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AI Buildout vs. Dotcom Bubble 10/9/25
00:44:10
Scott Wapner and the Investment Committee debate whether an AI bubble is brewing and how to navigate it. Plus, we hit the latest Calls of the Day. And later, Josh Brown spotlights Netflix in his "Best Stocks in the Market." Investment Committee Disclosures
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- [00:00]
Josh Brown
A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with detours, new possibilities, and even another passenger or three. And with 100 years of navigating ups.
- [00:17]
Edward Jones Narrator
And downs, you can count on Edward.
- [00:19]
Josh Brown
Jones to help guide you through it all. Because life is a winding path made.
- [00:24]
Edward Jones Narrator
Rich by the people you walk it with.
- [00:26]
Josh Brown
Let's find your rich together. Edward Jones, Member, SIPC how will you.
- [00:32]
Scott Wapner
Shape the future of banking with confidence? Industry consolidation, crypto, the rise of fintechs all create a complex landscape for banks to innovate and grow. EY provides domain led insights to navigate today's fragmented banking sector. So whether you're tackling regulatory complexities, integrating digital assets, or seizing M and A opportunities, EY sees your business from every angle, working together to deliver outcomes that create strategic value. EY shape the future with confidence. I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Walker. Front and center this hour, the bull market. Three years in the anniversary. This weekend we'll discuss and debate where stocks might go from here. With even more questions about a potential bubble brewing, we will discuss all. Joining me for the hour, Josh Brown, Shannon Sokot, Bill Baruch and Jim Bleventhal. So we were green, we turned red, we got a little work to do, but as I said, we're turning three. October 12th is the official anniversary and Truist says upside remains, quote, the combination of continued economic growth, resilient corporate profits and a supportive policy backdrop provides a solid foundation for maintaining a constructive stance heading into the fourth year of this cycle. Of the seven bull markets that extended beyond year three, all saw further gains during the following. Josh Brown, you're first.
- [02:07]
Josh Brown
I think the big takeaway for people is that it's very expensive to miss a bull market. This is a conversation we have with our wealth management clients all the time. You almost never recover if you sit these types of things out and watch from the sideline or you're way under invested or you spend the entire time waiting for it to end and too much focus on hedging, not enough focus on capturing that upside. The S and P is up 89% since the current bull market started as judge mention years ago. But if you look at the average bull market since 1950, they tend to gain 192%. Now of course that's an average. So there's a lot of dispersion at the edges. But we're less than halfway to that average bull market return in terms of duration. The average bull lasts five and a half years, so we're just about to complete year three. It's a little bit more than half of the average, but there still could be a lot to go. And the thing I want to tell you about year four, Judge, the average gain for the S&P 500 of a bull market is still 16.2%. So if you were to apply that to where we are today, that would put the S&P 500 at around 77:10. Now, of course, we're just talking about averages. That's not a price target. But I think people need to have that context, that background, so that they understand just because stocks have been up, that in and of itself is not a reason to say, all right, that's as good as it's going to get. I'm done now.
- [03:37]
Scott Wapner
Shan of the previous 10 bull market extended beyond three years. Some suggest maybe this looks a little long in the tooth. Maybe we're brewing a bubble. Others say there's a big Runway ahead for a variety of reasons. And truist, I thought, was pretty good in listing them out of the catalyst for stocks to continue to go higher. Even people like Paul Tudor Jones who says this is probably not going to end well, but you don't want to miss out on what's likely to come from here.
- [04:05]
Shannon Sokot
Well, I think it's also, I mean, we talk a lot about the concentration and the expectation for deterioration and earnings growth in the names that have really led them market over the last couple of years. And you haven't seen essentially the other 493 participate to the same extent. And there are actually some very reasonable catalysts if you think about the potential for this AI trend to broaden out in terms of spending not only on the capex side, but the productivity enhancements that are likely to come to the other sectors as they begin to incorporate AI into their businesses. That margin improvement that comes from increasing productivity, that can allow earnings to potentially grow into some of these valuations. Scott, that continue to be the problem with the market. Just because we've been up this much, just because valuations sit at a certain level, you're making the expectation, you're kind of setting the expectation that earnings aren't going to accelerate because if earnings are going to continue to accelerate and you might not necessarily get the same absolute level of earnings that you do from the Magnificent Seven, for instance, in the other sectors. But if they're continuing to grow, the rest of the s and P500 is continuing to grow. Why couldn't we be setting up for a 2026 which is more deregulatory, perhaps, perhaps a re acceleration in areas like production in the manufacturing economy? All of those things sort of point to a tailwind and you're actually seeing monetary stimulus that you may or may not need but is going to come because of this deterioration in the Labor Market.
- [05:33]
Scott Wapner
Bill, J.P. morgan takes a look at the retail investor through their retail radar where they suggest retail accelerated their weekly purchases of stocks. Net purchases were 7 billion this week, well above the two month average of 5.3 per week. Retail investors continue to favor ETFs over single stocks. What does that tell you about the momentum that suggests behind is still behind this market?
- [06:02]
Bill Baruch
The flows are strong. And I think looking at hindsight, I've been on the show over the last month or two and saying that we've trimming little bits here and there and we had a good opportunity to do that. Kind of just managing our overall overall risk and outperforming the market allowed us to do that. But I think when in hindsight you look back at June, July, the S and P was only up 10% year to date in the last two to three years. Each year 23 and 24 more than 20% year to date or yearly gains. And right now we're only at 15%. So if we match that, there's still a lot of Runway here this year. What does concern me in the near term though would be you have in the NASDAQ and the QS it's 70% is 8 stocks as you cited the concentration 40% is a makeup of 8 stocks in the S and P. And we're starting to see some deterioration in momentum in the near term. We're starting to see some of that breadth continue to deteriorate. Now I don't I'm not sitting here bearish. I think there's going to be a strong finish to the year, but I would imagine that we get some sort of little bit of wiggle here to kind of refresh and I would like to see that. I would love to put cash to work in order what we've raised in order to capitalize on what's going to be a strong finish of the year and at least carry into April of next year. I expect whatever pullback we get in October to November is going to be a very strong thrust Higher in through.
- [07:17]
Scott Wapner
April of next year if you get the pullback. I mean we've got to wait for tech earnings. It's going to be the whole show tech earnings and they don't come for a couple of weeks, two, three weeks. So there's an air pocket of real critical market moving information until you get to those numbers.
- [07:33]
Jim Bleventhal
Right, there is an air pocket. I don't think that's enough to be bearish at all. And you know, Shannon, Josh and Bill just went through reasons to be bullish. I'm going to go through reasons not to be bearish. Consider that notwithstanding the tech earnings are a little ways off that we are looking at double digit growth, approximately double digit year over year gains in profits. Consider that the economy is very far from a recession with Atlanta fed GDP at 3.8%. Consider the Fed is cutting rates. This is a very hard environment in which to get bearish. If somebody were to get bearish. I find these arguments really to be quite hollow. One would be, well, the shutdown is happening and we don't know how that's going to end. History shows that's not a concern. Or one might say that it's expensive, the market's expensive, but that is never a catalyst. And for the market to go down. And by the way, if earnings come in better than expected, which has happened for the last several quarters in a row, maybe the market isn't as, as expensive as we think it is or as we look at it to be.
- [08:26]
Scott Wapner
But you didn't mention anything about. There is some concern about a deteriorating labor market. And if you, if you look. Well, I think a growing amount. If you look at some of the surveys that have been done outside of the government, the one from, I think it was KKR the other day shows up pretty. Carlisle shows a pretty nasty picture of what's actually taking place within the labor market. And there are many other surveys that are out there that I just don't have in front of me which tell a similar story to me and I.
- [08:56]
Jim Bleventhal
Think to others as well. What we have is a condition here where there isn't a lot of firing going on. All right. And we see that in the weekly jobless claims, albeit it's been two weeks since we've seen them. There isn't a lot of firing, but there isn't a lot of hiring.
- [09:08]
Scott Wapner
Right. No higher, no fire. That's sort of what people have been. That is phrasing it.
- [09:12]
Jim Bleventhal
That certainly could be a lot better. I have two young adults, children's. I would like it for their sig to be a lot better. But that's not enough for me to get bearish.
- [09:19]
Josh Brown
I don't think there's an air pocket either. I reject the premise you're going to get bank earnings starting next week and these earnings are going to be explosive. Bankers are telling us these are the best of times right now. M and a capital formation deal making unbelievable activity both within the theme and external to the AI theme. And I think when when you think about the financial sector and its importance to the rally continuing this year cannot be overstated. This will be the fourth strongest earnings growth of all S&P 500 sectors in Q3. The financials as a group are expected to have earnings up 11 and a half percent. Anybody want to bet me that's not going to be an upside surprise? More like 12, 13, 14. All five industries within the S and P financials are expected to have earnings growth compared to same quarter last year. Banks themselves 9% growth. But you're going to see strength in insurance. You see strength in anything related to the stock market, asset management, investment banking. And I think these fintech names have a lot to justify recent rallies. And you're going to get that too. You're getting it from crypto. It's just in my view not going to be an air pocket.
- [10:35]
Scott Wapner
Well you better have good earnings though. Where considering where valuations are in the financial space. That's what Piper Sandler is talking about today. They say lofty valuations may be defying gravity. Banks continue to fly above the fray. The only real concern is that their lofty valuations may be defined gravity which leads to questions about whether they can continue to outperform from here.
- [10:55]
Josh Brown
It's chicken and egg. There's lofty valuations because business is gangbusters. Why wouldn't the. Why would valuations be at a discount to history or even at. Or even at a 10 year average? For what reason? Things are very good in the space. I wouldn't expect your stocks to be. You're paying for growth but. But look at the last 3/4 of pick your favorite 3 or 4 large cap financial stocks. Is anyone not doing well?
- [11:22]
Shannon Sokot
But you don't even need the exciting stuff that you talked about just basic loan growth like is like to accelerate insurance. Like you said that's not an exciting business necessarily but all of those are set up to your point to continue to show both top line and bottom line growth. And so you're right.
- [11:37]
Josh Brown
I mean it feels so aggressive activity. So ICE steps up with a $2 billion with a $2 billion investment into Poly market like this, this, none of these things would have been happening even as recently as a year or two years ago. Fifth third steps up and takes out Comerica. There's a lot of aggressive activity happening in the financials that has absolutely nothing to do with how many GPUs are being bought.
- [12:04]
Scott Wapner
Why have many of the names within the group, the largest ones over the past 30 days not done all that much?
- [12:11]
Josh Brown
Because look what they did in the first half of the year. These are all still in, these are all still in statistical uptrends. But stocks that have gone up a lot here, there's your chart.
- [12:20]
Scott Wapner
So you're saying that earnings are going to start the next leg for this group.
- [12:24]
Josh Brown
If we see anything even close for the money center banks to 9% earnings growth, who's selling banks say yes.
- [12:33]
Scott Wapner
Well, Goldman, Goldman says you're to buy Citi. Citi calls ahead of earnings. So if you want to do something ahead, buy calls cities on track to meet medium term targets driven by solid fee growth, efficiency improvements and strategic divestments. The option implied moves capturing Earnings are attractive versus as its average 8 quarter earnings day move.
- [12:52]
Jim Bleventhal
Look, Citi has a very specific set of circumstances to it, not necessarily applying to bank of America or Goldman Sachs, but they're about to do the Bantam X transaction sometime in the next three to four months. Spin that out. And after that happens, I see absolutely no reason why this should trade at a discount to tangible book value. It's just below that right now. I mean you look at something like bank of America at 1.9 times tangible book value and I say rhetorically, why shouldn't Citigroup be there? And if that were to happen, that would be almost a double from here.
- [13:20]
Bill Baruch
Now.
- [13:20]
Jim Bleventhal
It's a little bit provocative. We'll talk again when we're at 120% of tangible book value, which would be around 121, 25.
- [13:27]
Scott Wapner
Well, I mean it was provocative. Way back, you know, back. Pull the chart way back when you first got into it, made the case. But Citi in the face of what appeared to be a lot of headwinds and what appeared to be an extremely heavy lift by Jane Frazier. I mean she's, she's lifted, she's done.
- [13:47]
Jim Bleventhal
A good, she's lifted, she's done a really good job. She hasn't gotten full credit for it yet.
- [13:52]
Scott Wapner
I mean, come on, they'll get a look at the stock. What do you mean she hasn't gotten full?
- [13:55]
Jim Bleventhal
Okay, because it trades at less than A good question because it trades at less than 10 times earnings as I said, just a hair under tangible book value and got bank of America fine bank, you know, trading at almost twice the multiple tangible book value and about 40% higher multiple of earnings. So I think there is a lot more opportunity left to come in Citigroup.
- [14:13]
Josh Brown
Sector wide the beat rate for financials 80% this year. Okay. The last bearish here. Well that's my point is like so so taking Q4 numbers which were reported to us in January. Right. And taking Q1 Q2 now we're going to have Q3 reports, 80% beat rate in this space and tons of upside to guidance each time they've reported. Even during the spring these stocks held up pretty well. Considering how how scared most of the market was about the impact of tariffs. I think they deserve the benefit of the doubt. The one that I'm in, jpm, jpm, one of the best performing stocks in my portfolio probably in the whole s and P500 depending on the time frame. This stock has just been explosive during the last two years of this bull market. This is a company that's still Looking to post $4.83 which is a 10% year over year or 10 and a half percent earnings growth, 5, 5 and change percent revenue growth. It's a 14 and a half forward multiple with it's a company with 20% net profit margins. Like who's hitting the sell button if they do the number. I can't even imagine why you would.
- [15:25]
Bill Baruch
All these things all hits, all hit record highs within the last three weeks. Now, all right, if you're looking at them, they typically spike. If they get good earnings, you're going to get a spike. They typically come back a day or two following that. But the earnings story will tell you what what to look for and then to buy that pullback.
- [15:46]
Scott Wapner
It's always good to hear from Jamie Dimon, of course, which you will and we are because we did yesterday he was asked during an interview what he thinks about the current market landscape as many are weighing in on whether there's a bubble in AI and maybe some other places too. I want you to listen to what he had to say. You're not going to see Jamie, but you're going to hear his voice. Listen, we'll talk on the other side.
- [16:11]
Jim Bleventhal
It's really impossible to tell the burst and I've looked at you look at history when all the 74 crash, the 82 crash, the 97 market, 90 the Internet one that you mentioned. Nobody's really forecasting that and there's all that hype out there. And then you also take AI. There's a lot of money going into it. But the better way I look at the better way is real AI in total pay off. Just like cars in total paid off TV until paid off. But most people involved didn't do well.
- [16:40]
Scott Wapner
Okay, so that's Jamie on whether he thinks there's a big bubble in this market. Doesn't really sound like he's all that worried about it now. AI is real AI in total will pay off. Goldman agrees. We're not in a bubble yet. Valuations look increasingly stretched, they say, but not yet at the levels that were typically in other bubble periods before they burst. The biggest risk is that earnings disappoint and investors start to question the sustainability of their current rates of return. I mean, I think that's a little obvious, right? I mean we talk about that Shan, kind of every day. That's the greatest risk. But I don't think anybody's that worried about that risk coming home to roost in the near term.
- [17:19]
Shannon Sokot
Well, I think that also helps that it's an understanding that some of the transmission of the AI CapEx that's been done is going to take some time to actually be monetized by these companies. You know, not necessarily just at the front end. I mean I think some of the challenges, Scott, right now or questions about the, you know, this, this, this wave of vendor financing that we're seeing and the potential for that to create kind of a more a bubble precedent if you will. But at the end of the day the, the reality is, is that you are going to have a little bit of time in terms of determining what the return is for, for these investments. And what's going to happen coincident to that is you're actually going to start to see companies in areas like financials, in areas like industrials, to Josh's point earlier, they're going to start to be able to show real use cases for AI within their businesses. And that's only going to create a longer tail for these AI enablers because there's going to be these clear use cases that are out there side of just financing each other.
- [18:16]
Scott Wapner
How about this, that the tech sector, right, as a, as a group, the forward P e today is 31.1 times. Okay, when people talk about, well it's a one trick pony in this market and it's tech carrying a large portion of the load. Not all of course. The forward PE 20 year average for tech is 17.9. So you're at 31 versus 18, let's call it that, over a 20 year historical period average. What do you think?
- [18:47]
Bill Baruch
Well, I think it is a little high. But here's the thing. You're paying for that growth and you're paying for the story. But you could pick names within there. Amazon, lowest valuation ever. NWC growth is still just lights out. Google or Alphabet. You know, it's a kind of a call on quantum computing. You get a forward 21 on there, it's growing 20 to 30% a clip. And Micron is a name that I've talked about a lot on the show. There's a lot of arguments there that it's still undervalued. So there's some places to pick out here within the air space that there's an actual value. But again, as you, as you cited, it is a very big deal that these earnings come in and they beat expectations and race. This is not going to be like the April and May earnings reports where that, where that, that bar was set so low or I'm sorry, the following day, all day.
- [19:34]
Scott Wapner
When I read a stat to you that says AMD is up 43% in three days. In three days that you sold the stock before to repricing.
- [19:47]
Bill Baruch
Yeah.
- [19:48]
Scott Wapner
Does that sound like it's okay?
- [19:50]
Bill Baruch
It sounds, I'm not saying it's not.
- [19:51]
Scott Wapner
I don't mean to ask it in a, in a way that suggests it's not, but 43% in three days, it's.
- [19:57]
Bill Baruch
It'S absolute repricing and there's zero flows, zero interest in it. It was almost in some argument left for dead. The technical picture was ugly. But if you back it out a month, then you look at a name like micron up 40, 40, 50% over the last month. AMD is up about the same amount over the last month. Like a lam research. You go into the, into the equipment names. A lot of those names are up 40 to 50% over the last month. AMD was before that moment was up zero.
- [20:22]
Josh Brown
We put the one year chart of AMD up. No. A little bit. Back it up a little bit.
- [20:29]
Scott Wapner
They will.
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Josh Brown
I think it's an important point that you raise. I mean who buys, who buys charts like this? Who, who's the buyer today? I can't even imagine who that, like the last muppet that must own this stock no matter what.
- [20:43]
Bill Baruch
Who.
- [20:43]
Josh Brown
I can't even imagine what the thought process is. It looks incredible, obviously. But like does, does nobody think that there's the potential, potential for two or three bad days in the market go back for that 43% to be wiped away.
- [20:56]
Bill Baruch
Retest to 20 to 15. Was that the March, the March high from early last year?
- [20:59]
Josh Brown
Yeah. No, I think it's a valid point. You have, you have multi hundred billion dollar market cap companies going up 40 and 50% inside of a week. Yeah, it's what, it's ludicrous activity. It doesn't mean AMD doesn't deserve to be there. It's the speed at which these things are happening. Which is why I said at the top of the show, I don't know that we're going to have a news air pocket. Every day I wake up there's some massive deal between Oracle or in Video or Open Air or AMD or all four at once. It's really hard to look at this market environment and say, yeah, there's going to be a little bit of a news app, a lot of harmony.
- [21:37]
Scott Wapner
There's a big pick of, of winners obviously, and perceived losers. I mentioned the JP Morgan Morgan retail radar report that they put out suggesting that investors have accelerated their weekly purchases of stocks. More to that they certainly have when it comes to tech. Almost $600 million in Tesla, 370 million in video, 241 in Metta this week. But they actively dumped Apple shares almost by $200 million. So it just sort of says where we think we are, the market is chasing the perceived winners and it's not really interested in the perceived losers. Now we're not going to hear from Apple for a while because it, you know, obviously in the week in which most of the mega caps report earnings, we have to wait. The question to Steve Kovach, our reporter who follows this, is what does Apple have to prove at least this earnings period and can they do it this earnings period to get retail back interested in a name that's always been a darling?
- [22:39]
Steve Kovach
Yes. And there's that chart you just flashed right now. The reason why JP Morgan said they're chasing that is because of artificial intelligence. Now Apple had a lot of headwinds going on this year, especially the first half of the year to get through before they could get to artificial intelligence. And look, they had to take care of that because the tariff picture and so many other things. So we saw for example, the overtures for President Trump which actually paid off that $600 billion spending commitment from Apple in the United States over the four year term of this term of President Trump and Cook presenting of course President Trump with that golden Apple trophy in the Oval Office that won Apple some tariff relief Scott and that helped boost the stock a little bit though they're still going to feel some tariff pain about $1 billion or so in the revenue to hit to revenue rather in the September quarter. And they're also showing some positive momentum in iPhone last year's slump. Contessa Brewer who's out in Macao reporting for us, she sent me this video you're seeing right now of iPhone lines in Macao yesterday. That's a few weeks after the phone launch. They're all lining up by the way for the iPhone Pro Max, the most expensive model that there are signs there saying that they're unlimited supply because they're so popular now. Look, let's talk about AI because to get investors excited with this earnings report coming up, need more detail on the progress with series AI update that Apple says is coming next year after missing the launch this spring. Even some kind of Apple hints, some marketing language like we figured it out, you're going to love it. Can't wait to show you next year. Something like that could get people excited. But we're not going to see anything tangible until next spring at the earliest. So listen for those comments. Apple is reporting earnings Scott, three weeks from today. I'll be out there.
- [24:24]
Scott Wapner
All right, good stuff, Steve.
- [24:25]
Josh Brown
Thanks.
- [24:25]
Scott Wapner
You will as always, of course five bucks away or so from a new closing high. We've been watching that stock pulling back obviously little today. What's your, what's your point here?
- [24:32]
Josh Brown
I just wanted to point out Apple very publicly has made it clear that they don't see the value in launching a chat bot like product direct to consumers in the Apple ecosystem. But the last week or so they launched something internally for their employees that is a chat bot and it's Apple's own, it's not someone else's. LLM in a, in a rapper. I thought that was really interesting and some of the voices in the tech industry believe that it might be a head fake and there might be a ramp for Apple to at some point actually drop their own like direct chat bot competitor to some of their prevailing. Now you might say well they're late because chatgpt and everybody likes perplexity. I don't know that Apple can ever really be too late given the installed base and the power they have if they want to to make that consumer facing chatbot like the biggest thing in the, in the App Store like they literally could do it overnight if they wanted to. So I just think like that's this wild card thing that's out there, pure speculation. But if they have a really good result internally with this chatbot like product and they decide, you know what, actually we can own this, my God, is that going to shift a lot of things about current market expectations for who's going to be winning the race in the eyes of the user?
- [25:58]
Scott Wapner
All right, so we're going to take a break. Coming up, JP Morgan getting all up in Josh's grill before the lunch hour, no less, on one of his favorite stocks. We're going to debate it next.
- [26:14]
Josh Brown
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- [27:02]
Edward Jones Narrator
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Josh Brown
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- [27:57]
Scott Wapner
All right, welcome back. JP Morgan went and did it okay. They named Shake Shack a top short idea into year end. Well, I mean they say we see high absolute menu prices and are cautious around broadening away from top tier ingredient suppliers lower than guidance TAM to balance high price points with future customer breath frequency. Now Shake Shack did get downgraded earlier in the week by BofA to underperform. They cut the price to 86 for from 148 stocks. Moving higher I think because someone's expecting you to say something Positive and defend one of your favorite.
- [28:34]
Josh Brown
So I don't defend stocks. They might end up being right in the short term. I'm a, I'm a long term investor here. And this is not the first time people have downgraded Shake Shack because I'm in the name for almost 11 years since they came public. The thing I would point out here is nothing they're saying is new to the market. The stock is in a 28% percent drawdown already. So it looks like they want to press their bet. They actually said short the stock in July and it ended up being a really good call. The question is, is that still as good a call from 148 as it is here where the shares trade today? I point out what they're saying is actually true. The consumer is being pressured right now. And you're not just seeing that at Shake Shack. Kava is strong, struggling. Sweetgreen is struggling. Chipotle looks terrible. So this is a sector wide phenomenon. This type of thing does come and go. If you're a long term investor in the QSR space or the premium casual, whatever they call it these days, this is just something that you're going to live through. What happens though is that eventually they price too much of that in and then these companies start to surprise to the upside. The other questions they're raising are about shacks expansion plans. The new CEO wants to go to 1500 units. There are some questions about whether or not that will lead to cannibalization, which I think is absurd given the size of the world. You know, I think 1500 shacks will be okay. So I don't disagree short term that there is consumer spending concern. I do disagree with the idea of getting short a stock that's already in a 30% drawdown where enough people are already are worried about it that they could have upside Surprise.
- [30:13]
Scott Wapner
I thought your tummy was going to rumble a little bit more on this call. You handled that well.
- [30:17]
Josh Brown
Well, I mean, I'm not here to defend anybody. I'm an investor. Look, if they knock this thing down into this, into the 70s or 80s, I just buy more. I've done it every time.
- [30:26]
Scott Wapner
All right, let's get the headlines with Bertha Coombs. Hi, Bertha.
- [30:28]
Bertha Coombs
Hey, Scott. Transportation Secretary Sean Duffy says air traffic controllers who failed to show up for work during the government shutdown could be dismissed. In an interview on Fox Business Today, Duffy said the quote, small fraction of workers who have been absent were causing the spike in air disruptions. The union for the air traffic controllers has yet to respond for comment, but has urged workers to keep working. Safety regulators are opening a probe into nearly 3 million Tesla vehicles, vehicles equipped with the full self driving system over traffic violations following a series of crashes. The National Highway Traffic Safety Administration, citing reports of Tesla is driving through red lights and against traffic while changing lanes, including four crashes that resulted in one or more injuries. Tesla has not commented. And Sirius XM has signed a new deal with host Megyn Kelly. As part of the multi year deal, Kelly will have her own branded channel which will run her daily show as well as additional programming hosted by Kelly and others. Scott, back over to you.
- [31:41]
Scott Wapner
Okay, Bertha, thank you so much. Bertha Coombs, Coming up, rewriting the rule book. New data showing millennials are ditching one traditional investment strategy. Leslie Picker is following that money for us and she will join us next.
- [31:55]
Josh Brown
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- [32:25]
Edward Jones Narrator
What made you confident that you could do something that hadn't been done before?
- [32:29]
Bertha Coombs
I have no fear of failure.
- [32:31]
Josh Brown
Trailblazing women, changing the game.
- [32:34]
Bill Baruch
One of my favorite pieces of advice.
- [32:36]
Bertha Coombs
Think about what your boss's boss needs. Leadership can look in many, many different forms.
- [32:41]
Edward Jones Narrator
It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players.
- [32:51]
Josh Brown
New episodes every Tuesday, wherever you get your podcasts.
- [33:07]
Scott Wapner
All right, welcome back. Say goodbye to the so called 6040 portfolio. A new survey from Goldman Sachs says millennial investors are doing just that, especially as alts gain more traction. Leslie Picker following that money for us today. Hi, Leslie.
- [33:19]
Bertha Coombs
Hey, Scott.
- [33:20]
Edward Jones Narrator
Yeah, apparently stocks and bonds are for boomers. Millennials are way more interested and invested in alternatives than their older cohorts. The generation with birthdays between 1981 and 1996 has about 20% of their portfolios allocated to alts, areas like private equity, venture capital and private credit. That proportion is double, double that of Gen X boomers and the silent generation. According to the results of that Goldman Sachs survey of 1000 high net worth individuals. Millennials are also shunning public equities relative to their older cohorts, with just 27% of their portfolios in stocks, compared with nearly 50% for baby boomers. In fact, 54% of millennials survey perceive alts as the best exposure to growth industries, a response to the disappearing number of public companies and startups staying private for longer. This generation of course, came into adulthood, adulthood during the Internet and now AI booms, which was of course enriching to many of their tech savvy peers. Millennials were also early in their careers when the financial crisis crisis struck, which may have something to do with why they perceive equities to be riskier than older generations as well. And as we think about our role in the media, Scott, the survey asked respondents how they get information about alternatives and the number one answer, financial TV news.
- [34:44]
Scott Wapner
So we've been talking about them more than than ever for obvious reasons.
- [34:48]
Edward Jones Narrator
Because they've been selling off.
- [34:50]
Scott Wapner
Yeah, yeah, they have. Oh well. And retail has had more exposure to alts than they've ever had before. I mean, they've had the ability to get exposed in ways they never have.
- [34:59]
Edward Jones Narrator
Yes, the retail revolution. State street projecting that fundraising will comprise 50% of retail by about 2027. So, you know, a big shift away from the institutional investors. There are lots of product innovations, things that are semi liquid, a bit more transparency, playing around with the fees a little bit, then potentially the ultimate frontier of 401ks as well.
- [35:23]
Scott Wapner
Leslie, thank you very much. That's Leslie Picker. Shan, what do you think? Think?
- [35:26]
Shannon Sokot
I think an interesting point if you looked at that graph was actually the increase in cash that millennials are holding. I think part of this too is not only being able to barbell cash and fixed income with some of these more private assets, but, you know, millennials also have this entrepreneurial spirit. And so rather than invest excessively in public equity markets, they're really looking to be able to align themselves with companies investments that they believe in and that can truly make an impact in terms of financial for them. So I think it's a little bit less about just a kind of private markets democratization story and more about this idea that millennials want to take control of their finances and invest it in a way that perhaps a little bit outside of that traditional framework.
- [36:07]
Scott Wapner
Do you have a thought here?
- [36:09]
Josh Brown
Yeah, it's nonsense. If you were born in 1996, you should have 100% stocks and every time you get paid, you should take whatever amount you're setting aside for the future in your retirement accounts where you can't touch the money anyway and plow that into stocks. And you should bet on yourself having decades to endure the risks that come along. Do not need alts at 27 years old. Nobody needs it. It's. By the way, this is a survey.
- [36:34]
Shannon Sokot
I actually don't believe those things like that too. It's not just private equity.
- [36:38]
Josh Brown
There's other, other substitute crypto for like very aggressive.
- [36:41]
Bill Baruch
Forget the gold. I get the gold.
- [36:43]
Josh Brown
I just, I don't believe that. That's. I don't believe. I do not believe people in their 30s are 20 or 25% alts. I think they think they are maybe, but they're definitely not.
- [36:53]
Bill Baruch
It might be 25% crypto.
- [36:54]
Shannon Sokot
They have shoes.
- [36:55]
Josh Brown
That's. You think across the whole spectrum of a thousand high net worth millennials, they're 25% crypto.
- [37:02]
Bill Baruch
I think it's closer to 25 than 5.
- [37:04]
Josh Brown
That might be a good point. I'd like to see a breakout break down between crypto versus other forms of alt bots because I don't think they're in mezzanine credit funds.
- [37:13]
Bill Baruch
Well, a lot of, yes, a lot of these have been invested in Bitcoin or other coins for the last decade. You know, since they first put it on their app.
- [37:21]
Shannon Sokot
Yeah, yeah. Alternatives is such a bucket here.
- [37:23]
Josh Brown
That's like it could be almost anything. Maybe it's a pretty stock they work at. Yeah, okay, Fair.
- [37:28]
Scott Wapner
Okay, we're gonna take a break. Coming up, doubling down on the betting boom. Contessa Brewer, she's live in Macau today for us as that tiny territory looks to become the high stakes capital of the world. Hey, Contessa.
- [37:41]
Bertha Coombs
Let me make a gambling metaphor to something completely unrelated, like say, driving. I mean, after the pandemic, you had gambling in Macau like a slow Sunday driver. Now it's like a millennial has gotten behind the wheel, filled the tank with gas and put the pedal to the metal. I'm going to to leave the metaphors behind and bring you the real numbers after this on halftime.
- [38:18]
Jim Bleventhal
We're back.
- [38:19]
Scott Wapner
Casino stocks. They've been on a tear since the April bottom. And one key region of the world doubling down on the betting boom. Contestant Brewer is live in Macau for us today. How's it going out there?
- [38:32]
Bertha Coombs
I mean, it's pretty good, Scott. It's pretty good. Macau's booming. Its investment in these non gaming amenities which were sort of forced upon them, are drawing a totally different crowd. I mean, for one thing, the serious gamblers are still coming to Macau, but now they're bringing their babies and their teenagers for the K pop concerts or the NBA NBA China games, which start tomorrow. The eight day national holiday known as Golden Week just wrapped up. And JP Morgan analyst wrote this week it's likely to be Macao's best in five years with casinos raking in a projected $2.8 billion in gaming revenue for the month of October. And that's even factoring in the threat of a typhoon last weekend that significantly declined disrupted visitation. So I talked with executives at WIN and MGM and Melco and Las Vegas Sands, and all of them pointed to rising consumer confidence from their Chinese clientele. They say they're seeing green shoots in high end retail, which of course we saw pinched earlier this year. And a real shift from pre pandemic junkets and VIP transitions that's been happening over a decade or so now. Premium mass is where it is. They're big spenders. They come in with cash to gamble or spend. And Citi this week said Macao will likely get $33.3 billion in gaming revenue this year with 6%, 6% growth in average bet size. And apparently the gamblers are all loving this new side product. It's called Baccarat side bets. Popular with the casino crowd, very profitable for the operators themselves. And so all of this combined to drive that recovery in spending that investors have been wanting to see for so long.
- [40:25]
Scott Wapner
I think this is your first time there. Correct me if I'm wrong, but I'm curious just through your own eyes, like the vibe that you feel and see in the casinos relative to what you've seen in Vegas for all these years is what.
- [40:40]
Bertha Coombs
I mean. First of all, I was warned this is not like Vegas. It's a very serious, joyless gaming floor. Everyone is in it to beat the dealer and that's what they come for. That is not at all what I'm seeing. The palpable sense of a Vegas like bubbliness is it's just everywhere. And I asked about that. I said this is not matching what I was told Macau was about. And they said that shift in the pandemic where gamblers returned with their families in tow and their friends and now it's not that the gaming amenities themselves. I mean, if you go to the spa and you spend $400 on massage, it's not that that is going to immediately give you back a return on the $7 million overhaul at the spot. This is what MGM Macau did. But altogether it's driving and supporting the gambler to sit down at the table and spend that cash. And now all these properties are competing for that premium mass customer. And so there are, I mean, Scott, the presidential suites that I've seen in my visit here, it's like I'm walking through the modern day Versailles. Even with the Eiffel Tower over this shoulder here. I mean it's, it's just astonishing. They're not for rent. They don't put them out by the night. It's only to reward their high rollers.
- [42:07]
Scott Wapner
Oh, interesting. Contessa, thanks. Contessa Brewer in Macau for Steve Liesman, our senior economics reporter has some breaking news. What do we know, Steve?
- [42:14]
Steve Liesman
Michael Barr, the Fed governor are saying the Fed should be cautious about adjusting policy. And I'm making a point of this, Scott, because there's a contingent of people out there, Fed folks who have been using this term cautious approach and that was in the minutes yesterday. Lori Logan used it, Barr saying Fed the Fed's price stability goal faces significant risk. He's skeptical the Fed should look through higher inflation from tariffs. A quote from his speech that he's giving right now says there has been nothing one time or predictable about these tariff increases. Arguing against some of the folks who said the Fed should be looking through it, he said the Fed is heading to missing the 2% inflation target for 6 and a half years and that is if they hit the target as projected by 2027, the longest period since 1993. He said on the other hand, the Fed is prepared for possibility the labor market is softening and could become worse. Labor market is more vulnerable to shocks here. So he does talk about both sides of it, but the absence of data. He talks indeed about the shutdown, saying it's hard to judge what's going on with the shutdown right now, but it should be a hit to GDP now. And come back later. One more piece of Fed news here. I want to tell you, Scott, that I think is important for folks to think about, which is this idea that Dallas Fed just moments ago put out a paper saying the new break even rate for for the for the payroll numbers is just 30,000 now. So that's all we need to do to keep the unemployment rate stable.
- [43:37]
Scott Wapner
SCOTT wow, Steve, thanks very much. That's Steve Liesman, our senior economics reporter. Coming up, an update to Josh Brown's best stocks in the market. All right, we're back. Josh Brown's best stocks in the market, an update on which name I want to talk about.
- [44:08]
Josh Brown
Netflix. I wrote this up with with Sean Russo back in July, 87 days ago. The stock has basically been flat. It's done nothing. It sat out this entire mania. But I think that could be about to change. Company reports on October 21st. I am long the stock personally, by the way. You can see this thing has bounced off of its rising 200 day moving average. And I think the, the fact that it sat out actually works in your favor here because expectations are not terribly high. This is a company that's had massive hits during the course of this quarter. Jim, do you know what a K pop Demon Hunter is?
- [44:45]
Jim Bleventhal
I've heard of it, Josh. Okay, does that count?
- [44:48]
Josh Brown
Good enough. Nobody actually knows what it is. I'm going to tell you. It's the biggest hit that Netflix has ever had.
- [44:53]
Scott Wapner
Nor has he ever heard of it, by the way.
- [44:54]
Josh Brown
That's OK. 325 million.
- [44:57]
Jim Bleventhal
Thank you very much. 330.
- [44:59]
Josh Brown
25 million streams of this. This has beaten every single Netflix show or movie in history. The music from this thing is number one on the charts. That's the kind of thing that drives increased subscriber ads. That's where you get that kind of upside to the ad platform as well. So they report in a couple of days among the stock. I like the risk reward headed into there. The high target on the street is bank of America. They're at 1490. That would be about 20% upside from today. So remain long Netflix. I know it's been boring, but I wanted to bring it back to people's attention. Still in an uptrend. Still very close to a breakout.
- [45:37]
Scott Wapner
All right, good stuff. Thank you for that. We'll do finals after this break.
- [45:43]
Bill Baruch
Hope to join me.
- [45:44]
Scott Wapner
Closing bell, three o'.
- [45:45]
Bill Baruch
Clock.
- [45:46]
Scott Wapner
The Professor, Jeremy Siegel, Tom Lee, Richard Fisher, Stephanie Link, Keith Lerner. Good lineup. I hope you'll be there with us in a couple of hours time. Let's do final trades. Farmer Jim.
- [45:57]
Jim Bleventhal
Yep.
- [45:58]
Scott Wapner
Is up first.
- [45:59]
Jim Bleventhal
Oracle is up about 10% from the bud fox moment two days ago. It's got more to go.
- [46:05]
Josh Brown
All right. The abyss. Yeah.
- [46:08]
Scott Wapner
Thank you.
- [46:08]
Jim Bleventhal
Wall Street.
- [46:09]
Scott Wapner
Bill Baruch, what do you got?
- [46:10]
Bill Baruch
UUP Long Dollar. It's closed above its 21 week moving average for the first time since February. Got to watch the dollar.
- [46:18]
Scott Wapner
You think he was referencing the abyss? That he didn't know that Bud Fox was Wall Street?
- [46:22]
Josh Brown
That's the line from Wall Street. Man looks into the abyss.
- [46:25]
Jim Bleventhal
Right. Okay, that was a little obscure, but keep going.
- [46:28]
Scott Wapner
Okay.
- [46:29]
Josh Brown
Not for some of us.
- [46:31]
Shannon Sokot
Shannon materials. We see commodity price inflation but also a trade on some China reacceleration.
- [46:37]
Josh Brown
Okay, jb staying long. Netflix. Wish me luck.
- [46:41]
Scott Wapner
All right, so again we started green and we've taken a turn certainly on the Dow. The NASDAQ's given up 23k, so we'll see what happens over the final stretch. And I'll see you then. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [47:03]
Edward Jones Narrator
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their 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 an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither.
- [47:30]
Josh Brown
CNBC nor its affiliates and or subsidiaries.
- [47:32]
Edward Jones Narrator
Warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.comhalftimereportdisclaimer.
- [47:43]
Scott Wapner
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