Power Lunch - Closing out an ugly quarter, your best bets for the second half and travel chaos. 6/30/22

Episode Date: June 30, 2022

A tough end to the month, quarter and the first half. But will first half losses turn to second half gains? A strategy session for your money. Plus, a former airline CEO tells us which carrier he thinks will win the bidding war for Spirit and what it will take to fix the delays and cancellations. And, why one analyst says Coinbase is a buy. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. I'm Amin Javvers in today for Tyler Matheson. Here's what's ahead. The Supreme Court strips the EPA of some of its power dealing a major blow to the Biden administration's climate agenda. This hour, its impact on business and what it might mean for ESG investing. Plus, crypto crisis. That's how one analyst is describing the collapse in prices, but he's also betting Coinbase will come out of this rough patch stronger. We'll ask him how he thinks that later this hour. Kelly? Looking forward. Amen, thank you. Welcome. Hi, everybody. Stocks are well off session lows. The Dow was down almost 600 points earlier. It's down 100. The S&P's down 7, the NASDAQ, down 51 as we look to close out the first half of the year. The yield on the 10-year, more significant, falling below 3%. Remember, it had been up at 3.5% going into that Fed meeting earlier this month at the 75 basis point hike. Huge reset since then. Talk about resets. Shares of Amazon down 1.5% today are now trading below the pre-COVID high. from February, I'm sorry, pre-COVID lows from February 2020, a complete round trip back to the pandemic lows for Amazon shares. Amen. So, Kelly, we are two hours away from closing out the month, the quarter and the first half.

The Dow and S&P are on track for their worst three-month period since the first quarter of 2020 when the pandemic sent stocks tumbling for the first half. The Dow down 16 percent. And that makes it a relative outperformer compared to the other major indexes. Disney and Nike, the two biggest decliners, each falling about 40% this year. The S&P down 21% year-to-date on track for its worst first half since 1962, which was a long time ago. The two biggest losers in the index, Netflix, down 70% and Etsy off 67%. Now, the NASDAQ is down 30% so far this year, 23% for the quarter, which would make this the worst quarter for the index since the fourth quarter of 2008. Now, our next guest says these first half declines could turn into second half gain. So let's welcome in Courtney Garcia, Payne Capital Management, Senior Wealth Advisor.

Courtney, thanks for being here. Explain how you find the optimism in all this wreckage. I just read off some horrific stats, things down 67, 70%, but you're saying there might be some wins to come. Yeah, and I think there's no denying right now. Things are not looking good in the markets, and they're really pricing in the fact that a recession is, the chances of recession are definitely increasing. you're seeing that essentially get priced in. And people are very negative right now.

Even when you look at economists who are pulled by the Wall Street Journal, they expect out a 44% chance of a recession in the next 12 months, as opposed to that was only at 18% when you look back in January. But ultimately, the markets are going to price in the recession before the recession actually happens. And I think that's what you need to focus on as an investor. And when you have a period like now where the markets are down more than 15% the first half of the year, which has happened a couple times in history,

they tend to have a really good second half of the year by an average of about 20, 24% if you can believe that. So I think what you want to take a look at is not, you know, there is this idea of rising tide rises all boats, but I think you want to make sure you're taking advantage of the opportunities that will continue to do well in this period where we'll probably still have inflation that is, even if it's peaking, it's still going to be here for a little while. So how do you think about this, Courtney? Do you go after particular sectors? Do you look for particular names? What's your thinking? Yeah, and I've talked a little bit about this before, but I do think you want to still focus on your value as opposed to your growth companies,

which is something I don't think is necessarily highlighted enough right now, if you look at the S&P 500, it's down over 20% since the beginning of the year. But your value companies, if you look at the Russell 1,000 value, that's only down about 13% for the year as opposed to your growth companies are down 28%. And that is a huge disparity right now. And I think that will probably continue where your value will outperform. So I think looking at things like your energy companies, which have already done well this year, having a bit of a pullback, but a great opportunity there. Look at your banks, looking at your health care. I think those are some really good opportunities you can look to as an investor right now.

some particular names. You say you like Chevron in the energy sector. Why is that? I do. Yes, there's several names I like, but I do really like Chevron. They pay a really good dividend right now. And I think what's something that's interesting to note about Chevron, but especially your energy companies in general, is energy prices, I think, are likely going to stay higher for a little longer here. But even if they don't, even if they start to come down, their break-evens are a lot lower. And they actually highlighted the fact that they can probably buy back about 25% of their shares if oil prices are at $75 or barrel over the next five years. which is a lot lower where it is today. So I think it's just something you want to take advantage of and just take advantage to the great dividend in the meantime as well. And you've got an interesting pick here in healthcare.

CVS Health. I would think that CVS would be sort of a pandemic play. Like that's where we all mob to in the beginning of the pandemic. We'll strip the shelves of every single product that they had over there. Now you'd think, well, maybe they might be on the wrong end of this coming out of COVID. But you say, no, that's a good play still. Yeah, actually, I think health care in general is a really good opportunity, especially if we do end up going into any sort of recession. And healthcare tends to be one of those with pricing power and can withstand a recession better than other companies.

And CVS, I really like because they're kind of innovating. You look at health care and the idea that they're redoing what they're calling health hubs back into their stores, which actually really increasing your consumer retention and their engagement within their stores. So I think there's actually some really good opportunities to be had at CBS as well. And in the banking sector, give us a bank. Bank. I'm going to give you another name to start to the C here. I didn't do that on purpose, but I'm looking at Citibank. Courtney, of course.

You pick the C words. Right, I tried. So you like Citigroup. Exactly. Yeah, you're looking at a Citigroup here, which pays a good dividend of over 4% right now. And this is interesting, too, because we've seen some of the banks

have actually just recently increased some of their dividends. Citigroup was not one of those, but they are coming out on the more conservative side, making sure they have enough capital reserves, again, if we go into recession. I think looking at the more conservative ones is definitely interesting here.

So is that just a pricing power thing? The banks, when you have interest rates going up, They've got a little bit more pricing power. They can charge their customers a little bit more. That's exactly right. Yeah, the disparity on what they're getting when they're the mortgage customers, they're charging them versus what they're paying down on their savings rates, that yield is getting, the difference in that yield is getting stronger,

which is more that they can take advantage of there. That's exactly right. Always work those spreads. Courtney Garcia. Thank you so much. Really appreciate your time. Thanks for having me. Bitcoin down about 40% in June.

It's on pace for its worst month ever below 19,000 earlier today, pressured by the SEC's rejection of gray scale's ET. application. Coinbase, not unscathed, down 40% this month as well. Our next guest calls us a crypto crisis, but says all of Coinbase's bad news has been priced in, and the company will come out of this period stronger. Oppenheimer's Owen Lau is here to explain his thesis in today's power call. He has an outperform on Coinbase with a $90 price target. Owen, how do you get there? So first of all, thank you for being me, Callie. So how do we get there? I understand that in the near term, Coinbase will be suffering because of the trading volume declining.

The Fed keeps tightening policy that would keep pressure the trading volume in the near term. But longer term, this is actually an environment that the stronger player like Coinbase can thrive and survive because, number one, they have a very strong balance ship, $6.1 billion in cash. Number two, they have a very strong brand name. And number three, they are also expanding and diversifying their revenue stream. So longer term, I think the Coinbase can become one of the survivors and become stronger, longer term. So, oh, and you've got a $90 price target on Coinbase right now.

But I'm looking at the record here going back to last year. In July of 2021, you had a $44 target on that and a buy rating on it. You said that people should buy it at 377 in February, at 314. April at 197 in May. You said that was your price target. Now you're down to 90. Are you just telling people to buy this all the way down? I think that's a good question. We did not expect the severity of the Fed tightening policy. And I think we also make a mistake to underestimate the deleveraging cycle happening in the industry right now. But longer term, we always said, we always tell people, this is a long-term investment. Near-term, we're going to see a lot of volatility

in this name and also in this industry. Our investment thesis is still, you look at this space longer term. When we go back to back in 2001, the internet bubble, many stocks actually came down by a lot, but longer term, some of the stronger players would emerge much stronger. And the stock price actually recover very quickly, not very quickly, but we cover at a very good level long-term. I hear what you're saying about short-term and long-term prognosis, but it's been a year, Owen, and you've never put a sell rating on this stock, right? So again, our thesis is the long-term thesis. We never put a sell rating because we believe in the blockchain industry. We believe the use case is just more than the trading. For us,

there are many other use cases such as the Lightning Network in the payment space, the cross-border payment, and also the settlement, and also the NFT. It takes time to build this infrastructure, and now it's a good time to build this infrastructure. So again, I want to go back to our long-term thesis, and thank you for the opportunity to give us a chance to talk about our long-term thesis, which is the blockchain use case longer term. But overall, you could make the other argument just as easily, You could say crypto as a whole, the whole basket was really just a pandemic fad, right? A lot of people at home on their laptops, they had a lot of stimulus money. They jumped on this out of FOMO, right?

It was all fear of missing out. And the idea was prices were going up, so we're going to pile in from our couch and our laptop at home. Now that those prices are reversing, doesn't that drive buyers away and sort of suppress all of these prices throughout the entire sector for who knows how long? Yeah, that's exactly what's happening right now. But again, you have to look at these technology from an infrastructure perspective, and that has been our investment thesis. We think the near-term formal we just talk about can benefit some of these trading revenue, like many of the exchanges.

But longer term, my belief is Coinbase is more than just an exchange. So what's the most valuable business that someone's going to be building right now? What's the real business use case for Bitcoin, for the blockchain, for any of these things that you think is really going to take off in the next year or so? Right. I'm not sure about the next year or so, but longer term, number one, Lightning Network. And if you look at the number of transactions per second, Bitcoin can process seven, Ethereum 15. If you move up to Trado and Solaner, we can talk about 1,500 transactions per second. at MasterCard, 40,000 transactions per second.

But if you go up to the Lightning Network at max, it can process a median transaction per second. So it can be much faster, more efficient, and lower cost. And it can be one of the big use case for blockchain. And also like cross-border transaction and settlement, we haven't been talked about. And also NFT, you have a lot of creative economy coming into the NFT and try to build their community by leveraging the NFT blockchain technology.

Okay, so high speed trading comes to the blockchain. Thanks so much. Owen Lau for your insights there. Kelly, his target is $90 and he's still a buyer here. Right, exactly. But kind of been a buyer all the way down here, which has been true for a lot of people following the space. CNBC diving even further into crypto's decline tomorrow at 6 p.m.

Frank Holland will host our special edition of Crypto Night in America. And coming up from bidding wars to travel chaos, a former airline CEO tells us which carrier he thinks, will win the battle for spirit and what it will take to end flight delays and cancellations. Plus, Dow Inc., American Express, and Intel, three of the worst performing Dow stocks this month. Are they so cheap? They're worth buying right here. We'll find out in today's three-stock lunch.

And as we had to break, a look at Walgreens, the worst performing Dow stock today, after saying its quarterly profit was squeezed by waning demand for COVID vaccines. Maybe that's good. Welcome back. So much for the friendly skies. The fight over Spirit Airlines taking a new twist today. You can see it's helping Spirit shares climb almost 5%, but sending JetBlue the other way. Let's get to Phil LeBow with all the very latest. What's going on here, Phil? Kelly, there was supposed to be a vote scheduled for today that is not taking place. It was called off last night by Spirit Airlines. This was to have shareholders vote on whether or not to approve a merger with Frontier Airlines.

has been postponed. They announced that last night. It'll take place on July 8th, so that's a week from tomorrow. If you're keeping track at home, there are now five times that JetBlue has made an offer for Spirit that Spirit has rejected. Twice they have approved a deal with Frontier. There's the chart showing the number of times that this has gone on. JetBlue, after hearing that the vote was postponed, issued a statement saying, it's clear that Spirit shareholders have now handed the Spirit Board, an undeniable mandate to reach an agreement with JetBlue. Not sure it's an undeniable mandate, but it's certainly a victory for JetBlue. So as you take a look at shares of Spirit, keep in mind that they have said they will continue talks with JetBlue as well as with

Frontier for JetBlue and Frontier. Question now becomes, does Frontier come up with a richer offer? One where they perhaps raise the reverse breakup fee, make a richer cash bid. Does JetBlue then counter again and say, we'll go even higher? Does anybody end up with spirit? There are a lot of people, guys, who do not believe that this will end with spirit merging with anyone. Yeah, that's what I wanted to ask you, Phil. I don't want to ask you to go too far out on a limb, speculating because you've been doing such good reporting on this. But what do you think is going on behind the scenes here?

Well, look, I think JetBlue looks at this, and they have a couple of things in mind. One, they would love to have spirit because it gives them the ability to grow, which is going to be severely restricted if they can't make this deal. happen. The other option, the other thing to keep in mind is if you are JetBlue, you do not want to see Frontier and Spirit get together. They would become the fifth largest airline. Look, whoever merges with Spirit, it becomes the fifth largest airline in this country. So from their perspective, they would not like to see a deal between Frontier and Spirit take place. Frontier and Spirit, remember, they basically come from the same corporate tree, if you will.

They believe that they can create a low-cost jugger nut, and that's why they believe there's a synergy there. Phil, thanks so much. Really appreciate your reporting here. You bet. So as chaos continues in the airline industry, almost 21,000 flights have been canceled coming into and within the United States for the month of June for more on the state of the airlines. Let's bring in Gordon Bethune. He's the former chairman and CEO of Continental Airlines and a CNBC contributor, Gordon. Can you shed a little bit of light on this? What is happening here? Well, the world's kind of turned upside down. I mean, it was listening to Phil. It's like, reminds you of two dogs. chasing a bus, I'm not sure the winner is the one that catches the bus on the spirit deal.

Obviously, a lot of fluctuations in the marketplace because there's a lot of fluctuations in the economy, internationally as well as domestically. So it all kind of manifests itself to uncertainty and applying today is certainly an uncertain business. So if you were still back running Continental, would you be looking for a merger here or how would you play this? I'd probably want a psychiatrist, but... Assuming that's not an option, what would you do? I'm not sure, I mean, that merging is actually, mergers are deals, and airline is not a deal.

So whatever happens, you've got to run this organization, and hostile takeovers don't precipitate really efficiencies and good thinking and goodwill. So you're handicapping yourself because of the contested nature of this deal. It's not a friendly deal. and it's not going to turn out well, I don't think, for anyone. Well, and the reversal of fortune has been fascinating, where Spirit was once the most hated airline in the U.S.

Now it's JetBlue, according to the Wall Street Journal's polling at least. So now you have Spirit fans who are worried about what could happen here. But, Gordon, can we pivot and talk more broadly about what's happening with this travel chaos that, you know, we now have Senator Sanders calling on the industry to pay fines for late flights. Pete Buttigieg is tweeting that, They need to have better customer service. We're hearing anecdotally from people whose flights for the weekend are already canceled delay. They're literally just getting apologies from the airlines before they've even traveled

because it's an acknowledgement that it's just going to be so bad. Well, it is difficult, Kelly. And I'm not sure Pete Buttigieg knows the front end from the back of an airplane. So whether it is going to be helpful or not. The operations are affected by staffing, that's including the FAA staffing at centers, in-rout centers, control centers. It's certainly affected by pilot availability, which the government changed the structure of the availability of pilots. So you're seeing a bottleneck in the supply chain, I guess you would call it, but getting your airplanes out on time every day.

And quite frankly, the availability of equipment. So your maximum, everything is running at maximum. And it doesn't leave a lot of room for error. And any hiccup along the way shows up across your system. and that's what's causing the frustration. So the back end of the plane is the one with the tail on it, right? Just so we're clear. You're getting on to something about that's what a lot of people know about the airline businesses

that's from the back. Let me ask you this, though. I mean, you know, it's been a year since demand came surging back post-COVID for the airline industry, right? You can understand how everything got completely out of whack and they just didn't anticipate everything coming back as quickly as it did and they had scaled down. And so naturally, there would be some period of. chaos when they try to get back up and running. But a year later, we're still in this problem.

I fly all the time, and it's not getting much better out there. And the question is, are we in some kind of semi-permanent new normal? Or is this going to normalize over time? And we can think of, you know, going into the fall, things will be back to the usual way. Hey, man, I think it will get back to, quote, normal, unquote. But at the same time, use so much variability in different nations with different rules and different COVID restrictions and different quarantines. And so this turmoil within the economy and in the system just doesn't bode well for stability. And, of course, an airline got to be stable and on time and reliable. And it's just frustrating to all of us that they can't seem to get things to normal.

But normal is defined by what country and by whom today and what government. And it changes all the time. Yeah, it almost feels like, you know, the whole economy was stripped, so thin before the pandemic, just in time, manufacturing, inventory is low everywhere. The airlines, you know, barely staffing exactly what they needed and not an ounce more. There was no fat in the system, and then now when you need it, it's just not there for you in anything. Yeah, and, you know, the system's at capacity because there is demand now, and we're all happy to see the people coming back.

November was a killer month revenue-wise, so you see the build-up, pent-up demand, And what you need to do is now get a steady supply of capacity to fill that demand. Gordon, if I could just ask one more here. Obviously, years ago, they changed the timeout rule for pilots and flight attendants. And that's really becoming a big stumbling block. Should it be changed or done away with even on a temporary basis? Well, you know, Kelly, they've done that. As a matter of fact, they actually started quarantine people.

If you flew with a crew member who tested positive, you had to be locked up for a week. And of course, staffing doesn't accommodate for those kind of spare people. And so that changing of the rules or changing of the quarantine or changing of the duty periods really, really just disrupts everything because the whole system is like a wristwatch with a whole lot of parts. You can't even see them all, but you need them all. And it's just disruptive as hell. Yeah. So you more cite the pandemic still in some of those lingering effects.

It's crazy. We'll leave it there. We'll check back in soon. Gordon Bethune. much. Kelly. And good luck to everyone. When's your flight, Damon?

I'm flying Friday and I'm flying Saturday. So I'm going to be in an airplane all weekend. You will be in an airplane all weekend. If not, I'm calling Gordon to complain. Coming up, we have more on the markets with the Dow down about 100 points. Not so bad when you consider that we were down 600 at the lows earlier. We've got more on that. Plus, planting spies, why the U.S. government wants to block the construction of a corn milling plant in North Dakota over national security concerns.

and the summer slump. We'll lay out some of this month's biggest laggards as we're ready to turn the page to a new month, quarter, and half of the year. Power lunch will be right back. Welcome back as the Dow climbs off today's lows. Here's a look at why. Some of the names that have been bucking the trend

leading to the upside and trading solidly in the green. Some defense names, Raytheon and Textron up around 2% or more. Pfizer up more than 3% and Warner Brothers Discovery gaining 2%. Now let's get to Frank Holland for the CNBC News Update. date. Frank? Hey there, Kelly. I am Frank Collin. Here's your CNBC News update at this hour. The Supreme Court says it will hear a case that could give state legislatures, not state courts, the final word in setting rules for federal elections. The justices will consider whether state courts can order

changes to federal election rules and procedures if they find violations of state constitutions. That case is expected to be argued in the fall. The FDA says vaccine manufacturers should update their COVID-19 booster shots to target the most recent Omicron sub-Bariants that are gaining ground across the U.S. The FDA wants to update the booster shots to provide more durable protection ahead of the fall. And a Northwestern University study revealed the number of newspapers here in the U.S. has shrunk by 28 percent in the last 17 years. 2,500 papers have been lost since 2005. In the last two and a half years, 360 papers have shut down, and almost all those publications serve small communities. The study found that about

70 million Americans live in a county with either zero or just a single local news organization. That's the very latest. Amen, back over to you. Frank, thanks so much for that. And ahead on Power Lunch, climate change. SCOTUS stripping the EPA of its ability to regulate emissions, what this means for the energy industry. That's coming up next. Welcome back, everybody. 90 minutes left in the first half of the year.

So let's get caught up across the markets on stocks, bonds, commodities, and the fallout for business from the Supreme Court's EPA ruling this morning. But let's start with Bob Bassani and the latest action at the New York Stock Exchange. Bob? And Kelly, it was sort of a two-part day. The first part was the open in the first hour, so a very poor open, and partly because the European markets opened very poorly. Of course, we have those ECP policymakers. They're meeting in Lisbon and Cintra talking about defeating inflation, even if a recession results from that. And that caused some real weakness in Europe and cause a really weak open. You see that first half-half hour or so really poor. And since then, we've sort of come off of that bottom. There's not a real

pattern in the trading. It's very, very haphazard and confusing to traders. Kelly was mentioning the industrials. We've had a nice day for most of the big defense names. It's true. Lockheed, Northrop, Raytheon, Rockwell, some of the other big industrials. But don't kid yourself. Industrials are not in good shape. In fact, the biggest names that are out there, the General Electrics of the world, Honeywell, 3M. These are Dow components to some extent. and even dear, 52-week lows on all of these names. Also, remember, we're going into earnings season two weeks from now. Well, guess what's also at 52-week lows?

The big money center banks. JP Morgan, Citigroup, Bank of America, even separately, American Express, 52-week lows. That list expanded rather dramatically this morning at 1030. Still a very tough time for the markets. Kelly, back here. All right, Bob, thank you very much. Let's turn to the bond market now. where some headlines to close out the first half,

the yield on the 10-year back below 3%. Rick Santelli with the latest, Rick? Yeah, twos and tens. And if you look at it from the quarter perspective, consider look at a 24-hour chart of twos. You can see we're down nearly a dozen basis points, and we settled at the beginning of settled end the last quarter, 293,

which means yields are up almost 60 basis points as you see on the quarter to date chart. If you look at tens, there's a 24-hour. hour of tens, we're down almost 11 basis points, and many are saying that the reason is, is some of the numbers, personal assumption, expenditures, deflators, none of this was higher than anticipated. I'm not sure I buy it. They're still sticky high. However, what isn't high are the metrics that are measuring the U.S. economy or indeed the global economy. I think that's the flying ointment. Quarter to date of tens, they're up about 64 basis points. But maybe the most important

thing I learned today is that while it's been a nasty quarter and a nasty year, stock prices are down, treasury prices are down, yields are up, but what's really going on here? Where's all that money going? I know where it's going. It's going into the Fed's RRP reverse repo parking lot. At the end of the last quarter, it was about $1.87 trillion. Now it's a record today, $2.33 trillion, probably because of end of quarter and a half your window dressing. It's up nearly a half. half a trillion dollars. You know all that money that's supposed to be in your account for margin or those T bills you put in when you trade? All that's gotten sucked out. The new secret is the Fed's draining liquidity in places we don't even look because it's ending up in that parking

lot and it's coming out of just about everything else. Kelly, back to you. And there's nowhere else they want to put it to work. It's a great point. Rick, thank you for highlighting that Rick Santelli. Let's turn to oil, which is closing for the day now, down about 3.5%. You can see WTI behind me here. Look at natural gas prices as well. But on the oil front, President Biden saying he will not ask Saudi Arabia to increase oil production, but instead will increase all Gulf states to increase their output. Again, we're seeing that putting some downward pressure here.

But so, too, is the reset and inflation and yields that Rick was just talking about. Nat gas, especially after this larger than expected inventory build, absolutely downward sliding. we're back to $5.5.5 per million BTUs from upwards of eight or nine just a few weeks ago. Also, the shutdown of Freeport's LNG export plant in Texas has allowed utilities to stockpile more fuel than expected, less of it making its way out into the global markets. Let's stick with energy also because we got a major decision from the Supreme Court this morning that could have wide-reaching consequences for the sector. It strips the EPA of some of its authority. Brian Sullivan joins us now. Brian. Yeah, Kelly, it's being called a blockbuster decision. It was a six to three call from the Supreme Court.

And what it does effectively is overturns a lower court ruling that strips the Environmental Protection Agency of its ability to regulate certain types of emissions from power plants as well. The initial challenge coming after the EPA in 2015 made an order to coal plants to either cut production or to help subsidize other forms of energy. This was fought by a few states' attorneys general led by West Virginia. Now, lower court did uphold the EPA's power, but they lost here in the Supreme Court. And in striking it down, the Chief Justice John Roberts writes, quote, this court doubts that Congress intended to delegate decisions of such economic and political significance, i.e., how much coal-based generation there should be for coming over decades, to any administrative agency, end quote.

So effectively, in plain English, Roberts is saying that it is Congress and elected officials who should be making these types of big rules, this one around emissions, rather than federal agencies and they're unelected officials. The decision, of course,

quickly slammed by Democrats and climate activists with President Biden saying, quote, this is another devastating decision from the court that is going to set us basically backwards, while the court's decision risks damaging our ability to keep our air clean and combat climate change. End quote. So, Kelly, this case ostensibly is about climate, but it's going to be about so much more than that

because they invoke what's called the major questions doctrine. Without going too deep down the rabbit hole, it effectively is a legal doctrine that suggests that any major policy decision that would affect business or society needs to be expressly laid out by a statute or a law and that agencies like the EPA are not able to simply put their own interpretation on that. I'm giving a very extremely simplified version of the major questions doctrine, but if this line of judicial thinking continues, it puts into a lot of questions, things like the SEC's plan to propose climate change disclosures for public companies, cap and trade systems, and a lot of the administration.

types of actions that this administration have tried to put in place. Yeah, Brian, it's Amin here. I wonder if, as you look at this, I mean, first of all, the other argument, the other way, is that if Congress had any problem with any of these regulations over the years, they could have legislated against them, right? I mean, they could have stepped in with laws to say, we're going to put some parameters around this. So you can see both sides of the Supreme Court clearly landing on one side of the argument. What I wonder from you, though, is you spend so much time tracking this industry.

This is a big win for industry. So what are they going to do with it now? Well, that is the big question, Amon. And again, I have a law degree, but I'm not a lawyer, so I don't want anybody to take this as legal advice. The industry now will be given, unless states or Congress, this Congress enacts new laws, the industry is going to have more flexibility, perhaps,

more freedom to go forward with maybe something like building a refinery. I mean, I'm kind of stretching it just a bit, Amon, but if certain environmental regulations that the EPA is pushing, are now viewed as either being void or something that you could not push back against. If those go away, perhaps the industry has more ability to do some of the things like build a refinery, maybe even a new coal plant that, of course, is going to set off a lot of climate activism. So this case will stretch not only from energy, but perhaps to my point about the major questions doctrine to other agencies and industries like the SEC, Cyber, what you follow as well.

And this is, this may be about the EPA, but this is a major Supreme Court ruling with wide ranging implications for years to come. Absolutely. It's a whole new world out there. Constitutional Law 101 with Professor Sullivan, Brian. Thanks for that. Really appreciate it. And the Chinese agricultural firm looking to build a new corn milling plant facing resistance from the U.S. intelligence community. That story is coming up next. Plus, check out Semis. The Vanek ETF, SMH, down 15% this month. earnings tonight help get the sector back on track. We've got a preview of that coming up. And welcome back to Power Lunch. Now here's a story that we've been working on for the past month, a Chinese company pledging a huge investment to build a manufacturing facility in Grand Forks, North Dakota. The project could create a whole lot of jobs in a very small community,

but it also comes with some surprising national security concerns. Here's what we found in farm country. This is Grand Forks Air Force Base in North Dakota, home of some of the nation's most sensitive technology, including the RQ4 Global Hawk Surveillance Dome. And this property sits just about 20 minutes down the road, more than 300 acres of prime farmland. Earlier this year, three North Dakotans who owned parcels here sold this land for millions of dollars to a subsidiary of a Chinese company that says it wants to build a corn milling plant. Now that transaction has come under scrutiny here in Washington, D.C., where some in the intelligence community warn that the deal should be blocked because it could offer Chinese spies unprecedented access to the American base.

It's an only-in-America kind of fight, pitting the property and economic rights of a community against national security warnings from high-ranking officials in the nation's capital. The Chinese company at the heart of the controversy is the Fu Feng Group, based in Shandong China. Its American subsidiary says the company is not a threat. We're under U.S. laws. I'm an American citizen. I grew up my whole life here, and I'm not going to be doing any type of espionage activities or be associated with a company that does. The city's mayor says he just wants to do business. It's a $700 million plant, so that would really be the largest single investment in the city's history. The FBI didn't say there was any immediate concerns. They said, you know, if you see something, say something. The Air Force hasn't taken any official position on the Chinese.

Chinese investment, but an Air Force major composed an alarming memo in April obtained by CNBC, laying out what he believes to be the intelligence threat. He wrote, some of the most sensitive elements of Grand Forks exist with the digital uplinks and downlinks inherent with unmanned air systems and their interaction with space-based assets. The Air Force says Major Jeremy Fox was only speaking for himself, but he's not the only one with security concerns. In a report released May 26, the U.S.-China Economic and Security Review Commission wrote, the location of the land close to the base is particularly convenient for monitoring air traffic

flows in and out of the base, among other security-related concerns. That's why Senator Kevin Kramer says he opposes the project in his own state, despite the economic benefits it might bring. I think we grossly under appreciate how effective they are at collective. collecting information, collecting data, using it in nefarious ways. And so, yeah, I just assume not have the Chinese Communist Party doing business in my backyard. Both the chairman and ranking member of the Senate Intelligence Committee told CNBC they also have concerns about the Chinese development. Now, the city won't build out infrastructure there until next spring. And the mayor of Grand Forks

tells me he's moving ahead with the project in good faith. But he also says that he's still waiting to hear if the federal government has any official objection to this deal code. And the plan is to build what again? They're going to build a corn milling plant there. A corn milling plant. A lot of corn from the surrounding area. So a lot of farmers in that area support the deal because they say this is something that we need to build jobs

and build up the tax base in Grand Forrest. Is Foufong a major agricultural group? Or are they a consumer of corn? They're a big agricultural company in China, but this is their first venture into the United States. So this would be the first time that they're opening a plant here. And it's in North Dakota right near this base. And so that's where you get the national security concerns.

Is the corn for export for their Chinese customers or just, it just seems so random? It does seem a little random, but there are a lot of people in the community who support it. And this has really divided this little community. I mean, I talked to one of the people who sold land to the Chinese for $2.6 million. And he said he's gotten threats from his neighbors. He's had people putting signs in his yard. I mean, this is really dividing this community. And there's no clear answer right.

Wow, it's not quite like the Saudi Gulf League, but it reminds me of it a little bit. A little bit of that kind of feeling. Thank you. Great reporting. Up next, our three-stock lunch. We're trading the biggest laggards this month, from credit cards to chips to coatings. Who can rebound? Who might not? The picks. The picks up for today's three-stock lunch. As Wall Street wraps up a chaotic month of trading, we're taking a look at some of the hardest hit names in the Dow this month. The hardest hit is actually Dow Inc. down 24% month to date. Second place, Amex down 18% in June. And finally, Intel losing 15%. percent this month. Let's trade these names with Matt Maley, chief market strategist at Miller Tayback. Great to have you here, Matt. Let's start with Dow Inc. What do you think? Yeah, Dow, I mean, one of the things about this stock, I mean, it's down 25 percent, and rightly so. I mean, their input costs are going up with this big, you know, moving in commodities, although they've been coming down a little bit lately. So that is a concern. But, you know, just because

the stock goes down 25 percent doesn't make it make it cheap all the time. But in this case, it does. Again, we're training, it's training like six or just under seven times earnings. It's got a big fat dividend yield of 5.4%. So I think it's a stock you can nibble on here. They also have plenty of cash flow, you know, that dividend is very safe. So this is one I want to buy, not aggressively. You might have a better, even more aggressive entry point, you know, if we get a big washout later in the year.

But it's a stock that will pay you to wait while we go through this turmoil on the markets. So, Matt, where are you on American Express right now? American Express I'm a little worried about because we see that the consumers pulled in their horns. We see these connections on websites and travel websites have come down quite a bit. The hits on the places like open table for restaurants, that's come down. It's down 14 or 15 percent. So this is the type of thing that's going to hurt them. A lot of people like the financials right here, but I think with the flatter yield curve going towards a recession here, I think it's one, I want to hold. It's a cheap stock at 13 times earnings, so I don't want to sell it,

but it's not one I really want to add to it quite yet. All right. What about Intel, Matt? Well, Intel is one that I love on a very long-term basis. However, there's no question. It's got some serious headwinds that it's facing. But I honestly believe this is one you want to buy a little bit every month for the next year, because this is a national security issue. This has to succeed. When we've talked about this before, some companies are too big to fail. Intel is too important not to succeed. We need their chips.

We need to make them here. We need to help them make in Germany. The government's going to make sure that happens. So when the next bull market comes along, if you've got built up a nice base in this stock, you're going to do really, really well with this stock. Continuing our theme of national security into this segment. Matt, thank you so much.

We really appreciate it today. Thank you. Coming up, the semi-space struggling this month, could Micron's earnings be a barometer of what's to come for the rest of the group? We're going to look at that. up next. And welcome back to Power Lunch in life. If you have low expectations, you're less likely to be disappointed, right? Well, that seems to describe investors thinking when it comes to earnings

from tech, especially the chip companies, Micron reporting after the bell. Can it live up to those lowered expectations? Christina Parts Nevelos joining us now to get us ready for that report and set our expectations here, Christina. Well, I hope I'm not setting the expectation low and that's why you brought me in. But no, chip makers have fallen out of favor this year with the socks and the SMH ETF both on pace for their worst month since 2008, and Micron is no different. It's having its worst first half of the year since 1970. The stock is already down 40% year-to-date, and that's why the chipmaker's latest earnings could give investors further sign that the memory chip market is starting to weaken.

We've got weak demand for consumer electronics that continues. Forecasts today show worldwide PC shipments could drop 9.5% this year alone. And then you add on bloated customer inventory levels, and that's contributing to a decline in pricing for memory chips. Many analysts are actually downbeat on Micron because of that drop in dynamic random access memory or DRAM chips. City analysts even said the market was, quote, collapsing, and prices have dropped actually 1.5% from May to June and over 13% year to date. So you got pricing that is coming down. Demand is weakening, and freight costs are still high. But Micron's CEO has said previously, sales for data center products are outpacing its mobile market.

So maybe that could continue to help the company this upcoming earnings. But there are concerns that customer inventory levels are piling up due to overbuying that happened during the recent supply chain frenzy. So if customers already have this inventory, why buy more chips? Analysts said Jeffreys predict the industry is on course for an inventory correction in the second half of this year. That's why Micron's earnings could be the first. sign of that happening. So there's a bar. That's so fascinating.

You talk about demand softening. Kelly, you and I had this conversation yesterday off the air about this idea of a recession that could be coming. It could be a demand-led recession, which is the weirdest thing in the world. I've been lived through a couple of recessions now, and they all are different.

They're all sui generis. And the data this morning was, you know, Atlanta feds now has two negative quarters, but it's just kind of a quirk. I mean, it's because inflation's eating up all the gains. Maybe Christina, and that way, Emmys could be a cleaner read on where are we in the business cycle? Precisely why, especially with Micro on the fact that their quarter ended one month later,

so we'll have a better read on the month of May since the last report came out for NVIDIA and that was April. So maybe we'll have a little bit more of a read on the market. One can only hope. The other theme I'm detecting here is this retro theme, right? We go, all these stats in this entire show today have been back to the 1960s. It's the worst since 1970, 1962. I mean, this feels like very vintage, you know, all these stats.

That's maybe a little bit scary, but maybe that's an indication that you're feeling for a bottom? Right. If only the airlines were like they were in the 1970s and 80s. Christina, thank you very much. As we go out, let's just get a quick check on markets here. We were shaping up for a really down session to close out the first half of the year, but we've regained our footing somewhat. Again, some of the defense names outperforming, that's really the only thing you can point to. I mean, in time of war, everything going on in Ukraine, you think, okay, that's maybe a safe harbor in terms of investing.

There's no lack of ill will in this world. And yet, oil prices and energy prices going the other way, right? So it's like, does one have to give? Feels like they should both be going up or they should both be going down. You would think, you would think. We'll ponder these and other ponderables tomorrow. Amen, it's been great to have you. Great being here.

Thanks so much. Thanks for watching, Power Ledge, everybody.