Power Lunch - US Energy Sec. Chris Wright on Natural Gas Reduction & Nuclear Energy 02/07/25

Episode Date: February 7, 2025

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Welcome to Power Lunch. I'm Kelly Evans here at CNBC headquarters in New Jersey. And I'm Brian Sullivan here in Washington, D.C. We're here for a big exclusive interview with the new Secretary of Energy. You saw some of it earlier live right here on CNBC, but we're going to show you what you didn't hear or see earlier coming up. Plus, the implications of some new tax proposals from President Trump and why it might impact your favorite football team. Oh, yes. Let's start with the check of the markets, though, because we're kicking things off here at session lows. The Dow is down more than 400 points for the first time so far today. That's a nearly 1% drop. Same for the S&P and the NASDAX down 1.3%.

Now, the jobs report is one factor. We saw some inflationary pressures. We took a bigger leg lower at 10 a.m. When that sentiment report hit, sentiment fell a few points. Inflation expectations really shot up, and that's when you saw more angst. We've also had a bunch of tariff headlines throughout the day today. The president saying there will be reciprocal tariffs on many countries next week. And the markets have been under some continued pressure.

on that. The president also saying he is considering allowing the sale of U.S. steel to Japan's Nippon steel. Let's take a look at shares of X, not the platform, the corporate. The shares are up about half a percent now, so not huge move. But that's a story to definitely keep an eye on. Let's begin there with the impact of today's data. The drop in consumer sentiment caused by inflation fears and tariffs could be a real problem here for investors. Rebecca Patterson is former Bridgewater Associates Chief Investment Strategist, currently a Vanguard board member and senior fellow at the Council on Foreign Relations. We also have our chief economics correspondent, Steve Leasman, in the House. Rebecca, the market very unhappy today. Why is that?

Oh, it's interesting. The 10-year yield tells you a story of this whole day and what could this this whole year be like. After we got the payroll report, decent job number, not too hot, though, yields rose a little bit. Fed fund futures didn't move, so no need for the Fed to react. The sentiment report came out, bad sentiment, high-involve. inflation, 10-year yield goes higher, and now we start to see the market taking out Fed cuts this year at the margin. Tariff talk, same thing. And so what's worrying here is if we have tariff-related uncertainty or actual tariffs, and we have inflation expectations and actual inflation sticky or even higher, you're going to have higher 10-year yields for not good

reasons. And that's the worst case for investors. You have lower stocks, higher borrowing costs. I'm not saying that is going to happen this year, but that's the little glimpse of what we got in today's trading action that I think is a risk for us to keep an eye on this year. Are we putting too much on all these macro? I mean, could it be Amazon's fault? Look at the NASDAQ Rebecca and it's underperformance and how poorly tech has done this year. We had big debate with Rich Bernstein last hour about whether it's time to get out of the MAG 7. And I mean, I don't know, I guess granted all that, the Dow is down 400 points. I mean, I think you're making a great point. macro and micro both matter. You always have to be looking at both and putting the bigger picture

together. Again, you think about the jobs data we had, but also some of the data out of that Amazon report. Yes, it disappointed overall, but they also talked about year-end activity being very strong. The U.S. consumer today is still very strong. And at the end of the day, that and the hundreds of billions of dollars that are coming into the U.S. economy from tech cap-ex, these are important supports, but those are what is today and behind us. But we have to think about going forward if the consumer, which is the engine of growth, if they get more cautious because of the prices of eggs or uncertainty around tariffs and they start to pull back, it almost doesn't matter what Amazon does. I'm picking on Amazon. But if the consumer pulls back, all bets are off. We're going to

get lower yields because we're going to have a growth slowdown. Steve? You've heard this phrase snatching defeat out of the jaws of victory, right? So we come on. out with the jobs market. And not only did you have major revisions to the prior months upward, but you had this nice cooling back down to what looks like a more sustainable level, one that people think is more in line with where people think. Now look at that chart. Now, guys, if you wouldn't mind in the back, put up the three-month average chart. And it's a fascinating chart. What it suggests, Kelly, is this economy is accelerating. After a summer swoon in the job market, which really was behind the Fed rate cuts. If you look at that three-month average,

you can see July, August, September was, there it is right now. So it's a little bit squirly in the middle there. But look at it. One, two, three, four months in a row, you've had accelerating three-month average. The economy is accelerating. So the handoff from one administration to the next looks like it went pretty well. Not only that, if you look inside the University of Michigan numbers, Republican sentiment has followed for three. three months in a row. Right. So we're showing job growth is up and sentiment is down.

Inflation is the only thing that explains that. Inflation is the thing. And this idea that you flagged to me in the last hour that people volunteered their concern about tariffs, which I'm hearing at cocktail parties, right? Now, you can imagine how droll the hopeless thing must be if people are talking about tariffs at this point, how serious it is. 27% of respondents in that survey. Rebecca, I'm curious what you make of this, mentioned spontaneously, tariffs as an issue.

Again, this was for a tariff story, especially as it relates to Mexico and Canada, that wasn't even a major headline in the media until the very last minute. Right. And now we're hearing today headlines that we could have broader-based reciprocal tariffs as early as Monday. Who knows what we're going to get? But the bigger issue here is that all this uncertainty at the margin, it makes consumers and businesses more cautious.

Just like, you know, Steve's hearing at his cocktail party. People are worried about tariffs. It's going to slow them down at the margin. And that is not the outcome that I think. this administration wants. And Rebecca, just real quick, let's remember, President Trump came in with really sky-high confidence numbers from the business sector. And when I read what the commentary was in the ISM service sector, you just, I could read them out, but every other one is about tariffs. Well, the fact that we had to back off the de minimis tariffs, right, the little small packages

because we don't even have the mechanism yet to collect the tariffs on them. So we had to pause that. You know, there's a lot of things being thrown out there, how it actually plays out, how quickly we get the revenue, what do we use the revenue for? Is it for tax cuts? Is it for a sovereign wealth fund? There's a lot of talk and you really have to, Kelly, to your initial point, try to put the noise aside as much as possible and focus on how is the consumer doing, how are earnings doing, what's guidance? But keep in mind, confidence around inflation, around consumer sentiment, that drives economic activity. It is a leading. indicator by about two or three months.

Brian? Hey, Rebecca. You know, I'm down in D.C. I love America. I love America so much. I came down to our nation's capital. I brought an eagle. I've probably had a hot dog. But when I look at the global markets, I look at a Europe, which is soaring. No one's talking about it. I posted about Germany the other day. Their economy is in shambles. And yet, guess what? Investors in Europe just keep making money. I know we're talking about America and the jobs number, but I'm looking at a year. Europe, which is in trouble. And yet, guess what? It's just printing money for investors. Do you have a

take on Europe? I, you know, it's interesting. I saw that too, and I thought, how did that sneak up on me? You know, Europe is up almost 10% year to date. Canada is beating the U.S. The U.K. is beating the U.S. in terms of market returns year to date. I think this is a trade and not an investment. What's happened is we had initial relief by investors that we didn't get tariffs on day one because that had been something that had been campaigned on. And then we got very low valuations in these markets overseas relative to the U.S. and very little ownership. Everyone's been putting their money into the U.S. and especially tech. So it's been a catch-up trade. For it to last, I think we'd need to see, again, a benign tariff outcome.

Maybe we need to see more investment. in China in their consumer sector to get that engine of growth going again. And we need to see in places like Germany a new government that's actually willing to do some fiscal stimulus. It's possible. I wouldn't put a high probability on it. All right. There we go, Steve. Just by Europe. Everything's fine. Just turn every... For a short term, short term. We're turning every conclusion from 2024 on its head today. There's two potential underpinnings here. The idea, A, America is very fully valued. The second is that the dollar may be at the zenith of where it's going to go.

And so both sides, this would be the time to buy overseas. Very, very interesting. Thank you both. Rebecca Patterson, Steve, Steve, Lee Sman. Yeah, and I think I got to correct, Steve. They pronounce it Zenith over there. All right, lots of people apparently were eagerly awaiting this morning's job numbers. And even after we get the job numbers, we're still trying to get a proper read on this economy.

Here, now to give us his takeaway is National Urban League CEO, Mark Moriel. Also, the former mayor of New Orleans where apparently there's like some big football game on Sunday. We'll get to that mark. But from where you sit, how do you see the American economy? Well, yeah, great to be with you. This jobs report is a continuation of a trend of continuing job creation. And it's sort of the punctuation point on the previous administration and the starting point for how the jobs market will perform for the next administration. on its watch. My main concern now is that a combination of tariffs and over the horizon,

extreme fiscal budget cuts could be recessionary. On one hand, tariffs will introduce inflation because the way they have been talked about and the way they were employed for really 24 hours was as an across-the-board blunt instrument, not a strategic rifle shot with respect to some industries, which is the type of tariffs I could support. But that blunt instrument, which creates volatility and political uncertainty, along with the possibility of massive layoffs at the federal government level, I think we'll continue to create volatility and uncertainty. Here's what we have.

We have a stable economy, and I think policymakers should look at a do-no-harm approach, as opposed to tariffs, extreme fiscal, which do nothing but create what both Wall Street and Main Street do not want, and that is uncertainty. That's how I see it, and I think we're going to have to continue to measure what happens going into the future. But you'd rate the overall economy still is pretty good. It's good. Look, I mean, compared to where we were four years ago or five years ago, you've got job growth, You've got inflation, not where we want it, but far in a better place than it was. So you've got to, if you're managing fiscal policy or monetary policy, you've got to say, let's do no harm.

Let's do no harm and try to continue this trend of growth and declining unemployment and reductions in inflation. So I think that's what's important. And I'm concerned that some of these public policy measures, extreme fiscal cuts. Tariffs could create just a round of uncertainty and volatility and really damage the economy. Look, the retaliatory tariff. We got to wait, but we don't. We have to, but I will say, Mark, we have to, I know, listen, I'm in D.C.

There's a lot of concern here. Everybody's jumpy, scared, nervous. They don't want to lose their jobs. They don't want their friends lose their jobs or neighbors. But are we kind of, should we wait and see what happens first? The tariffs are delayed. We don't know, and I hope everything will be okay. Maybe it could be worse than I expect.

I don't know. But don't we need to wait and see what happens? It's almost like a preemptive panic. I think it was interesting that the administration issued these tariffs and within 24 hours completely backed off. And of course, they said, well, we leveraged it for some things. But in truth, and in fact, I think they tested the waters and found that the markets were not going to react favorably. Hopefully they've learned that across the board tariffs is not a smart way to do this. But what we have is now Canada and China and Mexico and other countries

taking retaliatory action. And that represents a trade war. So waiting to see, I understand, but what leaders should do is communicate much more clearly where they are going. We all want some certainty. We all want some expectations. And right now, what we've got is a whole lot of uncertainty. Hopefully we'll get more certainty. I know certainly we're going to have a big football game in your hometown on Sunday. No time for that. But Mark, let's hope we get some certain Philadelphia Eagles to disrupt this trend. I love Andy Reed. I love Kansas City. But I got to go with the Philadelphia Eagles in this one. Mark Morrill. is going with the Philadelphia Eagles to beat the Kansas City State Farms. Mark, thank you. I appreciate it.

Thank you. All right. I love Jake. Did you get that, folks? All right, coming up, what is the future of nuclear energy in America? Another part of our exclusive interview with the incoming energy secretary, Chris Wright. It is next. Well, welcome back. Let's continue our high-level interviews here in Washington, D.C. We're earlier today, we spoke live with the new Energy Secretary, Chris Wright. We've also kept the conversation going after the live part of the interview, which is about 940 this morning, and we began the second part of our exclusive interview by asking the Energy Secretary about how we can produce more energy, but do it in the most environmentally

sensitive way. I think the conflict there is more perceived than real. You know, what we've done over the last 10, 15, 20 years globally, I have called the greatest malinvestment in the history of the world. Maybe $4 trillion has been invested, mostly in wind, solar batteries, and transmission systems. It hasn't changed the mix of the global energy stack at all. We've got a little bit less than 3% of global energy comes from wind, solar, and batteries. 3% all in the electricity sector. And everywhere with high penetration, we've seen more expensive

electricity and a less stable grid. One thing we know for sure, that's not going to continue. The rest of the world will never adopt a model like that. The only way you're going to change global greenhouse gas emissions is with energy technologies that are affordable, reliable, secure, make people's lives better, and have lower greenhouse gas emissions. Like what? What are those? Well, the biggest one by far today has been natural gas. The U.S. has reduced our greenhouse gas emissions more than the next seven countries combined. And it's mostly been by market forces. Natural gas is out-competed coal as just as cheap or cheaper and cleaner burning,

meaning less pollutants as well as less greenhouse gas emissions. That's a model that can grow and can scale. And hence, that's why it has been the biggest driver of reduced emissions. Wow. So that's a pretty big statement that malinvestment or misinvestment Brian, it gives you kind of a hint of what might be up their sleeve. Yeah, I know a lot of people are going to disagree with that statement, Kelly, but the reality is that if we're going to produce more power and the Japanese prime minister was here, is

here, I should say, in town today meeting with President Trump to buy more natural gas. If we are going to do it, not saying we are, but it looks like we are, we should do it in a way where we can do it as smart as possible and not contribute to a warming planet. Now, I also asked Secretary Wright about our, as a nation, sort of renewed love affair with nuclear energy and the real fear, Kelly, that if and when we restart somebody's older nuclear reactors, I'm looking at you, Three Mile Island, we make sure that some of that power goes to homes and neighborhoods and not just to the highest bidder of big technology. We've had 30% increase in electricity prices under the last administration with almost no demand growth. Now we have rapid demand growth. You hit a key issue right there. So we need to balance both of those.

We need to supply that electricity. So this industry of manufacturing intelligence, AI, stays in the United States, but we want to stop the price rises for consumers, which means we need more supply. What's the biggest supply growth for electricity that can happen in short order? Natural gas. But nuclear now has commercial buyers, data centers, that'll pay a premium for that electricity. That's just what we need. A market force that will pay a premium for a technology that can't compete with natural gas today,

but maybe it can in five or ten years. And we're going to have private capital driving the construction of these new small modular reactors at scale. Is that going to happen? Our SMR is actually going to occur? Because right now they're kind of just, I don't say a pipe dream, but they're not far off of a pipe dream.

The long-talked-about nuclear renaissance is finally going to happen. That is a priority of this, for me personally, and President Trump and this administration. You're going to see that move in the coming years. That's quite a statement. So he's saying the long-awaited nuclear renaissance will finally happen. Brian, I thought your question was excellent, and I think is going to be where we see a lot of debate over this in coming years.

If energy bills keep going up, whether it's nuclear or what have you, there's going to be more scrutiny on how much of that is because of this big demand coming from big tech. Yeah, and the reality is the point I was trying to make was that if Three Mile Island, which is now known as the Crane Energy Center, comes back online. Microsoft is likely to buy all that power at something like $100 to $130 per megawatt hour. What does that mean? Well, a residential neighborhood might pay $30 a megawatt hour. I'm speaking very generally. My point is Microsoft is willing to pay two, three, or maybe even four times the money for the guaranteed power. And what we don't want to have, Kelly, is neighborhoods and housing, price

competing with big tech and data centers, because I'm just going to tell you, you as a homeowner, are not going to outbid Amazon, Microsoft, Google, Amazon, or others. Right. But I take it. I take it's on twice. I take my point, though, that there is, you kind of want the people with the deepest pockets to foot the bill of getting this stuff un-mothballed and back online. And if so, if they can do that and really get a ton of capital and a ton of momentum behind

nuclear, look, the households, to your point, don't have enough purchasing power. and wherewithal to really galvanize that movement. So I hope he's right that they'll start and then maybe we'll get it more broadly and more cheaply. But of course, if we hit any snags along that process is where we should expect some conflicts. It's been a huge anti-nuclear focus in the United States. Three Mile Island, Fukushima, I get it.

There's a lot of worries. These reactors are not Chernobyl. They're not built like that anymore. The way they're constructed. I'm not saying they're risk-free, but the risk is lower, especially if and when and small module reactors are not a thing yet. We hear a lot about them, Kelly. It's like I hear a lot about this high-speed train from D.C. to New York that's going to bring me

home in an hour. We're not quite there yet. I'll be on the Amtrak. It chugs along at, you know, 65 miles an hour. But down the road, we might have, you know, the maglev or the Shinca Sen here. Yeah, you're in the car, if I'm not mistaken. I took the train. Did you all? It was icy yesterday. and I just was like too lazy to drive. Yeah, it's a lot of this. I always get there, I get up to go to the restroom right when we hit a corner. Whoa, across the train I go. Exactly. I'm going to apologize to people I fall into already. You and I are tall, our center of gravity. We don't cope well. Brian, it was an excellent interview. Thank you for bringing that to us. Brian Sullivan interviewing the new Secretary of Energy, Chris Wright.

Further ahead, sports owners getting hit with the potential penalty if the president ends a key tax break. We do have those details further ahead. Welcome back to Power Lunch. I'm Angelica Peebles with your CNBC News Update. The Senate has been warned to not use AI tools from the Chinese-based company Deepseek. A memo warned Senate offices that the apps, terms of service, and the company's servers are located outside the U.S. and are outside of the purview of U.S. law. It comes as a bipartisan group of House lawmakers introduced a bill this week to ban all government workers from using Deepseek. We are seeing one of the worst flu seasons in more than a news.

decade. That's according to the measure of doctor's visits driven by flu-like symptoms. CDC data shows the number was higher that last week than it has been since the 2009-2010 flu season. At least 41 states are reporting very high levels of flu right now. And President Trump says he wants to get the nation, quote, back to plastic, at least when it comes to drinking straws. In a post on Truth Social today, he said he will issue an executive order to undo the Biden administration's push to require the federal government to ditch single-year-old. use plastics and adopt environmentally friendly paper straws. Back over to you. We'll see if that spurs people more broadly to do the same. Angelica, thanks.

Thank you. Let's take a look at chairs of Roblox taking a turn lower this hour. Steve Kovac with the detail. And didn't they have earnings, Steve? But this is something. This was yesterday. This is something separate going on here, Kelly. So Bloomberg just reported they got some confirmation from the SEC that Roblox is under investigation. They're not exactly saying what this investigation is about, but we do know that Hindenberg research put out that short-seller report, of which Roblox denied everything in there, that they fudge some of their gaming metric or some of their user metrics and other things that caused the short report to come out. And since the stock tanking, when it did come out, since then they had that blockbuster report

afterwards. But right now, you just see shares down about 2% on this news that the SEC is looking to it. Again, we don't know what it is. I've reached out to Roblox or comment, have not heard back yet. shares off about 2%. All right. We'll keep an eye on that. And meanwhile, not to say, it's a busy day on the video game front, but probably the real big headline was about Grand Theft Auto 6thes. I know you're excited for this one. You know, I'm actually interested in, I've never played the game running, but I know about the speculation and anticipation for this thing, which is 10 years in the making to come out in the fall and people wondering whether it really will or will be bumped back. What was the news today? Yeah, yeah.

So this is huge because yesterday, Take 2 Interactive, that's the company that publishes Grand The Auto 6, just reiterated that. it's going to launch this fall. That's not new news. We knew this was going to happen, but it was enough to send share soaring. This is especially after the pain we've seen from other gaming companies this earning season. Let me just give you some examples here. Electronic Arts, they revised the guidance lower in January. That's after Football Club, their soccer game franchise. And another game called Dragon Age Vailgard failed to live up to expectations. It was a really disappointing quarter. And then you look at Microsoft, their gaming revenue for that December quarter, down 7%. And they're gaming hardware revenue. That's the consoles, the Xbox

consoles. It was down 29%. And by the way, Kelly, this all includes Activision, which has now been fully absorbed by Microsoft. It was that $69 billion acquisition that they made, all that regulatory headaches and all this kind of stuff. You've got to wonder now, was that worth it? Especially as we see Microsoft just spend all this money on CapEx that makes that $69 billion acquisition look kind of cute by comparison. I was going to say it was right. The last big things they did before the arrival of AI. Before everything else happened. And then in the meantime here, we got Bloomberg reporting last year that take two competitors.

They're just waiting for this GTA-6 solid release date before announcing their own games. This is going to really dominate the entertainment industry. It's going to kill productivity. It's going to kill it. People are going to spend the entire—where's Cream? Is Cream here today? Cream is going to buy it. What are you going to do when GTA 6 comes out?

Am I going to see you for like a week? I'm putting in a leave of absence. Yeah. I wanted to see take two shares over the past decade or so, because my only question, while they're popping today is it's so long in between these cycles. Does it make, I mean, can you hold these shares for the long? And you can't, well, here's the thing about GTA. Again, the GTA 5, the best selling entertainment property of all time.

In the meantime, it's still generating sales. 600% in 10 years. Right. And so even though this game is 11.5 years old, it's still generating meaningful sales for Take 2. It's a huge part of their business. And the expectation here is that GTA 6 is just going to knock this out of the water. Keep in mind, back in 2013, when this first came out, when GTA 5 first came out, it did $1 billion in sales its opening weekend. That's going to look tiny compared to what GTA 6 is expected to do. Probably bigger than any movie, anything like that

that we're going to see this year. See for now. Thanks. Steve Kovac. Quick check on the bond market. We've seen interest rates rising after some inflationary pressure showing up in the data this morning. Rick Santelli with the latest. Rick, what can you tell us? Well, there was a lot of warm data out this morning, that's for sure. Whether it was the unemployment rate dropping to 4%, as you see on that chart, or University of Michigan, not only the weakness in confidence, but of course the big jump from 3.3 to 4.3, that really is a big jump on the one-year assessed future inflation. But a word of caution, there's a lot of nervousness and uncertainty.

that goes with these. I don't think it's a coincidence. Some of this information gets released on a Friday. I would take it in stride. We see what happened with Canada and Mexico and how the markets reacted, but you see a lot of red in the equity space now. You know, it's been an interesting week. We flattened the yield curve. 14 basis points. Look at twos and tens. That's a week-to-date chart. Two-year yields are currently up seven on the week. Ten-year no yields are down seven on the week. Very unusual. And next week, get this. Not only do we have three, 10, and 30-year auctions, those long-dated auctions,

we also have CPI and PPI. It's going to be a big week. Brian, back to you. Rick Santelli, thank you very much. All right, coming up next, a power player, Kyle Bass, is here. He will weigh in on President Trump's first couple weeks in office. You're going to want to hear what he's got to say, and you will, but only if you hang around. All right, welcome back to Power Lunch.

certainly a busy, and some would say scary time here in Washington, D.C., the president moving markets and your money with nearly every word that he utters. He wants lower interest rates, lower inflation, and lower oil prices, but higher pressure on places like Iran. And Trump also, surprising many trying to talk about changing the tax code that could actually raise taxes on some very rich people. All in all, there have been a lot of surprises, and we're only a couple of weeks in. Let's talk about all of this with Kyle Bass, founder of CIO of Hayman Capital Management, Kyle, good to see you. What to you has been the most surprising thing of this new administration or renewed administration so far? I mean, the thing that's the most exciting, I think, to many business people and to the people

of our country is the Doge team going through the various agencies and cutting the fat, taking some of the ridiculous expenditures out of government's budgets. And I think that with our government spending $6.1 trillion last year and set to spend more this year, I think Musk's targets of trying to save a trillion dollars would be phenomenal if he could hit those. So that's the most, that's the largest change in anything I've ever seen in an administration and I'm very excited about the results of the Doge team. It's very scary to a lot of people here. I will say that.

And by the way, if you haven't seen our interview, not you, but our audience with the Secretary of Energy, my first couple of questions were about that. And Chris Wright basically said, yeah, these are people that we have vetted. They've got badges. They're going through just trying to find waste. There's a lot of still confusion, but I urge everyone to kind of go see that. Outside of that, and I know it's not getting a lot of attention with all the domestic stuff, but you had President Trump issue a pretty big statement about Iran.

Obviously, I'm talking to the energy secretary. Iran's a big part of that. I mean, it sounds like if there was any hope for any kind of reconciliation with Iran, that is out the window. I mean, Brian, we had in 2017, we had Iran pinned down to about $12 to $15 billion of working capital. Iran produces 4 million barrels a day, they export 1.7 million barrels a day. And we had them sanctioned pretty hard in 2017.

And what the Biden administration did by loosening Iran's ability to access capital, they went from having $15 billion in capital to $100 billion of capital. And look what happened. October 7th happened. And so I don't know if you saw the president signed a couple of days ago. He signed a presidential memorandum to apply maximum pressure to Iran. And he instructed Treasury Secretary Scott Besson. to impose maximum economic pressure on Iran,

to get them to comply again with their nuclear ambitions. And I'm afraid that the war between Iran, its proxies, and Israel doesn't really have an off-ramp. And I think that, as you've seen the hostages returning, are going to slow to a trickle and maybe even stop, because it's Hamas' only leverage. So now we need to go back to Iran and their nuclear ambitions, and we need to.

to get to a JCPOA 2.0 or a deal in which they allow us full inspection of places like Nataz and their pickax facility where they're doing all the Amerenium enrichment, because we believe as a country that they're pretty close to having the ability to have a nuclear bomb. Yeah, and your connection is the idea that Hamas and Hezbollah are largely proxies and maybe the Houthis and Yemen of Iran. They get a lot of funding from Iran. So the more money that Iran has, the more likely they are.

are to fund these terrorist organizations. Do you think that President Trump then will try to effectively bankrupt, not bankrupt Iran, but reduce those foreign capital flows back to where they were so they simply don't have enough money to use it for bad things? Yeah, I mean, I call it make Iran broke again. This is what has to happen, Brian, for us to be effective in neutralizing their nuclear emissions. You think back to the Cold War in Russia. The Russians didn't wake up one day and say, you know what, Brian, you know what, United States, democracy sounds like a better idea than communism. We're just going to change our system. If you remember what happened, we along with our South, with our Middle Eastern partners, took oil down to $10 or $11, and

60% of Russia's GDP is Ural's crude, and we broke them. We can break Iran and we can certainly break China if we're willing, if we're willing to use tariffs and sanctions as the tip of our spear. We are still the strongest and largest economy in the world by far. And these belligerent, malign actors around the world only understand two things. They understand violence and they understand money. And if we want to avoid violence and we want to avoid kinetic conflict, then we have to be willing to not only sanctioned, but secondarily sanction some of our mortal enemies. And I think that reading, reading President Trump's national security memo, which was different than an executive order, it was broader.

It basically convicted a new policy. So I think that that was a big deal. Let me ask you this, though. And we know you've been critical on China for years. I get that. Let's put Canada and Mexico aside because those tariffs may never happen. They're on pause. Let's see.

Let's talk about China. There is a fear. and I'm not endorsing it or supporting it or whatever, Kyle, but there is a fear and you know it. You're originally a bond guy. People don't realize that about you. But here's the thing. Is there a level at which you think that we could tear off China, but their, quote, nuclear option is actually just dumping a bunch of our treasuries, spiking interest rates, raising, borrowing costs, and average Americans and sort of cracking our system? Is that, because I honestly, I don't care if I buy cheap socks from China, whatever it may be. But is that a real risk from China? It's not a risk at all.

This is a Chinese propaganda narrative, Brian, that somehow you and the press have picked up on. They own 740 billion of our treasuries. We have a $30 trillion economy. If they sold their entire treasury holdings in one fail swoop, they'd move our rates about 25 basis points and it'd be over. They are inconsequential to us in the treasury market. I love clearing that up because I think you know what I'm saying, Kyle. That narrative does exist. I know. It's the Chinese sort of Damocles that they think they can hold over our heads and they propagate it in social media and it's complete BS. Well, let's not take my initials in vain, but I think it's important, Kyle, to recognize the truth of these numbers.

And we're trying to clear a lot of stuff up. Kyle Bass, Heyman Capital Management. Really appreciate you joining us. Kyle, Kyle, have a great weekend. you soon. You too. Pleasure, Brian. All right. Coming up, we got movement in the shares of U.S. Steel. They're down 7 percent, and it may have something big to do with the guy sitting in the White House. It's next. Welcome back and take a look at shares of U.S. Steel today. What a drama this has been in the past couple of hours. First, they jumped into the green, as you can see there, on reports that the president might let the Nippon takeover go through after all. Now, it was only a slight increase, Not a huge move, but notable nevertheless. Now they're selling off, down about six and a half percent.

And that's after a brief trading halt. Why? Because the president and remarks with the Japanese prime minister now seems to be shooting that report down. We didn't want to see that leave. And it wouldn't actually leave, but the concept psychologically not good. So they've agreed to invest heavily in U.S. deal as opposed to own it. And that sounds very exciting. We're going to meet with Nissan next week, the head of Nissan, very great company, and they'll work out the details.

Of course, a little confusion there. The president did say Nissan. We think he meant to say Nipon based on all of his remarks there, Brian. I'm sure we'll continue to get more clarity from the White House. Usually the market can figure these things out. Yeah, he clearly meant Nip on. I mean, he said Nissan, but he meant Nip on Steel. That's obvious. I think that the investment versus outright purchase is interesting. So whether or not, you know, there's a buy. out of U.S. Steel, which Cleveland, and you've got to watch CLF. Cleveland Cliffs is another player, your buddy, Lorenzo Goncalfa, is the CEO of Cleveland Cliffs, who's come after me a few times, but I think he's a straight shooter. They're involved in this. How this plays out, ultimately will not only impact X, meaning U.S. Steel, but also CLF. Sure, and also our relations

with Japan. So in this meeting, there was, there's been discussion from the president where he says, you know, I'd be open to tariffs on Japan, that sort of thing. And everyone said, wait a minute, they're an ally. So what's this all really about? out. They are also right up your alley talking about more U.S. sales of LNG. Yeah, and that's it. The Japanese are here for a reason. Maybe I should say tonight. I used to be a commodities trader briefly for a Japanese bank, Shigoto al-Mitsibishi Bank desk. And knowing what they might be able to do, spend tens of billions of dollars in either LNG, natural gas, straight up, steel, whatever it might be. It's really interesting to have one of the

worlds. They've got a lot of problems in their economy, but they're still a gigantic, gigantic economy, Energy is a big piece of that. Obviously, the currency is very cheap. Energy's been very expensive so we could help solve that problem. I wonder if they're doing a state dinner. That would be a good one. That would be a good one to go to, I think. If anybody wants to take me to dinner, I'm available. Brian, we'll see you next. After this, more power line. President Trump announcing some new tax proposals, including one that could close with some call a loophole for owners of professional sports teams. Mike Ozanian is here now to explain. And Mike, some are bringing up Trump's

sort of history with the NFL, not even recent history. I'm going way back to the 80s when he tried to buy the bills and the whole USFL thing and wondering if this is some kind of retribution. Well, who knows, but what I can tell you is the effect of this, if it does happen, could be pretty devastating to the value of sports teams, because the way the law is right now is when a business is acquired, and not just a sports team, but many businesses, the purchase price that's allocated to intangible assets. So in the case of a sports franchise, TV contracts, player contracts, Sometimes the franchise itself, they're amortized over 15 years. Take the commanders.

1.2 to 1.4 billion of the 6 billion price tag, present value, could have been amortized. So that's a huge tax break. That creates a loss for the team. And apart from that, the excess losses, the team owners could use for their other businesses. Really? Yeah. So if you're looking at the commanders, that could have effectively driven down. the franchise costs from $6 billion to about $4.75 billion.

So you could see where this could have a very bad impact. Brian, it's practically a bargain. Well, yeah, practically a bargain. Listen, I wouldn't mind writing off a couple of billion over taxes, but I'd have to, Mike, make a couple of billion, which is not happening. So what does this all mean for valuations? How much have the tax benefits been baked into these incredibly growing numbers that we see to buy sports teams?

I think they're baked in a lot, Brian. I know somebody who told me that with recent NFL team transactions, take the Buffalo Bills, for example, over 90% of the purchase price was allocated towards intangible assets. I think conservatively you have to bake in at least, at least 15% as being able to be written off. Because most of these NFL owners, as you know, have outside businesses that are very profitable.

So the excess loss of the sports team that you can then pass through to your other businesses can be enormous. You know, there may be some, it depends on the useful life of the asset. If it can be determined that the asset has a useful life that can be determined, you may be able to still amortize or deduct from earnings some of the purchase price, but I think it's going to be very challenging. Well, you had a number, Mike, of basically how much you think this could haircut team valuations. What is that number? Yeah, I think it could be up.

to 20%. That's a pretty big hit. Yeah. The sizeable one to focus on. How much is the Super Bowl worth to whoever wins it, you think? Well, I think present terms, very little, because the NFL has very unique economic rules where basically all the ticket money from the Super Bowl and all the postseason games all goes to the NFL.

The teams in the playoffs in the NFL, they get some money from, you know, advertising, activation, concessions. If it's a home game, very, very little money. It's great in the out years. In the out years, you get a lot more. sponsorship. The Chiefs since 2021, when they started this great run, their sponsorship revenue is up over 59%. Wow. And, you know, let's face it, you want that because the Chiefs are looking for that new stadium or a big renovation and you want to lock in those sponsors. You want to have that

brand out there. You want to get the season ticket base excited. So could help them a lot in the future. Mike, quickly, do new stadiums matter? Absolutely, because that really determines the pecking order in the NFL, Brian, because you've got to figure over 60% of the revenue is shared equally. So how do you determine really, you know, who's the most value and least value? It comes from things like those cushy suites, other forms of hospitality at the stadium, being able to have huge partnerships with sponsors. The old stadiums don't really have the capacity to do that. The new stadiums do, and they really have the ability for activation with sponsors. And that really drives the revenue. I feel like I'm talking to my sister.

She does all these activation. I was here, Activation Act. Brian, who are you rooting for? Scott, is it Philly? Oh, yes. I'm definitely rooting for the Eagles to defeat the Mahomes and Otto, the Kansas City State Farms. You and Jake and State Farm.

I think there's like a beef there we all need to know about. Mike, thank you. Brian, thanks. And that does it for Power Lunch.