Morning Call 8/21/26

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 Good morning and a happy Friday. Let's get a start with a check on US stock futures with all three
 indices coming off their fourth negative session in the last five. I saw some pretty start selling
 yesterday. We finished at lows of the session and you could see we are bouncing back here this
 morning pre-markets. All the major averages are poised for gains, S&P poised to open up 23 points,
 the Dow, 208 points, the Nasdaq 168. Keep in mind though, we are still in pace for losses for the
 week, the Dow and Pays for its second negative week in a row. S&P Nasdaq and Russell 2000 are all
 on pace to break three week win streaks. The big factor in all of this, what we're seeing in the
 bond market. So Treasury yields on the rise again, shrugging off the Treasury Department's intervention.
 This week Treasury Secretary Besent on CNBC yesterday was discussing that intervention,
 even using the word twist at one point. We believe that the yields don't reflect the underlying
 fundamentals. This Iran conflict, we will get on the other side of this. We don't know when,
 and we can talk about the economic measures we're going to be taking against Iran in a minute.
 We believe that the liquidity, especially in the 30-year point, is very poor.
 Well, as you can see just now on your screen, we see yields taking a bit of a breather here this
 morning. But in general, here's what we've seen play out in Treasury yields this week
 and how the market has received his messaging. Look at the moves in the 30-year yields this week,
 hitting a new 19-year high on Tuesday, 5.33%, then coming off that a bit before the Treasury
 announcement falling below that much more aggressively as bonds were bought into. Again, following
 that Treasury announcement on Wednesday, falling to a low of 5.18%, on Wednesdays, you could see right
 there. And then we began to see a move higher. And we saw yields retrace their steps here.
 Even as the Treasury Secretary was explaining the impetus for that intervention on CNBC yesterday.
 As I mentioned, you could see a bit lower here this morning, 5.23% versus where we were in trading
 yesterday. We check on the 10-year as well. It was a very similar situation. We were above 4.7%
 on Tuesday, falling just below that ahead of the announcement. And then from there, yields moved
 lower before a reversal again yesterday and retracing steps post-intervention. You could see right now,
 though, as well a bit lower here this morning, the 10-year Treasury yield. What's feared better? Gold.
 Up over 4% this week on pace for its fifth positive week in a row. And as you can see right now,
 well, that's the Bitcoin chart. But if we were to show you the gold chart, you'd see that it was
 higher this morning as well. So let's take a look at Bitcoin. Bitcoin's up another almost 8% this
 morning. We're now at 78,300 and almost 59 dollars. And that is now on track for the best weekly
 gains in more than two years for Bitcoin. A huge, short squeeze really triggered this week,
 given what we've seen in terms of the shift into some of these non-treasurery non-stock assets.
 Let's get a check on energy as well. Treasury Secretary Besson also telling CNBC yesterday that
 the US will impose, quote, the toughest sanctions in history on Iran, suggesting details could come
 early next week. We hear there might be a meeting. He said this on CNBC yesterday as soon as Monday.
 So if you look at oil right now, we're actually a bit lower here. WTI is down more than 1% trading
 just below 86 dollars a barrel. Brent is also down 1% trading just below 93 dollars a barrel. But
 keep in mind we are on pace for two straight weeks of gains when it comes to crude oil. Let's see how
 Europe and Asia are closing out the trading week. JPMong is in Singapore, Ben Boulos,
 isn't London JP. Let's kick this off with you.
 Yeah, good morning to you, Amorgan. And we'll start off with these bond markets because it seems
 that the impact of the treasuries and recent actions to keep bond yields lower or easing
 seems to have faded somewhat. And you can see this actually playing out in Japanese markets.
 In fact, we're seeing the Nikkei to do five today taking a step back in part because of that
 slightly stronger yen. But we're also seeing core CPI for the month month of July showing the
 core inflation Japan is starting to tick up once again at 1.8%, but it is both really the case for
 a possible rate hike from the back of Japan in September. And that's putting pressure once again
 on these 10 year and 30 year yields up alongside some of the pressure and the impact being felt
 from treasuries moving up in a lockdown. Now, we want to take a look at the longer end of these
 yield curves here in Asia because of something interesting cited by the Korean finance minister,
 Ku Yunchul earlier today. And we're seeing it also impact a 10 year and 30 year yields out in
 South Korea. He did mention that increased fiscal borrowing and also uncertainties from the middle
 east of a war actually. The war that is in Iran impacting energy prices is keeping bond yields
 on the longer end of yield curves higher. And they will be closely monitoring this and try to keep
 borrowing costs in South Korea lower. Despite that though we saw the cost we actually defied
 that rise in bond yields, mostly due to the recent share buybacks announced by the likes of Samsung
 and SK Heinix. Elsewhere in the region, we saw stocks mostly outperform the Australian markets,
 ASX or just taking a slight step back and greater Chinese markets in Hong Kong and China
 actually outperforming. I do want to leave you guys with this. Take a look at the 10 year
 panda bond yield out in mainland China, which is actually going the other way and actually
 continue to stay rather subdued. In fact, this is due to the fact that we're seeing signs of
 economic growth slowing down and also price wars and evolution keeping China deflationary
 and thus also pouring the case by made by some strategy spoken to that perhaps these panda bonds
 have room in someone's portfolio for diversification. And really, who doesn't love a panda,
 right? Morgan, it's back to you guys and happy weekend and event.
 Thank you, you too. J.P. Young, thank you. Let's see how Europe's shaping up. Ben Boulos is in
 London with early trading there. Hi, Ben. Hi there, no pandas here, but we have got some green on
 the board for the European markets, etching higher and early Friday trade. Looking to end the week
 on a positive note, the pan-European stocks 600 looking to rebound after having posted its seventh
 straight negative session for the first time since 2023. Francis Kakaron also looking to recoup losses,
 so with the index on an eight-day losing streak for the first time since 2017. The basic resources
 basket of stocks is the one powering gains with mining companies among the top performers
 on the FTSE 100, helping to lift the broader London index amounts to the same extent on the Kakaron.
 It's the German DAX, though, that is powering higher and the Italian market. Look at that surging
 around half of one percent. We'll see if these gains are sustained throughout the session because at
 the moment all of the market, perhaps with the exception of the London FTSE, are pacing to end the
 week lower than where they had began. Front of mind for investors, though, throughout the week has
 been the bond market, Eurozone bond yields, easing slightly this morning, as you can see after
 yesterday's rebound, as intervention by the US Treasury, failed to ease those market jitters.
 The yield on Germany's 10-year bond is set for its second straight weekly climb. We're going
 to keep tracking these and monitoring these, as I'm sure indeed you will be doing with the US
 Treasury's Morgan. We sure will. Ben Boulas, have a wonderful weekend. Thank you. Let's take
 further into the market action we have seen this week, whether it is in the US or whether it is
 abroad because there's some similar dynamics playing out. As you just heard Ben say,
 let's bring in John Stolthus, chief investment strategist at Oppenheimer Asset Management. John,
 it's great to have you back on the show. I mean, I got to start right there. Bond, is this the
 new four-letter word, especially if you're an equity investor? You know, I think it certainly
 is the new four-letter word, and I think we've really got a normalization of interest rates
 taking place. There are shocks a lot of people who weren't born when we last had rates about
 this high. This is not uncommon. I mean, just think about it as a bond investor. Do you really
 want to lend somebody money for 30 years below four and a half, five percent? Even at that,
 it's not a heck of a lot compared to what we've seen in terms of gains in equity markets,
 metals markets, and other markets, generally speaking, past reform, we've no guarantee of
 future results. You just used a word I want to hone in on here, and that is normalization.
 Do you think we're trading where we should be, whether it's in the 30-year
 treasury, whether it's in the 10-year? We'll just say the longer end of the curve. Are we seeing
 normalization there? Is this where we should be given all the fundamentals that are factoring in?
 I really have to think so, Morgan. I've been in this business for 43 years. When I came in to
 business in 1983, about a year and a half before I'd gotten in, the 10-year yield of the
 treasury almost hit 16 percent. I can remember periods when rates were much higher than they are
 today, when stocks could still go up. I can remember very new in the business 1984-85 when
 clients were complaining because they did no longer easily 5-12 percent yield on junk debt or on
 mortgage-back securities. Yet stocks were going up. They were offering competition. Go figure.
 In light of this, we've seen some big moves and gold that happened before this week, but it
 just continues. Obviously, Bitcoin is spiking here and seeing renewed interest. Then the dollar
 has softened as well. In terms of just looking across asset classes, how do you want to position
 yourself, especially as we go into the rest of the year, that is going to be injected with other
 elements of volatility here, including midterm elections? We've got to say we expect volatility.
 Volatility is very natural. We've got traders on a day-to-day basis going risk on, risk off,
 risk off, risk off, depending on what kind of news, process, the tape, how they interpret it,
 what have you. But against that, you have very serious investing these days. That serious change
 in structure of the private investor who's really investing for intermediate to longer-term
 golds, three, five, seven, ten years and beyond, to maintain their lifestyle in retirement.
 And that goes across many generations behind the boomers as well as the boomers.
 That creates an environment where you would get the volatility that some investors will just
 buy the dip. We suggest buying the babies that get thrown out of the mouthwater at the
 better quality issues that get thrown out in down drafts. And it appeared to us that the market
 still has a lot longer to run. And it's fun to metals. It's outstanding innovation that is
 expensive. But as it gets cheaper to offer, it will likely see even greater adaptation
 or already be getting seen both by business and consumers. Okay. John Stoltz-Fiss,
 appreciate it. Great to have you on to start the hour. I keep waiting for our summer slowdown,
 at least in terms of the news cycle. It just hasn't happened. All right, we got a lot more to come
 here on morning call, including much more of the Treasury Department's intervention into the
 bond market, what Secretary Besson's endgame may be, how market-turned-turfing all of this,
 what it means for your money, plus digital margins, hitting a new record,
 as the energy supply crunch continues. We've been talking about it all week, the diesel crack spread,
 the potential wide-reaching economic ramifications, how that could hit your wallet, especially as
 we look to inflation readings next week. And later, President Trump touting a new golden age for
 the American space industry, taking fresh steps to help lift off that sector. Fun intended.
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 Ford has been lucky enough to spend more than a century with you. And if there's one thing we've
 witnessed, it's this. There's no can't in Canada. Ready? Set. Ford.
 We've talked about this all week. War and weather. The Iran War, ongoing droughts around the
 world, disrupting global shipping, causing freight prices to surge and further complicating
 the inflation picture. Pippa Stevens is here on set. And she has more for us. Pippa, break it down.
 That's right, Morgan. So the trifecta of the Iran War, Russia's war with Ukraine and
 drought in Europe and beyond is creating as Argus's John Olet put it. The single greatest disruption
 that the shipping market has seen on record. So at the beginning of the year, it cost about a
 $1.50 per barrel to move Arab light oil from the Gulf to Asia Pacific. That's according to
 Argus media. It now costs more than $13 per barrel. Now, that is below Maze High. But it ships
 reroute and look elsewhere. That's raising global prices. Freight races for the Red Sea have jumped
 85 percent since the Houthis announced a ban on Saudi Arabian transit through Babel Mandab.
 While historic low water levels in the Rhine and Maine rivers have pushed freight rates in Europe
 to record levels per Argus. And it's not just energy, but container shipping, too. Spot
 rate charges for container heading from the Far East to the US. What East Coast is up 287 percent.
 That's according to Zanada with the West Coast route up 271 percent. And as the war stretches
 into its six month long term rates are being renegotiated more than 40 percent higher.
 So this bill over is key. According to Zanada chief analyst Peter Sand who said
 the war is becoming a deep set and structural problem that will not go away anytime soon.
 Morgan, that's the key here. It's no longer just the spot rates, but also the long-term contracts
 are being repriced higher. Yeah. I mean, that's a key point that you make, too, because that had
 been one of the talking points earlier in this conflict with Iran. The fact that you had a
 market that wasn't pricing in future elevated levels here. I want to just dig in a little bit more
 with you, Pipa, on diesel and the crack spread we've seen, because we could talk about and we
 certainly track it, we do. The price of crude cruised up 50 percent since the start of the year.
 But if you look at ultra low sulfur diesel, which is what the diesel crack spread is tied to,
 it's up 100 percent this year. How does that speak to the refining piece of this and how much
 it actually is impacting more broadly the markets? Yeah. So refining margins are now at a record
 high, the 321 crack as well. You look at some of the numbers. A barrel of diesel is now trading
 north of 190 dollars per barrel. And that's what we've really seen is that you can have all of the
 oil in the world, but if you don't have the means by which to turn it into an end product, it's
 useless. And so that's really where the shortness is now concentrated on the refining side,
 because of course it's not just what's not coming out of the Gulf, but it's also now in Russia.
 We keep seeing these Ukrainian attacks on Russian refining infrastructure. More than 90 percent
 of Russia's refineries have now been hit since the start of the year. And so that's really where
 the tightness is. And then you look in the US utilization rates above 97 percent in the latest week.
 We cannot sustain those levels forever, given that there has to be turn around season,
 there has to be maintenance. And so that's where the where the problems right now are concentrated.
 I will say that if China were to further relax some of their export fuel bands, then maybe that
 would help the global pictures somewhat, but it really is that Russian side, especially that
 even if the straight-of-formers were to open tomorrow and all that refining capacity magically
 comes back online, the Russian situation is going to be here maybe longer term.
 All right, Pipa Stevens, thank you. Thanks Morgan. It's a great breakdown ahead of our next
 guest, John Kilda, founding partner at again capital, a CNBC contributor. And John, I mean,
 this is going to radiate it out into a lot of parts of the global economy and arguably already is.
 But let's just start right there with what we've seen with the diesel crack spread and what we've
 seen here with US refining capacity and the midst of all that. The fact that you're going to have
 to see some maintenance happen at some point, could we actually see this spread continue to widen
 from here or at some point you hit a level of demand destruction? I do think you'll hit a level
 of demand destruction. Morgan, good to be with you this morning. No doubt, not only just from the
 price, but also just from the availability. We should start to be seeing increased shortages out in
 Asia, especially as we move forward here. I can tell you as somebody's been in this business for
 long time now, these crack spread levels are just something you'd never even would have dreamed about
 or if you put them in a scenario out to company leaders or market participants, you would have
 been left out of the room, but to show you the extent of this. And this Pipa so rightly broke it down.
 I mean, we have two major problems, not just the Middle East refiners and not getting that
 refined product out through the Strait of Hormuz or any which way, but the situation in Russia is
 particularly bad. Russia used to be a major supplier of diesel fuel to the global market, even to
 the U.S. East coast. And they have shut that all down because they are now facing shortages
 themselves in country. And they're also having to import themselves now refined products.
 So we're all competing with the Russians. The pricing here, though, since we're uncharted territory,
 it gets bit up only as much as we can. I think there's an expectation or there's been
 throughout this war that things could end tomorrow as we've seen, particularly with President
 Trump's various statements about it. But now this thing is starting to set in big time,
 and we're going to have a demand spike here as we get into very late August, September when they
 start to, the farmers start to bring in the harvest, we always see a spike in diesel demand here
 in the U.S. then. So I would expect even more upward pressure on the retail diesel prices
 and result of that new factor that's coming out of this. Yeah, I mean, we're already seeing
 upwards of $7 a gallon for diesel in places like California right now. We're flirting with that
 in Hawaii too. Other parts of the country upwards of $5. I do want to get into the broader economic
 impacts of all this. But just one more question is we do look to the possibility of what I think
 President Trump has referred to as economic D-Day where Iran is concerned. As soon as next Monday,
 if you see big broader wider reaching sanctions on Iran, if that also impacts China,
 since China is Iran's largest trading partner, and there's some questions about that ahead of a
 Trump sheet meeting. But if that were to happen, what does that do to this entire conversation
 around the global energy complex? Well, interestingly, China's Iranian crude oil imports are down by
 about two-thirds at this point. The one thing that works on Iran is these economic sanctions that we
 see in over the decades. When you squeeze them really, really hard, they tend to come to the
 negotiating table and cut a deal. So, you know, that is what we need, but you need a uniform
 global group on that. Everyone has to have buy-in to a degree, although the U.S. started to
 implement secondary sanctions. So if you're a country that trades with Iran, you can get shut out
 here. That needs to be done. This thing needs to end. All these work around, you're hearing about
 pipelines and oil going out through Turkey, into the men, and through the Suez Canal,
 it's not going to do the trick. We need that straight back open. That's where the volumes of scale
 occur and get delivered to the world. It's what lowers the prices of everything that needs to happen
 immediately. And I do think, though, that since the bombing campaign seems to have limited success
 here, the economic sanctions will work on Iran, in my view. Okay. And just to bring this all
 full circle, economic impacts as we look to PC inflation reading next week. We're going to hear
 from Fed Chair Wars next week. We know the Treasury Department is intervening in longer-dated
 treasuries right now, as well. Where do you see the impact of this? Because we can talk about gas
 prices, certainly in a week like this where we've had retail earnings. But diesel is much more prevalent
 and actually arguably hits the economy much more quickly and aggressively when you see levels like
 this. It does. As I like to joke, you can do all the virtual shopping you want. It's all going
 to come to your house. Don't want a truck that ran on diesel fuel more than likely these days.
 So there's no way around it. This diesel price in particular feeds right into the producer part
 of the inflation readings, the PPI, and tomorrow's PC. The Fed is in a box here because they are going
 to be staring down an inflation pulse now from this renewed price by Kair. Keep in mind,
 diesel prices and crude oil prices did back down there for a few weeks, if not a month or so.
 And now they're right back up. The national average for diesel fuel not going on the door of the
 all-time record. So the Fed is going to have a problem on its hands. It's not going to be able to cut.
 They might be able to stave off a hike. But this is going to shave about half a percent at least
 of GDP, although GDP is quite strong in these days. So maybe not so much of a worry. But this is
 definitely an inflation pulse coming through to the PPI. And then the CPI as the shippers and
 the manufacturers roll these price hikes for shipping in particular out to the consumer for the goods
 that end up on the shelf or at your driveway. All right, John Kildoff. Great to have you on.
 Appreciate it. Have a wonderful weekend. You too. And our thanks to Pippa Stevens as well.
 Well, straight ahead, Walmart's latest earnings raising questions about the consumer. We're
 going to dig into whether American spending power may, in fact, be at a tipping point.
 And speaking of the consumer, let's get a check on shares of lost stores. Second quarter
 results topping estimates as same-store sales rose 10%. The off-price retailer also raising
 its guidance for the year. Company saying it's attracting new customers across all income levels.
 And existing customers are visiting and spending more. You can see shares are jumping
 9% bit of a bifurcation here in off-price when you think about this and compare it to TJX earlier
 this week. Morning call, be right back. Football is back. Every game, every weekend,
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 today and see what everyone is talking about. DraftKings, the number one sportsbook for live
 betting. In partnership with DraftKings, the crown is yours. Gambling problem call connects
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 live betting based on available live market data. The hard and stroke lottery is all about the wins.
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 fight heart disease and stroke. Play with one to two odds of winning thousands of prizes at
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 Ford has been lucky enough to spend more than a century with you. And if there's one thing we've
 witnessed, it's this. There's no can't in Canada. Ready, set, Ford.
 Welcome back. Let's get a check on some of the morning's latest headlines.
 China announcing new measures to help boost its economy. As it faces slow and growth,
 leaders there saying a greater share of physical spending will be directed towards households
 and consumption. As policy makers seek to shore up weak domestic demand. We started the week talking
 about this very dynamic. And in South Korea, Hyundai's union there beginning its first full strike
 in a decade. This after wage talks stalled as the union seeks a higher retirement age and job
 productions against AI and automation. Development comes as Hyundai CEO tell CNBC that the company
 is considering plans to further expand its U.S. production at a new multi-billion dollar vehicle
 assembly plant in Georgia. Well, Bloomberg is reporting that broad commas and talks with a
 group of lenders to raise at least $60 billion in debt. The report says that figure could climb
 to 100 billion and that Blackstone and Apollo global management are in talks with broad comm to
 participate in the financing. That has been something that has factored into what we've seen in
 the treasury market as well as all of this corporate debt issuance competition there for investors.
 Nvidia is denying a report in the information that it plans to begin shipping chips made by Chinese
 made for Chinese customers by the end of this year. The company telling Reuters it has no China
 specific chips in its plans. And President Trump signing a memo to help drastically increase the
 number of U.S. commercial space launches. That includes directing government agencies to look at
 federal land for new launch and reentry sites. The White House says it wants to see at least 1000
 launches and reentries by 2030. That's up from 178 launches last year, which was already a record.
 We'll still on deck. We've got more on treasury secretary bessons bond end game. The big questions
 our next guest has about the intervention and the credibility issue. He says the U.S. is
 increasingly facing morning call. We'll be right back. I'm Morgan Brennan. Welcome back to morning
 call. Let's get a start here with U.S. stock futures, which are rebounding. This morning is oil
 prices come down. Treasure yields take a breather here. You can see after a down day yesterday,
 all the major averages are poised for gains at the open this morning. The S&P poised open of 21
 points. The Dow 192 points. The Nasdaq 164 points were still in pace, though, for losses on the
 week as of right now for the major averages. Let's get a check on what we're seeing with treasuries.
 Because as I mentioned, yields are taking a little bit of a breather here this morning after a retracement
 that we saw yesterday after the treasury department stepped in and doubled the potential for its
 funding at the longer end of the curve. You can see the U.S. 10-year treasury yielding 4.68%
 right now. So we're actually above the levels that we were pre-treasury announcement on Wednesday
 and the 30-year treasury 5.23%, so we're well off the highs that we saw earlier. This week fed
 sensitive to your 4.18%. We're going to have more on treasuries and that intervention in just a moment
 when it means for the markets. Look at gold because that's had another seller week up over 4%
 so far this week. On pace for its fifth positive week in a row and you can see up another 1.5%
 this morning, $4,640 an ounce. That's where we're trading right now. Let's take a look at Bitcoin too
 because we continue to see a climb higher there. Well past the 70,000 mark on track for its best
 weekly gains in more than two years and that's before the 7% move that we're seeing here in early trading.
 We're now just below $78,000 for Bitcoin and if we get a check on energy as we do see crude prices
 take a little bit of a breather here this morning although still elevated. You can see WTI is down
 about 6.10 of 1% trading around $86 barrel. Brent is down about half a percent trading runs
 $93 a barrel and if we turn now back to what we've seen with the treasury markets and the treasury
 secretary the treasury departments aimed at using pressure on longer dated government debt with
 its intervention or its announcement of an intervention this week treasury secretary
 best in speaking with CNBC yesterday and calling the liquidity especially in the 30 year quote very
 poor also discussing the size of this buyback. We routinely do buybacks and we're going to increase
 the size of the buyback and you know Sarah I would note that it could be more than the 4 billion
 per issue. Well best it would not give an actual amount on a potential future bond interventions
 in terms of going above that $4 billion number saying it will depend on market conditions.
 Here's how the market has taken his messaging look at the moves that we've seen in the 30 year
 yield this week hitting a new 19 year high in Tuesday 5.33% came off a bit Wednesday morning that was
 before the treasury announcement and then fell further from there down to 5.18% on Wednesday after
 the news and then as I mentioned earlier retracing yesterday climbing back above that pre-intervention
 level even as a treasury secretary explained the impetus for the intervention but you can see in
 general we're at 5.23% right now on the 30 year and so taking a breather again this morning but for
 more let's bring in Chester Spatt professor of finance at the Tepper School of Business at Carnegie
 Mellon University he's also the former chief economist at the SEC and it is great to have you
 on professor welcome to the show let's start right there I wouldn't love your thoughts on the
 signal that the that the treasury department put out there to the market and then perhaps even
 more importantly how the market itself received that signal. Happy to be here this this this the
 secretary has has highlighted that the signal reflects the information that the treasure that the
 treasury and the government has and that the long term treasury is mispriced but you know
 fundamentally the the the the markets have been where they are reflecting you know massive
 massive long term deficits deficits that haven't been shrinking and actually in the background
 obviously huge problems with the social security and Medicare trust fund and an unwillingness
 of many administrations and many congresses to tackle these issues I think so I think the signal
 is is not view is not been really viewed so favorably by the by the market it's also interesting
 that you know he here in this context the treasury feels that it should signal to the marketplace
 in contrast of the new Fed share has weighed in very strongly against the use of forward guidance
 because the Fed wants to learn from the markets it's really striking to me that these are just
 the opposite approach that the treasury wants to signal to the markets because it feels that the
 markets are off base the Fed doesn't want to doesn't want to provide any forward guidance
 because the Fed wants to learn from the markets this is exactly in fact the opposite approach.
 There was a note out from city group on in the wake of the treasury news that we got this
 week and and one of the things actually might have been barklies let's see yeah barklies one of the
 things that they noted was that by choosing bonds and implicitly stocks the risk is that treasury
 has started us on slippery slope of dollar weakness and inflationary commodity cycle and thus
 more bond intervention I mean is that is that the real risk here right now that that you could end
 up in a selfish billing cycle of having to to intervene in the market reacting and having to
 intervene some more well I'm not I'm not I'm not sure that I would have characterized it quite
 that quite quite quite that way I do I do expect if these interventions are you know ineffective
 and the one this week seems to have been ineffective then I then I suspect the treasury officials
 will likely back off because of of concern of adding to credit credit credit credibility
 problem so I'm so I'm not sure I was just as seriously as the bank now also the the secretary
 referred to the liquidity problems that he sees in the 30 year but it's interesting interesting from
 my perspective that the discussion has been about relatively small changes in the supply
 and also that the treasury is proposing to reduce the the the in effect the quantity of three
 years that are out there by buying some back if you feel that a more if one feels that a market
 is illiquid you would think you would want to add to the liquidity in that in that market
 hmm one of the other things that came out of that conversation with the treasury secretary on
 CNBC yesterday was he basically suggested that we've seen peak deficit in a week where we've hit
 40 trillion dollars in in US debt if we're starting if assuming we start to see some cuts come
 into the picture in a more meaningful way what does that mean to this entire conversation
 well I think if we truly are at peak deficits that that would that would be very
 healthy and helpful and helpful I do see the issues here as fundamentally about the long-term
 aspects of the debt not not about relatively modest change is the secretary in his comments on
 CNBC yesterday referred to for example the tariff refunds I think that's a relatively small
 small issue for example so if the you know if the if the administration is able and it's not you
 know I wouldn't blame this administration so so much as I think it's a it's a bunch of
 administrations and a bunch of congresses over over the last two decades you know if there's if there's
 a move if there's a series if there's a move towards seriousness that that that that that would
 actually be incredibly helpful I think some of the market reaction was you know there was
 that they viewed this as kind of the opposite this is so a little bit like kind of rearranging
 the deck chairs you know if you think about it from the point of view of a homeowner or some
 other borrower you know if you were borrowing uh three hundred thousand dollars on a house
 and you change the maturity let's say you move from fixed rate to adjustable it's still all three
 hundred thousand dollars basically um you know the real the real the real issue is uh you know
 can you either have a house that is not quite as expensive or can you earn more money uh you know
 and this is this is part of the issue uh that the federal government confronts and and and what's
 happened over time one of the challenges you know in fairness to the administration one of the
 challenges has been obviously over time interest rates have risen dramatically um import because
 the interest rates for a long time were artificially low um in the aftermath of the financial crisis
 and as they've been renormalized that's obviously as they've been renormalized and also as the
 debt has increased that that has made the the portion of the federal budget devoted to servicing the
 debt uh huge yeah uh we can spend hours talking about this we're going to leave the conversation
 there for now but Chester's bad it's great to have you on thank you great pleasure to be with you
 thank you a lot more to come here i'm warning call including growing questions around the health
 of the American consumer wire next guest says many may be underestimating American spending
 strength and the factor he says could derail it's more and call great back welcome back
 you as consumers are showing some clear signs of strain but overall spending hasn't completely
 fallen off as households make a sharp pivot in their habits retailers consumer product makers
 food companies all talking about the pressure being felt by shoppers while martwood reported
 its slowest same store sales growth at least here in the u.s and more than six years noting
 consumers are feeling pinched by high gas prices and are making trade-offs joining me now is
 Jan Niffin CEO of Jay Rogers Niffin a consultant to investors in retail companies Jan it's great
 to have you on i mean look it wasn't horrible this week with earnings but it also wasn't the
 greatest whether it was Walmart whether it was Cody whether it was advanced auto lows lazy boy
 tjx um JD sports even home depot with that big you know boost from tariff refunds it only reiterated
 for your guidance yeah it's pretty messy out there and i think that comes sort of from what's
 happening right now with consumer right i mean Walmart okay they got hit by 125 basis points on
 pharmacy they weren't bad their earnings were great and their stocks don't went down 10 percent
 and that's because that lower end consumer still struggling Walmart still had really great business
 with that high end consumer that they've been capturing so it depends on where you're dealing
 right now but yeah tj max why did they have a tough number well could it be Ross stores turning
 in a 10 percent comp maybe that wasn't the consumer at all maybe that was just competitive pressure
 but we all start all sit we are seeing the consumer change they're trading down they're being more
 conservative in the way they think about what they're going to spend on but they haven't quit spending
 and they won't quit spending despite the parade of horrible so we've seen this morning on your show
 like the straight of hormones like diesel prices like inflation like the fact that the country
 always more money than anybody could ever pay back we've heard all of that and the consumers looked at
 that and said i don't care i've got a job i'm going to keep my job only 4 percent unemployment
 i'll be fine and they just kept spending they have reacted to that four dollar plus gas
 and if we don't get that down we're going to see more strains on where they spend their money
 but they certainly haven't given up on spending or on borrowing money to spend because their pay
 availability is just as good as it was in 2019 and when that's true and they have a job they just
 keep spending the american consumer is really hard to stop but boy we've done everything we
 can to stop them yeah and actually we've seen that show up continue to show up repeatedly in visa
 and master car and american express earnings too to your point look i'm a bright eyed optimist and
 when you lay it out like that it makes me very sad that that i'm talking about so many you know
 difficult things here in light of that though um i i am curious about this trade down that we're
 seeing with higher end consumers because walmart this has been a dynamic for a long time but raw
 stores is talking about it too and so we talk about it k-shaped economy but should we be looking
 more what we're seeing at the upper end of the middle class as well in terms of areas of strain
 well it's surprising how strong the top 20 percent is written no it's not surprising because the
 stock market has been fabulous right so the top 20 percent is doing really well and they're
 spending and it's if you're Ralph Lauren if you're tapestry you're turning in good numbers right
 if you're walmart and you're trying to do business with a hundred thousand dollar household
 it's working for you and you're getting more business raw stores has done something different
 we're not trading down to ross rossus trading up to us they basically said we're going to have
 a better product we're going to do a better job for that consumer and the consumer has reacted
 so they have been willing to move but you had to give them something they wanted to buy
 ross wasn't doing that they were only dealing with that lower end customer before
 they have said we're going to get up a little higher and that is going to put pressure on tjx
 and the secret is rossus done and it's worked just like walmart crawled up and it worked they were
 able to capture that higher end consumer there was a time when that couldn't have happened
 but today that consumer will talk to you as long as you're giving them product they want
 all right Jen if and we got to leave the conversation there it's great to have you on and see
 you as always you too and we'll get more results next week straight ahead though
 more on call crew we're going to tee up the day ahead we're back in a moment
 time for your call sheet crew members today Peter book bar Ryan Dietrich Gilbert Garcia
 okay we're rapid fire here today i don't know how we got crunched up against stand of the show
 but we did but we're going to get it all in Peter want to get your thoughts on what we've seen
 with the treasury this week so scout bassin have clearly drew a line in the sand
 i think few of his challenges is the market is much bigger than he is he does not have a printing press
 like the fed i think that the trade-offs are he's buying debt probably at well below par which
 is a positive but he's giving up low interest rate debt by doing so because the bonds he's buying
 back were when rates were zero and he's replacing it with short-term bonds that have much higher
 interest rates so this is a dangerous game that's being played here i understand his frustration
 with the rise in the long end we also have to watch the US dollar because if we lose the US dollar
 over this well that's inflationary and foreigners own a lot of US assets and a weaker dollar could
 facilitate their selling of US assets so this is a game of whack-a-mole okay and we have seen the
 dollar weekend this week Gilbert i think we've tracked you down on your world travels just to have
 you weigh in so there's no one better i want to hear from right now thank you so much for having
 first of all i think it was a brilliant move and i take a little bit of the other side of the trade
 i think what the secretary is saying is that the fundamentals do not warrant as high rates as they
 are today and if you look since the war the majority of interest rate increases have come from
 real rates and of course we all know that real rates being higher are much more difficult than
 just nominal rates being higher of course when nominal rates are higher we know that that's
 inflationary there must be some inflationary pressures that probably means wages are going up
 that probably businesses have the ability to raise prices but when real rates go up
 it's a much more strangling effect of the economy and that's what they're trying to curtail
 Ryan I want you to weigh on this especially since we you've been on panels with me here on the
 show in the last couple of weeks where we said you know when does when does the stock market start
 to listen to the bond market it seems like that's happening now it does good morning and thanks for
 having me back i mean you listen the last five days s and p's down two percent we know we've had
 some weakness like we said Jackson Hole is next week and video earnings next week
 have a little indigestion at the markets not surprising that 10-year yields up around that
 four seventy four eighty level kind of Frank Capillary comes along with you he's mentioned that
 level for like two years has been kind of the peak so we're not breaking out yet but clearly
 those concerns are there with those higher yields yeah we've seen a big move higher in gold
 Bitcoin is having a move this week as well to Ryan's point we're Peter we're we're looking at the
 Fed with Jackson Hole next week and certainly questions about what that's going to look like in
 the messaging there now in video possible we get an anthropic prospectus drop here too and then
 PCE well with Worsh he's told us he's not giving us forward guidance so I don't know if we're going
 to learn anything new of course I do want to hear what he has to say about what Besson's doing
 because by Besson front loading short-term T Bill issuance Fed policy is then highly influential
 on the amount of interest expense we're going to pay if he's going to do that I think with an
 anthropic it would be great to see them IPO they need the capital but that's extra supply on the
 market after the SpaceX and the other thing you said was PC of course well with interest rates
 doing what they're doing that's going to be huge now the one thing with PC is because we've
 already seen CPI and PPI it's usual that PC doesn't really deviate much from expectations
 but getting back to what our other guest said I do think it was smart to try to cap long rates
 but that's a big fight the market is much bigger than Scott Besson Scott Besson does not have
 had a printing press like the Fed so just because you do something that doesn't mean it works
 and I see this more like FX intervention where unless you have policy change these effects tend
 to be very fleeting yeah which we've gotten with dollar yen as well in recent weeks too Gilbert your
 thoughts I think this is just the very first salvo I think with time we're going to see if it
 doesn't work they're going to keep going they're going to keep going it's going to be something as
 large as some type of operation twist because I know that or at least I believe that they want to get
 real rates down I think it's the coordinated effort by both the Treasury and the Federal Reserve I
 think the Federal Reserve is going to be waiting for those task forces to come out before they race
 race and I think these are coordinated actions to get rates lower okay Ryan I owe you come back
 next week we'll finish this conversation then gentlemen it's wonderful to have you here thank you
 to our call crew have a wonderful weekend football is back every game every weekend
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