Closing Bell Overtime: Big Day for Apple, Ternus 9/9/26

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0:43Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com. Citi wealth investment products and services are provided by Citigroup Global Markets, Inc., member FINRA and SIPC. The Bell's bringing an end to the trading day at the NYSE LabCorp, bringing the closing bell, and HMH Holding doing the honors here at the NASDAQ. Welcome to Closing Bell Overtime. We are live from Studio B at the NASDAQ Market Site. I'm Melissa Lee, along with Mike Santoli. Stocks lower once again as oil and bonds move higher.

1:16Bond yields, I should say. The Dow losing 400 points. S &P 500 down about a half a percent. NASDAQ Composite off by two-thirds of a percent. Third straight day of losses for all those averages. WTI rising by three percent. Brent crude topping$100 a barrel and bond yields moving along with oil. The 10-year yield topping 4.8 percent, getting to its highest level since November of 2023. But today, mag-7 and semis not quite strong enough to offset that impact from oil and bond. Meta, though, getting an AI boost up 6 percent on positive reviews for its new model. Apple right near the flatline following its big iPhone event.

1:52More on all of that coming up. But we begin with those big moves in the energy markets and the bond market, the 10-year yield getting to its highest level, as we said, in nearly three years. This is the Treasury Department announced the size of its planned Treasury buyback program meant in part to help restrain yields. Rick Santelli joining us from Chicago with all the context. Hi, Rick. Indeed. You know, Mike, it's fascinating because as you look at a two-day chart of twos and tens and look at the percentages of yield increase, they're about the same, a little over 1%. And the reason I do the two-day chart is because if you just look at today, indeed, the$6 billion buyback definitely steepened the curve, which means 10-year yields moved a little more aggressively than two-year.

2:35But over a several-day period, that seems to disappear a bit. The point is, is that all yields have been moving up for a variety of reasons, from our economy doing much better in Europe and Asia without as much stimulus, although we have a lot of debt, to what's going on in Middle East and energy prices. Now, there's a lot of foreign exchange issues going on as well. Let's look at the dollar index. Right now, it's on pace to have the lowest deal closed since May. We'll call it four months. And it doesn't end there. We've all been talking about the dollar yen and the intervention that occurred at the end of July.

3:09This chart starts in February. And you can see this is the lowest the dollar has been versus the yen since then. We'll call it seven months. And you can see on the middle right of that chart where we were basically around 164. You could also see where the intervention hit. The point is, conventional wisdom is a dangerous thing, even when it talks about the logic of how interventions don't really work. It certainly seems, though, by looking at that chart, at least for the moment, it did work. Melissa, Mike, back to you. It is interesting, Rick, to think about Treasury Secretary Besant and how he's really taking on two of the deepest, biggest markets in the world by calling himself the House.

3:50I mean, not only are you seeing increased buybacks on the Treasury front, but also on the yen front, saying he has asymmetric information when it comes to what the BOJ precisely will be doing. And it seems like he's almost setting up market expectation for something majorly hawkish to come out of not just the decision, but more importantly, the speech afterwards. Yeah, no, I think when it comes to the dollar-yen, maybe he is like the House. When it comes to the Treasury complex, I don't believe he is, And I'm not so sure that he really believes he is with regard to treasuries, because the amount of buybacks we're doing, even at six billion, three times the two billion really historically versus the Fed amounts in the past is really small.

4:33And indeed, I can't believe this Treasury secretary with his trading background believes he's going to alter the market. I just think he's trying to be part of the market and have a presence there and acknowledge the notion that interest rates may be going up globally. But he's keeping a very close eye, especially on the thinner parts of the yield curve. Yeah, he did mention price equilibrium in the context of treasuries. Rick, thank you. Rick Santelli. Brand crude topping$101 a barrel for the first time since July as the fighting between the U.S. and Iran escalates in the Persian Gulf. Pippa Stevens is here with more on these moves today.

5:08Pippa. A lot of moves across energy complex today, but the one that everyone is focused on is Brent topping 101, getting closer to that post-war high of 126. And we are seeing a widening divergence between Brent and WTI. That is because Brent is the global seaborne benchmark, while WTI is technically landlocked and pushing. And so Brent is usually the one that responds more quickly. Moving over to heating oil futures, up another about 5 percent today, now just shy of the post-Iran war high. That means that it's really a question of when rather than if we see$6 on the national average for diesel.

5:37Right now we're at 594 in California. They're approaching$8, currently at 787. Moving to Europe, we saw European and Nat Gas prices top 80 euros per megawatt hour today for the first time going back to 2022. They are very behind on their injection season right now thanks to lost cargoes from the Middle East. And then the available cargo is getting bid up and sent to Asia instead. Those prices, as a reminder, are more than nine times above what we're paying here in the U.S. And then finally, energy stocks hitting records on the back of all these moves in the underlying commodities. The XLE had a record, but we do really need to look at the subsector performance because the refiners are really distorting the outlook here.

6:14They have now all the big three have more than doubled this year. Not a lot of love for the drillers or the pipeline companies. That's really not getting the same level of traction. Yeah. And if anything, the overall energy equity group looks a little fatigued. I mean, obviously, they've had tailwinds and it's worked pretty well to actually stick with them for a while. But I guess for months people have been saying we're really working down whatever buffers existed in terms of reserves, in terms of what we can expect on demand. And now I guess we also have to track, you know, Red Sea shipping is also along with the strait.

6:46So it feels as if some things are coming to a head that a lot of people have been warning about for a while. And I just wonder if there's any offset to that in the near term. I mean, remember back at the beginning of the conflict, everyone said there's no way this will stretch beyond June. And now here we are in month seven. And people keep pointing to the drawdown in SPRs worldwide, including in the U.S. Now, we are about 133 million barrels out of that 172 that was authorized. So we could see another sale there. But then the next step is kind of a drawdown in commercial inventories, which have stayed at better thresholds worldwide.

7:17But I do think one interesting divergence is that we are seeing, of course, money flowing to the likes of Chevron and Exxon as kind of the way to play the sector and not really have to make a call on commodity prices. But Chevron notably hit a record today. hey, Exxon hasn't hit a record back since March. And Exxon actually has the larger downstream footprint. So you would think that they would be the ones benefiting. But it seems more of a case that they also have more exposure in the Middle East. So perhaps investors are saying that's a long-term issue versus the refining upside is more temporary.

7:47Gotcha. Tiffin, thank you. So, I mean, just more broadly, Mel, it seems as if the market, the stock market has been trying to basically put on this brave face and say, You know, we are feeling the impact of what yields are doing and what oil is doing at the subsector level and at the equal weighted level. Right. Everybody was celebrating the broadening trade. It's really narrowed back out. In fact, the equal weighted S &P sort of rolling over a little bit down two thirds of a percent today. It's four percent off its high. So, yeah, I guess the question is, is this going to remain kind of a stealth internal pullback for the overall market?

8:19Are we going to have enough excuses pile up that that we actually have to see something a little more broad and headline level in terms of a pullback? I'll just mention one thing. It feels like the bond market is kind of stretched pretty far ahead of these inflation numbers. And if it's cool, if it's on target, nobody should be surprised if we see a ripping bond market rally. And then we'll see what the stock market does in response. Yeah, exactly. And I know there are plenty of people out there who hate seasonality and want to use it as a factor. but it's a factor out there. I mean, psychologically for a lot of traders.

8:49Yeah. And so you pile up all these excuses, ones that we've been able to move past on a day to day basis for all these months into a seasonally week period. And you wonder how the markets are actually going to digest these. I mean, combination of self-fulfilling prophecy, genuine seasonal flows that exist. And then I think there's always a little bit of hesitation about deciding what next year is going to look like. And it's conference season. Everyone's trying to formulate their view. So we'll see if it matters this year. All right, let's get to one of today's top story stocks. That's Apple, the company holding its product event, announcing its highly anticipated foldable phone.

9:22It was the first event for new CEO John Ternus. Mackenzie Sigalis joins us with the highlights. So, Mike, I just came out of the Steve Jobs Theater after getting my hands on Apple's first ever foldable iPhone, the iPhone Duo. Now, folded, it's roughly the size of a passport. And when you open it up, it feels much more like a small iPad than two phones stitched together. with Apple building a new interface specifically around that larger screen. Now, it starts at$19.99, roughly the same territory as Samsung's competing foldable, while the iPhone 18 Pro now starts at$11.99. So John Ternus' first launch as CEO is very clearly pushing the iPhone further into this premium end of the market.

10:04And arguably, the biggest addition to Apple's AI arsenal today wasn't on the iPhone at all. It was actually on the watch. Apple effectively turning it into an always listening AI device. Siri Recap, that's the name of a new feature, uses ambient listening throughout your day to generate notes from your conversations. While Live Rewind can recover the last 15 seconds of something that you missed, that puts Apple directly into a category already being built by AI wearables and recording startups, but now baked into a device that millions of people already wear. Guys? That was a really fascinating feature to me, Mackenzie.

10:41And I also wonder about the privacy concerns when you're wearing a watch. Let's say I'm having a discussion or conversation with Mike on set off camera. If that watch is also going to pick up those conversations, I assume the answer would be yes. Well, I mean, I have the exact same thought. And the question is, we've seen something similar from Apple in the past where you've got cameras on the Vision Pro that they say are not recording video but are part of the spatial awareness. That's also been a conversation in the context of an unreleased device, cameras baked into the AirPods. And so it's a similar situation here.

11:13If it's always recording but not actually holding onto the audio and instead using that as context to build these daily summaries, that might be a way to kind of get around the privacy infringement. But one has to wonder if you're living in a two-party consent state, there will be a legal case, I imagine, down the line where this is argued and considered. Because privacy is Apple's entire schtick, right? When they were talking about a lot of the AI features today, it was all about this on-device AI. Not even Apple has access to the queries that you're putting through Siri AI, but this certainly calls that into question.

11:45For sure. Mac, you've said a few times it's the size of a passport, the duo. And I just realized you mean an actual passport booklet. I was like, what kind of device is a passport? You know, so eventually I get things, even if you have to repeat them enough times, Mac. Thank you very much. Joining us now is more insights and strategy CEO and chief analyst Patrick Moorhead. So, Patrick, what's your quick assessment of what we got today from Apple relative to what you were expecting? Yeah, so let me put in the context of new CEO John Ternus. So he didn't reinvent the iPhone. He really priced it to keep share while memory takes the margin.

12:24And he put a meter on Siri. And that's the most interesting thing that I think investors should be interested in is we've been talking for three years. How does Apple monetize AI? And while they didn't give a lot of details about it, essentially, they're going to charge you when you've hit your server based capacity through the new Siri AI. And they'll charge you either either per token or probably a bank of tokens, but probably start off with a monthly overage fee. Is that going to make up for, I mean, it sounds almost like you're describing a loss leader of a product. I mean, they've increased the price.

13:02Presumably the memory and the components going into it sort of offset that price increase. And yet you're saying that it's the toll that they're going to charge that will make them the money. Yeah, I think it will. I mean, Apple already reset the gross margin expectations. They were at 51 percent and then they guided down to 40, 40, 70, 48 percent. And then they just added another 8 % to 9 % price increase. And then you have to factor in. And again, I think this is why the stock didn't move much today. There were very little details in what they would charge, how they would charge aside from the basics.

13:39The final comment on that is the lease. Apple's really good at factoring in how will people pay over time if they don't want to pay or can't afford to pay that up front. And 8 to 9 percent might might might sound like nothing. But if you remember just a few years ago, peak peak peak entry price was$18.99. And before that, it was$17.99. So there's only so much Apple can charge, but they are doing a pretty good job taking the sting off of it through these different monthly and even all you can eat programs. Yeah. And Patrick, you note that the stock didn't move much, which is true point to point, although it did trade in like a three dollar three percent range.

14:22You know, people trying to decide if this was something to get excited about or actually express some disappointment with. So I wonder what you think in terms of the new products that were delivered. Do they recharge any enthusiasm for for upgrades or people deciding that they're going to move now? Or is it just kind of noise and around the edges? Because, you know, I think we all have to remember so many times the initial impression of whether this is a big deal or not for Apple gets revised over the ensuing months and years. So, you know, I hate this might not sound great, but if Apple plays to not lose, they can win as long as they keep their services going.

15:04Their retention rate is astronomical. I mean, it's upper 90s. So anybody they can pull into the system, regardless of what has ever happened, will re-sign up. I don't see any evidence of an acceleration. I think nobody uses the word super cycle anymore because it hasn't happened for a long time. But Apple can't create a super cycle by increasing the price by 8 % to 9 % and then tacking on new service offerings to make up for, let's say, something that ChatGPT does even better. Yeah. I don't know. Are you going to get any of these products, Patrick? I mean, do these attract you? I get every new version of every new phone.

15:50Yes. On the Apple Watch, though, I mean, Ultra 4, I wouldn't consider myself an athlete, but I try to stay very fit. I'm very happy with my ultra, my ultra one. It does everything it needs to do. All right, Patrick, great to speak to you. Thanks, Patrick Moorhead. By the way, we're showing you the closing bell at the SIBO in Chicago. Philip Capital ringing the bell there, marking the end of regular trading for options. All right. Well, meantime, big gains from Meta closing out its best day since July in the back of positive reception of its new Muse AI agent. Y Combinator CEO Gary Tan posting on X, Harness wars are full on now, and Muse is very impressive.

16:31Shopify CEO Tobias Lutke is calling it pretty amazing. And Meta's chief AI officer saying last night that early usage of Muse has blown past their expectations, and users today are using Muse 10 times more than their testing cohorts. The app claiming the fourth place on Apple's top app downloads, ChatGPT, remains number one. Joining us now is Alex Kantrowitz, founder of Big Technology. Alex, great to have you with us. What's your take on the importance of Muse? to the Meta story? Well, it shows that Meta has a pulse in artificial intelligence, which up until recently really wasn't the case. You know, up until today, the company was negative on the year and people really didn't believe that it had a strategy or a competitive model.

17:10And obviously, a lot of AI is moving towards these use cases where you get an AI agent to go out and do things for you, like book movie tickets or search your email and help you stay up to date. So Meta does have this like now it has an app in the game where it shows it knows what it's doing. But I just don't think that this is going to succeed because it's meta. And the company even said in its marketing, the more it knows about you, the more helpful it is. Well, who is going to in their right mind is going to give meta all this information? It takes a lot of trust to connect your Gmail to it, your credit card to it, your shopping history to it.

17:44I think people are sick of giving this company all this information. And so while it shows that they're in the game, it's the competitors, the chat GPTs of the world, and even some of these upstarts that are actually going to run away with this use case. Why are people more comfortable than giving the information to another company? I mean, obviously, Meta has a bad press and the history of, you know, maybe not being careful with privacy concerns and things like that. But it seems like you'd be worried about no matter what. You would be worried about it no matter what. But the question is, you know, it's a tradeoff.

18:15How much utility are you getting out of an app, depending on how much information you put in. So people don't love AI. We know that. They don't love open AI. However, open AI hasn't yet had the privacy scandals that a company like Meta has. Where is the one indication or the one case where someone's ChatGPT logs have leaked and all their privacy is out there on the internet? You just can't, it hasn't happened. You can't say the same with Meta. I mean, obviously, we don't have messages leaking, but people have been concerned about their personal data being hoovered up by Meta. There's no meme that ChatGPT is listening to everything you say, maybe because you tell it everything you say.

18:52There is this meme that Meta advertising is. I just think Meta has so much baggage. And again, this is such a new category that you don't want to rule out any company. But Meta has so much baggage and so much concern among people in terms of giving it information about themselves. There's just a meme about it this weekend going around that it's going to be a very uphill fight for the company to get anything to take off. And I think ultimately the long term for Meta, which is spending 130 something billion on AI this year and is probably going to spend more next year, is to become a neocloud. So I'm just wondering, I mean, Meta has, you know, all the baggage, as we said, but a lot of the companies are not trusted.

19:30Those CEOs of all these hyperscalers are not trusted. I mean, survey after survey, the public backlash. I mean, we recently had a CNBC survey of young people and they did not like anybody. I mean, they like Satya Nadella the most and that was still less than 50 percent. And so from your standpoint, who is poised, at least on the PR front, to be in the position to try and earn your trust? OK, so that's a great question. So nobody's trusted. I would say Meta is trusted less than the others. But how could Meta win this battle? And the way to do it is you provide an experience that's so good that it overcomes people's fears about what you'll do with the information.

20:07Like, for instance, I'll give you an example. With ChatGPT, I have my calendar connected. I have my Gmail connected so I can read through all my Gmail. I have my health information connected, and I have my banking information connected. You might say I'm crazy, and maybe I am. But frankly, because ChatGPT's technology is that much better than everybody else's, it's worth it to me despite the risk. Meta has the unfortunate case of being not trusted and being behind on the AI models. So I was in the product today, and it doesn't have the same fidelity, the same conversational awareness that a chat GPT has.

20:41And even if it takes me a little bit more effort to get the same utility out of chat GPT, I would rather use it because I'm going to get much more productive uses of that AI versus having to fight my way through dumber intelligence with meta. And that's how you lose. If you're not trusted and your product is worse, you just have no chance of making any headway here. The good news is you have all these GPUs and data centers. You can sell those when you lose. Yeah, not a good combination. Alex, great to see you. Thank you, Alex. You too. Thank you. Coming up, an alarming new warning from an anthropic scientist about the possibility of AI taking over humanity.

21:15We've got the details there. Plus, we'll ask CrowdStrike CEO George Kurtz if current cybersecurity technology is enough to prevent AI from going rogue.

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23:04Welcome back to Overtime. One of the starkest warnings yet about the risks of AI out overnight. A former anthropic researcher resigning from the company today, warning that frontier labs are racing to build systems that may not be able to be controlled. Jacob Cox, when writing on X, the people building AI earnestly believe that it could kill us all by the end of the decade, adding that while executives may temper their language publicly, he hears the same fears expressed privately. A current anthropic scientist echoing that warning, saying he believes there is a greater than 10 percent chance that AI could kill all humans within the next decade, that anthropics still does not have a plan to solve the alignment problem for superintelligence.

23:43The Post reigniting the debate over AI safety as Frontier Labs raced to build ever more powerful models. Some industry leaders also pointed to recent high-profile AI hacks as a warning of what could come if future models can work together toward malicious goals and conceal their actions from humans. And just in the last hour, Anthropic disclosing a fourth cybersecurity incident involving its mythos model going rogue. So could cybersecurity be the answer? Will there need to be an evolution in the way we think about cybersecurity? With us now, David Faber. alongside CrowdStrike CEO George Kurtz, live at the Goldman Sachs Communicopia event.

24:17David. Melissa, thank you, and a good day to have you, George. Thank you for joining us. Great to be here. You weren't listening because you don't have an earpiece, but Melissa was talking about this latest news that we got today from an anthropic former engineer slash researcher who's basically saying there's more than a 10 % chance that this thing is going to kill us all, this thing being AI. Right. By the end of the decade, in fact, very specific on timing. You're as close to this technology as anybody, certainly in terms of understanding its capability when it comes to doing bad things. How do you view those comments?

24:55Well, you know, the percentage, the time frame, all of those things, I'll leave that to those folks. But I think in general, when you look at AI, it's been transformational in everyone's lives. Certainly the most transformational technology that I've been involved in. And obviously, like most technologies, it can be used for good or for bad. And I think part of what CrowdStrike is focused on in our mission is to make sure that you can leverage AI in a safe way, in a secure way, to make sure that these agents don't go rogue and do things that they shouldn't be doing. So, you know, we see it as an opportunity.

25:26And given the power of the technology, it should be harnessed. And that's part of what we want to do, harness it in a safe way, obviously working with the broader ecosystem. Yeah, when you talk about the power of the technology, you were one of the early people to see Mythos, I believe, right? You were part of Project Glasswing, where they made it available to companies like your own. Yes. Because they said internally, whoa, we can't release this thing into the public. Do you remember your thinking at the time? Do you remember when you first sort of understood what the power of that was, how you thought about it, and whether it was a step up somehow that you hadn't seen or expected?

25:59Yeah, I mean, there's a lot of watershed moments. I think that was one of them where you had a model, again, that was very capable from a cyber perspective. And as it became better and better at understanding code, it became better and better at understanding vulnerabilities. And one of the biggest advances in Mythos is it could actually string together multiple vulnerabilities, way more than a human could do. A human can't keep track of all these things, where it can actually do a great job and be very persistent in getting into systems based upon all these low-level vulnerabilities. So we were part of that.

26:31Obviously, we've been part of it since then, and I think it really showed the power of what these models can do and why they need to have the right level of safety built in. All right. Are they going to have the right level of safety built in? Well, this is the hard part. I mean, this is the classic genie problem. You know, you get what you ask for, not what you want, and it's the alignment of these agents. So if you think about some of the latest issues that were, you know, that we talked about hugging face, I mean, I heard you talk a lot about it. I did. You know, I spent time trying to understand it as best I can from a layman's perspective.

27:00It sounded pretty scary to me. What, 1 ,200 agents acting completely as a collective, but on their own, defying their human masters, so to speak, right away, and then spending most of their time trying to cover up what they were doing? Yeah. Well, you know, it makes for great sci-fi, but it really— Yeah, but it was real. It was real, but it really demonstrates that the outcome that the human wanted wasn't necessarily what the agent delivered, right? The agent was focused on passing a test, not actually exercising all of its cyber capabilities. And I think a lot of people, when they look at this particular incident, again, I would call that a watershed moment where autonomously it broke all into all these systems.

27:36And you were brought in early by OpenAI. We were. We were. We brought in early to understand what happened and just help them. Obviously, they've got incredible people there, but we were just one of the teams that was helping them. But I think when you look at this incident, you know, people have a certain view of, wow, it was an autonomous attack end-to-end. But I think one of the real big takeaways that maybe some miss is that the defenders weren't equipped to deal with this. The defenders didn't have the level of AI they needed and the models they needed to be able to deal with it. They didn't have frontier sort of defenses because the models were refusing.

28:09And I think this is a big part of the takeaway. How do you enable the defenders to protect themselves with as capable or more capable AI as what the adversaries are using? Now, obviously, your company is focused on doing that. Correct. And you've had a great deal of success, and anybody can take a look at a stock chart to see that as well. But are we going to be able to effectively defend ourselves, so to speak, as these models continue to get more and more powerful? Well, you have to. And I always talk about sort of the adversaries. And you've done work on this. I've seen your documentaries on nation states, right?

28:42Nation state obviously was the apex predator of the adversaries. But now the new apex predator is the agent state, right? And they're not at your perimeter. or they're on your payroll. So we're actually, think about this, corporate America, everyone is letting them into their own environment. And what happens afterwards, they're having a hard time controlling it. So I think from the standpoint of how you get in front of this is you have to have the right level of AI and focused on security activities, understanding the attacks, but also understanding the defense. And we've created this sort of red-blue, meaning offense-defensive loop, where we keep getting better and better from an AI perspective.

29:18You've got to be right every time, as we always say, And it only has to be right once. I mean, and they're so powerful, not to mention rogue agents out there doing things that nobody ever intended for them to do. This is true. But I think if you can identify these things very quickly, part of the issue that you saw in Hugging Face is, well, is it activity? Is it real? Is it not real? Is it AI? Is it isn't? It took some time. And we always talk about this concept, the breakout time. How fast is it when someone actually breaks in or AI agent to break in and do something else? and it used to be hours and days and those sort of things and now down to seconds and somewhat collapsed and it's really at the speed of inference.

29:55So even if you detect something, you can still prevent a breach. You just have to be on top of it with the right level of AI. And finally, George, I mean, just broadly speaking, you've been in technology since I think 1993, since the early days when you're working with mainframe computers. Are you positive on the prospects of AI given everything you're seeing up close? Well, when I look at AI, you know, I'm not a doomer. I'm a, the glass is half full, and I think it has changed fundamentally how we do work. It will change fundamentally society going forward, and we just have to harness it in the right way.

30:27And I think cybersecurity, not just CrowdStrike, but the industry of cybersecurity becomes even more relevant because it isn't just about keeping people out. It's about creating safety and allowing work to happen. For the first time, security has been the accelerator on the gas, not the brake pedal. And that's a massive change that we've seen in security, all the way from the board to the CEO to the people, the actual builders in these companies. So we feel we're going to play a big part of it. I think it's great for the cybersecurity industry. And, you know, I'm happy to come back and talk about what new stories we find from now and then.

30:59Without a doubt. We know you will, of course. You'll always join my colleague Jim Cramer as well. Appreciate you joining me today. Thank you so much. George Kurtz, CEO of CrowdStrike. By the way, don't miss next interview from Communicopia. have an exclusive sit-down with Airbnb CEO Brian Chesky, where we also, Melissa, talk about these broader issues for society, again, as somebody who founded a company 18-plus years ago at this point. Back to you. Wow. That's hard to believe, 18-plus years. David, thank you. A fascinating conversation with George Kurtz, CEO of CrowdStrike. It's the only game in town at this point in terms of if you want to have an AI defense, if you want to have that cybersecurity defense, you go to a player like CrowdStrike.

31:41As David mentioned, the chart is a great chart. I wasn't convinced necessarily. I was still sort of terrified about the conversation and the ability of what we have existing in terms of cybersecurity defenses to combat models that are constantly improving themselves. Yeah, constantly improving and essentially kind of pointed in the direction of finding ways to escape what the intentions were. This whole phenomenon really does test my normal mode of saying, we've all seen this before. Cycles come. This is just like some other technology in the past. It's just like what people said about the Internet or computers.

32:18And to some degree, that's true. I do think it's kind of similar to, you know, nuclear weapons, where honestly, in the 40s and 50s, the people who knew most about nuclear weapons were pretty convinced they'd be used pretty commonly. Like, in other words, multiple states having the capacity to do it. Like, when have we ever created a weapon that wasn't used? Now, this the difference here is you don't need intention for these things to kind of escape the grasp. Yeah. And the nuclear weapon, you needed a human to press the button, so to speak. Right. And here it's these agents that are enabled and empowered to work on their own constantly with the desire to exceed human intelligence.

32:56Yeah. So the machine incentives are built in a way that could be difficult. I guess maybe we're just hoping that it's still kind of being overhyped or it won't quite come to fruition in that particular way or we can create these little fire breaks. I hope. We'll see. All right, up next, the new tax strategy the wealthy are using. They're calling it tax awareness, but it's starting to draw the awareness of the government. We'll explain it all next on Overtime.

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35:08The wealthy are increasingly employing a new tax strategy to offset capital gains, and it's starting to attract the attention of the IRS. Robert Frank is here to explain the long and the short of it. Robert. Guys, great to see you both. This has become one of the hottest trades for wealthy investors right now. It's so-called tax-aware long-short strategies. They've grown to$170 billion in assets up from just$2 billion four years ago. Never seen a product like that catch on so quickly. The strategy, it's a form of direct indexing. So investors buy the individual stocks of an index, but they use added leverage and short positions to create larger losses, which can then be used to offset capital gains taxes.

35:51Now, those benefits, they come with risk. Officials from the Treasury Department recently warning of, quote, sophisticated abusive tax structuring that could become a runaway train. They cited similar so-called tax alpha products. Some custody firms also tightening their rules. Charles Schwab recently raised its minimum investment for the accounts from$1 million to$10 million. They also instituted new borrowing limits. Fidelity pausing the opening of new tax-aware long-short separately managed accounts. The strategy is also a bit hard to exit. Tax attorney is telling me that while some clients think they're eliminating taxes, they can face a hefty tax bill when they actually try to get out and shift the money back into an index or fund.

36:36Now, for more on the risks of Wall Street's hottest trade and whether the strategy makes sense for you, you can sign up for the Inside Wealth newsletter out tomorrow morning at cnbc.com slash inside wealth. Just so I understand the mechanism and also why it would be hard to exit without a tax liability. So a long, short strategy, you're aggressively shorting and using leverage to generate these losses. You realize the losses. Correct. So that you can use them to offset gains you're realizing elsewhere. But you, I guess, allow the gains to accumulate in the portfolio. That's right. Exactly. At some point, you have to pay.

37:10At some point, you have to pay. And it's the leverage that makes that so much larger. And it's the leverage that costs a lot. The reason that RIAs and the wealth managers love this is the fees. This could be between 100 and 300 basis points for this product. And so it's complicated. It's expensive. There's a lot of leverage. So many wealthy investors I talk to are in it, but don't understand it, exactly what's under the hood. So my goal here was to look under the hood and explain it. And so that's all laid out tomorrow morning. I would imagine it'd be hard for Treasury to say that that is not right.

37:43And to say that that vehicle that you started, that's just a tax, you know. Right. There's no economic value. There's no economic benefit. But yeah, and that's they're trying to understand it. Yeah, because I mean, AQR came up with this. Guantino is another firm that came up with it. It's now AQR alone has 70 billion dollars in assets just from this product. We've never seen a product take off so quickly in the wealth space. So everyone, including Treasury, is just trying to understand it and how it works. Fascinating. Robert, thanks. Thank you, guys. Frank. Time now for CNBC News Update with Seema Modi.

38:17Hey, Seema. Melissa, here's what we're watching at this hour. The first ever 2026 Republican midterm convention is underway in Dallas. The event will feature more than 100 speakers over two nights covering topics including immigration, tax cuts and a proposed congressional stock trading ban. President Trump will deliver a keynote address tonight and will close out the event with another speech tomorrow. Meanwhile, President Trump did not rule out a potential pardon today for his former fixer Michael Cohen. Cohen was sentenced to three years in prison in 2018 for making a hush money payment to adult film actress Stormy Daniels before the 2016 election.

38:49His testimony contributed to a conviction in 2024 against Trump in his criminal hush money trial, but Cohen has since said he felt pressured and coerced. And New York Knicks star Jalen Brunson will host the season premiere of Saturday Night Live. Later this month, the NBA Finals MVP will be joined by musical guest Katzai. Brunson will lead the Knicks to their first NBA title in 53 years in June. He will join the ranks of other basketball greats who have hosted the show, including LeBron James and Charles Barkley. Looking forward to that. Melissa and Mike. Absolutely. Yeah, I guess that's going to maybe finish his victory lap and then it's like, let's go.

39:26You have another season. Exactly. Get back to it. Do it again. Yeah. Seema, thanks. Yeah. Coming up so far this year, the name of the game in the market has been beta and momentum with quality stocks being left behind. Is it creating attractive opportunities in the space as tech stock valuations continue to rise?

39:52Welcome back to Overtime. Momentum is winning the factor race. The iShares U.S. Momentum ETF is up about 22 percent year to date, even after a big pullback from midyear versus a 12.5 percent gain for quality stocks. So is that creating more opportunities in non-tech areas of the market? Some of these higher quality parts of the tape with us now to discuss his view is Charles Cantor, Senior Portfolio Manager at New Burger. Charles, good to see you. Thanks for having me, Mike. Good to see you. It's a fascinating dynamic because all of the big companies we used to rely on for heavy free cash flow and no leverage are borrowing and spending their free cash flow like the Mag7.

40:27So you would think scarcity of those quality attributes would say, ah, we have to pay more for it. Not happening. I mean, I find the skepticism around the negative free cash flow for the large companies kind of silly, to be honest, because the fundamental question is, you know, what's the rate of return on investing? not do I have negative free cash flow. And so everyone loved it when they bought back their stock and now they don't seem to like it when they're investing in the business. I think it's really hard for investors to wrap their heads around just the magnitude of the investments and the companies themselves aren't revealing a lot.

40:59And that makes sense to us because we're in such a competitive dynamic race and they're playing for the future. You know, our work around these types of returns, we think, you know, if you can get over the fact that you may not see the returns for a while, They're going to be very attractive. And so there's a lot of skepticism around these levels of investments. I think it's not exactly well placed. But of course, as you highlight, you know, the market loves risk right now. It loves momentum. It doesn't love quality. And I think at some point folks are going to come back to to the quality factors, to the businesses that are moated and say these are you know, these are really attractive entry points.

41:38And I think you see that whether it's in the equal weighted index or in the market at all. I just don't think valuations are demanding relative to the earnings season you just went through. I think the last time you were on, you called the sort of, you know, the spend, spend, spend, trust us, it'll pay off later, storytelling, which is sort of derogatory in some ways. I mean, it's not like when you're spinning a tale, you're spinning a tale. It's not necessarily the truth. Do you still view it that way? Or because of earnings season, have you gotten enough data points to think that it's not quite storytelling?

42:06It is a leap of faith, though. I think it matters who the storytellers are and how much credibility they have in the bank. And I think when you look at the folks doing the largest capital spending today in the public markets, I think they've earned the right to tell their stories. And it's our job to figure out, you know, do you get mid-teen types returns from these types of investments? The skepticism is no different. For example, Amazon's a company we focus closely on. You know, you go back to 2014 or so, people were super skeptical about the billions of dollars they're going to invest in the cloud.

42:36You look back, those types of returns pencil out at 17 percent. Our guess is these types of returns pencil out at the same level on gigantic amounts of more capital. Right. That was probably a 300 billion dollar investment. This is going to be north of a trillion dollars when we all said and done. And so if you can get those types of returns on that amount of capital, I don't think the skepticism is going to be warranted. But we're in that season of everything's glass half full at the moment. That was$300 billion like over a decade, too, I think. And this is no, but this is this is kind of the delta year is a trillion over a decade, too.

43:12So it's three times more. But I think you're going to get similar levels of absolute levels of profits. Quick word. Our bond yields, our interest rates, any restraint on the returns you're going to get? And how would you think of it as an investor looking at bonds? I think we're at a moment in time where both bonds and equities are attractive on a risk adjusted basis. I think the bond market has the skepticism about the secular nature of inflation, whether it's because of oil prices or whether it's because of tariffs. To us, those are supply side shocks. The bond market reads that as secular. I would take the other side of that.

43:48And then on the stock market side of things, the earnings you see most recently, folks think of that as cyclical, not secular. And so there's just a lot of margin of safety in my mind in both markets. And we don't always see that. Charles, good to see you. Thank you. Lovely to be here. Great. Coming up, are we in a K-shaped economy? What retail results are telling us about the consumer? Over time, be right back.

44:18Mixed read on the consumer today. Shares of Signet Jewelers and Academy Outdoors jumping after both companies reported earnings ahead of expectations and raising their annual outlooks. The Signet CEO saying it is entering the end of the year well-positioned to deliver value throughout the holiday season for customers across different income levels. Meanwhile, Casey's general stores closing lower after reporting same-store sales grew less than expected. The stock closing its worst day since March 2020. And an interesting note about what consumers are buying, saying sales of its own branded chips rose 16 percent, while sales of national brands fell 8 percent as many of those companies have raised prices.

44:54All right, coming up, the NFL season kicking off in just a few hours. Ahead of that, CNBC is out with our updated list of team valuations, and the numbers are eye-popping. That's coming up on Closing Bell Overtime, live from the NASDAQ market.

45:16CNBC releasing our list of NFL team values today, and they continue to skyrocket. The Dallas Cowboys, the top team with an estimated value of$16 billion. Mike Ozanian joining us now with more on this year's roster, Mike. Mike, great to be here. The average team is now worth almost$10.4 billion, 35 % more than last year. The Seattle Seahawks just sold for 59 % more than the Washington Commanders did three years ago. I just sat down with Jacksonville Jaguars owner Shad Khan and asked him if the run-up in team values was over. Take a listen. I think what's going on is sports valuations are going up.

45:59But I think the real point, the big story is NFL is still greatly undervalued compared to the other sports. So I think the run-up for the NFL is almost endless at this point.

46:18Since Khan bought the Jacksonville Jaguars 15 years ago, the value of the team has appreciated 18 percent annually to CNBC's value of now nine point three five billion. When I asked Khan if he could keep appreciating at that rate and be worth over one hundred billion dollars in 15 years, he did not say it wasn't impossible. No, well, he says unlimited. So I guess that's that's his conception of the upside. You know, 18 percent annualized for 15 years. It's great. It's not super different from what the stock market has done over that time. But 35 percent one year bumps from these like quick succession of deals seems like it's been an acceleration to the upside.

47:00Yeah, I mean, over the same period since he plopped down seven hundred and seventy million for the Jaguars, the S &P has increased 14 percent annually price appreciation. So it has, you know, when you talk about compounding, it's a pretty marked difference and higher than the S &P. But we'll see where it ends up. I expect higher revenue and also expansion in revenue multiples in transaction in the upcoming years. Mike, thanks so much. You know, enjoy the opening wherever you might be. Appreciate that. Yeah, there's only 32 of these teams, you tell billionaires. There's only 32 things in the world.

47:36You got to bid for one of them. Yeah, exactly. All right. That does it for overtime. Fast Money starts right after this quick break.

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