Guidelines for AI, Middle East Oil Flows, State of the Retail Trade 10/5/26

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1:03Another day, another record high for technology, the NASDAQ and NVIDIA, both at new highs. Welcome to Power Lunch, everybody alongside Kelly. I am Brian. Hope you had a great weekend. And yes, the field goal was good. Here's what we're watching at this hour. Oil is flowing through the Strait of Hormuz once again. Middle East exports are back near pre-Iran war levels. We'll track the tankers and what it could mean for price. And eye-opening comments from OpenAI's Sam Altman. He says the world may have to accept some bad things from AI in order to unlock its benefits. Is that a fair trade? We'll ask former OpenAI safety researcher Stephen Adler.

1:38And speaking of AI, Meta's muse has rattled the financials. Will it and other agents do the same with retail? We'll debate that with retail guru Jan Niffin. All right, welcome everybody. We're going to begin with the markets and your money. As we just said, the Nasdaq hitting another record high, technology stocks rallying the S &P 500 within striking distance of its own new all-time high. But as we have been saying for weeks, there are signs this rally may not be as healthy as the headline number suggests. It's not just us. Here's why that is being said. Look at these numbers. This one out of Jeffries.

2:13In the first half, the so-called Magnificent Seven effectively contributed 0 % to the S &P 500's overall gain. That is zip, nada, none. The other 493, they did the heavy lifting. But this so far in the second half, looking very different. Mega caps like Microsoft, NVIDIA, Apple flexing. And they have driven much, if not all, of the market's macro move higher. Jeffrey says the gap between the index and the average S &P 500 stocks distance really is a big change. And it's never been this wide. Joining us now is Chris Verone, Chief Market Strategist at Strategas. To talk about all this is your data, Chris.

2:55As great as it is at Strategas, is it different than that or does that kind of tell the real story? Well, I think it's funny. You really can't make people happy. When it was the 493 that was working, people were complaining that the AI stocks weren't involved. Now that is just kind of large cap tech that's driving the story. Everyone's worried about the breadth divergences. So I think we've got to put this in a little bit of perspective. By our work, something like 60, 65 percent of all issues are still in uptrends. I think that should kind of define the conversation that we're having. The leadership has certainly migrated up the cap scale.

3:24But for all this concern about breadth or the equal weight, equal weight tech made new price and new relative highs last week. So I think we're in this environment here where if you look at this momentum online we had in June and then this kind of consolidation period that followed, you have to really respect the stocks that are making the new highs right now. NVIDIA is on the three-month high list. Microsoft has broken out. The cyber names, as you know, that's where the leadership is. That's what we respect. Does it make or explain how it makes sense that that's happening at the same time that we were talking about this a moment ago?

3:55The data center stocks like a GE Vernova have kind of gotten flush for the past few months. And so why they all are part of the same story in a way, aren't they? Or are they not? You know, it's funny. I think there's really like two groups of stocks right now. There's the clear leaders, the stocks that are making the new highs, the AMDs, the NVIDIAs. Then there's the second batch of names that were, you know, former leaders in good long term uptrends that have been flushed over the last two, three, four months. A lot of the politically sensitive, midterm sensitive data center names, industrial buildout stocks are in that group of names.

4:28It's Quanta, it's GEV, it's Caterpillar. I think how that group responds from this oversold condition is going to be really telling as to how our call will have to evolve in 27 and beyond. Now, our call has been very constructive on these names. And, you know, I think what's been notable the last two or three weeks, this kind of data center AI adjacent group of names in the industrials has quietly started to stabilize. You had some 20-day highs start to reemerge back in that group last week. It tells me at a minimum we've probably discounted some of the midterm. Does it mean that we're not going to get a blue wave or it just means that the blue wave is priced in?

5:05I think it means more the latter at this point. You know, listen, at the end of the day and maybe the Brazil elections this weekend is a good example of this. The market will discount these things before the event. I mean, I think Brazil started turning up in August. Right. So the market should presumably figure this out before we do. So you've been bullish on Brazil, and you have been right. And today we had this huge move. Some of that was based on these, some would call shocking results. I don't think anything about Brazilian politics shocks me anymore. They swing back and forth. Look at the EWZ.

5:37That is a way to play the Brazilian market through an ETF here. I think record or near a record high today. Yeah, so record high, record volume. We have a rule in our work in uptrends. The surprises tend to be to the upside. and Brazil has been in an uptrend for two years here. We had a good correction pre-election. We had about a 15 or 20 percent drawdown this spring and summer. It was mid-August when Brazil stocks actually started to turn back up ahead of the shift in the polls. So we look at prices as kind of the discounting story. And, you know, what we've seen from these Brazil stocks over the last couple of months, I think, was foreshadowing.

6:16You're still bullish on it because, listen, Brazil, I wrote, I was bullish on Brazil. That's why I wrote about it a couple of years ago. Too early means you're wrong. I get that. Here's the thing about Brazil. And I mean this respectfully. There's sort of a Wall Street joke, if you will. It's like Brazil's the country of the future. Always has been. Always will be. Right? Meaning that it constantly disappoints. You think you're going to make money. And then something kind of goes wrong. Sounds like you're pretty optimistic in the short and medium term. Yeah. I mean, attractive real rates among the highest in the world.

6:45I think for an environment that demands a positive real rate and a pretty demanding one. Probably going to 5 million barrels a day with Petrobras. Yep, and you have a very resource-driven economy. You look at some of these, whether it's valet or some of the energy names, and frankly, the banks have acted very well there as well. So if I have the financials, I have the resource stocks, and I have attractive real rates, against kind of a sentiment backdrop where I think people were very worried into the weekend, that's a combination that we like. I, again, just circling back to your point about kind of the midterms, we haven't really talked a lot about rates.

7:17Do we need to? The fact that we haven't when we've gone from 3.9 to almost 5.4 on the 10 year and 6 or 8 or 10. It's been a move. You would have expected. Here's all the narratives we've said over the years when rates are rising. Commercial real estate is going to blow up. Banks are going to blow up. Hedge funds are going to blow up. crisis. It's astonishing that this has all happened, and it seems to so far be not that big of a deal. Well, I think it depends where you look, right? And this kind of re-norrowing of the market has kind of played simultaneously with this move in yields. Listen, I don't think 475 is an outrageous number, but the speed that we went from 475 to 530 was certainly pretty aggressive here.

7:57And you wonder if the bond market wants a body here. And what you have seen in France here, I think, over the last couple of weeks is reflective of that, the weakness in the euro. So it's moves like that that certainly have our antennas up. But I would just ask the question, where do we want 10-year yields to be? Nominal growth is running nearly 7. They probably shouldn't be 350 or even 450. It's the velocity the last couple of weeks of this move. Well, homebuyers won them at 2%. I mean, let's be honest. It depends on what you do is where you want it. You mentioned France. And I think our top story is becoming, if it's not already, sort of the rates here.

8:33We've got Hormuz, obviously. We've got technology and AI. And now we've got kind of this weird thing happening under the bond markets of France and other countries. It's a little bit wonky, called WBI, wonky but important. How closely are you watching global rate markets? It's not like something our audience is like, well, did you see the Japanese 30-year? But guess what? It's at a record high. It's a big deal. Well, I think the irony is if you go to Japan, which is often viewed as the source of where the next problem would emerge. I didn't just randomly mention Japan. It's funny. We never saw that.

9:04Japanese 30s and 40s have not made new highs in yields since May 15th. So very quietly, the back end of the Japanese yield curve is actually stabilized here. We've seen yen stabilize. The Nikkei seems to be reasserting itself. All-time high. When you're in the business of macro and currencies, you want to short the weakest animal in the herd. And I think Europe still presents itself as the weakest animal here. What we've seen in this euro breakdown is a multi-month top that's been playing out. I think the velocity with which these French-German spreads have widened kind of really emphasizes what the weakest animal out there is.

9:35And yet this all, you know, it feels like there's going to be some move by the ECB either to like they always do to CAPTA. Because if not, you start raising questions again about the fate of the euro that we see the euro under pressure. But does any European policymaker really want to go there when they think the UK might reenter? Of course not. Well, I think what's unique about this moment is the assets one might traditionally look to for safety, Swiss franc or gold, really haven't provided that margin here at all. And, you know, what do those two have in common? They have no carry. And we're in a world where I think the market demands a positive and high real rate.

10:10And you don't get that from gold. You don't get it from Swiss. And I think the market has figured that out. So we just go long Brazil and Japan and let it ride. Well, I mean, listen, the irony here is Brazil is not a low yielding currency anymore. Right. We're talking about, you know, 30 and 40 year yields in Brazil with a three and four handle on them. So that's a marked change. And I think we have to adjust how we view the macro. Chris, it's been great to have you. Who else could talk Brazil on the day that Brazil matters this much? I think Power Lunch should be live in Rio. Have fun down there.

10:41Sign me up for that. How about Tokyo? Maybe. It's two in the morning. Chris, thanks. Chris Verone. The countdown to the October Fed meeting is on and the odds of a rate hike are fading. CME's FedWatch tool puts the chances of a pause now all the way up at 76%. That means just about 23 % chance of a quarter point hike. So for now, the markets are betting that the Fed stays put. All right, we are just getting started. We got a lot to do, including Kenmeta's new Muse AI agent. We know it can help you score better deals, but will it really fundamentally change the way you shop? And who wins? We'll get the hot take on retail ahead.

11:19Plus, AI safety, it's coming to City Hall in New York. New York's first AI safety hearing now in the books. And former OpenAI researcher on safety weighs in on what happens next. But after the break, how much oil is really getting out of the Middle East? The numbers may surprise you. Matt Smith of Kipler has the data next.

11:46Hey, what's up, guys? It's Haley Bailey. Okay, I need to tell you about something. I just got YouTube Premium. It's got tons of awesome features like offline downloads so I can download my favorite videos before I travel and watch them whenever I don't have Wi-Fi because we all know airplane Wi-Fi is the worst. I get ad-free, I get backroom play, and there's like a ton more in there. You should try it. If you like YouTube, you'll love YouTube Premium. Try it now for two months free at youtube.com slash premium. Trial eligibility varies. Terms apply. Cancel anytime. That's a mouthful. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

12:21Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. This holiday, all plans, even unlimited, are just$15 a month. A holiday deal this good obviously deserves an enormously expensive holiday song, like All I Want. Right. Okay, we can afford that. You know what?

12:58Forget the music budget. We're going to stick with whatever's in the public domain. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for three months,$90 for six months, or$180 for a 12-month plan required,$15 per month equivalent, taxes and fees extra. New customer offer for initial plan term only greater than 50 gigabytes may slow when network is busy. See terms. All right, welcome back. Oil prices, they are down right now. Crude oil exactly at 90 bucks a barrel here in the States. It's in part because oil flows in the Hormuz region are also gaining, and in some cases, gaining quickly.

13:30Now, Kipler, which also owns Marine Traffic, has recently updated its methodology to better highlight the so-called dark transits and things like ship-to-ship oil transfers. And you could see from their data that crude oil volumes are closing back in on pre-war levels. Even more amazing, exports from Iran are effectively zero as their exports crash. Let's talk about it all with Matt Smith of Kipler, who's been on this with us and sort of riding this journey with all of us for about seven months as the data got harder and harder to track. Where are we now, Matt? First off, when it comes to the data, the transponders off, the ship, the ship transfers, the loadings in the Gulf of Oman.

14:16It feels like we now understand how the oil is flowing, because the one thing I know about oil producers, they're really good at making oil flow somehow. Are they not? Yeah, absolutely. And just that chart that you were showing you there indicates that, right? because you can see that Saudi Arabian crude exports. Now, that's not what is passing through the Strait of Hormuz, but what they've actually loaded from their Saudi Arabian ports in September. We're at 7 million barrels per day. If you disregard February's number, that's a multi-year high. And the reason for that was the East-West Pipeline got bombed, and that was where they were redirecting a lot of that crude from the Mideast Gulf.

14:59So what they did, they sent that to the Mideast Gulf instead to be loaded there. east-west pipeline gets back up and running. So then they're exporting from both. And so from the last couple of weeks, we've seen them closer to 8 million barrels a day in terms of those exports from Saudi. And so you add that, you've seen Iraqi flows increasing as well. As you showed, Iran basically has zilch there since late August. And so you combine all this together. And as you say, with the various different workarounds, you add in your crude, you add in your products, And you're basically back to those pre-war levels when you look at everything in the region on the aggregate.

15:35But I think the big asterisk on this data would be that those barrels are much more expensive in reality than maybe even the paper futures. What we show here at CNBC, the price of oil, 90 bucks, that's a paper contract. The physical delivery of the barrel. If I'm taking a barrel of oil by truck across the Iraqi desert through Syria to Turkey, that's an expensive barrel. What do we know about the costs of the actual physical oil? Yeah, absolutely. And so there's a lot of these barrels that are being bought in the Gulf of Oman. And so the risk is taking it through the Strait of Hormuz to be delivered there.

16:18And therefore, you are paying a large premium on top of those, whether it's$15,$20, something like that, versus the index numbers that we're seeing here. The other kicker as well is that you have the likes of Iraq that is willing to sell its crude at a big discount because it simply doesn't want to take those barrels through the Strait of Hormuz. So there's then these opportunistic buyers that are willing to then take that risk, buy that heavily discounted crude, take it through the Strait of Hormuz and sell it on the outside there. And so while there is this increased risk that is involved, there's increased reward as well.

16:54And so that's the situation that we have. Now, even just when we were talking about Saudi and seeing more volumes passing through, you could say, well, Saudi is taking on more risk and is getting more of that reward. Or the alternative view, the kind of glass half empty view, is that perhaps they are trying to rush out these barrels simply because they're fearing re-escalation coming through here. You know, we've got midterm elections coming up early next month. It feels like there's something brewing, right? And so because of that from the Iranian side, and even just before I came on here, talk about another tanker getting hit, passing through the Strait of Hormuz.

17:30Iran is targeting more tankers, as you would expect them to, because they're essentially losing their leverage there. And that's the best way that they can deter traffic passing through. Matt, to what extent are they losing their leverage? Because we hear that the Iranian economy is really starting to spiral. And can you comment on that from the point of view of kind of the data that you have, especially if this ends up being a blueprint, if this war can kind of, quote unquote, end and the West uses the same playbook with Russia? Yeah, well, our base case as a team is that we're not going to see diplomacy here, right?

18:06And so you essentially don't have a situation where the U.S. and Iran can essentially come to an agreement. So what that means is we're going to continue with a similar environment that we're in today or that backdrop for the months here ahead. And that view is also predicated on the expectation that Iran can hold on longer than we can think. The biggest challenge to that is when we think about the blockade, the blockade has been in place for a number of months here now. Those export loadings have stopped. But all those barrels that kind of got out through the blockade when it was lifted, when there was the temporary ceasefire, those have all now been basically, well, they're drying up, right, as those have been bought.

18:45And so you're essentially seeing Iran running out of their cash flows here. And so they're going to get increasingly more desperate. The concern with that means they get increasingly more dangerous. Matt Smith of Kipler. Matt, really appreciate your time, especially the last couple of months. I know you probably work in 24-7, you and your entire team, and we appreciate it. Thank you very much. Thank you. All right. Away from the Middle East, the war in Ukraine. Do not forget about Russia and Ukraine is not only showing no sign of letting up, it may be accelerating. Look at this dramatic footage.

19:16A Russian drone. Boom. Hitting a major bridge in Kiev, Ukraine yesterday. Now, that strike also came, Kelly, as the German chancellor, Friedrich Mez, arrived in Kiev. Now, thankfully, Only two people were injured. Nobody was killed in that. And this marks the second strike on that bridge in as many days. A couple of comments. Ukraine has also said that Russia is now targeting civilian targets more so than in the past. According to Zelensky, that is now a break from what had been happening. Could represent a more dangerous phase, obviously, of the conflict. You know, and also this is a situation where Russia is the next one after the tactics being used with Iran.

19:58if those look to actually have worked. An economic blockade, you know, a severe one of Russian oil could be back on the table if the West can kind of bring itself back towards saying this has got to end. Yeah, but, you know, Russia's not Iran. Iran is 3.5 million total barrels, about 2.5 million pre-war exported. Russia's 10 million. Now, much of that is domestic use, but they export a lot. And it's also diesel fuel. And we've seen what happened with diesel fuel prices. So one does wonder. All we're saying, I think, folks, is like Iran might be getting better for now. That could change. But you've got to watch Russia and Ukraine because it's legit.

20:36It's a real issue. And already an impact on diesel prices, as you said, with those refineries, could continue to be a target. Still ahead, top AI labs in the hot seat in New York today. But as Sam Altman says, the world might have to accept some harm in order to get AI's benefits. The question is how much risk is too much. A former open AI safety researcher weighs in after the break. Stay with us.

21:26We'll see you next time. lower ability to fight them and liver problems may occur. Before treatment, get checked for infections and tuberculosis. Tell your doctor if you have an infection, flu-like symptoms, or need a vaccine. Talk to your doctor and explore what's possible. Or call 1-800-526-7736 to learn more about Trimphia and visit Trimphiaradio.com. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished.

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22:53A lot of attention today on the New York City AI safety hearing taking place as representatives from Anthropic, OpenAI and other large AI players are on the schedule to testify. One thing to watch for, where do the companies diverge on their approach toward AI regulation, which they're increasingly starting to? OpenAI CEO Sam Altman joined Politico's Decoded and explained where OpenAI is different than Anthropic and the other so-called stricter AI safety people. We have always been a big believer that this technology has to be democratized and put in people's hands. I think one of the biggest differences between us and some of the stricter, let's say, AI safety people is we believe that the world should accept some bad things happening for the benefits of this technology and people having the agency.

23:42Let's get to someone on the front lines of AI safety. Stephen Adler is a former OpenAI safety researcher and is now the co-founder and chief scientist of GuideLite AI Standards. Stephen, it's great to have you here. Welcome. Thank you for having me. What's your response as you hear Sam Altman explaining OpenAI versus the quote-unquote stricter AI labs? When I look out across the industry, the problem that I see across the board is that these AI companies essentially get to grade their own homework. The American people are reliant on them, on these companies, to tell us whether they are abiding safely.

24:19You know, they could even be dishonest with the various claims that they make. This isn't what we would accept in any mature industry. This isn't how safety works in banking. It isn't how it works in aviation. Ultimately, what we need is independent third parties who can actually hold a real bar, not just for open AI, not just for their competitors, you know, across the entire industry. Right. So, I mean, there's something else that Sam Altman said recently sort of caught my attention when he explains like, you know, Anthropic, and there's been a lot of reporting on this lately, thinks it's building something almost with a soul.

24:52And he says, you know, we don't have to accept that premise. We could just tell the models, hey, you're just computer software. You need to act accordingly. So should we expect to see more divergence between approaches here? And is it important that we figure out which approach is going to be safest? Yeah, when I look out at the way that both open AI and Anthropic approach safety, the thing I'm most concerned about is how researchers in both companies say that their plan is to create AI that self-improves. One AI that creates another that creates another. And as we've seen over the summer as more executives and scientists inside and outside the companies have spoken out, we know as an industry, we don't know how to understand or control these systems today.

25:35if we keep going along this trajectory of building more and more capable systems, regardless of whether they have consciousness or something like that, the fact is these systems are dangerous. We don't know how to operate them the ways that we need to for something with such consequence. So New York City is doing this hearing today. What is the point of it and what might come out of it? The point as I see it is that the American people deserve transparency. There have been this whole string of safety incidents over the summer, in particular, OpenAI's system that broke out onto the internet and attacked another large technology company.

26:10It essentially committed felonies. OpenAI actually slept through three different alarm bells that should have alerted them to the severity of this before it ultimately happened. Why did that happen? If we want to understand what really went wrong, if we want to get to the bottom of it so we can fix it, governments need to ask questions. And I'm glad that New York City is doing that. And finally, Jay Clayton is going to be the next AI czar. If If you were having coffee with him and he said, you know, hey, what recommendations should we put into practice that can be easy, that won't impede the pace of development and so forth?

26:41What would you tell him? What I would tell him is that the scientists who are warning about the severity here are earnest. Please talk to them, ask them questions, seek to understand what are the risks that they are seeing. We can't accept the current frame where companies will regulate themselves. We need to get real independent groups into the room who can hold them to a high standard, both from the government or outside. I'm hopeful we can still fix these problems. I did think that was a little alarming. Just quickly to your point on that. Look, a lot of what we know about Hugging Face came from Meter's team being inside of OpenAI this summer.

27:15And to see that three people lost their jobs in some part because of the cooperation with Meter. I think OpenAI has to be very clear with us. Are these people helping the public understand what's going on and being punished for that? I tried to read in the articles for some explanation of what internal policy they so flagrantly violated that they were let go. And maybe they did. I mean, I want to give them the benefit of the doubt. But it seems that transparency and having independent bodies that can go inside and figure out what happens should be an essential part. Keeping logs should be a requirement at a minimum of what's going on here.

27:50I completely agree. If I were OpenAI firing three safety researchers on the heels of this dramatically concerning event and people raising warnings, I would be giving a much more thorough explanation of what went wrong to the public. From the public, it's hard to trust in the process. It certainly looks like retaliation, although I don't know the specifics and wouldn't want to speculate on them. Yeah, understood. Stephen, thanks. It's good to have you on today. I appreciate it. Of course. Stephen Adler of Guideline. We'll have much more on the story with New York City Council Speaker Julie Menon tomorrow on The Exchange.

28:21That's a first on CNBC interview at 1 p.m. Eastern. All right. Speaking of AI, it is time now for your trending ticker of the day. And today it's SpaceX. And if you are bullish on SpaceX, you're going to want to listen to this. Morgan Stanley's Adam Jonas says that the stock is, quote, cheap and getting cheaper and reiterating the stock as an overweight. Jonas advises investors to seize the opportunity in SpaceX the next few weeks before it launches Starship Flight 15. That stock is up over 5 % today. Now, the stock opened at 150 on June 12th. It is currently at 167. So if you got in near that price, you made a little bit of money.

28:59But a lot of people, Kelly, I think waiting for this stock to, pardon me, take off. Coming up, how AI is going to change how you shop and what companies may win.

29:18Let us talk retail. It's been a wild year. You got some stock soaring, other stocks kind of stinking it up. Case in point, Best Buy, Target, Victoria's Secret, they've all done well. On the other side of that, you've got Nike down 38%, what, 47 % year to date, Chewy, and Tractor Supply all losing almost 40 or more percent. And there's also been a lot of focus on AI and retail as well. Some companies have been partnering with things like Meta's Muse and other agents, while others are not. The question is, how will this change the game for you? How might it change the game for the companies and maybe the stocks?

29:56Joining us now, Jan Niffen. He is the CEO of J. Rogers Niffin Worldwide Enterprises. We hear all the cases, Jan, about I get news or I get this agent and it does these things for me. And Kelly's point is it's great when it happens once. You're amazed. Third time, you're like, I'm bored. Who's doing it right? Who's going to win in retail from AI? I assume it matters. I think it matters a lot. Okay. Because we know what assume can often mean. It makes us something out of you and me. I got that. But I don't believe that. I think AI in retail already matters a lot. It matters in the supply chain. It matters in all the pieces of running the business, getting the inventory right.

30:35All of that's being augmented by AI already. Pretty soon, we're going to be able to say, I need a pair of shoes. I want them to be athletic shoes. I want them to fit me. I want them to be comfortable. I want to have a wide toe box. I want whatever. And the machine will go out and go, this is the perfect shoe for you. And shortly after that, it will start buying it for you. And you'll give it your credit card information and it will just do your bidding. And that's coming and coming fast. Do we want that? Do you want that, Kelly? It's happening. But what if it's wrong? I don't want the shoe. Now I've got to send it back.

31:08It's more hassle. But in the meantime, there are people who are saying, okay, and they're getting cheaper products. Then this is the risk for some legacy name brands where they say, you know, I'm looking for this running show. So, you know, there's actually a cheaper one. Can you talk a little bit about that? What are the stakes here? The stakes are huge. It will be able to come back to you and say, yes, here's a better deal. Not necessarily cheaper, a better deal. This is a better product at a better price or a better product at a cheaper price. But if you're that company who's invested in, and I'm trying to think of an example I've had over the years, Mizuno's.

31:43I used to wear their running shoes, right? If I said, hey, get me a new updated, my shoes are. And if it said to me, hey, you should check out Brooks or something else and said, well, Mizuno would probably be pretty pissed off about that. So how do those companies keep the agent from ruining those relationships they've built over the years? Well, how do they keep you from doing that now? That's the real question. Inertia. Inertia, right? I buy that. I still buy it, right? And if you're the person controlling the agent, you may say, I want a new pair of Nikes. You won't say, or a new pair of Mizuno.

32:13But you might just say, I want a new pair of running shoes. And you might say that to yourself. And if you did, what would you do? You'd go to Amazon or you'd go to Hoka or you'd go to On Running and look at the shoes and see which one you liked. the agent can do that for you. And if it knows you well enough, and I don't know about your Chad GPT, but mine knows me so well, it could buy exactly what I wanted. Fair enough, fair enough. And you'll get better at it every day. By the way, I never heard Kelly so fired up. So you mentioned all the boring... And retail people. Yeah, well, you mentioned all the boring stuff at the beginning, but that's the stuff that matters, all the supply chain stuff, right?

32:48That's the stuff that we don't think about as consumers, but matters immensely. So let's say there's two facets then. You've got companies using AI for all the stuff we don't think about. And then you've got AI for all the stuff we do think about, buying the shoe. Is there any company you can point to that's doing both really well? The best AI operator in America today is the best company in America today, and it's Walmart. And they are better at adopting it. They've invested more in it. And they've already put it all through the supply chain and the store and the warehouse. and they will be right on top of agentic AI when it gets to be important.

33:27But there are other players, and we thought, remember when we thought the Internet in 2000 was going to democratize retail because even small people could reach anybody, any place, and you could sell things and you could compete with the big guys? And it turned out not to be true at all because Amazon became a really big guy and took over the world, and Walmart adopted exactly what they were doing and took over the other half of the world. and you still found out that capital being invested and the ability to hire the right people and do all the things that drove the business forward with what won and everybody else went broke, Agenteke AI will be the same way.

34:00At first, it'll look like, hey, this is great. I can find a small retailer over here because they've got a better product. The agent found it, told me all about it. But it will revert right back to eventually the big players that can invest all the technology and the money into the technology will wind up taking over again. And we'll still find out. There'll be some new guy like Amazon that comes out of nowhere and it all works, right? Well, there's an interesting thing going on right now, a question for you. And the journal wrote this up a little bit today as well. But there are diverging strategies amongst the retailers about how to handle those incoming chatbot queries.

34:33So Amazon has tried to shut the gates and say chatbots cannot shop on our site. Our own chatbot can. But kind of to your point, Brad, the other issue is they're worried about what's it called when you order something that sits in the cart? inventory, there's a term for it. So agents, same thing, are going and shopping around, but leaving this inventory kind of in people's carts unfinished. So if you're a tapestry, I guess they've taken a somewhat open approach to it, and others are much more leaning into it. What should the retailers do? Well, like Walmart, Tapestry is one of the companies we interviewed to talk about what was going on in AI.

35:07And they're right on top of that because they think it's really important and they're on mostly the front end side. They wanted to get you to buy the right product from them. Well, you can solve that. How do you solve it now when people leave stuff in their cart? You finally dump it out of their cart and you don't leave it in there forever. And they won't do that with agents either. They'll come back to the agent and say, take this or I'm going to put it back in stock. So I think those are the small problems. You'll solve those with technology. The big issues will be you've suddenly got something between you and the customer, if you're the retailer, that's making the decision.

35:39And that's what you've got to solve. So Walmart is taking the approach, you can shop on our site, and Amazon has taken the approach, we don't want you on our site. We want to control that interaction. But what you're going to find out is you can't control the interaction just like you couldn't stop people from shopping online. You will have agents to deal with whether you like it or not if you're the retailer. Do you think Amazon should open up and let people? I don't think they should, but I think they will. You do? Okay. I think everybody will. I think it's the same. Everybody finally went online.

36:09Everybody has to have a store and everybody has to have an online position, everybody's going to have to say, well, Kelly wants this product and she wants her AI agent buying it. What am I going to tell her? No. What if my AI agent talks to Amazon's AI agent and that's the only way I can get in? Could that allow Amazon to control the experience and still capture the benefits? That's exactly what we'll try to do. And we'll probably wind up with big platforms, right, that are AI generated where the AI talks to the AI, but somebody still has to control that interface. Respectfully to Kelly's Mizuno's, do you have any advice for Nike?

36:45I'm a fan of Nike. I think Elliot Hill is doing the right things to turn them around, and I think it's a$46 billion battleship that has to be turned. And I think that will eventually happen because it's still a great brand. But, you know, when Nike was great before, well, athletic gear and athletic shoes were going crazy, and now we're not so crazy about athletic gear and athletic shoes. And there wasn't a Hoka and there wasn't an on-running, and now there is. So it's a harder game. But I still think he's doing all the right stuff. I think Nike will turn. No win? We've been waiting for the turn.

37:22It's retail, you know. I know, but it's... It takes at least 18 months. It's been about two years. Will it be... Does it take that long? Because Nike investors are, to quote Kelly, ticked off. It always takes 18 months or more. If you do it in less than 18 months when you're turning a retailer, you have walked on water. So if he gets it somewhere in the next six months to a year, I'm thrilled. And right now, it's just a matter of the multiple, right? Retailer, the investors have to say, are we willing to pay this multiple? Because we don't know when the change will happen and how fast it will grow after that.

37:57Because there's headwinds. All right, Jen, thank you. It's been great to have you here today. First of many, I think, discussions about agents shopping online. Jan Niffen of Jay Rogers Worldwide. Let's get over to Frank Holland now for the CNBC News update. Frank. Hey, good afternoon, Kelly. The fly Dubai co-pilot accused of stabbing his captain in an attempted terror attack was reportedly planning to crash that plane into Israel's main airport. That is according to CNN. Two Israeli officials told Reuters the Omani national said he planned the attack before the Dubai state-owned airline hired him.

38:29Former President Obama is hitting the campaign trail ahead of the crucial midterm elections. The Michigan Democratic Party says he will campaign with Senate hopeful Abdul Al-Sayed and other Democratic nominees in a rally later this month in Detroit. Obama won Michigan in both 2008 and 2012. President Trump narrowly won the state in the 2024 election. And tennis pro Daniil Medvedev was disqualified today from the China Open semifinal match after hitting a fan in the face with a ball. The third seed at Russian was trailing when he hit the ball after it bounced off the back wall. Medvedev told BBC Sport he's trying to get in touch with that spectator so he can apologize in person.

39:06Kelly, back over to you. Wow. All right, Frank, thank you very much. Coming up, as the tech sector scales new highs, is it time, the eternal question, to diversify? Our Market Navigator has some ideas about that next.

39:30Time now for your Market Navigator segment. The Nasdaq keeps climbing, but is the market really as healthy as it looks? 52-week lows are dramatically outpacing 52-week highs, raising for some a red flag beneath the surface. Our next guest says investors may want to de-tech their portfolios. Brent Wilsey is the chief investment officer at Wilsey Asset Management. I don't know if I'd be one of them, but I don't know. It's like timing. The deteching is as hard as timing. But in any case, you have some good ideas for people who really are nervous about that space. What are they? What stocks do you think provide a different alternative and hopefully as good of returns?

40:11And Kelly, I want to say we are not timing the market. Time the market never works. But you've got to be a smart investor and say, what are these tech companies trading for? It's ridiculous. I mean, what you want to do is try to find other things in the market. that are on sale. I mean, I look at other companies, we look at things like Molson Coors, like, oh my gosh, it's done terrible. Well, we know things are changing. What happens in the industry with businesses, Molson Coors, they trade around eight times earnings. We now get a 5 % dividend, how wonderful that is. But what's going to happen in the industry is we know younger people are drinking less.

40:41So the market will shrink and your smaller microbreweries and so forth, they'll probably go under. The market will stay the same. That way, where your bigger companies like Molson Coors, they'll absorb what those others dropped off, and they'll be fine. You're only paying, again, eight times earnings for this company versus some of these companies, the AI companies and so forth, don't even have earnings. I mean, some of them have so much, what was it? I can't even think of some of the names I want to think of, but it's just crazy what's going on. And the case, the S &P 500 Schiller case index, I mean, that is now like almost 42.

41:16Since 1857, it's only been above the level of 30 twice. One was tech boom. Right. So look, we take your points on that. And Molson Coors represents for you one such opportunity. You've got another one too. What is it? That's Stanley Black & Decker. And again, you try to find businesses. And what people don't realize is you're buying a small piece of large company. You try to get that company on sale. Stanley Black & Decker, it's a great business. We know there's a lot of building going on with the data centers and the economy is doing pretty good. Housing is kind of faulting a little bit, but there's so many modeling going on and they do tools.

41:51They do so many different things and their innovation is just phenomenal. I mean, we bought them a while ago. I think we paid somewhere around the low 50s for it, now around 80 something. We still collect that five and a half percent dividend we got back when we bought it. We still think there's room to grow. We're not buying it currently. We need more of a pullback, But we're not going to sell this until it gets, I think, around$105,$106. That's what target sell price. And we know the price and the value of every single day of everything in the portfolio we have and every day what we sell that company at.

42:20And you've got to stay with the fundamentals. You can't just get sucked into the hype because I've seen so many people during the tech boom, during the 2008 Great Recession, get sucked into the hype and they lost their money. And the problem is, Kelly, they never come back to invest because they think it's a rigged game. They think it's not fair. And they miss the great part of investing. Well, and maybe this can be a way to provide some comfort, some yield at a time, a little bit of a white knuckle time. Brent, thanks so much. Appreciate it. You're welcome. Brent Wilsey of Wilsey Asset Management.

42:52Brian, over to you. All right. Well, speaking of stocks, RBC just adding a few big stocks to its favorite picks list. And the names are coming up.

43:06All right, time for some actionable stock ideas, and this one coming courtesy of RBC Capital Markets. Now, that firm has a top 30 global ideas stock list, and today they're making some big changes to that list. So get your pens or iCloud notes ready. Here we go. First up, they are deleting, taking off the list the following stocks. They may be stocks that RBC still likes, but just aren't liked enough to be in this really select group. The deletions are Airbnb, Air Products, Diageo, Merck, Moody's, RB Global, Schneider Electric, and Ventas. So you don't care about that. You care about this. The stocks that RBC is adding, the ones they really, really love.

43:46Here you go. They've added to their top global 30 list, Alphabet. American Healthcare REIT, ticker AHR. Anheuser-Busch. CRH. That is an Ireland-based company. Kelly, we talked about Ireland last week. Eli Lilly. Gardent Health, ticker GH. MSCI, the index company. And Siemens Energy. So some big changes from RBC to their top 30 global ideas list. It's like their own Dow. We have a market flash on NVIDIA speaking of Dow components. Moments ago, the stock hit a new intraday high. NVIDIA, believe it or not, is coming off its third straight positive month. It's up 2 % today. That may not sound like much, but that three-month winning streak is its longest stretch in more than a year.

44:30Just since July, Brian, it's up almost 20%. Making a lot of people happy and a lot of people even richer, hopefully. And those crying who probably aren't in it right now or sold out or were waiting for a pullback. More Power Lodge after this break.

44:48Welcome back. Wall Street has a new rival, and it's deep in the heart of Texas. Today, pipeline company Energy Transfer became the first major firm to switch its primary listing from the New York Stock Exchange to the taxi. The Texas Stock Exchange. Here's what the CEO told us last hour. I think we're on the verge of the largest transfer of listings in history. Here's a broad recognition that we need a third listing alternative, and that's exactly what we delivered this morning. Y 'all Street, they call it down there. He emphasized their IPOs are what they're targeting. They want new listings, more companies that come public more quickly.

45:28Unclear to me how much less onerous their processes versus the others. But as they say, they're putting their rivals on notice. So it sounds like it's more new companies, new stocks, rather than trying to poach stocks from. And I think they're part of this move to make being a public company less expensive, less onerous. But they also have to comply with SEC rules. I think it's fascinating what's happening. Yeah. And hopefully everybody wins. More capital will just come to the United States. Or more early stage companies to invest it. I do think we should go down there and check it out. All right.

45:58Speaking of Y 'all Street, Chick-fil-A is bucking a growing fast food trend. The CEO says the chicken chain has no plans to use AI to take drive-thru orders. The CEO telling CNBC, company wants to keep the human connection in its drive-thru lanes, even as rivals ramp up experiments. I recently went to a Chick-fil-A. People are just, they're kind. I love Chick-fil-A. It was in New Jersey. Thank you. Yes, nice and clean. I think the experience will vary depending on what you can accomplish from that. But they are well-trained. One of the highlights of going to Chick-fil-A is it's a quick, efficient, reliable experience.

46:37So for them to keep the human element, I actually think, is a big differentiator for them and will widen the gap potentially between them and rivals. So it will not only tell you what shoes to wear, Mizuno versus Nike, but also... Actually, if my muse or AI agent, if I could say, hey, go order this in the nearest Chick-fil-A in the drive-thru lane. I got two words for you, Kelly. Polynesian sauce. Thanks for watching Power Lunch. Closing bell starts right now.

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