Power Lunch - Soft Landing Ahead?, and Political Pandemonium 1/9/23

Episode Date: January 9, 2023

Stocks are rising today, as the markets seem to be buying into a “soft landing” and second half recovery narrative. But the Fed seems insistent the inflation fight isn’t over. We’ll debate who’s right on the economy. Plus, 1,200 people were arrested in Brazil after protestors stormed government buildings in defiance of what they believe was a stolen election. While here at home, Republicans are looking to move on after an ugly battle for House Speaker. We’ll tell you all you need to know. 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 for a busy Monday. Stocks rising today as the markets seem to be buying into the soft landing and second half recovery narrative. But the Fed does seem insistent that the inflation fight is not over, far from it. Meanwhile, signs the consumer is starting to crack. We're going to discuss what's going on with the economy this hour. Plus political pandemonium, 1,200 people arrested in Brazil after protesters stormed the government building. links to protest what they believe was a stolen election. Here in the U.S., how will Republicans move on after that ugly house battle over the speakership? Kelly.

Tyler, thanks. Welcome back. Hi, everybody. Markets, giving up earlier gains, the Dow briefly went negative last hour after some comments from Rafael Bostic of the Atlanta Fed saying we might have to overshoot, even while acknowledging he was open to different scenarios for rate hikes. The S&P is still up two-thirds of a percent right now, one and a half percent gain for the NASDAQ, adding to its gains as well on Friday.

Remember, Dow was up 700 points in the session into the weekend. Today, it's the chip stocks leading the ways you might have guessed. We have big gains for AMD and Nvidia, Wells Fargo, naming them top picks and chips, seeing improvement on a number of fronts this year, including inventory and pricing. Look at the relief here for some of beleager chip investors. AMD up 7% Nvidia, nearly as much tie. All right, a busy week ahead for the markets.

We're going to get another read on inflation, the consumer, and the consumer in the CPI report on Thursday. A plus earning season kicks off with Super Friday, as several big banks will report on that day. Here now with a look ahead. Our friend Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors and a CNBC contributor. Let's start with the economy, Steph, and talk a little bit about the CPI, what the consensus is and what you expect the numbers to show. Will they be good enough to sort of quell the markets? Well, they're going to be, I think, lower than last month. So that's a good sign. It could even, the

core number could even come in at just two to three tenths. The headline number, month over month might even be flat, which would be nice. Overall, though, Tyler, I look at the year-over-year numbers just as perspective, just to have perspective. And it's going to be, headline could be six and a half percent. And the core number about 6.1. So even though these numbers are coming down, they're still really elevated. And with a 3.5% unemployment rate and the non-farm payroll wage number was still at 4.6% last week. I think the Fed is going to remain pretty hawkish and higher for longer. Well, that was going to be my question. In light of that, what do you think the Fed is going to do? And you just answered it. You think they're going to stay higher for longer? Of course, Mr. Bostick sort of

suggesting the same thing. Sure. I mean, well, you look at the non-farm payroll numbers. It was a good report but as I mentioned, wages were still pretty high, right? But you look at the Joltz number. They came in better than expected at $10.4 million. There are two job openings out there for one unemployed people person. So the job market is still very tight. And the ADP number, the wage number last week, came in at 7% year over year. And for switchers, those were switching jobs.

That number was 15% wage growth. It's good for the consumer, for sure. But this is not going to deter the Fed in terms of being, much more hawkish for longer. Stephanie, what should we expect with bank earnings? As we just talked to Hugh about last hour, Goldman's doing layoffs, but they're a little bit different business model

than some of the others. So Wells, B of A, J.P. Morgan, remind us which of these you own and what we are. Is the bar high or low going into this, do you think? I think the bar is low, Kelly. I don't think it's going to be great. I think you want to be very careful

and company-specific in terms of what you own. The big themes, though, I think for Super Friday are going to be strong net interest income and strong net interest margins. The Fed funds rate was up 146 basis points this past quarter. That bodes well for those sensitive to the Fed funds rate. That's mainly Wells Fargo and Bank of America, and to lesser extent, J.P. Morgan. On the flip side, you're going to see higher provisions, higher reserve builds, higher expenses, and also fees that are going to be weak. But I think I wrap it all up And I'm thinking one, 1.2 times book with a good dividends and good capital.

I think the bar is set low enough. Yeah. And which of the group are your favorite? Which would you stay away from? I mean, in general, Wells, B of A, JPMorgan, can we lump, well, maybe not Wells with those. But can we lump them all together and then kind of separate them out from what we're going to hear from Morgan, Stanley, and Goldman after that? Yeah. I mean, look, I think Wells is definitely the one.

It's my biggest position, for sure. I do want Bank of America to be clear. But Wells, I think, is a special situation because they are sensitive to rate. So for the every 100 basis point move in net interest income, excuse me, for every 100 basis point move in the Fed funds, net interest income goes up $2.6 billion. Plus, they have a very aggressive expense cost cutting program underway. The big number will be $12.3 billion in expenses for the quarter. I think they can do that and probably guide a little higher for next year, but it's going to be

less bad versus some of their peers. Bank of America actually already gave us new numbers on December 6th. So I don't think you're going to see much surprise there, but I don't think it's going to be that great because I do think expenses are running at the high end. That being said, net interest income is going to be up a billion dollars sequentially. That's really a very positive tail win for them. And again, the stock is super cheap, 1.2 times book. At JP, I just keep an eye on because everybody wants to hear what Jamie Diamond, the CEO has to say. But it's at 1.6 times. book. And they've stumbled a little bit over the last year in terms of expenses. I think the expense number is going to be very important. I do own Morgan Stanley. I think it's a different

sort of an animal. So is Goldman Sachs. I do think we're in the bottoming process of capital markets. And that's why I like Morgan Stanley. It's my favorite for the year. It's comprehensive. Wow. We've run out of adjective. Stephanie, thank you so much. We really appreciate it. Stephanie Lake. Thanks, it's my short. It's my short cut. Then I go, great. That's all the work I need to do for the week. I know what's coming up. Let's turn to D.C. now. Oh, boy. Kevin McCarthy finally gets elected House Speaker on the 15th try, but his victory comes with concessions like new rules to reign on his power and charm limits on spending.

Should Wall Street brace for more big changes or more gridlock in Washington? Let's ask Libby Cantrell, head of public policy at Pimco. All right, Libby, great to see you. And what do you say? We had one guest last hour arguing, no, no, no, the Republicans are going to shut things down now that doesn't play well for them. What do you say? Yeah, actually, you know, I think we'd be more in that camp. think some of this is a bit overblown. Yes, Kevin McCarthy made some commitments to cut spending or at least bring a bill that would cut spending. But remember, as you know, Kelly, Democrats control the Senate. Biden controls the White House. There is no way, know how that he will sign in

to law spending cuts. So the most that I think Republicans can hope for, honestly, is sort of flatline spending from last year, which is still elevated from the previous year. That seems to be sort of the best that they can hope for. In terms of the debt ceiling, we knew this was going to be an issue. The minority party always uses the little leverage they have, and the debt ceiling certainly is the source of leverage they have. But remember here, there are 213 Democrats who would very likely support a clean debt ceiling increase, meaning you only need to pick off, you know, five Republicans in order to actually raise the debt ceiling. So we think there will be, you know, some headline risk, maybe some associated market volatility. But in some ways that we think

This is sort of much ado about nothing. Spending will be in focus, as we expected. But again, we're not expecting the Republicans to push us actually to the brink in terms of default, for sure. I think that's very interesting because it has occurred to me that I suspect there are a large number of, let's call the moderate or responsible Republicans on the debt ceiling who would go along with the Democrats to avoid default. And so you may end up having some kind of bipartisan action on that? Yeah, Tyler, this is actually how the debt ceiling has been increased basically every year. It is increased with a sort of a coalition of folks, including Democrats and some of those moderate Republicans that you speak of. In terms of this Congress, there are actually 18

Republicans who come from districts that President Biden won, many of whom are in districts like in New York and New Jersey. So they're even more sensitive to sort of the financial markets and what have you and more likely, presumably more inclined to pass a clean debt ceiling increase. Now, the real question here is how do you get such a bill on the floor and not to get kind of too wonky here, but there is a mechanism if push comes to shove Democrats and some of those moderate Republicans can sign what's called the discharge petition to force a vote on the debt ceiling. So, again, we think there's kind of a release valve.

It's not to say that there won't be some sort of, you know, dysfunction and maybe some brinksmanship and what have you. around the X state, but we don't, again, we don't think it will result. Not to walk out here, but why would it, why would you need to invoke a discharge position, a petition? Is that because the rules committee would hold up bringing such a bill to the House floor? Is that the idea? That's exactly right, exactly. Not to get into sort of two inside baseball, but one of the concessions that Speaker McCarthy did make was to put three members of the House Freedom Caucus on the Rules Committee. That's three of the nine Republicans.

they could theoretically hold up such a thing from advancing to the floor of the House. And Speaker McCarthy may also be reluctant to bring up a clean debt selling bill because, of course, there is that sort of motion to vacate the speakership that will be kind of lording over his head as well. So, again, when push comes to shove, if Speaker McCarthy and the Rules Committee doesn't necessarily advance it, there is another mechanism in order to bring up and, again, increase the debt ceiling. questions. If I'm reading the sort of bill of concessions correctly, it's that

spending will be, discretionary spending, I should say, will be frozen at, I believe, fiscal 2022 levels. That is part of it. That's number one. And number two, the idea that any member can bring on the floor any number of amendments to appropriations bills. That sounds like a recipe for gridlock, gridlock. How long will either of those two things last? Yeah, so, I mean, again, and just to really put this in context here, Tyler, that even if there is a bill that passes that cuts spending to FY22 levels, which would, which would, you know, entail $130 billion cuts of discretionary spending, that's not going to pass the Senate, and it's not going to be signed into law.

So, again, it's more sort of symbolic than substantive. And McCarthy has guaranteed that he will bring that to the House floor. It's just not sure that that would even pass the House. in terms of the amendments to appropriations, we'll sort of see, but you're right that that is sort of a recipe for for mayhem, honestly. We've seen it before. Yeah, we've seen it before and nothing gets done. And then they scrap that and they go back to passing omnibus bills and limiting the number of amendments that can come forward. Libby, thank you very much.

As always, great to see you. Thanks so much. Appreciate it. Pimco. All right, coming up next, Economic Disconnect, judging by this two-day market rally. The market seemed to think inflation. is peaking. But the Fed says there's more work to do and the consumer is telling a completely different story. So who's right? We're also seeing a disconnect in the housing market. Prices still close to record

highs. According to a new survey, home buyers aren't so worried about affordability. We'll talk to the analyst behind that report when we return. Stay with us. Welcome back. The U.S. economy arriving at a perilous crossroads. The biggest issue, we can't even agree on how bad things are or or how bad they could get. Powell and the Fed think the economy is still too hot. They say their job isn't done and more hikes are needed. Investors are demanding the total opposite. They want the Fed to slow down. And their eyes, inflation and other conditions have improved.

For markets, the most important thing is to avoid a recession. And their consumers are feeling like this is all moot. The recession is already here. And for many Americans, debt is growing. And times are already tough. Steve Leasman here to discuss. You can make sense of this all right. Steve, how do you explain it?

I think there are two arguments out there, and they're not proffered by crazy people, so I think you want to give them a little time. But I think with the data on Friday, the wage gains coming down. And not only that, but they revised away that spooky November, 0.6 percent increase that had everybody freaking out a little bit. You did have job growth slowing. The unemployment rate did fall by two-tenths. But the bigger one to me was the ISM service sector.

The biggest part of the economy falling into contraction territory for the first time, It's obviously 2020, but then before that 2008, it was a pretty good harbinger. But guys, skip the first chart and go to the prices paid index. I want to show you this. The fed's all worked up about service sector inflation. Take a look at the price index from the IASM services. Oh, you guys are great in the back there. What does that look like to you, Tyler?

Have we round-tripped that puppy right there? Yeah. It looks to me like we kind of round-tripped it. And then you add in the stuff that Kelly was reading at the top, which is the savings, excess savings that people had. seems to be winding down. It's still some out there, but that's going to be spent out in the next quarter or so. You add to that the idea that we have some data showing that people are stretching more on their credit cards rather than, you know, so there's that stress out there in the consumer. All of that would tend to argue that the market may have this right, not, which is twofold.

Not only is the Fed not going to raise, but the Fed itself is going to reverse course in this regard. So what all of those numbers point to is a slightly cooling economy, right? Yes. But not a crashing economy. Not a crashing economy at the moment. You know, you don't know just because the line stops here doesn't mean it doesn't keep going. You don't know some of these things can have momentum, whether or not you can turn things around. Look, what's happening now in boardrooms?

People are getting together and they're saying, you know what? We want to probably stop hiring right here, at least in a bunch of businesses. and maybe we want to hold off on some CAPEX, all of that down the road creates outcomes that may not be welcome. Right, and that's why it's confusing. I mean, I understand why it's confusing, especially on two fronts. One, the labor market is strong because we were overheating. Two inflation still makes it feel, you know, early last year it felt to a lot of people.

Remember the consumer sentiment number? It hit a record low last June maybe, a reading of like 50. So it's really unusual for that to happen while the economy is still in the expansion phase, and it could end up being it was two years before, actually went into recession. Right. I mean, what's confusing about this, Kelly, is we are still rebounding from the pandemic. Yeah.

We're still putting people back to work. You look at the sectors where we have the job growth on Friday, leisure and hospitality, education, health services. And you might be getting bored of me saying that because month after month, those are the leaders. And we're not seeing a whole lot of job growth in areas that are outside of those two rebounding areas. Exactly. All right. Steve. Thank you. Do you get it now?

I do. Good. I'm going to go scratch my head. see what I can figure it out again. All right, Steve Leesman, thanks very much. Well, the Fed's aggressive rate hikes, there you are, have sent mortgage rates to double what they were a year ago. But even with that huge jump in rates, consumer confidence in housing is beginning to rise, thanks to falling home prices. And according to a new survey from UBS, potential home buyers aren't scared off by those affordability headwinds. Joining us now is the analyst behind the

survey, John Lavallo, with UBS. What did the survey say, John? First, welcome. Welcome. Happy New Year. What did the survey say? Hey, Tyler. Happy New Year and thanks for having me. The survey said a couple key things in our view. First, 39% of respondents said that they plan to buy a home in the next 12 months. That's only been surpassed once in the history of the survey back to 2014. Now, getting to your point, 70% of respondents said that they believe that buying a home, an affordable home, would be reasonably easy over the next 12 months. Now, that says a lot, and I think what it does say is that this buyer is willing to make concessions.

They're willing to move a little further away from the city. They're willing to buy a smaller footprint. They're willing to do whatever it takes to make that math pencil. This is a very need-based, motivated buyer. What was also interesting is that 89% of respondents said that they believe the value of their home will be the same or slightly higher in six months. So there's not a great expectation that prices roll over here. So that sort of rounds out the key points of the survey.

So I'm stuck on the first number you cited, and that is that two out of five people in this survey say they're going to buy a home in the next year? Yeah, look, I mean, I think your skepticism is understood. I think we had the same talk last time I was on when 44% of respondents said that they were going to intend to buy a home. It is a little bit surprising. But that being said, it just shows the underlying demand that's in this market and the fact that we are underbuilt as a need. and people meet homes. This is so spot on. I was speaking with a realtor yesterday, John,

who said in her 40 years of working in that town, she had never seen this little inventory on the market. The other number that jumps out to me is the fact that... Same in my town. Same, exactly. There's nothing on the market because nobody wants to move and have to trade whatever a paid-off portion, a low mortgage rate for a much higher one.

Interestingly enough, though, in terms of this pent-up demand, a lot of people said affordability is not a concern. 70% did not see it as a major problem, which tells me it's not the level of home prices. It's not even mortgage rates. It's really just the lack of inventory. Would you agree? Yeah, I think the lack of inventory, Kelly, is a real challenge. There's only about 3.2 months of existing home inventory in the market. That constitutes 90% of total inventory. So without that inventory out there, what I think it opens the gate for is the new home builders to be very well positioned. They're the ones that are putting incremental inventory. into the market. And we think that that's where the real opportunity will be, particularly at this

first time entry-level buyer that is so need-based and really desperate for a home. You like that, I mean, there hasn't been a sector that has been more sort of roundly crushed than the home builders in the past couple of years. But you like basically all of the ones you follow. You have buy ratings on all of them. Of your universe of home builders, what is your fave among faves and why? Yeah, sure, sure. So I would say, though, the stocks have done incredibly well since June. They've outperform the market by about 30%. So there's been a pretty big snapback off of the bottom. To your point, though, we advise on many of the builders. And I think that if the stocks do in fact work, they're all going to work.

Now, that being said, we do have our favorite. And I think that there will be some differentiation as the year progresses. Now, D.R. Horton is our top pick. They are the largest builder by volume by a margin of about 20%. They're focused on that right part of the market that we were just talking about, the entry level first-time buyer that is so need-based and very consistent executor. All right, John, thank you very much. We appreciate your insights. As always, John Lovallo. Appreciate it. Thanks for having me. You bet. Still to come, conserving space. We'll take a look at one startup trying to make clean reusable rockets. That's today's clean start, plus ride sharing the wealth. Piper Sandler upgrading Uber, saying car prices will push consumers to opt for ride-hailing

services. We'll discuss that call in today's three-stock lunch. Welcome back to Power Lunch. I'm Bertha Coombs. Here's your CNBC News update at this hour. The husband of a missing Massachusetts woman is being held on half a million dollars bond for misleading investigators searching for clues about his wife's disappearance. Brian Walsh was arrested yesterday and made his first court appearance today. Prosecutors say they found a broken knife and blood in the couple's basement. and that they have video of Walsh buying $450 of cleaning supplies the day after his wife was last seen. Walsh has pleaded not guilty.

Traffic deaths edged lower in the first nine months of last year. However, pedestrian and cyclist deaths continue to rise. Overall traffic deaths remain near levels not seen since 2005. And a pioneering restaurant voted, The Best in the World is closing its doors. Noma is closing its original location in Copenhagen, which helped usher in a new generation of ultra-fine dining. Founder and head chef Renee Redseppe says the business model is no longer sustainable. Gourmetes will have until the end of next year to enjoy one last meal costing over $500 per person.

That's more than most weddings, Tyler. Oh, that is a lot of money for one minute. All right. Thanks, Bertha. A head on power launch, a continental shift. Unrest in Brazil, the migration crisis, and energy prices all front and center. As the leaders of the U.S., Canada, and Mexico come together in a trilateral summit. First time that has happened in quite some time.

We will discuss with the Atlantic Council's Fred Kemp next. Welcome back, everybody. 90 minutes left in the trading day. Dow's hanging on to positive territory slightly. We want to get you caught up across stocks, bonds, commodities, and that chaos we saw in Brazil over the weekend. Let's begin with Bob Bassani with the Dow way off its highest of the day, Bob. Lower yields, bond yields, and the soft landing scenario becoming, let's just say more of a meme out there. That's what everybody wants today.

And that means growth stocks. The leadership board and the Dow, all tech, Salesforce, Apple, Intel, Microsoft. Intel's up 12% this year. We've had some of these sales force is up 10%. We've had some amazing runs in some of these tech names. Also, speculative tech, which had a terrible year, much worse than big cap tech. Also is moving. Coin Pace, U-Path, Roblox, Tesla's moving to the upside.

This is all Kathy Wood holdings, by the way. Some of this might be obviously short-covering, but you see, as a group, rallying rather noticeably. What don't people want that Dow Lagers today? It's all of the consumer-based low-volatility stuff that did so well last year. Travelers was just at a new high just a short while ago. So was Merck. Nobody wants it today. McDonald's Caterpillar, another one.

New high, just a short while ago. That's lagging today. Finally, what else is doing well today? Anything that is travel related, anything materials. Again, this goes to the soft landing crowd. United Airlines up 16% so far this year. Again, up today. Carnivals up today.

Freeports up 15%. Dow, another Dow component, up 11% today. So Kelly, lower interest rate. make growth stocks and broader economy stocks a lot more attractive. Feels very pre-pandemic almost. Bob, thank you very much, our Bob Bassani. Over in the bond market, still post-pandemic. Rick Santelli tracking the deeper inversion we're seeing in the three-month 10-year yield curve. Rick, how are you?

Yes, we have that historic inversion in three-month versus tens, and we see that two-year no yields are actually starting to roll over while everybody's paying more attention to long-dated treasury yields, look at this two-year chart going back to mid-October and realize, should we close under 418, that would be the lowest yield closed since mid-October. And when the short end starts to turn lower in a market driven by Fed nervousness, you really need to pay attention. Let's move down the curve to a 10-year, currently on pace for lowest yield close in three weeks.

However, anything under 341 would be the lowest yield close since. mid-September. Now, I know we're a bit away from that, but it certainly happened very quickly after we, end of the year, saw rates moving up off that support level in the low to mid-340s. We're getting very close to retesting it again, and keep in mind, 348 to 350s considered a big pivot by the technicians trading tenure, and finally the dollar index. Boy, it's gone from Darling to dark future in a very quick amount of time. at this chart. We're on pace for a six-month low close. Kelly, back to you. Wow, so many counter-trend movements here echoing what Bob said. Rick, thanks. Oil, it's closing for the

day. What's its trend look like? Let's ask Pippa Stevens. Pippa. Hey, Kelly, oil is getting a lift today as China reopens borders, prompting optimism around a demand rebound. China, of course, the world's largest crude importer and brokerage PVM noted the reopening will provide a, quote, immeasurable layer of price support. WTI is up one in a 30. percent at 74. Now turning to Nat gas, it is jumping 5 percent today after dropping 17 percent last week and hitting its lowest level in more than a year. EBW analytics noting the fundamental backdrop remains weak and so today's momentum is really just short sellers taking profits. Now the energy sector is lower today, but oil field services stocks are on the move.

And a note titled from Abyss to Bliss, Bank of America saying it's hard to ignore the oil field services names anymore. Despite their outperformance last year, the firm said an increase in spending, especially from international drillers, will boost investment in the services names. Now, one notable mover is SLB, formerly Schlumbergerge, hitting a more than four-year high. Kelly? They're not Schlombergey anymore? No, they're SLB. Come on. Who is it? EY, SLB, A-B. We have all these acronyms. We've lost something. But thanks very much. Pippa Stevens. President Biden landing in Mexico last night for his first trip to the country since being inaugurated, joining Canadian Prime Minister Justin Trudeau and Mexico's president Andres Manuel Loprez-Obrador

for a summit of the three North American neighbors. Now, this marks the first time a U.S. president has visited Mexico since Obama's trip in 2014. For more on the implications and an update on the situation in Brazil, we're joined by Fred Kemp, president and CEO of the Atlantic Council. Fred, what are you watching? It's great to see you again. Great to see you, Kelly. Well, I'm really watching. there is a change of globalization. Some people talk about it as de-globalization, but it's just really a changing of supply chains and what Janet Yellen, Secretary of Treasury said at the Atlantic Council, was friend-shoring or near-shoring. Well, that makes Mexico a lot more important.

And so last year, a lot of Americans don't actually realize this, but last year America passed China as the number one trading partner of the United States. They have a lot of manufacturing capability around automobiles. And the real question is can we fix immigration systems? Can we fix some of the violence in Mexico or help? Can they build some of the infrastructure that China has so that this story of U.S.-Mexican trading, obviously Canada as well, this is going to be a North American leader summit, can be one of the great success stories. We just don't concentrate enough on our own region and our own neighbors. So this could be a good news story. So let's talk a little bit about immigration, the president yesterday, going to the border for, shockingly to me, the first

time during his presidency. Is there a solution there that you see, Fred, that can be worked out? And if so, what is it? Well, that's a really good question. And the answer is there is no simple solution, but there has to be something that moves things further along from where they are right now. We're told at 6 p.m., the president is going to be meeting with president. Lopez Obrador of Mexico. And top on the Mexican president's list is going to be a discussion of taking on the root causes of migration. And that, of course, is economic development.

It's creating jobs. To a certain extent, it's also criminal crackdown. The Mexicans seem to be willing to take more returns of immigrants. And so I think it's being, you know, we have a 1.6 million person backlog with immigrants. And so a lot of people, thousands and thousands of people are crossing the border because they think that it's going to take so long for them to be processed that they're going to end up being American residents. So the president wants to fix that part of it, bring in more people who are truly under threat from Venezuela, from Haiti, from Cuba, and be able to turn back the people that are not legitimate. Do we know, Fred, and forgive me for not knowing, I should know this, the percentage roughly of those people who are coming across. the southern border who are Mexican as opposed to Nicaraguan, Venezuelan, Honduran, Salvadoran.

Well, the great growth, I don't know the actual percentages, but the growth has not been of Mexicans. That's what I thought. The growth has been with Cubans and Venezuelans and Haitians and Nicaraguan's. That is where the largest numbers of growth have come from and not from Mexicans themselves. Fred, also curious, as we're talking about how we didn't have this summit even during the Trump years, and this trend of friend shoring that you said Yelen is talking about. And that's quite a loaded term. We also have this rising nationalism in Brazil.

I mean, put this into bigger context for us. How could that complicate efforts if it would? You know what I mean? Are there dominoes to connect here or not? Well, in Brazil, I find it absolutely fascinating because there is no doubt that there are some connections, even copycat connections to January 6th, and then online, online groups, nationalists right-wing groups, speak to each other. They egg each other on, so there are those connections. But then in

Brazil, there's a very local connection, which is they have their own divisions. And what was different is when the Congress was attacked on January 6th in the United States, the members of Congress were actually there, and it was limited to the Congress. In Brazil, it was a number of different institutions. And it was on the weekend, the members were not there. What's interesting in Brazil is there was so many tip-offs, there's so many signs that one could have taken preventative action against us, and why didn't that happen? So I think what you'll see is this playing out. Just very briefly, I think what it underscores is when you have economic difficulties, when you have economic dislocation, you're going to have populism from the left and populism from the right.

And right now in Latin America, you're getting a lot of both. So I don't think this is going to be restricted just to Brazil. I think it's curious and not by accident that Jair Bolsonaro was not in Brazil, but rather was in Miami or in Florida somewhere when this happened. And I hear the same with respect to the person who's in charge of the justice sort of ministry in the area where Brasilia is located. That individual, the person in charge of security, was absent as well, as though to say, you know, hey, I'd had nothing to do with this. I wasn't even there.

Well, I mean, as you know, in my previous existence, I was a Wall Street Journal editor, and I would have my reporters out reporting all of what you just said much more deeply. I think there's a TikTok around this. A TikTok is a reconstruction would happen, where I think we need to learn a lot more. And I think one of the questions is going to be, you know, what are these individuals doing in the United States? What connections today? They have what Americans and what connections are there online with all of these groups. I think that's really rich area for reporting. And, of course, when we were reporting for printer, TikTok had a totally different meaning,

didn't it, Fred, than it does today. Yes. You won't. Thank you so much. Not that kind of TikTok. That's not the kind of TikTok we're talking about. We're talking about a different guy. Fred Kemp, thanks, man.

Appreciate it. All righty. After the break, folks, we will come back. I promise a new space race is underway, but it's not about which company can get They're faster or go farther, but which can do it cleaner. We will explain in today's clean start. Welcome back to Power Lunch. Let's get to Kate Rooney for a market flash on those popping shares of Coinbase, Kate.

Hey, Kelly. Yeah, Coinbase is up about 17% today. So there's a couple dynamics, 15% or so at this point, playing out here. First, we had a bullish note this morning from Jeffries. It sort of lit a fuse. But there's also likely a short squeeze playing out. So Coinbase had been among the most heavily shorted names in recent weeks, along with some of the other major crypto stocks out there, which are rallying today as well. S3 partners had some numbers on this.

They told me about 28% of the float or the available shares out there were sold short. That was as of Friday. So meaning traders were borrowing shares to bet against the company. The average S&P company has about 5% of shares sold short for context there. So Coinbase was becoming one of those crowded trades and crowded shore position, which all, always sets up that potential for a short squeeze, meaning traders need to rush, cover that trade, and then buyback shares, so that often lifts the stock and is really what we're seeing play out today.

Kelly, I did mention that analysts know that may have lit the fuse here. So Jeffreys wrote this morning, the Coinbase could really benefit from the fall of FTX that we've been talking about saying, thanks to its premium brand. They talked about the onshore regulated entity here, the scale and health of its balance sheet. It's got about $5 billion in cash. They say it should be able to weather. industry-wide storm here, really, as they put it. But Great of Salt, of course, the immediate impact is pretty negative with trading volumes down facing some pressure. They say there's a steep

hill to climb still for recovery. If you look at the 12-month chart, Coinbase is still down about 80%. Yeah, but it's a good bellwether. You know, it's a good way of kind of get, and look at what the rest of the tech stocks are doing, the Kathy Woods trade rates are down and all the rest of it. It's a good emblem, I think. Kate, thank you for drawing our attention to it. Kate Rooney. All right, competition in the space race heating up, whether it's to the moon or Mars or beyond. But with ever more focus on clean fuels, the clean space race is just beginning. Diana Oleg explains in her continuing series on climate startups.

Hi, Dai. Hey, Ty. Yeah, whether it's SpaceX's Starship or the SLS rocket for the Artemis Moon program, the rocket business is getting crowded. But one Seattle area startup is hoping to stand out as the cleaner alternative. Stoke Space is in a race to produce clean-fueled rapidly reusable rockets that can deliver satellites into Earth's orbit while protecting the Earth itself. Its founder and CEO is a veteran of Jeff Bezos's Blue Origin program. As we build this vital in-space economy and infrastructure, we have to be thinking ahead about how to do that sustainably and scalably.

The Stoke rocket uses sustainable fuels, including liquid hydrogen. The rocket is designed to go up and then return to Earth with both the booster and the upper, or second stage, fully and immediately reusable. You think about jumping on an airplane, you can pretty much go anywhere you want to go at any time for relatively low cost. That's what we want to get to for space launch. And having a reusable second stage allows you to do that. Using unique heat shields, the Stoke rocket comes down, targets a landing location, and then the engine turns back on, and it hovered. into a soft landing, ready to go again, which is particularly attractive to one of its largest investors, Bill Gates's breakthrough energy. So as we think about all the manner of things that you can do from space for the benefit of Earth, for the benefit of climate,

you have to start from launch and you have to start from ultra low cost, sustainable, reusable launch. In addition to breakthrough, investors include Spark Capital, Toyota Ventures, Point 72 Ventures, Mac Ventures, and NFX. Total funding to date, $100 million. Stoke Space is still in the first stages of testing the rocket and is a long way off from taking satellites into space. It's not just the technology, but regulatory and funding hurdles ahead. But it has come a long way in a short time in its quest to green the space space. Back to you guys.

And a reminder, the money is still flowing from that VC world, Diana, for some of these mega projects. Diana O'Luck. Coming up, Lulu, sinking 9% today after some weak guidance. We'll trade it. other big movers in three stock lunch. All right, welcome back to Power Lunch, everybody. The Dow turning negative on the day just by a little, the barest of margins. Time now for three-stock lunch.

And on today's menu, Uber surging after being named a top risk-on pick for 20203 by Bank of America, Lulu Lamont, sinking after lowering gross margin guidance for the first quarter. And Visa Hire, it's been upgraded to overweight on a bullish outlook at Key Bank. here to help us trade all three, Bill Stone, chief investment officer at the Glenview Trust Company. Bill, welcome. Let's start with Uber. It's not just a ride-hailing company anymore. Hasn't been for a long time.

It's a delivery service as well. Do you like it? Loathe it, what? You know, I guess it's interesting. I think Bank of America calling it a risk-on pick is probably a good way to put it. It's interesting in the sense that obviously, not maybe not obviously, but the largest, you know, ride company outside of China, as you mentioned, a very large delivery business as well.

The rise services come back a lot. It doesn't make any money. It doesn't make any money. Exactly. And that's why you have to put it into the risk on trade. If, you know, yields or interest rates continue to go up and the market continues to dislike money losing companies, even if they might have a very good long-term growth opportunities. yeah, it's going to continue to have tough sledding. That's why I probably leave it for right now and keep an eye on it,

because I think it is interesting because of them being the largest and they have user data and all sorts of things that in the long run make it interesting. Up four and a half. Putting this in the basket with Coinbase as stocks that are loving this kind of like rate change regime that's happening. Bill, you tease that you were wearing an item today from one of our stock picks. Since you can't wear Uber or Visa, I'm going to guess that it's, Lulu, and I don't think I see it on the half of that we can see. You know what I'm saying.

What would you do with the stock? Yeah, well, I'll solve the mystery first because one is it's the pants. So I got addicted to wearing their pants, and this is a non-paid endorsement. Because, you know, they're super comfortable, stretchy, all that stuff. So I guess that tells you, right, is the brand is synonymous with good quality and, you know, it's built up some real good reputation on that side. I'd say the hard part is I'm not yet ready to buy the stock. It remains despite getting hit hard today, as you mentioned, very expensive. It's about 30 times earning. They have some opportunity, clearly have some opportunities to continue to grow, particularly internationally, and despite the fact that I'm wearing it, they have a lot of room in men's fashion

as well. It's just tough because I think a lot of money managers ran into the stock, you know, thinking it was, you know, kind of a no-lose. And they've lowered margin expectations now two times in a row. And that kind of gets a little worrisome at that kind of valuation levels. I'm really tempted to ask you to stand up and model the pants, but no, it might be too much information. It's probably, they're not the yoga tights. Anyhow, let's move on to Visa, shall we?

Sure. It was ended on a, on a top note is, you know, I think it's a great company. in the long term because you've got just electronic payment trends in their benefit, e-commerce, all feeding to them in the long run. Also, it is really difficult to see a competitor taking them out in a sense that they have over 50% market share. They only take a little bit on each transaction. So it's really hard for somebody to spend enough money to possibly build a business that is anywhere near the scale to be able to come near them. And again, they have this long-term growth. the last thing in terms of short term kind of maybe boost to growth is to have a good exposure

to global payments. And now with people starting to travel internationally again, there's good news there. All right, Bill, I wear the Lulu's too. He does. Full disclosure. All the cool people. All right, Bill Stone, man. Thank you.

Appreciate it. Thank you. Coming up, another key story catching our eye today. Can you guess that? We're back after this. Welcome back. The good times are ending in 2023 for a lot of airline travelers. Leslie Joseph's writing our story for CnBC.com.

Several airlines, including Delta, American, and United are raising the bar for the biggest frequent flyer perks. You'll have to spend more to earn free upgrades to get early boarding to do more. Bottom line, when times were bad, they tried to lure people back in. But as Delta CEO said, if everyone is special, no one feels special.

You know, I noticed this having just come back from some travel, where they give you priority boarding on United. It seems like everybody is better than me. You want to get the non-priority. Yeah, I mean, it's like priority one, and then it's these guys, and then it's left-handed oboe players, and anybody who's carrying a piccolo. It's a lot of people who are now get the early morning. It's inflation. This is what the debasement of your currency looks like.

It's like great inflation. Yeah, I didn't deserve that, A. Exactly. All right, let's, it's an interesting little question here. The numbers are in and the top 100 rated television broadcasts of 2022. How many, Kelly, of the top 100 were NFL games? Now, you know, I have some inside, you know, not sources, shall we say, but it's a topic of conversation in the family quite often. So I'm going to guess, of the top 100, how many were NFL games?

25? Higher. Higher. Higher. Higher. 90? 82. Oh, my God.

82. In this day and age. College football was second with five. And, of course, the big college football. football playoff is tonight the final between TCU and Georgia. Political events had four. State of the Union speech was the only non-NFL game in the top 20. So that tells us both that the NFL can still unite people across a fragmented media

landscape and is this a high watermark? I mean, after this. And remember a couple of years ago people were saying people aren't going to watch, aren't watching NFL games. There was a lot, the kneeling and so on and so forth. The high water mark had been hit seemingly not. Are you watching the game tonight? I will be watching that game tonight.

I have a little wager on my favorite little app on it. Thanks for watching Power Lunch.