Welcome to Yahoo Finance's morning

brief. Joining us today is Al Root

Baron's associate editor and Dan Howie,

Yahoo Finance's tech editor. We have

like editor duo here. I love it. Um and

um we're watching here this morning um

as we watch markets that yesterday saw

like not a big tumble in absolute terms,

but a big tumble I guess in recent terms

for a single day. in August, we haven't

seen a lot of rockiness. Futures this

morning are not doing much, but the real

fireworks and the real action is

happening in the bond market, right?

Where we're seeing um 30-year yields,

10-year yields here in the US at their

highest since the 2000s. But it's not

just happening here. It's happening in

France. It's happening in Germany. It's

happening in Japan. It's happening

basically everywhere. And it seems like

there are a couple of things going on

here. Part of it has to do with recent

events and the war that doesn't seem to

be going anywhere. like the memorandum

of understanding expired yesterday and

but was it was not really in effect

anyway, right? And so that's still

happening. We're seeing oil prices go

higher. Um there's some talk that

there's some concern about the amount of

debt the various governments around the

world have, but that concern is not a

new one. It just pops up every now and

again every time somebody wants a reason

to sell bonds, I guess. Um and so, you

know, it's sort of inflation and then

the longer term stuff. Um Al as you

watch this happening like what what are

you pinning it on if anything or

sometimes these things just like happen?

I I don't you know I don't know.

>> Yeah. I think that uh on the the bond

yields you know Edardenni was talking

about bond vigilantes recently

>> and you know uh the US is about to pass

or just pass 40 trillion in debt and uh

you know we love round numbers right? I

turned 50 this year. I felt much worse

uh when I was

>> come on

>> uh 50 in one day versus 49 in 364 days.

Uh so these round numbers seem to matter

and it's just an opportunity for people

to focus

>> and then they look at bond yields and

then they look at the impact on the

consumer and they start to do a

freakout. Um you know so I I think

that's sort of what's going on. We've

moved from sort of AI bubble uh concerns

to bond yield concerns because we always

have to worry about something or

something has to be top of mind. Uh, you

know, Ed says, "Don't worry about it

until the 10ear is above five." We're

about 475. Uh, uh, 4.75% on the 10-year.

So, uh, while pointing it out, he says,

"Don't worry." So, I like not to worry.

So, I hope that's how things go.

>> Um, I like to worry on the flip side, or

at least I like to be skeptical and ask

questions about what could happen next.

Yes, Ed said don't get too worried yet.

He said we aren't pushing the panic

button, but he says we're closely

watching, right? It's hovering on the

hovering. And then on the flip side, I

noticed a note from Jonathan Kinsky,

who's a technician over BTIG. He said in

a in a note that um equity markets are

not prepared for a swift move higher in

the long end, say toward 6% for the

30-year. Now, he's not necessarily

saying it's going to happen, and I think

of course equity markets are not ready

for a 6% 30-year. That would be bad. The

problem is when you say we're not

worried about the the AI bubble anymore,

but this has to do directly with the AI

bubble, I would argue.

>> Yes. Because we have to finance uh

That's right.

>> two to three trillion in data centers

over the next few years.

>> That's right. And so if we're going to

continue to see these yields move

higher, and we've talked about this

before, all of this enormous amount of

debt that as the journal adeptly pointed

out um I think yesterday is off balance

sheet and therefore it's harder to get

your arms around where the risk is,

>> but it's going to cost morely.

>> It is also interesting just to see the

way that these are these deals are being

structured to ensure that you know

they're as you said they're off balance

sheet. So it's and we're seeing more of

I mean obviously Nvidia's big $500

billion

>> kind of mega pool that they've put out

or they're you know putting out. There

were no real

>> putting together. Yeah.

>> Yeah. There was no it was very much a

>> here's this idea and we're working with

these these you know companies. Uh we'll

see who ends up in in the space but yeah

I mean these these deals are going to

continue to obviously go through. uh we

I think we tend to focus on the the

bigname companies the the Microsofts the

Googles the Amazons but the Neoclouds

are just as much if not more so relying

on debt just because they don't have the

kind of you know cash flow that these

other companies do have and so I think

that's really kind of the the

interesting space with the core weaves

uh I can't think of the Nebus Nebus

that's what I was trying to

>> apply digital there's a lot of them

espec es especially a lot of them that

used to be crypto miners ers and then

they switched over to being AI data

center.

>> Why not, right? I mean, you know,

>> and you follow the money, so it makes

sense. Um, so yeah, so you have that

issue. So there's sort of like the

corporate side and what it means for the

corporate side. There's the consumer

side and what it means for, you know,

mortgage, home mortgages, etc. A lot.

The other thing getting a lot of

attention this morning is uh diesel

crack.

>> Mhm.

>> Right. The crack spread, which is the

difference between uh crude oil and

diesel. Like how much does it what's the

margin for turning it in? And it's the

highest um in a long time. It's above

100 bucks. Is that a record? Actually,

it might be a record.

>> It might be the first time that happens.

>> So that implies that diesel prices

obviously are going up and that has

implications for goods prices. So all of

this is um you know it and but yet

stocks are still near records and there

still seems to be a lot of bullishness

out there.

>> Yeah, there's reasonable bullishness.

it, you know. So, again, if I'm the not

worrier of this uh and like the 30-year,

it's it's one of these things like uh if

something bad happens, then something

bad will happen. So, yes, we have to

watch for a 30-year above six. Uh and

goodness gracious, I don't want to pay a

mortgage with the 30-year above six. Um

and shipping, you know, as a percentage

of goods prices absolutely matters. Uh

you know, industrial activity is

actually increasing. We're sort of

exiting a three-year freight recession.

Um, and they're still putting up

reasonable earnings despite rising

diesel prices. The shippers, the

FedExes, and UPS's of the world. Um, and

they're and the counterbalance to that

is some tariff headwinds are abating.

Yeah.

>> So, there are it's just push and pulls.

Um,

>> I'm not suggesting that everything is

bad. Yeah. No, it's just it's

interesting, right? And by the same

token, you know, the alarm bells were

ringing earlier this year. Oh, 4 and

a.5% on the on the 10-year. Oh, 5% on

the 30-year. That's going to be

problematic for stocks. It got there,

pushed above, stayed above, and stocks

kept going up.

>> Yeah. I'm not saying things are

different this time. That is definitely

because that's a disastrous thing to

say. I'm saying we might bell that rings

somewhere whenever you say that.

>> We might not know the levels where

things are truly concerning based on

this set of circumstances versus 2011,

versus 2006, versus 1999, versus the

'7s. Uh so all of these levels matter.

It's just uh not derailing earnings

growth,

>> right? Yes. and definitely hasn't done

that as of now. Okay, so if AI is one of

the big engines of the economy, the

other traditional big engine of the

economy was the consumer.

>> So let's check in on the consumer, shall

we? I mean, we had retail sales last uh

week that were a little bit concerning,

but most of the economist commentary I

saw wasn't that concerned, right? Um so

this morning we got Home Depot and we

also got Clara. So a couple of

interesting, pretty disperate reads on

the consumer.

>> Clara was interesting.

>> CLA was interesting. So, let's get let's

get to Home Depot real quick. So,

comparable sales there were up 1.7%,

best since late 2022. So, not bad here.

The company and and some of this seems

to do with the company's own strategy

that it is um you know, relying more on

contractors for certain things, selling

people other, you know, smaller

projects, etc. They like their tariff

refunds as well. So, that's helping, you

know. So, that's that's I mean, was

there anything in particular from Home

Depot that stood out to you? Well, I

just think 1.7%

is not worldbeating, right? But it's

better than the magical whisper numbers

of 1 to 1.3%. So, it's better than

expectations. It's an improvement,

right? The rate of change is so

important. And we still have expense,

you know, the home market, the

residential housing market is still sort

of more abund.

>> Yeah, thank you. I like that. Uh so it's

a you know it's like like if if you know

2% same store sales growth is sort of

like whatever but given the circumstance

we're like awesome relative.

>> So like the consumer is like okay the

housing market kind of stinks but it's

not getting worse.

>> So it's all like from a consumer's

perspective it's all kind of like eh

>> it does it does very much feel that way.

You know kind of just shrug your

shoulders I guess. you know, just

because you look at this, you know, I

mean, Home Depot relies on those big

projects. Um, unless you're my mom and

you, you know, tell my dad to go out and

change one thing in the house every

week.

>> Um, very annoying.

>> It's got to stay busy.

>> Sure. Yeah. I mean, yeah, take the kids

to Home Depot on Sunday. That's fun. Um

but it's it is interesting just to see

because you know I mean anecdotally I've

I've seen friends uh completely skimp on

the idea of doing any major projects

lately just saying okay let's you know

we'll just patch up what we patch up and

you know

>> then we'll move on and we'll figure

something out later down the line you

know so I mean and anybody that I know

that's buying a house right now I mean

your rate is insane.

>> Yeah. So, obviously, you're not going to

be going in and saying, "Well, hey, let

me spend $15,000 redoing, you know, uh,

putting French drains in the basement of

my new house, right? You're just going

to say, "Okay, well,

>> we'll get

>> we'll hope it doesn't rain too much.

>> We'll get a sump pump and figure it out,

I guess, or you know, one of those pumps

that pulls everything out." So, it has

been interesting to kind of see that.

>> I mean, if you So, okay, so you put you

put Home Depot together with some of the

retailers we've gotten thus far. You

know, we have gotten some of the mass

luxury retailers and they've mostly been

doing okay, right? Like for the most

part. Okay. Then we have CLA. So CLA

actually did well last quarter by some

metrics, right? It posted a profit. A

loss was expected. Average revenue per

active customer was up 24% although the

total number of active customers were a

little below estimates. But the

company's cutting its revenue forecast

for the full year. Um foreign exchange

issues. Um it's also saying um Germany

it might be seeing some volume

moderation in Germany but the US is its

biggest market but the fact that you

know I don't know what what what to you

was interesting when you when you raised

an eyebrow when we started to talk about

Clara.

>> Well CFO is leaving.

>> Yes.

>> Right. And and I it's it's like uh the

plan it said it was a planned departure.

>> I get to squirrel the debate with you.

I'm not sure how the consumer's doing

but I think people don't like turmoil at

the top.

>> Yeah. Um and so I think we have to

unwind that and hear from management and

see what's going on. Uh when you you

know have a quarter and then you know

sort of unexpectedly it was planned but

it doesn't seem to be that everybody

knew it was coming.

>> Um you know yesterday again uh scrolling

the debate it's like L3 Harris uh the

CEO stepped down. They maintain their

financial guidance. That was a conduct

review. Yes. You know investors hate

surprises.

>> Yeah. I mean

>> negative surprises. They love positive

surprises. They hate walking in and

seeing stuff like that.

>> It is interesting that they're looking

for a New York-based CFO for Clara and

not Stockholm. That was something

>> print the resumes. There you go. You

know,

>> um but it, you know, so who knows

exactly what's going on there, but Clara

um and the New York Times also had an

interesting story looking at buy now pay

later um marketing more towards people

spending it on necessities, things like

rent

>> and utility bills. Um, so that says

something I think about the lower-end

consumer too. I mean the but the the

signals on the consumer to me are very

mixed. Like the Bank of America

Institute today came out and said that

card data shows that uh households

across income groups are are paying off

their credit card balances in full. Like

a higher percentage is so that seems

good, right? Um but at the same time,

you know, then you have like obviously

the housing market is indeed more

abundant, you know, and that you have

other signals that are not as positive.

So it's and and the retail sales

numbers. So it's hard to get that clean

picture of what's going on.

>> Oh, I completely agree.

>> It is interesting the the the buy now

pay later. I have noticed just anytime I

do online shopping now, it's all an

option just to buy now pay. I mean, I'm

buying cat food and I could have it in,

you know, five installments of like, you

know, whatever. And I'm that just

doesn't make sense to me, but it is

something that I repeatedly see and I'm

I'm terminally online. So, it's just,

you know, the the amount of times that

I'm seeing it pop up in different areas

is really interesting. Now,

>> have you used it ever?

>> God, no.

>> I haven't used it either. Used it?

>> Uh, no. But, uh, I mean, I basically,

uh, don't use cash anymore.

>> Yeah. Right.

>> Right. And so, it's all tap to pay and

then I just do my best to pay it off and

>> Yeah. Yeah, exactly. Yeah, I guess

>> I have the conventional uh I pay the

credit card company occasionally as my

buy now pay later.

>> Yeah, ex I mean that's I mean that's the

exact way I feel. I mean if I'm going to

put it on my credit card now I'm going

two ways where I have to pay kind of

split up this way. I just I would rather

just throw it all on my credit card and

>> I think the difference is for buy now

pay later is that mo many of them if not

all of them don't charge interest. And

so if you're somebody who knows you're

not going to pay it off all at, you

know, at the end of the month, but

you're then need to allot it out, then I

guess it makes more sense.

>> Yeah. I mean, yeah, it does. It's just

it's so interesting to see it being used

on so many I mean, it at first it seemed

as though it was, you know, on more kind

of

no non-necessities.

>> It has spread.

>> It's very much so.

>> Definitely. Most definitely. Um, and the

final point I would make about consumer

is that according to the latest Bank of

America fund manager survey, like nobody

wants consumer stocks. They are very

unpopular, at least according to that,

that the underweight is the biggest

since February. Um, but that it's, you

know, it's kind of hovering around the

lowest it's been going back to 2006 or

so. Um, there it is. The allocation that

you see to um to consumer stock. So,

they've

>> Look at that. It's up in the last

survey.

>> Yeah, I guess. but it's still not great,

right? And so, I mean, Bank of America

sees it maybe as a contrarian indicator

that it's time to get into some of the

consumer stocks.

>> So, we'll see if that plays out the way

that

>> I think I think part of that just the

dominance of tech.

>> I was I was trying to see the years on

there to see where the AI kind of race

kicked off.

>> Yeah, that's a good point. It's Yeah,

you have to figure if it's going here,

if it's underweight here, it has to go

somewhere else, I guess, is the

thinking. Um let us talk about another

um stock that you I know you pay a lot

of attention to and that is SpaceX or I

should say SpaceX with Tesla, right?

Because Tesla there was a report in the

information which I know you saw

yesterday that um the Cyber Cab is

getting close to being rolled out. The

difference with the Cyber Cab being that

it doesn't have a steering wheel, right?

And that it's designed really

exclusively for

>> um you know hands-free driving,

autonomous driving, etc. So is it I mean

is it coming? I we'll I I guess for for

Tesla it's always kind of I we'll see

it's that's

>> believe it when it's on the road with

someone sitting in the vehicle.

>> But the thing is, you know, it's it's

interesting that they they designed the

vehicle in such a way. Uh they're not

the only ones that have a car without a

steering wheel. Zuk's built

a It looks like a VW minibus just but

you face each other in the seats and

it's it's it's fine. It's, you know,

I've been in, you know, two or or so.

Um, and I've been in Whimos, obviously,

and it's just, I don't know, it it does

seem as, I mean, it's all going to weird

everyone out the first time they get in.

I was weirded out the first time I went

in one, you know, years and years ago.

But it, you know, I think for for Tesla,

this has been kind of the whole play

until everything became about building

robots.

>> And so then it was, you know, okay,

well, robots are the big thing. And then

it's well what about when the you know

potentially inevitable merger comes with

yeah SpaceX. So it always feels like

it's kicking the can down the road to

the next big thing. But you're always

kind of waiting for that next big thing.

So I mean that's it's when whenever we

start to see them on the road really uh

in huge numbers. I mean Whimo obviously

outstrips them by a country mile. So

we'll have to see when that really does

take off. But like I said it does feel

like every you know couple of months

we're like oh they're doing something

else. That's where people are going to

be interested,

>> right? Yes. So, shiny new object,

chasing the shiny new object. I mean,

you wrote about the idea that like none

of this stuff matters. It's really the

SpaceX thing that matters.

>> So, you know, I like to your point, I I

think it's always, you know, it's

kicking the came down to the water

people. So you know it was uh uh

automotive one long ago it was

automotive fundamentals EV growth then

it became robo taxis then it became robo

taxis and AI and now it becomes what is

the premium that SpaceX will pay for

Tesla. Uh and you can reference a whole

bunch of of Wall Street notes. I have

actually been surprised because you know

the idea that Musk would combine his two

trillion dollar companies one day that's

that's fine and I understand that and I

believe it will happen actually this

sort of you know Baron is in print it'll

happen. I am sort of surprised with the

amount of attention the merger is going

to get. Uh uh Brett Winton at ARC says

it'll be announced by the end of the

year. Uh uh I know we all follow X

because of the retail community for

Tesla and SpaceX. It it for me it

dominates a lot of that conversation. So

it feels like now no we'll forget about

the robo taxi roll out. Cyber cam

awesome. Uh Tesla semi whatever. when is

the merger coming? Um, and the only

thing I know is eventually that'll fade

and it'll be something else.

>> Yeah.

>> I mean, I will say I I think that Elon

Musk shares his uh temporary boss's

flare for drama talking about Trump in

terms of like liking to keep people

guessing and liking that like sort of

>> game or show of it all to a certain

extent. So you wonder

even though he you know he's not sort of

like the people who are pushing for it

are people who support him not sort of

the haters so to speak. So he wouldn't

necessarily have anything to gain

amusement wise from messing with those

people but he in other his motivations

are are confusing sometimes

>> overpromising is so we don't so who

knows when it's actually going to happen

or if it's actually going to happen.

>> Yeah. And it's funny and to again so I

will be the devil's advocate today the

overpromising is legendary right we just

somebody just announced in just

announced 500 Tesla semis that that

vehicle was introduced in 2017

>> uh so it takes a while uh cybertruck

largely a disappointment and yet I mean

he still basically invented the modern

EV industry SpaceX essentially invented

the modern space economy look at rocket

lab as space mobile

>> I should probably have starink because

it would cut my internet still uh and I

have a Tesla Model Y. More than half of

my driving is now on FSD,

>> right? I don't really drive anymore and

my family doesn't actually want me to

drive anymore. So, you have these wins

and this wild overpromising and it all

comes into this millu of the world's

first trillionaire.

>> Yeah, true. All of that is true. All

right, let's talk about the meta trial

which is kicking off today. This is the

trial in California that will determine

um you know whether they violated

consumer protection laws, particularly

with regard to underage users of Meta's

various apps. Um Dan, you've been

covering this closely and this follows

on the heels of them losing a case in

New Mexico that was a smaller case. This

would be a bigger case because it's

happening in California, but it's a it's

like a multitude of state attorneys

general who are involved in this case.

Yeah. Um, and there's a lot of talk

about how much it could cost Meta.

>> Yeah,

>> eventually.

>> Eventually, maybe kind of.

>> Okay.

>> So, the the apparent this is Meta has

been saying this $1.4 trillion uh

potential uh payout that they would have

to uh have. But the state AGS uh this

according to Meta had banned that number

about a while ago. The AGS have since

revised that. Uh, but Meta is still

pushing the 1.4 trillion. And so, you

know, I I reached out to some of the AGs

and they said, "That's not our number.

That that's meta. We're just going to

see what what the the court says, what

kind of remedies they'll have to pay at

that point. That's not on us. We're

trying to prove our arguments in this

case." And it's so interesting to see

how this has kind of this number has now

become kind of the uh the touchstone

right where everybody says either you

know you you either say well sure Meta

has to pay this because of XYZ or that

this is just states trying to milk a

company and that seems to have moved the

conversation away from the the point of

the case which according to the AGs is

damages to you know young people and

addictive uh uh features in the apps

themselves.

rather than how much money Meta may or

may not have to pay. And it's, you know,

I think it's it's gone a very

interesting way here. But, you know, we

have seen them lose uh a handful of

cases now. Uh the there was the one in

New Mexico and the prior one uh in

California that they had lost. Um

>> this is going to be interesting because

it's a test case for the broader 29

state AGs. This is going to be four uh

states coming forward with their claims.

It's Colorado, California, New Jersey,

and Kentucky.

>> And the idea here is to say, well, does

this all kind of work out with this this

multi-state litigation? If so, we'll

move we'll continue to move forward. If

not, it goes back to all the states.

>> And the question is always like, is it

going to be material for Meta at the end

of the day? What I think is so

interesting about Meta is it's run into

the stuff before. Remember Cambridge

Analytica? And the stock like gets hit

sometimes a little bit, but it over the

long term it really hasn't mattered

which I think is quite interesting. I

mean listen if it was a trillion dollars

then it would probably start to matter

>> but that to your point that seems like

that is an unlikely outcome that worst

case number. I think the one thing that

would actually change all of this is if

not on the cache side, but on the

fundamental app design side, right?

Because if you're able to take away

something like infinite scroll, like

alerts, right? If you change that kind

of way that people interact with the app

itself, that makes it less sticky and

then that could be more of a a long-term

threat to meta because the idea is

you're constantly on there.

>> Yeah. Unless they can innovate and

figure out a different way to make you

constantly on there. I don't know. Are

you guys on there?

>> I'm on Instagram constantly.

>> I am.

>> I I hate it.

>> I am not on Instagram or X

>> except for work on this computer. I try

to stay off it, but

>> I don't matter because reference the old

other 50-year-old comment. It only

matters if my kids are on it.

>> Yeah. I mean,

>> which is always funny because we have

the money.

>> Do we though?

>> Do we?

>> I think so. Or is it all just flow to

them somehow?

>> Uh, I hope not. I I'd like to keep some

of it and use it.

>> I feel like I'm losing that battle.

>> Okay, that's fair. I get that. I mean,

especially with the kid about to go to

college in a year.

>> Okay, on that note, we're going to leave

it there. Thanks so much, guys, for

being here. Appreciate it. And that does

it for Morning Brief. Opening bid is

next with Brian Sazzy.

Heat. Heat.

Hey.

Heat. Heat.

Heat. Heat.

Hey,

hey, hey.

Heat.

Heat.

Down.

Heat. Heat.

Down.

Heat.

Down.

A very interesting start to the week for

investors so far. On the one hand, US

Treasury yields have surged higher,

driven by persistent inflation

anxieties, heavy government debt

issuance, and elevated energy prices.

The benchmark tenure yield rising now

toward multi-year highs directly

pressure stock market valuations by

increasing the risk-free rate used in

financial models. Higher yields make

fixed uh income investments

significantly more attractive relative

to stocks, luring capital out of stocks

into safe haven government bonds. The

bond market is taking control of the

stock market right now. So pay more

attention to it than you usually do

because I know you do not pay enough

attention to the bond markets. Then we

have more bearish vibes mostly on tech

stemming from the latest BFA fund

manager survey. Roughly 71% of fund

managers do not expect one of the AI

hyperscalers to announce a capex cut

this year. The figure is up from 61% in

July. Only 21% of fund managers pulseing

a capex cut at a major hypers scalar

like an alphabet. Uh what's more AI

hyperscaler capex is believed to be the

most likely source of get this a

systemic credit event for the second

straight month. I wish I had happier

market analysis for you on this Tuesday

morning. Uh but I really don't. Uh here

on the opening bid round table Matt

Melly Miller Tayback managing director

and equity strategist along with our

very own Brook Dealma and Jared

Blickery. Matt uh good to see you here.

How concerned are you about this uh rise

in bond yields starting to impact stocks

more negatively than it is already?

>> Well, it's certainly concerned. I mean,

one of the things that uh, you know,

we've been hearing for a long time that,

you know, don't worry, the stock market

hasn't really reacted to it, but history

shows that when the stock market uh, I'm

sorry, when bond yields rise for a

significant period of time, and they

have been now, I mean, a lot since

March, but it's really been going on for

the last 10 months, you know, eventually

at some point, it does have a negative

impact on on uh, the stock market. And

whether this is the beginning of that or

not is hard to say. uh but it certainly

happened at especially at times when the

stock market gets expensive uh which it

is today. So uh this is something that

that could create some real problems not

only because it's happening in the US

but it's happening around the globe as

well.

>> Jared, key point there from from Matt.

It's not just US Treasury yields rising.

I this this uh this has started to

spread across the globe.

>> Well, look at Japan. Uh Japan had ultra-

low rates for decades. They are facing

inflation for the first time in many

investors lifetimes. So that's really

significant. we can go to the Wi-Fi

Interactive. I just want to echo what

Matt was saying there and kind of build

on it a little bit. Uh this is going to

be the 30-year T-bond yield. This is the

longest duration the US has to offer

right now. And this is not the first

time that we've seen rates above 5% this

year. Way back in May, and I started I

started writing about this last May. Um

whenever rates start poking above 5% and

here's the 5% mark right there. Uh we've

seen stocks roll over. Now, if you take

a look at the last 3 years, this has

happened a few times, but each time

you're going to notice rates drop

quickly. So, stocks that pressure on

them, it just kind of evaporated pretty

quickly. Except this time, you're going

to note that we are much higher than

we've ever been over the last 3 years.

And if I put a MAX chart on, you can see

we are at the highest level since 2007

or thereabouts. And uh I found this

chart from Jim Biano. Love Jim Biano

over at Biano Research. This shows the

chances of a Fed rate hike on the in

white right here. These have been

declining. A few weeks ago, it was 100%

uh rate hike in September. Now, it's

only one in three chances. Meanwhile,

the 30-year T-bond yield has been

climbing. So, as the market becomes more

skeptical of the Fed doing the dirty

work, which is raising rates, guess

what? The bond vigilantes have done that

work for them. So Biano is saying uh the

bond market can stop panicking when the

Fed starts panicking and maybe that's

Worsh's job.

>> Uh and Brooke, you know, you cover a lot

of companies where inflation is uh top

of mind, a lot of consumer companies. Uh

sure, we might get might have gotten

some benign readings on on CPI and PPI

in the past two weeks, but the bottom

line is uh so many companies, some very

large companies in this country and

around the world are battling still

battling higher uh periods of inflation.

So I'm not surprised to see this rise in

bond yields. Absolutely. And this is

actually the second biggest tail risk

that BFA pointed out in that fund

manager survey is this what they called

a disorderly rise in bond yields. But

something I'm looking out for on

Wednesday and on Thursday is when we

hear from Target and when we hear from

Walmart on Thursday morning. I think

it's important to take a closer look at

where exactly we're at when they point

out food inflation as well as general

merchandise inflation and what exactly

we're seeing there. What has been the

impact of these higher oil prices on

transportation costs for these consumerf

facing products and how has it

ultimately impacted prices at the store?

Now, of course, we also expected to hear

about tariffree funds and how those

impacted the companies and how exactly

maybe they took those tariff funds to

reinvest into prices for us, for the

consumers, for the everyday American

right now who is worried about these

higher costs when they go out to shop.

Matt, of course, we don't know this

until it's months down the line, but is

this that moment where I think investors

should be paying more attention than

they are to bond yields? Not that

they're ignoring this move, but this

steady rise is a problem impacts

valuations, impacts valuations, momentum

names. Like, is this the starting point

of of something deeper in terms of

pullback for the markets?

>> Well, it's certainly a concern because,

of course, we're we're heading into this

seasonally tough time for the stock

market. You know, everybody talks about

how September is the worst month of the

year, although it doesn't happen every

year, of course. Uh, but it tends to

start in in in late August and the

second half of August and usually

doesn't end until some point in October.

Uh, but but also but the key thing is

that is is just what you all have been

talking about, Jared. made great points,

Brooke, the same is that, you know, we

have a situation where, you know, the

the pre- benign inflation numbers last

week uh weaker uh uh jobs uh employment

number two weeks ago. Uh Friday we had

weaker uh uh I'm sorry, retail sales

number and yet the long-term yields are

staying up. It tells me that it's not

just inflation that people worry about,

but they're worried about what you

mentioned uh Brian was this, you know,

this whole issue of the massive level of

debt issuance both on the uh uh out of

the government and on the corporate

side. Uh and also, of course, these

budget deficits, which have never been a

problem in the past, but you know, uh

we've heard people say budgets deficits

don't matter. Well, they're starting to

matter, not just here, but in Japan, as

Jared mentioned, with those hu huge use,

huge yields there, uh, but also in

France and the UK, where they also have

their own budget problems.

>> Matt, does it make sense to you at this

time where bond yields, and I'm going to

just keep harping on this one. Uh, bond

yields are rising around the world. Does

it make sense to still stay long a

Sandis, a micron, those momentum names

still trading at record valuations?

>> Yeah, it's it's it's very tough because

it makes it very difficult. you know,

higher yields are making it very tough

to to justify these higher valuations. I

mean, I I I know the uh the bullish

story behind them and and uh you know,

there's a question of, you know, is the

AI trade trade going to work? It's one

thing. Is AI going to make a difference

in the world? Of course, it is. The

question is, are the valuations

justified at these extended levels? And

I'm starting to worry that with the rise

in these uh long-term interest rates

around the globe, uh it's becoming much

much tougher to justify.

>> Hey, Brian.

>> Yeah, go ahead, Jack. real quick here. I

came I was on your show a couple days

ago or maybe it was even last week.

Anyway, I was very bullish on the

semiconductor sector because I don't

believe the cycle ends until 2028, which

means we probably have until 2027 to

keep buying it. But near-term concerns,

this really does kind of get me here. I

want to go to the Wi-Fi Interactive one

more time real quickly because yesterday

we rallied in the socks. I brought this

up quickly into a key level. If you take

the 50% retracement of this whole down

move right here, we rallied into that

yesterday and now we are 4% down. So

sellers are back in control of the

semiconductor market very short term.

Now that could change on a day-to-day

basis, but this has my attention right

now. Weakness in semis with those higher

rates.

>> Well, you know what else has my

attention, Jared? It is, you know, these

r this rise in interest rates makes the

uh the cost of capital for a lot of

these hyperscalers that much higher. And

I think that is a missing element for a

lot of folks, a lot of investors out

there uh that they didn't realize this

before. I look at company like SpaceX. I

mean, they might raise hundreds of

billions of dollars over the next 24

months at a higher cost. I mean, that

means they're losing more money.

>> That's right. And according to that BFA

study that we're survey that we're

talking about, everyone sees the AI

bubble, no one expects the spending to

stop. Um, you quoted it yourself. 71%

say no hypers scale, no hyperscaler

capex cuts this year. 53% still seem

still the most crowded trade. 30% net

overweight tech exposure and that number

is rising. So everybody wants a piece of

the action and nobody thinks they're

going to be the last bag holder here,

but somebody's always holding the bag at

the end.

>> Brooke, what else you watching?

>> I'm definitely watching the 10-year

Treasury yields when it comes to

mortgage rates. We saw mortgage rates

jump to 6.69%, now at 6.67%. And tying

all together, Brian, we did hear from

Home Depot this morning and what the CEO

said on the call are actually the

interim CEOs because CEO Ted Decker did

step away for a medical leave. Right

now, we have the CFO taking that spot

alongside their EVP uh also taking that

in an interim basis. Needless to say,

what they were saying on the call is

that consumers continue to do smaller

DIY projects. Why? because of the fact

that right now it costs so much to

borrow and so people aren't necessarily

doing these huge major renovations and

taking on these big expensive loans but

they're focusing on smaller goods like

outdoor patio these smaller DIY projects

maintenance repairs that won't

necessarily break the bank for Americans

>> right on Brooke I'm I'm one of those

folks 30 bucks get me some grass seed I

can grow some grass where it wasn't

there before and it's that cost me tens

of thousands of dollars with six new

siding or roof on makes a lot of sense

to meactly Uh but I want to stay on

retail uh do a little uh sector of the

day, a little uh retail of the day. You

mentioned Home Depot. We're going to get

targets. We're to get targets earnings

out uh tomorrow. Very important report

from them as well. Brooke, what what

should we expect from them?

>> Yeah, I think this will be an

interesting quarter because what we are

expecting is a return to revenue that we

haven't seen since the second quarter of

2023, right before they had that

backlash when it comes to their Pride

collection back in June of 2023. And and

we of course have a new CEO, Michael

Videlki, who joined the helm back

earlier this year, and we're really

expecting to see the company double down

on merchandise. They had these small

popup collections with Love Track,

Fancy, and even Hollister and Pop uh

Pokemon during the quarter, and all of

those are expected to have contributed

to this quarter. We are expecting now

2.4% in Samour sales growth. That's

according to Bloomberg estimates. And so

many on the street hoping that this is

the beginning of a turnaround for

Target.

>> Brooke, um I I've said it before, I'll

say it again. Target just needs to

expand their food selection, especially

the fresh food. There is no reason why I

should have to walk into Target at 4:00

uh Monday through Sunday and a lot of

the fresh stuff is sold out. Matt, it

just doesn't seem right. But at a time,

Matt, where interest rates are rising,

are you at all interested in playing the

consumer here?

Well, you know, Brooke makes some

incredibly important comments on both

Home Depot and uh Target. I mean, first

of all, Home Depot is interesting

because, you know, Home Depot usually

tells us, hey, what you know, if the

stock is doing well and they're doing

well, that's usually good for the

consumer, usually good for housing. Uh,

but except at turning points and what

happens, as Brooke mentioned, is that

when things, you know, interest rates

get higher and people start to pull on

their horns, they start to actually go

to Home Depot more. Uh, and we saw, it's

interesting, you saw how today the

housing starts were much lower than

expected. Well, guess what? Just like

what happened in May when when we saw

the other or the most recent big spike

in interest rates and the housing starts

fell in a big way. So, what's going on

with with Home Depot tells us something

about the consumer, what's going on

there at when it comes to Target going

to be incredibly important. And what you

say, Brand, I mean, the whole grocery

issue, they continue to lose market

share to Walmart because of this grocery

issue. and uh you know the the the rest

of the consumer, how are they going to

fare with these higher interest rates

with what looks like might be a starting

to see a slower job uh or employment uh

situation with the report we got two

weeks ago. Now, how is this going to

fair because the the I'm sorry, the uh

consumers remain very resilient in the

last two years. If that starts to fade,

we got a whole different can of worms to

deal with.

>> Jared, you strike me as a Trader Joe's

guy.

>> You know, I do. There's one not that far

from me. The line is out of sight. They

got to be doing something right. I've

never seen employees that happy, too.

They get to do I think there's some kind

of secret sauce they got. Um, waiting

for their ticker, though. What's What's

up with that?

>> Yeah, I don't think that's happened.

Longtime privately held company. J, real

quick, though, Jar, before we uh move on

here, what are you seeing on the charts

with with the Target Home Depot?

>> Yeah, let's go to the Wi-Fi Interactive.

I was just taking a look at this. So,

I'm looking at the gains or losses since

March 30th. March 30th with a was a huge

low in the market and just about

everything rallied off of it except

you're seeing red so not everything did.

If you're down in this market right now,

there's a problem. Nike down 23% since

March 30th. That's a problem. Kroger is

in

>> up 55%. Are you kidding me? That's like

the worst company out there in retail.

>> Yeah. Yeah. And then you asked about

Target. So, let me go to that chart real

quickly because the stock this year,

this looks like a great chart. It's from

the lower left to the upper right. Now,

let me go back uh to pre- pandemic and

you can see that 2021 boom there. I

think they were company of the year

here, but 180 is where the rubber meets

the road. Uh this is just noise until

we're able to until target investors are

able to push beyond that. Um having said

that, they're having a nice run this

year.

>> Cole sucks. Sorry guys, I can just go on

all day about coals. Uh but I won't

because I just won't do it. All right,

big thanks to Matt, Brooke, and Jared.

Appreciate y'all. Appreciate you guys

dealing with me. Coming up, Coinbase is

John Diagostino. Next on opening bid.

Heat. Heat.

Heat. Heat.

Heat.

Heat.

Heat. Heat.

Down.

Heat.

Heat.

Heat.

Down.

Down.

This is a critical week for the crypto

space as President Trump, SEC Chair Paul

Atkins, and CFTC Chair Michael Cel

prepared to host a major White House

summit with top crypto executives from

Coinbase, Ripple, and Andre Harwitz. The

high stakes gathering comes as the

landmark Clarity Act faces dwindling

odds in Congress, forcing federal

regulators to step in and establish

policy frameworks through agency

rulemakings instead. Meanwhile, the US

Treasury Department has officially

opened public rulemaking for the Genius

Act to finalize payment stable coin

guidelines, marking a pivotal moment for

domestic crypto regulation. John

Diagosino is Coinbase's head of

institutional strategy. John, we always

talk to you like those big moments that

are about to happen in crypto. Is this

one of them? So I think the innovation

summit which you talked about there's be

one at the white house and one at the

CFTC. I think that is a big moment

because uh you mentioned all the crypto

companies that are going but there's

also tradi companies going and so we've

moved from these crypto exclusive policy

sessions to broader innovation policy

sessions which I think marks this

transition from crypto being this asset

class that exists on its own to

blockchain rails powering really all

financial investment. uh we only care

about Coinbase but like but what what is

you know what is the out what is the

likely outcome here of Clarity Act

genius act like and what does it mean to

the average Bitcoin investor

>> so I think look let's start with the

Genius Act right so you had up there

that the Genius Act is now going into

final rulemaking which is really great

but even prior to that we saw with just

the passage of the bill an explosion in

stable coin activity now why is that

important everybody focuses on the rails

they focus on the distribution mechanism

which is blockchain and it's

extraordinary and it's cheap,

convenient, secure, all that's great,

but it's the product underlying the

distribution mechanism that matters. And

in the case of stable coins, the vast

amount are denominated in US treasuries.

If you're an American citizen, that's a

wonderful thing. We want to export the

safety and security of the US government

and economy out to the world. And it's

worked. That's why the stalling around

clarity is so depressing because what

genius did for treasuries, clarity could

do for everything else. One of which

could be US equities. So imagine a world

where the billions of people who can't

get a US brokerage account are able to

invest in the economic miracle that is

US equity capital markets. That's

wonderful for them. It's wonderful for

us. It's wonderful for the companies.

>> What's holding it back from getting

passed? who is holding it up.

>> So, look, politics is is holding it up

unfortunately and um uh you know, we're

still confident uh we'll get a vote and

we'll see where that where that leads

us. Uh but I can say, you know, Coinbase

announced uh launching of offshore

tokenized equities out of Abu Dhabi a

couple of days ago. I can say that

unfortunately while the politics is

stalling that process, the rest of the

world is not waiting. And in fact,

they're seeing that stagnation as an

opportunity to leaprog. So, City Bank

estimates that by 2030, two and a half

to three trillion dollars of equities

will run on tokenized rails on

blockchain rails. So, we have to ask

ourself, do we want that to be happening

here with US equities being the

underlying asset or do we want it to be

happening somewhere else with other

assets underlying?

>> Why are tokenized equities a big deal?

Well, because the US equity capital

market is u the most powerful wealth

generation tool that the world has ever

seen. And so what I want to see is now

the way Coinbase is doing it, I think,

is the right way in that we we actually

buy the equity. So when the when the

token is minted, it represents an actual

share of that stock being held in

custody.

>> So you have skin in the game. Coinbase

has skin.

>> No, it's not coin. So it's you. So if

you if you buy a tokenized equity, there

is an underlying share of that equity

actually there. So it's it's you can

redeem it for that equity if you want.

So that's different from the other

models. So assuming we're doing it that

way. What's so powerful about this is

every opportunity we've had to see this

in action, there's been insatiable

demand around the world for these

assets. That's incredibly powerful. That

improves liquidity. that helps issuers

and that helps um expand the overall

pool of potential buyers and sellers of

US equities from a billion to five or

six billion. So that's why it's a huge

deal because of the quality of our

equity capital markets.

>> I have a conversation uh my podcast

going out later in the week with

Mastercard Seal Michael Maybach and he

we spent a lot of time talking about

stable coins and why they are getting

involved in stable coins. But that

company's not alone. Like everybody is

getting seemingly involved in stable

coins. Why is that important?

>> Well, because I mean from from economic

perspective, the the the initial

businesses like Tether that have been

have been using stable coins, they're

insanely profitable uh because because

of the lack of regulatory clarity,

they're keeping all the float. Now,

again, the irony in all this is Coinbase

is fighting for a law that would allow

us to pay that float back to the

American consumer. Right? That's the

crazy part of all this. we are fighting

to give away money more or less and we

can't get it done for some bizarre

reason. Um so on a standalone basis

they're extraordinarily profitable

businesses you know barring barring that

regatory clarity. Um but just beyond

that they're just incredibly useful. So

so you have to ask yourself this when

have consumers just when given an

easier, safer, cheaper, more convenient

option gone back to the more challenging

option? when have you watched how often

have you watched a bad Netflix movie

rather than go out in the rain to a

movie theater right for a better for a

better movie right so so if you think

about that analogy we want the highest

quality products US equities US credit

uh US treasuries to be the delivered in

the most seamless convenient way allah

the Netflix analogy and the best most

soughtafter products in the world are

companies like Google Nvidia and all

these amazing companies that list in the

US companies We're going to push those

to the rest of the world. That's why

it's a massive deal.

>> Everybody getting involved or so many

financial companies getting involved

with stable coins. What does that mean

for the dollar over time?

>> It's extraordinary for the dollar. We

want the world to desire the US dollar

and then if they desire it, be able to

buy it anytime they want, anywhere. We

want we want that that that individual

who doesn't have access to a US

brokerage account uh who's manages to

save up some money for their future to

think about storing the money that

they're going to need in the most stable

currency, the US dollar, via a stable

coin on their phone. And in terms of

their future investment strategy, we

want them looking at their phone every

day and betting on the US equity capital

market. That's that's that's the best

marketing in the world for the dollar

and the best marketing in the world for

US equity markets. Has this

administration been as friendly to

crypto as many thought coming in

>> from policy perspective? Yeah,

absolutely. I think I think that's uh

that's we we went from look I I've

>> we went from a complete opposite on the

priorit.

>> It was it was a weaponized antagonistic

um attacking of a specific technology

which I still just I still just don't

understand. I I worked with three

generations of of SEC staff and for all

them are wonderful. they they're doing

what they think is right for the

country. Uh but they take their tone

from the top and so if the top pushing

down is we don't like this particular

technology for whatever reason uh that

filters through the organization. So we

went through a period of time where it

was um inadvisable if you were an

innovator to go in and meet with

regulators because they would weaponize

that information against you. So that

has been flipped 180 degrees. Now we

have regulators that are first of all as

smart as some of the innovators. They

deeply understand the technology. uh

they understand the guardrails that have

to be put in place. They're reasonable

about it. Uh but they're willing to work

for the benefit of the American

consumer.

>> Lastly, uh you talked to a lot of uh

international folks in the crypto space.

Is the appetite to own Bitcoin still

there? Is it as strong as it was?

>> Yes. Now, I understand that looking at

the price has been kind of in the

doldrums throughout August, you know, uh

through the summer, that's doesn't seem

that way. But I have the luxury of

looking at all the infrastructure

building out um the uh increase in

mining activity happening non- US non-

US participants. Um there is if you

think about just price then you'd argue

that artificial intelligence is not

going to change the world because the

price is down from the highs, right?

That's a silly obviously a silly

argument. So um to me a Bitcoin that's

skyrocketing and doubling every couple

of months that's fascinating but it's

not world changing. A Bitcoin with truly

stable infrastructure that has good

volatility band that is used as a store

of value around the world in the way in

which it was designed as a decentralized

mechanism. That is truly world changing

and that is what we're seeing.

>> John, good to see you. Enjoy the rest of

your summer. Yeah, appreciate you coming

in. All right, straight ahead, Julie.

We'll have you on Market Catalyst. We'll

be right back.

Heat. Heat.

Welcome to Market Catalyst. I'm Julie

Hyman. 30 minutes into the US trading

day. Let's take a look at the major

averages here today. um the Dow, the

S&P, and the NASDAQ all seeing declines

here today. That's actually the

Philadelphia semiconductor index. That

must have been what um Jared perhaps was

looking at before. And that is down by

5% today. So, obviously a sell-off in

semiconductors has come back. And let's

let's linger on this for a moment, shall

we? This is the year-to-ate chart of the

semis, which are still up 70% year to

date here, but we've seen goodbye. We've

seen this big pullback here in uh in

those semis. uh that has been happening

more recently, right? And then we had

sort of a nent recovery and then down

again today with that 5% pullback. So

obviously some volatility has been

coming in here. Looking at the major

averages here and getting back to what

we've seen today, the Dow is actually

little change. The S&P 500 off a half a

percent, but most of the pain today is

concentrated in the NASDAQ. And you know

what that means? It is big tech that is

selling off today. Uh so that index is

down by 1 and a4%. That's also evidenced

by the fact that the S&P equal weight's

actually up today. So, it tells you that

those large cap, heavily weighted tech

stocks are dragging things down. What is

going on here? I suspect it has a little

something to do with the bond market.

Now, the 10-year relatively benign today

in terms of where it's moving. 4.73% is

where it stands, but all eyes remain on

that 30-year, which has been seeing a

big surge as of late and now is at

5.31%.

There's a lot of debate over what

exactly is causing it, but there's no

debate about the effect of it, which is

that it being the benchmark both the 10

and the 30 for many other instruments,

it rise raises um debt costs across the

board here from everything from

mortgages to corporate debt. And so this

is something that the markets are

watching very closely and they're not

terribly thrilled about. Um so taking a

look at then what some of the moves are

in today's session on a more stock

specific basis here. Uh SpaceX stands

out to me because guess what? That's a

company that has a lot of debt and is

going to have to sell a lot more debt in

order to fund its aspirations. Um and a

recent debt sale that it did drew a

little bit of a higher yield because it

is perceived as a little bit more of a

riskier corporate. So those shares are

down three and a half percent today.

Nvidia off by 2%. Remember Nvidia has

its big $500 billion financing plan that

it won't hold on its own balance sheet.

It's doing it in cooperation with Wall

Street, but that's something to keep an

eye on as well. Meta shares down by 4%

today. It is more mixed more broadly

here, but let's zero in on the

semiconductors as we just did a few

moments ago. And this uh heat map is all

red and in fact all mostly dark red as

we see the semis come back under

pressure here. So let's dig in a little

bit more here and talk about what's

going on um as we see this big sell-off

happening. Dave Naza is joining us.

Round Investment Chief Executive

Officer. Dave, um do we pin this on

what's going on in the bond market? Is

that really what has created this latest

selloff that we're seeing in tech? I

think most certainly today like what

we've seen is an environment where

corporate earnings have been incredibly

robust, much better than expectations.

It's actually been broader than just big

tech which has contributed um to that

that strong revenue and earnings growth.

The challenge is is that now we're

seeing a day where macroeconomic

influences especially that 10year and

30-year yield as you noted is getting to

levels that make equity investors

uncomfortable particularly in the

context where big tech whether it's uh

SpaceX or the hyperscalers are embarking

on an incredible amount of fundraising

tapping the debt markets to power this

AI buildout. And so when we see yields

not just creeping up anymore, but

breaching some really important

psychological levels like a five handle

that we haven't seen on the 30-year in

some time, it does get investors uh a

little bit spooked uh who and today

we're seeing a kind of a prime example

of that.

>> So what now Dave? I mean, you know, like

um a do you think those yields are going

to stay at these kind of elevated levels

and do you think that after this sort of

shock of like, okay, it's at this level

now that the effect maybe on equities

dissipates?

>> Well, it's interesting, right? We we

came into this year uh or really

expecting cuts and then we started

pricing in and saying the market can be

okay maybe with some hikes or just

beating on pots. The real challenge

though is I think less about what the

Federal Reserve is going to say and

obviously we have Jackson Hole coming

up. It's more simply about what is the

driver to your point and investors are

questioning this of that long bond of

the 20 30-year yields getting so high.

Is it those inflation expectations? Is

it fiscal concerns? And are we going to

get into an environment where these

so-called bond vigilantes which is a

term I don't think we've used in some

time really come back into play? Um what

we're really uh looking at is what are

what are we going to begin to see? We

have FOMC meetings coming out this week

to begin to sort of uh decrease some of

the concerns that that exists out there.

Um and we still have the fact that the

Iran war situation is not necessarily

getting better anytime soon. And so

investors, especially in these summer

months where volumes are lighter, are

beginning to kind of take some some

money off the table. So, I don't think

we should read so much into exactly the

sell-off that we're seeing today, but it

does show that even though corporate

earnings have been incredibly strong,

there is some fragileness in the macro

side that can come and uh play a role in

stocks.

>> Um, and you know, you're really dialed

into the tech trade and the chip trade

um through, you know, your the products

that you guys have there at Round. I

want to zero in on Nvidia in particular,

which reports next week, right? Um, and

I'm just wondering if you think that is

sort of the next big signal to the AI

trade or are the earnings themselves

less important than they once were?

>> Well, Nvidia makes headlines nearly

every day now. uh whether it's related

to uh the the fundraising plan and their

uh the working with a significant number

of prominent Wall Street institutions to

help kind of fund this buildout, the

investments that they've made uh in

other companies like NeoCloud providers

and the like. But we view the video

earnings not just for its impact from a

weight perspective uh on the tech trade

and then broader indices but it's it

really is a macro event because it has

been the tip of the spear uh for the AI

buildout and you know our expectations

is that as usual um they'll have

unbelievable earnings likely continue to

guide higher but really what investors

are going to start focusing on is not

just uh are their ability to beat

guidance but where does their free cash

flow mix. Uh we know memory prices have

gone up. That impacts um some of their

chipm as well. Where does that look from

their ability to continue to kind of

meet demand uh that's out there and

actually supply that demand? Um so to

me, I think Nvidia is going to likely

set the tone um for the market, but we

have to get through the next week uh

before we uh hit next Wednesday. At at

what point do these elevated yields pose

more if not a threat at least throw some

more significant sand in the gears of

the AI buildout?

>> Well, I think we're starting to see some

of that right with the 30-year at 5.3%.

One of the I think investors have really

done an incredible job looking through

some of the noise that we've seen with

things like the war, the disruption in

oil. Of course, that that impacted

markets significantly, but then uh you

know, the market participants in the

investor community took a step back and

said, well, wait a minute, it's not

really going to bleed through earnings

or impact the consumer as much. That

said, retail sales uh last week were

quite uh disappointing. It's a big week

uh for retail earnings. Home Depot's uh

results this morning were were generally

positive, but there's more to come um

from from that point of view. And if we

start to see yields stay at the

sustained level, the biggest concern um

that we saw and one of the risks that we

were we were looking at to kind of

generally impact our positive view on

markets was just the the 10 and 30 are

moving so high so quickly. Investors can

get used to to higher yields. But if

these companies who have you know made

huge plans trillions of dollars capex

need to start spending more to actually

uh or sorry paying more on that debt to

get investors in. That's where we do

have some concern because investors have

other options right uh and they don't

necessarily need to go for uh such high

growth uh and potential growth going

forward if you can lock in yields at

these levels. So to me we're we're we're

right around there. That's why these

next couple weeks, even though it's the

summer months, are actually going to

really be important for setting the tone

for the fall.

>> Okay, so let's talk more about the picks

and shovels trade. I mean, Nvidia is

part of that, but so is DRAM, which is,

you know, the memory trade, the ETF that

you guys have that tracks it, and all of

the other sort of components of the

buildout. So, where are we sort of in

that cycle? DRAM, for example, obviously

is still up a lot this year, but like

the rest of the semis complex, has has

sold off considerably. So what do you

think is going to be pivotal for that

next move?

>> Yeah. So we we saw a huge move from uh

investors rewarding the uh the check uh

right not the check writers but actually

where the checks were going right. So

what we saw actually is people really

favor memory companies. So your your

Micron SK highix uh the DRAM ETF after

we launched it in April nearly tripled

um before we saw this situation. July

found some footing um most recently uh

in August. A lot of it was driven really

by I think excess leverage and

positioning uh both from of course the

situational awareness situation uh also

you know South Korean retail investors

who were uh incredibly exposed to these

names and as volatility came into market

um they took some strong hits. Looking

ahead um we still believe that sort of

investors going to look and and really

be more selective at these bottlenecks.

memory remains one uh even though the

the sector is transitioning um from a

cyclical business to one with more

consistent earnings. We're also

beginning to see investors look at sort

of uh even smaller components of that.

So photonics and optics stocks um so

these are companies like uh Coherent and

Luminite and what what they're really

doing is powering the connectivity in

these data centers um to make them to

make the chips be able to work faster uh

than just historical copper

connectivity. And so I do think even

with some of the the the headlines that

we're seeing, the volatility like we're

seeing in the market today, investors

are still going to be looking for

opportunities uh to be more selective in

the AI trade. At the same time, you

know, as you mentioned, um coming into

the segment, we see the S&P 500 equal

weight um you know, doing quite well

even on a day like today. So investors

probably should should look at this

broadening and that's another reason why

we're seeing some folks look at, you

know, continue to look at these halo

stocks, right? hard assets, low

obsolescence, companies that AI has

nothing to do nothing to do with because

it doesn't impact their business. So,

it's a bit of sort of I'd say a modern

version of sort of a safety trade in the

stock market looking at companies that

aren't exposed to AI.

>> Dave, great to see you. Thanks a lot.

>> Thanks for having me.

>> Coming up, oil prices are pushing higher

amid ongoing tensions in the Middle

East. We'll talk about the broader

implications after the break.

Heat. Heat.

Heat.

Heat.

Heat. Heat.

Down.

Keep it up.

Hey,

hey, hey.

Down.

Down.

The ongoing US Iran conflict is

continuing to push oil prices higher

with Brent crude gaining 15% this month.

That has sent diesel crack spreads,

that's the price difference between a

barrel of oil and the refined product,

to hit a record above 100 bucks a

barrel. joining us for Bob Ayino,

co-founder and CIO of the unfilter

unfiltered investor newsletter and

co-host of the futures edge podcast.

Bob, it's great to see you. Um, and just

when we think maybe things are quieting

down, actually, have we thought things

have been quieting down at all? I don't

know. You know, this this thing just

persists and folks in the oil market

keep saying it's going to get worse and

worse. It hasn't really gotten to its

worst point, the highs that we've seen

oil before. Why not?

>> Well, a couple reasons. Julie, good

morning. By the way, it's it's good to

see you. By the way, for those of you

that don't know, the crack spread

actually comes from cracking that barrel

of oil open and making different

products out of it. So, that's where

that comes from. Good to know.

>> Yeah, people make jokes about that name,

but I digress. when you look at it from

a perspective of what is actually

happening what most of us that focus on

oil that's probably 30 40% of what I do

uh in a given day is barrels are getting

out oil barrels of oil are getting out

the struggle now is in part related to

the Houthis attacking Saudi and others

refineries uh just last night they

attacked the Jazan refinery in Saudi

Arabia which was mostly a diesel fuel

refinery there was also chemical coming

out of it, petrochemicals, but it you

could characterize that as a diesel

refinery very loosely. And that's part

of the problem. The shortage is now

diesel fuel, not necessarily oil. That's

why you don't see oil responding as much

as diesel is. And that's why that spread

keeps widening. Russia has periodically

completely eliminated the exporting of

diesel fuel from their refineries. China

has built about 16 new refineries since

the US started the Brownsville, Texas

refinery project, which still hasn't

even broken ground and is expected to do

any actual refinering till probably late

2027, possibly early 2028. New

refineries are hard to come by in the

West. So, we're generally getting

refineries out of the places that are in

conflict. That's where we're getting a

lot of diesel fuel from globally. So

that's why that crack spread keeps

widening. And there's nothing the Fed or

even the opening of the straight can

necessarily do about that. The opening

of the straight, we're not just talking

about the straight of Hormuz anymore.

We're talking about the Babel Mandab

Straight, which is what the Houthis are

attacking where Saudi Arabia is

diverting some of their shipments. It's

over in the Red Sea. That's also been

blocked now by the Houthis. So that's

the problem. It's the refined products

coming out. That's why you're not seeing

actual crude oil react as much as you

would think it would. I mean, at the

same time though, crude is the ship's

getting through. There's some barrels

coming out, but it's still a heck of a

lot less than it was before this

conflict started, and the conflict

doesn't seem to really show any signs of

ending. Right. Just this morning, we had

reports of Iran striking a ship in what

is supposed to be the US controlled part

of the straight. So, I mean, that

doesn't necessarily imply any any

relief. I mean, even if if oil doesn't

spike again, it implies that it it's not

going to go a heck of a lot lower from

here either.

>> Well, it's certainly not going to help

with the diesel fuel problem. You could

open both straits right now and it

wouldn't necessarily put a dent in the

diesel fuel problem because the crude

that's coming out has to be refined.

Now, would add some refined product to

market that I'll give you. But if you

look at it from the crude oil

perspective, again, what you're hearing

in the headlines, and I'm not talking

about the news headlines. I'm talking

the headlines coming out of Iran as well

as the headlines coming out of this

administration isn't necessarily

reflective of what's happening in the

actual oil market. I'll give you an

example. When the lastou was signed, I

don't know if that was number 12, number

20, I don't know what it was. You look

at it from that perspective. There were

already Iranian ships getting I'm sorry,

Iraqi ships coming out because when that

was signed, they made note of Iraqi

Iraqi ships coming back to refill at

some of the refining plants. That

couldn't have happened if they didn't

get out in the first place. There were

clearly some empty ships sitting on the

other side of the straight, but these

ships were tracked as coming back from

purchasers, consumers of both oil and

refined products going back into the

straits to fill up. So, there's a little

bit of rhetoric between the two

governments, that of Iran and that of

the US, talking back and forth.

Obviously, from the US, every ship is

getting through. From Iran, no ships are

getting through. The reality is in the

price of crude oil, not in what you

read, what the two administrations are

saying to the to the media.

>> And just to get back to diesel for a

minute then, if what you're saying, you

know, ends up playing out, it sounds

like diesel could well go higher from

here.

>> It could. And that's the problem with

the inflation front and that's the

problem that the Fed is in right now as

we wait for the minutes to come out

tomorrow. You can't affect inflation

that's driven by the price of diesel

into the goods that are shipped to

consumers. You can't affect that.

There's nothing the Fed can do with

hiking rates to fix that. I believe they

know that. I'm not sure, but I believe

they are. And I think that's starting to

be reflected in the probabilities of F

of a Fed rate hike dropping even from

yesterday to today. Yesterday was about

36%. This morning it's about 34.3%.

So, you're not looking at a situation

the Fed can fix. Now, they may need to

hike anyway just to sort of take care of

their credibility. Um, but if they're

going to do that, they need to do it in

September because you can't do it

approaching the midterms. It's always

been strange to me, Julie, where

everyone says they can't be political,

but then they can't hike or cut rates

into an election because that would be

political. I've never understood that.

They're either independent or they're

not,

>> right? Doesn't Well, yes. It doesn't

make necessarily a lot of sense, but who

knows? I mean what they actually do and

what people say they do and why they do

it are two different things. So um let's

talk about something else that is very

inflationaffected and that is gold. Um I

just want to take a look at our

Alphaspace platform for a moment here at

a couple of different charts that uh we

have built to to kind of reflect what's

going on in the price of gold. So what

we're looking at here is the price of

gold versus the S&P 500. We've started

to see gold recover from the lows.

Obviously, we know last year we it had a

big up year for gold, but stocks are

still beating it. Um, then I'm also

taking a look at gold miners versus the

S&P 500 here. Miners have held up a

little bit better, right? They tend to

kind of magnify the movement in gold.

So, they've come up a little bit from

the uh lows here. And then finally, also

looking at gold miners versus the price

of gold. So, gold miners have

outperformed the price of gold itself.

So, all of this is to say, and you got a

heat map of the gold miners, many of

which are falling today. Um, all of this

is to say, like, what do you think about

gold right now? You know, do you think

we'll have further recovery from the

lows, especially given what's going on

with yields and what's going on with the

dollar?

>> I do. And the reason I say that is

because you can have two sides of the

long bond yield. Okay? The long bond

yield could be implying inflation. It

could be implying a strong economy as

well. Um I think it's the inflationary

story this this time and gold is an