mccartney and john lennon song of the year at the grammys. special auction services is hosting the auction this tuesday in newbury, england, and estimates the string will sell for between $35-- 3,500-6,000. i'll see you at 10 a.m. on sunday morning over on the fox news channel, join me for "sunday morning futures." exclusive interviews with chairman jim jordan, senator mike lee from utah, congressman matt gaetz of florida and 2024 presidential candidate larry elder all live sunday at 10 a.m. on fox. thank you so much for being with me. have a great rest of the weekend, and i'll see you again next time. ♪

♪ ♪ ♪ jack: welcome to "barron's roundtable" where we get behind the headlines and prepare you for the week ahead. i'm jack otter. coming up, higher rates for longer, that's what the federal reserve signaled this week. i'll ask jack ablin what stocks investors ought to own. then, new obesity drugs have the numbers going down on the scale, but it could be making health insurance more expensive for all americans. and later, the sphere is here. we'll take a look at how you can make money off a brand new entertainment venue in las vegas. we begin, as always, with three things investors ought to be thinking about right now. stocks down sharply for the week on the latest news of the fed. investors are now looking ahead to next week's key economic data. then the housing market urn pressure. mortgage rates remain above 7%, and existing home sales are nearing a 13-year low as

homeowners happening on to their properties, but investors can find attacktive yields. and finally, rocket labs' stock hitting a -- taking a hit. we'll look at at the company's prospects. on the round table, ben levisohnings, carlton english and jay con sonnenshein. so -- jacob sonnenshein. jay powell's comments really spooked investors this week, ben. >> yeah. you could say that the market is fed up. they were expecting no rate hikes, and they didn't get a rate hike, but they were also expecting the fed to signal that the cuts would start next year and that there would be about four cuts. the fed actually has two. and that combinedded with some comments powell made about maybe a soft landing not being the base case, that was a problem for the market, and it really did sell it off. i think if you're looking for a silver lining, the market looks very oversold right now. sentiment is way down, and the number of stocks that are trading above the 50-day moving average is down to about 20%, and that could be a bullish sign going forward.

jack: just because it's so contrarian. a lot of headwinds, ben. the uaw strike, probably a government shutdown and then the economy refuses to play to the tune the that jay powell wants, the jobless claim numbers just came out, and they're lower than in a long time, so that job market keeps on moving ahead. and then the market suddenly less enamored of ipos. >> yeah, the i ipo was interesting because we had three big ones, arm, instacart and klaviyo, i had to look at all o. all the stocks after a great first day, they came down quite a bit. none of them are below the ipo price yet with, but they're all below where they closed that first day. and that would seem as nice as it was to have u e pos finally, we're not back to the market where people are gung ho about things. jack: what's available to spook markets further next week? >> pce, which is the fed's favorite inflation gauge.

it's supposed to rise went 2% month over month -- .2. if it comes in at that number or lower, i think the market will be happy. but if it comes this in hotter than expected, we could see more selling again. jack: carlton, these higher rates, both the 2-year and the 10-year hitting highs or recent highs. not very good for the housing market. >> no. so we have seen that translate into a 13-year low on existing home sales. now, higher rates definitely make it more expensive for buyers to get a new home, and you also have to think about it this way, if you were someone who -- also a supply problem, if you were someone who got a mortgage at a 3% rate, you're not going to sell your home and try to get a mortgage at a 7 or 8% rate. so we have this huge supply problem which is actually pushing up housing prices to more than on average $400,000, up about 4% from the same time last year. jack: a supply which demand thing. the only good news here is you can take the other side of the

trade. we had rick reared on, he's guying mortgage-backed securities -- rick reider -- and there's a lot of other areas as well. >> the simplest thing would be a money market fund, a yield of about 5%. you could take a page from warren buffett's playbook which is to buy the ultra short-term treasuries, 3-month, one fund is an etf, vil. now, another way to get in there is to look at utilities. they're one of the less loved sec editors of the s&p 500 -- sectors of the s&p 500. yields around # 3.3% so, no, you're not beating treasuries, but you do have room for capital appreciation. three stocks we like, american power, center point and night source. jack: all righty. jacob, after a failed rocket lab mission, that stock got hammered. you think it's gone so far, there may be an opportunity. >> yeah. first of all, the stock fell as much as about 17 on the week after the launch failure. it does kind of make sense because you were expecting

somewhere around 10 launches this year, and so that would be roughly not exactly about 10% of the company's revenue. and so the net loss could really widen for the year. the stock is down by 17%. if the company can make the fix, then that revenue comes back into the picture, and the stock backs back to where it was before. by i also think -- but i also think longer term, this company's been around since 2006, a few years after spacex was founded. so this company has the systems and the integrated products and services to be able to increase revenue per launch, to be able to participate in more launches every year globally, and they're going to reach profit if about maybe in two years, but i think it's possible even next year. jack: you mentioned spacex, elon musk's company, still the big kahuna in space. what separates those two companies? >> so spacex has the number one, the the first mover advantage, right? they've been at it for a few years longer, and they also do slightly bigger rockets, so

their revenue per launch is a little bit higher, and and they've been doing hundreds of launches per year. but i do the think as rocket lab scales up in terms of revenue and really gets leverage on its costs to produce a launch, it's going to get to profitability. it's at a $2 billion market cap now. i think in a the few years you're talking maybe 4-7, but in a downside scenario, it's still pretty good. jack: and you can't buy spacex directly. a few mutual funds might give you access, but rocket lab? >> yes. jon cc the federal reserve was more hawkish than expected, dragging down stocks and causing a surge in bond yields. i'll ask cio jack ablin what investors should be buying in a high rate economy ne

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jack: the federal reserve may have paused its hiking campaign this month, but that doesn't mean it's the last hike. jay powell signaling rates will stay higher for longer, and some investors are pricing in another hike before the year's end. joining me now is crescent capital founding partner jack ab a lin are. thanks for coming by. >> thanks for the invitation. jack: just to give readers and viewers some context, you're an independent advisely firm, you guys manage over $40 billion. let's start with the higher for longer concept. you've been looking at a very specific consequence of that which is that companies that have been borrowing at ultra-low rates are over the coming years going to have to pay a lot more, and that's not going to be easy. >> i originally thought this was going to be a 2023 firestorm. what i realized when i started getting into these maturity schedules, it's really more of a gail force wind for the next few years. if you look, for example, at

investment grade borrowers, we have about a $1.44 trillion many maturities coming due over the next four years refinanced at rates anywhere between 2-2.5% higher than current coupon. and so part of the thought was, well, if rates could come down between now and then, that burden may not be as bad, but it looks like this higher for longer is going to make that phenomenon worse. jack: so investors ought to be thinking can the companies in my portfolio afford these higher rates. >> that's it. and it's not just the corporate market, it's it is also real estate, it's other a markets. and that's, i think, one of the issues that's mostly going to put a dividing line between heavy borrowers and companies that don't borrow e very much. jack: so give us some ideas of sectors, companies that you like this in that environment. >> sure. so we like high quality companies, and we like high quality companies that have and grow dividends. so, for example, microsoft, great high quality company.

yes, it's only a 1 dividend yield, but -- 1% dividend yield, but it's growing at about 6% per year. certainly well ahead of inflation. johnson and johnson, same thing. high quality company, 3% dividend yield growing also at around 6% annually. we like chevron. i think everyone's heard of chevron. 3.6% dividend yield, growing its dividend a little more than 6%. and then mccormack spice company. not, you know, well known, but everyone knows who they are. 2%. i think they're growing their dividend in excess of 8%. jack: and everyone's got a shelf full of those little red bottles. >> that's right. we love it when you throw it away before you use them all. [laughter] jon if you're not buying the individual securities, there's an etf as well or, right? >> that's right. vig is a high quality dividend growers from vanguard. it's pretty low, you know, low cost. what else do we like?

you know, a lot of the small cap names. i think it's ijr. and here i think we have to really make a distinction in small cap. it turns out that if you look ae russell 2000 as their small cap index. jack: sure. >> but what we have found is nearly a quarter of the russell 2000 can't cover their interest payments with their current earnings. jack: jim grant calls those zombie companies. >> that's what it is. so if those debt service payments go up, it's just going to make things worse certainly over time. what we would recommend is investors look at the s&p 600 as they corrupt the index, it's going to be comprising much higher quality companies. and so you avoid a lot of those pitfalls. jack: and small caps have had a tough run. that index has gone almost no nowhere in five years. they look cheap, maybe it's the time. >> they do look cheap.

the problem with small caps is really is access to capital. in an environment where not only are rates going up, but banks and other lenders are starting to tighten their lending standards, you know, it would advantage the large cap high quality companies where everyone's tripping over themselves, for example, to eleven money to apple, but if you're -- lend money to apple, but if you're autozone, they may not answer your calls. jack: all right. jack, thanks so much for coming by. obesity drugs are seen as revolutionary for the health care industry, but it could be costing every american more even if you're not taking the medication. ♪ explore endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible.

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ripple effect through the industry from insurers to private companies and government programs. it's the cover story on barron's week, and carlton, these drugs have incredible potential. it's a huge addressable market. apparently, half of hollywood is taking them. but there's some complications as a well. give us an overview. >> as you point out, about 40% of u.s. adults are obese, and apparently you're a reader of the gossip pages where there is speculation that maybe people that don't fit in that classification are also taking some of these drugs. a jpmorgan analyst estimated by 2030, the amount spent on these treatments will be about $50 billion which you can kind of imagine when you look at the cost of one of these drugs being about $16,000 a year. jack: wow. so the maybe silver lining is that if people lose weight, then you have fewer complications such as diabetes, heart failure, etc. so medicare, insurance companies will save a little bit of money on that side. >> that would be the hope.

[laughter] so there was a paper out by usc that said that the savings for medicare would be about $700 billion over 30 years. but the challenge with that is right now you have a dynamic of people are taking these expensive drugs, and you have people that have not had, have not had those drugs, still getting diabetes, heart disease. so you have these huge, huge costs on the health insurance industry right now, and then you also have, you know, looking forward i mean some of these will still persist even if people are taking the drugs. so the savings might not be that big. could make an impact, i think people are getting a little too excited. jack: it's a long-term impact as to thosed -- opposed to the immediate cost. a lot of people are wondering, will my company health plan cover this? >> super expensive drugs right now, and when you look at it, you know, the person taking the drug isn't the only one footing the bill, right? all premiums go up. so in short, companies are going

to be looking at this, does it make sense for our employee plan to offer it. you have one company thinking, well, maybe before putting someone on the drug you do something like, say, okay, you have to meet certain requirements. you have to try a 3-month diet and exercise plan, maybe meet certain b mixer requirements before you to go on -- bmi requirements that could start to be a deterrent for getting people on the drug which would keep costs down for the insurers possibly. there's a lot of push-pull here. jon seems like they're raising the bar. >> what are the implications for medicare benefits? >> again, this could look to get much more expensive. right now medicare is not covering the cost of obesity-related drugs because the thinking is this is a lifestyle situation, not exactly an illness. but if they were to, it would be a huge burden for medicare. the new england journal of medicine estimates in that if 10% of participants took the drug, it would cost about $26 billion a year which is about one-fifth of the cost of all drugs in medicare. jack: wow.

so, ben, novo nordisk, eli lilly standing to make literally hundreds of billions of dollars on this. is that all priced into the stock right now? >> i would have said it was until about a week ago, and novo nordisk had become the most valuable stock in europe. lilly is up a ton. both stocks have pulled back, and if you're the kind who likes to buy the dip and a momentum investor, probably would be a pretty decent time to go in and pick these up. but if you're thinking very long term the, i think you have to worry that a lot of the good news is priced into these stocks at this point. you hear analysts talk about really being only two stocks in pharma that you can own and that's novo and lilly, and i think at some point you do have to worry about competitors, prices under pressure a little bit and maybe just not as profitable as a people think, and then the stocks would be priced kind of to perfection. jack: got it. >> you would think that the health insurance stocks might get hit. they have not been.

jack: and they probably figure if they do cover it, they'll just pass the prices on to the rest or of us. >> maybe. jack: another interesting dynamic, those companies that are trying to cure diseases that this might alleviate are getting hammered hard. insulin pump makers, sleep apnea devices, liver disease drug makers. amidst all the records, are there any bargains to be had? >> a lot of stocks are down double digits. intuitive surgical is down about 17% since then. i was talking to an analyst for intuitive surgical, is and he was saying that that he shes probably -- he thinks probably 2% or less that the procedures that their goods and services are exposed to are bariatric surgery, so this might be a buying opportunity for intuitive. for dex com, they sell devices to type i and type ii the diabetes folks. with type i, those people still need their devices. that's number one. number two, the company did talk about for all people with

diabetes, they might be trying weight loss solutions as well as continuing to have their device. so dexcoming being down double digit ises might be a buying opportunity. jack: all right. you guys have some investment ideas, and ben will tell us how to bet on the las vegas sphere. what do we always say, son? liberty mutual customizes your car insurance... so you only pay for what you need. that's my boy. ♪ stay off the freeways! only pay for what you need. ♪ liberty. liberty. liberty. liberty. ♪ >> tech: need to get your windshield fixed? safelite makes it easy. >> tech vo: you can schedule in just a few clicks. and we'll come to you with a replacement you can trust. >> man: looks great. >> tech: that's service on your time. schedule now. >> singers: ♪ safelite repair, safelite replace. ♪ [coughing] when caroline has a cough she takes robitussin. so, she can have those one on ones again. hey jim! hey! can we talk about your yoga breaks? sure. get fast, powerful cough relief with robitussin, and find your voice. ♪ robitussin ♪

♪ ♪ jack: ben, a very cool concert venue about to open in las vegas, and we have town an investment angle. >> of course. the sphere is a gigantic music venue. it is twice as tall as the statue of liberty, it holds 20,000 people, and it has a massive screen. actually, on the outside of the sphere where they project stuff but if also on the inside.

and it's very cool. it's going to open next week with u2 coming on on the 29th of september, and they're going to be there for 25 the shows. i always thought in vegas was for liberace or even britney spears, but here comes u2. [laughter] i'm old enough when they played at red rocks and had sunday bloody sunday and bono waving the flag, but now they're at the sphere. the stock hasn't done great. it cost $2. 6 billion to build this thing. the stock has a value of about $11.3 billion -- 1.3 billion. my colleague, andrew berry, thinks it's the undervalued. there are plans to build more spheres, and this could be a very big business. it's part of the dolan empire, and there's discount that just keeps these stocks under pressure, but this one looks like a good opportunity. jack: jim dolan is not quite his dad, but there's some other

parts of the 'em ooh pyre that we think might be good guys -- buys as well. >> msg entertainment owns madison square garden, that's, you know, it's the also an undervalued business. this is some things that they could do by selling stuff that would make the stock perhaps worth america but i find the more interesting one to be madison square garden sports. they own the new york rangers and new york knicks. and they're worth about $8.1 billion combined. the stock, though, trades for just $4.3 billion. again, dolan discount. jack: actionable ideas, carlton, what do you have? >> after the banking turmoil this spring, taking a look at western alliance is one of the most beaten up during march and april. it has been on a bit of a rebound. also still trades pretty cheaply at about 5.7 times price to earning, historical average has been about 9%. you get a 3% dividend yield and also everyone's concerned about credit quality going into a

possible recession or downturn the, but loan book looks healthy. jack: jacob? >> it's boring, but colgate pal microsoft -- palmolive. they've been much higher than that that relative to the market before. the company is talking about price increases this year, but as that goes down, volume of goods comes back up, sales growth is going to be okay. you're going to get a little bit of profit margin expansion with costs moderating a little bit. you might get 8% earnings per share growth and a growing dividend. jack: and that's the kind of product that people buy. even in bad times. all right, thanks, guys. to to read more, check out this week's edition of barron's.com. don't forget to follow us on x, formerly known as twitter. and that's all for us. we'll see you next week on a "barron's roundtable." ♪ ♪