Power Lunch - The Dow’s win streak, Apple boosts pay for workers and a surprise policy change that could help lower energy prices. 5/26/22

Episode Date: May 26, 2022

The rally on Wall Street picks up steam this afternoon. A long time investor says there’s value to be found in the market and he has two names to consider. BofA’s Francisco Blanch says one way to lower high energy prices is to drive slower. And three stocks that have declining multiples but improving fundamentals. Our trader tells Kelly & Tyler which stocks are buys. 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 this day's power lunch. I'm Tyler Matheson. Here's what's ahead. We've got a rally on Wall Street. The S&P up more than 4%. So far this week, is there value now to be found at these levels? Yes, says one of our guests, and he's got two names to consider. Plus, crude at 114. Brent at about 117. Nat gas closing in now on a 14-year high. The UK hits oil and gas firms with a windfall profit tax that it says will help ease the power. for consumers, but will it backfire? And what are the implications for the global energy market? We've got a big hour ahead, full of stuff. Kelly? Tyler, thank you. Hi, everybody. And the market rally really gaining steam this afternoon. The Dow up 650 points at the high, and we're only 60 points off of that right now. The S&P reclaims 4,04066, and the NASDAQ, the biggest gainer up just shy of 3%. Retailer leading the gains today after Macy's raised its profit forecast this morning, Dollar Tree, dollar general, also predicting stronger profits for the year.

These stock reactions tell you how much fear was priced in. Macy's up 19 percent, dollar tree, up 20 percent, dollar general, just behind that. It all makes consumer discretionary the top performer on pace for its best day since March 2020. We don't often see a sector jump by 5 percent, but we have that today. And it's also helped by the travel names. Norwegian cruise line up 13 percent, Carnival up 10 percent. Marriott, Tyler, up 7 percent. All right, despite today's rally, Wall Street remains.

divided over the outlook for a recession. Today we learned that the economic contraction to start the year was worse than expected. First quarter GDP declined at 1.5% on an annual pace. That's the worst quarter since the start of the pandemic. But our next guest says no recession this year, in part because the labor market is so strong. Let's bring in Bob Dahl, Crossmark Global Investment, CIO. Bob, welcome back again. Good to see you. You say the health of the U.S. consumer, the health of corporate America, lots of cash, and the strength of the labor market. The U.S. has never entered a recession with the labor market this strong. Yes, so far so good, Tyler.

I think the recession fears are a bit overdone. Doesn't mean we're going to have a significant slowdown. We're already seeing that. But the three things you mentioned caused me to think, probably not this year. And I know all three are weakening to some degree. Profit margins of corporate America under some pressure. but we think we'll skirt by. Remember, the stimulus in the system operates with a long lag.

It'll take some time for the tightening to the extent we've seen it to have an effect on the economy, I think, stalling the recession until at least next year. You began your year with predictions that the order of finish for this year would be cash number one, stocks number two, and bonds number three. Are you still sticking with that? Yes, for the full year, Tyler, if you all, let me start from today to the end of the year. I do think stocks will be higher at the end of the year than they are today, assuming we don't have that recession. But I don't think we climb above

where we started the year. So stocks and bonds likely be down for the year, cash is king. What do you think about inflation? I divine from my notes that you think it's about to or has started to roll over. On what do you base that? Well, there are, there are. There are lots of reasons why inflation move from, call it, two to eight. We think there are reasons that it's in the process of moving from eight back to call it four to five, still an unsatisfactory level. We are solving some of the supply chain problems that cause the inflation. The war got in the way of that, however, to some degree.

The compares, the base effect, as economists call it, are also in our favor in terms of a lower inflation rate. So irregularly, it's going to fall. And I think that's part of what the bond market is enjoying. And it's almost 50 basis point rally and 10-year yields from, call it 3 and a quarter, 2 and 3 quarters, Tyler. You point out that while the market may be down sort of 16, 18, more than 20 percent in the case of the NASDAQ, that lots of stocks have fallen much more than that from their highs, making some prices interesting. Where are those interesting? Where are those interesting prices? So I'm still, believe it or not, overweight tech, but not the tech we usually talk about. I like old tech, cheap tech, low PE tech, HP, MasterCard and V's if you let me call them

tech stocks that's where they're efficiently classified. Those sorts of companies have earnings. They have cash flow and I think they're going to be okay. I still like the healthcare service companies, the HMOs, they've gone down a lot less than the market, but I think for good reasons. And I would have some financials in my portfolio, especially on this rally. They got beat up really hard, I think unfairly, because people assumed the recession and brought those prices down. I think there's some more recovery coming there, Tyler. Bob, it's great always to see you. Bob Dahl, appreciate it. You bet. Despite today's rally, plenty of damage has been done to valuations. According to bespoke the number of single-digit PE stocks

and the S&P has nearly doubled since the start of the year. There are 59 of them now. So what are some good names to pick up here? Let's go value hunting with Surrath. He's managing partner at DCLA and a CNBC contributor. Surratt, it's great to see you. And let me just before we get into the names, ask you about the valuation reset.

Is it a healthy thing or what does this tell you? I do think. I think, you know, we've had such a good run over 10 years to get a valuation reset because you're having these things. the Fed is raising rates because the economy's too hot. And unfortunately, you know, we've got these things going overseas. But investors need to see that it's just not a straight line up. And, you know, below all this, they are some real companies that we think are selling at some real value right now, especially at these prices.

XPO is the first one, the logistics name. That's been a difficult space, the transportation space. Is this one of the stocks that's single-digit PEs now? It is, actually, one of the 59 that you mentioned. I mean, it's trading it nine times earning six times. cash flow and you've got some catalyst coming here they're getting rid of their freight business they're spinning that off they're gonna sell the European business it's gonna be an asset light business they're de-levering and and

guess what there's still business out there it's not like freight is just totally disappeared you've seen the you know we saw the numbers from the retailers the consumer are still buying companies are still shipping so less than truckload LTL is a great business and the markets brought the stock down over 30% just here to date so it's a cheap stock on cash flow. It's a balance sheet that's improving and I think too much a bad news has been discounted into XPO. And JP Morgan, you know, we could say price to book, price to earnings. Why do you think this one is still cheap? So this is almost on the

cusp of trading in single digits is 10 times earnings and it's the premier bank. It's got a solid balance sheet, 3% dividend yield and Jamie Diamond came out just a few days ago and said, hey, we're spending $17 billion to improve our our businesses, we're improving our technology. I like companies that are reinvesting into their business, not just cutting costs. And if you look across their lines, asset management, investment banking, credit is actually not that bad, and they've got credit cards. So I think you've got a global bank with a solid balance sheet, a great management team, trading at 10 times earnings at a price to book at 25%, kind of where it was just three or four months ago. And you get the tailwind of interest

I mean, that's really going to help companies like a JPMorgan that really haven't performed in an environment just like this. Let me take you off into a straight corner if I might, Sarat, and that is to ask you your thoughts on retail. Over the past couple of weeks, there have been a lot of sort of conflicting profit reports out of different companies, whether it's a Best Buy or Target or Walmart. Yesterday a positive report, or maybe the day before, on Nordstrom, Macy's moving up higher today. Where are you on retail, generally speaking? And is, are there any opportunities there that you see?

So I think, Tyler, what happened was when you look at the targets and the Walmarts, they just didn't have the products that the consumer wanted. The consumer wants the reopening products, the apparel. They want to go out. They don't want to just buy things that they had bought when we were sitting at home during COVID. And that's why you saw Macy's and you saw, you know, Nordstroms, like you mentioned, good numbers over there. And, and, and it, and, and, you know, dicks not a good number. So I think in retail you have to kind of be where the consumer is going to be. The consumer, as Bob Dahl said, is still strong. They are spending money. They are spending money on apparel. They're spending money on services and on travel. So I do think if you've got the

right company in retail and you've got the right company in services, that's where the demand's going to be. And it's really going to be a question of can these companies keep up their margin and will the demand stay, especially as input prices and you see more costs coming with other types of inflation. Are there any single-digit valuation businesses that you would stay away from? I think at this time, yeah, I would look in some of the technology companies that are more single-digits on price to sales, where they don't really have any earnings, where you have declining earnings. That's where I'd be really careful because you can get into that value trap, as we spoke about a few weeks ago. The value trap of single-digit multiples, it just means that the E can get even smaller.

Ironically, the PE actually expands. So that's where you have to look at. You have to look at not just the earnings, but the balance sheet to say, hey, as these companies come out and reissue more debt, what is the credit market saying? And a lot of the focus has been on the equity market, but the credit market, spreads have been widening. So investors have to be very careful that, hey,

if I'm buying an individual stock, let me just look at what the future cash rolls are going to be, and what does the debt market? Because debt market is pretty much always ahead of the equity market. All right, XPO, JPMorgan, two names you would pick up here. Sarat, thanks so much. We appreciate it. All righty. Coming up with Bitcoin prices down 35% year-to-date, how many holders are underwater. We've got the results of a new survey and stocks with falling multiples, but improving fundamentals.

Lenar, VF Corp, Adobe, they're on the list, but not all of them are buys, says our trader. That person will tell you how he's positioned. And as we look to this break, a look at the biggest percentage gainers on the Dow right now, Boeing, Nike, and Home Depot, leading the way today. All right, welcome back to Power Lunch. Bitcoin prices lower today and off 35% for the year so far. According to a new survey from Missouho, the average investor's Bitcoin cost basis is $21,000 a coin. And so as prices near that level, is Bitcoin approaching a tipping point? And what does that mean for names like Coinbase? Joining us now is Dan Dolev, senior analyst at Missouho Americas. Dan, why don't you tell us the results of the survey and what that

cost basis of 21,000 means for the typical investor in Bitcoin? Hey, thanks for, I mean in Bitcoin. Yeah, thanks. Thanks. Thank you for having me on the show again. Look, so we did a survey. This is actually the second time we revisit the survey and the results are remarkably consistent. The average cost basis for sort of the median or the average coin investors for Bitcoin is about $21,000. Those results are consistent across surveys. What it means is if you look at the distribution, it means that right now about 30% of investors, you know, once it goes below 30 are below water. When you get to 21, 50% of investors are going to be below water. So it's sort of that, that's kind of that, I think, well, the tipping point at which people

are starting to think, wait, what am I going to do with my Bitcoin? Am I going to stay or am I going to leave. What it means for Coinbase, just to answer your question, it means that as it goes down, it kind of makes, you know, people's excitement to continue to invest in this, I think, come down. So it sort of reduces the engagement on Coinbase as Bitcoin comes down. And so Coinbase, even though up today by $2.80, you would expect if Bitcoin continues to slide as it has over the past several months, that Coinbase would slide with it. Exactly. And it just loses its luster, right? So it becomes, you know, self-fulfilling prophecy. Remember, like a lot of the stuff that's traded on Coinbase is not just Bitcoin, right?

There's Ethereum and there's, you know, dozens, if not more, of alternative coins, right? So this is kind of Bitcoin is sort of the last man standing here once we've seen, you know, what happened with the other cryptocurrency. What about the other exchanges? What about other exchanges that do business in cryptocurrencies? currencies, will they be similarly affected and will there be a great consolidation among them? So I think that's a great question. And, you know, we cover Robin Hood. And I can tell you that I'm more bullish on Robin Hood than, you know, I'm more concerned about Coinbase. And the reason for that is because, A, they don't charge fees. And B, they're more diversified. So I think if you're a pure play crypto exchange, that makes that where you make your money on an overpriced transaction, retail transaction. rate, which is kind of what Coinbase is, I think your, you know, your future isn't as bright

as your past. And I think that's what we're seeing. So if you have any of these other exchanges, I don't, you know, I don't cover them. Most of them are private. You know, if that's how they make their money, I would be worried about it. Is the decline generally in the, in the, in the, in the cryptocurrencies, a reflection of risk off? In other words, people just don't want to be in assets where they perceive high volatility, high risk, or is it something more fundamental existential? I think it's probably the latter. I think the people's understanding that, you know, I think we've always, you know, thought about this. And I think Warren Buffett was the first to say

that that these are not productive assets. So I think fundamental existential, the questioning on what are we actually doing here, we're trading, you know, all these alternative coins that have no intrinsic value other than what people think they are. And I think that as this understanding trickles through, there's less and less excitement about some of these things. So I would go with the letter. Well, I've got to say, I'm surprised that you go with the latter, which is the more sort of, oh, I guess, sort of extreme case there in the way I put it.

We'll have to have you back and debate that because I know that some of the social media are probably lighting up now with that. But Dan, thank you very much. We appreciate it. My pleasure. Dan Dolov, Missouho, Americas. Still ahead. Profits over principles. Well, is it? Vanguard says they have no plans to curb investment in fossil fuels for the sake of climate change. Is the ESG movement losing its influence?

Plus, a taxing time. The UK issuing a one-time tax on oil and gas giants to ease pain on consumer energy bills. Plus, during May, we're celebrating Asian American and Pacific Islander heritage and featuring some of our CNBC teammates and contributors. Here is Jane Hoon, author of Breaking the Bamboo Sealing. The concept of this bamboo ceiling, which I've worked on for the past 20 years, continues to be a barrier for Asian Americans. And it's this myth of Asians as a docile group of hardworking,

capable people who have overcome barriers to discrimination. And I believe that's really false. And I've been working inside Fortune 500 companies where Asians are simply not making it all the way through the system. there's a lot of work to do there. So I believe it's important when we look at diversity and inclusion efforts to include them in that process, right, to include them in that conversation. Because many of them are still falling through the tracks. Welcome back, everybody. Vanguard, finding itself stuck in the middle of the climate debate. Like many other companies, they're trying to be more environmentally friendly, but they also have a mission to maximize shareholder returns.

Christina Partsenevelis has the more, the more on this issue. I have more. I have more. I have more. Right. And we're talking about it. talking almost up as an echo of Milton Freeman's doctrine, which is the social responsibility of corporations is to increase profits. But the world's biggest asset manager and biggest investor in coal companies, Vanguard, told the FD, quote, our duty is to maximize long-term total returns for clients. Climate change is a material risk, but it is only one factor in an investment decision. And continue to say that Vanguard does not seek to direct company strategy and suggested some firms actually with a large carbon footprint can play a big one. role in a low-carbon future. Vanguard, they did follow back. I asked him earlier this morning. They gave me a comment just before and told me that they encourage proper board oversight,

risk mitigation, effective disclosures, so as to not undermine its long-term investments. And what we are seeing, though, is fossil fuel prices. We know this. Surging. Investment firms want a piece of the money pie. Sometimes, though, at the expense of the climate. And that's the debate right now. And despite the drop in markets this year, companies like Occidental, Uppo, of what, 137%, BP, 23%, and the list continues. The energy sector in the S&P, up on the year as well. And so a new report today says that eight oil and gas companies alone are involved in over 200 expansion products over the next three years. What they say is the equivalent to the lifetime emissions of 77 new coal power plants. So yes, although increasing in the past year,

the downward trend of coal consumption in the United States is continuing. to go down since its peak in 2007. Nonetheless, the topic that we have right now is the companies are stuck in a bind and Milton Freeman's doctrine, right? Profits over planet? Which one? Well, they're a great example because they sort of own so many different things.

And if they felt like they had to divest from fossil fuels would be a very big deal. So here they are saying, you know, they offer ESG funds, but in this case they don't feel like they need to divest from fossil fuels per se. What about other companies who have been under pressure like this? Is it other companies or I guess even statements right? A lot of, there's been a little bit of backlash. For example, the HSBC head of responsible

business recently said in a presentation that, you know, climate risks are overblown and who cares what happens to Miami in if it's six feet under or six meters under in a hundred years. Because Amsterdam has been, he said, already. Yes. I think something to that. So there's one example. And then Tesla getting removed from the SMP ESG index because, not because they're getting worse in terms of their emissions, but everybody's getting better, and Tesla may could improve and have a better low-carbon strategy. Still, all of this suggests maybe there's some pushback to the kind of overbroad ESC. Exactly.

How do you quantify and qualify so much uncertainty? Yeah, absolutely. Christina, thanks very much. Thank you. Christina Parts and Iveless. All right, let's get to Frank Holland for a CNBC News Update. Frank. Hey there, Talley, here's your news update for this hour.

The Palestinian Authority says today, its investigators have determined an Al Jazeera television journalists was deliberately killed by Israeli forces during a West Bank raid, the Jerusalem funeral procession for Abu Akla led to clashes between mourners and police. Israel rejects the investigation's conclusion, saying no soldier fired intentionally at a journalist. And outside the Capitol today back here in the U.S., some Senate Democrats, they joined a rally for more restrictive gun laws. That included the Democratic senators from Connecticut, where 26 people at an elementary school were shot to death more than nine years ago. Those senators told the crowd, things must change.

We are not going to allow this to become the new normal. We are not prepared to allow our schools to continue as killing fields. We are not prepared to allow the gun lobby and the gun industry to continue to run this town and this place. And today the Supreme Court is rejecting a bid by Republican-led States to block the Biden administration from using a larger cost estimate for the societal impact

of greenhouse gases when agencies draft new regulations. That's the very latest. Kelly and Tyler, back over to you. All right. Thank you, Frank. Head on power lunch. Apple boosting pay. As the company struggles to keep employees amid record inflation and growing unionization efforts, can cash keep workers around. Plus, even billionaires need some extra cash. Elon must scrambling to finance his purchase of Twitter. But it could put his wealth, and Tesla at risk. As we go to break, check out some of the names moving the NASDAQ higher. Tesla is one of them up 8% to 7-11 at the latest today.

We're back in a moment. Welcome back, everybody. Just 90 minutes left in the trading day, and it looks like a pretty strong one. We want to get you caught up on stocks, bonds, commodities, and the UK's new efforts to bring down energy prices. In stocks, we've got a five-day rally now going for the Dow, and we're still near session highs, Bob Bassani down at the New York Stock Exchange. Bob?

Got to rip your face off rally going on here. Makes me a little bit nervous ahead of some important data tomorrow. Let me just show you two key sectors are moving. Number one, tech, number two, consumer discretionary. And Vida had, I thought, a fairly muted outlook, but give you an idea how dramatically things have been oversold. That stock is rallying and bringing all the big cap names along with it. Even Apple, which has been weak recently, and Microsoft on the upside.

But the real moves are in the consumer discretionary group. This is the worst performing sector in the S&P this year. But here the high-end consumer news has been good. Movado, William Sinova, even Macy's. These numbers were pretty good overall, and it's led in credence to the idea that the higher end are holding up fairly well and giving some credence to the bull argument that maybe they're not going to fall apart. Maybe they're not going to go away and pull back on their spending.

We've seen some wild moves in some of these other growth sectors, these travel and leisure names. I just want to show you, Cesar's. How crazy this has all been. 70 to 43, down 40%. In the last couple days, it's rallied 24% back to 51. Those are crazy numbers overall. It gives you an idea how confused everyone is.

Are we a peak travel, or are we not? Two or three-day rally here. Costco's going to be after the close. Here's the key story on the company, and this is down 25% in the month because the multiples compressed 25%. The earnings expectations haven't changed. We're expecting 10% earnings growth.

Guys, Kelly, this is the classic, Retail growth stock, reliable, consistent earnings growth every single year. Again, 10%. It's not earnings that are coming down. It's the multiple that's come down. We'll see what they have to say. All I can say, there's a lot riding on Costco tonight with the earnings expectations this high. There certainly is.

Bob, thank you very much. Let's turn to the bond market now where you could argue it's helping the conditions as well. We've seen an easing and bond yields and then a strong auction today, Rick. Yes, a very strong auction, which sends the signal that investors, as you just described, were watching the equity markets, just scratching their head, thinking, hey, maybe there's a bottoming going on here. Well, time will tell. Look at an intro of tens. You could clearly see that one eastern yields dropped rather dramatically. Open the chart up to two days, a couple of things you should pay attention to.

We held yesterday's 2.70% low, which is very important. and gave today an upward yield bias. And if you open the chart, the reason why? Because yesterday we closed it basically at one month low yield. And today, with equities being up, of course, many are getting brave thinking that yields? Well, are they going to turn around because equities have made a bit of a comeback when they're on the downside? There was a lot of buying going on because there was no other place to hide out. And if you look at these Fed Fund futures, and this is important.

Yesterday, they closed at a five-week high. They're even a little bit higher today after all the tough talk. We see that everybody who had their hand up looking for recession, a lot of those hands have gone down. Does it really change that quickly? Well, all I can tell you is that when Fed fund futures go up, the market's anticipating less fed. Who's going to be right? Tough talk are the markets? We will see at some point down the road.

Kelly, back to you. All right, Rick, thank you very much. Now, speaking of tough, let's turn to the... energy space where oil is higher again, natural gas is higher again. Pippa Stevens with the relentless bad news except for energy investors. Pippa. Hey, Kelly, that's right. Bren is now at a two-month high in approaching 120. Both Brent and WTI are on track for their sixth straight month of gains for the first time since 2011. Now, natural gas remains in focus here just now turning negative ahead of the June contract's expiration today. The July contract is trading at a premium

right around nine bucks. And we focused a lot on prices at the pump, since we noticed that immediately. But with these Nat Gas prices, utility bills are also going up. It varies widely by region and company and depends on factors like the utilities fuel mix and how far out they buy supplies. But Barclays estimates bills will jump between 30 and 40 percent with Nat Gas between six and $7, which were, of course, far above. Now, turning to energy stocks, 15 of the 21 components in the sector hitting multi-year highs today. Conoco, Chevron, EOG, Marathon Petroleum and Pioneer Kelly at all-time highs. That is a great stunt that you just brought to us.

When Barclay says it thinks bills will go up 30 to 40% electricity bills, do they mean for households, for businesses, a little bit of both? So this was for households specifically, but if those bills are going up, everyone's bills are going up. And this is just another big headwin for the economy. And it's something that we'll see playing out a little bit later on since there are different. There's regulated utilities. There's unregulated utilities. So there are a lot of different factors here at play. But basically the bottom line is utility bills are going up. Yeah, absolutely. All right, Pippa, thank you. We appreciate Pippa Stevens. Now, as crude oil prices continue to surge, the UK taking some bold

steps, a 25% windfall tax in oil and gas companies. In a last-ditch effort to ease soaring energy prices. They're using the fund raising to pay for low-income subsidies to consumers. Will it work? Will it be counter-effective? Let's ask Francisco Blanche. He's head of global commodity research at B of A securities. Francisco, great to see you again. Kyle Bass this morning told us he thought this would end up raising prices and harming consumers in the long run. What's your take? Hey, Kelly. I can't disagree with that. Certainly when you tax excess profits that companies, are making at times like this, you're going to force a reduction in investment, which is the only thing that's going to take us out of this hole and get us into a better position in the

medium term. Remember that we have a huge supply shortfall building up. Inventories are at very, very low levels. If you adjust for consumption, we have the lowest stock to use ratios we've had in decades, meaning that we don't really have any buffer to accomplish. the next energy supply shock. So I don't know. I mean, I think the UK government is doing that just to appease consumers, which are obviously getting hit very hard. So in that sense, I understand the policy move.

But also, I think it's very important that we focus on making the right investments so that we prevent farther price spikes over the course of the next two, three, four years. The rule is supposed to have an incentive, Francisco, for investment. So it's supposed to, on the one hand, tax profits, well, on the other hand, making sure it doesn't discourage investment. Do you think they can, you know, put the needle through that thread? You know what I'm trying to say? No, I know what you're trying to say. And they've been talking about potentially allowing for faster depreciation of investments.

So there's still, I think it's still up for debate what they're going to do exactly with that tax windfall, whether some of it's actually going to be. going to be pushed back to the companies in the form of accelerated write downs. But I do think at the end of the day, we need to take a more serious look at what we are doing on the supply side. And remember, this is just before Europe goes into yet another debate on how to crack down on Russian energy exports. Remember, Russian supplies down a million barrels today. oil demand was supposed to grow 3.3 million barrels of day this year.

It's only growing by about 2 million or so or maybe a bit less even because prices have risen so much. So we've already lost a good chunk of our demand recovery, of oil demand recovery, energy demand recovery. Essentially, that means that we're losing our GDP recovery as well. So we are very concerned about that because, again, we could be hitting a wall here from a demand standpoint. We may not be able to keep growing our economy if we don't get that. supply. Well, you talked a moment ago about the need to focus on the supply side of the equation.

What does that imply? What do you mean there? Spell it out. Well, I mean, I think we need to rethink how long the energy transition is going to take, right? And certainly try to take steps that are reasonable within our ability to get to the net zero targets for 2050. But at the same time, making sure that we have enough hydrocarbons for the here and now. Otherwise, we could end up having a very disruptive transition in the next six, 12, 18 months. And essentially, I'm talking about the potential for supply rationing. I'm talking about the potential for forcing, I think, consumers to take a bigger hit.

Remember that for the time being, we are taking all the wrong policy steps. We are subsidizing consumption at the pump in many places around the world, including the U.S., including Europe, by cutting back taxes. And that's doing nothing but just the demand levels to a limited available supplies. So I think we need to first correct the policy errors on the demand side. And then we need to, you know, essentially, as I mentioned, address some of the supply issues, maybe incorporate or entice companies to invest faster here and help us bridge this gap, this huge gap called Russia that we have ahead of us here.

That's very interesting what you just said. I mean, that through policy, for example, by cutting state tax on per gallon tax, you're actually encouraging consumption. And you said in your answer there that we may be looking at supply restrictions. What do you mean by that? In other words, that I would only be allowed to buy a certain number of gallons per week or what? Well, maybe not that dramatic, but I do think. I'm thinking, maybe not dramatic.

I'm thinking actually lower speed limits would be good for starters, right? Interesting. Rather than giving subsidies, I think we may want to ask people to drive a little slower. The U.S. may not have to do this, but I think Europe actually is getting closer to the point where you're going to have to do this. I think gasoline supplies are just getting very, very tight. Diesel supplies are getting very, very tight. and while the U.S. can actually handle, you know, remember, the U.S.

a net energy exporter at the end of the day, but Europe is a huge energy importer. So I do wonder six months from now whether we'll be talking about potentially speed limit restrictions in some parts of Europe. Which is what we had in the 70s, as I recall. I mean, I remember waiting in gas lines in 73, 74 as a result of the war in the Middle East. but but but there were speed they cut the speed limits down from 7075 to 55 nationally and uh you know it was it was pain and now they've all gone back up very interesting uh discussion francisco our weekly our weekly uh well it's usually tuesdays but today thursday with francisco blanche we thank you sir thank you good to be with you man all right musk's plan musks it's a musk c tv his plan to

finance, his Twitter purchase may be unraveling and dragging Tesla down with it. We will explain next. And Tesla is part of the consumer discretionary sector, which is now on pace for its best day since March of 2020. Every stock in that sector is higher. Plus, you can now listen to Power Lunch on the go. Look for us on your favorite podcast app. Follow and listen. That's the direction today. Now, immediately. Let's take a look at shares of Tesla, shall we, bouncing back today by more than 7%, back above 700 bucks a share. Robert Frank joins us now with a look at what that means for Mr. Musk's still pending takeover of Twitter. Robert?

Yeah, a bit of a relief, Tyler, relief rally there, Tyler. Now, of all the issues confronting Elon Musk with that purchase of Twitter, it's the Tesla share price that's causing the biggest financial headache. Those shares down over 40% since he announced that Twitter stake back in April. His net worth down $70 billion this year. He's just barely holding on to that two handle with his net worth at $200 billion. But the decline has just blown up that original funding plan for Twitter. That first plan called for a $12.5 billion margin loan. That is now gone, mainly because as the shares decline, he needed to pledge more for the loan,

and then he ran the risk of a margin call. He did replace some of that loan with investments from Larry Ellison, Sequoia, and a lot of others earlier this month. But the big question now is where is he going to find this other $6 billion? Well, he could sell part of his $55 billion stake in SpaceX. He could recruit a lot more billionaire buddies or get some private equity to chip in. Either way, guys, he's going to have to bring in more economic partners, which could change his overall strategy and the profit goals for Twitter, all of which or most of which because of that Tesla share decline.

We'll see what happens now that they're on the way up again. What's your sense of whether he really still wants it? Yeah, look, he keeps harping on this excuse of the bots. But in this filing last night, he says, I am committed to completing this deal. Remember, that means his equity in this is going to be $33 billion. Not all of it, his, of course, but the equity portion, largely him is going to be by far the bulk of this.

So he's still in. Very interesting. I mean, hard to bet against him, but on this one, he'd be buying like what, a number four player in social media? I mean, where do they rank? Yeah. Yeah, I mean, it's tiny compared to Facebook, TikTok, and all the others.

Facebook, TikTok, YouTube. And we'll also have to see whether he's, yeah, you name it. And we'll also see whether he's done selling Tesla shares. He said back in April, I'm done selling, but, you know, he said that last year, too, and he ended up selling $8.5 billion back in April. So questions for both the Twitter shares and the Tesla shares. All right, Robert, thank you very much. We appreciate it.

And after the break, three stocks, three silver linings. We'll trade names with falling multiples, but improving fundamentals. There's a preview. We're back in a moment. All right. Welcome back. Time now for three stock lunch on today's beverage menu. Credit Suisse out with its own version of the Silver Linings Playbook,

screening 50 stocks with improving fundamentals but declining multiples that could be attractive at today's prices. Among the list are Lenar, VF Corp, and Adobe, three companies from different industries. Let's bring in Quint Taitro, founder and president of Jewel Financial, to help trade them. Quint, welcome. Let's start off with Lenar in the beleaguered home builder segment. Yeah, thanks for having me, first of all. But the home builders are interesting because the stocks are obviously extremely well off highs and they're trading as if we are going to head not just into a housing recession, but a housing depression.

We don't think that's the case. In fact, we think that we're going to start to see some inflationary pressures come down, could potentially give the Fed some pause and therefore the interest rate environment may ease off a bit. Lenar is now trading four, it's not a misquate, speak, four times forward earnings. And even with relatively modest estimates set to grow those earnings by 10%. They have an exceptional balance sheet. And ultimately, again, the stock well off highs trading in this environment, we think it is a great opportunity for investors to pick up for a long-term investment here on a beaten-up play.

All right, picking up Leonard at four and a half times earnings. What about VF Corp, Quint? Yeah, this one, this one's not for me. We talked about this a few weeks ago on the show as an earnings preview, and we said basically that as long as they didn't say anything too surprising, the stock had already baked everything in. So the rebound off the in-line expectations is not all that surprising for us. But let's face it, this is a company selling 12 times,

forward earnings growing those earnings less than 12% with a terrible balance sheet. I mean, they have a tremendous amount of debt. And here's the real problem. Many would be enticed by a 4% dividend, but they're paying out over 50% of their earnings. So it's going to be tough to really take chunks out of that debt and improve that balance sheet when they have such a high payout ratio. So if you're stuck in this name, I think you use this strength to the lighten up or to get out altogether. It is not for me. Well, let's move on to Adobe. Adobe, I would say, is our trading name here. This is a beaten up tech. Again, it kind of goes along with the thesis that we have a little bit for Lanar that the Fed may end up backing off. I know

that's an unpopular belief. And tech can catch a sustained bid. Adobe's now selling 25 times forward earnings. Growing those earnings are roughly the same pace and ultimately has an incredible balance sheet. But again, from a standpoint of a trade, a stop at Lowe's on this name, recent May lows, I think is exceptional risk reward here. All right, Quint, that's an interesting, interesting call on Adobe, VF, and Lenar. Thanks very much, Quint Atro. And Apple is boosting pay to employees. But with unionization talks heating up, is it too little, too late? We have the details right after this. Well, one way to find workers in today's tight labor market is to pay them more. But that only works if you have the money.

And Apple certainly has plenty of that. And it is raising wages for workers, including $22 an hour for the Apple store employees. Let's bring in Steve Kovac now for more. Where does this come from? Why do they feel they need to do it now? Yeah, well, Apple tells me in a statement, this is all about an annual review. But it's a coincidence, let's call it, that it happens a week before these first union votes they're going to start rolling in at this retail store they have in a Cumberland Mall in Atlanta,

Georgia. Those workers are asking for actually something similar to around $22,000, $22 an hour. So they might be getting what they want before they even have to cast a vote. So it's going to be really interesting to see when the voting starts and gets counted the following week, if this kind of puts a wet blanket on these efforts to unionize. Are these raises only for retail employees? It's across the board. So they're making a big deal out of the retail employee thing, again, because of this unionization thing happening at that store and three other stores, but it's across the board globally, every Apple employee the budget is going up for salaries. We all saw this narrative starting to play out and gain some traction.

If you go back a couple months ago with wage gains at Amazon and the likes, but lately it's felt more like that tide is turning. And Amazon's been shuttering some of the warehouses that it added during the pandemic. And Apple has held up relatively better than the other companies. But I guess it's an encouraging sign that they, still feel like the labor tightness is a much bigger issue for them than any kind of labor markets. Yeah, exactly. And you've got to keep in mind. So they have these two factors working against them, right? The labor tightness and inflation. What people are talking about, the employees are talking

about is we need more money to combat inflation. We've heard this story a million times across all companies. I was talking to our Courtney Reagan earlier this morning. And she's, she was telling me, per square foot, Apple stores make more money than any other retail store. And plus, we know how much cash Apple has on hand. So if any company can set an example and afford to do that for retail workers, it's going to be Apple. You go into a mall and lots of stores may well be empty, but Apple's stores never are empty. That's right. Yeah. They're always, they're always piled up. Do we expect that this is going to be something that is going to spread throughout the tech world or? It has a bit, Tyler. So Microsoft, I know today they announced that they're going to pull back or slow down hiring in some

segments, but a few weeks ago, Microsoft did a very similar move. Now, they don't have a retail presence, like Apple does, but for their salaried employees, just like Apple's doing, they're raising prices. And you've got to keep in mind, Microsoft shares are down over 20%. Apple shares are down about 20% this year. So that's a good retention thing to keep employees at Apple, at Microsoft, so they don't go elsewhere, or start a new startup and disrupt the companies that work for. All right, Steve, thank you very much. Steve, Colac, we appreciate it.

And we like sitting over here. Yeah, it's nice, a new location. Love it. Thanks for watching, PowerLone.