Morning Call 8/3/26

AI Summary

Transcript

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 I have no fear of failure. Trailblazing women changing the game.
 One of my favorite pieces of advice. Think about what your boss's boss needs.
 Leadership can look in many, many different forms. It really does come down to just trusting
 yourself, like the short, and you just gotta think big to accomplish big things.
 Julia Borsten hosts CNBC Changemakers and Powerplayers. New episodes every Tuesday,
 wherever you get your podcasts.
 Of losses in July, although we did see gains on the week with a late week rally last week.
 If we turn to energy, number of headlines were following this morning as well.
 President Trump says negotiations with Iran will begin today after he says he held off on
 new strikes against that country. At the request of neighboring Middle Eastern nations,
 Iran reportedly saying that it remains skeptical. The president is, quote,
 truly dedicated to diplomacy. Meanwhile, OPEC-plus announcing its sixth oil output increase
 by 188,000 barrels a day next month. CN is largely symbolic. As I mentioned, oil is moving
 lower right now. WTI has been flirting with a seven-handle. Brent is firmly in the 80s,
 and of course we're coming off of the best month of gains for crude oil since March.
 If we take a look at treasuries as well, you see some bond buying and yields lower across the curve
 as well. Busy week of economic data, including Fridays and jobs reports,
 and the 10-year hovering above 4.6 percent. We'll just say basically below 4.7 percent.
 If we turn to the currency market as well, dollar index breaking below 100.
 And the big focus there, and really the big focus of the weekend has been the dollar
 yen trade after bilateral intervention in Japan's currency. It's the first US-Japan joint
 operation to buy yen since 1998, and the yen versus the dollar breaking below 157 this morning.
 That's after it's led to 163.73 per dollar last Thursday. So just huge moves in that market.
 For more on that and so much more, let's turn to Elaine Yu in Hong Kong. Elaine.
 Hey, Morgan. Indeed, the top story is Japan's currency policy. Tokyo and Washington have
 confirmed that they have indeed conducted a rare joint yen buying intervention to counter
 disorderly moves in the Japanese currency. The yen continued to be volatile today,
 gaining to $1.56 against the dollar after weakening to a 40-year low, near $164 against the dollar
 in late July. Analysts expect the BOJ to hike rates in October, and the two-year JGB yields
 in higher to $1.55. The highest level since 1995. Meanwhile, South Korea is still seeing
 sharp swings. Again, the cost fee fell more than 5 percent, and Samsung and SK Heinex both
 plunged more than 8.7 percent. Reversing part of Friday's record gains, but Morgan Stanley sees
 the sell-off as a healthy entry point. Now in China, the indices also end at lower, but this month
 were focused on the Chinese Humanoid Maker UniTree's IPO. Bookbuilding will start on August 5th.
 It will set an offer price the following day, and final terms are expected on Friday.
 So this listing on Shanghai's star market comes after the Trump administration is banning
 new Chinese humanoid and foreign-legged robots, and UniTree has flapped that its U.S. exposure
 could constrain its growth abroad. Back to you.
 Alright, Elaine Yu, thank you. You're up kicking off the new trading month as well, mostly in the
 green. Ben Boulos is in London with that. Hi, Ben.
 Hi, Morgan. Good to see you. Yeah, European markets. Broadly speaking, they're in the green.
 Some small patches of weakness here and there, oil majors are under pressure, but other beaten-down
 sectors are getting some relief with autos and travel stocks outperforming. The FTSE 100 in London,
 trailing its continental peers, given the presence of the oil and gas majors on the London listed
 in-days. There's another factor weighing on the London listed markets because London listed
 AstraZeneca shares are sharply lower, weighing on the FTSE in contrast to the pre-market gains
 for Bristol Myers script. The two firms are reportedly in talks about a possible tie-up that could
 create a far more giant worth almost $400 billion. Now, talks have been held in recent months,
 according to the financial times. They could still be delayed or even fall apart, but the potential
 deal, if it goes ahead, could be one of the biggest in the sector ever. How's that for a start
 to August? Morgan, by two. Yeah. Merger Monday, potentially. We'll see. Ben Boulos, thank you.
 It's a good start to the week here. Markets here in the U.S. meantime are in focus as investors
 prepared to kick off the new trading month. After a turbulent July, the Dow eking out of gain,
 notching its fourth positive month in a row. The S&P and Nas X seeing their second straight months
 of losses in July, with the Nas X100, the worst performer posting its worth monthly,
 worst monthly performance since March of last year. Now, this week, it is another busy one for
 earnings. It's the second busiest for S&P 500 companies' economic data. Most notably,
 Friday's jobs report, although we do get the ISMs, including manufacturing this morning. Let's
 bring in below a little global ETF strategist at Direxion. Here on set, new to the show, welcome.
 It's great to have you. Good to see you, Morgan. All right. I want to start with the macro,
 then get down to the micro here. But first, let's start with just this FX intervention,
 this yen intervention we saw involving the U.S. over the weekend. And the fact that volatility is
 not just a stock story, it's an everything story right now. Yeah, absolutely. I think if you take a
 step back and you zoom out and you look at this entire picture, what you're going to focus on is
 a tactical trade end or versus a long-term tail opportunity. I don't think the market is actually
 pricing in that this is a major headline. It's just a headwind right now. And I think that's going
 to create some short-term volatility, but I don't think that's going to lead to the best upside
 opportunity in the trade. So I think you should look back to equities and you should stay focused
 on, I would say, where opportunity will present itself back here in the U.S. That said,
 what we've seen in the treasury market and the run-up and rates here, how much of that is now
 factoring into what we're seeing in the equity market and the momentum unwind of recent weeks.
 Look, I think that's a good question. I think, again, if you look at last week as a microcosm of
 what people should pay attention to, I think the market is telling a very important story, Morgan.
 I think the market is telling you that, one, we're going to reward profitability over promise.
 And if you look at what we saw last week, you actually had divergence in the AI trade,
 hyper scale has had to basically make a decision and say, hey, not only are we just going to provide
 guidance, but we also need to provide results. And the results are, are we going to be compensated
 for the decisions that we made? And I think that's the equity conversation that people should
 be paying attention to. So how does that set us up then for this week when you have more in terms
 of the AI trade, whether it is Palantir after the bell today, SpaceX with its first report as a
 public company after the bell tomorrow, or a number of chipmakers and others like AMD and Sandisk?
 I think, well, two things should happen. One, if you're going to evaluate Palantir, that's a
 different evaluation than you're going to do on SpaceX. And I think your interview actually was
 really telling on how people should actually think about SpaceX. But let's just look at Palantir,
 for example. Palantir is a company that has to focus on moving past this government contract.
 Play into how will they commercialize their enterprise suite? And what does that look like?
 And then the market will either reward it and or punish. And that's the same tale that you
 actually saw from this week. The same should be considered around SpaceX, and I'll tell you why.
 SpaceX, the conversation and the narrative is, it's much more of an ambitious play.
 It's, this is not a traditional name where you can actually evaluate it on a quarter by quarter
 basis. This is part of the Elon Musk trade. And I think, you know, if you look at what they're doing,
 they're solving complex problems that no one else wants to touch. So I think, yes,
 you'll see some short-term volatility, but I don't think that's the story.
 Okay. It's also interesting because, seasonally, this time of year, apparently, and
 BTIG's Jonathan Krisky pointed this out over the weekend, is poor for equal weight. We know we've
 seen a rotation. In recent days, recent, we case in point, the Dow actually logging gains
 last month. Does that mean we potentially see a rotation here, depending on what we get from
 some of these results moving forward back into the high flyers? I think if you think about the
 investor, the investor wants one of three things. They want stability. They want growth or they want
 income. And right now, growth is challenged, and they're trying to identify what does that look like
 for them. And then stability, one can argue, is also challenged with obviously the move around the
 Fed last week, and then the bond market. So what are investors looking at now? They're looking at
 income as a possible staple for that three-legged stool of how do they want to participate in the
 markets. I think that's a bigger question, and at the same time, I think that's what investors are
 going to look to pivot to. To your point, right? You have the NASDAQ post its worst report month
 for the last 17 months. Then you have the S&P not drive the returns, and you have this concentration
 risk. However, no one's talking to the investor about portfolio construction dynamics of saying,
 hey, income could be that viable stool for you. Okay, so when you say income, what are you thinking
 about? I've seen from our perspective, we're seeing a lot of growth on the derivative income.
 A lot of people are asking, saying, hey, can we take advantage of some of this volatility option
 writing? That's what's happening on our end. At the same time, I think at some point, investors will
 make a trade decision, given the fact that the yield curve, obviously, is steeping. At some point,
 if they don't see the growth on the equity side, they're going to make a decision to actually
 allocate towards fixed income. All right. Well, a little. Great to have you on the set. I appreciate it.
 Appreciate you Morgan. All right, a lot more to come here. I'm warning call including we've got
 much more on that U.S. intervention regarding the yen. Our seed leesment is here. Standing by,
 you're going to break down the ripple effects that could, that that could have on Wall Street and
 Washington. Plus, counting down to SpaceX's first earnings as a public company, we just touched
 on it. We're going to dive a little deeper. Key numbers to watch and another key event beyond
 those results that could fuel big moves in that stock. And later, not just SpaceX, another busy
 week, on the earnings front, overall quarter of the S&P 500 companies are on deck. The names
 you need to be watching. We have a very busy hour still ahead. You don't want to miss it.
 We're going to call it right back. There's nothing better than ballpark evenings,
 but nothing worse than waiting in ballpark lines. That's why Bet365 has early payout.
 If the team you're riding goes up five, they'll pay out immediately. In the earlier you get paid,
 the earlier you can get another hot dog, Bet365. Download the app and see what early payouts all about.
 Must be 19-year-old or Ontario only. Please play responsibly. If you or someone you know has
 concerns about gambling, visit connectsontario.ca in terms of conditions apply.
 What made you confident that you could do something that hadn't been done before?
 I have no fear of failure. Trailblazing women, changing the game. One of my favorite pieces of advice.
 Think about what your boss's boss needs. Leadership can look in many, many different forms.
 It really does come down to just trusting yourself. Life is short, and you just got to think big
 to accomplish big things. Julia Borsten hosts CMBC Changemakers and Powerplayers. New episodes
 every Tuesday wherever you get your podcasts. Welcome back to morning call. We just touched on it
 before the commercial break, but it's a big week for SpaceX. It reported its first earnings as a
 public company after the bell on Tuesday, followed by the first major stock lockup expiration on
 Thursday. So with SpaceX down more than 20% from the IPO price, down more than 50% from its trading
 high, stakes are stratospheric and not just for the company and for Elon Musk. Let's start with
 earnings. Starlink results, CapEx plans, those will likely matter the most. Starlink, which is part
 of connectivity is the profit engine for SpaceX and it counters big spending on both Starship
 and XAI as it builds an integrated AI tech stack that spans semi manufacturing with Tesla,
 Frontier AI models and applications as it buys cursor. The key question. How much to starlink
 subscriber growth, NeoCloud deals with likes of Anthropic and Google and multi-billion dollar
 government contracts offset that cash burn. As for stock lockup expiration, it starts Thursday when
 911 million shares owned by some 20% of insiders become eligible to sell. Now just to put that
 in perspective, SpaceX sold 629 million shares or less than 5% of shares outstanding in the IPO.
 So we're talking about a lot of supply points to come online. That's just the start, too.
 More lockup expressions will follow through the end of September. The public float could triple
 overall. Take a look at that chart to see what I'm talking about. All of this isn't just expected
 to impact SpaceX either. Other space stocks have been selling off in the wake of the IPO.
 Could move in sympathy here. Wall Street's expecting more pressure. Short interest in SpaceX
 specifically sits at an estimated 35%. So we'll see what this week brings. But let's talk more about
 the growing business of space. The space economy overall and let's bring in Tej Batia CEO of Nebix
 and the former CEO of Axiom Space and someone who've known for a little while. I'm excited to have
 you here on set. Welcome. Thank you, Morgan. It's great to be here with you.
 Okay. I want to get into the company that you're building out right now and why. But first just
 more broadly, your assessment of the space economy as we do look to SpaceX earnings, which
 are going to be their own sort of milestone. Yeah. You know, the space economy, if you follow
 every dollar back right now, goes to some government budget. And that's a very large number.
 It's about $138 billion that's going to be transacted by the governments around the world this year
 in 2026. Launch only makes up less than 7% of that and SpaceX is maybe half of that. So when
 you're talking about the overall spanned, SpaceX is a small part of it. Now SpaceX is one of the
 most fundamental part of it's without launch. There is space. There is space. We just can't get there.
 So it's a very important piece. And when you look at their earnings this week, I know everyone's
 talking about cloud and AI. But if you actually bring it back to the fundamental cash cow, which is
 starlink, it's telecom. It's an industry we've known. And for every million subscribers, they bring
 in a billion in ARR a year. So I'm pretty, I'm not a stock person at all, but I'm pretty bullish
 about what they're going to do for the economy. Okay. So in light of that, tell me a little bit about
 nebix and why building out an exchange, a financial exchange focused on the space economy is something
 that needs to happen right now. Yeah. So you know, I've been a space fanatic since I was a kid.
 Since I was three years old, I jumped into the industry about five years ago. I got an opportunity
 to sell missions to space. Literally when I was three years old, when I was 43 years old, I couldn't
 imagine that being a real thing. But I sent 16 astronauts up on four missions on SpaceX rockets
 to the International Space Station. And in a matter of a few years, brought in a billion dollars of net
 new revenue into the company and into the economy. And as special as I like to believe I am,
 it's a little strange that someone coming from Google, never having worked in government or space,
 can drive that much revenue. So I started to analyze what's this 138 billion that's going to be
 transacted and how do more people get that? So the reason why an exchange, a financial exchange
 is needed is majority of that growth and that 138 billion over the last five years has come from
 outside of the United States. If you look at the civil space budget globally, the United States
 NASA has less than a third of it. So two-thirds of the spend is coming from outside of the United States,
 yet 85% of all supply is concentrated here, which makes sense, we're the only ones that really
 do space. So that is an export gap of $70 billion a year that could be transacted. But it's extremely
 friction. Politics on one side, import expert on the other, and we just see a giant opportunity
 to build those commercial rails that sit on top of the physical rails that is SpaceX.
 That's super interesting, because you think about what new technologies do in industries,
 I mean essentially what they do is they democratize access within that industry and that's where
 the disruption happens. And so if I'm hearing what you're saying correctly, you're saying there's
 an opportunity to democratize access to space, commercial industry is enabling it, but the actual
 connective tissue is still missing. Correct. And it's not just democratize. We've seen this over
 and over again, whenever physical rails are set, commercial rails must follow. In the United States,
 the railroads of New York to California, that brought about American express, the travelers check.
 Butterfield, Wells and Fargo in Buffalo, New York were guaranteeing wealthy New Yorkers that their
 gold would make it to California, even if Jesse James robbed the train. Then they realized if
 you're doing that, you don't have to actually send the gold. And that's what became American Express,
 that became what that network of suppliers was. JP Morgan in 1871 standardized the shipping container,
 invents the letter of credit. Global banks are accelerating trade between the United States and China
 150 plus years ago. So that has not happened in space yet. For geopolitical reasons,
 everything the time is now and we think the upside is way larger than what people are expecting.
 All right. Why don't you build this out? Come back. Keep us updated. Look forward to it. Great.
 Tejbatia. Great to have you here. Well straight ahead, tapping into the booming business of
 prediction markets. We talked to the CEO of gaming operator Russia Street on how the new
 frontier of betting is impacting his company's bottom line. But first, as we head to break,
 massive weekend for Sony and for Disney after the new Spider-Man movie dominated the weekend
 box office, it trounced existing records, pulling in $355 million in North America. That's
 the second biggest debut in domestic box office history, just missing the record set by 2019's
 Avengers Endgame. With a new Spider-Man Endgame along with Spider-Man No Way Home and Avengers
 Infinity War, there's so many superhero movies. Marvel Studios now has the four largest openings
 of all time at the domestic box office. Should also note Disney reports earnings this week. Morning
 call. We're right back. Not every game's an all-timer. Sometimes you get a dud, but at bet 365,
 boredom is the thing of the past. Thanks to their early payout, there's always a reason to watch.
 And while they can't make games exciting, they can help fans get excited.
 Bet 365. Download the app and see what early payouts all about.
 Must be 19-year-old or Ontario-only. Please play responsibly. If you or someone you know
 has concerns about gambling, visit connectsontario.ca, terms of conditions apply.
 What made you confident that you could do something that hadn't been done before?
 I have no fear of failure. Trailblazing women, changing the game.
 One of my favorite pieces of advice. Think about what your boss's boss needs.
 Leadership can look in many, many different forms. It really does come down to just trusting
 yourself. Life is short and you just gotta think big to accomplish big things.
 Julia Borsten hosts CNBC Changemakers and Powerplayers. New episodes every Tuesday,
 wherever you get your podcasts. Welcome back. It's been a hot summer for the gaming market,
 driven by sports betting surrounding the World Cup. Traditional sports books,
 seeing a massive spike in way drink during June and July, with New York alone hitting a
 two and a half, two and a quarter billion dollars. That was thanks to the World Cup final
 and the NICS NBA title, prediction markets getting in on the action too, with platforms like
 Calishe and Polymarket handling, more than $50 billion during the World Cup. Let's talk more about
 the state of gaming and gambling with Richard Schwartz, CEO of Rush Street Interactive, which operates
 online casinos and sports betting sites like Bet Rivers and Play Sugar House. Richard, it's great
 to have you on the show. Welcome to you. Let's start right there, especially since you're coming off
 of earnings last week, which was a beat and race quarter. How would you assess the market right now?
 Good morning, Morgan. Thanks for having me. I would say the markets for a company like us is doing
 extremely well because we're able to take advantage of the all-micocino market in America,
 which are growing at a very, very vast rate. And so we've been able to reinvest a lot of our
 resources strategy and innovation in this category that I think has it received as much attention
 from others as it asked from us over the years. And we've been able to now have the 15 quarters
 in a row beating EBITDA and revenue expectations. We're on a great, great trend. Yeah, the online
 casino market. I'm very curious about this. Where is it pulling market share from? Is it from the
 brick and mortar casinos? Is it from other areas? And how would you assess the consumer given
 what's been considered a discretionary environment? Well, great question. First of all, it is
 drawing from not letting these players only a small percentage of the players for them, but it's
 a really just a digital only entertainment audience that really likes to engage these types of
 products. I would say from the economy of discretionary spend standpoint, the pauses are healthy,
 engagement is strong. Our active players are up 54% year over year, which is a really high
 number of days to come off of a high growth number like that. So what I think you're seeing is that
 when consumers are more sensitive for the discretionary spend, they tend to fare affordable at home
 in our payments like us. Yeah. I mean, the fact that we're coming off of a monster start to the
 summer in terms of the sports environment. How does that set us up for the second half of the year?
 Really strong. We're absolutely into World Cup. You just referenced some great numbers.
 About 30% of our biz is sports. Well, the World Cup provides the green opportunity for user
 acquisition. And what we do with that is that we didn't cross out from the sports to the
 online casino, which I referenced earlier with our strength. So what we've seen is that we have a
 highest number of new users who have ever seen for an event like a tournament for the World Cup
 this year. And so it's a great opportunity for us to keep these new players engaged and drive
 meaningful growth for the rest of the year. The fact that you apply for a CFTC designated contract
 market license for the prediction market, how should investors think about that? Could a launch
 be in the cards here? Or is this something else?
 Was it fascinating time on our industry? What's happening? And we're going to have to wait a year
 or so for the certain parts to weigh in and all the different circuit courts decisions you're seeing.
 From us as I referenced, we're going to see no first company. And so we're not seeing an impact
 from the sports relevance, which is the majority of the prediction margins from sports. But
 we are seeing is that our acquisition costs are improving. Our active players are up 54%
 as I said earlier. And so what we've done is we've applied for a CFTC application in June.
 So we have the flexibility and preserving the optionality. It is market because we're relevant
 for our business in the future. We'll have a chance to participate. That's interesting to hear
 you say that. So basically the prediction market business even though it's growing gangbusters
 is not eating into online gambling. Not in the online casino space where we specialize in.
 And even in the online sports betting on the state by state level, most of the investors going
 into the states that haven't legalized online sports betting yet through a state process.
 So that's where you're getting the majority of the impact. But the company like us,
 where we're most of our sports betting that we do have as international are not impacted as much
 in the United States. In fact, most of our sports betting is in Latin America, which is another
 compelling part of our story. But we're not seeing the impact from the sports. And the fact that
 so much of our business in sports, Latin America means that they've actually helped us with it
 because others are distracted on the sports air while we get to reinforce and focus on the
 casino space. And we're hoping it's going to happen. We're seeing some signs of it
 is because some of the states are on risk of losing some sports money.
 Eventually as this prediction market industry grows, there might be more of a demand for all
 like a scene of it legalized around the country. And it's actually quite valuable because if you think
 that you might know the stock is pretty interesting, only 12 percent of the U.S.
 population to play on my casino today at a state level, and over 61 percent of my sports.
 So there's a lot more growth ahead for on my casino, which is what our social dance.
 Wow. Super fascinating to see how all of this evolves, Richard Schwartz of Rush Street Interactive.
 Appreciate having you on. Come back, keep us up to you.
 Well, still ahead. Well, thank you.
 Okay, still ahead much more on the U.S. intervention in the Yannars. Steve
 Leastman is here. He's got the ramifications. The move could have on markets here in the U.S.
 Why it matters to your money? Morning calls back in a moment.
 I'm Morgan Brennan. Welcome back to Morning Call. Let's start with U.S. stock futures with
 markets kicking off a new trading month. Higher right now ahead of the open, all the major
 averages are poised for gains here at the opening bell. This after gains on Friday and for the week,
 although a mixed month overall for July, we take a look at treasuries too, busy week of economic
 data including Friday's jobs report, the 10-year hovering above 4.6 percent, and yields in general
 a bit lower across the curve as oil prices move lower as well. If we stick with overseas markets,
 we are watching the Yann, Japan and the U.S. intervening to boost the currency after it touched
 a 40-year low against the dollar late last month on Thursday. Treasury Secretary Besen saying
 yesterday that he will not hesitate to repeat a coordinated intervention also urging that a
 federal reserve backstop for foreign central banks and monetary authorities be, quote, upsized.
 So, for more, let's bring in our own Steve Liesman. Steve, it's great to have you on, and there's
 a lot to get into here. But first, I have to start with why now, after so many years?
 I mean, apparently, it's been 15 years since the U.S. intervened in a foreign currency
 foreign market in this regard. I think some interests align here. In this case, I believe it was
 the idea that the U.S. did not want to see the Japanese Yann devalue further, which would have
 really hurt the terms of trade as far as the U.S. concern exacerbated perhaps the U.S. trade
 deficit with Japan. And Japan had reached a point where it was concerned about internal financial
 issues regarding the Yann devalue and what would happen with its own bond market and other domestic
 investments that it had to really staunch this outflow or this devaluation that maybe would
 precipitate an outflow. Also, there is the issue of the carry trade where a lot of money is borrowed
 in Yann and then bought and dollars are bought, and that underpins a lot of the market. Maybe you
 see why the stock market is reacting favorably this morning to all this because, at least for a moment
 here, there's a little stability to the carry trade. Yeah, I mean, along those lines, Steve,
 Torston's lock at Apollo yesterday writing that the bottom line is that the Yann carry trade is
 broken down. He argues that broke down after the liberation day last year, and that the Yann
 is no longer a rate story that until volatility subsides, it's going to trade on Japan's fiscal
 outlook, rather than the interest rate gap. That being said, I realize there's ramifications for
 US Treasury market. There's also potentially ramifications here for the Fed, depending on what next
 steps could be. Right, so I'll take those piece by piece. When it comes to ramifications for
 the US Treasury market, it looks like the US Treasury market has bounced back from weakness
 from yesterday, from Friday. The issue here, I think, is that you had some concern on Friday,
 there was also concern with what the Fed didn't do, or didn't say last week, so that caused something
 of a sell-off in Treasury. They bounced back maybe because there's some stability out there
 as regards. Then when it comes to the carry trade, yes, it's going to be much more based on domestic
 financial issues that are out there regarding Japan. There is one interesting thing here,
 well, there's a couple interesting things. One is whether or not the Bank of Japan ends up
 following up with a rate hike here. That's usually something that you need some more structural change
 rather than just the idea that you intervene in the currency market. So we'll see there are some
 who expect the Bank of Japan to follow up with an interest rate hike here. Yeah, I just had
 one more question on the reports over the weekend. The US sold euros rather than dollars to buy
 yen. What's to make of that? How unusual is that? Yeah, that's pretty unusual. I can't quite figure
 out. I talk to a bunch of people as to why that is. I don't know the reason for that. Ultimately,
 it had to be something of a dollar transaction in there. So people are puzzled by that, Morgan,
 and I'm not sure why it'll be interesting to see. This will all show up, or some of it will show up,
 at least, on the Fed's balance sheet because, of course, the Treasury conducts its operations
 through the Fed. So we'll get a feel for this one. Also, when they report the contents of the
 Exchange Stabilization Fund, we don't actually know how much the US Treasury intervened. There's
 that picture from Scott Best's notepad where he said intervene 5 to 10 billion. So maybe it's
 that amount. There's a report this morning just coming through that says Japan itself may have
 done as much as $35 or $40 billion. Yeah, some good handwriting there too, and that picture
 that we saw circulated over the weekend. I wish my handwriting was that good. Super fascinating
 situation. Steve Leesman, I'm sure as a working weekend for you, appreciate you bringing us the
 latest on all of this. Steve Leesman. Well, checking some of the morning's latest headlines,
 we're watching oil prices. President Trump saying that negotiations with Iran will begin to
 today, and maybe just say restart, after he held off on new strikes against that country,
 speaking on Air Force One yesterday, the president saying he called off strikes,
 describing a potential deal covering the Hormuz straight and Iran's denuclearization as, quote,
 imminent. Federal Reserve Chairman Kevin Worceman's time is apparently raising the possibility of
 changing the frequency of the central bank's regular policy meetings. That's according to reports.
 One idea that Worceman reportedly floated was for Fed policy makers to meet six times a year,
 to decide on interest rates and other monetary policy issues, and twice a year for discussion
 of other economic topics. I'm in those reports, St. Louis Fed president, Alberto Musalom telling
 the financial times this weekend that the sell-off in U.S. Treasury's last week signaled the need
 for the Fed to earn its inflation of fighting credibility with interest rate increases. Keep in
 mind he's not a voting member this year. The FT reporting that AstraZeneca is weighing a deal to
 merge with Bristol Myers Squibb in a deal that would value the joint company at $400 billion.
 AstraZeneca and Bristol Myers Squibb did not immediately respond to a CNBC request for comments.
 But the CEO of AI firm Hugging Face, speaking out on his company's recent hack attack by Open AI.
 In an interview yesterday, he was asked if AI developers have lost control of their own models,
 saying it's a technology system built by engineers and engineers can make mistakes sometimes,
 going on to elaborate on his view of the incident.
 It felt very weird and unprecedented to us, right? Because I think it's the first instance of
 something quite autonomous doing something like that. So the volume of the actions taken
 and the speed of them, I think it was 17,000 actions taken in four and a half days,
 was very new. While the press tour will continue, Hugging Face's CEO will have more on all of this
 when he joins Squawk on the street at 11 a.m. Eastern. And a lot more to come here on Morning Call
 including a busy week for earnings with the consumer heavily in focus. We're going to get a pulse
 check ahead of those results. Morning Call is right back. Welcome back to Morning Call,
 the consumer in focus this week as we get a diverse lineup of earnings, including McDonald's,
 Disney, Marriott, Under Armor, that's just scratching the surface. Results come on the back of the latest
 consumer sentiment data which showed an uptick last month despite gas prices moving back towards
 the $4 a gallon mark. But for more, let's bring in Martin Dolphi. He is founder of Veliott consumer
 partners, which invests in consumer businesses across food, apparel, beauty, wellness and retail.
 A lot of names you might know as a consumer that we will call, they're still private companies,
 but upstarts, many of them. So we're going to start with the big macro question that is
 state of the consumer as we do look to results. Yeah, the US consumer is very healthy. We're seeing
 broad base growth across our portfolio of brands, largely in the health and wellness sector.
 You know, they're shopping, female head of household is like, you know, controlling a lot of
 the purchasing decisions. They're shopping healthier for their kids. They're more transparency
 ingredients. You know, we're seeing like, you know, 30, 40% top line growth and a lot of our funds.
 And, you know, we're seeing resilience. So we think the US consumer is very strong and it's
 going to continue to be. And so yeah. Yeah, and of course, you know, you're in companies like
 Van Luen, ice cream, good crisp company. We're just talking about on commercial break here,
 hydration farms, people. There's a whole bunch including some names that I think have seen
 exits recently like coterie and rone. So along those lines, speaking of exits, we had two
 consumer companies IPO last week. Do you watch something like that very closely as a mark of
 appetite for investors as we do see some of some of these companies mature? Absolutely. I was
 just talking to somebody backstage about we want to see work consumer IPOs. You know, I think
 you know, on holdings was a great one that happened recently that we watch closely.
 There's been rumors that V-oriented skims and a lot of other kind of apparel brands are in
 the pipeline and filed us ones. Definitely, it's an exit route for a lot of our brands, you know,
 typically, you know, we're underwriting a small private business to get to three, four hundred
 million dollars in top line revenue and exit to a strategic buyer or a larger private equity firm.
 But we want to see more and more IPOs. And I was in a room a few months ago down in DC with the
 new chairman of the SEC and he was talking about, you know, creating more IPO, a better environment
 for more consumer IPOs. And so, yeah, I mean, I think we got to reverse the trend. There's just
 fewer IPOs on the US markets and we need to see more great IPOs for the small and mid cap companies
 and environment that like really encourages that. So it very closely we watch it.
 Do you think investors have appetite for it when you look at, I think, Reformation had
 you know, debuted and ended up 8% higher than where the IPO price was, but Jersey
 Mike's was a different story. So I guess how does it speak to investor appetite? No pun intended
 here. Yeah, I think it's there. I mean, I hear it all the time. Investors want more of these
 consumer names to invest into. And I think maybe some of the investment banks have been a little
 hesitant to bring more consumer stories public, just giving how they have traded as a large group
 over the last four or five years. But I think that's changing. And I think the younger investor,
 this modern investor, once more investments in stock picks that are like are very relatable that
 are brands that they shop. And I think it's there. And I'm excited to see more of them.
 Yeah, I mean, you mentioned some of the consumer trends that you're seeing through your portfolio.
 I guess if we just dig a little deeper into that, especially as it is women and heads of
 that are the heads of households and sort of controlling the purse strings. Yeah.
 I mean, undeniable health and wellness and longevity. I think that's a sector that we see across
 a lot of different consumer categories. I think made in American businesses or something that
 like the consumers appreciating more, the premization of brands. And yeah, I think there's also this
 movement that we're tracking where there's lots of the consumers moving outside of New York Chicago,
 San Francisco, to some of these like more regional markets like Austin and Nashville and Charlotte
 and so on and so forth. And there's great consumer businesses being built there. And yeah, I mean,
 we're very excited to be focused there. All right, Martin Delphi. It's great to have you here on set.
 I appreciate it. All right. Thank you. Come back there. We'll do. Well, the morning call career was
 up next to end up the trading day. And from currency intervention to earnings, economic data,
 we got a monster week taking shape. We're back in just a moment.
 It's time for a call sheet where we look at the topics driving the trading day ahead.
 Crew members today, Michael Rorck of Jones Trading, Lee Baker of Claris Financial Advisors. He's
 also a member of the CNBC FA Council and James Pethikukis of the American Enterprise Institute
 and a CNBC contributor as well. It's great to have you all here. Mike, I'm going to kick this one off
 with you. Dollar yen. I don't want to be on the other side of a Scott Besson currency trade at
 this point in time. It's all I could say. It's, you know, it's, it's interesting. Obviously,
 the weekend's been an issue, but you have a government that has pro stimulus spending policies.
 You have a central bank that's very slow in raising rates. I feel like a lot of this is a
 mess of Japan's own making and they need to move forward and figure out real solutions here.
 I mean, we're the key problems. They're telling their local pension funds and insurance companies
 they want them to buy JGBs, but those institutions have done very well being underweight JGBs in the
 past year. So they really need to have some real policy structure. Obviously, the intervention is
 going to help in the short term, but it is a short term move. It's a short term solution.
 Yeah, Jimmy, I'd love to get your thoughts on this since you are joining us from Washington here.
 Yeah, my thoughts are that Japan can do a lot of things and though one of those things,
 you know, Americans aren't going to like very much. You know, you know, it's not just us doing
 things there is that, you know, they can sell treasuries. Great. We're a country with a massive
 debt, a debt that's going higher. People waiting for like when their market's going to care about
 our debt. So like anything with the potential to have a upward impact and interest rates in
 the United States, I'm concerned about, I'm concerned about our debt. I'm not sure many people
 in Washington are. So like that's the first thing I think of. I don't need anything else as
 sort of an upward factor on American interest rates. Yeah, of course you can make the argument
 that the fiscal picture in both of these countries is worrisome and there's been a lot of debate.
 I think about Jamie Diamond and others for several years now who have been saying this is going to,
 you know, come home to ruse. This is going to become an issue. Don't know when, don't know how,
 but it's going to happen. So in light of that, Lee, I want to get your thoughts on this,
 especially as we have seen this run up in rates here in the US Treasury market and whether and how
 that is affecting the equity market right now. Well, you know, I think this is adding to the
 nervousness of the US equity markets. We've got a whole lot of things going on and when we
 look at the markets, they're zigzagging back and forth, I think this is just an additional
 thing that's compounding the situation. So there's concerns about all of the cap
 expending in the AI sector. There's concerns about Kevin Warsson, the new Fed regime, so to speak.
 And so I think this is just one more thing that's causing the equity markets to be just a little
 manic if you will. Yeah, and of course, you saw that big momentum unwind in the month of July as well,
 Mike. But before we get more into what to expect for the markets this week, we've also got a potential
 deal. I'm not going to say a deal. Talks. Talks again between the US and Iran and others in the
 region as well. So how does that factor into what we're seeing, especially with crude prices coming
 down this morning? I don't think it factors that much. I believe the last time I was on with Jim,
 he talked about this never being solved and he was right. So we're still dealing with this and I
 think investors are just for the time being, they're trying to look through it. But the longer this
 goes on, I think, you know, if it goes on into the fall, it's going to be a problem. And it really
 feels like we're making zero progress whatsoever. I mean, Jimmy, it almost feels like Iran is incentivized
 to keep, you know, dragging this out. The US is incentivized, especially ahead of midterm elections
 to try and come to a deal. Does that equal an impasse? It is an impasse. And I mean, listen,
 we're now in the month of, month of August, we have midterm elections three months away.
 You know, the president is not going to want, you know, not just like higher oil prices,
 but news of, you know, more American casualties coming in from a war, which was like supposed to
 have been over like weeks ago. So there's a huge plug impact. And there's a huge incentive
 not to escalate Iran knows this. They can push. And therefore, we end up in this really
 as policy cul-de-sac, where we don't seem to be making any progress, even though like at this point,
 like the end game seems like fairly obvious, I think, which is, you know, there's pressure on them
 to do nuclear Iran has more influence than before on the strength of hormones. Not great.
 That's kind of where we're at, but that doesn't look like a big win for America, which is why this
 isn't ending. Yeah, meantime, we have more earnings on tap Lee this week. And we get more data
 ISM manufacturing today. We get services later in the week. And then of course, I think the big
 piece of data that investors are watching for and that's jobs on Friday.
 I think the jobs numbers are going to be significant. Now, I've been crisscrossing the country
 here lately. And it's been interesting to hear what amounts to me to be a bit of a tale of two
 cities, right? On the one hand, airports are packed, restaurants are packed, but as I listen to locals
 and a lot of the communities, there's a lot of concern. And you're hearing about people that
 are struggling, if you will, and cutting back in a lot of different areas. So it's going to be
 very interesting to see what the jobs numbers look like. And to determine whether or not that is, in
 fact, are we beginning to see the canary in the coal mine, so to speak, as it relates to the US consumer?
 Yeah, actually, Jimmy, I'm going to jump to you on this one because I'm looking at your notes and
 you touch on something that I actually had this conversation with an executive on Friday.
 And that is the pendulum swinging on the need for workers where maybe earlier in the year
 companies were thinking they wouldn't have to hire as much because of AI.
 You know, I feel like the version of that is somebody's hiring. We like that. We like people
 have jobs and some of the sectors where we saw either slowing job growth, job growth below trend,
 some of your tech sectors, your knowledge sector, professional services, that maybe we'll see
 more hiring there. But the downside of that is that businesses are disappointed at the return
 on the investment in AI, what it's doing, their ability to be more efficient, their ability to
 perhaps not hire in certain sectors, that's a problem. We want companies to hire. We also want
 companies to say, hey, we've started up all these AI projects and they're not only making this
 more efficient, they're generating revenue, like fundamentally, that is what investors want to see
 who are interested in AI and make sure all this CAPEX is going to pay off in business productivity.
 And the fact that we're not seeing that has the job impact, so listen, I love the job impact,
 but I love to see a productivity impact as with the market. Mike, want to get your thoughts on that?
 I know you've written quite a bit about this topic. You know what? I just keep thinking back to
 the Fed decision last week and everyone being upset about Kevin Worshnot raising rates.
 What if we do get a weaker jobs number this week? All of a sudden that thinking, you know, it flips
 and I think people need to be a little more thoughtful. Look at the economy, wait for the status,
 see how it plays out. I'm still, I think we're still in this K-shaped economy and again,
 raising interest rates isn't going to help bring oil prices down if there's a war going on.
 It's not going to stop the hyperscale of some spending massively on the data center buildouts,
 so you're really going to squeeze the consumer. So from that perspective, I think you need to see
 this data play out this week and see how things look going forward. Yeah, I'm going to, of course,
 we're going to get a test on. Yeah, exactly. Great point.
 All right, gentlemen, thank you. And of course, you have talent here after the bell today,
 speaking of AI trade, SpaceX tomorrow, quite a few others, and many consumer stocks reporting
 as well. Gentlemen, great to have you here. Thank you to our call crew. That does it for us here.
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