Power Lunch - Crude hits $122, warnings of a global food crisis and travel sticker shock. 6/8/22

Episode Date: June 8, 2022

One of the Biden Administration’s most powerful energy advisors is working to lower crude prices. We’ll hear from him and find out why he thinks the private sector needs to do more. Plus, talks to reopen Ukraine’s grain ports end without a breakthrough. Are wheat prices on the verge of heading even higher? And, how big data can help you find the best travel deals. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. I'm Tyler Matheson. Here's what's ahead on a busy hour ahead. With crude at $122 a barrel, we will hear from one of the Biden administration's most powerful energy advisors. Can he solve the high-price problem by convincing oil-producing nations to increase their output? And new talks to reopen Ukraine's grain ports and without a breakthrough, there are warnings of a global food crisis, and if not resolved, already high food prices could rise even more. We do, Kelly, have a big hour ahead. Yes, we do. Tyler, thanks. Hi, everybody.

And stocks are taking a leg lower now, really over the past hour or so. We're just off the session lows. Dow's down 290. Worst performer is the S&P down 1% NASDAQ reversal from its half percent gain earlier. It's now down a similar amount. And as Tyler mentioned, oil breaking above $122 a barrel, going back to the highest since early March when it spiked all the way up to over $130. And you can see how LeBurton Exxon, Baker Hughes, some of the best performing energy names,

new all-time highs for Exxon finally as well. It hadn't yet taken out that previous 2014 peak, so certainly something to mention here. Flipside, semis are struggling. Intel is all 5% on bearish comments from a city analyst who's predicting a negative pre-announcement for the second quarter. Intel down 5%. That's weighing on the Dow. AMD and Micron down 2 to 3% as well, Ty. All right, thanks, Kelly.

one of the biggest questions facing investors right now is where are we in the cycle? And our next guest has a framework to identify that and what's ahead and how to invest. He calls the framework hope. It stands for this. Housing, orders, profit, and employment. And it shows the timing of when key economic data points slow as the Fed tightens. And this is the year tightening catches up to profits. Let's bring in Michael Cantrowitz, chief investment strategists with Pipe

Sandler, Michael, it's good to have you back. We just showed that graphic, and I guess what this template does is tell me that there is a recurring pattern that affects, that maps the economic cycle that begins with a decline in housing, then a decline in orders, then a decline in profits, then a decline in employment. Do I have it basically right? That's right, and it simply spells out hope, and it all always, starts with an increase in interest rates and inflation, oil prices, food prices. You know, things we're seeing today, probably the most robust tightening cycle we've seen in over 40 years.

And so while there's a lot of unusual and exogenous and idiosyncratic things happening around the world today, what we're seeing playing out in the hope cycle plays out in literally every cycle. And so it helps you kind of understand where we are in the world. this cycle in terms of how much? And you say that now we have already seen housing start to slow. We have seen orders start to slow, I'm assuming. And now this is the year we're going to begin to see corporate profits start to slow. Yeah, that's right. The housing data is actually peaked over a year and over a year and a half ago. The NHB index peaked at about 90. It's now back to down

to about 66 right now, or 68. We've seen PMIs or new orders decelerate for about eight or nine months now, and we expect that to continue for another year. And yeah, this is now the time where everyone's waking up and seeing profit expectations that are too high. You're seeing negative pre-announcements. And we expect a whole heck of a lot more of that over the next few quarters. And that's where we expect the bare market to re-assert itself when we see earnings season play out and companies miss expectations and earnings estimates have to be revised lower. And then what we should start to look out for later this year and the beginning of next year is the strength of the employment backdrop starting to weaken.

We've seen some layoffs announced by those companies that have overhired during the pandemic and over-earned during the pandemic. So they're forced to do layoffs, companies like Amazon. But we believe that's just the beginning of the tip of the iceberg where you're going to see a much broader change in the employment backdrop, most likely next year, after we see the profit slowdown that we are clearly seeing play out today. What if the profit slowdown, Michael, doesn't get a lot worse? In other words, the other way to look at this is that earnings are resilient, valuations are not. So yes, obviously they're coming in a little bit,

but could they actually prove more resilient and help kind of, you know, help stocks find find their footing, so to speak? They could. Of course, anything's possible. And, you know, people often look back at past analogs like 1994, where we had the Fed Titan rates and we had a soft landing. And you can go through each one of these analogs people are hoping for, no pun intended. But, you know, I think the reality is the U.S. consumer going to step in and borrow a lot

as interest rates stabilize or even start to come down. And we don't think so. And that's really preceding the global financial crisis of 08. That's what gave us those soft landings. It was when rates came down and consumers came in and borrowed a ton of money. And we just don't see that. The savings rates for consumers have been drawn down. Everyone who's bought a house has probably already done it in this cycle.

And inflation is clearly eating away at real income. So let's round third base here and bring this home to profits. How do I use this hope and make my portfolio dope? You know what I mean? Yeah. So we want to look for stocks that can be resilient in a slowdown that comes from higher interest rates, higher inflation, higher oil prices, et cetera. So it's cyclical stocks that, you know, think of the companies that benefited so much in 2021 when earnings expectations went from being very low to extremely high. It's those types of cyclical companies that benefited from all the stimulus, from the increase in jobs, from their reopening. In a way,

we're kind of unwinding everything that we wound up in 2020 and 2021. And so you go with more sort of consumer staple stocks. We just showed Hormel, which would be defensive, Clorox, which would be defensive. It was, of course, a pandemic play for a while there, and Dollar General. Michael, thank you so much. We appreciate it. Let there be hope. All right. Thank you. Thanks, my friend. Bye-bye. We've found the hope. It's in whiskey. It is apparently recession-proof. Shares of Brown Foreman are rising after reporting better than expected quarterly results. Shares of sales of Jack Daniels, Tennessee whiskey rose 20 percent. Their premium bourbon sales up 17 percent. Tequila sales, up 22 percent. And profit margins, the source of problems for everyone else in this market, those improved to 63 percent from 61 percent a year ago. Here now in a Power Lunch exclusive is Lawson Whiting. He is the CEO of Brown Foreman.

Lawson, I'm like the least knowledgeable person about on the planet to talk about the spirits and everything it is that you do. But I fundamentally understand that there is some demand inelasticity here, isn't there? What can you tell us? What's going on here? How are you managing to put up such different results than others in the consumer sector right now? Yeah, I mean, look, the spirits business has been sysf been. through this pandemic. It's been very volatile. You've seen ups and downs. We've seen consumers move from restaurants to the off-premise and then back again. So you've had tremendous volatility, but tremendous resilience. And the businesses hung together. And yeah, over the last year, the results

are really driven by Jack Daniels reloading in the on-premise, which are really the bars and restaurants around the world. And as one of, if not the largest brand in the world for for bars and restaurants, it was time. And so we really prioritized the growth in these bars and restaurants and just had a wonderful year. So again, just to highlight, there is a big reopening effect here. People getting back into bars and restaurants. They're ordering. I think you said it was Jack Daniels substantially. Can you just offer a little bit of a backdrop here? I mean, there was a couple of years where the sort of hard seltzers were taking share from almost everything else. I don't know if that's kind of the same market that you're, you know, necessarily.

talking about here, but is there an underlying secular increase in demand for the kinds of liquor that you guys sell in particular? Yeah, well, look, I mean, if you step back literally 20 years, spirits has been taking share from beer, you know, throughout, literally for the last 20 years. And like a lot of other consumer trends during the pandemic, what was happening before the pandemic only accelerated. And so that has been a source of volume for us for a long, long time. Seltzers came in a few years ago and really disrupted beer much more than spirits. There was some talk that the shelters were taking maybe a little bit away from vodka and gin and the lighter, lighter spirit drinks, farther away from American whiskey. American whiskey and tequila, between the two of them, they drive the vast majority of sales of our company.

And they're the two hottest categories, at least in the U.S., in the spirits business. And so they're both very healthy. We've got some of the best brands in that space. and it all kind of came together for us. So let me ask you a couple of quick, quick questions. Is tequila replacing vodka? Yes. Yes, it is.

Tequila has been an amazing category the last four or five years. Tequila historically was much lower end, made a lot of margaritas at it. But what has happened over the last, I'll say five years, really, is there's a handful of really very super premium, multi-premium brands. Eradura is one of them, where consumers really enjoy much, you know, a better. or drink very awful with soda and a squeeze of lime, something like that. Smooth, you're drinking on the rocks, drink it with soda or whatever. Question number two, is all the Jack Daniels in the world made in one plant? Oh, yes. All in Lynchburg, Tennessee.

All in Lynchburg, Tennessee, Tennessee, whiskey, Chris Stapled, and the whole thing. Now, the key question here is, to me, how do you judge with an aged product like Jack Daniels? I don't know how long it is aged, but for years. How do you judge demand that far ahead? Yeah, it's a great question. It is the trick to us, to our business. 85% of our sales are of age products. So scotches, they're more like 12 years and up, or single malt scotches.

We have Irish whiskeys. We've got obviously the Jack Daniels franchise, Woodford Reserve. Most of those brands are anywhere from four to six years old. And so you need to make a forecast four to six years out, and it's tough. And the reality is you never get it exactly right. But we've figured out how to do it over 150 year history. And I think we've got pretty good at. But there are times when we've had shortages.

Exactly. Lawson, could you speak to that for a moment? How much are prices up? How much markup has there been at the retail level, maybe more so in the past couple of years than now? And what shortages have you faced or anticipate facing? Well, we've had shortages. We've had over just too.

So, and it's something that you learn to adjust with. And you do raise prices when things get tight, obviously. We have taken price. The spirits industry has not taken a lot of price in the last 10 years. We changed that about a year ago. And thankfully, we did because we were able in fiscal, in our previous fiscal year, our pricing actions offset the costs that we incurred, the incremental cost that we had.

So you saw a little bit of gross margin improvement. And we're going to continue to, you know, try to manage that and try to, to continue to take price and hopefully offset some of these input costs that have been so difficult. I'm going to ask the father of the brands a hard question. What's your go-to? Oh, boy, you're going to get me in a lot of trouble. I'm going to get you in a lot of trouble. What's your go-to? Give me two go-toes. I love Woodford Reserve. I love the taste of it. It's my favorite brand. I can't disagree with that, my friend. He gave you one, too. That's all right. He's a manly man doing that. Thank you, sir. Okay. Thank you all for having

me on. You bet. Take care. Cheers. Coming up, mortgage rates are up. Mortgage demand is down falling to its lowest level in 22 years. Is a great reset underway in housing plus sticker shock when booking summer travel. How big data is attempting to ease the pain of high-cost getaways. We'll cover that when we return. Welcome back, everybody. Yet another sign the once hot housing market is starting to cool off. Mortgage demand falling to the lowest level in more than two decades, down 21% from the same time last year as low inventory and rising rates continue to take a toll. The average rate on a 30-year fixed mortgage now up to 5.4% according to the Mortgage Bankers Association. Our next guest says the market is weakening fast and we haven't even seen the worst of it yet.

Let's welcome in Mark Zandi, chief economist at Moody's Analytics. When I read that copy, Mark, I think back to 2007, 2008, when there was the housing crash. Are we on track for something remotely approaching that? No, no, no, no, Tyler. Relax, not that. A number of big differences between now and then. First, there's a very severe shortage of homes today, the vacancy rate across the housing stock for rent for sale is pretty close to a record low. Direct opposite back in 08, 708 in the

housing bubble, vacancy rates were at record high. Second big difference is mortgage lending. It's been pristine, you know, 30 year, 15 year fixed rate loans, nothing complicated, no two-year subprime loans, no ninja loans, no Negam loans. And so underwriting has been excellent. And I just don't see any significant increase in mortgage defaults and foreclosure. And it's those distress sales that really cause big price decline. So no, you know, the market's going to weaken. There's a come-up that's coming, but nothing compared to back a little over 10 years ago. Okay.

So, and you've got, remember, the securitization market and the ripple effects through there, that was really sort of what triggered an awful lot of what went on back in 07, 08, 09. Let's talk a little bit about, but you say there is a come-up and's coming here. What does it look like in terms of prices of existing homes, of sales volume, of interest rates, et cetera? Yeah, well, home sales are going to get, that's housing demand. That's going to get hit hard.

It already is. The run-up in mortgage rates are now to 5.5% per a 3-year fix. That's up, you know, two percentage points, three, actually almost three percentage points from the bottom a year ago. And so if you're a first-time home buyer, you're locked out. You know, you mix these high mortgage rate, higher mortgage rates with a very high house prices,

just can't afford the monthly payment. And then trade-up buyers, they're kind of locked in because who's going to want to take the seller existing home at a low mortgage rate, go buy another home and have to get another mortgage at a much higher rate. Their payments are going to jump. So home sales are going to get hit hard. Home prices, I think they go flat nationwide. You know, I think there's a lot of resistance in the market for sellers to actually cut prices. You'll see some price declines in some of the most juiced markets in the South and West, but nationwide, I expect flat pricing. Finally, in terms of supply building, that will hold up better just because, as I said,

we have this very severe shortage of homes. And there's a lot of homes. In fact, a record number of homes in the pipeline going towards completion. I haven't quite gotten there yet because of the supply chain issues. But as they get ironed out, we're going to get a lot more homes getting completed. Does that spell relief mark for home builders and their stocks? Yeah, I think that should help home building stocks. Yeah.

So I think home builders should kind of navigate. through this better than other companies in the housing mortgage finance world. Their world should hold together much better, you know, through this period. Let me turn you to, because I know you got range beyond most economists. What about inflation? Do you see signs that it is peaking or not? It's peaked, in my view. I mean, give or take, you know, the consumer price index was 8% year every year through the first

quarter of this year, that probably will be a high watermark. You know, this number we get on Friday, Tyler, that's going to be, that'll be ugly because we've seen oil and gas prices jump here because of the EU sanctions on Russian oil. So that's going to be an ugly number. But I think we've peaked and as we make our way through the year, assuming the pandemic is a phase and the supply chains continue to iron themselves out. And that the worst of the fallout from the Russian invasion is at hand right now, the $120 barrel oil. I expect inflation to be moderating. by this time next year. You know, we talked a fair amount, just quickly thought on core inflation, which we used to cite

a lot, which is inflation minus fuel and I guess it's food. But that feels to me like calculating a batting average if you just take out all my outs. Well, the reason why economists like that core measure and why the Fed uses it is because that is a very, that's the best predictor of future inflation. So because oil prices and food prices, they go up as we're observing now and they go down, which we will observe at some point in the future. So if you want to really understand where inflation is headed, the core measure is a statistically, historically, historically, a much better way of looking at things. And that's why economists in the Fed tend to look at that. I feel better now.

There you go. All right. Thank you, Mark. Your thing. Mark Zandi. Up next, travel sticker shock. Consumers looking to book a vacation are facing more. really high prices, but travel sites are trying to offer more tools to help find deals.

Further ahead on the show, pain and grain. We're talking about the next wave of food inflation. Don't worry about the core here that could be headed our way. Before we go to break, though, throughout the month of June, CNBC is celebrating Pride Month. Here is Ina Freed, Axios Chief Technology Correspondent. To me, Pride Month is all about celebrating all the work that has been done to get us to this moment all the people who fought sometimes with their lives so that we have a chance at equality and it's also a reminder that there is so much work still to be done. I am so

proud of the next generation of trans and non-binary youth. They are fierce, they are happy, they are thriving and they've had a chance to have a childhood in their gender which is amazing and has really changed the game. Welcome back to Power Lunch. Travel companies have been waiting two years for this summer, but so many people are getting back to traveling that the prices have skyrocketed. It could be benefiting the booking companies like booking itself up a third of a percent today. Expedia, TripAdvisor, though, they're still under pressure. Will Stickers Shock travelers turn to these sites for help in getting the best deals?

We ask Sima Modi, who has more on what these companies are offering? Seema. Kelly, get this. People visit travel sites on average 140 times and the 45 days before booking a trip. That's according to Expedia, and we've all experienced this, right? You keep monitoring prices on different sites before deciding to book a vacation. What the travel operators are doing now is unveiling new financial products that give customers more data that they can use to plan that trip. Expedia's price predictor tool and machine learning capabilities to improve the selection of properties presented. Hopper, that this is the highest value travel company in the private market with a $5 billion market valuation,

We'll now let customers pay a $30 fee to leave a hotel after check-in for any reason. The room wasn't what you expected. Hopper will cover the difference. The travel site also allows customers to freeze prices for two days for a $45 fee. And it comes as hotel occupancy is rebounding not just in resort markets like Hawaii, but big cities. Co-star data shows nearly three quarters of hotels in Los Angeles and San Francisco are occupied, 82% full in New York. We've got a bunch of conferences happening this week where the price to book a hotel is now over $300 compared to the $149 national average.

So that really tells you that demand is really improving here or rising, I should say, not just for the coastal cities and resort markets, but New York and Chicago as well, guys. I would say tourism is back, maybe not fully back, but back in New York. Thank you very much, Seema. Let's get to Contessa Brewer now for a CNBC news update. Contessa. Hello there, Tyler, and here's your news update right now at today's house hearing on gun violence. Lawmakers heard pre-recorded testimony from a fourth grader who survived the Yuvaldi school shooting. 11-year-old Maya Serrillo calmly described how she saw her teacher get shot in the head.

And then when the gunman went into an adjoining room, she said, she covered herself with the classmates' blood and just stayed quiet. She later used the dead teacher's cell phone to call 911. Police in Berlin now say 14 school children were hurt and their teacher killed when a 29-year-old man drove his car into a crowd on a popular shopping street. The students from central Germany were in the city as part of his school trip. Police still don't know if the driver acted intentionally. And the United States says Iran's announced plan to remove two UN nuclear surveillance cameras is extremely regrettable and counterproductive. The International Atomic Energy Agency's board has just passed a resolution.

criticizing Iran for failing to explain uranium traces at its undeclared nuclear sites. Tyler, Kelly. All right. Thank you very much, Contessa Brewer. Ahead on power launch, a Roku. Roku shares soaring on reports that employees inside the company are discussing the growing possibility of a Netflix takeover will trade the stock. Plus, as oil continues to move higher, reports say the administration is actively engaging with the Saudis to try and lower prices. We'll speak to one of the president's top energy advisors ahead. We've got about 90 minutes left in the trading day,

and we want to get you caught up on all the market stocks, bonds, commodities, and the man charged with bringing oil prices down, the administration's person on that. Let's begin with Tom Chu on the markets. The Dow fading just a bit in the recent minutes. It is. I'm Thailand. Markets have seen both positive and negative territory to your point today.

But as you can now see, we are drifting towards the lower end of the session right now. The good news is, though, the gains and losses right now have been relatively modest compared to the recent volatility. Now, from a sector perspective, it's energy and communication services, the outperformers. They are right now the two, not only one sector up on the day. Utilities and materials, real estate are the laggers so far. A lot of the company's specific stories, though, are in the mix here today. Campbell's Soup, one of the biggest gainers in the S&P 500, after the packaged food maker reported better than expected quarterly financial results. It also raised its full-year sales outlook.

COVID vaccine makers also on the move higher. Moderna up after reporting a new version of its booster shot triggered a stronger immune response versus its original vaccine against the Omicron variant and then NovaVax as well up after it cleared a key hurdle in the approval process for its COVID vaccine candidate here in the U.S. Meanwhile, on the downside, you got Intel lower after analysts at City said the chipmaker could possibly make a negative earnings pre-announcement or missed current quarter four. that has those shares lower. And then the biggest decliner in the S&P is U.S. Tobacco Giant Altria, which got downgraded by analysts of Morgan Stanley to an underweight rating due in part to competitive risks in the future and weaker consumer sentiment. All those playing out. I'll send things back over to you. All right, Dom, thank you very much. And now let's move over to the bond market, where yields are

continuing to move up ahead of Friday's inflation report. And Rick Santelli, tracking the action for us. Hi, Rick. Hi, Tyler, you nailed it. You know, this May CPI report that's coming up at the end of the week, we're looking at month-over-month numbers that are almost double on headline, the up-3-tenths of our last look, and on the year-over-year number, we're still probably over 8%. Look at an intraday of twos.

Look at an intraday of tens. You see at 1 o'clock Eastern, they both popped. Well, they pop because investors definitely overlooked, avoided, did not show up at the 10-year auction. I gave it a D-minus, and there was very little that be pleased about other than the fact that domestic institutions, hedge funds, pension funds, they did step up.

They were the only category that did. Look at a year-to-date of tens. And remember, 313s are high-yield closed, 3-20s are intraday high, and yes, count them. Today could be the fifth close above 3% since the fourth quarter of 2018. Look at booned yields.

They close to 1.35% today. They haven't been that high in eight years. And here's the one month of the Euroversy the yen, seven and a half year high. Against the dollar, it's a fresh 20 year high. Against the yuan, it's near a seven-year high. And why is this important? Consider this. If you own stocks, you see what our central banks are doing?

You see what inflation's doing? Well, consider that it was 1989 that the Nikai peaked at 39,000. Where is it now? 28,200. Boy, that sounds good if you're holding equities for a country that wants to manipulate their interest rates. Tyler, back to you. All right, it's been a long time suffering in Japanese stocks. Rick Santelli, thank you very much.

Let's go to the oil closing for the day. Two and a half percent gain today, getting back to three-month highs set right after Russia's invasion of Ukraine. Demand for gasoline in the U.S. still rising, even with record prices there. You see, West Texas crude up 2 percent at 122 a barrel. And natural gas down 5% after an explosion at the largest LNG facility in the U.S. John Kilduff of again capital saying this could actually bring prices in the U.S. down, but impact exports which could send prices higher in Europe. There you see, Nat gas down about 7%.

Meantime, let's bring in Brian Sullivan now. Brian just spoke in person with the person. President Biden has assigned the difficult task of trying to bring oil prices down. What did you learn, Brian? Well, it's not an easy job, Tyler, as you know. In fact, oil price is at 122 a barrel, but the administration is working behind the scenes, working with both the U.S. oil and gas sector and with Saudi Arabia and other nations around the world to try to increase supply.

His name is Amos Hochstein. He is a special envoy for energy security, and he is arguably one of, if not the most important people in America right now for energy policy. He has the ear of President Biden. He travels the world. In fact, he's trying to help broker that meeting and that deal with Saudi Arabia. I'll get to that more in a second. We're at the RBC Energy and Power Infrastructure Conference in New York.

We sat down with the most just a few minutes ago. We began by asking about, of course, gasoline prices and where the lack of refining capacity in America plays a role. In the last two years over COVID, we shut down additional refining capacity in the United States, and even more than that in Europe. So those are refiners that are not coming back. We have to acknowledge that. So we have to manage an ecosystem where we need more oil production, more gas production, but we also need more infrastructure and more abilities to make sure that our inventories on the East Coast are filled in time for crisis times like hurricane seasons, the winter, etc.

We have to make sure that we have those supplies there, and we're going to do that. But we are not, if you look at the projection for demand of energy consumption around the world and in the United States, as we electrify more and more, we are going to need. to also do something about demand. And that's where the energy transition is not about which side are you on. It's not, are you an environmental guy? And I press Hawstein on production as well,

and U.S. producers, are they putting more online? And the SPR release as well. We got into all that, and I asked him about the effect of the SPR release, maybe not bringing down the price of oil. He said, well, where would the price of oil be had we not done it? It is, to be honest, a fair point.

Here's part of that interchange about the SPR, and the role that Wall Street is playing in oil production. That production is not going to come online until towards the end of the year. So what we've done is we've put a million barrels a day on the market between now and the end of the year. At that point, as we retreat, the private sector will by then be putting on another million barrels a day. I think they can do more. I believe they can do more. They believe they can do more.

But their constraints are not just the labor force and other things. They can manage those. but they have real fiscal concerns because quite frankly it's not Washington, it's New York that's creating the problem. Around here in this city, there are the banking community and financial community that is saying, look, if I have to choose between you increasing production even further and reducing dividends and share buybacks, I'd rather you did a combination of both. We would rather that they increase production, especially in short cycle production that can come online relatively quickly, beyond the million of barrels of day that we're going to come on this year.

And we already know that about 800,000 is going to come on in 2023. We're doing our part. It's just that it's not enough, and it's not only about oil. And Tyler Hoxton is the person who's trying to broker that meeting between President Biden and the Saudis. I pressed him on it. He basically said, well, I'm not going to front run the president. We're working on it. Saudi Arabia may be in the card. So no confirmation there. But Hoxton is the one who's been on a plane. He's been in the kingdom of Saudi Arabia a lot in the last couple of weeks and months trying to broker that deal and maybe broker more oil as well. That entire interview, and by the way, the president taking maybe a more pragmatic approach

to fossil fuels in last few months, the industry here even admits that. That whole interview should be up on CBC.com later on today. But Amos Hochstein, one of the key people behind the scenes trying to help bring down oil and gas prices. Yeah, maybe his actions like you're saying, Brian, speak louder than words, at least for now, in terms of what they hope will happen with the Saudis. Brian, thanks. We appreciate it.

Brian Sullivan and the Russian-Ukraine conflict continues with fears over the global food supply growing. Ukrainian president today warning the situation will cost economies around the world billions. Is there a plan to get grain out of Ukraine? And if not, what happens? That's next. Welcome back talks today between Russia and Turkey to secure safe passage of Ukrainian grain exports made little headway. Shipments have been mostly blocked since Russia invaded Ukraine earlier this year. Together, Russia and Ukraine export more wheat than the U.S. and Canada combined. Wheat prices are up 21 percent since the war started. Ukrainian president Volodymyr Zelensky said the situation could deal a severe blow to economies around the world.

To date, this is probably one of the most challenging tasks that we are facing, that is besetting our economy and our exporters. indeed, because Russian fleet has blocked the Black Sea. Indeed, we are not able to export our grains abroad. I can mention some statistics. But once again, this is just the surface of the problem, the top of the iceberg. With us now is Ed Asset. He's a grain marketing economist at the University of Minnesota. So, Ed, it's great to have someone with your specialized expertise.

here. My understanding is that June is when the crop, you know, is ready for harvest in Ukraine. It needs to get out or else it could just rot and those markets won't be met. Maybe prices could spike further. What are we seeing play out as we work through the month here? Well, we've got a lot of issues going on and thank you for having me on. Ukraine is a major exporter and just the fact that they can't move even some of last, much of last year's crop into world markets is a big problem. This year's crop, I think June is a little early for their current crop harvest, but it's coming up in the next month or two. So this is peak season. It's very hard to get you. Very hard to put a finger out.

Yeah, if that grain isn't exported, what could happen with both prices and with shortages? You know, in the Wall Street Journal, I've even seen people quoted talking about, you know, the need maybe to stockpile on wheat-based products than that kind of thing. I mean, could we really get to a situation that extreme globally? In parts of the globe, Ukraine and Russia export a lot of wheat, as you've noted, but they export primarily to Africa, Southeast Asia. They export to poor wheat importing countries. we're not going to run out of wheat here in the U.S. even though we were just coming off a not-so-great crop in Kansas. And last year, our spring wheat crop was pretty very poor.

But we're not going to run out of wheat here. We're going to pay a higher price for it, but we're not going to run out of wheat here in our country. So let's say that Ukrainian wheat and corn can't get out of the country. You've got last year's crops sitting in, silos, presumably sort of hitting their shelf life, they're going to have to either move or get dumped, and then you've got this year's crop coming online and into those silos. It's not getting out, or it seems that it isn't. What is the solution here? Where is the swing producer

who can send or send more wheat to those stressed countries like Africa, where the problem isn't just rising prices. It's literally survival in many cases. Yeah, it's availability. The traditional exporters are going to have to step up. The European Union, primarily France, the U.S., Canada. And then the timing here is very poor. Canada also had a very poor wheat crop in 2021. And they're having problems getting their crop in this year because it's too wet. last year too dry, this year too wet. But it's the big exporters. Argentina is going to be one of those players, Australia.

They're going to have to step into the breach. And ironically, Russia has a big crop coming, and they will lead the world in exports once again of wheat. Ed, how much more could prices spike do you think, given what you see in terms of whether they can get grain out of the, Ukraine and what's going on with the crops in the North America, how much further could prices rise? I want to caution people on how much further they will rise. They've already risen.

I want you to understand that here in the U.S., wheat prices are two and a half times what they were just 24 months ago. Yeah, we're talking about farm-level prices throughout the U.S. in excess of $10 a bushel, frankly, as high as they've ever been. We had a brief period in the first quarter of 2008 when prices were as high or possibly even a touch higher. But we're already there. Could they go higher? Absolutely. There's a very slow trickle out of Ukraine.

Shut that off. We'll go higher. Is this good for American farmers quickly? If you want to look just simply at how much money they're making on the sale of wheat. Sure it is. All right. Ed Usett with the University of Minnesota. Thank you very much. Thank you. All right, a latte to worry about. J.P. Morgan, downgrading Dutch brothers, citing a consumer slowdown. We'll hit that call and more in today's three-stock lunch. All right, time for today's three-stock lunch. We take a look at some of today's biggest movers,

Roku shares, jumping on rumors of an acquisition potentially by Netflix. However, sources tell CNBC there's no truth to headlines, but a strong move nonetheless. Dutch bros, bros lower on a downgrade by JPMorgan, and we've got Pinduoduo, higher along with the rest of the Chinese internet stocks, up 27% in just a week. Let's bring in Joanne Feeney, advisor's capital management partner and portfolio manager. Welcome, Joanne. Good to have you with us. Let's start with Roku. What are you hearing? What do you think? Well, Tyler, we're hearing, you know, I think something similar that's the, you know, consensus today.

It doesn't make a lot of sense for Netflix to buy Roku. I mean, clearly Netflix has signaled that they want to get into an advertising tier of their subscription, which would open it up to more potential subscribers that don't want to pay that high monthly fee. And good for them. It's probably a good way to go. Roku doesn't really add much. Yes, clearly they already have the advertising, so it might jumpstart it. But it doesn't make sense to us for Netflix to pay. up for, you know, buying that into the business. And moreover, you know, we're a little bit wary of

this space. We think there's a bit of a war going on between finding subscribers, becoming much more competitive. And then also buying content is becoming very competitive. And so that really does threaten margins, we think. And then the battle for subscribers is really going to compromise growth, particularly in the short run, as these guys really duke it out. So not our favorite space to be in right now. All right. And that sounds like an avoid, Kelly. Yeah, sounds like it, but let's talk coffee. What about Dutch Bros. Joanne? Well, I love coffee, Kelly, but Dutch Bros.

I think is facing some, yeah, Dutch Bros. is facing some challenges. And in particular, right, their model, right, of having these sort of high calories, sweet, sugary, cold, mostly cold coffee-style drinks is really pitching them to a younger crowd. And the younger crowd, you know, may be more, become more cash. constraint over time because of the high price of gas and food and everything else. So that could be hurting them. But in addition, they're having trouble getting labor. And for those kinds of drinks, they're much more time intensive than a straight-up cup

of coffee. I don't know about you, but you're in line behind five people ordering these foo-food drinks. It's very frustrating as it takes forever. And so I think that's a bit challenging. And that's why they, you know, at their analyst day, they pulled back on their expansion plans. And so, you know, with the growth numbers coming down relative to when they went public, I can understand why J.P. Morgan would have downrated them.

But more importantly, this is also a space where there are not very large barriers to entry. When Starbucks first came out, it was novel, like a good cup of coffee and into a nice cafe, and you're willing to pay a little bit more. But now sort of everybody in their uncle can open a nice, higher-end coffee shop. So I think it's a bit more challenging in this area right now to sort of maintain a moat, to be able to continue to charge high enough prices and get enough foot traffic that, you know, you're going to be able to expand over time. It's just a bit more of a challenging space.

I just learned, by the way, the difference between cold brew and iced coffee. It's very interesting. All right, final name. My favorite name to pronounce, Pinduoduo, Chinese tech company. Yeah, I mean, it's clearly one of the main players in e-commerce in China. There's a battle going on in e-commerce, right?

There are a lot more players there than, say, in the U.S., where Amazon really is dominant. So, you know, that's going to constrain them a little bit. They don't have their own logistics, and so they rely on others for that. But, you know, they're tied up with 10 cents and their payment system, and, you know, that's a source of revenue for them. I think more broadly, though,

when you look at China Tech, what we're seeing and what moved a lot of the stocks today, is China clearly signaling that they're going to ease up a little bit on all these regulatory constraints that have really hurt the tech industry in China. So we prefer some other names in the space. We like Baidu, we like Tencent. You look at Baidu, for example, not only do they have the search engine and the advertising, but they have the cloud business. And we're still seeing an awful lot of growth in the cloud expansion,

which I think will really help a company like that. Plus, we see China, the government really has an incentive to take off all of these restraints because they have 10.76 new graduates in China that have to get jobs. And they really need growth to come back in order for those folks to find jobs. So we can see this moving in a positive direction for China Tech. Got to leave it there. Joanne Feeney, thank you very much. We'll have you back soon.

Appreciate it. So what's the difference between cold brew and ice? Ice coffee is just sort of coffee on ice. Cold brew is steeped. Cold water steeped in double the amount of grounds for many hours. And then it is filtered so that the grounds don't go. That's why it has so much more caffeine. I am staying away from it.

Makes me dizzy. Up next, a deal in the sports world breaking records. We have the details next. The biggest price ever paid for a North American sports team. Dominic Choo joins us more with more. on the sale of the Broncos. Broncos. I mean, so this was, it is the Walton.

So it's a markup, right? I mean, you're talking about confirmation now of this deal. $4.7 billion, or just shy of that. Record price for an American sports franchise, more than twice as much as was paid for the last record NFL franchise, which was the Carolina Panthers purchased by hedge fund billionaire David Tepper back in 2019 for about $2.3 billion. So the folks purchasing the Broncos arguably more well-known. It's the Walton family behind Walmart.

Rob Walton, his daughter, Carrie Walton Penner, her husband, Greg Penner, and of course, Melody Hobson, current Starbucks chair. A lot of moving parts here, but yes, they still need approval from a lot of owners and the NFL itself. But boy, if you are a tepper, you're feeling good today because your 2.3 billion looks a lot more money. Just imagine what Jerry Jones and the Cowboys are feeling right now. True, true. Dom, thank you. Thanks everybody for watching PowerLy.