9AM HOUR: 5% Yields Watch; Tech Titans at Trump-Xi Dinner; Oracle's Data Center "Force" 9/25/26

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1:24The first time we've ever seen a big deal of five, yield stop and two after the long bond hit five and a half last night, and the 10 got to five, 22. Tons of fed speak today, we just got durable as you mission an hour. A road map begins with the easing of that global bond sell-off, providing some relief ahead of the open, but the Dow does remain on track for four straight losing weeks. Plus, President Trump wrapping up a summit with China's President Xi Jinping, but did the nations achieve much substance from the historic state visit? We're a little laggered to a leader who are watching meta today as its muse-fupield rally sent shares near all-time highs. Let's begin with the markets revving up what's been quite a week when it comes to yields. We mentioned some of the levels we got to late yesterday, Mike. I think the 30-year fixed got to 745. Yes. A lot of the discussions about the speed of the move, not even over a year, kind of over five years on the 10. Over five years, obviously, we had this range that was in place. We blasted above it. There's been an acceleration.

2:24You could see it in the move index. The VIX for treasuries. It really has curled upward in a vertical way. That's what everybody always says. It's not the level. It's the speed. It's the acceleration. It's the volatility of bonds. I do think it's a little bit of a gut check on the average stock in the market. That's what's been going on. The 10-year yield did have a sniff above 5.2 yesterday afternoon. We've retreated from there. You could look at it as the bomb market searching for that level that represents the pain threshold that maybe upends some of the fundamental story. It hasn't really happened yet. I think everyone is leaning on the various explanations of what's driving this. But fundamental is resilient growth, massive cap X demand. A Fed that has said they're not going to look through the headline inflation effects here. The neutral rate is going to be higher. They think financial conditions need to tighten arguably. That's what lower stock valuations are doing. There was that piece in the journal this morning talking about just the correlation we have seen. The tight correlation we've seen with regard to oil prices and 10-year yields.

3:27They say it doesn't really make sense given that the moves on inflation eventually will find some level in which oil will settle out. It'll stop having as much of a directive factor into the price changes, the inflation at some point in time. Then it also asks the question is to whether the economy is moving at such a pace that it will require more from the Fed to actually slow it down and prevent inflation. All of these different factors playing a role in yields but that correlation between oil and the 10-year in particular focus. That piece, it's true that it's become a trading rule. It's just not programmed when when when oils down yields have a chance to fall and vice versa. On some level, yes, there's a mechanical kind of self-reinforcing feedback loop that's in there. But it does make sense in one respect which is we have seen that the world economy did not buckle at a hundred dollar oil. Therefore, rising oil prices has not yet been the thing that created a growth scare that would bring yields lower.

4:33So create a change in that relationship. And once again, Warch said that we're not going to explain away the oil effect on inflation. It means that it has Fed implications. Now I do think the bond market has become pretty hawked up. If you look at the way projected Fed policy is shaping up right now, it's more than three further hikes by next by a year from now. So that would be one percentage point of hikes in total that would more than take back last year's 75 basis points of cuts. Who knows if we get there? Six months ago, we thought they were going to be cutting. So it doesn't mean you can kind of set that as your expectation that it's going to happen. But the bond market is so far is forcing people to come up with a preferred set of rationales for why it's happening. And that decides whether it's a good or bad thing. We're watching the fiscal picture. Obviously, derbels were solid. The labor market's kind of strengthened up a bit.

5:34We'll see what you miss says in an hour. Interesting. The journal goes with the story saying, oh, the economy is surviving high oil prices and surviving high rates. But we've been talking before the show about industrials getting a look at your total. Down 10, you brought up consumer discretionary and the week has been rife with commentary on inflation from McDonald's, General Mills, Ryanair, J.B. Hunt was just the other day. Yeah, the aggregates in terms of economic growth have absolutely held up. And we all know that CapEx is the big part of the story and as the rest of the economy feels the pinch, CapEx becomes a bigger piece of the whole growth story from AI. So I'm just looking at the internals of the stock market and how it's having an impact. So on a month-to-date basis, the median S&P 500 stocks down 5%. The S&P is slightly positive by like a quarter of a percent. Peak to trough, like the average S&P stock, the median stock is 17% off its high. The S&P is within like a percent or two. So that just shows you the narrowness of the index, Meta's gain this month is basically good for 1% of S&P.

6:43It's the best month for Meta since 2013. Yeah, so and that was like the year after it came public when it was this wild, the early growth story. Besides the first day, first couple days, first couple days. Yeah, first month, actually. Let's lay as a good member, it's the first few months. How should we be thinking about Muse? You mentioned the retailers and discretionary. Muse is a potential disinflationary force in the future. If the retailers are facing inflationary pressures on their input costs, but then you have Muse, which is directing consumers to price shop, yield shop, do all sorts of kind of more productive things in terms of the way that they spend money. I mean, is that is that a potential disinflationary factor in the economy that obviously it's still early days, but something that we should be watching? I think it absolutely is a disinflationary factor and I think it really crystallizes the whole debate, right? Worse that people thought, and I thought there was a chance, that his message was going to be, we have a supply side productivity boom being constructed right now. Let's have our faith in that, and that's going to kind of rescue us from the stickiness of inflation in the real world at this point.

7:47He didn't say that. He basically said, look, we have to get inflation down toward two, and maybe we get the bonus of a productivity boom later. So it's not going to make its way into the aggregate numbers. I guess soon enough to change what the bond market thinks is going to be done on the Fed side, but absolutely. And I think look at the stocks that are getting hurt by me, and that basically means there are all these kind of frictional taxes that these companies collect from people, and they have pricing power where they might not if you have a tireless comparison shop or working for you while you sleep. Yeah, Morgan Stanley had a good note on affordability yesterday, and they have a good nice charter real income growth, negative, now year on year. Costco is an interesting example today too. Cops were okay. Yeah. 72, beat 69, but total mempaid membership has gone in the last three quarters from 4.7 to 4.1 to 3.8. Yeah, right? As we keep our eye on all retailers. Yeah, that's definitely a little bit of a jolt to the longer term Costco story, because as we know, like kind of by strategy and policy,

8:53let's go sort of caps its own margins, right? Anything they were able to make, they share it with their members. And so if they're not making it up on the membership fees as much as they were before, including, you know, tariff refunds, they say they're going to basically plow it into pricing for the benefit of customers, you know, it does change the overall story, and it should impinge on the, you know, the super premium valuation that Costco's had. I was talking to a banking source this week who was saying they are starting to see some wage growth though, in the lower income part of the economy. And that is starting to pick up, and we've talked so much about the K-shaped economy, what it means for affordability. Those consumers are still being very choiceful, I'm told, with regard to setting aside more in savings, to be sure that they can afford the higher gas prices and other kind of fixed costs that they have. But the fact that those wages in that part of the economy is going up does kind of speak to maybe a counter narrative to the whole K-shaped economy debate that we've been having for what years now. Yeah, yeah. And we'll talk about a couple of fresh downgrades today for Nike and for Comcast in a little bit.

9:58Let's get a bit on the president's estate dinner last night for his Chinese counterpart, Xi Jinping. Several tech titans were in attendance. Let's get to Megan Kasella at the White House who I'm sure can parse. Who was at the head table with that all means? Pretty fascinating optics last night, Megan. Absolutely, Carl, so much to read into the photos that we were seeing. It was a black tie affair at the White House last night for the Chinese president. More than 130 guests and at least 27 CEOs, according to the guest list provided by the White House. Now, besides the tech and finance heavyweights that we knew about, other attendees included the leaders of Paramount, Skydance, Pfizer, LVMH, AMD, I could go on, and a few notes on the guest list. Amid all the tech CEOs, there was no one from Anthropic invited despite all the focus on AI. There were also new Chinese CEOs in attendance, something that had initially been expected. And it was Jensen Huang and Elon Musk who got those seats at the head table with the president's. And both President Trump and Xi deliver marks at the dinner. President Trump spoke of U.S.-China relations that he said had never been better. Xi then called the friendship between the U.S. and China a worthy cause that holds great promise.

11:02And as for what was accomplished on the policy front through all these meetings, we just heard from President Trump on true social in the last few minutes. He called it, quote, a very productive meeting with President Xi for both the U.S. and China. Tremendous things will be happening. But there are still open questions, guys, on exactly what those tremendous things will be. Trade was a big topic of conversation that we know, but the tear of truth extension that we'd been expecting was only two months, so a lot smaller or shorter than people had been expecting. I also just caught up with Ambassador James Ingrier right after his guac box hit. And he did talk to me about the 30 by 30 trade deal that we were expecting. That's tariffs that might be paused on $30 billion worth of goods in both directions. But rather than reduced tariffs for now, it just means that those goods will sort of be protected if and when tensions start to escalate once again. Then there's the AI question, the safety dialogue that China has yet to confirm on Iran. We know that China was saying it would like to see the U.S. and Iran return to the negotiating table, but we're not sure yet whether President Trump was pressuring President Xi on Iran.

12:02And then on Taiwan, we know that President Xi brought this up, probably the top of his list of topics he wanted to talk about. And he was asking President Trump to oppose Taiwan's independence. Again, we haven't heard from the White House yet on what their line was, but that just leads us to where we are now. There's a little bit of programming left today, but still a lot of open questions about what the deliverables from this summit might be. Guys, making a lot of headlines sort of framing it as big on pomp, big on pageantry, light on substance. I mean, there are some student visas in there, some maybe some more flights to China and the U.S. Would you agree with that framing? I think that's right. Don't forget the pandas. There are two new Chinese giant pandas going to the Atlanta Zoo. Pandid diplomacy is alive and well. I will say expectations were low going into this of any real policy deliverables. But I was hearing from experts who said that even with those low expectations, so far at least what they've heard hasn't met the low expectations that they had. The pageantry is important for both of these countries, both sort of speaking to domestic audiences here. She, you know, Chinese state media we know was blanketed in coverage of the red carpet welcome, both on the tarmac and at the White House, portraying him as an international statesman respected on par with the U.S. President on the global stage.

13:13The U.S. President Trump also wanted the handshake, wanted to show their stability and closeness in this relationship. Both of them think this is the best way to ultimately achieve their policy issues. And we do know or their policy priorities, I should say. We do know they have two more meetings scheduled for this year, November and December, the first in China, the second in Miami. So much more to watch there. And we'll see if that's where we get more of these policy outcomes. We've been looking forward to it. And finally, just on today's calendar, what a visit to the National Archives? That's right. First, it's here. About 10.30. We'll see them arrive for a private tea here at the White House. And they'll go over with their wives to the National Archives for a tour there. They say it's to commemorate America's 250th birthday. We'll see what they look at specifically once they get there. Megan, appreciate that. Megan Kasella watching our last night's festivities. Mike, I don't know if you saw the head table musk. Yeah. Jensen, Tim Cook, Lisa Sue, and there as well. I mean, it's sort of a almost a visual representation of at least the markets reliance on AI and tech. For sure. And the economies and really where the stakes lie in terms of the economic part of the diplomacy.

14:16I feel like from a market perspective, a no surprises summit is fine. You know, we're kind of essentially status quo in terms of this relationship, this sort of managed disengagement, whatever we want to call it. But nothing really on breaking AI or anything like that. That would probably have you have to reassess the trajectories for some of the demand picture. Yeah, you've got this post from the president saying like almost everyone else, he seemed to like calling the poorly and inaccurately named artificial intelligence to a far more accurate, important name, super intelligence that would be super. Still open AI. It's not open SI. Not yet. Although we have seen some map changes. Yes, that's true. You know, stranger things have happened. We've got a tough ship to turn. We'll see what happens. Take a look at the pre market here as we get Friday underway. We will dive into Oracle. Thank goodness. Leslie is here with us to walk us through force, measure who's on the hook for what? That's after the break. Stay with us.

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16:19I chose Shopify because when I was testing other platforms it was definitely one of the most user friendly. It was important to me to think about where we would be in the future. All of the tools for reading your sales like planning inventory. They're just right there on your dashboard. For anyone starting a small business, the biggest thing I can tell you is it doesn't have to be perfect. Shopify can help you build upon it. Start your free trial on shopify dot com. Welcome back Oracle remains in the spotlight after declaring a force measure on a new Mexico data project. So basically what happened here guys is that Oracle sent a notice over concerns about the building being powered on time. Now this is basically hypothetical. The building isn't constructed yet. They're not officially paying the full rent price yet. But what this does is it allows them to pay essentially a discounted rent for about a maximum of three years in order to kind of wait for that power to be put back on before they start paying the full amount of rent for say 18 years.

17:19So the landlord so to speak is Blue Owls, one of the Blue Owls subsidiaries here called Stack Infrastructure. And basically the Blue Owl shares took a dip on this yesterday, but it isn't necessarily a negative thing for them because it just means that Oracle will be paying rent to them for discounted for three years, but still say 18 years. So it's 21 years instead of instead of 18. So Blue Owl is still getting essentially a higher rent payment as a result of this. But I think one of the interesting components for this is we think about the data center build out more broadly is this idea of here is a data center. They knew from the beginning I told that there was no power. They had to kind of facilitate the power and the permitting and all of that before building and construction during the construction. And that's challenging. That's very much out of their control because it requires permits from the local municipalities.

18:19It's everything that we've heard about the moratoriums and the pushback and everything. And so this based on conversations I've had in these least terms are private. Blue Owl is essentially covered here. I was told they had a call with the lenders where they communicated, don't worry. You will get your money back as a result of this, but you've got Oracle on the other hand, which is on the hook for those rent payments over an extended period of time. They're on the hook if the power ultimately is denied for some reason and isn't able to get fully functioning. And so you've seen their CDS widened. You've seen the cost of their own borrowing go up over time. It doesn't mean it's a systemic risk for Oracle necessarily, but I think it's interesting to think about as we talk about just the various obstacles with regard to data centers, the build out, and these least agreements which seem to be pretty favorable for those who are lending to the institutions.

19:19Fairly airtight. Yeah. I mean two things on this one. One is there was some discussion yesterday about whether or not they're in jeopardy of losing their investment grain. Morningstar had a piece and then the other Goldman today they up their global capex to 1.2 for 27, but they also say they're underweight hyperscaler issuance because there's just a flood of the coming. Yeah, yeah, I heard that kind of emanated from Jamie Diamond last week when he spoke or was it this week actually I'm getting my weeks confused. We've so busy might have been Monday. Yeah Monday of this week where he spoke to our partner in India and said, Jake, you Morgan is expecting a trillion dollars in cat backs this year. And that's a dramatically from previous estimates that we've been trying to change in on these projects getting done. You don't even mean so it's not like oh, they're going to write the check and it's just going to happen to me. It's a big question about where ultimately the economics, the profit layer is going to sit for this entire build out. And the whole bear case on Oracle and the Neo clouds was they're taking all the financial risk.

20:21Yeah, taking the execution risk and the hyperscalers and the model builders are going to reap the benefits. I'm not saying it's going to happen, but revenue is supposed to double for Oracle from last fiscal year to the one two years from now. Yep. That's 60 billion, 70 billion incremental revenue that's supposed to be coming and it's only if it happens. Only if these projects happen. Yeah, I mean, there wins a question. I was just hypothetically talking with sources and I said, what happens if Oracle can't stomach this? And they're like, someone also come in. Yeah, they just feel like there's so much demand, but it's not a problem for the people who are lending money or serving as essentially landlords here. So I go, we'll find someone. It's the anti dark fiber thesis on this particular investment round or chapter. Take a look at the pre market here. We'll get to a lot more regarding the market. It's that the open just a few minutes away. Stay with us. Who says Americans don't build big things anymore? Through innovation, venture global is not only building some of the largest energy facilities in the world right here in the United States,

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22:26Print postage for certified mail, register mail, and packages in seconds. Then schedule a pickup right from your home or office. For a limited time, go to stamps.com and use code podcast for a free welcome gift. Taxes and fees apply. Watch Akamite today leading the S&P pre-market winner list as they pen the seven-year deal to supply computing services for Anthropic. $11.6 billion with an option for nine billion more already. It's being called a landmark deal. Google in line today maintains a buy but they raise their target from 190 to 225. We'll get more on that. Opening bell a few moments away in a quick reminder. You can catch us anytime, anywhere. Just listen to and follow the Squawk on the street opening bell podcast. If they say the alternative, which is there is no way to contain our experiments. There's just no way. When we test our AI models, it will get out and it will damage the world.

23:27Then I think the answer is we have to shut the labs down. Because the cost to command the damage is too great. The liabilities, it could be civil liabilities, criminal liabilities, something to liabilities and incredible. And Vity is Jensen Wong on that Ezra Klein podcast this week. While he doesn't believe that AI poses an existential threat to humanity, he does say if the people working at places like Anthropic or OpenAI really are on the verge of destroying the world, they should shut it down. Interesting example of him not exactly talking his book. By the way, there is a business implication here. Because I talked to several CEOs behind the scenes who say, look, we're paying all of these tokens to use these products. It's expensive for us. And if they are basically saying, oh, we can't control that. If you're paying us to use them and we don't know what's going to happen, what's the incentive to continue paying for something that the product isn't controlled?

24:28And so I do wonder at what point you start to see more of a pushback from the enterprise side of this. If they feel like they're buying these expensive products that they can't trust and then they have to spend even more money to create cyber security around in order to protect their own businesses. Does that become a greater concern? It kind of gets to the end of the Alex Carp or is this pressing that I've come to discuss a few days ago. Let's get the opening bell here at the big boy on Wall Street, it's Operation Life Saver. A rail safety area is an education organization celebrating the 10th anniversary of C-TRAX Think Train Week. Athenazdeck and Times Square, it's ADRX, Pharmaceuticals, focused on treatments for various diseases, celebrating their IPO. And it's SIBO in Chicago, Advocates Global Management, an alternative asset manager, 7710 here at the Open Mile. The comfortable gain for the week at this point. Yeah, I guess we're up like three quarters of a percent, it was almost all on Monday. We're still in what I like to refer to as the August 4th range in terms of that one-days move.

25:30So we're hanging in there, I think is the way you would put it. And hanging in against, again, this persistent under-toe below the surface of the average stock. Take a look, it's only a month or two ago, people were celebrating the broadening trade. Well, take a look at Equal Weight S&P 500 relative to the headline S&P, it's basically at its loads. You look at it at a two-year, you have these little episodes where the majority of stocks can have a little bit of a comeback. And then it has failed. And I think now the question is, does that mean we have properly and rationally discounted the macro pressures in the average stock? Are we starting to look oversold on an internal basis? Do you start to see essentially little mini washouts in there so that any little spark if we get relief on yields or oil can create a little bit of upside-lip to the average stock? Who knows, but I think that's where we're kind of rounding into in terms of the debate. That's Equal Weight S&P compared to the headline over two years. So essentially you've had your internal correction.

26:33And the question is, is that enough? And I think the reason we keep sort of rotating, it's all picking from one pocket into another, is that we came into this period with equity exposures really high. Everybody, professionals retail everybody. So it wasn't like there needed to be another push of new money into the market, it's just kind of rotating around it. And then of course you have rates impact on what people are willing to pay. And are we going to extrapolate the massive earnings gains of the first half into next year and pay up for it? Yeah, I kind of liked how UBS summarized this week. They said in a note this morning, I don't think I've ever met TGIF more sincerely than I do at this exact moment. Between non-stop and gentick AI fears, the never ending pacing the frontier debate, lingering post-FOMC paralysis and consumer anxiety. There are currently about four different narratives, fighting for custody of the market's mind share. And they say, we've all deserved, we've all earned this weekend. But I think that speaks to what Mike was talking about with regard to just the, you know, where are we at any given moment when you have these four competing narratives that seem to oscillate on it.

27:39I don't know, by a headline. Yeah, people are getting chopped up. I mean, I would say if you are a manager, even a short-term tactical manager, and you have really caught all these micro rotations one day, it's AI infrastructure, one day it's hyper-scaler, you know, et cetera. It's like you guessed right on 50 straight coin flips. It's not because you had a process that told you to go that way. So I do think that's, you know, people feel chopped up. On the other hand, I'm reminded of the reported comment of Lloyd Blankfein, you know, during the financial crisis. You're not getting out of a Higgins boat to, you know, land on the beach in Normandy. You know, you're taking a limbo to the New York Fed. That's from Andrew's books, or a camp's book. So like, go easy there, trading desk guy. You know, I know you earned your weekend, but market's up 12% this year or something. Exactly. I will say there's more notes than usual today about whether or not a continued increase in rates would slow down earnings growth even further.

28:40Yeah. Great chart out of Barclays. The risk, of course, would be if growth expectations for next year are unrealisticly high. And this is what chart three is illustrating that they have a look at operating margin expectations, which they call literally unbelievable. Yeah. And so, and they actually are more on board with that than not, but they do expect to get questioned going into year end. And that's going to provide some child. I mean, this is just an option. It's almost just kind of predicting the present in a way, because the second quarter earnings were up 30 something percent, even on an operating basis. This quarter supposed to be up 30 something percent. And the aggregate index is trading where we were before they started reporting the second quarter earnings. Right. So it's, it's, it's happened. You've had the valuation compression. I think over earning risk. It's a big one. I've been saying that for a while. Nobody seems to think it's possible because you know why we remember for decades, people saying profit margins mean revert. You can't go higher than record highs. And they kept going higher because of the mix of companies in the index and technology and everything. So I do think that's a really good tug of war in the, in the narrative is around exactly that.

29:49Most of the upside for this market happened during and right after like up till the end of earnings season. And then all of a sudden it was macro macro macro oil rates and everything else. Well, that just this morning we started to see a slew of reports on bank earnings, which of course take off earnings season for us. And despite some of the headwinds we've talked about with regard to potential risks around trading sales and trading. We heard some guidance last week in the Barclays conference about that from certain certain banks others were a bit more constructive on that front. The potential impact of higher rates on banks. It seems like the overall consensus so far from the reports we've seen from the analyst community has basically been. They're not expecting just blockbuster earnings necessarily by pretty stable results. Maybe they beat but don't raise guidance is kind of the theme I've been dissecting here with a bit more concern around the capital market sensitive areas where there's been maybe a little less underwriting than expected during the quarter. Part of that plays into everything we've talked about with regard to AI the data centers all the IPOs that were kind of expected in either delayed or postponed as a result of that.

30:58But not not horrible thing either even though banks have had a pretty pretty rough work you can see down the SBC financials down one month on one month basis. Yeah, we talked about goldmenguede to 920 yesterday, which lowest since May. What was the line out of Morgan Stanley? Q2 was amazing. Q3 is no Q2 right that was the essential for an end. Exactly and I think there were tough comps last year you had kind of a big rebound off the post liberation day Q2 last year which really helped the trading businesses in Q3 so the comps are difficult but you're also contending with the yield curve that has been flattening. That's not great for bank profitability but at least according to the research it seems like there's not a big expectation for a change in guidance as a result of that for net interest income quite yet given everything we've seen. Yeah, I mean it's really also this more kind of the atmospheric conditions of okay if the Fed really wants a tight financial conditions the channel through which that happens is capital markets activity wrist spreads things that would matter for banks.

32:00So it's not lending as well as a big component of that. Do small businesses pull back and are they kind of a collateral damage and all of this. And it remains an if you know we don't really know how aggressive the Fed feels it needs to get or you know whether in fact you're going to get these really disorderly increases in yields but yeah you got a pretty flat yield curve right now it's kind of owing an eye over the long end you're basically getting 5% and the 5% and 7 year maturity as well. So it's not as if there's just a lot of juice in there at this point although I would say that bank stocks because they had done so well. They had a little more of a cushion before this pullback and so they haven't really cracked their overall up trends and it seems like maybe there's a better risk reward there than in you know some of the other areas that seem like the kind of charts got broken. Yeah, it's an interesting confluence of things because this Carl was talking about just a few moments ago this idea of what is really propelling the economy forward what's really propelling inflation forward.

33:01If the concern of inflation isn't as much tied to what's going on in oil and what's going on in geopolitical space and more tied to this AI build out the cat-backs build out that we've seen is monetary policy to solve of that and if it becomes more challenging to solve it you need more rate hikes to really slowly slow down the rest of the economy. So back would be France doesn't have a huge AI build out Germany is not going crazy on the AI build out and they're yielding and just as dire straits. Yeah, I mean I just feel like that's very true. The Fed does not have like this fine tuning ability to kind of hit this part and not that part of the economy. I always just think the decision is look if you're if you're this far away from the data in terms of where your mandate is and where where policy rates are just moving that direction and hope you get lucky. I mean it really is all it's going on and it's probably the right way you know there's also the problem of you know the global debt picture as well which is another key factor as to why we're seeing global bond yields and higher as there is just this massive amount of debt and those countries are also competing with the AI build out here to fund their own balance sheets and the sovereign level.

34:15And so everyone's building their own like domestic secure industrial infrastructure and energy infrastructure we're deglobalizing you're getting all of the benefits of the 90s into the 2000s from globalization and better demographics is going the other way. So I think that's where we are you know I mean that doesn't mean you know we spike inflation from here but it's sort of you know I always think of Henry McVey KKR's idea from a few years ago which he stayed with which is the world economy has a high level of money. The world economy has a higher resting heart rate than it did in the prior decades and that's where we are what would the or a ring say. You would know being a consumer of I know my apparently has been highly late. This is why I refuse to know the information. I mean it's really serious. Speaking of which Meta is a little softer today after this barn burner of a week or month actually as we said earlier best month for Meta since 2013 they got to that $2 trillion market cap today. The focus on Microsoft as they roll out this long promised they're not calling it a super app but it is a new version of co-pilot combines AI chat coding long running agents you basically can build your own apps and tools by simply describing it to co-pilot.

35:31So we'll see if we can the Dell has been making the rounds. Yeah he's been doing some interviews discussing this new project. I mean I think the key question here is just the stickiness for consumers and also the business model. You know what does how does Meta get money back from this? I downloaded the app and I've kind of played around with it this week. Mews you mean. Mews yeah and I didn't pay anything for it. Whereas I have subscribed to other LLMs in the past and so does that change over time. What's the you know after I did a couple of things with it I kind of just dropped it so we'll see if we pick it back up but I've seen some chatter about that that habitual people kind of play around with it and then maybe don't pick it up again for a couple days so you know obviously it's still early days but how that really changes the workflow remains to be seen. Deutsche by the way today on Meta goes to 820 versus a prior 750. Yeah I mean I think that the angle of that move in Meta and the fact that it made up its entire deficit with the S&P 500 over two years in like a week.

36:36I think it's more a measure of how doubted and under-owned it was and now it's back to like a slight premium PE. It's sort of like the mean reversion has happened and now the question is how much bullishness do you have incrementally from here based on the numbers that are going to come through. It seems like they have you know now the benefit of more doubt than they had before. I would note though the second biggest upside contributor to the S&P is my chron this morning. It's above 1100 bucks to share price. Has it really stayed there since the big meltdown after June and July sell off. It's been up a couple of times there this week reports next week reports next week and I think that everyone is taking that second step and saying this consumption of AI, the proliferation of all of the agents on a consumer level just means we're going to need more. So the inference market whatever you thought was going to happen in June, guess what it's going to happen. We just price the stocks for great things too early. Speaking of consumer couple of rather discouraging calls.

37:37One is on Nike, B of A finally cuts to underperform. They were at 36, they go to 30, they cut numbers by 11% for fiscal 27, by 12% for fiscal 28, negative sales growth for all of fiscal 27 and no spring inflection which they were prior expecting. That's almost back to 35 now. Yes, brutal. I mean it's the stock is back to where it was in 2013 or so. But the valuation is no lower because the earnings estimates have come down so much I think that's kind of part of the B of A call too is it's just not going to hold the 20 multiple and that's still where it is even after this devastation. The other one is Comcast, key cuts to underweight target 18. This case, broadband churn, will worsen, competitors will take share, park visits not really doing much in Orlando or they argue in Osaka. So that's going to be, that's a new cycle low here on Comcast.

38:41I do think, you know, it's in the minds of investors with regard to those types of stocks which is, you know, muse hunting for the best, you know, the best deal on any kind of subscription all the time is is going to basically be a cost to these companies that have a lot of subscribers that are paying what they're paying for the broadband package and they don't really look for the better deal. Yeah, it's fascinating though because, you know, consumers are still spending but what they're spending on the product mixes so much more tilted and we talked about this ad nauseam to experiences and this remains true it remains to be cruises and vacations and, you know, some park visits, at least to a certain extent here in the US maybe less or so on a global basis but that continues to be but the consumer spend money on regardless of where oil prices is. Oil prices are there hasn't necessarily been a kind of, oh, we're going to cut back on our cruise vacation because oil prices are high and maybe some of that is supported by what we were talking about earlier with lower income wage growth remaining strong or rebounding a bit more recently.

39:48Yeah, I mean, I do think that's a demographic piece of that as well. I mean, you're getting a lot more of the steadiness of the spending income is among older Americans or more of them. That's a priority there. You know, that's the one thing we're not going to give up kind of kind of an idea. So I do think that's that's part of it. Also, housing market is obviously very weak and, you know, housing turnover catalyzes a lot of stuff purchases. It's really kind of household formation and things like that. So you have a lot of things working exactly. Yeah, that's that's a concast story right there as you set up new broadband you buy furniture from our age. You get silverware from Target. You name it. Exactly. What do you make of this barrage piece that argued that mortgage rates could go to nine? Yeah, Mike. Yeah, I don't know. I mean, obviously there's a kind of a stack of assumptions built into there in terms of, I mean, you know, the government agencies are going to fight, fight, fight to make sure the spreads mortgage spreads to tragedies don't get particularly high.

40:50I don't know. I feel like something would break along the way if treasury yields got to the point that under wrote 9% mortgages that might kind of cause a little bit of a reversal on these trends, but yeah, I don't know. Is there any concern that because housing prices have remained so high and they have remained those who haven't been able to get into a home, especially those who've been able to get into a home with low mortgage rates. The prices have remained high throughout, you know, the post pandemic period. Is there any concern that the even where the 30 or fixes today at 745 that that starts to reverse things for the home prices and then what does that mean for the rest of the economy as people feel less wealthy and almost has to, right? I mean, for many people you're buying as much house as you can for the monthly payment. It's kind of how it's also the answer to people saying like, why are you complaining about 7 and a half percent mortgages? My mortgage was 9% Yeah, a lot of it. I was paying 18 and 1980. On your $70,000 house. Exactly. Thank you. So I mean, there's a lot of adjustments that we need to have. You can't even find a parking spot for 7K these days.

41:56As we go to break, speaking of all of this, watch the long end. I mean, not necessarily the most important number, but little stubborn here this morning at 549, even with the rest of the curve trading. There's a look at the 10 at 520. We'll get you mission. Get a look at some expectations for inflation in about 12 minutes. Back in my surging here, although not the session early opening highs, we will talk to the CEO later this morning about this new deal to supply computing services to anthropic being widely hailed as a pretty important deal for that company and Tom Layton will join us for now. Nice opening pop down to 23 don't go anywhere. Try to get a kid to do long division right now. You know, the multiplication table is starting to be forgotten doing square roots. My goodness. I mean, he's just basic math is being forgotten. Does it matter? That's my question for you. Yeah, I don't think it does. I don't think it does. But there must be some set of skills. It matter. Oh, yeah, yeah, yeah, but maybe not those.

42:57That's Jensen Wong on Ezra clients podcast this week weighing in on how some kids do lack basic basic math skills. He goes on to say that he doesn't even know his own zip code or his phone number. He was trying to pump gas didn't just and why would you need to know that pump gas a few years ago. He said and you know, you need to input probably for the credit card. I think his point is not worry about the loss of mass goals. It's that, you know, there are things that we used to have to know. That we don't need to be good at anymore and you know, I don't not sure he was totally successful in saying like yes, but we're going to require other skills which kinds of other skills. And at some point he got to I did listen to it. He got to this idea that well people working technology soft for people created who they're going to be better systems thinkers are going to understand how things work together in the AIs going to be really more of a tool than anything else. So, you know, hopefully and as a technology revolutions have gone in the past, you know, when people bought cars years ago, you almost had to be a mechanic in 100 years ago if you wanted to operate in successfully. Now you have to be a software engineer. Yeah, exactly. Now you need this computer diagnostics and whatever. So I do think there's a there's a case behind it, but it's not clear to me that he landed it.

44:09I mean, it wasn't that the concern when calculators were first invented that they shouldn't be in schools because kids won't learn how to do math. Now we have calculators in our phones. So I mean, you never go anywhere without a calculator. I guess the argument is are those exercises training you in some fashion to focus or to think about process or to go through the steps and problem solve that could help in another way. Right. Nobody ever thought everyone's going to be walking around needing to do long division. Right. I think internally a golden they call it cognitive decay. Right. I think about that because I got a part time MBA 12 years ago and we did all the valuation math and we did the discounted cashful model. I don't use it my daily life, but there is a part of my brain that kind of remembers what I did and I know that I could find tools to help me do it if I needed to. And was that a useful time and learning process maybe what I've been okay without it also maybe I don't know. At least you can do the full time. I'm a pretty grueling. It was a really really good discussion with him in Ezra and kind of a new wrinkle and a new element in the debate about AI beyond whether or not we're all going to die.

45:17Yeah. That was up to 62. We're back in just a minute. You've been listening to the opening hour of CNBC's Squawk on the street. All opinions expressed by Squawk on the street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. Do you the full Squawk on the street disclaimer please visit CNBC.com forward slash Squawk on the street disclaimer. Every house has a beginning. Our starts with a rebellion. This is not just fashion. This is freedom worn out loud. A place where individuality isn't a look, it's a law. Perfect is boring. The algorithm doesn't know you. You do. A look is never just a look. It's a declaration. It's time to step out and into somewhere new. Step into the house and burl and find a burling to near you.