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The Exchange
The Exchange 7/15/26
00:43:24
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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This year's girls trip to Telluride was the best.
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B
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A
Thank you very much, Scott. We'll see you later this hour in fact. And take a look everybody, at shares of SpaceX falling below the 135ipo price. Also the semis broadly weighing on the market again today. I'm Kelly Evans and Welco Exchange. The sell off in chip stocks is accelerating this hour with the stocks ETF down almost 5%. You can see the names in that space as well. We have Western Digital down 10. SanDisk down 12%. The Mag 7 keeping the tech space from even bigger declines. And the financials are picking up some slack again. BlackRock up 7% as it crosses 15 trillion in assets under management. We'll talk more about that and what's been driving it. And a health expert weighs in on the cyclospora outbreak as Americans worry about getting sick from fresh produce. Taco Bell among the names pulling products. But we begin with these wild swings in the tech trade. There have been almost three dozen instances this year where the chip or software ETFs have moved up or down 4%. You can add today to the list. This comes as IBM just had its worst single day percentage drop ever yesterday. And as names from Samsung to ASML have been under pressure despite posting better than expected results. ASML down half a percent. Then there's Space X falling below its IPO price. Remember, it debuted at 150 on June 12th. It hit a high of 225 on June 16th and it's now trading at 134. Let's start there with Gene Munster. He's managing partner at Deepwater Asset Management. We have a lot of show to get to today, Gene, so I hope you can explain to us in a quick couple of words here what's going on with the tech trade today. Is Space X part of that or is it its own story?
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D
It is, Kelly. I mean there's a psychological impact here. If we objectively look at the data points and I'll quickly get to them what we've learned over the past day in terms of the health of the trade, they have been positive. But what we have seen is this dynamic where the market is kind of looking around and seeing some stocks trade off and there's this concern. This has nothing to do with the fundamentals. The sell off in Space X has nothing to do with their long term potential. There's no story out there. If you look at the broader infrastructure you mentioned kind of being down 4% today, there really is no new news. And so I think what has happened is this is essentially the trade has gotten a little bit tired. And what investors are looking around and saying that we know the fundamentals are going to be great, what we're going to hear in a few weeks and the question that they're asking is are they going to be great enough ultimately to drive a lot of these stocks higher. And so that remains to be seen. But I think we've had some material positives in terms of the health of the trade here Just over the past
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A
day in just going over the dates that you're talking about. Alphabet July 23, Meta July 29, Microsoft also on the 29th. Apple all time high today on the 30th, Amazon on the 30th. So the Mag 7 today are holding up a little bit better. But overall there's this idea for you that we have bought the rumor sold the fact, meaning that for the CapEx projections and for the receivers of that capital that so much is priced in now that even as their earnings come in, Samsung and ASML really strong and even be a little bit beating expectations, there's just nothing left to move it higher. Does that mean the whole, what is the whole trade pivoting now to a different area?
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D
I think ultimately what happens is the market goes through these moods of kind of looking around and seeing what the stock action is and, and not having a lot of confidence in that. And I just want to kind of reiterate, I still believe that we're in the third inning of this infrastructure piece and just not even begun on the application side or physical AI side. The news around IBM was positive for the infrastructure build out. It was also positive about how AI can disrupt software. Even though the Numbers were negative. I think that was a positive read. If we look at ASML grew at 21% versus 11% last quarter, that's an acceleration. They were looking for 16%. This news from Apple yesterday, this beta of iOS 27, it's really, essentially it's the birthday of personalized AI and I've been using it for the past day. The negatives are that it's a little bit slow, it takes up a little bit more juice on your phone. But I can say this is a major unlock for consumers in terms of understanding how personalized AI can impact us every day. I feel like I actually have a new phone right now. And so Kelly, when I think about like again that your question is the right question, like we know everything is great, my perspective is the market's going to kind of do what it's going to do just around some of the emotion. I'm looking at the real fundamentals. We talked about those near term. You also mentioned the some of the bigger companies. And ultimately this all comes down to the trade. All is going to come down to two simple events. What, what's going to happen with capex spending next year and separately the cloud growth numbers. And I think that we're going to see much better. I think the numbers for next year, for example, for the Capex, the street's looking for 23, I think it's probably 37% plus growth.
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A
Look, new street raised yesterday they said, you know, they thought the sell side was underestimating the scale of hyperscaler investment. We had Morgan Stanley's Brian Nowak just raising his outlook for CapEx. We have Morgan Stanley's CFO, our CEO today on the call talking about CapEx hitting $10 trillion. If these aren't moving the needle, then you have to ask yourself what will?
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D
Well, ultimately what will is that if this continues to grow higher for longer. And what we're hearing from all those data points, everything we've talked about today underscores just how early we are. And this I think is a market kind of digesting. The basic concern is that all of these data points are so incredible. There must be a slowdown, there must be a mat material slowdown. Next year, for example, Capex this year the street's looking for 77% from the hyperscalers for calendar 26, as I mentioned, going to 23 next year, 23% I think will be higher, but that kind of piece. And so Kelly, you're asking the right question is will the market get credit? And I would just put it in this very simple term is that when you think about what AI is at its most basic level, it's intelligence at scale. What is the value of that to humanity? And ultimately, if these companies are going to continue to invest aggressively and we're going to see some pretty impressive growth rates and margin expansion, I think they will get credit.
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A
I just wonder if it's moving on, if the new beneficiaries of AI are the financials, you know, are corporate America itself that's able to deploy this to better ROIs. I wanted before you go, to quickly look up the market cap of Space X because it's gone from 225, I think we said the high was to 134. I don't know if Musk is a trillionaire anymore. The market cap of the company is 1.8 trillion, give or take. What would you say to investors now? A lot of the retail investors in this are in this for the very, very long. But again, why today and when do
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D
you think the pressure personally? Yeah, I'm an investor, Deepwaters investor in this and I would say is over the near term, the next three months. I don't know what the stock is going to do. The concern about this lock up these lockups coming. I think it is this unanswered question obviously that keeps investors up and that lowers the multiple on stocks. And so I very well could see a situation where the stock continues to go lower here over the next few months shares. That said, I'm not selling any shares. And the reason is that ultimately I believe this company has such a unique position around kind of the full stack of AI sovereignty is how we talk about it. It's such a unique perspective that they have such unique assets. I think that this can be a 5, $10 trillion company longer term. And so Kelly, my message is that if you want to trade this, you probably want to get out of the way. If you want to invest in this, this is a great time to own it.
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A
Gene, appreciate you joining us today.
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D
Thank you.
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Gene Munster of Deepwater. Meantime, crude oil prices are coming off their highest settle in a month as the US Launches a fresh wave of strikes on Iran. Let's turn now to Megan Casella who has the very latest for us.
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Meghan kelly, the US Launching several new rounds of strikes against Iran last night and early this morning. That brings us now to five straight days of attacks with the US Continuing to strike military targets in and around the Strait of Hormuz. Now, the president last night on Fox News said these strikes will continue until he says it's enough.
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E
I'll save the energy targets for last, but ultimately we'll hit energy targets. Yeah, but we're going to hit them very hard tonight. We're going to hit them very hard tomorrow night. We're going to hit them very hard the night after. And then next week it gets really bad for them because next week comes the power plants.
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B
So energy targets could be coming. And the president went on to say that bridges will get hit next week too, unless the Iranians come to the table and negotiate. And that's one of the big questions right now is what's going on by way of negotiations and is work towards a diplomatic solution still ongoing? The president said that the two sides held talks yesterday, but the Iranian foreign minister this morning in state media says there are no plans for negotiations at the moment. And Kelly, the other big question has been whether the two sides are back to full scale war right now. Asked about that, the president said simply, quote, you can define it any way you want, right?
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The market choosing to define it differently than when this first broke out and oil prices were in the 120 range. We're still much lower than we were at that point for now. Megan, thanks very much. Megan Casella, we have some breaking news out of the Fed. Steve Liesman has that story.
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Steve.
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Hey Kelly. Fed Governor Lisa Cook in a speech in Washington said if we do not see signs of disinflation, disinflation soon, I am prepared to act. She said the Fed cannot rely upon inflation expectations being under control. The Fed eventually has to act to control them. The risks to the dual mandate have shifted more toward price stability and away from the employment mandate. Inflation is simply too high. She says this is true even with tariff effects waning. Rising core goods prices, she says, show inflation is not just in energy price, in the energy prices and tariffs and conflicts in the Middle east should only result in in short lived inflation increases. So I'll leave it there, Kelly. Just to point out that as you know, John Williams was more dovish this morning giving reasons why he thought inflation might be going down in the months ahead and trying to balance all that. Kevin Warsh, as you know, said very little about any of this.
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Right. So in her message, Steve is much more hawkish, wouldn't you say?
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I would say for sure she has a more hawkish, more on edge message, not necessarily ready to hike right now. John Williams, the other way. And we don't get any guidance at all from Kevin Warsh.
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All right, Steve, thank you. Steve Liesman appreciate it.
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F
Pleasure.
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JP Morgan announcing a $24 million effort to revive American Shipbuilding, helping finance a new submarine manufacturing facility in Philadelphia. Here's what CEO Jamie Dimon told Squawk Box this morning. People have to remember this is like
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one big complex ecosystem.
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We're also financing, you know, people. We need 300,000 electricians, welders, etcetera, to ships in the next five or 10 years. So we're helping finance people who train people, who will train people here. There's 16,000 workers here.
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C
That number may very well double over the next five years as it builds
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more ships for more. We're joined now by the head of the Small Business Administration, Kelly Loeffler, along with our very own Morgan Brennan. Morgan, kick things off.
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G
All right, Kelly, thank you. And by the way, I like your wardrobe choice today. Not for nothing, but Administrator Loeffler, it's great to be speaking with you. We just heard from Jamie Dimon, who was talking about this, you know, shipyard, the shipbuilding investment that he talked about on CNBC earlier today as part of a broader package from Senator McCormick, 10, $10 billion in capital to go towards Pennsylvania, Pennsylvania's jobs. I mean, what are you seeing from your vantage point in terms of this reinvigoration of small business and specifically from the defense industrial base?
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H
Yeah. Here in Pennsylvania, I've seen it firsthand. I've been in the state about a half dozen times already. I' Philadelphia shipyard at a small business called Philadelphia Ship Services. These are this is a small business that is part of our the strength of our defense industrial base that is coming back thanks to President Trump's belief in the American worker and American industry and the need for a resilient supply chain that also acts as a deterrent. So never again should we be dependent, whether it's on our adversaries or allies, for our industrial might as well as our military strength. And small businesses are the backbone not just of America, but of our defense supply chain. Manufacturers are made up of 98% of small businesses, which is an astounding number. But that shows how is the link in the supply chain for our military might.
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G
Wow, 98%. I mean, I have conversations with, including here today with defense contractor CEOs, and to your point, it's like supply chains go down 10 layers, 20 layers, and it is all these small businesses that comprise it. How does it also speak to this American reindustrialization effort and the fact that defense and military modernization is really ground zero to see that broader reemergence of manufacturing?
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H
Well, none of this would be possible without President Trump's agenda to apply tariffs and incentivize building in America again. I mean, America is a nation of builders thanks to his policy policies of fair trade, cutting taxes, deregulating and having a strong energy dominance platform. Because off of that, we can rebuild our industrial dominance and deterrence ability and have that hard power as well. And you see small businesses increasingly involved in the innovation that's taking place, whether it's a factory floor here at Lehigh Valley Plastics or out on the West Coast. We see innovation from drone manufacturers to shipbuilding to submarines. It's all happening with these small business innovation. Then you talk to bigger businesses like Sig Sauer, who produces 5,000 weapons a day. They do it with a supply chain of 1200 small businesses in this region that make up about 50% of their spend. And then you couple that with jobs, jobs. I mean, this is critical to have a strong economy pairs well with national defense. And you see our jobs data coming in incredibly strong. Half a million jobs in the last four months. And we know that small businesses create two out of every three new jobs. So this is an economy in growth mode. And the defense industrial base is a big part of that.
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G
Yeah, I mean, in terms of the workforce, what are you hearing from small businesses? Because this conversation I find is emerging with larger companies too. But that is skills mismatch especially. You do start talking about things like the industrial side of the economy.
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H
Well, the skilled worker is in great demand right now. Manufacturers have about a half million jobs open in this country right now. And just down the road about 30 minutes from here, I have visited Dauphin County Technical School where they're training the next generation of workers for that skilled trade, which is at the nexus of the physical and the digital. And so these are not the dirty jobs of the past. These are the high tech, manufacturing, almost pseudo engineering jobs. But you don't need the engineering degree to do it. And it's speeding our ability to reshore and strengthen the supply chain for every industry. Pharmaceutical, automotive, defense, aerospace.
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G
Yeah, we've gotten some key economic readings here in the last couple of days. They've been promising nfib. Small business optimism has ticked back up. We've seen that simultaneously as we've seen CPI and now this morning. Cpi, inflation readings deflationary month over month. A lot of this is tied to what we've seen with energy prices. So what does that look like? What does that mean moving forward for that small business ecosystem here in the US Especially as we do see energy prices start to creep higher again.
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H
Yeah, Morgan, you're exactly right. Main street is thriving because optimism is back in this country. If you look at where we came from, think about four years ago, last July 2022, inflation was 9.1%. The average gas price in America with no conflicts going on was $5.01. So Main street has come a long way. That's why we have all time record business formation happening in this country right now. About 530, 13,000 entities being formed each month on average. Couple that with, you know, the leading indicators like the ISM pmi, which for five or six months in a row has been an expansion territory. That means our manufacturers are hiring, they're buying inventory, they're producing, they're getting orders. This is incredibly powerful. And then you look at the export data, also all time records. This is the Trump economy and it's just one and a half years in. So it tells, I think all of us that there's a lot more to come and we're just really getting started.
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G
All right, Administrator Kelly Loeffler of the Small Business Administration, it's great to speak with you here.
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H
Appreciate it so much, Morgan.
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G
Kelly, I'll send it back to you in studio.
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A
Thanks for bringing that to us. Really appreciate it, Morgan Brennan, Kelly Leffler, I think the president is going to be there later on as well today. Coming up, Taco Bell removing some items from its menu as a precaution amid the widening parasitic outbreak. We'll tell you what the CDC is saying about it. With Yum brands on track for its worst week of the year, PL PPI posting an unexpected drop in June as gas prices fell. Has inflation peaked? We'll debate that and what it means for your investments coming up on the exchange.
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I
This is the exchange on cnbc.
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B
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B
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A
Cards issued by JP Morgan Chase bank and a member FDIC subject to credit approval terms apply.
- [18:58]
I
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics. That may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
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A
The CDC is now warning that this year's cyclosporiasis outbreak is already one of the largest on record and officials are expecting cases to climb through the summer. Our food and consumer wellness reporter Brandon Gomez has the latest. Everyone's worried about this and whether their salads are safe, Brandon, what they should
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J
eat, what they shouldn't eat. That was the dinner last night. The table next to us got a salad. Proceed with caution.
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Right.
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But the CDC is warning us that there is a roughly six week reporting lag between illness onset and case reporting. But as of right now, there are 1,645 confirmed cases across 34 states with 141 hospitalizations and no reported deaths so far. That's sixfold the number of cases this time last year. More than 5,100 additional reports are being analyzed, including 440 where people ate or drank food or water after outside the United States. Now, the outbreak centered around Michigan, Ohio, West Virginia and Kentucky, where investigators have found a common link between cases but have still not identified a food source. However, Michigan state health officials saying, though that lettuce has repeatedly come up in patient interviews but stressed they have not confirmed any product as a source. The CDC saying the same thing as well. Many companies awaiting guidance from the cdc, some not waiting though Taco Bell confirming yesterday it is cooperating with the investigation and has voluntarily removed ingredients, including lettuce and cilantro at select restaurants. The company saying public health officials have not linked Taco Bell, any supplier or ingredient to the outbreak. Now, the CDC says cyclosporiasis cases typically peak between May and August. And because this outbreak is already much more robust, Americans can expect the number to keep on rising as reports continue to come through.
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A
All right, Brandon, thanks. Brandon Gomez, let's talk more about what investigators are up against and what it means for the public with infectious disease expert Dr. William Schaffner. He's professor of preventative medicine at Vanderbilt University Medical Center. Dr. Schaffner, it's great to have you here on CNBC this afternoon. Welcome. So do I. What should we do? I hear extra cleaning might not do much. Eat cooked fruit and vegetables. Is this all overblown? Is this all because of what's been going on with the Maha movement? What's happening here? It feels like just the latest in a number of these outbreaks. And I Can't tell if it's just anecdotal evidence that makes it feel worse than usual or if something has actually changed.
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K
Well, Kelly, for sure, this is a very large outbreak. And the illness itself, if you happen to contract it, is very troublesome because it does produce diarrhea, vomiting, feeling poorly, abdominal cramps, a little bit of fever. It can get better by itself, but then it can recur and get better and then recur again. So it's very, very annoying. Fortunately, we can treat it it with antibiotics and I would say very quickly. There's no knowledge that we can transmit it from person to person, so it had to come from somewhere. The disease detectives are looking at that from the CDC and in all the state health departments that are involved. Of course, lettuce has come up as a possible source. We eat a lot of lettuce.
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A
Yeah.
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K
Is that coincidental or is that. Or is that causal? We don't know the answer to that yet. We recommend what we recommend. Wash all your produce before you use it. Brush off those melons. Wash it, peel it or cook it.
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A
So I think a lot of people, Dr. Schaffner, are wondering why. Why is it taking us longer than usual to find the source of the outbreak again? Is it it something that has to do with what's been going on with the changes at CDC and up and down kind of the health department area is there is. Is that they pulled back and that's why this is worse. Why is it taking longer than usual? Why is this worse than usual? Why can't we get an answer?
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K
Yeah, well, the real. Well, first of all, let me say that although resources at the CDC and state health departments are strained, there are people all over the country and state health departments and at the CDC working on this very, very hard. It's top of the top of the mind. What makes it so difficult is from the time of exposure, should I eat something that's contaminated? It can take a week, a week and a half, or even two weeks before I develop symptoms. So now when the investigators ask me what it is I ate last Tuesday, that's rather fuzzy. And so it's hard for them to get a clear picture of what so many of these people ate that was in common that could lead them to the source. This has been a very, very challenging investigation.
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A
We see some restaurants taking precautions, like Taco Bell, by removing product from the shelf. But as we know, I mean, now, fortunately, it's a blessing. There's tons of fresh food options, salad chains and restaurants everywhere. So I don't know what they should do. If no one can figure out, I guess they do nothing. I guess the answer is to do nothing for now. But you're saying there's not been a change that's making you, you studied these. Have there been more outbreaks, outbreaks of infectious diseases this year than usual?
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K
Well, I don't think there have been more outbreaks of infectious diseases. We can talk about measles and some of the other vaccine preventable diseases because people have been withholding themselves and their children from vaccination. But other than that, I think that anytime there is a widely distributed infectious disease such as this, it gets into the headlines and we want to get information out so that people can do the best to prevent the illness from infecting them.
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A
Well, I will. I guess we should document. Okay. On Monday, here's the 27 things that I ate on Tuesday. And two weeks from now, if we get hopefully it doesn't happen. I know everyone's concerned. Dr. Schaffner, thanks so much for your time for joining us today from Vanderbilt University. Coming up, blackrock's Larry Fink telling CNBC what's keeping him bullish for the next 12 months as the firm's earnings beat and push shares toward their best day in over a year. Plus, Warren Buffett sat down with Becky Quick why he says Kevin Warsh was a good choice for fed chair. And as we go to break, check out shares of Pentair having their worst day since 2000,000. The water treatment company slashing its guidance after weaker than expected Pool sales led to disappointing results. It's also dealing with the sudden departure of its CFO shares of Pool Corp. Leslie's also under pressure, down about 5%. Nine for Leslie's. More of today's biggest movers when we come back at Ameca Insurance, we know it's not just what's inside your home that matters, it's who you share it with. That's why we work even harder to protect. Visit amica.com and get a quote.
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J
Today
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A
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- [26:31]
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This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com Market Update podcast or find Schwab Market Update wherever you get your podcasts.
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A
Welcome back to the markets which are inching higher and a tug of war today over the tech space in particular. But the Nasdaq is now up about 3, 10 of a percent and the Russell's are eking out the best performance of all the major averages. BlackRock is having its best day in over a year after posting better than expected results. Chairman and CEO Larry Fink telling cnbc, quote they're continuing to see extraordinary flows with eight quarters of above trend line growth. And he sees no reason to stop being optimistic.
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D
I'm very bullish on the markets over
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K
the next 12 months.
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D
I think the technological revolution is going to power better margins for more companies.
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A
I mean think about BlackRock.
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D
We've raised our margins increased by 260
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A
basis points over the last 12 months.
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K
A lot of it is using more and more technology.
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A
Assets under management for the company were up 22% year over year to $15.34 trillion. The shares are up a little less than 7%. From BlackRock to Buffett, our Becky Quick sitting down with the Oracle of Omaha today and he had an interesting take on new Fed chairman Kevin Warsh.
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E
I don't know what he'll do, but I would say that that job is so complicated. I think the other day he was quoted as saying, you know that they have 950 economists where they could use 110. I admire him for taking on the job. I think he will do the best he can at achieving the job he was assigned to do, which is, you know, 2% inflation and while maintaining maximum employment. And my guess is that just like some of the others that have preceded him, not all of them, but he would read that every morning. You know, I mean the dual mandate of the Fed, the dual mandate and he doesn't, he knows he can't be perfect at it. And just like I know I couldn't be perfectly taking people's money and earning super returns on it. But my guess is that people were right in realizing that I cared about what happened to their money. And I would say that Wash has, he cares about the country. I think that's been true of a good many. It doesn't mean their decisions are always great, but sometimes the decisions are so tough. I mean, imagine Paul Volcker getting, you know, death threats all the time. And others just think they know more than they do.
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A
But you think Kevin knows a lot and is.
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E
I think he's a very. Yeah, I think he was a good choice, which probably means the president will be mad, future presidents will be mad at him because future presidents are looking the next election and he's not supposed to be looking at the next election.
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A
Buffett also told Becky that he was the driving force between Berkshire's recent big investment in Alphabet, which they disclosed in November. He went on to say that he, quote, made a mistake by not investing in Alphabet sooner. And since he revealed the stake, it's up 33%. Over to Kate Rooney now for the CNBC news update. Kate?
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L
Hi there, Kelly. Smoke from Canadian wildfires is spreading across the US Prompting air quality alerts in parts of the Great Lakes, New England and the Mid Atlantic regions. The main concern is fine particle pollution which can aggravate asthma, heart disease and other respiratory conditions. Health officials are urging sensitive groups to limit time outdoors, keep windows closed and use filtered air when possible. Meanwhile, the Wisconsin Election Commission found probable cause that Elon Musk violated rules against election bribery during the 2025 State Supreme Court race. The complaints center on Musk promising $1 million checks to voters, including at a Green Bay rally just days before the election day. The case now does go to the Brown county district attorney who will decide whether to bring charges. And finally, the U.S. mint will produce a new $1 coin featuring President Trump's face. Treasury Secretary Scott Besson says it is part of the country's 250th birthday commemoration. The coin will have a gold like finish, but it won't be made of the precious metal treasury says it will be available. Kelly, this fall.
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A
Back over to you. Listen, the wildfire smoke here I thought this was behind us. It was fine this morning. It was fine last night and all of a sudden mid morning you can't breathe. It's, it's crazy.
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L
California problem coming to the East Coast.
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A
I hope they can get it under. We wait all winter long to come outside. We can't go back indoors.
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L
Such a bummer.
- [31:40]
A
Thank you very much. Coming up, a second day of cooling inflation data. Not that reassuring to our next guest, but he does still see big opportunities in other parts of the market. Not the S&P 500. We'll tell you where next. Welcome back. Producer prices dropped 3.10of a percent last month, more than than expected comes the day after. Consumer prices also dropped more than expected in June and that has sharply reduced the odds of a near term rate hike. But my next guest says not so fast. He expects inflation will remain stubbornly high for a while. Rich Bernstein is global head of Macro at Janice Henderson. Rich, it's good to see you again. So to me it looks and feels a little bit like we might be peaking here, pivoting away from, you know, both, both the labor market and inflation missed on the downside last month month. So that would seem to give Wash a little bit more breathing room.
- [32:33]
C
I think you're right, Kelly. And you know, nothing moves in a straight line and I don't think we should ever expect it to. But I think, you know, there's cyclical, there's still very powerful cyclical and secular inflation impulses in the backdrop here. And those haven't gone away, right? I mean, the huge secular impulse is from globalization. I think everybody will agree that globalization is not going to expand. Globalization is, is in, is pretty much in favor these days. And remember, globalization removes competition and when you remove competition, you get upward pressure on prices. That's not PhD type stuff. And the cyclical is, you know, where we've argued that we're replaying the second half of the 1960s with a guns and butter type type environment where we're getting a big defense spending build up. At the same time we're getting a big tax cut. So you're getting big fiscal stimulus impulse. At the same time you're getting a big defense buildup. So, so there's lots of impulses here and I don't see those going away anytime soon. So the month to month may change and I get that. And I think that's pretty normal. But I think the backdrop still calls for more inflation rather than less.
- [33:44]
A
Does any of that for you give a reason to be out of the stock market? I mean, The S&P 500 is performing in spades, granted. And it does make me chuckle when people are saying no, no, no, but the small caps are better and internationals. But I think that's fine. But it's not as if you're in the s and P500. You're not losing money.
- [34:01]
C
No. And I think, look, one of the issues that the new Fed chair is going to have to grapple with is, is a very healthy nominal economy, Right? Nominal meaning real growth plus inflation. That's very, very healthy economy right now. And how are you seeing that? You're seeing that in the breadth and strength of corporate profits. Because remember, corporate profits are nominal, Right. We talk about real gdp, but companies don't care about real earnings. They care about nominal earnings. And so you're seeing that in, in the broad and powerful earnings reports that you're seeing these days. So what that argues for, and I think the market has been playing out sort of under the surface, is this kind of broadening of the market both in terms of the United States and around the world, where I think people are still very myopically focused on a small universe and a small theme extreme and missing that the rest of the market is actually performing pretty well.
- [34:56]
A
You say non US Stocks, which is where you're still telling people to look. They offer twice the dividend yield of the s and P500, and earnings growth is accelerating. And it's. I mean, look, let's rattle these off because this is impressive. The Russell 2000 is up 20% year to date. That's twice what the S and P has returned. As you say, the even more disliked Russell 2000 value index is up 22%. Non US stocks are up 13%. The Mag 7 is up only 3%. Against that backdrop, when you watch, you know, day after day that smh, it's up or down 4% or the stocks are the softer. I mean, what is going through your head as you're watching this, this churn take place in the tech and AI trade, Right?
- [35:35]
C
So. So, Kelly, I think one of the environments that we're in, and I think most people agree with us, we're in some kind of speculative environment, right? When people can't tell the difference between the financial markets and the prediction markets markets. It's pretty clear something's gone wrong here because the two markets are very, very different and have completely different purposes. And, and so in light of that, that speculative fervor has gotten people to think only about a small portion of the market. Now, I would say that, that they're speculating, they're betting, they're not investing. Because if you were truly investing, you'd be looking at this broader portfolio of corporate profits around the world.
- [36:14]
E
World.
- [36:15]
C
But that's not where people are. So from my perspective, it's. It's a symptom of this very speculative environment that we're actually in.
- [36:22]
A
The only thing I would say about that, because obviously, you know, I'm sympathetic to that point of view, but for many of these companies, the earnings have risen even faster than the stock price. You know, as someone the other day was saying, that even for the S&P 500, the multiple has fallen since the beginning of the year. So, yes, if we were trading this way, and it was all on, all on speculation about quantum computing, that'd be one thing. But for a lot of these high fliers, it's the earnings that have been high flying.
- [36:46]
C
Yeah, great point, Kelly. And I think, look, you know, when I started on Wall street back in the Mesozoic era, you know, many long time ago, one of my bosses said to me that you buy cyclical companies at 90 times earnings and you sell them at nine times earnings.
- [37:03]
E
Right.
- [37:03]
C
And the argument was that when they have no earnings, you're at the beginning of an earnings earnings cycle. And when their PS are very low, it's because they're at peak earnings. And I think people have kind of forgotten that, that when earnings start outpacing the stock prices and multiples are contracting, that's historically been a signal that you're getting towards the end of the earnings cycle and the market is pricing in those peak earnings and starting to look further out towards trough earnings or decelerating earnings.
- [37:31]
A
Well, I'm going to leave it on that note, which I think will give people an uncomfortable amount to think about. That's about Nvidia. So many different names, Micron. But come back and we'll do that. Maybe more specifically. Rich, thanks very much for the broad laying that out today. Rich Bernstein with Janice Henderson. Coming up, PayPal shares are soaring on a report that Stripe and the firm Advent International have submitted an offer to buy the company for more than $53 billion. Famed Big Short investor and major PayPal shareholder Michael Burry not a fan of the offer, which has PayPal shares at 16% today. We'll have those details next. Welcome back. PayPal shares are soaring on a takeover report by Stripe along with PE firm Advent International. Mackenzie Scalos has more in today's tech check. And Mac, I guess some shareholders are worried that Stripe and the private equity firm get all the upside and they're going to be left with just was it 50, $60 a share, something like that?
- [38:32]
M
$60.50. And that is a question going into that shareholder meeting. That is apparently the board meeting rather that's apparently coming up on the 20th. Very curious timing there. But what we know now, Kelly, is that sources are telling CNBC that The offer values PayPal at more than $53 billion. As of Tuesday's close lows, that represented a 28% premium. But that gap is narrowing this morning with shares surging as much as 20%. Our David Faber reporting that Stripe, Advent and Jack Dorsey's block would contribute $17 billion in equity with roughly 50 billion in committed bank financing backing the Bid. The plan here is to take PayPal private, with Stripe and Advent then holding equal stakes, rather than folding the company directly into stripe. Now, PayPal has not responded to that offer and officially has no comment on the report. There's also no certainty that a deal gets done, but sources familiar with the matter tell CNBC that the board could meet as soon as July 20th as we were talking about to discuss this bid. Now, an early pioneer in the payments space, PayPal has struggled to revive growth, issued disappointing profit guidance this year, and recently replaced CEO Alex Kriss with former HP chief Enrique Laurez in an effort to, to reset the company's trajectory. With the bet here really being that Stripe and Advent can run this business more effectively, better monetize Venmo's roughly 90 million users, and revive a widely recognized brand whose stock is more than 80% below its former highs.
- [39:59]
L
Right.
- [40:00]
A
So I guess that, you know, for PayPal, this is, I don't know, Mac. I mean, there's so much going on in the fintech space right now. And company. They're still the parent of Venmo.
- [40:10]
M
Venmo, exactly. They're still the parent of Venmo, even
- [40:14]
A
though they, they kind of spun it
- [40:16]
M
out a bit and made it its own separate entity. But what's interesting here in terms of the strategic side of this is that we think of Venmo in the context of this consumer facing business. That's really been a bright spot for PayPal, 90 million users there. But Block has done a far better job of monetizing their almost 60 million cash app users. A combination of techniques. And so I have to wonder if that's part of it. Braintree is another acquisition that PayPal made. That's their enterprise business. It goes head to head with Stripe. I have to think that there's some sort of strategic advantage there, being able to look under the hood of how that business works.
- [40:47]
A
Yeah, good point. All right, we'll see where it goes and if other shareholders speak up and are frustrated or not. Mackenzie. Thanks. Mackenzie Seagalos. Coming up, our parent company Versant inking a five year deal with Germany's top domestic soccer league. World cup fever, baby. Scott Wapner joins us with the details. As the race to secure media rights heats up. And as we head to break, we're keeping an eye on Nvidia's market cap, which is at risk of breaking below the 5 trillion. Everyone else wants to be above it. Nvidia might actually lose it. It's down 1% today. We'll be right back. Welcome back. Our parent company Versant striking an exclusive media rights deal with Germany's to top domestic soccer league as World cup fever takes over the country. Scott Wapner joins us now with the details. Scott, this is the hottest thing now, anything that has to do with soccer. Americans have fallen in love, no doubt,
- [41:39]
N
and we're witnessing that by record TV ratings. All the excitement, of course. Kelly. The deal with the Bundesliga is an agreement worth $100 million over five years. Just the latest example of how Versant sees live sports as a key piece of the company's growth. It adds to the company's growing media rights portfolio that now includes NASCAR, the WNBA, Pac12, PGA of America and the DP World Tour. I asked USA Sports President Matt Hong why this deal, which includes 300 live games, makes sense for the company.
- [42:12]
C
It's more live sports, which is good for our company. And then strategically, we're spreading out the Bundesliga matches across both USA Network network and our newly relaunched Fandango AVOD service. So the highly accessible, free to consumers Fandango, which, which I think our company is announcing the new strategy for or you know, the new offering as we speak.
- [42:38]
N
Scott. All right, that was Matt Hong. Now, coverage begins Aug. 22, which means it can take advantage of the momentum Kelp was talking about from the World cup, which has produced record television ratings. It's also made stars like England's Harry Kane better known to the US Audience. According to the Bundesliga, the number of fans in the US is up 43% over the past five years. Mr. Kane playing for Bayern Munich in the Bundesliga. So that can't hurt. Goldman Sachs pointing out today that as media rights for the big four leagues continue to escalate, that's created an opportunity for smaller rights deals like this one, a deal that went for 30 million a year in the prior agreement with ESPN, now settling at 20 million per annum. It is clear, Kelly, that the Bundesliga was interested in eyeballs and exposure maybe a little bit more than the money. It is more evidence, as you let into this whole segment, suggesting soccer is not just having a moment, it's a movement, according to those who are so bullish on it.
- [43:41]
A
Look, it makes a lot of sense to immediately capitalize on it, try to keep that audience. And you and I both know there's been tons of fans watching all these, the Premier League and the Bundesliga for years now. That probably only grows so and didn't Alex Sherman report? Was it Netflix, Scott, that was trying to get the Women's World cup right? So, yeah, the race is On.
- [43:59]
N
Yeah, well, and they also, you know, for the next negotiating rights for, for media deals for the World cup, they'll do both, I think the English and the international language or foreign language or Spanish language, all in the same package, which is going to be different. That may very well drive up the cost. Netflix, according to Alex, one of those interested, perhaps Disney as well. And that really speaks to what Goldman was talking about today. NFL rights. They're expensive.
- [44:26]
A
Yeah.
- [44:27]
N
NBA expensive. Expansive. This has created an opportunity for companies like Versant who want to have a bigger live sports and news exposure. Thought it was interesting. They point out today 62% of programming for our parent company is live news and sports. It's where the action is, figuratively and literally.
- [44:45]
A
Yeah, no, and it's. How about Fandango? That so, so now we have, you know, what is it? We have, we have, you know, Paramount plus plus, we have Netflix, we have, we have Peacock and now, and now we have Fandango. And it's one of these growing number, as they said, advertising support. So it's free, it's advertising support. It's kind of reinventing the wheel here.
- [45:07]
N
I was going to say that's, that's the key difference from those services that you mentioned. And when it was announced that Fandango and the ad supported product was where a number of these games would be, people had, you know, raised the eyebrows like, oh, I didn't realize that this service was going to be that. And of course it is becoming that. And the free aspect just invites bigger audiences to join and not having to worry about a subscription service. Yet another one.
- [45:34]
A
Yeah. And to be clear, nobody should be watching it at 3pm to be clear. That would be the wrong, absolute wrong move.
- [45:42]
N
I would wholeheartedly agree with that. And I have issues with, with FIFA
- [45:46]
A
putting those games then I don't we all. Scott, thank you. Really appreciate it. Big day there for Versant. That's it for us. Thanks for watching the exchange and I'll join Brian Sullivan for Power Lunch right after this quick break.
- [46:07]
I
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