Mortgage Rates Hit Multi-Year High, Can Nike Be Saved?, Powering Data Center Demand 10/1/26

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1:04The markets and your money now positive to kick off the fourth quarter while oil and borrowing costs are still in focus and oil moving higher. Welcome to Power Lunch, everybody. Early today, 10-year yields hitting a 24-year high. The market expects more Fed rate hikes, but the big payroll number tomorrow could be a game changer either way. AI and data centers, they have changed the game for power. It is surging and so are the investment themes around it. And Evercore's Nick Amacucci is here to lay out how you can invest. Plus, coming up, the cost of buying a new home hits a new or a home, I should say, hits a new milestone.

1:39The 30-year fixed mortgage at 7.6%, just a hair below that right now, the highest since 2023. It's squeezing affordability and putting new pressure on builders and housing-related stocks. And a turnaround test for Nike. Earnings are on deck with another quarter of declining sales expected. Can the company recapture its brand heat and get its swagger back? We'll ask Wharton professor and branding expert, Americus Reid. Maybe that swagger has run off in Nike shoes. All right, well, it is a new month and a new quarter. And the big three averages, they're all now higher. They were lower earlier, only small caps up.

2:15Now everybody is up. And time may be on your side longer term. Because here's a little random but interesting trivia for you. While September is historically the worst month of the year for stocks, Carson Research says that October tends to be the best, at least in an election year like we have this year. And tech could once again lead the way because even as prices of stocks have gone up, valuations have stayed flat or even gone down because of early growth and higher earnings. Sector is not cheap, but it has in some ways actually gotten less expensive. Text forward price to earnings ratio falling from about 32 times earnings late last year to about 21 today.

2:57That, according to FactSet, and that is near levels last seen when ChatGPT first launched in late 2022. So what does this mean for you as you think about the fourth quarter and into? OK, we're going to go to AIM. That was a great intro, Joanne Feeney. I was so psyched to come to you, but we do have some breaking news. So before we come to you, I'm going to go to D.C. and AIM and Javers. Brian, that's right. This is a new report that just popped from The Wall Street Journal. So this is their reporting. We have not been able to match it yet, although we are out to CENTCOM. They are saying that the United States military is sending a third aircraft carrier and up to about 10 ,000 more troops to the Middle East as the president contemplates his military options regarding Iran.

3:43So bear that in mind as you read the president's latest tweet. The president posting on social media, he says, I stated numerous times that it would take four to six weeks to get rid of the Iran nuclear threat, and I did it in one night. The rest of the time is just to make sure it stays that way. So the president sort of reframing his initial guarantee that the war would last four to six weeks, now saying that that was just about ending the nuclear threat. He says now that that has been affected, and he wants to keep it that way. And so the rest of the time, however long this conflict lasts, is designed to keep the victory that he's suggesting that he already won.

4:21So what The Wall Street Journal is reporting here is that ships, jet fighters, Marines and sailors will arrive in the region by the end of November. That's they're citing officials. The president recently told aides they say that he expects to resume bombing Iran the same month. Obviously, the end of November would put that military action after the midterm elections. And Brian, the president has suggested in recent public appearances that he feels the war could be ended after the midterm elections because the Iranians are holding out until then to see if they can have more political leverage.

4:54This report from The Wall Street Journal would suggest that the president is also contemplating ramping up. Well, is this is what I do. We know that, Eamon, because I'm looking at the story and it says that George's are there, the Bush and the Washington, and that the U.S. carrier Theodore Roosevelt, which I assume is the third carrier referring to, left its home port of San Diego Sunday on a scheduled deployment. Right. So what the journal is reporting is the Pentagon is sending a third aircraft carrier strike group and additional Marine Corps ships to the Middle East, according to U.S. officials, right?

5:28So I guess the question is, where was that scheduled deployment scheduled to go? And I don't cover the Navy often enough to know exactly where all these deployments are scheduled on a week-to-week basis, But presumably this puts a lot more firepower in the region on behalf of the administration. And the president can then choose to use those assets or not in a stepped up campaign that he, according to the journal, appears to be contemplating in the end of November. Just two comments to add to that. One is that many have made the point we have so many assets in the Middle East right now. Wouldn't be a great time if China were to make a move on Taiwan.

6:03And you wonder again with everyone asking, well, why did the president cozy up to Xi Jinping last week? well, maybe this has something to do with it. You can't fight two wars with this number of aircraft carriers at the same time. So anyway, just that comment, as well as the fact that there's been so much discussion about is there going to be a long term American presence in the Mideast if and when this conflict deescalates? So are we escalating to deescalate? That's a little bit what this looks like. Yeah. And you saw the final withdrawal from Iraq earlier this week, right? After, you know, we went into Iraq in 2003.

6:37So, you know, 20 plus years in Iraq. The question is, how long does the president contemplate being at, you know, open conflict with Iran? There have been these reports about munitions depletion, to your point, Kelly. And the question is, you know, how much does the U.S. have in reserve? The president has insisted publicly that the United States has plenty of munitions and plenty of firepower to do anything that it wants to do militarily around the world. But of course, he would say that, right? He has to say that. So the question is, how drawn down are U.S. stockpiles at this point? And how vulnerable is the U.S.

7:12elsewhere in the world because of the lengthy commitment here? And it clearly was unexpected. The president did suggest this would be a four to six week military commitment earlier this year. The war launched in February. Here we are in September. So obviously this has taken a lot longer than was initially contemplated by the White House. But I guess, I guess, and we'll let you go, Eamon Jabbers, I guess if we don't, if the Theodore Roosevelt was going somewhere else and was rerouted to Iran, I guess that would be the news, right? The news is that the ship is being rerouted to a different, but if it was scheduled to go to Hormuz, I'm not clear.

7:48And I know this is the journals reporting, not ours. I'm not putting anybody in the spot. It's unclear what the news is. Am I right about that? Well, no, I mean, I think if you look at the lead of the of the journal piece, it's clear that the news is that they're going to the Middle East. Right. And that that additional capacity is, according to officials cited by the journal, that that is new. Right. We are out to CENTCOM with our own request for a comment on this to figure out what we can say with our own reporting. But I think for now, we've just got to you know, if you're a market participant and you're looking at this, this is new information from The Wall Street Journal to the market.

8:21except it says the carrier left its home port on a scheduled deployment. So, again, we don't know where, to your point, Eamon, we don't know where it was scheduled to go. It's not like rushing to the Middle East or maybe it is. I don't know. Oil did move on the report, I think. It's up for sure. Anybody in the Navy want to clear this up, let us know. We're here. You know where to find Eamon Javers and us and everything else. Eamon, thank you very much. As we mentioned, Joanne Feeney is here on a day where we started, Joanne, with Treasury yields breaking out, global yields breaking out. Then we've seen a huge turn of events.

8:56I don't know if it's Fed speak. We've had a few officials coming out now and kind of talking about maybe we don't need to hike regardless. And stocks have gone positive this afternoon. So, you know, we like to kick off the first day of the new month and the new quarter. Sometimes it is a trend-setting move. What are your thoughts as we kick off Q4? You know, I think one of the things we have to factor in is the Micron report of last night. What did you think about that? It's not a stock that we like to own for clients, but it is information. And what you see in response to their very strong numbers and their continued comments that demand remains well above supply, at least in the memory market, it tells us something about how much more there is to do in the AI infrastructure build out.

9:35And that's why you're seeing other technology stocks up today, even as Micron has wavered. I think it's up now. But the point is, you know, you see Lamb Research, which is one that we've owned in our growth strategy for a long time, up, you know, over 3 percent because the clear implication is we need more capacity. Yeah, I heard some people saying after they heard the call that prices are going up. I mean, they're at least staying up. And we know that's been a big part of the story. Hundreds of percent. Micron is primarily benefiting from the higher prices. And that's why our concern lies. It's ultimately those prices come back down.

10:07And you never know when that's going to happen. And you never know when the stock is going to reverse because people finally anticipate that that's going to happen. Now, they're putting in some strategic agreements. That's great. But I think it's a relatively risky place to be to play this whole build out. I think you can go elsewhere where you've got more vertical integration, whether it's an alphabet because they've got the applications all the way down to the chips, or a Microsoft where it's balanced, Azure and the Microsoft 365. Or Lumentum today up again. I mean, highly volatile stock, but one of those layers of the cake.

10:39Yeah, exactly. Can I, I don't want to be pedantic. Can I go back to this breaking news that Eamon just delivered on Iran? Because I'm still, I'm genuinely confused about the Wall Street Journal story, not our reporting. If the Theodore Roosevelt was going to Iran already, that's, I don't know what the news is. But again, I'm not that bright, so maybe somebody can figure this out. That aside, let's assume this is new, and let's assume from this article there's a higher risk of some sort of flare-up. I'm not asking you as a military person to talk about it, Tuan, don't worry. Not any of that. But if we have another flare-up in the region, maybe a bigger one, oil prices surge, I hope we don't have this, then what?

11:21Does the micron conversation, does all that stuff kind of go away? and people like Joanne Feeney have to now focus again on all these global risks, I've got to imagine that would add a risk premia to the market. And we remain focused on those global risks because we know that the Iran situation is by no means settled. Although there was some data out earlier that suggested that there's a lot of oil getting through relative to pre-war. Somebody said nearly 90 % versus refined products up around 60 % pre-war. So that's all positive. And so what this news, if it's news, and I agree with you, Brian, the question really is, were they going to go there anyway?

12:00But even if they were, so, OK, it was news two days ago, right, that they were going to deploy. But if they weren't, I think it is news in a sense that the U.S. government sees a bigger risk now, a risk enough that three of our aircraft carriers, of which there's not many, are now heading to that region. I think if this ship was destined to go to the Pacific or wherever it was going to go, maybe somebody in our audience, we've got a family member under Theodore Roosevelt, they had an idea where it was going. I'd love to know. because that raises the risk, I think. Exactly right. It raises the risk that another flare-up could then pull back the flow of these liquids getting through the strait.

12:33Or it could say, hey, we're going to solve this problem once and for all. And so even if it's a temporary flare-up in violence, ultimately we'll secure the strait. Although military experts suggest that's an awfully hard thing to do. So it seems like we're stuck in this quagmire for a while that we're going to have constrained supplies out of the strait. And that's going to keep oil, gas, diesel prices up, which elevates costs across the economy. But it still doesn't undermine, in our view, the value of investing in companies that are able to continue to deliver strong revenue and earnings growth.

13:09And we still think the AI build is going to continue regardless of what happens in the strait. And that's why you may see investors running back towards these technology companies, because they are relatively insulated from that kind of global geopolitical risk. Anything else on the stock picking front before we get into kind of what's happening with bond yields? You're sending so much of your bread and butter, but you mentioned you think tech continues. Anything else in kind of the stock specific world that you want to call out? Now, one of the things we've learned, right, is those valuations that you mentioned, they're even more severe a drop for just semiconductors.

13:45Beyond that, I run the balance strategy, right? We need to be diversified. We find other areas of growth. Housing is out of favor, right? Mortgage rates are really high. But that doesn't mean that people aren't going to continue to spend money, say, on fixing up their houses, right? So there are opportunities there. It also means that, hey, there are these risks to the economy if we do get more inflation from a geopolitical blow up, you know, TJ Maxx, one of my favorites, long time holding, or William Sonoma, which is relatively protected because they sell to the higher end household. There are plenty of places to own right now that give you diversification from both geopolitical risks.

14:20And, you know, you don't want to be over in the tech space, right? You want to have the balance in the portfolio. All right, Joanne, thank you. Good to see you today. Busy afternoon, Joanne Feeney. And thanks for rolling with that because we're getting the breaking news as you are in the market is as well. So thank you. My pleasure. And we can check on Treasury. You'll see how they're digesting it. They're off their multi-decade highs from this morning, but it's still a tough time to be raising debt. Just ask Paramount, which wrapped up a$52 billion bond sale to help fund its Warner buyout. That caught the eye of the so-called bond king.

14:50Double lines Jeffrey Gundlach wrote on X, Paramount floated the largest high yield bond offering in history this week, and the bond sold off immediately in trading afterwards. He said this is not a sign of a strong market. Brian, these bonds traded from 100 down to 95 because of the backup in yields broadly that was happening, maybe some company-specific risk. So I guess today is the—we're going to go in a second, Jake. Today's the day where I'm just going to challenge everything that goes on television. Everything everybody says, I'm just going to push back. This is going to be a fun one. Because I saw that Gunlock tweet, and he says, this is not the sign of a strong market.

15:20I asked somebody, I said, well, he's talking about the bond market. I think he's talking about the stock market. I don't have any idea what he's talking about. I would say he's probably referring, if he's referring to corporate credit, which— I think he's talking about the stock market. Jeff Gundlach, can you clear it up for us? Are you saying this is not a sign of a strong? I know you're watching. Strong market. Is it stock market, bond market, corporate credit market, investment-grade market, junk bond market, super market? Or what? A little bit of it all. But, yes, I mean, obviously, if you can't bank on the level of treasury, the base risk-free asset, it's not going to be a strong market whether you're raising investment-grade corporate credit or certainly high-yield corporate credit.

15:58And to your point, if you can't be strong raising high-yield corporate credit, what is your equity going to do? Do I have a point? I don't know. We have a lot more coming for you this hour. Nike shares have gotten crushed this year, but can the right strategy save the swoosh? And is it possible to outbuild the data center backlash? We'll ask a street analyst about that. But first, with mortgage rates at their highest level since 2023, will anyone buy or sell a house? Maybe try to buy. Can't. We'll get more details on that next.

16:57We'll see you next time. Wealth Management, Capital Markets, Investment Banking. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools, no extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at go.gle slash workspace with Gemini. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much.

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18:15Dow fluctuating around the flatline there. Higher interest rates are hitting the housing market. The 30-year fixed rate now at 7.6%, just below that today, the highest since November of 23. What will it take for rates to calm down and the housing market to bounce back? Let's ask Matthew Graham. He's the COO at Mortgage News Daily. Matthew, first of all, can you explain why we keep seeing different rates? I see some cite 7.3, some say it's 7.6. What is the typical buyer experiencing? Yeah, that's a great question. And it really speaks to the different measurements from weekly surveys like Freddie Mac and the Mortgage Bankers Association.

18:52and then, of course, our daily rate index. And none of these metrics are wrong. They just measure things in a different way. So the weekly surveys have a bit of a lag because they take a five-day average of what rates have done and then report it the next day. And in Freddie's case specifically, they don't include upfront points in the methodology. So that can have an impact at a time like this when upfront points and buy downs and discounts are more common. So if a home buyer wants to know where rates are, generally speaking, on any given day, I'll throw you a curveball and say the best thing they can do is talk to a loan officer that they have a good relationship with and see what the different menu of options looks like.

19:38All of these big picture rate indices are really highest and best use. Their highest and best use is tracking day over day change in rates because the actual outright level won't necessarily apply to somebody's individual circumstance. As you know, different credit scores, different amount of down payment, et cetera, can have a big impact on what it's going to be. So focus on the day-over-day change and don't sweat the outright level too much. But I think it's clear the outright level is getting to a pretty sweaty place. It's moved a lot in just the past couple of months. Things seem to have cooled off quite a bit out there.

20:13What do you see kind of refi mortgage apps? Diana was talking about this last hour. I mean, the numbers are down. So is this as bad as it gets or could it still get worse from here? I try to think back to high school trigonometry or whatever, the asymptotic approach to some lower boundary. Anytime rates rise as much as they have, we see that sort of glide path down toward a low, flat level. And that's going to be particularly true for refinances anytime rates spike. But it also has some effect on purchases as well, although the purchase market holds its own a bit better than the refi market. So is it as bad as it's going to get?

20:55I mean, you know, it could get a little bit worse, but we've really seen a lot of the bad come through since 2022. And then there have been some flashes of hope when rates have rebounded. We've seen refis pick up refreshingly well. and we'll see that again next time rates have a little bit of a recovery. What did the CEO of Ford say the other day about cars? The average loan, I think, was 84 months. So whatever seven years, Matthew, again, we're not the math show, but whatever seven years is, is now the average length of a loan, which means some people have nine - and ten-year car loans, which seems insane.

21:31I wouldn't be shocked if the mortgage industry said, why don't we have a 40-year loan? Why don't we have a 50-year loan? I know it sounds weird to say that, but they're not just going to let things do nothing for years, I don't think. Yeah, I mean, interestingly enough, in the sort of the nerdy backroom of the mortgage industry, we think of a 30-year fixed loan having an average lifespan around seven years. So that's how long people live in a home on average, correct? And then they sell, somebody else comes in. Yes, that either they're selling to move up or more commonly, especially over the secular bull market of the past 40 years up until 2022, there was incentive to refi on the way down.

22:19So those refinances took those mortgages out early as well, averages out to about seven years. But the mortgage industry is always trying to figure out exactly how long mortgages are going to last. And that's key to how rates move as well, in addition to just the foundational rate movement from treasuries. But doing a 40-year fixed mortgage, you know, it could lower somebody's payment a little bit. But it's not necessarily a big source of relief. And I think everybody's cognizant that there are going to be cycles in interest rates. And this one is particularly painful, you know, with how long we've been as high as we've been.

22:54But when the cycle turns the other way, then the activity should pick up as it always has, because we're just not seeing any kind of 2007 style of stress or concern in the housing market. It's just high rates. Yeah. Simple math. Not geometry. Not trigonometry. Not any of that advanced calculus. Forget the asymptotes. Exactly. Matthew, thanks so much. Really appreciate it. Matthew Graham. Have a good one. All right. Coming up, we're going to talk about Nike. It is on track to pull off something it is not done in more than 30 years. And we don't mean pull something off in a good way. How do you fix Nike, one of the world's greatest brands?

23:36We'll talk with one of the world's greatest brand experts. Coming up.

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25:29An American icon reports its earnings after the bell, and we're talking about Nike. The shares are actually up 2 % ahead of the results, but the swoosh has been stuck in a slump, on track for its worst year since 1993, a year that just so happens to be when this happened. When I lose the sense of motivation and the sense of to prove something as a basketball player, it's time for me to move away from the game of basketball. Yes, Nike is having its worst year since Michael Jordan retired for the first time. So has it lost its edge? That much we know. Is this a management miscue or a brand that lost its cool factor or all of it, I guess?

26:11Let's ask marketing guru Americus Reid, professor at the Wharton School. Now, Americus, before I give you the chance to even weigh in here, I'm going to argue against our premise here a little bit. They are selling out of the new Caitlin Clark shoe. OK, sometimes it's darkest before the dawn. Are we near the point at which this is a turnaround story or no? That's a great question, Kelly. It's great to be with you. I think we're not quite there yet. I think what we're seeing with a bit of the buzz and interest in the drop with Caitlin is, you know, the celebrity, the aura is all there. But we've got to keep in mind, Kelly, that there's a difference between creating transactions versus developing relationships and deeper connections to the community and creating the kind of narrative discourse that elevates your brand to a high level such that people are really willing to just go with you no matter what and to always be with you no matter what in terms of their loyalty.

27:08So we've seen a challenge that Nike has faced, obviously, from going back to when they tried to disproportionately focus on direct-to-consumer and not quite realizing that the brand is very difficult to live and breathe in a two-dimensional context on a digital device. And so when you're not in the retail outlets and the consumers show up to experience the brand in that sort of setting, that emotionality, that story, and you're not there in those retail outlets. But this other thing is they are called Hoka and on and these other sorts of interesting, quote, new brands. And you might try those things out.

27:43So we're seeing a little bit of that play out. But we've got to be careful because it really is about creating that emotionality. LeBron, the king, right? They call LeBron James was on our Game Plan Summit a couple of months ago. So he was asked this same question. What would you do? How would you fix Nike? Here's what he said. You got to get back into the roots. You got to get back to being out in the inner city, having runners. You agree, Americus? I love that point. And by the way, thanks for showing LeBron. He is with us in Philadelphia 76ers. So that's an awesome moment. He's right, though, in all seriousness, because what he's saying is like, literally, look, We've got to go back to developing that connection with the people, the normal, natural human tensions of identity that create interest in sport, right?

28:31That idea to be able to overcome, to be able to be with the people, to be able to be that brand that's telling the story that is the vehicle that creates the connection and resonance. We've got to go back to that and maybe, you know, not focus so much on just celebrity, celebrity transactions, sell shoes, sell shoes, but really try to be culturally relevant again and interesting again. As I called you before the break, Americus, I hope you heard this, one of America's leading brand experts. So, Professor, if and when you teach a class on Nike at UPenn, maybe, by the way, you already have or will, what would the lesson be?

29:06Like what would the headline, the title of your syllabus or the book be about the lessons of Nike? I love that. My class is at the Wharton School. It starts on October 19th, Dynamic Marketing Strategy. And I'm going to exactly talk about this. The headline is this, Brian. Never underestimate the power of what the brand brings you. Never believe that the brand can just exist as the tagline, the logo, or in a two-dimensional space on a digital screen. You've got to be investing in the story. You have to be understanding that the brand is something that needs to live and breathe in an organic way within the community, across different transactions, across different sorts of elements that create that emotionality, that tell your story in a very unique way that makes you very different and interesting, authentic, and relevant in terms of things that will be chosen that are not your competitors.

29:58And so it's a great lesson to be learned. And I think if we focus on brand, brand is an asset. So focus in on it. And make sure you don't underestimate the power of how it can drive so much connection, resonance, and loyalty. Well, I'm hearing that they need to be out there. It's expensive, you know, having stores with product, getting people in. And in the age of AI, that's all the more important. Or just talk to the agents and have them buy it. Amerikids, we got to go. But we'll see what they do after the bell, and we'll check back in soon. Appreciate it. Thank you. By the way, if you're in his class that starts October 19th, you better do some reading on Nike.

30:30I think he just gave a little tip to what may be on the test. All right, coming up, can enough power be built and brought online to stop data centers from making electricity prices soar? It's a huge question, and there are stock answers. We'll get some. I'm Nick Amacuchi next.

30:56Well, hyperscalers are projecting to spend trillions on the AI data center build out over the next decade. One obstacle standing in the way is energy limitations. Companies pushing to add capacity to an already strained and some would say overstrained power grid. So how will the U.S. meet the growing power demand in which companies and stocks may be best positioned to benefit? Joining us now to discuss is Nicholas Amacucci, is the head of power utilities and clean energy research at Evercore ISI. And you write about this as well or better than anybody. Nick, good to have you back on. Thanks, Brian.

31:28Who's going to win? Well, so look, we think in the near term, we kind of we could kind of categorize it in three phases. Right. Like the near term, immediate term, we're thinking it's going to be more behind the meter kind of bridge type solutions. So in that kind of in that circumstance, we've been on talking about Bloom. We continue to like them. Also, EROC is another interesting solution and an interesting use case. You also have pretty new stock, pretty new stock. Yes. Also have the capability to add battery storage to a lot of these. When we're talking about bring your own capacity, right, increasing the capacity of the grid is very different than adding true new generation.

32:06And so that capacity factor allows you to kind of bring new assets online via battery storage. How we like to play that is Solve Energy. It's an EP. SOLV. SOLV. Yeah. Ticker is MWH. So that's kind of the first like the near term stuff. We also do think that you're able to contract despite what the market has kind of conveyed. You're able to contract existing assets, which we saw just yesterday with Constellation's announcement with Amazon. Right. On an existing nuclear facility. And then importantly, associated with that, there was 190 megawatts of upgrades. So what is that doing? That is basically, again, squeezing more juice out of the orange.

32:46You're enhancing that nuclear facility, that nuclear reactor, to now bring more power online. And the ability to do that is paramount and basically done through the valves, the reactor kind of moderating systems that Mirian Technology provides. And so we do like that as well. Let me ask a question about kind of this whole sector right now. Now we have utilities hitting a 52-week low today. Now, obviously it makes sense. Rates are soaring. But they're also supposed to be a big beneficiary. How much of a utility is like the sexiest thing in town. So if I'm in your sector and I'm in your space, tell me about this tug of war.

33:28You've got big opportunities to fund AI, but now you have really high interest rates. Which way do you kind of bet? No, Kelly, I think it's a great point, too. And it's almost we have kind of categorized it as it's, you know, you've been right for the wrong reasons. Right. Because a lot of people have seen the rising treasury yield and basically have said, OK, well, these guys are more or less bond proxies, which we disagree with. But in a bond proxy scenario, OK, their dividend yields aren't as attractive as treasury yields. So we're going to buy treasuries rather than rather than the the regulated utilities.

33:58But in this instance, I think it's more so when you think about the size of these capital plans and now how the economics kind of shake out. It is putting some consternation into into the market because you now have a bunch of debt that is going to have to hit the market. That is not going to be hyperscaler debt. It's going to be regulated utility debt. Yes, still good quality bond grades, but it's still a much more expensive build out that is only really going to kind of enhance. So to put it differently, you think that utilities and some of these companies are falling, not just because rates are up, but literally because their borrowing costs are going to are soaring in order to fund this build out.

34:39Yeah, I think that that is definitely that's definitely some of the consternation that we've been hearing. And I'd say, too, importantly, when you think about the ability to then capitalize those interest expenses, right? Because if you're able to capitalize it, then you're able to bake it into a rate base, which is how you generate earnings for a regulated utility. But absent that capitalization, right, you're just kind of wearing it on your sleeve. And then that regulatory lag also becomes a much more meaningful, much more impactful to the real life. There is a school of thought, Nick, that all the power that we talked about is not going to get built because a lot of it is redundant.

35:13Like people will just apply for the same permits over and over again. And there's a lot of duplication of the numbers that the numbers are not ever going to actually work out because they're not fake numbers, but they're not the actual demand estimates. What do you think about that? Well, I do think, look, there's definitely some overstatement going on. I mean, I don't think anybody in their right mind believes that you're going to have 430 gigawatts of power generation. I mean, you're basically doubling the American capacity now. Well, that's in ERCOT alone. You can't do that. I mean, no, it's and you can't do that in a timely manner by any means.

35:46Right. But I think you have seen kind of the two primary power markets, whether it's ERCOT or it's PJM. Right. They're in such a tight, constrained environment that even if you get 10 percent of that, Brian, like you're talking about a significant, meaningful uplift in kind of the electricity prices and and really the merchant, the merchant market and those forward curves start to shift. Can I ask you a question that I would ask you if we were like hanging out in my backyard? I don't know why we're doing that, but I'm just saying it's power lunch. Maybe we're having a barbecue. My electricity bill was so high last month.

36:16Right. The heating oil bill is about to be insane. There's so much new innovation and all this stuff happening in the space. What is there anything that I as a as a homeowner, I want to benefit. I want to benefit from all of this. I don't want I don't want to be exposed to upside and energy prices. I want to somehow do this differently. What are my options? Well, so, I mean, right now there have been a lot of proposals for kind of VPP deployment, so virtual power plant deployment. And really what that is, is that's deploying more distributed energy resources. So think two-way chargers for an electric vehicle.

36:51Think that your battery storage within that charger for an electric vehicle. So being able to tap into that, smart thermostats as well. Should I go solar now or wait? I mean, I feel like it changes every year. Well, I mean, then we go back to the interest rate point, right? Like, I mean, because a lot of things with solar, especially on the residential side, what people don't fully appreciate, I don't think, is that in most cases you can't just deploy solar on a house, right? Like, my house is over 100 years old. And I think, you know, if I need to then deploy or I choose to deploy solar, I'm going to need a new roof on top of it.

37:21So now you're talking you just went from easy, easy, right? And with refi. This is New Jersey. It's 160. What are you talking about? Point proven. I guess I pay the electricity bill then and I just, that's it. And with refi rates where they're at, I mean, it's just a hard sell. Yeah. Well, you know, you're the guy to ask. We're watching E-Rock. We're watching Solve Energy. Some interesting new names. And that's why I bring you on. Nick Kamakuchi, Evercore ISI. I really appreciate it. Thanks for having me. Thank you very much. Let's get over to Brandon Gomez now for the CNBC News Update. Brandon.

37:53Hi, Kelly. UK officials announced another arrest today tied to a suspected plot at an airbase in England used by American bombers in the war against Iran. Authorities say they arrested a 27-year-old dual UK and Iranian national on suspicion of preparation of terrorist acts. The news comes one day after the British Prime Minister Andy Burnham said there were strong indications Iran played a part in the incident on Sunday. Police in Miami Beach say rapper Rick Ross was arrested this morning and charged with battery. According to the arrest affidavit, Ross's former live-in girlfriend claimed he repeatedly hit her and strangled her during an altercation in August.

38:28Ross's attorney submitted a not guilty plea on his behalf in court. And the U.S. Postal Service says it will take unprecedented steps to ensure the delivery of millions of ballots for next month's midterm elections. According to Reuters, the Postal Service says in a memo that retail branches may extend hours starting October 4th through November 3rd to handle ballots. It will also establish a ballot only line on drive through mail ballot mail option, mail option in some locations. Kelly, something's back to you. All right. Brandon, thank you very much. Brandon Gomez. Coming up, our market navigator has some stocks he sees as having 30 percent upside or more from here.

39:07He'll name them after the break.

39:22Welcome back. Despite all the world events going on, some big defense stocks have been slumping lately, including one that hit a new 52-week low yesterday. But are they poised for a major comeback? Our next guest is watching. A few of them thinks they have plenty of room to run. Let's bring in Eric Clark. He's portfolio manager of the Logo ETF. We should have asked you about Nike, Eric, and CIO at AccuVest. But you're actually here to talk about some defense names. Northrup, L3, Axon, Taser, I think, if I'm not mistaken. All of these you think have major upside. Why? We do. I mean, you know, nice to see you again, Kelly.

39:56You know, we just have about a half a trillion dollars worth of backlogs in future bookings, which is about one and a half times the market cap of the group of these stocks. And, you know, you have pretty significant sales, usually because of the midterms. There's a lot of infighting whether the budget is going to go through. Maybe we don't get a trillion and a half worth of defense spending, but I think a trillion dollars is probably in the bag. And so you have these companies, super strong businesses, really important parts of the military and defense complex, 30 to 40 percent upside in the stocks with with big mega sales, with big backlogs.

40:35And so, you know, we we kind of think the economy kind of slows into 2027, and that's going to favor companies with stable, predictable businesses and backlogs with good valuation. So this group on sale just looks really intriguing. And there's a lot of others, obviously, with some tax law selling opportunities. Why is Axon your favorite? Well, I just think it's a very unique company serving the public good across everything from tasers to AI to body cameras to using all of the data, making officers more productive so they can spend more time doing their jobs rather than sitting in the office.

41:16And, you know, that's a that's a great company. It's had a stellar return series over the long term, and it occasionally just has small pullbacks. And we've seen a pretty decent one this time giving us a good opportunity because there's not a lot of companies that are in that category. So they are the clear leader. We have to go. But what do you think about? You run the logo ETF. Your whole premise is that companies' recognizable brands do well over time. And Nike should be in that category, but they're not. Thankfully, it hasn't been in the portfolio, down 70-plus percent. So at some point, some of those names are going to look interesting.

41:53Nike's probably not the one that we go to. Maybe Decker's are on running. But for now, I want stability and predictability. All right, Eric, it's been a pleasure. Thank you, Eric Clark. Great to see you. For Market Navigator. Coming up, Jamie Dimon outlines some bold plans for Europe in his op-ed on reviving the Western world. We'll ask the head of Ireland's agency who is responsible for wooing outside investment. We'll get his thoughts on that and more.

42:27The Emerald Isle has helped investors get another type of green lately, money. The iShares Ireland ETF ticker EIRL, get it, has returned nearly 17 percent over the past year. That's a few points better than the S &P 500 and the EIRL has more than doubled from its lows of four years ago. Ireland has worked hard to be a big economic growth engine for the Eurozone area and attracted many U.S. companies by being smart, particularly on taxes. So where does Ireland go from here? Michael Lohan is the CEO of IDA Ireland, the group working to attract investment in this country. Happy that you're here and back in the United States and here for a bit and coming out to CNBC.

43:05I assume you are in the United States because there are companies that are actively looking to either move there or move their headquarters there or attract more talent there. Correct? Yes. Fair assumption. Yeah, that's it. I think it's a good analysis of the relationship, longstanding relationship between Ireland and the U.S. U.S. multinational companies have been really transformational for the Irish economy and indeed have been transformation for the U.S. companies as well. you know, there's been growth and you talked about the growth of Irish companies, but the US companies have also grown on the back of the really strong investments that they had in Ireland over many decades.

43:40And that's really the secret of Ireland is, it's a trusted long-term partnership. Many of the US corporations in Ireland are in Ireland for 50, 60, 70 years. In fact, J &J are 80 plus years in Ireland. So there's a longevity to those investments. I think there's a mutual beneficial element to that as well. And of course, Ireland is the fifth largest investor from the United States. So it goes both ways. It goes both ways, which is a really important piece. The J &J execs are happy about the direct flight from Newark to Dublin. And I think the Shannon as well, which helps. I write a lot about energy.

44:12I talk a lot about energy. Data centers and AI have obviously been the theme here in the United States. Europe, you guys have your own energy and electricity challenges. We do. So where are you on the AI investment debate? How does Ireland compete when you also have to make the electricity to make the data centers? Yeah, so I think you're correct. This is a global challenge, I think. But in Ireland, we have built a very strong tech hub. And as part of that, includes digital infrastructure. So in Ireland, we've been early adapters of data centres for probably over two decades. And what we've done actually now is, because we are a net importer in order to generate our energy, but we're actually changing that direction.

44:50So the Irish government have made a significant, ambitious plan in terms of renewable energy, increasing our potential to generate energy by a factor of 5x and what we're doing now is we're linking our policy on our generation side with our enterprise. So actually using large energy users such as data centres as enablers to bring that new generation onto the grid and supporting the grid. So we're actually seeing how we can couple those two elements together and that actually brings both, if you want to call it, capacities onto the grid but also brings economic performance as well. You know, it's good to hear a lot of the potential because we do have concerns about what's going on with Europe, with its economy, with a lot of the kind of social pressures that seem to be back.

45:34Jamie Dimon was writing an op-ed recently kind of talking about how do you revive the West? I mean, the fact that we're talking about that tells you about the problem. You said, you know, many of the current disputes between Europe and the U.S. are minor compared with the size and benefits we could have from like a major meaningful kind of economic relationship. Do you think something like that could ever be achieved now? Yeah, I think, look, I think Jamie Dimon is, you know, is well outspoken and well versed in these topics. Obviously, you know, has significant investment in Ireland as well. But I think from your perspective, Kelly, what we're looking at is how do we make sure we can balance that growth with the need for digital infrastructure?

46:14Because all of our economies are growing and we need strong partners. And remember, the US-Europe partnership is the strongest globally in terms of that connection. Why do you think so? Well, it is. I think it always has been. And I think it will be in the future. And I think at this juncture, we have to continue to see that benefit. We know that from an Ireland perspective. The relationship between Ireland and the US is so critically important. And I think the strengths of that, because what we're seeing in Europe as well, as we look to building the technology, how do we actually harness the innovations that we have, the capital that we have, both European capital, US capital?

46:49How do we actually harness that? Could you buy more US treasuries? We're showing. So we need more buyers of U.K. treasuries, U.S. treasuries, all of it. But, you know, it's just there's a lot of a lot in flux right now. So it does feel like a moment where you can maybe press. Look at what's going on with European bond yields right now is going to once again call into question the future of the euro. The northern countries, again, are going to get tired of subsidizing the ones like France who haven't gotten their finances. These we can all feel that these questions are simmering just below the surface.

47:18Yeah, but I think within Europe as well, we see a very strong focus. Ireland is obviously chairing the European Council at the moment, so we're at the very heart of those discussions. A clear focus within Europe in terms of Europe's competitiveness. How do we ensure to drive that competitiveness? How do we drive the single market within Europe? To be honest, that's one of the elements. I think there's a real focus around those areas within Europe and within Ireland and through Ireland's presidency. So, look, I'd be on the scenario of looking at this in terms of positive. We have to make positive strides forward.

47:49And we need a strong Europe. We need a strong Europe, not just for Europe. We need a strong Europe for the globe, for the partnership with North America. And that's certainly something I know that the Irish government are focused on and indeed the European Commission. I know. I guess I'm a little biased. I don't know. Why would I be biased for Ireland? I have no idea. Michael Lohan, CEO of IDA Ireland. Thank you very much. Thank you very much. My Gaelic is a little rusty, so you'll forgive me. Do you know any Gaelic? No. Do you know Gaelic? Coop de fockel. Coop de fockel. We can't say that. What did you say?

48:20I don't even know what he said. So that's a few words in Irish. Hopefully, good one. Shares of Mattel are surging. The Wall Street Journal reporting the company has received takeover interest from Authentic Brands. Authentic is privately discussing an offer from Mattel that could value the company at more than$20 a share. According to the journal, they're citing people familiar with the matter. Authentic Brands has declined comment to CNBC. We've also reached out to Mattel, whose shares are up 25 % to just under 16 right now and have been halted for volatility. OK, today is the theme of the day is why I question every Wall Street Journal report.

48:53We did at the top of the show, folks. But that would be a gigantic deal for authentic brands. They've done a great job, authentic brands. Jamie Salter and his team, they've done a terrific job buying assets. This would be an entirely different level of deal. Bigger. Huge. Mattel? Oh, with their approach. They buy up Sports Illustrated. And I mean, all of these iconic, going back to our logo ETF and our Nike discussion. Just questioning everything. I'm just questioning, enraging everybody. Question everything. Folks, I love you all. Thank you for watching Power Lunch. And Closing Bell starts right now.

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