JD DURKIN: And a very good morning, Action Alerts PLUS subscribers. We've got a very special edition of The Rundown this morning here with Chris Versace, joining us here truly on the floor of the New York Stock Exchange. Nice to see you. Bob Lang is also here. Bob, you want to peek your head in and say hello to the good folks at home? Because we've got the whole crew here. That's how we roll today.
CHRIS VERSACE: [LAUGHS]
JD DURKIN: We'll chat with Bob later. Chris, it is good to have you here in person--
CHRIS VERSACE: Great to be here, thank you.
JD DURKIN: --for the conversation. Lots of little bits and pieces shaping today's trading. Lots of momentum from yesterday. What is top of mind for you, and what do you think investors should be paying attention to in today's session?
CHRIS VERSACE: Well, I mean, the market's kind of mixed at best today. I think we're seeing some follow-through from yesterday. Remember, we had that stronger-than-expected ISM services report for November.
It was also indicating that inflation is, as we like to say, persistently stubborn. It also flew in the face of the S&P Global Services PMI for November. That one, for the US, contracted. We also saw contractions in China, in the eurozone, and in the UK. So there's a lot going on in terms of what is the real macroeconomic landscape.
And I think today is-- as we look at the market, it's another day of digestion of all of that-- not indigestion, just digesting the data. But the reality is, I think we're in a little bit of a holding pattern today, because we get a lot more data in the next couple of days, particularly on the inflation front. And remember, next week is the Fed meeting.
A lot of people are keying into, what are they going to do? What will they say? What will they signal? So I think the data that we get the next couple of days-- unit labor costs for the third quarter, PPI for November, CPI for November-- that's going to be the divining rod, if you will, for whether we get a 50-basis-point rate hike next week or perhaps something a little larger.
JD DURKIN: Absolutely, another jumbo-sized rate hike.
CHRIS VERSACE: Perhaps.
JD DURKIN: So it seems like so some of those data points, if you don't mind me just drilling down, those would really be the ones, would you advise people, to pay most close attention to in the coming days?
CHRIS VERSACE: Well, for generally speaking, yes. But as members, as you know, Bob and I will be drilling into that data and piecing it into-- one of your new favorite words, JD-- our investment mosaic.
JD DURKIN: Love it.
CHRIS VERSACE: Trying to understand what the data tells us, what's likely to happen as a result, and what the market reaction might be if the Fed does indeed go bigger.
JD DURKIN: Absolutely. I do want to get your perspective on PepsiCo. We are seeing shares of that company begin to move up. There were reports, I believe, out of The Wall Street Journal--
CHRIS VERSACE: Yes.
JD DURKIN: --yes the Journal, that the company is preparing to lay off hundreds of workers here in North America. Perhaps that's not-- there's the headline version, and then there's a little bit of the perspective.
CHRIS VERSACE: Correct.
JD DURKIN: So what's the perspective when you see a report like that?
CHRIS VERSACE: Context and perspective.
JD DURKIN: Absolutely.
CHRIS VERSACE: It's always wonderful when we hear these things. So how many people does PepsiCo employ globally? About 300,000. How many do they employ in the US? About 129,000, 130,000. So when we do some quick math, hundreds over 129,000, not a very big number. We put out in our comments to members this morning, this is a little bit of-right sizing here. Nothing to be worried about.
JD DURKIN: Do you see it as-- is it fair to say this is a bit of a continuation to the other top headlines we've seen? We've seen tech companies, we've seen layoffs at the Amazons, and people know the drama over Twitter. Are people maybe inclined to throw this in with that, or do you see it being pretty separate and unique to PepsiCo?
CHRIS VERSACE: I think what you're going to see in this environment, particularly if the data continues to slow, you'll see companies use the "macroeconomic concern" as an excuse to do some-- in some cases-- bigger layoffs. In other cases, I think that this is, with PepsiCo, just some modest rightsizing.
JD DURKIN: Absolutely. We were talking earlier this morning-- I want to go back to Taiwan Semiconductor-- am I correct to assume here that it's been a while since you've held the semi in the portfolio for AAP?
CHRIS VERSACE: Well, yes. And to be clear, there's different types of semiconductors, not just in terms of end markets, but there's chip companies, and then there are the companies that make the machines that make the chips. So for that, we had Applied Materials. AMAT is the ticker symbol. It's also in the bullpen, and it's one that we're watching, really, for around mid-2023 as the fund of flows begins, as members know, with the CHIPS Act.
JD DURKIN: So we did get a-- oh, yeah, of course, the CHIPS Act, which we'll be following very closely into next year and its implications there as well.
CHRIS VERSACE: Right.
JD DURKIN: Taiwan Semi here looking to boost US investment to the tune of about $40 billion.
CHRIS VERSACE: It's a big number.
JD DURKIN: And it's a bigger number than we've previously thought, right?
CHRIS VERSACE: $12 billion was the number that they previously discussed. So this is more than three times that size.
JD DURKIN: Wow.
CHRIS VERSACE: And I think there's a couple of things at play here. One, we know that we need to reshore-- if anything, because of the pandemic and/or what we've seen during the zero-COVID policies in China, massive supply chain issues. No kidding, right? So this is a big issue, to reshore chip capacity back in the States.
There's also some concerns, as we know, out of Washington about what China might be using some of the chips that they previously had exported to them for. So this is, again, bringing that capacity back home to shore things up.
JD DURKIN: Of course, everyone watching knows tomorrow's game day. It's my first call time.
CHRIS VERSACE: December.
JD DURKIN: Let's get your sense on, can you give us a little bit of a preview for what may be in store for tomorrow's session at noon?
CHRIS VERSACE: Well, we tend to do the stock-by-stock rundown. I think we're going to talk about some of the favorite names we have for newer members that are joining. In other words, we have 29, 28 positions in the portfolio. If you're just coming into the club now, what are the two, three positions that you should be buying, because we all have to get started somewhere.
But the other thing that we're going to do is follow up on something we talked about in a prior member's call. I believe we're going to start talking about the new AAP rating system.
JD DURKIN: The new AAP rating system?
CHRIS VERSACE: Yes.
JD DURKIN: OK, great. That's a great little preview to get people excited for tomorrow. And since tomorrow is game day, how do you prepare the night before game day? How does that happen?
CHRIS VERSACE: Hydrate.
JD DURKIN: What are we doing here?
CHRIS VERSACE: Hydrate, a lot of sleep.
JD DURKIN: Hydrate and a lot of sleep?
CHRIS VERSACE: Yes.
JD DURKIN: That is--
CHRIS VERSACE: Got to be on my game.
JD DURKIN: That is what television takes. I don't always do a great job with the sleep part myself, but a lot of journalists [INAUDIBLE].
CHRIS VERSACE: Well, we can always get the stuff to de-bag the eyes.
JD DURKIN: It's just this little thing. That's it. When my mom watches, she's like, I could tell you didn't sleep. That's always the dead giveaway, is under your eyes.
As a quick reminder to those of you watching at home, you can catch Chris, Bob-- he's here somewhere-- and The Street's editor in chief, Sarah Silverstein, live tomorrow-- that's Wednesday, Wednesdays is tomorrow, right?
CHRIS VERSACE: Wednesday.
JD DURKIN: 12:00 PM Eastern time as they look ahead to the year of 2023. They will review November, as well as all of 2022's biggest moves, and, of course, answer some of your biggest questions. Thanks for being here.
CHRIS VERSACE: Happy to do it.
JD DURKIN: This is a blast. Good luck with your hydration and sleep for tomorrow. We'll be watching.
CHRIS VERSACE: I'll be on it.
JD DURKIN: All right, we're looking forward to it. Members, we're looking forward to chatting with you again tomorrow as well, and we'll see you then.