Scott Wapner (3:21)

Okay, so Brin, I feel like that's a good place to have a debate. So the mega caps can disappoint this week and the rally is just fine. That is the word, according to Joe.

Brin Talkington (3:35)

They're not going to disappoint. But I think, I think to your point, Scott, you have five companies collectively with what, a $15 trillion market cap? There's, there's no way, if they were to disappoint, which they won't, it definitely would change the narrative around AI. And to me, this super bowl of earnings this week is all going to be about what is going to be the capex spend. And are the analysts in the Q and A going to start talking about return on equity? And I think the answer is they're going to ask the question. But it's still early days. I think that Metta and Google and Amazon are going to be the most interesting. I think Google is in pole position. I think they're going to, they're going to crush it. But Absolutely, for the AI trade, this five companies worth 15 trillion are absolutely critical for us to understand. Are you going to continue to be fiscally responsible or are you going to, are you going to do an oracle and all of a sudden go negative? Free cash flow in order to build out what you think is the, is the next leg in the air, in the air fight?

Scott Wapner (4:40)

Okay, so Jimmy, this rally has withstood a lot. As Joe rightly says, it's been incredibly resilient in part because any bit of negative news we have still focused on the AI trade the tremendous amount of money that these companies are spending and the greater belief from them and every investor out there that this is all going to pay off. And that's why we continue to buy those stocks and they continue to go higher and they continue to take the market higher. You think Joe's right, that if there's a disappointment among the mega caps, that this rally is just fine? Because honestly, I'm not so sure. If I haven't made that clear to.

Joe Terranova (5:21)

This point, I'll just reiterate it. I'm not so sure.

Scott Wapner (5:24)

I'm not so sure. I don't see how that could possibly happen.

Joe Terranova (5:28)

It's not an inflection point, but go ahead, Jimmy.

Jim Lebenthal (5:30)

I think what you're saying is the chase to performance was the exact term that you used.

Joe Terranova (5:34)

I did.

Jim Lebenthal (5:34)

And there probably will be a chase to performance performance through the next two months of the year. That being said, for me, obviously, I look a lot further than two months down the road and when I see an s and P500 trading at 22.5 times next year's earnings, I say, how can that be? I answer it this way. It's based on the fact that we're projecting 14% earnings per share growth in the S&P 500 next year over this year. Now, if you get that, or if, as has been the trend, you get more than that, then 22.5 is just fine. The problem is if you start to see cracks form, that is, if the hyperscalers disappoint, then that 14% becomes more difficult. Extending the argument a little bit. What's also important this week is the US China trade deal, some form of it. It may not be everything we want, but we've got to get trade uncertainty continuing to decline if we're going to get that 14% earnings per share growth, which to me is the fulcrum upon which that 22.5 times.

Joe Terranova (6:30)

Multiple rests surround.

Scott Wapner (6:32)

Dan Ives at Wedbush says the Trump XI meeting removes the overhang on tech bank of America talks about monetization. I thought Brin made a really good point. They suggest all eyes will be on monetization versus spending. Brin made a point. Well, it's kind of early to really have a handle on whether they're monetizing their spend. I think we're willing to give the benefit of the doubt because we judge the amount they're spending to mean that they are going to get the results. We're just going to have to be patient. And that's why we're Willing to pay up for the future growth that we are in. The mega cap valuations. Yeah. And I think that's going to continue because the focus, the questions will be asked what's your return on invested capital? And it will get kicked down the road. It'll say hey, we're spending on these data centers, we're spending on chips because we think that's where the efficiency and the margin expansion and the revenue growth is going to come. I think going back to the question you had to Joe, if you see some cracks in consumer spend or advertising that are affecting the top line, I think that might cause the market to kind of reassess. Is there something on the macro level? But if that comes through pain free then I think you keep on going and this catch up trade for performance keeps on going.

Joe Terranova (7:49)

Can I ask the question? What is, what is?

Scott Wapner (7:51)

Are you asking yourself the question?

Joe Terranova (7:52)

No, I want to ask you the question. I want to ask Sarat Brin, everyone. So what does it look like if they miss like so that's the inflection point. The rally ends, it's over. There is enough built into this market that it could absorb a stumble from the mega caps.

Scott Wapner (8:06)

I don't know. And I think.

Joe Terranova (8:07)

Right, you're talking about next year. $420 billion worth of capex from four of these companies growing from 360 billion this year. So what does a stumble look like?

Jim Lebenthal (8:17)

Tell me the math. I mean, you know the math as well as I do.

Joe Terranova (8:21)

And that becomes the inflection point for the market.

Jim Lebenthal (8:23)

Game over. No, not game over, but that's what I'm saying.

Joe Terranova (8:26)

So you stumble.

Jim Lebenthal (8:27)

You heard me agree with you about the chase to performance. I do agree with you on that. That being said, with the Mag 7 being whatever it is, somewhere between 35 and 40% of the S&P 500 if they stumble, if they go down, let's just say 5% on a disappointing report, I mean that's not unheard of. I don't think it's going to happen by the way. Everybody listening. But let's just say hypothetically I don't.

Scott Wapner (8:46)

Think anybody expects it to happen. So.

Jim Lebenthal (8:48)

But if it does, because that's the question you're asking and you've got 40% of the market cap of the S&P 500 going down 5%. It makes for an ugly day and I think, I think there would be contagion, Jimmy.

Joe Terranova (8:58)

It makes for an ugly day. I'm not disagreeing with that but I'm saying the market will recover and it will continue on its prevailing bullish trend through the remainder.

Jim Lebenthal (9:07)

I don't think it's game over, to use the term Scott just used. I don't think it's game over, but.

Scott Wapner (9:10)

I think it makes for another use. Game over.

Jim Lebenthal (9:12)

You actually did. But it's okay. It's okay. All right, then I used it fine. I don't think it's game over. All right. But do you have an ugly week going forward? Is this something that, that we skate past? No, I don't think it's going to happen. I think these are going to be good earnings.

Joe Terranova (9:25)

There's enough that we could absorb a stumble. There's enough.

Scott Wapner (9:27)

How about this? Apollo has a look today at what the hyperscalers are spending since we're focusing a lot on that. They're spending a record high 60% of their operating cash flow on CapEx. We have made Capex the bar of where this rally is like the barometer. Right. So as long as CapEx remains high. Right. We deem everything in the story to be good. Right. Because then the capex flows to the chips, it flows to construction, it flows to power. So there's a lot there. And if the revenue or earnings come down and Joe, if that 14% goes to 11 or 12, I'm not saying it's going to happen, but that could be the core quote temporary short term scare in the market which would then say, okay, maybe they'll cut back capex the next quarter.

Joe Terranova (10:14)

That would be a very quick reversal though on what the estimates currently are doing. Yes, estimates are rising in the near term. They're not coming down. You generally don't see that type of degree.

Scott Wapner (10:25)

Jim's I'm not saying it's going to happen, but I'm saying if that does, that's what you got to watch. So we used to look at and we still do. I don't mean that we don't anymore. But this idea that, you know, companies buying back their stock, as you've often talked about, was a highly stimulative process for stock prices to go up and investors rewarded the companies that obviously did. No company buys more stock back than Apple, which is one of the things that people always say, no matter how negative the story gets, that, well, there's a floor under it because they're buying back so much stock. What if investors are looking at the whole picture differently now? I thought Reuters had a really interesting look today about this very topic that investors are increasingly favoring US Companies that channel capital towards AI innovation over those offering traditional shareholder Payouts such as dividends and buybacks. There was a Goldman look that said, well, if all of these companies are spending so much capital towards their capex that they're going to be spending less of it towards the buyback. So if you flip it on its head and say, well, if investors are now rewarding those companies that are actually spending more on capex than returning cash to shareholders, does that change part of this equation too for how the whole market looks at these companies?

Jim Lebenthal (11:41)

Well, let me, let me start by answering with the obvious poster child here, which is in video. Nvidia is sitting on a lot of profits and they could have returned that to shareholders but they looked and they said the most efficient thing, the most productive thing for their business is to go ahead and invest in Open Air and others. And I think that makes a lot of sense. That's a more productive use of their capital. I think. You know, you also have to consider though, is that the same thing as maybe, I don't know, Alphabet spending tens of billions of dollars on data centers? Same things with Metta and others. That question needs to be seen and it will only be seen over the next 12 to 18 months as we get the return of return on investment of those investment.

Scott Wapner (12:19)

I want Brin to, I want to ask everybody, I want to know the simple question, simple answer to this question. Would you rather the company that you're invested in use their money to invest in AI or use the money to buy back stock, whatever incremental money was going towards one? As an investor, would you prefer, do you think it's better that a company use that cash towards their capex rather than buying back stock?

Brin Talkington (12:45)

Well, I think if you're the cfo, if you're Amy Hood, if, I mean if you're across the cfo, you have to say which one long term is going to make me more money? There's clearly going to be a huge waste with all of this capex that's going to be spent. There was waste in the railroads, there was waste in dotcom, but ultimately those were wonderful infrastructures that we put into place. And I think that to me, the question I asked myself is really from 2012 to today these companies have grown so big because they have high margins and for the most part besides Amazon, they were capital light companies. Now there's this paradigm shift where these are now capex companies and I think you have to re underwrite, as I said earlier, what is ultimately going to be that return on invested capital and should the valuation and the margins be where they are because I do think if they're going to continue to spend the next few years and that ROIC is not going to be high, I think then you question once again there's going to be winners and losers, what do you want to pay for these companies? And so I still think we're in the early days of the figuring that out. But ultimately we are at a paradigm shift of cap light turning to capex. And to me it's not like a temporary thing. These guys are digging in and they're spending this. To me, what I see years out, which is, which is a change in how we've priced these for the past decade.

Scott Wapner (14:03)

Joe, maybe, maybe AI is a cure for so called short termism, right? We, we had rewarded companies in the past for buying back stock. We threw out terms like financial engineering as a hit on them even as we accepted what they were doing because it drove stock prices up. One of the knocks on a company, for example, like IBM, over all those years they couldn't grow their top line, but they were buying back stock, they were doing whatever. They were criticized as financial engineers. Now they're being rewarded for investing in AI. It goes, and the stock's done incredibly well. It goes towards this very conversation that maybe it's time to reward companies and think of it differently for the longer term rather than short termism which people have railed on for years.

Joe Terranova (14:59)

So it's indicative of the personality of the market that right now you are rewarded for investing in the innovation versus the capital allocation strategy, whether it be buybacks or dividends. One point on this. First of all, right now we're in a, we're in a blackout window. So majority end, it's about to end. But if you go back historically on a 3, 5, 10 year time period, quality outperforms all else. All other factors, investors, companies that buy back their stock, companies that give a robust dividend, they are the true definition of quality. On a one year time frame though, it is all about momentum and companies that are investing in the innovation. These are the momentum names. So the personality of the market right now is saying, okay, we understand that buying back your stock or maybe raising your dividend, that's a really nice capital allocation story, story for your shareholders. But right now we're not going to pay a premium for that type of activity. We pay the premium in a momentum market for investing in the innovation.

Jim Lebenthal (16:05)

I think it depends critically on what the business is we're talking about, which is transformational. I mean, I don't even know what the Words are. But if you're in a more mature company, you know, you and I surround Delta Airlines. If they, I want them to return capital to me as the shareholder. I don't need them to get into some new business because there's no transformational business in, in the airline. If they want to buy a few more planes, take out some debt to do it. I'm not slamming Delta. I'm saying it matters critically what the investment opportunity is. When we talk about reinvesting in the.

Scott Wapner (16:32)

Company, let's talk about just quickly because I want to move on, but record high for Alphabet today. They're obviously in the queue for reporting this week. They're going to really kick things off. We can show you the calendar once again just to keep you honest and let you know what's going on, what's, what's coming down the pike. So Alphabet record high Target goes to 300. At JP Morgan, it was at 260. Right. They kicked things off on Wednesday. In terms of the Hyperscalers Reiterated by 285 is the new price target at Truist, Microsoft gets upgraded. Apple is at a record high. Apple's four bucks away, by the way, from $4 trillion in market cap. And that's the last one to report this week as we await Nvidia, which we almost have to wait a month for about three weeks or so. Apple's target goes to 290 today at JPM, the target goes to 275 at TD Cowan. I mentioned all these just to underscore the optimism that exists into the prince. So they have a lot to live, obviously up to semis, hitting a record high today. And there is no bigger story today than Qualcomm as it relates to that group. Shares are surging. You've heard about it already, no doubt. They announced these new data center chips, the highest level since July of 2024. Christina Partzonevalos joins us now for why the stock is jumping so much on this announcement today.

Brin Talkington (17:51)

Yeah, it's because of these particular chips and that they're focused on the data center, something that Qualcomm hasn't really focused on. They're launching in 2026 and their first customer is humane in Saudi Arabia. So Target Qualcomm specifically is targeting AI inference, running AI models, not necessarily training them. So every time you use ChatGPT to ChatGPT for example, that's inference. Qualcomm has been making AI chips for smartphones for years now. They're essentially just scaling up that technology for data centers like the giant rack you're seeing on your screen. But analysts at bank of America right now are skeptical. They're calling this a potential fade, saying the rally quote feels a bit much because they're Assuming these new AI chips are lower end AI chips without high bandwidth memory. They ship in 2026 and so far the only disclosed customer is that Middle east project. There's no US Hyperscalers named just yet. Bank of America estimates this could be a $1 to $2 billion revenue opportunity for Qualcomm. But Qualcomm's market cap just jumped about $20 billion today. But also you also have Qualcomm is launching years behind Nvidia's dominance and analysts are just questioning whether today's rally is justified or if investors are just slapping on an AI label on what might be more modest revenues. Nonetheless, it is a new market for them.

Scott Wapner (19:04)

Scott, now you, you raise a good question right at the end, which perfectly tees up the debate that I want to have here. Christina, thank you. Christina. Parts of Nevillos, what is it justify this move today?

Jim Lebenthal (19:13)

It's too much today. It's just too much.

Scott Wapner (19:15)

You know, you own the stock, I.

Jim Lebenthal (19:16)

Own the stock, by the way. I mean I still think this is going to get above 200 over the next several months. But up 20%, which it was earlier today was just too much for the news that came out today. Now let's put this in the context of a very cheap stock mid two, mid teens multiple 2% dividend yield with much greater than double digit earnings growth in Internet of things Automotive, their baseline cell phone business is becoming less and less important. It's those other two that are really the reason to own the stock. But up 20% today on news that we just don't know, you know, what the earnings power is that comes from it is too much. But I still believe in this stock will be well above $200 a share, say over the next six, six months or so.

Scott Wapner (19:56)

Jim just can't be happy. You know, he owns it.

Jim Lebenthal (19:59)

Just catnip. I use this word with you today, it's catnip. That's what it is. Throw the air word out there on any stock. We had rare earth, you can't even.

Scott Wapner (20:08)

Take a big gain in the stock he owns. I'll take you.

Jim Lebenthal (20:11)

I'll take it.

Scott Wapner (20:12)

I'll be happy to take it. It's been, you know, a long time. I mean the Stock trades at 14 times earnings now trades at 16 or 17 times earnings. Nothing has really changed. We'll see what happens. But what it does tell you is that the market is so big and investors look at it and say, hey, if they even get a small piece of a big pie, it could be rewarding because they are trying to get out of the telecom business. And I think if they do get customers in this space, it could actually be pretty good for them. Well, I mean it appears they are going, you know, they announced their first customer and we assume that they're going to get more. The market obviously does that chart's not thinking one customer. It's thinking one of the many, many customers and able to compete whether it's in any magnitude with the Nvidia's of the world and others. Well, I do think if you look at the history of Qualcomm and it's not like this is a startup that's going to be competing. They are well known and they do have customers all over the world and also in the big hyperscaler. So there could be potential demand there. All right, last story. The A block is a big one because it doesn't happen very often. Berkshire Hathaway getting downgraded. Not just downgraded, but to the equivalent of a sell. A sell underperform is officially at kbw quote, many things are moving in the wrong direction. You don't often hear that about Berkshire Hathaway. The stock has been moving in the wrong direction. Obviously it's lagged the S and P by the largest gap so far this year, which has been jarring. All of that really getting ignited when Warren Buffett announced that he would be stepping down as CEO. That was May 3rd. The stock's down 9.5% since Joe. You get the first crack at this.

Joe Terranova (21:52)

Okay, because we own it in Josie.

Scott Wapner (21:55)

Is this justified telling you to sell Berkshire Hathaway?

Joe Terranova (22:00)

No, I don't think it's justified telling you to sell Berkshire Hathaway.

Scott Wapner (22:04)

That's what they're doing.

Joe Terranova (22:05)

I think so. I will disagree with that. I think you're better served trying to understand why this stock has underperformed. And you know, in our prior conversation we've highlighted the importance of being allocated and investing in the direction of innovation. And if you think of the businesses that Berkshire Hathaway is involved in, excluding Apple, which you can make an argument they're late on the innovation there. So surrounding AI, we're talking about insurance, we're talking about rails which are being punished because of the tariffs. We're talking about energy and energy infrastructure. They do have positioning in Japan that's working out well, but that has been the struggle for this company and they're sitting on $344 billion in cash. I saw a statistic that they could buy about 80% of the companies in the S and P with that cash.

Scott Wapner (22:59)

Not collectively. And they've been sitting on a lot.

Joe Terranova (23:00)

Of cash quite a while.

Scott Wapner (23:01)

So whether Mr. Buffett was, was there in that job or not, they've been sitting on the same amount of cash. So is, is there enough of a premium, a Buffett premium that his presence alone shifting is justification for an underperform on the stock?

Joe Terranova (23:23)

I just as I said, I disagree with the sell. I don't think this is an outperform. I think this is a stock that's kind of biting its time before ultimately it finds the next catalyst higher.

Scott Wapner (23:35)

Is it a buy today?

Jim Lebenthal (23:37)

It is a buy today. And the reason why is because if you strip out the stock holdings, the Apple, the Japanese companies etc. The operating companies underneath Berkshire Hathaway trade in the low teens as an upper earnings multiple. And these are, you know, you went through what they are railroads, energy, aerospace parts, insurance, etc. I would say that that's an incredible combination of assets to buy in the mid teens with the cash on top of it that somebody can do something transformative with, whether it's Mr. Buffett or a successor.

Scott Wapner (24:06)

Here's what they say and what if this supersedes everything we believe GEICO is likely Underwriting margin peak, declining property catastrophe, reinsurance rates, lower short term interest rates, tariff related pressure on the rails and the risk of fading alternative energy tax credits will drive underperformance over the next 12 months. This says it doesn't matter who's sitting in the biggest office in the coziest chair. This says the fundamentals around the core holdings of this company are challenged, particularly.

Jim Lebenthal (24:37)

Focused on the insurance on Geico. And I think that that is highly likely to be priced in the stock. You never know, somebody like me says it's priced in the stock. The analyst says no it's not. But let's face it, there has been a heavy mood on this stock for several months and I think if it.

Scott Wapner (24:50)

Because of the announcement.

Jim Lebenthal (24:51)

No, I know that. But that probably explains a month or two, not the last several months. I think, look, you see what the US insurers have been trading. They've been trading like, like you know, garbage. And so I think that that has already been priced into. We know that this is an insurance company at its heart. I think that's already been priced in.

Joe Terranova (25:08)

So Apple is still is its largest position. I wonder if we'd be having a different conversation if they were not significantly reducing the holdings of Apple the way they have since the end of 2023. Different narrative.

Jim Lebenthal (25:20)

It's still as big as stock holding.

Joe Terranova (25:22)

Still.

Scott Wapner (25:22)

Yeah, but it's been a consistent drawdown.

Jim Lebenthal (25:24)

I know, but it's still as big as stock. This is the he started in the fourth quarter. I mean, look, if I were running his portfolio and people gave me a hard time. Not saying you're doing that, but if people gave me a hard time for selling Apple along the way, it grew. It grew too big. It just grew too big.

Scott Wapner (25:38)

Well, I mean, they've been taking down almost every stock in the book over the last handful of months, at least. What do you make of that?

Jim Lebenthal (25:47)

I think. I think they're ready to pounce. What do I really think? I think that Mr. Wexler and Mr. Combs are going to have a lot of dry powder with which to make their signature on where Berkshire Hathaway goes over the the next 5, 10, and 20 years.

Scott Wapner (26:01)

All right, coming up next, we have a debate about the value of Elon Musk. Is he worth a trillion dollars? That's what the pay package is. There's a vote coming up. He has to meet some very lofty levels to get that money. We'll take it down the road to a trillion and we'll debate it next.

Brin Talkington (26:40)

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Brin Talkington (28:48)

Yes and yes, I voted. And for all those Robinhood shareholders, Robinhood actually makes it really simple to vote. I think what's getting lost for everyone out there is like this is dependent, first of all on the stock being worth eight and a half trillion dollars.

Scott Wapner (29:02)

I want to show 20 million.

Brin Talkington (29:04)

Well, not at eight.

Scott Wapner (29:05)

I don't mean to interrupt you. I apologize. I apologize for interrupting you and I should have, I should have been cleaner how I did this. We're going to show, I think we have the wall that was made that shows these milestones in market cap that Tesla has to reach in order for Musk to get the money. To your point. Now forgive me again for interrupting you, but here it is. To get to the promised land, so to speak, the market cap of Tesla has to get to eight and a half trillion dollars. So it's broken up into 12 tranches. So please continue. And again, forgive me.

Brin Talkington (29:37)

Yeah, so I think when you, when you invest in a company, you have individuals like myself who, who we own the stock outright. And I think you have to trust the board and vote with the board. And this is what the board is saying. The board is all, you know, and so, so. Or you could be with ISIS and Glass who I think are saying no for nothing to do with innovation, but to do with like I think strange policies that, that, that have no business right here. And so I'll be very curious to see. I think this will definitely be a clearing event on the street. Stock is to these firms like Glass and Ice, which are just proxy voting, trump individual investors. And ultimately where this is ironic is when Elon set up Tesla as a public company, he purposely didn't do a dual class share like Facebook and like Google because he wanted to be democratized. But that's now coming to bite him in the butt as they should have done a dual class share and then we'd never be having this conversation.

Scott Wapner (30:31)

Sure, but. But you say you want to trust the board. You. You want to vote with the board. I mean, well, of course, in every, in every scenario, you want to trust the board and vote for the board. Not if the board is rubber stamping something. And I'm not suggesting in this particular case they are, but. Are you making a, like a carte blanche statement? You always trust the board, vote with the board. I mean, no, We've seen rubber stamp boards before work.

Brin Talkington (30:55)

When we are in an environment where CEOs, you know, get these huge pay packages based on nothing. The LSU coach has 95 million for nothing. This pay package is. Elon, if you do this over this period of time and then this happens, then we will reward you. So to me, it's like aligning exactly what a board should be doing to the founder to the chief innovator to stay, stay here for the next 10 years, innovate, and then execute and then we will pay you this. So to me, it's very pragmatic and sensical to versus the nonsensical way that we pay millions and millions to these other CEOs and other like, people that really don't even add value to the company. So I think in this case, absolutely, I would vote with the board because they're aligning my return with his pay package.

Scott Wapner (31:45)

There, there are. Joe. I mean, Bryn makes a really good point. There are CEOs that we've seen over time who preside over companies whose market cap has deteriorated and their pay has increased. Okay, so you're a shareholder?

Joe Terranova (32:02)

I am. Through the T. I would like to read a line from Adam Jonas of Morgan Stanley's note today, please. It is our long standing opinion that if you solve autonomy for cars, you solve autonomy for many other form factors of AI enabled robotics, aviation, marine, weapons, etc. This is a moment that would change transportation forever. And he doesn't deserve the pay package if he could reach the targets. Yes, there are other people that might be able to change transportation forever, but he has certainly been at the beginnings of it and he should see it through. And ultimately I think he should be rewarded for that.

Scott Wapner (32:44)

It's good to see the wall that we have made today on the milestones. Because, you know, you hear a trillion dollars. Is he worth $1 trillion? But this is a, this is a long road to get to a trillion dollars, Jimmy, worth of pay. I mean, Tesla's. Tesla's market cap right now is a bit more than a trillion dollars. Right, Right. The current market cap is a bit more than a trillion dollars. So there it is. One and a half trillion.

Jim Lebenthal (33:12)

One and a half trillion.

Scott Wapner (33:12)

1 and a half trillion. So I'd like to have a bit more than a trillion being one and a half trillion too. But 8.5 trillion is the market cap that it has to achieve for Mr. Musk to get the money.

Jim Lebenthal (33:23)

Right. So that's another $7 trillion and give him 1 trillion of that 14%. Honestly, I think if he could do that, he's worth it. Now, some would say on the other side of that, but what about the value of his shares, his holdings? Aren't they going to appreciate? Isn't that bad enough? I would say if you could, if you could in some way incentivize and maybe even lock in that performance, which is a bold statement, then it's worth it. Give it to him in. Seven trillion is, is bigger than, than in video right now by a lot and eight and a half trillion. Just to be more specific, is 2x of Nvidia. I don't know if he's going to be able to do it or not. You got to believe that Optimus comes through that what Adam Jonas is saying about autonomous driving is true. A lot of things have to be true. See if it comes true or not.

Scott Wapner (34:06)

All right, let's get the headlines now with Courtney Reagan. Hey, Courtney.

Brin Talkington (34:09)

Hi, Scott. President Trump today said that he recently received an MRI at Walter Reed Medical center and that the results were, quote, perfect. He did not disclose why doctors ordered the scan as he spoke to reporters to board onboard Air Force One. He also didn't rule out serving a third term in office, saying he would, quote, love to do it despite the 22nd amendment of the Constitution expressly forbidding anyone from being elected to to the office of the president more than twice. The American Federation of Government Employees, the largest union representing federal workers in the US Called today on Democrats to abandon their position and vote to end the government shutdown. Democrats have said they will not vote to reopen the government without a commitment to extend health care subsidies through the Affordable Care Act. And protests broke out in Cameroon today after 92 year old Paul Bia won his 8th term in office. Demonstrators said Bia's rank ruling party stole the victory from the opposition leader. The new seven year term could keep him in power until he's nearly 100. Halftime report returns after this. Ten years from today, Lisa Schneider will trade in her office job to become the leader of a pack of dogs as the owner of her own dog rescue. That is a second act made possible by the reskilling courses Lisa's taking now with AARP to help make sure her income lives as long as she does. And she can finally run with the big dogs and the small dogs who just think they're big dogs. That's why the younger you are, the more you need AARP. Learn more at aarp.org skills.

Scott Wapner (35:40)

The heaviest metal credit card of all time, rumored to be one of only 18 in existence, plated with the very same tungsten that forged the International Space Station and wielded at business dinners like a samurai sword. It's a classic corporate power move with a real power move having end to end visibility on your most critical shipments. FedEx the new power move. We're back with today's ETF edge in the growing debate over buffer funds as investors decide that downside protection is worth limiting possible gains. Dom Chow following the money force domino. All right, so judge what happens if you don't have to have a cap on that upside. So as the markets grind higher, those so called Buffer ETFs have been catching a lot of flack for that limited upside potential. But there's a twist in the methodology at some ETFs have to kind of quell out some of that criticism. Joining me now is Mike Lucas, the CEO of Truchares ETFs. We're going to talk about little a little about this, about this idea that we have uncapped buffer ETFs. That means you actually get more of the upside with limiting the downside. How exactly do these funds work, mechanically speaking?

Jim Lebenthal (36:58)

Well, you know, back in 2020, we pioneered the uncapped buffered ETF because of one simple belief, and that was that capturing as much of those chunky right tail events is just as important as mitigating those left tail or downside events when it comes to long term compounded returns. So mechanically speaking, what we've done is because as we all know, there's no free lunch and hedging. But what we've done is we've used a traditional buffer and we've set an upside capture or a participation rate to the upside with no limit. And so when you see I'll take the first year we were out there, for example, our first product launched In July of 2020, the S&P was up about 39% in the succeeding 12 months. And we returned close to 31% from a buffered product when most of our peers were capped out in the teens. And so that's an example of how you can still maintain the growth characteristics of equities to the upside when you have a buffer in place.

Scott Wapner (37:59)

And Mike, just how often in the history of you running these funds have you actually been tested with regard to that downside versus upside potential?

Jim Lebenthal (38:09)

Well, I think the reality is that if you look back 30 years and 12 month rolling returns, roughly a third of the time, call it 34% of the time or so, the S and P will return north of 17% and the average return in those time periods is about 26 or a little north of 26%. So every few years, you know, roughly a third of the time you're going to have a chunky up year that helps buffer or at least pad your performance throughout the life cycle. But if you look at a series like Liberation Day, for example. Right. Let's look to last April, I think that was the biggest test for the buffered space to date. You know, barring the pandemic, I think was in the early days of the buffered space. And we learned a lot of things about buffered products in that time frame. And now in the succeeding snapback.

Scott Wapner (39:03)

All right, Mike Lucas, thank you very much. We are going to continue this conversation over at ETF edge.cnbc.com Mike's going to be joined by Tony Kelly, the co founder of Bond Blocks for a fixed income conversation along with buffer. Scott, so tune in one o' clock Eastern time. I'll send things back over to you. All right, Domino. Thank you. Don. Chew up next, breather in the gold trade coming off its first down week in 10 and their retreat continuing today. We will debate the move for here it's above 4000 again but been a little strong, shaky lately. Discuss next. All right, welcome back. Gold briefly falling back below 4,000 today though as you see, it has retaken that level coming off the first negative week in 10. That gives you an idea of where this trade has been. Joe Oppenheimer today says gold is due for another breather, allocate to bitcoin. I thought that was an interesting call there. But you own Newmont. We do. We've looked at these miners, the gold miners. And if you pull the chart back out, there's a nice look at it today. I mean, 6.5% down but the stocks have ripped go, I don't know, six months year to date. Give me something. There you go. Thank you. That tells a story about what these stocks have done.

Joe Terranova (40:33)

Year data 109%. You really are relying on technicals right now because for Newmont, we've already heard about earnings. It's sitting between the 50 and 100 day moving average pierced below the 50. As far as gold, I think 3797 for DEC gold, which is spot is your 50 day moving average. You're not there yet yet. So there is the potential for further long liquidation that can take you down that level. I wouldn't be surprised to see that at all. It's going to take something significant to reverse the near term downward pressure on precious metals right now. Understand that over the course of time, in particular in January, I think it comes strongly back into favor.

Scott Wapner (41:16)

What about the Pear trade? Gold's due for a breather, allocating said to Bitcoin. Brent, what do you think?

Brin Talkington (41:24)

I think that's great. I think JP Morgan thinks that's great too. I saw last week that J.P. morgan at the end of the year is going to allow their institutional investors to use Bitcoin and ether as collateral on loans. So I guess Jamie's had a change of heart. So I think that that's a, it's a good trade. I totally agree with Joe on the technicals around, around gold, I think that 3790, we'll see that before it makes new highs.

Scott Wapner (41:48)

Okay, we'll keep our eyes on all that. Up next, Mike Santoli with his midday word. We're back after this. Senior markets commentator Mike Santoli joins us now this midday Word. So, I mean the rally took a power nap.

Joe Terranova (42:22)

Yeah.

Scott Wapner (42:22)

Right. And we are, it feels pretty good right now. Again, refreshed. Is that all it took to two.

Joe Terranova (42:27)

Weeks, nine trading sessions? That is the question. I mean obviously that's all it took in the sense of removing some impediments to this breakout. And that's what I see two trading days in a row, the CPI report and then some of the reports about some kind of an agreement on trade with China. It's not about the substance of it. It's about okay, that we have one fewer thing that's standing between this market and kind of cranking up the trade again and going back to the old names and seizing on earnings and all the rest of it. You wouldn't see the character of today's rally if it were about tariffs. Okay. This is a NASDAQ led rally. This is Nvidia up 2 1/2% and it's actually only 52% of New York Stock Exchange volumes to the upside right now. So it gets it out of the way. It checks the box. I think the question is going to be did you get enough of a reset in the majority of stocks that you could have some kind of breath push toward the end of the year. And are we going to be able to look through some of the signs of consumer softening because early 2026 has the makings of kind of a re acceleration policy?

Scott Wapner (43:32)

You make a good point. I mean, these deals have never been about the substance.

Joe Terranova (43:35)

Yeah, exactly.

Scott Wapner (43:36)

Because we don't know much about the substance of any of it. But in the market's mind, it was just, all right, just get it out of the way.

Joe Terranova (43:42)

And the talk about it was, as long as it's not about, oh, they're looking to engineer some kind of friction and some kind of recession, which literally six months ago you had to ask the question, is policy directed at that kind of a shock? Only 12, 12% of the S and P market cap is in the direct line of tariffs. And that's why the market can look through it if it's not going to create broader, you know, broader global economic issues.

Jim Lebenthal (44:06)

Mike, I'm not sure I heard you correctly. You said it's not about tariffs today, but then in video up 2 1/2% to me and videos up on potentially selling China. Is it just. You're saying it's specific?

Joe Terranova (44:16)

I would say if it were in video without the rest of the semis moving. You know, I mean, to me it's sort of like it, it's Mag 7, not just in video. But I'm sure Nvidia is part of outperformance. Is that. Yeah, What I did like is Qualcomm goes up 20 billion in market cap on this news and Nvidia is like 30 billion below its peak market cap of the morning. As if we're pretending that these are being handed back and forth.

Scott Wapner (44:40)

All right, I'll see you in a couple of hours. That's Mike Santoli. We'll do finals after the break. Sam.

Joe Terranova (45:16)

Are you following the Halftime Report podcast? What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime podcast now.

Scott Wapner (45:30)

I hope you join me 3 o' clock Eastern today for the closing bell. Sonali Basak, Dan Greenhouse, Brian Levitt, Ben Snyder. He's replacing David Costin upon his return retirement at Goldman Sachs end of year. And the restaurant hitmaker Stephen Starr here at post 9. Can't wait for that, too. And we'll see you then. See where this market is, Brin, final trade.

Brin Talkington (45:49)

Google earnings are Wednesday. They were a slow start on another cooking. They just launched gemini for Enterprise October 9th. I think the street will like what they have to say.

Scott Wapner (45:59)

We only have three. That means somebody else is doing Alphabet.

Jim Lebenthal (46:02)

It's me. Brin's exactly right. It's that good of a call. We need to make the call twice.

Scott Wapner (46:07)

Alphabet that good of a call right? Well, they're the first ones to report. We shall see. Mr. Say T Amazon I think the stocks underperformed. I think they're going to have good things to say and watch the stock. Joe T Highs the day for Lammer LCRX it is LRC Excuse me.

Joe Terranova (46:25)

Capex comes through on the I don't forget the semi equipment names. Lam KLA Corp. Terradyne yeah well it's.

Scott Wapner (46:31)

A big day for the chips obviously. Nvidia is up. Qualcomm we already talked about we'll continue the conversation at 3. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.

Brin Talkington (46:50)

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 CNBC nor its affiliates andor subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer. Ten years from today, Lisa Schneider will trade in her office job to become the leader of a pack of dogs as the owner of her own dog rescue. That is a second act made possible by the reskilling courses Lisa's taking now with AARP to help make sure her income lives as long as she does. And she can finally run with the big dogs and the small dogs who just think they're big dogs. That's why the younger you are, the more you need AARP. Learn more at aarp.org skills.