Halftime Report Live at the CAIS Summit 10/13/26

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1:00Scott Wapner: I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

1:17Scott Wapner: All right, guys, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. We're live in Beverly Hills today at the Case Summit. This annual get-together is really all about giving retail investors greater access to alternative investments. We'll speak to one of those asset managers in just a bit. Glenn August of Oak Hill Advisors will join me momentarily. I do have Shannon Sikosha and Rob Seachin right here by my side as well. Josh Brown and Joe Terranova are joining remotely today. Guys, it's good to have you with us. We'll check the markets. You know by now we are mostly lower. Bank earnings do begin.

1:50Scott Wapner: We're watching yields. There's the 10-year yield at 522. As I said, we'll get into the whole alts conversation because there is so much money going in that direction. Expected to be$30 trillion globally by 2029. But let's talk about what's happening in the markets today and what really is the conversation. And that remains the AI trade. Where are we in that trade? I thought it was interesting. Paul Tudor Jones was on Squawk Box this morning. He said 2027 is going to be a really challenging year, said he's going to be short the entire year and is likening some of what he sees today to the dot com boom and eventual bust.

2:31Listen, it still feels like 1999, a two speed market. You've got it completely, perfectly bifurcated in the sense that you have, obviously, everything that's adopting AI and everything that's not, and they're going in opposite directions. And that was pretty much the case in 1999. that. All right.

2:55Scott Wapner: So Paul Tudor Jones weighing in on the market. I think we should jump off there and really expand on what he's talking about and how you see the current market landscape, whether you think it's going to be a very challenging year ahead. Well, I think he's making the differentiation in terms of what's happening with AI, who's doing it, who's not. And I think it's actually a little bit more complex than that. Right now, you see all-time highs being hit in the S &P 500 for instance, yet when you look below the surface, Scott, 39 % of the S &P 500 is 20 % below its all-time high mark. You look at the Russell 2000, 56 % of that benchmark is actually 20 % below its all-time high.

3:34So I think the challenge for us right now is that you're having these questions around AI, the next phase of AI, that implementation, that adoption, and that's hitting with full force against the rates question. And so not only do you have questions about some of these high flyers on the growth side, but you're also seeing that barbell, that cyclical barbell where we saw a lot of people plowing into the broadening out trade. People are quickly moving away from that trade because of interest rate and energy price sensitivity. And you're getting questions about some of these high flyers and the persistence of that really strong earnings growth.

4:06Those year over year comparisons get really tough next year.

4:09Scott Wapner: They do. They're ringing the bell, obviously, because the summit's about to begin in case everybody was wondering what that was as Shannon was speaking. It feels like what Paul Trudeau-Jones is really talking about is concentration risk in the market today relative to what some saw back then. You know, Jonathan Krinsky is talking about that today, too. He says the last man standing, MAG 7 holding things up, but for how long? And then Michael assemblist of JP Morgan last week, I think just sort of brought it all together in terms of the concentration risk. And I want to get, Rob, your reaction to it.

4:48Scott Wapner: He says a basket of 42 AI stocks accounts for 60 to 80 percent of all S &P earnings growth, price returns and capital spending since January of 2024. At the same time, 60 percent of S &P 500 stocks are down 20 percent or more from their all-time highs. Only 30 % of stocks outperforming the S &P. It's one of the lowest figures since 1991. It does talk about the bifurcated market that PTJ was recognizing this morning on Squawk Box. Is that a risk or just the way things are for obvious reasons? I think it's the way things are for obvious reasons, actually, because that is where the earnings growth and earnings revisions have been.

5:30That's where the contracted revenue is. That's where visibility is. And pricing has improved from a valuation standpoint. The challenge is there is this one pillar of strength underpinning everything. And not only is it underpinning everything in the market because of the constituency that it makes up, whether you add the MAG-7 and the chips together and you get to 44%, 45 % of the market, right? That's huge. So if there's any wobble there, and I think that wobble might come in financing or just ability to raise capital to continue to fund the build out. Are you worried about that? I am later, not right now.

6:12It seems to be in talking to the sources that we have that that is available now. That is not today's problem. Paul may be right that that becomes next year's problem. and any wobble that ultimately changes that one fundamental pillar impacts energy. By the way, it impacts the consumer because the wealth effect that we have right now that's driving up spending in this country, you start to get a wobble in the market with the amount of people that own stocks in the market today at all-time highs. I think you could see a little economic deceleration on that.

6:47Scott Wapner: Well, that's why Carl was just, when he was talking to the Wells Fargo CFO, brought up the point of, you know, they say, well, the stock market isn't the economy, but maybe now it actually is. It is now. And frankly, if you look at all the growth in the economy with the tensions on rates that Shannon just talked about, other companies are going to get squeezed. There's going to be a squeeze out of capital. It's different if you're growing 30, 40 percent to be able to pay higher rates when others aren't having that same growth and they can't. And so that's why you've seen this kind of K-shaped re-rating.

7:24I don't think it's over yet, though. And I think your highest conviction bet still should be in this space. I know the chips are a little scared. Stocks are a little wary right now because every headline that comes out that looks like this train may crash and we want to get off. But I just don't think the time to get

7:42Scott Wapner: off yet. Josh, because as HSBC today says, when they say don't fight the AI trade, earnings continue to be exceptional. You can't be at the end of the cycle if earnings are still going to be exceptional. Shannon mentions tough comps, and maybe earnings are peaking or in the process of, but how do you meld that call? Earnings continue to be exceptional with the fact that you do have a bifurcated market, one that's so top-heavy as Paul Tudor Jones and Michael Semblis have been talking about nobody's asking the obvious question so i'll ask it what happens if and when interest rates fall what does the market do what does the s p 493 do in response to a little bit of pressure coming out of the 10-year uh or or or even god forbid um the the two-year like what what we've seen in the last 15 years, 17 years, excuse me, is this pattern where we have a group of leadership stock.

8:50They push the index at a nominal level higher. There was hand wringing about weaker internals. We don't have full participation at every phase of the market or at every single instance of a new high. And people say it's all being held up by five companies. By the way, those companies change, but we'll put that aside. And the conclusion that everyone draws is, it's like a table being held up by three legs, and now there's only two legs, and now there's only one leg. The actual history of the stock market over the last 17 years, most of which, Scott, you and I have documented live on air multiple days a week, is that eventually, if the market is able to hold up and avoid a correction, despite the crumbling internals, all of a sudden, and the catalyst changes, the rest of the marketplace catch up.

9:44We have seen this time and time again. I'm not saying it's guaranteed to go that way this time. I just want people to remember that is the way that it is usually gone. So what is the catalyst? What happens? I don't know. Something calms down in the Middle East. Oil prices fall. All of a sudden, you see weights come in as inflation expectations are held in check. Maybe a dovish commentary from a Fed speaker, something overseas. It's just amazing to me that nobody could tackle this question conversely. It's just it seems so obvious to everyone that like we're on our last legs here because large cap tech is doing all the work.

10:26Large cap tech is where most of the earnings growth is going to be. And if you listen to commentary out of Goldman, Citi, JP Morgan, none of them are seeing anything with the consumer that tells them that this is about to end. So let's just not be so sure of how this definitely has to resolve. We've seen too many examples of a positive resolution to negative divergence in the internals.

10:51Scott Wapner: I just don't think, Joe, that many expect rates to come down markedly anytime soon. I mean, as long as inflation expectations remain elevated, as long as the Fed is talking about hiking interest rates, and it plays right into what BlackRock's Rick Reeder just did. And he sort of front ran it on Closing Bell with me a week or so ago when he said stocks are a B - right now. Well, he's acted. He downgrades U.S. stocks and he turns bullish on short-term bonds. We upgrade treasuries, favoring those. In turn, we take profits, downgrading equities to neutral to manage potential volatility around the AI build-out.

11:37Scott Wapner: Higher yields, potentially excessive Fed tightening expectations create room to unwind. They're Treasury underweight, a mainstay for most of the last six years. It speaks to the competition that exists today that hasn't existed for the better part of the last six years. Yeah. So you have these two forces at play. On one hand, you have the phenomenal, robust earnings that are being driven from the technology sector. And by the way, when we say the stock market is the economy, let's narrow that phrase and basically say technology is the economy. On the other side of it, you have the headwind force of higher oil and, more importantly, higher yields.

12:18They're pushing against each other. And the result of that is this resiliency that you see in the market. And Scott, I think the resiliency that you see in the market is fully represented by the fact that these trillion dollar companies are not so much focused on the fact that yields continue to rise. So if yields stay elevated, the broadening trade that does not come into play as you move through the remainder of the year into 2027. You have the ability, though, to play defense in the trillion dollar companies. And that's why the market stays elevated. So if you're going to tell me we're going to get a rollover in the entirety of the complex, tell me what exactly will be the conditions, the headwinds that will present themselves that are not there now that are going to force the correction in the trillion dollar companies.

13:06Scott Wapner: How about this? Okay, I'll give you one. What if the cost of capital continues to rise to the point where it gets too punitive to raise debt for the AI buildout and all of the spending commitments that have already been pledged by the hyperscalers? I mean, some are talking about that possibility. I think we're there already. I think you're beginning to see it. I think that's why we're beginning to narrow further and further where the appreciation is in the market. And it's isolated to a very select few names, the trillion dollar companies. You could have an unhealthy market, which is how I characterize the market currently, but still have a resilient market because you're Apple, because you're Meta, because you're Microsoft are working.

13:53And that's what's going on now. You have to take down those trillion dollar companies. If you're going to get the Paul Trudeau Jones 2027, be short narrative. I don't know.

14:03Scott Wapner: Goldman's Tony Pascarello today says the tactical setup's net positive. I'm not sure, he says, quote, that I can remember a time when a market that was on the highs was attracting so little chase. Right. Because you still have a lot of doubters who are waiting for, to Rob's point, that one pillar to crack and fall. Well, and I think that's the challenge right now is that, you know, for at each point over the last 12 months or so, there have been these inflection points that investors and many professional investors, institutional investors have said, whoa, we've got to take a step back. We need to take money off the table.

14:37And yet that has been the wrong decision and has continued to be the wrong decision because at each turn, what ends up happening is, to Joe's point, there's another leader and there is evidence of demand. And I think that's what we haven't seen. We haven't seen, Scott, any decline in that evidence of demand. Like, there is still meaningful demand out there, whether it's in the power trade or whether it's for chips. At each term where we get those questions, something comes in the next month, in the next two months, that materially changes the outlook for demand. And those demand expectations continue to rise.

15:11Scott Wapner: You know where there's also demand, according to the Wall Street Journal today, which writes about it? In the appetite of individual investors to continue to be hungry for risk. Daily trading volumes in single stock options have recently reached about$700 billion, near levels seen during the 2021 meme stock mania. So there still is an appetite in the investing community to take on risk. Bank of America's Global Fund Manager survey. So if you're talking about individual investors with an appetite for risk, institutions apparently still have them too because investors remain bullish and they're overweight tech.

15:50Yeah, I think there's an underlying level of caution on the institutional side, I'm going to say. But the individual side, there's a lot of YOLO out there. These short-term options all on the call side, buying upside while understanding your exposure.

16:06Scott Wapner: By the way, fund manager survey investors, 37 % overweight technology. It's the most since August of 2020. Of course, because that's the only game in town. That should be no surprise. This has been an earnings-driven market. It's been an earnings-vision-driven market. We are coming into an important three weeks with 70 % of companies reporting, and we're going to get great visibility into it. I see no reason for it to change yet. What if it's peaking? What if we're peaking? So you're bringing up a great point. What if 30 % today for, let's say, tech earnings, what if that's the best, that's as good as it's going to get?

16:46Scott Wapner: Does that change anything? I think it does at the margin for forward return expectations. Because one of the most important things in kind of betting on categories or betting on sectors is the change in the rate of change. It's not the first derivative, it's the second derivative that most investors look to, specifically quantitative investors look to that. So I think that deceleration could lead to a hiccup, but then it becomes the relative strength of those earnings still and the price you're paying for those earnings relative to the rest of the market. Josh made up a great point, Scott, which is there can be things, and I think it's why Rick made this decision.

17:27It's not equity exhaustion. It's that forward returns may come in a little bit, but the bond market has re-rated to a two-standard deviation event. And now you have a shock absorber that you can go buy at a reasonable valuation in the event something unwinds.

17:45Scott Wapner: That's why, as he says, he thinks that stocks are a B -. Now, he didn't say this as part of his note, but maybe you can infer that maybe he thinks bonds are now a B+. Plus, where they were, they were like a D. Well, that's what you did. Well, they were a D. Now they're going home with, like, the ribbon on the report card and the lollipop. They're getting picked in the class now, where they were ignored for a long time. And I do think there's some of that. And by the way, Josh pointed out some of the things. You don't need a calamity to have bond yields behave and collect the coupon and maybe come in a little bit.

18:21And by the way, if that happens, he also said you're going to see a broadening out to some of these areas, which indicates underlying market health. Now, it's not all Pollyanna out there. I mean, there is risk in the market that you have to pay attention to. And I think that risk is borne out in ability to finance. When all these companies start coming to market and you see them, you know, taxing the system, the Apollos, the KKRs, and how much can they lend to this space? What other private credit is going into this space?

18:53Scott Wapner: A lot, as we're going to learn over the next couple of days at this very summit. And what you're going to hear in the ballroom over there is a lot. It's like the private credit appetite and maybe a certain degree of risk is just moving along from software to somewhere else. And it's concentrated in its own right, and it's going to remain that way. I mean, you raise an interesting point, one that's going to be topic number one, two, and three here. Well, but I think to be fair, after the SaaSpocalypse in February, you know, coming into that, Scott, spreads were very tight in the private credit space.

19:32And there was, you know, very light covenants. There was a significant amount of debt that was being taken on that probably didn't have the right growth profile to justify the risk that investors were taking on. But you also have at this point, you have a combination of investment grade public issuance with the amount of debt that's being raised in the private credit market. But one could argue that since the reset in February, you're actually seeing sort of a new paradigm or shift in terms of the quality of that underlying lending universe. And the likelihood is that this is probably a good time for private credit.

20:06To your point, everyone is moving quickly out of software to everything else, but it's all AI adjacent. And so now you've got a public credit market that has AI. You've got a private credit market that has AI. And I think what investors really need to think about is how do you diversify? Do you diversify into areas like high yield where you have less of that exposure? There's a lot to think about, and it's going to be certainly in the topic here.

20:29Scott Wapner: Well, because it speaks to really the conversation that we're having. What sort of return can you get from treasuries versus what sort of return can you get from stocks If 2027 is going to be what Paul Tudor Jones believes, a more challenging year, then you're going to want to reach for yield and return somewhere else. And that's why the private markets have become so popular, as I said, more than$30 trillion by 2029. Your clients are in the private markets probably bigger than they've ever been. Actually, no. No, we're active allocators to that, but there's not been broad acceptance because investors have been scared off by what I think is a lot of headline risk in the space.

21:16So if you look at our target allocations, they're 20 to 30 percent. When you look across our, you know, 120 billion of assets, it's more like 14, 15 that you actually see from an implementation standpoint.

21:30Scott Wapner: It's still a tough sell because I thought it was interesting when Kristen Olson from Goldman came on not that long ago, and they had just done a survey which suggested that all of this noise and everything else around private credit and software and redemptions really hasn't dampened the appetite at all. Not on the institutional side. On the individual side, it has. There's this silly liquidity premium being paid. It's evidenced in the public markets. There's also something that's kind of interesting happening in private markets. I think we paint it with one broad brush. But there is a need for those companies to finance all the things that we're talking about.

22:12There's also attractive parts of that market and unattractive. Let me give you an example. Large P.E. has more capital than ever and less opportunity than ever, maybe. The small PE funds have less capital and tons more opportunities. So the forward returns should be higher there, right? And so if you look for those disconnects, secondaries, for example, most of these big funds are returning very limited capital over the last several years. You know, secondaries are required for that liquidity because some of these institutional investors need that money to finance their actuarial draws on their endowments.

22:54And so not everything you can just lump alternatives. There's great categories and weaker categories. And even within the weaker categories, there's very strong opportunities. Asset backs, for example. You know, it's an interesting space.

23:09Scott Wapner: I do wonder what the fallout has meant. You know, a year ago, we're asking questions at this very event. Private credit, is it a bubble? What's the impact of software? Now you've had, over the last year, so many stories about redemptions and how your clients might be feeling about this area of the market now. Well, I think that the challenge is that it really comes down to individual investors, Scott, as a comparison of the relative opportunity. And so as much as I understand that people might have become hesitant or reticent because of what's happened in terms of the quality of those underlying investments, at the end of the day, the public market, the public equity markets here in the U.S.

23:46have been so strong. And that's the comparable. For many investors, it's public equity versus private equity. It's how do I want to access the equity market. And so I do think that looking out over the next couple of years, though, there is a very real continuation of this drought of distributions. There needs to be the secondary capital, secondary co-investments. And the other thing is, is that there are still a lot of really good companies that are still private. And the ability to create value from those companies is not at IPO. It's well before then. And so investors who want to play in that space and really be on the cusp of growth, you need to be in private markets in order to garner that exposure.

24:23Scott Wapner: Yeah, because so many of these companies are now so mature by the time they hit the public market, if they ever do. This space is the lifeblood of the real economy. Yes, you have this drag effect with these larger cap companies because of the spending they create. But the lifeblood of tomorrow is private equity and private credit funding wonderful businesses that can do great things. All right. We're back here in a moment. We do have a news alert crossing on Google. Mackenzie Cigalos has that for us. What are we learning here, Mac? So, Scott, Google just announcing that it's broadening access to Gemini for Argon, opening its most powerful AI model yet to developers, enterprises, and then also paying customers after initially keeping it tightly gated.

25:08Since launching almost two weeks ago, Argonne has been available only to a small group of enterprise cloud customers and trusted cybersecurity defenders. So today marks its first broad pressure test at the frontier, making it Google's first real chance in almost a year to prove that it can retake ground with a major new model. Gemini 3, remember, really put the company back at the front of the AI race last November. But that momentum has faded as rivals keep pushing out splashier releases. That, of course, includes Meta, which just yesterday debuted its new Muse models. Both Google and Meta increasingly focused on agents, but with a different pitch.

25:44You've got Meta leaning into personal intelligence and memory while Google is positioning Argonne around these agentic workflows across coding, finance, legal, cybersecurity and science. The wider rollout also follows buy-in from the U.S. government after Google submitted Argon for voluntary safety testing ahead of launch. Scott, those shares moving higher, about 1%.

26:07Scott Wapner: All right, we'll watch both, Mac. Thanks. I mean, Meta's the best performing of the mega caps over the last month. Apple, by the way, hitting a new high today as well. So still a lot to follow. We're just getting started here at the Case Summit in Beverly Hills. Coming up next, our halftime headliner today, Oak Hill Advisors founder, Glenn August. He's all in on alts. You'll join us exclusively next.

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28:20Scott Wapner: All right, welcome back here to Case in Beverly Hills. With more than$100 billion under management, Oak Hill Advisors is in the thick of the alternative investment universe with several strategies. One of the newest is the AI build-out. Led August is founder and CEO of Oak Hill, joins us once again. It's good to see you again for, I guess, what's our annual visit. I know. Last year was cockroaches. It was, right? Last year we were all about is, you know, AI a bubble. The comment, it was Jamie Dimon who talked about cockroaches. We're talking about software and redemptions. And we'll get to all that in a minute.

28:52Scott Wapner: But I do want to start on what one of your newest opportunities is. And that is the AI build out, direct lending around the data centers for both infrastructure and power. What kind of opportunity do you see there? We have a lot of opportunity across the infrastructure space. We focus on private credit, as you know, liquid credit, stress credit, distress credit. And clearly the AI buildout is just the most extraordinary CapEx investment of all time. And whether it's$3 trillion,$5 trillion, or$10 trillion, there's a lot of capital that needs to get raised. And there's opportunity across the space.

29:25And again, I think as the amount of capital gets raised, spreads are actually going to widen and make it even more attractive. because what we're seeing is a lot of investors already at the early stages are starting to fill up. And so whether it's power generation, whether it's constructing data centers, whether it's chip financing, we're looking at all those, if not.

29:44Scott Wapner: Turbines is an area. Turbines, yes. You are investing in that, right? We are actually investing in that. We just were able to do a transaction with buying, lending against a group of turbines that are powering a data center. And there was a large institution that had some pressure to sell. and we created an opportunity that was two to one over collateralized at a very very attractive yield at a discount that we think will make mid-teams returns. Where's your, I guess your confidence level on whether all of these data center projects that are pledged are actually gonna get built and that these investments that people are making are actually gonna pay off.

30:20Scott Wapner: And I'll bring you there, I mean there's the news over the last 24 hours, AI models may soon self replicate without access to data centers, according to Anthropic. See anything? Does that worry you? Look, I do feel like we are in this moment where the demand for compute is so great and the expectation of deployment of power and data centers is so great that I'm not sure they're all going to get built. And again, we obviously have the NIMBY movement where people don't want power and data centers in their backyards. I think there's capital constraints, but the demand for compute is great. And so I think there's going to be good opportunity.

30:59And again, what we're trying to do is not take risk on is the data center existing 15 years from now? When we look at transactions, we're looking at a much shorter time frame that's backed by an investment-grade company with a five-year type horizon.

31:12Scott Wapner: I wonder what you make of this note from Jeffries around credit risk, around the build-out, where they say, quote, there's a 2008 real estate credit angle to this AI boom in the sense that the hyperscalers have invested in data centers on the assumption of a promise by the assumed tenets of future payment in exchange for future compute. The result of that, of around$2.3 trillion in aggregate contracted backlog across the four big platforms, that's Microsoft, that's Alphabet, that's Amazon and Oracle, about half is owed by OpenAI and Anthropic. Do you see any credit risk around this? I think there's credit risk.

31:51I do think there's risk ultimately. Longer term, there's risk with OpenAI and Anthropoc being the end user. In the interim right now, when you have the hyperscalers and taking their risk over a five-year time frame, I think there's much less risk. That's a hard process.

32:06Scott Wapner: I guess that's opportunity that you always try and look for. There's definitely opportunity out there when there's such a demand for capital and people are starting to get filled up. So again, if you think about$5 to$10 trillion of CapEx need, and you think about the size of the investment grade and below investment grade markets, you're talking about potentially 20%, 30 % allocation, which is too high. So we're going to need to develop other sorts of finance. And again, I think that's going to create very attractive opportunities. When are we going to have another credit cycle? So a lot of people want a credit cycle, but the economy is really good.

32:43The capital markets are in much better shape. I mean, I've been doing this for 39 years. The banks don't have a lot on their balance sheet. It's been syndicated out. The loan market is held 70 % by CLOs, which basically don't have mark to market. The high yield market is double B. 60 % of the market is double B credit. The private credit market, for all the talk of redemptions last year, is actually doing just fine. And so if you have a good economy and you have a good capital market, there's no sign of imminent recession. And again, just to be clear, today in the credit markets, about 5 % of the high-yield market is trading at stress levels.

33:25In the bank loan market, it's about 9%. The 5 % is at a very low level. It's kind of at the 20-year lows. And the 9%, if you strip out the 4 % of software, is at 5%. That's basically at lows. And 9 % is in line with where it's been. And so there's not signs of stress. What you hear about, though, is idiosyncratic issues companies in secular decline, companies with over-leveraged balance sheets, sectors like building products where interest rates going up has basically had a real impact on those companies. But broadly speaking, the credit markets are doing just fine.

34:00Scott Wapner: Well, what's your outlook for rates? I mean, because at the end of the day, if rates continue to back up like they have, then our conversation takes a different turn, doesn't it? Well, again, I think that because there's not as much leverage in the system, it has less impact. In fact, there's no doubt that as we've moved up from, in effect, the short-term expectations have really moved 200 basis points. Because people thought we were going to three, and now people think we're going to five. The economy can handle that. And actually, for investors who are looking to lock in yields, the opportunity to invest off of a 5 % five-year with 300 basis points of spread in high yield and loans, with three, 400 in loans, 500 in private credit, put some leverage, use some buy, take complexity premium, and you actually have the opportunity to make high single digits and low double-digit returns.

34:49Scott Wapner: There is a lot of debt coming due in the next few years. Again, the bifurcation of the market is the name of the game today. So you have 90 % of the market trading at very healthy levels, and you have 10 % trading at triple C below 80 or distress levels, that 10%,$150 billion of triple C debt coming due over the next few years, there's a real opportunity there, Scott, on the stress side, on the capital solution side. Everyone is throwing out some of those troubled credits and trying to find the attractive opportunities amongst them. In software, I mean, there's a lot of dispersion, obviously, within the software.

35:30In software, it's dispersion. It's not bifurcation. But interestingly, today, 75 % of software loans are trading above 90. 20 % is trading below 80. So the question is, on the ones trading below 80, who's going to be a survivor or not? And again, the ability to pick credit, that's how we make our returns.

35:51Scott Wapner: Lastly, the whole reason we're here and that, you know, case as a platform exists to begin with, is to make that connection between the retail community and asset managers like yourself. You just launched a new retail fund this year. Tell me more. So two things. One is institutional investors put 25 % to 35 % of their capital in alternatives. The individual investor has 0 % to 15%. It makes sense in a portfolio to have alternatives. So we have a couple of different products, one that's focused on senior loans, ones that focus on multi-strategy credit. And we think the opportunity to bring what we do for institutions, we manage money for seven of the top ten U.S.

36:34pension plans, seven of the top ten sovereign wealth funds, to bring that product offering to the wealth channel makes a ton of sense for us and we think makes a ton of sense for investors.

36:44Scott Wapner: I appreciate the time, as always, very much. Glenn, it's good to see you here at Case. That's Glenn August. Still ahead, Josh Brown. He's back with best stocks in the market and a new name that just hit the list.

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38:29Welcome back to the Halftime Report. I'm Dominic Chiu with your CNBC News Update. Kimberly Guilfoyle addressed her departure today as the U.S. ambassador to Greece after the White House press secretary said she had been asked to step down. In a statement on social media, she said serving in the role has been the honor of a lifetime and called the allegations against her false. President Trump said yesterday he was considering firing her amid a recent string of damaging reports, which include allegations. She asked a Republican donor to pay off a credit card bill. The Supreme Court said today it will take up a case over whether the Department of Governmental Efficiency, or DOGE, formed by Elon Musk, is subject to Freedom of Information Act requests.

39:10The justices will hear an appeal from the Trump administration seeking to stop the release of information about the agency's attempts to downsize the government. And Hillary Clinton is getting into the podcasting business. The former secretary of state and Democratic presidential hopeful is launching a limited series on the midterm elections called High Stakes alongside Vox Media and journalist Kara Swisher. The podcast debuts tomorrow and runs through mid-November. That is your CNBC News update. Halftime report returns after this. Keep it right here.

39:47All right.

39:48Scott Wapner: We're back. in Beverly Hills. Time for Josh Brown's best stocks in the market. Do we have a new name today or where's the spotlight shining, Josh? So we wrote up two stocks and I thought Robin Shannon did a great job of explaining how the stock market sort of has become the economy again, because these are companies that you would not associate with AI or the high tech trade, but they're both putting up big numbers because they're selling into this CapEx frenzy. We're We're going to focus on we're going to focus on EXPD. This is Expeditors International of Washington, because I think it's a really fascinating situation.

40:27The technicals say this stock is about to break out. Wall Street hates it. They think this company had an earnings report in early August that just absolutely blew the street away. Second quarter earnings were up 51 percent, which was 21 percent above the consensus. and they said air freight revenue jumped 57%, mostly on higher tonnage. You know what that is? That's shipping chips and servers to the hyperscalers from all over the world. There's also another thing with tariffs where every time the tariffs get weirder, this is a customs broker, so the paperwork becomes more expensive. They make more money.

41:06And they had some tech-related restructuring that helped their margins. And what ends up happening is five of the 17 analysts who cover this stock have a sell or a strong sell rating. You very rarely see that in a stock making new highs day after day. We own this stock, full disclosure, in our Porterhouse concentrated momentum strategy. And in the column, we give people the correct stops here. But I just think it's a really interesting situation because it's been building a tight range between 183 and 195. The rising 50-day at 187 is climbing up right below it. 196 would be the breakout. We're like literally right there.

41:50RSI is only 57. We're not crazy overbought. We're telling traders the stop is 183. That's the September low, also the 50-day. We're saying investors can anchor to 177, which was the early August post earnings pullback low. If it stays above those levels, we think the stock continues higher. The other name we won't spend time on is Johnson Controls. They're doing data center cooling. Same type of story. This was not an AI or a tech stock. And then all of a sudden it was. Look at the trend on this bad boy. This one is already broken out and is doing a low volume test of that of that breakout right now.

42:32Scott Wapner: Yeah, the other Johnson controls. And by the way, you do also own Old Dominion and J.B. Hunt, right? Which report later this week. I mean, at least they are in the best stock. So it's a theme that you've liked. Yeah, J.B. Hunt does not have nearly as pristine a trend as Expeditors. But I will tell you, EXPD is the eighth best stock in the S &P transportation sector this year. It's up 30 % on the year. There are not many stocks doing anywhere near what this team is doing, which is why it's attracted a lot of attention. But the street doesn't believe those drivers that gave them that monster quarter are going to repeat.

43:13It's 28 times for a cyclical. So I'm not saying that I think Wall Street's wrong. That's why we have risk management. That's why we use stops. Wall Street may be vindicated, but their average price target judge is 159. They are way behind where the expediter's price is right now. So either the buyers who have taken this up to new highs will look like geniuses and Wall Street will have an egg on its face or vice versa. The sell side will be vindicated. I love this game because we're all going to find out together. OK.

43:48Scott Wapner: All right. Good stuff. We'll take a break. We'll come back. We'll have an alts version of Options Action. Oliver Rennick is next. All right, we're back at the case summit here in Beverly Hills, where the alts boom is front and center. And competition for dollars in the alt space is spilling over into the options market. That's where Oliver Rennick takes a look today, live from the SIBO Global Markets in Chicago. What do you see? Hey, Scott, not to blow up the party in Beverly Hills, but as alternative asset managers approach a two-year bear market, the options story is not about the trading around these stocks, but the options market itself.

44:23as an understated threat to the industry. The big pitch from private credit right now is that it's a solution to what many see as a treasury bond problem in portfolios for which many investors want alternatives. Chicago's solution is the options market, going after the same slice of pie and, in many respects, doing a better job with risk-defined trades, guaranteed outcomes, and structured products that offer better yield than treasuries without the credit risk of private finance. Look at the boom in box spreads, which trade billions a day here at SIBO. The huge rise in buffer ETFs. Case in point, Goldman Sachs' purchase of innovator funds, Wheaton, Illinois, based earlier this year.

45:03Private credit promises juicy yields, but carries sector risk and a lack of transparency. And options, all the math is right in front of you. Scott.

45:15Scott Wapner: Really interesting look, Oliver. Thank you. Oliver Rennick in Chicago. We're talking bank earnings right after the break.

45:25Scott Wapner: Let's kick some bank earnings around because they're a bit mixed in the market today. Joe, I'll give you the first shot at this with your take on Goldman Sachs and J.P. Morgan.

45:40That the trading revenue was going to be lighter than expected.

45:43Scott Wapner: Oh, yeah. I can hear you, Scott. So we anticipated that trading revenue. I'm sorry. Yeah, trading revenue is going to be lighter than we expected. That, in fact, is what we got. But the equity division, in particular, J.P. Morgan, came out particularly strong, up 49 % relative to last year. The struggle really was in commodities and currencies. That was offset with some better guidance as it relates to net interest margin. So I think ultimately the resiliency you're seeing in both J.P. Morgan and Goldman Sachs relates to the fact that you saw some position unwinding over the third quarter. And I think that's why the stock is supported today.

46:22I purchased J.P. Morgan back in June. I've been trading around it. I'm maintaining position there. Goldman Sachs got you know I've had for the better part of the last three years. Yeah, no doubt.

46:32Scott Wapner: What's your read here? Well, I think$56.5 billion in combined net interest income for JPMorgan, Citi, and Wells, that actually should be something that we care about in a rising rate environment. But I actually think more importantly, that's a good read-through for regionals because they're not as beholden to the trading revenue as the big banks are. Listen, I think loan demand was okay and NIM was kind of flat, not a lot of credit issues. I think it was a pretty solid season for the banks. And I think the read-through is if the capital markets activity can pick up. Listen, they got surprised by rates like everybody.

47:10Their fixed income divisions in many cases, well, in JP's case, did not do as well. And so when you look at them, I think the read-through is the more capital market sensitive will be fine if you have the right trading business.

47:24Scott Wapner: Probably going to remain capital market sensitive, though, aren't we? I mean, the IPO market is not, I don't think, nearly as robust as many thought it would be for the duration of the year. Correct. But broader than that is the trading of securities, right? Naturally, there's the coming public, but also the making markets in securities. We've got a blockbuster afternoon, by the way. I want to remind you from Case here in Beverly Hills on Closing Bell. Vista Equity Partners CEO Robert Smith is going to join us here. The Case CEO, Matt Brown, and Fortress CEO, Drew McKnight. So we're going to continue to kick around the alternatives space, whether it's right for you.

48:07Scott Wapner: You've heard about allocation size and what you think should be the right allocation for your own portfolios. And we'll ask our experts over the last hour. A reminder as well on Thursday, we're going to go to San Francisco from here in Los Angeles and do a special AI in America. It's going to be live from one market in San Francisco as we really assess. where we are. Take the pulse of AI in America. Where are the best opportunities, the risks that everyone seems to be talking about on almost an everyday basis? We'll get to the bottom of that. We've got some special guests joining us along the way as well.

48:40Scott Wapner: Let's do some final trades. Joe Ternov, you want to start us off? Sure, Scott. How about West Pharmaceuticals, steering away from energy and technology? I like this name moving forward. Who's JP Morgan? Josh Brown, is that you? It sure is. You have a fairly rare dip in the stock. This was$3.63 in August. Now it's$3.35. I like it here. Yeah, I mean, the financials as a group, I didn't get your take earlier, so you want to give me your quick read-through here? I mean, they basically said everything looks as solid as it did last quarter, even though people want to hear some deterioration story. It's not in the data.

49:20It's not in the labor market. It's not in the company's credit metrics.

49:25Scott Wapner: All right. You must be Rob Mehta, which, as I said earlier, is the best performing in the mega caps over the last month. And it's still the cheapest, and it's got some of the best things happening at the business right now. So I love that. Yeah. Muse comes to market and the stock kind of takes a different trajectory. It certainly happens. It's up again, just shy of 3 % today. What do you got? Energy. The Middle East is not going away. And if you look at refiners, they remain the go-to in this space. All right. Good stuff. Thanks, everybody. It's good to have you guys next to me here at Case. I'll see you on the closing bell.

49:59Scott Wapner: The exchange is now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC. All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

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