Power Lunch - Power Lunch 10/10/23

Episode Date: October 10, 2023

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. 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, everybody. Alongside Kelly Evans, I'm Tyler Mathes. Good afternoon. Busy day at hand here. Coming up, fighting continuing in Israel today. President Biden, expected to speak very shortly to pledge his support for Israel. With the current chaos in Congress, what can the U.S. actually do? What can they appropriate? Absolutely nothing right now. And we are continuing to monitor all the market reaction. Stocks continuing. Yesterday's late afternoon rally, oil giving back some of its gains and bond yield. Kelly are falling. And Tyler, that is supporting stocks. Take a look here where the Dow is up about half a percent, three quarters of a percent for the NASDAQ and the S&Ps up 31 points to 4366. A couple of individual names we're watching are in the hotels and travel and leisure broadly. Take a look at some of these increases. Hyatt hotels is up about 7 percent. It's being added to the S&P mid-cap 400. It always gives a stock a boost because it goes into all those index funds that managers have to buy. Year-to-date up 23 percent. Truist also. higher. The company reportedly in talks to sell its insurance business for $10 billion.

To private equity firm Stonepoint, this comes ahead of earnings season where banks will be a real focused. Truist shares also up about 7.5% tie. All right, Kelly, the human toll in the Middle East continues to rise tragically as the conflict enters its fourth day. President Biden is expected to speak any moment now. So what kind of role about what kind of role the U.S. could play in the conflict moving forward. We'll discuss that now with a panel of experts, joining us as Michael Rubin, Senior Fellow at the American Enterprise Institute. He specializes in Iran, Turkey, and the Middle East, and has lived frequently there. Laura Blumfeld is the senior fellow at the Philip Merrill Center at Johns Hopkins University.

She has previously covered the region for two decades as a reporter at the Washington Post. Mr. Ruman, let me begin with you, because you say something in something you wrote, I guess, for the AEI very recently, that really caused, my eye, and it goes as follows. Israel should be very worried about the Ford's deployment, that is the Gerald Ford aircraft carrier, the nation's largest. Jerusalem should worry that the real reason for the naval president might not be to dissuade Israel's enemies, but rather to dissuade Israel from launching a retaliation that could widen the war. You go on to say that targeted indiscreet U.S. chatter monitored by Iranian or Turkish assets in Gaza, Lebanon, or Turkey-occupied northern Cyprus would be enough to warn Iran of a potential strike and dissuade Israel from following through.

This suggests rather darkly, rather deeply, that the U.S. may not be on Israel's side the way we present ourselves as being. Well, the best thing that the United States could do for Israel is to give them some space. Israelis used to talk about mowing the lawn, degrading Hamas from time to time. but after this last attack, they've got to uproot all the grass. What they can't have is the United States second-guessing them with a 7,000-mile screwdriver, which appears as what's happening. It's not clear what the Ford is doing beyond simply diplomatic and military virtue signaling. The United States might want to help with hostage rescues, but beyond that, Israel has the capabilities itself to do what it needs to do. It just needs to have the United States stand aside.

Laura, do you agree with Michael's premise here? I sense that you agree that Hamas must be ejected from Gaza permanently. But do you agree that perhaps the presence of the Gerald Ford Carrier Group is not what it appears to be? No, I think that the message coming out of the White House is clear. At this point, they're saying no restraint. We're here to rearm you and we'll support you at the U.N. I think that they've got Israel's back, and that's unequivocal. I think that in a word, this is all about deterrence for Israel to deter the northern front opening up,

but also for the U.S. to deter Russia and China. The world is watching. And that ship is sailing. I think it's actually within operational striking distance. It's in Cyprus now. It's not only speaking to Iran. It's speaking to powers beyond who are watching with respect to China and Taiwan. Putin and Ukraine. This is a global crisis.

Michael, you say we can't just mow the lawn in Gaza anymore, but Hamas must be pulled up by root and shaft. How do you do that? And where do those individuals go if they're not killed? Well, you know, there's a precedent for uprooting groups like this. You had Black September in 1970 where Jordan uprooted the PLO and sent them first to Lebanon, and ultimately they were sent onto Tunisia. You had the Khmer Rouge in Cambodia, completely uprooted by the Vietnamese. What's clear is you can't allow Hamas to have a safe haven. It's going to be a multi-week operation. In the past, Hamas and Hezbollah have waited for the international community to force a ceasefire amidst growing civilian casualties. What we can't do is allow for a premature

end to this operation to allow Hamas to survive. Yeah, I think Michael, just to pile on to the point, but isn't there a lot to be said for even if you call it virtue signaling to move the carrier to where it is now? I mean, that's better to do it than not signal it at all, right? Well, I used to teach for the U.S. Navy, and every admiral I talked to said that if you want the Iranians to take you seriously, what you need to do is park an aircraft carrier 400 miles off the Iranian coast. because in that way, you can reach Iran with airplanes, but they can't reach you with small boats. That would be the posture we need if we want the Iranians to take our diplomatic demands seriously. So, Laura, let me turn back to you and talk about one of the other risks that we raised on this program yesterday, and that is the potential for involvement of Hezbollah from the north, largely supported, maybe even wholly owned by Iran in Lebanon.

If Hezbollah enters this battle, they will do so with the full, full support and approval of Iran. Would that leave Israel with any alternative but to strike directly at Iran and not just at Hezbollah in southern Lebanon? Well, absolutely. That's the fear that's kept Israeli defense officials up at night. It wasn't the dumb rock. It's from Gaza. It's the PGMs, the precision guided missiles, raining down on them in a missile blizzard on the north on Israeli civilians. So that's what the United States is doing.

I think it's not virtue signaling. I mean, I think it's military muscle. This is going to be a contest between strategic brilliance of the West and brutality, frankly, of the terrorists. The weapons that Hamas's brothers pioneered, whether it was the truck bomb in Lebanon or the suicide bomber in the 90s, and now we have weaponizing social media, X. When you see John Kirby choking up in tears on the White House lawn because he's devastated by the images he's saying, that's not virtue of signaling. That's commitment in your guts, and I think we're going to see that play out. We're not talking all options on the table, right?

This is pistol poker, and the only option is to win. You're backing up your cards with bullets. I think that's what we're seeing. There's a determination across the brow. Did you see the Secretary of State's forehead? I haven't seen a crunch like that. And there's an intensity in Biden's eyes. You'll see it when he speaks.

I was going to ask exactly that, Michael. What would you like the president to say in this regard? What's at stake here? Well, I agree with Mara that what's at stake is civilization. Israel's on the front line. And when we see the brutality of what Hamas did, there can be no ifs, ands, or buts. They are a terrorist group.

They need to be uprooted. I would like to see the United States give them space to do that. After we saw two statements come out of the State Department, admittedly, they were later withdrawn, calling for ceasefires, calling for all sides to stand down. I'm afraid that the gut reaction of this team isn't as dead set as perhaps we just heard from Mara. What is, Laura, very quickly, the role of Qatar and Turkey in funding the Hamas group in Gaza? Well, they have historically been supporters of Hamas. I think that we have the opportunity, though, to use their connections to Hamas to our advantage.

I mean, we have that back channel. We just negotiated the release of our own hostages through some of those channels. Iran was holding our American prisoners. So let's take advantage of relationships now. It's kind of an all-hand situation. I think the best thing we can do is go big and go home. There's also the political season upon us. presidential race, and that's going to significantly muddy our operational options.

So I think that I think acting quickly and decisively will do us well. So much to talk about here, so little time. We really appreciate your insights today. Michael Rubin, Laura Blumfeld, we will hope to have you back soon. Thank you. Thank you. We've been discussing what U.S. support for Israel will look like, but with the current chaos in Congress, no Speaker of the House, how does that limit the United States ability

to respond. Let's bring in our DC correspondent Emily Wilkins with more. What's the latest, Emily? Good afternoon. Good afternoon, Kelly. Well, Congress is still really in uncharted waters right now. I mean, it was unprecedented for the House to remove a speaker. So right now, there's no speaker in place, which means there's not really an ability for legislation to pass on the floor. And this is something that's really concerning to a lot of Republicans, especially with the situation in Israel. It's put a lot of pressure on the proceedings that are going forward. Last night, House Foreign Affairs Chairman Michael McCall talked to a group of us and he said, look, it is dangerous not to have a speaker in place at this point and it really limits the ability for how Congress can

respond. Every time you project weakness, you invite aggression and we've seen that after Afghanistan. We see it with Russia and Ukraine. We see it with China and Taiwan. And now we're seeing what with Iran and Hamas and Israel. Now if you actually look at the House rules, it basically says that the speaker pro tem, the current acting speaker, that they can't really do anything unless it's to help elect a new speaker. But Republicans have also kind of said, hey, if we need to move, who exactly is going to stop us here? And you heard that this morning from Speaker Pro Tem Patrick McHenry. He told reporters, look, if the government needs to act, we will act on this particular point. But at this point, the White House hasn't sent Congress any sort of request for funding or

materials or different things. And so we don't have that in place yet. At the same point, Republicans are hopeful that they could get a speaker in as soon as tomorrow. They're having a candidate form later today with Congress members Steve Scalise and Jim Jordan. They're the only two members of Congress who have announced that they're running for speaker. And then tomorrow morning, supposedly starting at 9 o'clock, you were going to see Republicans go into a room, shut the doors, and begin a secret ballot on who their candidate for speaker should be. And if they come to a consensus pretty quickly, you could actually see a vote on the House floor for speaker tomorrow. Kelly?

What are you hearing, Emily, on Capitol Hill, about the reaction to the release a couple of weeks ago of some $6 billion in Iranian cash? It was not, it was money that had been sequestered. But many are, as I understand it, many are criticizing it because money, of course, is fungible. That release comes with all kinds of restrictions attached to it. But it at the very least would free up other monies for Iran to to work its mischief wherever the heck it pleases. Tyler, you've definitely seen a number of Republicans point to this $6 billion in funding, raise concerns, criticize the Biden administration. I mean, they've criticized the Biden administration on numerous points when it comes to Israel. And you've heard the White House really push back saying, look, there are lots of restrictions on the $6 billion.

None of it has been touched yet. whether or not this is something that Congress does a deeper dive into really remains to be seen. We certainly have seen some lawmakers who have an interest in looking at it, but I think at this point, first things first, the House has to elect a speaker. The Senate is out of session this week, so they got to come back. I think this might be something we see further down the road, but I think at this point it's really a huge question mark as far as how that money actually is played into what we're seeing right now in Israel. All right, Emily, thank you very much. We appreciate your time today.

Thanks. And the bond markets are getting their first chance to react to the Israel-Homass War. Yield's heading lower for 10-year note around 465. We'll get more from Rick Santelli in a live report shortly. And with global uncertainty rattling markets, we'll talk to a fund manager who's always on the hunt for yield. Our five-star fund week continues next. We're also still awaiting President Biden's remarks on Israel. We'll bring them to you live when they happen over an hour delayed at this point.

I have a lot of questions about how the U.S. will respond to an Israeli offensive into Gaza that's reportedly being prepared. We're back after this. You're on Power Lunch. Welcome back to Power Lunch, everybody. Bond yields lower today as bond markets get their first chance to react to the Israel-Hamas War. Let's bring in Rick Santelli now with more. Yields are lower, but not by all that much, right, Rick? Well, it's a bit deceiving, Tyler, because many of us who were watching the markets yesterday when the cash market was closed were able to interpolate based on futures where,

interest rates would be. And yesterday, most of the trading would have occurred around 5% for a two year and right around 465 to 467 for a 10. So when you look at where those rates are at today, they're in a very similar area, arguably a little bit lower. But the point is, as you look at an intradate chart of 2s, tens, and the dollar index, a couple things should jump out. That we're sharing along the entire curve of all the buying, which is not normal. Usually flight to safety was in more concentrated in short maturities. And the dollar index usually participated, it didn't. And if you open the chart up, and this is really interesting, to early July, Tyler, what you should notice is a two-year note yields very close to its top in July.

But look at a 10. That's the same time reference on the chart. Look how much lower the left side is. And I think that speaks volumes about why the entire curve is sharing some of that buying by nervous investors globally because the moves on the long end have been so large that in addition to flight to safety, there's a mean reversing going on in the minds of many trading the long end. And when it comes to the dollar index, I'm not sure exactly why it's out of vogue right now as a safe harbor currency. It doesn't look like any of the currencies are going wild. But if you consider we were at the highest levels of the year prior to this, it makes a little more sense when you look at that chart starting in November.

All right, Rick, thank you very much. We appreciate it. Now, our five-star fund week continues amid growing geopolitical risk, so we're taking a global focus. Our next hunt, our next guess is on the hunt for dividend-paying stocks in the U.S., but also abroad. Ben Kirby is co-portfolio manager for a pair of five-star Morning Star rated Thornburg funds. His investment income builder fund consistently, one of the top performing in its category, up nearly 15% over the past year. Ben, it's good to have you here. Thanks. Great to be on the show. And this is kind of tough rowing this year when the 100 dividend stocks in the S&P, the biggest

ones are down like 11% year to date. So how do you navigate that? Yeah. So look, I think we're really happy to be a five-star portfolio. You know, it means that our clients have had a great outcome for 20 years in this portfolio. Every year's a little bit different. You know, we are process focused. We're disciplined. We're really building a portfolio with intention and client outcome in minds. So, you know, we have a concentrated portfolio. We're going to do fundamental work. And sometimes the markets in our favor, sometimes it's not.

This year, even though dividend paying stocks overall are down, our portfolio has a mid-single-digit positive return. So we're pretty happy with that as well. Do you, you know, how much of this has to come from dividends? What are your constraints? Can you be in money market funds, for instance? Because that's pretty nice returns right now. Yeah, cash at 5% is certainly more compelling than it's been for a long time.

So we have about 5% or 6% cash today in the portfolio. That's dry powder. So if we do get a pullback, we can definitely invest that opportunistically. But look, we also own a lot of stocks that are paying a 5% dividend and they're growing at 3, 4, 5% or even more sometimes. So to us, those are actually better current investments and better long-term investments as we look out for a longer time period. And again, providing our clients with that growing income stream that's so valuable. Anything you can do to be opportunistic right now where some international markets are selling off facing challenges. I don't know if you worry about, you know, Germany's prospects at this point, for instance,

is that economic outlook continues to grow a little cloudier? Yes. So the dollar is strong. So it makes some sense, we think, to be diversifying internationally. So, you know, buying some of those foreign currencies. Germany is certainly very tied to China and China is slowing. Maybe China gets some stimulus and that would be helpful. But actually, a lot of our big holdings in Europe are in France. France is still performing relatively well as an economy. And a lot of the stocks there are trading at 30, 40 percent discount to similar companies in the U.S.

And their yields are at a 30 or 40 percent premium to those in the U.S. So a lot of value to be found in Europe, especially in France in this portfolio. In your Summit Fund and maybe in the other one, you are by prospectus allowed to go short. How often do you deploy that and do you have many short positions on right now? Yeah, great question. Summit has no shorts today. We had some shorts going into COVID and, you know, those were helpful. But overall, shorting is a tough game because the upside is limited and the downside is unlimited.

So, you know, really we're trying to position the portfolio a bit more defensively today from a duration standpoint, from a beta on the equity standpoint. But we're not going actively short, just trying to have a bit lower beta and position for what we think is going to be a slower economic environment next year. It's an attractive time with high-ield bonds, mortgages 8%, high-ield bonds at 9% to go and lock in those kinds of fixed returns. Is that what you're doing? I mean, you can't guarantee 8% in stocks at all. We're absolutely doing that. So if you can buy a contractual obligation, a bond that has equity-like long-term returns. And by the last 20 years, you know, the stock market's done seven-half, eight percent.

So if you can lock that into a fixed-income investment, great. You should definitely do that. That said, there are some parts of the equity market that are still pre-attractively valued. Some parts have really run. They look pretty expensive. Expectations are high. But there's certainly parts of the equity market that are still interesting. And so, you know, we're about 50-50 stocks and bonds in the Summit Fund. Energy real quickly. You've got a couple of names in that space. Yeah. The energy stocks are inexpensive and they have been for a long time. They're generating a lot of cash flow. Their CAP-X has actually been moderated. So they're able to afford very high

dividends and we think those dividends grow over time. And from a portfolio context, they fit into your portfolio as a hedge. So if we do get further geopolitical instability, one of the transmission mechanisms is going to be higher oil prices, and the energy companies will benefit from that. So for us, we like it for the yield, we like it for the low valuation, and we like it for the portfolio fits in more uncertain geopolitical time. And it's, you know, it's kind of strange being in your seat right now, because on the one hand, you probably want yields to stop declining, but on the other hand, maybe not too much. Ben, we'll leave it there. We really appreciate your time. Ben Kirby joining us from Thornton as the president takes to the podium.

You know, in our moments in this life, I mean this literally, when the pure unaduled evil is unleashed on this world. The people of Israel live through one such moment this weekend. The bloody hands of the terrorist organization Amas, a group who's stated purpose for being, is to kill Jews. This was an act of sheer evil. More than 1,000 civilians slaughtered, not just killed, slaughtered in Israel. Among them, at least 14 American citizens killed.

Parents butchered using their bodies to try to protect their children. Stomach turning reports of babies being killed. Entire family slain. young people massacred while attending a musical festival to celebrate peace. To celebrate peace, women raped, assaulted, paraded as trophies. Families hid their fear for hours and hours desperately trying to keep their children quiet to avoid drawing attention. And thousands of wounded, alive but carrying with them the bullet holes and the shrapnel wounds

and the memory of what they endured. You all know, these traumas never go away. There are still so many families desperately waiting to hear the fate of their loved ones, not knowing if they're alive or dead or hostages. Infants in their mother's arms, grandparents and wheelchairs, Holocaust survivors abducted and held hostage.

Hostages whom Hamas has now threatened to execute in violation of every code of human morality, It's abhorrent. The brutality of Amos, these bloodthirstiness, brings to mind the worst rampages of ISIS. This is terrorism.

But sadly, for the Jewish people, it's not new. This attack is brought to the surface painful memories, and the scars left by a millennia of anti-Semitism and genocide of the Jewish people. So in this moment, we must be crystal clear. We stand with Israel. We stand with Israel. And we will make sure Israel has what it needs to take care of its citizens, defend itself,

and respond to this attack. There's no justification for terrorism. There's no excuse. Hamas does not stand for the Palestinian people's rights. to dignity and self-determination. The state of purposes of the annihilation of the state of Israel on the murder of Jewish people. They use Palestinian civilians as human shields. Moss offers nothing but terror and bloodshed with no regard to who pays the price. The loss of innocent life is heartbreaking.

Like every nation in the world, Israel has the right to respond, indeed has a duty to respond to these vicious attacks. I just got off the phone with a third call with Prime Minister Netanyahu. I told him, the United States' experience with Israel experiencing, our response would be swift, decisive, and overwhelming. We also discussed how democracies like Israel and the United States are stronger and more secure when we act according to the rule of law. Terrorists. Purposely target civilians. kill them.

We uphold the laws of war, the law of war. It matters. There's a difference. Today, Americans across the country are praying for all those families that have been ripped apart. A lot of us know how it feels

that leaves a black hole in your chest when you lose family. Feeling like you're being sucked in, the anger, the pain, the sense of hopelessness. This is what they mean by a human tragedy, an atrocity, on an appalling scale. We're going to continue to stand united, supporting the people of Israel who are suffering

unspeakable losses and opposing the hatred and violence of terrorism. My team has been in near constant communication with our Israeli partners, and partners all across the region and the world from the moment this crisis began. We're surging additional military assistance, including ammunition and interceptors to replenish Iron Dome. We're going to make sure that Israel does not run out of these critical assets to defend its cities and its citizens. My administration has consulted closely with Congress throughout this crisis. When Congress returns, we're going to ask them to take urgent action to fund the national security requirements of our critical partners. This is not about party or politics.

This is about the security of our world, the security of the United States of America. We now know that American citizens are among those being held by Hamas. I've directed my team to share intelligence and deploy additional experts from across the United States government to consult with and advise Israeli counterparts on hostage recovery recovery. hostage recovery efforts.

Because as president, I have no higher priority than the safety of Americans being held hostage around the world. The United States has also enhanced our military force posture in the region to strengthen our deterrence. The Department of Defense has moved the USS J.L.R. Ford Carrier Strike Group to the eastern Mediterranean and bolstered our fighter aircraft presence. And we stand ready to move in additional asset. as needed. Let me say again to any country, any organization, anyone thinking of taking advantage

to this situation, I have one word, don't, don't. Our hearts may be broken, but our resolve is clear. Yesterday I also spoke with the leaders of France, Germany, Italy, and UK to discuss the latest developments with our European allies and coordinate our United Response. This comes on top of days of steady engagement with partners across the region. We're also taking steps at home. In cities across the United States of America, police departments have stepped up, security around centers of Jewish life.

The Department of Homeland Security and the Federal Bureau of Investigation are working closely with state and local law enforcement and Jewish community partners to identify and disrupt any domestic threat that could emerge in connection with these horrific attacks. This is a moment for the United States to come together. together, to grieve with those who are mourning. Let's be real clear. There is no place for hate in America, not against Jews, not against Muslims, not against anybody. We reject, we reject,

what we reject is terrorism. We condemn the indiscriminate evil, just who we've always done. That's what America stands for. You know, just over 50 years ago, I was thinking about this morning talking the Secretary of State, the Vice President, in my office. Over 50 years ago, as a young senator, I visited Israel for the first time as a newly elected senator. And I had a long, long trip meeting with Golda Mayer in her office just before the Amkipur War. And I guess she could see the consternation of my face as she described what was being faced. They were facing. We walked outside in that sort of hallway outside her office to have some photos.

She looked at me all of a sudden and said, would you like to have a photograph? And so I got up and followed her out. We were standing there silent, looking at the press. She could tell, I guess I was concerned. She leaned over and whispered to me. She said, don't worry, Senator Biden. We have a secret rep here in Israel. My word is what she said.

We have no place else to go. We have no place else to go. For 75 years, Israel has stood as the only guarantor of security of Jewish people around the world so that the atrocities of the past could never happen again. And let there be no doubt. The United States has Israel's back. We'll make sure that Jewish and democratic state of Israel

can defend itself, Today, tomorrow, as we always have. It's as simple as that. These atrocities have been sickening. We're with Israel. Let's make no mistake. Thank you. Mr. President, what was your reaction?

All right, President Biden flanked there by Vice President Harris and Secretary of State Blinken, saying, among other things, that the United States has Israel's back. We stand with Israel. that when Congress comes back, there must be action to ensure Israel's security. We stand with Israel against evil, the evil that Hamas represents, and the United States will be ready to replenish ammunition and interceptors, which have been so effectively used for the most part in defending against rocket attacks.

We're rejoined by Michael Rubin, senior fellow at the American Enterprise Institute. Laura Blumfeld is Middle East analyst at Johns Hopkins. University and John Kilduff, his founding partner at Again Capital. Welcome back, everyone. Mr. Rubin, you said earlier that Israel needs the space to do what it needs to do. Do you sense in the remarks that President Biden just made that that space has been given? We will see. Look, as a Republican, I say that was Biden at his best. That was an A-plus. But we need to make sure that we take that sentiment and continue it for the next. several weeks. We also need to have a serious discussion about a change of policy towards Iran,

and with 14 Americans confirmed killed, according to President Biden, we need to extradite Hamas leaders from Qatar and Turkey to have them stand trial in the United States. And if Qatar and Turkey don't agree, then we need to sanction them. Very interesting. As you pointed out, he confirmed 14 Americans killed among those killed in the weekend's hostilities. Laura, your thoughts on President Biden's remarks there. Did he give Israel the kind of space that Michael says is so critical at this very moment? Absolutely. I mean, starting off with the words evil unleashed, invoking, I think, World War II imagery.

And I reached for my, this is my flag from Normandy from the American Cemetery. You know, this is good versus evil. from the extremist point of view, this was their land air and C. D-Day assault on American values. And I think that he called for a swift response and decisive. Yes, between the lines there, he was asking for no siege. Again, when he said we follow the code of law, in other words, do not cut off food and water to two million Palestinian civilians. But let me be clear, he said, Hamas is ISIS. They do not represent the Palestinians who would go to the negotiating table.

They never had a seat at the table, and they were ready to basically poison the meal. Also, his call for national unity, let's remember that many Israelis, when they try to reflect on why this happened, they say it's because we were disunited, we were distracted by political infighting. I think Biden is also saying we would be good to take note of that and pull together in a crisis, because our enemies will take advantage of it. And finally, he was, I would say he's speaking to other countries. He's not only speaking, though, to Iran and their proxies. He's talking to, you know, to Beijing and to Moscow as well,

hands off of Taiwan and hands off of Ukraine or whatever other, you know, what other designs you have. So there's a lot at stake here for the United States. It's not just Israel. America's all in. It's more hawkish, John, I think, than some might have expected. Looking at the market reaction, I would say maybe we're a little bit off the highs, maybe oil still lower on the session.

So not looking for any major moves here that would price in, now a heightened tail risk of bigger conflict, but a notable development nonetheless. Oh, no doubt. And as Michael Rubin referenced and brought in two other countries, Turkey in particular, about extraditing Hamas, folks. I mean, look, the Israeli defense forces have compared this to Pearl Harbor and 9-11 combined. So that's unprecedented. And I think we have yet to see what the unprecedented response. from Israel is going to be. And from a, I hate to do with this, but from a trading perspective, from an oil market perspective,

oil market supply stability perspective, where this goes next from here is what's going to really impact that. And these are just early hours yet in terms of what Israel's unprecedented response, in my view, is going to be. And that's what we all need to gird for. Michael, let me come back to you and pick up on something Laura mentioned. And that was when the president said that to those who might attempt to take it, advantage of this situation. I have one word for you, don't. Who was he talking to?

I agree with what Laura said. I mean, he's talking to Russia. He's talking to China, but he also may be talking to Lebanon, to Iran. There's no shortage of states who are trying to challenge the liberal order, and President Biden is putting them all on notice, and frankly, even U.S. Allies like Turkey and Qatar. All right, folks, thank you very much. We appreciate your time. John Kilduff, always great to see you. Thanks, here coming in the house. Michael Rubin, Laura Blumfeld, Blumenfeld, excuse me, and we thank you as well.

More Power Lunch after we return. Welcome back, everyone, to Power Lunch. The trial of FTX founder Sam Bankman-Fried, continuing in New York today. On the stand is Caroline Ellison, the former CEO of Alameda Research and one-time girlfriend of Sam Bankman-Fried. Let's get to Kate Rune now

to take us inside this very tangled web. Hi, Kate. Hi, Tyler. So Caroline Ellison is on the witness stand as we speak. The prosecution coming out swinging today, asking her, did you commit financial crimes when you were running Sam Beckman Fried's hedge fund Alameda Ellison saying without hesitation? Yes. Then she said, quote, Sam directed me to commit these crimes. She arrived today this morning in a baseball cap. She came in through a side door of the courthouse. When she did go into the courtroom, there was no eye contact. She walked right by Sam Bankman Fried. They both stared straight ahead today. had her look around the packed courtroom to point out Bankman Fried. It actually took her about 30 seconds. She stood up, kind of peeked around. Then she said, oh, there he is. Took a little bit of time there. But Ellison said she met Sam Bankman Fried when she was an intern at Jane Street, then dated him for a couple of years. She was calm today, very matter of factor in all of this. She spoke pretty slowly and deliberately. Ellison was one of the highest ranking executives in Bankman Fried's inner circle also lived with him in the Bahamas. Among the things she said Bankman Fried, about and approved, first a $65 billion line of credit and the ability for Alameda to have billions of dollars worth of customer funds from FTX sent into its bank account. She also said SBF was the one to direct employees to set up some of the systems that allowed all of this. She also said that SBF, as he's also known, directed her to use customer funds to repay loans in the ballpark

of $10 billion and told her to adjust Alameda's balance sheet when sending it over to lenders in a way that made it look less risky. Bankman Fried has pleaded not guilty to seven counts of fraud and conspiracy. Ellison has pleaded guilty to similar charges. We did hear a similar testimony this morning from Gary Wong. He's the co-founder of FTX. He said that Sam Bankman Fried knew about customer money being taken and spent illegally as well.

Back to you guys. All right. There's a rich tale. Thank you very much. Kate Rooney. Tech check is next. We'll be right back. Welcome back, everybody. The Dow up about a half percent right now.

In meantime, check out shares of Amazon up today and higher by 55% so far this year. Today is Prime Day, which puts the focus back on Amazon's e-commerce roots, but that business has lately been facing some serious competition from China. Let's bring in Deer Doeboza for today's tech check. Hi, Dee. Tyler, thank you. And I've got a special guest with me today, Ben Harburg of MSA Capital.

He's usually based in Beijing, but he's with us at one market in San Francisco today. Welcome. So talk a little bit about the Timo effect. And Timo is this Chinese retailer owned by Pinduoduo, and there's been worries, rising anxiety, that it's going to displace everyone from Amazon to the dollar stores to PayPal. And Costco as well.

So, I mean, this is an application that uses gamification, user-generated content, highly engaging, and it is taking over the app store. It's a threat to everyone, including Amazon, as it makes a very fun and engaging experience at a low price point. Right. On an absolute basis, though, Amazon is still extremely dominant here, but it's only been a year that Timo has been here. We've seen the Super Bowl commercials.

It's been at the top of the app store downloads. How worried should American retailers be of the threat or non-threat that it poses? What have you seen in China? They should be very afraid. I mean, this is on par with what Sheehan did with fashion and how we're seeing that affecting the likes of Zara and Uniclo and others. This is a company, though, that goes beyond just fast fashion and also, again, targets, targets very small goods, electronics and trinkets, and therefore that whole range of potential customers and retailers are at risk. Right.

And in such a short amount of time, they've managed to actually gain a lot of American consumers. I think Morgan Stanley estimated that about 15% of U.S. consumers have used the app. Why aren't regulators more focused on this? It feels like they're very, very focused on TikTok, but in reality, Timu and Xin and these Chinese e-commerce apps have been gaining so much ground. I think one, they maybe don't know a lot of them are Chinese. Two, they've come very quickly, as you said, zero to three billion GMV in just under a year. And it's hard for Congress to get ahead of new technologies and particularly ones that are coming out of a market like China. Right.

Well, they'll hear more and more about it. Ben Harberg, thanks so much for being with us today. Guys, I'll throw it back over to you in studio. All right. Thank you both very, very much. You know, we've talked with this. I've used Timo. It's a different kind of experience. Oh, yeah. Supercharged. Coming up, we have more on the market.

Stocks are higher once again. That's all despite what's happening with Israel and Hamas. And we'll be right back with the S&P already off to a 1.3% start for the week. Welcome back, everybody. Here's a market check with stocks higher for a second straight day, despite the terrorist attack this weekend. And Israel's declaration of war, lower bond yields might be helping. a lot with that. Joining us with more in the market, Scott, Nations of Nations indexes. Scott, it's good to have you here. Start with oil. It's surprising to see that one lower. And normally,

we'd look for pressure on the market to come from a pop like this. We saw one yesterday, but short-lived. Yeah, and it's never good news when traders have to look at a map to find the precise source of geopolitical news that's moving the market. We had a big pop in oil yesterday that's understandable, reflexive. It's down a little bit today. I'm not certain that it says too much other than maybe we got a little bit of an overreaction in oil yesterday. What about the defense stocks? We saw some 10% moves to the upside. You think they're pulling forward some of what now will become fundamental demand, or is that effect too going to fade?

No, I think that it's also a reflection of the fact that if we're going to help Israel as we are expected to, then I think that the price of that is going to be even more support for Ukraine. And so just because we're talking about these stocks doesn't mean we don't care about the human cost of what's going on over there, just the opposite. But it does mean that certain companies are going to benefit and not just because of what's going on in Gaza, but I also think that this is going to help American support for Ukraine. What about bonds? Yields have come down, maybe not by a ton, though, enough from 4.8 to 4.4. 0.65 or something in that area. What do you see as the future course of treasuries?

In the short term, it's a wonderful place. And now that they are actually generating some yield, it's a wonderful place to put money if you're worried. And when you woke up on Monday morning, it was certainly normal to be worried about our stock market. Now, I do think that there's good news for equity investors. The price action on Friday after the jobs report was just stunning and very positive. The price actually we got yesterday after the news was also very positive. If you look at the cost of insurance, say tail decks, TDEX, cost of insuring the S&P against a tail event for the next 30 days, that index is above 10, but it's still relatively low, particularly over the last 52 weeks. So there's lots of reasons for equity investors to feel pretty good.

There are also reasons right now as a safe haven for bond investors to feel pretty good. So while the news is horrible for the financial markets, it's not as bad as it might be. Is the most important thing that bond yields stay at or beneath these levels from here? I think it's more a question. Do people feel like they want to be in bonds because of the fear factor, that they're just terrified of everything else, that they want to be in the United States, that they want to be in the safest securities possible. That attitude is really the concern. And I don't think anything's really going to get going to the upside,

either outside the United States or in the equity world until that is no longer the fear. And the only way for that to happen is for this to continue to play out and for us to get some clarity about the course of action that Israel is going to pursue. Yeah, when people want to buy the bonds more than feeling that they ought to or have to. So Scott, thanks so much. Scott Nations. We appreciate it today. Yes. All right, folks. The Dow is higher by about 127 points, a little bit off the highs, about 4 tenths percent. Thanks for watching, Power Lines.

Closing bell starts right now.