Closing Bell - Closing Bell Overtime: Interior Secretary On New Energy Agenda; Former Walmart U.S. CEO On Summer Sales Impact 7/7/25

Episode Date: July 7, 2025

Brenda Vingiello of Sand Hill and 3Fourteen’s Warren Pies join the market panel to talk the week ahead. Secretary of the Interior Doug Burgum discusses domestic energy strategy and the changes to the country’s energy agenda. Former Walmart U.S. CEO Bill Simon weighs in on retail’s outlook. Plus, Roth Capital’s Craig Irwin on whether Elon Musk’s political ambitions are distracting for Tesla shareholders.

Well, that's the end of regulation wisdom tree ringing the closing bell the New York Stock Exchange Sharp link gaming doing the honors of the Nasdaq stocks ending the day lower as the president announces a new round of tariffs including on Japan and Korea the Dow and S&P both posting their worst days since mid-june the Russell 2000 was the biggest loser The consumer discretionary and energy where your laggards utilities was the only sector in the S&P in the green utilities was the only sector in the S&P in the green discretionary was led lower by Tesla and by Lululemon. Treasury yields rising across the board particularly into the afternoon the 10-year at two week highs the third year up to 4.92 percent. Oil shrugging off the impact of OPEC plus hiking output more than expected for August WTI closing at the highest level since June 23rd.

And that is a scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford, alongside Morgan Brennan. Coming up, we are digging into the impact of spiraling debt and deficits. Could they be making us less safe? Plus, we will talk to Interior Secretary Doug Burgum about new proposed rules aimed at boosting energy production. And it's like Christmas in July, Amazon, Walmart, and Target all with big shopping events this week.

Former Walmart U.S. CEO Bill Simon is going to be here with a look at who will benefit most. Let's begin though with the markets, stocks having their worst day in nearly a month. Tesla, the biggest loser in the NASDAQ 100, the S&P 500 as well. Christina Parts-Nevelis joins us with today's biggest movers. Christina. John, let's start with Tesla because like you said, shares sinking amid CEO Elon Musk's growing feud with President Trump. Musk said on Saturday he would launch a new political party that would focus on several

congressional races. President Trump responded calling the move ridiculous and that Musk had gone, quote, completely off the rails. Tesla shares, though, falling almost 7 percent, their worst day in a month. The drama continues. Uber shares hitting an all-time record high after Wells Fargo upped its price target on the stock to $120. The analysts over there are citing strong ride growth, solid bookings, tailwinds from

favorable currency trends, and that's how you saw or you can see shares closed over 3% higher Core scientific shares that's a name plunging after the company confirmed It would be acquired by AI hyperscaler core weave in a nine billion dollar all-stock deal The deal aims to boost core use position in the AI arms race by bringing critical infrastructure in-house But that also means the core scientific shareholders get diluted. Core shares fell about 3%. You can see core scientific shares down over 17% today.

Netflix slid about a half percent on a downgrade to neutral from buy at Seaport. Analysts over there say the next phase of growth for the streaming giant is already baked in. That's why shares are up, or you can say shares closing a little bit lower, but still up almost 45 percent year to date, Morgan. All right. Christina Parts-Nevelest, thank you. Well, President Trump announcing a number of new tariffs and a series of letters posted

today on Truth Social. The White House saying there are more to come. Megan Casella is joining us from the White House. She has all the latest. Hi, Megan. Hey, Morgan. A lot of trade headlines coming out of here today. We are expecting this hour the president to sign a set of executive orders and we are expecting one of those orders to be formally postponing that

deadline for reciprocal tariffs to take effect from July 9th this Wednesday all the way till August 1st, allowing more time for negotiations to continue. We do have to wait and see whether he's delaying the deadline for all of those roughly 60 or so trading partners that originally saw country specific tariffs threatened back on April 2nd, or if it's just going to be for the countries that have gotten those letters that you mentioned so far today. That's seven letters that have been sent so far to a number of trading partners laying out the tariff rate that all of their exports to the U.S. will face beginning on April on August 1st. I should say the biggest trading partners by far on the list South Korea and Japan both seeing a 25% tariff but those tariffs range up to

40% for Laos and Myanmar. I will flag guys that most of these rates are roughly in line or even somewhat lower from where the reciprocal rates were threatened back in April so we're really mostly just postponing that deadline and sort of rounding off those numbers to put them in different buckets. I'll also say a few top line details here. All of these tariffs, according to the letters, are on top of and separate from any tariffs that are already in place or forthcoming on individual sectors. They also could all increase if there's retaliation or they could decrease if the countries do strike a trade deal So despite all the headlines guys, I'll say still a lot up in the air here

Although we do know for sure now once the president signs this executive order that deadline moves from July 9th to August 1st guys All right, Megan Kasella. Thank you Those tariff concerns dragging down the major averages today, the worst day in three weeks, pretty good three weeks though. Let's bring in Brenda Vangelo from Sandhill Global Advisors and Warren Pies from 314 Research. Guys, welcome. Brenda, if you erase Thursday's half day of trading

before the holiday, just forget it happened. We closed today about the same place as Wednesday. Now we got another four weeks of tariff uncertainty, but given the circumstances, should investors care? Well, I think we've learned a lot over the last few months. And one of those things that we've learned is a lot about President Trump's negotiation tactics, particularly around tariffs.

So I think the market is past the point of peak uncertainty. We've also learned a lot about the health of the underlying economy and the health of corporate earnings in the first quarter. All of those have been a positive. So I think as we embark on second quarter earnings being reported, I think we're likely to hear more good news

in terms of earnings being better than projections. Projections are pretty low. Really when companies were not giving a lot of guidance when they reported first quarter, analysts took that as an opportunity to actually reduce estimates for the full year, even though the first quarter growth was twice as good as what was being projected. So we have a scenario where earnings went up, but then overall earnings for the full year continue to come down.

So I think that's creating a pretty low bar for companies to beat. So I do think we're not out of the woods, obviously, when it comes to negotiations over trade. But the good news is it's been postponed for another month. If you could say that's good news. But at least we'll have time to work through some more of the details. Okay, well, Warren, kind of on the other side of this,

it seems to me, you think July might be about as good as it gets for a while anyway? It looks like you're looking at cutting back your stock exposure ahead of a pullback you expect in August, September. What's gonna trigger that? Yeah, I don't like to be too regimented with my plans when it comes to the market you have to kind of take

as it comes to you. We're overweight stocks right now. I would say we're bullish. We've been overweight for a couple months since early May. And if we were to reduce, it would just be to neutralize our equity positioning. I do think that the seasonals for July peak in the first half of the month.

And I agree with a lot of the good points that Brenda brought up, but our view, our focus has been since the tariff stuff started, the drama started in April, is that investors really need to focus on technicals and the price action is going to guide you through this rough patch. We're getting back to some deja vu. But instead of having negative sentiment, we're starting to get to this place where

the market is optimistic. The market participants are starting to get more optimistic. We see that in AAII, more bulls than bears for the first time since Liberation Day, put call ratio. We track inverse ETF volume, which is very low, very similar to what we saw at the top in February. So I would say in this current move, it doesn't mean we're done for the year, but in this current move, we're like in the sixth or seventh inning, and it might be a good idea for investors

to try and beat the traffic and get out of here before mid-July at least neutralize their overweight positions. That's kind of our rough guideline for the month. Yeah, Warren, I mean sticking with technicals here some of the some of the technicals are signaling that you have an S&P for example that's getting very overbought here if you start to look at RSI and things like that. Valuations are arguably lofty. I want to throw this chart up. I don't know if you can see this on the screen, but it's showing US equity index valuations and where we are right now relative to 20 year distributions.

This is showing the NASDAQ and it's showing the Russell 2000 and S&P and equal weight S&P, S&P mid cap, all very lofty in terms of valuation metrics right now. So how does that factor in, especially given the wall of worry that investors are climbing? Is that for me? Yes. Yeah, I mean, for me personally, I actually

we don't think the market is nearly as overvalued as the consensus believes. You know, we've done a lot of work on this and you kind of see it in the chart. You put up there, if you look at the S&P equa, it's right close to its historic average. I think that the character of the market has changed. We have more stocks producing more return on invested capital than we've ever seen before. We have more than 100 stocks in the S&P 500 with 20% ROIC. ROIC is an indicator there's a mode, a more sustainable mode, a higher quality market.

So we've done a lot of research on this, and especially if you get margin expansion going out next year, which we expect as we get through this tariff drama, and the AI benefits, which I think is really the bull story that's coming into focus, start to kick in, you get higher margins, and that justifies higher multiples, all that stuff in the mix. So I'm kind of, I think those simple P E ratio, historic P E ratio average arguments are good things to fade ultimately. That's, I know that's dangerous to say, but that's how we're approaching it.

All right. I knew I'd get a hot take from you, Warren. Brenda, speaking of hot takes, you're a Tesla shareholder. What are your thoughts given everything we've seen with Elon Musk and the stock selling off again today? So we've owned Tesla since mid 2022 and I think if you look at the pipeline of innovation at the company it is unmatched compared to other large publicly traded companies that are out there. So we are continuing to own it for that reason but this is is a high beta stock, has a beta of over almost two and a half, 2.5.

And so it's gonna be volatile. Obviously Elon is a big part of that volatility. I think the bigger question for the board is really one of, you know, does it make, would it make sense to bring in someone as CEO to be another public face for this company, for the company of Tesla, while Elon remains more of a visionary for the company. But I think when we take the drama with Elon out of the picture and just look at what is

this company involved in, it really is, again, unmatched with EVs, with humanoid robots, with battery technology, with humanoid robots, with battery technology, with self-driving technology. We think that is future where we're going. And so we think that this is going to be an important company, even though it's incredibly volatile stock. Brenda and Warren, thanks for kicking off the hour with us. Appreciate it with all the major averages starting the week lower. Well, the tech sector is outperforming the S&P 500 by the widest margin in more than two decades, despite some pressure today.

CNBC Senior Markets commentator Mike Santoli joins us now for a look at this tech leadership. Mike. Yeah, and really, Morgan, a rewind to what we saw last July. So here's a two-year look at the NASDAQ 100, obviously dominated by the big growth stocks in tech and communication services that's here,

and the equal-weighted S&P 500. This peak right here, that's July 16th of last year. That was the absolute peak in Mag-7-type dominance that we saw last year. And what happened afterward, you got this crescendo of buying, everything was looking all clear. Yes, we were also overbought, as we're starting to get right now. And you basically had a nice gut check.

You had a 10% plus correction in the NASDAQ 100. And you kind of went nowhere for a few months. It did not change the overall uptrend, but you had previously had this low in April. So a slingshot April into July. Of course, this year, a much deeper drop in April. The slingshot was pulled back much farther. And now you're up even more coming into July.

So again, going into mid-July is when you have a little bit of the, you lose some of those seasonal tailwinds, and of course the S&P equal weight managed to go up while the NASDAQ 100 did nothing last year. So take a look at the relative performance. Same chart, it's just as a ratio of the NASDAQ 100 to the equal weight.

This is that July 16th of last year, and you see we basically got there last week before the broader list of stocks started to working. So whether this means it's a double top and you've gotten all you're going to get out of the big caps, and of course you can't always count on the choreography of the average stock taking up the slack and rising if we do get a pullback in the NASDAQ 100. So just be aware that the conditions are there for a little bit of a payback, even if it's not the end of the uptrend.

Yeah, some good historical context there. I'm gonna shift gears a little bit with you, Mike. I'm gonna ask your thoughts on the bond market given the shift higher we saw in treasury yields today, particularly as we saw more and more of these trade headlines hit the wires. And given the fact that we have quite a few bond auctions this week, there's that moniker that's going around right now that deficits don't matter.

Yes. So I mean, deficits ultimately maybe matter at some point in this unpredictable future. I guess you would read the bond market action as, okay, we have the budget bill is now law of the land. We know what the deficit outlook is gonna look like. We're growling about Korea and Japan in terms of setting tariffs. Every time you've had this idea that somehow we were gonna do something to potentially raise tariffs

and reduce the US trade deficit, well, those dollars that we send overseas to buy stuff come back in the form of people buying our financial assets, including Treasuries. I don't think the market is doing that math in real time, all the time on the fly, but today was an unwind of the yields down, dollar down, oil down, stocks up equation.

So I don't know if it was anything more than just reflex kind of asset allocation and unwind, or if it was a little more attention To the supplier Treasury's coming out. That's what we'll have to know We didn't need any critical yield levels really that seemed like a tripwire for stocks, but you know might not be far away All right. Yeah, we can't forget the the taco trade Trump always comes around. That's what that stands for, right? Mike will see you in just a bit Well, Tesla the worst performer on a down day for the markets, two big things at work.

Impact from the budget, or rather, fiscal bill. Also concerns about Musk's political ambitions. We will discuss the consequences coming up. And Interior Secretary Doug Burgum will join us to talk the budget bill, some new rules for energy production. We've got a big show straight ahead. Overtime's back in two.

Welcome back to Overtime. Oil slightly higher despite OPEC Plus agreeing to raise production in August. But even with oil in the green, energy was among the worst performing sectors in the S&P today. Nearly every component there lower. Texas Pacific land, Halliburton, EOG,

among the biggest decline. Well, sticking with energy, the Department of Interior, out with news earlier, announcing proposals aimed at boosting energy efficiency by allowing increased technology usage by oil and gas companies in their operations. So joining us now in an exclusive interview is the Secretary of the Interior, Doug Burgum.

Secretary Burgum, it's great to have you on Overtime. Welcome. Great, Morgan, great to be with you. Okay, we're talking about commingling, which would allow oil and gas Secretary Burgum, it's great to have you on overtime, welcome. Great Morgan, great to be with you. Okay, we're talking about co-mingling, which would allow oil and gas that's produced from different reservoirs to be using the same well pad. Why is this meaningful?

How does it boost production? Well Morgan, co-mingling from different sources is something we've already put in place for offshore. Today's announcement deals with onshore, but it's not just different reservoirs. It's about the fact that the federal government has had such outdated rules that right now, unless it was the same ownership, the same royalties, the same everything on a pad of land, Bureau of Land Management land, you couldn't commingle. So this is about making sure that state, tribal, private, and federal resources

are all can be with today's technology easily measured at a single wellhead, which means greater efficiency, less capital expense for the industry, smaller and fewer number of well pads, which is great for the environment. And we expect that the announcement today could save the industry in close to $2 billion of capital expense

just by bringing everybody up to what's, bringing the federal rules up to what many states are already have in place today. Is that going to change the oil field services game? I guess, how does it change the business model for the guys that are putting the rigs up and servicing them? Well, it won't change anything about putting the rigs up

and the servicing of them, but it's gonna really help on the back end from an accounting standpoint. It will help with some redundancy of equipment because at a single wellhead you'll be able to, we can accurately measure if you've got different ownership across say a two square mile, three square mile pooling unit where we're splitting the royalties across different ownership at different royalty rates. That can all be done with today's equipment. So again, this is just the federal government

being behind playing catch up, simple rule change. This was one of the things that we had proposed. It was included in the one big, beautiful bill. So this is now law that we're able to do this on Bureau of Land Management. Again, great for the operators, great for the environment, and great for taxpayers, because we'll be able to collect more revenue for the citizens of this country

off the federal lease permits. I mean, it speaks to this wave of regulatory reform and permit streamlining that your agency and others, including the Energy Department, have been involved in. We've seen crude prices come off. They're off from a month ago, they're off from the start of the year, they're off from a year ago. they're off from the start of the year, they're off from a year ago.

How much does all of this regulatory reform actually spur investment by producers into domestic oil and gas, if you do see those prices continue to come off? Well, I think one of the things that we know is that one of the huge costs of developing energy on federal lands in particular was all the regulation, whether it was the Environmental Species Act,

whether it was NEPA, which is being reformed, getting all the permitting done on federal land, it discouraged capital investment. We know that even some of the studies that have been done in the Permian by companies like Morgan Stanley have showed that if you've got a private lease, you might be getting four times as much,

$32,000 per acre versus on federal 8,000. That's how much the cost of regulation is priced in to this. The Biden administration's strangulation by regulation was very effective at one thing, driving capital away from developing on federal resources. And by us cutting this regulation, we can actually lower the break even point for people in the oil and gas industry developing

because at a lower price per barrel, they can still make money because I think we can cut at least 10% of the price of a barrel right now on federal land is regulatory overhead cost. Hi, Mr. Secretary, going back to the co-mingling change proposed, if this goes through, how do you prevent premature depletion and pressure interference?

Are you proposing any new requirements for higher resolution reservoir models or dynamic pressure monitoring so it's clear where the resources are coming from? Well, I think that technology all exists in places like my home state of North Dakota, in the Bakken, co-mingling has been going on for more than a decade across different ownership tools,

and that's what we're talking about here on the onshore, is just allowing people to be able to co-mingle across different mineral ownership and of course the four basic cases of that is federal, tribal, state and private interests. But on BLM land, unless everything was identical including the royalty rate, we were not allowing operators to co-mingle. Even something that was just an accounting, nothing to do with reservoir pressure, just

accounting on the back at different reservoir rate, They had to have duplicate equipment in place. So this is just a common sense step forward that's gonna lower the cost. Like I said, could free up as much as 2 billion in capital from the industry that they don't have to spend, creating redundancies that aren't necessary because the technology can allow us to accurately separate which oil is coming to which owners. Okay, Secretary Burgum, appreciate the time. We didn't even get to mining so

you're gonna have to come back so we can talk about that, especially on the heels of this tax and budget bill. We appreciate it. Thank you, would love to come back. Well coming up we will look at the impact of the tip exemption in the budget bill. I keep saying budget, really fiscal bill on restaurant chains and their workers. Plus Amazon extending prime day to prime days. And Walmart and Target getting in on the action as well. So a closer look at this retail battle five months before Christmas. Welcome back to overtime stocks falling from record highs today.

Restaurant stocks getting hit particularly hard after a key component of the tax and spending bill affecting taxes on tips. For more on what that could mean for the space and the workers, let's bring in Kate Rogers in San Francisco. Kate? Hi, John. Workers will have the opportunity to deduct their taxes on tips up to $25,000. After that, federal taxes will apply. Qualifying jobs include servers

and bartenders with more guidance to come from the Treasury Department. Now there's also a deduction on overtime pay for workers capped at a much lower rate. $12,500 annually for single filers, $25,000 for joint filers. Workers will still be paying those payroll taxes including Social Security and Medicare along with state and local taxes. Both of these deductions on tips and overtime have phase-outs for higher earners at $150,000, annual income for individuals and $300,000 for joint filers. Importantly, these deductions phase out in 2028. But the benefit for these workers may not be that high after all. The Tax Policy Center did an analysis in February on tax-free tips.

Their study showed only about 2 percent of all households, or 60 percent of households with tipped workers, would receive a tax cut. Now of that 60 percent, the average tax cut would be around $1,800 a year. And for the lowest earners, making less than $33,000 a year, the after-tax income would increase, John, by around $450 a year and for the lowest earners making less than $33,000 a year the after-tax income would increase John by around $450 a year. So the idea being that this group of the lowest earners on the rung there is not paying as high a level of federal income tax so the savings and boost to their income rather overall is under $500.

Okay. Kate Rogers, thank you. Time for CNBC News Update with Bertha Coombs. Bertha. Hey Morgan, as recovery efforts continue in Texas in the wake of last week's flooding, White House Press Secretary Caroline Levitt suggested that the administration would consider salvaging FEMA after President Trump earlier suggested that it should be shut down, leaving disaster response to states.

Levitt went on to say the president has always said he wanted the states to do as much as they can. Federal agents gathered near a park in Los Angeles for a large-scale immigration enforcement operation. Federal defense officials said the operation included about 90 members of the California National Guard and federal officials. It's unclear whether anyone was taken into custody and the park was mostly empty, according to reports. And six medical agencies have sued HHS secretary Robert F. Kennedy Jr. today over recent changes to vaccine

recommendations. Groups which include the American public Health Association and the American Academy of Pediatrics say the decision to limit access to the covid vaccine for helping children and pregnant women was unilateral and unscientific HHS has not replied with a comment. The suit. Back over to you Morgan all right for the comes thank you coming up we're going to check on the markets as stocks have to you Morgan. All right, Bertha Coombs, thank you. Coming up, we're gonna get a check on the markets

as stocks have their worst day in about a month. And only a handful of Dow stocks were actually higher today. One of them is Walmart, which is girding up to duke it out with Amazon and Target in the war for summer spending. Overtime's back in two. Welcome back to Overtime. Stocks selling off today, roughly 1% for all the major averages. But remember, they were all at or near all time highs.

Nine of the 11 S&P 500 sectors closed lower. Consumer discretionary, energy and financials were the worst. Industrials, which is the best performing group this year, hit an all time high earlier in the session before pulling back to actually close lower. The 10-year yields, that moved higher getting back close to the 4.4 percent rate and of course keep an eye on some of these auctions including for 10-year t-bills later this week John. All right we'll be watching and it's a major week of discounts at several retailers with Amazon, Target, Walmart, several others launching summer sales events this week.

Consumers are expected to buy big in the next few days. Adobe estimates a record breaking $23.8 billion is gonna be spent online between July 8th and July 11th. That's up 28% over last year. So, who wins? Joining us now is former Walmart US CEO, Bill Simon. Bill, welcome.

So, kinda stepping back and looking at this from a tariffs point of view, you say that while we're seeing prices on some individual items rise from tariffs, it's not yet affecting the consumer overall because if there's a tariff, say, on imported bananas, some fruit consumers will decide to buy domestic oranges, say,

instead. So you say for that reason tariffs might not affect consumer prices overall in the short run. What happens in the long run and perhaps if there's a sudden hiccup in domestic production, something consumers rely on, who's best positioned? Well, you know, ultimately the consumer is the arbiter of whether a tariff works or impacts or doesn't impact. If the price of a certain item goes up, they have a choice to buy that item or buy another

item as long as there's a reasonable substitute. In certain categories like apparel, for example, you can delay a purchase. It's not a product that you need to buy on any given day. I think there's a lot of consumer discretion in how tariffs are going to impact. And I think that's why you're seeing item level pricing go up in certain cases, but not yet market basket pricing in the form of inflation. Bill, do you think that there's likely to be a special enthusiasm for these summer sales because consumers know that tariffs might be coming

and who's going to take best advantage of that if so? Well, I think, yeah, we're headed towards really a real interesting sort of perfect storm of retail throwdown. It gets an old retailer like me excited, right? You got Amazon who started with a day, went to two days. Now it's five days and Walmart comes in and they're gonna go two days longer. And oh, by the way, you don't need a prime membership at Walmart and Target's throwing

what they got against the wall. And the consumer's in a place right now where they're flush. We just saw unemployment, our employment numbers better than expected. So we have full employment, people have jobs, wages are up and everybody at least believes that there's a price increase is coming.

And so I think this is going to be a perfect opportunity to buy. So I think the consumer will win. So how much are, how closely are you watching actual discounts? And I guess how steep those discounts are versus just this idea of clearing out inventories ahead of the back to school season and the holiday season. Well the offerings for, all the retailers, but led by Amazon, are tremendously broad across multiple categories.

It's not just the products that are, you know, clear-out inventory. Walmart, for a couple years now, has started to include back-to-school product into their sale week here. And so that's new product. So it's not clear out inventory, get rid of the old stuff,

which is I think how it started back when Amazon started it. It's too broad for that. One clear loser to me seems to be the Chinese fast commerce, e-commerce companies in the midst of all of these trade dynamics. I've seen it even as a consumer trying to order things online. We've also seen simultaneously things like some of the value retailers and

the dollar stores, at least from an investor point, shoot higher. Are they winners in this new trade dynamic moving forward? All the discussion about tariffs has really sort ofone a bright light on pricing for consumers. We just went through a couple of years of really difficult inflation, which brought a price focus, consumer price focus. Now the discussion about tariffs and the media reporting about price increases because of tariffs. People are very, very focused on pricing right now.

I think that is to the detriment of certain retailers who had price advantage in the past and the benefit of others who are discounters. And that's why I think you're seeing some of the dollar stores and discounters responding. All right, Bill Simon, thank you. Bet. Up next, we'll discuss whether the skyrocketing

U.S. deficit could lead to financial retaliation from China and other major foreign creditors. And later, a top analyst on Elon Musk's political ambitions and whether they pose a threat to Tesla stock. It's the worst performer in the S&P 500 today. Be right back. Welcome back to Overtime.

President Trump signing his tax bill into law on Friday. It is projected to add trillions to the U.S. deficit over the next decade. Leslie Picker joins us with a special report, America's Deficit Reckoning, and a look at the potential international implications of America's soaring debt. Leslie, great work. Tell us. Yeah. Thank you, John.

When Admiral Michael Mullen was asked back in 2010 what he thought was the biggest threat to national security, his answer shocked the nation. I responded that the most significant threat was our national debt, which was the biggest threat to national security, his answer shocked the nation. I responded that the most significant threat was our national debt, which was a bit of a surprise. The reporter and others actually would have expected some kind of weapon system or some kind of country or something like that.

The former chairman of the Joint Chiefs of Staff told us that as debt levels rose, his concern was that interest payments would, over time, squeeze the discretionary defense former chairman of the joint chiefs of staff told us that as debt levels rose, his concern was that interest payments would over time squeeze the discretionary defense budget historian Neil Ferguson published research recently, which says that a great power that spends more on debt servicing than on

defense risks ceasing to be a great power. This year, the US is expected to spend about $90 billion more on interest payments than on defense, deepening a critical tipping point that America hit in 2024. The recent tax and spending legislation that was just passed is projected to increase defense spending by $2 billion this year and $150 billion over the next decade. The Committee for a Responsible Federal Budget estimates that the law will boost interest costs and those will rise by $700 billion.

I asked Admiral Mullen whether our adversaries pay attention to our debt levels and see them as a potential vulnerability. I would think that Putin and Russia, Xi Jinping and China see this as a vulnerability. And you've heard President Xi in China over the last certainly decade-plus talk about the United States being in decline. The irony is that China is one of the largest foreign holders of U.S. treasuries, although it's been steadily reducing its stash. Japan holds more than a trillion dollars' worth of debt, the most of any foreign country.

They recently started accumulating or they really started accumulating U.S. debt in the late 70s and 80s through trade. While the White House says higher tariffs will generate additional revenue to shrink the budget deficit, there's also a looming question about what the reworking of global trade relationships might mean for international demand for treasuries, guys. Yeah, it's a fundamental reworking of how our system operates, our economy operates. And I've had these type of conversations with folks on the national security side because of it.

And you sort of just touched on it. But this impasse we've seen, at least ahead of today with tariffs announced today with Japan, sort of speaks to the leverage that the Japanese, for example, as investors, maybe have in trade talks. And the reason why the Japanese have treasuries to begin with, Japan is an exporting nation. So if they're exporting, say, a car that's worth $30,000, they get that Japanese automaker gets dollars.

They need to convert that to yen through a bank. That bank invests in treasuries so not to cause much appreciation for the yen, which would hurt their exports. So all of this kind of goes back to trade. So if you start to see a weakening relationship for trade, how does that impact the demand for treasuries over time? What does that mean for the U.S. dollar over time? And what are the options for the U.S. economy, one might argue, we've taken our first big

step, gamble perhaps, with an entitlement cut, Medicaid. Now how people feel that, how people react to that might determine whether we can cut further in order to balance this out down the line or whether taxes might end up having to go up eventually. Well, that's exactly right. Because basically the way we got here is one third due to tax cuts,

one third due to spending increases, and one third due to emergencies. So there's a lot of blame to go around. It's not just one thing. It's not just the other thing. And every expert I spoke with said that you have to have a combination of these levers, spending, taxes, and then have kind of a rainy day fund for emergencies in order to prevent something like this from happening in the future. Kent Smetters at Wharton said that if you only tried to solve this problem with tax revenue, for example, you would have to increase taxes 30% to solve this problem. If you only wanted to solve this problem with spending cuts, you'd have to cut spending 25%, which means

anyone who's receiving Medicaid or Medicare or Social Security, they're going to see their checks cut by 25%. So either option is not great for the country. That's essentially austerity, which nobody wants to see. But the challenge is coming together at the table for an agreement. And one of the things that I asked Admiral Mullen is, do you still see the debt as the biggest issue for national security facing this nation? You know what he said? It's number two. The political divide is the biggest threat facing our nation right now, which I think all kind of feeds together as well. Well, that could keep us from getting to the political divide is the biggest threat facing our nation right now. Which I think all kind of feeds together as well.

Well that could keep us from getting to the answer there. Exactly, an agreement on the debt. Again, great work calling America to the kitchen table where we gotta figure some stuff out, Leslie Picker. Well, you can catch much more of Leslie's special report by scanning this QR code on your screen, going to cnbc.com slash deficit reckoning, or by following and listening to the closing bell overtime podcast.

Well, do Tesla shareholders have a political problem on their hands now that Elon Musk is trying to launch a third party over his concerns about the federal deficit? A top analyst weighs in when overtime returns. Breaking news on tariffs, Megan Kisela has the details, Megan. Hey guys, that's right. Seven new countries have now received letters from the president today laying out the tariff rate that all of their exports to the United States will face effective August 1st. No

huge trading partners here, but some significant ones. The tariff rates range from 25% for Tunisia to 36% for Cambodia and Thailand. The other countries on the list include Bosnia, Indonesia, Bangladesh, and Serbia. Everything else in these letters holds true guys, so all these tariffs will be effective August 1st unless the countries strike a deal in the meantime, in which case we could see them fall a little bit lower. They also could rise even higher if the countries do retaliate. And I'll also flag that the pattern we talked about at the top of the hour still holds as well, which is that all of the tariff rates these countries are now seeing are on par or slightly lower than what they were going to see back on April 2nd. So mostly we're holding the same, just the deadline now kicking from July 9th to August 1st for these

to take effect. Guys? So this is probably the administration's attempt to nudge these trading partners along to doing the deals that we've been told are coming now. Absolutely. We know that these negotiations have been a little bit stuck in the mud for lack of a better term, at least with many of these trading partners, and they weren't able to get as many deals done in this first 90 or so days as they wanted. Now they are giving themselves more time sending these these letters to say we really are serious, this is the rate that we're going to charge

on all of your exports to the US, and if you don't make a deal now, we really mean it this time, August 1st is when these will take effect. All right, Megan Casella, thank you. Up next, Tesla losing $68 billion in market cap today. Bringing it below $1 trillion as Elon Musk plans to start a new political party.

We're gonna break it down for investors. We'll be right back. Welcome back. Tesla, the worst performer on the S&P, posting its worst day in about a month, losing $68 billion in value. Today's decline spurred in part by Elon Musk starting a new political party,

once again drawing the ire of the president. Will Tesla shareholders have to contend with another extended political distraction for their CEO? Well that is the key question and joining us now is Craig Irwin, senior research analyst at Roth MKM. He has a buy rating and a $395 price target on Tesla. And Craig, let's start right there because shares sold off. How much of this is because in late April, Musk said, I'm leaving the administration, I'm moving away from politics and I'm gonna focus on my businesses. And now that seems like that's shifting again.

Yeah, someone needs to grab Elon Musk and say, Elon, do not fight with the president. It's not in your interest. I know what he's seen, right? He's seen that our government operates on razor thin margins right now. And because of that, it's just a few individuals can exert control. He's even said that directly in the last couple of days where just a couple senators and a

handful of people in the House, and you can exert substantial political strength, right? He's not trying to do a Ross Perot and go for 20% of the vote in the country. He's going to go after very specific areas. But that kind of a thorn in the side of the political establishment is not in the best interest, in my opinion, of Tesla and the investors in Tesla and Elon Musk's other companies. It's unfortunate. And I know his intentions are good? He's a purist. He wants the best possible regulatory environment for growth in America. We all do. But that's not what our constitutional democracy

is set up for. We have to be practical. And President Trump is being practical. And, you know, it's an unfortunate fight. Someone's gotta grab him and say, hey, dude, cut it out. I know there's been a lot of focus on the changes to EVs and

EV sales incentives in this budget and tax bill, and the president has talked about Elon Musk being upset with that. But the FT came out with an article, and they said perhaps more significantly than the EV tax credits.

It's a huge hit to emissions credits. And the fact that hit to emissions credits and the fact that Tesla makes so much of its income selling these regulatory emissions credits to rivals that could potentially ding Tesla. Your thoughts. I mean both of them will have a

big impact. They'll pass it through on price right. So they've shown the ability to both raise prices and lower prices in the last few years. So I think you're going to have competitors retrenching from the market, and Tesla is going to be the category king. They already are.

But their market share most likely goes up fairly substantially over the next couple of years. But yeah, they will have to move price to offset the benefit of credits. They will have to move price to offset the benefit of the federal EV subsidies. Right. Well, Craig, let me try out a different argument on you, which is that actually, Elon's not breaking a promise here. With him coming in, proposing a third political party, it actually helps undo some of the polarization he might have created by helping the president. And that really, China is a bigger problem for Tesla right now in the US

if they can't figure out that market and how to make their product feel fresh again. I like the way you think, right? I like the way you think. That means there's still this political alignment, which is what I fundamentally believe, right? At the peak of the discord between Trump and Musk, Trump was saying, elevate Vance. He's not running away from conservative values.

He's very clearly in the camp. China I think doesn't really come into this directly right now. I think Musk has been a lot more politically savvy in the way that he's dealt with China. He's been able to meet with all the right people. The city of Shanghai has given him all the right approvals. I think Beijing is a little more tricky given other strategic interests in some of these other companies, but he's dealt impeccably with China. I just wish he would bring that political savvy over here to the US.

Well, he seemed to have it a few months ago. He had hundreds of shareholders. Yeah. So what's the antidote to the political turmoil that the stock is suffering? Is it RoboTaxi announcements and hopes? You know, RoboTaxi, I think, will learn some interesting things on this upcoming call. You know, Optimus as well. You know, I've said a couple of times, you of times that I'm hearing from the supply chain, they're pricing

out for 30 million units. They're looking to build 30 million units over the next many years, maybe 10 plus years. When they start giving color on these things, and when these things look more and more real, that's going to come into the valuation and people will probably forget about some of this political noise. I think fundamentally people know that Elon Musk is an ally of our president. They just both have very big egos and have earned the right to own those egos.

Right, yeah, that's one way of putting it for sure. Craig Irwin, thank you. Morgan, it might've felt like a down day in some significant way, but really we're just back to the Wednesday close and we're above 6,200 on the S&P. We're above 6,200 on the S&P. The Russell 2000 was sort of the big loser today,

down about one and a half percent. Perhaps not unexpected given the trade dynamics we're seeing here and the fact that major averages overall are looking a little overstretched depending on how you're valuing them. And we've got to watch those tariff levels but another month until we get to see how it all turns out. That does it for us here at Overtime.