11AM Hour: FTC Investigates AI Companies, Nike Earnings on Deck & Former Fed Vice Chair Alan Blinder 10/1/26

0:00This 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. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules.

0:35Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Good Thursday morning again. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla, live from Post 9 of the New York Stock Exchange. Today, with the softer than expected inflation data and the September jobs report on deck, just what could it all mean for the Fed's rate policy path?

1:13We are joined by former Federal Reserve Vice Chair Alan Blinder for his insights. FTC launching this probe into AI giants, Anthropic and OpenAI. We'll discuss the implications with the former chief technologist at the FTC. And Nike set to report after the bell stock near a 12-year low with shares tumbling from the 2021 peak. We're joined by one analyst who's sticking with his buy call and joins us to explain why. As for markets, we move our way into Q4 today. Some moderate losses on the Dow S &P. Only a couple sectors are green. One is energy up more than 1 percent and then IT just a little bit.

1:47It is that pressure on yields that may be a suppressing activity with that 10-year still above 5.3. Yeah, some strong economic data in the mix and then higher crude oil prices as well, all pressuring yields higher. We're going to start on the move in oil prices today. Pippa Stevens joins us with that. Pippa. Good morning, Sarah. Brent is hovering around the triple digit level with China reportedly suspending product exports for October as it looks to shore up domestic inventories. And while there's little question that oil exports from the Middle East have rebounded, Goldman estimates flows are at 2025's levels while JP Morgan puts the crude recovery at 98%.

2:21The question is, at what cost, since oil has become much more expensive to move? VLCC rates are at all-time highs, according to Argus, with a composite index of tanker routes hitting a record$18 per barrel, up from less than$4 at the start of the year. VLCCs going from the U.S. to Asia can now earn$400 ,000 per day, while the riskier Mideast Gulf routes can fetch$1.2 million per day. That's in part because the market has become very inefficient. Vessels are taking longer routes, and a lot of the crude coming out of Hormuz is via ship-to-ship transfers. Both require more ships to move the same amount of oil, which is pushing up tanker rates.

3:00That's typically baked into what refiners are paying for oil, which then contributes to elevated fuel prices. Now, diesel futures are retreating this morning, with Reuters reporting the U.S. has told France and Germany to release diesel stocks or face a U.S. export ban. Now, in the widely followed Dallas Fed Energy survey, nearly 50 percent of oil and gas executives said it will take more than a year for diesel to return to 2025 levels. Guys? Yeah, that was some interesting commentary out of Dallas Fed yesterday. I got to get you on this EU stuff this morning, Pippa, and these reports that we're leaning on the Europeans to start releasing some of their emergency stockpiles or face the prospect of an export ban?

3:39That's right. So the reports are that the administration has asked France and Germany specifically. They do hold more than 30 percent of the continent's stockpiles for fuel products, including diesel. And so the administration is asking France and Germany specifically to release more of their reserves or else the U.S. will impose this ban on diesel exports. And, of course, the European economy is much more dependent on diesel than the U.S. is. And so this would be very detrimental for Europe if they were all of a sudden cut off from the U.S. market. Now, we did hear Secretary Chris Wright say earlier this week that he felt the U.S.

4:14and Japan were doing their part as part of that 400 million barrel coordinated release by IEA nations announced back in March. But he said that other nations, including the European Union, are not doing their part. Now, from analysts I've spoken with, they do say that if Europe were to release some of their stockpiles, that could buy the market about six months or so. But again, that is more of an intermediary band-aid measure because then those stockpiles would have to be refueled. And then also, if you look at just the fact that gas inventories in the EU are below the minimum threshold levels ahead of the withdrawal season, you've got to imagine that that is also a factor in terms of politicians thinking about whether they also want to tap into their fuel stockpiles.

4:54Yeah, yeah. Even the president this week did say that although they're considering this ban, it would have a potential negative impact on retail gas. Really interesting times. Pippa, thank you. Pippa Stevens on the energy sector. For more on the broader markets, let's bring in Michael Cagina today, permanent portfolio of a family of funds. President Michael, it's great to have you back. Thanks for joining us. Morning, Carl. Is it fair to say that when it comes to opportunities and equities right now, the targets are getting smaller? Yeah, I think so. When you look at the big macro story, the S &P 500 is trading at a rich multiple.

5:30The earnings yield is around 4.5%. And that's equivalent. You know, you can get risk-free bonds, shorter duration bonds now in that same zone. So for an income equity investor, there's a lot less risk in the bond market. And for a go-go growth investor, I don't know if the interest rates are going to matter as much. However, the higher you get valuation-wise, the broader chance of a correction or a consolidation. and you've got to be much more selective in your individual names. Right. That said, it sounds like financials are one example where you think there might be some opportunities in the coming weeks, months.

6:09That is one area that's sold off in the last couple of weeks pretty strongly. You know, still not cheap, cheap, but definitely with interest rate concerns, you know, those stocks have sold off from where they were before. Many of them pay decent dividend yields for total return investor, reasonably priced equities with a strong stomach to maybe ride out what may come up. Not a bad place to be. Absolutely. What about within technology? How sensitive is it to the rate story? You know, again, that's a growth, you know, go-go growth sector. So I think you're not as concerned with interest rates per se, especially the bigger cap names, the ones that are really driving the AI trade.

6:52However, the higher rates go, the cost of capital going up. So smaller companies, more development stage, more emerging type companies are likely going to get hit by the higher rates, especially if this continues. So I would be more careful in the smaller to mid cap space. You know, some of the hyperscalers, you know, the business is strong. There's a lot of growth. The chips, obviously, same story. I think you do need to be concerned with the semis. You know, it's a tightrope between how long is the backlog going to continue? How long is demand going to go up? You know, because obviously that is keeping those stocks elevated to where they are and where they could possibly go.

7:34The outlooks are strong, but that can change quickly. I think you like energy stocks as well. We have we have here in the notes and the graphics and you say it's a great long term total return risk reward. I mean, clearly right now with the with the war, with no end in sight to the war, energy has been a good place. But but ultimately long term, don't we don't we eventually get back to the supply glut narrative? Well, I mean, I think the fossil fuel story is not going away. There's going to be demand, especially if you have a global growth. And so those stocks have not kept up with the broader market, even as we speak.

8:10And so they can be very profitable companies where oil is trading now. Oil doesn't have to be trading, you know, at crisis levels, which it hasn't reached yet, by the way. But you've got strong dividend yields. You've got stocks that are trading below market multiples. I mean, you can look at a Chevron or Exxon trading about 13 times next year's earnings with a three and a half, two and a half dividend yield. Chances for dividend increases, buybacks, et cetera, in a strong macro environment with supply demand, regardless of what happens in the straight long term. And so for a patient investor, income-oriented investor, total return an investor, yes, energy is a good place to be.

8:50And there's a lot of other names with that similar profile. Michael, we just had a conversation about Nike going into earnings tonight. I just wonder at what point in apparel or restaurants or even travel, you start to think it's got to be worth taking a flyer on some of these beaten down names? No question from a valuation standpoint. I mean, you always have to remember that, you know, sometimes there's a reason stocks go down and they're not just going to snap back up. I think with Nike, they had such a run for so long. There's been a consolidation. There's a lot more competition in this space now where they are.

9:27And so I think it's just harder to be profitable. I think Lululemon, which is one that we used to own, had a similar story. There's just a lot more competition out there for that dollar. Consumers are being more discerning as prices go up. And so it's more difficult to get, maintain and build market share there. And consumer tastes are always incredibly hard to predict. So there's that aspect of it, too. What's hot now? What's hot next week and next month and whatever? So you got to be careful. I think the surprising thing has been, even in retail, some of the real stalwarts for years, Costco, TJX.

10:03It's been sort of the re-rating in those names that's taken some by surprise. Yeah, a name like we own Costco. And I mean, that is a phenomenal execution story, has been for years. It's not cheap, but, you know, they do an incredible job in a low margin business, making money, being profitable. There's a small dividend to it as well. And it's a growth stock. And it's a stock that probably has some safety to it, although I use that word cautiously with equities. but it's got some staying power even in an environment that may slow down or be more challenging for consumers. Well, we'll learn some more tomorrow, certainly with the jobs number, Michael.

10:45Always good to get your take. Love having you on. Thanks. Thanks, guys. When we come back, Google just unveiling its latest AI model. We'll discuss how it stacks up against the competition. FTC opens this investigation into open AI and Anthropic over the safety of their products. We're going to break down some of the implications with a former technologist, the chief technologist at the FTC, when Squawk on the Street comes back. 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. Vantage Score is changing that by modernizing credit scoring.

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11:59Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools, no extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking.

12:40Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Welcome back to Google, just unveiling its latest and most advanced AI model. Mackenzie Segales has the details, Mackenzie, and how it stacks up. Yeah, so Sarah, this is the model that we have been waiting for. Google's Gemini 4 Argonne promises major advances in coding. It ties OpenAI on a key cybersecurity benchmark, and its introductory pricing matches OpenAI's latest cuts. But Wall Street very much focused on what Google actually builds with it.

13:19J.P. Morgan saying in a note this morning that Google needs a major step forward in personal AI agents, while Bank of America sees Argonne potentially laying the groundwork for one. And that's where the conversation in Silicon Valley has shifted. You don't need the most powerful frontier model to build a great personal assistant. Meta's free Muse app continues to top the charts, while Google's competing agent Spark remains behind a paywall. There's also a capability gap. I spoke with Google's agent team, and they tell me that Spark works across Gmail, Calendar, and Chrome, but by design, cannot make calls or complete purchases.

13:54Those are features that are available through Muse that have helped drive mass consumer adoption. And keep in mind, Google had virtually every advantage going into this race. Billions of people use its products with their emails, calendars, and personal data already inside its ecosystem. Meanwhile, rivals have to persuade users to connect all those accounts. I asked Gemini's product chief whether Argon could ultimately power a revamped personal AI agent, and she says that Google is exploring that internally, particularly for complex multi-step tasks. But the Spark team tells me there's still no announced timeline for expanding access beyond those paying subscribers.

14:32And Argon itself, that new model, remains restricted to select cyber defenders and cloud customers while undergoing U.S. government safety testing, perhaps why Alphabet shares have erased their pre-market gains and are trading in the red right now. Guys? Yeah, I mean, is the market still thinking that, you know, the fastest model and the best model wins? Or is there a rethink of it, given, you know, for instance, Muse's entry into the consumer AI market and just the fact that Anthropic and OpenAI both seem to be growing, even though, it changes whose models, I guess, better and faster. Yeah, definitely the latter.

15:09So the conversation has entirely shifted to what is your agentic strategy here, where a flash model from Gemini would probably get the job done for less money. And the overarching concern, part of what The Street has been talking about this morning, Bank of America, JP Morgan, is that Google's core search business, how they print money and have such a high margin still as they pay this massive CapEx bill is search, right? And so if you have a competing model or rather a competing agent from the likes of Muse that is completing a transaction for you, whether that's related to travel or this new Walmart partnership, ostensibly you could bypass search altogether.

15:43And that's potentially problematic, which is why the street is so keen to see a rival offering. And we do have Spark, that is the name of their agent, but it is behind this paywall. People want to see it unleashed to the masses with some of these merchant capabilities baked in, because that's the other question here. How do you monetize it? And with Meta, we're seeing this very interesting example of getting a cut of transactions. People would certainly like to see a similar setup in terms of that merchant Google relationship when we get Spark unleashed to the masses. Yeah, well, we've been through existential worries regarding surge before.

16:14We'll see if this is a more powerful chapter. Certainly three million weekly users in less than a month on Muse is pretty interesting. Thanks, Mackenzie Sagalos. Let's stick with AI. The FTC confirming yesterday that it's launching an investigation into OpenAI and Anthropic over concerns they deceived customers about the potential harm their technology can cause. The investigation coming as OpenAI scraps that latest model over safety concerns and a growing chorus of AI insiders warn the public about existential risks to humanity that AI might present. Joining us this morning to discuss former FTC chief technologist, now head of AI policy at the Abundance Institute, Neil Chilson's with us.

16:54Neil, thanks for the time. Good to see you. Great to be here. Walk us through what you think the FTC is thinking, especially as the administration has taken pains to say, we're going to let this sector innovate. So, you know, I think this is just a classic case of, even though you're building a new technology, the old laws still apply to you. I think here, what the FTC is looking for is, were there unfair or deceptive acts or practices? You've already mentioned the sort of deception idea, which is, did you lie to your customers about what you were going to provide? On the unfairness side, the commission will look to see if there is concrete harm to consumers that was unavoidable and that was not outweighed by benefits to consumers or competition.

17:38And so that's a long existing legal standard. I think this investigation is gathering the facts to determine whether or not there were violations of that standard. And I think the public statements of these companies and some of the blog posts that they have written about their practices probably are what provoked this case-by-case approach. And so it's not really in tension with the White House's goal of not regulating here. This is existing regulation, and it's case-by-case. So it's not tied to a specific set of practices. It's tied to the outcomes. And I think it's appropriate that there's an investigation here.

18:14So you think it's more than just posturing, yes? I do think it's more than just posturing. I think this is part of, you know, you could think of this as part of the White House's campaign to say like, hey, we have existing laws that can deal with some of these concerns that people have. We need to apply them. And I think the commission here has every right to investigate this. Now, that doesn't mean that they will find that there are violations here, but this is clearly a new frontier. The FTC has been down this path in the past. They brought hundreds of data security and privacy cases against a wide range of technologically complicated innovators.

18:54And so I think that by focusing on the harm to consumers and what practices would mitigate that harm, the commission can help deal with some of the trust issues and the concerns that people have around AI. When I saw this news break yesterday, I was having deja vu and realized that it's because the FTC has investigated OpenAI before. July 2023, the Washington Post broke a story. This was under Lena Kahn's FTC, under the Biden administration, that they were demanding documents from OpenAI. This was like eight months after the release of ChatGPT, and they were looking into consumer safety harms.

19:33And I guess, Neil, the Trump administration just put an end to that because they weren't going to regulate AI. So I just wonder what you make of the fact that now it seems like they are. So I would say, you know, that that open AI investigation was around privacy concerns. There were some reported stories that open AI had leaked the types of transcripts that people, the information that people had put into open AI, that those had bled across different sessions to different people. Like I said, investigations do not always lead to viable cases. Often it's not that a privacy incident or a data security incident means that the company was unreasonable in what they were trying to do.

20:21And so the commission will need to look at the specific facts. So I don't think the fact that that didn't lead to a case means that the FTC is changing its tack here. I think that might have been a little bit early to establish any real facts on the ground at that point by the Khan administration or the Khan FTC. But I think it's appropriate. We have a bunch more facts. We have a really different technology even at this point. I think it's appropriate to take another look. And what is the role of the FTC here when it comes to investigating? Like, is this a job fit for the FTC? I usually think of it as an antitrust cop.

21:00So what exactly can the FTC do when it comes to consumer protections here? So the FTC has a dual mission. It has the competition mission. It also is the federal consumer protection regulator. And so, like I said, brought hundreds of thousands of cases in fraud, but also in data security and privacy. They can impose consent orders. They can impose orders ordered if they win a court case. And sometimes those can come with consumer redress or penalties if there's violations of an existing consent orders. So the FTC does have authority in this space. One thing I'll point out is one great thing about the FTC is that it's very focused on the types of harms.

21:41It's not trying to set prescriptive rules about how companies achieve consumer protection. It is not heavy-handed interventionist regulation. It's very focused on the outcomes. It lets companies innovate as long as they don't create harms that aren't outweighed by benefits to consumers and competition. When it comes to consumer harm, does that include like death? I mean, the end of humanity, existential risks? So the typical consumer harms that the FTC would investigate would be things like monetary harms, harms to the physical body or to property. And so, yes, I think it obviously includes death.

22:24You know, existential risks are not something that I don't think any federal agency is charged with that, maybe perhaps the military. And so those types of speculative harms, it is hard to figure out exactly what you would do with them. But we don't have strong evidence. What we have evidence of right now are these types of incidents that are cybersecurity in nature. They look a lot like past cybersecurity concerns. I think the cybersecurity folks would tell you there are practices that can help mitigate those. And the FTC is going to look to see whether or not the companies had reasonable security when they were doing these types of tests.

23:01Do you think this is the kind of thing that these companies would welcome? I mean, they've been calling for like more government involvement to help make sure what they're doing is OK. It's a great question. I think that when you see the companies accord that they signed together on just a day or so ago around the promises about what they are going to do internally to secure their systems, That's the exact type of promise that the FTC can actually turn into not just a moral obligation, but actually a legal obligation. If they make those promises externally, the FTC can enforce them. So I do think that the companies are making pledges that have real legal impact.

23:43Well, also, Andrew Ferguson, the head of the FTC, the chair, was in that meeting, right, was at the White House with them, which is interesting. I've also heard internally, make of it what you will, that a lot of folks inside the FTC first found out about this from the New York Post yesterday. In other words, that there wasn't necessarily an investigation in the works, but that maybe now there will be. Well, I would say typically FTC investigations are non-public and there are by rule. And so it is true that we don't know the exact dimensions of this, but it's not unusual that not everybody within the FTC would understand if a case was being pursued.

24:22Yeah, certainly the investigations, one more line for the risk factor prospectus, if and when we get it, Neil. Really interesting. Please stay close. Thanks for the guidance. Absolutely. Neil Jilson. I don't know. Maybe it's like crypto. Remember, they were begging to be regulated to give them legitimacy and credibility. So maybe it's a risk factor and a potential win. When we come back, former Federal Reserve Vice Chair Alan Blinder joins us. His expectations for the jobs report tomorrow. And what will happen with the Fed next? Mike Ryan shares lower in a pretty soft tape here. Breath is about two to one negative.

24:55We'll get a closer look at the quarter and how they are navigating this memory market that they say is going to stay tight for a couple more years at least. Stay with us. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini.

25:34This 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. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts. It's the holiday season at House of Burrell, which means that it's the perfect moment to review some key rules.

26:09Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Welcome back. Shares of Micron are falling despite the company beating the earnings estimates. Sima Modi joins us with more. Expectations on this one were a little high, I guess. Yeah, and as you said it in the last hour, gross margins, but also a bit of a letdown on that capital return program.

26:48Yes, compensation to employees went up, but no big buyback previewed at a time when Micron is seeing an over 1 ,000 percent increase in earnings. Now, on the call, Micron did preview that a stock buyback around the two-year anniversary of the CHIPS Act in December could be in the cards. Bank of America right now estimating$30 to$35 billion in 2027, with that number growing to$60 to$100 billion in 2028. The reason it may not be committing more is because Micron is in expansion mode. The market right now, from memory, is tight. CEO Sanjay Mahotra telling us earlier this morning that it is increasing capacity.

27:24$250 billion of investment in Idaho, New York and Virginia to grow memory capacity here, create 90 ,000 jobs and, of course, working with the communities to even before we had first shovel in the ground, working with the communities, working with the power utility companies. Mahotra went on to say Micron is spending more not just on its manufacturing plants, but putting hundreds of millions into the communities it's building into. Just two days after President Trump said Big Tech would need to invest in making data centers, quote, very financially beneficial to the communities where they are located.

27:58The other catalyst likely driving the stock is, yes, margins. Raymond James saying the only thing to complain about is Q1 margins of only 87 percent. Guys, the street wanted something a lot higher. Yeah, I was trying to pin down Ben Reitz on how high they could go, the margins. So what do you hear? Because that's really what the case of the story is, right? There's just so much demand, not enough supply. They have pricing power. They have demand. But on the call and even Sanjay Mohd, even during our interview, made a point that higher compensation is key to maintaining their competitive edge. And I thought that was really notable because what we're seeing across this AI ecosystem, you could argue, is a talent grab.

28:37Case in point, MongoDB CEO CJ Despai getting an offer he could not refuse from Meta's CEO Mark Zuckerberg. I heard that call happened about a week ago. It was so good that he left his pay package and severance at MongoDB to lead Meta's enterprise push. In the semiconductor industry, you haven't seen that level of high-level profile departures, but I think what they're trying to say is they don't want that to happen because their two main competitors in memory, SK Hynix and Samsung, are quietly expanding here in the U.S. SK Hynix just breaking ground on their Indiana wafer packaging plant. What is the case today, the playbook that any foreign company uses when they try to come to the U.S.?

29:14They just pick the best talent from their U.S. competitor. I think Micron doesn't want that to happen. Yeah, yeah. I mean, between MongoMeta and Mattel Peace Guy, there's been a lot of job switching regarding CEOs in just the past couple of days. Salesforce, OpenAI. So I guess your point is that the compensation packages are pressuring market margins a little bit. Yes, that seems to be what was the narrative on the call and something they say they're defending because it's important right now for maintaining their lead. When are they going to clarify the buyback level? He said the night, right?

29:44Yes, I think that's when that Chips Act restrictions are in list that allows them to then provide more clarity on that. Yeah, he did say stay tuned. Thanks, Sema Modi on Micron. GM's out with the Q3 auto sales down 5.5 from Q3 of last year. Year-to-date down 6.4. Internal combustion vehicles were up fractionally, despite the impact of some discontinued cars. And GM EV sales down more than 50 percent from last year when consumers rushed in to take advantage of that EV tax credit, which expired in September of 25, if you remember. GM notes the industry sales rate remains resilient in the upper 16 million range for Q3.

30:23We've been watching shares of the legacy OEMs, I think Ford earlier in the week, Sarah, lowest since May. Interesting space to watch. Yeah, I mean, it's interest rate sensitive as well, you know, with the auto loans. That's one of the areas, like the home builders, that get hit earliest and hardest with these higher rates that we talk about every day. Let's get a news update with Brandon Gomez. Hey, Brandon. Hey, good morning, Carl. The Supreme Court today agreed to review the Trump administration policy of indefinitely detaining immigrants who cross the border illegally. It's one of two cases considering the legality of the president's immigration crackdown.

30:56In the other, the justices agreed to fast-track a case over the policy of deporting immigrants to third countries where they have no ties. In a new interview with Time magazine, President Trump says he regrets nominating Neil Gorsuch, Amy Coney Barrett, and Brent Kavanaugh to the Supreme Court. The three have opposed the president in some recent rulings. According to the interview, President Trump said, quote, I gave them the position of a lifetime and they vote against me often. And Madison Square Garden Sports announcing that its board has approved splitting the New York Knicks and New York Rangers businesses into two separate publicly traded companies.

31:29It expects the transaction to be completed by the end of the month. James Dolan will serve as executive chairman and CEO of both companies. Carl, send things back to you. All right, Brandon, thanks very much. When we return, former Fed Vice Chair Blinders with us. We'll discuss his expectations for the next Fed meeting and the jobs number tomorrow. Plus, we'll speak to one of the few Nike analysts hanging on to a buy rating, what he expects from the earnings report this afternoon. Back in a moment. Welcome back. As we get set for tomorrow's big jobs report and what it could mean for this month's Federal Reserve rate decision, our next guest out with a new op-ed in The Wall Street Journal, making the case that markets need to get to know Fed Chair Kevin Warsh better, especially with the potential for more hikes on the horizon.

32:09Joining us now is former Federal Reserve Vice Chair Alan Blinder. It's great to have you back. Alan, good to see you. Nice to be with you. Well, one thing we do know, we learned, is that he's not the sock puppet that Senator Elizabeth Warren accused him of being because he raised rates even though the president said he wants lower interest rates. That's got to be a positive, isn't it? To me, it's definitely a big positive, yes. So what else do you want to know? Well, he's a hawkish leader. We thought that. His whole history suggests that he's an inflation hawk. And that may be a good thing at this point in time, because the problem facing the Fed is not high unemployment, it's high inflation.

32:52But that's open to opinion. And he seems to look, I hedge this in the Wall Street Journal piece deliberately. He seems to have some kind of ability to handle the president of the United States. We know that the president did not blow his stack when the Fed raised interest rates. That's a good thing. Yeah, he kind of he's been asked questions about this all the time and kind of said, like, Kevin's going to do his own thing, which seems to distance himself on the on the independence thing. Isn't there isn't the real question, though, whether they'll keep raising interest rates, I guess, at every meeting, because what's really changed between the last meeting and this meeting?

33:37We got an inflation report that was slightly better than expected, but I'm not sure. I don't know. Worsh himself has said one number isn't necessarily a trend. That is true. But if you look at the data just the right way, this is why there's a dispute between the hawks and the doves right now. But if you look at it just the right way, there does seem to be a downward trend in core inflation. Headline inflation is bouncing around with the price of oil, of course. But in core, little. I don't want to exaggerate this. It's not exactly plunging into the sea, but probably more a slightly stronger case that is trending down than trending up.

34:17So would you hold? Would you hold in October if you were a voter or would you? I would. I would hold. Because what you'd be worried about doing further damage to the to the economy? I want to see if it's necessary. And I also believe, as the past history of the Fed suggests, the Fed wants to keep its head down very close to elections. And we're talking about a Fed meeting that's only days before the election. Days don't matter in macroeconomics. They can always move. If they need to, they can move before the next scheduled meeting, even. Well, that would be like an emergency hike. I feel like that would really freak people out.

35:02Yeah, I don't think that'll be necessary, but there's one coming up in December and that's probably good enough. But look, this is a close call. There are people on both sides of it. There's been some interesting discussion today, Alan, about Treasury buybacks and why, after announcing that you're going to go bigger, you don't go quite as big. What do you think's behind that? You know, I can't get into Donald Trump's head and I can't get into Scott Besson's head. He looked foolish with this half-hearted attempt to buy down the yield curve. And instead of, you know, the old adage, if you're in a hole, stop digging, he seems to still be digging at least a little bit.

35:48I don't get it. The market doesn't get it. The market doesn't think much of it either. And that's one of the reasons he's not accomplishing what he wants to accomplish, which is bringing down, say, the 10-year bond rate. Right. I mean, although, you know, what he said is it was really the speed of it that he was after and a pocket in the summer where he thought that there was a mismatch, you know, in liquidity. And so he was trying to calm things down a little bit. I don't think that, you know, he said in an interview with us, he wasn't trying to change the equilibrium of the bond market. That's obviously a tall task now with with huge, huge things like fiscal and monetary policy, which are ultimately what defines bonds.

36:29Right. Yes, that's right. But you remember before that, there was this incident with the Japanese yen, the Treasury getting involved in that, which it almost never does. he seems to think it's a good idea to monkey around with the bond market, and the bond market doesn't think it's a good idea. Do you see a case for sharply higher yields from here? Well, if I take away the word sharply, I would say yes. I don't think sharply. Excuse me. We've already had a kind of a sharp upward movement in the long bond. There may be more. People forget that where the long bond is now is not historically anomalous.

37:13It's not unusual at all. We just got used to very, very low bond rates. Yeah, we're definitely out of practice, that's for sure. Yes, we are. Thank you for joining us to preview what we're going to expect here from the next meeting. Alan Blinder, it's always good to have you. You're very, very welcome. When we come back this morning, Nike earnings on deck this afternoon. We'll break down the bull case for the stock with one of the few analysts who still has a buy. Yields have actually come in a little bit. It hasn't really helped equities, at least at the moment. Stay with us. Welcome back. Nike set to report earnings after the market closed today.

37:51Investors aren't buying the company's turnaround efforts yet, with the stock losing nearly half its value this year. But our next guest believes in CEO Elliott Hill's ability to steer Nike back from the slump. Let's bring in Bob Durbel, Managing Director and Consumer Retail Analyst at BTIG, one of eight analysts covering Nike with a buy rating on the stock. So what is the bull case here? Well, I mean, I think the bull case is it's going to take time. They have time and we need to give it time. And then when you look at the business, I think they're doing the right things, focused on product, focused on the brand.

38:27And the balance sheet is strong enough that they can continue to invest in the business to turn it around. And we're willing to wait for the turn, especially where the stock is. What do you see that the market doesn't see right now? I'm a big believer in the strength of the brand still today. I think that this is one of the most powerful global brands in the world. You know, I think it has lost a little bit of luster. But I believe when you look at the reach, you look at the roster of athletes, the distribution globally. I think they really need to bring new product to the market. Given time you said is needed here, then how do you read into what we're expecting today in terms of earnings and what they might say?

39:09Well, I think they're going to ask for more time. And I think that they're managing the business with a lot of discipline. We're focused on keeping inventories clean, managing the expenses on the business. You know, you've got a lot of new executives taking new roles within the company. You know, it's going to take time to sort of to gel. But I would also come back to say that when they installed the sport offense, you know, 18 months ago, 27 is when the rubber hits the road around the new product that will be coming. And so that's what we're really waiting for, what we're looking forward to, looking forward to hearing more about it.

39:53The analyst meeting in the Investor Day in November. You know, I think there's still a lot on the common. We're very patient with what's happening. I mean, when you look at shares of on-holding or Adidas, it's not like competitors are knocking the cover off the ball. Is it about the category or share or the pipeline or something else? I think it's about new product, innovation. Across all players? Yeah, I don't think there's a whole lot of new product in the market right now. And I think Nike's the biggest one of all of them, so they're the most important to try to drive the market. So when you asked me about the questions, are we close to a pull market?

40:34How long will it take to get back to pull versus push? No discounting, the market comes for the innovative product. I think that's an industry-wide pursuit. And, you know, you look at the distribution and a lot of the changes they're making. They still have an amazing roster of athletes, and they have to make better use of it. And the backdrop of enthusiasm for sport has never been better, you could argue, right? I would agree. We were talking about Caitlin Clark, you know, games going to air tonight on CNBC. But the shoe launches today, like, are they still, is the innovation machine that Nike was so famous for that it needs to drive growth still there?

41:13I think it is still there. I think that it probably dozed off a little bit over the last few years, and I think they're trying to wake the machine back up. And I feel like that's something that we're going to see in November when we go out for the investor day. I think it's something they need to showcase. And I think that's the place to do it. It's hard for management to do it coming to do meetings in New York City. Bring everybody to Beaverton and let's see what's behind the curtain. No, I mean, look, he knows what sells, right? He's been in that company and ahead of sales. Why do you think they let Mbappe go?

41:47I don't know for sure. I think it's a really important question. I think, look, I think at the end of the day, he's an amazing athlete and drives a lot of interest. I think it was a financial decision, ultimately. I don't know if it was an equity decision or what the terms were. But they're pretty disciplined around the management of their their portfolio of roster of athletes. Yeah. And they've got and they've got still a great one. Bob, thank you very much for helping us get ready for tonight. We appreciate it. Bob Durbel, who's from BTIG. When we come back, the SEC considering rolling out a new exam that might expand private market access for investors.

42:25We're going to break down how it might work when we come right back. Welcome back. The SEC proposing a new investor exam that could expand access to private markets. Our Sharon Epperson is here with more. Man, this got some tugs wagging yesterday. Absolutely. You know, the SEC proposal would expand eligibility for accredited investors beyond the current criteria to include professionals with certain designations and individuals who pass a test. Right now, you qualify as an accredited investor if you have$200 ,000 in annual income or$300 ,000 for a married couple in each of the last two years, with the same expected for this year or a net worth of at least$1 million, excluding a primary home.

43:05The SEC proposal would allow an exam to also open eligibility. So here's how it would work. Finland will develop the exam. Anyone age 18 or older could take it. And if they pass, they could opt in to be an accredited investor. So what's on the test? Well, there's no exam to take yet. It's just a proposal. But SEC officials said it will be modeled on a FINRA test that's already given to potential security industry professionals. It would have 75 multiple choice questions, a two-hour timeline to complete it, and a cost of$100 per exam. The test may cover securities and investment structures, investment risks, disclosures and financial statements, conflicts of interest and corporate governance.

43:47But financial knowledge is not the same as financial capacity. Some say a test may not show whether someone can actually afford to tie up money in risky, illiquid investments. Meanwhile, supporters say the exam route would open access to private market assets and other alternative investments to so many more people. You can learn a lot more about this by subscribing to my Money 101 newsletter. You can use the QR code right there on the screen or go to cbc.com slash money101. I have a feeling we're all going to be taking this test and seeing who does best, right? Yes. Yeah, we're going to have a competition.

44:20But, you know, you only have to have a 70 out of 100 to pass the existing test that they're modeling after. I don't know if they're going to have that same score, but, you know, I'm kind of an A-plus overachiever type. That's not going to be enough. I don't know how this is going to work. A lot of studying. Do we know if there'll be ways to study for it? Will they give you study guides? Well, you know, the FINRA has information about that current SIE test on its website. If you want to get an idea, maybe look there. But what FINRA is telling us is they're waiting for the SEC to provide guidance.

44:52If you have questions about that, go to the SEC and submit your questions. You have 60 days for public comment about whether you think this is a great idea or not so much. Is there a lot of demand for this, do you think? Well, OK, people in the industry are saying that there are young people that are already working in private markets that can't even that aren't accredited investors. Right. They have the sophistication. They have the knowledge. But there are other people who are in the financial literacy community who say when you look at some of the basic financial knowledge tests, people don't pass those.

45:21So how many people are really going to be able to pass this exam? That's that's the question. And even if they can, will they have enough capability, understanding to know that really they need to have some of their other long-term investors shored up and emergency savings and all of those things? Still, it might answer the concern from some in Washington who say these instruments are too dangerous. You've got to protect consumers. This may be a way to protect consumers from themselves by using the screen. If everyone took the test. The thing is, if you do meet the net worth income requirements, you don't have to take a test and you may not be as sophisticated as those assets say that you.

45:59It pays to watch CNBC. That's exactly right. You've got to watch CNBC. That's exactly right. That's right. Thanks. Sharon Epperson. 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.

46:37To view the full Squawk on the Street disclaimer, please visit CNBC.com forward slash Squawk on the Street disclaimer. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.