11AM Hour: Dan Niles on Tech, Brazil Stocks Rally & AI Hearing Today 10/5/26

0:00We're an agent supposed to take things off your plate. Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. Traders don't need a prettier app. They need a better angle. Schwab's think-or-swim trading platforms were built for real traders like you.

0:35They have an insane amount of chart studies. I'm talking over 300 studies for virtually any strategy. They also have integrated risk management technology and nearly unlimited customization so you can shape the platform to fit the way you trade. And when you do that, you can analyze trades from angles you won't find anywhere else. Go see what that looks like at schwab.com slash trading. Good Monday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Melissa Lee here at Post 9 of the New York Stock Exchange. Sarah Eisen has the morning off today. Sell-off risks, AI optimism, and NVIDIA's record watch.

1:07Veteran investor Dan Niles joins us with his Q4 playbook and why he is advocating for more investor prudence. And with 30-year mortgage rates sitting at multi-year highs, we'll discuss the state of the housing economy with the CEO of online realtor EXP. Plus, Eurasia Group's Ian Bremmer is with us to break down the latest geopolitical risks for stocks and investors. And right now, let's get a check in the markets with the 10-year yield hovering at about 5.3%. We've got the Dow a little bit to the downside, down just a fraction of a percent. S &P 500 up by four-tenths. NASDAQ composite really leaving of the big three up three-quarters of a percent.

1:41And as I mentioned, 10-year holding steady. Despite that pullback we're seeing in crude, 5.32 % right now. Meantime, an AI safety hearing in New York City is getting underway this hour with executives from OpenAI, Anthropic, Google, and Meta. Meantime, OpenAI's Sam Altman making some headlines of his own over the weekend. Let's get to Kate Rooney with details. Morning, Kate. Hey, Carl. Good morning. So OpenAI CEO Sam Altman is really trying to draw a sharper line now between his company's approach to AI safety versus rival Anthropic. In an interview with Politico over the weekend, Altman says he does agree on things like pacing and third-party evaluators, but there is, quote, a lot of daylight between these two on regulation.

2:21We have always been a big believer that this technology has to be democratized and put in people's hands. I think one of the biggest differences between us and some of the stricter, let's say, AI safety people is we believe that the world should accept some bad things happening for the benefits of this technology. Guy Zollman said that we shouldn't accept catastrophic risk, but he argued that people will ultimately use AI for significantly more good than bad. He also called concentration of power one of the ways that AI could go, quote, horribly wrong. He rejected the idea that AI should be controlled by what he described as a small number of AI labs in San Francisco.

3:02He says he is also against regulating smaller AI competitors. And OpenAI, of course, has been at the center of this entire safety discussion after a string of hacking incidents, namely the hugging face incident. And in the wake of that, the president has made it clear that he doesn't want any new laws or regulation, which he says would slow down the industry. The White House, in the meantime, is assembling a new team to address some of those risks. Trump has officially named a new AI czar. It's National Intelligence Director and former SEC Chair Jay Clayton. He was tapped to lead what Trump is describing and calling the super intelligence force, rebranding there from AI to SI.

3:39The team does include FTC chair Andrew Ferguson and then two very well-known names in Silicon Valley. You have Pentagon Technology Chief Emile Michael, who's formerly of Uber, and OPM Director Scott Cooper as vice chair. Cooper was president, partner, I should say, at Andreessen Horowitz, guys. It's interesting to hear him say the world should accept some bad things, but not that open AI should be liable for bad things. I mean, there's just no moral hazard here in this equation. It's all of us should bear the brunt of something going wrong for the benefit of AI. But the companies that actually profit from AI, what is their liability in this?

4:17The liability question has been massive, Melissa. When we talked to Sam Altman, and he said this in other interviews as well, he's talked about things like the auto industry, where the liability is sort of spread based on the situation. And he's also talked about a new framework around all of this. And there's going to need to be legal precedent almost. You need to have an incident, unfortunately, probably something going wrong or a lawsuit to set the bar for what the companies are responsible for. He used the example of driving. You know, if an automaker makes a faulty part, that's on the fault of the automaker.

4:50But if he's the example of drunk driving or doing something malicious, it should be the liability should be on the person who does that. And it is completely a gray area. But for now, based on what I was just talking about with where we are in regulation, the liability and the the onus is really on the companies that are creating this technology to make it safe. So there's a lot of trust inherent in the current situation right now where the companies who are making this are also going to be the ones policing it. But I think you're right. Moral hazard. But also the pushback and liability is one of those guardrails.

5:23It'll be interesting. I've talked to folks in D.C. who've talked about this accord that was signed by all of the biggest CEOs. They say, based on that, there is still room to actually create laws to sort of codify what they have come up with. So that's something to look for, I would say, in January. Not expected end of this year, but it's still possible that we do get something in writing that goes beyond that accord. Kate, thank you. Kate Rooney. Thanks, Bill. For more on the market setup to start the week, let's bring in Roundhill Chief Investment Strategist Drew Pettit. Drew, great to have you with us.

5:53Good to see you. Interesting times. You've got the 10-year yield strong above 5.3 % here, despite a pullback that we're seeing in crude. So that sort of correlation is sort of breaking down. And as we are seeing this, we continue to see a flight to safety into technology and more specifically to MAG-7. Is this the playbook? Is this sort of what we should be prepared for for the last quarter of the year? I think so. Look, at the end of the day, the flight to safety is flight to macro safety, not necessarily low beta stocks. And look, it's secular growth that continues to win out, even if you push rates higher and push a lot of input prices higher as well.

6:34End demand is really strong for AI. We saw that when Meta came out with the Muse releases. We saw that when Google talked about its next model, Anthropics, OpenAI. Look, there's demand, demand, demand at the personal and business level. So where within technology do you think there are the values, Drew? Look, I think you stay up in mega cap. We're not really at that point where we want to be into mid and small cap tech stocks. I think the Mag 7 right now gives you pretty good value when you consider it's trading at its tightest premium, even after all the outperformance on valuation, and you're getting better growth than you expect.

7:14So, look, Mag 7 is a really great place to hang out through the end of the year. That's why we keep focusing in on Roundhill Magnificent 7 megs into the end of the year. What's your base case scenario for rates, though? I mean, how much does that change, the view on technology change? At what point does it change if it does, if rates tick higher above 5.3, 5.4, 5.5? We are right at that level, Melissa. We've said this for about the past month now. You know, it's interesting because we've said it five, five and a quarter, 5.3. And here we are. We have said it at every single level. Yeah, for us, it's been 5.3.

7:57And five, it's a psychological round number. I'm absolutely happy to really blow that off. But 5.3 % is what we think the market's kind of priced in for that pressure point for the 10-year yield. The reason it can sustain something over five, but maybe not six, is the growth expectations are really, really good right now. So, yes, higher rates, that pressures valuations. But unlike bonds, equities have something that actually changes, and that's the earnings. And growth is really strong. So that helps offset when we do our math. Look, DCF math here, the risk-free rate at 5.3 % does not break that math.

8:37Right. What happens, though, when earnings begin to decelerate? I mean, we're not going to do 30s forever. Yeah, I think right now, if we stay in the low double digits for the next couple of years, that I think is fine. Actually, just to kind of flip this around, Carl, on you. Yeah, we're not going to stay in the low 30s, but the revisions keep moving higher and higher and higher. So we're in the low 30s because we've had non-operating items, people really writing up investments and adding back tariff refunds. But when you look out, we're compounding off really good levels. And I don't think the sell side has those kind of one off items in 27 and 28 and 29 numbers.

9:21That should be really good. We're looking at more than$500 in earnings by 2029. That much earnings is really good for growth stocks. I want to get you on consumer, too. I mean, XLY has been a straight shot down for a couple of months. We've got a softer jobs number. Wages are not keeping up with inflation. And yet today we get upgrades of HOG, upgrades of EL. I just wonder whether or not upgrades of Texas Roadhouse. Do you think something's happening here? Look, coming from that side of the world, people are going to really hone in on valuation and say, oh, this is cheap. But at the end of the day, I think it's a falling knife.

10:01The problem there is the estimate revisions aren't higher. Even if you broaden out beyond just consumer discretionary, the rest of the S &P 500, the other 493, the revisions are stable to coming down. Russell 2000 is even worse. So, again, valuation is getting people to think buying these stocks, or I should say upgrading these stocks. I don't think the market's buying that right now. So, look, I think you stay in growth near term. You've got to feel better about the consumer, about the macro being better, and rates coming down for those types of trades to actually work. Yeah, I think one, I don't know if the booth can build the Dow versus the NDX year to date, but talk about divergence.

10:47It's not really a miss. I mean, it's definitely happening. For what reason, we don't know. Yeah, I think, honestly, the Russell versus Nasdaq is even a better one to look at. So there's more work for the booth. But there, again, it comes back to small cap Dow. It's still not that cheap, and there's no conviction in earnings growth. I don't think anything changes that. And on top of it, anytime you get good earnings numbers and good macro data, you kind of worry that the Fed might choke it off. And that's why real rates have actually pushed the 10-year higher. So putting it all together, I just think short term, there's not a catalyst, even if valuation starts to look attractive.

11:27And I'll intentionally air quote that. Drew, thanks. And of course, our thanks to the booth. I mean, awesome job on those two charts on the fly. All right. Coming. Thanks, Drew. Coming up, Dan Niles will join us with his outlook for the tech sector, why he's remaining bullish on the AI infrastructure trade. Plus, we'll speak to the CEO of EXP Realty, one of the biggest residential real estate brokerages in North America, how mortgage rates are impacting the housing market right now. Back in a moment. 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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13:10required. Traders don't need a prettier app. They need a better angle. Schwab's think or swim trading platforms were built for real traders like you. They have an insane amount of chart studies. I'm talking over 300 studies for virtually any strategy. They also have integrated risk management technology and nearly unlimited customization so you can shape the platform to fit the way you trade. And when you do that, you can analyze trades from angles you won't find anywhere else. Go see what that looks like at schwab.com slash trading. NDX coming off a record close, boosted by NVIDIA, closing in on this$6 trillion market cap.

13:46Let's bring in Niles Investment Management founder and portfolio manager Dan Niles. Give him a little round of applause on this meta call. Dan, you feel good about that?

13:56Dan Niles: How can you not? I get plenty of things wrong, so it's nice to have a nice big winner for a change. What did you see? I mean, were you actually looking for a physical agent to come around? And what do you do now? Yeah, I mean, I think with Meta, we wrote about it on September 7th. And we said, look, the stock's down 7 % year to date. Zuckerberg's really smart. He's very focused on monetizing all of this spend. And you got the Muse API. So that's for businesses. And then the next week, you got this agent. And you can kind of think back to OpenClaw. That's when people got really excited about Agentic AI.

14:35Dan Niles: And that was, you know, January 30th that got formalized. But that's kind of hard to do, right? You got to buy a Mac. You got to set it all up. This is kind of Meta Muse is the agent for the rest of us. And it's pretty easy to use, et cetera. And so I think with Meta, you still have to like it because I think the next big thing that comes from Meta is, hey, Google, Microsoft, Amazon all have public clouds. Meta doesn't. And so that would be the next phase of them being able to monetize that huge AI spend. And right now, you know, MetaMuse is number one on the App Store. It's above ChatGPT. And so it's hard not to say, hey, you should have a position in it.

15:21Dan Niles: Do I like it as much as I did on September 7th? Of course not. I mean, it's up a ton. But I think you still have momentum in it. Do you worry about search per se? I mean, are we back to that on the Alphabet discussion? I mean, you do. The other side of it, I actually like Alphabet quite a bit, is that people have said, you know what, they're nowhere near the frontier. Well, guess what? They put out a model last week that it's not formally out. Everybody can't use it. But you look at it relative to the benchmarks, it's at the frontier now. Now, what I don't like is they don't have an agent out that competes with.

15:57Dan Niles: And by the way, you're going to get agents from all of these companies, right? OpenAI launched one called Dots at their developer conference last week. I think it's really important for Google to get one out themselves. But you're right, Carl. Search is something I'm looking at. I don't think it's a problem because, remember, we were worried about search going back a couple of years ago. And then Google came out. They had their engagement go up. Monetization was good. And they sort of integrated it in with search. And business has been booming for them. And let's not forget Google Cloud, they're doing over 80 percent year over year revenue growth in that business.

16:36Dan Niles: It was the fastest acceleration between them, Microsoft and Amazon last quarter. And I expect to see that momentum continue. So I actually like Google quite a bit, but you're 100 percent right. You've got to watch the numbers and make sure there's not some issue with search. And right now, I don't think there is going to be. And I think there's some good product announcements potentially coming later when it gets. How much of a moat is early mover advantage for Muse? I mean, you said it, everybody's going to have an agent. So what is the moat that Meta will have to remain number one? Because right now, that's a choice for people.

17:11Download it now, experiment with it, but something else comes along and that switches very easily.

17:17Dan Niles: Well, you're right, Melissa. The biggest moat is consumer laziness, right? You get used to, I use Gemini all the time. I've been using it now for a couple of years, and I'm on the highest program for that. And so it'll take a lot to get me to move. And so if you don't capture the consumer's interest, you could potentially have an issue. Now, where I see this evolving to is ultimately where are you going to use your agent? It's going to be off your phone. So then it's going to come down to, well, does Apple own that experience or does some LLM below that own that? And I think what will ultimately happen is we'll all go, hey, Siri, go book me a flight to go see, you know, Melissa and Carl and get me a hotel and get me a car, et cetera.

18:03Dan Niles: I won't care what it's accessing underneath that, whether it's MetaMuse or it's Dots or whatever other agent there is. And I think it's going to be the same for Android, which is Google sits on top of that and you'll speak to your Android phone. And by the way, that's 75 % of the world's users are on Android phones. And so I think that's where this ultimately migrates to. And that's why I think Google and Apple ultimately, you know, a year or two from now, will end up being the big winners because they own the platform we all access it from. And we're not going to care what agent gets used underneath it.

18:39Dan, on chips, is NVIDIA the tip of the spear to getting the socks back to all-time highs? I see Western Dig today and Seagate trying to undo some of the damage from last week.

18:52Dan Niles: Yeah, I mean, I like NVIDIA quite a lot between now and earnings because, you know, they were marketing in New York City last week. They sounded great, picked up a few incremental data points where they think they can gain share at hyperscalers this next year because their view is, hey, if we've got all these data center moratoriums and pushback on power, hey, we have the best token per watt out there. And that's what people are going to be focused on if power is a gating item. You look at it and say, wow, it's trading at a 16 multiple on 70 % revenue growth for calendar 27, which is a market multiple.

19:28Dan Niles: You go, this is amazing. And so it's all about risk versus reward. And can you get in front of stuff before it starts to move? Because the overall market, I got some real concerns with that. Like cash is one of my favorite positions right now because of bond yields spiking. And at a certain point, either the bond market's wrong or the stock market is wrong. And so for me, I'm trying to be very selective, even though I do like some names underneath this. And for me, NVIDIA is great valuation for terrific growth. And as you said, Carl, it is the tip of the spear for the trade and for the market in general.

20:07There is a perception, though, Dan, that the bond market can be right and tech can still be right. because there's a belief that it is the defensive sector of the market. Are you also in that camp?

20:20Dan Niles: I mean, you know what? It's nice to say, oh, it'll get through it. Don't worry about it. But let me give you a counterpoint to this, which keeps me up at night. So we've been talking about open wait and what that's going to do to pricing. Because you may generate a lot more tokens, but if the pricing drops a lot because you have an alternative that's 90 % cheaper, ultimately that's a problem. If you look at the ramp index, and I've been watching this pretty closely, you've had tokens go up about 9x from the beginning of the year through August 2nd. And sorry, you've had token spend go up 9x from the beginning of the year to August 2nd.

21:04Dan Niles: But since then, you've actually had token spend drop about 11 percent or so in the combination of OpenAI and Anthropic, even though the number of tokens produced is up over 20 percent. Now, this has been going on for a couple of months. Like, I don't worry about a couple of weeks or, you know, a month. But when it starts to stretch out, you go, hmm, maybe OpenWeight is having some impact. Maybe where Meta, Muse, Spark 1.3 is priced, maybe that's having some impact. You've seen what the theoretical pricing is for Google when they launched their new LLM last week. It's way below what you have for some of the others.

21:45Dan Niles: And so at the end of the day, it comes down to revenues and profits. And so I'm watching that going, well, I need to also temper my enthusiasm a bit because I do have that going on, right? At the end of the day, profits matter. Yeah. Yeah. And revenue and versus if these costs, that's why we continue to watch it so closely. Dan, really interesting. Nice call on Meta. We're going to stay in touch. Dan Niles this morning. Thank you. Thank you, Carl. Coming up, we'll bring you the latest details on the AI safety hearing in New York City today. How it could impact companies like OpenAI and Anthropic.

22:20Later on, Eurasia Group's Ian Bremmer is with us. why he's seeing a shift to the right in all of South America's major economies and what that might mean for investors as we're watching this Brazil runoff. Stay with us. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow.

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23:28Fidelity Brokerage Services, LLC, member NYSE SIPC. If you remember when your VCR was your personal trainer. Up and back and up and back. Feel that burn. Then remember this. RSV can be a serious respiratory virus. If you're over 50 with certain health conditions or over 75, it can make you really sick. You got this. There's no prescription treatment, but there is a vaccine that can help protect you. Find out more at PfizerForAll.com. Pfizer, out due yesterday. Take a check on the markets there. S &P 500 higher by about four tenths of a percent. The real story, and we were talking about this in the break, Carl, is what's going on in France and the spillover effect that it's having on the currency markets as well as the bond market here.

24:16We saw the euro hit its lowest level since May of 2025 on concerns specifically in France. We've seen sovereign debt there really pummeled in France. The premium over German bonds is now, I think, more than 150 basis points at this point. So we see the Dixie, the dollar index at 52-week highs. And, of course, the commensurate move in yields on the 10-year yield were firmly above 5.3 percent. Yeah, we're going to talk to Al-Aryan in a bit, who does suggest that maybe contagion risk is back in the EU. For now, though, let's get a news update with Pippa Stephens. Hey, Pippa. Good morning, Carl. President Trump said over the weekend he did not jump the gun when he announced South Korea's participation in a$50 billion Alaska LNG project.

24:56His comments came after South Korean officials said the country's participation in the projects hasn't yet been finalized. President Trump told reporters on Friday, if they don't want to do it, that's OK with me. I'll just charge them more. He threatened to double it up without explaining what he would double. South Korean media raised the possibility that he was referring to higher tariffs. The Supreme Court's new term begins today. Between now and early December, the high court will hear cases about climate change, gun control religion, and transgender minors. The court also has two pending cases related to President Trump's immigration policies.

25:32And former White House Press Secretary Caroline Levitt is joining Fox News as a contributor. The network announced today that she will start on November 1st and provide commentary across the Fox lineup, including both news and opinion programming. Carl, back to you. All right, Pippa, thanks so much. When we come back, we'll talk to the CEO of EXP Realty, one of the biggest residential real estate brokerages in North America, how these rates are impacting the housing market. Plus, Brazil stocks rallying today as the presidential election heads to a runoff later this month. We'll break down the implications in just a moment.

26:05Welcome back. We heard this weekend from National Economic Council Director Hassett sounding off after that 30-year fixed posted its biggest weekly increase in four years. Take a listen. Mortgage rates have to come down. And as we get inflation down to 1%, 2%, then that's where mortgage rates are going to head towards, you know, that plus two or three. And that's going to happen, I think, very quickly over the next few months. But the bottom line is that in the end, you know, look at the hard data. People are buying houses. Our next guest oversees one of the biggest residential real estate brokerages in North America and joins us this morning with his outlook.

26:41Let's bring in EXP Realty CEO Leo Pereja. Leo, welcome back. It's good to have you again. Carl, thanks for having me. No doubt that the environment on mortgages is kind of punitive. Which direction do you think we're going to go next? Yeah, very good point. The 7 % interest rate is a very real barrier for people psychologically. And this is not unprecedented. We were here in October of 2022. What we saw immediately when rates crossed into the sevens was higher cancellation rates for a couple of weeks. Then it normalized to year over year numbers. What this means is that by the end of the year, we will probably have a softer market than we had in the beginning of the year.

27:18So we were on track to close 4.2 million transactions as a country for 2026. We might not even touch 4 million. So we might end up in the high three millions, which hasn't happened since the early 1990s, and that was with 80 million less Americans. That's just if the rate stabilizes here, doesn't get any worse? I don't think it's out of the question that rates could touch 8%. But again, buyers and sellers have to move because of human condition. So I still believe the activity will probably end up somewhere in the high threes to the low fours in number of homes sold in the United States. Which areas are feeling the most freeze when it comes to these higher rates?

27:57Yeah, that's a great question, Melissa, because right now, more than ever, buyers and sellers really need to understand what's happening in their local market. So the suburbs of where you guys are sitting right now is still low inventory environment with multiple offers. I'm sitting in Miami, Florida, where we've experienced a completely drastic market. And if you drive over on I-75 to the southwest part of Florida, that's probably been the hardest part of the country, where in the last couple of years, they've seen eight to nine percent year over year depreciation. So more than ever right now, it is a local market.

28:30I would tell you that every post-COVID boom market is probably seeing the hangar of that. Think of Boise, Idaho, Austin, Texas, and the Sun Belt, while other parts of the country are stable and even depreciating. So a national headline is really confusing compared to what's actually happening in your local market. In those local markets, Leo, where they're seeing the biggest hits, have we seen the commensurate or what we need to see in price adjustments lower to compensate for those higher rates? And as you think about 8%, what sort of price adjustment is that? Yeah, I've seen a lot of experts on social media over the last couple of weeks saying that we're heading towards another great recession.

29:13That is categorically false. The underlying inventory problems of adjustable rate mortgages don't exist right now. If a seller doesn't have to sell and they have a 3 % mortgage rate, that's an affordable mortgage, even as a rental property, if they have to move. And so we're not going to see large depreciation in value. We are in a housing recession of total transactions sold. Think of 2021. We were selling close to$7 million resale with new construction included. And now we're barely going to touch$4 million transactions. So what that means is a lot less people are moving, but the people that have to move, there is still activity going on in the marketplace.

29:51Yeah, it's a great point. I think Parcel Labs, which tracks a lot of housing data, has an index of what they call forced landlords, where you tried to list, it didn't sell, but you're not going to lose your house because you will be able to rent. And we can see the tide moving into rental because of the inventory issue. Yeah, Carl, I'll give you a fantastic stat that most people are unaware of. Year to date, almost 30 percent of all single family homes in the United States have been sold to investors, but not hedge funds or big private equity. Mom and pop investors defined as less than 10 single family homes.

30:25So some folks in this country are seeing an economic opportunity in purchasing real estate right now. And so I would say to any would be first time homebuyer who's being scared off by national headlines to really dive deep into your local market and see what opportunities they are. I would say the silver lining for a first-time homebuyer right now is to investigate new construction. New construction inventory is hitting an all-time high of nine and a half months. And those sellers, unlike the ones we just described, Carl, have to sell. And so they are giving massive incentives. For the first time in the time that this data has been recorded, the average new construction home is selling below the average resale home.

31:06So you could buy a brand new home and potentially have a rate as low as in the fives because the builder is willing to buy down your rate and get you into a 30 year fixed mortgage with a 5 percent rate. That's 300 basis points potentially better than what the overall market may bear. Right. The Times did do a story last week on arms sort of what we were joking that it gave us all flashbacks. But you don't think that's going to become an overriding dynamic? Even if they were to become a bigger part of the market, Carl, they are fully underwritten. The PTSD that we all collectively have was that no income, no asset, which were weapons of mass destruction, financially speaking.

31:49Leo, appreciate it. Really interesting times in your business. Please come back soon. Thanks for having me. Over at EXP. Appreciate you guys. Coming up, Eurasia Group President Ian Bremmer will join us on the political landscape abroad. That's as Brazil readies a runoff election and Spain calls for a snap election. Let's walk on the streets back right after this. Welcome back. Brazil stocks rallying today with the EWZ ETF hitting its highest level since 2020. As we now know, the presidential election will go to a runoff later this month. Our Seema Modi joins us with more on that. Hey, Seema. Carl, Melissa, this sort of marks a potential shift for Latin America's economy to the right for incumbent left-wing President Lula, who will face off against the son of former President Jair Bolsonaro.

32:30Bolsonaro, yeah, led the country from 2019 to 2023, but has been barred from running following a conviction last year on coup-related charges. He was sentenced to 27 years in prison. Now it is his eldest son, Flavia Bolsonaro, who is deadlocked with Lula as the vote, heads to a runoff election. This vote is seen as a striking comeback for the right-wing movement in the country and shows the voters prioritizing the economy over the social policies that Lula has been campaigning. Other members of the Bolsonaro family have won their respective elections at different levels of the government. So the family name has plenty of sway in the country.

33:03Brazil's economy has held a growth rate ahead of other South American peers. Household debt has been rising, borrowing costs, though have been coming down in recent months. We saw a rate cut as well. Second round of voting, October 25th, but the results may already be baked in. Citi analysts noting that no candidate who finished first in the first round has gone on to lose the runoff. Take a look at markets. We've been talking about it. Brazil responding positively to the potential of a new Bolsonaro regime in the country with some of the nation's biggest companies there moving sharply higher.

33:35The ETF that tracks Brazilian stocks, the EWZ at its highest level since February of 2020. And then there's the currency, the real, outperforming its biggest move against the dollar since 2022, guys. And it's actually the best performing emerging market stock market this year. This is a surprise. This is in terms of Bolsonaro. And so I'm wondering, our strategists are now looking beyond and looking past that October 25th runoff and saying, OK, let's say he wins. Then what? What does that actually mean for policy? And is this pullback one to sell right now? Yeah, that's really what analysts have been talking about this morning.

34:08Focus has really been on interest rates, which are right around 13 percent. But they've come down since the beginning of this year. It puts them in a unique position compared to other markets or economies that are in the process of potentially raising rates. So that's what has allowed Brazil to outperform. And the expectation is that if Bolsonaro does become president, he will continue to push for lower rates. And I think people like that. The market likes that, despite his story past. Seema, thank you. Seema Modi. Lots more overseas action as Spanish Prime Minister Pedro Sanchez calls a snap election in the France CAC, hits its lowest level since March and made new debt fears.

34:44Joining us now, Eurasia Group president and founder Ian Bremmer. Ian, great to have you with us. Let's pick up where SEMA left off in terms of Latin America. I mean, this is important for Brazil, but it's important for the entire region in terms of U.S. primacy in the region and the impact we can have. I think so. If you look around the world, Trump foreign policy has, without a question, been most successful across Latin America. In Mexico, that's true despite a left-wing government that's very popular because they know they have no choice but the U.S. Their supply chain is very integrated. They've been very engaged with the Trump administration.

35:18It's been pretty positive in terms of the overall relationship across the rest of the region. It's been right wing government after right wing government winning from the left. We've seen in Peru, we've seen in Chile, we've seen in Argentina, we've seen in Colombia most recently. And now we look like we're going to see it in Brazil. Very likely that Bolsonaro ends up winning in the second round because the third party candidates that didn't make it are almost all to the right. And so that means that those votes are going to go to Flavio. The markets like this not just because he's on the right, but also unlike his father, who was a military man.

35:53He's a political operator. He's very comfortable with big business. He's very comfortable with the financiers in Brazil. And he is seen as someone who will not only be much tougher on fiscal balance, which the markets respond to, but also will align with the United States on technology, on AI, on critical minerals. all of which Lula was not doing. Lula was seen as a figure of the global South, a classic figure of the Americans are exploitative and the neo-colonialists and we don't want to work with them. So, I mean, from a strictly market perspective, I think this rally has legs. Taking a bigger picture, though, Ian, in terms of what the U.S.

36:36can gain from this dominance here, I mean, is it better trade? Is it oil? Is it ag? How should we look at this? So, first of all, the shield of America's program, Brazil will immediately align with it. They've refused to join under Lula. And that means that not just that they will be declaring their drug cartels to be terrorist organizations, but they will work with the Americans on defense. They'll work with Americans in intelligence. And that's pretty significant. There are obviously American companies that will benefit from that in terms of contracts. But it's important in terms of America's security role across the region.

37:13Brazil had been in absence there. It's the largest economy in the region. Now, suddenly, they're going to be aligned. I mentioned critical minerals already. The fact that the Americans had taken their eye off the ball over decades while the Chinese are building out massive supply chains that they threatened to cut off and American companies would be hurt. Brazil has very substantial deposits and this government will be the incoming expected government of Bolsonaro would work much more closely with the U.S. national security complex and with American companies, some of which will be funded by the U.S.

37:45government, to develop joint ventures in production and in processing of those critical minerals and rare earths. So that's a pretty big deal as well. There will also be a lot more focus on, sadly, deforestation. This is an area where Lula has had a great deal of success. It's an area that Flavio Bolsonaro isn't going to care much about. Again, investors in that space in terms of agriculture will like that. But for the rest of us in the world that actually really need the Amazon because it matters to global climate and it matters as a carbon sink, that is going to be a problem. Yeah, sounds familiar.

38:24So, Ian, between the Brazilian results and the other countries you mentioned and Venezuela and what the U.S. has done there. Have we managed to sort of vacate whatever influence the Chinese tried to get into Latin America? Oh, no, no, no, not at all. China, of course, remains the largest trade partner of almost every country across Latin America. And, you know, keep in mind that Flavio's father, Jair Bolsonaro, when he was running for president the first time, he was a staunch anti-communist. But then once he became president, He realized that actually the Brazilians still want to buy those really cheap manufactured exports.

39:02The Americans don't export and they really want to sell a lot of their soybeans. They want to sell a lot of their agriculture to the Chinese. The Americans aren't buying all that Brazilian meat. I mean, all of that stuff. And so Flavio is not going to cut that off in the same way that the Argentines. I mean, Millet loves Trump, but he still has the stronger relationship overall economically with the Chinese. So the Americans are the dominant security power in the region. That's only becoming stronger. American diplomacy overall is not taking a hit, despite allies not liking Trump in Latin America.

39:33That has been more aligned over time, not less. Venezuela, we didn't even mention. That's clearly been a win for Trump. But from a commercial perspective and from a trading perspective, China is not only the dominant power, but continues to actually extend that influence every year, irrespective of who the American president is or who's running these Latin American countries. Interesting. I wonder if we could switch tracks really quick. I mean, we were talking about France a moment ago and what's happening to the bond spread blowout there. Yardani points out today that the only major economy that has seen the 10 year yield rise more than the U.S.

40:09this year is France. How dangerous is this? Well, I mean, the French are used to not being able to close a budget. It happens pretty much annually. In this case, you know, the most popular leader right now in France is Marine Le Pen. And many consider her the odds on favorite in next year's elections. I wouldn't go that far, but it is certainly close. And the issue is that she can destroy this budget. And what she's been promising is that if she becomes president, she will take 125 billion euros out of the budget over the five years of her term. The only problem is she refuses to raise any taxes.

40:49She refuses to touch any major social spending, which is over 50 percent of the French expenditure because it's France. And she's going to actually bring down the pension level from 63 to 62, in some cases 60. So, I mean, obviously she's a magician because there's no other place this money is going to come from. I mean, she's supposed to give a really big speech talking about how this budget's going to work. But if she wants to win as president and she also wants to have a credible budget, those two things do not align. And people that are trading on the French bonds, I think, have figured this out.

41:26So, I mean, they're clearly punishing France, you know, kind of the way they were punishing the Brits back when they were saying utterly incredible things that don't work from a market perspective. Ultimately, gravity does matter economically, right? Ian, thank you so much for your analysis. Appreciate it. Great to see you, Trevor. Still to come this morning, AI executives from companies like OpenAI and Anthropic are testifying this hour at a safety hearing here in New York City. We're going to get to the latest right after this break. The true intent of this hearing is to ensure that innovation happens responsibly, that the government does its job to protect the public as the technology advances, and that the protections at the municipal level can potentially serve as a national model.

42:14I spent a large portion of my life being a regulatory attorney. The idea that artificial intelligence is going to self-regulate defies all reason. That was New York City Council Speaker Julie Menon kicking off this AI safety hearing this morning with executives from companies like OpenAI and Anthropic. Our Ashley Kapu is there now and joins us with more. Really interesting, Ashley, to see this get down to the local level. What is testimony focused on so far? Yes, I just stepped out of the hearing at City Council where Jacob Coxon, the researcher who resigned from Anthropic and kickstarted a firestorm on social media, is kicking off the hearing by discussing some of AI's biggest risks in his view.

42:59That includes the pace of the technology's development as well as companies' inability to control it. So that's really where we're kicking things off for now. What are we expecting out of this, Ashley? As I understand it, there are something like 10 proposals on the table concerning AI, including who would be liable if anything goes wrong. What is really at stake with these hearings? Yes, Speaker Menon opened the hearing by saying, you know, we're really going to use this as an opportunity to better understand the risks and get input from experts as to how we could approach this from a legislative standpoint.

43:33As a reminder, with the midterms just a month away now, there's really not much of a window for Congress to do anything in the near term. So states are stepping up and thinking about the actions that they can take to really bring this discussion to center stage. Ashley, what do we think is going to happen as a result of a day like today and this hearing? Is New York City coming at it with sort of a unified view on either optimism or gloom? Several council members have proposed bills already. So a lot of them are seeking input about what's feasible and what's not. But really, again, this is to kickstart conversation and try to get a better understanding of the risks that these researchers and companies have been warning about.

44:12So it's a it's a start of a long process. We're not likely to see anything really concrete come out of today. But it's a step in the right direction as far as the city council is concerned. Ashley, appreciate that. Good to have you on the ground. Ashley Kapu watching this hearing. And by the way, tomorrow, do not miss a first on CNBC interview with New York City Council Speaker Menon. at 1 p.m. Eastern time on the exchange. Pretty interesting exchange of views now getting into various cities. As for some of these levels, I know you're watching S &P 70. We've tried to get above 77.50 like three times in the past 10 days, but tech is really helping out today.

44:48It really is, and it's not coming from semiconductors as we have seen recently. We do have NVIDIA New High today, so we had that game. We also had that upgrade of Microsoft from Mellius today, so it's helping the Mag-7 complex. So we're continuing to see that sort of bid for safety in that MAG7 complex continue leading the markets higher here, even as the 10-year yield gets firmly above 5.3%. And we were talking about the dynamics globally. We don't talk about France enough, Carl. I know you're watching that. It's a very serious story over there. But you're right. We got that ISM services. Prices paid 74, which was a little bit hot.

45:27and as a result, unable to keep the yields contained at 5.3. It's not that dense of a data calendar this week. We'll get some Fed minutes and you, Mish, but it's really a lot of that's getting pushed to the next couple of weeks. Yeah, when earnings season starts, we'll continue to watch financials. We did have an upgrade of Wells Fargo today from Citi, so that's something worth watching here. They say NIMS are helping there, so that's improving the story. But, yeah, we're sort of lacking that big catalyst, so we're drifting here, But we do see some of the same sorts of themes take our ass with the market as we are here dealing with, continuing to contend with these very high yields.

46:04We talked to Drew Pettit. He said 5.3 percent has been the line in the sand. We have held this line in the sand. So the question is, if we don't come off and this is it, how do we cope? Finally, you mentioned some of the early earnings we're going to get ahead of the banks. Pepsi, I think, and Delta come along later in the week. Pepsi, new 52-week low today, and we know how many consumer staples have been challenged in this environment, trying to get volume and pricing to work. Although that upgrade of EL, again, another consumer product, which has been in the doldrums for a while, getting upgraded today.

46:38We'll see what the coming days bring. Mel, thanks for coming in. Pleasure. Always good to have you. Emily. 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. 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.

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