During earnings season, when 93% of companies beat estimates, investors should focus on companies with strong backlogs and capital discipline rather than those with high debt levels, as the market rewards quality and sustainable growth over aggressive spending.
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Yahoo Finance Live: Daily Market Coverage - July 22, 2026 9AM-11AM (ET)
Added:[music] Welcome to Yahoo Finance's morning brief. I'm Julie Heman. I'm joined today by Yahoo Finances Pro Bmanian and Hardica Singh, Fundstrap's economic strategist. Thanks for being here you guys.
>> Thanks so much.
>> Um so, you know, we're sort of continuing the back and forth that we've been seeing in some of the tech trade and in particular uh the chips as of late. Although today we're also focused not just on the chips day by day which seems to be kind of like the thing that we're all watching but also the earnings that are coming out including the ones that are due after the bell from Alphabet and Tesla. Um what I'm struck by is if you look um you know if you sort of take the the big picture view and you guys were out at Fundstrap you come out with a daily earnings release.
I'm struck by, you know, earning season seems to be going pretty well on the in the aggregate, right? Um you guys found 93% of companies are beating estimates.
We know companies always beat estimates, but 93% is a higher margin than usually beats estimates. And so it looks like we're going to see this what around 25% growth at least in earnings. And um overall that you know the sort of thesis is intact that that is continuing to drive stocks higher.
>> I think so and I think that's why we have seen some of the chip makers rally this week. I think investors are starting to position now for the earnings to come in really strong for these chip makers and tech tech names which have suffered in the summer because of the war escalation and whatnot. So I think I think it's going to be really strong and given historical data I think earning season might even come in close to 30%. Just how it typically fares. It's crazy to think about.
>> Yeah. Because they they do tend to be by by that margin.
>> Yeah. We saw yesterday GM uh big report there uh growing profit revenue even even growing and people thought they wouldn't do that because sales were down overall vehicle deliveries down. But they mentioned chips right they mentioned or DRAM it specifically.
talking about how we're securing their their sort of supply for that and that they anticipate those prices going up.
That's going to it's a headwind for them, but it's not the end of the world.
But like you said, for chipmakers, more great news. People still need their stuff. They need memory. They need they need stuff for all kinds of types of components and >> servers and whatnot.
>> Yeah. Yeah. And inside cars. Yeah.
>> Speaking of which, even a company that has struggled sum micro, right? You know, even that seems to be doing better. Gross margins, it says, are going to be 15 to 17%. That's double what it said before. backlog is more than $60 billion. So like if even a more marginal player like Super Micro is catching um you know an updraft here, what does that imply for the biggest players? The difference is is that the some of the bigger players are pricing in that updraft. Um and so even if you get companies, you know, like a Micron, like an Nvidia that beat estimates, the stocks don't always go up, at least not right away. They go up, you know, over the long term. Exactly. You know what's so interesting to me is that I've noticed it's obviously never enough to just beat earnings. You need to have good guidance. But what we're seeing is the tech companies that are benefiting right now are the ones that have a backlog that they can show. So in Super Micro's case, they Super Micro's Computer's case, they showed a backlog.
We had G Vernova also show a backlog, but their earnings missed this morning.
So I think that's why the stock is being punished a little. But if you look to TSMC, ASML, they both have a backlog and Nvidia is the biggest customer of TSMC at this point. So I think investors are nervous that one day the demand's going to dry up and when that happens, they would rather have the contractual obligation for customers to still be paying. And that's really benefiting these chip names, server names.
>> In other words, the so-called picks and shovel rather than the end customer.
because if that's contracted revenue, then you know, you at least have it locked in for some period of time. To your point about the the backlogs, also I was looking at a Bloomberg story this morning that looks was looking at an earnings momentum.
>> Yes, I did that, too. Yeah. That said it's at the highest since at least 2011.
So, it's not only that companies are beating, it is that they're raising the guidance and that they are, you know, predicting more. Um, GE Vernova is sort of like falls in that camp of it's already priced in a lot, right? It's already continued to grow this year.
It's up something like 60% over the past year. So that also is the backdrop for for that situation.
>> The picks and shovels trade, right? The the power generation for not just, you know, regular power stations, but actual, you know, uh, data centers.
Quickly, I want to talk just real quick.
I wanted to mention this real before we move on, but yeah, the the chip the chip the chip stock surge, right? That was yesterday. Today we're kind of come down a little bit. Um, I just think it's interesting and I know you probably talked about it earlier, Julie, about how a lot of that the the recent scare was these the Chinese AI sort of open source model stuff, right? That was that was a scare there for both the chipmakers, the Nvidia of the world, uh, the big the big hyperscaler companies, uh, and of course the open AIs and the labs. But, uh, I just think it's hilarious that, you know, these guys like we're all about, you know, we want to disrupt software, job losses are going to happen. Sorry about that, guys, but don't disrupt our model. Oh, Chinese AI. Oh, no. We got we got we got to control that. That's open. That's that's that's dangerous. National security danger. We got to we got to stop that >> once they get disrupted. Oh no. Right.
So it's not just >> software. It's not just the chipmaker whatever you want to call. It's it's actually them too. That's how crazy vulnerable to disruption in other words.
>> Yeah. I >> And then for investors, what does that mean for us? Right. Then it's we're constantly on our toes.
>> We all of us collectively. But yeah, there's just no I mean you got to really find places to sort of really believe in I guess and have conviction. You're talking about broader market, broader earning story. Still pretty good. So maybe the broader market is the tail, right?
>> Right. And it's not necessarily the LLMs themselves. Maybe. We'll see. Um just a brief word. You're watching for Tesla, of course, after the close today. I'm going to be really focused on Alphabet.
Um just looking at how these stocks have done. I'm taking a look at our Alphaspace platform on Yahoo Finance which has this like heat map of uh the Magnificent 7 if we're even like I don't I'm sort of over Magnificent 7. It's over for sure as a moniker. It'll come back.
>> But if you look at how these stocks have done year to date and I realize this is a messy chart that we are looking at here. I mean you have like the Teslas of the world that have not done well. Meta which is sort of little changed yearto date. There's a real bifurcation among these stocks is what I'm trying to say.
You have Apple which is up like 21% this year and trading near a record. Um, Alphabet has also done well this year and [snorts] people are really going to be looking to these Alphabet numbers >> for a read on Alphabet itself and for a read at, you know, what's the capex number going to be or is it going to confirm the increase that we might see in spending next year? I mean, YouTube is just an absolute monster, right? So, like that's not a read through to the bigger AI trade. that's just about, you know, what does that mean for Alphabet?
Um, but it's going to be that's going to be a fun one to dig through.
>> The cloud computing business for Alphabet, that's what I'm really going to be keeping an eye on because it'll be the strongest signal for AI demand continuing. I mean, Alphabet, like you said, like Kimmy K3 came out and everybody's saying, "Oh, this is much better than the amount of money we've already put in towards other models."
So, it just turns the game a little bit.
And I think Alphabet needs to come through on that. I >> mean, I think Julie touched on it. You talked about the bifurcation. Yeah.
>> Apple and Google, why are they sort of outperforming here is because they're not totally dependent upon the AI sort of buildown, the AI uh product situation.
>> YouTube, even search. I mean, Google Cloud, not just AI, Google Cloud, these are just like as the acquired podcast, it's like durable. They're durable businesses, right? They really are. And I think that's what's sort of insulating them maybe from like oh Gemini 3.5 sorry it's taking a bit longer than expected.
Uh oh yeah sorry the the we might maybe we'll adjust our AI spending here our our um you know our cap at capex. So I think that's what helping companies like Google and right we're going to watch that any kind of hiccup right on the AI spending will be a problem but these are still good good businesses.
>> Yes these huge underlying businesses.
>> Yeah outside of AI they still have a viable business model which has survived the test of time. So I think AI is just one component, not the whole game. And I think the declines that we saw in memory stocks in the past two months, I think if they made you nervous, the Magnificent 7 is where you would go to hide.
>> So seemed like there was a little bit of rotation there. And um speaking of chip stocks, we'll get a little bit of insight into TPU now, which is the tensor processing units, which is the chips that um Alphabet sells. It's not going to be a big material part of the business yet, but it'll be interesting to hear what they say about that. to your mention about Gemini three and a half being delayed. That report, I don't know if you read that report, but like the level of dysfunction that it seemed like was surrounding that was pretty surprising. So, I'm curious if they're going to say anything about that.
>> Shed a little light or try to give us an explanation, oh, why this is happening.
You know, I mean, yeah, >> I know Dan Howie wrote about this and they and Google gave him a statement talking about how everything's fine.
It's not delayed. It's just we're still ironing out some kinks, right? That's the right word. [laughter] We'll see.
>> Yeah. Yeah, we'll see. But yeah, real quick. Yeah. Tesla tonight. Also, you [clears throat] know, it's so funny if you don't mind me just quickly saying, you know, >> so much of the spotlight used to be on that company, just everything it was doing and and all that. Now, this is Elon's other company. And it's >> Tesla's flying on the radar these days.
It's so strange to me. But again, we're still, what are we watching? We're watching Optimus, right? We're watching Robo Taxi build out. Uh we're talking about people think they're not spending enough on capex. M >> they're going to burn a decent amount of money this this this quarter or sorry Q2 on that capex build out. So the question is investors want do they want to see more more free cash flow burn? I don't know. It seemed kind of crazy to me but uh that's that's what we're watching.
>> Do you think uh there's going to be an announcement about being rolled into SpaceX potentially?
>> Not yet. I don't >> but do you estimate that to happen in the future?
>> Why not? I don't know.
>> It seems like reportedly it's already talking about that. But I think this is I think this is down the line. uh potential.
>> Yeah, it doesn't feel like an imminent situation, but who knows?
>> Yeah. So, does buying Tesla now become a way to get into SpaceX for the long term? What does >> I think that's what people think. The stock is down is the question.
>> Yeah. What does buying Tesla get you at this point?
>> You're buying SpaceX, right?
>> Well, you you know, you got robots, you got robo taxi if you're into that sort of thing. I just don't know who the marginal buyer is, right? Like, if you already are an Elon Musk person, you're in these stocks. Mhm.
>> And if you're not and you just want to trade around it, you're not buying it for those fundamental reasons anyway.
You're buying it thinking that it could be acquired.
>> I really think it's all about optimist and it's all about the autonomous driving. Like, do you believe in those two products? And I think that's the big bet for for Tesla right now.
>> All right, we could do earnings all day, but let's move on to some um economic implications of what's going on right now. So, we know that the president wants to impose 50% tariffs on some Canadian products. Now he's saying um generic drugs are going to get smacked with tariffs in a couple years in 2028.
Generic drugs that come into the US. Um this is happening at the same time, you know, this sort of increased tariff rhetoric at the same time that oil prices are moving higher as a direct result of I think we can argue of Trump's actions in uh Iran. Um $95 a barrel. So we're up back around those levels. I mean, as somebody who's an economist, like it seems like inflation is still very much on the table.
>> I was shocked when I saw oil prices this morning at near 95. And you know, earlier on with the renewal of fighting, I didn't really estimate that oil prices would start inching back closer to their 2026 highs, but now that seems like a possibility again. Still though, I'll say I don't think inflation's going to be at the 2026 highs again. I don't think it's going to be like four or 5%.
And that's because people have already increased prices and passed it down. Uh in Delta's case, for example, they have so much pricing power. They said that even though oil prices came down, they're not really looking to cut prices for their tickets, which to me is a little bit crazy.
>> All right, I got to hop in on this Delta thing. I was looking at, you know, our good buddy Ethan Wolfman, he's gonna go Sorry, you started blowing up, Ethan.
>> There's a big there's a big road race biking uh thing happening in Montreal in September. I was looking at I'm like maybe I'll come look at tickets. Delta was $900 for the weekend.
>> What?
>> Um other airlines were 300.
>> Yeah. 9 I mean like I'm like I'm not paying that. Like >> because you get that premium experience like is that [laughter] >> it's triple the price?
>> So wait triple the price of other airlines like like discount airlines or >> like Air Canada?
>> That's Air Canada is a nice flying.
>> Exactly. Exactly. And I couldn't I couldn't believe it. I mean I know I've definitely I'm a Delta guy. I paid up more to fly them, but not triple. And I and I have to wonder like, yeah, they're they pass.
>> They just have the pricing power because they know their customers like you are just so [laughter] loyal, but he chose not to make you didn't make that decision. Who are you flying for?
Montreal.
>> I didn't buy the ticket, but I think I'm going to go Air Canada.
>> Same thing happened to me. I was going to fly to Ohio and the tickets are triple the price for September. And now I'm wondering if I should try United.
Yeah.
>> Yeah. For Delta specifically. It's just so much higher than other airlines. It's very confusing.
>> But but but airfares overall do keep moving higher, right? Um and you know, memory chip prices aren't coming down.
Like so some of those components, you know, you have to wonder with Kevin Worsh's refrain, inflation is a choice, price stability, price stability, price stability. Um, you know, I don't think anybody's arguing the Fed is going to raise rates in July, but it does raise the question of whether they're going to have to before the end of the year.
>> Yeah, I think his call at the hearing was ended up being completely right where he said, "We're not really sure if this is the inflation report we can look at and say inflation."
>> Mission accomplished.
>> Yeah, mission accomplished. I think it's a good sign because as we saw oil prices this morning, 95, and I think they're going to keep going higher because Saudi Arabia now isn't able to transport a lot of its oil. Previously they were sort of helping this supply issue by sending it through another uh straight but now I don't know what's happening there. I think that might get cut out of the picture too.
>> And I think Boris's sort of job is is is toughened by the fact that you mentioned early the generic drug pricing stuff like >> from Trump these are kind of like these self-owns in a way. Let's you know start a war in the Middle East. Let's hike generic prices for drugs because we're going to and put tariffs on it at some point. This sort of speaks to the fact that like you've already have the the general world is kind of giving you chaotic things and maybe it's going to lead to some uncertainty. Let's add more, right? Let's add more generic drug prices. You're going to restore that here. It's not it's not a high value manufacturing type of in activity.
>> No, their margins are really low.
>> So, some of those drugs are just not going to end up being made. I mean, you can understand the the national security argument, but in terms of like making drug prices more affordable for Americans, this is it >> a pretty dumb thing to do.
>> Yeah. Yeah. It's a low value. I was just going to say it's a low value pretty dumb thing to do, >> but you know, whatever. Okay, on that note, [laughter] let's move on. Um, I've been looking at some new data um or newish data on the like that we are becoming Italy, right? Like I think of it [laughter] is laughing over there because I think of Italy as the place where like all of the young men live with their mamas until they are older. It's just like culturally different and this is becoming this way to in the US to some extent. Realtor.com recently did a study that a record number of adults under 35 are living with their parents or lived with their parents last year. 25.2 million adults um which is 33%. It's just below the all-time highs where it was in 2020. Um this is another figure uh that came from um I think the the Federal Reserve number. So like different numbers show different things.
>> Whatever exact number it is, the idea is it's going higher. And it's not because these people don't have jobs, by the way, >> in in many cases. It's because they can't afford their own housing or they want to save money to eventually maybe be able to afford their own housing. I mean, you know, again, as an economist, like these are pretty shocking numbers to see.
>> This uh this definitely has me a little shocked. And because it's not just the housing price that's going up, right?
You also have mortgage rates that are up, electricity prices are up, insurance prices are high. I think they're just getting it. These young buyers are getting hit on all sides. I think I saw a stat that said the median age of the first uh median age for a home buyer in the US now is 40.
>> Yes, there were some questions about those numbers and whether they were actually accurate. But >> we know that the housing market is challenged.
>> I mean, it's just how do you even say I think if people have to move back in with their parents that breaks the American dream, right?
>> Um you know, it's funny you mentioned this whole Italy thing. I wrote here like congrats everyone. We're now Europe, right? With regards to half the people according to that fed survey under the age of 29 adults living with their parents, you know. Um I also saw a stat that showed that for the first time ever, I think it's something like new home sales or new home pricing is below existing home sales.
>> Uh and it kind of hints to the fact that like maybe a lot of the new homes suck, like they're just not really built well.
>> There's so many concerns about their construction quality and build, right?
Yeah, I I I think I saw that as well that they're just using terrible materials.
>> Right. Right. But even even then it's still unaffordable for young adults to to get into these homes and and they're having to rent pay a lot of money or in some cases maybe your kids are living with you, Julie, at some point. I don't know if you're going to enjoy that, but um >> I I mean, listen, I'm even thinking about my older son leaving the house next year. He's going to be a high school senior. It makes me sad to even think about which and I think there is like a certain beauty in the idea of multigenerational housing if it's by choice right maybe like because I think it's not only the kids that are living with the adults with the parents it's their parents it's the grandparents living there too and that is also because of financial strain because it is so expensive and again I speak from experience as a sandwich generation person like caring for the aging parents is no joke and that is also I mean that's housing cost that's healthare cost. That's all of it. Like people are getting squeezed big time.
>> It's funny. I sent this this to a friend of mine this morning and he's he's a physician and he said, "Well, when I was 27 to 30, I lived at home because I was doing residency and it was in Michigan."
Well, he's like an outlying case here.
Like, yes, of course you live at home if you're not working all the time and you want to save some money. This is mostly people that I think don't want to live at home.
>> Well, yeah. I think if it's by Yeah. If like you said, if it's by choice, that's a whole different story. But then if you're forced to because even though you make enough money but you just can't buy a home, what do you put that money toward? Do you just buy stocks and hope that you can retire earlier and buy a home then?
>> Yeah. I wonder how many of these people are paying their parents rent too.
[laughter] >> Some of them some of them probably are or contributing to your very least.
>> They're going to be on your cell phone plan for the rest of their lives.
>> Oh my god. Thank you. Um, all right.
Speaking of children and going to college, um, this story caught my eye that Jensen Wong is giving $75 million to Vanderbilt, um, for its, um, its campus in San Francisco. Now, this campus was an arts school, um, which was like, I think the California College of the Arts, and so now they're going to be converting it to this Vanderbilt school.
Now, there's a whole like San Francisco history about this College of the Arts and people complaining that a billionaires are getting control of education in in San Francisco. I'm gonna leave that to the side. This is a Vanderbilt story to me. Vandy, as people call it, Vandy um Vandy is like this it school now. Did you guys know this?
>> No.
>> I have discovered this like you know they jokingly called it Harvard of the South in the past. like its acceptance rates are very it's really tough to get into Vanderbilt now. Like it's in Nashville, by the way, for those of you who don't know it.
>> And it's expensive and they have a campus now in New York City.
>> It is expensive, but most of the kids who go there get some kind of aid and don't have to take out loans. They've like restructed that they have very deliberately set out to change the image. They've set out to increase diversity at the school.
They've changed their whole financial aid structure so that most kids who go there get get some kind of grants. Um it's pretty fascinating to me that Vandy's the IT school now.
>> Yeah, I think so too. And you know the bigger question to me is with AI just running everything now on arts and humanities are just going to be more valuable, right?
>> But >> it is right that he's giving money to an art school. Fascinating.
>> But what does the future of arts and humanities look like? Is it just being able to have analytical and critical thinking skills or do you sort of get hired at these AI companies and help the AI models think and do a good job with their writing because their writing is pretty terrible from what I can see so far.
>> Yeah. I mean and that's one of that was one of the concerns about his involvement in the university is like what does that say for the arts? Like what is the future of the arts?
>> My art, >> right? I mean that's already it's already becoming a thing, right? So >> I hope that it increases the value that's put on human art, you know, artisticity.
>> Jensen and his wife said, "Technology expands what we what we can build. Art and design determine why we build it.
Together they shape civilization."
>> I don't know what that means.
>> Highminded stuff there.
>> I don't know what that means in real.
>> I will say this about Vanderbilt though, but Vanderbilt, uh, yes, it's it's definitely expanding its sort of, you know, its view of of like we're not just like a southern school. where like an actual the Harvard of the South, whatever you want to call it. Um, but it also is still an SEC school and it has a pretty decent football team and that sort of runs into the why you'd want to go there. Oh, they're expanding into the arts. They're investing in new campuses everywhere in the United States. It's a great place to go. It's Nashville. They have football team SEC football. Lots It's like it it covers the gamut of why you'd want to go to college.
>> Yeah.
>> I don't know. You got a kid going to going to college next year.
>> I don't know if you can get in there.
It's really hard to get in. That's the whole that's the whole point is their acceptance rates are now very low.
>> I'm not surprised. I'm not surprised given what they're doing, you know.
>> But that but that also speaks to like, you know, when we went to college versus even probably when you went to college and like the the way that the popular schools change over time, both by design and by accident, I just think is super >> I mean, Alabama used to be a school that just was such a regional school. Now, people from all over the country want to go because of the whole SEC lifestyle, all the different TV shows they've had about them. And >> I did actually tour the sority and fraternity houses there. It was it was shocking to me. Yeah. I was like, "Wow, these are some of the biggest houses I've ever seen in my life."
>> It's this whole thing.
>> Yeah. It's a culture. It's a cultural moment.
>> If I was going to school now, sounds like a nightmare. [laughter] >> Not for me. Then again, we toured Swarmore and I was like, "This sounds great." And my son was like, "Absolutely not."
>> You know, you didn't like it.
>> Yeah. Just too just too quiet. Too quiet. Yeah.
>> Very stious. Yeah, >> you know. Anyway. All right, enough about me and the college church. I think that does it for us. Thank you guys so much. Really appreciate it. Opening bid with Brian Sazzy is next.
>> No, we got to do a college.
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[music] [music] >> [music] [music] [music] [music] [music] >> I've been swept up into this tech stock trade. Trust me, I'm trying to climb out of this black vortex. I know there are other things going on in the stock market. Take for instance what the CEO of elevator king Otis told me this morning by phone post earnings CEO Judy Mark says prices are going up significantly in her business because of the rise in oil prices. Therefore she had to cut fullear profit guidance. She responded by raising prices for her elevators and various other services Q Federal Reserve rate hike. But I have to push this nugget and others like it aside and stay locked in on all things tech because it remains the main market driver. Super Microshares are ripping after it said backlog rose to record levels at the end of its fiscal year.
Good sign on the AI trade and it comes at a great time. Then we have earnings out later from Alphabet and Tesla with investors waiting to see how much AI capex guidance will be hiked on each.
Evercore ISI strategist Julian Emanuel sent a note this morning. The report out of Alphabet represents a moment of truth for investors. I agree with Julian and the reaction to the report and spending plans is critical for an overall boldup stock market. Then we have IBM, which is in fullon damage control after its epic stock crash last week because of a pre-earnings warning that completely came out of the blue. How IBM conveys its problems to investors can also say a lot about the AI trade and where it may go next. Here on the opening round table on this very big day for earnings, Tim Rvenitz, uh, innovator from Goldman Sachs, asset management chief, investment strategist, Paisley Nardini, Simplify Asset Management, managing director and head of multiasset solutions, and Yao Finance senior reporter Brooke Depal. Good to see you all. Tim, let me start with you here.
Um, how important is this Alphabet uh, report later after the close, not just for the tech trade, but for the overall market, which is still really at or near record highs.
>> Well, Brian, I think it's incredibly important. This earning season is is is is very much a key here. Uh, we're looking for capital discipline, other pockets of revenue to help offset uh, some of the spending that we're we're seeing. Uh but look, at the end of the day, Brian, I think the good news here is we've already seen MAG7 stocks take a pretty big hit on valuations, down 20 to 25% from where uh we started the year.
So, in our mind, that really helps hedge some of the risks that we see uh this this earning season, and ultimately makes a more attractive entry point if we do see good news. I think we we we we're viewing this as investors are being fairly compensated for taking on the risk of this excess uh capex spending.
>> P I'm just going to assume that Tesla and Alphabet come out on these earnings calls. They don't put on their press release because nobody wants to do that.
They make you listen to the earnings calls which I have a problem with, but they're going to say on these earnings calls, they're going to lift their fleear capex. Are we headed to the same situation where we were three months ago where the market didn't like that?
>> Well, there's an environment right now where we're priced for perfection, right? And I think that's what Tim was just also alluding to. And so as we think about some of these earnings coming to market today, I think we're waiting with baited breath. And it's no longer that you can meet expectations.
It's it's that you really have to beat.
So what we've seen is a lot of volatility injected into markets, especially around these earnings reports. And I don't see that changing anytime soon. We're in a bit of a rotation period where we've moved from these really hyperscalers to the chip makers. And some of this might be old news, but as we're anticipating some of these earnings reports over the next several days, the markets are going to be hyperfocused on ensuring that these companies are not only meeting but exceeding expectations and providing forward guidance. However, this does provide a bit of like this cyclical kind of vortex where you really have to just keep meeting and in order to do that from a capex perspective, these companies have to keep uh increasing their their cash flow and a lot of this isn't possible, which is why we're seeing these companies tap into the debt markets and that provides an additional source of volatility within the markets.
>> And Paisley, where could someone go?
Because if if the investors are not going to uh embrace what they hear from an Alphabet or Tesla because of these spending plans and then as I mentioned at the top of my show, you had Otis company makes elevators. They have a big backlog for servicing those elevators.
They're out there raising prices and customers might be bulking just a little bit. Where else do you go in the S&P 500 to find value?
>> We are seeing quite a bit of dispersion.
We know that technology as a sector broadly is continuing to lead the charge from an earnings growth perspective.
There are a lot a lot of other pockets though whether it be industrials materials we're starting to see a bit of a resurgence within healthcare as well in financials as well if we start to think about forward expectations on rate hikes or even cuts steepening curve could lead to financial sector looking really attractive but at the end of the day I I we don't see it as much as an individual stock um versus another but more so what does this mean from a volatility perspective and how do you capitalize on that which at the end of the day as boring as it sounds.
Sometimes diversification is often the answer.
>> Brooke, which report are you most excited for? Is it an IBM? Is it an Alphabet? Is it a Tesla? Is it all three? Are you going to try to listen to all three at the same time?
>> Brian, I'll definitely try to look at all three at the same time given they're all aftermarket close today. But I will say I will have my eye on Tesla. I'll be breaking those earnings on market domination later on this afternoon. And with Tesla, I'll largely be looking at what analysts are focused on. And that's largely this robo taxi roll out and also those uh optimum robots as well. I think that what we're really looking to see is the pace at which these robo taxis are ultimately going out to market. We know that recently Tesla launched a uh test within Miami. That's now in Tampa and Orlando as well. But at the same time, we know that San Francisco still needs to have that safety assistant within the car as well. and ultimately where exactly will it stand in terms of price point when it comes to compete with uh Whimo and Uber. And so all of these when you take into consideration the roll out of these robo taxis and the competition that Tesla is up against and also taking into account where exactly those Optimus humanoid robots stand and the roll out of that and the production pipeline of those. I think that that's what investors are really focused on and it kind of is a different take on this AI roll out that we're seeing as well.
>> Timmy, you're a Tesla fan.
Well, I'm a Tesla owner. I, you know, it's it's tough to figure out with a valuation. And look, Brian, I think you take a step back, you you you look at these these tech stocks, the long-term growth estimates are incredibly incredibly aggressive. And, you know, uh, to to Paisley's point earlier, you you look at the the financing of the AI trade as a whole shifting more towards debt. We do think that because of those long-term growth expectations on a lot of these names and and that debt financing, you are going to see increased volatility on earnings reports that don't meet on any one of the criteria. And Brian, I think because of that, it's so important right now to think about how we're constructing portfolios and and and we need to be looking out of that traditional stock bond combo. We think this means diversification within the equity sleeve of our portfolio trying to go against that momentum AI trade leading into sectors like financials, consumer stocks that have had negative correlation to momentum and AI this year and then also adding in additional uh risk management via optionsbased strategies to find outcome ETFs. very important because we continue to see Brian as the AI trade shifts more toward debt funding that interest rates are in the driver's seat when it comes to equity prices and we need to disconnect those uh when we're looking at constructing a portfolio.
>> Well, Tim, I'm glad you mentioned options because we had a big launch today. Uh options analysis now available on Yahoo Finance Alpha Space. What is a good option strategy, Tim, in this environment, you think? Well, Brian, what we're seeing more and more in the ETF market is that the the derivative category is really really uh an area advisor gravitating towards in a big way uh for for risk management for income.
Uh one strategy that has been very popular here over the last couple years has been the the buffered ETF concept.
And very simply what that is doing is offering a set known level of downside protection on an index like the S&P 500 or the NASDAQ 100 with known upside exposure to a cap. So it's a simple uh yeah put spread on the downside and then buying calls uh on the upside to get that exposure. Uh all done in the convenience of the ETF wrapper for advisers and for investors that we're working with. You know, that's been a strategy that has has really been taking off in the ETF market.
>> Good stuff there, Tim. Paisley, I actually think between Alphabet and Tesla, I I I think IBM is the report of the evening. And look, we're going to have to watch Tesla. We're going to watch Alphabet. But what IBM said last week in the stock market's reaction is very really troubled the hell out of me.
Uh because they're not alone. Large company, a lot of different management layers being totally disrupted by AI. It could be any company. It's not just IBM.
And that bothers me as investors try to go out there and hunt for value in this market.
>> Yeah. My thoughts on that essentially is as we're selecting or picking individual stocks, there's so much idiosyncratic risk or company specific risk. And with the uncertainty in the market, whether it be from a macro perspective, especially around the rate environment, Tim just mentioned that as well, the level of rates will be um highly impactful on how certain sectors and parts of the economy continue to move forward. And we've even seen some turbulence in the small cap space, whether or not rates go up or rates go down. there's a lot of speculation within small caps. And so I think as a market broadly, I think we're trading a lot on technicals and we're trading a lot on hopes and dreams. Um, and as we start to come back down to earth and think more through the fundamental lens of what's driving a lot of these companies, earnings remain robust, but as you mentioned, some of these companies just aren't delivering because of the attention, the focus, and the drive through the AI lens that some of these are just not able to keep up. And IBM has shown an example of that.
Paisley, how concerned are you about AI debt levels? Uh I we briefly mentioned it here. I have a story now on Yah's homepage about it. I think uh AI related debt uh has total about $412 billion this year. That's according to Goldman Sachs. So a very big number there as well. That was ahead of you know their estimates for last year at about 355 billion. We see Oracle stock down about 50% from the June 2nd highs because of debt concerns. When does this all come home to roost and what does that even look like?
>> It's a meaningful concern that investors should absolutely paying attention to. I would say from 2023 really through 2025, the bid that we saw with an AI and technology broadly was due to all the free cash flow that was sitting on the balance sheets of these companies. And so now we are here in 2026 realizing that this is just not sustainable. And so as we look back, we've had some historical runs in the equity market over the last couple years. I'm not sure that this is sustainable at the level that we've seen. And going back to my earlier comment, the fact that a lot of these stocks are priced for perfection and priced for the continuation of the trends that we've seen over the last couple years leads me to believe that it's perhaps time to take some chips off the table. I always lead through a more bullish uh view on markets broadly. So, I think there's a way to prudently participate in markets um without having kind of that hyper concentrated exposure in a market that has seen a strong run up.
>> All right, Tim Paisley, Brook, stick with me. Uh we're just uh getting started here. Coming up, my stock of the day is overvalued vibes according to [music] some nifty data I pulled from Yahoo Finance Alphaspace this morning.
I'll be right back.
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>> [music] [music] >> Heat. Hey, Heat.
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Against [music] [music] the backdrop right now of well-known tech companies trading off their all-time highs, we have the Teflon tech stock of 2026. That's Apple. Apple's impressive run this year on the stock charts has pushed up its valuation multiples that are light years removed from their 10-year averages despite the company about to wave goodbye to proven co and not even being in the AI revolution discussion to any significant degree. Uh still with me to weigh in on this, Tim Paisley and Brooke. Uh Paisley, I I was surprised to see the valuation levels when I went on to Alphas on Apple. Now, I've of course I've seen the stock come on and by extension of that run in Apple, the valuation multiple is going to go up.
But I mean, there's a significant premiums versus their 10-year average despite the company really being an afterthought in AI.
>> Yeah, my initial read on Apple is that it's standing out a bit from the pack and like the Mag 7, it's really kind of buck this trend of being kind of the hyperscaler spending a massive amount on capex and it's being a little bit more fiscally responsible, one might say. Um, I wouldn't say it's avoiding innovation, it's just avoiding leverage. And that goes back to the conversation we were having before the break around the massive amounts of debt on the balance sheet that a lot of these companies are taking on for this AI race. So, Apple's kind of said, "Hey, I'm going to do my own thing over here." Um, and what ultimately this is doing is it's benefiting shareholders. They're able to take some of the free cash flow, return it to shareholders, able to engage in buybacks still, and that's a much different fiscal position relative to some of its peers. And the market's rewarding it as such. Um, we have seen a lot of innovation from Apple and as you mentioned too, they're in the midst of a bit of a transition from a leadership perspective. Um, but from an iPhone sales perspective, we're still seeing a lot of strength there. Um, the one risk or concern I have as it relates to Apple though really kind of takes it up a little bit more of like a macro 30,000 foot view because they are looking at kind of diversifying their suppliers and engaging in kind of um, supply chain logistics that are maybe tethered to China. And as we know, given the current administration, that could pose some risks um should our tone towards China um escalate uh from where it is today.
>> Yeah, Tim's gonna Tim Cook have to give him the president another glass trophy or whatever he gave him a couple months ago. Tim, how how concerned are you, Tim, that Apple's trading at these levels uh at the same time that Tim Cook is about to pass the baton in the CO leadership. I can make the argument the valuation that Apple's turning on today, you are paying to own the Tim Cook story, not the next CEO story.
>> Well, Brian, I think in this market, investors are paying to own quality, and we think that's a pretty uh wise strategy at this point. You look under the hood of the S&P 500, we've actually seen some pretty significant pockets of volatility, whether it be the software uh stocks earlier in the year or right now, the momentum and and AI volatility that we're seeing. But investors in in the S&P 500 really haven't felt that same level of volatility. Right now, what we're seeing, if you look at the average stock in the S&P 500, we're seeing about 3x just under 3x the volatility that you're seeing at the index level, that's an all-time record in in terms of relative volatility. But at the same time, if you look at the correlation among stocks, we're also at a record low. So, you know, there there's a lot more going on underneath the service. a lot of volatility, but investors at the index level aren't necessarily feeling it. And so when we dig into to these companies, I think quality is something that we we want to be leaning into here because there's a lot of uncertainty around the growth, around spending, around capital discipline, and when these cash flows are going to be realized and at what level they're going to be realized. So, uh, you know, avoiding leverage, leaning into quality, investors are paying a premium. We think that makes sense.
>> Tim, is Apple the anti-AI trade? I don't think it's the the anti- a AI trade, but I I think there's much more of a focus on on capital discipline there. And look, Brian, I think that's what this earning season is all going to be about.
It's going to be when can you monetize and how disciplined can you you stay with with capital? What do the debt levels look like? And we think uh that's where Apple's really bucking the trend.
Brooke, a lot of this uh move in Apple has really come uh over the past month and it's a way I think of the market positioning for another big quarter from Apple and then when they hop on that earnings call, Tim Cook of course will be on that call still. They're going to signal perhaps price increases for their devices later this year. So, you know, I can't say there's there aren't some catalysts coming up in the near term for this company, >> Brian, that those price increases are some of the catalyst that Wall Street is looking at. And I was reading a note from BFA this morning that said specifically within the December quarter, we could also get those foldable iPhones. And of course, that would come at a price premium. But in addition to that, they already rolled out those higher prices when it comes to laptops and iPads uh including their budget friendly sort of MacBook Neo just uh late last month or earlier this month. And so when you think about all these different puts and takes, I think that's what really is Wall Street is focused on is how exactly is Apple moving forward with this environment when of course you do have a higher cost for those memory chips. And on top of that too, as they look to integrate Siri AI into their products as well, will that sort of propel another buying cycle for consumers? And so the momentum certainly behind the stock, Bank of America does have a buy. And within this recent note, ahead of that report, they did reiterate that buy rating.
>> I'm just realizing, Brooke, uh I've never used Siri. Uh, we can take that offline. I I and I guess I'm not surprised. I'm probably not alone. I don't think others are with me there.
All right, we have just witnessed one of the most alarming AI stories of 2026.
OpenAI has admitted that two of its AI models autonomously broke out of a controlled testing environment where they were supposed to be completely walled off from the internet and then hacked their way into the systems of Hugging Face, the popular open-source AI hosting platform. It's a stunning admission that OpenAI CEO Sam Alman himself called quote an unprecedented cyber incident. I've said it before on the show and I will say it again. AI models and agents are moving very fast and they will break something and I think all of this will only greatly expand the total addressable market or TAM for the cyber security space where the likes of Crowdstrike, PaloAlto Networks and Octo Supreme. Here's more on that one from my podcast chat with Crowdstrike founder George Kurtz earlier this year. From our perspective, an AI agent is nothing more than a superhuman.
It has an identity, non-human identity.
you have to use AI to fight AI. And what we're seeing with these AI attacks is that they're becoming much more sophisticated and they're dramatically decreasing the time that defenders have to be able to protect themselves. So this sort of window uh of exposure that used to be months then Amen. George Curtz, my question of the day is this.
Should cyber security stocks be a key pillar in your portfolio for the long term because of the AI revolution and its many risks? Let's take it to the OB round table. Paisley, what's say you?
>> Well, this is an area of the market I would just be candid in saying I don't have a lot of insight. I do think that as it relates to the broader AI trade though, cyber security is paramount and I think the individual companies and their ability to navigate this, put protocols uh and processes in place to ensure that they're delivering um integrity to their their customers and their clients. And so this is a huge risk I think broadly speaking especially as it relates to kind of global relations. I think the companies that are not able to show that they have processes in place governance to sustain this I think will see uh stock prices adjust but from a broader AI kind of trade and the trend on this I do think this is an instrumental part of that supply chain that we're delivering AI to our clients. And so yes, I do think as it relates to from a broader diversification lens, the ability to integrate this within a portfolio as another way to play into the AI trade broadly.
>> Good point there, Paisley. Tim, if I own shares of Nvidia, why wouldn't I add Crowdstrike, PaloAlto, and one other one or even just one to the portfolio?
Because as Nvidia does, Nvidia does well because of the air revolution.
Theoretically, that increases cyber security risk and Crowdstrike makes money too as well. PaloAlto, Octo, they all cash in.
>> Well, I think you're you're you're absolutely on something. uh Brian and uh you know one thing we want to be be wary of is just the valuation. I mean this the market has already figured this out.
Uh but at the end of the day you know every dollar that we're seeing spent on AI you're going to need to spend a dollar uh to help pro protect against those increased threats. So we we see cyber security right alongside uh you know a lot of the AI infrastructure trades and that they're they're necess they're a necessity and Brian they're probably a little bit more defensive because it's it's it's a need. you you absolutely need to protect more uh with this AI buildout. And so um valuations are are rich, but still this is a long-term growth story and one we view as a little bit more defensive than some of the other pockets of the AI trade.
>> And Brooke, as Tim just mentioned, a lot of these cyber security stocks have had big runs. I even was checking CrowdStrike on Alphasace this morning and it caught a bid after this open ad news. I can't say I'm surprised.
Yeah, Brian, these stocks already have run up because as we see these mythos like models from anthropic roll out, as we hear from Open AI that now we're there's potentially this fear that their model is way too powerful, it almost has become like a bragging right among these AI players that their model is just so powerful and that they're looking to protect it even further. And of course, that has run up since about June. uh this momentum behind these cyber security stocks including you take a look at a ETF uh amplify cyber security ETF that one up about 15.4% 4% in the last about 30 days. And so certainly the momentum is there. And another thing, Brian, is I was reading notes, this continues to be a long-term theme among many different firms, including the like of City. And when I speak to so many experts, they're saying that these large tech players are adopting this AI. The mid and smalls size players haven't even fully put these AI Asians into their budgets yet as they were supposed to for heading into 2026. But the momentum behind AI is just so fast, so rapid that now when they're thinking about their 2027 budgets, not only will they be planning out to roll out AI agents, but also perhaps the cyber security backs up this as well.
>> Budget season is upon us. A big thanks to Tim Paisley and Brooke. Awesome insight here on this busy day. Before I go, Yo finds Alpha Space Stay for you to chew on and it's on IBM ahead of its earnings later today and a few days removed from one of the worst stock crashes in big blues history thanks to a pre-earnings warning. Stock's plunge has pushed IBM's dividend yield to 3.21% above the S&P 500's yield of about 1.1%.
In case you are wondering, and I know you are, Apple's dividend yield is about 3/10en of 1%. It's palry. Julieman has you next on market catalyst.
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[music] Down. [music] >> [music] [music] >> This is Market Catalyst. I'm Julie Heyman, 30 minutes into the US trading day and let's take a look at how [music] things are shaping up here in this early session. We've got a mixed picture as we look at the major averages. The Dow and the S&P higher, although the S&P very marginally, the NASDAQ lower. So right now the Dow's up about 230 points give or take about 4/10en of 1%. The S&P 500 very little change slightly to the upside and the NASDAQ composite is down about a quarter of 1%. Just pointing out another thing that throws into relief the idea that tech is sort of driving the bus to the equal weight index. The S&P equal weight is doing better. So in other words, the drag today such as it is is seeming to come from large cap tech. Let's take a look at that large cap tech specifically through the lens of the NASDAQ 100. And we see a pretty mixed picture here. If we equal weight it just to get an idea uh you know pretty even steen here between gains and losers today and we're not seeing a lot of huge moves in either direction. We are seeing some of the um Neocloud so-called do well today. I see Cororeweave and Nebius on the plus side there. And then go going back to market weight. Of course, there are going to be a couple of big focuses today, but perhaps none bigger than Alphabet, which reports after the close of trading, giving us our first hyperscaler measure of how things went in the second quarter and how they're projected to go for the rest of the year. We're going to be paying attention to things like capex.
I'm going to be paying attention to those YouTube numbers to see how big they are. Google Cloud, of course, will be important as well. So, all of that in focus as we await Alphabet. And then the other big company reporting is Tesla, which has diminished importance. I think you can probably pretty easily argue in terms of its weight in the market and of course being overshadowed by its larger cousin perhaps one day part of the same closer family. Uh SpaceX, of course, is the one I'm referring to. And SpaceX, by the way, is also a little changed today.
What's also interesting today is that the semis are not trading as much in tandem today and they're not moving as much. We've seen some really dramatic swings in recent days. The semiconductor index entering a bare market and then kind of whipsawing between gains and losses. Today, we've got Nvidia up very slightly. We've got TSM down a little bit, but not seeing those big moments of drama like we have seen in recent days.
And then finally, looking at the other sectors in the S&P 500, as I mentioned, tech is down the most, materials up the most today along with energy stocks and utilities. Those three groups are really outperforming by quite a wide margin in today's session. Um, as we watch a lot of the earnings roll in and by and large the earnings have been very strong this season. Uh, we earlier talked to Hardikica Singh from Fundstrat. She said she thinks we could even see them closer to 30% versus the 25% or so that has been estimated and earnings forecast has been trending higher from the companies themselves as well. So, let's put all that together and talk about what this means for the stock outlook going forward. Lzanne Saunders is joining me now. Charles Schwab, chief investment strategist. Great to see you, Lizanne.
>> Hi.
>> Hi, Julie. Nice to be here.
>> I mean, we all expected that the earning season was going to show a lot of growth. And companies always beat estimates. We know that. And yet still, we, you know, the the growth, the magnitude of the growth that we're seeing, the type of commentary we're seeing has been surprising. I guess the question is we keep asking how long is this going to last? How long do you think it's going to last? And does that sustain gains through the end of the year?
>> Well, I guess I don't know is not good TV. So maybe I'll expand a little bit more.
>> That's honest. I appreciate that.
[laughter] I I I think what's interesting is the reaction on the part of stocks and this dates back to uh the last few quarters and uh also you can look back to when Samsung reported a few weeks ago which was in advance of the US reporting season and what I think is happening is we've got the consensus sellside estimate where in general companies have been pretty successful in leaping leaprogging that sellside estimate but increasingly there's also a buyside expectation what the fund managers, portfolio managers, um you know, hedge funds, kind of the the the higher bar, the the whisper number as we used to call it. And that's where you're seeing some of the stocks get punished. So, I think that's maybe a more nuanced way to look at this earning season to get a sense of whether that forward expectations bar may be the problem, even if the consensus sellside estimate is still fairly low. And I think we have to be wary of any meaningful gaps between those two >> meaningful gaps between sort of the so-called whisper number and where companies are actually coming in. I mean so what are you seeing on that front so far? Is there because we know in some of these tech stocks in particular there's a lot of high expectations priced in. So does that imply at least in some cases things have gotten ahead of themselves?
Well, uh, you know, we don't have the meat of earning season as it relates to the tech tech adjacent space. So, that's that's more of a here's what I'm paying attention to as opposed to here's what happened. You know, the the spread between the sellside consensus and the buy side whisper number is nowhere near as wide for a sector like financials.
So, simply a series of beats occurs to the benefit of that sector, but it's also amid this rapid fire rotation. I think what's happening here is that there is a lot of skittishness about that forward expectations. don't hear a lot of internet-like bubble stories, but you do hear more of the bubble concerns as it relates to that forward expectations and the fact that these, you know, prior darling cohorts like the Magnificent 7, we're seeing a soontobe decelerating aggregate rate of growth such that if the consensus is accurate by the end of the year, by the fourth quarter, the growth rate for the MAG 7 is actually a touch lower than the expected growth rate for the other 400.
93. Now, the the expected growth rate for a group like the MAG 7 is still high in an absolute sense, but as I'm fond of saying, better or worse tends to matter more than good or bad. And I think we are part of the reason why we're seeing these rapidfire rotations, why the semis went into their own kind of mini bare market, is I think that there is some skittishness about that potential inflection point where the rate of change moves and you start to see a decelerating pace of growth. And I think that helps to explain some of the underlying volatility we're seeing in the market.
>> And it also then raises another question which is you know there's been as you know hand ringing for years about concentration risk that too much was concentrated in those large cap tech companies. This could provide the test okay what happens if those guys aren't performing but everybody else is providing that earnings growth. And does that transition still support sustained gains in stocks? I think if we were to see an aggregate decline in the AI space even spreading into the non- tech non-com services area which the AI story has it spread into you know utilities and industrials then I think it's a problem for the cap weighted indexes but what I think could persist is what we have been seeing with which is under the surface of sort of the AI umbrella under the surface of just the tech sector the comm services sector you've got a lot of rotation and churn happening under the surface. It's a reason why, you know, in the case of the S&P 500 at the index level, the maximum draw down for the S&P is only 9%. That was earlier in the year, obviously, but the average member within the S&P on a maximum draw down basis is -23%.
It's - 41% for the NASDAQ. That's not a bad way to sort of cleanse excesses, valuation excesses, sentiment excesses via a process of rotation and churn. I think everybody would choose that as opposed to the NASDAQ in the aggregate dropping by 41% or the S&P in the aggregate dropping by 23%. But if we were to see more broad-based weakness in the AI space, I think it's difficult for a cap weighted index like the S&P to overcome that >> and and that underlying volatility that you were talking about. We've been having conversations with folks lately about what to do about that and whether to hedge against that and hedge against this possibility that it does end up spreading to the index level. Is that something that you think is a good idea?
And if so, how would you do it?
Well, there are lots of hedging techniques for investors that are comfortable with options. It can be done there. I'm not an options expert, so I'm not I'm not about to give you the strategy for for hedging. There can be some hedging done through even just exposure to a sector like energy, which tends to have a very low, if not negative, correlation between a sector like tech, not every single day, but in general. But there are also more traditional discipline strategies that can be adjusted. So, a lot of fund managers, even a lot of individuals, they do their rebalancing based on the calendar. They might do it once a quarter. They might do it on a calendar year year-end basis. This is an environment where instead of trying to get ahead of these rotations, trying to, you know, pick the next shiny new object with this half-life of regime changes and narrative changes having collapsed is maybe do portfolio-based rebalancing where you're letting your portfolio tell you when it's time to trim back some of the winning areas and add to some of the underperforming areas and stay in gear.
not in a pure reaction because that often suggests you're chasing performance but taking advantage of the churn under the surface to stay in gear via that rebalancing discipline.
>> Lzanne, something I want also want to ask you about is the oil trade and the sort of um inflation concerns that have bubbled up occasionally this year but which the market has mostly overcome.
But with oil creeping back up again, you know, how how much does that sort of throw some sand in the gears of the equity trade? I I think it does throw maybe not of the equity trade. I I think you know if we were to see a significant inflation spike here and a major ramping up again of expectations for Fed rate hikes, I I think that probably causes some some index level volatility in the market. But we know that part of the reason for the more recent benign readings at least for CPI and PPI was at the headline level courtesy of what had been the decline in oil. Well, maybe pun intended, that ship has sailed, at least for now. So, we're going to see that upward pressure. But that's not the only part of the inflation story within the core level, particularly core services x-ousing. You've got other forces, not least being AI, software and equipment pricing going significantly higher. So, there's stickiness and inflation that's exclusive of the energy price, which hits the headline story. In addition, even with that more benign CPI and PPI report, the components of the combination of those two that map to PCE, which of course is the Fed's preferred measure, those were the less benign components. So, we still probably have PCE sticky on the high side. The interesting rub is that, you know, the Fed will make their announcement on July 29th and we get the PCE on July 30th.
Whether they have an inside look at that, uh, we don't know.
>> We do not. And Kevin Worsh is probably not gonna tell us if [laughter] if his recent task turn at the Fed is any is any indication. Lizanne, thank you so much. It's good to see you.
>> My pleasure. Good to see you too, Julie.
Thanks. Coming up, we'll tell you how you can trade big tech earnings using options and also share our latest Yahoo product that will help you navigate the world of options trading.
The market moves fast. So when you're trading options, timing isn't just an advantage, it is everything. [music] That's why Yahoo Finance is out with a new options hub on the Alphaspace platform with data provided by unusual whales.
>> Alphaspace brings you real-time data and makes the starting point pretty simple.
It breaks it down into direction, time, [music] and risk. I've got Nvidia pulled up. If you think the stock is going higher, you're looking at buying calls.
But if you think the stock is lower, you're looking at puts. The expiration is your clock, and the strike is a price level you're trading [music] around. So once I pick one, how do I know what I'm actually betting?
>> That's where the contract detail comes in. You get the break even, the expected move, the max loss, and the payoff chart. Basically, what needs to happen, and what you're risking.
>> There's also a section in here called the Greeks. [music] What is that all about?
>> Think of them as a dashboard. Delta is the direction, gamma is the acceleration, [music] and beta it's time. Alphaspace shows you where the stock can go, how long you have, and what happens if [music] you're wrong.
>> And you can access all of the tools we're talking about by going to our website using alphaspace.finance.yahoo.com.
[music] Hey, [music] hey, hey.
>> [music] [music] [music] [music] [music] [music] [music] [music] [music] [music] >> Heat.
Heat.
Heat. Heat.
[music] [music] >> [music] [music] [music] [music] >> want to play earning season through options. then we've got the guy for you.
Jim Stricker is joining me now. Kino Capital managing partner. We also happen to have a new options platform here at Yahoo Finance on our Alphaspace platform. Um before we get into sort of imminent earnings, the volatility has been incredible lately. I don't know if you heard the conversation I just had um with Lzanne Saunders of Schwab Jim, but she was talking about the single stock volatility under the surface that has been so much more than the index level volatility, which I guess has meant a lot for you to do and a lot of potential opportunities for people trading options.
>> Well, exactly. Frankly, we run an energy and AI infrastructure fund. So, uh, we're right in the bullseye of much of this volatility.
>> Yeah, for sure. Okay. So, let's talk about one of the ideas that you have.
Um, and it has to do with iron, which we're showing on the screen. It's one of the so-called Neoclouds that provides computing power. Um, I noticed some of those Neoclouds along with iron are rallying today. We've got Cororeweave up, we've got Nebus up, and this is a multi-pronged um, strategy that you're suggesting.
It's a risk reversal. So, I want to take a look at Alphaspace here and walk people through here what you're suggesting. So, you are suggesting selling 30 strike puts and I have the 30 strike put up here in the corner of the screen. Here's that 30 strike put and what that looks like alone. And then you also at the same time are suggesting um a um buying 55 strike calls which again I'm showing here on the screen.
So, talk me through this structure why this works for a name like Iron.
>> Sure. So let's just take a little step back and maybe look at a chart of iron and consider the fact that the stock is down about 50% in re recent weeks.
Right? This was a pure plate Bitcoin miner, one of the leaders transitioning into being a Neocaler, so full stack compute akin to an NBIS or CRWV coreweave. And what you have to know about a company like IN by the end of 2027 they'll have about 1.2 gawatt of net compute that they'll be selling to clients and then another almost 4 gawatt of secured power which is a critical element here meaning that they already have a purchase power agreement in place. A lot of the delays we're going to be reading about over the coming years is because a HPC name a neocaler can't hook up to the grid. So back to the trade. Why do we like it here? We like it because skew has picked up.
That's to say with the pull down in the stock put implied volatility has lifted relative to calls. So how do you take advantage of that and express a directional view? That's what we're showing here. So the stock bounced off of that 30 level. That's why we like it.
And what we want to do there is sell that put and turn around and fund that 55 strike call. So uh nice way again to exploit the skew and get directional exposure. One really important caveat in sizing this trade you need to understand that in selling that put you're committing to p potentially buying stock down at 30. So when sizing the position, that needs to be understood.
If you sell 10 puts down there, 10 puts in the whole risk reversal, that's equivalent to a,000 shares of stock at 30. That's a $30,000 position you're potentially committing to if IN is below 30 at expiration.
And Jim, again just to take a step back here and referring back to something Lzanne said that like because of that volatility under the service now um is a time where if you are an options literate person like yourself that this is the time that is really a good one to employ some of these hedging strategies.
So, for example, if you want to be in the AI trade, but you're a little worried about some of the aspects of the AI trade, like you know, how are you thinking about that as you apply this options lens during this earning season?
>> Well, if you were long a stock that you're concerned about, you can actually do the exact reverse of this risk reversal we're talking about. So, that would be a collar. Let's say you're long, even if it's IRN or another name where you think there's further downside, you can sell a call against that underlying stock, turn around and buy a put and that creates a call.
You're you're committing to selling that stock higher at the call strike and in return for that, you're depending how you structure it, paying for that downside protection. So that's that's one way at the single stock level to layer on a hedge.
>> Um, and speaking of companies that are reporting, let's talk about Alphabet for a second. It's reporting after the close of trading. There is even more attention perhaps than usual in this stock because it is the first of the hyperscalers to report. Um, so so what are you what are you watching when it comes to Alphabet?
>> Well, we're always looking at these in a nondirectional way, right? We always know that heading into earnings stocks have implied volatility that lifts pretty sharply to capture all of the potential outcomes and in volatility. So in a name like Google, first of all, what you need to understand is the option market right now is pricing about a 6.1% post earnings move. That is right in line with its history. So for all the market volatility, the market is really saying for Google that it's not going to be a terribly unusual outcome on earnings. That's number one. It's realized post earnings move in absolute terms is closer to about 5%. So for us that expected value, if you will, that 1% difference between implied and realized is what we want to take advantage of. And the way to express a view that isolates implied volatility that uh that is nondirectional and defined risk is something like an iron condor. And that's the kind of structure that we would look at for a name like Google just to give you the legs. And we priced this out yesterday. So we're talking about expiration in two days.
Someone would wanting to put this on would have to repric everything and make sure it lines up. But the way this would work for Google again using options that expire in two days would be a 320 330 365 375 iron condor. Let me walk through that so it makes sense. What you're doing is you're selling put spreads.
You're you're put spread. You're selling a call spread. So you're selling the 330 320 put spread. You're selling the 330.
You're buying the 320. You've got defined risk to the downside. On the upside, you're selling a 365 strike call. You're buying a 375 strike call.
Again, defined risk on the upside as well. And you're doing all that for about $4. So really, what you want is for Google to respond to earnings the way that it has historically over the last uh eight quarters. Only twice has Google realized a move post earnings outside of the range that the option market >> implied heading into earnings.
>> That's really interesting that it that's that it's been that unusual. I guess they don't surprise people more than they expect to be surprised traditionally, >> right? We all tend to get, you know, a little pumped up into earnings and we see that implied volatility, but like many things in life, the actual realized impact is less than what's typically implied.
>> Yeah, makes sense. Um, and then as we talk about all of the volatility that has sprung up here in the US, like it's almost dwarfed by the volatility we see in another market which has become sort of the poster child for this. We're talking about the Cosby, the South Korean market, um, which has been dominated by SKH Highex and Samsung, and the retail participation there is off the charts, right? We've got leverage ETFs there. We've got more options activity. We've got more margin debt in the Korean market. How does that I mean, you know, any any market participant like yourself is looking for dislocations, but in the options market even more so, right? So, where are those potential opportunities now amidst all of that volatility?
But what is really interesting about the Cosby index is that as it has moved up sharply, it's up, it was up about 100% between January and a few weeks ago before it began to correct sharply. But as it moved up, implied volatility moved with par positive correlation to price.
That is very unusual in equity indices.
Usually you see that in commodities for example where there is scarcity in an underlying asset. So they chase price higher and that also drives implied volatility higher. So why did this happen? First of all uh you you're talking about an index where SKHix and Samsung have about a 55% weight, right?
So it's really two stocks and then what do those companies do? Well, they're memory chip suppliers, right? So HBAM, HBM, uh, DRAM, NAND, these guys essentially supply the world and there is scarcity of these chips with relief coming it looks like beginning in 2028.
So this is going to remain a story for a long period of time. But what we've all realized over the last several months is that watching the Cosby and frankly watching in the US EWY which is the eyesshares South Korea ETF. So you can essentially uh you know see this domestically uh dayto-day and keep track of it. But what we've all come to realize is you need to keep an eye on the memory stocks and the Cosby. Yes, it's interesting that you have this phenomenon implied volatility moving with a positive correlation with price, but also it is now a leading indicator of sentiment around the entire AI infrastructure trade.
>> Um, and just Jim, just to zoom out for a second, you and I have been talking for a long time about options, right? And you've been at this a long time. I'm curious options trading whether we're talking about this market in the Korean market whatever it may be h how does it how is it like what's the biggest change between now and a decade ago or when you started doing this is it is it just the the sheer magnitude of trading in options or is there something else yeah I would say really the sheer magnitude of trading and also the as with equities underlying it that it's shifted from human beings to computers, right? I mean, I started uh having a focus on derivative markets back in 2005 or so.
So, I have been at this a while. I would say that's the that's the largest change that I've witnessed. But also, I think there's much better education out there.
I think people have a much better understanding of volatility, volatility surfaces, uh how to approach a market.
Even for for example the Google trade that we just talked about and I condor when people come to me and they say I want to trade volatility as opposed to trading directionally that's a signal to me frankly that they're a little more educated as it comes to listed options right because one of the factors that's structural in listed options that professionals always want to take advantage of is the fact that implied virtually always outpaces realized That's exactly what we structured in in the Google trade, right? The fact that there is angst and volatility coming into an earnings print, but in reality, the realized response to that earnings usually does not keep pace with what is implied, right? And so I like to see, having been at this a long time, people come at options from the volatility side as opposed to the directional side. I have no problem with trading directionally in options um game for anything. But again, I think that's one of the big evolutions over all of these years. There are enough sources out there now that people really can get smart understanding options from the volatility side. And frankly, that's really where the professionals come at this.
>> Yeah, very good stuff. I'm looking forward to watching those alphabet shares tomorrow to see if the actual volatility, the realized volatility matches that implied volatility or not.
We'll see. Jim, great to see you. Thank you so much.
>> Thanks, Julie. Appreciate it.
>> And a moment ago, we used the new options hub on Yahoo Finance's Alphaspace platform, which is powered by Unusual Whales. Reminder, Alphaspace is a professional-grade financial platform featuring advanced charts, real-time news, customizable investment research, and now options. And you can access all of those tool tools by using the QR code on your screen. Coming up, [music] SpaceX is snapping a losing streak.
We'll dive into the next catalyst. We just learned when the earnings are going to be and when the lockup expiration's going [music] to happen. We'll talk about it next.
Hey, hey, hey. [music] [music] [music] >> [music] [music] [music] [music] [music] [music] [music] [music] [music] [music] [music] [music] >> Heat. Heat.
[music] [music] [music] Heat up here.
>> [music] [music] [music] >> Down.
[music] Down.
[music] SpaceX has scheduled its first earnings date after its Blockbuster public listing. This comes as it shares snapped a 7-day losing streak yesterday.
Promanion covers the company for us and he is joining me right now. Um uh I think the shares were were they up today? Also >> treading water a bit here. Uh but you know look over the last >> week and a half thereabouts stock was down around 20%.
>> Uh hit a closing low of 11985 on Monday the 20th. Uh it's basically been an elevator down after hitting a uh I think $215 or thereabouts uh a recent high dropping below 150 market debut below the 125 IPO price right uh we had that delay in the Starship launch which didn't help matters people sort of selling it there and others questioning well one delayed scrub scrub launch why is that a selling event but I mean there hasn't been many catalysts there and and they're talking about how you know $100 is the new threat level here because there's nothing new on the horizon coming up >> speaking which I was inspired by a conversation I heard on Josh Brown's podcast with Michael Batneck where they were talking about on prediction markets are people trying to figure out when it's going to go below $100 and it's sort of like a little bit of a different flavor than that on poly market they're looking at closing price at the end of July so above 100 is 96% so most people think above 100 which is interesting but fewer people think it'll be above 120 and fewer still think it'll be above 140 so not a lot optimism here that there's upside although it seems like there's not a lot of bets on downside which is interesting but we have these two important events that are coming up one the earnings although I guess you could quibble about whether they're important because most of this stocks most of this company's >> appreciation is in the further in the future and secondly the first lockup expiration >> right which >> so what are the dates on this again >> so the the fourth is the first is the earnings release after the bell um for for Q2 and then you know obviously we're going to hear more about how things are going from a cash burn point of view and are they growing are they growing Starlink uh what's happening with you know launch business all that sort of stuff uh data center stuff but then also that August 6th is that first lock up which I think is around 8% of the of the stock which is I think double the amount of stock that's free floating out there now so that's kind of a big deal see what happens there do people hold on do people sell or ex are people trying to exit immediately uh yeah it's going to be huge I think I bigger like you said bigger than the earnings event is that locker >> I I think that's right I mean and I think okay so just to to to set the scene for people out there the people who hold SpaceX stock it's a combination of folks right it would be venture capital people who joined in various uh funding rounds and some employees of SpaceX and we don't know I don't think what the composition of the holders in this first expiration are then it's going to be followed by other expirations until December and that's when um a much larger portion of the float of the company will be out there in the market. So like when we think about okay so are those people going to sell you know and obviously it it depends on a lot of factors where did they get into the stock are they normal working people at SpaceX or are they already millionaires or billionaires you know like so it's going to be really interesting >> yeah I mean you have some people like like Ron Baron who says you'll never sell right and he's got billions of of SpaceX stock apparently so you have those guys the Kathy Woods of the world etc that are never sellers >> that are believers >> believe holders holders um and then you have people who are just everyday SpaceX employees who might think I need to pay for my new house. I need to pay for my kids school. Uh I need to get some liquidity here. And so I think that's the pressure. Yeah, it's really remains to be it's it's an open question. We have no idea. Um I'm curious what what some people like the Josh Browns of think and Matnik who work in the wealth management field. Right.
>> I mean he seemed to think that people are going to sell [laughter] you know that there's going to be so which is which explains part of the reason why the stock has been under pressure, right? is that you know people are looking at these events as causing more downward pressure on the stock. Then you have Elon's own stock is going to be up for he could potentially sell it. That's not to suggest he will, right?
>> But at some point he will be able to, >> right? I believe that's a year and a day after the market debut. So that's when he can officially begin selling. Um, you know, historically he has been the the type of person that does that except for doing things like buy X.com or Twitter.
We looked at did a ton of Tesla stock, nailed a lot of investors, they got just smashed by that, right? And then, you know, eventually it sort of uh build back up. But the question is what happens then? What's what's his newest thing? Does he need to raise money? I mean, look, SpaceX needs to raise money to buy Tesla, >> right? Right. That's Oh, wow. We didn't we we can go that's a whole other thing, but but I was going to mention this that SpaceX itself needs to raise a lot of money every year. Um, and how does that play into do they have to sell stock?
Does the company have to issue stock? I don't know. I mean, that's another huge overhang.
>> Well, especially since we know the company's first debt sale of what $25 billion worth of corporate debt um in the secondary market did did not see as much demand.
>> Yeah. Weird how >> so what is it?
>> I mean the the reporting was that it was overs subscribed and all sort of stuff I guess and then in the second secondary market it's trading you know not pennies and dollar but it's getting it's getting kind of >> at a discount.
>> At a discount yes that yes exactly. So, we'll see how those further attempts to raise cash go.
>> That Tesla SpaceX potential merger stuff is another thing to keep an eye on.
That's maybe that's what Elon will use the stock for.
>> And we'll see if he gets asked about that on that call. It's going to be a good call.
>> Yeah, >> when it happens. You got the Tesla call to get through today before then.
[snorts] Pros, thank you so much.
>> It's going to come up in that Tesla call. I think >> it probably will.
>> Um, OpenAI says its technology went rogue, hacking AI startup hugging face of its own accord. Now, the companies are partnering to address what they're calling a security incident. Tech editor Dan Howie joins me now with more. Dan, this has been the talk of the AI verse um I think over the the past day or so.
What the heck happened here?
>> Yeah, basically what they said was they were doing some cyber security testing uh on their end uh open AAI with uh their uh GPT 5.6 soul and then an unreleased AI model. Uh that you know they said that during this exercise they you know lower the guard rails to see what the kind of ultimate range of the cyber capabilities are and it turns out that the ultimate range is that it can break free of containment, reach the open internet and then hack another website. Uh and it did just that. um it found an exploit. Uh these these models uh it managed to uh get out of a sandbox that they open AI had put it in basically you know you put it in containment. Uh, think of it as, you know, they they kind of wormed their way or it kind of wormed its way out of uh the box uh and then hit the web uh and went to Hugging Face and figured you know it was trying to solve a a a benchmark problem basically uh and said, "Well, Hugging Face probably has the information. I'll go there." Uh, and managed to hack and kind of get to the point where it escalated privileges and things like that. So Dan, I mean Dan, what is it like what does this imply to us when you know there was so much concern about mythos and not releasing mythos more widely and all of these questions swirling about how to regulate AI like what does an incident like this tell us about all those questions?
>> It means that we have to figure it out sooner than later. Uh this is going to happen again. Uh these models are fully capable of doing this. um you know obviously it it just means that that we have to uh get some kind of regulation or some kind of safety protocols in place uh to to address this you know obviously open AAI basically saying you know that this is something that will happen again uh and you know we're working to to address it but you know at this point these these models are this capable um you know again it's important to point out that they had uh lowered the the guardrails or the the the safety measures here just because they were trying to you know, kind of the limit is. But look, we're going to have to uh have some kind of regime set up to address this. Um it can't just be, you know, one company uh deciding how to do it its own way or another company deciding how to do it another way. It seems as though at this point there needs to be uh a kind of coming together uh of the companies to determine, hey, these models are super capable. We have to stop them from doing this. And while this is happening, there is a very hot debate in Washington and in Silicon Valley about whether to regulate Chinese models, open source models. And um Jensen Wong weighed in on this, the Amidia CEO, of course, he he talked with Axios. And I'm going to play for you what he had to say. He basically said the US has nothing to fear from China's open source AI models.
>> These China Chinese models are excellent uh open- source models that are excellent should be used. And so the markets misunderstood the impact of deepseek the first time. It's misunderstood Chinese. Yeah. It's it's misunderstood the impact of Kimmy again this time. I think first of all with great AI open models it's great for the whole industry. Obviously when there's more if there's great AI even if it's open uh wherever it comes from there will be more use. Whenever there's more use you'll have to sell a lot more Nvidia computers. We'll have to build more data centers. will have more services. The technology will diffuse into more industries. And so starting point is great models lead to great use which leads to great growth.
>> So interesting that he's talking about that because a couple things stand out to me, Dan. One, um it's good for Nvidia if there's more use of of AI. Um, two, you know, Nvidia has stakes in a lot of the companies that will be competing with the open source models out there.
Um, so in that way, it's not necessarily in their financial interest. And three, he doesn't even touch and maybe he does elsewhere in the interview to be fair.
Um, he doesn't even touch the Chinese security concerns about these open models. Yeah, I think one of the things to keep in mind with these open open models is they're they're open weight so that you can you can make certain adjustments but not, you know, fully kind of go in and and kind of tool with it on your own. You can customize it to a degree. One of the things that's uh noteworthy about open- source software is that so many people because it's open source uh usually are messing with it that they're addressing cyber security issues on the spot. So, you know, that's what makes open- source software so kind of secure. It seems stupid because you're like, well, everybody has access to it. Why would it be safe? But it's because everybody has access to it that it is. They're all, you know, trying to ensure that it's it's not, you know, something that people can can break. Um when it comes to what Jeden said uh on the you know uh Deepseek versus Kimmy uh K3 is you know kind of what what they continue to say is I if it becomes easier to run models more people will buy our our hardware because they'll want to run more models. So that the thinking is okay, we have more companies that can afford to run models or get access to models. They're going to need to power that somehow and they'll use our soft hardware. The other flip side of that is that uh his his regular uh kind of uh approach is the more hardware you put behind a model, the better the responses are. So in other words, the the you know, the bigger the engine, the faster the car goes. uh that's what what he's regularly applying to these kind of AI models as well. So, you know, I I don't I don't see this as as necessarily a negative for Nvidia. Um but, you know, I think it it kind of leads to the question of how far into this argument can go because of the geopolitical implications. You know, Nvidia is trying to get back on sale in China. China is saying maybe some companies will take this. the US has, you know, banned certain chips, then kind of flipped on that. And so it's it's interesting to see him kind of go out and and talk about this kind of stuff. Yeah. It's crucial to his business, but also, you know, could raise uh could be like kicking a hornets's nest uh in Washington.
>> Yeah. And then finally, just quickly here, AMD is signing a new deal with Anthropic. That's according to a report from the Wall Street Journal. I believe AMD is having some sort of event. So talk talk to me about what's going on there.
Yeah, AMD announced this uh this morning. Uh there it's a 2 gawatt deal.
It will use uh what's known as their Helios uh rack scale solution. This is their first true competitor to what Nvidia has to offer. Nvidia has yeah the Grace Blackwell, the Ver Rubin, but those are slotted into what's called their NVL 72 rack scale system.
Basically, the 72 stands for the fact that there's 72 GPUs in this whole rack.
It's a lot of GPUs. Helios does the same thing. It has 72 of uh AMD's own Instinct uh MI400 uh series GPUs uh MI450, excuse me. Uh as well as you know CPUs, things along those lines. Uh it's a true competitor and so it's a big deal that Anthropic is going in on this. Uh Meta's also announced similar deals. Uh and we saw uh Microsoft uh announce a deal as well.
But also uh a part of this is this kind of continuing conversation about circular investing. Uh AMD will invest5 billion dollars uh into sorry my cats decided to make a little appearance.
>> We'll announce uh will invest 15 uh five $5 billion uh into uh anthropic and so it continues to raise that okay if one piece of this chain falls how badly does that impact the entire industry and what kind of cascading can it have?
>> Yeah we will see thank you so much appreciate it. Coming up, the rise of thematic funds in the [music] ETF market. We're going to talk about it next [music] [music] Heat. Heat.
[music] [music] Heat. Heat. N.
>> [music] [music] [music] [music] [music] [music] [music] [music] [music] >> Thematics are seeing a surge in ETF inflows this year, particularly anything having to do with tech. My next guest says investors are riding the tsunami of thematic ETFs as new funds and inflows flood the market. Joining me now Dave Nate, president of ETF.com for this week's ETF report brought to you by PIMCO. Good to see you Dave. So, how there were a lot of thematic ETFs out there before? Right. So, what has changed this year that has created this tsunami both on the supply and the demand side?
>> Well, if we're going to pick one poster child for this, it would probably be DRAM, right? The Round DM memory ETF went from 0 to 25 billion almost overnight. I mean, certainly eclipsed anything we've ever seen like that before. And as such, we've had a a bunch of follow on ETFs there. We've had 70 new filings for thematic ETFs, most of them techoriented. Just in the last two weeks, we've had about uh 28 billion flow into the 125 semiconductor ETFs.
Just that narrow little niche has pulled in about 28 billion. and about a h 100red billion overall into broad tech this year. So all of that money is chasing a handful of themes. Most of it is obviously AI related. That's where this connects the dots. But we've also seen other thematic funds launch from upstarts like Corgi looking at new uh sort of new cheaper ways of accessing these markets. And we've seen lots of the traditional players in the space like the Round Hills, the Black Rockcks, lots of folks showing up with new products trying to chase really the headlines, >> chasing the headlines and garnering in some cases flows. But as we all know, when you get this wave of issues, they don't all survive. So what's characterizing? I mean, you know, DRAM sort of had the first mover advantage. I guess that's why that one was so successful in particular. But what's going to distinguish the winners and losers among that that big big crop?
>> Well, you point out that, you know, that was a bit of a lightning in a bottle, you know, launch for something like DRAM. And this is a bit of a problem we have in this industry. You can go back to something like the Bitcoin launches where we had a handful of products come out and get real traction, but we also had maybe a dozen products that have really languished and haven't pulled in hundreds of millions of dollars and haven't become profitable. We're seeing the same thing in the tech space. We had 49 funds closed just last month. Uh a lot of those were things like leverage funds that got over their skis, income products targeting a lot of these themes. uh the core uh beta equity products here. We haven't really seen the graveyard yet. We haven't seen a rash of these things close. Most ETF issuers want to let these funds season for at least a year or two to catch that lightning if they can. Uh so I would expect that the flood of closures will actually be a 2027 story. Right now investors just have to hang on for all the new funds.
>> Well, that's what I was going to say.
you know, do you do you think this will keep going and like how what has been a what has allowed the industry to get faster with some of these issues?
>> Oh, well, in 2019, we passed a new rule called the ETF rule or 6C11, which streamlined this whole process. So, if you're launching something as sort of traditional and plain vanilla as a collection of stocks to track an index, uh that is now really trivial in an ETF, maybe a hundred,000 bucks, you can get that out if you're already in the business. So it's not a giant lift to launch your own ETF. Now keeping it open still takes some money. You got to pay the fund accountants. You got to pay the the portfolio managers. So you still need flows to support that. But getting a product to market has absolutely never been easier. And that makes the job of an investor trying to pick and choose really difficult. You really do have to read things like the perspectus these days to understand what you're buying with a lot of these new products. Um, speaking of that 2019 rule change, um, there was a a Bloomberg story um, about ETFs that highlighted what are called 351 conversions and a rule change the rule change in 2019 also made these possible where it's basically like repackaging of wealthy people's portfolios to save them paying as much in taxes. Um, and you know, I'm just curious, you know, do you think it's going to get more regulatory scrutiny?
Is this something that is just a growing area that's going to continue to grow?
What do you think about it? Well, look, the ETF industry has always pushed the boundaries, right? We've always pushed the edges to see what you can get away with to save investors more money. It's always been in that that vein. Save investors on taxes. Save investors on fees. Save investors money on transactions. So, as we push the edges of this, we've run into these corners of the tax code. Now, the IRS has come out or the Treasury's come out and said they have some concerns about how these 351 exchanges are working. They're not really a tax dodge. They're really just a way of taking portfolio A and turning it into portfolio B. You still have to own it for a while. You still keep that t tax basis. So I I see this as kind of an edge case for the very real but small case where you've got a portfolio that has the wrong composition that you've got low basis on. If the IRS comes back and steps on that and says you can't do it, that's fine. They're allowed to do that. The problem I have is what we're getting is a kind of a lot of hemming and hawing and you know they made some announcements at a conference but then they wouldn't answer direct questions.
This is a place we need regulatory clarity and at the moment we've got regulatory mud.
>> Any expectation that cl that clarity is forthcoming.
>> Uh I don't really think so. The SEC's got a lot on their plate right now.
They're underst staffed. They're going to be down to basically nonfunctional in November when Hester Pur leaves. Um they they won't actually have a commission that can have meetings. they'll be under quorum. So, the idea that we're going to get actual rulemaking from the SEC seems very unlikely. The IRS needs a full-time commissioner as well. So, I think it's unlikely we're going to see big regulatory clarity on any of these. I hope we'll get maybe some guidance for filers by the end of the year.
>> Gotcha. Dave, great to see you. Thank you so much.
>> Thanks for having me.
>> And that is it for Market Catalyst. I'm Julie Hyman. Thanks for watching. More [music] finance is coming up.
Heat.
Heat. [music] [music] >> [music] [music] [music] [music] [music] [music] [music] [music] [music] [music] [music]
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