after the bell tonight? the now trillion-dollar stock will also have big implications for the rest of the market is the ai boom cooling at all or not? we'll get all the nitty-gritty as we await this key report. plus charles schwab scales bac its office footprint just the latest example of tenants signing smaller leases and manhattan converting office space to homes we'll speak with one company that provides financing for some of those rather difficult projects and kick up your heels
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go ahead, lean back, recline and listen to what the ceo of la-z-boy is telling us about home shopping trends and the state of the consumer right now. are they seeing the same weakness plaguing dick's, macy's and foot locker or not we'll talk to ceo melinda whittington ahead. but first the markets. dom chu has the numbers and maybe a 1% rally >> maybe and if it does happen for the s&p, kelly, it would be the first time that we've seen an s&p 500 1% gain ogoing all the way back to june 30th. this is a rare occurrence at least in the summer trading months the s&p 500 sits at 4429 up about 42 points, or almost one full percent right now just to give you an idea, generally positive day even at the lows of the session we wereup nine points on the s&p, up roughly 46 at the highs of the session so again, just right below those session highs right now. but all eyes on the nasdaq composite index, currently up
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about 1 1/2% to 13,700 up 194 points. and a bulk of this year's 38% gain in the larger cap nasdaq 100 has been one stock and one stock alone. that's nvidia. artificial intelligence, data centers, the boom around that super computing and microchip company nvidia up about almost another 2% ahead of earnings later on this afternoon. and just to give you an idea of how high the stakds are right now, because it is such a bulk of the year to date gains so far in the s&p and the nasdaq, options traders are already pricing in what could be a 10% move up or down in this stock. and just to give you an idea, over the last eight quarters after it reports it's up or down about 8 1/2% so already expecting a slightly more than volatile report on average. so watch nvidia shares and then the consumer focus, as kelly points out it's a very mixed picture. but there are softening consumer trends and certain discretionary areas. we're hearing that from the likes of foot locker which cut
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its guidance for the second time this year on softening consumer demand peloton seeing some of those subscription weakness numbers as well kohl's, though, generally positive and abercrombie & fytch thanks to a strategic business shift to koomd different types of clothing and different demographics, that's up 24%. they raised their full-year guidance and by the way, nike is working on what could be a record ten-day losing streak right now. that kind of discretionary trade very much in focus but kelly, you've got to look at nvidia, got to look at the retail trade, it's setting the stage right now. some traders think nvidia, kelly-s more important than the fed's symposium out in jackson hole later on on friday. back to you. >> it's certainly going to be a fun what would i call it, 48 hours or more here, dom. i appreciate it. ten-day slide for nike that's fascinating since we have so many earnings movers lately that's exactly where we're going to begin today with our earnings exchange let's get the trades on nvidia and a couple other names about to report. our trader today is decatur capital ceo digas wright great to have you here
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welcome. we're going to save nvidia for last, and we're going to actually start with dollar tree today which is having another bad month after that dismal earnings report back in may. although shares are about flat on the year. they aren't immune to those shrink, or theft problems plaguing other retailers they also have to grapple with consumers opting for lower margin staples over discretionary goods. and thanks to inflation they've had to hike dollar goods to $1.25 and add some higher priced items. would you be a buyer here? >> yeah, so with nvidia what we're seeing is we've been owners of nvidia since 2017. so we got in at $73 and now we see a 400% gain. so we are holders of nvidia and we would actually be buying nvidia because as we look at our models we're seeing that this is actually still in the buy range of what we look at for overall forward performance. so that's why we really like nvidia, even at these heightened valuation levels >> let me circle back to that in
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just a second. if i may, while we're on the topic of dollar tree, i know that's probably not on the forefront of your mind right now, but are shares of dollar tree one that you think could be a compelling investment right now or would you stay away >> so with dollar tree this is really more of a turnaround story. as you know, mattel ridge hedge fund actually purchased about 10% ownership into dollar tree so this is still a turnaround story because they are really increasing their investment in four major areas one is increasing the wage and benefits of their employees. they're also increasing the supply chain and they're doing major repairs and maintenance on the stores. and lastly, they're improving the technology around all their systems. so this still may be a little bit too early to get into dollar tree but we would say that let's get past the print and let's see how they do because the economy,
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the overall impact on the earnings and revenue can still be impacted by four things -- the economy, obviously their customers may be more impacted with the economy, individuals with limited incomes also, the cost of the turnaround has a major impact on their ongoing costs. and that still may be a headwind and then lastly we saw that with dollar general, their main competitors, in june they actually missed on earnings, and that has significant drawdown on the company. so those are some things we're concerned about with dollar tree >> sure. all right. maybe mantle ridge can help them in the long run but you're staying cautious for now let me ask you about splunk. the shares are up 14% this year although down 9% in the last month. the company is also touting its ai implementation but it's unclear how many companies are looking to jump on that right now and its expenses are high. i think we're going to have the
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ceo here tomorrow, degas what do you think about owning these shares right now >> yeah, so splunk is a company that what we're seeing right now is we evaluate this company as really more a market perform we're not looking for splunk at these levels to outperform the market so we would not be buyers because it doesn't meet our buying criteria. and so what we're seeing, though, is that it does have top quintile profitability but also there's an issue of will they be able to continue the growth in their annual reoccurring revenue, and that's a concern because what we would like to see in the print is that they are talking about a 10% annual recurring revenue growth and we don't know if that's going to happen if that does not happen we could see a major decline in the stock after the print. so that's -- we're very concerned about splunk at these levels >> all right and we will see about that not
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only the results as we mentioned, we have an exclusive with the ceo here tomorrow, we can talk a whole lot more tomorrow gary steele will be joining the program, degas and you mentioned this off the top but i just want to circle back to it with nvidia you say this is a hold right now? you want to chase this one into the numbers or do you think expectations are way too high? >> yeah, so once again now, we've been holders, long-term holders. so for the new investor looking at this one thing they have to be concerned about is the valuation. now, the valuation -- and our models indicate that this is really about below average for valuation because it has a earnings yield of about 0.4% so we're concerned about valuation for new investors. but if you're going to be a long-term investor and can really deal with the volatility that nvidia may have at times, this is still a good time to buy. so we are once again long-term buyers >> all right degas, thank you very much appreciate your time today kick things off with us.
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degas wright -- >> thank you >> -- decatur capital management staking with nvidia those shares and the so-called magnificent seven are mounting a comeback after underperforming the market to start the month and even in the face of surging interest rates. deirdre bosa here with the details in today's tech check. hi, deirdre. >> kelly, i want to show our audience this graphic from gardner because i found it really helpful we spent a lot of time this year talk about the ai hike cycle this charts the different phases for new technologies at large. first you have an innovation trigger like when chatgpt went into consumers' hands and that set off a flurry of different applications the next is a peak in inflated expectations and here is where you will see generative ai at the very top. it's small but it's right there. nvidia of course is leading that charge it's the only company with financials that are currently benefiting from the shift. but this is also a precarious place to be as you can see because the next phase here is the trough of disillusionment before coming back down to
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reality and ultimatelying building back up to what gardner calls a plateau of productivity but doesn't, again, reach those heights. that kind of nicely tells the audience where we are ahead of nvidia's report tonight. expectations, they are sky high. they're near or at that peak if guidance delivers, and really it's all about guidance, that will tell investors that there's more to be wrung out at this stage and it could help bring some momentum back to the other ai plays like microsoft and google, the magnificent seven, which have taken a breather over the past few weeks disappointment, though, kelly, that could pushgenerative ai into the next phase, a trough, and bring the broader markets with it because as we have talked about a lot nvidia, the magnificent seven, ai has been underpinning them and they have been leading the markets higher this year. >> yeah. although chatgpt usage i think has leveled off a little this summer we'll see if the autumn brings another spike. and i don't know how in history you could ever top raising your guidance from 8 to $11 billion for the next quarter i mean, that justifies the stock price to me.
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how they repeat that, i don't know if that's repeatable. >> that's the question, right? can lightning strike twice but you hear the narrative around this platform shift, certainly here in silicon valley and san francisco how this is bigger than the mobile shift, bigger than the desktop shift, bigger than the internet itself. i don't know maybe you can see that but i am with you. the expectations are so high but then again, they're saying similar things how could they reach expectations last quarter and they just blew them out of the water. everybody was talking about how expensive nvidia was as a stock but all of a sudden after that guidance the next day the multiple was lower because of that blowup number >> even at 50 times i can't say that i look at that and go -- you know, it still seems for the kind of growth they're able to put up it still seems not totally insane deirdre, we appreciate it. our deirdre bosa continuing to follow this for us meantime, arm's upcoming ipo has investors hoping it can kickstart the ipo market following restaurant train cava,
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and oddity tech which went public in the last couple months if arm goes well could instacart and a slew of other buzzy tech names be next? our intrepid markets reporter bob pisani says don't be so sure about that what are you hearing >> this announcement at arm would begin the road show for its ipo. it has these ipo watchers down here, they're giddy with hopes the ipo drought is slowly coming to an end. here's the problem particularly for tech unicorns is might be coming to an end unfortunately several factors might prevent an ipo lift-off for the fall first the most important factor for a strong ipo market is an up market and stable interest rates. the market gyrations this month and rising rates present a real problem for future ipos. let's just say market conditions are not quite ready for lift-off second, what gets ipo investors really excited are the tech uni unicorns these are relatively early stage companies with high valuations traditionally over a billion dollars that are disrupting their industries the problem is there's not much similarity between arm and tech
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unicorns like instacart or stripe, for example. arm's an older, much more mature company. it's more like kenvue, the recent johnson & johnson spinoff than a tech unicorn. then there's the valuation issue. arm is said to be valued near 60 billion but the final valuation could be much lower. other tech unicorns like stripe have recently seen much lower funding rounds now, this may not open the floodgates but there's a long list of potential ipo candidates out there, some that have been around for a long time, including instacart and reddit and stripe and fanatics. birkenstock, the shoe manufacturer, and car sharing firm turro as well shein of course the china fast food retailer. arm may not be the kind of tech unicorn that really excites the stock market but is really big and the fact that it's coming really soon is going to set the tone that means the pricing is really important. and kelly, what that means is they have to price it so it doesn't flop and let me explain what a flop is a flop is not oh, we thought it was worth 60 billion and now we're going to price it -- or
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$50 billion. or valuation that's not a flop. a flop would be we price it at 20, it opens at 23 and it closes at 18 that day or three weeks later it's 15. that's a flop, priced at 20, three weeks later 15 the retail market will determine whether it's successful. that's why this is important they've got to get the price right, and it's got to hold and not be sold off in the first few days kelly? >> yeah, so better for them to be conservative. and i like your point too that listen, this is more telling us about softbank's need to sell or to raise capital to reinvest for other reasons than it is, you know, someone who thinks hey, the retail public might be really thought on this stock right now. i'm not sure how strong the interest is going to be in a company that's reporting declining financials >> look what happened, though, to kenvue. i think this is a similar situation. very stable. everyone knows the metrics on kenvue everybody's got a good sense of the metrics on arm as well and yes, i think that's going to be a problem with the numbers you were talking about that's why i think the valuation
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may well be lower on that. but again, would it not be a great thing if the average investor, cnbc investors bought in at a lower price and the stock rose rather than what we've seen in the last few years where they price them high and months later the ipo price is gone, the prices are much lower. let's price them lower andlet' let the viewers and our investors get in on the deal and maybe get a rise in the next few months >> vehemently agree, bob preach thank you so much, and we'll see how it goes. our bob pisani reporting today from the new york stock exchange still to come, commerce secretary gina raymondo set to become the fifth high-level u.s. official and third cabinet member to visit china just this summer do all the trips signal a major strategy shift from the biden administration we'll try to unpack what it means for business and trade between the two superpowers. plus, new york city is on the way to rezoning part of midtown manhattan to deal with the housing crisis but will the cost of office conversions keep real estate giants at bay? we'll ask the head of one firm
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handling multibillion-dollar deals in the space and as we go to break here's a broad look at your markets we're watching the s&p which is up more than 1% today, first time in a couple of months today. dow's up half i percent, nasdaq up 1 1/2%. nvidia, by the way sshs about a sixth of the total point gains we've seen there so far this year so what happens tonight will have huge implications the 10-year yield back to 4.20 we're back after this. >> announcer: this is "the exchange" on cnbc. with gold bond... you can age on your own terms. retinol overnight means... the smoothing benefits of retinol. are now for your whole body. plus, fast-working crepe corrector diminishes wrinkled skin in just two days. gold bond. champion your skin. my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds.
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welcome back to "the exchange." commerce secretary gina raimondo traveling to china for talks with senior government officials. it's the latest in a series of high-level visits and comes at a time when both countries try to repair relations it also comes at a vulnerable time for china as they deal with economic pain and that is crucial, one of my next guests says the u.s. needs to proceed with caution. joining me now david dollar a senior fellow in the john l. thornton china center at brookings. and stefan seelig is former undersecretary of commerce for international trade. welcome to you both. david, are these your words to proceed with caution >> i definitely think we should proceed with caution there are some opportunities to stabilize u.s.-china relations
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and i respect the biden administration is sending a range of cabinet officials to do that we don't want relations to spiral downward. but we shouldn't have very high expectations there hasn't been the preparatory work you would need to really getfull any new trade agreement. commerce department took 27 firms off a list that prevents firms from buying from u.s. suppliers. that was a small goodwill gesture. and maybe this trip will lead to more small goodwill gestures but i wouldn't expect any big breakthroughs. >> why do we need small goodwill gestures, david? >> well, i think the main thing at this point is to prevent a downward spiral. the official statements from the administration basically lay out this idea of small yard with a high fence we want to identify technologies that have military applications. we don't want them to defuse to china. so the high fence means serious controls of exports and investment but we say we're going to keep
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that yard small, and frankly a lot of our allies have much more economic exchange with china than we do so our allies like this idea, that we're going to not pursue decoupling but have this small yard with a high fence and i would say until recently it did seem like we were creating a very big yard of technologies and products that we were restricting. and so now the administration is really following through and i think that that's sensible because it was a good strategy and it's what our allies are looking for. >> so stephan i'd be curious about your perspective as someone who made many trips to china. what do you think the commerce secretary's trip is going to be all about? what's the significance for the business community >> well, look, kelly, i think it's about building relationships that as david pointed out don't currently exist. in my experience success came from building those relationships that were fundamentally underpinned by
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trust and respect and looking for win-win opportunities that were good for both sides and frankly, this economic and commercial relationship between the united states and china is vital to both of our interests so we both want it to succeed. but you know, in d.c. at the moment there has been this gang tackling of china. there's this bipartisan view about getting tough with china tough doesn't always mean smart. and we've sent a bit of a muddled message as i think david is suggesting. and i think they need to understand that this is not about containing their development or the rise of their economy but rather about protecting our national security interests and creating a level playing field for our companies and our investors. >> do you think we should be distrustful of their intentions? and i'm speaking of the chinese communist party here, stefan >> well, look, they're not our friends, right but fierce competitors also need to cooperate where we have
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shared interests and we have plenty of shared interests. and that i think is what this is about. it is not about kumbaya moments but it's about cathy a dynamic and an environment where we are able to cooperate in the future. >> so do you think, david, that the administration is trying to signal that they've -- maybe implicitly and just to the business community that they're backing off a little bit and they don't want, as you said a moment ago, they don't really want a decoupling from china maybe they want starbucks to have locations there and they want companies -- is that what they want or they don't want what is the message here >> well, it's easy to get confused because we have heard different things from different members of the administration over time. but i think more recently you've got a pretty consistent message that this administration does want there to be business times between the u.s. and china i think an important part of secretary raimondo's trip will be meeting the u.s. business community, and i'm pretty sure they're going to be pushing this
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idea that we really need to keep these restrictions on exports and investment, we should really keep them narrowly tailored because there are a lot of good business opportunities for american firms in china. she'll be interested in what their specific complaints are and is there some traction with the chinese government to make progress on issues that we've been discussing for a long time. >> and of course we're all curious to watch the realpolitik of it, how is she received, how much of an audience, how does the visit go over. david dollar, stefan selig, thank you both so much for joining us today we appreciate it >> thank you, kelly. sticking with china, its recent series of underwhelming economic reports have investors worried not just about growth there but in the rest of the world as well. here to discuss that, andres garcia amaia is the founder and ceo of zoe financial and nathan sheets is chief economist at citigroup great to have you both here. nathan, let me start with you. you recently made some changes to your gdp forecast if i'm not mistaken how do things look globally? are we the only house in town at this point
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>> our sense is that the united states continues to look pretty resilient. and we've maintained a call for a first half recession in the united states but let me tell you, we're feeling increasingly anxious about that call as the economy continues to show momentum and the consumer looks pretty strong. but in contrast when we look abroad we're seeing a fair amount of weakness in two other major economies. and specifically in china the consumer is looking very weak. after the reopening in early 2023, early this year, consumer spend for a few months, but since then confidence and spending has fallen off. and similar ly germany is lookin very weak as was reinforced this morning with some of the pmi data where it looks like manufacturing which has been soft is now starting to drag
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down services, which have been somewhat stronger. so a desynchronized global outlook is what we think we're seeing at the moment >> yeah. not to go off on a germany tangent but i read about the trains being way behind schedule and it's causing -- are they the new sick man of europe it's quite a change of fortune in the past 15 years andres, i'll ask you to just kind of go back to the broader investing implications, especially for the u.s. investor what are they? >> yeah, so it's interesting because if you look at u.s. economy exposure to china it is different to the s&p 500's exposure to china, right u.s. gdp exports account for only roughly 10% of gdp, but 30% of s&p 500 revenues come from abroad and roughly 1/3 of those come from china. so a slower chinese consumer, a slower chinese economy could actually have an outsize impact on the s&p 500 versus an outsize impact to the u.s. economy >> so if that's true for the s&p
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500, andres, what would your advice be to investors who are looking and saying listen, if i'd missed the market this year what do i do now >> yeah, one, i would echo that we can't ignore the fact that the u.s. economy has been really resilient to a rising rate environment and to a slowing global economy, and i think that's one of the reasons we've seen the market act the way that it is. right? double-digit returns this year so you have to look at every factor here. not just china slowing down but on the up side the u.s. economy's been very resilient. when it comes to the u.s. investor, i think the question now is where is that incremental dollar going not just within stocks but versus a bond or versus a savings account. and that's one of the areas that i feel a little bit more skeptical that we could go back to all-time highs in the stock market this year considering now a savings account gives you more than 5% and a 10-year treasury
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bond gives you more than 4 prs >> i'm singing from your hymnal, andres, so to speak. nathan, i just wanted to mention as well, we had some significant revisions lately to u.s. data. yes it's robust but a little less so on the employment front even prompting mark zandi, our friend and colleague, to say now that you look at the jobs data we've gone from a pace of hiring about 300,000 jobs a month through march, less than 200,000 jobs a month since then, actually he says it's strong but slowing. and this is the key part end the rate hikes do you agree with that >> i think that's broadly correct. we're seeing the labor market moderate the pace of job growth we're seeing is much softer than, say, a year ago but relative to pre-pandemic still very, very solid readings. and i think the fed is looking for more slack in the labor
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market and more evidence its hikes are really getting traction on wages and services inflation. and quite frankly i think that the resilience we're seeing is still not quite consistent with where the fed ultimately wants to arrive. >> all right and we'll hear a lot more next couple of days, jackson hole and so forth andres garcia-amaya and nathan sheets, thank you both he with we appreciate it coming up the latest developments on the hollywood strike and why it's looking more unlikely we'll see a rolioesutn before the fall. "the exchange" is back after this dow's up 220 (hero fan) uh, yea. i have to watch my neighbors' nfl sunday ticket. (josh allen) it's not your best plan. but you know what is? myplan from verizon. switch now and they'll give you nfl sunday ticket from youtubetv, on them. (hero fan) this plan is amazing! (josh allen) another amazing plan, backing away from here very slowly. (fan #1) that was josh allen. (fan #2) mmhm. (vo) for a limited time get nfl sunday ticket from youtubetv on us. a $449 value. plus, get a free samsung galaxy z flip5. only on verizon.
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russian state media reports that a small business jet crashed in flight from moscow to st. petersburg today according to the associated press, officials say all ten people on board were killed and that wagner mercenary chief yevgeny prigozhin was on the passenger list it is not clear whether he was on board nbc news has not independently confirmed the details. but it is possible that yevgeny prigozhin, the man who made a move against the kremlin, may have perished in a private jet crash. the infamous yre festival relaunched and the first round of tickets already sold out. founder billy mcfarland has been released from jail after serving time for fraud and is bringing the festival back. no details or line-up release bud the location is set as, quote, the caribbean that's a pretty big place. the bahamas ministry of tourism said last year that the government will not approve any event associated with mr. mcfarland. and starbucks is adding a
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third coffee drink to its fall menu line-up in a shocking twist it involves pumpkin spice. can you believe it the iced pumpkin cream chai latte joins the pumpkin cream cold brew and the popular pumpkin spice latte. starbucks is adding cold drink options despite the season iced beverages accounted for more than 3/4 of drink sales last fall. pumpkin spice all around, kelly! >> they know what people like. tyler, thank you very much i'll see you next hour i appreciate it. coming up, good-bye high rollers, hello strollers fewer bankers and bids, more parents and kids less head-hunting and more home dwelling from wearing out suits to putting down roots all of this could be in store for midtown manhattan down the road we'll speak with one private lender about new york city's plan to address the housing kroos. this is the highway to the zo, xt renene
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welcome back to "the exchange." charles schwab cutting jobs and downsizing its real estate footprint in an effort to save costs. they aren't the only ones. according to the "wall street journal," office leases are increasing but the square footage is declining as companies plan for long-term hybrid work models and that means more vacant office space across the country.
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in response new york city lawmakers are taking action, reechtly announcing plans to convert vacant office buildings into residential apartments to boost affordable housing options. but my next guest knows firsthand some of the challenges involved in doing this ron eliasep ceo of northwood group. ron, welcome back, first of all. >> thank you for having me, kelly. >> secondly it's a reminder that these things have to be rezoned. you can't just decide as a developer to make this conversion how big a deal is this rezoning? how much flurry of activity do you think it will unleash? >> well, it's a great first step in the right direction i mean, we all know that vacancies are very high, especially in this location where the rezone, which is midtown south, or garment district a lot of d class office buildings are with high vacancies. so it's a good first step. you could have made these adjustments before and conversion before but this took
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a much wider step to allow a much wider variety of office buildings to be converted. it will create at a maximum 20,000 apartments in that area, which is a nice start. >> and the attraction here is kind of twofold. number one, you don't want giant towers sitting vacant. you don't want any office buildings really sitting vacant in decay that's never a good idea for a city but number two, we just learned that manhattan rents are at an all-time high. so they're trying to kind of solve both of those challenges i guess. but how attractive is this for developers to get involved >> it's attractive but not enough it's a very costly project to convert an office building to resi there's a lot of unforeseen conditions once you start stripping away the walls and also not every office building can be converted sometimes the floor plates are too deep or too wide, there's not enough air and light the rezoning is a good step but you also need to provide tax incentives for these projects to be actually viable and that has not happened yet. so i don't see that we're going to see a major flurry of
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conversions start. we've seen a few there was about 6 million square feet being converted right now in manhattan that's not enough. you have about 80 million square feet vacant in the city. >> boston if i'm not mistaken is doing something more significant in terms of tax incentives where -- i'm going to just spitball it but maybe you get to save half on taxes for the next 20 years or something really big like that. so you think that additional step is needed if we want to do a lot more conversions >> it's not needed, it's a must have so there were programs in place, 421-g which is equivalent of 421-a which bis clay says if you convert to resi as long as you provide a certain percentage of affordable housing, 20% is the most common number, then we'll give you a tax break on your property tax for a certain duration of years to incentivize you to do the conversion it was existing. it's not existing now. it has to be brought back to allow for these to happen. same thing with multifamily ground-up construction in new york city. you need a 421a tax abatement
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program to be back in order to incentivize developers to build. you were talking about rents studio rents two years ago, average studio rent was about 2300, 2400 a month it's now up to 3200 a month. >> wow, it's jumped about $1,000 in two years >> yep and salaries are not up in that same pace. so that means it's not just a housing crisis in new york city, there's also an affordability crisis one-bedroom rents are up from $3200 to over 4200 those are big numbers. and when you look at the population growth in the next five to seven years, the city will grow from about 8.8 million to over 9.1 million, adding a lot of need for housing. >> so even as a developer you agree the rents are too dang high but maybe we need some policy changes to accelerate the developers' willingness to jump in and get involved with this. and you know new york city better than anybody. do you ever look outside the city or is it just too byzantine
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and complex to try to have projects going in multiple different venues at the same time >> we're financing projects in major gateway cities so new york is our main hub. about 70% of our activity. but we're doing a loan right now in philadelphia. we're doing a loan in boston we've done a loan in houston and miami. but new york is definitely our number one favorite place because of the supply constraints. so actually, we choose to lend on residential in new york because it's a supply-constrained market which means pricing remains stable or actually go up >> so in a way you kind of need it to be good but not too good for some of these new conversions. final question, we're actually talking about how much the financial system kind of capital markets have held up you talked about the capital availability you're still doing deals you're still financing projects. and some even think this is why the fed needs to hike more than it has, because the financial system has just proven so solid these days would you add any caution to that do you see things slowing in maybe the next six, nine, twelve months' time >> it's very deceiving it already slowed. when you look at the senior capital stack in real estate
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financing right now, there's actually a shortage on the senior side. banks have pulled back and activity actually went down for lending. private debt funds like ours have stepped in. doing more activity than we've done last year so we're kind of filling in the gap for the banks. but there's actually sort of a credit crunch on the senior part of the first mortgage side so a lot of debt shops use financing to provide their leverage they take leverage from a bank that's hard to come by getting a-notes from other banks is hard to come by >> so what's the impact of that credit crunch going to be? >> you already see it. there's less activity. activity in the marketplace mean deals happening is about half of what it was a year ago >> wow >> and a year ago about 70% of the activity of the financing was done by banks and cnbs now it's about -- and 30% from private lenders. now it's the opposite, about 70% of the financing is given by private lenders and maybe 30% from banks and cmbs. >> that's fascinating, ron, thanks for updating us and talking about some of the
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challenges we appreciate it today ron eliasaf joining us from northwind. still ahead, coming to tv this fall there may not be much or maybe a bunch of reality shows. the latest meeting between hollywood striking writers and the studios turning sour the potential impact on the key programming season next. and as we head to break here's a look at the sector heating up of the s&p 500. communication services and tech leading the way. energy the only group in the red with wti below $80 a barrel but the s&p holding on to a 1.2% gain right now dow near session highs up 224. we'll be right back.
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welcome back to "the exchange." it's now day 114 of the hollywood writers strike and as negotiations drag on the alliance of studios including cnbc's sister company universal revealed the details of their latest proposal to the wga, which includes a wage increase, but the striking writers aren't buying it. julia boorstin joins us now with the latest
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want to hear all the details of this one, julia, and what it could mean for the fall tv line-up or lack thereof. >> well, the ship has sailed for the fall teeb season we had expect lots of reality tv and sports rather than new scripted shows and now as picketing continues the question is whether resolution can come quick enough for production to restart in time for new shows to be ready by early next year and whether studios will be pushing big fall films such as "dune part 2" amid concerns that those films will suffer from the lack of promotion from actors, who are also out on strike here's the latest. last night the wga met with the amptp's president as well as disney ceo bob iger, warner brothers discovery's david zas-love, universal's donna langley and netflix's ted sar sarandos when those talks been go well the amptp released its latest proposal effectively pressuring were irz to put pressure on leadership to accept their offer. the studios say is the highest
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wage increase in more than three decades. quote, landmark protections against ai and increased transparency around streaming data the wga criticizing the offer and writing to their members, "this was not a meeting to make a deal this was a meeting to get us to cave." so now we're going to have to see what gets them back to the negotiating table. kelly, i was hearing a lot of optimism about the talks that were going on last week. so now it seems slightly less optimistic >> for sure. now, the wage -- i thought i saw something that was 1-13% or 14% over a couple of years it didn't sound like anything that impressive next to what we hear the teamsters agreeing, you know, for ups on the one hand and the pilots and everything. so i don't know if it's all apples to apples >> it's not apples to apples there are the wage increases there's also about thor compensation around streaming. so much streaming compensation had been structured at flat fee up-front payments effectively. and what writers are saying is they want to be paid if their show or their film is successful and if something is watched on netflix or amazon prime video
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over and over and over they want to make sure that they get paid commensurate with that. so that's a key piece of this. so i would say the streaming compensation, overall pay increases especially in light of inflation, and then of course this question of ai protections those are really the three key issues it sounds like there's been some progress made but not enough for the wga just yet >> right and how much longer now -- if this is kind of going to go to the next round, what are we talking in terms of timeline >> yeah, one thing i'm hearing a lot about islabor day is seen as a deadline in the mind of a lot of the studios in terms of the decisions that they're going to have to makeabout the big fall films it's expected that the writers will make a deal before the actors, but if they can make a deal with the writers guild then they could bring some similar proposals to the actors guild and then hopefully get that resolved in time to have actors out there promoting their films on the red carpet by, say, november or december, which is of course the essential holiday movie season if the studios think we don't have a deal with the writers by
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around labor day, then they're going to have to make decisions about whether they push these big-budget fall films to next year because if they are -- if they figure hey, we don't have the writers yet, we're not going to be able to get the actors in time to do this promotion, they have to decide if it's better off to release the films without the a lot is going to be decided around that labor daytime frame. >> it's barely a week away. the clock is absolutely ticking. julia, thank you so much. we appreciate it. coming up, shares of lay-z boy on the earnings call. she joins us for an exchange ivteiextinrvw ne. don't go anywhere.
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welcome back to the exchange. shares of la-z-boy are raising their declines after sales were down 20% last quarter due to industry challenges. the furniture maker did beat on the top and bottom line with earnings topping estimates by 7 cents and retail store sales climbing 2% on the year. joining me now to discuss is
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president and ceo, melinda whittington. welcome to the program. >> thank you for having me. >> we spoke with a door maker who said that listen, this is just a little bit of a tough part of the cycle right now, you know, kind of post pandemic. describe for us overall how business is going this year compared with a couple years ago. >> yeah, the last three years for furniture, here's been a lot of disruption. we had consumers home, they were ordering a lot, and there was significant supply chain disruption that slowed down production to meet that demand. so, of our $2.3 billion of sales last year, and our year just finished the end of april. that $2.3 billion, $300 million of last year's sales were just servicing pandemic related backlog. >> wow. >> so we look at, where's the consumer today? now that we caught up on the backlog. our consumer right now is fairly stable across the industry with where we were
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last year and as that disruption settled out. across the furniture industry for the quarter end of july, which is how we look at it, the consumer is down across furniture and furnishings. our consumer is doing better than that. we believe that's the strength of our execution and our brand name in a really fragmented market. we just delivered 8% growth in our retail business for both manufacturer and retailer and even within that 8%, of course, that's new stores and acquisitions. 2% of that was same-store growth. we are seeing the consumer reacting. when you are still speaking with them. >> i hear from some of our younger producers, joy byrd is a popular brand. a little bit more apartment facing, that kind of thing. we heard from macy's and foot locker that in july, june, july
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time frame, the consumer started to weaken a little bit. is that unique to those companies or did you pick up on that as well? >> we really didn't see that. we are seeing sequential strengthening. i think the last year and a half, furniture broadly has been somewhat subdued. what we have seen is the consumer go back to normal seasonality. summers are slow months. we have actually seen sequential strengthening since the last half of our fiscal and may, june, july quarter and into early august as we start. so, we're seeing broadly, you know, stabilized and slightly positive trends. >> sure. you know, and in a way, it's good to hear. maybe it speaks to the challenges other segments of retail are having. maybe it's not happening with the consumer more broadly. we talked about inflation or pricing. is that out of your pipeline? in other words, when we talk about whether sales will be up, whatever the number is, as you are more hopeful about the holidays. how much of that is pricing and
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how much of that is volume? >> pricing is pretty stable at this point. so you know, over the last couple of years, the furniture industry saw some pretty dramatic price increasing. the majority of that has held. it has been well over a year since we have taken any significant pricing actions. we are really looking at more stable trends and more volume related as we go forward. >> i guess my last follow-up question would be price cuts. people are starting to notice it at the price leaders like walmart, that they are taking advantage and saying we can now eat into this a little bit. maybe win the consumer and not have to do too much on margins for the reasons you mentioned. >> across our industry and certainly for us, more than half of that pricing held up. it varies a bit, you know, by the consumer base. our la-z-boy consumer tends to
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be a bitf an upper, middle income consumer. maybe a little less price sensitive. we have so seen some activity within furniture broadly. it's maybe a little bit, you know, to a little more price sensitive consumer. overall, we're not seeing dramatic actions taken. we are always keeping an eye on that. >> of course. >> you know, we believe the consumer is going to pay for the brand, the trust, and the following. >> every time, i would like to settle into a la-z-boy right now. it sounds good. >> we could set you up with one of those. >> i would hate to eat into your bottom line. melinda, thank you for joining us. we hope to check back in soon. >> that does it for us here on the exchange. we have special things for jackson planned. we'll be there. but first, i'll see you next hour on power lunch, tyler is already getting ready. st wh . ayitus raps are mind-blo! they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery.
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