Power Lunch - The federal gas tax, buy now pay never? and three-stock lunch. 6/22/22

Episode Date: June 22, 2022

President Biden proposes to suspend the federal gas tax but immediate reaction on Capitol Hill was lukewarm. Plus, why some buy now, pay later delinquencies are rising. And, the trade on Altria, following reports the FDA could pull Juul off the U.S. market. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome. We have a developing story out of Washington this afternoon. President Biden to officially propose a three-month gas tax holiday within the next hour or so. Record gas prices, of course, have contributed to the highest inflation rate in 40 years. One of the biggest challenges facing the administration. Now, the proposal faces an uphill battle on Capitol Hill. Critics say it's going to backfire and we'll dive into that debate. but first to Kelly and a check on where the market stand at this out. Tyler, thank you. And energy absolutely plays into the story. We're seeing them still largely trading in tandem. At least this morning, both were in the red energy and stocks.

But this afternoon, a little bit different story. Stocks in positive territory, even after hawkish comments from Fed Chair Powell, even after he didn't rule out a full point rate hike if they have to to fight inflation, the Dow's up 128, the S&Ps up 20, the NASDAQ, up 69. Ahead of the president's speech, oil prices are still under pressure. crewed back to around, now it's up to back around 107, but we were down around 105 earlier, and part because it is the first day of the new monthly futures contract. Gasoline, which had been in the red. Look at this. Gasoline futures now higher on the day that doesn't exactly

point to an effective solution to high prices for the moment, but still really underscoring a tight market that might see more demand if consumers get a little bit of a break. Energy is the worst performing sector still today. down about 3% names from Marathon to APA to Conoco, Philips, all under pressure. Tyler? All right, the problem is supply, folks. And if you reduce the gas tax, you do nothing to help supply. You might help demand, but you have nothing to help supply.

Let's look at the prices right now. National average for gas sits just under $5 a gallon. Remember it hit that price earlier this month. $5 a gallon. Wonder why the president is worried? Well, there are midterms coming up. His popularity ratings are going down with every penny gas prices go up. One month ago, just $4.59.

So in just the past month, you've got a 40 cents increase in the gas price. And a year ago, it was $3.7. Doesn't that look nice by today's lens? Suspending the federal gas tax was last proposed back in 2008. It's never happened. Critics of the idea say it won't help. And the proposal comes one day before the CEOs of, of major oil and gas companies are set to meet with the Energy Secretary.

The president's set to speak over the next hour or so about these rising prices and what he has in mind to do for it. Amon Javvers with more on this story. Hi, Amon. Hi, Tyler. Well, we are told that the president is expected to speak now momentarily. So keep your eyes on that monitor where you just showed the podium in the South Court auditorium over at the White House where we do expect the president to step up any minute now.

The president is going to call for a gas tax holiday. we're told that it will extend through September, and here we see the president now approaching the lectern. So I'll step aside. I'd like to talk to you about the actions I'm announcing to bring down gas prices. First, today I'm calling on Congress to suspend the federal gas tax for the next 90 days through the busy summer season, busy travel season. Here's what that means. Every time you go to the gas station to fill your tank, the federal government charges an 18-cent tax per gallon of gas that you purchase. and a 24-cent tax per gallon of diesel you purchase.

It's a tax that's been around for 90 years. It's important because we use it for the Highway Trust Fund to keep our highways going. But what I'm proposing is suspending the federal gas tax without affecting the Highway Trust Fund. And here's how we do that. With the tax revenues up this year and our deficit down over $1.6 trillion this year, alone, we'll still be able to fix our highways and bring down prices of gas. We can do both at the same time. By suspending the 18 cents federal gas tax for the next 90 days, we can bring down the price of gas and give families just a little bit of relief. I call on the companies

to pass this along every penny of this 18 cents reduction to the consumers. There's no time now for profiteering. There are a number of other proposals by Democrats in the House and the Senate, and I hope my call for action can help move those proposals forward as well. But we can also cut gas prices even more in another way. That's why the second action I'm taking is calling on states to either suspend the state gas tax as well or find other ways to deliver some relief. state gas taxes average 30 cents per gallon. Already, some states have acted.

In Connecticut and New York, the governors have temporarily suspended their gas tax as well. In Illinois and Colorado, governors delayed theirs to give families a bit more breathing room as well. In Minnesota, Governor Waltz proposes using state budget surpluses

to give households a rebate that will help them pay for gas at the pump or other essential needs. I'm calling on more states and local governments to take actions like these. Thanks to our historic economic recovery, which fortified state budgets that had been hurt in the pandemic,

states are now in a strong position to be able to afford to take some of these actions. Now, I fully understand that a gas tax holiday alone is not going to fix the problem, but it will provide family some immediate relief just a little bit of breathing, as we continue working to bring down prices for the long haul.

Third, I'm calling on the industry to refine more oil into gasoline and to bring down gas prices. Let me explain. I know my Republican friends claim we're not producing enough oil, and I'm limiting oil production. Quite frankly, that's nonsense. Here's the truth. Just this month, America produced 12 million barrels of oil.

per day. That's the highest, that's higher than average under my predecessor. And we're on track to set a new record for production next year. Plus, I've added to that supply of oil by releasing a record 1 million barrels of oil per day from what's called the Strategic Petroleum Reserve. In fact, I just led the world to coordinate the largest release of global oil reserves in history, including from other countries. In total, that's 240 million barrels to boost global supply. And Republicans falsely claim

that I'm blocking production on federal lands. But again, that's nonsense. Industry has more approved permits for production on federal lands than they can possibly use. That's a fact. My administration also directed the sale of gasoline

using homegrown biofuels, E15 this summer, which will boost gasoline supplies and lower the price at thousands of gas stations across America. And I welcome the recent announcement from what's known as the OPEC Plus, a group of nearly two dozen oil-producing nations to increase global oil supply. The bottom line is we are setting records in terms of American energy production. We're supplementing that supply with a release from our oil reserves. So the issue isn't oil production alone. The problem is the refining of that oil in the gas at the pump. During the pandemic, some oil and gas companies shut down refining facilities. Last week, I sent a letter to the CEOs of the largest oil refining

companies asking them to work with my administration to bring refineries back online to get more gas, to the pump at lower prices. The Secretary of Energy, Jennifer Granholm, and members of my team, will be meeting with many of these refining companies tomorrow. And I hope they'll come up at the table with some real ideas and practical steps in the near term. And I'm prepared to act quickly and decisively

on the recommendations if they make sense to address the immediate challenge in front of us and the American people. Finally, when the cost of oil does come down, does come down. We need the price at the gas stations that they charge at the pump to come down as well. For example, in the last two weeks, the price of oil has fallen by more than $10 a barrel. Normally, this reduced the cost of the pump about 25 cents a gallon. Yet, so far, gas stations have only reduced prices by a few cents a gallon. Some haven't reduced prices at all.

I've heard plenty of explanations from companies and economists about why it normally takes time for these price reductions to reach the consumer. I might note that the price of a barrel of oil goes up, it doesn't take much time for the price at the pump to go up. So let's be honest with one another. My message is simple to the companies running gas stations and setting those prices at the pump. This is a time of war, global peril. Ukraine. These are not normal times. Bring down the price you are charging at the pump to reflect the cost you are paying for the product. Do it now. Do it today. Your customers, the American people, they need relief now. So let me summarize. Today I'm calling for a federal gas tax holiday, state gas tax holiday for the equivalent relief to customers.

Oil companies to use their profits to increase refining capacity rather than buy back their own stock. Gas stations to pass along the decree, not to decree, but the decrease in oil prices to lower prices at the pump. And together, these actions could help drop the price at the pump by up to $1 a gallon or more. It doesn't reduce all the pain, but it would be a big help. I'm doing my part. I want the Congress, states, and the industry to do their part as well. And let's remember how we got here. Putin invaded Ukraine.

Putin invaded Ukraine with 100,000 forces. Just look at the facts. Since the start of the war in Ukraine this year, gas prices have risen by almost $2 a gallon in the United States and sometimes more around the world. But it wasn't just Putin's invasion of Ukraine. It was refusal of the United States and the rest of the free world to let Putin get away with something we haven't seen since World War II. I said at the time, siding with Ukraine during the most serious aggression in Europe

since World War II, defending freedom, defending democracy, was not going to go without cost for the American people and the rest of the free world. We were going to have to pay a price as well in the cost of military equipment, economic assistance, humanitarian relief, and sanctioned Russian banking industries. Russia is also the largest oil, one of the largest oil producers in the world. We cut off Russian oil into the United States, and our partners in Europe did the same, knowing that we would see higher gas prices. We could have turned a blind eye to Putin's murderous ways.

and the price of gas wouldn't have spiked the way it has. I believe that would have been wrong. I believe that then, I believe then and I believe now. The free world had no choice. America could not stand by and the West could not have stood by, although some suggested at the time, and just watch Putin's tanks rolling Ukraine and seize a sovereign country. If we did stand by, Putin wouldn't have stopped.

Putin would have kept going, and we'd face an even steeper price. And it wasn't just me. The American people understood. The American people rose to the moment. The American people did what they always have done, defend freedom around the world. They chose to stand with the people of Ukraine. We had near unanimous support in the Congress, Democrats, Republicans, and independents for supporting Ukraine. knowing full well the cost.

So for all those Republicans in Congress, criticize me today for high gas prices in America, are you now saying we were wrong to support Ukraine? Are you saying we were wrong to stand up to Putin? Are you saying that we would rather have lower gas prices in America and Putin's iron fist in Europe? I don't believe that. Look, I get the easy politics of the attack.

I get that. But the simple truth is gas prices are up almost $2 a gallon because Vladimir Putin's ruthless attack on Ukraine, and we wouldn't let him get away with it. We're doing everything we can to reduce this pain at the pump now. And of those experiences have shown us anything, it's that we need to grow and harness more energy here at home. Let's lower the price of electric vehicles,

so we never have to pay at the pump in the first place. Major auto companies are preparing for 50% of future sales to be electric vehicles by 2030, 100% by 2035. We're already building secure supply chains to build these electric vehicles here in America, and we're investing almost $100 billion in public transit and rail. For all the studies show that it will take millions of cars off the road

and significantly reduce pollution if there's a serious transportation system available. Let's keep accelerating our deployment of homegrown resources, sources of energy like solar and wind and nuclear and hydrogen and carbon capture stories, and keep developing a battery technologies so we can store that power we need when the sun doesn't shine or the wind doesn't blow. Folks, let's make sure we're never again forced to pay the price of a menacing dictator halfway around the world. We can deal with this immediate crisis of high gas prices and still seize the clean energy future. We're Americans. We can do both. We have the most qualified people in the world. Let me close with this. Even as we lead the world in defending democracy

and standing up to a brutal autocrat. There are actions we can take to help American families now. We have taken them. We are taking them. The federal gas tax holiday, state gas tax holiday, bringing back refineries,

putting them back online. We just have to keep going. I promise you I'm doing everything possible, everything possible to bring the price of energy down, gas prices down. I want to make sure we all work this together. May God bless you all and may God protect our troops. Thank you very much. That was President Biden officially proposing his break on federal gas taxes for the next three months

as he urges gasoline stations to drop the price as quickly as possible. Let's get to Amon Javers to wrap the key headlines. As we note, Amen, that the markets, we have stocks at fresh session highs. The Dow's up more than 200 points. Kelly, the president here laying out his proposal what he's going to do about this problem of high gas prices and also who he blames for the high gas prices. That's Vladimir Putin. A big chunk of this message to the American people today was all about who's responsible for this. The president's saying, okay, sure, Republicans want to blame me, but it's not me. It's Vladimir Putin and his invasion of Ukraine that's at the root of this. He returned to that theme time and time again.

So this is as much about proposing a solution as it is solving a political problem for this president of the United States, who is getting an increasing amount of blowback from the public on these high gas prices that we're seeing across the country. The question is whether this idea, though, is going to be able to go anywhere up on Capitol Hill. We already saw an announcement from the Democratic chairman of the House Transportation Committee today, pouring cold water on the idea that President Biden just laid out, the Democratic chairman saying, although well-intentioned, this policy would at best achieve only minuscule relief while blowing a $10 billion hole in the Highway Trust Fund. So some skepticism among his fellow Democrats up on Capitol Hill, not clear where the Republican votes are going to come from for this proposal as well.

So the president here calling on Congress to do something that Congress in the end may decide not to do. So some political difficulty there in selling a political solution if you can't get Congress to pass it. So this is a White House that is decided clearly they need to take action. They need to be seen as taking action, but that action is going to be difficult to execute, Kelly. All right. Damon Javers, reporting from Washington, and we'll be following, of course, this story throughout the afternoon. And right now with Kevin Book, managing director at Clearview Energy Partners and Dan Pickering, Chief Investment Officer at Pickering Energy Partners. Kevin, let me begin by asking you, the president said several times there that one of the keys to increasing supply will be to increase refining capacity.

As I understand it, refineries in the United States are running very close to full capacity. That's number one. The president, correct me if I'm wrong. Number two, the president says, we need to bring back online every refinery that is offline. How many of them are there and how quickly could that be done? Tyler, to the first point, you're absolutely right. The refinery is in the major refining centers. A Gulf of Mexico running at 95% capacity utilization higher than comparable weeks in previous years.

Also, the East Coast 98%. That is flat out. So if the president is calling on the major refining centers to run more, there isn't much more to run. But as you point out, if he's calling for mothballed refineries to come back, there's only so much that can be done there too. Some of them have gone to conversion for renewable diesel, a very large East Coast refinery, Philadelphia Energy Solutions, basically caught fire and has been. shut down. So we're talking about probably a universe of one or two. That is something that could take months. It is something that is sooner than building a new refinery, and it gets around environmental permitting that might be associated with expansions, but not necessarily an immediate turnaround. If I'm not mistaken, there hasn't been a new refinery either licensed or built in this country in maybe two decades. Am I right on that? No major one. No. And the reason is really because of

the environmental permitting burden. And more recently, because putting capital to work when you're told it's going to be stranded is not a very compelling investment thesis. Dan, let me turn to you. One of the things that caught my ear there, apart from the president's mentioning that nuclear power is going to be part of the energy mix going forward, which I thought was an interesting thing, was this line that the price at the pump needs to reflect the cost of the product

That's a shot at the oil companies that suggests that they are increasing their pump prices beyond the increase in crude. Explain to me what he's talking about and whether that allegation holds any water. Yeah, Tyler, a lot to unpack in that speech. I don't think that it's an accurate statement to say that the oil companies are pushing price beyond what the, inflation in the base of oil price. We've seen supply and demand very tight diesel and gasoline competing for that refining barrel. And the reality is President Biden's absolutely correct. The Ukraine-Russia situation is tacked on a buck plus to a gallon of gasoline for consumers.

But the reality here is that we were in a tight supply demand environment already. Demand was fine at 375 a gallon. It's not at $5 a gallon. And this is a a global situation. We could turn on all the idle capacity in the U.S. We would still have a tight market and high prices. So a gas tax is it's an action. It's not a solution, relieving the gas tax, but the reality here is we've got to get more supply into the global system and we've got to recognize it as a global system. All right, then let me, let me turn back. And I'm really fascinated by that linkage between the oil that comes out of the ground. Then it is refined and it is sold on a wholesale market to somebody, then it is distributed, that there's a linkage between

these prices, and it's pretty fixed. It's not like somebody's, and then there's supply and it's not like somebody's jacking on extra price to gouge in most cases. That's my opinion, but be that as it may. Let me go back to you, Kevin Book, and that is this. If you reduce the tax on a gallon of gas, the federal tax, the state tax, aren't you in effect doing the opposite of what you need to do, which is to say that you are increasing the, you will then decrease, increase, excuse me, the demand for gasoline while it does nothing to help you with supply. So the result would be that the basic crude cost would go up, not down. Yeah, when you get right down to it, inducing or preserving demand doesn't balance the market

more quickly. It does offer some demonstrable evidence that the White House, has done something or in this case called on Congress to do something. In terms of magnitude, if you go over the Biden term from Jan 2021 to date through today, we're talking about almost 2% of disposable personal income per capita eroded by gasoline price increases. A 90-day holiday of the federal gasoline tax is single basis points. So a fraction of a percent offset to that. So if we are going to see demand response to price, this isn't going to been a blunted a lot. But your point is well taken. Anything you do to preserve demand doesn't balance the market. Yeah, doesn't balance the market at all, really, it seems to me. Anyhow,

gentlemen, thank you very much. Fascinating topic. The dynamics of the oil market, tough to get my head around, but you've helped me. Mr. Book, Mr. Pickering, thank you. And with gas prices, you got it, guys. Being pulled front and center into the D.C. debate, big oil under the microscope. Tonight at 8 p.m., the premiere of David Faber's Inside Look at Exxon, He had unprecedented access to executives, to workers, to facilities. Watch the full documentary. Nothing could be more timely than Exxon Mobil at the Crossroads tonight at 8 p.m. Eastern. And we have stocks moving to session highs this afternoon after the president's speech about gas prices. That was up more than 200 a moment ago.

Interestingly enough, we also turned positive this morning after Fed Chair Powell's tough talk on inflation, telling lawmakers it's essential that the central bank brings it down. Our next guest says he expects better trends and is investing for the long term. Joining us now is Mike Bailey of FB Capital Partners. All right, Mike, welcome to you. I don't know if you're especially bullish on energy, but anything you've heard today that would change your mind on where you want to be in this market? Yeah, no, it's some interesting comments from the president and then your prior guest.

I think it does feed back into three of the themes we're looking at and frankly, sort of ways to overcome some of the fear that's driving the bare market. inflation is definitely the number one theme. So energy is, you know, front and center right there. The other two are really what the Fed's going to do and then earnings. So, you know, to your point, at this point, it really, nothing that we've heard makes a sort of major change in our opinion. We could see a little bit of change on the margin. Frankly, you know, just the president coming out there and saying we're doing our best, we're trying to impact oil prices and gas prices. Maybe there's a little bit of impact on consumer sentiment. Hard to say, but I think I would go with your last

guests, I think just really pervasive market forces. That's really what's going to be driving gas prices. I think supply. I would agree. I think that's probably the biggest kicker what we need. Do you do want to see a lower price of the pump? Right. And yet, if we don't get that, you still, one of your picks here is a consumer facing named Church and Dwight, you confident a name like that can hold up, continue to hold up? Yeah, I think so. So one of the things that we look for generally a quality consumer business, something with bearers to entry. One of the things that we've seen is a big theme of consumers trading down. So Target blew up on that. Other retailers are seeing it. So when you look at the product companies, you want to find a business where it might

be a little bit tougher to trade down. Something like a Church and Dwight, they've got laundry detergent, they've got vitamins, other things, pet care. Only about 12% of their categories have a private label competitor. That's something where, again, within consumer, it can get tricky. People can switch to, you know, store brands very, very rapidly. That can really hit you on margins. So again, something like a church and Dwight stable business, not a ton of low-end competition. I think that's something that can recover, even if some of their input prices rise up. Yeah, your other couple of other names here, Adobe American Tower. These are a little bit more B-to-B facing. Would you say that the path of interest rates matters hugely to you from here?

So for those particular stocks, I think a little bit more for American Tower. So it's, you know, kind of, is it a telecom company? Is it a tower? Is it a reed? Technically, it is a reet. So if interest rates keep moving up, you know, in the short term, that does hit your real estate investment trust. So that is something that we're thinking about. However, we do look a little bit longer term. And typically, you know, these big tower companies, it's an oligopoly. So not a lot of price competition. And in fact, they have these, you know, escalators in terms of overtime and raising prices. So I think that that's, that can insulate them. And the base business is doing just fine. You've got mobile data, you've got 5G that's really helping demand.

So from rising interest rates, we're not too concerned there. The other one is Adobe, and a lot of sort of organic growth going on. They don't do a lot of deals. They don't need to raise money. I think debt or higher interest is not really concerned for them. It's frankly just the economy. Are people still out buying and shopping and do sellers need to create really fancy websites and need a lot of creative software?

If the answer is yes, you're going to stick with Adobe. Yeah, and their international exposure of the dollar factor there as well. Mike, thanks for joining us today to react. We really appreciate it. Thank you. Mike Bailey with his thoughts on the market. And we have a news alert for you. Sources are telling CNBC's Lauren Thomas that retail holding company franchise group is conveying, lowering its bid for coals to closer to $50 a share from about $60.

The original bid made earlier this month values coal at about $8 billion. The two companies then entered a three-week window during which they can firm up any due diligence and finalize financing arrangement. that ends this weekend. So perhaps we're seeing some movement. The shares are down 9% now for Coles, Tyler. That is a big move down. All right, let's get to Contessa Brewer now for a CNBC news update.

Contessa. Hello there, Tyler. Good afternoon, everybody. The mayor of Yvaldi, Texas announced plans to demolish the elementary school where a gunman killed 19 students and two teachers last month. Mayor Don McLaughlin said at a council meeting, no child or teachers should be asked to return to Rob Elementary School. We don't know when that demolition

might happen. North Dakota Republican Senator Kevin Kramer suffered a serious hand injury and may need to have a finger amputated, according to his office. Kramer tweeted he was working in his yard when he got hurt, but he didn't explain further. He will remain in North Dakota to receive medical care. And media titan, Rupert Murdoch, and his wife, actress Jerry Hall, are getting a divorce. That's according to the New York Times. Murdoch's divorce would be his fourth. It is unlikely to alter the ownership structure of the businesses that he holds stakes in, which included. of course the parent companies of Fox News and the Wall Street Journal. Murdoch and Hall wed in March 2016 at a centuries old mansion in central London. Tyler, Kelly. Thank you very much. Contessa.

Ahead on power lunch. Two big warnings for Missouho. First, by now, pay never, or the firm seen growing delinquencies and what it could mean for a firm. Well, plus crypto fatigue, Missouho also saying Coinbase's volumes surge during crypto sell-offs, but don't move during During rallies, is the buying party over? We'll speak to the analyst behind both of these calls next. And in this version of the CNBC, I test, 90 minutes left in the trading day, and we want to get you caught up on the market. Stocks, bonds, commodities, everything.

And the latest bit of bad news for the buy now, pay later companies. Let's turn to Christina Partsenevolous on stocks at the NASDAQ. Christina. I love the energy. So the NASDAQ in the green right now after we are seeing a decline in yields, although the tenure is still above the 3% mark. You're seeing lower oil places and no new hawkish commentary on rates from Jay Powell.

The biggest drops today, though, coming from Chinese technology like JD.com, Pinduodoo, Buydu, I want to focus on JD.com down over almost 3.5%. They had their big retail birthday event that they do every year on June 18th, but this year it brought in the slowest sales growth in about five years. So it seems like the lengthy lockdown's playing a role

on consumer sentiment, especially in China. Then we've got hotel chain Marriott. Down about two and a half, oh, almost inching closer to 3% right now. Overall, hotels are lagging on this concern about a slowdown in consumer spending. It's down 18% in the past three months. You can see other hotels also training downwards. And we can't talk about the NASDAQ without bringing up semiconductors. And unfortunately, they're not doing so great.

We got Qualcomm, ASML holding, Skyworks, all struggling today. The Sox, which is a semiconductor ETF, currently tracking for its worst calendar quarter since 2008. Let's talk good. Moderna, DocuSign, Netflix, the biggest winners today on the NASDAQ, and we've got some company news. Moderna's new bi-valiant vaccine appears to work against Omicron's sub-variants, so that's trending over 6% higher. Then you've got DocuSign CEO Dan Springer stepping down as the company is kind of struggling with slowdown and growth, but the stock is up over 5%. And lastly, several software and cyber names that are top gainers so far, like Intuit, Octa, Crowdstrike, Autodesk, all trending above 2% or more. But they're all still between 40 and 70% off their most recent highs.

So unfortunately, they've got a long way to go. Tyler, back over to you. Christina, thank you very much. Let's go to Rick Santelli in Chicago as the bond market reacts to Chair Powell. Rick. You know, everyone I talked to, whether it was by email, whether it was by texting or voice, thought that his talk today in a Q&A was quite hawkish. It was really hard to disagree with that.

But yet, as you looked at interest rates and equity markets, it was hard to square. Well, here's the reason, because interest rates had a huge drop today, and that drop really started before our time zone. Look at a 24 hour of our two-year. Then look at a two-day of our two-year. We're now down 14 and a half basis points. Look at a 24-hour tens and a two-day of tens. Yes, we are down over a dozen basis points,

and considering we had a spike last week all the way up at 350 really drives home the point, considering we're at 315, not 350 now. And if you look at GILTS overseas, well, they hovered around their clothes at 250. That's down 25 base points from their spike last week. And boon yields, they were down 14 basis points around 163. That's down 30 basis points from their spike last week. So the recessionary issues out there may not be valid, may not be borne out by yield curves, it doesn't matter. They're borne out by fingers that are hitting the buy button on the sovereign side,

pushing yields down, and they're hitting the buy button on equities, pushing prices up. Tyler, all right, you got that. Thank you, Rick Santelli. President Biden speaking today on gas prices within just the past half hour. So proposing now a federal gas tax holiday. It's got to go through Congress where its possibilities are iffy at best. Let's see how oil is trading right now following those remarks. Pippa Sevens is at our commodity desk. Pippa. Hey, Tyler, oil is in the red, but well off the lows of the day, which at one point saw WTI down 7% and under 102.

This, of course, comes, as you mentioned, as Biden calls on Congress to temporarily suspend the federal gas tax. But that's not what is driving today's decline. This is about recession fears, which are hitting all asset classes. And as Goldman's Jeff Curry said today on square. walk box. There are also technical elements at play here, given the huge spread between oil and everything else. So ultimately, what this means is that fundamentals are not driving this action. With that in mind, let's check on prices. WTI down 3.6% at 10553, Brent crew dropping 3% to 11119.

And of course, Biden saying that he's doing everything possible to bring down gas prices, but there are many people who say such a move is more like a Band-Aid and doesn't act. actually fix the structural issues in the market. Harvard's Jason Furman saying it will mean higher prices for producers instead of savings for consumers. Tyler, back to you. All right. Thank you very much. Pippa Stevens reporting. A new report from Mizzuho shows that by now, pay later delinquencies are accelerating and June will be a critical month for firms like a firm, which has seen its stock drop 80 percent so far this year. Joining us is the analyst behind that report. Mizzuos Dolev, Dan, welcome. It is good to see you. To me, a firm reminds me of a horse that won the

Triple Crown. This has not been a triple crown stock over the past few months. It is down a lot. Forgive me for being sarcastic. But you could have seen this one coming when the economy runs into stumbling blocks, possible recession, higher prices. You could see that delinquencies were going to go up, right? Yeah. And I, you know, forgive you for being sarcastic as always. Look, I think, we're talking about two separate things here. We're talking about a cyclical trend and not really good trends that we're seeing right now with delinquencies, the 30 plus day delinquencies or the 30-day delinquencies moving up. By the way, the 60 and 90 are still very stable. And then the other part, which is what our call is predicated upon, it's the secular long-term disruption of credit by

very sophisticated by now-pay-later companies like a firm. So I would want to separate the cyclical, which we may or may not get into more trouble. I guess the... this everyone has a view and the long-term secular share gain from credit, which is why we're such big believers in the firm. So this is a buy for you, this stock? Yes, 100%. And explain once again, you've got a price target. It's right now it's $19 or thereabouts. You've got a price target of 50. What takes it there? Look, again, I don't know. I don't have a crystal ball. I don't know what the economy, how bad, how bad, you know, the recession, yes, no soft, hard lending. I have no clue. What I do know is that buy now, pay later, and especially sophisticated firms like a firm,

they are targeting at a new generation, the Gen Z generation that actually does like to trade or does like to, you know, buy things using this capability. They don't like credit. This is a replacement for credit. This is actually taking share from the large banks, which are issuing credit cards. And that's the reason I think the stock could like more than double. Because once we get out of this. And I don't know how it's going to pan out. But once we get out of this, you know, they are the go-to market leader in Binaw P. Later in the U.S., and they could literally be the visa or the mastercard of Binaw P. Later. That's why I'm so confident on my call on this. So what distinguishes, forgive me for being ignorant on this, or at least sort of partly

ignorant, which I usually am, but these companies, what distinguishes them from credit card companies is that they do not charge interest on the open balance, correct? You have. a schedule. You pay X dollars in three months, X more dollars in more three months, X more dollars in three months after that. It's not interest they're making money off of. They're basically, they're a lot of separate, you know, ways to do this. One is interest free. One is interest bearing. For example, with Amazon, it's a, you know, zero percent commission to Amazon, but they charge interest. I think what distinguishes them is sort of that pay as you go, right? So it's like a pay as you go, whereas you're getting stuff on a

product by product basis and the underwriting and the understanding of the consumer is the key competitive advantage because credit cards are archaic. They're using, you know, FICO, which was invented years ago. And there's a whole new generation, which I am not part of, which likes to transact with this. And I think what they're doing is they're catering to that generation and they're capturing the mind share. And that's so much more powerful than any particular cycle. And I cannot stress it enough. They're a huge market. leader in this. And if, you know, if they can weather this. And I hope they do, it'll double. And if you're not part of that generation, by golly, I'm certainly not part of that generation.

Let's move on to crypto, where the phrase of the day is crypto fatigue. What do you mean there? And how is that translating into stock prices for companies like Coinbase and others? So I, very sharp, you know, you turn from my bullish view on a firm. I could not be more bearish on Coinbase as I am today. And what we feared for, you know, for months or a year since we've initiated coverage on Coinbase is that crypto transaction fees are going to zero, right? And, you know, we didn't know that the news about Binance is going to hit today, but this is actually materializing. And you're seeing, you know, crypto fees actually eventually going down. And this is like 90% of what Coinbase does.

The note that we wrote today actually shows you that the down days have much more voluntary. compared to the up days on Bitcoin down days, the volumes are 3x more dramatic than on up days, which has never been like that in history, which means that people are not buying the dip. And that's very important. That's the crypto fatigue that we're talking about. Something has happened with the consumer. Yeah, the Fed. Dan, thank you so much.

Very insightful, very enlightening. Thank you. And we'll have you back soon. Dan Dolla. Appreciate it. Thank you. Speaking of which, as an ad-conomic recession coming, With fears over a slowdown growing, could added subscriber-driven businesses also be at risk.

We'll explore that. Plus, the FDA ordering Jewel to pull e-cigarettes off shelves. Altria shares lower. We hit it in today's three-stock lunch. We're back in a moment. Welcome back. A lot of areas of the economy bracing or worried about a recession, especially those consumer-facing companies right now.

Stocks of those that rely on advertising have been hit hard this year, like meta, snap, and Spotify, all down by more than 50% since January. So what's the outlook at the industry's largest conference of the year? Julia Borson is out at Can Lion at the Advertising Festival, and she has a look for us. Julia? Well, Kelly, despite a range of macroeconomic headwinds, as well as the sell-off, the very dramatic sell-off in those ad-driven stocks, the outlook here for the future of advertising is very much bullish, as the digital platforms expect to continue to gain share from traditional.

advertising. Now Twitter, which announced a big partnership with Shopify here in Cannes. They told us they're reassuring advertisers that they're committed to building their ad business and brand safety on the platform, despite all the noise around Elon Musk's pending purchase to the company. We've built a very robust ads business, one that for any buyer that were to take over this company would also want to maintain as a healthy part of a multifaceted diverse business. And that is one of the things that we've shared with our customers and why we are so, so committed still to the commitments that we've made around brand safety. TikTok is here for only the second time. It's ad chief telling me that they continue to see massive growth potential as brands chase consumers onto their platform, despite those broader headwinds.

Now, another company with a fast growing ad business is Spotify. It's showcasing the fact that it's the leading audio ad platform with its massive presence here. performances on the beach post Malone will be performing in just a couple hours. I sat down with Spotify's chief content and advertising officer Don Ostraff. She said her business is benefiting from that shift from traditional to digital formats. Obviously we're very cognizant of what's happening in the world and all the talk about there being a lot of headwinds but as of now we have not seen or felt any of those headwinds specifically through the advertising business. Now that's not to say things won't change, but it's to say as of now, it's still been pretty consistent and been

fairly positive. That positive outlook was echoed by NBC Universal CEO Jeff Shell. I interviewed him on the main stage here, and he talked about the strength they're seeing still in that ad spending. Now, you can find more from my interviews here in Cannes on CNBC.com. Kelly? All right, I'll pick it up for you. Julia, thank you very much.

Wish I were there. Up next, three big news. movers in today's three-stock lunch. We're going to talk about Altria. You know what's happening there with Jewel. We'll talk about Kraft Heinz as well and Roku. Our trader will tell you whether to buy, to sell, to hold, and a programming note tonight on Mad Money. Jim Kramer will talk with Meta's Mark Zuckerberg. The interview like none you've ever seen before, it takes place in the Metaverse. Kramer and Zuckerberg must see TV. Welcome back, everybody. More news out of Washington.

Following the president's call to Congress to suspend the federal gas tax, members of Congress are already commenting. House Speaker Nancy Pelosi saying, quote, we will see where the consensus lies on a path forward for the president's proposal in the House and Senate. Republican Senator John Thune from South Dakota saying Biden's gas tax holiday is dead on arrival in Congress, Tyler. Yeah, you wonder whether how much of that verdict on it comes from the political side, which, of course that there's a, the president's, the Republic, the GOP wants to do nothing that would help the president's popularity rating heading into a, into a midterm election. On the other hand, there are legitimate concerns about whether it's good policy or not. And somewhat fortunately, we are seeing a little bit of a break in gasoline prices and oil prices lately, but as we've been talking about,

those refinery margins are still really large, and that's kind of keeping that price elevated, and those pressures don't look. And as our guests earlier said, the refineries are working full out. So where the price is going up is in that spread between what crude costs and what issues from the refinery. Coming up, three stocks, three trades, three stock lunch. It's time for today's three stock lunch. We've got three movers starting with Altria, lower after a Wall Street Journal report that the FDA will order Jewel to take its e-s off the U.S. market. Those shares down 9%. Roku up 4.5% and up 13 days on a couple of positive analyst comments and the CEO saying its ad business is strong. Kraft Hines, higher by 2% today after BMO upgraded the stock and sees

25% upside from here. Let's bring in David Traynor. He's the CEO of new constructs and investment research firm. And David, Altria, what would you do with the stock? We think that's a buy. Look, this has been a major, major free cash flow generator, 10% plus free cash flow yield consistently over the years. And the stock price has really beat down. I mean, it implies the profits will permanently declined by 50%. So risk reward is really good. And when it comes to competitive advantage, no one or very few companies in the history of the world have been better at branding, marketing, and distributing their products than Alria. Let's move on to another category, another stock, Roku. Yeah, Roku. I mean, you know, what's there? I mean, is it really that

differentiated a product? And look, they've never met any money cash flow wise. I don't know that they ever will, especially if they couldn't do it during the pandemic. And yet the stock, price implies that profits will increase by over 300%. So sort of the opposite of Altria, never made money with the stock price that's going to imply cash flows or profits will dramatically expand. And so we think risk reward is really bad there, recommend selling. All right. So one buy, one sell. What about Kraftines? I'm in the middle ground there, right? This has been a profitable business, but profits are in decline. And it's relatively undifferentiated. It's commoditized for the most part. There's not a

a growth or innovation. We think recession and or inflationary risks are going to really be a big headwin for this business. Its valuation isn't very steep, but, you know, there's nothing, there's not a lot to like or not a lot to like or a lot to hate here with Kraft. Is Kraft Heinz, is there a case to be made by investment bankers that you could bundle parts of Kraft Heinz and divest parts the way Kellogg is going? I mean, you know, absolutely. look, but Kraft-Times up to this point has kind of been an, you know, an M&A nightmare, right? I mean, they've had some of the biggest write-downs in the history of acquisitions. And so, you know, they don't have a great track record in terms of capital allocation. Unwinding those bad acquisitions

doesn't necessarily make bad investments good. But, you know, it puts more, it puts less capital in the hands of certain folks who've not had a good track record. That could be accretive. But it doesn't create value where there isn't any to begin with, you know, even if you divide the pipe into smaller pieces, it doesn't change the size of the pie. Yeah, and as you say, it doesn't make bad moves, good moves. A parting thought, David, on the market? We think there's a lot more pain to come. There are plenty of stocks that are still dramatically overvalued. Clearly, we've not seen capitulation when certain stocks, like whether it's Coinbase or Robin Hood or Peloton or Tesla, are still trading evaluations that imply extraordinary cash flow

growth. And so we think things have come in a lot, and that's a good sign. But there's a There's a lot more, I think, culling of the herd that needs to happen before this market hits a bottom. All right. David, Traynor of new constructs. Thanks. Maybe we can do a quick check on the energy complex on our way out of here. Yeah, sure. You got any energy stocks. Can you throw some up there? WTI around 107. Back down to 100. That's the $20 drop or thereabouts in the last. It got close, and we've seen the firmness coming back. Well, shall we say goodbye?

All our friends. Goodbyes are hard. They are hard. Thanks for watching, Caroline.