Power Lunch - Apple announces first new iPhone operating system redesign since 2013; Trump, CEOs promote savings plans for newborns 6/9/25

Episode Date: June 9, 2025

Apple’s WWDC event is underway, and the tech titan unveiled some major updates, including its first major iPhone operating system redesign since 2013, “Liquid Glass.”Plus, CEOs are attending President Trump’s roundtable event touting a program that would deposit $1,000 in investment accounts for newborn Americans. We’ll take you there live.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stock starting the week pretty strong with Kelly. Hi everybody. I am Brian. Here's what's new at two. President Trump meeting with top CEOs. You're going to see and hear it live. Plus, is Apple going to wow investors with some hot new tech? And Besson meets with Beijing in London. But will the trade talks really bear fortuitous fruit? Kyle Bass is here. But first, to check on the markets with the down-year session highs. You can see about a quarter percent gain there. The NASDAQ's up nearly half a percent. Now all the more remarkable as Apple shares going the other way and in the red. And Warner Brothers Discovery is splitting in two. Huge pomp in the stock initially, but it's now turned lower. But look at that, down 1%. Kind of undoes its mega merger also from a few years back. And Tesla hit by a pair of downgrades. It's off session lows, though, and in fact it is positive by about a percent and a half. All of this continued worries around the stock and the relationship between the president and CEO Elon Luff. A lot to talk about media companies splitting in two. It's a novel

concept, Kelly. And we're going through it right now. Oh, that's right. I totally forgot. All right, we're going to get to that in a minute, but to start today, we're monitoring a big event at the White House. All Americans may get a slice of the stock market. President Trump launching a new initiative that would give all kids, born in America, an investment account for $1,000. It is a huge potential deal, and Trump being joined by some major CEOs to talk about it, but here's the big question. Is it actually going to happen? Megan Cassell us at the White House is more on what we know and don't. Megan.

Hey Brian, that's right. So President Trump holding a roundtable here at the White House today with those CEOs that you mentioned. We're expecting it to get started within the next hour to highlight this pilot program that was already passed as part of the House version of the recent spending bill. We'll have to see if it makes it into the final version. More on that in a second. But first, let's dive into the details here. This would be a federal investment of $1,000 to every U.S. citizen born essentially between

in 2024 and 2028. It would go into an index fund that matches the stock market, roughly. It's controlled by the child's guardians. And as I said, this was passed in the House version of the bill. But it's not law yet, the president today just highlighting it, obviously the White House showing its major support behind this program. You mentioned the CEOs to take a look at some of the CEOs that we are expecting here today.

This is according to a White House official talking to me earlier. Now I'm told by the White House official that all of the CEOs here, that they're these companies will be announcing billions of dollars in collective investments into these Trump accounts for the children of their employees that would come on top of the federal investment of $1,000. The parents can also add up to $5,000 for each year that the accounts are open. Now, as for the politics of this guys, we will have to see if the Senate decides to keep this in the final version if it ultimately stays in there when all is said and done.

But the Congressional Budget Office, when they scored this, they say that the Trump accounts, given that this is a short-term pilot program will cost under $13 billion. So in the grand scheme of this bill, not the most expensive thing in it by any means. Also, no major public opposition to it at this point. So still a chance, guys, that this does ultimately become law. Yeah, I spoke with Brad Gershner about this out in Los Angeles extensively. This is really sort of Brad's baby at Altimeter Capital. And, you know, I asked him questions like, can you sell it?

Are people going to sell it the minute? And there's all these restrictions that are put on it, Megan, correct, that we know that would basically prevent people from say, okay, well, I got $1,000 because that kid born. I'm going to sell it for $500 because I need the cash now. There will be a, if this happens, and it's a huge if, there will be a lot of restrictions put in place that would make sure that the money does what it is intended to do. Yes, that's what we're anticipating. Some folks I talk to sort of said this is almost like a $529 for your kids college education, but a little bit different. but they are anticipating that there are ways to make sure this money stays in there, stays invested until the child grows up, becomes an adult.

The White House officials I've talked to are talking about things like using this to buy houses, for example, really a seed investment that as you said at the start, gives everybody a piece of the stock market. The White House is talking about this as a way to sort of limit or boost equality, I should say, limit some inequality by giving everybody who's born in this country something to get started with. All right. Thanks, Megan Cassella, and of course we'll see footage from that event shortly.

The other key event we're watching in the meantime is Apple holding its worldwide developers conference. It's a big deal for the company, but this time around, investors are focused on Apple's weak spot, which is AI. Stock sold off into this event, selling off now. Steve Kovac is here with more on what we've heard from the past hour or so. Yeah, Kelly, and just playing off what you just said here, the most important or a buzzy announcement, let's call it, out so far in this keynote, has nothing to do. do with artificial intelligence. It's actually a redesign of the operating systems on iPhone, on iPad, across all of the platforms. They're calling it liquid glass. And it kind of looks like, as you would imagine, glass and everything you see on your screen, it kind of bends the light

and moves around. It's like a very dynamic interface. So that is coming. If you've used Apple Vision Pro, you're probably used to this look and feel. That is going to be coming to all devices later this fall. But of course, we're curious about artificial intelligence. So what do we got there. The main feature right now is they're calling it live translation. And this is an Apple intelligence feature that works in messages. It works in FaceTime. It can work in third-party apps. And it does exactly what you would think. If you're texting with someone who speaks a different language from you, it'll automatically translate that back in your preferred language. It works on phone calls. It works on FaceTime. However, those appear as subtitles. It doesn't

kind of mask over the person's voice with a different language or something like that. And then there's visual intelligence. This is more updated features using some new technology from OpenAI and ChatGBT. That's already part of Apple intelligence, but now it lets you take a screenshot of what's on your screen and uses that visual intelligence system to give you more information. They use the shopping example. I think they said something like, oh, I saw a cool jacket somewhere on Twitter. I can take a screenshot of it. Use the visual search engine to figure that out.

And then finally, Workout Buddy. This is what they're kind of calling an Apple intelligence system, but assistant, rather, for your workouts in the fitness app when you're doing your workouts on your Apple Watch. They use Apple fitness instructors. They use their voices. It gives you little notes of encouragement, your stats and things like that. And look, guys, this is stuff that we've seen from Apple's competitors before. Nothing groundbreaking or new here like we saw with the Apple Intelligence debut last year. But it is kind of iteratively building on that.

And then finally, we do have developer tools that they're finally letting developers tap into the Apple intelligence system on device so you can use some AI features, even if you're not connected to the internet, like you have to with rival, like OpenAI and so many others that rely on the cloud more than what's on your device. And you see how investors are reacting here, guys, shares down. It looks like 8 tenths of a percent or so, guys. So as you said, Steve, it sounds like a lot of the stuff is stuff that may have already been available on Android. but with things like the screenshot feature, sounds cool, but I would imagine it's also a way to collect a lot of information on what you're screenshot. Well, Apple Intelligence is designed not to do that, Brian. So yes, maybe if you're using a chat GPT feature integrated, that could go to Open AI.

But the way Apple intelligence was designed is actually unique and novel. They showed this last year. It's a private cloud system. So Apple claims they've even opened it up to researchers. to check on this that it's all done in a very private way. So I'd be surprised if they are kind of collecting data on you in that respect. Maybe Google will, maybe open eye will, but Apple itself, not necessarily. But look, you're right.

This is some stuff that we've seen before, not necessarily novel. And at the end of the day, these features, Brian, are coming for free to your iPhone and to your other Apple devices. So they have to be compelling enough in order to get you to upgrade to the new ones that have Apple intelligence on there. Steve Kovac, and if it points us to your sweet jacket, then that's a good thing. Somebody's track of that, though, but I don't think I could pull that off. Steve, thank you very much. It's theory.

It's theory. Go to theory, Brian. Very fancy. All right, so while the conference may be neat, what do you do with Apple stock? Because technology is one cool thing, but making money on technology is another. Your next guest has a cell rating on Apple and heading into the event, expressed worries about its internal AI efforts calling it struggling at best. Huh.

From what I was bringing, Craig Moffat, he is partner and senior analyst at Moffat Nathanson. Craig, a lot of this, the reports that you've done, excellent work on Apple, came out before today. Is there anything so far that you have seen or heard from the conference that would change your thinking on the stock? No, hey, Brian, how are you? No, not really. Look, you know, what's the old joke? they set expectations really low and then they proceeded to meet them. They did pretty much what everybody expected.

I think Steve did a really good job of recapping what they've said. There's nothing here that's going to change any number in anyone's model. And the real question is, where's the growth going to come from? And that's still a huge question mark. Where do you think it's going to come from then? If this, if we're seeing the neat, listen, some cool new features, absolutely be able to pin music as a music guy. I love that feature. It's probably not enough for me to want to buy a new phone that could run the iOS that could do it.

So it sounds like, Craig, you're not seeing or hearing anything that would drive somebody to say, you know what, my phone works, but I want to pay a thousand bucks because I need the new phone because it does X, Y, or Z. That's exactly right, right? Step back a little bit, and there are two fundamental questions that underpin the bull case for Apple. One is this question or this belief, really, that we are on the cusp of a big upgrade cycle for iPhones, which are, after all, by far Apple's most important product. The reason people were excited when we came out of last year's WWDC was that it looked like we were on the brink of an Apple intelligence revolution that was going to require a better device.

It was going to require 8 gigabytes of memory and it was going to require a neural processor and you were going to have to therefore get a better device in order to take advantage. That hasn't materialized over the past year and it's not just that it's getting pushed out. It's starting to be a real question about whether when Apple intelligence comes

it will really be sufficiently device-based as opposed to cloud-based that it's going to require an upgrade cycle. Craig, oh, go ahead, go ahead. I was going to say the second big belief is that maybe alternatively, agentic AI is simply a subscription, and there's another $20 a month in Apple services, that's also becoming harder to envision, in part because Apple's competitors are moving really quickly and defining alternative business models, including advertising-based business models,

and it's getting harder to see either the upgrade cycle or that big subscription. subscription bump to services that you kind of need to have to justify a valuation that's still flirting with 30 times earnings for a very low single-digit growth company. And to that point, I was just going to say you have the lowest price target on the stream, and you think it's worth 141 a share. It's at 200. I think back to when Buffett started buying, it was what 10 years ago, maybe not even, Apple had gotten down quite a little multiple, a lot of concerns back then.

I forget exactly what it was around. at what point is this an opportunity for long-term investors to get in and go, you know what, in the long run, they're going to figure this out, but these kinds of buying opportunities don't come around a lot. I guess to your point, 30 times earnings is not usually a bargain basement opportunity or moment to get in. That's right, Kelly. We're not, it's not like we're suggesting there's this calamity coming and therefore people are going to switch from the Apple universe to the Android universe. I don't think anybody believes that's going to happen. No one is suggesting. that Apple is going to start to lose its customers. But you have all of these pressures, this sort of death by a thousand cuts type of pressures, on, for example, the growth rate that Apple is getting from services that is now under pressure because of the ruling in the epic case,

where companies can now go outside of the Apple ecosystem. Or alternatively, the threats to Apple services from the Google case and the what are called tack revenues or traffic acquisition cost revenues that they get paid by Google, or the challenges that they face in China simply because the alternative devices and this desire for nationalist champions in China are crowding out Apple's market share. All of those pressures say the numbers are likely to come down, and the multiple still hasn't come down. And so no one, I certainly wouldn't suggest that, you know, Apple is on the brink of losing its customers. Nothing like that. Right.

It's simply that if you start to see even a little bit of pressure on particularly services revenue, but just revenue in general. And the growth rate comes down and you have negative revisions, the multiple is going to come in, too. And all our 141 target price was saying is that you put a slightly more sober multiple on this, thing and you start to reflect the cuts that, remember, we haven't even seen estimate cuts in response to tariffs yet, that if you start to see estimate cuts and a trimming of the multiple a bit, you're talking about a stock that trades in a more pedestrian valuation and 141 is not some kind of bargain basement price for Apple. It sort of reflects kind of what Apple is, which is a really well-run but slow-growth staple rather than tech growth company at this point.

Well, at least one commentator, a video producer on Twitter, is saying the Vision OS widgets are kind of sick. He says, lets you, and kind of shows the way it works. So I don't know, maybe something is buried in here that will justify this sort of price level. Look, design means a lot to me. The design is gorgeous, but again, I'm not going into my Apple model and changing any of my numbers because of how good the design is, I can certainly acknowledge, wow, what a nice job they've done. Especially for Vision OS, which applies to, I don't know how many thousands of people at this point. So what about Warner Brothers Discovery, Craig? Long rumored, finally, you know, it's happening. The WB is going one way, the D, another. The shares are down 3% now. As people

have pointed out, it's kind of undoing the merger that created this company in the first place. Why do you think it's selling off? What do you think is ultimately the fate of all of these properties. So first, let me say, Kelly, that this is not directly my coverage. My firm covers it. My colleagues, in particular, Robert Fishman, but also Michael Nathanson, have done the real work here. And there are a couple of things. First, this isn't a surprise, right? They've been talking about this restructuring for a couple of months now. So it's not new. It came a little faster than people expected, but not truly a shock. And I think what it does, it certainly follows this. same template that your own parent company, Comcast, that I do cover, has done with separating

what will be called Versant from its core business. It sort of creates, if you will, this good bank, bad bank, the faster growth, the slower growth, you already put the leverage. There's good bank and gooder bank. That's what we call it here. There's more goodly and super goodly. That's right. Super, super goodly, right. And you're in the super goodly part. by the way. Yes, because of Kelly. But look, I think what everyone is going to speculate, and it's not new speculation, so it's not, this has been around for a long time, is ultimately your parent company, Comcast, and NBC Universal, needs to come together with Warner Brothers Discovery. And Robert Fishman and I collaborated on a report

some time ago to say that seems like where all this is headed. And it's sort of headscroman in some ways that it's headed there in this painfully slow motion process because it's not like the the obvious need for additional scale for both Peacock at Comcast and for Max or HBO, as it will be renamed again, that HBO and Peacock wouldn't be better together. And it's not like all those legacy cable networks wouldn't be better together. And so ultimately it seems like that's where this is going. It's amazing. A lot of people scratching their head over what's taking so it's like we just, we're

going to re-bundle. Yep. Yes, imagine, right? The Warner Brothers Discovery was built on a deal, as Kelly said at the top. Now they're going to break apart that deal. We broke apart the cable bundle. Now we're going to put that bundle

sort of back together. I mean, that's literally, it's not exactly what's happening, Craig, but it's directionally correct. It's pretty amazing to watch. The most amazing part about that, Brian, is I wrote a piece 20 years ago, almost 20 years ago, 18 and a half years ago, I wrote a report that was a sort of joking future history of imagining what will happen when ESPN goes direct to consumer and everything unbundles and how frustrated consumers are going to be about everything on bundling and streaming and passwords and all that

sort of thing. And they're going to desire putting it all back again. And it wasn't that hard to see that this is where we were going. It was fundamentally a better business model for everyone involved to have cable networks bundled together. And the media companies have done themselves an incredible disservice by taking apart a much better business model and making it worse instead of better. Wait, why is it their fault not Netflix's fault? I mean, what should they have done instead? Oh, they absolutely could have built and preserved the existence.

model. They started creeping out with taking their best content off and putting it on streaming platforms, taking marquee sports events and putting it on their streaming platforms, and in the process, devaluing and devaluing the existing linear model, and then starting to scratch their heads over, why are people leaving? And, well, as long as they're leaving, let's take even more off, and they have shot themselves in the front. I know we have to go, Craig, but of course we can't There's just one more on this. So should they have done nothing and just said, we are a legacy product. You can find us on linear TV and good luck to you.

And there will be a voice remote, so it'll be easier to use it. It'll all be fine. Or should they have migrated at all to streaming and be doubling down on those efforts even now? Well, I think there's actually a hybrid model that makes a lot of sense. And what Charter Communications, the cable company is doing, is saying, give our customers, that is Charter's customers, the benefit of choosing where they want to watch, the content. Don't force them to choose between the streaming platform or the linear platform. If they pay for the linear platform, they also get the streaming platform. And it actually

looks like it's working. Customers just want to watch their content. The media companies have done them a disservice by making it much harder to find. But at least when you pay for it, you ought to be able to get it. All right. Look, because you wrote about it 20 years ago, we'll let you kind of take the hindsight as 2020 view. And we really appreciate you coming on today. Craig, it's good to see you. My pleasure. Good to see you, Kelly. Craig Moffitt with Moffitt, Nathanson. Now to the broader markets in the economy, we also have the next Fed decision on rates just around the corner. All eyes are on Powell, especially the presidents, after City pushed back its rate cut forecast and now expects three cuts this year instead of four.

They were amongst the most dovish. Our next guest says if the Fed cuts too early, it could reignite inflation. Here on set with us is Danny Moses, the founder of Moses Ventures. It's good to see you. Thanks for having me. Another, I'll just say a highly, followed DC economists made the exact same point this morning, saying to the president, you know, just be careful that you don't push the Fed too far to end up with the very inflation problem that you don't want to have. So it sounds like you see that very similarly. I see it. And I think the reason you would cut rates is important. Are you going to cut rates because the economy is slowing? You can cut rates because inflation keeps coming down.

If you do it because, you know, the economy is slowing reason, it could be dangerous here. Wouldn't it be the right reason to do it? Well, the right reason to do it. But if inflation has an ebb yet, you definitely are in a pickle here where you could see inflation re-accelerate. Is the economy slowing? I think it is slowing at the margin. I think it's still holding up relatively well. We saw the jobs number last week, which was fine, a couple of revisions lower to previous months.

But things do feel like they're teetering and were one bad tariff announcement away, I think, from sending consumer confidence back down again. And I think the wealth effect has a huge impact on it. Is it slowing enough to cut rates? I don't know. Because we cut them last year when we were told things are great. Well, rates were extremely high. Okay. So I think we knew the neutral rate.

We were a little bit high there, so I think there was room to cut. I understand the argument that you can cut now 25 basis points and wait and see what happens. I totally get that. I just think that Powell's upset that the White House kind of ruined his soft landing temporarily, and they just want to be careful and make sure they do the right thing here. Where are you on the market, broadly? Are you in the kind of, it's all going to be fine and kind of move higher camp or in the the overvalued camp?

I think we're overvalued, but that's never a good reason necessarily to sell the market. I'm more interested in the sectors within the market and what they look like. And there's two few stocks controlling the market, just like there's two few citizens controlling the economy, in my opinion. You're not wrong about that. Yeah. I mean, something we've talked about a lot. And not only is it the same 10 stocks that run the show, but the other, if somebody said to me, what's the biggest reason to be bullish on the stock market? There's one very simple reason, and it's just freaking math.

Yep. The number of stocks that are publicly traded in America has declined by. 50% since I started doing this job. It's gone from 8,000 to under 4,000. And there's more people in the world with more money investing in the stock market. So why wouldn't stocks go up? Listen, flows keep coming to the market. Even in April, you saw flows come into ETFs. Didn't stop. So you're right. It's supply and demand to a degree. But I think within that, right, you're relying on two few companies that are providing most of the earnings for the S&P. At some point, secular becomes cyclical. You need to find a place to put your money.

Although today is an interesting example, you have Apple, one of the biggest, probably top three of market cap, moving lower, rest of the NASDAQ is moving higher, rest of the market's holding up okay. So it doesn't feel like, you know, there's too few companies in control. There's probably a dominant narrative with the AI right now in control. For sure. There's new announcements every day. And I think the CAP-X cycle, every day we go by, proves to be more real in terms of AI and the spend that's going to be occurring. So it's hard to fight that cap-ex cycle, for sure. So that's not the area that you're necessarily worried about.

No, I'm not shorting any of those companies, per se, but I do believe that there is wool. be a reason at some point is they're just too expensive and or too concentrated. You've got to move it around. Your point is well taken because I saw something, and I know the internet's going to app me on this because I was flying all weekend. I was in Texas. I'm back. The equal weighted S&P 500, the one that's not weighted to the NVIDIAs and Amazon's the world. Is that like a multi-year low? Yeah. Like it hasn't done well. If you put your money in the S&P 490, you've made no money. Correct. Well, I think it this way. If you're a portfolio manager, an active manager, you get paid on beating the passive ETFs, right?

That's your goal. So you have to pick a sector and then overweight a certain sector and overweight stocks within that sector. So until proven wrong, you know, it's a catch-22. And what will happen will be, I believe, as money comes out and it goes to try to find a different home, those are the stocks and sectors that I'm looking at here. But just quickly before we go, you like energy. Not many people come on and say, I like energy here. It's not sexy, right. Not even.

Hey. It's been terribly underperport. Pretty sexy. I think energy is people who cover energy or sexy. Very, very, exactly. Price and crude. goes the administration wants it lower. Why be bullish on energy stocks? Think about the waiting in the S&P in energy. It's 3% right now. Historically, it's been seven. It's crazy. So it won't take a

lot just to turn it. So I don't see that going much lower. Price of oil is a little bit disconnected from the value of these energy stocks. These energy stocks in the last four to five years have gone through transformational M&A. Their balance sheets are in much better shape. No one's going to tell them to drill baby drill when they don't want to. As a matter of fact, look at rig counts. They're at a four to five year low right now. So it's much more economic, makes much more economic sense to own these stocks here. And ExxonMobil, to me, cheap name, relatively, I think, to its growth rate, pays a nice dividend, buys back stocks. Same with Diamondback, you know, energy fang there as well. So those are the two names I own. Are the dividends at risk? I think that's a, that is a concern.

I don't think so. I think they know what would happen if they cut those dividends. And instead of cutting dividends, they're going to cut CAPX and they're going to keep cash. And so I think these are cash generating machines now. And listen, I don't know what's left in the shell. I mean, there's U.S. producing here. There's not as much left, I don't think, in the ground as people believe also. It's like they're no longer, you know, oil producers. They're just, it's financial engineering. Financial engineering is replacing kind of geothermal engineering or something like that. I mean, is that your point? Because most people would say, as the rig count goes down, how are they going to keep making money? Well, I think that the mathematics,

share prices can keep going higher. Correct. And they're also exposed to natural gas and natural gas has gone up here. So there's a level where oil and gas mix. Just trust these management teams have been through the ringer many times that they're going to optimize shareholder value. don't drill dry holes anymore. They don't, they don't screw up like they used to. Thanks to AI, right? AI, all the technology, the slumber's days, the Halliburton and the world, make sure that the hole has a lot of oil in it. Yeah. For sure. Danny, thank you. Thanks for having me. That's your thing. All right. We are still awaiting comments from President Trump. If and when he shows up, you will hear it. We've got Kyle Bass coming up on China as well. A lot more to do. Don't you

dare go anywhere. Crypto.com is America's premier crypto platform. All right, welcome back. The trade talks that may run the world are happening right now in London. Treasury Secretary Scott Besant, Commerce Secretary Howard Ludnik, and U.S. Trade Ambassador Jameson Greer are meeting with their counterparts from China. It's to try to solidify a real trade deal that would benefit both sides. Remember, we made a handshake deal last month,

but White House accused China breaking that deal. So what is likely to happen now? because if we can make a good deal, stocks certainly could have a path higher. But as Danny Moses just said, if things fall apart, could also be watch out below. Let's talk about that and more joining us. Kyle Bass, founder of CIO of Hayman Capital Management. And Kyle, you know this thing that got in your ear. If President Trump does come out, we're going to have to go to that.

But stay tuned and we'll try to come back to you if and when that ends. We're all kind of flying blind here. So thank you for your flexibility and patience as always. You think a deal that will benefit both sides and thus the equity market will come out of London? Well, I tell you, Brian, first of all, it's a pleasure to be here. And, of course, you know, I'm not offended by you switching over to President Trump when he comes out. I think that the market and the world is expecting a controlled de-escalation in these talks. I think that this August 12th date kind of looms large.

The question is, will they push that date out a little first? further or will they have to really get into the heat of advanced negotiations in late July? I personally think that we are so far apart on this, that it's going to be difficult for us to kind of get a global trade agreement put together. This is a pivotal moment in time for global trade. But more importantly, you know, the relationship between China Inc. and the United States in the long run is kind of boiling down to one important moment here. And as the Chinese frequently do, is they do a handshake or sign a deal and then don't live up to the deal.

They didn't live up to the deal that they signed with Trump in the first Trump administration on trade and the agricultural purchases. And in this case, they certainly haven't released the rare earth magnets that are required to run these EV motors. I've met with a couple of EV company heads who tell me they've never released the magnets since the since the May 12th date. And so, you know, we've got a situation in hand, Brian, here, where the Chinese are not living up to the agreement the moment that they agree to something. So it's a difficult situation, I think, going forward here. It sounds like we're going to relent on some of the items that we were sort of cracking down on Kyle. Here's what Mark Fields, the former Ford CEO, had to say about just how serious the

rare earth magnet issue. He was on the show on Friday. Take a listen. If you thought the chip shortage was bad, wait until magnets go missing. They'll strip out certain features like adjustable seats or high-end audio systems. But more importantly, I think what you'll see, Brian, back in probably 20, 25 years ago, there was a palladium, which is a key input for catalytic converters, just skyrocketed. And what you saw the industry do is innovate around this so that it can reduce the amount of palladium. And maybe, Kyle, that innovation happens in the long run. But for now, I think people are aware of the seriousness of the issue.

Yeah, I think, look, I don't think that we need to be that worried about Ford's issue with these rare earth magnets. I mean, you have to realize, we all know that the writing has been on the great wall since 2017, since China really turned around and took a different tact with their kind of opening and they're integrating into the world and potentially becoming more west. and capitalistic. In fact, they turn inward. And post-COVID, they've really turned inward. You know, this is not rocket science. It's finishing and creating rare earth processing facilities, which, as you know, our Defense Department and the White House is focused on creating some of our own. We have an abundance of rare earth metals and minerals in our soil here. We just need to build processing facilities, and that takes time. In the interim, some of the companies, that didn't heed thinking about their supply chains and how they relate to China, they're

really going to suffer, including Ford. But as part of these negotiations, we certainly can't give in to a belligerent China over electric vehicle magnets. There's a much larger state of play here as it relates to, let's say, the world order. If we don't get adjustable seats because we create a more fair economic system with the country that has been artificially keeping the value of its currency low for decades. So their products will always be cheaper than maybe there's something to that. On the other side, though, listen, electric seats are one thing, Kyle.

The pharmaceutical and manufacturing supply chains are another. What kind of power does China wheeled over us and the world on that? Because so many of the critical ingredients in drugs actually also come from China. Yeah, so it's fascinating to me. Just if you take a few steps back when you think about the conversation we're having, I've recently had this with a handful of CEOs and some people in the government here in the U.S. You know, it sounds like we're talking about a hostage negotiation. This doesn't sound like a trade negotiation on what's fair.

It's thinking they have something so critical to us, the active pharmaceutical ingredients in antibiotics, which they threaten to pull from us, withhold from us, in the first Trump administration, when Matt Pottinger and his team wanted to investigate the origins of COVID, we wanted to understand where it came from. They immediately threatened to pull antibiotics from us because they didn't want the origins of COVID investigated. So every time I hear about negotiations, I think we need the FBI's lead hostage negotiator here instead of a trade negotiator because what we're talking about is where we have gaping holes on our side. But on their side, they've got an economy that's 300% of GDP to assets in the banking sector and their bankers are lent to the real estate, which is down 30 or 40.

Their entire banking system is teetering on insolvency. They have a real estate crisis, a banking crisis. They have a youth unemployment crisis, Brian. We are dealing. You have a demographic crisis? I mean, the demographic crisis is so severe that you've never seen actuaries have to redraw lines like they're drawing them. The average fertility of a Chinese woman's 1.1. It's at the lowest it's been. ever in recorded history, and you need 2.1 just to simply maintain a population. So we're dealing with a caged animal here. We're dealing with a cornered animal here. They like to project strength and what they, what kind of sorts of Damocles they hold over

our head. But we actually hold all the cards here. And putting together APIs for pharmaceuticals and building rare earth finishing facilities, if we committed ourselves to it, like a Manhattan project or a public-private partnership, we can do it pretty quickly, Brian. We just need to marshal the resources and do it. Well, and people would say, well, what about all the cheap goods that we produce here? Yeah, that's a different article. Kyle, we're going to ask you to stick around.

I can't promise you were to come back, but just stay cool and stay loose, and we're going to kind of figure it out, okay? Kyle, thank you. All right, so Kyle's not going to go away yet because we're waiting on President Trump. Kelly's expected. Why don't you give him a call? I would like to. It's supposed to come out at 2 p.m. Eastern.

Let's get these savings accounts going as get them in the market. Let's get it. Let's go already. I can't say it better than that. We'll be right back. Welcome back to Power Lunch. I'm Courtney Reagan with your CNBC News update. California Governor Gavin Newsom sued the Trump administration over deploying the National Guard in his state in response to widespread protests over federal immigration rates. The move came as the president suggested Newsom should be arrested for obstruction. Newsom said Trump's remarks were a, quote, mistakeable, unmistakable step towards authoritative, authoritative. Easy for me to say.

The heads of the FAA, Amy Army Naviation and NTSB will brief senators Wednesday and two aborted landings at Reagan National Airport. The planes are forced to perform go rounds because of a nearby Army helicopter. The incident came just months after a Black Hawk collided with an American Airlines jet near Reagan, killing 67 people. And a huge twist in the legal saga between it ends with us co-stars Blake Lively and Justin Baldoni. A judge tossed Baldoni's $400 million counter suit against Live. Today, as well as his $250 million defamation lawsuit against the New York Times.

The judge said, Lively's claims of sexual harassment were legally protected and immune from the suit. Brian, back to you. Courtney Reagan, Courtney, thank you very much. Appreciate it. Folks, just a reminder, the president is meeting with a bunch of CEOs right now at the White House, got the CEOs of Robin Hood, of Uber, got Brad Gerster, Valtimeter Capital, and a number of other bold-faced names. The topic is this idea about giving every child in America. born in the next five years, a $1,000 savings account that would invest in a low-cost stock market index

funds. Basically, every child born in America would get $1,000 that is invested in the stock market that he or she could not sell until they turned 18. So it's not like you get the thousand, then you could sell somebody and take the cash. It would be kept in an account. It's not a done deal yet. It's got a long way to go, Kelly. But we are waiting on comments for the president. about this. And it's surprisingly cheap in the long run. We talk about all the budget busting things that are going on, including the tax cuts and everything else. This one is not one of them. It's been an idea you've seen floated on both sides of the aisle for a very, very long time. What would it grow to in a period of 10 or 20 years? That thousand could become 35, 5, 6, 7. I mean, it's substantial.

Depends on market returns. Of course. Of course. Conservatively thinking. Well, you know, Kyle Bass has agreed to kind of hang around because, you know, he's cool like that. And Kyle, we do appreciate you sitting while we're waiting on the president. Let's forget about China for a second. You are first and, well, you were actually a bond guy and then you became a subprime and a stock guy. What do you think of the idea of giving everybody a thousand bucks at birth? I mean, as long as they're U.S. citizens and legally in the United States, I think it's a great idea. I mean, in the long run, as you know, the way that we run our pension scheme and our retirement scheme in America, I think teaching kids and giving kids an investment, you know,

when I think about how many children there are in America today, I don't know what the proposal is for how many there are today, but if you earn 7% annually, you double every 10 years. So if you're giving a child $1,000 on day one, if you earn 7% annually, you're double every 10 years. So if you're giving a child, percent a year, 10 years later, you'll have doubled it. So by the time that they're 20, it'll be worth something. It won't be worth enough to pay for college. But, you know, there are IRA accounts that you can put aside, set aside for kids and for workers and this and that. There are tax-deferred ways of earning money. The question is, in this gift for children, you should certainly, I don't believe you should be able to spend it. You should be able to spend it on

education. You shouldn't be able to go out by a Gucci bag or some shoes with it like a lot of people did with the money very COVID. I'm only jumping in because we've got the two-minute warning. So we're expecting the president in two minutes. We'll see the naysayers, and by the way, I posted a poll online. The naysayers have already started to come out of the woodwork. You know what they're going to say, Kyle, which is, number one, to your point, rich people, why should they get it? They're already rich. Number two, just going to enrich Wall Streeters because someone's got to manage the money. And number three, what about my kids? They were born last year. Now they're not going to get it. I think there's a phase out by income, too, if I'm not mistaken. But yeah, if families can put another

5K into it, obviously the ones who are better off are going to, you know, going to take advantage of that and not everyone will be able to. Yeah. When you think about inflation, what inflation does is it tears at the social fabric of America. The poor are already poor, right? The middle class lose their mobility and the rich get all the money. And so back to Kelly's point, like they would to be a serious means testing going on here because I think there are around 70 million kids under the age of 18 in America. So if you gave them all $1,000, you're talking about $70 billion, just a funding account. So you're talking about real money.

And so who knows how to put the bells and whistles and the suspenders around this thing. But I love the idea of saving. I love the idea of saving any possible way, and any way you can do it in a tax-deferred, is going to benefit our society. If you can mandate those funds before college expenditures or even high school expenditures, if you go into private. This would be something like 50, up to 50 percent would have to be for qualified purposes. So education, home down payment, starting a business, that kind of thing. Of course, we'll see whatever the final proposal is. Yeah. I mean, again, we're talking huge amounts of money, but it is a great idea to start to

teach our kids how to save. You know, I don't know about you guys. I went to a public high school And there was no talk of saving in my entire high school career. There was no math on investing. There was no math on compounding interest. I only got that in college because I went looking for it. Yeah, I got it from my dad who said 401K more than me. I'm not even sure I knew anything about compound interest, but I just knew do the 401k. And then what's amazing, Kyle, is you just do that thing.

You do the match. And then you wake up 15 years later. And it's really turned into something to the point of what they're trying to accomplish here. Exactly right. But as you know, Kelly, it takes a constancy of purpose and repeating the savings. A one-time investment, again, of $1,000 if we earned 7% for 20 years, you know, end up being worth $4,000, right? That isn't enough.

So you have to teach people how to save and teach people how to compound. You think about that number, though, okay, because Kelly and I both also into public schools in the Shandoah Valley of Virginia, Kyle, so we learned a lot about compost interest. I don't know about compound interest, but think about this. Okay, so it's only $4,000 by the time you turn 18, right? So let's say you're able to keep it. Then it's $8,000 when you're 28. It is $16,000 when you're $38, $32,000.

And when you die, it's $100,000, assuming you don't spend it without adding another dime. This is what Warren Buffett learned. Warren Buffett said the majority of his fortune came in the last 15 years of his life for 20, years because while the money, the numbers are big no matter what, but you get my point, when you double it $100 billion, you go to $200 billion, that's when it really starts to matter. And I don't know why we don't teach this to sixth graders. They're smart enough to understand it. And to your point, it's just stupid that we're not teaching kids this, the most powerful

mathematical tool in the world. Yeah, there's an old adage, you know, give someone a fish or teach them how to fish. Like, we should be teaching them how to fish in grade school and in middle school and in high school. And, you know, the first time I ever saw that compounding effect of savings was when I did the IRA math on what the maximum contribution to an IRA could be. And then if you made that contribution to the math you just did, Brian, but if you make it every year and you earn and you keep compounding, you know, $2,500 investments each year over your lifetime by the time you're 50, a million dollars in the account, then you're talking about money you can buy homes with and keep a savings. And to your Warren Buffett analogy, you want Warren Buffett put a tax wrapper around his investing so it grew tax deferred. That's what needs to happen. I think in IRAs,

things grow tax deferred until you draw them. And maybe, as Kelly said, if there are, call it allowable expenditures for down purchases on homes or starting businesses or spending it on on education, maybe you should never pay tax on that savings and allow it really to work for you. But it's all in all a great idea. It's a great idea. They're talking about like long-term capital gains if you withdraw between 18 and 24, maybe right, you know, by 30, maybe ordinary income if it's non-qualified. So there's some stuff like that build into here. But the key is going to be kind of leave it alone and get as much as you can in there. You know, so the president will be talking about that shortly, you know he's going to get tons of questions about Elon Musk, Kyle,

maybe about China. There's just anything else on your brain in particular you're going to be listening for? You know, just going back to, I don't know about what's going on between Trump and Elon Musk. There are two very strong personalities. And I'm just thankful that Elon Musk is here in the United States. He's one of the most consequential human beings. He's the most consequential human being in the 21st century, in my opinion. It's great that he's here. You know, when you think about what he did with Doge, imagine if the prior administration said, we're going to hire McKenzie and we're going to pay them $200 million to go into our government

and find the places where we have fat and places where there's large S in the government expenditures and cut them. I think the whole world will be fine with that. I think the fact that the world's richest man came in and kind of came in with a sledgehammer, but he agreed to do it for free. I think unless the consultants found that the consultants were the source of the money. Yeah. So I applaud the efforts of Doge.

We must cut government expenditures. We must figure out how to fund our deficits and close our deficits. But they're not going to, Kyle, you can't do it because, again, Kelly and I from Virginia, a lot of our friends work for the government, work around the government. You make a cut. Someone's going to come out and say, well, you're trying to take money away from retirees, your kids. it's politically unpalatable, even though we know a lot of that money is stolen. The biggest part for me is not the people that work hard and make a good living.

It's the money that the government just, I was going to say a bad word, wastes on fraud and abuse, and it goes to cyber crooks overseas. I don't know why we just don't focus on that. As opposed to saying, well, we need to lay off some people over here. Why not just stop giving money to cyber criminals? hundreds of billions of dollars per year by the government's own estimates. That's not like us just saying numbers. That's the governments.

And yet they keep doing it year after year. Money that could go to veterans is going to some Romanian gang. Yeah. Well, it's also going to NGOs. And, you know, the real fat, the real largesse, the real fraud in our government's NGOs. And I think you'll see Jay Clayton at SDNY and the FBI. I actually think you're going to see some really interesting things coming forward with some money that was moved just between the election and the inauguration.

Tens of billions of dollars went to very specific places. And I think you're going to see a number of arrests and a number of perp walks. And you're going to see some of that prosecuted, Brian. But in the end, if you believe the political reality is the way that you stated it, whereby we're just, it's impossible to cut because there are too many interested parties, then you better own hard assets and you better own a lot of them because... Like gold. Is that why gold is up 25% this year? And I want to be clear, nobody's been accused of anything. I want to make that very clear that there's been no accusations. We'll see what happens.

That's your opinion. But gold keeps going on. And is that the reason? I think there's some money that moved around right before the inauguration that I think is going to get, it's going to get interesting pretty quick. But, Gold. Gold is simply a proxy for inflation. I think gold was held back due to the introduction of crypto being digital gold. And then in the end, reserve managers can't put their money in gold. There's not enough of it out there. So I think reserve managers have been investing in gold. If you look at China, China has a closed capital account, meaning they don't allow their currency to freely trade. And they are, again, in kind of an economic winter, their 10-year bonds

160, their policy rates 1.5%. They're telling the world they're growing at 5.5%, but their 10-year bonds at 1-6. So, you know, one of those things is lying, and I'd go with the government, certainly lying, not the bond market. So I think you see state actors, you know, I call it the axis of authoritarians are all working together. You have China, you have Iran, you have Russia, you're North Korea. I think you're going to see China revalue its gold holdings much higher. And I think you're going to see them try to find legitimacy in having larger gold holdings so that people might trust CNH in the event that China goes to invade or invade Taiwan. Kyle, great discussion there. We're going to say goodbye because we are now going to the White

House, President Trump with Wall Street's top CEOs. Let's listen to it. I would say, mostly good. Some of the things you're reading about in Los Angeles, thank goodness we sent out some wonderful National Guard. They've really helped and a lot of problems they were having out there. They were afraid to do anything. And we sent out the troops and they've done a fantastic job. So I want to thank them very much.

I also want to thank you for being here as we discuss one of the most exciting parts of the one big, beautiful bill. It is indeed a big, beautiful bill, and it's doing very well. The Trump accounts, as they call it, pilot program, which will make it possible for countless American children to have a strong start in life at no cost to the American taxpayer. Absolutely no cost. It's going to have a huge impact. I want to thank House Speaker Mike Johnson for number one being a great speaker, and number two, perhaps slightly less important for being here today.

Thank you, Mike. Along with Chairman Jason Smith, who's fantastic and representatives French Hill, August Flugher, Blake Moore, Rob Bresnahan, and Frank Lucas. Thank you all, fellas. Thank you very much. We appreciate it.

Very much. Thanks as well to many top business leaders from Invest America, CEO, counsel. It's been a wonderful council. They've come up with some fantastic ideas. We're putting them into use. They're really the greatest business minds we have today. These men and women lead large, successful companies, and they're committed to contributing millions of dollars to the Trump account, and it's really, it's going to be something incredible for children and for their employees in many cases. Here is how the accounts work. For every U.S. citizen born,

after December 31, 2024, before January 1st, 29, the federal government will make a one-time contribution of $1,000 into a tax-deferred account that will track the overall stock market. In other words, it'll be pegged to an index that we'll pick, right, Michael? We'll pick it. We'll pick a good one. Maybe you should be the index. I'd like to have that. These kids would be very wealthy if that were the case.

That would be a good idea. I think we might do that, Michael Dell. These accounts will be private property controlled by the Giles Guardians, and in many cases, those guardians will be the parents. We think probably the parents will be the guardians. They'll be open for additional private contributions each year from family, friends, parents, employers, churches, private foundations, and more. This is a pro-family initiative that will help millions of Americans harness the strength of our economy to lift up the next generation. and they'll really be getting a big jump on life, especially if we get a little bit lucky

with some of the numbers and the economies into the future. In addition to the substantial financial benefits of investing early in life, extensive research shows that children with savings accounts are more likely to graduate high school and college, buy a home, start a business, and are less likely to be incarcerated. Trump accounts will contribute to the lifelong success,

of millions of newborn babies. They'll are fully, and this will be very interesting, I think for everybody to hear. They are fully funded through targeted reforms in the One Big Beautiful Bill, like the $1.7 trillion in mandatory savings, welfare reforms, to stop waste and fraud, a 3.5 percent remittance tax, and more. And it's just a part of that. The One Big Beautiful Bill is among the most important pieces of legislation in our country's history.

I don't think there's ever been anything bigger. And I think it's going to go down as certainly one of the most important things will ever have done. In addition to the largest tax cuts in the history of our country, including the most powerful border security measures ever, it delivers major economic relief

to the American workers, families, and there are so many things rebuilding our military. We built it. Just eight years ago, we started and did a great job, but now we have to rebuild it again, plus technology change. All of a sudden, it's about drone. You know, we have a new form of warfare. It's drone warfare. So a lot of things change.

We did a great job with the military, but now we're going to have to do some little tweaks, to put it mildly. And we'll be doing that, and we have it all nicely funded. I look forward to signing this into law. It's really something that we're having such an opportunity. And I have to say he's here with us. He's a person that I've admired for a long time. You take a look at what he's done and followed his record. And it's Dell Chairman Michael Dell.

He's done such an incredible job. As a business person, I study business people, and that's a perfect one to study. It should be almost mandatory reading. So I want to congratulate you on that. and thank you for the idea because you're the first one that really brought this to my attention. I know that you and your friends have been talking about it for a long time, but other presidents didn't get it done, Michael, right? So we got it done.

Congratulations. Thank you very much. Sure. I want to also give some recognition to my friend, Brad Gersner, who helped get us all organized and actually— Thank you very much. I spearheaded this. Good.