Power Lunch - Apple of My Ire, Electrifying Partnership 9/7/23

Episode Date: September 7, 2023

China’s government has reportedly banned its agencies from using iPhones. What would further bands in the country mean for Apple? We’ll explore.Plus, Hilton is teaming up with Tesla to install EV charging stations at thousands of its hotels. We’ll bring you the key details on the partnership. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. And coming up, the Apple of My Eyre. China's government reportedly banning agencies from using iPhones. So what would further bans in China mean for the Big Apple? More on that shortly. Plus, Hotel Motel, EV plug-in, Tesla to install charging stations at 2,000 Hilton hotels. Details on that deal further ahead on the program. But first, let's get a check on the markets. You can see the Dow outperforming again today up 84 points driven by strength in health care and Intel, interestingly enough. Broadly speaking, chip names are weak. The S&P 500 is down a quarter percent, and the NASDAQ is off the lows, but still down almost 1% today.

On the media front, Disney and Paramount both hitting new 52-week lows. There's Walt Disney shares, which dipped below $80 earlier in the session, just a hair above that now. Fubo TV also up about 10%. Warner Brothers Discovery down almost 4% after CEO David Zazlov said strike costs have prompted them to lower earnings expectations. And Fubo is popping after Charter has been pushing its subscribers to sign up as part of their ongoing fight with Disney. And in the AI space, C3 AI is down almost 13% after forecasting a larger than expected operating loss for the second quarter. And NVIDIA also down after warning of an 18-month lag in supply. This follows warnings about TSM about supply constraints on AI chips.

And finally, as we mentioned, the focal point for investors today is Apple, down more than 3% and down almost 7% this week on China's apparent iPhone ban. On that note, let's turn to Steve Kobach for more on this story, Steve. Yeah, this is a big one. So we got another report today out of Bloomberg this time saying the ban on government employees using iPhones that the journal reported yesterday, that's going to extend to agencies and state-backed companies. We haven't been able to confirm that report or yesterday's WSJ report, but it's still rattling investors. Apple was down over 3.5% yesterday, down another 3% so far today. No comment

from Apple on this, by the way. Now, these reports are causing confusion about what's really going on. China Mobile, that's the largest carrier in the country. Knock down some rumors. It would not sell the new iPhones that are going to be announced next week. The investor fears are valid, though, Greater China made up almost 19% of Apple's total sales in 2022. On top of that, Apple has benefited from the demise of China's Huawei over the last few years. Huawei couldn't make 5G phones due to some U.S. restrictions on supplies, so many of those customers switched to Apple. But Huawei has a new phone that it's calling 5G, adding to fears customers will go back to the homegrown brand. And all of this happening, of course, before we hear about the next iPhone line,

up in just five days time. Analyst chat are speculating Apple were raised prices on the pro line this year, despite weak demand for phones. Can you see this in any other way than retaliation for the troubles we have caused? Oh, absolutely. Huawei, the troubles we have caused TikTok. Yeah. I mean, if you work for the federal government, you can't put TikTok on your phone.

We're seeing it banned even in public universities. Yeah, this very much seems like a tit for tat. What I'm curious is when it comes to Apple, how far are they willing to? to go. We know Apple provides so many jobs for Chinese in that country. So, you know, they can't push them too far. And the China mobile commentary here kind of knocking down reports, no, we're still going to sell to normal consumers. I think the Huawei thing is super interesting, though. It's going to be a real test. Was their brand loyalty for this homegrown Chinese brand? They make good Android phones. A lot of those people switched over to iPhone, or is there this kind of like pride that they want to

You said it is sort of a 5G phone? Yeah, without getting too technical, they're claiming it can do 5G, but maybe not necessarily the definition, the industry standard definition of 5G necessarily, but it has fast speeds. It can kind of mimic it. Yes, that's a good way to put it, yeah. All right. And either way, is this about Apple or is this about something more?

Let's turn to Michael Farr. Will any company doing business with China potentially be at risk, Michael? I mean, we talk about stocks like Starbucks. We talk about Nike. I mean, these are a couple of underperformers lately. What would you say is the significance of this news, if any, for your average investor? Yeah. So we saw that, right?

We've seen China make a lot of these companies political. Yum Brands started Yum Brands China. Chris Campbell was the CFO, General Counsel, whose idea it was to set up a separate Chinese version with Chinese board members of young brands to try and avoid some of these political ping pong games back and forth. You know, Apple's under pressure. Other companies could be under pressure. We put Huawei under pressure and TikTok under pressure. So we're becoming political with some of these investment companies. When you back out and take a look at Apple, we've seen these sort of hiccups over the years. 2018 and 2019, we saw Apple pull back from July to July a full 20 percent, rally back.

up to even, so it was a bad dead money for the year. But since 2018, Apple's up 200 and some odd percent, 2018, 2019. So this is a company, it'd be very hard for me to bet against. I've owned it a long time. $2.76 trillion in market cap with a new product release coming out, 8% of the S&P 500. Portfolio managers have to bet against the whole country if they're going to go blank in Apple. Dan Niles is a much more courageous guy than I am. So let me turn back to you, Steve, if I might. You say that Apple's revenue total is 19, 18%, from China. Depending on the year and the quarter. What percentage of that is represented by these government phones or state-owned enterprise phones that may now be banned? That's tough to really pick

out, Tony Saginawaghi had a note out, I don't know, a couple hours ago, actually. The third, is it a quarter? Yeah, it's guesswork at this point. Yeah, and, you know, people are making estimates all over the place. No one really knows. That's the bottom line. So, Michael, would you, you're inclined to hold the stock you have. Would you buy more here as this, as the price dips a little bit after a nice run up so far this year? I might, Tyler. I buy things on a, on a, on a, on a, on a, on a, on a, on a, on a, on a, on a, on a, on a pullback, of course. But if you think about this stock up 200 percent or even up 36 percent year to date, you sell that stock, you've got to pay capital gains of, you're going to lose 10 percent of

your gains already this year. And then you've got to find a company better than Apple for the long term. You're going to find a better CEO than Tim Cook. I mean, Apple is ultimately the world's most valuable gatekeeper for its most affluent users of iPhones. And I think for the longer term, for me, I'm going to have a position here. I wouldn't sell it. And yes, on weakness, I'd certainly add to it. And I would also note that, again, that referring back to Saginaw's note,

after an iPhone event, typically shares go a little bit down, you know, the buy the rumor, to sell the news. So that's something else to watch for. Yeah, Michael, let me just kind of put this in context. Well, Apple's probably the biggest stock. You know, it was $3 trillion in market cap, maybe just shy of that in the whole market.

So it does feel like a bell weather. It feels like a bell weather for the S&P, which, as we know, has been over, represented in terms of the gains this year by the magnificent seven. And it's a bellwether in terms of the relationship between the U.S. and China, I think. I think that's an excellent point. It's a bellwether for our text and certainly for our relationships with China. So it could come under fire.

And I'd go back to that 2018 trading year from July to July where the stock went down 20% and came back 20%. I don't think you wanted to sell it. Now, if you're Dan Niles and you can short it and get back in it and you're not have it in your retirement, you know, part of your long-term retirement strategy, then that's a different way to invest. I think as a long-term investor when something's 8% of the S&P 500 that has the execution history that Apple has in place, the numbers, the cash on the balance sheet, it's very difficult to say you're not going to be an owner of this stock. All right, Michael Farr, thank you very much. Steve Kovac, thank you. as well. And Michael, you've set it up perfectly for us. So how are investors responding to all this?

Deidre Bosa joins us now along with the aforementioned Dan Niles, who says Apple is his single largest short. Deidre, over to you. Yeah, his name mentioned a few times in the last segment. So, Dan, we have you now on the line of Sotori Fund. Thanks for being with us. You outlined a number of reasons why you're short, including those latest reports from China. And quote, no AI play in you. In your view, what is the biggest risk to Apple at the moment? Well, it's the one thing that hasn't come up in this last segment, which is what's the risk you're taking on for owning it. And one way to measure that is what's your PE ratio and what's the growth you're getting?

So if you look at it from that standpoint, you're paying 28 times PE for Apple. Revenues grew 2% last year. They grew 1% this year. And you can buy the S&P at 21 times. So the multiple, if you look at it, is it actually expanded about 7% from two years ago, while the revenues are dead flat and the EPS is down. Now by the way, if you think that's an aberration, if you go back to before COVID, Apple's revenues were down in fiscal 19.

COVID just supercharged that revenue growth. And by the way, the four years prior to COVID, smartphone sales were down every single year, year over year, for the industry at large. So Apple really has benefited tremendously from this, you know, from COVID and everybody having to buy an iPhone or a PC. And if you compare it to the other mega cap stocks that are comparable, so Google, Microsoft meta, their revenues are up between 10 to 22 percent or so over that same two-year time period. And their multiples have actually gone down about, you know, 7,8 percent or so, as has the multiple for the S&P 500. So the risk is something that I know nobody cares about risk anymore with the belief that the Fed's going to bail you out every time the stock market goes down, or you're going to get stimulus checks. But that's the thing you need to think about, which a lot of people are.

Well, that's why we have you on, Dan, to highlight some of those for us. So I think what you're saying, though, is that over COVID, consumers were purchasing goods over services. And you're saying that that's going back. But what do you make of the argument around Apple that it's no longer reliant on iPhone. sales, but it now relies on its installed base of over 2 billion devices. So its thesis going forward is actually about that services side of things, which has been growing. Well, you got to remember, Deirdre, they had a big install base in 2019 as well. And their revenues, when you include the services growing really fast, was still down that year. So you can say services

all you want, but here's the thing. Where's their growth coming from? It's coming from emerging markets. So if you look at China where they're expanding into, the GDP per person there's a much lower. They're not going to be buying as much services. They're going to be buying more of the lower end of that lineup. And so you have to put it all in context of you can say services a lot, but what is it actually doing for revenues and earnings? As I said earlier, their revenues and earnings are exactly where they were two years ago. The other magnificent seven, by the way, you can buy it in much lower P.E. So you can buy, you know, Google or Facebook or Google and Facebook in particular 23, 24 times. The S&P's at about 21 times. And you're getting, you know, between 8 to 13%

revenue growth from both of them. We don't own Microsoft for the reason that it's at a 32 PE, but its revenues at least are growing 9%. So I think you have to balance all that. And by the way, we own meta, Google, as well, Intel is our largest position right now. We own Amazon. So we like Big Cap Tech. We just don't like Apple. And we have a note on our website that goes into all the details around it. But if you think about the fourth quarter coming up, which is a retail quarter, you've also got 40 million student loan repayments starting on October 1st. And the price of the iPhone is probably going to go up. So that's not a good mix in my mind when you look at it and you put in the PE and the growth rate.

It's Kelly here. I just want to jump in with two quick questions that related. One is what's your dating history with Apple in terms of shorting it or being long or just kind of track record? But the second is also, I don't hear much of this conversation focused on China. I hear you talking about valuation

and maybe that's going back to historical, you know, U.S. student loan. I mean, is China as a risk something that's entering your investment world or not? No, absolutely. That's why if you look at our latest set of tweets, Kelly, I was just sort of mentioning valuation because it hadn't been brought up in the bull case because you can't bring it up because there's no defense.

But if you look at China, yeah, that's a big issue because the thing people forget is Huawei was 19% of the global smartphone market at its peak in, I think, the third or fourth quarter of 2019. Then the sanctions came in and their market share literally went to, you know, just collapsed. Now they've got their first new flagship phone since 2019. I don't think it's a coincidence that the China. Chinese government, at the same time that flagship phone is coming out as talking about trying to restrict government employees and state-owned entities from having iPhones at work. And so you put that together and Apple being 19% or so of, sorry, 19% of Apple sales coming

from China, this is a huge deal. And that's why in the post we put out yesterday, we said, you know, Huawei's got this new phone coming out. We're selling our long, our plan is to get short, and as we thought about it more during the day, you know, given the valuation differentials and what we own in Big Cap, Tech anyway, we're like, this is a perfect short against the longs that we have, and so that's why we put it on. So the catalyst is really China. Nobody cares about a valuation until the stock starts going down, and then people have to do some homework.

And so that gives you the downside risk in the name. All right. We'll leave it there, and we really appreciate it. Dan and Deirdre, thank you both for joining us today on a pretty impactful day for Apple and for the market as a whole, we think. Dan Niles and our Deirdre Bosa. All righty, coming up, NFL kickoff is upon us and there is a lot of green on the field. And no, we are not talking about the grass, the turf, or whatever else. The big money in the league as well as on the gambling front. That's what we're talking about. And to do it, we're going to be joined by our friend, the best in the big. business, Mike Tarrico, plus a power player in the crypto space. Coinbase up a whopping 120% this year. We'll speak to the CEO ahead of the show. And as we break for a moment, here's a quick power check on the negative side of the S&P, insulate.

The medical device firm down 9% following concerns the strong demand for diabetes drugs could hit sales of its insulin pumps. On the positive side, West Rock, the packaging company in merger talks, to create a company with a combined value of 20, billion. It's a lot of packaging. We'll go right back. Welcome back to Power Lunch, everybody, as we count down to NFL kickoff. The season returns tonight with the Super Bowl champion Kansas City Chiefs hosting the Detroit Lions on NBC. And it's not just a championship on the line this season, but some big money, too. A new survey shows that a record 73 and a half million people

plan to bet on football, pro football this game. That's up from an estimated 46 million people who bet last year. Joining us now is Mike Tarrico, who will call tonight's game. I assume you're calling Sunday nights game as well, Mike. It's great to see you. Hey, here, Tyler, busy week, but it's what we look forward to. Great way to start the season with Thursday night, Kansas City. I just have to tell you, there's no one who is more enthusiastic about their job than Mike

Toriko. And your fans all follow it. My son, who is 17 and thinking of going to your alma mater, Syracuse, is so excited about tonight. He wants to know what you're looking for in tonight's game, Kansas City and Detroit. A lot of hot money, and we'll get to hot money, is on Detroit this year. Well, first off, he's a well-raged young man if he wants to go to Syracuse. It's good to hear that, Tyler, for sure.

You know, this is an interesting game on a couple of fronts. Kansas City, the defending champs, always get the champs opening at home. For the Chiefs, this is an interesting week. Chris Jones is their best defensive player. He's holding out for more money. Travis Kelsey is their star tight-in. Patrick Mahomes, Batman and Robin combo. But Kelsey injured his knee on Tuesday in practice.

They're going to check him out before the game to see if he goes. A huge part of the Kansas City success. If he doesn't play, it doesn't mean the Chiefs can't win. They have a lot of offensive talent. One of the best coaches the league has ever seen in Andy Reed. But without Mahomes and without Chris Jones, Detroit has more of an opportunity to come in here and ruin the party for the celebration on the opening night of the season.

Let's talk about legal wagering on pro football games. The league has already had to take disciplinary action against a couple of players. And so I want to get your thoughts on whether as a broadcaster and journalist who covers the league as well as presents the games, whether you think the gambling is helping the game, hurting the game, a neutral, that's number one, and does it influence in any way how you call the game? In other words, will you be saying, for example, if you had to reek Hill and five receptions in your prop bet, you're in? You just made it. How does it change what you do? So we don't go into the specifics. In general, there's a very clear rule for us,

broadcasting the game within the body of the game, not to discuss point spreads or any of the profits that you talked about. Now, certainly will carry an awareness into the booth of what the interesting numbers are related to the game because you'd like to know who your audience is at the end of the night because if they're out there, you'd like to speak directly to your audience. So with a wink and a nod, you kind of understand what's going on, but you can't come out and say, hey, this touchdown could be for the cover in this game. Now, to the specifics of gambling and the league, the pregame shows can now put point spreads and totals on the bottom line of their screen or discuss it in conversation before the game in certain ways. The league

has multiple gambling sponsors. And it's a little bit of a slippery slope because it's part of the league's business right now, yet within the body of the game, we can't talk about it. There's no mistaking that legalized gambling in so many states and the fact that folks can pick up their phone and wager, the fact that you have legalized betting places within some stadiums in the National Football League now has changed the conversation a lot. But the one place Tyler of the league has been very clear, and multiple teams have seen this with players suspended, there is no gray area in terms of players betting on football or betting when they are on the work site in general. If you're in the building of, let's say, the Detroit Lions, and you're in their practice facility,

you can't take out your phone and make a bet while you're there. So the league has been very clear. Players have been suspended going into the season, and they know the rules, and the education is ramped up in that regard before this season. I think it's fascinating for viewers to know what you just said, and that is that there are strict rules that govern what you can and cannot refer to with respect to point spreads,

prop bets, and so forth during the body of a game. I had no idea of that. I learned something every day, and I'm actually glad to hear that. because I would, as a fan, not want to see my broadcast turn into a gambling show. I want to watch the ball game. Let's pivot forward because my son insists to talk about the Giants and the Dallas game that you will have on Sunday night. I will be there with him.

We will be rooting for the Giants. What do you see from those two teams on Sunday night and for the year? That NFC East last year had three playoff teams. One went to the Super Bowl. Exactly, in the Philadelphia Eagles. And I think they may be the best team in the east again, if not in the entirety of the NFC. I think San Francisco has a roster that's right there.

So too do the Dallas Cowboys. Dallas has won as many games in the last two years as anyone in the league except for the team we're going to see tonight in Kansas City. So Dallas has it all there. They've run into San Francisco the last two years, and the 49ers have knocked them out of the playoffs. That's one of the big games we'll have on the Sunday night schedule during the year. But Dallas has had the Giants number.

especially in these openers. But the Giants get the chance at home to come up and try to knock off Dallas and make a stable. The Giants found their quarterback in Daniel Jones, brought back Sequan Barkley, the running back. And maybe most importantly for the Giants, they found a head coach in Brian Daibald, who I think they feel really good about building their offense around a good tight end they got from the Raiders and Darren Waller. So I think overall this Giants team has incrementally taken a step forward. We'll see how they do on the defensive side because Dallas has been a good offense. If you want a headline to watch the Cowboys this season,

Mike McCarthy, who was the Packers head coach, came to Dallas. Mike McCarthy is now calling the plays. That's a little bit of a change for them. Their play caller, Caller Kellan Moore is now with the Chargers. So we'll see if it's an offense that makes fewer mistakes. That's the problem that Deskot had last year. Too many interceptions. Those are the big storylines for the Cowboys and the Giants on Sunday night.

Mike, it's Kelly here. And with apologies, I might be one of the wonkier members of the audience here, who's almost more interested in some of the off-the-field drama right now around where and how to watch these games than in the games themselves. I mean, there's more, if we don't have a resolution between Disney and Charter, Monday Night Football might not be available for a bunch of people. Just I'm curious on your take on the changing media landscape as we navigate through this, and what you're hearing from the audience is they're kind of trying to remember

where to find these games and how to watch them and whether this is a great viewing experience for them. Well, as a 10-year voice of Monday Night Football, I'm glad I'm on Sunday night at the moment where we'll be able to be seen on NBC. We have none of those issues to deal with at this point, but I wish Joe and Troy the best on the Monday night broadcast. Kelly, it's an interesting time in all of sports. And as the cable bundle continues to evolve and not in a growth direction at all, and the streaming's becoming more significant, fans are having to get used to new habits. For example, I broadcast a game on Saturday. that's the start of our NBC Big Ten relationship.

And the game was on Peacock exclusively, and it was the University of Michigan. And there wasn't awareness of people of how to get to Peacock and find the game and all of that. Now, that doesn't mean that there will be games on NBC. We'll have the Big Ten on NBC every Saturday night all season. But there are about eight or nine games that are going to be exclusive on Peacock.

There'll be more come basketball season in the Big Ten. And this is just happening with the different streaming services. And while fans may be frustrated, And you understand the frustration when you get calls from your relatives and my mom says, hey, I'm trying to download Keecock and watch your broadcast, right? And she did, by the way. Moms are the best. It's a reality of where we're evolving in the media space. And more games are on than ever before. They're on in more places than ever before. And it used to be a set there with a remote. You just found them. And you just clicked from one to the other. Now you've got to go from service to

service. So it's a change in habits for the viewers. And it's going to be fascinating to watch how it plays out as we go through the next, not month, but years in the space. We've got to run, Mike, but what is your sleeper team pick for the year? Sleeper. I don't know if they're a sleeper necessarily. I'm going to give you one because I think there's a group of about six or seven teams that can get to the Super Bowl. And those are the usual suspects, Cincinnati and Buffalo, and obviously Kansas City who will see tonight and the NFC, Philadelphia, San Francisco, Dallas. I think Atlanta's going to win the NFC South. That's the one division. I think there's a little surprise in. And keep an eye at Jackson.

built. They made it to the final eight, won a playoff game last year, and that's a team that's building positive momentum. And the last one I'll throw out is if the Lions somehow win tonight, the momentum that has built the last offseason in Michigan plus a win in Kansas City will be huge behind a team that hasn't won a playoff game in 31 years. There are a couple of teams on the fringe. Your mention of Atlanta, your mention of Atlanta is going to make my friend Dave Ragon, their offensive coordinator, so happy. Mike Tarrico, we'll be watching. Thanks, my friend. Good see, Tyler.

Thanks. Take care. As a reminder, you can catch the Chiefs. Take on those lions tonight on NBC and Peacock. Coverage starts at 7 p.m. The game a little after 8. I love how you said. I'm glad I'm not on Monday night football right now.

Up next, a new CNBC. Your Money Survey finds that most Americans live paycheck to paycheck and feel financially stressed. We'll talk about some strategies to build your savings amid those worries next. Plus, going from red to green, Maine fishermen are ditching. launching lobsters in exchange for seaweed farming. No joke. We'll explain why when Power Lunch returns. Welcome back. How nervous are Americans about their savings? A new survey reveals most are living paycheck to paycheck. Sharon Epperson is here with more, so not much savings, I guess, to mention, Sharon. Yeah, that's a big issue for a lot of people. I mean, if you're financially stressed, you're not alone.

A new C&BC, Your Money Survey finds 74% of Americans are stressed about their personal finances. That's up from 70% in our April report conducted by SurveyMonkey. And 37% of respondents say they're very stressed. Among the top stressors are inflation, rising interest rates, and a lack of savings. And of the survey respondents who are employed, either full-time or part-time, 41% do not contribute to a 401k or company-based savings account, although the majority, 57% do. And here's how they're funding that retirement plan. 46% are contributing as much as they can afford.

24% are putting away as much as their employer will match. 11% are saving up to this year's employee contribution limit, and 8% just save the automatic default amount set by their employer's plan. Now, in 2023, you can save up to $22,500,000. for retirement in a 401k plan. And if you are 50 or older, you can put away an extra $7,500 in catch-up contributions for a total of $30,000.

Some plans will let you save even more through after-tax 401K contributions. But the majority of survey respondents, 56% admit they are not on track with their yearly 401K savings in order to be able to retire comfortably. Tyler? Very interesting.

I think this is the key stressors. is inflation. Yeah. Because when you look at, and I fault the government, frankly, for this idea of core inflation that takes out core expenses like food and fuel. I think that's not there. Right. Let's just say that. Right. Well, you're not alone. I mean, this is what the survey is showing. We've been doing this survey every year and since November of 22 asking the question about inflation. And it continues to be the stressor that is the top risk factor for their, investments in savings and also the top financial stressor. This time, though, it went up about three points or so from April to now. So 61% of people are saying inflation, that's the biggest

reason that's causing me financial stress. Eggs, bread, milk, the whole thing. Yeah. You go, a $17 bottle of chlorox, my wife found the other day. All right. You can dive into a lot more. I didn't make her happy. I know. I didn't make her happy. There's a lot more on CnBC.com slash your money if you want more on the results. Thank you. Lots of economic data out today. Initial job. claims, 216,000, lowest level since February. Productivity, 3.5%. Highest level since third quarter, 2020. So why are people, Rick Santelli, why are people not feeling good about the economy?

I think we just talked about it. Inflation. Well, not only that. Do you think there's stresses in people's personal lives? Think about the stresses of those who monitor the debt of the country. The budget deficit's going to be double what it was last year. $2 trillion. You want to talk about stress?

That's one of the reasons the bond vigilantes have gotten fresh horses, Tyler, and that's something to pay attention to. As far as jobless claims today, they were well-behaved. Notice how they popped interest rates? Look at the intraday of 2, intraday of 10. But also notice basically on the low yields of the day. And I think there's some important information. Probably the Labor Day holiday most likely skewed those initial and content.

claims a bit lower. And in terms of productivity, that was indeed good news. But remember, we had a minus first quarter. And if you looked at year over year productivity, this quarter is the first positive quarter in five. Now, if you look at a 10-year chart going back a bit, our current high yield close is 434 from the 21st. We potentially were aiming for that. I don't think we're going to get there. Now, remember, high frequency area on 10 is going to be 4 in a quarter. And if you look at the dollar index, it's reflecting all this nervousness we're discussing. And it's impact on rates, impact on central banks and what they need to do because the dollar versus the Chinese currency is at 16-year highs and the dollar index on pace for a six-month high close. Kelly, Tyler, back to you.

All right, Rick, thank you very much, Rick Santelli. Over to Bertha Coombs now for the CNBC News Update. Bertha? Hey, Kelly. Former President Trump's legal team gave formal notice today that he may try to move his Georgia election case to federal court. The maneuver could help him secure a more politically diverse jury pool or allow him to argue he is immune from prosecution for actions he took as part of his official duties as president. Trump is accused of conspiring to overturn his

2020 presidential election loss. He pleaded not guilty. Google is cracking down on the use of artificial intelligence in political ads. The tech giant will require a disclosure for ads. that use AI to alter images or sound. There are some exceptions. For example, it may be or will be okay if the ad uses AI for editing techniques like color correction or image resizing. And former Finnish Prime Minister,

Sanya Marin, who was once the world's youngest premiere, is quitting politics. The 37-year-old Marin says she will join the Tony Blair Institute for Global Change in London. She took office in 2019 and led her country through the COVID-19 pandemic and saw Finland become the 31st member of NATO. Quite a resume to retire from already. I remember she was a pretty good dancer too in some videos, right? Really?

Yes, I think that's true. I think she got some criticism for that, for the dancing, by the way. Got to have a lie. Anyhow, I'm all for it. All right, ahead on Power Launch, Coinbase up more than 120% this year, all despite potential. risks to the stock from regulators. We'll speak to the company's CEO about the future of the crypto industry. Welcome back, everybody. Coinbase is getting into crypto lending, pushing deeper into a corner of the market, hard hit by industry turmoil. But even against a backdrop as

volatile as that, and a battle with the SEC over alleged unregistered securities, the stock has more than doubled this year. It's trading over $81 a share right now. And joining us from Goldman's Communicopia and Tech Conference in San Francisco right now, our own Kate Rooney, who is joined by the CEO of Coinbase, Brian Armstrong. Kate? Hey, Kelly, thanks for that. And thanks to Brian for being here. Great to see you in person.

Yeah, thanks for having me, Kate. Of course, let's start with regulation. So you guys are publishing this blog post today about international expansion. I feel like it's something you've talked about a good amount. Is there any sort of tipping point or breaking point at which you say, all of these G20 countries have got some sort of regulatory framework? The U.S. doesn't. And we're just going to pick up and leave.

As a CEO, would you ever say, it's not worth it to operate in the U.S.? We're not there yet, but as you pointed out, it's really good to see that 83% of G20 countries now either have crypto legislation in place or they've started the process. It's in progress. And so that's where we're investing our resources around international expansion this year. We just launched in Canada last month. We launched our international derivatives exchange the month before that. And so it's true the U.S. is a little bit of a laggard here, and that's not good for America. I'm an American. We started the company in America. America is going to get this right. There's some really important bills going through the House right now that just got bipartisan support in the House committees.

We're going to make sure America gets this right, but it is disappointing to see it lagging behind right now, the rest of the G20. Why are they doing this wrong? What do you think is holding the SEC back especially? Do you feel like they have it out for crypto? Why hasn't Gary Gensler come around to this? You know, I'm not sure. It doesn't represent the will of the people. And in a democracy, the government should be, you know, helping the people with their own goals. Now, 56 million Americans, or roughly 56 million Americans, have used crypto now. That's, you know, about one in five Americans. Just to give you a sense of scale, I mean, about 5x as many Americans have used crypto as have an electric vehicle.

Okay. So this is not some minority thing. It's a mainstream thing in American society. We need to have clear rules that recognize the innovation potential of this technology, but they also protect consumers from harm. And in the absence of that, we've seen terrible things happen. This industry has moved offshore. We've seen exchanges blow up.

We've seen a weakening of America's dominance as a financial hub, as a technology leader. You know, the U.S. dollar as a reserve currency can be enabled by making these things like stable coins. And so it's unfortunately been an abdication of responsibility. Congress now realizes that they need to step in and create these clear rules in the U.S. They have regulated through the court system, as you've described it, or sort of this enforcement action versus, you know, putting out some sort of framework or legislation. we did get that core decision about grayscale. That seems like it's getting the industry at least one step closer to a Bitcoin ETF. How should investors weigh what an ETF would mean for your business?

On one side, there might be more competition. You might be able to buy Bitcoin or get exposure just through a brokerage account. But you're also a partner in this. I just wonder how investors should think about the impact for Coinbase. Yeah. Well, to start with the first part you mentioned, I've been really happy to see the judicial branch of the government. You know, one of the beautiful things about America is we have different

branches of government, the judicial branches has been a great at upholding rule of law here. And even if we've seen some actions which were negative from the regulator, the courts have now upheld in the ripple case, the Terraform case, that the underlying assets themselves are not securities. We saw in this gray scale announcement from a judge or ruling by a judge that the SEC's action was unlawful and it was arbitrary and capricious, right? And so we need to ensure that everybody has equal treatment under the law. Crypto should not be penalized. it should be treated on a level playing field with traditional financial services. So the judicial branch has done a great job of upholding that, which gives me a lot of confidence.

You know, you mentioned these ETFs, which have been a really important development. Now, Coinbase has an important role to play here. We've been named as the custodian in many of these ETF applications. And our view is that it's going to be really good. It's going to bring in new sources of capital into the crypto ecosystem. That's going to be good for crypto, but it's also going to be good for Coinbase. What about the revenue side of that? If there's more competition, does that compress fees at all?

margins have expanded this year, but trading volume is also dropped. How do you think about what more competition might mean for Coinbase if there is an ETF? Well, we haven't seen any margin compression yet, and our general view is that we want to grow the size of the pie. So we want crypto to be integrated into every traditional financial service firm. We want it to be integrated into every FinTech out there. We want it to be integrated into new types of wallets, Web3, that's just coming on the scene. So I don't view it as competitive. Coinbase has really incredible infrastructure that we're going to be able to power a lot of these things

to have a piece of the pie. But the most important thing is we've got to grow the size of the pie. Got it, Brian. We'll have to leave you there. Thanks so much for your time. I'm going to send it back. Tyler, to you in EC. Thanks again. All right, Kate, Brian Armstrong, thank you both very much for that. And coming up, an electrifying partnership. Hilton teaming up with Tesla to install EV charges at thousands of its hotels will get the key details when power lunch returns. All right, welcome back, everybody. Tesla is announcing plans to bring 20,000 universal wall connectors to thousands of Hilton hotels across the United States, Canada, Mexico. Sima Modi has more.

This is a kind of game changer, isn't it? It is a game changer, Tyler, because for Hilton, they see it as imperative to driving bookings, adding these electric charging stations to its properties, they say, will also come in the face of the hotel industry, really facing growing customer frustration. In total, an additional 20,000 wall connectors will be installed across 2,000 hotels. These connectors can be used not only by Tesla cars, but any U.S. made electric vehicle. And Hilton says these stations will drive or play a role in driving sales as electric car adoption is set to increase steadily over the coming year. No doubt it was a limiting factor to not have charging capabilities.

And so we think this will essentially surmount that limitation and allow any traveler, business or leisure, to take advantage of this charging capability now. The more ubiquitous we can have the charging capability, the more inclined travelers will be to stay with us. EV charging is a top search inquiry on Hilton.com, often playing a role in converting search to stays. And the rollout comes as business travel season kicks off this month amid a flurry of conferences from the APEX Summit to Dreamforce. And it's worth noting that hotel occupancy and pricing have both weakened in recent months. We've been talking about how so many people were going to Europe that really put a lot of pressure on the U.S. hotel market. So this next coming month is going to be huge for the industry. Fascinating stuff.

fascinating. Who's paying to the installation? Tesla is. Yeah. So Hilton will identify the properties where it makes no sense to install those charging stations. It's Tesla that sees this as an opportunity just to increase mass adoption. So they're fronting the bill. Who's paying up now? Paying now. All right. Seema, thanks. More to come on the show on Power Lunch. Don't go anywhere. Well, you can't visit the state of Maine without enjoying some fresh lobster. At least it's not recommended. The state's lobster economy, however, could be in jeopardy as warming. As warmly,

waters force the crustacean population north. So lobstermen are pivoting to a potentially bigger business. Seaweed. Diana Oleg has a story from Portland, Maine. Diana. Steve Train has been a Maine lobster man for roughly 40 years, but those years may be numbered. The Gulf of Maine waters are heating faster than nearly every other ocean in the world, forcing lobsters north to colder waters and leaving lobstermen in a pinch. If we have something like kelp to harvest, on top of all the other benefits of the health and all the other benefits of the carbon to significantly help our income. That's huge.

They're doing it with the help of a main startup Atlantic Sea Farms, which has grown the local industry from just 30,000 pounds of lime-grown seaweed five years ago to a million pounds last year. We're growing it without any inputs, no pesticides, no arable land, no fresh water, no inputs. Mother Nature is the kelp farmer, and what we are doing is we're providing seeds to our partner farmers. 90% of seaweed is grown overseas now, but the U.S. market is expected to grow from about $2 million a year to over $5 billion over the next 10 years. Warner sees a massive opportunity for both Maine and the planet. Depending on if you're in a Kroger or Whole Foods, there's about 16 aisles.

15 and 3 quarters of them have no seaweed, and it is the most climate, friendly food on the planet. It's helping fishermen diversify. We need to tackle that other 15 and three-quarters aisles. Maine is now responsible for more than 80% of U.S. seaweed production, and it doesn't just go into food. They're using it for cosmetics, for clothing, and most especially for bioplastics. And that's why big companies like Toyota and Procter & Gamble are here in Portland, Maine today at Would You Believe, guys, an international seaweed conference. I can't make this up. There's so many shocking parts of this story. That's fascinating.

Yeah. We need to get Tyler on the seaweed bandwagon. Industrial uses for seaweed. Diana, thank you very much. Diana Oleg, reporting from Maine. And I will say, you know, seaweed is becoming popular as a crunchy snack. Yeah. You know, obviously Japanese restaurants.

I love the seaweed salad I get in. Same. It doesn't look like that, but it's very, very good. No, it has a wide variety of applications. We could do another story if we wanted to, or we could just do another story if we wanted to, Or we could just sit here and talk. We could mention my favorite one, which is keep an eye on this one today. Walmart reportedly, the pay for new hires is about 5% less than what it was just a few months ago.

They're cutting wages. They are not raising them. Because the, well, yeah, okay, not raising them. Yeah. Lower than it was. Loser labor market. I guess the labor push is maybe abating just a little bit of labor shortage, I should say. Yeah.

All right. Well, you know, we pretty much filled that time there, didn't we? Enjoy the game tonight. Thank you. Yes, you too. But first closing bell starts right now.