Power Lunch - Crude Oil, Natural Gas Futures Remain Elevated 3/19/26

Episode Date: March 19, 2026

API President and CEO Mike Sommers joins to discuss the energy outlook. Noted investor Kyle Bass gives his market take during the global uncertainty.   And CBOE's JJ Kinahan breaks down the CBOE's move into prediction markets.   Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks and your money lower as energy prices around the world move higher. Welcome to Power Lunch, everybody with Kelly. I am Brian. All three major averages, they are in the red. Not a huge drop, but with the move, the S&P 500 trading below. It's 200-day moving average for the first time since last May. And welcome back, Brian, by the way. Think your interviews had something to do with the move in oil price over the last several days.

One of the biggest individual laggards of the day is Micron, although it's off the session lows. after investors are apparently doing some profit taking when the chipmaker posted that blockbuster second quarter result last night. And speaking of big bets, the Simo is perhaps best known for its Chicago Exchange and Trading Platforms. Now it's waiting into the prediction markets. We're going to get a look at their new offerings what it means for that whole landscape.

All right, and that is where we begin, the global energy supply and price shock as the Iran War drags on. And there was a very important meeting in Washington, D.C. that just wrapped. That meeting included Vice President J.D. Vance, Energy Secretary Christopher Wright, Interior Secretary Doug Bergam, as well as several governors and others, and they all met with a number of oil executives at the American Petroleum Institute. One thing that was top of mind, the floated idea about a possible ban on oil exports, which the American oil industry, shall we say, is not a fan of, and says that could make prices actually go higher. so it is not likely to happen. Let's talk about that and more and other critical issues from that high-level meeting in a first on CNBC interview, Mike Summers, president and CEO of API.

A lot to discuss, Mike. First things first, that idea, the ban on oil exports. Is it over? Off the table? Well, fortunately, we had both Secretary Wright and Secretary Bergam with the American Petroleum Institute today, and they positively affirmed that an oil export ban is not on the table. In fact, I just saw that they actually publicly announced that as well. And that's good news. This was a long fought battle in 2015 when we finally were able to export crude oil from our country to other countries all over the world. The result of that has been increased oil production

in the United States. We've seen about a two million barrel a day increase as a consequence of being able to find new markets for American crude oil. The last thing we should be doing now during a time of energy crisis is to restrict those exports because they provide energy security, not just for American consumers, but for the world as well. Okay, so that down, let's move on the longer issue. Let's all hope that the war has a speedier end. I think one of the themes that will ultimately come out of this, Mike, is what does it mean for change in the American oil and gas industry? Was there conversation in that room today about the American producer's ability to go above and beyond these already record

numbers. Can we truly become fully energy independent? That was one of the topics of conversation that we had today. The vice president in particular emphasized, I think appropriately, the importance of us not being dependent on the straight of Hormuz during times of energy crisis. We need this country and we need other countries all over the globe to be focused on energy independence for themselves. Because during times of energy crisis like this, we don't want to be held hostage by the Strait of Hormuz and an Iranian regime, which is why it was so important for the president to take this action. Because if you think energy supplies are tight today, imagine if Iran had a nuclear weapon. So what the president did absolutely was the right thing to do.

but we need to work with our allies and with American producers now to continue to produce to supply a very tight market. Here's the good news. You already are seeing American producers do it. You saw just yesterday there was a lease sale in Alaska that had record numbers of applications, and we're going to see production come online in Alaska. It's going to take a few years, of course, but I think that's a recognition that the marketplace is showing that we're going to need a lot more oil and gas.

deep into the future, and American producers are ready to step up. So, Mike, that said, as we learn more about the oil markets, some of us didn't want to. We were fine with, you know, 289 oil or whatever. It turns out the Brent price has a lot of influence on what we're paying at the pump. So while it's reassuring on some level that WTI is lower, and last hour we just heard part of that is because of these rumors about export controls that you're saying are not going to happen, so maybe it goes higher now. Regardless that Brent at 109 or 119 is still going to push up prices at the pump.

What do we do about that? We should absolutely be concerned about that. The one thing that we need to do is get the Strait of Hormuz opened. And one thing that I learned from Secretary Wright, Bergam, and the Vice President today was that they're focused on that. That is the top priority right now, now that they've disabled the Iranian regime. We need to get the straight open. There's just no substitute right now for getting the straight open.

The president and his team already have worked very very very important. have worked very hard to do some things like getting 400 million barrels out of strategic petroleum reserves all over the country, all over the world. That was an important step. They put in place Jones Act waivers so that we can move product within our shores. They've also made sure that they're looking at other items as well to ensure that we have all of these things in place in case this issue prolongs for some time longer. How much of a conversation was there around that Jones Act?

I don't want to go too deep in a 1920s era maritime law. 60-day pause on that. But let's be clear, we've got a lot of viewers right now in California. They're paying $5.50, 6 bucks a gallon, in part because, well, there's a lot of reasons. One of which is they got to import gasoline and oil from places like the Bahamas because they can't ship it from Houston because the Jones Act. Was there any conversation that maybe that gets, that 60-day pause turns into a lifetime pause? maybe this is a law that has seen its time pass. Well, you've put the nail on the head here.

I think the concern in California is less about the Jones Act, actually, and more about the fact that they are so dependent on crude oil from all over the world. In the United States, only about 9% of the crude oil that we use is from the Persian Gulf. But in California, it's close to 30%. And that makes no sense. When you have abundant oil and gas resources here in the United States, And that should be our focus. Production here in the United States,

not just on federal lands and on private lands in the United States, but also the very rich crude oil that we find off the coast of California. So, Mike, where do we go from here in terms of, again, you could say that even the administration jawboning about options is keeping WTI prices down. That's probably a good thing. But if you're saying that all the policy options remaining are not good options, Does that mean the other options are off the table?

The WTI price could go higher again. I mean, are there any other solutions here? I think their focus is appropriately on getting the straight-of-hormuz open as quickly as possible. We're going to do everything that we can to continue to produce here in the United States. We're bidding on leases, not just in Alaska, but in the Gulf of America and in other places as well, so that we can increase production in the United States over time. but in the short term, the thing that has to be the focus is getting the straight of Hormuz open as quickly as possible. The optimism around that, Mike, what was the level? I mean, because it's not up to us.

There are people firing drones and RPGs and a lot of that oil is going to China. Well, and when you hear people talking about how boots on the ground might be needed on the Iranian coast, and I don't hear the administration pushing back that hard against those reports. Well, I do think that that is their focus right now. We support what the administration is doing. I have a lot of faith in American war fighters. And we're hopeful that this gets over in the next couple of weeks, and we can get back to transporting the oil through the strait of Hormuz.

And it's not just oil, it's fertilizer, it's potable water. It's everything that we need to make sure that these markets are well supplied. It has to be the top priority. I know it is the president. All right, Mike Summers, API, leading that meeting today, a big one. Mike, thank you very much. All right. Speaking of Interior Secretary, Doug Bergam, we're going to be speaking with him on Monday live from the Sierra Week Conference in Houston, Texas, right here on Power Lunch, him and a number of other big guests. What an event that's going to be.

Sticking with energy, let's bring someone who closely follows oil and natural gas into the conversation. Paul Sanky, the lead analyst at Sanky Research. Paul, how are you going to be thinking about this? If Mike Summers says, this is all about reopening the straight of Hormuz, is that the way that you're thinking about it as well? Well, obviously, yes, but I mean, it's a total catastrophe. And you have to remember that this is a – the tankers are a floating pipeline. So we haven't actually seen the impact of, you know, these tankers that basically go at 15 miles an hour from Qatar to Taiwan. You know, we still haven't seen the impact of the actual physical shortages.

Obviously, we're looking at a situation where prices are going crazy. I don't see, you know, strategic petroleum reserves. It's a solution to the biggest oil outage. in world history, not to mention, as you will know, both of you, you know, all the other, you know, helium, sulfur, urea, all those other items now, it's going to be a matter of actual shortages, I'm afraid to say. Yeah, and is there an more optimistic view that we could take about this, one that says the market's already priced in worst case scenarios?

And to quote Fred Kemp last hour, he said at some point he thinks Iran is going to be so weekend, they're going to have to come with some kind of, I don't want to call it resolution here, but you know what I mean? Well, that's why I was stunned by reported comments from the Treasury Secretary that they might, that they'll allow Iranian oil exports to continue because, you know, you broke it, you own it, and you can't start allowing the Iranians to then export oil in order to make money. I think, you know, one of the thoughts is the Marine Expeditionary Unit may take the Karg Island.

But, you know, it's a series of very depressing potential outcomes here. One of them is, you know, maybe you engender a civil war within Iran because you have two million standing forces, more or less within Iran. That's why you can't totally invade. One thing that people miss actually is that Kuzestan, formerly known as Arabistan, is actually where the Iranian oil production comes from. That's actually not Shia. And we haven't heard much about that, but of course it's right next to Kaga Island.

And, you know, I think that, you know, maybe there's a military option. But we know that all the outcomes here involve just a blaze of drones and other, you know, military attacks. That unfortunately, and this is what really worries me, is that the situation is more or less escalating in terms of energy attacks. We've heard this morning that the Haifa refined me in Israel is on fire from an Iranian attack. I mean, you know, this is a catastrophe. Let's talk about natural gas. I know you're a long time gas analyst as well, Paul, because it's a little bit more of a complicated story, right? We think oil prices go up, gasoline prices go up here. That's the story. But there's a natural gas facility in Qatar that got hit for the second time.

It's the largest natural gas facility in the world. And the CEO telling Reuters apparently that they may be down 15 to 20 percent for five years. We're talking like, what, four to five percent of natural gas in the world? It doesn't sound like a lot. lot, but when the marginal gas is so important, right, to pricing, how do you see this natural gas hit playing out? Well, I mean, the single biggest price change, obviously, it's been in European natural gas. So, again, it's a total disaster in Europe because you're back to another major gas crisis. The hit that occurred to South Paz in Iran is going to impact Turkey. All of these things have knock on effects, you know, and as I said, it's a floating pines.

that you've cut off, what is it, now 19 days ago, and these things take 30 days to actually deliver. So the prices obviously go absolutely nuts, but what concerns me is that you're going to start to see the physical shortages. So, you know, you're seeing the countries in Asia the most affected, you know, rationing, you know, days of holiday to try and reduce demand, which is the other side of the price equation. But it's awful from an economic point of view. So, you know, I'm, you know, very worried about what's going on here, and I wish we would get a consistent message from the administration, quite frankly. As people pile into the space, the tourists and others, those looking for a profit, those who just believe now that we're going to be in secularly higher energy prices. Is there anything that you, as the person who's been in this space and maybe in these trades, would say about, you know, caution and just kind of blindly piling in here?

Well, it's the demand side. I mean, we can all see, obviously, that, you know, a US LNG export for a VG or, you know, a U.S. refiner is going to do well from this situation. Obviously, we've got extraordinary refining margins at the moment, $80 a barrel for distillate. I remember when we hit $40 a barrel with the export ban on crude, as was under Obama, you know, to have $80 a barrel of refining margin, it's just extraordinary. But you have to assume there's going to be a demand impact. Having said that, you know, my biggest concern at the moment, Taiwan, I was looking at the comments of the Nvidia CEO committing to Taiwan for the long term. But it's like this is not going to be good for Taiwan.

Now it will just affect margins, which are huge in terms of chipmaking. But as you know, there's a helium issue here. There's a lot of unfortunate, really bad economic outcomes here that are almost guaranteed at this point. And we've got a situation that's arguably deteriorating. So I hate to be, you know, dressed as the Grim Reaper, although I'm not. But, you know, it's a bad situation. And it's one that takes weeks to play through. These tankers travel at 15 miles an hour.

So it's the equivalent in Qatar of sending a runner to Taiwan. You know, it takes 40 days. We're halfway through that process, and we're not seeing a solution at the moment. You definitely don't look like the Grin Reaper. If you're listening on the radio, Paul's wearing all white. You actually look like his nicer cousin. Many of the refiners, PBF, Par Pacific, Delic, Valero, they're up 49 to 75%. They've already had that run.

Is this, just to wrap it up, is the natural gas issue in Qatar in that region? Is that necessarily bullish then for venture global, for Chenier, for EQT, for expand energy? Yeah, it is. I mean, I hate to use the word bullish because I'm so upset by the situation here. I mean, I'm thinking about what's going on in the Middle East. It's appalling. You know, we just had a call with Israel, and it's, you know, now the attacks are at night, but it's a very disconcerted situation.

We do have the potential for regime change. For example, in Israel, they have elections in November. Obviously, we've got the midterms, and that might be the regime change that we get out of this. For the U.S., as you know, natural gas prices are very low, very abundant natural gas. Our systems are all working. I just would ask the administration not. to get involved in free markets at this point. And as the previous guest was saying,

sorts out the straight support moves. It's a matter of immediate urgency. Don't want to make it worse. I know what you're saying, but they're going to probably get desperate here soon. Paul, thanks very much. Thank you. Paul Sanky.

Yeah, and by the way, like we said, we kind of gave a small tease earlier. On Monday and Tuesday, we're going to be live at the Serra Week conference in Houston with a pretty amazing lineup of, utilities, gas, oil producers, renewables. Peter Orszag of Lazzard will join us as well. GE Vernova.

It's all AI. You know, I always say, Kelly, AI is not, it's a software story, it's a hardware story, it's a Nvidia story, but it's really an energy story. It's an energy story. Absolutely. And that probably would have been the whole thing about this conference if we didn't now have an energy story of a very different kind. After the break, stocks are lower.

Yes, energy prices are higher as the fumes from the Iran War hit the markets and your money. We'll ask noted investor Kyle Bass for his strategy on how to navigate all these conditions and power lunch returns. Let's get a check on the markets which are selling off as oil prices remain high and rising. WTI crude is down slightly now, but it was over $100 a barrel earlier after those Iranian attacks on energy infrastructure in Qatar. Talk more about how to invest amid all this. Let's bring in one of our favorite power players. Kyle Bass, founder and chief investment officer at Hayman Capital Management. Kyle, it's great to see you. You don't need a preamble from us. What are you following in terms of the recent developments?

And our last guest just brought up Taiwan as well. And he's thinking through the geopolitics of all this. Yeah, I mean, first of all, glad to be here, Kelly. I think that, you know, China's watching this very carefully. She has told us since 2017 that he's going to take Taiwan by force if necessary. And, you know, what I'm following is, believe it or not, the defense supplemental bill going through Congress and the fact that, you know, we need to spend, you know, at least 50 billion. on precision munitions, and that's got to happen soon. And so we just need to replenish our stockpiles

of both legacy weapon systems and we need to create new weapons stockpiles. So that's what all of this means to me when you look at the global tension and what's going on, Italy East and continental Europe. I'm glad you brought that up. And maybe you can give us some bigger picture context in all this. You know, the bill is going to be high. One of the things people talk about in the 90s when we were able to kind of turn deficits into surpluses is that we had the peace dividend from the fall of the Berlin Wall. We kind of have the opposite of that going on right now. So our interest costs have exploded. Our defense costs need to go higher, it sounds like. We already have a lot more debt than we did back then. We already have big deficits.

I guess this would explain why the, I mean, if anything, it's surprising that we're at 430 and not higher. Yeah. I mean, Kelly, you just laid out a perfect case. something that I talk about behind the scenes with, you know, other sovereigns and our investors is this is the largest peacetime accumulation of debt in world history. Typically, when economies like China's or Japan's or ours, when we get to 300% total debt to GDP, not just sovereign, but including corporate debt, that is a big warning sign. And that's typically two sides' deficit spending going into a major war. And historically, to the victor go the spoils and to the loser goes defeat and to fall. This is, it is unprecedented,

the debt levels that we speak of. And there is no doubt in my mind that over the next decade, we're going to see defense spending as a percentage of GDP go from roughly right now, little over 3% in the U.S. and Europe collectively got to 2% last year to mean it's NATO pledges, although there were a few countries in Europe that didn't get there, just collectively they did. I think you're going to see, I think you're going to see the spending go from three to five to six percent of GDP, which means deficits are going to widen, which means that Fed's balance sheet's going to have to grow again. And we're going to have a larger gap between the haves and the have-nots. And it sets the stage for more conflict, not less conflict, around the world and also internally. You know, it just, it starts to tear at the social fabric of everything.

And that's the insidious nature of the inflation that we helped create post-GFC and then really accelerated that once COVID propagated from China to the rest of the world. How do we, Kyle, how do we think about Europe as an investment? I hate to be so, you know, talk about investments or whatever. That's, we're CNBC. So that's kind of what we do. Europe has had a better run than America in terms of dollar-based returns. But, as you know, I just got back from Europe yesterday.

My flight was mostly empty on the way home. I talked to cab drivers, Uber drivers. I asked them, they're all costs, energy costs, eating into everything that they do. And it was before the war. By the way, they already had this. Europe then restimulated, right? The Germans arming up again. Whatever you think about it, it helped their markets.

How do we view Europe as an investment? Do we look at it like, okay, they're going to have to add to the deficit and stimulate, therefore it's a good thing? or they're in big, big trouble. Yeah. The way you think about Europe, Brian, is it's the retirement community for the world. You go earn your money in the U.S.,

you earn a living, you develop a life, and then you go spend it in Europe. Europe has so many problems, and they've got, now they have an energy dependence problem where, you know, what's gas, LNG is costing them now $60 an M, where it costs us three here. You're going to have to, Europe's going to have to spend more on defense. So European defense names vis-a-vis the rest of Europe,

they're going to do much better. The only reason Europe's doing great in dollar terms over the last 12 months is we introduced tariffs, right? And our effective tariff rate around the world was roughly 16 percent. And the dollar declined by about 10 percent. So that was something that we knew going in, but we were trying to simply reset the largest trade deficit in the world because we have the world. its hegemonic reserve currency. So going forward, I don't expect the dollar to depreciate vis-a-vis the euro or any of the other developed nations currencies. So that kind of trade is over. So if you're thinking about investing in Europe, I would invest in European defense. If you have to. If you don't, I would leave. I would keep all your money in the U.S.

And they are. I mean, there was an interview recently, and I think it was the journal. It might have been Reuters. Kelly helped me out if you know, but it was with the head of Norges Bank, the giant Norwegian investment fund, one of the most powerful investors in the world. And he was saying that their percentage of investments in America as equities had like doubled in a couple of years. Like they're basically a European company that's slowing its investment in their own continent and buying more U.S. equities. And I wonder how much of that feeling is occurring elsewhere as well. At the Europeans, well, it's a lovely continent. To your point, it's nice to visit, from a investment perspective, they're going to look here where gas, gasoline is five bucks a gallon, but it's not 10.

I mean, look, I drove to the ranch yesterday. I paid $3.59 a gallon for premium on leaded. So, you know, whether you're in California paying $5.50 because of bad policy or you are in Europe and you're paying $60 an M for LNG, You know, Europe, Gerhard Schroeder sold Europe's soul to Russia in 2005, and the rest of Europe kind of followed in. It was unbelievable to see them doubling down on the instant replay. The fact that the Germans, you know, continued to turn off their nukes, even after that war began, goes to show you that the institutional rot, a thought process of the Europeans hasn't changed. It's got to change. They have to realize that they need to do things where they're also developing hydrocarbon.

a reserve so that they can be more self-sufficient and they need to invest more in nuclear. We need to do the same things. But now we're the hydrocarbon capital of the world. Thank God we're in the right spot. But I think when you think about Europe writ large, Brian, in the last 20 years, Europe has grown its GDP collectively, the EU 27, about 20%. The U.S. in the last 20 years has grown 100%. It is, it is without a doubt, the pro-business, pro-entrepreneur, best place to be in the world is the U.S. And if Europe would just change its mind, if it would just understand the way the world's going to work for the next 10 years, they could get out of their own way. But so far, they can't get out of their own way. They finally realized that they need to get to 2% of GDP spending

on defense three years into the ground war in Europe. It's unbelievable to me that they didn't get there immediately when that war began. But it's just the entrenched psychology of the Europeans. It's just a financial capacity problem. And that just, we were just talking to Nancy Tangler last hour and this reversal now where she said she always viewed Europe as more than a trade than an investment. And that's, you know, so people are changing minds. By the way, Kyle, thank you, Kyle Bass of Hayman Capital Management. The head of the Norges Bank was talking to CNBC when he made those comments. So for King and Country, folks. There you go. I got to say my flight back from Europe yesterday was really empty.

And I fly all the time and almost every plane I fly on everywhere in the world is full or almost full. I was shocked and when I got to Newark for customs because I was coming in from Europe, it was also empty. Strange. And I just, maybe it's a one-off. I'm not making a pronouncement on an anecdote, but it was something. All I know is they're also doing financial deregulation. So that's something. There is something happening to keep an eye on when it comes to Europe. It is beautiful, though.

Beautiful. I mean, just the Sen. Yeah. Everyone's retiring to Portugal now. Yes, they are. All right, let's check in on so the biggest movers. One of them, by the way, goes right to what we're talking about. That is natural gas.

That is EQT. That stock is up about 3%. Going the other way was the name we talked about a lot last night, Micron. That's down 3%. Why do we bring these both up? Because your trader is going to talk to you about it in power check. next. Welcome back with stocks chopping around near session lows. Let's get a power check on some

key companies with Michael Lansberg of Lansberg Bennett Private Wealth. So great to have you here on set with us. We'll try to rip through this. There's a lot to talk about. But we'll start with EQT. In a Nat Gas name, we're just talking about prices. Our price level obviously is lower. This stock is up 3% today. What do you do here? EQT is a great, great name. We love it. Lowest cost provider in the region for Nat Gas. and that gas is really going to be what we're looking at for AI for powering. Everyone talks about nuclear. Nuclear is a few years away. Nat gas is here today. Stock is cheap. We own it. We continue to own it.

Any kind of additional thought because of the complexity about the Iran war, or is it just own it and don't worry about it? I think you own it and don't worry about it. I think actually the whole issue with Iran actually makes it more compelling to own something that we already have and we have complete control of. We own the Nat gas market in the world. It makes sense to invest in it. And they're in the right location. Virginia is actually the center of the universe for AI data centers. 70% of the stuff goes right through there. We're not going to overly dwell on it, but I just want to mention it so our audience knows.

Next Terra is another name you really like NEE, your longstanding favorite utility. So there's another kind of energy play for you. But I also want to talk Micron, because they reported last night incredible, incredible, Michael Jordan quarter, I sell like Dan, but it really was. Maybe a bomb out of bio is the reference now. You own it. It is selling off of 3 or 4% today. What do you do with it?

You'd be buying it here. I mean, realistically, they may. a product, that memory that you can't get really anywhere. The other day, the NVIDIA CEO said, you know, we're going to pound memory. You know, the new chips are going to be memory. S.K. Heinex, the other player in the space, one of the two, said, we're going to be basically at a deficit until 2030. So they've got a product that everybody wants that you can't get.

You can't really get AI to move as fast as you want it to without memory. And it trades like a commodity. It's traded 13 times. It trades at half the value or half the P.E. That's crazy. You have to own that. And you've still got NVIDIA in the portfolio. Is that your top holding?

It's a top holding, yes, still is number one. Apple, Microsoft. I mean, you're with the MagS7, basically. I am, but I have Nextera's 7. I have some other things that are there. We're underweight Mag 7 versus the S&P. We have been for a while. Just because they've done so well, I think you've got to look at the other 493.

Yeah. Because that's where the growth is going to happen. But you have to own Nvidia. You have to own some of those. You've got JP Morgan, Eli Lilly, like you said, Visa as well. Michael, thanks. We'll leave it there for now. Appreciate it.

I'd see you. Michael Landsberg. Let's get to the CNBC News Update now. I'm McKenzie Segalos. Hi, McKenzie. Hey, Kelly. I'm Vecenzie Scalos with your CNBC News Update. California lawmakers are introducing a bill to rename Caesar Chavez Day as Farm Workers Day

in light of a bombshell New York Times investigation into sexual abuse allegations against the Latino activist. The reaction follows similar moves from Texas, Arizona, and Los Angeles to end celebrations of Chavez on his birthday coming up on March 31st. The Chinese CEO of the router maker TP Link has applied for permanent residency through a Trump gold card. That's according to Bloomberg. Gold card applicants must give a $1 million

unrestricted gift to the Commerce Department in exchange for a visa. TP Link is currently the subject of a commerce investigation over concerns that its connection to China may pose a national security risk. And the National Highway Traffic Safety Administration is escalating its investigation into Tesla's full self-driving systems. The probe alleges that Tesla's FSD sometimes fails to detect or warn the driver in poor visibility conditions. The agency is now opening an engineering analysis, which is a step before it can seek a recall. Back to you guys.

The prediction markets craze across the investing world continues, and now CBO Global Markets is getting in on the action. The firm recently announcing plans to launch a prediction market framework that allows traders take positions on market outcomes beyond the traditional binary payout, i.e. yes or no, right or wrong, one or the other, whatever. that would enable customers to earn partial payouts, even if the results are not exactly correct. How does this all work? Let's talk about that and more in the state of the retail investor with one of our favorites, JJ Kinan, senior VP of retail expansion, alternative investment products at the CBO, formerly known as these Chicago Board Options Exchange. There's a lot here.

Okay. So in a traditional prediction market, Kelly's favorite, I know, could be like, will it be, you know, will the bears score more than 29.5 points of the game? You vote yes. Or yet, well, I was going to say no. Northwest Indiana Bears. You vote no or you vote yes. You're right or wrong binary outcome. You're trying to solve it where there's some middle ground. How does this work? Absolutely. So we are going to have, so we're going to start with the S&P 500 SPX. And so what we're going to do is a traditional yes or no, but we're going to use the XSP, one-tenth the size of the SPX. Why? It's then. a very retail friendly product, everything settles to $100. You can go yes, no. Easy math. Easy math. You know, we're trading just over $6,500 right now.

So that would be $650 any XSP. Yes, no, makes sense. But what we're trying to do, Brian, as you know, I've spent my entire career in the options market. And so we see people trading options. And one of the basics of options is you don't have to be exactly right. Try and be directionally right. And you can make some money.

So rather than saying, I'm just $6,500. or in this case, as I said, $6.50, yes or no. What if we provided a mechanism where you could buy this $6.49, $6.50. So you still think we're going to be above $6.50, but we'll say for ease of math, $50 on that, $0.50, however you want to say that. And we close at $6.49.99. In the traditional prediction market, nothing. Here, you'd be $0.50. I guess I think one of the strengths, and we have a data partnership with CalCHA, but one of the strengths of the prediction markets is their simplicity, right?

It's like, is it going to be over 70 degrees in New York on Wednesday? We know the answer's going to be no because it hasn't been over 70 degrees in about eight months. Anyway, this, how do you maintain that level of simplicity, right? Enough to bring in more people,

but also solve some of the things that the traditional prediction markets don't do that. It's a great question. So what we're doing on this, We're going to have the yes, no. And then so we're going to, I want to call it yes, no, maybe so. I thought that would be kind of funny. But we're going to call it the plus.

And what you can do in the plus market is you just see a market for $0.6.50, maybe $0.52. Okay? So you're still trading it the way you know with a very tight market. And what that allows people to do, they're trading vertical spreads. And when you say vertical spread, people's eyes roll up in their head. when you say here's a plus market, which allows you to have a payout zone that isn't the exact payout zone, people are like, oh, this is really interesting. We want you to focus on the outcome. And the outcome here is you'd like us to be near 650.

Maybe you don't have to be exactly there. We're giving you the basics of options trading. And the retail firms, and you know, I spend a lot of time on the retail side of the business, the retail firms like this because we're teaching people how to start trading. one of the very basic blocks of options trading. We're going to put a ton of education around this. So as people trade it, they start to realize what they're doing. We're going to make these clients stickier long term because in vertical spreads, it's also hard to get killed trading them.

I think it's obviously like everyone, now that they're in this game, it's like you all got it. But I don't know how you differentiate it in the long run. How should we be thinking about this? Like, who is the retail person going to go? Because I don't do a lot of the prediction market. I don't even know if we can. I guess we can if it's about, but anyway. Do it and find out.

I don't really want it. I'm all about the sebo, Kelly. There you go. June 1st. I love it, Sally. Well, people go to the cheapest option? Will they go where they think they have the best payout outs? Like, what would differentiate?

Well, people may go different places. What I think is going to differentiate us, we're going to be on the security side. Almost everybody else is on the future side of the business. We're on the security side of the business. And so with that, people don't have to get futures approval. And most people who have options approvals at all can do that in their regular retail trading. So you're only doing financial markets-related. We're not doing sports.

We're not doing pop culture. We believe that you should, for a few reasons. We believe that things that affect the markets is where we want to be. That's how we've built our name. There's some regulatory clarity that probably, in our eyes, at least, has to come to make us want to be on the sports side of the business. So things that affect the market every day that you guys report on, you know, that's where we 100% want to be. And that's what you got. There's something in the Chicago water.

Now, I'm married to Chicago. My wife is a great woman. She's from downtown Chicago, Ogden Elementary School. She's really downtown. She's really downtown. I was like, what suburb? I'm like, no, no, an apartment. So there's something in the river, the water that makes you guys really good at this kind of stuff.

How big do you want this to be? Kind of to Kelly's point. Maybe you're not going to break news. But like you said the regulatory scheme, would you get into sports if it was allowable? I think if we had very clear regulatory guidance on this, we'd certainly have to consider it because that's where a lot of the money is at at the moment, 100%. And you look at, you know, if I was joking with somebody earlier today, if you watch a football game with a college-age guy,

you know, besides the fact he's probably eating like he's going to the electric chair at the end of the game, they really do have something in this younger generation where they do like to better. They do. But with that, what we want to do. And again, what the spread concept is doing, How many times have you heard people come in and criticize younger people for wanting to do near-term stuff, for saying they're not investing? So two things about this, and it's why I'm really passionate about the spread element.

We're trying to teach them and say, listen, this is what you're comfortable, shorter-term payouts. Well, let's think about shorter-term while you're learning how to trade the proper way, doing things like vertical spreads. Not we think you're wrong. Welcome to the markets. How can we help you? Let us give you a product that helps educate you. They're so nice in the Midwest. create long-term investors. But that's the future of our business, is making sure, and when people

criticize, a lot of these people have 401ks or IRAs or whatever it may be, so good for them. But they should start learning, in my opinion, how to invest in a way that they can apply to any instrument they want that trades options, and in a way that their payoff in terms of the amount they risk starts to make a lot more sense. Very interesting. How many wins will the Northwest Indiana of Chicago Bears have next year? I'm killing you. I'm just... killing me, but I'd be over 10. How's that? I'll take that. Don. You know what? Nine and a half. We're on the record. I got a hamburger bet with you. I was going to say you can't keep. We got a cheeseburger bet with

Santelli. Sanelli. See, they bet. Well, let's go deep dish pizza. Nine and a half. Lumana. Lumal Nottis. Done. Lou Malnottis, nine and a half. Okay. Done. All right. JJ, thank you. That's why I like coming. Jay Jada. Kinaan. Sebo, senior vice president. Speaking of Chicago, let's get to the bond report. Key Central Banks are talking concern about oil prices in the U.S., the two-year yield touched 395 in early trading. We're 10 basis points below that right now. And while we do, and it's still a 10 basis point increase. While we debate the path of rate cuts here, it's a different picture in the UK.

Their two-year yield jumped 33 basis points to their highest level in 14 months. As the Bank of England warns, they might have to actually tackle inflation with some rate moves. Markets imply at least two-quarter point increases there now by year end. That's all having an impact back here as well. All right. Still ahead. If the market, The market downturn recently has you a little bit worried. Don't worry because your market navigator has a few investment ideas he thinks are sell-off, safe. I'm Dominic here with your market navigator on this Thursday afternoon. With all the red arrows on the board today, you may be looking for a possibly safer, less volatile bet for your money.

Our next guest has a couple of ideas for companies that will likely be immune or relatively so from steeper drops. Joining me now for the case is Jed Ellerbrook, portfolio manager over at Argent Capital Management. Jed, maybe start off with one of those stocks that you think could be less volatile and why? Hey, Dominic. Yeah, sure. Progressive Corporation is the second largest auto insurer in America. Of course, auto insurance is a required thing by law if you have a vehicle. So non-discretionary purchase, Progressive is a special company on top of that. They are continually gaining market share in auto insurance. They're growing their policy. about 10% year-over-year while most of their peers are, you know, struggling to stay flat.

And they also earn a very high return on equity. And they take those profits, repurchase shares, pay special dividends, continue to reinvest in their business so they can grow policies and premiums. So we think it's a good business that can grow, but also has really good defensive characteristics when the economy or stock market are struggling. All right. So it's lost a quarter of its value in the last year. Take us through another pick and why. Yeah, and then our second idea is HCA, which is we think America's best hospital chain.

Obviously, hospital services are non-discretionary as well. You don't avoid traveling to a hospital because gas prices are up from last month. And they're a premier operator. They have really high network density, so they're an important part of any in-network policy for insurance companies, and that gives them pricing power. The company earns significant cash flows, which they use to grow their hospital network. make a select acquisition and then also repurchase shares when they're attractively valued. And they've repurchased a lot of shares over the last few years.

And the stock has been a really strong performer for years and years now. All right. So hospitals and car insurance domestically focused. Jed Ellabrook, thank you very much. We'll see you soon. Keep it right here. We got more power lunch after this short break. Tonight, don't miss the premiere of CNBC Cures defying rare disease.

A deeply personal story from one of our own. In a special one-hour documentary, Becky Quick, opens up about her daughter's rare disease and connects with others determined to rewrite the rules of medicine. Again, you can catch that right here on CNBC at 7 p.m. Eastern Time. It's a powerful story because they've been living with it. Her and her husband, Matt, who's our executive producer. Yeah, absolutely. Matt, thanks for all you do. Really appreciate it.

And juggling a few things and the stories of other people and the way that they show people in the biotech world stepping up is really amazing. We're all human beings. Thanks for watching. Power Lunch, everybody. Closing bell starts right now.