10AM Hour: Middle East Attacks Rattle Energy Markets, Social Security Commissioner, iPhone Demand Slowdown? 10/12/26

0:00This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups. Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get Wise Business. Download the app. T's and C's apply. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S.

0:43and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. Good Monday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. Oil prices are rising after another deadly attack on Saudi Arabia's airport in Riyadh, as President Trump calls for an emergency ceasefire between Russia and Ukraine on energy.

1:17We'll have all the latest details for you in just a moment. Plus, Morgan Stanley says the iPhone 18 bull case is quickly coming off the table. The analysts behind the call will join us to explain what it could mean for Apple's stock price. And this week, we'll get the Social Security cost of living adjustment for next year. It's expected to be among the largest in decades. Social Security Commissioner Frank Bissignano will join us here at Post 9 in just a few minutes, also the head of the IRS. But guys, we've got a big week ahead when it comes to both earnings and the economy. So we will learn a lot of new information about what's going on out there.

1:50Just in terms of earnings this week, the big banks starting tomorrow, of course, Citigroup, Goldman Sachs, PNC, Wells Fargo. You'll get some of the other big banks like Bank of America on Wednesday. Sorry, PNC is on Thursday. Always a good read for what's going on out there in the U.S. consumer. And then some of the regionals cap off the week on Friday. As far as economic data, the biggie will be the Consumer Price Index, CPI, on Wednesday, the key inflation read there. Also, beige book from the Fed, some color on what the Federal Reserve districts are seeing out there. PPI, wholesale inflation, coming Thursday and then Friday, import prices, which is also important for inflation and industrial production.

2:30Where are we right now on the state of the consumer and everything going on out there? I thought that the Delta quote is worth highlighting because it gives you a snapshot of what they're seeing, which is very strong. Delta CEO from the call, the demand remains strong, supported by a secular shift in consumer behavior. The top 40 percent of U.S. households, which make up the majority of Delta's customer base, are nearly$40 trillion wealthier than they were just a few years ago and increasingly prioritizing experiences, including travel, which I think underlines the case of why the travel part of the spending economy has been so strong.

3:06Now, yes, high-end, low-end discrepancy on spending, that was noted there in Delta. But I will note this. Well, Delta is a premium product. Well, they said that's most of their customers. Just want to make that clear. And they've done a great job, by the way, executing on that. For sure. But I would say a glimmer of hope there is that the low-income consumer, the low-wage consumer, actually is getting a little bit of a lift. Bank of America, new data. So low-income there is at the bottom, right, where it's been for most of this cycle. But look what's happening. Starting to catch up in terms of wage growth, around 4%.

3:42higher wage growth now than we're seeing, say, in the top 5 % or the middle income or the higher income, which is good news, right, as we want to see things level off. Obviously, there's still a big discrepancy in terms of who owns assets and everything like that. But good to see wage growth at the low end come up to that 4 % level. Is it good? Is that what you want to see if you're the Fed? I think you want to see a broadening. Yeah. I don't think you want to see just the upper income spending and doing well in this economy. For the Fed, look, wage growth hasn't been the inflationary problem.

4:15It's been inflation from oil and inflation in transportation and in services and how that filters through. Overall, wage growth is pretty subdued relative to inflation. Right. I'm just saying, if we were to see that turn, then you'd have another element to consider if you had to make a decision about rates. Sure. But I think it's good overall because you don't want to have an increasing wealth gap. in this country. The other chart that everybody's talking about, you know, from the Wall Street Journal, from the Fed survey, which is, now this is not wage growth, this is net worth. And a lot of people are looking at this, the median net worth rising 2%, basically, in the last few years from 2022 to 2025.

4:57But the discrepancy by age is so stark. Did you guys see this? So if you are older, here's the change in median net worth adjusted for inflation by income percentile. And it's the highest income, of course, is higher. But the interesting, the really interesting one is by age. If we could go to that one, 75 years or more saw the biggest increase in net worth by inflation. And there's at the bottom less than 35. This, to me, explains a lot of what we're seeing sort of in the political dynamic and why younger college educated kids are turning to socialism and frustrated by the system. Yeah, the old people have more and more of the assets.

5:39They have the assets. They have the housing, right? They have the stocks. Right. They got the money to pay for the really high-end retirement communities. Right. But this is why, you know, this is the problem. It's a problem. It's a problem. It's hard for young people to buy homes because mortgage rates are so high. Correct. And, you know, they like to spend too. I mean, we've seen broad consumer discretionary spending across the board by age, but they're not, you know, saving and participating necessarily. And so their net worth has fallen. Meantime, we're watching energy speaking of some of this.

6:11The president says there's now an energy ceasefire between Russia and Ukraine, but that agreement already in question follows an agreement on Friday that Russia would release more diesel from its reserves and some new attacks in the Middle East today, adding to concerns the Houthis once again striking the airport in Riyadh with more than a dozen killed and hundreds injured. For more on all of this, we're joined by our Brian Sullivan here at Post 9. A wire item just crossing, Brian, that the airport's going to be closed until the 17th. Oh, it's supposed to be in Riyadh. Today? Yeah. There's a big energy conference.

6:43What for, right? Oh, big energy conference. Yeah, which is happening, by the way. It's called the World Petroleum Council, WPC. I've got a lot of friends there locally and who've come in. And best to them, most of them are safe, which is good news. Some people had trouble getting in, as you might imagine. So, yeah, we're here. Listen, a cowardly, deadly attack on civilians at the airport. Left 12 dead, 309 injured. Another attack today. So best thinking our best thoughts to everybody in that part of the world, because the Houthis are clearly ramping it up. And I say Houthis in part. We know the proxies of Iran.

7:15But I want to show the price of oil and oil is not moving that much. Oil is up a little bit, but not a lot of it. And there's two things I want to say to this. Number one is the oil market is largely looking this as a sort of Houthi Yemeni regional issue. Saudis will reply. They will respond. but there's not a response likely on Iran itself. So that's why you're seeing a relatively muted reaction in the price of oil and gas. The other thing I would say is don't look at that. I would just say that's not the price of oil. I mean, I know that's, I thought that might get your attention, David. You always get my attention.

7:52Always, just by sitting down and the volume of my voice. You have my full attention. Why is that the case then? Why should we be looking at that? So that is the futures price. That is a paper contract. and you can buy and sell that. And it's what we've got. But if you want to actually buy a barrel of oil, okay, as I reported last week, there was a ship charted from Houston to China, 76 million. There was a ship charted from Houston to Korea, 77 million. Assuming the ship holds 2 million barrels of oil, which is about normal for a VLCC, aka Supertanker, that's$38 a barrel in shipping costs. So if you buy the oil at 90, you're adding 38.

8:29I didn't go to Tufts. I'm not a math whiz, but I would say it's$128. Neither is he. He majored in English. I think we're all kind of in that boat, Northwestern. I picked it up along the way a little bit. $128 per barrel is the actual cost of that oil, and it's going to be higher. The landed cost, as you might call it, of a barrel of crude is now only about 50 % to 60 % in those futures. So while we've got them and we have to look at them and they're useful, the price of an actual barrel is way, way higher than that. As a result of the cost of transport, essentially. So$77 million, I realize that didn't do a very good job comparing that.

9:08Pre-war. Yeah. January. What was it, like$8 million, something like that? $7 to$10. See, you're David Fay. Yeah, there you go. $7 to$10 million, now it's$77. Again, not a math whiz. That's almost 10x the lower band price. But Brian, so the Houthis have targeted Saudi energy infrastructure and oil before. East-West pipeline. It's notable that they're going now for civilians instead. But I do wonder if that also raises the risk premium because they've wreaked a lot of havoc in the past. They have. Saudi oil. They have. And there were attacks on other Saudi energy assets. But this is one of the first attacks on civilians at airports.

9:47Terminals 3 and Terminal 4 at King Khalid International Airport in Saudi Arabia, which does remain mostly closed to commercial traffic. And, of course, they had an attack again yesterday. Somebody was left dead. I mean, these are attacks on civilians. Why are they going to respond? What are they going to do to respond? Unclear. But they're going to have to. And they've said that there will be a response. But, again, I'm here to talk about— But it's asymmetric in some ways. You're here—listen, let's move to the other energy story, which is diesel. Back to the inflation and a different war, Ukraine and Russia.

10:19Ukraine continues to take out refining capacity in Russia. That has raised the price of diesel around the world. We now have a deal, I guess, to buy diesel from Russia. And the president has also declared a ceasefire on both sides attacking each other's energy infrastructure. But very much unclear whether that's going to be the case, given Russia continue to attack Ukraine. All right. I've set you up. Now what? I spent the week in talking to people in D.C. and also around the world and including in Riyadh. The president's trying to push through, force some kind of a ceasefire deal. I mean, Putin yesterday hit some natural gas assets in Ukraine.

10:56So Putin clearly did not get the memo. Zelensky says he is waiting for more information. So President Trump trying to obviously push something through. Let's talk about what we do know, which is this temporary relaxation of sanctions. OFAC, the Office of Foreign Asset Control, part of the U.S. Treasury, 300 ,000 metric tons. A little weird here on the math again, because we're talking about tons, not barrels or ships. So 300 ,000 metric tons now, 500 ,000 in November, 1 million by the end of the year. It's about seven and a half barrels per metric ton. So if you do the basic math, this load would be about three hours of global diesel demand, two days of U.S.

11:39diesel demand on the 300 ,000. So it's not much. It's something. The bigger question that the energy market participants have and that I cannot answer sitting here with you all, is is this the opening of a door to further sanctions relief? Or is this temporary, I guess, not one offs, but three offs, if you will, 300, 500, one million metric tons. And then it's over again because that won't add a lot of longer term relief. And we're not seeing the price of diesel. Look at that. It's legitimately unchanged. Even amongst the from the president's party as well to to this latest. You had multiple people, senators, Republicans and Democrats.

12:18I think Murkowski, Susan Collins of Maine, Tom Tillis of North Carolina. I'm not the political expert, but I'm going on memory. But you know we just passed a law sanctioning people who buy Russian crude. Remember we were going after India for doing the same? That was like a couple months ago. I remember those days. By the way, as we're talking, you see this notice I just gave you a copy. Delta going to ban flights from Atlanta to Riyadh until March. Well, they're going to postpone it. The first ever direct flight to Saudi Arabia was supposed to happen on Delta from Atlanta on October 23rd. This is ahead of the big FII conference that they're set to host, which is a big financial conference.

12:54Which is still, which is, by the way, the WPC, which is happening right now. I mean, they had events today. Most CEOs, a lot of the Western CEOs, U.S. CEOs, didn't attend like we were. I mean, there's safety issues here. Boards are going to say to CEOs, we just don't think it's right. No. But the conference is underway. There's a lot of headlines being made from the conference. There's a lot of high-level attendees that are in Riyadh now. FI is a financial conference, by the way, Future Investment Initiative. I know you go every year. Yeah, I know. I'm planning to go, although it looks a little dicey now.

13:26Yeah. Well, listen, we don't want this kind of stuff to win out, right? Like, you don't want to have—they're clearly trying to scare people off. And that's the definition of terror. Yeah, especially for Saudi right now. That's right. And to your point earlier, they're not hitting energy assets. They're hitting civilians. Right. But they're trying to. At the airport. At a really key. If you can impact the Saudi economy, which is trying to diversify in so many different ways. And attracting these big conferences. That makes a big difference. Thank you, Brian. Brian Sullivan. Here's our roadmap for you for the rest of the hour.

13:59Trivariance Adam Parker is here on earnings and the three sectors he's betting on to close out the year. Plus a wake up call for Apple. Morgan Stanley's out with a new report that could signal some trouble for iPhone 18 demand. And Social Security Commissioner Frank Bezignano is with us. The agency expected to release its cost of living adjustment this week, which many expect to see a big jump. He'll join us just after ringing the opening bell today when Squawk on the Street continues. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture.

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15:14You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups. Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get wise business. Download the app. T's and C's apply. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S.

15:51and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. Time to check in on what we like to call the broader markets. You can see We are down on the S &P and the NASDAQ. Joining us now to discuss, well, all the action. Adam Parker, founder and CEO of Trivariate Research. Always good to have you here at Post 9. Good to see you guys. All right. You always set out on Sundays or whenever you're level set.

16:29We're always level setting, which I appreciate. And a lot on earnings growth from your perspective. We're moving into earnings season. Again, the bank's reporting the next few days. So how strong? I know it's been very strong. Will it continue for the remainder of the year? Yeah, I think it's two or three years more. Growth is above what we'd call the long-term trend. So I think the setup remains the same as it's been all year, which is earnings grow, the multiple contracts, and the market appreciation is somewhere in between. I think the street's got over 27 % growth this year and over 20 % next year.

17:04And what's new for some of us is that the numbers keep coming up. You know, a lot of us are used to the estimates being too high and they come down. But the last really since AI, since NVIDIA's 2023 numbers, the estimates have come up. And so I think you can expect pretty good numbers, you know, all the way through 28 at least. And, you know, you mentioned AI and immediately I think many people think, well, it's because of efficiencies that are being introduced in these organizations as a result of AI. But that's not really the case. Not yet. Only 20 percent of companies are even saying on the common calls they're doing anything cost related.

17:37I think it's always been kind of maybe beginning in 2027 and then beyond. So I think the case for the super cycle is you'll see more earnings-related productivity later. But in the near term, it's just going to be the beneficiaries on the revenue side.

17:53But, you know, look, I think the multiple expansion, you know, it used to be a lot of people would say, I buy a stock at 12 times$2, I think you can earn$3, it'll trade it 15 times, they get the double whammy of the higher multiple and the higher earnings. I think it's hard to sketch out the double whammy for too many stocks here just because oil is correlated to rates. It's, you know, the Fed's hiking while rates are rising. We were talking earlier on the 9 o 'clock. I mean, there's plenty of stocks that are in a bear market right now. A lot. You know, markets up a decent amount since July 1.

18:23But, you know, tons of stocks are down double digits since then. So it's been a very concentrated market. And I think that's because of the multiple contraction. And so what do I want to own? Stuff that doesn't miss, which we've talked about before. But stuff that's gotten beat up or stuff that's outperformed? I definitely don't want to own stuff that's gotten beaten up. You know, if you look at cheap stocks with bad momentum that miss, they underperform. The market's not saying, oh, this is my opportunity. It's saying I got a confirming data point of why I made a cheap. I don't know if you think the banks are going to be good earnings.

18:54They've gotten picked around a little bit on this rate move. They have, but, you know, to me, you know, we've been recommending an underweight in financials. I think the case for getting more optimistic would be more certainty on the private markets. probably oil comes down, rates come down, they'll act better. But even the high-quality ones, JP, Morgan Stanley, Goldman, are all down a decent amount. So we'll see. I think earnings season will be fine for them. But I think it's really, do you think estimate achievability is above average in 2027 to 2028? Maybe not. Maybe it's a little trickier there.

19:24So I don't think I load into financials right now. People are asking me all the time, though, like, what can I own that's economically sensitive but not rate sensitive and not an AI play? Like, they've got to find something. And so the market, it's hard. You sort of dive through and you're like, yeah, there's a couple of restaurants. But it's really health care. And that's the area that I think people feel like maybe will be the initial beneficiary on the productivity side and health care services and the like. And you're starting to see that one area where you're seeing more multiple expansion.

19:55But everywhere else, it's been tougher. Look, I spend a lot of time thinking about where can human beings add value. If you're a portfolio manager, how can you beat the S &P long only? Like, what decisions can you make? Where should you spend your time? So we do a lot of that sort of, I don't want to say it's paranoia that we're all going to be made obsolete, but it's part of it. It's part of it. I'm great at paranoia. Oh, yeah, we can go down that road if you want. Yeah, I'm awesome. Yeah, when AI exceeds human cognition, which is coming soon. I think for a third of stocks, people will always matter because at the end of the day, they're run by people who introduce volatility.

20:27So I think you can spend time thinking about high company-specific situations, new products in healthcare, consumer tech, new trends. because maybe if there's a complex capital structure, they do a deal, something that I think for a third, there'll be some combo of machine and human. And the other third just all be machine will be better than human. But I try to identify those. I try to spend a lot of time thinking through that. We have a number of our clients that send us their portfolios to do custom risk work. And that's always where I'm thinking, like, maybe you should make that one bigger because it's more idiosyncratic.

20:55And if you feel like you have an edge, because I think ultimately investing is going to come down to be more about portfolio construction and less about individual security selection as the AI tools can implement more for what we do. So, yeah, so I spent a lot of time thinking about that. Well, that's going to change a lot, by the way. Meaning should you run more diversified than normal? Should you add to your losers or should you trim them? Should you put a stop-loss program in place? Should you, you know, take bigger risks? Like the biggest challenge I see with a lot of portfolio managers is they're underweight, these MAG-7 or grade-8 names.

21:28And so when they outperform in an uptake, it's just hard for them to generate enough alpha to offset that. So that, to me, is a reason you shouldn't make your biggest active bets there. And I think it's likely that those continue to outperform, at least for the next 12, 18 months. How quickly is this world you're describing coming? I think it's here now. You do? I do. And I think you put that chart up of concentration. I mean, not that many stocks are outperforming. So there used to be, when some of us were formulating our investment heuristics, that there really wasn't a lot of benefit to trading once a year or once every three years versus once every 10.

21:59You could hold stuff. And that's not true. I mean, if you bought the average stock 10 years ago, I think only 20 % have outperformed for 10 years. So, like, you have to trade more. I mean, there's a lot of, you know, random things happening. Something like 64 % of all options are zero day. Something like 70 % of those are retail. So what did you do between 930 and 945 this morning? And what are you going to close out at the close? I mean, that's what a lot of people are doing. And so that's creating some distortions in the price action. And so I think that stuff's super interesting and studyable.

22:29And so, you know, we do a lot of that work as well. Yeah, we haven't even gotten to tokenization. I mean, Hoctan's on the tape this morning saying when you're a kid, you go to a video arcade, you play. Your parents give you$10 of tokens. You finish it in 10 minutes. You haven't learned anything. That's what's happening in enterprise today. Well, yeah, as a former semiconductor analyst, I've been following some things that Hoctan has said for a really long time. But, you know, if you go back to when I covered semis 25 years ago, I never would have thought Jensen would turn into what he turned into either.

22:58So things are changing quickly and evolving quickly, and it's not always that easy to predict five years in the future. And I think that's consistent with the thought that you've got to trade more. I mean, think about it. So, look, I'm optimistic on earnings. I'm optimistic on the U.S. stock market. And I think there's a chance we get a big rally after the midterm. But things got a little policy-ish in my meetings over the last few weeks, just oil and rates and the Fed hiking while rates were rising. and some perception that some of the polymarket odds on the election were getting a little anti-capitalistic, I guess, if you phrase it that way.

23:31But I think we get on the other side of that. The corporate earnings are going to be so strong. If we do get high 20s this year, another 20-plus next year, the market's not going to be commensurally cheaper than that. We're going to be higher at the market, and it'll just be about security selection and who has better average estimates. Adam, we've got to leave it there for today. Always good to see you guys. Thank you, Adam Parker. Social Security Commissioner Bizzinato is with us on the other side of the break. Cost of living adjustments expected to be announced this week. Bigger boost than normal might be coming.

23:56We'll get to Apple and iPhone 18 demand. Morgan Stanley with some new research that might be cause for concern. When we're back. This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups. Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get Wise Business. Download the app. T's and C's apply.

24:35When you fill up with 76, you're ready to go. To that music festival you see posted about each year but have never been to. And you ready to go? Do a sunrise yoga class before work. And go. Dog sitting. And try to get the zoomies under control. Now who wants to go? Go here, go there, go anywhere with 76. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading.

25:24Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. Welcome back. The Social Security Administration is expected to announce its annual cost of living increase later this week. Could be a nice boost for beneficiaries due to the stubbornly high inflation. Joining us now is Social Security Commissioner, CEO of the IRS and head of the growth phase of the Trump accounts for the U.S. Treasury Secretary and the President, Frank Fissignano. He also rang the opening bell here at the NYSE to celebrate Columbus Day.

25:58Welcome back, Commissioner. Happy Columbus Day. Thanks for having me. day. So just on the Social Security, this is a big deal because a lot of folks are going to find out what they get if they get a big increase for 2027. I guess the question is, will it be enough to match the rising prices of groceries and health care and oil? Well, I, you know, first of all, I started off with the president once again, keeping promises. And the promise was to protect and preserve. And we've been running that platform since I've been here with the president. And we're going to do it Wednesday. There'll be a cost of living adjustment.

26:37Protect and preserve Social Security benefits. Yes, yes, yes. And this is all part of it. So I think it's a good day. You know, I get lots of notes, people thanking me. I was here last year. There'll cost a living adjustment. You know, people are very, very grateful for it. And they look forward to it. So I think it's a good day. It'll be a good day Wednesday. Yeah, I mean, also more than 20 million Americans and Medicare will get$90 from Social Security Administration in their bank accounts this month. Yes. Some folks will say, that's political. You're just doing that ahead of the midterms. Well, we've been taking care of Americans.

27:13This administration has done a great job, specifically for elders and vulnerable. We keep people out of poverty. So I don't think there's anything political about doing something like protecting and preserving something like Social Security that's 91 years old. And we do do a lot of the administration for Medicare. People may not know that. And we've digitized that. We're processing claims faster, much faster because we're doing it in a manner that we did it in the private sector where humans don't touch it. Yeah, no, this was the big hope. You would come in and operate it like a private company.

27:59Does that mean that it's less dire in terms of? Well, it means it's way more accurate. You know, we cleaned up 30 million erroneous records on the Social Security file. That's 10 percent. You know, in a brokerage firm, that'd be the name and address file. You'd have, you know, zero, zero, zero, zero, zero. And now we're driving that. So all of that contributes to accuracy and accuracy. I always say the best way to save money is with high quality. And we're delivering it under President Trump. Well, is it still I mean, I was I was sort of going for the economic forecast. Well, all of it, all of it will ultimately show up.

28:42You know, these are things that happen during the course of this year. You know, obviously, once a year we put out the report on solvency. And, you know, what you see going on is you will always fix the operations of business to actually understand what the financial outcome for the business is. And we're still in the midst of fixing it. But you think it's getting better? I think the work we're doing is making a huge difference. Now, that may not show up right now. And remember, you know, this is a long journey. It's 90 years old and it'll be around for another 90 years. The president has, you know, promised protect and preserve.

29:29And that's what we're doing. If we all have, you know, get advances in health care, we all may be living a lot longer, which, of course, then raises the question as to whether we should raise the retirement age and put this on firmer financial footing overall. Well, there will always be questions. But so far, we've done a great job for America on it. And I think we'll continue to do a great job for America on it. It's interesting because your job is to make the trains run on time, right? But what percentage of your workday is spent thinking about out-year projections, sustainability, retirement age, entitlement reform, things like that?

30:09Well, we have a trust fund, so they have trustees, which I'm one of. We have a president who is committed to this and lived by Protect and Preserve and made it a mandate to me. And then ultimately, you know, it will be the White House and Congress and the trustees. But the job, when you have 30 million records that are wrong, is fix the place. Right. But we also have a$2 trillion deficit, and entitlements are only one reason for it. Interest costs continue to go up, any number of other areas. But the rising cost of medical care is certainly a part of that underlying Medicare. I'm just curious from your experience, particularly in the private sector and what you're seeing, do you think we can start to bend the cost curve overall on medical as a result of AI, for example?

31:02I think. I think AI will bend the cost curve on everything. and I think AI, you know, it will be used responsibly and, you know, I think we're going to change the inside of federal government, lots of it, at least what I'm running, you know, which would mean great advances and I think it's going to happen everywhere. Are you using it now? Oh, yeah. At the IRS and Social Security Administration? Yes, yes. You are? And we'll use more. Yeah, we used it. I was on this show once and was asked about AI, and I said I was using AI before we called it AI. You know, that's the God's honest truth in the private sector, so that would have been a go-to move on my first days here.

31:48All right. I do want to get to some new exclusive data that we got from the Treasury on Trump accounts, which you're also working on. 26 million now Trump accounts have funding in them. over$8 billion have been deposited in the accounts from family, friends, U.S. government and donors, which is up from$4.5 billion that the White House reported just last week. So people are doing this. It will, you know, I mean, look at, I keep talking about$70 million. You know, when I talk about a number, it may seem really tough to get to, but we always get to the number who will have Trump accounts. There are$70 million we've already enrolled.

32:27We have$26 million already funded with money,$26 million. We're communicating. I will be communicating that every American who is not completely locked in on it, that means that they've claimed it until. And we'll have great partners. I met with all the tax preparers. They think it's the greatest thing. They're going to be this tax season and starting now communicating with their clients. you're seeing donors, 70 plus companies have agreed to do an employee match. Yeah. Wonderful name companies with great CEOs. We have, you know, obviously Michael Dell, you know, was, as I like to say, I'm running America's largest startup here, Trump Accounts, and he was the seed funder with 6.25 billion.

33:21I love the notes that he posts from all the kids. Oh. Thank you notes that he's been getting, thanking him. Well, great leadership by the administration led by President Trump. Finally, you're here for Columbus Day. Oh. The parade, the lovely New York City parade tradition. How do you feel about the fact that the mayor's not participating in it? I don't spend a lot of time thinking about the mayor. I was up there with Ken Langone, Vinnie Viola, Dick Grasso, all others, the chief on 9-11 who were down in lower Manhattan. Those were great Americans. The first time we've ever done this, right? That was the 27 Yankees you saw.

34:04The 27 Yankees. A couple of my partners in the administration, Joe Gebbia, great founder. We're going to get Joe to move his stock to the New York Stock Exchange. You know, that was really a transfer party for Lynn Martin. Lynn Martin's Italian. Lynn Martin's Italian. Kellyanne Conway is Italian. You need to know that. That was the passport to the opening bell never done before. The 27 Yankees were up there. Well, happy Columbus Day, celebrating Italian-American heritage. Thank you for joining us as part of it. We appreciate it. Frank Bissignano, IRS commissioner, Social Security Administration commissioner, and now also head of the growth phase of the Trump account.

34:42$70 million. Thanks, Frank. Pretty narrow range here, just around 7 ,800. Let's get a news update with Dom Chu. Hey, Dom. Good morning, Carl. Federal authorities reportedly raided the Washington, D.C. home of Minnesota Democrat Representative Ilhan Omar today as part of a criminal investigation. According to the Associated Press, Homeland Security agents carried out the search. Fox News reports the raid was part of a fraud investigation into immigration paperwork filled out by her father. Omar was born in Somalia and brought to the U.S. as a child. A jury has been selected in the trial of British actor and comedian Russell Brand.

35:18He is facing three counts of rape, three counts of sexual assault, and one count of indecent assault, tied to accusations from six women between the years 1999 and 2009. The trial is expected to last six weeks. Brand has denied all of the allegations. And the Vatican says Pope Leo will be admitted to the hospital tomorrow ahead of surgery to remove a lung nodule. It's not clear when the surgery will take place, but recovery is expected to take roughly one week. Vatican officials say the nodule was discovered during recent medical tests. David, I'll send things back over to you. Thank you, Don.

35:55Still ahead, should Apple investors be concerned about iPhone 18 demand? Morgan Stanley is out with a new note suggesting just that. The analyst will join us next. And a programming note. Of course, we were just talking about that gentleman right there, Michael Dell. joining me tomorrow. Talk about how that company's thinking about the AI buildout, enterprise demand, safety, alignment of the models, and a lot more exclusively, 11 a.m. Eastern. Welcome back. Some new research from Morgan Stanley corroborating Nikkei's report on Apple cutting component orders for the 18 due to some soft consumer demand.

36:31Let's bring in Eric Woodring, head of U.S. Equity Tech Hardware Research at Morgan Stanley, has an overweight rating on the stock 335 or sorry 355 target eric good to have you good to see you thanks for having us on carl so nikkei doesn't always get supply chain stories right but it does sound like you think they're onto something this time yes so listen we spent kind of thursday night and friday morning doing our normal round of supply chain checks and we started to pick up similar chatter to what you heard from largan on their 3q earnings call which was uh very specifically component component order adjustments.

37:03I want to make sure I'm specific on that because we haven't necessarily heard about wafer order adjustments at TSMC or build adjustments at Hanhai. And we know that Apple pulled forward a number of different non-memory component procurement kind of this summer into early fall simply to get ahead of what have been constraints to try to get some volume-based discounting. And so it does seem as though some of that is reversing, but again, and it's kind of component order cuts. It feels a little early to get build cuts, right? We haven't even gotten the duo availability, or excuse me, pre-orders start on Friday.

37:39So there is still a little bit more to learn. But the way that we interpret this is kind of the bull case is off the table here. If Apple tried to procure a lot in advance, it seems as though they might not necessarily need all of the components that they've procured in advance. So that element of over-ordering to get the volume discount, I mean, how real, or fake was that? How worried should bulls be on the name overall? Yeah, so let's maybe separate the two. In terms of overordering, you know, it's hard to say again, right? Apple is obviously feeling pressure on their bill of materials for memory prices, even from wafer pricing and TSMC.

38:16So they need to find ways to offset that. And one of the ways that they seemingly were trying to do that was get larger volume orders than they typically give to the component supply chain in hopes of getting some discounts. And it seems as though they've been semi-successful there. They've told us their non-memory bill of materials is a tailwind to gross margins. But again, we're only kind of four weeks into the iPhone launch, iPhone Pro and Pro Max launch. You know, typically when there is smoke, there is fire over the last 11 years. Six of those years, we've seen billed cuts in either October or November.

38:54five of those years, obviously, we've either seen no build cuts or even build adjustments upwards. So we are in a period where kind of rubber meets the road. And again, right now, we would say we're keeping our ear to the streets to understand if there are any build cuts at Hanhai. That's kind of the next area that you would see it, other than kind of adjusting your component inventory. So we'll have to see. But again, just maybe to put some stats there quickly, at the end of the September quarter, excuse me, at the end of the June quarter, iPhone purchase commitments were up 30 % year over year, total Apple purchase commitments were up 30 % year over year.

39:30And what we hear from component vendors in calendar 26, we're targets of something like 5 % to 7 % growth in component orders versus build growth that is kind of flat to maybe up 3%. So there has been some degree of overordering. It's just hard to say if that is definitely bleeding into build cuts or not yet. I mean, just to step out of the weeds of the supply chain for a moment, Eric, I guess the upshot is, do you think there's a mismatch in demand expectations and earnings expectations for Apple, given what you're talking about, what we've learned on the street? So I think that there are, at least as we look to the December quarter, there is a bit of a mismatch.

40:11We're a little bit below the street on both revenue, gross margins, and EPS. And that's a function, again, primarily, I would say, not yet of any build adjustments, but really of this oddity when it comes to launch timing, right? So Apple had the fall iPhone launch event. You got the Pro, the Pro Max, and the Duo. The Duo isn't out yet. So there might be some dynamics around timing, i.e. if you want to evaluate the Pro Max versus the Duo, you might wait to see what happens in person before making that decision. And then come this spring, you obviously have the second iPhone launch, which will be the base model 18, the 18E, and the Air 2.

40:49How consumers respond to this is really an uncertainty, but this is the first time Apple has really separated the launch timing in the history of the iPhone. And so I do think that there's a little bit of mismodeling for the December quarter when it comes to iPhone shipments or product gross margins, where we are more concerned. As we look further out, kind of fiscal 27, calendar 27, that risk absolutely exists. It's just a little early, right? If you're launching six new iPhones this year, we've had two of them in market for four weeks. This early news is not necessarily great, don't get me wrong, but there's still a lot more time to go before we have to learn about consumer demand.

41:29Finally, Eric, Tim Cook meeting with the China vice premier at the Great Hall of the People in Beijing. I'm just thinking about the relationship to China manufacturing. We all remember a time where the discussion was largely about diversification into Vietnam, diversification into India. Where do you think that heads into a turn as tenure? Yeah, listen, I think that on the margin, Apple's strategy is still to diversify to kind of China-friendly countries. Vietnam has obviously been in front and center of that. But China is still obviously critical to the entire Apple ecosystem, both from a supply perspective and from a demand perspective.

42:08And let's not forget that on the demand side, there are still a few factors that are hanging out out there without necessarily an answer. Apple intelligence approval, for example, in China, still undetermined. There does need to be approval for eSIM on the iPhone Duo, which would be a big hit in China, but still needs to get approved. And so I don't think a lot of the supply dynamics are changing within China right now. Again, I think Apple would look to China as its most critical international supply partner. But it does seem as though Apple needs some answers on the demand side and some critical answers at that, obviously, with Apple intelligence being the biggest software update for Apple in a while.

42:48And then the iPhone duo being kind of the biggest innovative new iPhone in a number of years. Yeah. Please stay close, Eric, because we want to track the home category push and certainly the duo when those go live. Good to see you. This week's a big week. Yeah. Over in Morgan Stanley, thanks. Thanks, Carl. Up next, the options volume in Meta this morning is double its daily average. We'll tell you what's driving that action after the break. Welcome back. Meta seeing a surge in options activity this morning, not to mention its stock price up nicely as well. Let's get to Oliver Rennick at CBO in Chicago.

43:19He's got to look at what the options market is signaling. Oliver. Hey, David. As tech struggles this morning, MetaShares continue to shine with a 3.5 % rally into options trading that's been elevated since the company launched its news assistant, which is nearing 10 million downloads. Volume is about 60 % above the 30-day average at this point. And the bias in the flows remains distinctly positive, starting with the single biggest trade of the day. Someone opened a new position, buying some super deep in-the-money calls, expiring January 2028 for a$1.5 million position that trades a lot like being long stock.

43:58Overall,$340 million of meta options have traded so far, and more than$250 million of that premium was tied to calls. And more than 110 ,000 call trades look like they were initiated by buyers. Seven of the top 10 options contracts traded by volume were calls. The most popular, the 750 strike zero-day option expiring today, That's a$1.40 contract that needs Meta to add another 1 % gain to this move. By the way, not too early to think about earnings a few weeks away. Right now, there are two open call contracts for every put on Meta. So safe to say, guys, the expectations here are running very high.

44:38Carl, back to you. It's going to be a big few weeks here heading into earnings season. Oliver, thank you, Oliver Rennick. When we come back, the highlights from Sarah's appearance on Marr over the weekend. And next hour, we'll look ahead to the big banks, unofficially kicking off the start of earnings season tomorrow when Squawk on the Street returns. Throughout history, there have always been fears around major technological changes, the Internet, the automobile, the nuclear weapon. I know this is different. I know this is different. But we do not want to not be on the side of progress. And we do not want to let China get ahead of us on this dangerous technology.

45:11We want to own it and we want our best people doing it. And so I do think it's a little dangerous that it's become so unpopular. And now there are lots of moratorium on data centers. We have to build data centers in this country because you know what? They're not slowing down in China. I was there on Real Time with Bill Maher Friday night. AI and data centers top of mind on that show, too. You sounded like you sound at this desk. Yeah, well, you know, it was me. But I did really want to make that point because, you know, and I've been watching the more mainstream conversations, I think, outside of CNBC and a lot on shows like this.

45:49AI is a boogeyman. And there's plenty of rational reasons to be worried about the technology, as we've heard warnings from inside those companies themselves. But that gets so much of the airtime. And I think that that's why AI has become so unpopular. And you're seeing the political backlash show up in these midterm elections in places like Senate campaigns in Ohio, moratoriums, calls for regulation on both sides of the aisle. And if you, you know, we talk to the people at the forefront of building out the AI revolution. They say this is not something you can turn your back on. This is coming.

46:25And that's why I wanted to make the point about progress. We do not go against progress. By the way, that was me just chatting it up with Michael Douglas. He was the other guest. I told him the traffic should have won the best picture, not Gladiator. Remember, it was filmed in Cincinnati, so I loved that one. But the AI point, I just wanted to bring in a different perspective there of, look, China's doing it, so we need to do it. But also, the word progress connotes that there could be a lot of positives from it, too. And we shouldn't just completely reject it. Was Marr receptive, by the way? He was receptive, although, you know, he's been more worrying about the existential civilization level threat for good reason.

47:07But, you know, he definitely was respectful and happy to hear it. The View, Marr. What's next, David? I'm getting around. She's our star. Or as I like to say, our queen. Thank you, David. Just call me queen. I do call you queen. Every morning. Thank you. 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. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion.

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