10AM Hour: Anthropic Sets IPO Price Range, Fallout at Nvidia, David Zervos on CPI Print & Calls for Rate Hikes 11/10/26

0:00I'm Mike McNerney, Equity Investment Strategist. Markets move fast. My mission is to provide market insights to our clients that help turn uncertainty into opportunity. Janice Henderson, investing in a brighter future together.

0:41ever. Good Tuesday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Cantania and David Faber. We are live at Post 9 of the New York Stock Exchange. Big news of the IPO that all of Wall Street is watching. Anthropic just releasing an updated filing, setting its IPO price at$70 to$78 a share with a potential valuation north of a trillion dollars. We'll analyze the key parts of that filing and why it could set the tone for the entire market. Plus, NVIDIA's down again after losing nearly$200 billion in market cap yesterday as details emerged about CEO Jensen Huang's affair with an alleged Chinese spy.

1:16We'll talk with noted corporate governance expert Nell Menno, who says NVIDIA's board should suspend Huang immediately. And why longtime market watcher Ed Yardenny sees a buying opportunity into year-end here. Even after another hot inflation report this morning, we'll hear his bull case in just a moment. But let's start with that hot inflation report. It's still too high. It's still too hot. And we still have this inflation problem. Don't have the year-over-year numbers because of the government shutdown last year. But what we can tell you is that the month-over-month numbers came in higher than expected.

1:47They gained 0.4 % overall in the month. 0.6 % was September. So a little bit of step down, but still too hot. 0.3 % was the consensus. So it was higher than expected. If you look at CORE, which strips out food and energy, which is important because energy has been such a contributor to inflation lately. It was also above expectations, 0.3 % month over month. And that was hotter than the 0.2 % that was forecast. Now, we also got really hawkish commentary from Fed Governor Waller, who the market pays really close attention to, speaking this morning about the potential of doing a double. Listen. In that case, I believe a 50 basis point hike in the policy rate should be considered at the December meeting.

2:34Hiking only 25 basis points in that situation would put our credibility at risk, and it's a risk I'm not eager to take. So after Waller and then the CPI report, the rate hike odds for December went almost all the way up to 100. I think they're above 100 now. And then also the odds of 50, so the double that Waller just floated there as a consideration for December, also climbed a little bit. We're not quite there yet. But basically, there's the difference between yesterday and right now of December, which now is at 100. And also, they're pricing in more hikes in March of next year as well. Look, the inflation story is not going away and it's not getting any better.

3:17If you look at some of the categories month over month that contributed the most, first of all, you have to start with shelter. Shelter is about 30 percent of the increase. But then fuel, oil, certainly gasoline, electricity costs. had a big month-over-month pop, transportation. So food away from home, the food story was a big one. It was both food at home and food away from home. And by the way, in the grocery, if you have noticed these prices going up, there's a reason. Lettuce, 8%, baby food and formula. A lot of the cookies and cupcakes saw big increases as well. Margarine, vegetables, ground beef, especially uncooked ground beef, very strong.

3:56One bright spot was that coffee fell 3.6 % on the month. But basically, you know, guys, there's been this argument that, okay, it's just oil prices and energy prices and that will fade. But then there's been this other argument that it's starting to trickle through into transportation costs, which we saw, and food prices. And, you know, the pass-through is spreading a little bit wider. And today's CPI report actually does make that case, which is why the market odds are jumping for a hike. Yeah. Yeah. Pipeline inflation, as Waller alluded to. It is the biggest jump of the year for food away from home.

4:30Haven't seen the jump like that since December of last year. And then it's seven straight months of no real wage gains, although this was a goose egg. But we know it's been negative on wages for the last six months. Although the last payrolls report was not bad. I mean, we got 0.4 percent average hourly earnings in the last payroll report. So that wasn't good. But yes, you want to see, honestly, the wage number is actually one of the reasons why the Fed would not maybe go 50, right? There's a case for 50 if you just look at inflation. Jobs report has been good, sure. But housing's weak. Wages are not super hot, which might argue that it's not necessarily a monetary phenomenon.

5:11And the AI trade is a little shaky here. And we know how big of a contributor that is to the market and the economy. So that's going to be the debate at the Fed. And then you saw NFIB today, the percentage of companies planning to raise prices in the next three months. That's a four-year high on NFIB. Yeah, I mean, we have inflation. Look, their costs are going up, right? Because they have to pay more for transportation and they have to pay more distillates, oil. That filters through into the economy. And now we've been going for several months. And so it's not a surprise that we're seeing the kind of higher inflationary numbers.

5:44And we've got big IPOs coming, too. And we do. Yeah, one we've been waiting for for quite some time, of course. We're talking about the IPO of Anthropik. It's going to be next week, pricing Wednesday, start trading next Thursday. More or less, as had been anticipated, the company following through, of course, with a much-awaited offering and filling in some key blanks as well with its latest amended S1, including, well, a range, which is now$70 to$78 a share. Class A shares sold by the company, about 801 million shares. There also will be a concurrent private placement that could raise as much as or will raise as much as$26 billion.

6:25Buyers there will include Google at some$10 billion, NVIDIA, AMD, Broadcom, and others, some of whom have had previous commitments as well. And the total raise could be as much as, let's call it,$84-plus billion. At a fully diluted number, you would have a valuation at sort of the bottom of the price range, or let's call it a little less than$1.3 trillion, and at the top, around$1.4 trillion. And the roadshow has begun. It began this morning. And over this next week, it will be interesting to see what investors, what their reaction is to any number of the numbers and to the story being told by Anthropic as well.

7:10It's possible, at least according to some of the people I spoke to this morning, who, by the way, to be fair, already own the stock, that it could get even talked up. Maybe you end up with an issuance price that gets raised, in other words, a range. We'll see. We also got a key blank filled in in terms of that annual revenue run rate. It was, as had been more or less reported last week by a number of news outlets,$81 billion. It was up, though,$10 billion from the last reported number at the end of September. So that means as they move along in terms of the revenues that they recognize in October, that would equate to an annual revenue of some$81 billion.

7:49And as you move into 2027, of course, the expectation is, given the enormous growth rate of the company, that that will move up substantially. It gives you some sense in terms of where you're pricing this thing as a multiple to overall revenues. And, Sarah, when they raise$84 billion, you add that to, let's call it, the$130 plus billion they have in cash and marketable securities. Talking about a company that will begin its public life, at least, with over$200 billion in cash. Now, it's not as though they don't have a lot of compute commitments. In fact, over the next 12 months, they have$70.7 billion.

8:23but they have total compute commitments, including leases of some now$900 billion. And they, as opposed to OpenAI, do not have as much compute and have been aggressively syncing it wherever they can find it. And this data center delay, if we do have one, could also impact their ability to find it as well and or at least means they're going to have to pay more for what is already out there. But you meant that$10 billion from the end of September to end of October in revenues? It went, the run rate went up by 10 billion. So the number for September annualized, the number in October annualizes, leads to a 10 billion dollar more number.

9:03Yeah, it's a big jump. Big jump, 70 to 80. Yeah. Big time. To put it in perspective, OpenAI ended September at about a 50 billion dollar annual revenue run rate. And now the FT says that Goldman expects them to have annual revenue of 600 billion by 2030. Is that the number they're going to be going with? This is what FT just went with a few moments ago. OK, so that will be part of the roadshow and part, at least, I guess, of what Goldman is somehow communicating in terms of longer term, longer term expectations. You just count back a 600 billion dollar number, if that really is a real number and what the margin is.

9:37And you could see why there are at least some people bullish on the idea that this thing actually will either trade well in the aftermarket or even move up in pricing. We will see. 85 percent margins, gross margins, 45 percent compute margins. Right. And that's yeah, that's pretty good. They're big numbers. I know. But, of course, the price of compute may continue to go up, especially if there are fewer data centers that are built or at least built over a certain time period. And their compute costs are obviously great. And the price of tokens might continue to go down. I mean, that$10 billion annual run rate that increased in the month was on top of the 40 % discount on the price.

10:12That's right, with token prices going down. And then, of course, we'll get into the larger debate about open source versus frontier models and how that's going to be used. And Dario, you know, in the soundbite we ran earlier from the video, talked, of course, as well about uses in cyber and a potential new avenue for them there as well in combating some of the very things that they're helping to create in terms of now you've got to use this on defense because we've created these incredibly powerful weapons for bad guys on offense. Yeah, and we've been talking about what that might mean for the cyber stocks, maybe in 27, the crowd strikes and the Palo Altos of the world.

10:50Yeah. OpenAI is doing that, too, by the way, launching all this. Yeah. And OpenAI obviously does have 50 percent of its revenues coming from enterprise, whereas, of course, Anthropic is much more heavily weighted to enterprise. But OpenAI does have one point two billion dollar at one point two billion weekly customers. Yes. And more compute. I know I asked Sarah Fryer last on Friday, did you go through the Anthropic IPO? Of course. Of course they did. Are you kidding? But then one comments on the numbers, but she said, you know, I'm happy that we distinguish ourselves because we have a big consumer business.

11:21We have a lot of compute. Yep. And I think that they see themselves as potentially more revenue streams there. That may be possible. Meantime, a bit of an inside day here, although we're shaving some opening losses. Joining us at Post 9 to talk about the market action, Ed Yardeni, president of Yardeni Research. So much to get to with Ed. Good to have you in. Thank you. There's NVIDIA. There's Anthropic. There's CPI. There's the midterms. Chef's choice. What's most important right now? Well, I tend to look at the big picture, and the big picture is showing that the economy is doing great. The labor market is doing extremely well.

11:57And as Sarah pointed out, we've got an inflation problem. I was thinking that when the Fed passed on doing 25 basis points in October, that we probably would get 50 basis points in the December meeting. And I think that's increasingly likely. I think it's going to happen. They're kind of behind the curve, and I think there are Fed officials who've said that if they stay too incremental, they're just at some point going to have to go a lot more. So I think they've got to go more because they were too incremental. Even if this is the peak on monthly gains, monthly CPI jumps? Well, it might be, but they don't know that.

12:34And the reality is it's the handle on the PCED, on the deflator, and that the year-over-year percent change, according to the Cleveland Fed's inflation now indicator, is going to be something like over 3 percent, both headline and core. We have an inflation problem, but not that big of an inflation problem. Not that big. That would have to go 50. Actually, I mean, if you look at some of the metrics today, SuperCore, which the Fed pays attention to, it actually came down to the lowest level since July. And some of the AI-related inflation, the chips, which has been passed through, have come down a little bit.

13:09What I've been thinking is I really thought that the 75 basis point cut in the Fed funds rate last year made no sense. I thought that calling it an insurance policy kind of belied the fact that the economy was more resilient than they were saying. So I've been thinking that they need to reverse that. If that was an insurance policy, there's no reason for it. And I think the fact of the matter is that kind of the nirvana interest rate out there at which the economy performs perfectly well, it's higher than where we are right now. And I think that's been indicated by the two-year note. The two-year note, I'm a big fan of the two-year note.

13:48I think we could get rid of the Fed just by following the two-year note. And I'd be happy to do the job for half the price. Well, that's an interesting point because some argue today that Waller's offered a ton of forward guidance. Absolutely, yeah. What's going on there? Where do you think? Well, Kevin Warsh can't muzzle all of his colleagues. They obviously are going to continue to talk. You can't kind of put the genie back in the bottle. I mean, Volcker kept a very tight lid on everybody. But once they realized they could go ahead and give speeches and it's a free country, they're doing it.

14:21And they're expressing their opinions and their opinions on balance are hawkish. You're hanging on to year end 79? $7 ,900? $7 ,900, yeah, yeah. And then do you have a 12-month or a next year? I think we're probably going to see something in the neighborhood of$9 ,000 and then$10 ,000 by the end of the decade. But, you know, the thing that's really bizarre is the analysts currently are expecting that earnings, S &P 500 earnings, will be$500 a share in 2028. That's my number for 2030. So, you know,$500 times 20 gives you$10 ,000 on the S &P 500. And we're thinking at the end of 2029. But if the analysts are right, it's going to happen sooner.

15:02Why do you have so much bullish conviction, Ed, with some big uncertainties hanging over the biggest part of the market, which is the AI trade? Namely, the CEO of NVIDIA, but also the policy uncertainty about whether we can build at the same rate in this country. I've got a great deal of respect for the resilience of the U.S. economy. I mean, it's think of all the stress tests that's weathered since just since the beginning of the current decade. We had the pandemic, the lockdowns, the supply chain disruptions, inflation, the Fed raising rates, a mini financial crisis, tariffs, a couple of wars as well.

15:39Oil prices going up. And here we are with an all time record high in real GDP. I guess what I'm asking, though, is where would we be with it? Would we have an all time high of GDP in the market if we didn't have the trillions of dollars that were going into building AI? The answer is clearly is not. We wouldn't be doing as well, but it is what it is. And the other thing is the federal deficit is running two trillion dollars. That's very stimulative. And then the consumer, it's not all about AI. The consumer has really been extremely strong. And that's baby boomers retiring with 100 trillion dollars of net worth.

16:09And they're spending it. That's been your thesis for a while now, is that they are not going to leave it? Well, you need some explanation of why consumer spending just continues to go up. The K-shaped economy just doesn't do it for me. It's really more what I call the G-shaped economy, generational. You know, a third of households in America are headed by somebody 65 years or older. And they're retiring seniors. They're retiring baby boomers. Mortgage-free in a lot of cases. Mortgage-free. Interest rates go up. They're happy about that. And they're helping their kids. There is definitely an affordability crisis for younger people.

16:48And I think, to a large extent, their parents are helping out. I know I am. Well, now we're going to live to be 170, apparently, according to AI. Well, then I better not just help the kids anymore. Yeah, exactly. You may want to cut that off. I need it. Thanks, as always. Good to see you. Thank you, Jenny. All right. Here's our roadmap for you for the rest of the hour. Still ahead, Jensen Wang's future hangs in the balance. We'll talk with one corporate governance expert who says the NVIDIA board should suspend its CEO immediately as it investigates his ties to a Chinese spy. Plus, the CFO of Oracle will be with us as that stock trades near its 52-week lows.

17:26We'll discuss, of course, the future for that company in terms of the AI build out and what it may take to turn around the shares. And much more on Anthropics still ahead, including why one trading instrument is already predicting a pop for the stock when it does hit the public market, we think, next week when Squawk on the Street comes back. Which NHL teams are scoring big off the ice? CNBC Sports' Michael Ozanian has the numbers. If a dive margin in the NHL is right there with the NBA. Official NHL team valuations revealed Friday in Squawk Box on CNBC. Welcome back. NVIDIA under pressure again this morning as the fallout grows from Jensen Huang's affair with an alleged Chinese spy, President Trump, saying the FBI is investigating the relationship.

18:12And as the company faces a major crisis, its board of directors says it still has confidence in Huang as CEO. Let's bring in Nell Minow, chair of Value Edge Advisors, a boutique corporate governance consulting firm. Nell, you say that that they should they should what the board? The board should suspend him immediately. That's the only way to reassure the shareholders and the customers that they are on top of it. The board has done everything wrong so far. They've had early notice that this was a problem. They did nothing. They have no apparent succession plan. They've got nobody there who can take over easily.

18:49And worst of all, they issued the statement that you just mentioned where they said they still have confidence in him. You're not allowed to say that until you look into it. I mean, in his defense, he is a unique CEO, a founder, built almost six trillion dollar company that an entire ecosystem relies on. Wouldn't it be prudent to look into whether there was actually anything compromised on the part of the company or or the U.S. before taking the drastic step of removing him? no because they've already gone past that point we've already identified this woman as an operative he's shown monumental bad judgment the board has failed in every way to respond uh no not at all i i think we are past the tipping point in terms of dealing with it i as i said they could suspend him right now but believe me he's going to be very very busy responding to this you know who's got the biggest headache right now is the DNO liability insurance.

19:51There's already been one lawsuit filed against the company. There are going to be plenty more. There are going to be a lot of investigations. Believe me, he's not going to have time to run the company. Yeah, a lot of the plaintiff's attorneys will show up there. Nell, you know, you looked at plenty of boards. Obviously, we looked at this one. I have to admit, I hadn't really focused on it for quite some time. I'm curious to get your characterization of the board itself, given who's on it. The characterization of the board is that it's your typical board of the great and the good. You know, people forget that when a company is in crisis, the board is generally very active, very involved.

20:28When a company is doing as well as this one, and as you said, it's had unprecedented good results, they tend to be asleep at the switch and afraid to mess in. Listen, I understand that it's very cringe to ask your CEO if his girlfriend is a spy, But unfortunately, this is something that every board in America needs to be looking at. I don't care if you're making farm equipment. You need to be on top of it to see whether your CEO is doing something that could compromise the future of the company. Now, any doubt in your mind if a junior staffer had been found to have been sleeping with a customer, forget the spy stuff, they would be fired?

21:06Right. And that 100 percent. And that is exactly why we talk about tone at the top. You don't want to see the CEO being treated differently than you would a junior officer in that same position. So what do you think happens to Kulture if he does stay internally? If he does stay, it's going to deteriorate very badly. You see what's going on with the stock. That is a vote of no confidence from the market in this management. I don't know if I agree with that. Sorry that it's a vote of no confidence. I think it's actually a concern that he will leave because he's so crucial to this company now. I mean, without him, it's hard to imagine what the company would be like.

21:43He's got 60 direct reports. As Sarah said, he helped create this company that is a colossus and one of the most successful companies we've ever seen. It's the board's fault that he has 60 direct reports. It's the board's fault that they've made him so indispensable. Yes, he is a remarkable person, but it's a mistake whether you're talking about him, whether you're talking about Elon Musk, whether you're talking about any of these superstar CEOs. It's a mistake to forget that they're just human beings and there is nothing more human than falling for a pretty girl and messing up your entire life and possibly putting your company at risk.

22:18I hate the cliche of it. I really do, especially as someone so smart as him now. But there is no public evidence that he compromised any of NVIDIA's secrets. There is not. But this issue of his meeting with Trump and getting Trump to change the policy is very troubling. And I think that that's that's going to unravel in. But we don't know what the motivation was for that. I mean, being targeted, I think we should say being targeted by foreign intelligence is not the same thing as knowingly cooperating with it. Well, whether you're a schnook or a crook, it's still a very compromising position to be in.

23:00Yeah. You know, Nell, as you might expect, I made a bunch of calls on this more to a lot of CEOs I know as well. And many of them believe that that the board is going to figure out a way to keep them, even if it is proved that he actually lied to them, that they will bend over backwards to figure out a way to keep him. I'm just curious if that, in fact, does occur, what your thoughts would be. My thoughts will be that it'll be a target for some kind of hostile action on the part of the shareholders, because if you've lost the trust of the market, if you've lost the trust of your customers, if you've lost the trust of the American people, then it's just not going to be good for the company going forward.

23:45You know, I think right now the company isn't like Wile E. Coyote, run off the cliff and he hasn't quite fallen down yet. that they're all in a state of denial, but that can't last long. Yeah, I don't know. I think the board would be acting on the very opposite view, that without him, the company's nothing, and therefore they're doing the best they can for the shareholder base by keeping him. It's a compliant board. That's exactly the problem, is that you put people on the board, and they just think that he's magic, and nobody is. It's not just the board. He may end up going to prison for this.

24:16Well, if he actually shared, yeah, I suppose that's a possibility. then I guess he would no longer be CEO. Well, unless he ran the company from... We're kidding. No, but I do think that there's a unique... Like a mob boss? No, it's... This is a unique scenario now where what you're suggesting is, I mean, punishing, first of all, shareholders, second of all, America, because I think in many ways, Jensen is sort of a leading competitive advantage for America in our race against China with AI. And all the other companies that NVIDIA touches through its financing and its relationships, before establishing any wrongdoing?

24:55I think we have enough evidence to think that there's a problem. I think he's going to be, as I said, tied up in a lot of investigations, a lot of litigation that is going to be a distraction. And I think, you know, the fact that the board has said we have confidence in him, but we're going to do an investigation has got it exactly backwards. Whether he personally leaked anything, whether he was in the other room and his girlfriend was going through his computer, whatever it is, This is a very bad situation, and the board needs to take it very seriously. Yeah. All right. Well, Nell, thank you for weighing in.

25:29We appreciate it with the strong views. It's a good debate. Nell Minot, a corporate governance expert at ValueEdge. Later on this hour, the same instrument that was used to correctly predict SpaceX's IPO valuation now signaling more upside for Anthropic, we will explain. We'll talk to David Zervos, counselor to Secretary Besson about today's CPI number, what can be done to tame prices. And we're watching some of the key names tied to the AI trade. GEV is one name that David mentioned earlier today. That's going to be the lowest since March. Caterpillar also with some declines after some gains yesterday.

26:06Stay with us. AI is here transforming how we work, live, and lead. And the women I talked to aren't waiting for the future. They're shaping it. I'm Julia Borsten, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers, women leading in the age of AI, wherever you get your podcasts.

26:38Welcome back. Time for our ETF spotlight. Today, we're looking at the VanEck Video Gaming and Esport ETF, ticker ESPO. Nice rally over the last week, turning positive on the year. Take-Two is a top-five holding, and of course that name, the top gainer on the S &P today, after reporting a narrower quarterly loss than expected. Net bookings did decline 18 year-on-year, but the full-year revenue outlook was raised. Strauss Zelnick said GTA 6 pre-orders have reached unprecedented demand. And after all this time, David, looks like we're finally close to actually getting it. GTA 6, that is. Is that finally going to happen?

27:13Yeah, yeah. I saw stress this morning, of course, on Squawk Box. There it is, up about 8 percent. All right, let's get a CNBC News update. Contessa Brewer has that for us. Contessa. Defense Secretary Pete Hegseth is defending his actions after Republican Representative Thomas Massey yesterday filed eight articles of impeachment against Hegseth for abusing his power in the Iran war. In a news conference at the Pentagon, Hegseth called Massey's effort a farce and sabotage that plays into the hands of adversaries. The House will take a procedural vote today that could table the resolution or send it to committee.

27:48Negotiators from the U.S., Russia and Ukraine met earlier today in Abu Dhabi for the first of two days of peace talks over the Ukraine war. Secretary of State Marco Rubio called the negotiations productive and said the U.S. wants to expand them to include Europe. And the United Nations Human Rights Council delayed a review of the U.S. human rights record until January. The U.S. was set to become the first nation ever to reject the process since the council was created two decades ago. The Trump administration pulled the U.S. out of the body last year, accusing it of anti-U.S. and anti-Israel bias.

28:24That's the news now, Sarah Alcindor. OK, thank you, Contessa. Still ahead, we'll be joined by David Zervos, counselor to the Treasury secretary. His first response to today's hotter inflation number. And next hour, an exclusive interview with the CEO of Zillow, The stock is getting crushed this year as high mortgage rates weigh on homebuyers. Stock down another 6.5 % today. We'll be right back. Welcome back. Traders are looking to these perpetual futures to help determine Anthropik's potential IPO price. Now that we have all some new details, let's get to Oliver Rennick and to Cibo in Chicago with a look at what the market is signaling there, Oliver.

28:57Hey, Sarah. As Anthropik begins its IPO roadshow, now we can all follow along from the stands by watching perpetual futures on sites like Hyperliquid, Binance, Polymarket. While these are currently international markets, the volume is not insignificant. Hyperliquid's two Anthropic perps have traded about$200 million in volume the past 24 hours. One contract tracks the price and the other the expected market cap. Both have come in about 4 % to 5 % after today's filing for a midpoint IPO of$74. dollars. What's most notable is that the pre-IPO stock PERP, which has been live for about two weeks, is currently trading at about ninety eight dollars, which means the PERP traders are absolutely expecting that typical post IPO pop, this time to the tune of about 30 percent or in terms of market cap evaluation closer to one point seven trillion.

29:54If you look back at SpaceX in June as an example, the perps did converge with the list price at the IPO, but then SpaceX did go on a three-day post-IPO pop of like 40%. So it's worth taking the message from these perps seriously that IPOs are coming to the market intentionally underpriced, which is one of the points the proponents of these tools will say is a market inefficiency that perps they see over time solving, guys. Oliver, thank you. Oliver Rennick. Yeah, take a look at SpaceX shares up again, as you saw right there. When we come back, former Liberty Media CEO Greg Maffei is going to join us right here at Post 9 as well.

30:33Oversaw Formula One, of course, in that role. Still chairman of Sirius, I believe. Just announced a new venture involving horse racing with our parent company, actually. Plus, next hour, don't miss the CFO of Oracle. It's her first broadcast interview since she was named to the job in the spring. We're going to get, of course, deep into that business and data center delays and, oh, you know, all of it when we come back. The market action is all tech all the time, but we're going to catch up with a trader who's making the case that a biotech hot trade will continue and lays out the strategy for using options to capitalize.

31:09Tune into our Market Navigator segment later on today on Power Lunch for more on that option story, 2 p.m. Eastern time. Welcome back. What is being called the F1 of horse racing will shoot out of the starting gates in 2027. The Horse Racing League will host three events in Miami, Los Angeles and Lexington, Kentucky next year, securing a TV deal to broadcast the races on USA Sports, a Versin property. There will be 10 celebrity and brand owned teams of two horses each competing in both dirt and turf races at those events. Let's bring in Greg Maffay. He's co-founder and chairman of the HRL, also founder and CEO of Band Ventures.

31:46And, of course, our viewers know you well as the longtime CEO of Liberty. All those great interviews we did through the years. And now you're into horse racing. Tell me about why and what this media deal does for this new league. Well, first of all, horse racing is an unbelievably exciting sport with a great heritage. It's the sport of kings. All the words that came out of our vocabulary, including horse power, may have related to Formula One and the like, relate to horse racing. It's also the sport for which there is no better ability to gamble and bet. Our goal is to bring that story, which has not been told well in our view, to the general public.

32:26And we have 10 teams racing, each with eight horses, in four events per day on the three days, as you mentioned. And we'll have purses that they get paid. and then they'll have a payout, much like Formula One, based on who is the champion for the season. But we hope to bring innovative betting. We hope to bring innovative storytelling to something which is incredibly exciting, two minutes of racing. Yeah, what is the part of the story that you don't feel has been appropriately told? Well, there are so many great stories, backstories, whether it's about the lineage or the horses, the heritage, or whether it's about the jockeys or whether it's about the trainers.

33:00A great example is this year we had Sherry DeVoe, the first female trainer to win the Kentucky Derby. Really didn't get the play that it should. And we're going to make Sherry's going to be one of our trainers and be very exciting. She's going to have a female led team. We're going to have something for everybody. How do you make money? Well, horse racing is relatively unique in that not only, you know, most kind of sporting events, you might make it on the event revenue. You might make it on sponsorship. If you're the NFL, you might make it on media revenue, probably less for a smaller sport.

33:34But what's unique about horse racing is we also get a piece of the handle. So we have a real incentive to grow the betting, grow the amount that's bet on the teams in horse racing. And we have some innovative ways we think we are going to make the gambling more exciting. I mean, I covered in the documentary we did together, Inside Track, how you transformed. I mean, you did with the Liberty takeover and your strategy, Formula One, into one of the hottest properties in sports. What is the lesson there that you can apply here? First of all, thank you for your help in transforming us, Sarah. But what is our lesson?

34:07I think Formula One is a great example. It was an unbelievably exciting sport that had not really been told well in the United States. It had been treated almost like a glass cavern that you looked in on. You really didn't get a view. We hope to do the same for horse racing. There are so many great stories that haven't been told. There are so many reasons why it's exciting. And frankly, one of the challenges for something like Formula One is it's an hour and a half. And we find our younger viewers want to watch the 10-minute summary. Here, it's two minutes of racing. Everybody can pay attention for two minutes.

34:40So in a world of shortened attention span, this is a great sport. It's also a great sport, as I mentioned, because there are ways to bet with parlays and interesting, innovative ways to really get excited. This is fantasy on steroids. You can really have a piece of it. And I don't think that story's been told or it's done as well as we think we can do it. I'm curious, the storytelling. I mean, in F1, it's the driver, right, who becomes the star. In this case, is it the jockey, the trainer, the horse? Great question. Look, you say it's the driver who's the star, but think of how Toto Wolff and Christian Horner, who didn't participate in the beginning, were competing for airtime in the end.

35:20I think we have an opportunity to tell about the horse, or as we call them, our equine athlete. We have an opportunity to tell about the jockey. We have an opportunity to tell about the trainer. And we have an opportunity to tell about the team principal and the owner and all the interplay. Do they hate each other like the F1? Of course. You should hear what those horses say. If they don't hate each other now, by the time we finish the stories, they will. There's going to be interesting things we can tell. And you could imagine a cohort, again, to your point about short attention spans, being a younger generation perhaps that can actually watch this stuff on TikTok or Instagram.

35:54I don't know, but is that part of the strategy? Absolutely. We will be digital first in so many ways, and we have a whole system in plan. And frankly, you think about what Drive to Survive did for Formula One and how everybody candidly tries to copy that. I think the world has changed, and not to be negative on my friends on Netflix, so much this is going to be driven on YouTube, Instagram, Twitch, gambling platforms like Kick. This is going to be moving to the next generation and following that younger audience where they are in ways that they want to consume the sport. All right. Well, you mentioned your friends at Netflix.

36:28I mean, do you think that they have a more challenged future? Certainly the stock market seems to believe so. Look, there's always the case that the new guy comes along and does something innovative and steals some thunder. Netflix did an unbelievably great job. Reed, Ted, the whole gang. But, you know, they now have more competition from new platforms. You know, YouTube is the beast in many ways. It absolutely is. And it's the case of the just good enough, you know, the coming from the bottom and meeting that need. And clearly, it's a more challenging environment for many platforms. But Netflix is among them.

37:03Finally, Sirius, of which you are chairman and have been involved with for many, many years, once a Liberty company. Too long. Too long. So you're going to step off the board soon? Not just yet. I used to give you a hard time about all those board seats. How many do you have now? I'm down to only three or something. Three? Oh, my God. You are going to spend a lot of time on horse racing. The stock is up a lot at Sirius. Yes. Is that because they have the spectrum position that is perhaps something that could create a great deal of value were it to be sold to a SpaceX, for example? Look, I think there are a lot of positive things going on at Sirius XM.

37:35First, you know, there's been fear about declining growth on subs. That's really slowed down. And we've done a bunch of things to improve that. Obviously, competition makes that growth harder in terms of adding new subs. but the management team led by Jennifer Witts has done a great job of improving the cash flow. And as you rightly point out, the market has figured out we have a very interesting spectrum position, which has value. How we achieve that value, whether it's in some kind of a partnership or something else, is still evolving, but a lot of opportunities are out there. Yeah. And finally, on the horse racing, back to that for a minute, have you sold all the teams?

38:11So we have sold. The plan is to have 10 teams. We are going to sell four the first year. The other six will remain league-owned. We will have partnerships, including celebrity partnerships, involved with those, and they'll be part-owners of those teams. One of the things that's really fascinating, if I've got one more minute on horse racing, if you look at what attracts new fans to an audience, a team rather, and a sport, it's not necessarily the sport itself, but it's the influencers, it's the celebrities, it's those stories that go around it. And we will definitely have and you'll see a series of announcements almost as exciting as our announcement that we're working with your parent company on this media strategy about a bunch of celebrities who are going to be involved.

38:52I hope the jockeys are as good looking as the drivers. I think you know what, Sarah, I am not here. I'm not going to comment on that. Isn't she an advisor already to like an F1 team? Clarence. She loves horse racing. Isn't that a conflict, Sarah? I don't even want to ask. I watch horse racing once a year at Kentucky Derby. You know what? That's a great point. Never again. Never other times. No, can I? One of our points is the Kentucky Derby, 24 over 24 million viewers up from 12 million 2003. While linear television has declined, it's more than doubled. It's an event that everybody wants to be a part of.

39:25Horse racing doesn't have a tension problem. It has a retention problem. They fall off. Our goal is to capture those fans and all the fans who love college football and want to bet and bring them into the sport and have continuity. Greg, good luck. Thank you. And thank you for spending time with us. Thank you for having me. You're very welcome. Greg Miffen. Getting some breaking news from Dallas Fed as we speak. Let's get to Steve Leisman. Hey, Steve. Carl, Dallas Fed President Lori Logan talked about the possibility of consecutive rate hikes. Now, she says it is possible to hike rates, quote, more rapidly this winter than in the fall.

39:57Remember, the Fed hiked in the fall, then it paused. Now, she seems to be suggesting the possibility of consecutive rate hikes. She says the Fed needs to implement at least two more quarter point hikes after those two hikes. Quote, it would make sense, in her opinion, in my view, to pause. How high should they go? The Fed should make policy, quote, modestly restrictive. Now, if you look at where Fed probabilities are, they are now pricing that. And that's been the development this morning after Waller and the CPI numbers. You now have the possibility of a December hike at 100 percent and the possibility of a January hike.

40:32It had been at 60 percent before she spoke, and now I'm looking at it looks like 62, 63. So she's affecting those probabilities now with the market pricing in the idea of consecutive hikes now, December and January. Of course, Waller saying this morning that it was possible to think about doing 50 in December alone. So in any event, there's your Chinese menu of possible Federal Reserve rate hikes. But there is no all of the choices are for higher rates at this point. Sarah. Okay. Thank you, Steve. We've got the great, the perfect guest to talk about it right now. Joining us is David Zervos, counselor to Treasury Secretary Scott Bessent.

41:09I mean, you guys didn't want to see rate hikes, and now they're all coming out talking about rate hikes after another hot CPI report, David. It was a little hotter, Sarah. There's no question the core number had a few bits. The recreation, the motor vehicles definitely got us a little bit a little bit above where we wanted to be. But in general, I think you want to take the forward-looking stance, and the forward-looking stance is that oil's down$20 in the last few weeks. It's probably going to go down, I would say, another$20 or more over the course of the period where we wind down this conflict, which looks increasingly likely.

41:49And if you kind of run those numbers and you look at the base effects into 27 and you look at the effects of that energy price fall on everything from the actual energy prices to things secondarily like airfares and the like, you're going to get headline CPI numbers that are really going to collapse next year. And I feel pretty confident about that. But what if the Fed reads it differently and they either go 50, which Waller suggested in December, or consecutive, as Logan was suggesting, go in December, go in January? Do you think the economy can handle that or would something break in your view?

42:24So I think the Fed does see that differently. There's no question. And we could discuss, you know, why the committee has these these biases. We've done that before, but probably leave that aside. Let's talk policy, not politics. I think that the the answer to your question is absolutely. Yes, we can handle it because we've already seen the storyline from this year. We started the year with two rate cuts priced in. We've moved to two rate hikes, fully priced, one given and one price. That's 100 basis points and a little bit more into next year. And guess what? Stock market's up, I don't know, 9%, 10 % for the year.

43:00Growth is running at a full 3%, if not more. The latest Atlanta Fed was 3.4%. There's so many other things going on besides the Fed. It's just not the driver. The driver is the technology drivers and I think many of the policy drivers that we've talked about in the past, like DREC. Yeah, I mean, I wonder that in light of the midterms, and we saw a big market sell-off last week, on this idea that there's going to be increasing pushback or friction when it comes to building out data centers in this country, the investment has been such a big part of why the economy has been doing so well. If you reevaluate the outlook for the economy next year and the year after because of policy changes.

43:43I think there's two sides to it. One is the market always seems to like gridlock. And so if the default is that we're going to go from sort of very pro-business policies that have been put in place and already legislated to a period of gridlock where maybe nothing changes that much, I think the markets are going to be fine with that. The question you're asking is, are we going to start to, you know, repeal some of that deregulatory push or that sort of pro-business and I would even say pro-consumer push that came through on the tax side? And it's just it's just not really, I think, easy to put into the forecast in 2027, 2028, because the president does have that veto power.

44:22So I think there's no real sort of pullback. There's only stasis. And history tells us the market is just fine with stasis. So your view is that the inflation we're seeing now is temporary because oil prices are coming down and they will come down. And therefore, the pass through will lessen. And so do you not think we have an affordability challenge or crisis, as you hear, in the political sphere? Well, let me just say, before we get to that question, if I run simple simulations of where headline and core PC are, with oil dropping back down toward$60 a barrel, which is where we started this year, and maybe even drifting a little bit lower toward$50 because we have more of a supply glut coming from Venezuela and increased drilling, I get numbers for headline CPI bottoming in the 1.1 to 1.2 region by the middle to end of next year.

45:15And I get core PC basically diving in toward 2 percent. So I'm not sure what the Fed's looking at and why they're that concerned, because if you do the math with oil and with energy, you get a really big dampening in headline. And then you because you have base effects and the energy both coming in. So it's a double whammy on headline and core keeps coming lower. As for the affordability question, you know, we could debate the sort of nuances of what, you know, what got said in the elections. I think there are a lot of issues with with affordability overall. And I think we're all supposed to take that message and run with it and try to get get policies in place that really address that.

45:59So I don't think that message went unheard. Okay. David Zervos, thank you so much for joining us. First reaction from the Treasury Department to today's hotter CPI number, some of the Fed commentary. That's the counselor to the secretary. Meantime session lows here on those Logan headlines as the two-year, almost to about a three-week high on yields. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, internet, or another medium.

46:31You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. What happens when you combine a cozy night in with the whole family in matching Old Navy jingle jammies?

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