Welcome to Yahoo Finance's Morning

Brief. I'm Julie Hyman joined today by

Adam Shapiro, AI invest managing editor,

another Yahoo Finance alum, and Jack

Farley, co-founder of the Monetary

Matters Network. It's good to have you

both here with me. And um it's an

interesting moment for markets it feels

like right now because we had this big

sell-off that happened last week,

especially acute in technology. It's

been a lousy month at least for the

NASDAQ and S&P. It hasn't been a lousy

month actually for the Dow which is up.

Um but you know, so we come into today,

it's a holiday shortened trading week,

but it feels like there has been, if not

a wholesale vibe shift. It feels like

that the vibes have gotten a little

rockier when it comes to the tech trade.

Like Jack, I know you're watching some

of the memory chip makers very closely.

They actually um surfed through last

week a little bit better than some of

the rest, but they still were victim to

some of the sell-off too.

>> Yeah, I think there's a huge divergence

between who is receiving the vast sums,

you know, hundreds of billions of

dollars, trillions of dollars on AI. So

those semiconductor names and the the

memory players and other companies and

the companies that are spending on AI.

So that's many of the Magnificent 7

stocks. I think uh the the Mag 7 was

down double digits this month and you

know Microsoft or uh Oracle, Google,

Amazon, Meta, like why is Meta spending

so much money on on AI? Um I mean Mark

Zuckerberg knows but I think that that

that trade is going to see. So I don't

know. I think for this AI the huge boom

to to to stop I think that you're going

to have to see far more severe declines

in the the prices of like stocks like

Meta or the the hyperscalers the people

companies who are spending. So until

that happens, I I think that the

beneficiaries, semiconductors, memory,

are probably going to do still pretty

well.

>> And it also feels like we're in this

weird in between time between the last

earning season and the next earning

season where we're going to get more. I

mean, yes, we got Micron, but like Ben

Snyder of Goldman Sachs this morning

come out with a note and said like we're

going to continue to have this good

earnings growth that's going to support

returns for stocks and most of that

earnings growth is coming in tech.

>> It's coming in tech. But let let's let's

break it down because at avest.com I'm

plugging my platform because we are AI.

I mean can't ignore it.

>> We can talk about the Mag 7. Everyone

loves bigger and all of the money that's

going there. There's going to be a

trillion dollars spent next year just on

hyperscaler data center buildout,

>> right?

>> Who's benefiting? In that Goldman note,

they talk about the fact that the

smaller companies, the infrastructure

buildup is where that if you're looking

for an investment right now, yeah, okay,

you want to play Nvidia, fine. You want

to play Micron, go. But if you really

want to make some money, midcaps and

small caps are outperforming and they're

outperforming right now the S&P 500 uh

the the larger com uh uh stocks because

of the huge amounts of money that are

going into infrastructure buildout. It's

really quite simple. And and the other

thing is and I I mentioned to you folk

this conference that's coming up in

September uh yada 26 all of the

infrastructure buildout companies gather

in Las Vegas it's investors it's money

and it's the people who are doing this

so we can talk about the mag 7 endlessly

but the money right now is being made

and has been being made for the last

year by those smaller companies

>> right and I guess the question now is

when you know when are we going to get

that bridge built right the other big

announcement this morning on the infra

infrastructure front was in Korea where

Samsung and SKHEX

um are now you know that South Korea is

getting involved the nation is getting

involved um just like we've seen some

involvement here in the US so $880

billion is what those two companies

alone are going to be spending on the

build out there of more chip um capacity

which is clearly needed on the memory

front. Um but you know and and last week

I think it was Dan Ies who called it an

air pocket

>> between the buildout and then the ROI

like when are you know the the when are

we going to see the hyperscalers or for

that matter some of the software

companies an enterprise on that side

like we're in this sort of rocky period

right now where we're spending all of

this money but we don't we still don't

quite know how

>> I put out a note this morning he he

called it a gut check and I'm glad they

their pocket and he said of the mag

They're they're spending huge money. We

know that they're coming to the market.

They're they're selling shares. Alphabet

just raised money. They're all trying to

raise money, but they're also in a wait

andsee mode because they have yet to

really figure out the true monetization

of all of this. And that's why he said

it's a gut check as we go into the

earning season.

>> Yeah. And that's what seems to be what

investors are thinking about, too.

>> Yeah. I'd also say that I think the the

companies that are making the lion share

of the profits right now are

semiconductor companies. And I'm I'm

curious like what type of the small and

midcaps are that are infrastructure

plays. I think a lot of those companies

like probably the hottest one would

probably be a Nebus or or a company that

hasn't traded as well is like a corewave

are very capital intensive like the

hyperscalers as well. And yes, you have

tons of construction firms and um energy

type plays a

>> would be one you'd want to look at. You

you know that you want the companies

that are going to be providing the

energy, the cooling systems. be there's

a big caution flag when it's with the

new the SMR companies, the small modular

reactor companies because they don't

they're not providing anything yet.

Right. Right. So, it's potentially in

the future. Yeah. I'd say people could

say like oh my god like lamb research

it's the trailing PE is 70 times but

they're going to be selling the machines

into Korea to for Micron and Samsung. So

if if the memory there's a giant bust in

memory, it's going to be because new

supply comes online and that's they're

to do that they need to buy all these

machines from ASML and LAM research. So

I view that as a lot more solid than

like a potential. Yeah, I I I haven't

looked into Olo.

>> Well, I think there's a bunch of I have

looked into a little bit, but there's

there's some different categories,

right? There's the the companies that

are providing these services right now.

You know, Alam Research is already

selling chipm equipment to the companies

that are making the chips. There's all

the memory chip makers. There's also

increasingly the fiber optic companies

that have been getting back into this,

the Cornings of the world, uh the

coherence of the world. Then you have

all the HVAC companies that are

providing cooling for for these services

and the energy companies.

>> And then you have the stuff that like

people are trying to buy lottery tickets

on right now. Then the lottery ticket

might pay off. Like the certainly the

federal government is very supportive of

the new nuclear buildout, but it hasn't

it's not there yet

>> yet. So we'll see. You know, we will see

how that kind of stuff. the old nuclear

I mean didn't meta you know the

investment they made at three mile

island I mean so

>> yes exactly constellation energy Duke

Energy some of those existing

>> which also those traded really well last

year not so much this year they're

>> no they've been coming down this year

which has been an interesting trade I'm

actually going to talk about um nuclear

in the 10 a.m. hour today with an

analyst who tracks that stuff. So that

should be an interesting um discussion.

Speaking of speculation, I did want to

mention as well like there's all the

fundamental view of all of this. And

then there is the debt that's being put

on top of it right now. So whether

you're looking in Korea where margin

debt has been exploding where here in

the US margin debt is at a record, you

also have an increasing number of

leverage and money in leveraged ETFs. So

that can mean that things are a little

bit more delicate, right? when you've

downside the downside can be um sort of

exacerbated by some of these speculative

tools.

>> Bloomberg I think in article they talked

about the dangers of this is if you have

a 30% downside in a leveraged ETF you

could have a 90% loss right

>> in that ETF. So yeah so leverage

magnifies the potential downside. But a

lot of people their only access to what

we've just talked about are those ETFs.

They want to be liquid. They don't want

to go into private markets. They want to

be liquid. They want to be able to get

their money out should they need to get

their money out. The problem is at that

downside you get a it's like running for

the exits in a fire.

>> Well, they also have the choice of not

buying a leveraged one. They could just

That's correct. They just buy a one to

one, you know.

>> Yes. And actually uh yeah, if the losses

if like if the if volatility is very

high on the underlying stock and it's

down only 10%, you'd think that this

leverage product would be down 30% but

it could be down 50% or 70% or 80%. And

I mean some of these products such as

like the Micro Strategy double lever

ETFs is down 99% from its peak. So I

would I would urge caution to our to our

viewers here today. And I'd also say

that I think it definitely does create

risks of because it's they're forced

buyers when it goes up and they're

forced sellers when it goes down. So I

think that you could have some volatile

moves um to the downside.

>> I think that happened last week.

>> Yeah.

>> Does the what is it 1.4 trillion in in

margin? Right. Right. Yeah. Does that

does that number frighten anybody though

because the people who are are going to

rush into leverage ETFs don't seem to be

afraid of that.

>> Well, that so those are two the that's

not included with the leverage ETFs are

two separate. I think that the margin

debt

>> we've had levels of margin debt that

have spiked before. It doesn't always

precede a stock selloff but it you know

as we say it can exacerbate the

downside. So it's is it a is it a cause

of a sell-off in and of itself? No. Is

it sort of an accelerant potentially? So

I don't know how I mean it's like it's a

reason for caution but it's not a reason

in and of itself is the way I would view

it. Um let's talk a little bit more

about the month of June um for just a

minute here because we're coming up on

the end of it. So the NASDAQ is down

more than 6% this month. The S&P down

3%. The Dow is up 1.7% and our Jared

Blickery wrote an interesting piece

where he said like if risk off was the

vibe here. What if that was it? People

just wanted to get out. You wouldn't see

small caps doing well for example or

midcaps which are doing well. The S&P

equal weight is outperforming the S&P

market weight. And so this is not as he

points out you know a lot of the

selling's been in the MAG7 right it's

been in some of these more speculative

tech areas. It hasn't been in people

have not just been fleeing for the exits

in everything which I think is

interesting and especially not in small

caps which tend to be a more riskon kind

of trade.

>> Well the earnings per share growth that

we've been witnessing which what 20 22%

>> something like that

>> but for the smaller stocks it's what

around 9%. Yeah.

>> So, so put it into perspective. I mean,

it's it's everybody loves the big names

and the big money, but what what's the

quote, and I I'll butcher this, but how

do you get rich? I took my profits too

soon. So, maybe what we're seeing with

the the um with the big stocks, with the

MAG, with the large caps, is people are

taking their profits, but maybe they're

investing those profits in because

Jared's article talks about the the

overperformance right now of mid and

small cap.

>> Yeah. Yeah. So maybe there's just a

rotation at least for now that's going

on.

>> Yeah, I I uh would caution people about

like I do think most of the trade is AI.

I think most of the stuff that's doing

well is AI. So I think that

>> even on the smallap small yeah small and

midcap like you look into you know a few

weeks ago I looked into oh what are the

best performing stocks this year in the

Russell literally all electronic

companies that are supplying you know

electricity the power names and

something like Powell Industries which I

first came on my radar a few years

because I thought of JPAL um so uh

>> that's not his company

>> yeah no it's unfortunately not yeah I

wonder what are the best sectors this

>> okay so he so so Jared looked at this

and it's not all AI. That's what's

interesting. So, airlines have gotten a

boost as oil has come down, right? And

by the way, airline fairs have not been

coming down. So, they might hold on to

some of that that margin. Um,

homebuilders have been performing well.

And again, in the in the 10 a.m. hour,

I'm going to talk more about them

related to the housing bill that is

maybe set to go into law. Biotech and

healthcare. Now, traditional healthcare

tends to be more defensive. So, you get

that. But biotech, the IBB, which is the

ETF that tracks biotech, has been

flying. And that does tend to be a

traditionally a riskon area. And I mean

I guess you could you could say like

maybe it has to do with AI because like

these companies are are leveraging AI to

like come up with new um new treatments

but

>> or that the market thinks that they will

>> right but but it but it also could just

be like the reason that people usually

get into biotech which is like they have

a lot of experimental stuff and some of

it hits.

>> So I don't I don't know. So it's so it

doesn't it's in other words it's not

telling as clear a narrative as just

like a sell-off on the face of it would

have you believe maybe. Yeah, I think I

think a lot of it is people selling

Microsoft to buy Nvidia or actually not

no and selling Nvidia to buy Micron,

>> right? Yeah. To your point about that ro

about the rotation

>> and then when they buy Micron, the

Micron double lever ETF has to buy more

Micron.

>> Exactly. Exactly. That's exactly what's

going on. Um something else that is

happening in this holiday shorten week

is the jobs report. Um which feels weird

to be happening on the day before the

July 4th holiday, but that is indeed

what's happening. And like we're in an

interesting moment right now because we

don't have to seem to have to worry

about jobs as much because the job

numbers over the past few uh months have

been relatively solid. Right? So like if

you look at I'm just pulling up the

estimates for this week and what we're

going to um expect for the jobs numbers

which I can't find while you pull those

up.

>> 113,000.

>> Yeah. Useless trivia. Julie and I met

for the first time in person in a jobs

report lockup in Washington.

2016,

>> something like that at the BLS. That's

great. That's great. And they still do

that in our AI age. They physically put

the reporters in a little room with no

communication with the outside.

>> How much time do they get? Because I

know for the Fed, they get 30 minutes.

>> You get 30 minutes.

>> You get 30 minutes.

>> It's the same thing. You go in there at

8:00. They let you out at like 8:28.

>> You go stand in front of a camera and

then they count you down and you can't

say anything. And there's a code word

that they you that like the only word

you're allowed to use to test your mic

is the word they give you that morning

which usually is seasonal like fireworks

or whatever.

>> But you know was it the big short they

talk about this inside the lockup are

all the print reporters and the digital

reporters. There's a switch. No one has

communication to the outside world. They

throw the switch and their computers

send it because the trades will then

>> begin instantaneously in micros

secondsonds.

>> Yeah,

>> I don't know if our if our viewers

caught that, but you have a very

powerful snap.

>> Thank you.

>> Do it again. Do it again.

>> Yeah,

>> there you go. Powerful snap that

illustrates all of the all of that

information. Getting to the jobs report,

there's a lot of fear

>> about AI and we can talk you you both

have been talking about who's really

using it, how are they using it and I'm

sitting here saying they're using it in

ways that we're not even imagining.

>> But the jobs report seems to be saying

the fear is not um grounded in reality.

Torstston who's on I I believe he still

comes on to Yahoo Finance. He's the

chief economist at Apollo. he writes

about this and that the data so far

there has he is saying even though some

companies are saying you know we're

laying people off because of AI he's

saying the data does not support that

>> well it depends on where so the um Eric

Bolson and some other researchers over

at Stanford have been studying this for

several years now and they have like

their sort of canaries uh indicator that

they just updated that looks at specific

jobs and they have a lot of the

researchers who are looking at this look

at most exposed to AI least exped

exposed to AI and they are showing that

more AI exposed jobs are experiencing

more job loss and particularly in the

lower age cohort right people who are

starting out their career but it does

feel like that we're at the beginning of

a maybe decadel long remaking of the

workforce in other words we're not going

to know in the next year right what this

is going to look like it's going to take

a while for this to shake out and us to

figure out how this is going to affect

>> totally it's like in um you know 1890

you're like the horses still have jobs.

>> What are you still doing when cars get

rid of horses? This is crazy.

>> Yeah. Right. Exactly. Or locomotives get

rid of get rid of you know the the

covered wagon.

>> But look how look at the efficiency you

can get with AI and and you and I from

media traditional linear media

backgrounds not anymore. But but my team

is using AI. If we do an interview like

what you're doing with your podcast, we

take the raw interview, we can put it

into an agent which then selects the one

minute sound bite for the social media

distribution. Now, a human has to review

it, but it's gotten really good at

picking the one minute salient point and

then we can put it out there almost

instantly. So, that's that's an

efficiency that's been created, which

also negates the need to have your

social media folk on staff to do it.

They have to review it, but they don't

have to create it. So, that's one

efficiency. Real world experience with

AI. You know, I was looking at long-term

uh health insurance versus hybrid.

>> What did I do? I put both plans into AI.

I said, "Analyze this for me." And

within seconds, there's your snap again.

>> There you go.

>> I got a useful readout as to which I

want. Now, I'm expecting to get the ads

for Look at this.

>> But would you have hired somebody to do

that before?

>> You usually would. You would. Most

people would go to a broker. They would

get a plan. and they would pretend to

read it and not understand it. And who

would they turn to explain it? They

would call their aunt and uncle who show

who sold insurance who would then try to

explain it. Now, you don't need that.

You literally get an an agent and you

could use any of them. You could use

Gemini, you could use Claude, you could

use whichever one and for free, give me

the the the salient points in simple

English. You're prompting it in the in

the uh the playground they call it, and

it'll tell you and then you can make

your decision. That is an incredible

efficiency that did not exist just a few

years ago. But I also think like what

you said about how you're using at work

is very important. Like you need you

still need a human verification I think

in most first you need the ideation

right you most of the time you still

need the human

>> saying like this is what I want you to

do although agents yes are increasingly

doing that and you still need a human on

the back end to say yes this is correct

we're going to go ahead with this. Yeah,

I've I've found I'm using it for social

media and editing like Adam said, but to

be honest, I found way more value in

just researching industries and like I

think AI is tremendously effective at

like teaching me about the semiconductor

industry and all the different companies

and the supply chain. Like I was on the

train yesterday looking up Rambus, this

semi semiconductor um you fat fab

designer. I uh also by by the way Adam I

think that uh your to get the full power

of your snap you have to do it. We can't

we can't prompt you.

>> I wish I could do an NFT of my snap.

Does anyone still do NFTs? But

>> I don't I don't think so. Now they're

called tokens. It's same thing.

>> But your so so and by the way none of

this is new. Bloomberg your old employer

your old team. They've been using this

kind of uh data scraping to trigger

>> that's more machine learning

>> machine learning but but still I'm not

talking about the analysis but for

greater efficiency. the Bloomberg

headlines. There is a trigger when an

SEC report comes out or when there's a

press release

>> get all of that.

>> It gets triggered and then they're I I

don't work at Bloomberg, so I don't

know, but I'm I'm betting that once it's

triggered, their agents are then writing

what's going out on the headline.

>> Yeah, some of that is I think is is

without the I don't know how much human

I don't know how much you guys we got to

get to Comcast. I don't want I don't

want to talk about Comcast. So Comcast

is spinning off um NBC Universal. So

it's going to include the theme parks um

Universal Film and Television Studios,

NBC, Telmundo, Peacock, Bravo, and Sky,

which is the European media business.

And this is the second spin-off they've

done. They've spun off Versent Mow now

and CNBC among other things. So Comcast

has gone back to being a regular old

telco. No more media. Um and it's just

been extraordinary in the past decade

that we have seen the unraveling of all

of these you know I mean Yahoo ourselves

we were owned by Verizon right and now

we are no longer owned by Verizon so

it's been really interesting and look I

investors really like this right the

shares are up by 20% um as we see this

new world and I was reading some of the

commentary that was out this morning um

Brandon Katz over at Greenlight

Analytics for example said that this is

a cleaner smaller balance sheet this

makes M&A easier going forward. That

seems to be like one of the big

takeaways as well.

>> Why do they want to do MMA? It's the

whole point is that of this spin out is

that they did M&A and it's not

>> smarter M&A or maybe well not

necessarily that Comcast wants to do it,

but that NBC Universal could then

perhaps be purchased by one of the other

media companies. I think that's where

the although Vers got spun off and has

done relatively nothing, right? Down

it's been it's down like 20% since it

split off from Comcast hasn't recovered.

This is the, you know, since I'm 17

years old, I've worked in and and like

you media and we're I'm old school.

Look, I'm the Lipur generation. But

here's the deal.

>> There's value in the universal library,

right?

>> The movies and all of that. And we we

see this play out with, we were talking

about the Paramount deal. I mean, what

does Ellison really want? He wants that

library. Does he care about CBS News or

CNN? Who knows? With NBC, and we have

colleagues and friends who who are on

the news side, I mean, beware. value is

in perhaps the theme park and in the

library. What happens to news is another

thing. So who you know there's still

money to be made. They made Studebaker

made horsedrawn carriages until 1920 and

that division was still profitable. So

there's still money to be made in the

dying linear broadcast industry. But for

how long and how much and how much are

you willing to risk?

>> Yeah.

>> Okay. The library point is interesting.

I do think that there is a you you want

to make investments that many years

later have more value like the the the

best thing to do is to buy a copper mine

and then 100 years later it's still

producing that's the dream it does it

rarely happens but but you know

sometimes and I think that for a lot of

like news is something that is very

relevant that day but like 5 years later

it's it's nowhere near as relevant the

like are people still making money from

you know a great movie that's made in

1990 like yes they're buying it on

Amazon but I feel like If they were, you

know, looking through like Warner

Brothers discoveries before the

acquisition, I feel like it is the type

of business where it needs constant

reinvestment.

>> Absolutely. Well, the way you make money

in news is one, politics. The election

cycle is a lot of money, but they've got

to they they've all been trying to

figure out streaming and they're not

doing it very well. But that's where the

the political advertising will

eventually migrate. But they're still

making a profit on these dying linear

broadcast news divisions. The question

is, where do you go? I I don't want to

read the Barry Weiss 60 Minutes

kurfuffle, but the guy they brought in

knows documentaries and you know to your

point those documentaries and those

long-term news investigative kind of

products do live and you can find them

and they can generate money

>> right but on the on the streaming side

you know to your point you know always

having to make new content yes I do

think especially if we are going to a

more AI generated content world that the

legacy human-made content like 50 years

from now, I think there's going to be

real value in that. I think people are

going to be nostalgic.

>> Yeah.

>> Nothing else.

>> I I could see that. And I also could see

AI generated content being used

massively to cut costs for the the

Netflixes and the studios of the world.

So like a scene a huge battle uh you

know in 3,000 years ago used to cost you

know millions of dollars to produce and

now they could save a lot of money on

doing that.

>> Yeah. Although the Odyssey I think they

still do it practical.

>> Hollywood's going to have its first $10

billion you know year since before the

pandmic.

>> All right we got to leave it there.

Thank you so much guys. Appreciate Adam

Jack. Good to see you guys. Opening bid.

Brian

Hey,

hey, hey.

Down.

Heat.

Down.

Heat. Heat.

Surprise, surprise. I'm back in the

opening big command post. After sending

into a sunny hot alternate reality

called the Canned Lions Festival of

Creativity, I talked with everyone from

MLB uh MLB great Alex Rodriguez to

Reddit co-founder and CEO Steve Hoffen.

I even got to talk to uh with the GOAT

of DJing, Tiestto that you can see me

there right on the screen living my best

life. I can continue name dropping, but

who has the time for all that? Indeed, I

find it fascinating what I return to in

these markets. First up, the S&P 500 has

violated the 50-day moving average. Oh

no. Meanwhile, the all the MAX 7 stocks

are down double digit percentages from

their respective 50we highs. Never like

to see that. Good economic data is being

seen as fuel for interest rate hikes,

not just good for the sake of being

good. And yes, before you messaged me on

X, of course, I closely followed markets

last week while I was on the French

Riviera. To prove that point, check out

the five stories I posted this morning

on Yahoo Finance homepage. Read all them

and share them with all your friends.

Let's rip apart all this stuff with my

opening bid round table, Great Hill

Capital Chairman Thomas Hayes, Global

Investments portfolio manager Keith

Buchanan, and Yifi senior reporter Jen

Shamber. Good to see you all. Keith, let

me start with you here. Um, we're seeing

some tech jitters in these markets. When

is that buy signal start to emerge?

>> Sure. And thanks for having me. We're

looking at this as a um a moment that

the market is is demanding

diversification and and it hasn't really

done that over the last couple of years.

We saw it start to percolate so in the

first half of this year we we feel like

we can see more in the second half but

the market has gone from assuming and

asking question is a real and we think

the the market and also the the uh

capital flows have indicated and

answered that emphatically yes. Now,

which companies are positioned to

monetize those returns uh from that

capital investment in a way that's

accretive to shareholders? That's a much

more nuanced question. And as those

questions are are being asked, we feel

like they're they're better places to be

um from a diversification standpoint.

So, we want to make sure we're not just

hunker down in a handful of names of

different returns of the last couple of

years. Um but we have a broad array of

assets that our clients have exposure to

uh to diversify those returns they

demand had. Tom, is this just a good

time to, like Keith just said,

diversify, diversify, diversify, or do

you put that aside for a second and look

at some of these mag seven names which

are down about double digits, each one

versus their 52- week highs?

>> Well, Brian, this is the back to the

future trade. The minute the Iran

situation kind of got pushed in the

rearview mirror, you saw the January and

February massive breath, massive

participation of the market. We had been

calling for it in the middle of the war.

Once this once ships get through, uh,

you're going to get a broadening of the

market. Look, you you know, month to

date, just in June, Nvidia down 9%,

Google down 11%, Amazon down 14%, Mag 7

has lost $2.8 trillion of market cap

down 13%. Even Micron was down last week

10 basis points after crushing earnings

uh beating earnings by 16%. Semi down

8%. So uh the answer to your question is

if you're talking from a trading

perspective uh there's something called

the midyear rally 12 days uh from the

stock traders almanac last three days of

June first 12 days of July tend to get a

bump in tech this might be a counter

trend bump the fact of the matter is and

and we've been pounding the table on

this for a while uh with MAG 7 you know

they they're basically capex to free

cash flow now 98%

uh they've had to issue debt that the

markets uh absorbed as much debt as

they're going to absorb for the time

being. Then you saw equity issuance. So

they're running out of runway and uh

we're seeing kind of token costs come

down a little bit. We're seeing even

Microsoft looking at cheaper models

maybe hosting lower cost deepseek. So

there's a lot of turmoil in tech. And

then finally, you have retail traders

crowding in to semiconductors chasing

what's worked in the rear view mirror at

record pace. And you know, I I don't

often agree with Mike Wilson, but he was

out today saying maybe uh semiconductors

are the last commodity to peak this

year. Drawing the analogy to silver, to

what we've seen in oil, to to what we've

seen in other and you know, people keep

saying it's different, but we know the

story. every four years. Uh there's a

shortage of memory. Micron ramps up

production just in time for demand to

Wayne. Maybe this time will be

different, but I wouldn't bet on it. And

based on retail positioning and everyone

crowding into the same trade, I think

for the next 3 months, where you want to

be is kind of backing off that crowded

trade, according to the Bank of America

fund manager survey, it's the most

crowded trade in the world. and start to

back into the consumer because with oil

plummeting, with gas prices going down,

the consumer has been left for dead.

Whether that's consumer discretionary,

consumer staples, uh consumer

discretionary, worst relative

performance the S&P since 2013, staples,

you got to go back 26 years. Those

things are starting to rip. When the

consumer has a job, and I know we're

going to have a jobs report this week,

uh never bet against consumer spending.

And that's I think where you're going to

get your relative outperformance in the

coming months.

>> Jen, I think the market is being

reminded of a very important lesson. The

mere threat of interest rate hikes is

something to take seriously and that's

the the landscape we are in right now.

>> Yeah, that's right, Brian. I mean, let's

rewind the clock back to former Fed

chair pal's speech in what was it August

of 22 uh in Jackson Hole where he said

we are going to focus on inflation and

kind of pull the Mario draw. He's

saying, "Believe me, it will be enough."

Cause the Dow to drop something like

a,000 points at that point. And the

textbook scenario playbook is that yes,

if the Fed hikes rates, stocks drop. And

you could point to the go- go9s and

former chair Allan Greenspan who sort of

led that that tech rally, but then

pricricked that bubble in 2000 when he

started to raise rates. But then I would

also point you to just a couple years

ago when the Fed did embark on one of

the most aggressive rate hiking cycles

since the 1980s. And guess what? The S&P

rallied 24%. Yes, we had a bit of

volatility and the NASDAQ outperformed

some 40%. So I don't think you can sort

of treat this as black and white. And

the reason we saw that outperformance

back in 23 24 was because everyone

thought that the increase in rates would

plunge the economy into recession. We

didn't see that. We saw a resilient

economy and that's what we're seeing

right now. And as it relates to the tech

sector, as you've been talking about,

the hyperscalers have fortressed balance

sheets. So, they're going to get lower

borrowing costs. Yes, if the Fed hikes,

that's going to create some valuation

issues because then you're going to

raise that risk-free rate when you look

at valuing stocks. But still, I think we

need to look at this as this doesn't end

the rally per se if the Fed hikes once.

Jen, um I had an executive on the ground

at Can last week. I'm going to summarize

what they told me that they their

layoffs that they just did uh and

they're a tech company. They did workers

a favor by firing them now before uh

more layoffs and tech come over the next

12 months. I thought it was ridiculous,

but I'll I'll leave it at that. When do

these AI layoffs, Jen, start to show up

in the jobs report? Well, so Brian, I

think there's a lot of debate right now

about whether AI is leading to layoffs

or not, but I would point you to the

last three jobs reports, which have been

stronger than expected. And for June,

we're expecting 115,000.

Over the last 3 months, we've seen

188,000 jobs created on average. And so

I think that the last three reports have

been defying that trend and the the fear

perhaps about AI right now. That's not

to say that we're not going to see more

disruption at some point here. But I

think that we need to see whether this

is sustainable, whether all of a sudden

companies are saying, "Hey, look, we

understand we're we're operating in an

environment of uncertainty, but we're

going to continue moving forward with

our plans." And as it relates to the

Fed, I think if we get 115,000 on

payrolls and 3.5% increase in hourly

average uh earnings, that shows that the

job market isn't inflationary at this

point. So the Fed looks that the job

market is stable. Maybe they focus on

the inflation side of the equation at

this point.

>> Keith, six months basically in the books

here. As we look towards the second

half, what will what will drive this

market? Is it more the Federal Reserve

and what it may or may not do on rates?

Is that increasingly likely to stay in

focus as it is now or do we go back to

uh what all these MAG 7 stocks are doing

and then yeah toss in SpaceX?

>> Sure, we we've seen um earnings

expectations move pretty dramatically

and they're still very optimistic

fulfilling that um optimistic uh

expectation is is critical for the stock

market to continue to move forward. Um

but we feel like the the the long-term

um interest rate really is the is kind

of the variable that that shifts all of

these expectations and and that's going

to be confirmed or rebutted by a jobs

market that either is too hot or too

cold and inflation that also falls

behind that. So, we're watching that

element uh very very directly and and

making sure that uh earnings

expectations continue to fulfill um the

the again double digit growth that we've

seen over the past gosh couple couple of

years and those sources of that growth

have to continue to fulfill uh those

expectations if not in the second half

will continue to be a lot bumpier. We're

not bearish on the economy necessarily.

We feel like it can be a lot bumpier and

a lot more widespread returns that can

continue to drive growth. Um if

especially if the 10-year continues to

put pressure on the broader economy.

>> Tom, I put this insane graph uh from

Goldman Sachs on my ex account this

morning. And uh Micron Nvidia will

account for about 40% of the S&P 5

earnings growth in the second quarter.

Does that does that disturb you at all?

>> Uh well, it doesn't disturb me, but I'm

going to give you I'm going to break

some news for you, Brian. I think what

you're going to see happen in Q2

earnings that's going to surprise a lot

of people is you're going to see one or

more of these hyperscalers announce a

reduction of capex commitments.

>> Thank God.

>> Okay. And once you see that because

here's the deal, investors are

impatient. We saw it with Mark uh

Zuckerberg with the metaverse

investment. The stock plummeted and then

he said metaverse metaverse. Did I

mention we were going to invest 10

billion? Scratch that. Stock went up.

Okay. I think you're going to see that

because yes, they are going to get a

return on invested capital. The problem

is it's probably 18 to 24 months away.

In the meantime, as you're seeing with

$2.8 trillion lost this month in the MAG

7, uh investors are getting impatient.

So, what happens when one or more of

these in Q2 earnings late July says

we're backing off on commitments? I

don't know that that will necessarily be

bad for hyperscalers. Uh you could get a

knee-jerk bounce. I think it's going to

be terrible for the most crowded trade

in the world, which is semiconductors

and memory. You're going to see the

leverage unwind in this trade abruptly.

And most people aren't going to be

positioned for it. And what you're going

to see is the stocks that you couldn't

give away, defensives, consumer staples,

healthcare. Healthcare is sniffing this

out. You saw in the month of June some

of the biggest performers in in June are

United Healthcare up 12% Lily up 9% J&J

up 13% Baxter is a company we own is

starting to rip uh Danah's up so if you

don't have staples and some defensives

going into uh you know Q2 Q2 earnings

with tech when this stuff starts to

unwind in the semiconductors and memory

uh I think you're going to be

disappointed but if you have some

ballast in your portfolio and some of

the everything trade and things outside

of semiconductors, I think you're going

to be super happy. I think I think the

relative performance of staples and

defensives is at its lowest in 26 years.

That's a once in generation opportunity

to buy these. Even last week, you're

seeing companies like uh um McCormick,

like Kagra, like all these food

companies that you can't give away,

Dagio,

uh all starting to rip higher. There's a

reason and uh and you might get faked

out in the next 12 days with this stock

trader almanac. You get a 2 and a half%

bounce in the NASDAQ. That's the perfect

setup into tech earnings. Draw everyone

back in and then pull the rug. Uh and I

think I think that you have to be a

little worry if that's where you're

overconentrated. And if you're in

indices alone, uh news flash, you're

overconentrated.

>> It's a good uh it's going to be a good

week for me anytime. Uh my Monday starts

with two shout outs to the stock traders

almanac. Good to see you all. Amazing

insight to kick off this holiday short

week. Appreciate it, y'all. Coming up,

convulsions through the tech trade. Some

hot takes on this next

Heat. Heat. N.

Heat.

Heat.

down.

Down.

Down.

The tech trade is sucking wind on the

Yow finance stock charts. Pick your

poison as to why. Higher interest rates

could raise the financing cost on AI

projects by big names like Microsoft.

Who the hell knows if OpenAI will really

go public this year? Really, I mean,

nobody has any clue. And SpaceX shares

have cut back down to earth after a

rocket blaster like IPO. Dan Ies is a

managing director at Wed Bush Securities

and an astute watcher of all things

tech. Dan, good to see you on this

holiday uh short week. Look, I you heard

me. I just laid out a bunch of factors I

think that are driving these tech stocks

lower. What has been the biggest

determinant in your view?

>> Look, I think you you see it when it

comes to Microsoft, Oracle, the hypers

scale. You know, when you look at meta

as well, those that are funding the AI

revolution, the capbacks, I mean the 700

billion, well, probably a trillion next

year. Those are the ones that are all

almost getting put in the penalty box. A

lot of them getting treated like bare

market stocks. memory stocks run to the

bank. So many of the sort of derivative

names, they're the ones that are

benefiting and I think right now you're

really seeing a buy fork market. I think

it just comes down to you have to see as

we go into earning season July the

validation the monetization of AI. We're

in that kind of you know sort of air

pocket period.

Do you think this is the quarter when

these hypers scalers get on their

earnings call, Dan, and they cut back a

little bit on capex because they realize

investors don't want to see all this

aggressive capex and these guidance

raises on capex every single quarter?

>> There's a better chance of you going

Chipotle and getting like half of the

thing of chicken.

Like half of the thing.

>> Well, why not? I mean, we I look, I

talked to a lot of tech CEOs, Dan. Uh,

they are very, especially now, I think

that's why they're canning a lot of

employees. Um, they're very locked into

their stock price. I would argue in more

so than they have in the past. Stock

prices are down. At what point does the

stock price being down really really

cause these exacts to to think about

what they're investing in? But look like

to my view is like look this is an arms

race and if if anyone cups back others

will just get ahead of them in line.

It's about compute power. It's about

capbacks. It's about building

partnerships.

Look I get in terms of the stock

performance and you know what that

ultimately dictates but you could argue

maybe it's just more buybacks or changes

in terms of you know capital allocation.

They cannot at this point cut back. I

mean because when you think about where

we are in the AI revolution I mean they

are right now going to be in the

modernization phase over the next 6 n 12

months that's why I say so confidently

we don't see a cut back on capbacks

>> well in that case do you see them

increasing the outlooks they increased

just 3 months ago

>> yeah look I think that I mean to me

that's where we're going to that's where

we're going to go I think we're going to

see continued increases in cap I think

outlook could ultimately increase again

when it comes to what we see relative to

numbers because it's my view it's really

shortages that we're seeing from a

compute perspective when you look at

Azard you could ultimately add 4 500

bips to growth if they didn't have the

shortages Dan I I started today's show

looking at you know some of the we're

talking about the declines and the mag

seven names from their 52- week highs

all down double digits as you look into

the second half of the year what's the

one mag 7 name you like and that you

would buy and one stock you continue to

hate and why?

>> Well, Microsoft to me is the most

oversold large cap tech stock. Not just

here, maybe I've seen the last 3 years

relative to my view of the enterprise.

That's their backyard. I don't say you

could be bullish in AI without being

bullish in Microsoft. Have they had

speed bumps on co-pilot? Yeah. But to

me, that's the one I I continue to be

garage sale price

>> is test. Oh, go ahead. Go ahead. Yeah.

And if if there's one that you'd be more

cautious or negative, look, we like I I

just think it's one where it's like it's

approve me for for Meta, but we're

bullish. It's approve me for Oracle, but

we're bull. But those are probably the

ones much more in the penalty box, at

least relative to, you know, how

investors view it.

>> If OpenAI Dan does not go public, uh

what sign does that signal to those

invested in AI?

Look, they can go public. I mean,

technically in early 27, if they don't

go by, you know, by the end of 2026,

but I continue to believe anthropic and

open AI go public. I just don't think

you could say if things get delayed in 3

months or 4 months, does that mean some

sort of armor getting moment? I don't

believe so because it comes down to like

what's ARR? What's the path to

monetization? They are the hearts and

lungs of AI. Dan, help me understand

really the dramatic sell-off in

Palunteer. Fundamentally, this company

has basically crushed it. Every quarter

they have gone public, but we've seen a

major sell-off here. What has to happen

in the second half for that stock, which

retail investors love, for that stock to

start working higher again?

>> Look, I think that's been a victim of a

little SAS apocalypse, a little also

just to view like anthropics eating

their lunch, which I think are basically

fictional narratives.

Look, Palunteer

I continue to view this I mean S this is

going to be at the epicenter of the AI

revolution of modernization. I think

this is probably one of the most dislo

okay not just software but tech stocks.

Look at last quarter you had some

revenue that went from enterprise and to

government and that maybe you know

caused some to be skittish. I continue

to view this. This is a stock that has a

two in front of it over the next 6 to9

months

>> over 200. You're still bullish on

Palunteer.

>> Look, this is there is no one, no

company that has a moot like Karp and

Palunteer. And I think those that think

that because of Anthropic or because of

the overall market that in in some way

that that's going to eat into

Palunteer's mood, I think that's just

way wrong. And that goes against

everything that we see and hear when we

talk to customers, CIOS, and even

competitors. Dan, I'm asking every guest

on this show this week, uh, second half

predictions, and I would love to get

your take on this one. Is the second

half when SpaceX and Tesla combine?

>> No.

>> No.

>> I mean, we've talked about that that

that's a 2027, you know, we've tal about

that is over 80% chance, but this look

for Tesla right now. I mean, it's very

important for them individually, right?

It's just a separate com show robo taxi

to show the launches across different

cities to get toward physical AI and hit

important boogies. I think this is a

very important 6 to9 months for Tesla

especially with so much of the focus of

Musk and just overall market obviously

away from that.

>> Dan, any big July 4th weekend plans?

with July 4th, beach, Netflix, World

Cup, you know, maybe look, I'm not going

to work out as much as as you s, but you

maybe try to follow the footsteps a

little.

>> All right, have fun, Dan. Appreciate

your predictions. Enjoy that grilling.

Enjoy that World Cup. I will talk to you

soon, my friend. Appreciate it.

>> Thank you.

>> All right, you know what Monday means?

No, it's not the day you go hard in the

gym like uh Dan just mentioned because

you didn't go over the weekend. It's a

new drop day for my Power Players

podcast. This week I sat down with a

powerhouse investor in women's sports,

Karen Nortman of Monarch Collective. I

loved her predictions on the future of

women's sports. You can catch the

episode on Yao Finance, YouTube, Roku,

and Samsung TV, or listening on Spotify,

Apple Music, and Amazon. Julie Hammond

has you next on market catalyst.

Heat. Heat. N.

Heat. Heat. N.

Heat. Heat.

Heat. Heat.

Downow

down.

Down.

Welcome to Market Catalyst. I'm Julie

Hyman. 30 minutes into the US trading

day and let's take a look at what's

going on after last week's selloff and

what's been a rocky June. A little bit

more of a perking up here on this Monday

morning of the holiday short and trading

week. Um we've got the Dow right now up

by nearly 300 points, about a half of 1%

by the way. It has been the outperformer

this month by a long shot. The S&P 500

also up about a half a percent today and

the NASDAQ composite up by about 1%

today. So definitely turning things

around a little bit on the session at

least. Looking cross asset, not seeing

much action on the bond front right now.

The tenure at 4.37%. We do have economic

data coming later this week. By the way,

we're going to hear from Kevin Worsh

also who is speaking midweek at a

conference of central bankers

internationally. And then we're going to

get the jobs report on Thursday, not

Friday because the markets are closed on

Friday. So that could move things a

little bit more. Bitcoin dropping back

below 60,000 here this morning. And

we've got crude oil futures up higher as

people continue to watch the potential

negotiations between the US and Iran.

Getting now to what's going on

sector-wise in the S&P 500. We've got

materials down the most. We've got

communication services and consumer

discretionary up the most. I also want

to take a look at monthtodate

um as we're nearing the end of June here

and we really have had a sell up this

month in tech stocks in particular. So

the XOK information technology

communication services which includes

things like meta all of that has seen a

big drag and that is what has dragged

down the S&P 500 on the month. Energy

has also been selling off along with

underlying oil prices. On the flip side

we've had a little bit of a defensive

rotation here. XLV, which is healthcare,

doing well, although biotech is a subset

of that, which is less defensive, has

also been doing well. Utilities are

higher, industrials are higher,

financials. So, we've seen some of those

underperforming groups come back,

financials is one example of that. And

as earnings get underway once again um

shortly in a couple of weeks, we'll get

some more clarity on what's going on

with the financials as well. So, that

should be interesting. Getting over to

the NASDAQ and here's the month-to-ate

figures where we've seen a lot of that

red from large cap tech. But if we get

to today, we see some bouncing back

happening. Amazon in particular, look at

that, up 4% today. Tesla's up about 3%,

Alphabet up 3%. So seeing some folks

come back into those names that have

been beat up on the month. Micron though

down by 7%. It had held up relatively

well uh during the sell-off that we have

seen. So let's set the table now for

what happens from here in the second

half of the year. what happens with all

these tech stocks and beyond. Joining us

now, Chris Harvey, CIBC Capital Markets

head of equity and portfolio strategy

here with me in the studio. It's good to

see you, Chris.

>> Good to see you, too.

>> So, it has been this interesting period,

hasn't it, where we've seen some doubts

creep into this um the tech trade. Um

what has stood out from you for you and

and do you feel like something has

fundamentally changed or is it sort of

just a short-term

>> hiccup? I think it's a short-term

hiccup. some of these sectors whether

defensive whether it was more

economically sensitive really beaten

down then you had resolution with not

resolution but you have progress between

US Iran rates go down oil goes down

that's pretty positive consumers still

in pretty good shape and so you can see

the bounce kind of broaden out and

that's exactly what happened I don't

think it's anything more than that

>> do you think that investors should be

looking in their own portfolios at

broadening I mean we saw for example the

even though the S&P 500 was has been

down in June. The S&P equal weight has

actually done pretty well.

>> Yeah, I I think so. We're more agnostic

this year. We think there's good

opportunities in utilities, in in

industrials, in consumer, in tech. You

just have to be very stock specific.

Look for the companies that are working.

Look for the companies where the

fundamentals are improving, numbers are

going higher, and that's what you want

to do. We are beginning to think more

and more about economically sensitive

name. One of our one of our few

contrarian opportunities we think are in

housing. Housing stocks are beginning to

bounce. Home builders are beginning to

bounce. Um, for those that want to play

it through an ETF, XHB is is a good way

to do that. Um, it was very contrarian a

month or two ago. It is beginning to to

really rally and it's an area that's not

um not well correlated with the AI

trade. So, if you want some

diversification,

>> you can get it there.

>> Why do you think that group is going to

do well? Because, you know, the rates

outlook has been shifting. You would

think that that could be a tailwind if

rates were coming down a lot, but

there's some debate over that.

>> So, a couple things. One, rates are

slowly grinding down. In addition to

that, we're seeing oil come down, which

has led rates higher. That's a positive.

The consumers still strong. It's been a

belleaguered area for a while. And

consumers still need a house, right? Uh

so eventually people will start to buy

and there is a belief that the Fed's

going to raise rates this year, we think

that's wrong. A and while we don't think

there's going to be easing, um we can

see rates come down a little bit more,

especially at the front end of the

curve.

>> Yeah. And there's also this new housing

bill, which we're going to talk about

with Mary Whitney in a few moments, that

some are seeing as a tailwind for

housing, too.

>> That could be great for first-time home

buyers. It's it has bipart one of the

few things that has bipartisanship. It's

sitting on Trump's um desk. I I think he

wants to attach uh voter ID or voter

registration, national voter

registration to it. Um unclear what's

going to happen there, but if that bill

does get passed, it could be a real

positive for first-time home buyers.

>> Something else that maybe um is a little

contrarian, you guys are looking at gold

again.

>> We are looking at gold.

>> Yeah. What like gold has had such an

interesting year, right? You would think

>> Yeah.

>> I mean, it just hasn't been performing.

people people seem to be maybe selling

it and to to fund some of the other

trades that have been popular.

>> So So what happened? Gold got there was

a lot of speculation. It the sentiment

really went pretty wild at the beginning

of the year. Um we weren't so

constructive on it and

>> let's just say we had some very

interesting conversations about that.

>> Um and what happened was people thought

it was the debasement trade and the

geopolitical trade. We found out it was

the debasement trade but not the

geopolitical trade. And then with part

of the debasement trade as rates went

higher, okay, the debasement trade

didn't look so good. And people recently

have been calling for debasement trade's

over. It's done.

>> Yeah. Yeah.

>> And we think sentiment has gone from

euphoric to pretty bad at this point in

time. And again, we see oil going lower.

We see break evens going lower. that we

see the basement trade coming back

>> and gold really out of favor more out of

favor than I've seen it in a long time.

>> If the debasement trade is coming back,

does that mean the dollar is going to

weaken as I think as part of that?

>> I think the dollar is probably seen it

top here and and we could see it weaken

a little bit though not by a ton. Um we

just think things are stretched right

now and we're just playing the

sentiment. Speaking of of stretch and

speaking of volatility, um I've been

talking a lot about the margin debt

increase and leveraged ETFs, right, that

have gotten more attention lately

because we've been seeing a lot of money

going into that.

>> So, how do you think about that as a

potential risk? Do you think it's a

potential risk? How would you

characterize that risk? How are you

thinking about it?

>> So, there there's a Julia, there's a

couple things there. So, last week we

took a look at the levered ETFs. There's

a big difference between single stock

lever ETFs and index ETFs. On the single

stock, we did see a lot of speculation.

People would just mostly it's retail

just piling in, piling, piling, and

things didn't turn out so well last

week, especially with Korea pulling

back. What we're seeing on the index

side is something very, very different.

We're seeing probably since the start of

the quarter, people being very

disciplined and starting to take profits

on it. And we thought that was very

constructive and that's one of the

reasons why we didn't think the market

was going to fall apart last week.

>> Interestingly,

>> in addition to that, you know, you point

out, hey, we're starting to see some

speculative things. One thing that we

saw last week is um Google or Alphabet

went into the Dow

>> back in November 1999. Microsoft went

into the Dow. Not a great omen. We don't

think that's

>> um that's not the beginning of the end,

but we do look for these signs. And back

in 21, you know, laugh at us if you

will. We were talking about naming

rights and things like um Staple Center

turning crypto.com right where the heat

play FTX we're not there but I I think

it's it's smarter it's right to keep

your eyes open for these more

speculative signals if you will

>> what what about margin debt how do we

think like I know that by dollar amount

from April to May it was the biggest

increase in margin debt ever

>> on a percentage basis it was also pretty

sizable about 8 and a half% is is that

you know how does that compare with some

of the speculation out there.

>> So, we look at it. I've never been able

to get a great signal out of it.

>> Um, a lot of times it's more once things

start getting moving, then it becomes

okay, there's a lot of scope for

downside, but it's not a catalyst in and

unto itself.

>> It's more like an accelerant maybe,

right,

>> to the to the downside,

>> that if things if there's a catalyst and

things start to move, that's going to

add to it as as you point out, an

accelerant.

>> Um, so I mentioned this week we're going

to hear from Kevin Worsh.

conference of central bankers

report

especially as somebody who doesn't think

there is going to be um an increase in

rates this year

>> right

>> like but but he it seems like so far

he's not he doesn't want to give us much

>> um I thought Kevin Worsh did a masterful

job in his press came out very hawkish

which gave him credibility inside the

Fed and outside the Fed

>> however if you listen to to him. You

know, I'll use very interesting

language. He basically said, "This is a

1970s gut renovation. We have five task

force from communications to balance

sheet. I need that's not that's not a

ringing endorsement of what they're

doing." That's that's saying, "Hey, we

need to improve. We need to improve

quickly." And so with Kevin Walsh, I

thought he was very smart to come out

very hawkish. I didn't um but I don't

think the market really needs it. And um

more importantly, these task force, you

know, in 3 to 6 months, we'll find out

what's going on, but the Fed's going to

look a lot I think the way the Fed acts

and reacts is going to look a lot

different. And the last thing I would

say is one of the things he's been

indicating is we want to be on the back

page. We don't want to be the front page

story,

>> right? Do you think the Do you think

that's going to work out? He can say

that all he wants. If the market's going

to still key on everything he says, then

>> I don't know. Um, I I think for a while

he it's going to be hard for him to

become back back back page news,

especially with a different task force

and the changing of communication, how

they view the balance sheet and

everything else. But I think ultimately

he he has a long time. Ultimately, he's

going to set the stage and then what I

think he wants to do is just slowly

here's the way we're going to work.

Here's what what what drives us. Here's

what we're going to do with the balance

sheet. Here's what we're going to do

with Fed communication and Fed funds.

And now we're going to take a step back.

>> Yeah. He's going to have to get more

boring before the market starts. One one

quick last question. Jeremy Grantham

getting some attention recently for

calling for as as Grantham's got a

Granthm um for calling for what a 70%

pullback in stocks.

>> That's a big pullback.

>> How what would you put the probability

of a big sell-off at right now?

>> I I right now I wouldn't put a big

probability out there. However, what a a

very um thoughtful client said to me is,

"Hey, Chris, I would put a 10 to 20%

probability that we could see a mega cap

bankruptcy in the next three years,

possibly a trillion dollar bankruptcy."

Wow. That's not me. That's one of the

clients. And I thought that was very

interesting. 70% pullback in the market.

>> I don't see the same systemic risk. I

don't see the same things I saw in the

late 90s. Today, I think it's much

healthier environment. And I think

fundamentals are much better. I think um

there's a lot less leverage. You

remember the summer of 07 there was a

ton of leverage on on all all parts of

the balance sheet and I I think we've

gotten rid of that. Um can we have a

pullback? Certainly. Right. Stocks just

don't go up and to the right. Um but the

the interesting thought was hey we could

have a pretty big and if you go back to

the late 90s early 2000s you had

WorldCom you had Enron. Yeah.

>> Uh a few of them. Yeah. Did that person

have a cont have have a list of of or of

of stocks they thought would be likely?

>> Yes, but not to be disclosed.

>> Okay. All right. I tried, Chris. Thanks

so much. It's good to see you.

>> Good to see you.

>> Coming up, we're going to talk more

about the state of the housing market as

that landmark legislation is set to be

signed into law or at least go into law

one way or another. Meredith Whitney is

with us next.

Heat. Heat.

Heat. Heat.

House Speaker Mike Johnson says he plans

to send the bipartisan housing bill to

President Trump's desk today. The

legislation could help boost the US

housing supply and lower costs for

millions of renters and buyers across

the country. At least that is the goal

of that legislation. Let's talk about

whether it will actually achieve those

goals. Joining us for more is Meredith

Whitney, CEO of the Meredith Whitney

Advisory Group. Meredith, as we know,

the president was supposed to sign the

thing and then at the last minute said,

"Uh, nope, not so fast." So unclear

exactly what's going to happen here, but

um you know, talk to me about your view

of how effective that legislation will

be.

>> I I think he ends up signing it. Maybe

he signs it, you know, off camera, but I

think he ends up signing it. Um you

know, most most things to do with real

estate are local. So about 70% of um

what's you know, what can be done with

um with housing and making more housing

available has to be done at a local

level. This legislation does a lot to um

advance uh making things more uniform.

One thing it definitely does is it

removes a um outdated uh requirement

that manufactured housing, which I think

is the biggest beneficiary of this bill,

um uh b uh um uh have a a chassis uh

attached to the manufactured home when

it's um laid down on on on ground. um

that saves about $10,000 per um per

house and manufactured housing is about

50% 35 to 50% uh cheaper than sight

build housing. So manufactured housing

is key to affordable housing and as we

discussed before um manufactured housing

is re is not like a trailer park um the

association that that a lot of people

have with trailer park homes. They're

really nice. Um HUD um uh is also uh uh

suggesting uh legislation to allow

multi-level manufactured housing. So I

think the whole outlook for manufactured

housing is going to change dramatically.

One association estimates that um what

is now about a 100,000 manufactured

housing um units uh transported annually

that could rise to 500,000. So, it's a

gamecher for companies like um Clayton

Homes that's owned by Berkshire

Hathaway. Um uh Champion Home, that's a

pure play that Sky, Ticker Sky, um and

others. I think it's the manufactured

housing um industry is really going to

benefit from this.

>> Yeah. I mean, Meredith, credit to you.

You've been talking about this for a

while, right? The manufactured housing

space and you were talking about the

potential change to that chassis

requirement as uh potentially coming

down the pike. So, so here it is. Um you

know the question is okay so this

reduces the cost of the manufactured

housing and I think as we've discussed

before manu this is not your your

grandfather's manufactured housing right

like people when they think of a trailer

there have been a lot of um sort of

advant advances um in that construction

I guess the question is now who's buying

it what do the developments look like

where does that happen because space is

also part of the issue

>> that's such a great great point because

land is the critical factor and so um

you know about twothirds of manufactured

housing um owns the land beneath it. So

you have manufactured h housing

developments and um the local

governments and this is critical the

local governments can do a lot to um to

advance uh affordable housing by

providing land that is owned by the

municipality city and state. And there's

a lot of that and so there's also a lot

of land that is currently can be

reszoned. um a lot of uh uh land that's

owned by the governments that are not

being used, right? In terms of um a lot

of say 50% of government buildings, but

both stateowned um municipal owned uh

are not being used. So you could raz

those buildings um and put down

manufactured uh housing communities or

um uh raz uh and rehabilitate existing

um uh rundown homes and uh rebuild with

manufactured housing. So there's

actually a lot of inventory uh land

inventory that's underutilized that can

be repurposed and I think that's um

that's what the local governments have

got to really work for and I think

employers are going to work for that too

because one of the biggest uh uh areas

of need is um uh work uh you know

adjacent uh housing.

Well, and and what's interesting also

when you talk about these manufactured

um home companies, like take Sky as an

example, the stock is up almost 40% over

the past year, but it's kind of stalled

out this year. So, do you think it's

then those sort of next steps of getting

the product moving that is going to be

needed to further catalyze some of these

manufactured housing names?

>> Yeah, I think that the companies have

been very careful about not getting too

excited about this. Um so the real

excitement comes from the industry uh

associations. Um but uh yeah I think

that um demand has got to pick up and um

avail you know and shipping will will

pick up. I think this is going to be

going to be a gamecher but to your point

um uh you know uh Sky is only up let's

say you know 5% year to date. I'm I'm

surprised that the stock hasn't been up

more given um how much potential they

have.

The the other thing I want to ask you

about and you spoke a little bit to it

is yes we have this new federal

legislation but a lot of the change

would need to happen on the local

municipal level. So as you look at that

landscape across the country how much is

that happening especially in the places

where it most needs to happen?

>> It's happened um it has happened uh in

patchwork. So um uh the state of

Washington has done um uh great progress

in terms of reszoning. So if you take uh

zoning from a commercial uh to

residential and they fasttracked that.

So that's been great and you know the

politicians should be inspired to do

this because it ultimately um uh brings

businesses in. So businesses are not

going to um to to invest in areas where

there's not enough afford affordable

housing. So you have seen some and and

what's also an interesting development

is you're starting to see um uh state

investment uh vehicles, pension funds be

interested in investing in affordable

housing. So um uh in Chicago that's

happened um uh in larger Illinois that's

happened. So, I think you're going to

see public private partnerships really

get um get involved here because it's

such a critical issue and the given the

fact that it's such a bipartisan issue,

too. It's a win-win for everybody.

>> And Meredith, I also wanted to ask you

about the provision of the federal bill,

uh this whole thing about restriction

restriction on institutional investors

buying single family homes, which you

know, a lot of the folks we've talked to

have said like that's not really the

crux of the problem here. I'm curious

what your view on that is.

>> Um, it's not it's just too small to

matter, but it's a big it was a big

talking point. Um, I think that uh, you

know, it's also the way it was written,

it's also makes it very subjective in

terms of who will be allowed to um to to

purchase and who won't. So, um, you

know, I don't think that's the real

issue. I think the real issue is getting

um now the local municipalities

motivated to repurpose land to your

exactly to your point um reszone and uh

and get housing inventory like off the

table in terms of the biggest challenge

for affordable housing.

>> Meredith, thank you so much for joining

us. We really appreciate Thank you.

>> Thanks. Well, um just wanted to let you

know that we've got this breaking news

on the Supreme Court saying that uh

President Trump cannot immediately fire

the Federal Reserve's Lisa Cook. Uh she

has been combating allegations from uh

the administration so she can stay in

her job while she continues to fight

those allegations. We're going to have

much more on that decision coming up

next.

Hey. Hey. Hey.

Heat. Heat.

The Supreme Court is allowing the

Federal Reserve's Lisa Cook to stay in

her job more. Now, she has been fighting

allegations from the Trump

administration having to do with alleged

uh mortgage fraud. Um and in a 5 to4

vote, the court said that Cook can stay

in her job while she fights those

allegations. So, it's not clear if she

will eventually keep her job, but the

Trump administration had sought to

immediately remove her. So, this uh does

seem to be a step in terms of

independence of the Fed in the short

term. Let's talk more about this now

with John Hillsenrath Stone senior

adviser who covered the Fed of course at

the Wall Street Journal for many years.

So John um this was something that we've

been waiting for for for weeks now as

the Supreme Court has come out with his

decisions. So put sort of contextualize

this for us. What is the importance of

this decision?

Well, um, so if the Supreme Court

allowed the Trump administration to fire

a Fed governor on allegations, unproven

allegations, I would say, of mortgage

fraud, then that actually would

undermine the Fed's independence. There

would be a risk hanging over almost any

Fed official uh that they might be fired

by uh the executive branch. And by the

way, this isn't just about the Trump

administration. it would be about future

presidents uh that could kind of

reconstruct the decision makers at the

Fed and take away their independence.

So, this does preserve the Fed's

independence in the short run. But I

will say a 5 to4 ruling on this is a

little bit of a surprise. I think a lot

of people in financial markets were

probably expecting a stronger consensus

at the Supreme Court that uh that such

firings would not be allowed. So, we all

have to read I mean this is just

breaking news. We all have to read the

text of the decision. It's a temporary

win and and I'll say it's a temporary

win for the new Fed chairman Kevin Worsh

uh who was of course appointed by

President Trump. Uh but it it does

establish some independence of action

for him.

>> Well, and he sort of I I think it's fair

to say that in his first press