0:00 spk_0
Welcome to Morning Brief presented by Robinhood, the home to commission free trading. I’m Julie Hyman. Let’s get to the three things you need to know today. First up, a big win for Nvidia. The chip giant has secured US approval to sell its H200 AI chip to China and will give the US government 25% of the proceeds from those sales. Nvidia can now potentially regain billions of dollars in lost business through the China market, and President Trump said he informed Chinese President Xi Jinping about the move and that X has responded favorably.The president also said chip makers like Intel and AMD would also be eligible. Plus, the contest for Warner Brothers’ Discovery is intensifying. Paramount Skydance has launched a $108 billion hostile takeover bid. The proposed offer backed by banks, Gulf sovereign wealth funds, and the US president’s son-in-law Jared Kushner. The move comes just days after Netflix announced the studio had accepted its $72 billion offer. Investors are now watching to see how Warner Brothers Discovery CEO David Zozlov reacts.And earnings still coming out. Campbell’s Soup this morning reporting results that showed both revenue and profit falling year over year. Its CEO said consumers remain intentional in their shopping behaviors, but did highlight they stand to benefit from at-home cooking trends. Campbell’s also announced it agreed to acquire a 49% interest in its supplier La Regina, which produces its Rayo’s pasta sauce. Campbell’s had previously said it would work more closely with its suppliers in an effort to mitigate added tariff costs.Let’s get a check in on stock futures. We are, uh, seeing indications of a slightly lower open, very small declines being indicated, the largest of them by the NASDAQ, which is falling not even 0.1% in terms of how it’s indicated at the open. Let’s dig into our top stories of the day now. Joining me now, senior markets reporter Inne Ferre, Federal Reserve correspondent Jennifer Schonberger, and Mark Malloch.with us as well. Seibert Financial CIO. Now we’re getting closer to the end of the year, guys, but things have not quieted down that much, of course. The two day Federal Reserve meeting begins today, Jennifer, and there’s some talk here about what some people are calling a hawkish cut. What do we mean when we say hawkish cut and what would that looklike?
2:19 spk_1
Yeah, that’s essentially financial speak for the Fed’s gonna cut, but then they’re going to signal that we may not be doing many cuts going forward. So therefore, the hawkish part, hawkish means the Fed is looking to hold rates or raise rates, dovish means cut rates. And frankly, I do expect Chair Powell to, to come out swinging hawkish in the press conference tomorrow because he’s gonna say, look, this is the 3rd rate.cut that we’ve done this year. We’re now what, 3.5 to 3.25, 3375 on the Fed funds rates that much closer to neutral. And so we’ve done all the insurance cuts that we need to do at this point. If we’re going to need to do more cuts, it’s because we see a massive deterioration in the labor market. So, I think that, you know, investors need to sort of sit tight here as we go into 2026.
3:12 spk_0
Yes, it feels that it feels that way maybe on the Fed front. I want to ask Mark about that too, like what you’re expecting from the Fed hawkish cut, and then what are the implications for the markets if we get, we know everybody’s expecting a cut. Is the market expecting a hawkish, a hawkishcut?
3:27 spk_2
Yes, I believe so. I mean, the market is definitely expecting a cut. Let’s get that out of the way. The market is addicted to this, having this cut at this point, so it’s definitely factored in. But in terms of what the Fed is going to say.About next year, I expect they’re definitely going to temper our sentiments on that because it’s in their best interest to do so. However, you know, we’re going to need to, and investors are going to need to read between the lines. What is Powell going to say about the labor market, because clearly the labor market is showing some signs of weakness. How is he going to respond to the questions that I’m sure he’s going to get from the press about what are your thoughts, how are you going to deal with the labor market that’s crumbling here? And I think that’s what people are going to be watching.That is what is going to sort of set the sentiment on what people are expecting next year. I mean, we’re expecting a couple of cuts next year, no telling when they’re going to hit, but they are getting closer to neutral, whatever that level is, and so you know they have it’s in their best interest to also temper investor sentiment a little bit.
4:28 spk_0
And just quickly, Mark, are you changing anything investment strategy wise based on what we might hear from the Fed? Are you waiting for them to say something in particular that could change things for you?
4:38 spk_2
No, at this point, no. You know, to be clear, a 25 basis point cut is important for investor sentiment, not necessarily for many of the companies that we invest in. This 25 basis points is not going to make or break a lot of these companies. I mean, it is important that the Fed is showing that they’re concerned about the labor market, right? It’s good for the consumer to know that the Fed’s got their backs, if people are worried about their jobs, or maybe they’re going to pull back on spending after the holiday season.Maybe it’s good to know that the Fed has got their backs and that could sort of help ease the economy forward in the 1st quarter of next year. So I’m already thinking ahead.
5:16 spk_0
Yes, Jen, Jen, I’ve got to ask you about the personnel question as well and through the lens of the Supreme Court decision that we got yesterday, which we haven’t talked that much about but which seems important because of its potential implications for the staffing at the Fed.
5:30 spk_1
Yeah, there, there’s two things that we need to talk about here, Julie. One is that we already know we’re going to get a new Fed chair come May. Seems like the favorite favorite is going to be Kevin Hassett. We know that the president is leaning towards someone who favors lower rates, but given so much division on the committee right now about who is more concerned about inflation and who is more concerned about the job site of the dual mandate, it’s going to be.Difficult for whoever that Fed chair is to maybe force through more cuts at this point, given more of a hawkish contingent that we expect on the committee next year. Now that said, to your point, the Supreme Court heard a case yesterday in which it seemed like the majority of the court was in favor of giving more presidential power to Donald Trump.When it comes to removing personnel from independent agencies, so that was sort of a hat tip to, well, is that how they may rule with the court case with Lisa Cook, the Fed governor who Trump fired and who has sued in return. And if he is able to remove her, then that means that we’re going to see a dovish person.Put in that position of Lisa Cook, who has voted typically along with the Fed chair, so that could sort of tilt the Fed more dovish next year. But I think there are a lot of question marks that are, are even bigger than the Fed’s decision, you know, when it comes to policy next year, which is Fed independence and the president’s ability to pack the Federal Reserve and remove members of the Fed based on.Policy disagreements, right,
7:18 spk_0
sothere’s still a lot for investors to consider beyond just the simple question of are they cutting or are they not cutting. I do want to move on and talk about the sort of other North Star from the market now. I mean, I think you can pretty easily argue there are two North Stars from the market at the moment. It’s the Fed and it’s the AI trade. So Mark, I want to ask you about this whole Nvidia development here with the US government saying, OK, now you can sell those H-200s. We’ll take a 25.0% cut. Oh, and by the way, Intel and AMD, if you guys have modified less advanced chips, you can do that as well. Is this just sort of Nvidia story? Is it a bigger AI story? How are you thinking about that this morning? Well,
7:57 spk_2
it’svery much an Nvidia story because it obviously has immediate impacts on Nvidia’s revenues, which is positive for Nvidia, but I think it is a bigger AI story as well, right, because competition is so critical.For these advanced technologies at this point, even though it sounds counter to what a lot of arguments are out there, so giving other people a competitive edge against us, but in fact the competition is good. In fact, it will help actually propel the market forward.
8:27 spk_0
So in other words, you’re buying Jensen Wong’s argument that to prevent China outpacing us, we need toBe a participant in thatmarket.
8:39 spk_2
Absolutely. Huawei is about 2 to 5 years behind Nvidia at this point, and the software industry around it is so hungry for the technology that providing, let’s say, the Nvidia chips, the industry, even in China, is going to jump on that opportunity and in fact it will probably slow down the competition, the domestic Chinese competition.And it will allow again Nvidia to even leapfrog because remember all this money is now coming into the US and domestic investing here and now they’re going to plow that money into further into further innovation. So it will be very positive, I think, for the industry overall. That doesn’t mean there are going to be some setbacks. There’s going to be challenges. We’re going to have to watch carefully about security, etc. but they’re going after it anyway.Technology is an interesting thing. It’s like water. It will find the cracks, especially when there’s opportunity for the money and the growth. So if Nvidia is not there, someone else is going to be there, and that’s going to be Huawei or somebody else, but it’s not going to be a US company. So it’s actually a really smart thing to in a controlled way, let Nvidia in. Yeah,
9:47 spk_0
interesting. All right, so we’ve talked about the Fed. We’ve talked about.Nvidia and the AI trade. Got to talk about alternative assets a little bit here this morning and that’s where comes into the conversation, charging in. I think it’s so interesting when you look at Bitcoin and the recent activity, not just recent, but this year versus what we’ve seen from silver and gold. It’s really been an interesting, maybe education period for some investors. I don’t know.
10:14 spk_3
Yes, it’s a huge diversion. I mean when you look at where gold has been up 60% year to date, silver up 100%, more than 100% year to date, and then when you see what’s been happening with Bitcoin, look, strategists right now are cautious going into the end of the year with Bitcoin, with some strategists warning against chasing a sort of rally because the cost basis for the short term.Holders, the ones that basically bought less than six months ago, is around $103,000. So when you have Bitcoin that’s trading below that cost basis, when you see a rise in Bitcoin, they tend to sell the rip rather than buy the dip. And so that’s one area to be cautious of that it’s been trading at this range of 81 to 93 94,000. And then you have this issue of a hawkish cut.As you were talking about with Jennifer and the hawkish cut strategists are saying would not be good for crypto in general because yes, expecting a 25 basis point cut, but then if they pause afterwards this wouldn’t bode so well. So you’re looking at Bitcoin that could end the year below 100,000 even though you had some street estimates at 150,000, getting up to even 200,000. This was months ago, but certainly.The big divergence that we’ve seen, it should bode well for crypto in the long run that gold goes higher, but right now we are seeing gold at around 4,200,000 and not that far off its all-time high. Yeah,
11:56 spk_0
and Bitcoin is pretty far off its all-time high. Thanks so much, Inez, Jennifer, Mark, and Mark’s going to stick around and talk with us a bit more in a moment. Coming up on Morning Brief, we’ll bring you today’s top trending tickers and count you down to the opening bell. We’ll be right back.Welcome back to Morning Brief presented by Robin Hood. Now time for some of today’s trending tickers. We are watching CVS, Home Depot, and AutoZone. First up is CVS. The pharmacy is raising its full year profit forecast and it also guided for profit growth next year. CFO Brian Newman said CVS is closing out the year with meaningful momentum across its business and expects earnings to grow again in 2026. The outlook suggests CVS expects to manage a volatile environment.That has posed challenges for all three of its businesses. Next is Home Depot, the retailer offering cautious guidance ahead of its investor day. Home Depot says it expects comparable sales growth to be in a range of flat to up 2% for the year. The outlook signals it does not anticipate the housing market will rebound in the short term. However, it did provide a market recovery case that spells out higher growth when the company sees housing activity and spending pick up.And AutoZone, the auto parts retailer, reported first quarter earnings that missed analysts’ expectations. Despite seeing solid sales growth. Its investments and growth initiatives weighed on profitability. The stock’s up 17% this year. It has 27 buys, 2 holds, and 1 sell, and the stock’s off 2.5%.Paramount’s $108 billion hostel bid for Warner Brothers Discovery has rocked both Wall Street and Hollywood. It also tells us a lot about private financing, risk appetite, and could maybe mark a turning point in the credit market. It also stirs up memories of the days of Wall Street excess, perhaps in the 1980s. Mark Mali is back with us Sebert Financial CIO and Mark, you wrote about this in a recent note. You worked on Wall Street in the.80s you worked across the floor from the so-called junk bond guys who as you portray it were sort of like the sexy guys or the, you know, the more fashionable guys on the floor, but you see some parallels here. So talk to me about what that environment was like first of all.
14:07 spk_2
Well, obviously, it was crazy when I started. It was the later days of that.Market and you could see almost the excess. It was so obvious all the crazy deals and you know I was sitting on the other side of the trading floor on a Treasury desk, so we’re trying to figure out what their deals were all about and we would all sit there and try to do the math and we didn’t understand the math. It was way above our pay grade, so you start to recognize that these deals were so exotic that you know they could easily break and ultimately many of them did, as we now know history, we look back on history.Interestingly, earlier this year, you start to see some very interesting finance deals come about. A lot of this private credit stuff, a lot of the, a lot of debate that’s happening right now as we speak, where you have these big chiefs of these big private credit companies, which are great companies, but they’re finding that they have to defend the types of deals that they’re working on.There’s a lot of money out there chasing a few really good deals, and that’s where the challenge happens, where people start to accept things that may not be, may not have been acceptable two years ago, and that gets you wondering and worried is excess starting to build in that end of the market
15:18 spk_0
and I want to go back in time again real quickly because the big deal that happened, all the kinds of deals that were happening then were called leveraged buyouts. Now the deals that are happening now are still leveraged buyouts, but we usually don’t call them LBOs anymore because they got a bad name and they got.Bad name in part because many of them did not work very well, and you retell RJ Nabisco, which was, you know, one of the biggest, was it the biggest at the time, and so and kind of what happened in that situation? Well,
15:47 spk_2
soyou had a lot of folks focusing on trying to buy out RJR Nabisco. KKR ultimately won the bid, but they had to finance that acquisition with lots of debt, very expensive debt, which ultimately ended up on the acquired company.And the company could not afford to pay that debt and ultimately you know a lot of the sort of the crown jewel assets of the company had to be sold off in order to maintain. So looking back on it, it’s like a case study, a business case study of failure of the leveraged buyout market, right? Of course you’re right. Today they’re doing the same things, but we don’t call it leveraged buyout anymore. We also call junk bonds junk bonds, then they became high yield bonds and maybe perhaps we’re starting.Call them junk bonds once again, but it’s not necessarily junk bonds and the fact that they are lower than investment grade. The fact of the matter is the heavy debt load that will now end up on possibly on a company like Warner Brothers could be a challenge to their ability to be successful going forward, and I see very close similarities to that
16:50 spk_0
time. And what does that tell us, not just about the M&A market, but is there something that it tells us also aboutThe appetite for risk and the willingness to take on that risk in the service of some of these deals or investments.
17:07 spk_2
Yes, I mean the risk level today has really gone up quite a bit. People think it can’t fail. We haven’t seen any major failures other than we saw Tricolor earlier this year and a couple of other companies end up in bankruptcy as a result of very challenging, not only but as partially.As a result of a challenging ability to pay off their debt service, right, so that really was, uh, you know, I wouldn’t say I wouldn’t agree 100% that it was the cockroach that Jamie Dimon said, but certainly there’s some smoke there and there’s some reality there that we have to examine very closely. People do have this risk appetite. We see a shift in finance to private finance who are willing to take because they can take different types of risk, and they have.Also from banks that they have to deploy and like I said, the deals are not as great as they were maybe even 5 years ago, so there are very few good dealsnow
18:01 spk_0
and even not from a credit perspective but from an equity investor perspective. I mean what you’re talking about also reminds us that these deals don’t always, you know, if you’re an equity investor and you say oh I’m going to get into WBD because this is going to end up being great, or I’m going to get into Paramount Skydance or whoever ends up winning WBD.Maybe be careful what you wish for because particularly these media mergers, but also when you take on a lot of debt, the history is notgreat.
18:29 spk_2
No, absolutely. I mean the burden is on the investor to really look more closely at what the ultimately ultimate company is going to look like. It’s very challenging, right? I mean, it’s what they usually leave it up to the experts, but.Today investors are making a lot of their own decisions and they’re excited about what they see looks very shiny. Netflix is a great company. You might love their products, but you really do have to dig in and see what is the Netflix Plus Plus look like, what does Paramount look like with Warner Brothers and all this potential odd debt that is ultimately.going to end up in your lap as an investor, right? So you have to really pay close attention to that stuff. It’s achallenge.
19:10 spk_0
OK, so let’s zoom out for a second because if there is this maybe excessive risk taking, at least in certain segments of the market, when you look at your portfolio, is there hedging you’re doing? Is there more safety that you’re relying on than you would.You know, would have a few years ago or you would in a normal environment.
19:28 spk_2
Well, I think yes and no, right? I think that we’re always careful, right, but we never just jump into anything just because it’s, you know, it’s a hot opportunity. However, we’re looking at things a little bit differently, as I, as I intimated, you know, we’re looking very closely at debt. Obviously 6 months ago we were looking very closely at supply chains.Because we were concerned about the challenges that tariffs might might impose on our profitability, but now we have to look at debt. We have to look at how are people financing these things, what is real growth and what is not real growth, because you see a lot of companies now are cutting expenses to keep their margins, keep their margins healthy, but how much before they get too close to the muscle and to the bone.To the point where it may impact the growth prospects for these companies, and that’s the challenge because a lot of us are investing for growth right now, not a lot of value that makes sense. Usually the value that we’re finding these days seem like value traps, right? So they’re they’re cheap for the right reasons, not the wrong reasons. So it’s a challenge.Hey, big challenge,
20:35 spk_0
Mark. Thank you so much for chatting with me. Thank you. People are going to get even more Mark because he’s gonna hang around for a little bit longer. Opening bid is next, and our executive editor Brian Sazi is with us now. Saz, what are you going to be talking about on
20:46 spk_4
the show? We’re gonna talk about Mark and what he thinks about Nvidia. Uh, but look, Julie, we’re gonna spend a lot of time on Nvidia, AI. I’ve have Cell point C on Mark McLean.Uh, fresh off his earnings call, that’s gonna wrap up soon. We’ll have him on the show. And Julie PepsiCo out with some big changes, looking to cut a lot of expenses and potentially do away with some of, uh, some of the items we see down in the supermarket
21:04 spk_0
aisles, Julie, and a new logo, right?
21:06 spk_4
I got a lot going on, Julie. What, what’s your favorite, uh, Frito-Lay snack, Julie?
21:10 spk_0
Um, what’s my, I like just like plain Lay’s potato chips.
21:15 spk_4
I didn’t.I didn’t even think I was getting an answer from you.
21:16 spk_0
I’m, I’m a Doritos girlie. Like I, depending on my mood, whether I would like the nacho or the cool ranch.
21:22 spk_4
Ican’t see you eating Doritos, but I’m gonna take your word for it. I, it’s I’ll take it offline.
21:25 spk_0
It happens sometimes. It happens sometimes.
21:28 spk_4
So
21:28 spk_0
does the eclipse. Sometimes you got to spoil the tempo a little bit, you know what I’m saying? All right, that doesn’t presented by Robin Hood. Sauce has got you next.