Power Lunch - Brent Crude Hits $100/Barrel Again 3/12/26

Episode Date: March 12, 2026

Stocks sell off again due to Iran War concerns. Rapidan Energy's Bob McNally joins the show to break down the state of the energy market.    And investors Tom Lee and Cathie Wood join Power Lunch and give their market outlook right now.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks are falling as oil continues to rise. Iran's new ruler making more threats about shipping and the price of energy. Welcome to Power Lunch, everybody. We are lower across the board today. The major averages all down over 1%. Banks and financials, they continue to see selling. All is crude continues to climb briefly hitting $100 a barrel again. Energy Secretary Chris Wright telling us this morning not to expect the U.S. Navy to escort ships through the Strait of Four moves before the end of the month. One of the best minds in oil and geopolitics, Bob McNally on set to break it all down. Plus, two of the biggest names in investing are joining forces, throwing their money and might behind some of the hottest tech investments available right now. We're talking about ARC Invest and CEO and CIO Kathy Wood and Fundstratt head of research, Tom Lee. They'll join us ahead to discuss these moves they're betting on here. Stay with us for that.

We're looking forward to it. All right. So we've got a lot more to do this hour. But let's begin again with the big story right now. the war, oil, energy, and more. The price of oil continues to climb at $94. This even is the world, including America, set to release 400 million barrels of oil onto the market. The problem is that somebody forgot to tell Iran that the war was winding down. Either it or its proxy warlords keep hitting ships in the Persian Gulf region. In fact, that's a video from last night, two tankers burning one of those ships owned by a company based right here in New Jersey. Wow. And

Despite some talk about the U.S. Navy protecting ships in the region, it is not happening, at least not yet. Here's what Energy Secretary Chris Wright said about that earlier today on CNBC. It'll happen relatively soon, but it can't happen now. We're simply not ready. All of our military assets right now are focused on destroying Iran's offensive capabilities and the manufacturing industry that supplies their offensive capabilities. While oil does have less of an impact on the American economy than it has in decades past, it still matters, a lot, not just for gasoline prices, but input costs on many other items.

And the shipping slowdown hitting not just oil, but everything from natural gas, the fertilizer, and even the gas says that go into making things like semiconductors. So when might this war end and things return to some kind of normal, whatever that means, with flows and shipping, Rapidat, Energy Group founder and President, Bob McNally, a rare interview on set, Bob. We're glad you're here. Thank you very much. Thank you very much.

You've been writing and you've been correct that this war may go on longer than we think. I mean, we're seeing ships hit with projectiles last night. What is your latest insight into when this may end? Brian, I'm prefacing everything with I wish I was wrong. I hope I'm wrong. But when my team and I sat down last June to model this exact scenario with a military officer helping us, the maximum most pessimistic disruption duration of Hormuz we could get to was 30 days. And if the Secretary of Energy you just quoted and showed is correct,

we'll be into our worst case 30 days without a full flow of Hormuz. That is about the worst thing you can imagine in global oil and energy markets. I challenge you, I don't think before 12 days ago anybody even contemplated. It's something like a load-bearing assumption in global economics. It's sort of like the U.S. will never depend. peg from gold or the federal never let a bank fall or the treasury never do value. It's something that can't happen and it's happening. From an energy perspective, and this is, I'm going to give a little East Coast home or maybe I should do a West Coast thing as well, but it's kind of like

Interstate 95 being shut downs, right? Everybody's like, well, they're not going to shut down 95. It's the busiest roadway in the United States. And then they do shut it down. And then it goes on for another week and another week and another week. And suddenly people can't move. Is that kind of a bad way? I know you're a DC guy, so I tried to use that analogy. In a bad way, is that what's happening with not just oil, but the other commodities we talked about? I'd say it's even worse. With I-95, we have other routes, I-66 and other highways, I-88, to move things around. This is the only artery from the heart of the world's commodity center to the world markets.

So there are no real workarounds. A little bit on the crude side, Brian. You know, there's 15 million barrels a day of crude. Maybe we're able to get 11 out now. But those 5 million barrels a day of products stuck. 20% of LNG stuck. Yeah. So we were speaking with Marco Pepedge last hour who said maybe $120 or $130 crude is going to be necessary to kind of force both sides to come to or certainly, I don't know, maybe our side to come to some resolution here.

Just how would you be thinking about this in terms of the oil price, the pressure that's on Iran, how long they may be able to sustain the kind of bombing that we're now talking about? Right. So as traders, investors start grappling with this simple, but. stark math, they will think that oil prices must go to levels that induce a recession, because the ports of oil will enforce the iron law of economics, you can't consume what you can't produce, world can't grow without 20% of its energy. That level is well above old highs at a 147 and above. However, the fellow you cited is probably right. Sometime between now and then, there's going to be true panic and a desire to get to an off-rank. The question is,

it takes two to ceasefire, us and the Iranians. And the Iranians are enjoying this moment. This is their strategy all along. Play the oil card, back Trump off by inflicting the one thing they can do to him, because they don't have any military anymore, that he knows that he fears. So the question is, is it 120, 1, 130, 140? But sometime between here and 150, 160, that moment may arrive. As you heard and Brian mentioned this morning, the Secretary of Energy said, we're not quite ready in terms of maybe our military escort.

But yesterday we had Marshes, one of their key officials on to talk about this from the insurance piece of things. And he said what they need, and we heard this repeated last hour, is a multinational flotilla. Apparently we had this in the 80s. The Soviets were helping. We've done it before. They were ways to kind of try to clear those mines. Would that be the kind of thing you look at and say,

this is now a sign that this conflict, this war, is starting to near an end? Yes, it would. But that won't happen until the prerequisite is met. Before insurance starts, before even we risk Navy ships there, we've got to degrade those thousands of moles that we need to whack. the anti-ship cruise missile launchers, the boats, the mines, the torpedoes, the unmanned cruise ships that lit up that nap the carrier last night. We've got to degrade that before we can even get those forces in place and defend that I-95 corridor. We can do that, right? And I think the frustration

that many of our viewers and listeners have, because Kelly and I hear about them from them, we love them all, on X and other platforms, is that why are Iranian ships just kind of coming and going to who and from? They're selling all this oil to China. And the answer is probably that we don't want oil to go to $175 a barrel. But is there a scenario where something like that would need to happen to shut down Iran? Because they need the money more than China needs the oil. Yeah. There is a scenario, but then we go to a very dark place, Brian, because so far... That's why I was saying it carefully and... So far, both sides have shown restraint.

They're only attacking each other's energy infrastructures that matter domestically for those countries, refineries, storage. So far, they haven't crossed the Rubicon into attacking Karg Island Export Terminal, or the Abcaik Stabilization Plant, where Rastunura Terminal, they attach the refineries. So far, we're not going there. If we go there, then even opening up Hormuz at some point won't really alleviate the energy shortage, and we're in a much, much worse world. A couple of questions about the SPR release. I was reading that apparently if we try to allow release from our reserves too quickly, we can actually damage them. And there was some damage done during the Biden release, which apparently was also pretty swift.

And those facilities are to some extent degraded. Can you just talk a little bit about what's available here in the U.S., how quickly that oil might get flowing and whether there are going to be some side effects? Well, here's one area I can be somewhat optimistic. In terms of the ability of the Strategic Petroleum Reserve Office at DOE to flow that oil, I think they can do it. The caverns are in good shape. Yes, there's been some repairs.

There's always rumors that they can't do. Now, they can't do the 4.4 million barrels a day they have on the website. No one thinks they can do that. But can they flow a million barrels a day? I know the guys who have that job. They take it very seriously. I think we'll be able to put, and we will see one and a half million barrels a day flowing out. The problem is a math problem.

We've lost 15 million barrels a day of oil. That's 20 minus fiber redirects. They'll only be able to flow with everybody else, two at max. So those numbers, and I'm trying to, again, I'm trying to be a little bit optimistic. All right, we don't want to be doom and gloom here, but it's a scary situation. Ships are literally burning and people are dying. That said on the U.S. side, we're at 13.5 million barrels a day production. We get about 5 million from our friends up north in Canada.

We get some from Mexico as well. We use about 20 million. And if any of these numbers are wrong, just tell me I'm wrong, and I'll do whatever. You're doing really good. Well, math. Thank you, Virginia Tech's engineering education, which, which I did not take, but I seeped off. You were adjacent to it.

I was adjacent. I was engineering adjacent. Is there a scenario, and I know oil's global, and there's a lot of different types of oil, thick and whatever, light sweet, scenario where the price of oil goes to 150, but somehow in the United States, we can stay at a different price for gasoline and other input products because we are somewhat isolated physically and logistically,

or is that impossible? No chance whatsoever. Zero. No chance. It works with natural gas, Brian. We're still at $3. Henry Hub. The rest of the world is seeing 50, 70% increases.

Gas is expensive to move around the world. It's not globally traded and priced and fungible in the way that oil is. No, there's no way we can avoid seeing higher prices here if crude goes to $150. On the oil price, too, when we peaked at $119 over the weekend, it was interesting to watch how WTI and Brent were basically effectively the same. There's 20 cent spread. And we were told that's because people were scrambling for physical delivery. So they would take WTI if Brent wasn't available. And I wonder if we could get into that situation again.

Well, that's absolutely right. And there are rumors out there, and I hope to God they're not true. I know friends in the White House, you know, part of good energy policy is stopping bad energy policy. And as people get panicky here, some are going to say, let's do what the Chinese are doing. Let's stop exporting product. Right. Let's keep it here. It would be a disaster.

It wouldn't lower pump prices. The president may pitch that. I reported that earlier today, and then I reported the industry doesn't want that. It wouldn't work. It wouldn't work. We'd have higher gasoline prices eventually. It wouldn't work. We can't. The pump prices we pay are determined globally. We import gasoline in the East Coast. All we would do is make it unattracted to invest in America. We would demolish our reputation as energy dominance and an energy secure place to invest. It would be a very boneheaded thing to do.

So you think if they say we're going to crack down on exports, that our gasoline prices could still go up? Absolutely. You see refiners reduce. runs. You will see producers, if we do it on crude, reduce production. You may get a week or two of lower pump prices in Texas for a week or two, but then in a month or two, and thereafter, we'll be worse off. Yeah, and as he just said, we, and I want our listeners, we'll let you go, viewers, listeners understand this. We import gasoline in the United States, apart because the Jones Act and some shipping laws that maybe they get tweaked. And then California, the two biggest refineries in the state of, or two of the biggest, are either shut down or shutting down.

year. So to all my friends in my former place of birth, beloved home state of California, and is that, you're in big trouble? That's because the energy transition, or that's because they were outdated or we don't, do you know why bomb? Who we ask in here? Look, in California, we have a case of what the energy industry calls above ground whisk. They were made to feel unwelcome and they left. And now California needs these supplies and it's importing them from the Caribbean at higher cost, et cetera. Folly. California is literally importing oil. from the Caribbean because it's green, I don't know.

Would the Jones Act, if we tweak that, as Brian hinted at, what would that do? Would that make a significant? I'm going to go down the list with you, Bob. I know you have to go, but... There's a toolkit. He doesn't have a flight we want him to make. I'll miss the flight. So I heard today they're announcing,

it looks like there'll be a 30-day lifting of the Jones Act. Great idea. It'll be cheaper. Now you can't import gasoline from the Gulf Coast because you can't find a foreign ship. Now you can. It's a smart idea. The president's right to do it.

Will it stop the upward march to one? 150 if we don't open Hormuz? No. Is it a good idea that'll make it a little cheaper for the coast to get gasoline? Yes. So in other words, we need the multinational flotillas, but first we need to make sure that the drones and the attacking, that that can... We need to do, we should have done on day one. The top priority should have been degrading the boats, the mines, the missiles, secure the straight at the very beginning to avoid an oil price increase that may undermine political support for the laudable goal. And I'm sure in the 1920s, when they signed the Jones Act, 1920s to protect the U.S. maritime industry and jobs, it seemed, now it just seems like the prohibition of shipping, and maybe that's, its time has come. Get your flight before the prices go up because jet fuel prices are going to store. Well, do you have a five-hour wait at TSA to get through to. I hope not.

Let's have a lot of go so you don't find out. All right. Thank you very much. Bob McNally, Rapid Energy, and drummer of the band Sound Policy, the only bipartisan. energy-related rock band in America. I can do vocals if you're ever in it. Just say. All right. So the oil and energy are getting much of the market focus as they should. Do not, my friends, lose sight of what is happening with banks and financials. That group is down again right now. It's six down day in a row. Financials down 11 percent on the year. Block, Aries, KKR, you know,

Blue Ow. We've talked about that and others. Some of the worst performers in the sector, the move has to do with a lot of things, but they're worried about it. the bond markets, the credit markets, and the serious deterioration in parts of what they call the private loan or private credit markets. Again, not just oil and energy. Watch the banks, watch the financials. Absolutely. And the Dow is down about 572 right now. How do you decide when to deploy capital in a market like this? And what areas do you go into? We'll get a strategist insight right after the break. Welcome back. The market is certainly under pressure this afternoon as oil prices are spiking and we have the same for bond yields.

traded above $100 a barrel a few hours ago. With today's moves, the major averages are all lower for the month. The Dow and the small cap Russell 2000s are down 4% since the beginning of March. So when should investors start putting more capital into the stock market? Let's ask Ryan Dietrich. He's the chief market strategist at Carson Group. And Ryan, the correct answer is always. Every, just daily, what is it called? Daily cost average. No. What do you really think? Welcome. Well, thank you, Kelly. There's a great conversation, by the way, before I joined. I enjoyed that. What do we know? I mean, what do we know, right? The Dow is up 10 months in a row. One of the longest win streaks ever. The S&P just was up nine in a row on a total return basis down barely last month. You know, we've been saying for a minute here, this is the banana peel period of the year, right? From the middle of February to the middle of March, the last 20 years, the last 20 years, the last 20 years, the S&P 500 bought, now, no, we were not expecting all of this to take place. But the market's doing what it's doing. And one kind of fun stat, the last 20 years, the S&P 500 bought.

on March 12th. Today is March 12th. So listen, you don't blindly do seasonals. But I think what's fascinating about this is, you know, if you have a diversified portfolio and you have some exposure around the globe, you're still like up on the year, all right? I mean, I'm not saying you're up a lot, but after the rally we've had, this consolidation, I think it's pretty healthy. And we, I mean, you guys just talked about financials before I came on. I mean, that's a clear concern. What's the weakness from financials. I'm not saying it's 2007, but 2007, financials obviously were weak ahead of time. But the reality, we're, we're weak ahead of time. But the one final comment here, the credit spreads, right? I mean, credit markets, there's concern clearly,

but I was shocked when I looked into this. Triple B spreads are tighter now than they were at the end of February. So in other words, credit market is showing almost less fear than they were, you know, all this crazy stuff happened this month. So I think there's still a lot more positive negatives out there, even with all this volatility. Yeah, I mean, and we all remember during the financial crisis. I think was it, what was it March 9th? We were just talking about the Haynes bottom, you know? So you're right. We do often kind of get these turnaround moments. But how would you then be gaming this out if you were in the more short-term business? Is it, you know, oil price go down, stocks go back up? Yeah, it very well could be that simple. We clearly need some resolution

out of the Middle East. Now, what's fascinating about it, when you look at market sentiment, like, I'm going to get a little geeky here. If you look at something called a put-to-call skew, right, how much people are willing to pay for puts relative to calls? Well, we are seeing extreme amounts of people willing to pay almost anything for puts, like off the charts. What's that tell us? Well, everyone wants protection. Hedge funds are about as short as they've been, individual stocks and ETFs they've been, I mean, literally since like almost in history. We're seeing this. So there's a lot of reasons, Kelly, with some any good news at all, and I know there's not much out there. I get it. But any good news here, and it's going to come from Middle East, you're going to need a lower oil.

We could have similar to last year, history and repeat itself often rhymes, where once you got out of all the trouble with tariffs, the market rallied back. And I really think that's the case. And we just had another solid earning season, right? We still have the fiscal stimulus, monetary stimulus, All this stuff most of the guests have been pointing out. I understand that. But the truth, again, is this bull market, Wheatlin's over. It's just taking a break. But usually bull markets, once they get to this point, they don't just end.

And we still think this one has a few tricks up his sleeves here. Really amazing stat. Now, I've lifted more your data. I'm like the kid, you know, at the full-sized candy bar on Halloween. I'm going to take more than once. I've used your data. I love it. March 12, historically the bottom.

So I'm not questioning the data. It's amazing. But the only thing I would add, maybe throw a little steam into that, whatever. is we haven't had a war any of those years, right? We haven't had oil at risk of 100 or 125 or 150 bucks a barrel. So we love the history. March 12th, historically is the bottom. Today is March 12th.

But that means tomorrow's Friday the 13th. Shouldn't have mentioned that. But how much does, to Kelly's question, the energy costs and sort of the war, alter any of your thinking? Well, they clearly can solely. And again, a happy early St. Patrick's Day. I know that's a big day for you next week there too. But you think about it, there's a lot of ways to look at this.

I think one of the things is interesting for a lot of people, bonds haven't given much protection, right, during all this trouble. Because we know yields are going higher, right? I mean, at Carson Group, we've said for a while, we think we're in a high inflation, or remotely put it away, a volatile inflation, period. So we've had some things if you drop it, it hits your foot and it hurts in our portfolios. We've had an underweight of bonds for a while. We have some managed futures. So I think it's like, you know, everybody listens to the shows and are you all in or you all out? Listen, when in doubt, diversify it out.

There's some reasons I still think you should be underweight bonds relative to stocks, but that other stuff, right, commodity still makes sense. Energy stocks are about as stretch as they've been. They're probably going to come back. That's fine. But have some managed futures. Look at industrial still look really good materials. I mean, there's still some reasons to still be diversified solely.

And I think we'll get through this. And again, we still think gas a peak and gain, you know, potentially low double digits this year. I know it feels like a long way away. A year ago right now, we were down 5% for the year. this day. We're down about 2%. We know the bottom fell out in April. We understand that. But we still think, you know, there's going to be an upward bias when this is all said and done. Well, a little bit of optimism on the day before Friday the 13th. We could use it. But I will say the S&B is only down 2.5% this year. It's like we're down 20%.

Everybody's like, oh, the markets are getting hammered. Not really, but let's hope that today maybe is the bottom. Ryan Dietrich, Carson Group, Chief Market Strategist and Lone Bengals fan. Ryan, thank you. Thank you. All right. Bad news for borrowers. As oil prices keep going up, so are borrowing costs. Ten-year yields back above four and a quarter percent. That is the highest level since early February.

And the energy-related hit, let's be clear. It's not just here. It's not a U.S. issue. German, other European bonds, their yields keep going up as well. Rick Santelli, joining us now. Is the bond market, or how much is the bond market we're connected to the energy market? Well, I think it's connected, but I think it's connected. It's sending a lot less bad news.

You remember the old days, don't you? Green shoots, 0809. I think the long end has a lot more green shoots than everybody else. And if you consider that climate change was the big topic in Germany and they've restricted themselves from fossil fuel, this is the price they pay. Look at twos and tens. Tos are going wild today. They're up significantly more than tens.

Why? Because of the inflation that everybody keeps talking about in the marketplace is affecting investor's psyche and taking away a lot of the easing probabilities in the Fed Fund futures market. And you just referenced bad news in the Treasury market, bad news going all the way to February 4th. That's the last time we're at this level around 425 or higher. But in Europe, as you pointed out, October of 23, and their interest rates are firm, the UK's interest rates are firm, and ultimately inflation and energy, you said the road to 150 oil, I'll take you a chance. cheeseburger. We get nowhere near that. Back to you.

I didn't say we would. I didn't say we're going to hit it, but I'll bet you a cheeseburger anyway. Just the road to it. I'd say it's the road to 70. Okay. I'll bet them I'll take that bet, Rick. I always look back. I'll tell you what, here's the bet. I'll bet you we see 70 before we see 125. I'll take that 100%. I'll take it. All right. Cheeseburgers all around. Oh, Chival. Fancy cheeseburger in Chicago, Rick. Thank you. Some breaking news from Washington as stocks are nearing session lows down about 650. Amen, what are the headlines? Kelly, we've got a new filing here from Customs and Border Protection,

detailing the process around those refunds for tariffs that are now court-mandated. And what Customs and Border Protection is saying in this document is that this is a slow process. It's technically complicated, but they're working on it. That's my summary as a non-trade lawyer and a non-software programmer. They're saying that they have to build an entirely new software system. to handle these tariff claims that are coming in. You can only imagine the volume of this. And they're also developing software

to handle each of the processes within that. So they're giving us some updates here on Progress Made, and I'll just read you some of these stats so you get a sense. They say as of March 11, 2026, CBP estimates the development of its claim portal component of this software is 70% complete, but the mass processing component, that's just 40% complete. They say the review liquidation, re-liquidation component, that one is 80%.

And the refund component, which would be the important part of software designed to give refunds to people who pay tariffs, that is just 60%. But they say once processed, refunds will be sent electronically to designated bank accounts. So the update here is that CBP is working on it, but it's complicated and it's going to take some time, guys. Back over to you. Speaking of complicated, there's someone now suing Costco to get his first. money reimbursed from them if they get reimbursed. So that does- luck with that. I mean, that's a fascinating one because if that guy succeeds, you know, I bought some stuff at Costco last year too.

Exactly. There will be many people looking to get in on that. Amen, thanks. Amy McJavours. All right, coming up, is it too late to get into the energy trade? Your next guest says no, but he's got a particular way you could join in. Talk about that way. Next. Welcome back. It's time now for, you've been waiting for it, market navigator. Energy, obviously, outperforming every other sector, given what's going on with oil this year, although it was happening even before that. It's a 30% since Jan 1. All this while the Iran War continues. Our next guest, well, he's got some ideas. He says there's still time to jump in if you want to add more energy exposure to your portfolio. Todd Sona's senior ETF and technical strategist at Stratigas. Todd,

it's great to see you. Let's talk, equal weight energy ETF, and have. cap, why these two? Hey, Kelly, great to speak with you. There's a little bit of a sugar rush going on to energy. As you mentioned, up 30% since January. We've seen an abundance of ETF flows go to this sector. But this is more about structural normalization. Folks are realizing how under-exposed they are to the energy and material space.

We like RSPG because of the equal weight nature and energy. You don't want to get pushed around too much by the cap-weight names. And if you're saying, I don't want just pure energy. HAP, natural resources. that's going to have energy, materials, metals, and mining, some industrials in there, too. So you're getting the whole real asset space if these inflationary pressures keep up. We think this deserves a major spot in portfolios because it's uncorrelated to large-cap growth. That's the key word here going forward, uncorrelated.

Since you're a technical guy, we'll keep a technical. I won't ask you about the fundamentals of deer, which is in the HAPE, F, and what it could be facing. But we just spoke with Ryan Dietrich, who also kind of looks at things this way. He said almost in passing, you know, the energy obviously is a little bit overextended. I'm curious what you would say in response to that. Yeah, tactically, absolutely. It's the most overbought sector out there. But if you zoom out, right, keep in mind, we just went from 2022 to 2026 with energy being a drag on portfolio.

So now there's this massive shift underway back to a more inflationary regime. There's this possibility of a second wave. And I think that's what's being reflected in energy and material specifically. So, yes, if you're a very short-term player, not the best to chase here. I think if you're a structural allocator, then absolutely you want to get in because of that uncorrelated nature. Todd, quickly, I want to get you in on the cheeseburger trade. Do you think oil goes to 125? Was it 125, Brian, or 70 first? It was 70 or 125?

Okay. Rick says 70. We're feeling 125. What do you say? Listen, I think you can lean towards that higher for longer, but use options, right? If I'm wrong, use the options market. Is that what you're limiting capital? You can play U.S.O and the options market is deep there to play both sides, that one. Why not? Because that's not how it worked.

I don't even know. That would be like I get cheeseburgers for everything or something. I'll come up with the right analogy, Todd. But in other words, you think maybe we could stay elevated, 9500, 100. What does hire for longer mean for you? We hit 110, right, the other on Sunday, Monday morning. So that's 125 is not that far if you keep getting these volatile headlines. And this world, who knows?

So listen, call options on USO. I think that makes the most sense for investors out there. All right. We appreciate your time. Todd, thanks. Todd, Stone with Strategist. Brian? All right. Is the bottom for software stocks already in? We're going to ask an analyst that those stocks have the all clear. There's a lot more going on in the market, not just energy. We're going to hit some of it as markets are down across the board. Next. All right, no sugar coating it. We would never do that anyway. Software has gotten crushed this year.

The group as a whole, down 18%. But take a look at one of the biggest software, ETS. out there, the ISG, which since last Monday, its first trading days since the start of the Iran War, has actually outperformed the S&P 500 and the NASDAQ 100. It kind of begs the question, is the software bottom in or just kind of a head fake pause before another leg down? Joining us to help answer that question as well as Fargo software analyst Michael Turin. So yeah, Michael, listen, we don't need to tell you. Horrible start to the year. Things have calmed down for a couple of. of days, but what's ahead? Yeah, it's hard not to say there's going to be some level of volatility.

It's tough to say this is the bottom for the broader sector, but we do think this is a stock pickers market in software and you have the benefit of being able to start with the highest quality franchises given the broad sell-off. In general, software is still waiting for its AI moment. We think you're seeing some of it in the AI infrastructure space with names like Microsoft and Oracle, and that you'll start to see it in cybersecurity next as a Gensick Tools ramp. But in the app space, it's going to take time, given some of the newer models, still take time to diffuse into the existing apps. So still some uncertainty out there. I think we'll see choppy waters across the space for the next couple of quarters at least.

We'd like to lump them all together, Michael. It's, you know, software is down. They all do something different. I mean, they all service different people, customers, types of software. But it's all about the risk of AI. So is there a way to rank like what types of software companies are at the greatest? risk of getting kneecapped by artificial intelligence. Yeah, I mean, we are more comfortable near-term with spaces like the AI infrastructure space

and the platform enablers there. Cybersecurity saw a bit of a head fake at the start of this year as well, but we think those platforms, particularly Palo Alto and CrowdStrike, are likely to prove more resilient and then vertical software. There's been a lot of back-and-forth in terms of industry expertise. We do think names like Autodesk also have stronger positions. It's the app software space that is facing the greatest uncertainty just because those are seat-based models and they're generally later cycles. So we're waiting for the compute to flow from infrastructure into apps. This is going to take some time. I do think in general the incumbent platforms are a lot better position than they're getting credit for.

So again, starting with the household names across software, it feels like a great place for anyone looking to take on some exposure here. I almost want to ask you the opposite question, Michael, and make you, and make you sort of convince me that AI is going to replace any of these software names. And, you know, maybe Adobe after the Bell is a good example of something that is more hard hit, where P-Were sentiment has really turned much more south because of the ability to DIY. But, you know, I'm like, we're so early on in this technology. It's not about the technology being amazing. I mean, to go from A to B is just such a big leap to make, given the value.

we're seeing for some of these stocks? You're preaching to the choir a little bit, so I'll, you know, I'll try to provide a balanced answer. I do think we've just taken on more tooling, particularly after COVID and things like remote work came into place. So the argument there are too many software tools in the hands of general business users is probably a good one, and I think that's what the market's most comfortable with is suggesting that many of these companies maybe won't have as strong a value as we work through the tech chip. But the household names, I think, are being massively underestimated at this point.

Adobe's- Thank you, exactly. I was just going to say, what is your view there? Because this is actually a use case where generative technology has value. It's really been coding that has taken the world by storm. Designers are becoming a lot more productive using these tools. Adobe has taken on more of a marketplace strategy. They've still added two billion of net new business last year.

they're still growing around 11%. Their growth rate is not deteriorated the way the market expected. They're still healthy growing businesses like Canva and Figma in those markets as well. So we think the market's missing just the size of the market getting bigger, as all of us can use these tools. And what's happening within Adobe's Creative Suite is you can try all of these models. So that gives them a better bridge than I think they're getting credit for at the moment. Well, we can look forward to hearing what they have to say.

I won't do any more cheeseburger bets, but this is another one that feels. feels like it's going to really be, it's going to go way higher from here or, you know, I'm missing something. Michael, thanks. Appreciate it. Thanks very much for having me on. Michael Turin of Wells Fargo. All right, let's get over to Julia Borsden now with the CNBC News Update. Brian, the suspect in a Michigan synagogue shooting has died according to multiple reports. Local police say no one appears to be injured after one individual approached the synagogue security today before gunfire was exchanged. One security guard was also hurt.

FBI director Cash Patel said agents are on the scene to assist the local sheriff and says they are still trying to determine if there was anyone else involved. Authorities in Ethiopia say at least 100 people are dead after heavy rains in the southern part of the country caused a massive landslide. Dozens of people are still missing. It's part of a storm system that's caused torrential rains across East Africa in recent days, causing widespread flooding. And President Trump discouraged the Iranian men's national soccer team from attending the world. Cup. Trump said in a social media post, quote, I really don't believe that it is appropriate that they be there for their own life and safety. Iran's sports minister said yesterday that the war makes it impossible for Iran to attend. Power lunch will be right back. Welcome back. Stocks are

selling off this afternoon as oil prices surge once again. And tensions continue in the Middle East. The NASDAQ is the biggest loser. All of the Mag 7 names are actually in the red, which is a little bit of a break with what we've seen up until now. In fact, some of the best known mega-cap techs are down about 2% or more this week, 4% if you're Amazon. But geopolitics is not deterring to well-known investors from joining forces right now, committing new capital and tech and digital asset firm, 8co, to invest in some of the hottest companies in these spaces. Let's welcome in Kathy Woods, CEO of Arc Invest,

and Tom Lee, head of Research at Fundstratt, chair of BitMine immersion technologies and a CNBC contributor. Welcome to both of you. Tom, you want to just start with your thoughts on the markets? Why is tech kind of not participating this? time. They've been a ballast so far in this in the sell-off. Yeah, I mean, I think tech in general has actually held up really well, including software. It makes sense to us because, and I'm going to make a counterintuitive statement, higher oil is relatively good for U.S. equities because,

one, you know, the U.S. is a net producer of oil, but as people worry about global growth slowing because of high oil, they want to own growth stocks, which actually makes. them want to own the U.S. stock market because it is a growth index, especially the Mag 7 and software. So I actually think that this kind of makes sense. And I've heard the earlier conversation today. I'm also in the camp that I think we're making our bottom this month for the equity markets. Okay. What about, you know, we got Jeffries down 7% Deutsche down about that much. A lot of people are trying to look around, poke into where these private credit exposures and stuff might be. What would you say about that narrative right now, Tom?

Well, you know, private credit's been a problem for some time. So I think it has been increasingly revealing, as Jamie Diamond said, more cockroaches. I do think it's probably not as systematic as we might fear. I know people carry the Lehmanhammer and think that this is a repeat of the GFC. But again, there's a lot of reasons. It's not a systematic. One is just the size of the market's not nearly. is large, but also things that look like credit stress aren't really signaling like they did in

2008. So I'm, you know, I think it's hurting financials right now, but I don't think it's a broader problem for the market or the economy. Kathy, you guys are looking, if I'm not mistaken, to kind of help the public get into more early stage growth companies. And we saw last week Robin Hood did something similar, their IPOing a venture fund. And this comes against this backdrop where a lot of the kind of growthy companies have ended up in private markets and they don't go public.

anymore. Then I know the SEC has a big push to try to change that, but one of the problems, as you and others know, is that sometimes they don't perform that well. It's very risky. So could you just comment on the current state of affairs? Like, the private markets have losses. You go in the public markets. People don't want losses, but they want access to growthy companies. You know, who can they feel confident will help give them the best of the bunch? Yes, Kelly. Well, it's very interesting to be managing money at this time. and to have managed money, very early portfolio manager, early in my years, in the tech and telecom bubble.

It's night and day. There was no fear back then. And today, there's extreme fear. And there are some reasons, understand that. But I believe, and this is going to fit into what Tom just said, I believe the market, when we look back, maybe at the end of this year, is going to be characterized as climbing a water. of worry. And of course, now with the war, there is another reason. There are another few bricks

being put into that wall. This is a really good time to pick up on stocks that might be more volatile. Volatility in our world does not measure risk as much as it measures uncertainty. And I think the new technologies evolving today and the way we do, ARC does its research on these technologies to understand how they're going to scale and who's leading the pack. I think we're in a very good position and the opportunities. This is a technology revolution. And we are not in an AI hype cycle. And we think it has miles to go. And of course, consider the source. It's all we do. But we're beginning to see results, astounding results at companies like Anthropic and OpenAI in terms of their ARRs.

Looking, Kathy, at your top holdings as of the last filing, you still love Tesla. Is there a thesis at all that what's happening in Iran, energy prices, whatever, will send some Tesla had a problem because Elon Musk, literally my neighbors sold their cars because they're like, oh, they can't get on board with Musk. Do you think, though, that higher gas prices might push people to rethink the next car they buy to the benefit of Tesla? Absolutely, absolutely. And we do think the trend in oil prices is down. But at this moment of time, yes, everyone's thinking that decision. But they'll also buy Tesla for another reason. With hardware for full self-driving, Tesla cars, should you choose to lease them out, can become revenue generators for people. And the cash flows coming off these. cars are going to be quite substantial because Uber, the umbrella, $2.80 per mile, is so high.

So stay tuned for that. We think analysts, as they do their models, are going to be shocked at the cash flow characteristics of this new model. Tom, just going back to AETCO, which has investments, including small ones in OpenAI and Beast Industries, but the stock has not done well, and it's very small. I believe Dan Ives was chair, and I think you guys are kind of both. stepping into this now. Can you talk broadly about what your plans are to invest here, especially at a time when there's been a lot of underperformance in the crypto space? I mean, is that a space that you're looking to double down in?

AECO is actually the world's largest holder of World Coin, which is a blockchain for proof of humanity. And what AECO has done strategically, and, you know, Kathy is in some ways her team is really providing a lot of guiding light is to provide adjacent and complementary technologies and services. So that's why there's an investment not only into Open AI. And Sam Altman is the founder of both World Coin and Open AI, but also bringing in global, the biggest global content creator, which is Beast Industries. And in fact, AECO has actually facilitated actually the communication and the bridging between Beast and Open AI. So I think that's... This is now a company where you have exposure to really one of the most important blockchains.

But now you can also have, for public investor, an investment into Open AI, which, as you know, is going to go public this year. This is the only public vehicle that you can get exposure and also have exposure to beast. Kathy, kind of a similar question. You know, I worry a lot about the due diligence. I mean, this is coming up now, of course, with some of these private portfolios as well. But there's less reporting requirements. You know, it's the flip side of the coin. Do you want to get exposure to more speculative stuff early on,

knowing that it may not perform, it may not, you know, meet the performance you're looking for? You know, I think this idea, this idea, we're effectively creating a new social network because I think many people are surprised to learn that AI output, written output this year, it has just topped in the last year, just topped all of human written output in the last year.

And by the end of this decade, AI will produce in one year more than all of human written output in history. And so 80% of what we're beginning to see on networks is AI generated. And so this idea, proof of humanhood is going to become more important. I don't like it when I think something's real and a real person, you know, promoting it or giving me some context.

When I find AI is the reason I'm seeing this. And there's no reason, meaning I have no agents that I've sent out to find it, I am getting to the point where I want to know who is sending this, a real person or not. And I do think the introduction of Open AI, what we have here is really an operating system. Open AI is really interesting. It has 80% of all of the attention for the last quarter, the last month, the last year out there in terms of AI. And so we think this combination, and then which will help us reach human beings,

that with the one billion users, and then with one of the biggest influencers, Mr. Bees, who has 500 million subscribers, we may see some influencing going on. So it's a very interesting new social network evolving. And I think people are underestimating what's going on here. Okay. Last thing.

Tom, beginning you said, thought the market bottomed out this month. Listen, S&B small caps up this year, midcaps up this year. S&P's down 2.5%. I mean, we really haven't had a stock shock this year. Do you think we're going to get one? What makes you confident that markets may bottom this month? Yeah. Well, Brian, it seems convenient because we know oil is uncertain. In fact, we could have a $100 dollar oil prediction markets are looking past June for a hundred dollar oil, so an extended war and high oil. And investors want to think that that's the reason we actually have a decline here.

I think positioning has already rapidly moved. Ryan pointed out the put call skew, but we know the mag seven's been in a mini bear and software. So to me, I think a lot of the bad news is priced in now. I'm more in the camp that we're going to rally for the next few months. towards 7,300. But later this year, we have a bear market-like, but it's more testing the Fed. All right. Thank you both. Tom Lee, Kathy Wood. We appreciate it. Power Lunch. We'll be back right after this.