Power Lunch - Consumer Check-In, Labor Pains 1/26/24

Episode Date: January 26, 2024

The Fed’s favorite inflation gauge, Core PCE, just rose nearly 3% from a year ago. Between that and credit card company earnings, we’ve received plenty of interesting consumer insights. We’ll dig into them.Plus, a looming labor strike in Las Vegas is threatening the biggest sporting event of the year – and in more ways than one. We’ll bring you the latest details, including what’s at stake for the local economy. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch alongside Contessa Brewer with Shaky Nick on the Steady Can. I'm Tyler Matheson. Coming up, the Fed's favorite. Look at a smoothie is. Inflation gauge, the core PCE rising slightly and up nearly 3% from a year ago. Between that and credit card company results, we have some interesting consumer insights to dig into more on that short. You know, we laughed, but if you'd been funnier, he would have laughed. He would have gotten a jiggle in out of that. We have a looming labor strike in Las Vegas, which could threaten the biggest sporting event of the year. in more ways than one. First, let's get a check on the markets, Tyler. You want to do that?

Yeah, the Dow slightly higher, as you see there, by 0.02%. That's really slightly higher. The S&P 500 down about a fifth of a percent. The NASDAQ, down 65 points, about four-tenths of a percent. A number of names hitting new 52-week highs. You got your meta, you got your Netflix, Ross stores, TJX, and Merck. Well, on the negative side, though, you've got Intel slumping after issuing some weak guidance. There you're seeing it down 12%. Is that or is that 2%? It is 12%.

There it is. It's right on the line, isn't it? It's right on the seam there. It's not a great sign though for the chip space. Western Digital KLA also lower following those results. Let's start with some insights into the consumer we're getting today. Credit card firms say the consumer is resilient, but some signs casting doubt on whether that will last for long.

Plus, we'll find out soon whether that holiday spending will stick or if retailers are seeing higher than normal returns. And a lot of eyes are on another key area of consumer spending. That would be restaurants. We've got full team coverage on these stories. We're going to start with Kate Rooney on those credit card earnings results. Kate. Hey, Ty. Yeah.

So the theme of credit card earnings so far, it's been all about consumer spending. And that has still been strong. It's boosted quarterly numbers for Amex and Visa. American Express, though, is the winner. far, at least if you look at the stock reaction, the company's positive outlook. It's been the main driver. It forecasted better than expected profits for this year, and it boosted its dividend as well. I caught up with MX's CFO, who told me the higher income consumer that they serve is looking strong. He pointed to restaurants as a bright spot there topping $100 billion

for the first time. Spending was up 11% compared to about 6% across the board. Airlines spending, though, did slow a bit. He also said they're gaining traction among younger people, Gen Z in particular, And then Apple pays growth he talked about, said it's a win-win for Amex while it's been a negative for companies like PayPal. Amex did see record revenue, although that and earnings were light of expectations. And then he got Visa. So by most accounts, Visa had a really strong quarter. Beat estimates saw a pretty strong cross-border volume. The reason for the stock drop was the slowdown we've seen in U.S. spending, at least in January.

The company actually partially blamed severe weather conditions, keeping people inside and spending less in the last few weeks. also forecasted disappointing second quarter revenue. Growth has been up double digits, but it does appear to have plateaued a bit in recent quarters. Management once again calling the consumer resilient. That is deja vu. We've heard it from Visa before, citing holiday shopping and travel.

Guys, back to you. All right, Kate Rooney, thanks very much. And joining us now and for the rest of the hour to talk about this and a whole lot more. Steve Grasso, CEO of Grasso Global. Steve, welcome. Good to have you with us. Good to be here. So much fun to be in a different studio.

Yeah, you've got the window seat here. So we reserve it for you. Let's talk about the credit card companies. I guess the big three are AMX Visa MasterCard. There are others. So if you look at it just to pick up where you left off in that segment, American Express has the highest, the most affluent clientele. And if you're worried about recession, what do you want to go to?

The most insulated. So that's the 50,000 foot up on that name. If you look at Visa, the revenues weren't that bad. Up 9%. So it was their guidance or the way they felt about the transactions. I don't know what to make of that. I don't know if it is a weather issue. But we're willing to give it to them because the consumer hasn't cracked yet.

What does the consumer still have? A job? Yeah. What do you do when you have a job, you still spend? So I think all of these, and if you look at the charts on all the technicals are all intact, the technicals on American Express look actually the best. That's the most momentum. Visa a little bit waning and MasterCard is somewhere in the middle.

You know what is getting under my skin and almost causing me to put my credit card back in my pocket is the fact that more and more merchants are trying to recoup the charge that they have to pay to the credit card company. So they're charging you 3% if you use your credit card or 2% or whatever it is. But now we're getting a window into how these payment providers make money, right? Sure. If you're a consumer, all of a sudden you're like, oh, right, it costs money to use my visa. True. But think about what is the alternative, though? Well, it's to pay cash, I suppose. So you better get a big rubber band because that's what I have holding my credit cards and my cash in my pocket.

I am carrying, to your point, more cash than I've ever carried before because they've, what do they normally do now? The first one to go is American Express because it has the highest transactional fee. And then it's the Visa and the MasterCards. But there's a lot of companies that don't accept any credit cards these days. Yeah. I feel like I'm back in the There's also a lot of companies that don't accept cash at all. They are cashless, and that creates its own set of problems. Can we move? Let's move on. Let's go with our consumer check-in time of the year that retailers are closing their window for holiday returns. It's a sign of relief, not only because the practice costs the money, but because of growing fraud. Courtney Reagan has

that story for us. Hi, Corti. Hi, Contesta. So it's not the increasing cost of returns that concerns retailers the most, even though the cost of processing an online return average at least 21% of an order's value, according to Pitney Bowes. Fraud is number one, and it's not even close to number two. Number two is really the cost of doing something with those returns, because that's a very manual labor-intensive thing. Retailers expect 16.5% of holiday returns to be fraudulent this year. That's $24.5 billion, dollars worth up from the annual average of 13.7% of returns that are fraudulent. This is according

to Apros Retail and the National Retail Federation. Now, Saxo, Mark Metrick told me at the NRF Big Show that fraudulent merchandise not received complaints have doubled over the last several years for his retailer in particular. Now other fraud tactics include shipping back a different item than was received. That's actually number one, like a box of bricks instead of a TV, returning stolen gifts and or using counterfeit receipts. So here's an example from appraised retail of one person netting more than $224,000 from fraudulent returns. They returned 1,000 fraudulent items, 215 stores across all of these states using a variety

of some of the tactics I mentioned above. Now, return fraud has caused a number of retailers to tighten their return policies writ large. Some, though, are using AI to personalize. their return policies. That includes retailers like Amazon. So my return policy for the same item, Contessa, might be different than yours. I know. It's going to be far superior to what mine is. Contessa puts bricks in the return. Like I go find them in my Manhattan apartment. Courtney, thank you. I mean, that's a fascinating look. It's got to be expensive for one person to go in all of those places to return that too. It's got to be expensive to ship a brick back. Yeah, exactly. It's probably more

expensive than the actual item anyway. I totally concur. We have heard a lot. We have heard a lot from the retailers about returns, shrink, fraud, all of this. Give me your big picture sense on retail and where it's a good investment. I hope in 2024 we start to crack down, and I hate when they call it slippage. It's crime, right? You're walking into some place and you're stealing something. They have to crack down on that because these are really, these are big numbers now. They're not little incremental numbers and they just keep exponentially getting larger. But let's talk about stocks. So my favorite stock in the space is Costco. What was the last time you guys went to Costco? I would assume it's pretty often.

Every night. Right around Christmas time. And your membership, above 90% on membership renewal. Oh, I'm sure. If it comes in annuity. Yeah. They do better than Walmart. But now let's slide a different way. Amazon. Mega Cap Tech. What do they have that a Costco doesn't have? AWS. So the number one in cloud computing followed by Microsoft. So if you want that kicker of mega cap tech, and you get the retail strength, you go to Amazon as well. Love them both. And then you flashed up before I came on, T.J. Max and Ross Stars. So those are, if you think about the pandemic, what did we have a lot less of? Supply, right? The supply chain was

halted. So those companies get the excess in supply, and they sell them at discounted rates. Now the supply chain is more intact. Those companies have things to sell. All righty. Finally, let's move to the restaurant space. key issues are in focus this earning season, value for customers, AI, and wage hikes, and Kate Rogers has got it covered for us. Kate. Hey there, Tyler. First up, value, as mentioned, TD Cowans, Andrew Charles says he expects a pickup in value pricing at restaurants, but not necessarily a spike. BTIG's Peter Saleh says it's already upon us. That also could continue into the spring as

restaurants look to grow traffic this year. Remember, grocery prices are rising at a slower rate than restaurant food prices are. So analysts say that restaurants may do some targeted value offering on their digital platforms as names like McDonald's set ambitious goals to grow there. Another area of focus, of course, wages and minimum wage hikes. 22 states raised their wages to start the year. And industry watchers are looking to April when California out here will have the highest wage in the country for fast food workers at $20 an hour. Earlier in January, Pizza Hut franchisees in the state began driver layoffs in advance of that. So you can expect that higher prices for fast food operators are going to make up for that labor.

inflation or a move into another theme, which is AI and automation. Del Taco is one example that T.D. Charles points out already using AI in its drive-thrus for orders. Other big names like Chipotle, which warned of higher costs in California have been testing out robotics to ease kitchen operations prior to this wage announcement. So that could be another theme this year to combat wage inflation in the future. And a quick final note on the restaurants, the Middle East and the war there. Papa Johns and McDonald's have already warned of potential impacts from the war in Starbucks, will be another name to watch, guys. Back over to you. Thank you very much. Steve, some thoughts on restaurant stocks. I see that you like a couple that my son likes. Yes. So Shake Shack has been a favor

of mine. I'm actually long the stock today. Chippotle is the second one. I'm not long that one. But if you look at the price action in Chipotle, if you see the chart up there, that price is astounding. And now I know that a stock split does nothing for shareholder value, but what does it make people do, go out and buy the stock. Because it seems cheap. Because it seems cheap and they figure, oh my gosh, I'm going to get 10 for everyone that I own. That's a bargain. I want that. I want the right size stock split. So Chipotle and Shaq will benefit from international expansion. Very few stores in both of them are outside the United States. They're U.S. centered. Is that an opportunity? I think it's an opportunity. And if you look at it,

that's where they've perfected, especially... We're new. That's good. That's your delivery from Chipotle. Yeah, you know, I always have it on silence, but I let my family slip through my thing just in case. So when you look at a Chipotle in particular, you want to perfect the operational skills that they have in the U.S., and then you want to bring that to the other countries. They've done that. Shake Shack, much smaller scale, but the same opportunity internationally. All right. Thanks. Great to have you with us. You're going to stay with us for the hour. Coming up, a growing viral debt debate, consumer is still spending for now. That may be.

fueling another problem, debt. And as that continues to grow, a lot of people are turning to social media for help. We have that story next. Plus, further ahead, between constant strikes and layoffs, tensions are growing throughout America's labor force. We discuss those issues when power lunch returns. As we discussed before the break, despite some hiccups, credit card stocks still boasting resilient spending. On one hand, good news for the economy, also raising some worries about America's massive debt, consumer debt. Credit card debt sits at over a trillion dollars in the U.S. and discussions around that growing debt are prominent now on social media. On TikTok, many financial influencers have made careers on helping people get out of debt and change

their spending habits. However, some call this debt shaming, encouraging people to have no debt at all, putting a moral value on it, leading to a debate on the financial side of TikTok, aka Fintock. Here to discuss America's debt problem is Jade Warshaw, a personal finance expert, and co-host of The Ramsey Show, Steve Grasser here as well with us. Welcome. We appreciate it, Jade. You're being with us. So, what are people saying on social media that has some folks saying this amounts to debt shaming that we're making people feel worse than they ought to about carrying some levels of debt? You know, I don't think it is about debt shaming. I I think it's about bringing a very real topic to the forefront, or at least it should be.

I mean, we do see that 78% of Americans are living paycheck to paycheck. We know that, you know, 49% of Americans have reported that the state of their finances is causing them mental distress, right? It's a negative effect on their mental health. You know, most Americans, they can't afford a thousand dollar emergency. And so this truly is the reality of the situation. And we should be shining a light on that and offering solutions, not shaming people. So, you know, if it's me, I'm giving you solutions. I'm telling you, listen, let's stop borrowing money.

Let's get on a budget. Let me teach you how to start paying off your debt. And shame is really the last emotion that I want people to feel. You know, it's interesting because we often talk about how that kind of education should start much earlier in elementary or middle school or for certainly in high school. Before money becomes a problem for, instance, those who graduate from high school and then get themselves in a lot of credit card debt. I was interested in your five pillars of personal wealth. You're saying not only to get out of debt and to live on a budget, but also to have the proper amount of insurance. I mean, is any of this going to, do you think, really carry through to kids who, and I say kids, but a lot of times it's even older adults who are like, I can't afford to put gas in my car this week, much less think about am I carrying proper insurance?

Yeah, I couldn't agree with you more. We're not taught this in schools. And I do think that's a problem. And it's a problem that we're working to solve. We have a curriculum that we're introducing to more and more schools, foundations and personal finance. And so we are offering that. But I think you're right. You know, people are looking to social media because they're like, what is the first place for me to start?

And I do think that if you're going on social media, you want to look for any credible source, right? And a credible source is one that's going to be teaching you those five pillars, right? To get out of debt, to live on a budget. You need to carry those insurances. obviously we want you saving for an emergency fund for retirement and prioritizing generosity. But to your point, the order in which you do those does matter. And so for people who feel overwhelmed and think, oh my gosh, I can't, you know, afford to do all those things.

Of course you can't. We want you to start at step one. And for most people, it's just getting $1,000 saved and getting on a budget. Jade, we started off the show talking about having credit cards or cash in your pocket. And when you look at the younger generation now, everyone, has Apple Pay. And I ask my children, even when I use Apple Pay, you have to be cognizant over what you are spending. So do you encourage people to use less Apple Pay and use more paper money? Because you're cognizant over what the bill actually is at the register or online. Obviously,

you can't do it. But they don't even know how much they're spending, including myself, when you're using all cards. That's right. You're exactly correct. I mean, we know that the studies have been done that when you use cash, it lights up those pain centers of your brain. You actually feel it leaving your body. And now, don't get me wrong, a lot of people aren't walking around with loads of cash in their wallet. Although we have seen that cash stuffing is a big trend on TikTok and Instagram. And I'm a proponent for that. Listen, if you can pull out cash from the ATM to pay for things like going out to eat, to pay for your groceries or gas, you are going to spend less money. But even going and using a debit card, that even helps. For the first time, my husband

and I, I've never used Apple Pay, and we used it for the first time last night to pick up Indian food. And my husband said, wow, you're right, Jade. I didn't feel that at all. So there's zero friction, and we want to create friction. When I was working way back when in the world of personal finance, there were two sort of things that we said, people trying to get on a budget. Number one was pay cash because you will feel it when you pull out the wallet and you pay cash. The other is to pay by check because the act, the act of actually writing down what you're paying and then maybe balancing your check register there. We're not going back. Let me ask you this, Jade. When is debt good?

You know, I have to tell you, I don't really think the only time that I would say debt is okay is if it's your primary mortgage and you're purchasing it the correct way. Other than that, honestly, I think the only good debt is a paid off debt, again, with the exception of that primary mortgage, because in that case, it's really acting as a forced savings account, right? It's something that is an asset. It's going up in value and that equity belongs to you. I take your point on mortgages, but what about automobile debt? Never that. I would advise anybody the first thing to pay off should be if you have a credit car or if you have a car loan that is what's keeping the middle class middle class for most of us it's the car payment that's keeping us broke no wonder people say I don't have money saved no wonder they're saying I can't save anything for retirement I'll give you a hint it's in your car payment so add that to your debt snowball and get it paid off as quickly as possible. Although if you're paying 29% on average on your retail credit card that'll get you poor really fast to Jade, it's great to see you. Thank you so much for joining us. It was my pleasure. Thanks for having me. Still to come. A Patriots wide receiver arrested in Louisiana for sports betting violations.

We break down what it means for the industry. We're back in two. Welcome back. Key Economic Data out today. Let's check in to see how it's affecting the bond market. Rick Santelli is tracking the action from Chicago for us. Hi, Rick. Hi, Contessa. And you're asking the exact correct question. because the market does have an input here. Now, if you look at rates from twos to 30s, all of them are up on the session. So if the numbers this morning were as cool

as so many people have been saying, why are rates up? I don't think the numbers were as cool. We've definitely made progress, but the job doesn't seem to be finished. Now, here we are at 4.16 in 10, which happens to be the high yield today. And boy, the next couple hours are going to be

really important. Why? Okay, let's look at a one-week chart. Okay, you see to the left there, that spike, that's 419. Okay, that was the 2024 intraday high. Okay, now let's look at a year-to-date chart of tens. You see on the right side there, that spike, that's 4.17%. That's the 24th. That's the high yield close for 2024. So you can see how it's all jumbled together, and here we sit basically right below both those levels. And should we start to see yields move up a bit and price move down, you can see some action today. These are important levels. And finally, if we consider that the two-year break-even, which I don't have a chart for, unfortunately, is at a nine-month high, just shy of 2.4%. Finally, the year-to-date of dollar index, it's already

up 2% on the year. None of these seem to auger with the notion, that inflation is ready to be put on ice and easing to start. We have a meeting coming up for the Fed. It's going to be interesting to see how they frame the recent spat of data. Tyler, back to you. Have a good weekend. You too, Rick Santelli. Thank you.

Let's get to Julia Borsden now for a CNBC News update. Julia. Tyler, Russian judge once again extended the pretrial detention of Wall Street Journal reporter Evan Gershevik. It has been pushed until the end of March, Gershkevik will spend at least a year behind bars since his 2023 arrest for espionage. Gershkevik, the Mall Street Journal, have strongly denied the accusations that he was trying to obtain defense secrets, and the U.S. government has declared him wrongfully detained.

Uber filed a legal appeal against a plan in Paris to restrict access to tourist vehicles on two major streets in the central part of the city. The ride-chairing company is trying to overturn the restrictions and warns that if they remain in place, it could cause big problems with transport for this summer's Olympic Games in Paris. Work productivity took a hit this afternoon. Thousands of people reported on downdetector.com that they lost access to Microsoft teams. It's not clear how widespread the issue is. Microsoft said on social media platform X, it identified a networking issue impacting team service and is working on a fix. Guys, I hope it hasn't impacted your workflow.

It has not at all. Julia, thank you. Thank you very much. Have a good weekend. Coming up, Las Vegas Culinary Union, one week away from a potential strike just ahead of Sin City's first ever Super Bowl. We will break down that and all the labor issues across the country. When Powell lunch, Richard. Las Vegas Culinary Union is just a week away from a possible strike ahead of the first ever Super Bowl in America's gambling capital. Contracts lapsed last summer for workers at more than 20 properties, and the union is asking for record wage hikes. pensions and built-in protections when it comes to automation replacing human jobs. Workers today are holding informational pickets outside Circa, Gold Nugget, and Fremont. Those are all casinos in the downtown area of Las Vegas. The union, of course, struck a deal with Wynn, Seizers, and MGM.

They're the biggest companies in Las Vegas. They did it just ahead of F1 in November, and it resulted in the largest wage increases in the union's history. Well, now they have a week to hammer out deals with 21. other properties, making up nearly 5,000 workers. There is a big sticking point. The union is asking for the same wages at the smaller casinos that the big guys are paying. The union told me, yeah, that's standard, and says the casinos are making huge profits, even the small ones, in the post-pandemic boom in Las Vegas, and that the workers deserve to participate in the upside. A spokesperson says workers are committed to striking next week if their employers won't make a deal.

And of course, that's going to affect hospitality at the Super Bowl at those affected properties. And it has an impact on the bottom line. We know from Caesars, for instance, they just revised the fourth quarter estimates in part because of labor costs attributed to this historic deal with the culinary union, Tyler. Interesting stuff. Let's talk a little bit more about this looming or potential Vegas strike, only the most recent example of labor tensions here in the United States. For more, let's bring in Dan Julius. He's a labor management scholar and practitioner with academic affiliations with Yale, Rutgers, and Case Western Reserves. Mr. Julius, welcome.

Good to have you with us. How are you today? Well, we're fantastic. Let's talk a little bit about this Las Vegas situation. What do you expect is going to happen there ahead of the Super Bowl? And why has this union, among many others, become rather agitated recently? Well, I think what you're seeing in Las Vegas is almost a perfect storm. You have unity among the unions.

You have 100 different unions operating there. You have a labor market, which is tight labor market in the sense that these places need these individuals. There was an exodus of hospitality workers during the pandemic. And now you have a major event coming, similar to the Formula 1 in a way. And there is no way that the power structure in the city wants a laborer. strike at this time. Keep in mind also, these are the unions that gave Joe Biden, Nevada, by 2 percent. They were out there and there are strong connections there. You know, unions in Las Vegas have a long history. And I suspect they will come to an agreement. I don't know the

details, but I suspect they'll come to an agreement rather than have labor strife during the Super Bowl. Well, because there is competition for labor in Las Vegas. And, you know, the housekeeper matter. Let me ask you about this sticking point that I was told about. Is it typical to have wages at a smaller company be on par with wages at a much bigger company? And I don't know, like if this is a good comparison, but can spirit, does Spirit airlines pay its flight attendance the same as United? Does a local news station that belongs to the union pay its reporters the same as the reporters in New York City? Well, I'd hesitate to say anything in Las Vegas is typical, but I would say that there's always comparability.

And it depends on the union has political problems of its own if they are representing the same group. And one group is being paid very differently than another. So there's no question that there are strong pressures mitigating towards paying very comparable wages. No question. And I think that what we'll see is something. very similar along those lines. There's another issue that it was a sticking point I understand in the negotiations with WinMGM and Cesar's about automation.

We're talking so much about AI replacing human beings. I'm curious to hear what you think of this. The union told me in Las Vegas, we aren't trying to stop automation from taking our jobs. We know that's going to happen. And especially, you know, you see the robot vacuums coming through or the robot bar They said, instead, what we did was we demanded specific language and protections so that, one, we're alerted that it's coming. We're now looking at vendors for robot vacuums and we're going to be replacing housekeepers

for it. Two, here's some money to go start retraining these workers who will be replaced. Three, severance, if there's no job waiting. Is that something that you anticipate will be more in use across the nation and across industries? it looks like we're frozen. We've got one of those moments where Zoom is not zooming. There's a problem with teams. But what do you think?

You know what I'm saying? We are talking all the time about whether AI is taking over, but already if you are a clerk and a cashier, you're seeing your jobs replaced by customers being able to go in and do their own thing. You know, your own. He's back. Okay, we get his answer there.

Dan? Did you hear the question? Sorry. That's all right. I did hear the question. The notion of automation and union jobs is an old one in the labor movement. And ultimately, they've worked this out. This is true with toll takers.

This is true on railroads. Ultimately, there's going to be some kind of arrangement where jobs are safeguarded. In the future, there may be fewer jobs. It would be very enlightened of the management to look towards retrain. That would be a very good way to go, in my opinion. There needs to be a partnership between labor and mad. Is there a resurgence in unionization in the United States these days? When you think about SAG after on strike, the UAW on strike, earlier this week, fascinating to me,

the Cal State University system went on strike, shut down classes for a day, then that was settled. And agitation for unions at the likes of Starbucks, where they have some, and even Amazon. Is are unions coming back? Well, certainly there's an interest in unions that we have not seen in decades. And there have been some high profile successes. If you take a look at the actual data, fewer employees are represented by unions today than in the heyday of the 1950s and 1960s. And in fact, it's really less than 7% of the private sector, maybe the public sector is 25, 30%. There's no question that there's a great deal of interest and success.

at the bargaining table. You mentioned the Cal State Strike. That's quite interesting. 29,000 faculty at 23 institutions go out for one day. But now what we also hear about that strike is that may have difficulty ratifying that vote, which brings to mind one issue that doesn't come out very often. That is unions have difficulties managing the expectations of employees. What you do to organize groups and what you do then to negotiate is something. sometimes at odds. There's an old phrase called bread and butter unionism. And that unionism seems to very concerned with wages, working conditions, and as opposed to the ideological strands within the union movement that want much more out of social unionism. So what's happening

today is that you're finding very, very effective organizing efforts in a number of industries. But when you get to the bargaining table, when it comes 50,000 feet to sea level, then we're really it's really a different, a different kettle of fish. And what happens there is that most of the social issues and the organizing issues sort of dissipate. And it focuses more in wages and working conditions. And that's exactly what happened to the Cal State system. But in fact, the university, excuse me, the union may not have prepared the union well enough to accept what the final settlement was. Dan, it's good of you to join us to. Thank you for sharing some of your insight and perspective with us.

Thank you so much, privilege. Still ahead. Flag on the play. The NFL wide receiver charged in an illegal sports gambling scheme accused of placing thousands of bets while he was underage and while he was playing college football. A legal expert weighs in on who else bears responsibility when Power Lunch returns. New England Patriots rookie wide receiver, Kisham Booty, is in some serious trouble with the law over allegations of gambling while he was underage and while he was playing college ball. He was arrested, booked in jail yesterday on a felony count of computer fraud and a misdemeanor

charge of underage gambling, according to Louisiana State Police. And they say there could be more charges. The affidavit for Booty's arrest warrant says Fandul contacted police to report a possible college athlete making bets under aliases. One of them, his mothers, the investigation alleges, nearly 9,000 bets over a year, more than half a million dollars staked or wagered, bets on himself, all of that. But Booty is not accused of throwing games.

I reached out to Fandall, it won't comment. I've reached out to gaming regulators in Louisiana. I have yet to hear back. But this raises a lot of questions about integrity in the game and the integrity of betting. Let's dive in further here with Danny Savalos, who's a criminal defense attorney and NBC News legal analyst. and Steve Grasso joins us back as well. Danny, walk me through a little bit the significance of charging a kid. He turned 21 last year.

For a year, he was doing some serious gambling, gambling that wasn't permitted under aliases, which is where the charges about computer fraud presumably come in. Yeah, the biggest problem here for him is clearly the felony computer fraud, both on the criminal front, And then, of course, on the NFL discipline front, two different paths here. On the criminal side, the felony, of course, is the bigger deal. And it's also the bigger deal in terms of discipline with the NFL.

Any felony will get someone under NFL's personal conduct policy, will subject them to discipline, and I believe in an automatic administrative suspension. Strangely enough, the NFL's gambling policy has been relaxed, at least as to betting that doesn't involve NFL teams or the really, the worst offense is betting against your own team or betting on your own team in the NFL. Betting on college is actually allowed for players, but not NFL personnel. It is really, really confusing. Also punishable for an NFL player is betting on college sports, but at an NFL facility or on an NFL trip. As you can see, it's incredibly complex.

Yeah, and the NFL just changed its policy on suspensions regarding. if you get caught, it's two years, if you get caught betting on professional football. But in this case, we have no indication that Booty bet on professional football or even as a professional player. The allegations that we have seen written out and the charges against him have to do with him betting as a student athlete in Louisiana and betting underage. I'm curious, could there be more charges coming, for instance, against his mother whose identification, he alleged. used or against the other, there is a, the other alias he used is a real person. We don't know whether that was permitted, whether she gave permission for her identity to be used or not.

But could other individuals be on the hook? Yes, potentially. But even if there are other individuals on the hook, it won't get this defendant off the hook. He is not going to be able to pass off liability unless he can make an argument that these were the people who were really involved in the gambling. But that is his biggest uphill battle is fighting the fraud charges and the misdemeanor charges. And strangely enough, as long as betting on college sports didn't happen at an NFL facility,

NFL players and players alone are actually allowed to do that. It's really the criminal allegations that are the biggest problem for this player because of the NFL's personal conduct policy, which, again, as you point out, these things are alleged to have happened while he was a student. and not a player. So that might be an out as well. Yeah, I was just noticing that. I mean, this looks like it took place between 2022 and the spring of 2023 while he would have been a student at Louisiana. LSU. Is that right? Yeah, that's right. LSU. And he put 8,900 bets down in a year. My goodness. Exactly. Exactly right. Yes. And so the other concern, I think, might be, and there's really been no reporting of this, but whether or not the NFL becomes interested to find out, well, what has he been doing since he became

an adult because obviously these allegations arose out of conduct by a minor, by an underage person who alleged to be gambling. But if the NFL decides to conduct its own investigation, see what he's been doing since then. They may find additional information that could be problematic for him, not criminally. And I know for sure that other sports books are looking at their records to see whether they have exposure. I'm curious what you think about, I mean, I covered the gambling companies. What's the danger? here for them. What's the danger for the bottom line? What's the danger for investors who might be looking at these companies? Well, I think it's the liability. So you touched on it before, and Danny

mentioned it. So it's very convoluted, who's responsible. So this, it's very difficult to say it was my mother's phone, his phone, who was betting, how is it betting? So there's a lot of, what happens if people want to use this as a nefarious way of getting out of losses that they actually bet and say it was my 16-year-old son who bet it. If you think about it, when you buy something on Apple, and it's not you and it's your children and they run up a tab, Apple forgives it. What happens if the tab turns out to be $80,000? Every time that we're talking about these things, is it easier? So there's a liability that these companies share.

But when you take it back to a draft king, where you take it back to something that's pertinent for, the conversation, there's so much upside to these stocks. It's up over 170% that the liability is very small. By the way, and they still want gambling legalized in, for instance, Texas, in California, and these things come up with a regular. Danny, do you like Kansas City plus the four-mass? Now we're way, way outside of my area.

All right, thanks very. This is not my jurisdiction. Danny Savalas, thanks very much. All right, still ahead. Out of gas, President Biden pressing pause on a new LNG export projects. A move many are calling a victory for climate activists. We'll get the key details when Power Lunch returns after this. Quick market flash for you.

Johnson controls moving sharply higher in the last few minutes, Somebody considers selling $5 billion worth of some of its HVAC assets. That's according to Bloomberg, shares up around 2% intraday there at 5681. Coming up, rules of engagement. Lawmakers in Florida propose an outright ban on social media users younger than 16. We'll discuss that and much more when Power Lunch returns. All right, we've got about three minutes left in the program and several more stories we'd like to tell you about. Let's get right to it.

the Biden administration pausing approvals of pending applications for liquefied natural gas export facilities to countries with which the United States does not have free trade agreements, citing environmental concerns related to climate change as a key reason for the move. We talked about this, Steve, in the last hour, with former Secretary of Energy Perry. He sees it as purely a political move. Yeah, I think it is a political move. And if you look at on the crude production side, we're at historic levels. So that got the base really angry with the Biden administration.

administration, this is his way of sort of pulling that back, throttling it back, if you will, and getting them back in his corner. Pre-election. Pre-election. I think it's important to realize that our allies will still have the production or the supplies that they need in theory. Hopefully this doesn't expand to a bigger dimension. And this is going to take months to review this case.

Florida's House just passed a bill that would limit youth access to social media by banning new and existing accounts of users younger than 16 years old. GOP-backed bill would be one of the strictest social media restrictions in the country if passed by the Senate and signed into law by Governor Ron DeSantis. It is unclear how that legislation could be enforced or would be enforced, but you have to wonder if Florida was able to do something like this, that might not affect the bottom line of Facebook and Snapchat and other social media companies. But if other states started to follow suit, if other countries...

started to lawsuit it could. This could overlap with our last story on gambling, right? So how do you, how do you enforce it? How are you supposed to enforce this type of thing? And it's worth noting that it was a bipartisan decision. So it was equally as many Democrats inside of Florida that were against social media as well for kids underneath 16. Which if you can get those two sides to sit down at the same table, then there's something there. I just, I just think it's, this is better to be left up to the parents, but I do understand the concern having four kids. You want to get them off. What do you do? What do you do? So you take their phone away at a certain time, but the problem is when you take their phone away, they say they need it for homework. And then shut off the Wi-Fi occasionally and they say they need it for homework.

So you really have to be, you can't be an absentee parent. You have to be hands-on. It's a tough one. I should have been, we should have been stricter on the phone because now it's all the time. Of course. All the time. All right. Let's finish off here on two dismal tech reports this week.

Tesla warning vehicle volume growth in 2024, maybe notably lower than last year. But it was very good last year. You can come down from that number and still have nice growth. Our own Jim Kramer now says the stock has lost its spot among the magnificent seven and also Intel taking a hit after issuing weak guns. Let's start with Tesla. They may not have the growth they had in unit sales this year that they had last year, but they grew something like 50% last year.

But when you look at Tesla, though, the story was always it was a tech stock. It wasn't an automobile company. And it's being valued now as an automobile company, The AI angle is sort of losing its luster. Steve, it's been great. It's been great. Yeah. Come back, will you?

Thank you. All right. Awesome. Have a great weekend. Closing bell starts now.