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The SPAC is back, The Fed & Financials & no more quarterly reports? 9/15/25
00:44:06
It's the busiest year for SPACs since 2021. The unusual case of rate cuts with bank stocks at record highs, and the President says quarterly reports aren't necessary.
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- [00:46]
Courtney Donohoe
You're listening to the Exchange. Here's today's show.
- [00:53]
Mike Santoli
Thank you Courtney, and welcome to the Exchange. I'm Mike Santoli along with Leslie Picker. The NASDAQ and S&P 500 starting the week at Fresh records this as the President' says China trade talks are going well and a rate cut is all but certain this coming Wednesday.
- [01:07]
Courtney Donohoe
Tesla a notable standout today up 5% as Elon Musk discloses $1 billion share purchase will get a technical take ahead on why the recent run may not be done in video under pressure, but well off the lows of the session now after China's market regulator said the company violated anti monopoly laws and Alphabet becoming the fourth company to reach a 3 trillion dol market cap. A notable addition to this cohort, Mike, and one that comes kind of after some, some legal overhang as well as some AI questions seem to be lifted at least temporarily.
- [01:45]
Mike Santoli
Yeah, the market in general has been in a hurry to sort of latch on to potential new bellwethers. And I think that now, you know, Alphabet's taking its turn. Maybe it belonged there all along. I think more interest, or as interestingly is, is you seeing this move in the NASDAQ and the S&P 500 while the rest of the market kind of just hangs out at record highs. I mean the equal weighted S and P is basically flat on the day. And that makes all the sense in the world because it felt like we came into the week kind of pricing in most of what the bulls wanted. Right. Which is we're going to get this rate cut. Obviously earnings were great. They're supporting the valuations and the sense that the economy is still hanging in there. We when we're going to get the bonus of the rate cut. You have the cyclical sectors working really well. I think that's been something the bulls have been latching on to. You see consumer discretionary and industrials kind of leading the way and then you're going to get a rate cut on top.
- [02:38]
Courtney Donohoe
So do you think that kind of this desire which we've heard about for years now, diversification, the concerns around concentration risk, do you think that comes at expense of the previous winners, that there's a clear rotation out, or do you think it just kind of is a rising tide, that all boats are lifted and it's not like we're going to see some air come out of Nvidia in favor of, you know, Oracle, Alphabet, name your kind of a pick Digital.
- [02:59]
Mike Santoli
It's interesting and this happens by the way is as the NASDAQ 100 is basically on this huge streak and it's really outperforming even the median NASDAQ stock. It's the nine straight day gains since the first time since November of 2023 for that index. There actually has been a lot of like taking turns. The correlation among the MAG7 stocks with one another is actually near a low right now. So if you think we've had all these periods here when you know, Apple was kind of in the doghouse and Metta was ripping and Amazon's been kind of just sitting around, Tesla's now of course having this huge surge, but it also is way below its highs for much of this year. So within that cohort you're kind of like shuffling the inventory around and then more more broadly speaking, I do think the market is being selective in terms of what it's rewarding and what it's not in the sense that, you know, tariff impacted stocks. A lot of the, the big ones are getting punished, but in general it's netting out to, you know, everything being up in aggregate.
- [03:56]
Courtney Donohoe
Yeah, there's, there's more dispersion in terms of kind of a stock pickers world. Meanwhile, the president posting on Truth Social that companies and corporations should no longer be forced to report on a quarterly basis, but rather to report on a six month basis. The President saying it will save money and allow managers to focus on properly running their companies. You know, Mike, this is something that is not a new concept. It was brought up during his first term. It's something similar to what Warren Buffett and Jamie Dimon penned in the op ed in a 2018 piece where they said basically short termism is harming the economy. But there they were referring to guidance. Yes, EPS guidance in particular. They weren't referring to quarterly reports per se. And I think it's interesting in this kind of where we are in history because you know, you talk to people who are repairing, Preparing these reports, CFOs and so forth, and they talk about the prospect of I really disintermediating the filings, which would bring down the costs of, of doing them every quarter, of.
- [04:58]
Mike Santoli
Actually performing the exercise of getting your results and getting them out and kind of crunching it. Look, it's unclear exactly whether this is going to be a sustained policy push to actually change the rules conceptually. I just put it in the category of the president would like to see businesses be a lot less burdened on many different fronts. And maybe this is one way to do it. I would presume companies would have the option of doing every three months instead of every six, just as companies have the option of giving no guidance, giving annual guidance or giving quarterly guidance. The thing is, I think for investors the information exists somewhere. So getting less of it means probably more volatile stocks and maybe compressed valuations. Right. I mean Europe is where we do every six months or at least as a requirement. It's not clear that you want to look to Europe to say, oh, that's where they had the most vibrant capital markets and the greatest valuations and the best capital formation. That's right. I mean, so it's kind of one of these, I put it in the category of this administration is saying to investors and businesses better to beg for forgiveness than ask for permission. Right. We're talking about lending against crypto. We're talking about putting private assets in 401ks. You know, I think it goes along the lines of a lot of things where it's just hands off.
- [06:13]
Courtney Donohoe
Well, in the, in the Buffett diamond piece, they argued that essentially trying to meet or exceed the guidance that they had given affected everything from staffing to research and development and was kind of hindering these companies. I don't know if the same can necessarily be said. Maybe it could about just, you know, meeting or exceeding analysts expectations because a lot of those are brought down to kind of where the companies want it to be. That's right. You know, and their ability to, to.
- [06:40]
Mike Santoli
Outpace companies seem to, like many of them, like to seem, seem to, like to be able to shape the narrative every few months, in fact, more often than not sometimes. So we'll see how, how they choose to do it. All right. We are just two days away from a Fed meeting unlike any other in history. One Fed governor is in a court battle against the White House for her job. One board seat is technically open but could be filled 24 hours before a vote on rates. The chair has become a punching bag for the President and the economic data isn't giving the Fed a clear narrative. Job growth is slowing, but inflation is being stubborn. With us is CNBC senior economics reporter reporter Steve Liesman to tell us just exactly how this is all going to break.
- [07:21]
Steve Liesman
Other than that, Mrs. Lincoln, how was the play? I guess that's what you're saying, Mike. While the Fed is likely to vote to cut rates this this week, it's unclear how many officials are going to be voting with a potential Senate vote. As Mike said in a court ruling, could be 10, 11 or 12 voters. Here are the events we're waiting for. The administration has asked an appeals court to overt the Cook injunction against her firing by the President by today so she won't be able to sit. That is what the administration is asking the Senate to vote tonight, we understand, at 8 o' clock on the nomination of CEO Chair Steven Myron. So there could be 10, 11 or 12 voters at the meeting, depending upon how all that shakes out. Beyond personnel, the Fed has to deal with inflation running above the 2% target and unemployment ticking up as well, though it still remains low. Futures market don't seem very troubled either. Does the stock market by the personnel or economic issues they overwhelmingly are. Price for three cuts this year, one in September consecutive meeting September, October and December. If Myron is approved, there will be considerable speculation about the myron. President Trump, he's complained rates are 300 basis points. That's 3 percentage points too high. But no Fed official has a future DOT anywhere near that number. Myron, however, will remain chair of the President's Council of Economic Advisers on an unpaid leave of absence. So it remains to be seen if he sides with Trump and forecasts deep rate cuts down the road that could sharply drive down the average rate for the committee which the market follows closely. We could have also dissents in favor of a cut bigger than 25 and even a descent for no cut at all. So just like you said, Mike, a meeting like no other.
- [09:01]
Courtney Donohoe
Steve, I'm curious about the concept of Myron remaining as part of the administration on an unpaid leave. Is the goal there to return to the administration after he certainly serves in his four month post? And how does that coincide with some questions surrounding Fed independence? Especially since he has only one voting member, presumably if he gets approved, right.
- [09:24]
Steve Liesman
It'S only one voting member. That is true, but there has never as far as anybody knows, been a situation like this, you're right, it is just a four month term and but by the way, it is only four months. If they keep it four months, he can stay on until the next person is nominated and approved by the Senate. So that could be longer than four months. And the concern this is, you can read it in the op ed of the editorial of the Wall Street Journal today. Many economists said that we have it in our Fed survey that will issue tomorrow, that will air tomorrow. And the issue is that he remains beholden to the President. Does he reject the president's call for rate cuts and then think he's going to go back to his job? That's really the concern there, that the president has a lever over the voter and on the Federal Reserve Committee.
- [10:12]
Mike Santoli
All right, Steve, busy couple of days. We'll talk to you again. Plenty. Our next guest has been calling for 100 basis points of cuts this year for months, long before we saw a downturn in the official jobs data. So what is he looking for this week and how should investors position? Well, this is Barry Knapp, Ironsides Macroeconomics Director of research. Barry, it's great to see you.
- [10:34]
Barry Knapp
Good to see you again, Mike.
- [10:36]
Mike Santoli
So it's an interesting take that you have here that in other words, 100 basis points is warranted, I guess you would also say perhaps overdue. At the same time, we've been talking about how the markets seem to be treating this prospect of a quarter point cut as a little bit of a bonus. Like the economy is doing well. Markets are at a high, financial conditions are loose, credit spreads are tight. You think that there's actually a little bit more to be addressed in the real economy here?
- [11:03]
Barry Knapp
I think there's a lot more to be addressed. This has been a long standing view of mine. I recall talking to Becky Quick about it in December of 21 and Kelly and I have spoken about this often, which is the Fed eased primarily using their balance sheet and tightened primarily using their rate policy that created very, very tight financial conditions for floating rate small businesses, small bank borrowers. Leslie, you'll like this. One of the biggest manifestations of this is the spread between return on equity of the regional bank index and the large banks has never it's near historic wides at about 4%. So small banks are not earning their cost of capital, not creating credit, you know, not buying securities, not making loans. And large banks are much in a much stronger position. So again, we've got you could see the same thing in the duration of the high Yield index versus the investment grade credit index. The way the policy the Fed tightened really hurt the small business sector. And we see that in the underperformance of the Russell 2000 over the last couple of years. So there is a part of the economy, housing is part of this, that desperately needs a steep yield curve. Last year the 100 basis points of cuts merely took away the diss or deep inversion of the curve. This year it would steepen it, lower financing rates for floating rate borrowers, revive the housing market. We've already seen the spread of mortgages to Treasuries tighten considerably and really jumpstart Main street, so to speak. So that part of the economy really needs it. And that's what the labor market weakness is all about. If you, if you assume, which I would for sure, and it may have actually gotten worse that that overestimation of monthly job growth of nearly 80,000 jobs per month continued from April through August and it probably got even bigger than employment growth is zero. We arguably have a recession in the labor market and we certainly have real struggles for small businesses. So that's what the Fed needs to address here. You know, the financial conditions because of the Fed's balance sheet, anybody who finances out the curve are still relatively loose and the stock market benefits from that. But conditions for Main street are really tight.
- [13:33]
Mike Santoli
So if what we get is the 25 basis points on Wednesday and then seemingly a consensus for one or two more for the rest of the year, it's going to fall short of presumably what you think is needed. What are the investment implications of that?
- [13:48]
Barry Knapp
Well, we'll for sure have a setback. I don't get too caught up in the DOT plot. And I mean, the Fed tends to always get this wrong and macroeconomic conditions are likely to overtake them. There's the only real catalyst I can see for an acceleration of growth in the next couple of quarters would be that steepening of the yield curve and a revival of the housing market. Sure, that one big beautiful bill is going to spur recovery in capital investment. But you know, again this morning we saw the Empire State Survey 6 month forward, Capital spending plans go down, not up. And so just like what happened in 2018 after the passage of the tax Cuts and Jobs act, trade policy is offsetting the corporate confidence boost that came from those corporate tax incentives. So we need a steeper yield curve right now to get Main street going, get the housing market going. If we don't get that, the labor data will continue to be weak and the Fed will end up going that 100 basis points by January, whether they think they're going to do it and the dot plot falls short or not.
- [14:55]
Courtney Donohoe
Yeah. Barry, I wanted to follow up on your diagnosis involving the labor market because I mean, we're looking at 4.3%. It doesn't seem like it's at crisis level yet. Ed Yardeni pointing out this morning that the main problems he sees in the labor market are shortage of labor and skills mismatches, neither of which would be solved by monetary policy. I'm just curious if you agree with that.
- [15:19]
Barry Knapp
I don't, not even close. If you look at the Atlanta Fed wage tracker data, for example, on this, you see that the spread between the lowest income quartile of wage earners and the highest income quartile, which was plus 3.6% in early 2022 when we did have a labor shortage because of pandemic related policies, that's now negative 1%. That is very deeply negative. So that indicates, no, there's not a shortage of low skilled workers. There's excess even with the immigration tightening the pressure and that that wage measure came down another 10th in the latest month and continues to be under pressure. So that would imply, no, there's not a shortage of labor at all. There's, there's actually surplus. Furthermore, I would add that that unemployment rate is corrupt data. The bls, amongst other things, totally got the immigration surge over the last three years wrong. They had a small increase in the population for 2020 to a small decline in 2023 when the border was wide open. And then this year they suddenly came up with 2.9 million jobs. If you use the conference board, labor differential jobs plentiful, less jobs hard to get, which had a.95 or 9.6R squared with year three and U6 unemployment rate. Pre pandemic, the unemployment rates more like 4, 6 and headed higher. Now remember, the U6 underemployment rate's gone from 7 1/2 to 8.1 this year. So I see plenty of labor market slack. And I think, you know, Ed's been around a long time, he's great at what he does, but I think he has that totally wrong.
- [17:03]
Mike Santoli
All right, it's fair. Honestly, it's a, it's a really interesting two sided debate right now about the underlying macro. Barry, really appreciate you, you contributing to it.
- [17:13]
Barry Knapp
All right, thanks both of you.
- [17:14]
Mike Santoli
All right, coming up, Tesla hitting its highest level since January after Elon Musk bought $1 billion worth of stock. On Friday we'll get the technical take on Tesla ahead.
- [17:24]
Courtney Donohoe
But first, tick tock, no longer on the clock. The US And China say they've reached a framework deal on the social media giant. We'll bring you the latest on those talks and what it signals about a broader US China trade agreement. The exchange is back after this.
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Mike Santoli
This is the Exchan on CNBC.
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- [18:53]
Mike Santoli
Welcome back to the Exchange. The U.S. and China have reached a framework deal on TikTok. Megan Casella is in Washington with the details. Hi Megan.
- [19:01]
Megan Casella
Hey guys. That's right. That was the biggest focus and the biggest news from two days of US China trade talks that wrapped up just earlier today in Madrid. Now, details on the deal are scarce for now and they're expected to remain that way until President Trump speaks with President Xi by phone on Friday. But U.S. officials describe the deal for now as both fair to the Chinese and completely respecting US national security concerns.
- [19:25]
Mike Santoli
I think the framework is for it to switch to US Controlled ownership. But again, I'm not going to get ahead of the leaders call on Friday. We have a framework. They'll have to confirm the deal.
- [19:41]
Megan Casella
Now. Two major questions from here. One of course is who the buyer will ultimately be and the other is why the Chinese have now agreed to a sale, especially of its algorithm, which the company has long resisted. China's top trade negotiator earlier today said only that the basic framework consensus is centered on properly resolving TikTok related issues through cooperative means, reducing investment barriers and promoting relevant economic and trade cooperation. So more to learn here, guys. But one point of leverage that may have helped is that we know Beijing is eager to have President Trump visit China later this year for a summit with President Xi. And agreeing to some sort of a deal on TikTok was seen as one precursor to letting that meeting go forward. It's not the only issue that needs to be addressed, but it was a major one. So notching this now could have helped smooth the path towards this deal. Guys.
- [20:29]
Courtney Donohoe
Yeah, certainly an important one. We'll see how that framework develops over the course of the next year. Few days. Megan, thank you. While the focus is on tick tock, Chinese tech stocks have been on a tear. The K Web China Internet ETF up 20% in the past three months alone, driven by huge gains in Tencent, Baidu and Alibaba. Our next guest is behind the K Web. Let's bring in Brendan Ahern, chief investment officer at Crane's shares. So what are the key drivers and where are these flows coming from into K Web? I mean is this does is this US investors feeling like the geopolitical environment is such that they can get back in here or is it coming from somewhere else?
- [21:06]
Brendan Ahern
I think on the US side the geopolitical narrative is still a bit of a headwind. You've seen this movement to em ex China. At the same time outside of the US you see really significant flows in the space, Europe, the commodity world, if it's Australia, South Africa, Chile, Brazil, number one counterparty economically is China, Middle east because of oil LNG and then obviously within broader Asia. So this rerating in China is coming really from non US investors. But we think the geopolitical as that dies down, you'll see us come back.
- [21:40]
Mike Santoli
And in terms of the drivers really within the China market, it's, you know, I was observing last week that suddenly the world has this parallel AI Capex boom to play. And obviously it's manifesting in a lot of those names that are levered to it. Is that creating a disconnect with the domestic Chinese economy? Is it kind of similar to here where, you know, the trade ran ahead of the rest of the market?
- [22:02]
Brendan Ahern
It's been a little bit of a rising tide boat. But I certainly you're seeing these growth names that we hold in K Web, these kind of this growth factor, particularly around AI starting to really outdistance itself because people want, I call it the good stuff. You don't want Chinese banks, financials, energy, slow, no growth 60s slow growth sectors just pull out the good stuff, right? These growth names and that's what K.
- [22:23]
Courtney Donohoe
Web represents and how it plays into the broader Macro environment ultimately maybe down the road. Brennan, stay with us in video Becoming the latest pawn in the U.S. china trade negotiations. Christina Parts and evil less has more on that layer in tech Check.
- [22:37]
Christina Parts
Christina Maslow, China's market regulator announced this morning that Nvidia violated anti monopoly law. But this is more than just about antitrust, it's a also about leverage. Beijing launched this probe in December, just one week after Washington unveiled tougher chip export controls and conveniently announced the violation today as US China trade negotiators just finished meeting in Madrid this weekend. Today the alleged breach involves Nvidia's 2020 Mellanox acquisition which was a deal China approved with conditions five years ago. So why act now? Well perhaps posturing to gain negotiating power plays a role. Nvidia released a statement this afternoo that they quote comply with the law in all respects. But shares are slightly in the red last I checked about 310 of a percent lower. But the selling pressure really extends across semiconductors. And why is that? Because China also launched an anti dumping probe Saturday targeting US Analog chip suppliers, hitting companies like Texas Instruments which you can see is down over 3% today. But for Nvidia investors the bigger worry is that revenue upside really hinges partly on China demand and the company is caught in this tug of war where the US wants China to be dependent on American AI compute while China is pushing its domestic companies to avoid US tech at all costs. But the immediate financial impact may be limited which is why you're not seeing that hit a big of a hit to the stock. Nvidia already reported no H20 sales to China based customers in the second quarter saying those sales hadn't reached the country yet. And this limits Nvidia's upside potential. That's the big thing. It limits the upside potential on revenues and earnings in the a near future if China comes back into the game or never returns because of this drama between both countries.
- [24:21]
Courtney Donohoe
Yeah, yeah. It's still kind of a question mark as to whether they'll pursue any sort of remedies related to that antitrust allegation they have there. Christina thank you Brennan. The timing of this is all very interesting. Of course we heard From Meghan on TikTok and now we hear from Christina on chips. And does this suggest to you that maybe China is is trading TikTok for chips as it pertains to just the geopolitical balance between China and the U.S. yeah.
- [24:47]
Brendan Ahern
What I mean these are pawns on the chessboard. I think a few copies of Art of the Deal got sold In China, if it's Boeing airplanes, soybeans from the Midwest, these are things that, from the China side. And then you have rarers. So they're just applying pressure where they can. We saw this with the US Threatening tariffs on Russian oil. These are just. You're applying pressure. The two sides, hopefully the two leaders work it out. And we see a Trump Xi summit this year.
- [25:12]
Mike Santoli
I mean, you have both parties as you lay out there, kind of creating new leverage points. Where does that ultimately net out relative to where we started?
- [25:21]
Brendan Ahern
I mean, I mean, ultimately the US And Chinese economies are highly integrated. So I think, I think, you know, you don't. This decoupling idea, I don't think it's going to happen. Certainly you'll see strategic industries focused here in the US but big picture, there's a lot of cheap stuff coming out of China that US Consumers want. They want US Airplanes, they want Nvidia chips. And I think they're willing to concede things like Tik Tok provide rare earths magnets to the US and so I think it. It's just more. Some of the rhetoric dies down a little bit. I think that's allows corporations to do what they've always done within the US And China, which is get along quite well with one another.
- [25:58]
Courtney Donohoe
Are you surprised, going back to TikTok, that the Chinese would be willing to let the algorithm go to US Owners? I mean, that was something that was such a sticking point for years now, and it was something that from a national security standpoint, the US Was adamant about. Do you think that all along it's essentially been upon, or do you think it's something that China was just kind of conceded that really it's chips that they're focused on and an algorithm is an algorithm?
- [26:24]
Brendan Ahern
I think the latter. I think big picture, go on to ByteDance.com and you look at about us. 60% of the shareholders of ByteDance are people who hold US passports. I mean, this is us and global private equity. Who's invested in those private equity funds? Your alma mater, your local foundation, your local pension? To, to make that a zero hurts the interests of the U.S. interest in ByteDance, in TikTok. So I think that's why you find a solution that works for both sides.
- [26:55]
Mike Santoli
Are there other kind of names in the sector in China that feel like they're a little bit less exploited already, in other words, that are playing on the big trends, whether it's AI or something else that you focus on?
- [27:07]
Brendan Ahern
I think obviously you're seeing this rerating in Alibaba coming out of their August talk about AI and the benefit of their cloud business. At the same time I actually really like some of the smaller names. You have a tencent music the Spotify a China this company Bilibili, it's online video Kuwashu which is another online video company. These are names that are a little bit under the radar. They're going to be pretty volatile but I think it's part of reason we like this basket approach. Obviously it's self serving and highly biased with Kube just because the E commerce has really struggled with some of the restaurant delivery war. Hopefully some of this anti involution is applied to E commerce like we're starting to see in auto and solar which actually does address US overcapacity complaints points interesting.
- [27:50]
Courtney Donohoe
Brendan Ahern, thanks for rolling with us today of Crane Shares. Appreciate your time and be sure to tune in to Squawk Box tomorrow morning to hear from Treasury Secretary Scott Bessant. That's tomorrow morning at 7am Eastern Time. Coming up, Apple shares basically trading where they were before last week's product event. We'll tell you what demand looks like for the new iPhone 17. We're back after this Foreign.
- [28:19]
Julia Boorstin
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Mike Santoli
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- [29:06]
Mike Santoli
Welcome back to the Exchange. Wanted to highlight just how good diversified investors have had it in the last little while here. The AOR is an ETF. It basically tracks the 60:40 equity fixed income portfolio and you see it's just gone almost vertical. This is a five year chart obviously at new highs, stocks going up to new records successively. We haven't even had a 3% pullback in the S&P 500 since April and of course bond prices going up as yields have compressed and the Fed is going to cut rates. Now the question is whether you know, as good as it gets in the short term. Obviously stocks and bonds do not always move together and in fact they did move together in 2022, which made it a nightmare for the diversified portfolio. So now we're coming back as to the question of how stocks and bonds are relative against one another. Take a look at the equity risk premium. This is essentially comparing the earnings yield of stocks versus the treasury yield of 10 year paper. And we are down, meaning that the valuation cushion that equities are meant to provide over Treasuries is relatively low. I don't think there's any magic correct answer to where this should trade, but it is perhaps notable that the last time we were well below this was in the late 90s when rates were also up around 5% on 10, 5 and 6%. And you did have relatively expensive equities. I'm not sure if it's predictive, but it's noteworthy that this has compressed down from here. Let's now get over to Julia Boorstin for a CNBC news update. Julia?
- [30:31]
Julia Boorstin
Hi Mike. Well, the Department of Agriculture is working with Congress to see whether economic aid may be necessary for U.S. farmers this fall. That's according to Secretary Brook Rollins today who says they are monitoring markets daily to evaluate the amount of additional assistance needed. It comes amid stalled trade talks with China over billions in soybean exports. Maureen Comey, who is a former top federal prosecutor and the daughter of former FBI Director James Comey, is suing over her abrupt firing this summer, saying she was never given a reason for her dismissal and argues in the suit that no plausible explanation exists other than she is the daughter of a presidential adversary. The White House and DOJ have yet to comment. And Ford announced today that it is moving its global headquarters. The company announced its iconic glass house building will be demolished and a new facility will be built close by. Chairman Bill Ford and CEO Jim Farley said the new building will be a physical symbol of its transformation to Ford plus its new growth plan for the company. Back over to you.
- [31:34]
Courtney Donohoe
Yeah, that is a historic building there, Julia, thank you. Coming up, Tesla jumping today as Elon Musk buys nearly $1 billion worth of stock for the first time since 2020. Those shares up more than 5% right now and up 20% in a week. But is this sustainable if the fundamentals don't catch up to the momentum?
- [31:52]
Mike Santoli
And what a deal between the US and China on tips TikTok might mean for the other social media giants. The exchange is back after this.
- [32:06]
Courtney Donohoe
Tesla shares up more than 5% as Elon Musk reveals a rare and biggest yet billion dollar stock buy in the EV maker. This makes five Straight days of gains for Tesla. And our next guest doesn't see that rally ending. Let's bring in Paul Sienna, head of technical research at B of A securities. Paul, so the technical suggest to you that this stock still to run from here?
- [32:29]
Paul Sienna
Absolutely they do. Over the last couple of years Tesla's share price was forming a very nice triangle pattern which resolved to the upside late last year. And since that peak in late 24, it came back down, retraced part of that and found a lot of support and formed a smaller bottom pattern that says, you know, the bigger picture upside story is still intact.
- [32:49]
Courtney Donohoe
And how much higher is that upside based on what you see? $700 and if so, when.
- [32:55]
Paul Sienna
Yeah, so our bigger picture target from that long triangle pattern over the last few years does measure to about 700. And given the size of that consolidation, taking roughly almost three years, we tend to use Fibonacci ratios to project forward when that could occur. And a few different measures, say as early as July 2026. Some linger into 1Q27.
- [33:18]
Mike Santoli
I mean Paul, I'm sure that this particular pattern was not the same setup as past times when Tesla, Tesla has had one of these runs. But if I look at a five year chart of the stock, there have been a handful of times when it really accelerated to the upside and put in a pretty serious peak. It hasn't spent much time above $400 really only a couple of months since first getting there a few years ago. So what would you look for to suggest it's getting overheated? It seems like the trend this time is just now turning as opposed to peaking.
- [33:47]
Paul Sienna
Yes, I would agree with that statement wholeheartedly. And I think the first thing we can look for is new all time highs.
- [33:53]
Courtney Donohoe
Right.
- [33:54]
Paul Sienna
We're really not in a secular bull market, let's say for Tesla's share price until it's well past $480 a share, which was the prior peak. So you know, with the move that's happening this week and over the past couple of weeks, you know, informing smaller bottom patterns that complement those longer term charts you've mentioned? Mike, I think the shoe fits that. Yes, that $700 target is still well in play.
- [34:16]
Mike Santoli
And in terms of the broader market, Paul, how are we set up going into the Fed meeting going into the second half of September here? Obviously clicking to new highs markets, not really kind of doing anything wrong if I just eyeball it. But, but what can we expect in terms of how it might trade in relation to the coming period?
- [34:33]
Julia Boorstin
Sure.
- [34:33]
Paul Sienna
So we've had upside targets on the S and P this summer of about 6,500 to 6,625. So I see the equity markets in a mature place where having reached these kinds of targets. So one of the things we advocate for is if you are long and have been long to think about maybe hedging some of those longs in the options market, if you're in the position where you think the S and P is going to 7,000 and maybe that's approximately where it peaks out, well then you have yourself a very convenient strike price to think about playing with. I'm a little concerned going into the Fed for a couple of reasons, Mike. One, because the last 10 days of September are notoriously and seasonally bearish. They're the worst 10 days in the market for the year and actually September 17th is the 10th day before month end. So it's perhaps just a coincidence, but we'll find out if some of the bearish seasonals come back after all. I'm also a little concerned about some of the breadth measures that we track, like the advanced decline line on the NYSE stocks has not broken out to a new high. Even though the S and P has the percentage of stocks in The S&P 500 trading above the 50 day moving average is still consolidating into a narrowing range, which means it's diverged from new highs. So there are a lot of those kinds of divergences still present as we get to a mature technical target area. And I think about hedging some of those longs and being responsible with that.
- [35:54]
Mike Santoli
Side of the portfolio mature phase and maybe some signs of fatigue internally. Paul, appreciate it. Thanks a lot for laying it all out for us.
- [36:02]
Barry Knapp
Thanks Mike.
- [36:03]
Mike Santoli
Paul Siano Be a bit Coming up, Chinese pre orders for Apple's newest iPhone reportedly breaking records amid strong demand. What the street is saying about it next. Welcome back to the Exchange. Apple shares fractionally higher as initial orders for the latest iPhones look strong. Steve Kovac is here with the latest.
- [36:26]
Julia Boorstin
Hasty yeah, overall it seems like things are looking pretty good as far as the early indications of iPhone demand, guys. So wait times are longer for these iPhone preorders versus last year, which hints at that stronger demand. You might want to get your phone faster, but Apple investors want to see those wait times a lot longer. That means demand is high for Apple to catch up to it, JP Morgan this morning they're writing modestly higher wait times overall globally for each of the four iPhone models. And China was especially strong with 25 to 30 day wait times depending on the model. But the iPhone Air is not on sale in that country yet due to some regulatory issues. Jefferies, by the way, writing this morning, iPhone 17 base model in China is a hit, they call it that qualifies for those government subsidies, which was a big boost to the China business in the last earnings report. So it's actually a price cut compared to the iPhone 16 last year. And in the United States, lead times for each model are still slightly higher for each year or from last year rather. Now Citi analysts writing those lead times are also longer in India where more iPhones than ever are being built to avoid tariffs. That's a big growth market there for Apple. So what this means, this is early data and it's hardly perfect, but it does help us understand directionally how strong demand is. We saw shares last year when it looked weak on the iPhone 16 really drop over all those concerns that people weren't going out there and ordering those phones ahead of time. And it's not just the iPhone launching this week, guys, we got the Apple Watch which just received FDA approval for those hypertension alerts and a feature, that feature is also going to come to some older Apple Watch models. And there's new AirPods Pro WSJ. They did a review of that this morning and they said though that translation feature everyone was talking about, it was a little bit slow and buggy. Overall though, it was pretty good. By the way, we've got so much more in Apple coming up. Part two of Jim Cramer's interview, interview with CEO Tim Cook that's coming up tonight at six o', clock, guys.
- [38:20]
Mike Santoli
Steve, you know, historically there's always been kind of only a loose relationship between whether people immediately say this is an innovative new step by Apple and how well the product does. So are we seeing the benefit of just pent up demand with, you know, previous poor upgrade cycles or is there something about this, this group of products? It seems like it's catching.
- [38:39]
Julia Boorstin
The answer is yes. The answer is that. So what we're seeing that's catching on. New designs. The iPhone Pro looks a little bit different, has some interesting design changes there. Of course, the iPhone Air super thin design, biggest design change they've made in about five years. So there's definitely that. But then of course where most people are in a three to five year upgrade cycle, so you're always going to see that wave. But I will say last year, these preorder numbers, they looked pretty bad last year for the iPhone 16 cycle and that turned out to be true because in that December quarter, we saw iPhone sales go down. Now we're seeing that early demand indications go the other way. So we'll see. I'm going to be at the Apple store this Friday in New York and seeing what those lines look like, talking to customers. So as the days move on, we're going to get more of these notes and more analysis of what demand actually looks like. So this is just the beginning.
- [39:26]
Courtney Donohoe
Yeah, I was going to ask about this. The whole wait time as the marcation for what demand looks like, are there other, are there other exogenous factors that can, could contribute to that? Whether it's the complicated elements of the supply chain or just tariffs at the border or something of that nature that.
- [39:42]
Julia Boorstin
Could also contribute, not tariffs so much. But the supply chain thing is an interesting question because going into this cycle, analysts were looking at builds. How many orders did Apple make? They cut their orders a little bit, but they mostly think the builds are about the same as they were last year. So if the builds are the same but the wait time is longer, that tells you demand is a little bit higher. Again, so early. It's only been a few days of orders that we're looking at, but the early data are pretty good.
- [40:08]
Courtney Donohoe
Yeah. I mean, look at the early data.
- [40:09]
Julia Boorstin
Yeah, it's setting shares up about a percent today.
- [40:12]
Mike Santoli
So someday when companies are not reporting for six months at a time, we're.
- [40:15]
Julia Boorstin
Going to have to be counting people in Apple lines.
- [40:20]
Courtney Donohoe
Exactly. That sounds like a fun reporter job for you.
- [40:22]
Julia Boorstin
Yeah, I can't wait.
- [40:23]
Courtney Donohoe
Thank you. Coming up, What a potential TikTok deal could mean for social media companies. That's up next.
- [40:36]
Mike Santoli
The Trump administration says a framework for a TikTok deal has been reached with China. Julia Boyson joins us with the potential impact on other social media companies. Julia?
- [40:45]
Julia Boorstin
Well, Mike, there are still a lot of unknowns about this deal for TikTok, including which company and or individuals will be part of the US ownership of TikTok and what kind of restrictions could be placed on the new company. Now rivals Meta, Snap, Pinterest and Reddit, as well as YouTube parent Alphabet. They're all competing for ad dollars and all of those stocks are trading higher today on this news about a path forward for their rival Tick Tock. Now, while Tick Tock's future has been in question for five years now, it was seen as increasingly unlikely that Tick Tock would be shuttered, which is why today's news did not send stocks lower. And E marketer tells us, quote, if the deal brings about Significant changes. It's likely that some marketers will pull ad spend at least in the short term, reallocating budgets to platforms like Instagram, YouTube and Facebook. It ultimately remains to be seen how this new version of TikTok will compare to the one still being used today. Moffitt Nathan says. Michael Nathanson telling us that the market is fatigued with this issue. And quote, if and when a deal is made with a credible buyer, the market will be concerned that Tick Tock is potentially a more credible competitor. So the real question then will be is how mandated changes to Tik Tok impact its user engagement and also how well its ads work. A marketer tells us that TikTok's user growth is slowing and projected to continue to slow. Well, Instagram actually sees bigger Gen z gains than TikTok debt. So a lot of moving parts here. Leslie.
- [42:15]
Courtney Donohoe
Absolutely. That market fatigue element is in it. Focus today. Julia, thank you. Coming up, the SPAC is back. Financials defy logic, a passive problem and Robinhood's VC move. Rapid Fire is next. Welcome back to the Exchange. Let's catch you up on a few more stock stories that are on our radar. It's time for Rapid Fire. First of financials are having a great start to the year with many of the stocks at or near record highs. And that comes ahead of a Fed meeting. According to Strategic, there have only been three times in history that the Fed has cut with banks at all time highs. They point out that usually by the time the Fed gets around to cutting, bank stocks are already showing a problem with the economy.
- [43:12]
Mike Santoli
Yeah, Mike, So this feeds right into again the preferred scenario that investors are trying to anchor to right now, which is good news. Rate cuts, those prior three times that Chris Vernon Strategic is talking about 92 and then twice in the mid-90s.
- [43:26]
Courtney Donohoe
Right.
- [43:26]
Mike Santoli
Which are kind of nirvana periods for financial stock performance. But also, you know, when the markets are kind of getting rate cuts. Not really because there's macro stress involved. See if that plays out. You know, we've had head fakes.
- [43:38]
Courtney Donohoe
It also speaks to that kind of double sided issue of, you know, our condition, our financial conditions. You know, if you've got bank stocks at record highs, usually a decent sign. Exactly.
- [43:46]
Mike Santoli
They're loose.
- [43:47]
Courtney Donohoe
Exactly. Next up, SPACs are definitely back. According to SPAC Insider, 89 SPACs have launched IPOs this year, the busiest year since 2021 when a record 613 SPACs came to market. The CNBC SPAC Post deal index is up around 39% this year. Noteworthy because I don't think the regulatory picture has really changed following that 2021 surge that we saw. There were some regulations put in place that did put a damper on this sector and that that hasn't changed, but people are coming out full force.
- [44:18]
Mike Santoli
Well, we were promised that animal spirits phase and you're seeing it come through. And it's funny because those numbers suggest to me, yes, things are getting a little bit spicy in the markets and a little more aggressive, but not like we saw in the first quarter of 2021 when all of this culminated in a mega top for the riskiest parts of the market. So at 90 versus 600, you know, we'll see. I mean, obviously each one of them is only as good or as bad as the business they buy, but it does show you that again, people are willing to put some risk on the book.
- [44:47]
Courtney Donohoe
Yeah, and that was the issue before there were enough supply of companies to buy. Several was just sitting there in treasuries. Topic 3 Passive investing continues to take off. This is really interesting. Apollo noting today that nearly 55% of ETFs and mutual funds are now passive and that active funds have lagged their benchmarks over a 3, 5 and 10 year horizon. Apollo argues there are consequences to all of this, including reduced market efficiency and price discovery. These laments are nothing new necessarily. But you hear a lot in the market for investing right now about the higher fee alternatives and the lower fee ETFs. There's not much room in between. And that's why you see the Franklin Templeton of the world, the T. Rowe prices of the world, all migrating toward alternatives because they need to stay alive.
- [45:32]
Mike Santoli
That's where you can get the fees. Now you say the concerns are not new. In fact, they've existed since the beginning of indexing.
- [45:38]
Courtney Donohoe
Right.
- [45:38]
Mike Santoli
Like 50 years ago. And so nobody knows the magic threshold where the market becomes less efficient and you misallocate capital because everybody or too many people are indexing. To me, the fact that people can't beat the index tells you that nobody can exploit whatever market inefficiency is supposed to be created by all these people passively investing. Obviously, the fees are a big advantage, but I think that's at least noteworthy.
- [46:02]
Courtney Donohoe
Yeah, good point. And finally, Robinhood wants to get even deeper into the private markets. According to the New York Times, the company is planning to announce a new publicly traded fund that will let ordinary investors get a piece of privately held companies. A lot of questions on the wrappers with these. There's fees with these. The information asymmetry that, that retail investors will get with.
- [46:21]
Mike Santoli
Yes. People want the, the new stuff and they're going to get a wrapper for it. DXYZ is a closed end fund.
- [46:27]
Courtney Donohoe
Exactly. And that's very volatile.
- [46:29]
Mike Santoli
Brand new.
- [46:30]
Courtney Donohoe
Yeah.
- [46:30]
Mike Santoli
All right, that's it for the Exchange. Powerland starts right now.
- [46:33]
Courtney Donohoe
You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [46:41]
Julia Boorstin
It's not rocket science. Grayscale has been educating investors on crypto for over a decade. Grayscale, Invest in your share of the future. Investing involves risk and possible loss of principle. Visit grayscale.com for more information.