Nestlé CEO dismissed over misconduct, court rules most of Trump tariffs are illegal

The financial markets kicked off September with a downturn, with major indices like the S&P 500, Nasdaq, and Dow all trading in the red. This volatility is a characteristic of the month, which historically sees a dip. Notable company news included PepsiCo's stock surge following a $4 billion stake taken by Elliot Management, who are advocating for significant changes. Additionally, Kraft Heinz announced plans to split into two separate companies, one focusing on global tastes and the other on North American grocery, while Keurig Dr Pepper also revealed a similar breakup strategy, signaling a trend of restructuring in the food and beverage sector to navigate market pressures and enhance growth.

• September trading started with a market decline, with the S&P 500 down 1.3% and the Nasdaq down 1.7%.
• Kraft Heinz announced a split into two companies: Global Taste Elevation Co. and North America Grocery Co.
• Keurig Dr Pepper also revealed plans to split into Global Coffee Co. and Beverage Co.
• Elliot Management has taken a $4 billion stake in PepsiCo, aiming to drive changes and improve earnings growth.
• Gold prices reached a record high above $3,500 an ounce, driven by expectations of Fed rate cuts and concerns about Fed independence.

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September Market Open and Volatility [0:00]

• The trading day began with a noticeable downturn across major indices.
• The S&P 500 was down about 1.3%, the Nasdaq led the downward momentum at 1.7% lower, and the Dow was down about 1%.
• This is in line with historical trends, as September is typically a volatile month, with the S&P 500 averaging a 4.2% drop.

"Summer may unofficially be over, but there are a few fireworks still poised to pop off in Wall Street over the next few weeks and they are wasting no time lighting up markets the day after the Labor Day holiday."

Corporate Breakups in the Food Industry [0:00]

• Kraft Heinz announced its plan to split into two distinct companies: Global Taste Elevation Co. (including brands like Heinz and Kraft Mac and Cheese) and North America Grocery Co. (featuring Oscar Mayer and Lunchables).
• Kraft Heinz has been under pressure, down nearly 9.5% year-to-date, with the split aiming to improve performance.
• Keurig Dr Pepper also announced a major breakup, separating into Global Coffee Co. and Beverage Co. The stock saw a significant sell-off after this announcement, falling nearly 17% in the last 10 days.
• The speaker suggests that these breakups are a strategy to mitigate the impact of tariffs and address changing consumer tastes.

"We're seeing craftiness that announced today that they do and plan to split up and we're seeing just a bit of movement there when it comes to craft tines under just a bit of pressure down about 0.5% and they're splitting up into two companies officially global taste elevation co with those uh big names like Hines Philadelphia craft mac and cheese that will be one and North America grocery co will be the other behind Oscar Meyer craft singles and lunchable"

Elliot Management's Stake in PepsiCo [0:00]

• Elliot Management has taken a significant $4 billion stake in PepsiCo.
• This move is seen as an attempt to push for changes and improve the company's flagging earnings growth.
• The stock saw a positive reaction, jumping about 5.5% as the market opened, indicating investor optimism about potential turnaround efforts.
• The activist investor is reportedly calling for a rare and historic opportunity to turn the company around.

"We know that Elliot Management has taken a $4 billion stake in the food and beverage giant and that's causing stocks uh this PepsiCo stock to jump."

Tariff Ruling and Market Uncertainty [0:00]

• A federal appeals court ruled against the Trump administration's tariffs, stating the president went too far in declaring national emergencies to justify global tariffs.
• The ruling allows the White House until October 14th to appeal to the Supreme Court, leaving uncertainty hanging over corporate America and markets.
• The market is focused on how this uncertainty will be priced into stocks.
• Victoria Fernandez suggests that if tariffs disappear, it could lead to higher yields on the longer end of the curve and create market chaos due to uncertainty, though it might also lower prices for companies.
• A removal of tariffs could also impact the Federal Reserve's decision on rate cuts, potentially diminishing the odds if it leads to sustained economic slowdown.

"A federal appeals court has ruled that President Trump went too far. We declared national emergencies to justify global tariffs."

Gold Prices and Investor Sentiment [0:00]

• Gold prices have surged to a fresh record high above $3,500 an ounce, doubling since the start of 2023.
• This upward trend is attributed to investors anticipating steady rate cuts from the Federal Reserve, which is historically bullish for gold.
• Concerns about President Trump's challenges to the Fed's independence are also contributing, as any weakening of the Fed's autonomy is viewed positively for gold.
• Wall Street remains bullish on gold through 2026, citing structural changes like central bank demand and expectations of inflation and geopolitical issues.
• Silver has also seen a surge, trading above $40 per ounce, indicating a general bullish sentiment for precious metals.
• Victoria Fernandez suggests playing gold through gold ETFs or mining stocks rather than physical gold for greater flexibility.

"Gold prices have broken out to a fresh record high above $3,500 an ounce." "It just keeps going higher. I mean, it's the safe haven trade. It's yields going lower, the anticipation of yields going lower. It's the fact that you have other central banks buying gold perhaps instead of US treasuries."

CEO Misconduct and Governance Concerns [0:00]

• The year has seen a string of high-profile CEO departures due to misconduct.
• Examples include Nestle's CEO being ousted for an inappropriate relationship, Centuri's CEO reportedly resigning after his home was searched for illegal supplements, and past incidents involving former Starbucks CEO Andy Byron and Kroger CEO Rodney McMullen.
• Victoria Fernandez emphasizes that CEO resignations highlight the importance of a company's governance, including the board's composition and the experience of potential replacements.
• While some CEO changes can create excitement, the reasons for departure can lead investors to question leadership.
• Nez Fere adds that in the age of social media, CEO actions are amplified, and distractions are particularly damaging in precarious economic conditions with thin margins, such as in the food industry.

"And the CEO of alcohol giant Centuri Takyanami reportedly resigned today as his home was searched for illegal supplements." "When you're looking at what companies you want to invest in, what does that look like? What does the board look like? What do the uh potential replacements for the CEO? What is their experience?"

Apple's iPhone and Media Landscape [0:00]

• Apple's stock is rallying ahead of the expected September 9th iPhone unveiling, up about 10% in the past month.
• Analysts anticipate a strong replacement cycle, with nearly 50% of iPhone users on iPhone 14 or older models, who will need new devices to leverage AI features.
• John Malone, Chairman of Liberty Media, discussed the potential sale of Formula 1, stating they would sell if a buyer offered more than the board believes they can deliver.
• F1's popularity is growing, fueled by a US audience, F1 TV, the Netflix series "Drive to Survive," and the upcoming Brad Pitt movie.
• Victoria Fernandez believes F1 is a strong asset for Liberty Media, noting its growing demographic appeal, with her college-age daughter and her roommates being fans.
• The play on F1's popularity could be through Liberty Media itself or potentially Netflix.
• John Malone also commented on the future of media, predicting big tech dominance and potential consolidation, especially with streaming and social media merging, and the impact of live sports on these platforms.

"Look, it's a public company. If somebody gets carried away and they want to buy it and they're willing to pay more for it than the board thinks that they can deliver to the shareholders, then we would sell it. I mean, that's the bottom line." "I think that that was the most important point that he made of the entire interview as well. uh the fact that you have uh big tech and you have streaming."

Investment Strategy for Food Stocks and Breakups [0:00]

• The question is posed whether investors should buy "old food" stocks in anticipation of major changes.
• Victoria Fernandez favors PepsiCo over Kraft Heinz due to the recent Elliot Management involvement and PepsiCo's potential to catch up to competitors like Coca-Cola, while acknowledging the struggles of the broader food staples sector, partly due to GLP1 drugs impacting snack consumption.
• Brooke Depalma notes that Elliot's plan for PepsiCo involves a series of operational changes rather than a breakup.
• Investors are optimistic about the potential changes at PepsiCo, reflected in its stock performance.
• The forward-looking thought of the day advises caution with companies undergoing breakups, as the process can be distracting and weigh on performance.

"Do you buy old food stocks in the hopes big changes happen?" "I think if I'm choosing one or the other of those, I'm probably going more towards PepsiCo." "Proceed with caution in putting money to work on companies in the middle of a breakup. Just like in life, a breakup could be really messy."