Power Lunch - $1,000 a month car payment, $100 steaks and the Power House Road Trip. 7/1/22

Episode Date: July 1, 2022

The inflation debate. It’s one of the most important issues for the market. Two guests with two different takes on whether we’ve seen the peak. Plus, a growing number of people are paying $1,000 a month for a new car. Our Power House Road Trip starts in New York City where one realtor says inventory is up and it may soon be a buyers’ market. And, Wolfgang Puck on the likelihood of $100 steak. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. I'm Amin Javvers. In today for Tyler Matheson. Here's what's ahead. An inflation battle. A growing number of strategists say stocks won't rally until inflation shows signs of rolling over. It's a key question for the market. We'll debate the answer and what it means for your investments. Plus, how much would you pay for a new car? According to Edmonds, a record share of new car buyers are shelling out $1,000 bucks a month. The CEO of Group One automotive talks sky high car prices and whether they're here to stay. Kelly, over to you. Always enjoy checking in with him. Amen, thanks.

Let's check in on the markets where stocks were negative last hour, but now they're back into positive territory. The Dow up 111. The S&P up 10 points. The NASDAQ up 6. Big mover is the yield on the 10-year. It's hitting its lowest level since May. After the ISM survey today, weekend to a two-year low, new orders fell below 50. This was up at 3.5%.

just a couple weeks ago, and we are now firmly below 2.9. Big implications for the housing market. It's not just here where we've seen a reset. Metals are lower as well. Copper down another 2.5%. This is a 17-month low now on slowdown concerns, and it's fourth straight negative week. Again, it's down today almost 3%. Amen.

Now, the inflation debate is probably one of the most important for markets right now, if not the most important debate out there. The economic data that we've gotten over the past few weeks has been anything but definitive on where inflation is actually headed. So our next two guests aren't on the same side of the aisle when it comes to the big question of where inflation is going from here. Let's bring in Keith Fitzgerald, Fitzgerald Group Principal, along with Ron Insana of Schroeder's North America. He's a senior advisor there and, of course, a CNBC contributor. Guys, thanks for being here. Keith, let's start with you because you're bringing the bad news here. I like to get the bad news out of the way first.

You think it's going to get worse from here. Explain why. Well, here's the thing. It's not a rates problem like everybody thinks. It's a policy issue. And I say inflation is going to get worse because many of the supply chain challenges that we're talking about have not worked their way through the system. The consumers are feeling pinched. They have no problem there.

Retailers are not going to back off prices anytime soon. And there's still a lot of money in the system chasing comparative of few good services and quality stocks. Now, can the markets go higher? That's actually the good news because many of the stocks have been beaten down. They're not all the same. So inflation, bad news, does go higher, gets worse before it gets better. Fed can't fix it. It's a supply chain issue resolves a policy.

Ron's probably going to have a good side of the other coin here. Well, let's see about that. Ron, look, it's Friday. It's coming up on a holiday weekend. Give us some good news. Well, you know, the bad news is the good news. We're seeing market-based indicators that are suggesting inflation is about to go down rather meaningfully.

And Kelly pointed out just a couple. Not only is copper down rather dramatically, about 30%, but a host of other commodities and market-based indicators are pointing in the direction of slowing inflation and slowing growth, I should point out. In five-year break-evens in the Treasury market are down over 100 basis points. We've gone from 359 to about 258 as of yesterday's close, copper, soybeans, other commodities, ex-oil, are falling. And we're seeing even the bond market itself, with yields down as dramatically as they are, suggesting that there are a variety of concerns pointing towards slower growth and lower inflation that I think the Fed ought to pay attention to.

You know, 22 years ago, I wrote a book called The Message of the Markets. And if the markets are not yelling and screaming about this, I don't know what is. I think Fed doesn't need to do anything in the way of cutting rates, but I think it would obviously be helpful for them to stop and look around a bit before doing anything further. Ron, let me ask you this. This might seem like a very basic question, and maybe it is. But I think a lot of folks out there across the country, when they hear that inflation might be slowing down and going away, they sort of

intuitively think, well, okay, that means prices are going to go back to where they were last year, but that's not at all the case. What you mean when you say inflation is going to go away is that inflation will continue but at a normalized pace from these prices here and prices aren't going back to where they were in 2021 at all. So my question to you is, if that's the case, you know, given that the prices are of just about everything have increased, isn't there some period of time where the economy needs a major readjustment to these higher new prices? Workers need to push for higher salaries. Companies need to factor all that in. And don't we have a sort of a snake with the swallowing a rat problem or we have to digest this inflation that's already come through?

Yeah, I mean, I think to make it even more graphic, I think we've always had the piglet through the python, you know, metaphor here for inflation. It definitely has to travel through. There's that big bulge in the middle. And then it works this way through the system. And coming up against comparisons year over year in 2021 versus 21 against 20, yeah, the rate of inflation. is going to slow just by dint of math. Now, whether or not it slows and remains elevated at current levels, I think is an open question, but you're starting to see things like housing prices fall, more houses come to market. And at some juncture, prices will actually fall. And labor may not have as much long-term negotiating power as people think, because technology is going to

solve some of that labor shortage issue that's driving up wage gains in the way of automation, whether it's productivity enhancing software, whether it's robotics or other types of mechanical fixes, eventually wages will be less sticky than they are today. So I think inflation is going to come back down. Maybe it's certainly not to 2 percent, but it's not staying in 8, it's not staying at 6. It's maybe going to get under 4 over the course of the next, you know, 6 to 12 months. Now, we are going to talk about those housing prices later in the show. So if you're thinking about buying or selling a house, stay tuned.

We'll get to that debate. But Keith, I want to ask you this. You say the Fed can't really solve this problem. So who is going to solve this problem? What's the end state here? Well, I think this is actually a message of optimism because two groups are going to solve it. Number one, consumers are resilient, hopeful, and clever people. America is filled with brilliant business people of all shades, colors, creeds, everything.

That's going to drive most of this because innovation is formed into the crisis. The other thing is supply chain. Eventually, this is going to sort itself out. There are lots of goods working their way this way. There's money in the system. Too much is chasing too little, but that's a different nuance here. What we're really talking about is the movement of consumer power. There's stuff that people still need and have to have.

That's going to power the company forward. And to Ron's point, it's an adjustment. It's not like flipping a switch. That's the mistake that a lot of people are making. They're thinking you can just adjust a rate and boom, the thing's gone. That's not how this works. It's like the ocean and ebbs and flows. And what you want to do is stand at the coast and look for the good wave

because that's the thing that's going to take us out of this. I like that you brought up supply chain. We are going to talk about that in the next block. But give me a thought if you could because supply chain is sort of, of where all of this started, right? We had this shock of demand surging back after COVID. People, importers in particular, weren't prepared to handle that. Keith, if you look at the supply chain, do you think there's any hope around the corner there? Oh, there's no question. There's hope because, you know, again, crisis creates opportunity. So if we have pinches,

there's going to be new technologies. There's going to be new labor arrangements. There's going to be new trucking. There's going to be all kinds of new people coming in to solve this problem. So we have great computing power. We have great incentive. Companies have great purpose. So all of those things are going to work. History shows very clearly that that's the case. So you've got to place a bet. Is the sun coming up tomorrow or is it not? I believe the sun is coming up tomorrow and we're going to get through it. I hope the sun is coming up tomorrow. The beach is coming up tomorrow. The ocean is coming up. I hope all of it for the holiday weekend. Keith and Ron, we've got to go. Thanks so much. Keith Fitzgerald and Ron and Sona there. Appreciate your time.

I hope your flights are on time. That's going to be my recurring theme of that. That's the supply chain and the travel backup. I'm going to experience all of it this weekend. So we'll see what happens. All right, as Amon said, there's no question that the supply chain issues have been a big driver of inflation. And it could get worse. A labor contract between shipping companies and West Coast port workers is set to expire today. Raising fears of a walkout, the union represents 22,000 workers at 29 West Coast ports. And the transport stocks have already had a rough year.

The indexed down 20 percent, every name, flat or negative. Let's bring in Donald Broughton. He's managing partner at Broughton Capital. Donald, what are the reverberations likely to be? Well, the reverberations, learn to say that word. In the short term, there might be some disruption, but in the long term, this will all get worked out. You know, what we have here is you have some very highly skilled,

also very highly paid union workers who are no doubt performing a service that's critical to our nation's economy, the global economy. but they have the threat of being automated, of being obsolete because that's what technology allows. Right. So I guess there's two questions here. One is simply the disruption. Number two is the impact on pricing throughout the supply chain. What do you expect that to be? Well, you know, what we've seen already, I expect it to not be that strong, at least because there's been a shift already. First of all, it used to be, if you go back to like 2015, before they opened up the widened Panama Canal, about 55% came through the West Coast, and about 45% came through the East Coast. Now that's more gotten to be 50-50.

In fact, last year was a record year for the ports, and more than two-thirds of that incremental volume came to the East Coast. So there's already been a shift away, first of all. The second thing is that in just the last few months, we've continued to see volume surge ever higher. And normally, seasonally, you see the first three, four. four or five months of the year are seasonally weaker, not stronger, and they've been actually stronger than the fourth border.

So it looks as if some distribution managers are playing a little, let's get it shipped while we can, as well as just trying to rebuild inventories. Let me ask you this, because, Don, the whole subtext here is about automation, right, and what happens to these workers in an automated future? And you think about sort of the Amazon warehouses with the robots crawling around and delivering the products. Is that something that could happen at the ports? I wonder what you think the long-term vision of labor at these ports looks like as the companies seek to automate more and more.

And the workers are saying, hey, wait a second, those are our jobs. Well, I think it depends upon how they approach it. You know, I've seen labor be very successful by saying, look, if we can do 15% more, you should pay us 5, 10% more. If we're willing to be more productive, there may be less of us incrementally hired. but if you'll share those productivity gains with us, we're willing to onboard as much technology as you can invest in. Those kinds of partnerships have been very successful in all kinds of businesses, from railroads to ports, you name it.

And I guess I just wonder if there's a tipping point, though, where the automation proceeds so quickly that you can't sort of calibrate it at that 5 and 15% level that you're talking about, and automation sort of wipes out a whole swath of jobs. Then how do the businesses respond? How do the unions respond? Well, there are always buggy whip manufacturers created by every technological innovation, but there are also new jobs that no one ever even imagined created as well.

It's the creative destruction of technology. So what will we need next? There's a host of things. I mean, you go look at some of the companies out there, J.B. Hunt, for instance, and their transloading business is benefiting greatly from this. You know, the XPO and their ability to grab all of the information, all of the data, and predict what's going to happen next. are beneficiary. FedEx are saying for the same thing. FedEx is essentially a technology company

disguised as a transportation company if you look at it really closely. Where would you put investors in the space right now, Don? Well, those are the three places I just mentioned right there. You've got companies who focus on using technology to facilitate improvements and asset utilization and giving their customers better visibility of their supply chain, better ability to to quickly adapt and flex and respond to their customer's needs. And those companies again and again end up generating not only more growth, but more margin on that revenue growth. All right.

They're the names J.B. Hunt, XPO, FedEx, for instance. Donald Broughton, thanks for all your thoughts today. And coming up, the return of our powerhouse road trip. First off, New York City, just over the river from here, where inventory is up. And some say it's on the verge of turning into a buy. market and sticking with inventory will ask the CEO of Group One Automotive if the supply of cars to buy is easing and how long he thinks drivers will be willing to pay up for a new ride.

And as we had to break shares of Coles 20% down after CNBC first reported that it ended talks to be bought by Franchise Group. Coles also cut its current quarter outlook amid cautious consumer spending. Back in a second. Welcome back to Power Lunch. I'm Kate Rooney. We've got some news for you on that block fight. deal. We reported FTCX officially signing that deal with the option to acquire blockfi. The FTCX deal is done here. FTCX has a built-in option at this point to acquire blockfi for a maximum,

a maximum price of $240 million. That's based on certain performance triggers. We don't have a minimum. sources I had talked to earlier in the week said it could be $25 million, it could be $50 million. No word on a minimum here. They're also upping the loan in this case. So the loan, that FTCX had provided BlockFi was originally $250 million. We've got here that is being up to $400 million. So the potential acquisition down the line option to buy BlockFi, but significantly lower than what we saw at BlockFi's prior private valuation, which is $4.8 billion, but a deal officially signed here.

Back to you. People have been watching this one closely. Just again is a sign of the times, Kate and Crypto. Thank you for bringing us those details, are Kate Rooney. ahead of the holiday weekend, we are starting off on a road trip. Last year, we took you across the country for a peak at housing in five major cities. This year, we're back in the camper, revisiting those same markets to see what's changed. Tyler hit the road early to beat traffic, so we'll take you through it, starting right here on the East Coast in New York.

According to Zillow, the median sales price is 535,000, and that's 17th in the country. San Jose, the most expensive market north of $1.4 million. Now, 11% more homes in New York sold above asking in May compared with a year ago, while inventory was down 24%. For more, let's welcome back Christopher Cromer. He's a broker for real estate firm Brown Harris-Stevens with two decades of experience in the New York City housing market. All right, Chris, welcome back. So are we right that we're still seeing more properties above listing being sold this May than last May? Hey, thank you.

It's so great to be back. No, I don't think that's actually a fair character. of what we're seeing in the market now. Looking back, it's really a tale of two vastly different markets. I mean, we're coming off a near record year that saw double-digit increases in volume and price appreciation and the sellers had all the upper hand and the leverage. But now what's happened is the buyers have been really hit with what I refer to as a one-two punch of rising interest rates, equity, volatility.

And then on top of that, we're throwing in a looming recession. the buyers are taking a step back and trying to make sense of a shifting and rebalancing market and really trying to make sense and figure out what can we now afford in this climate and where the market is. And is it in fact still the right time to buy? So deal volume has really tapered off tremendously. Chris, I wonder what this means for the mindset of sellers, right? I mean, you have this idea that you're going to sell your property for a certain price.

You've been looking forward to that price for years. You put it on the market. How long are things sitting on the market now? And then how long before sellers sort of have to psychologically come to terms of the idea that they're not going to get X, they're going to get X minus Y? That's a great point. And a concern for sellers because sellers sometimes look in the rearview mirror. They're looking at what their neighbors sold six months ago. But I'm telling you, in January, the interest rate was around 4%.

Now it's 6%. There's a whole different mindset and psychology that the buyers are going through. And the sellers need to be sensitive to that. So how long does it take? How long does that take to come to terms with that? You have that sort of emotional moment. You put the house on the market. It doesn't move.

Or you talk to your real estate agent and they say, you know, that's not the price. It's this price. Can people get over that in days? Do they take weeks to sort of put their places on the market? You know, it depends on the broker and the seller. But in my experience, I would say probably around four to six weeks. Wow. You know, and the tricky part, if I can just add, you're going to have these 2Q reports coming out next week.

Keep in mind that the data that they're looking at, The average contract signed is in January. That was a completely different market. So you really have to trust what the brokers are advised to do that we're seeing on the boots on the ground. Christopher, one of the other things we've been hearing is about upward pressure on rents. Now, Manhattan rents for sure have made this comeback to, I guess, what are past or new all-time highs. How is the dynamic against the housing market helping to boost rent prices if it still is? Are there bidding wars, or is that starting to cool now?

Where do you think rents are going? No, well, the rent market is going crazy. And traditionally, the summer season is always the hottest time for rentals. I think we just eclips the $4,000 average mark. And people are coming back to work. The city has been back to life. So there's strong demand there. And it's pretty humbling, actually, as a renter, to see just how little your rental dollars go.

And I'm interested to see the interplay between that and rising interest rates. and how that works out. Absolutely. New York real estate has always been humbling, hasn't it? $4,000 is, that's a heck of a number. It is, and it really has mounted a comeback and continues to keep the heat on. Chris, thanks.

We'll check back in soon. Thank you so much. Happy tofer Kromer. You too. And coming up, everything you need for the 4th of July and your portfolio. First, food costs are surging ahead of the big weekend, restaurants and consumers paying the price.

We'll speak to famed chef Wolfgang Puck, putting the lunch in power lunch. Plus a special edition of three stock lunch, trading names you might see around the BBQ this weekend. Don't go ahead. Time now for our weekly ETF tracker. This week we're focused on bond funds, which brought in $1.8 billion in the weekending yesterday. Investors seeking a flight to safety as inflation remains hot, which means the Fed is likely to continue raising rates. Looking at the performance, it was the longer end funds that performed the best this week.

Pimco and I shares 20 or 25-year Treasury ETFs gaining $1,000. 3% or more. Now, this data comes from our partners at track insight. More information on all of it is available on the F.T. Wilshire EF. Hub. Right now, let's get over to Frank Holland for the CNBC News Update. Frank, what's going on up there? Hey there, Eamon. Here is your CNBC News Update at this hour. A group of Democratic governors today trying to protect abortion rights, President Biden acknowledged his suggestion of a limited exception to the filibuster role that's blocking action in the Senate has not been embraced enough by Democrats in the chamber. Ultimately, Congress is going to have to act to codify the row into federal law.

As I said yesterday, the filibuster should not stand in the way of us being able to do that. But right now, we don't have the votes in the Senate to change the filibuster. Secretary of State Anthony Blinken says today that winning Brittany Griner's freedom is a top priority, but he hasn't been willing to talk about speculation in Russian media outlets that the U.S. basketball star might be traded for a Russian arms. dealer serving a 25-year sentence here in the U.S. for helping terrorists. And take a look at this video from Ukraine, shot by security cameras in a city park. A missile hit a nearby shopping mall earlier this week, killing at least 19 people. Ukraine is a cruising Russia of deliberately targeting the mall. Hundreds of people were inside that mall. The Kremlin says the target was actually a

nearby Arms Depot. That's the very latest. Amen and Kelly. Back over to you. Frank, that's scary stuff there. People just out for a weekend, walk in the park, and you see that terrifying. But thank you for bringing it to us. Coming up on Power Lunch now, industry warning signs, car prices soaring in the first half of the year. But sales are sliding. GM says chip shortages are hurting their deliveries and average monthly car payments are climbing. We'll make sense of it all with the CEO of Group 1 Automotive. And based on Microns' earnings, the semi-space isn't showing signs of any improvement soon. We'll have the details when Power Lunch comes right back. 90 minutes left in the first trading day of July and the second half and the rest of our lives.

So let's get caught up on the markets, stocks, bonds, commodities, and an inside look at the auto industry, which is a good tell on the macro landscape right now. Let's begin with Bob Passani on this first day of July trading. Bob? You know, we just had a nice little like, I'm just talking to my producer, Kirsten Chang, in the last 10 minutes or so. We've seen mostly its consumer names. Procter and Gamble's had a nice move up.

Coates had a nice move up. McDonald's as well. So we're sitting right near the highs for the day here. Nice little move at the second half of the trading day. But at the same time, we've seen some significant new lows here, and it's mostly situated in the semiconductors. Micron, of course, had some negative comments talking about weakening consumer demands, hurting cell phone sales potentially.

But even before that, we were in a downtrend. So Nvidia is at a new low, and there's the big cahoon in that space, Lamb Research and Advice Advance Micro as well here. Look at how fast things can change here. Freeport MacMaran was at a 52-week high just a few months ago. Three months ago, it was the darling. And remember, medals were all the rage because the global economy was reopening. Guess what?

52-week low today. Copper is at a new low. It's really amazing how fast the sentiment has changed from the global reopening story, now to the global slowdown story, and this is less than three months here. We also see copper at new 52-week lows. I've been watching those metal stocks pretty carefully. The one to watch here is the ETF for this. It's DBB. It's the base metals ETF, and it's essentially a basket of all of the major metal commodities that are out there. These are futures contracts, and this, too, is a 52-week low, so it's not just copper, but other metals like aluminum as well that are

slowing down. Finally, I want to note we're having a great day for the home builders, really second day in a row. And the reason this is happening, I think, is because we're seeing rates come down. That 10-year yield moving down, that's usually not far away from where mortgage rates go. And when mortgage rates decline, obviously, the home builders generally improve. Guys, back to you. 6.66% jump for Pulte right now. Bob, thank you very much. Let's get to the bond market meantime. Speaking of key levels, talk about the reversal in the 10-year yield. The lowest since late May today, that's at 2.889% right now. The two-year yield, same stories, really retraced a long way.

Remember, just a couple weeks ago, the 10-year up here was around 3.5%. Now, oil is closing for the day after a volatile week. Let's head to Pippa Stevens for the very latest. Pippa. Hey, Kelly, oil is in the green after posting its first negative month in seven, but it did end Q2 higher the 9th positive quarter for the first time ever. Driving today's action is supply outages in Ecuador, Libya, and Norway. WTI is at 108-24 gain of 2 and a third percent.

Brent crude also up 2 percent here at 1140. Looking at Nat gas up more than 5.5 percent as it tries to make back some of yesterday's 16 percent drop. Now turning to prices at the pump, we have started. to see a little bit of demand destruction. Products supplied, which is a proxy for demand, fell below 9 million barrels per day on a four-week rolling average. That's according to the EIA.

And that is the lowest seasonal level since 2014, with the exception, of course, of 2020. And for those hitting the road this weekend, the national average is currently $4.84. Kelly? At least it's not five. Pippa, thank you very much, our Pippa Stevens. The auto sector is in the middle of both

an opportunistic time and a challenging one. Just this morning, GM warned of continued manufacturing issues. It comes as inflation has raised car prices and higher borrowing rates are hitting leasing and buying costs as well. Now, in spite of these headwind's appetite for new cars seems to remain strong. Buyers are willing to pay up. In fact, 12% of consumers are paying more than $1 a month. On that note, let's bring in Earl Hesterberg. He is president and CEO of Group 1 Automotive, one of the largest auto retailers in the U.S.

Earl, it's great to have you back. Welcome. You know, the last time we spoke, we were pressing you for like the number of cars and lots because there wasn't a lot of them. Where are we today on inventory? No different than where we were the last time we chatted and not really any different than the position we were in one year ago, surprisingly. So no material change. Why is that? Well, demand is just outstripping supply. You've seen, you just mentioned generally. Motors. We've seen Toyota continue to revise their production figures down month after month. And there's still a big gap between supply and demand in the auto industry. Earl, let me ask you about this. I saw an astonishing stat earlier today and help me understand it, 95,000 cars manufactured by GM, but they haven't been able to finish them because they don't have the chips in place to actually produce those vehicles and roll them off the lot and sell them to you and me.

So A, what happens to those cars? I mean, they just sit in a lot somewhere, and then B, how long do you think it's going to take GM to sort of get through that, get the parts they need and get those cars out there on the market? Well, other manufacturers have followed that same process for the best part of a year now. And those cars tend to sit in yards either near the factory or near transportation lines. We really don't have many of those unfinished cars on our lots. But the car manufacturers tell us that it will be well into next year before we get back into any kind of normal supply rhythm. Where is that leaving prices, Earl? Where are we on a metric that not only tells us about how much affordability there is,

but also about the buying power of the consumer, the need versus the desire to have these new vehicles, Are prices rolling over? Prices are still relatively high when you look at historical levels. And it's three reasons. Basically, everything's selling at the manufacturer-suggested retail price. Incentives that were very common two to three years ago are basically gone. And the mix of vehicles that are being built by the manufacturers are those that are favorable to them, which tend to be bigger, more heavily.

optioned vehicles. So those three factors have really pushed the average price up in the last two years. What about the used car market? Because that went all out of whack during COVID. We saw this huge demand surge and you saw used cars selling for prices similar to new cars. Is that normalizing? Where do you think we had from here? I would say it's tempered a bit, but it's still out of kilter based on historic pricing levels. They're still high. But I would say they're They've adjusted a bit. And one thing we have to be careful of is when you get in an economic challenging situation, it'll show up first in a lower priced, older used cars.

So what we try to do right now is keep our used car inventory lean and push that average retail price a little bit lower because there are more value seekers in the used car market right now than there were a year ago. So is that sort of a canary in the coal mine for a recession? Watch that used car market? Well, yeah, that would be typical in that kind of environment for sure. So, Earl, leave us with this. Where are we going to be in six months' time with still not a lot of inventory, high prices, and less demand?

Or just I'm curious at a time when we're talking about mounting pressure on the consumer and all the rest of it, what do you see playing out here as we move throughout the summer? Well, I don't see any, any major. decrease in demand, certainly in the next six months. You have to realize we're going into our third year now, where the average selling rate is like a recession rate already. It's probably two million units a year in the U.S. below what the normal demand would be without these constraints. So we're selling 14.5 million vehicles a year, and in a normal situation, we'd sell 16 to half million, and we're going into a third year like this.

So there's a lot of pinup demand in particular for new vehicles. I love the figures. It definitely helps us follow it. Earl, have a great fourth. Thanks so much. And coming up after the break, a Fourth of July edition of Three Stock Lunch, Booze, Grills, and Pools. I'm not kidding. We'll be right back.

Grills. Did I say girls? No. Grills. And time now for today's three-stock lunch, the 4th of July edition. We're going to keep it clean, though. We're looking at drinks, dining, and diving.

First, Molson Cores, outperforming the market, big time, up 17% this year. Weber, on the other hand, down a whopping 43% so far in 2022. And finally, Poole, a market darling in 2020 and 2021, sinking 37% this year. So let's bring in CNBC contributor Boris Schlossberg. He's managing director of FX Strategy at BK Asset Management. Let's start with beer and let's start with Molson Coors, Boris. What do you make of it? Yeah, I mean, the tap has been a great stock, and I think it's benefiting a little bit from the trade down effect.

Consumers are going maybe to their lower cost beers because of inflationary pressures. Overall, you know, the beer market is a great market. It's maybe very, very slow. So inflation is good for cheap beer is what you're saying? Yes. Okay. I mean, you know, because people still want to drink, they'll just simply trade down to maybe a lower brand. I got it.

But the beer market itself, I think, you know, is fascinating. It's very slow growing, but it is massive. By 2028, it's expected to be a trillion-dollar market. So it doesn't take much to move the needle here. A couple of basis points of market share from Molson, and it could really have a strong impact on the bottom line. In the meantime, you get paid 2.5% dividend to just basically wait to get their operational structures in place. So I think it's a good stock to hold for the long term.

All right. So we move from that to the grill. Weber Grill, oh, still. relatively recent IPO. Do you like the stock? Well, I've got to say, after all these years of being a city person, I've now finally become a Jersey dad, and I definitely appreciate the quality of a good grill. Now, Weber is much more a story of the stock than it is of the company. The company has had a lot of problems with supply chain constraints and fall off of consumer demand, obviously a little bit. But the stock itself has just been an unbelievable tug of war between

shorts and longs. It's had a huge short position on it, almost 100% of allowable shorts. And because of that short squeeze, it's had big moves over the last couple of weeks. Now it's come back. And I think the volatility at this point provides an interesting opportunity for people who have a long-term perspective on the stock. If you're coming in around seven, I think you have a reasonable chance here in three to five years to possibly double your stock. But you have to be prepared for a lot of volatility. It could go down by 50% from here. So it's clearly a very speculative position. But long term, I definitely think Weber, a classic name, great name with consumers, certainly

is going to hold over time, I think. Our final name here is Poole. Where's that one going to be headed? That's the one I'm sort of least excited about. Even though it's performed really well, it's definitely been the pandemic darling. But the problem now is it's really having this hangover post-pandemic. People are really starting to spend their money away from their houses, much more towards experiences.

And I think Poole is certainly feeling the pressure. at this point. 60% of its business is recurring. So it's definitely had a huge bump from the COVID bump. And it's definitely, I think, in great financial shape. But there's very little catalyst to really get investors excited, in my opinion, at this point. I don't see people really spending a lot of money going forward on pool improvements because of constant interest rates and just generally, you know, the issues of issues with the economy. So to me, this could be just pretty much a stall for the next 10 to 12 months. That's why I'm neutral on the stock. It's fascinating.

Yeah, treading water in pool. Boris Schlossberg, thanks so much. You get your beer, you got your grill, you got your swim. Have a great weekend, Boris. Thanks. I am all set. All right. Thank you.

Coming up, we'll speak to famed chef Wolfgang Puck. Does he use a Weber grill about the state of the restaurant industry? We'll ask him for some tips maybe for that Monday barbecue and how to deal with the rising food and labor costs. We're back after this. And welcome back to power lunch. The restaurant industry is getting hit by inflation from all and. angles, higher food costs, wages, rent, gas, but there may be some relief on the horizon here. Grain futures have fallen over the past month. Wheat down 18%. Corn off 16%. So, let's welcome in.

Wolfgang Puck. He's a celebrity chef and restaurateur. Wolfgang, thank you so much for being here. The last time you were on Power Lunch, you talked about the possibility, because of all of this inflation, all these price pressures, the possibility of $100 steak entrees at restaurants. Are we getting there yet? Is that going to happen? You know, we are very close already at that price rich for top quality. You know, top quality has gone up a lot. For example, tenderloins, a pound went from $43 to $66. So a pound of tenderloin, you can make two portions of eight-ounce fillets. And, you know, if one costs you $30, $33, it is really close to $100 for a steak, especially if you give a sauce or a sauce or anything.

with it. Now, there are still some good options, like rabbis or the New York's did not change much in price. Lobster went from 50 to 20. But for me, the most difficult part is labor. Now, labor is part, you know, where we have seen the most increases over the last year. Why? Because housing has gotten out of control. You know, in New York City, I just was at Katte, New York City, downtown, and my manager, George told me, you know, his apartment going to go from $2,800 to $5,000 a month in next April. He said, I'm going to have to move somewhere. So I think that's really, really difficult.

And to attracting enough labor, it's really difficult. You know, when I look at the news all the time, and we have all these people coming from south of the border, all the immigrants with no profession or nothing. And yet we have difficulty getting a visas for people who are professionals from anywhere in Europe or Asia, so from wherever they come. I think the government really should look into that and figure out a visa for people who have a job already lined up, who can come here and contribute to the economy. Wolfgang, let me ask you about that price point, though.

At $100 a stake, if you get there, I mean, that's a lot of money. I wonder when the customers are going to just simply say no. expense account set? I mean, I could see somebody, a corporate executive sitting down for a stake and saying, I don't think I can charge that on my expense account. My boss is going to see that. At what point do you start to hit that price resistance? You know, I really think, for me at least, the $100 is really a top thing, you know. That's the hard ceiling. When you look at hotel prices, room prices, I mean, it has gotten out of control everywhere. I mean, I tried to go to Miami.

It was $2,000 a room. And who's going to pay $2,000 to sleep for one night? It's totally insane. I think everything has gotten up, and there's not more service. You know, I would say, okay, now I'm going to get chocolate truffles. I'm going to get a little tin of caviar in my room. I would say, okay. So for us in the restaurant industry, I know at Cut in New York, I told George,

give the people a little more, give them some little snacks with their drinks. So that way you make them feel good. Because at the end of the day, it's really, how do we make the customer feel? You know, if you spend a lot of money, but the service was great, and you got something extra, even it doesn't cost us a lot of money, people will really feel appreciated. And I think that's really for me the heart part, how we're going to navigate a price line, which is still reasonable. Yes, it's luxury, but even in the small things like chicken wings, Basically went from $3 to $6 a pound.

So if there's a restaurant, a bar, there's a chicken range in tons, really, you know, that's doubling the price. So I think we have a problem. And don't think also vegetable fish. Everything has gotten up. And somehow, you know, for us to survive, we have to charge the price.

If not we go out of business. So you can raise prices, but make sure that the customer feels the love. Yeah, get something. Yeah, no, I really believe. have to make the customer feel good. Give me extra love, extra service, and really look that everything is perfectly cooked. And I think that's really an important part.

And for a drink, maybe send an extra drink sometimes. That doesn't cost a lot of money. And, you know, there's no spoilage if you send somebody a negroni, you know, and the gin or the mescal, whatever you make them with, it stays pretty much the same. So I really believe service is an important part. The hospitality is more and more important. Wolfgang, since we're sort of talking about inflation hacks that restaurants might be doing, do you have any barbecue or grill hacks for Monday?

Are you a grill guy? You know, I started at Spago having everything wood fire. So even in our restaurants, we have grills to cook our meat or our fish. I love the flavor of a grill. So I think on Monday, I might just. go to the Bel Air and not cook another day. For me, it's like a bus month's holiday, you know, what I'm going to do?

Leave my house after all the housekeeper wants to be off also. So it's hard, but I think grilling really like burgers actually don't have gotten up that much in price. New York street Roins don't have gotten up much in price. And you can get cheaper parts

to just cook them right. You know, that's really an important part. You don't have to just buy the most expensive parts. And maybe cook them slow, maybe wrap them in aluminum foil and let them steam really on the grill, like a brisket and things like that, which are not that expensive. And don't forget, corn is in season, tomatoes are in season, make more vegetables. That's better for us anyway.

I'm taking notes here. By the way, this is excellent. This is like our version of the cooking segment on the morning shows. I'm just learning how to grill for the weekend. Wolfgang. I'm in my kitchen here. Thank you so much. I hope you get out of the kitchen.

sometime soon this weekend and enjoy your day off Wolfgang Puck. Thanks so much for being here. Thank you. I will be at the Bel Air Hotel. Thank you. All right. Coming up more breaking news out of the crypto world, but first, just an hour left in the trading day. Dow is now climbing more than 200 points. It's leading the way today as well. The NASDAQ up 43. We're back after this. More breaking news now in the crypto space. Kate Rooney has that story. Kate, what's going on? Hey there, Eamon. We've got more damage in the crypto lending space. Voyager saying that it's temporarily suspending trading, deposits, withdrawals, and all loyalty rewards. That was effective at 2 p.m. Eastern that release, though, just coming out in CEO Stephen

Ehrlich saying, quote, this was a tremendously difficult decision, but we believe it is the right one given current market conditions. He says the decision today gives them additional time to keep exploring strategic alternatives with various interested parties while preserving the value of the Voyager platform. This is an investing app. It's also a lending company. It comes after major crypto hedge fund, Three Arrow's Capital, defaulted on a loan to Voyager. The company is saying on Monday that that hedge fund failed to pay a $350 million loan in the U.S. dollar-pegged stable coin U.S.D.C. They also had a major Bitcoin loan that the hedge fund defaulted on. That was worth more than $300 million.

So we're seeing a lot of margin calls and defaults lately in the crypto space. And remember that company had also gotten a $500 million loan from Sam Baceman-Freads. Alameda research. So guys, this is the latest fallout we've seen in the crypto space. So suspending trading, deposits, withdrawals, I mean, that's a lot, right? You wonder what happens to the customers here? We've seen this also. There's a major crypto company called Celsius that took this, did the same thing two weeks ago and hasn't really had an update since. So we've seen companies seemingly facing liquidity issues not being able to honor some of those withdrawals and deposits and without a lot of other options saying, hey, we need to close this.

doors for now. And it seems like a lot of these companies are scrambling on the back end to find other options and really stay afloat at this point. Well, Kelly, imagine if a bank did that. Oh, my gosh. But are the underlying funds safe, Kate? Good question. So a lot of the underlying funds have been used for a lot of these other crypto companies to do lending. So they've gotten these high yield accounts going and to customers saying if you deposit your crypto here, you'll get a return on that. But on the back end, we're going to go lend it out to hedge funds.

unclear here. The company doesn't comment on that specifically. They say it's in the works. They're figuring it out, but no details in that, Kelly. Kate, thank you very much, Kate Rooney. Crypto Night in America, by the way, tonight, 6 p.m. They'll have a whole lot more on this. Yeah, fascinating conversation. And Aeman, we'll see you at 7. Yep, I'll be hosting the news with Shepard Smith tonight. Yeah, we look forward to it. Thanks again for joining us the last few days. This has been a great week. A lot of fun.

Thanks for watching, Power Lunch, everybody. Closing bell starts right now.