Bond Bonanza, Driving Oil Action, A GOP Guarantee? 9/10/26

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0:56Jeff Currie: your podcasts. You're listening to The Exchange. Here's today's show.

1:03Jeff Currie: Thank you very much, Scott. Oil hits$100 a barrel today for WTI and mortgage rates pop back above 7%. I'm Kelly Evans and welcome to The Exchange. The Nasdaq 100 is the worst performer today, down about three quarters of a percent as the 10-year treasury yield jumps above 4.9 percent. 491 there. We neared 492 earlier. European Central Bank hiking rates today. We'll debate whether our Fed should do the same next week. Plus, Jeff Curry, we were just shouting over to him. He weighs in on energy prices as Saudi production hits its lowest since 1990. Gasoline,$4.27 nationwide today. Diesel about to hit$6 a gallon for the first time.

1:43Jeff Currie: And the Treasury kicks off its buybacks of long-term debt this hour. Yields have only moved up since its plans were first announced. Are markets trying to do to Besant what Besant did to the Bank of England 30 years ago? We'll discuss. But let's begin with shifting expectations for Fed rate hikes. Economist Claudia Somm writing earlier this week that she is no longer confident inflation will get back to target in the next year or two without Fed rate hikes. Our next guest has also changed her call, now expects two rate hikes. Kathy Bajancic is the chief economist at Nationwide. Steve Leisman is with us as well.

2:14Jeff Currie: He's our senior economics reporter. Quickly, Steve, I just wanted to start with you. We did have PPI today. About as expected, correct me if I'm wrong.

2:22Rick Santelli: No relief there, essentially. The key is that Jeff Curry is standing there in the darkness. Bingo. With his call that has been a dark call that is now seeing the light of day about what's happening with oil prices. And from my standpoint, covering the economy, thinking about how the Fed covers, it doesn't seem like you can say this surge in oil prices is one-off anymore. unless you want to say it's one off for a very long while.

2:48Jeff Currie: 70 percent, is that right? Is where the odds are for a hike? We're at 70 percent now.

2:52Rick Santelli: It's leaning that way, and I'm leaning that way. I want to see the CPI report tomorrow, but I don't think it's one report. I think that if you look at the drift of things since the war spoke in Jackson Hole, much higher oil prices, stronger jobs numbers, and you have this sort of gathering idea here that they ought to hike. And plus, there's a credibility issue that Kevin Warsh could do himself an awful lot of good with a rate hike.

3:20Jeff Currie: Although, and Kathy, I'll kind of comment, turn to you on this, but Michael Falkender was on the show yesterday, obviously worked at Treasury with Besson. He said that markets misunderstood what Warsh was saying in Jackson Hole, Steve. He said that he was signaling balance sheet action, not rate hikes.

3:35Rick Santelli: Yeah, I don't agree with Mr. Falkender on that. I think he's a really smart guy. But Kevin is not in a place now where he can start using the balance sheet for policy. He wants to do that and he can get there and he probably will get there. But for addressing the immediate things in front of him and the immediate need to address policy, I don't think he's in a place where he has the committee behind him to use the balance sheet to address inflation.

3:58Jeff Currie: Kathy, jump in here. Why did you change your call looking for two hikes now this year?

4:02Rick Santelli: Do I, Kelly? Well, I believe, agree with Steve here. I think the pressure is building on the committee to raise rates. I wasn't necessarily looking for it to start next week, but I now think they very well could. For the reasons Steve laid out, I mean, you're seeing energy prices continue to march higher, oil, diesel, gasoline. Even if the core number is a bit insulative for now, it could spill over. And inflation expectations is really, at the end of the day, what they're most concerned about. If headline inflation continues to come in strong, that's a risk for inflation expectations. And I would say, too, that the main tool, and I thought Fed Chair Walsh did a really good job at Jackson Hole, really emphasizing the main tool for adjusting monetary policies, interest rates, not the balance sheet, and certainly not at this time.

4:59Rick Santelli: Can we put up a chart of the 10-year? And I believe what we're seeing is the 10-year move on oil. Rick, my friend Rick Santelli, has been on that for a long time as the main thing.

5:10Jeff Currie: We'll go back to just before the war. So if we can show it kind of year to date. The day before the Iran war, the 10-year was at 399.

5:17Rick Santelli: We're at basically a full point. And when I step back and I ask myself, why is the 10-year moving on oil? Because it's moving on inflation, despite what the inflation expectations may say. Which, I want to throw this out there.

5:29Jeff Currie: I don't think oil is inflation.

5:30Rick Santelli: Well, I think that's what the market... I think it's like a tax hike.

5:33Jeff Currie: I think it's like a price shock.

5:35Rick Santelli: Well, then the 10-year would fall. So let me just throw out this idea.

5:38Jeff Currie: I agree with you.

5:39Rick Santelli: Which is, if the Fed were to hike and signal additional hikes, I think that would do far more for bringing down the 10-year yield than Scott Besson's enhanced buybacks. So Kevin Warsh can help Scott Besson and Donald Trump by hiking rates. if that's the concern, if I've identified it. And Kelly, you have a different point of view. Respect that. No, but I agree with you. But if that's why the 10-year is rising, because it's asking for compensation for inflation.

6:07Jeff Currie: The only thing I'd throw into the mix is, in the past couple of months while this has been going on, the Supreme Court struck down tariffs. They've been refunded. The deficit situation has gotten a lot worse. Japan and global bond yields have all reset higher. And so I don't know to what extent those two forces are pushing up the long end. And, you know, because otherwise, yes, to me, if it were all oil, if that oil shouldn't be pushing up the 10-year, it should be pushing up the two, right? It is pushing up the two, though.

6:33Rick Santelli: The two's at 450. Two's at four and a half. Four and a half now. I don't know. Maybe Kathy can settle this internal family fight that we're having. Well, maybe I would throw in another reason that economic activity looks like it's accelerated in the third quarter. We're estimating real GDP growth of at least 3 percent. And it could even be higher. and the labor market has really picked up steam too, right? We saw the latest, the August employment report. It wasn't just healthcare adding jobs. It was much broader than that. Cyclical sectors, right? And manufacturing, construction, and a lot of that coming from AI.

7:09Rick Santelli: So I think the economy is actually running a bit hot now. It's just further reason for them

7:14Jeff Currie: to tap on the brakes a little. All right, let's bring Rick into this, not least because we just had the 30-year auction results at the top of the hour. Remember, yesterday we got an A-plus for the 10-year. Rick, how'd it go?

7:26Rick Santelli: Well, I'll tell you what. You can draw your own conclusions. I have my own intuition about this. But another A-plus, another A-plus. I am sure the Treasury is really monitoring all the large players, making sure they pay attention to current conditions. These higher yields really have found some love. So let's go through it. $22 billion reopened 30-year bonds. The yield, 5.308, which happens to be the highest yield at a 30-year auction since August of 01, primarily because from 01 to 06, there was no 30-year bond. It was brought back in 06. That yield is significantly lower than the one issued market at top of the hour when the auction bidding ended.

8:13Rick Santelli: That was 5.33 and change. Lower yield, higher price, similar to yesterday. They were all over it. 2.2 % is the takedown by dealers. I've never seen a number that low in any coupon auction. That is just unbelievable. What does that mean in English? It means that investors were so hungry for these 30-year bonds, they didn't leave any leftovers for the primary dealers to take, which is what they normally do after all the pieces are gone. If you look at what's going on in yields today, 532-ish. I mean, these are yields we haven't seen since 07 in a 30-year bond. It's not the benchmark, but all the other maturities are starting to come around.

8:56Rick Santelli: Kelly, you nailed it. This is an international dynamic. I really do think it's war, not wars, but it's a little bit of everything. But I do think the biggest, the biggest factor is oil. Just go from Feb 27 to today, put oil on top of the treasuries, and you can see the patterns are almost identical. The percentages aren't. And that makes sense because the percentages in oil is going to always be significantly higher on these moves than the percentage of interest rates at these lower levels. You know, maybe if interest rates were 12 or 13 percent, it would make a little bit more difference. Ultimately, as Steve, I'm sure, has pointed out, Fed fund futures have dramatically jumped here after tomorrow's CPI, which is probably the most important number for obviously next week's Fed meeting.

9:42Rick Santelli: We're going to get one more chance to reevaluate from the trader's perspective what will happen, you know, next Wednesday. But once again, I leave it to the markets and investors. When I look at what's going on in these contracts, there's definitely a renewed interest in looking for the Fed to potentially get involved. Let's see how it looks after tomorrow's CPI.

10:06Jeff Currie: All right. And do you see what he did there? He said it's war, not war. Who else can say it's war, not war off the top of his head? That's like a great headline that you know. Anyway, we have still a few weeks, Rick, to but he's just so good at this. We certainly do. Yeah. And I'll let you go so that we can also let Steve go and then we can talk to Jeff Curry. But I wish you could stick around and we could make this a whole panel. But logistically, that's difficult. So bring bring that point about the 30 year auction, Steve, back together with, again, the European Central Bank hikes today facing an energy shock.

10:40Jeff Currie: I don't understand what that does to help the underlying economy.

10:42Rick Santelli: Well, I was at a Treasury conference. I moderated a great panel a week or so ago, and it was very hard. I kept asking the people on the panel, make a case for me to buy the long end. You know, the reason why I hope to win the Nobel Prize for economics is because of my theory is you can't say somebody won't do something until you tell me the price they won't do it at. So there is a price here. I'm sure there's a much simpler way that somebody's already won the prize for that. But there's a price here at which people will come into the long end. It's possible that there's a little help coming from the enhanced buybacks.

11:18Rick Santelli: If you take the liquidity out of the off the runs, there's a little more liquidity on the runs. I was interested to see if the dealers were more involved. They weren't. They didn't need to be. That was Rick's point. But we have to watch this right now. And I still believe. And can I just get Kathy's answer to my question?

11:34Jeff Currie: She gets a final word here.

11:35Rick Santelli: Kathy, take the final word. And I understand what you're saying about growth. But would the Fed rate hike help bring down long end yields? Oh, yeah, I think it would. I think. And I was going to say, that's not the only reason growth. I was just adding it to the list that you and Kelly had. I agree with all of those. There is a global phenomena going on. But I think, you know, getting a little bit of short reaction to the inflation, inflation expectations could tamp down at least control.

12:05Jeff Currie: long-term rates a bit. I think it would just be for the wrong reasons. But that's just me. Maybe it's a strong economy.

12:10Rick Santelli: It works with what Bess is trying to do rather than against it. Well,

12:13Jeff Currie: that's why they call it the Treasury Fed Accord.

12:15Rick Santelli: That's what everybody says. You can't just do intervention without some help from policy. And policy on the rate side will help the intervention on the other side.

12:26Jeff Currie: Steve, thank you. We'll pick this up with your colleague. Everybody listen to Jeff or not. We have lots of, Kathy, thank you as well. Kathy Bustjancic. We do have a ton of headlines in the energy space today, so let's just quickly review them. Brent crude hitting 102, well, I think 106 actually. WTI back over 100 a barrel for the first time since May. It's on pace for its eighth straight day of gains, its longest win streak, by the way, in about three years. Gasoline prices are up nearly 30 cents in a month. The Arbob contract around 335 right now. Some Some parts of California are selling diesel for$9.99 a gallon, according to GasBuddy.

13:02Jeff Currie: The state's average at$7.76 right now, up from nearly$3, up$3, I should say, from a year ago. Our next guest says the price of oil is the most important number for the markets. Jeff Curry is the CEO of Real Macro. It's great to have you here. And the headlines are pretty troubling out of the Middle East right now, where there's some reports that the Houthis are taking control now of Babal Mandab, which is the southernmost way to get oil when you can't get it out of the strait. So is all of this why the oil price is shooting up suddenly?

13:30Rick Santelli: Actually, I put a bigger weight on China coming back to the market because you can just see the bid across Asia. In fact, I just got back from Singapore and Hong Kong. And you can see, you know, whether if it's Dubai, huge bid there because that's where they buy the Russian oil going into the Pacific. The Shanghai crude contract on Monday went over 100. So they're coming back. They were part of the problem. Diesel got so tight because they took their refineries down. that cut off global product supplies combined with what's going on in the Middle East and Russia. In fact, I was on this program.

13:59Jeff Currie: But why did the Chinese take their refineries down?

14:01Rick Santelli: Because they didn't have access to the crude.

14:04Jeff Currie: Oh, they just had to.

14:05Rick Santelli: Yeah, they basically took it down and cut exports. So why would they export to the rest of the world? Then diesel cracks$107 a barrel, more than the price of crude. That's a pretty big profit. They start chasing it, brought those refineries back online, and it was just like an earthquake going through here. But I think the one thing that's really different about this rally is that people are starting to go, this is not transient. And you're seeing it in the equities, the long-dated oil prices. It has a different flavor to it.

14:31Jeff Currie: I know you are primarily an oil and currency commodity guy, but can you wear your rates hat too? I mean, when we talk about why the 10-year yield is moving higher, what does it feel like to you is going on here?

14:43Rick Santelli: I mean, you and I were talking about earlier the revenge of the old economy. The old economy is taking its revenge. You see it's in the rates markets. You see it in the commodity markets. And what this means, we're dealing with higher structural inflation because of years of underinvestment in the ability to supply and deliver hard assets.

14:59Jeff Currie: But plenty of people like Ed Yardenny would also say 5 percent 10 years, not that big of a deal. Do we really need to be panicking? And yes, I understand the deficit's much worse now. It's one of our biggest spending programs. It's just interest on the debt. But why could 5 percent, five and a quarter, whatever that number is now, can it just be what it needs to be? and be its own salesman. Because someone in the world, we've had people on this program who go, yeah, if it hits 5%, I'd be a buyer.

15:25Rick Santelli: But let's go where the break even, the break even, and there's around 2.5%. And we're talking about, this is not, this is a broad commodity rally. This is the super cycle we've been talking about. I want to emphasize commodities are the best performing asset class this decade, even though nobody trades them. They just ignore that fact. But when we think about it, you have beans in the teens a day, hit 1330. You have a food crisis. Yeah, 1330. We've got a food crisis on our hands. We have a fuel crisis on our hands. Copper was hitting, you know, high after high after high. Today is the first day pullback.

15:56Rick Santelli: Oh, it's down 3%. We've just hit high after high. What is that telling you? We're probably underestimating the inflationary impact of what's happening.

16:04Jeff Currie: Robin Brooks said it's a bit of a dollar debasement trade, and it's coming from the Treasury. Because, again, if you can't express your point of view about where rates should go, then you're going to sell the currency. So weaker dollar, and this was happening in the markets yesterday, is shooting up the price of a lot of commodities. So I don't know if we're talking about two sides of the same coin. Is dollar debasement the same as real physical inflation?

16:24Rick Santelli: There's a scarcity trade and there's a debasement trade. So both of them. You have both of them at the exact same time. They actually feed on one another. Actually, the debasement trade is in the denominator of inflation and scarcity is in the numerator of inflation. So you have both of them. Think about as the denominator goes down because of debasement, it just shoots up the inflation number. But let's think about scarcity. And I think that, you know, that's the important point. is I have to say that all commodities, particularly the non-energy ones, are dirt and diesel. Diesel is the highest-priced commodity on your screen.

16:56Rick Santelli: What do you think that's going to do to the value of those other commodities? But let's not. We have shortages in grains right now because the Ukrainians took out the Black Sea Grain Corridor. Weather has taken out the U.S. yields. So the largest producer in the U.S. has slowed down its production.

17:12Jeff Currie: So why should the Federal Reserve tighten interest rates in response to any of this?

17:17Rick Santelli: Yeah, 25 basis points is meaningless in the grand scheme of things.

17:20Jeff Currie: But let's say it did have a meaning. Would tightening policy be the right thing to do?

17:24Rick Santelli: It won't do anything. I mean, this is a global shock that's outside of the purview of the U.S.

17:29Jeff Currie: Will they make things worse if they tighten one or two or three times? Because economists are pointing and saying, hey, you've got to do something. Why did the European Central Bank tighten? Does that make any sense to you?

17:38Rick Santelli: No, the Europeans did this in 08, 09 and got in trouble. You know, they did it to a lesser degree in 21, 22. We'll see what they do this time.

17:47Jeff Currie: I suppose an advocate of tightening would say this is there's some evidence this is a demand side issue. And when the president's out there talking about five thousand dollar checks, you do start to get echoes of the of the stimulus in the pandemic. And you were very vocal about it at the time, saying, again, denominator effect. What's going to happen? All of this money goes into people's hands. It's pushing up prices. Is there some of that happening today or you think it's all supply side?

18:10Rick Santelli: There is some, but none of the same degree. I mean, he can't do the five. That's$1.3 trillion. We're going to get the$1.3 trillion. It would be incredibly debasing to the currency. But I think the key point here is the government does not like the market price for rates. That's why it came in there and physically tried to push it down. You have an economy where they're trying to push down rates. You have full employment. You still are running a, what, 7 % fiscal deficit. This is called financial repression. Financial repression is the road to debasement. So I love commodities for that debasement trade.

18:47Rick Santelli: But at the same time, you have war and weather ravaging the supply and demand of these commodities. So you have the scarcity trade layered on top of the debasement trade. That's toxic.

18:56Jeff Currie: I have to leave it there. But if you then were policymakers, you're almost implying the best thing for them to do would be to stop signaling to markets or actually intervening in rates.

19:05Rick Santelli: Because you're saying the debasement trade is pushing up prices of commodities and everything else. I always said during the 2000s, don't let the investors trade these commodity markets, the futures. Why? Because it's like you're driving down a road, you see the pothole. If we don't have the market signal, you don't know where the pothole is. The markets are letting you drive around the pothole. What we're doing is driving straight into the pothole. And we're in the pothole right now. It's not like, what if? We're inside the pothole.

19:30Jeff Currie: Energy, food, I take your point. Jeff, thanks so much. Really appreciate it. Jeff Curry. Coming up, September, living up to its swoon reputation so far. But our next guest thinks we could still surprise with some solid gains for the third straight year. We'll talk about what it would take to get there. And as mentioned, the president's$5 ,000 dividend promise getting a lot of attention today. Is it enough to move the needle at the polls? And would Congress ever make it happen? We'll talk about that ahead on The Exchange. This is The Exchange on CNBC.

20:01Rick Santelli: See.

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20:39Jeff Currie: 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.

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21:36Jeff Currie: September off to a little bit of a rocky start in the stock market. And in spite of all the AI enthusiasm, the Nasdaq 100 hasn't made a new high since June 3rd. Ryan Dietrich is the chief market strategist at the Carson Group. It's great to have you back. I know you're still saying, don't worry about it. September could be fine and all of that. Do you have a top level thought as we see some new, what to us are round numbers, maybe to you as they're not as important, oil, bond yields, mortgage rates, you know, all of it. Is all of that noise or is it is it significant?

22:05Rick Santelli: Well, first of all, thanks for having me back. It's always fun to do this in person. I mean, all this is significant. I mean, you've had some great conversations before I came on. You get a little technical here. We're flirting with the 50 day moving average right now on the S &P 500. Also, we're right at that June peak on the S &P 500. So one thing we've been talking about a Carson group for the last couple of weeks, and I'm sure a lot of other guests pointed this out, market breadth has been deteriorating. Nothing major. So to have a little indigestion kind of ahead of the big bullseye with the Fed next week, we're not surprised by that.

22:32Rick Santelli: We're still optimistic, though, we're going to have a higher September when all is said and done.

22:35Jeff Currie: There's the 50-day, the blue line. That's for the NASDAQ 100, 200-day. So is there a shift? People talk a lot about this for traders. It's been kind of a frustrating market. And you look at this with the gainers and decliners each day. There's some days where there's a strong AI overlay. There's other days where there's not. And the NASDAQ 100 has kind of been chopping sideways since June. What do you make of that?

22:56Rick Santelli: You're right. I mean, the NASDAQ 100, like I said, it is just chopped sideways. For the year, technology just looked up still 28 % for the year. I mean, what's so neat about it, the passing of the baton, right? We understand software has had a huge rally. Kelly, last five weeks, software is up over 25%. Go back in history. It's only happened three other times, at least looking at the big software ETF. Off to lows in 2002, off to lows in 2009, off to lows in 2020. So those weren't the worst times of buying thrust. And the other side of this, you know, semiconductors and software, they kind of take turns.

23:24Rick Santelli: I mean, energy and technology, you look all year to date, one's up for the month, the other's down and vice versa. Last month was the first time in August that both energy and technology were higher. So it's really this kind of choppy, diversified market. But honestly, it's still a bull market in our opinion.

23:40Jeff Currie: Jeff Curry just mentioned that commodities are the best performing asset class this decade. And they've certainly been rising this week, both in his words, because of physical shortages and also because of some dollar debasement trades. So, I mean, people do look at gold in these things and wonder if they should be parked there instead of in stocks or, you know, certainly bonds lately. What would you say about that? If someone agreed with his point of view, what are some other ways to express it? Or should you just own commodities?

24:09Rick Santelli: Well, we would agree that this is more of a commodity super cycle. I know it's cliche to say, but it's the truth. I mean, at the start of this year, Carson Group, we said it's an inflationary growth environment. Inflation would probably be 3 to 3.5 percent. But you know what? The economy is going to grow. We're having nominal 6 % GDP growth the last couple of quarters. I mean, things aren't perfect. We get it. But the way we manage our models, yes, overweight equities. But underweight bonds and owning things like managed futures, owning a little bit of gold, maybe about 1.5 % Bitcoin in our more tactical models, having hard assets, real assets.

24:37Rick Santelli: Those things clearly have done better in this higher inflation world. And we still think that's the way to be positioned, overweight equities, but owning some of those things in place of bonds.

24:44Jeff Currie: Quick last question. When would you be a buyer of bonds? I know the answer might be that it depends. But are there if we get to 10, you know, 4%, 5 % on the 10 year things like that. I mean, where where would be the places where you start to get that itchy feeling of, you know what, there's there's gonna be some capital appreciation here.

24:59Rick Santelli: Real quickly, I mean, I think 6%. And let's be honest, 6 % 6 % is not as crazy as sounds. We had 6 % nominal GDP growth the last four years in the 1990s. I know Ed Ardini's pointed some of these things out. That's where we are now. So 5, 6 % 10 year yield. I know it sounds crazy, but if that happens, we still think it's optimistic for the economy. I mean, maybe that could be a time to potentially add a little more duration when it comes to your fixed income.

25:21Jeff Currie: That's good to know. So you wouldn't necessarily be leaping at 5 % yet. No, we wouldn't. Okay. Ryan, thanks. Always good to see you. Thank you. Ryan Dietrich with the Carson Group. Coming up, Oracle on deck to report after the bell today. The shares lost half their value in the past year. We'll look at the mounting debt risks that are weighing on the tech giant as we speak about higher yields. Those shares are down 3 % today. That's coming up next.

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27:10Jeff Currie: Oracle is on deck to report results after the bell. The options market implying about an 11 % move in either direction. And remember, it was a year ago today when its shares spiked 36 % to a record high after reporting blowout cloud demand numbers. The company's market cap hitting$922 billion that day. Fast forward, and it's lost half its value since then. And Oracle's debt burden has a lot to do with that. They have$130 billion of debt due over the next four decades. They're expected to post negative free cash flow into 2029. And in July, S &P Global downgraded Oracle to the lowest investment grade rating.

27:48Jeff Currie: In fact, this chart kind of sums it up. While Oracle's stock has lost half its value in the past year, that's the red line or orange line, the price of their five-year credit default swaps, that's the cost of protecting against default, soared fourfold to an all-time high. So a lot at stake for its earnings later on. Let's get to Pippa Stevens now for the CNBC News update. Pippa?

28:09Rick Santelli: Hey, Kelly, Iran has reportedly resumed production of ballistic missiles using stockpiles components in underground facilities. That's according to The Wall Street Journal, quoting intelligence officials in the U.S. and Middle East, who say while Tehran is building missiles from existing components, it's still in a more limited quantity than before the war. Secretary of State Marco Rubio wrapping up a three-day South American tour of conservative-led countries with a stop in Peru. Rubio is meeting with Peru's president on drug trafficking and immigration as part of the Shield of the Americas program after stops with Trump-aligned leaders in Colombia and Ecuador.

28:46Rick Santelli: According to the DEA, Peru is one of the world's leading producers of cocaine. And Ford announced today that it's investing a billion dollars for a new state-of-the-art paint shop at a Kentucky truck plant. It comes the same week Transportation Secretary Sean Duffy blasted Ford for partnerships with Chinese battery companies saying it raised national security concerns. Ford called Duffy's comments a wrongheaded attempt to capture headlines. And that Ford is investing to build batteries here in America. Kelly, back to you.

29:16Jeff Currie: All right, Pippa, thank you. Coming up, President Trump pledging$5 ,000 payments to all adult Americans. If the GOP holds the House and Senate this fall, what would it actually take to get that done? We'll talk about the shifting odds there next.

29:35Jeff Currie: Welcome back. Donald Trump delivering a 90-minute speech in the first-ever midterm Republican National Convention in Dallas, Texas last night. He's pledging to give every adult American citizen$5 ,000 if the GOP wins in November. Eamon Javers joins us with that and more, and then some more Obamacare refund news this morning, Eamon.

29:56Rick Santelli: Yeah, Kelly, that's right. Let's start with the Republican Party's midterm convention. It's in Dallas this week. And in his keynote speech last night, President Trump unveiled a new trillion dollar campaign promise,$5 ,000 to every American if Republicans retain control of Congress this year. Here's what he said. If the Republicans win the House of Representatives and the United States Senate, both of them, because of our economic, tremendous economic success, like in history, we've never had anything like what's happening. But because of our tremendous strength and success economically, I will issue a dividend to every adult citizen in the United States of America for five thousand dollars.

30:46Rick Santelli: Now, the president did not say where the funding for this proposal would come from. But Vice President J.D. Vance on television today raised the prospect that tariff revenues could be redirected in these redistributive payments to Americans. The president's comments last night came, as you say, a night before the White House announced a separate election season direct payment plan today. The White House said that it will issue$500 refund payments to nearly one million Americans that the administration said have been overcharged for Obamacare health care premiums over the past several years. Now, those payments, they said, would go to Americans in 30 different states beginning in October.

31:25Rick Santelli: So this is an administration, Kelly, that's very much of the mindset all about sending direct payments directly to Americans. And it's happening just before these midterm elections.

31:36Jeff Currie: I don't know if you know the number off the top of your head, Eamon, about how much tariff revenue we've actually collected post the Supreme Court refunds. Probably that's a good question. $100 or$200 billion, maybe something of that magnitude. So if the$5 ,000 checks would cost$1.2 trillion, it's possible that something on the order of$500 or$1 ,000 maybe could be funded with tariff revenues. But it certainly wouldn't cover the whole thing. Yeah, it doesn't get you all the way.

32:01Rick Santelli: So presumably, Kelly, Congress would have to be involved here. And we've seen a lot of skepticism up on Capitol Hill today of this proposal, even among some Republicans. So I think, you know, sort of tick this one as a this one ticks the box as a campaign season promise that might not happen. The president has talked a lot over the past year or so about various dividend and stimulus payments that he'd like to make, including Doge payments and the like. Right. To directly to Americans. None of those things have happened. So this one seems unlikely to happen, but nonetheless, it's an idea that he threw out last night designed to get Republicans fired up in particular to get out to the polls.

32:40Jeff Currie: Yeah. Eamon, thank you very much. Eamon Javers. Our next guest says that proposed dividend would be also highly unlikely to become reality, even if the Republicans hold the House. Let's bring in Tobin Marcus. He is head of U.S. policy and politics at Wolf Research. Tobin, I think people kind of broadly would say, yes, it's unlikely to happen. But what does it tell you directionally? This is by far the most eye grabbing thing. It does kind of harken back to a lot of what we saw during the Biden era. And the president has always talked about, you know, checks of one kind or another that he might be able to cut to Americans.

33:13Jeff Currie: If he really wanted to do something like this, what could he do?

33:17Rick Santelli: Yeah, I don't. It's not something that the president has the authority to do absent Congress under any legal authority that we've been able to identify. And I think that explains why, as Eamon was just referring to, a lot of the past proposals for dividend checks, whether it was Doge dividends or tariff dividends, none of those checks have materialized. So I don't think that the American people are going to take this all that seriously. Certainly, it has not been my experience today that investors are taking this very seriously, tellingly we have not been getting a lot of questions from people about what the macroeconomic impacts of this would be, which probably goes without saying.

33:53Rick Santelli: is not really macroeconomically appropriate in an environment where inflation is already running uncomfortably warm.

33:59Jeff Currie: Was there anything else that caught your ear last night? I think he also talked about lowering credit card swipe fees, said that could save, I believe,$1 ,200 per family. Although, again, the research analysts say that they're not sure that number has a lot of merit. So that also, I believe, would require an act of Congress. So I guess in many ways his wish list is emphasizing why there is a midterm convention that the party is holding, because it is really important for them to hang on to power. How likely do you think that's going to be?

34:27Rick Santelli: Yeah, the swipe fee proposal did, in the same way, this is not the first time that we've heard about this, right? Earlier in the year, he came out with this idea of capping credit card interest rates. He proposed to pass the Credit Card Competition Act, which is aimed at swipe fees. So, you know, in both cases, we're seeing him kind of return to the kinds of promises he was making coming into this year, again, with an eye towards the election. You know, I don't think that Republicans are going to hold the House.

34:52Jeff Currie: It's not an impossibility, but certainly that's not our base case or really anyone else's.

34:57Rick Santelli: So, you know, but I do think that they are trying to fill a gap in terms of what is it that we would do if we were to retain power? What can we tell voters is on the agenda in the unlikely event that we actually do have two more years of unified Republican control.

35:12Jeff Currie: Presumably they would want to be doing something with that time holding unified power. And this is an attempt to answer that question. You know, we just spoke with an investor who's, you know, I said to him, at what level would you buy, you know, 10-year treasuries? And he said 6%. And he said nominal growth is about 6%. 6 % was a level we had in the late 90s when we still had a booming economy and a lot of tech innovation. Can we do, should we stop doing all of this intervention, all this, you know, financial repression, what people are calling it, and let yields go up to a level where investors are probably, there's probably a lot of them out there who would say, I'll take 10 years at 6%.

35:48Jeff Currie: I can do something with that.

35:49Rick Santelli: Well, I don't know that we have any other choice because I am not convinced that some of these bond market interventions that Secretary Besant has been turning towards are going to work. So, you know, if we have the capability of actually capping

36:01Jeff Currie: yields without really serious unintended consequences elsewhere, perhaps there would be something to recommend that.

36:06Rick Santelli: But of course, the so-called Treasury Trist is not working so far with yields making new three-year highs today on the 10-year. And, you know, even if they go bigger and they do have some firepower to go bigger, I think it's going to be really hard to hold that line. So I think one way or another, we're going to be dealing with high yields. Not that they're going to six necessarily, but even the levels that we're at right now are a challenge fiscally.

36:28Jeff Currie: We are making new year-to-date highs, even as we speak, 4.934 on the 10-year, 4.55 on the twos, 5.34 on the 30s. Tobin, thanks. We appreciate it. Tobin Marcus of Wolf Research. Cost of living concerns are front and center in this election cycle, and the Democratic Senate candidate in one state has built his entire campaign around it with the slogan, quote, make stuff cost less. Megan Casella is in Concord, North Carolina with that story. Megan.

36:57Rick Santelli: Kelly, that's right. This is Cabarrus County, North Carolina. It's a pretty red leaning suburb of Charlotte. But Democrats are feeling confident that places just like this one will help them win some votes and possibly flip this Senate seat in November and possibly take the balance of power in the Senate along with it. And they're feeling that way because of these concerns over affordability. So the Democratic candidate Roy Cooper, as you mentioned, is zeroing in on this campaign slogan of make stuff cost less. While the Republican Michael Watley, he says that inflation is the fault of the Biden administration and of Cooper, who was governor here until just last year.

37:28Rick Santelli: But here in Cabarrus County, the race could come down to who voters decide to blame. This is a booming suburb by nearly all metrics. It's a busy downtown with a strong local economy. There's lots of population growth fueling new construction and housing, Also, big influx of private investment, including billions of dollars right here in the county from Eli Lilly. But all of that growth is also fueling a rise in the cost of living. So here's how some local residents were describing it to us just yesterday. I'm paycheck to paycheck right now, so everything feels big, right? Groceries feel big. Everything's just become so increasingly difficult for us to live and, like, where I might have to get back to work.

38:06Rick Santelli: The cost of the food has gone up, but your pay has not gone up. Now, Kelly, I'll leave you with this. Just two numbers here. The median household income here in the county is$89 ,000. So we're in a pretty well-off suburb. But MIT economists estimate that the average family here with two parents, two kids, needs$114 ,000 just to cover their basic expenses. So that underscores the financial strain that these voters tell us that they're feeling. And that's exactly the kind of thing that the Democrats here are hoping will help them win some votes in November.

38:37Jeff Currie: Kelly. All right, Megan. And by the way, this, as you mentioned, is one of the areas there. It seems like there are a lot of areas in play. What would you identify as the most important to watch at this point?

38:49Rick Santelli: North Carolina is one of the biggest races to watch. It's one of the only chances, definitely the best chance Democrats have to actually flip a seat held by a Republican. This is Tom Tillis's seat and he's retiring. So definitely in play. And if they're able to flip seats like this one, they could even take control of the chamber. As for within the state, suburbs like this one are really important for Democrats to make some inroads. They don't have to win them outright. This was a President Trump plus eight county just in 2024. Democrats think if they could shift that to becoming something like a Watley plus two or plus three, that's still a win for them in areas like this one.

39:21Rick Santelli: And they think that's what could be enough to turn the seat blue for the first time, Kelly, since 2008.

39:26Jeff Currie: All right, Megan, thank you very much. Megan Costello. Coming up, reckless. That's how Republican Senator Josh Hawley described OpenAI's handling of the hugging face hack in his letter opening an investigation into the company. And that's just one of the latest incidents of AI angst. We'll hear from the CEO of Y Combinator about that next.

39:50Jeff Currie: Welcome back. OpenAI is now launching ChatGPT for financial services. It was designed in partnership with Morgan Stanley and Evercore, and it combines built-in financial data with Astra's reasoning. What does this mean and signify? Kate Rooney has the details in today's tech check. Kate?

40:07Rick Santelli: Hey, Kelly. So this just rolled out. This is also OpenAI's answer to what rival Anthropic has done. They're both racing after Wall Street and to get an edge in financial services. It's a new version of ChatGPT and their enterprise side of the business. So it's tailored to Wall Street and some of the jobs that are the most labor-intensive. If you think of what an analyst would do, building pitch books, making research, and it plugs in a lot of the data that they need. So they said that they need a very specific version of this for Wall Street and for what analysts do. We spoke to one of the executives there, Nick Turley, who briefed us on this.

40:43Rick Santelli: He said, quote, we're effectively teaching ChatGPT to research like an analyst and to back up its conclusions like an analyst as well. Kelly, one of the questions that came up, of course, is what is this going to mean for junior bankers? These are the ones that are doing a lot of these jobs. A lot of us were asking, hey, is this going to replace the banking analysts that would otherwise be doing this work? They have pushed back and compared it more to Microsoft Excel, saying you don't need to do this by hand anymore. That didn't mean the end of the analysts. They're still going to be around. They will still have jobs that will just make them more productive.

41:14Rick Santelli: Maybe they don't need to work a 100-hour week at an investment firm. Maybe they can cut their hours, but they'll still be relevant. Again, as I mentioned, this is their answer to Anthropic. They're trying to do this and compete at a time when both of these companies have filed to go public. Enterprise is extremely important. Banking and finance, huge part of that enterprise size of the business.

41:33Jeff Currie: But again, this just rolled out in the last hour or so, Kel. Wow. And obviously with financial, you can't hallucinate. If close enough doesn't work, right? We've seen a lot of warnings and pushback to AI this week. Kate, we have a Senate subcommittee now investigating OpenAI's hugging face hack. I mean, the reports there are pretty incredible. Hedge fund manager Paul Tudor Jones writing that AI may become the third superpower in a Wall Street Journal op-ed today. And he says the U.S. and China need to work together on that. And you're at Y Combinator's, I should say, demo day out in San Francisco where this is what they do.

42:05Jeff Currie: They incubate the new companies that we're going to have to worry about down the road, I guess.

42:10Rick Santelli: Kelly, it's come up a couple times here. I would say the tone is not surprisingly extremely enthusiastic. This is a group of founders in Silicon Valley who are trying to build the next thing. But again, you mentioned Paul Tudor Jones. There were the anthropic warnings from researchers there. You also had an open AI researcher write his own op-ed in The New York Times and saying, among other things, that recursive self-learning is the thing that keeps coming up, Kelly. It's this idea that AI is going to help build itself. And as that starts to happen, it's going to be harder to shut down and to track.

42:41Rick Santelli: I did ask Gary Tan about this. Here's what he said. I think that we need to be focused on science fact, not science fiction. Why aren't we grounding this conversation in what is actually happening right now? I mean, the cybersecurity risk is real, and the policy and the way both Democrat and Republican lawmakers should be looking at this is actually the lens directly coming out of what is happening right now. We don't need to be responding to a science fiction sort of fantasy about what's going to happen. And Kelly, he said the opportunity is that some of the founders here that are right behind us are working on cybersecurity.

43:23Rick Santelli: They're working on things that are tangible. And one example he gave was, think of a data center. If you had this group of rogue agents in a doomsday scenario that went and shut off a data center, he said startups are starting to talk about, OK, how can I make this a business? How can I make a physical off switch to shut down some of these agents? And so it's becoming a business opportunity. We're also seeing a lot of robotics companies. There's a lot of defense companies. So he is acknowledging that there is a risk, but it's saying, OK, what are we going to do about it? We can't just wait for the Category 6 hurricane.

43:52Rick Santelli: We've got to figure out how we can actually figure this out on the company side until there's any sort of regulation, which, as many of us know, can take a long time. And industry is moving a lot faster than D.C. in a lot of ways.

44:03Jeff Currie: And this was with last night's report that Anthropic had detected someone working on biological weapons and shut them down. So I take your point. It's a boom time for cybersecurity. Kate, thank you very much. Appreciate it today. Kate Bruni. Coming up with Treasury yields hitting multi-year highs. We'll get the latest read on mortgage rates. And speaking of housing, the homebuilder ETF, the ITB, it's definitely in the red today. Nearly every component is as well. This was after August existing home sales disappointed, dropping 2 % from the prior month for the slowest sales pace since June of 25.

44:36Jeff Currie: More when we come right back.

44:43Jeff Currie: Welcome back. The 10-year Treasury yield hitting its highest level since November of 2023, and that is pushing mortgage rates above 7 percent, considerably above. Diana Olek has the very latest. Diana?

44:56Rick Santelli: Ray Kelly, you asked me yesterday when were we going to get to seven, and we hadn't seen a seven-year handle on the 30-year fix since May 21st of 2025, but today 7.07 % according to Mortgage News Daily. That is up 10 basis points from yesterday, and we're now up 18 basis points just this holiday week. Mortgages loosely followed the yield on the 10-year treasury, which is higher today on another surge in oil prices and didn't get any help from the PPI, which was in line with expectations. Now, the home building ETF, ITB, was already down this morning on that drop in existing home sales. Sales were down right along expectations.

45:32Rick Santelli: But the supply of homes for sale was the highest in over a decade. And despite that, home prices were still higher. So names like Lenar, Pulte, D.R. Horton all down on the day. These stocks have been battered since mid-July when mortgage rates really took off again following that first surge in March at the start of the Iran war. So just as a comparison, since the start of the war, when rates were at 5.99 percent on the 30-year fixed, the monthly payment on the median priced home, that's principal and interest, is now about$250 higher than it was back then. And of course, Kelly, you know that emotional

46:07Jeff Currie: level of seven, that's a thing. I think the headline, there is a headline effect. And the fact that we are already seeing buyers backing off a little bit, inventory is there. The buyers are backing off. I guess my longstanding theory is that at some point, you can't have surging home prices and surging interest rates. Like at some point, it all has to soften. And I wonder if that's kind of the point that we're at.

46:33Rick Santelli: Well, but you have to remember that we are at still historically lowish supply, even though we're saying we see the highest supply levels in over a decade. We have been under building for two decades since the great financial crisis. So we're at these really low levels. And again, it depends market to market. Most of the supply also is on the highest end of the market. If you looked at those home sales, you would see that the sales were only higher in the million-dollar-plus range. Everything below that, all those price ranges, we're seeing lower sales, and that's because they still have pretty lean inventory.

47:04Jeff Currie: I think I asked you this the other day. It's not meant to be a trivia pop quiz, but what was the recent high for the 30-year mortgage? Did we get to about seven and a quarter? It couldn't have been much higher from here.

47:13Rick Santelli: It was 7.25 or 7.29, and that was back in May of 2025.

47:18Jeff Currie: So over a year ago was when it really get surged higher. What if we go to eight? I don't know. Diana, thanks very much for now. Appreciate it. Diana Olick. That's it for us. Thank you for watching. And I'll join Brian Sullivan with a special guest right after this break. Tomo Bravo, founder and managing partner Orlando Bravo joins us next.

47:40Jeff Currie: You've been listening to The Exchange. Make sure you're subscribed to get each episode every day. Same time, same place.

47:51Rick Santelli: Oh, look, you just got added to a meeting about coordinating another meeting to prepare for the pre-meeting ahead of the follow-up meeting, which will, of course, require a recap meeting. And then another meeting. Hit your booking point, book with Southwest, and enter airplane mode.