Power Lunch - The great rate debate, OPEC’s big move and your power playbook 10/5/22

Episode Date: October 5, 2022

Should the Fed slow its pace of hiring? Two economists, two opinions, one informative debate. Plus, OPEC slashes its oil production target. The Saudi Oil Minister speaks out. The White House reacts. And, your energy power playbook for the fourth quarter. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. I'm Contessa Brewer. Here's what's ahead. Breaking point, should the Fed slow its pace of hiking? It's a big debate in the market and we'll debate it right here because, of course, there is too much at stake for the Fed to get it wrong. OPEC slashes its oil production target. How much will that actually curb supply in an already tight market? And what does that mean for a sector that's up more than 40% this year? We have your power playbook. Tyler. Contessa, thank you very much. Stocks are right now off the lows of the seven. The Dow had been down 430 points at the low of the day. Right now, the losses are more moderate, about a third of a percent, 114 points down on the Dow. The S&P off 20, about a half percent. And the NASDAQ, as has been the case so often, is the laggard here down about four-fiths of a percent, though back above 11,000 for the first time in a while. Treasury yields, they're moving higher after two straight days of declines. And despite those higher yields, banks are low. across the board, as you'll see in just a moment. Goldman sacks down more than 2%. As you see there,

2.3%. Bank of America off 2%. J.P. Morgan, point in a half, and the financial spider down about 1%. The semi-ETF is turning higher, but AMD, InVIDIA, Lamb Research, lower. They, however, off the lows of the session. There's a lot of green on the screen, though, in energy oil stocks moving up as crude jumps on the back of that production cut announced earlier today over in Vienna by OPEC. Contessa. All right, Tyler, the fight against inflation far from over, but do the risks of more rate hikes outweigh the rewards.

The latest data is painting a confusing picture. In today's ISM report, improving supply chains caused services inflation to decelerate last month. A gauge of prices pay dropped to its lowest reading since January of 2021. but a separate report then showed that labor market strength with private companies adding 208,000 jobs last month. Of course, that was more than expected. So should the Fed pivot and change its hawkest stance slowing the rate of hikes, or should the central bank continue on its path in order to get inflation under control?

With us are Stephen Stanley, chief economist at Amherst-Pirpont Securities. It's a Santander company. and Ed Yardinney, president of Yardini Research, gentlemen, good to have you both with us. First of all, I just want to say if this was a sport, let's say it was football, there would be a lot of armchair quarterbacks right now, right? Second guessing what the Fed is doing. But I want to start with you, Stephen. What do you think the Fed is getting right? Well, they fell way behind and they let inflation get out of control. And unfortunately, they don't have the luxury of looking around the corner and hoping that maybe things will slow down and everything will turn out all right. I think they

have to they have to ring inflation out of the system and that means finishing the job as as Chairman Powell and others have indicated. All right, Ed, is there anything that you think the Fed is getting right? Well, I think they got things wrong for sure back in August of 2020 when they decided to prioritize getting the unemployment rate down and not worrying too much about inflation. And now, yeah, they are trying to catch up to the inflation curve, but they've done quite a bit. I mean, since March, we've had 300 basis points and increases in the Fed funds rate. And I think what the Fed is really not paying enough attention to is that the strong dollar and QT2, this quantitative tightening program they're on, they're equivalent to probably 50 basis

points each. So I think when you look at the whole package of monetary tightening, they've already done quite a bit. And I think it would make sense for them to do maybe one more 75-8 point height in early November, but then pause and just see how this whole thing plays up. The big risk is something will break and then they'll be forced to bring interest rates down before they've actually brought inflation down. You know, Stephen, we saw the Fed tapping the brakes like this as soon as it saw signs that inflation was coming down a bit in the 70s. Did that work out then? And could you apply those historic lessons to today, 2022? Well, Chairman Powell has brought up that exact phenomenon from the 70s.

Talked about it Jackson Hole. And a number of other Fed officials have taken up that same argument. And basically what they're suggesting is that the Fed has to err on the side of being aggressive rather than of stopping too early. And, you know, I think until they see more concrete signs that the labor market is cooling, and more importantly, that inflation itself, underlying inflation is cooling. You know, it's just hard for them, I think, to stop at this point. I think, you know, they have to reestablish their credibility.

And that's going to require, as they've said, taking rates to a restrictive, significantly restrictive stance. And most of the Fed officials are saying they don't think they're quite there yet. They've gotten to neutral and, you know, maybe at the top end of neutral, but they still have a ways to go in their view. You got at rates quantitative tightening, you've got a stronger dollar. all of these things acting as restraints on the economy. It's very hard to practice this kind of tightening without breaking some glassware along the way. So my question for you is, what is the bigger long-term risk to the U.S. economy? Is it high and sustained inflation, or is it the risk of a painful recession? What's the bigger risk?

Well, I think right now they kind of go hand in hand. And, you know, Steve made a good point that Fed officials are saying that they want to raise interest rates until inflation comes down until it's restrictive enough. I think that's just another way of saying that they've decided that the only way they're going to bring inflation down is with the recession. And that can create all kinds of other problems. And so instead of going on this roller coaster ride between the Fed and the economy, I think could they be, lies after 300 base point increase since March. In seven months, they've gone 300 basis points. I think, you know, give it a rest after the next hike and see how things play out. They're not going to be bringing inflation back down to 2% any time soon. They have to

acknowledge the bringing it down is going to take some time. If you do it too rapidly, you're going to get all kinds of unintended wicked consequences coming along with a recession with a credit crunch, and the global implications won't be a very much. are you happy either. Well, and we saw that warning today from the World Trade Organization about the risks to the global economy. So it's not just the U.S. economy that comes into focus here, but also what happens around the world. But I had conversations today, Ed, with two gaming CEOs, one CEO and one chairman of a board, rather. And both of them brought up to me the fact that that what they're seeing with employment makes them think this is not going to be a recession like

we saw in 2008, 2009, that this, they said if employment holds out, and so far we've seen that happening, if house values steady, then they don't think, even if it's a recession, it's going to be the kind of personal, painful to the consumer recession that we've seen in the past. So where do you see the risk in a mild recession? I see it. I say it, you can describe what I see in different ways. You can say it's a soft landing. It's a rolling recession. And it's different industries. in different times. It's a growth recession, or it's a mid-cycle slowdown. We've had mid-cycle slowdowns, 2015, 2016, the mid-90s, mid-80s, and they were not counted as official recessions.

So I do think that this economy is not going to go into the typical hard landing, but if the Fed just keeps it going, then it will. So, Stephen, let me ask the same question that I asked, Ed. Which is the worst alternative here, not taming inflation or enduring a recession? Well, I think if they cause a recession with tight policy, that's something that's easily corrected, right? I mean, it's, you know, as soon as they get the desired result that they want, they can pull back on rates and hopefully the economy rebounds. I think they run a real danger here.

Every day that inflation stays high is another day that people get just a little more acclimated to it. And by, you know, that includes consumers. It includes price setters. and I think they feel an urgency to ring inflation out of the system. They made a bad mistake by staying too easy for too long. And unfortunately, this is the price that we have to pay is that they do probably have to tighten a lot more than they would have

if they'd been on top of it in the first place. All right, gentlemen, thank you very much. Stephen Stanley, Ed Yardinney. Always great to see both of you. We appreciate it. Well, unless the Fed changes direction, our next guest says the recent rally was more about oversold conditions. and not improving fundamentals.

He's bringing us a few stocks. He thinks we'll do well in the current market environment. Michael Cugino is president and portfolio manager of permanent portfolio family of funds. Michael, always good to see you, sir. Good afternoon, Tyler. Give us your thoughts right now about what's going on in the market. The first two days of October were blockbuster good. The last week of September, quite the opposite.

Today seems to be trying to figure out where we are. Yeah, a little bit of a breather today. I mean, I think you stated it. You know, unless the Fed and other central banks changed course, and we saw some evidence of that with England last week, I think this rally is another bear market rally. Maybe similar in some ways what we saw in the summer, you know, where market conditions, I think, are deteriorating, earnings or estimates are coming down. The higher interest rates go.

I think the last segment touched on this. The debate right now is recession or killing off inflation. That's a very real debate. That's not positive for stocks, I guess, in the long term. But they were very oversawed in late September. And so it's not unusual in bare markets to have rallies in the middle of them. And so it's not that surprising. But whether it's a lasting bull market or the start of something more, I think it's too early to tell.

Right. Your stock picks come from what we call the Garp School, which is growth at the right price, and they come from various areas of the economy, Freeport Mac, Moran, Chevron, and First Republic Bank. You can't sort of get more diverse than that. I guess you can say Chevron and Freeport Mac are natural resources plays. Yeah, very different markets, though, copper and oil. But basically what we look for all the time, and especially in a period like this, is companies that possess pricing power for their goods and services and those that can control costs. And when you look at some of those names, I mean, we're big believers that energy prices are going to go up again.

In fact, we've seen it. I've seen it here in California with going to the gas pump. And I think with OPEC's news that they might be cutting, maybe not using the Strategic Petroleum Reserve anymore for a little while, that's going to be a natural uplift to energy prices again. So I wouldn't be surprised. That leads to a larger discussion on everybody's wish that inflation's coming down. I don't know how you can have that with rising energy prices, but we'll see. And so I think for the long term, you know, a Chevron pays a great dividend. It's in a market that's going to be in demand.

They have pricing power. They do a good job of controlling a cost. And so for a long-term patient investor with a good dividend yield, it's a good story. Freeport, I think, similarly in the copper space, I do see longer-term demand for copper going up in the long term. Freeport's very reasonably priced. They have a history of returning money to shareholders with increasing dividends and special dividends. And they do a good job of managing that business and extracting copper.

So again, patient, long-term investor, good places to be. First Republic, regional bank, great client base, very good at managing the balance sheet. And I think with net interest margins going up and healthy balance sheets, financials generally and First Republic specifically are a decent place to be as well. Michael, always good to see you. Great insights. And thank you for the cases you made on those stocks. Michael Cogino. Thanks, Tyler. Coming up. So much for Bitcoin being the go-to asset during high inflation, prices plunging more than 50% over the past six months. The CEO of Strike discusses what's next for the cryptocurrency. Plus, energy stocks higher on OPEC's big target production cut, which names will speed ahead in Q4. We have your power playbook. And before the break, despite the down day, there are some

stocks hitting 52-week highs today, Lamb Weston and PG&E. Welcome back to Power Lunch with inflation high globally. Bitcoin isn't acting much like a hedge. Under 20,000, down 70% from its November highs of 68,000. But one crypto payment company strike is still raising cash at what really is a bleak time for the private markets, notching an $80 million series B. So is the future for crypto still in the payment space? Let's bring in Jack Mallor's founder and CEO of Strike.

Congratulations on the funding. Talk to me a little bit about how you were able to accomplish that when I'm hearing from other companies, the access to capital right now is very slim. Thank you and thank you for having me. Yeah, it's true. I mean, the Federal Reserve, huh? What are you going to do about that?

No, it's a difficult market, much more difficult than times prior. But I think it speaks to Bitcoin at large and strike in particular in what we represent and what we mean to the world. Cheaper, faster, more open, more inclusive, more freedom-based payments means a lot to the world. And no matter the economic environment, we've seen tremendous growth in the business and a tremendous appetite from investors to push for that vision. There's a huge opportunity in a capitalistic sense. And there's a big opportunity in a moral and principled sense, especially in times like now, where trust within financing and in payments is arguably at an all-time low. It's beneath the floor I'm

standing on. So I think that's really what that headline means more than anything else. You already are giving people around the world the opportunity to move money at an instant. In fact, your 70 million cash app users have access to the platform. So how are you using this money? Where are you going to grow? How do you expand at a time when, quite frankly, you look at Bitcoin and crypto in general and think, boy, I'm glad I didn't stay out of that market. Yeah, so I want to just divide for a second. I'm a big Bitcoin advocate and holder, but the thesis of the business is we can actually use Bitcoin and in particular the Lightning Network to make for better payments. We think of Lightning Network like a Visa or like a Swift Plus Correspondent bank.

And so our customers actually don't ever touch Bitcoin. Some of them may not even know we use it as a technology to advance payments. We move dollars over it. We allow you to clear as opposed to Visa as a merchant or allow you to remit instead of Swift plus correspondent banking. So our customers don't care about the volatility. They're never subjected to Bitcoin. So the money is used to continue to grow that. You have this magic instrument that doesn't infer or require any credit to settle a payment. It's bearer. It's global. It's cheaper. It's faster. And that is a huge. I mean, the payments industry is worth tens of trillions of dollars globally. And so commercializing that product and letting the real world reap the benefits from that is, I mean, there's a lot to do there. And so that's exactly how we're going to use

the capital is further entrenched this new technology to benefit everybody in the planet. but maybe everybody listening right now is interested in your thoughts on Bitcoin. You said that you're a holder of it. You said that you're, I mean, I'm taking it that you're bullish. Are you buying more Bitcoin now that it's below 20,000? And where do you think it's going? And is that still your cryptocurrency of choice? Yes, of course, I'm buying, I'm always buying, and I think it's going up.

I think the wrong mental model to deploy is Bitcoin's not an inflation hedge. Why is it not going up as the rates are going up? How about this way? Let's think about it this way. What else are you buying? What else is as scarce? What else is as censorship resistant and defensible? Not defensible like Silk Road defensive. I'm talking about defensible like nobody can change the monetary policy of my asset that I'm holding. Nobody can change the issue into the asset that I hold and I save in. So I don't know. Fine. I'm willing to have some whiskey and debate with you. What else you want to buy? You want to buy real estate right now? You want to buy securities? Bitcoin is the only asset.

that guarantees you a future in issuance rate, a monetary policy. And so, listen, the Fed's going to be the Fed. I mean, managing the existing fiat currency economy today is clearly the hardest rocket science problem that's ever been invented by our species. And so my long-term trajectory is Bitcoin carries the qualities that will appreciate against all other assets. And I got nothing but time on my hands. I'm a young gentleman.

And I'm just sitting really patiently acquiring an asset that I can trust in because I actually don't have to trust anybody. Wow. There's so much to unpack there, but I think, Jack, I'm going to leave it there. Thank you for joining us. I appreciate it. Nice to meet you over our little boxes here. Thank you guys. All right, crude prices surging on the news of those OPEC production cuts, despite efforts from the White House to deter the plans. Kayla Towshi standing by at the White House right now with the NEC director Brian Deese. Kayla. Tyler, earlier today, the NEC and the NSC issued a sharply worded statement about the decision. by OPEC and we're joined now first on CNBC by Brian Dees who is the director of the NEC Brian just first what's the counterpunch from the US what can you do well

we were disappointed by the decision today but it's also important to put this in context we've seen the price of oil come down from $120 a barrel earlier in the summer to where we are today and we've really seen a lot of progress in bringing down gas prices in the United States as well and so as you heard from President today, we're going to keep focused on the things that we can do to try to make sure that at the end of the day, U.S. consumers are paying less for gas. We've made a lot of progress on their front. There's more that we can do on that front as well. Senator Manson says that needs to be permitting reform. The industry wants new leases in the Gulf of Mexico. And then there was a suggestion in the statement today that perhaps there could be some changes to antitrust laws focused on OPEC and potentially more releases from the emergency reserves. Which of those outcomes is the most impactful one to you? Well, first, and we've been clear on this for a couple of, a set of weeks here now, we want to see companies, energy companies, bring prices down at the pump to reflect the wholesale price that they're paying. We have historically high spreads between the wholesale price that energy companies are paying and the retail price that consumers are paying.

But a lot of that is taxes, distribution, marketing, there are other costs that go into a two. Even if you take into account all of those, the typical spread there is about 90 cents historically over the course of the last three, five years. we're now seeing that spread at $1.20, $1.30. So if we bring that down to historical levels, taking into account everything you're saying, you would see some immediate reduction. The idea of permitting reform, that's something that the president has worked

with Senator Mention and Senator Schumer on. We should progress on that, and those who are opposing that should recognize that we need to build more clean energy here in the United States. And you mentioned the Strategic Petroleum Reserve. One of the biggest reasons why we've seen some downward pressure on oil prices

has been the historic release from Strategic Petroleum Reserve, and as the President made clear today, that continues to be an option on the table going forward. The releases from the reserves have been extended into November, but now the actual level of the SPRO is at the lowest since 1984. So how much realistically could you even consider releasing, and how much did that extension have to do with the midterms? So I'll take the last part of the question first.

We made a commitment to release 180 million barrels from the SPRO over six-month period. But it was supposed to end in October. Well, we said that we would do 180 million barrels and that we would do that over six months. We're trying to make good on the commitment to actually release close to 180 million barrels. And the sale that we was announced

and will be delivered in November was part of that effort. In terms of going forward, it's a strategic resource that we continue to have. We continue to have available to us. And we will use when it is consistent with economic and national security. But make no mistake, it's still a tool that we can certainly deploy if we need to.

Coming out, there has been more concern about a global recession earlier this week. The United Nations called on global central banks to halt interest rate increases because they said that that is going to tip the economies over the edge. What's your response to that? Well, look, we're in a transition globally, and certainly prices are too high globally. Inflation globally is a challenge. Here in the United States, we are better positioned than almost any country to navigate our way through this.

and the economic recovery in the United States has actually helped to sustain economic growth around the world. What have you guys told the IMF about what it should be doing and what it should be communicating to different countries about their own domestic policies? Well, look, we're working closely with the IMF and the other international financial institutions to try to address concerns, particularly for lower-income countries who are dealing with a complicated global environment and are reeling from high energy prices. And I just take it back to the announcement from OPEC today. You know, one of the biggest losers from anything that takes energy supply off the market right now at this moment of global instability are lower income countries who are particularly affected and exposed to energy prices. That's one of the reasons why we've been so focused on maintaining global supply and having supply meet demand in this economy. Absent any policy change on the energy front gas buddy today estimated that the OPEC production cut would add up to 30 cents a gallon to the retail

price of gasoline. What's your forecast? Look, there's a lot of production out there. Let's see the market reaction. We're seeing today a relatively muted move, but obviously we're going to have to wait and see on that front. Our focus is on what are the policy measures we actually can do to help keep bringing gas prices down. As I said, bringing those retail prices down to match wholesale prices, continuing to work on getting refineries to be operating at their maximum capacity here in the United States. Things like common sense permitting reform that would help speed cleaner sources of energy here in the United States, all things that we can and should make

progress on over the next couple of weeks. And safe to say with WTI nearing $90 a barrel today, it's not the right time to be replenishing reserves? Well, look, the question of replenishing reserves is one that we have, we are taking a considered approach to. The Department of Energy has proposed a rule to make sure that we can replenish in a way that will actually provide forward certainty to the market, but also put us in a position where we are replenishing our national resource in a way that we can replenish our national resource in a way

that's good for taxpayers. We obviously sold at higher prices. We will clarify as that rule gets finalized how we intend to do that, but the goal is to provide forward certainty to markets. Ryan Dees, we appreciate your time and your expertise today, weighing in on this very important newsday. Tyler, I'll send it back to you in the studio. All right, fascinating conversation. Thank you, Caleb, for bringing Mr. Dees to us, and thanks to Mr. Dees as well. You know, Contessa, I'm interested there. He was talking about the difference between wholesale and retail prices and that the usual spread is 90 cents. Now it's a buck 20. If I understand correctly, the retailers are the gas station owners, right? Right. And so between

that wholesale price that is paid to, I guess, the producers, the big companies, the chevrons, the exons, whoever's producing this stuff, there's a difference there. And part of that difference in cost is profit. But part of it is the higher costs of transporting the product to the retail location, the higher price that the retail location is paying for wages, the higher costs they're paying for power and other things, it's inflation. So maybe some of that is not, some of that difference, which he said, okay, usually it's a 90% gap between wholesale and retail. Now it's a buck 20. Well, maybe some of that is not pure profiteering, which seemed to be the suggestion, but is explained by other things. Well, and the other thing that I think we should

listen carefully for is the way he talked about the strategic, reserve still being a tool that they can deploy, it's clear that the administration believes that high gas prices are the enemy of a midterm win for the Democrats. And so if they can deploy that tool and keep gas prices moderate and still maintain energy security, I think that you will see the administration. You bet, because it hits you in the face every day. It's not like a gallon of milk or whatever it is, whose price has gone up as well. But the gas price, you see it, you feel it, you notice it.

That's right. And when it comes down. Okay, enough of that. Further ahead on the show, everything must go. Elon Musk already sold $6.9 billion in Tesla stock. They did it back in August. But even with some big backers, does he have enough cash for his Twitter purchase? We'll discuss that.

And as we had to a break, take a look at solar stocks. They're lower today, end phase leading the group down by 12%. We'll be right back. Welcome back to Power Lunch. I'm Bertha Coombs. Time now for your CNBC News update. New York Times reporting U.S. intelligence agencies believe some Ukrainian officials were behind an assassination in Russia.

Darya Degina, the daughter of a well-known Russian nationalist, was killed in a car bomb attack. American officials tell the times the U.S. did not know of the attack ahead of time, but they are concerned it could escalate the conflict with Russia. In Iran, national security forces have been deployed to quell protests at universities in several cities. Unrest continues over the death of Masa Amina, who was detained by morality police for not wearing her headscarf properly. Human rights groups say thousands of people have been arrested and

more than 150 have died in protests that have gone on for more than two weeks now. Alex Jones decided not to put on a defense. put on a defense at a defamation trial to determine how much he should pay for claiming the Sandy Hook school shooting was a hoax. Jones says he is boycotting the trial because among other things, the judge will not allow him to say he is innocent. A previous trial found him liable and that he should pay damages. Closing arguments are set to begin tomorrow. Tyler and Kandesda. Bertha, thank you very much.

And ahead on Power Lunch, OPEC cutting oil output targets, sending shockways. across the globe, but what this could do to prices and the sector, we'll discuss that in today's power play. Plus, finding a tonic for tough times. We're going to take a look at how low volatility names could provide some portfolio cushion in today's three-stock lunch. I know that it's, and here he comes. He's rushing over. 90 minutes. Now I can see it, but I knew it was 90 minutes left in the trading day. We want to get you caught up on the market, stocks, bonds, commodities, and our energy power playbook. Let's begin with Mr. Bezani at the New York. York Stock Exchange, stocks off the lows of the day, Robert.

And we've got a rally going. We were down a lot, folks. We were at 3722 on the S&P 500 at 1030, 11 o'clock Eastern Time. Look, we moved 60 points, and we had some negative points here. ISM service is a little stronger than expected. Doesn't help the inflation crowd. The OPEC plus production cuts. That doesn't help the inflation story.

And yet, look what's leading here. Semiconductor's technology stocks turned around. They opened down, moved down, and looked. Look what's positive. Taiwan, semi-broadcom, Texas. These are big cap semiconductor stocks. Of course, we talked about the energy stocks three days in a row. These big energy names, they're up 10 to 15%. Another big move up today. Chevron's the only one that's really not participating. And finally, the one sector kind of not helping that much. Banks, Goldman, J.P. Morgan are down. But even these are both well off of their lows. Goldman, the big price name, so the big high price.

So that's influencing the Dow Jones Industrial. Very impressive little midday turnaround. Tyler, back to you. Bob, thank you very much to the bond market we go. Yields on the rise once again. Rick Santilli tracking the action. Rick, what's going on? Bonds down, bonds up. It's crazy.

You know, Bob nailed it. We are starting to see some buying pushing us well off the lows and equities. And guess what? We're slowly turning the ship on what has been mostly a down price, up yield day, not only here, but across the globe. Let's look at a tenure going back to the 28th. I like that date. 401 was the cycle intraday high. Boy, we certainly dropped to 356, but boom, we're right back.

And if you look at the mid part of the curve, sevens, five, sevens, tens, they are all up double-digit yields. But the very short end and 30-year bonds have given a little bit back. We want to pay close attention. Look at a two-day of boons. Same thing. Boy, what reversals. From 177 back up over 2 percent settling to 202. guilt. Huge turnaround from 373 to well over 4%, settling it a little over 4%. And finally,

the Italian 10-year bonds having one of its biggest sessions on yields moving higher since COVID, March 2020. Huge moves approaching 4.5%. What's going on? Well, I can tell you this. Bob talked about the service sector numbers being better when everybody else was looking at prices paid down five consecutive months. Listen, it's hard to figure out the cycles and markets, but one thing for sure, my sources say the last couple days when yields were going down, it was short covering. Today, the liquidity's on the tight side and selling's on the heavy side. And finally, two-day of the dollar index. It's up today a penny and a quarter. And when the dollar's up, most likely there's going to be pressure on stocks. Tyler, back to you. All right. Rick Santelli, thank you very

much. Oil closing higher for the day as OPEC Plus announces it's going to cut production targets by two million barrels a day. It's a little more complicated than that, as Brian Sullivan, who is live in Vienna, will explain. Brian. That's right, Tyler. And moments ago, we actually just wrapped an interview with the Saudi Energy Minister, Prince Abdulaziz, Ben Salman. We'll air most that tomorrow morning on Worldwide Exchange and someone's squawk box. I'm going to summarize what he said, because I think it goes to what Rick just talked about. Rick talked about interest rates and central banks. Well, why am I referencing that when it comes to talking about oil? Because part of what OPEC plus said today, part of what they said in their press conference, and part of what the energy

minister said to us moments ago here in an interview was that there is a fear that central bank moves have been so rapid and so aggressive, and based on, by the way, what federal central banks have said that they may, I don't want to use the term, crash the U.S. or Western economies, but certainly slow them enough where we could see oil demand drop off, prices drop off. What the Saudis, what OPEC plus have said forever, is that they don't want necessarily sky-high prices, but they don't want loat. They want similar and stable prices. So actually, I asked Prince Abdulaziz, Ben Salman, about central banks, about rates, and about being proactive and here's what he said.

OPEC plus had been successful, effective because we take matters we are attentive. Now how we are attentive because we take things

measures in a preemptive way and we make sure that in order to be to preempt you have to be assertive so we have to be assertive. preemptive and of course we have to be proactive. So I think people in Washington might say that they were being assertive, Tyler,

maybe a little bit overly assertive. He said preemptive, obviously preempting what, preempting perhaps a central bank and inflation-led slowdown as well. Listen, what OPEC and what the Saudi energy ministers say, as you know, is going to be challenged. It's going to be contradicted at pretty much every level. We tried to get into a little bit of that, although he's. He makes sure he stays away from politics.

That is a different side of the family. That is a different part of the government. We'll air some most part of that interview tomorrow and running a Worldwide Exchange. But OPEC Plus coming in with a 2 million barrel cut, which to your point at the very top is going to be more around 900,000 because quotas aren't being met. But 900,000 isn't nothing either. And oil rose once again.

Brian, thanks very much. Brian Sullivan reporting from Vienna for us. And today, energy is the focus of our power. Playbook, the sector, has been moving higher, 46% in 2022 most of the year. So does today's OPEC Plus News make energy names more attractive? And if so, what names should you consider in the fourth quarter? Let's bring in Sam Margolin, managing director with Wolf Research. Sam, welcome.

It is great to have you. There you are. I see you over there. What does this production cut mean for the price of oil over the next three to six months? or maybe even the next three to six weeks, number one. And is there going to be, what do you see as you look into your crystal ball for oil stocks over the next three to six months? Yeah. Well, like Brian said, you know, it's really, I think, a response to the demand outlook.

And actually, I'm not even sure it's preemptive. I think it's a pretty sure thing that demand is going to be down globally year over year for the remainder of the year. And some of that has to do with some pent-up demand for last year, but then there's obviously very challenging. economic conditions everywhere. And so I think this OPEC cut was really managing around that. And in general, I'm much more focused, and I think a lot of energy investors are much more focused on the European energy crisis,

which is sort of separate from oil and has more to do with natural gas. But if demand is down, the way it's connected to oil is because if demand is down, why is oil strong? Well, it's really because of Russia. And not that Russia's declined, but the prospect that anything could happen in this situation, It's very volatile. Russian supply could disappear very quickly. And so some of that risk has to be embedded in oil prices, even if demand is very soft. So in terms of actionability, I think you need to be focused on kind of companies that are positioned within the natural gas world to help Europe get through winter and manage this crisis.

So a couple of the names you have your eye on, like a lot of people, Chevron, there it is again, Marathon and New Fortress. Why those? Yeah, so earlier, somebody mentioned earlier that Exxon was up, but Chevron was flat today. Exxon had a pre-announcement today that was very strong. You know, I think Chevron's exposed to the same factors. And in the fourth quarter, they have a lot of LNG capacity, liquefied natural gas capacity that's ready to supply Europe out of Australia. It's far away, but it's available. So that's something.

Marathon Petroleum's a refining stock that can return capital to shareholders in sort of any commodity price environment. So if the risk right now is really macro and you have to consider kind of recession scenarios, MPC is very defensive because it's balance sheet is strong. And then New Fortress Energy is a younger company, but they're setting up a platform to deliver LNG to Europe. It's got faster turnaround times than other LNG projects. And I think they're in a really strong position for really next year to get gas supply into Europe and help the crisis there. Sam, thank you so much for your insights today. We appreciate it. Sam Margolin. Thank you. You bet.

Elon Musk finally agreeing to purchase Twitter, but will the Tesla CEO need to sell more stock to fund his big buy? We'll discuss that next. Plus, as we had to break, check out some of the consumer tech names. Wayfair, Roku, Docu, Sign, and Teledoc, all down more than 4%. Welcome back to Powerlun. Shares of Twitter and Tesla are both lower today following Elon Musk's decision to revive his $44 billion deal. to buy the social media platform. What could the buyout mean for Tesla shares? Robert Frank brings us that part of the story. Hello, Robert.

Hey, contest. Well, Elon Musk is funding much of this deal himself, but there are many other winners and losers. Musk, of course, has to put up $33 billion of equity just to get this deal done. He's already sold about $15 billion in Tesla stock this year. He's raising another $7 billion from VC funds, Larry Ellison, Mark Andreessen, and the Saudis.

He already owns... about 4 billion in Twitter shares. That brings him to 27 of the 33 he needs. So he still may sell up to $6 billion of Tesla shares just to get the funding. Morgan Stanley, B of A, and other banks, they have to put up about $12.5 billion in loans for this. They could lose hundreds of millions of dollars

just trying to resell that debt to investors since credit markets right now are so tight. Now Tesla could see more pain ahead in terms of the share price. the market cap down just under $60 billion since yesterday. Well, look at the winners. Twitter CEO. He could get a payout of up to $42 million for a change of control. Co-founder Jack Dorsey, he supported Elon's bid and resigned from the board. He could take home over $900 million in cash, but that is if he doesn't roll his stake into the new deal, which he could very well do. Carl Icon, meanwhile, he had a $500 million stake in Twitter.

going into this, he could make $250 million or more just because of the stock run-up. You've got D.E. Shaw, Third Point, and other hedge funds also kind of making money on that arbitrage, getting a payday now if that deal is done. So a lot of winners, but the big potential loser here is Elon Musk, not just in terms of how much he's going to have to put up, but if he's got to fund this thing and grow an entirely new app or business, that could be expensive, guys. Yeah, absolutely. We were talking earlier today about the idea of this super app that is no easy trick to pull off. Robert Frank, thank you. Still to come. Some low volatility picks in today's three-stock lunch. We'll be right back. Time for today's three-stock lunch, and today we're trading names that have a track record of being less volatile and outperforming the market.

According to a CNBC.com screen, those names include Lockheed Martin, Amgen, and Courage, Dr. Pepper. Let's bring into trade, Jeff Kilberg, founder and CEO of KKM Financial and a CNBC contributor. All right, first up, we have Lockheed Martin. Take it away. Well, contestant. Lockheed Martin, I want to be a buy-haired. But you're right. These are all workhorses.

We've seen for the last 10 years consistent performance, but this is an essential name. We talk about Lockheed Martin being about 15% off its all-time high. I think it's really fascinating as we're going to see earnings come out later this week. Obviously, the crown jewel of this global defense contractor is the F-35. They actually just won a new $152 million defense contract for logistics for that F-35. F-35. So I'm positive about this, and it's poised technically, Contessa, to move much higher above its 50-day as well as two-day movement average. Well, let's move on to number two, and that would be Amgen. You know, Amgen, Ty, I'm going to give you quick three reasons here. There's a lot of free cash flow here.

This is $125 billion market gap. This is the biggest biotech company in the world, and you see the pipeline has a very rich and promising, pipeline. However, it has lagged the industry. It's down from a forward PE ratio, only about 13 times forward earnings where the industry is closer to 15, 16. So there is opportunity here, but I'm a buyer here of Amgen as well. What's the problem with Amgen? Why is it? Why is it being penalized if its pipeline is so good? Because it hasn't been delivered. This is late stage. This is not tangible yet, Ty. So when you talk about these drugs, which we have so much volatility, and we don't know if they're stage one, stage two, or late cycle, but there is promise, but nothing's been to delivered yet. That's why. And our final name in this list, Kourig, Dr. Pepper. Would you drink it,

Jeff? I love Dr. Pepper, contest. And it actually kills me to put a cell rating on this because I love the Fansville commercials, Brian Bosworth. I had the matching mullet tie back in the 90s for Ryan Bosworth. But why I want to be a fate here is that his lagged, the industry. It's down about 15%. And you talk about the note that came out from Goldman late in September. There's a reason why it's lagging. And it's really focused more on the coffee side, the curate, Dr. Pepper. If you think about post-COVID, everyone was brewing their own coffee at home. That's starting to normalize. So they're going to have a little bit of a dent in the coffee side of it.

But Dr. Pepper, how do you not love Dr. Pepper in the commercials, Ty? Do you take, let me talk a broader market, do you take any solace from the fact that after two very strong up days, today the market rallied off its lows and is now basically flat? I do take a lot of solace from that because you talk about the spastic nature. As we're in price discovery mode, and we continue to try and figure out what the Fed messaging will be, you are seeing buyers come back to the market. There was a lot of window dressing that happened last Friday, end of the quarter. So you are seeing buyers return, but I stay cautiously optimistic here, and you're right. I feel like the bottom is in for 2022 after a

very surprising test. There's a call for you. The bottom is in for 22. Jeff Kilbert, KKM Financial. Thanks. And for more stocks that can write out the market, go to CNBC.com slash pro. And that does it for us on Power Lunch. Thanks for watching, Power Lunch. Close the bell starts now.