Closing Bell - Closing Bell: 8/17/26

Episode Date: August 17, 2026

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Melissa Lee and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to closing bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This maker breakout begins with a record run for the Bulls, and the sky high level. Some say stocks are poised now to reach. We'll discuss with our experts if that's possible over that final stretch. Here's the scorecard with 60 to go in regulation. We're mostly red, as you know. Chips, though, a standout. Nice gains today from Mike Prawn, S. S.K. Heinex and Marvell. There you go. Invidia is also green. About a week before it reports earnings had a really nice run lately. Otherwise, industrials and energy have been the bright spots in an otherwise red tape today. It does take us to our talk of the tape.

It's three weeks and counting for the S&P's winning streak. So how long can this momentum last? Let's welcome in our headliner today. CNBC contributor Josh Brown. He's the CEO of Riddholz wealth. It's good to have you here for a rare appearance on closing bell. I know. Well, when the market calls, I answer.

I don't know what that. And the markets are calling. Like I said, three straight weeks. Vicks is the, you know, on Friday it was the lowest it's been all year. Yardinney says 10,000 by the end of the decades possible. Evercore today says 9,000's possible in the next 12 months. I mean, that gives you the kind of optimism that is being exuded really everywhere. It feels.

Yeah. And, you know, the negatives are very well cited by now. Everyone understands that people are bullish. And I know there's this sort of like knee-jerk thing where, well, if everyone's bullish, I better be on the other side. That really only works at major turning points. For the most part, you want the safety in numbers, and you want to be part of these record-setting bull markets,

because if you're not, you can't catch up. The returns come from markets like these. We have a long periods of time where the market does nothing. You have to stick around for the moments like these. You can't all of a sudden get bullish because the market runs up 20%. So the big picture is, here is if you knew nothing about what the market did this year, but I just told you, 84% of S&P names have reported so far, and profits are going to grow 32.2% year over year. And I said,

what would you say the market should do? You would say it should be acting pretty much exactly the way it's acting right now. Okay, then put on top of your Sunday that you're scooping out, gross margins, right? Those numbers are amazing. The revenues that we're seeing are amazing. The revenues that we're seeing are amazing. So there are a lot of different things that look and taste pretty good in this market. So when you talk to the people that have been bearish for most of the last 16, 17 years, the thing that they've repeatedly said was that earnings would mean revert because profit margins would be unsustainable at 10 or 11 percent. And here we are at 15. So we still haven't had the revert. We're still waiting for that reversion. In the error that we're in, the way that earnings

are growing, it's coming from a very specific source. It's coming from technology. And very hard to predict when the cycle ends, we know it ultimately ends. But there have been people that have been waiting year after year after year, and it just doesn't seem to be happening. Let me ask you this. Look at what we're seeing now. Okay, we're looking at the yield curve, basically, right? On your screen. And the bottom, 531 on the 30 year. Yeah. At 520, when Fed Chair Warr was giving his last news conference in what was a decidedly more hawkish event. The market started selling off as the 30-year hit 520. We're like, wow, look at that. That's a much more hawkish take on the Fed. And here we are, as we say, at 531.

Jonathan Krenski has a no doubt today said equity market's not prepared for 6%. Now, I don't know if we're going to 6%. But the point of bringing it up is to ask you at what point is that an issue? So it could be a temporary issue, but I think it would end up being met with buying. And I spent an afternoon two weeks ago with Ed Yardinney, and Ed Yardini coined the term, literally invented it, Bond Vigilantes. He doesn't seem to be terribly worried about that this year. His year-end target for the S&P 500 is 8,000. If Ed's not worried about bond vigilantes, I'm not overly worried. I do agree, though, that there would be some new volatility coming into the market if people all of a sudden get spooked.

But as always with these things, it's more about the rate of acceleration than the actual level itself. I'd also point out the 1990s, one of the best decades for stocks of all time, the average interest rate on the tenure was 5%. Like we can live through it because we have before. But you're saying what you said is right, though, it's not the level, it's the speed in which you go from one level to it to the other. Of course, you don't want to see something in the bond market that shocks people, but just talk about an absolute level in the absence of, the causal, you know, the reasons why we're at that level is, I don't think, helpful for investors. So speaking of levels, as long as earnings remain at these levels, which are knock your socks off, amazing. Everybody can agree with that. And it's no longer just a tech story. It's broadened substantially.

If you look at the percentage of beats and what have you. So as long as we remain delivering these earnings, why should the market do anything but what it's doing? You know, it's funny, a lot of people were complaining about the nature of the earnings growth in the 20-teens decade because they said, oh, it's engineered, it's buybacks, it's buy-backs. That's not part of the story this year. Not only is it not buy-backs, but companies are actually going into debt to do even more capex spending. If you had reround the clock and told the buy-back truthers, hey, we're going to have another bull market that'll look just as good as this one, but instead of companies shrinking their float, we're actually going to see them. go out and borrow money or issue secondary shares of stock and invest directly back into the economy. Will you be bullish then? They would all say yes, and none of them are bullish now. So when you look at your menu and you know where I'm going here, of the kind of stocks you want to have, you pick what you say is a porterhouse. It's a strategy that you have at your firm.

You talk about it a lot on halftime. I don't want to take for granted that people who are watching this now know what that is. So what kinds of stocks work and make sense in this kind of environment? What is that? So our original research into the best stocks in the market, the premise was we want to stay on the right side of trends. We want to have a way where we can own the market leaders, but have there be a built-in risk management function so that when leadership changes, or there are whipsaws, or a trend just literally comes to an end and a new trend takes over, we're not sitting with yesterday's leaders hoping for them to come back.

we have that game plan and it's quantitative and it's rules-based. And we took that idea and built the Porterhouse strategy, which right now has 50 stocks in it. It's very concentrated. But the goal is to be in the sandisks, be in the microns, and the Western Digitals and the KLAs, but not be in them naked, not be in them with no answer for when we sell. By the same token, we also don't want to have extraordinarily high turnover

because remember, we're a wealth management firm, and taxes are a really big part of the net returns that investors receive, and it does no good to be whipsawed every week or every day or reacting to intraday noise. So you're not afraid to play in the momentum sandbox, obviously, if you have the kinds of stocks that you just said, but you're trying to offset it with things that are not going to be potentially as volatile as those could be, frankly, at any moment, which is one of the characteristics of this market that we've been in, those kinds of stocks in that kind of factor have, you know, had a significant reset at points. And this market has been resilient through it.

Yeah, because when you have a stock that goes up 800%, it could be in a 30% drawdown and still statistically being an uptrend. This is like one of the hardest things to do if you're just sitting there manually, trying to select, when do I buy Sandisk? When do I sell it? When do I buy it back. So having rules in advance doesn't mean you won't lose or you won't be wrong or you won't be early. You won't be late. But it takes a lot of that sort of, it takes a lot of sort of that guesswork and inconsistency out of the picture. And Sanchez is a really great example. It's had massive drawdowns this year. And yet it's been on our list of the best stocks in the market since last year has never come off because that longer-term picture, not just technicals, but the growth

rate, et cetera, has been intact. So we traded 10 days ago, so I could talk about this publicly. In the Porterhouse portfolio over the last month, we sold that avertive. We sold that WX technologies, people that are in momentum trades or people that are playing the AI CAPEX story, they know these tickers very well. The long-term trend had weakened, short-term price action broke. They're out of the portfolio. It's not a judgment or these good companies are not. It's not the goal here. The goal was to make money. Regions Financial was a sale. Ford was a sale. These had been great stocks up until recently. What did we buy? Rockwell Automation, which obviously the robotics and automation theme.

Oventive, East West Bank Corp, Citizens Financial. So that's an industrial, an oil company, and two financials. So it's not just about AI, CapEx. It's not just about tech. The portfolio, will own stocks in every sector. And the reason that's so important in a tape like right now, 11 out of 11 sectors have beaten beginning of season growth estimates through the period that we're at in the quarter. 10 of 11 sectors are posting a year-over-year increase in profits. There's money being made away from AI.

How do you find those stocks? How do you end up in those stocks before your friends and neighbors are talking about them at the barbecue? This is the goal. This is what we're working on specifically with that Porterhouse. sleeve and client portfolios. It's apropos that we have spent some time talking about, you know, the portfolio, but also in general, the fact that chips are having a pretty decent day, at least memory names are.

Oliver Renick is at Cebo in Chicago. He's tracking the options activity, which is pretty substantial, isn't it, today? It's massive, Scott. In fact, it's been one of the most wild days for semiconductor options trainings we've seen in a while. Volumes are exploding again in favorites from the first half of the year. Sandisk, Micron, all seeing massive call option volumes to the point that upside calls and some expires are multiples more expensive than the equivalent puts to the downside. DRAM, the ETF is doing twice its average 30-day volume and the ratio of calls to puts in SMH is the most bullish since April.

Might sound familiar, but the single biggest trade in the entire market today is a gargantuan, $130 million purchase of in the month, 630 strike puts in the SMH. It's a synthetic short expiring in November for perspective. That's more than a third of the entire ETF premium today in a single trade, which is almost four times bigger than the next biggest trade in the market. So basically for investors, the question here is, who do you go with? The crowd, where flows have been getting more bullish since the situational awareness blowup, or this specific single contrarian, a giant whale putting on, I think, what is the biggest trade I've seen in the fund all summer. That's a great look, Oliver.

Thank you so much. That's Oliver Renick. Okay, let's bring in our panel now. Meryl and Bank of America's Chris Heisey and I Capital's Chenali Basic. Josh Brown, of course, is still with us, guys. It's great to have you here. It's funny that Oliver mentions, you know, what do you do? Do you sort of ride with the crowd?

Chris, there's a big crowd of Bulls. Is it too big? there's a big crowd of bulls until something hits the tape that they don't like and they kind of walk it back a little bit. Josh hit it on before. There's been something on everyone's list every year. And we've been doing this a long time. And it seemed like the list was smaller decades ago. Now it doesn't matter what it is.

It just comes in there. And the bear camp never points to the denominator. The denominator is promo, profit momentum. And that's what the crowd is following. And until that story and that narrative changes, it's going to be very hard to be a contrarian. And some people like to be a contrarian just to be a contrarian. And they find little bits and pieces to fit that story rather than focusing on what is visible, what is working. And again, you mentioned the 5% 30-year yield.

What happens when we hit the 6? They said the same thing before we hit 5. Stocks are not going to like five. Stocks are not going to like four. And Josh talked about the average 10-year yield being around 5% during the 90s. And the yield curve was pretty good steepness there. And now we survived going from 0% front-end rates to 5 to 3 and 3 quarters. And yet there's still a complaint out there about, oh, my goodness.

You know who likes 5? The $9 trillion sitting in money market funds and deposit accounts. The boomers really like five, taking no risk, earning two to three points above the rate of inflation. I think five is not the negative that it once was because of how much cash there is in the system. Conversely, we actually saw rising rates generate more spending on things like travel and second homes because people have cash in an account. They expect no return on because 15 years rates were zero. all of a sudden that became a geyser of new cash.

They actually don't know where to put it. So this idea that 5% was going to break the market, I knew it for it wasn't going to be true. I mean, the most boring thing in the world is to say that if you put your money in a high-yield savings account at the beginning of the year, you're actually doing a very good job this year. But, you know, that is, to your point,

money in the bank. Where it doesn't do well, though, is for highly levered companies, and I don't mean the AI borrowers. I mean the host of companies that have been extending and pretending. So I think that the flock to quality here makes sense, and it's part of the reason you're seeing the broadening. You know, there was a note out today. I forgot who it was by. It's not that important.

But the note itself, the crux of it was it's hard to be a bear, sort of to these guys' point. It's hard to be a bear, but can we really continue to live up to these, you know, immaculate markets and expectations and earnings? Something's got to give. Risk management. Or not. Maybe it doesn't. earlier. If you're managing your risk appropriately, then you can sleep at night while you're appreciating the upside here. Chasing momentum is a full man sport, in my own opinion. For us,

we have a lot of people employing buffered strategies for this reason, you know, structured investments that will cap downside risk here. But again, it lets you stay invested. Scott, let's not forget how many people miss the last three years. A tremendous amount of people in the market. So nobody wants to miss the next leg. But at the same time, I would, but agree with Josh that there's other places to look besides where just the herd is going. So if you can just take out your pencil and do the math, there are some places in the market that still look cheap. Is the next leg driven by the FOMO that Shinali is talking about? Maybe part of it's already here.

Ed Yardinney calls it Fimo. Yeah. Instead of FOMO, it's the earnings momentum that's driving the whole thing. There are no signs that earnings momentum is going to shift from a slower growth rate to a substantially lower growth rate between now and mid-27. And we can't think too far out after that because so many things can come into place. But we were talking about this before real quick. When are international stocks going to outperform? They have been.

When is value going to outperform growth? It has. When is small caps going to outperform large? Remember all those types of arguments? They have. And they have. So this broadening out. Almost a double.

But you never hear people come back and say, yes, this is the thing I used to complain about. It's been cured by the market. I'm now bullish. They just move on to a new thing to complain about. So the people in 2024 who said it's all Mag 7, it's all AI, it's all hyperscalers, those are the only stocks going up. It's too concentrated historically when the S&P concentrates above 30% for the top down all the blah, blah, blah, blah, blah, blah.

That's over now. Those are not the leading stocks in the market. What's replaced it? Healthcare stocks, industrials, energy stocks are leading this year. We have utilities that are up double digits. We have retailers that are working. I don't know how, but it's true. Forget the Russell.

What about the has to be midcaps? Right. So do these people come back and say, remember all that concentration? I was scaring the hell out of you about 40% lower. Well, it's not concentrated anymore. I'm bullish. It'll never happen. You know what they're talking about instead?

Yen carry trade. What color tied at Kevin Warsh where? They will not come back and say that thing I told you was bad. Now it's fixed. okay, I'm happy with it. Are you a believer in the continued broadening story in the market? Absolutely. And you look around and there's still more room to run. The outperformance is recent, which means that even in the last month, the S&P equal weight still did not outperform the NASDAQ or the socks, which tells me that it's still been relatively left behind even in recent days.

I thought, I love, I still think back to the John Waldron comments of a couple weeks ago now to Andrew, I believe it was out in Aspen, where he talked about the broadening of the earnings growth. That now it's, you know, you look average by sector. It's like more than 14%. So it's a broadening earning story. Thus, it's a broadening market performer. And until that changes, and maybe it even gets even better as some of these, you know, beneficiaries from AI show even greater earnings. growth because of all the benefits that they're now getting.

That's right. That's right. The argument was, well, there's only few that are going to benefit from the revenue side. And we're betting on all these people having an ROI on what's all to spend. You cannot measure productivity today the way we used to measure productivity. You measure it in margins. And if margins stay wide, it's doing its trick. My last point here, I'll say this. When you look at the broadening out and everything, the story was small caps had bad earnings before, negative earnings. Now all of a sudden you go from negative to positive debt, second derivative. That's a big deal. Same thing in emerging markets. You know, they're big oil importers. They're still doing well. Fiscal deficits are everywhere in the world. You could

look at it as a negative, or you could say that's what produces six, seven, eight percent nominal growth, which feeds the revenue line. And that's why you have the broadening out. All right, we'll leave it there. That was great. That's good to have you guys here on set. Thanks for being here. You stick around, okay? We're going to take a break. You're not going anywhere. Don't leave. All right, coming up next, Anthropics CEO sounding the AI alarm. What he has to say about the rising risks of artificial intelligence and the race to go public? We're live with the New York Stock Exchange. You're watching closing bell on CNBC.

Recent departures from the upper levels of OpenAI continuing to raise questions about that company's timeline for an IPO. This while competitor Anthropic is moving closer to its own public offering. And now its CEO, Dario Amode, is going public. again with his thoughts on AI's impact on society. Kate Rooney joins us now with more. He's done this from time to time. There just usually is a lot of space between time to time. And he doesn't usually chime in on social media, Scott.

It was interesting to hear from him on X or formerly Twitter. We'll start with Anthropic in some of the numbers, though. As we've reported, a company has been holding meetings with bankers and investors. Reuters now reporting that some of those bankers are now forecasting $190 billion to 200 billion for Anthropics' 2028 revenue. I've also been speaking to sources who tell me Anthropic did share an update with investors over the weekend. This was some of the Q2 numbers. The preliminary revenue for the quarter rose about 14x year over year.

It's now around 11.5 billion. This is according to source familiar with those numbers. And based on their math, a couple of investors that I've talked to are now forecasting a $2 trillion valuation. When this company goes public, a lot needs to go right for that to happen. Momentum needs to continue. but rival Open AI at the same time has also filed confidentially and is dealing with a lot of questions about its C-suite as another executive leaves the AI giant.

This was Chief Revenue Officer Denise Dressor. She stepped down last week. And Greg Brockman, president and co-founder of Open AI, joined Squawk Box earlier to talk about this. He said, fundamentally, they are a resilient company, talking about different eras, having different sets of leaders. And then the difference between Open Eye and others, he says, is that they are in the spotlight.

So a lot of these departures, he argues, might get more. attention. He also focused a lot on cybersecurity. Put out a blog post on that today and the need to get ahead of some of these bad actors. Finally, Scott, you mentioned we did hear from Daria Amade in a very rare tweet over the week. And he basically pushed back on some of the criticism that he has been overly pessimistic throughout the years on AI. He says he's been balanced between some of the risks and the benefits, Scott. All right. Kate, thank you. That's Kate Rooney following that story, which seems to add new chapters all the time. How do you view both of these companies, this race to go public, you know, what brain drain, some of the departures, the difference

between the way these two companies are perceived? So I said last week, we've never had trillion dollar startups before. And as a result, the level of scrutiny that these companies are getting prior to going public is something brand new. Dario is currently attending the Sam Altman School of Public Relations. Doesn't appear that he's having a lot of fun. Sam went through this last year. Dario's turn is this year. These guys, their messaging is not ready for prime time. It's sort of okay. We like a little bit of eccentricity in our tech geniuses. It's also sort of crazy. Here you have a guy last year starts going on podcasts and making public statements like, for example, 50% of all white-collar jobs will disappear. And then everybody should fund this

thing that I'm building that's going to bring that about. So he stopped doing that. Now the debate is shifted. Gavin Baker and others are talking about, let me get this straight. Your pitch is that AI should be heavily regulated, but we know what happens when you do that. It creates regulatory capture and monopolies. Famously, people used to worry about Facebook because there'd be more regulation. I would come on the air and say, no, you don't understand.

The more regulation, the better, because now no one can afford the compliance costs except for meta. And as a result, you won't see any new social network. works. And that's exactly how it played out. So is anthropic pursuing this sort of public policy push where they say open weight models, open source models are too dangerous. There should be a vetting process. Anytime a new model comes along and then people will look at that and say, yeah, we get what you're doing. You're trying to capture the whole industry and stop startups from coming out with their own products because all the profits are in big companies paying you for

access to Claude. So that's the debate right now. I think for investors, it's probably not important. I think what investors should be focusing on is the news that we got today. A 14-fold increase in second quarter revenue over last year. Positive net operating income. For anthropic. Right. 11.5 billion dollars in quarterly revenue. And anecdotally, our event future proof is next month out in Huntington Beach, California. Anthropic is coming. They have an amazing guy running their asset and wealth management business. His name is Peter Nolan. They'll be making announcements with, like, lots of companies there.

I don't even know who his counterpart is at OpenAI. Nobody does. So what does that tell you about what they want their reach to be and where they see the multifacets of their bigger business going? Okay. The multifacets of their bigger business are going in one direction. Upstream. this is uncomfortable for incumbents, but they will be making and selling software.

They are not going to be a company that lives and dies based on having a model that is 1% faster than someone else's model. That's not actually a business. The actual business will be figuring out the profitability between compute and selling an enterprise product. Not everybody's going to like that. Alex Karp kind of rang the alarm about this on Squawk the other day, but that is 100% what will happen. has to happen. Because if you're just in the business of selling tokens, tokens are in mass deflation, and it's really the profitability will accrue to the companies that figure out what will enterprises pay for those tokens, not just who will they buy the tokens from.

So the compute side of the business is going to be a little bit more industrial. The thing that Anthropics are going to do, and I think they'll do it really well, is they're going to find ways to take the power of their model, productize them, and sell them to companies. And again, that will not be popular in Silicon Valley amongst the incumbent software companies, but it's almost inevitable that this is where things are going to go. That was awesome. And that was a treat for us. And open AI needs to figure it out too, which will be the next. That's the, the next battleground will be product, not compute, not tokens, not LLM efficiency.

It's going to be what will people buy? Don't be a stranger on this. show, okay? I love this show. It's my favorite show. Good having you. Thank you, Judge. All right, that's Josh Brown. Coming up, another twist in the ongoing story involving billionaire investor Guggenheim, CEO, Mark Walter, Alex Sherman following the money. There's a lot of it. joins us next. All right, welcome back to closing bell. Another twist and turn in the ongoing story involving Guggenheim CEO, Mark Walter. He's the billionaire investor who's selling the Lakers for $12.5 billion to Bob Eiger and Josh Kushner. Our Alex Sherman is here with these new details.

So what do we know here today? So the Financial Times is reporting. Scott, sort of a follow-on from a story. The Wall Street Journal reported a few days ago that Mark Walter is now in talks to sell his minority stake in Chelsea, the EPL soccer team, Chelsea, to Clear Lake, which is the majority-controlling owner of the team. They own about 60% of the team. Now, Walter's stake is only a little bit more than 12% of Chelsea, which CNBC sport values at about $3.35 billion. So this deal is nowhere near the deal of magnitude of selling the Lakers at a $12.5 billion valuation. But really, the news is not this deal.

The news is the potential implications of this deal, which is, okay, well, if the Lakers are for sale, and now this minority stake in Chelsea is for sale, is Mark Walter just kind of putting up all of his sports assets for sale? Are the Dodgers potentially for sale or the L.A. team per sale? He owns a portion of the F1 Cadillac team, which is a brand new team. So these are obviously going to be the questions now that the investment community is focused on, that the sports community is focused on. We don't know the answers to anything right now, but it's the obvious follow-up to today's news. Scott.

I mean, there is intrigue in this story in and of itself that may not be a big surprise to those who have, followed this story in the sports finance and just the sports landscape, especially around the Premier League, because there's been reported friction between those two sides of the Chelsea ownership group for many, many months. So to think that it could come to a head one way or the other, and it sounds like this is going to go to the point of Clear Lake, hoping that they will now be the sole owner, perhaps. That's how many saw this. going for now many months. Yeah, that's right. So again, a little bit more background here. Mark Walter and his business partner, who they were colleagues at many years at Guggenheim,

Todd Bowley. They're both selling their stakes. There had been ownership friction, as you mentioned, between Clear Lake and this minority stake, because Bowley actually, while he owns a far less of the financials of the team, had joint ownership control of the team. So this kind of cleans that up. And again, similarly to the Lakers deal where suddenly Mark Walter got this giant offer that was, you know, three day, the deal came together in three days. Like each one of these transactions maybe make sense on its own. And we have not heard publicly from Mark Walter about why this is all happening. But you need to think of the broader context of federal investigators looking into his insurance

businesses at this point, which it's sort of a potential tax fraud that's going on with the undocumented double dealing of having various different loans from a. insurance companies that were going to other businesses within the Mark Walter ownership. He owns a ton of different assets for a variety of different vehicles. Because these loans have now come up that are clearly there that were not documented, they may require a lot more collateral. So that may be triggering the various different sports sales that we're seeing. Again, this is just sort of logical speculation at this point because Mark Walter hasn't formally

said, this is why all of this is happening. But it's the focus of a lot of the finance world and the sports world today. But to your point, I guess you made at the outset, I mean, people are asking the questions. So what's next? Where do the Dodgers, for example, go from here, which is obviously a substantial asset and would be highly sought after if that was to come on the market. It may be a little more tricky, given the number of partners that are involved in this particular deal rather than how. the Lakers sale and ownership was structured with Walter to begin with. Absolutely.

And again, you have to think about, like, what does it mean for an asset to be for sale? Well, I would imagine that Mark Walter will be getting a lot of inbound phone calls from people to say, hey, look, would you sell it if we offered you an exa high premium over whatever the Dodgers are valued today, which is quite a bit? Like, would you go for it then? these assets don't need to formally be for sale in order to sell. That's exactly what happened with the Lakers deal. There was no process there.

There were no investment banks involved. It was simply Josh Kushner and Bob Eiger were reading the headlines, got a tip, still sort of an unknown tip, on saying, look, Mark Walter may be willing to sell. And then that deal came together. So I think that's what we're going to have to see play out here over the next few days. In 72 hours, right? I mean, just an incredible story all the way around.

And I know you'll keep following it, and we'll keep hearing from you. Alex, thanks. Thank you. Alex Sherman. Up next, Sycamore Tree Capitals, Mark Okada. He'll be right here at Post 9, where he sees the recent run and rates heading from here. Where are the best opportunities in the credit markets? He'll tell you next. Welcome back to closing bell interest rates. Very much in focus as the 30-year yield continues to touch levels not seen in several years. It's happening, at least in part, as the hyperscalers issue large amounts of debt to finance their AI infrastructure buildouts. Mark Okada is the co-founder and CEO at Sycamore Tree Capital. He's here once again at Post-Nine.

It's good to have you back. And a good time to have you back. We were talking about the 30-year yield earlier in the show. You think that's sort of directly tied to the debt that's being issued for the AI build-out? No, that's really what's going on within the treasury markets and the scale and the size of the issuance and the deficit we're saying. I don't think that has much to do with the hyper-scales. But it's all connected, obviously. I mean, everything happens in the spread off.

It's a lot of paper. And that's the story, right? The amount of paper that's coming into the IT sort of debt world has changed what it looks like. A year ago, you had nothing in high yield. Now it's 4% of the index. You had very little in IG. Now it's the largest sector of IG.

My God, you said 20% it's 20 times higher that it's 20 times higher that at this point then at this point last year. Investment grade. So the numbers are $417 billion of IG related debt issuance this year. $417 billion. And over $100 billion is in the IG bond market. There's been about $50 billion in the high-year-old market.

And the rest is either in private credit or it's international. They're hitting international markets too. Europe, Netherlands, but it's an insatiable demand for capital. Are you a buyer of any of that investment grade paper? No, no, that's not what we do. We're high-yield investors. You're your buyer of the high-yield paper related to the AI infrastructure build-out? Absolutely.

Some of it is great. Some of the data center and the neocloud stuff is coming fully advertised, fully secured, really great cash flows, and there's no residual. You're not taking any sort of chip residual risk. And the reason these deals look so much better than kind of your garden variety LBO risk is they're shorter, they're amortizing, and they're coming 100, 200 basis points cheap.

Because just the demand for paper is so huge, and they're testing the markets, sort of like, you come into our market, which is new for them, right? There's not a whole lot of high-yield debt from the hyperscalers or the data centers in our space. It's coming, but it's got to come in our premium because it's all brand new, and then there's a lot more coming. But doesn't that come with more risk from people who are new in the market? Is there some degree of, I don't want to say, a debt bomb lurking, but there have to be some risks? around that? Of course there are. Of course there are. To what degree? So we've seen some of it already, right? The hyperscalor IG debt spreads have doubled this year. So the market's figuring out that

on paper, they look like they're 0.8 times levered. You put the least adjusted leverage on top. Now it's two times levered. You look at all the forward commitments and some of these guarantees and maybe the shadow leverage within a lot of this other chip financing, is it two and a half? Is it three times? If you're at three, now you're junk rated. Now you're growing, so you're not going to get that sort of rating. But it's like that's not a great place to be, Scott.

If you own it in an unsecured bond at a spread, and that spread goes from 70 to 140, and then it goes from 140 to 220, that's painful as a fixed income investor. So we're not doing that, per se. I don't think that's a good place to be. What do you make of, I think I read a story, I think it was this morning in the journal about the off-balance sheet obligations from the hyperscalers that those obligations are not being reported. People aren't talking about them because they are off-balance sheet.

Yes, they are. Is that concerning? How should we be thinking about that, do you think? Well, again, I think it's a function of kind of, are you doing your underwriting? Do you know the deal you're signing up for? So some of the projections for next year for CAPEX are up 57% from last year. So there's much more of this coming. So square one, you've got to be selective.

We've picked some deals we really like. We've passed on most of it. And so what's coming, right, is the next wave of now they're financing not just the data centers themselves, but they're going to finance all the chips that go into them. And some of these deals have residual risk. And you're going to have older chips sitting in there. You're financing them, but the debt doesn't advertise and cover you, and so you've got that residual risk.

We're not doing that right now. You passed on those deals. You passed on many more because you think the risks are too great. Yeah. But as history looks at it now, the residuals have actually been pretty good. The value has held up. But I don't need to reach to do that because there's just so much paper coming. Because if there's another $100 billion of the stuff that comes into high yield this next year,

I've got a lot of stuff to look at. And we can pick our spots and do stuff that we think is cheap. The bigger risk, though, is like when we get longer, farther out, all this contingent sort of guarantee stuff, if you actually have to count on that guarantee, you're counting on it when things aren't working. And so it's kind of a double whammy. It's like you don't want to be underwriting credit to something that looks like you're going to need it when things are actually really bad.

Man, we didn't even get to the Fed. We didn't even get to private credit. And that means you need to come back. Don't be a stranger down there in Dallas, okay? Yeah. All right. It's Mark O'Cotta, Sycamore Tree Capital. Coming up, we have more on the breakout and shares of SpaceX today in the Market Zone, which is coming up.

All right, we're now in the closing goal market zone. Mike Santoli and Wilmington Trust, Megan Shue, here to break down these crucial moments of the trading day. Oliver Renick standing by live from Seabo Global Markets in Chicago, where he's been all day doing some great reporting. Michael, you first. What's on your mind? I mean, a pretty controlled little pullback in the indexes at least got,

but some of the dynamics at work are pretty familiar from a couple of months ago. You can buy memory, the whole kind of hardware recipients of all the spend are kind of supporting the indexes, and then higher rates preventing the broader list of stocks tied to the real economy from working. And even the hyperscalers are now on the decline. We had this little window where both the Mag 7 and semis could work, and that helped us get to all-time high. So I don't know, we're a little bit on notice that we've priced in a lot of the earnings, you know, riches that have piled up, and we're on alert for what's next and whether we're going to have another rethink of the pace of the whole investment boom.

Want to tell me what's up in three minutes? Yeah, Dan Niles actually going to join us. He's got a take on exactly how much longer you can ride this theme in AI with his preferred names. All right. Good stuff. We'll look for you in overtime, as I said, less than three minutes now. It's Mike Santoli. Oliver, tell me about some SpaceX today.

Exactly, Scott. A pretty good rally today bringing the SpaceX move to 30% over the past two weeks. Given the aggression of that rally, I'm surprised SpaceX Bowl. have not been piling on. There's a lack of bullish conviction today. Now, volume is elevated about 50% above the 30-day average, but it's mostly split between puts and calls. Seven of the top 10 trades by dollar amount are neutral, two are bearish, and just one outright bullish. It's certainly possible there's some profit taking going on and at least one big $4 million sale of in the money, 127, 132 call spreads, looks.

like someone closing out a nice winner. But there's also some fresh speculative activity happening in the 145 and 140 strike puts expiring this Friday. Trade did at least a 3.5% drop to work, Scott. All right, Oliver, good stuff. Thank you. It's Oliver Renick to Megan Shue.

Where's this record-setting market going? Yeah, we think the market's going higher. We're constructive. We're overweight to equities, really on three key drivers. One being a bit of a Goldilocks economy where it's not so cold or weak that we're really worried about recessionary risks. Retail sales were disappointing,

but I think there's some explanatory factors for that. But the economy is not so hot that we're really worried about inflation. And we think disinflation will continue. The three-month core CPI is closer to 1.5% than it is to even 2%. And I think that that will continue. So we see the Fed cutting rates before the end of the year, which is a very different position than where the market's priced right now. Oarnings are strong. Geopolitical risk, I think, is the biggest wild factor because we have been looking at some cushions, whether it's inventory draws on supply or tax refunds for consumers that have helped bridge the gap thus far, but those are obviously not going to continue. So I think that's the thing to watch, but the market's been managing through that

risk pretty well. Yeah, certainly has. Absolutely as. Megan, thanks. Appreciate that. Megan Schu of the Wilmington Trust. Joining us, bell's going to ring in a moment. Yes, we'll be red. on this Monday, but pretty interesting stories within the market today. That move and chip names. Certainly one to keep an eye on, Nvidia as well. Pretty nice run lately, earnings in about nine days or so. That'll be a big market event as well. That'll do it. I'll send it into overtime with Melissa Lee and Mike San Jose.