Rates Back On The Rise… And Used Car Market Shifting Into Reverse 10/7/26

Delta Air Lines

• Michael Khouw · OpenInterest.PROBullish

  Delta is the best airline to own because its own refinery cushions it against oil price swings.

  Options imply about a 5% move around earnings, and call buying has run about four to one over puts for 20 days. Mike likes Delta best among airlines. Owning its refinery gives it more immunity to the oil situation, which affects all airlines, and it is the best operator in the space.

  “I do, actually. Among the airlines, I like this one best... They have more immunity to the oil situation because they own their own refinery.”at 43:42

• Steve Grasso · Grasso Global Inc.Bullish

  Delta hedges fuel through its refinery, which profits from high crack spreads, so it is the airline to own.

  Nobody hedges fuel anymore except Delta. Owning its refinery gives it a hedge by proxy. Refiners have been taking in money on crack spreads hand over fist, so the refinery offsets Delta's fuel costs. That makes Delta the airline to own.

  “Delta is the only one that by proxy owning that refiner has the hedge, and refiners have been taking in money on the crack spreads hand over fist. So if you're gonna own one, would own Delta.”at 44:38

• Tim Seymour · Seymour Asset ManagementBullish

  Delta is resilient into earnings, runs better capacity discipline, and looks cheap.

  Tim thinks Delta will hold up into earnings and, more importantly, runs better capacity limits. He argues that if you are betting on an eventual drop in oil prices, you should stay with a company that keeps growing gross margin and has operational discipline. He says it is the best-in-breed airline and that the stock looks cheap.

  “Delta flying high, and I do think resilient into earnings but more importantly run better capacity limits. I think it's cheap.”at 45:39

Space Exploration Technologies

Across the shows: 3 speakers in other episodes, 4 bullish and 1 bearish calls, past 30 days

• Steve Grasso · Grasso Global Inc.Bullish

  SpaceX's debt is backed by fast revenue growth and customer prepayments, so the market will buy it.

  Grasso says SpaceX's revenue nearly doubled last quarter, and the new debt is used to buy free cash flow assets. Anthropic and Google are already paying SpaceX about $26 billion, which covers the debt. He says that without customers the debt would be worrisome, but the market is now focused on the fundamentals and will buy the stock back.

  “revenue last quarter nearly doubled, and the debt is to buy free cash flow assets. So Anthropic and Google are already paying them. So on their debt, they've got 26,000,000,000 already coming in”at 31:58

• Tim Seymour · Seymour Asset ManagementBullish

  SpaceX is executing well on Starship, which he finds incredibly impressive; the selloff is technical.

  Seymour points to Starship Flight 14 and roughly four booster recoveries in a couple of weeks as evidence the company is executing well. He calls that incredibly impressive, and says the recent share pullback is about technicals such as overhang and the unwinding of locked-up positions and index additions, not the business.

  “They've been executing... In fact, I think it's actually incredibly impressive. So I I understand this has been a story about technicals. It's been about overhang.”at 32:27

iShares 20+ Year Treasury Bond ETF

Across the shows: 2 speakers in other episodes, 1 bullish and 1 bearish calls, past 30 days

• Michael Khouw · OpenInterest.PROBullish

  Options positioning in TLT is turning less bearish, hinting the long-bond selloff may be ending.

  Khouw points to TLT options flows. Put volume, already well below call volume, fell further and sat about 30% below its 20-day average. He reads this as bond investors using TLT beginning to think the sharp rise in long yields may be coming to an end, since bond prices move opposite to rates.

  “options flows were significantly less bearish today than they have been. Saw put volume... It was probably about 30% below the twenty day average, which suggests... maybe there's an end in sight to the sharp raise in the tenure.”at 16:54

Zillow Group

• Karen Finerman · Metropolitan Capital AdvisorsBearish

  Zillow is struggling because its business depends on housing transaction volume, which is weak.

  Finerman says Zillow's performance is clearly tied to the number of housing transactions, which matters to its business. Because it needs volume, and home sales are weak under higher mortgage rates, the stock is not doing well on the chart.

  “It's clearly tied to the number of transactions. That's important for them.”at 24:24

Cloudflare

• Steve Grasso · Grasso Global Inc.Bullish

  Cloudflare should gain as agentic AI traffic grows, since it collects a toll on about 20% of the internet.

  Grasso argues that the more AI agents there are, the more cybersecurity is needed, and the companies that are paid like tollbooth collectors benefit most. He points out Cloudflare handles about 20% of global internet traffic and says it should catch up to Palo Alto, which gets more attention. He has been long Cloudflare for about a month.

  “the more agents you have, the more cybersecurity that you need, and you have to look at the ones that get paid as a tollbooth collector. So I'm in Cloudflare. I've been in Cloudflare for about a month now”at 27:00

Oracle

Across the shows: 4 speakers in other episodes, 0 bullish and 3 bearish calls, past 30 days

• Michael Khouw · OpenInterest.PROBearish

  Oracle's debt issuance to fund AI is the one that makes him most nervous.

  Khouw compares AI-linked debt deals. SpaceX's $40 billion is not much for a company valued around $2.2 trillion, and implied volatility only ticked up. Of the names mentioned, Oracle is the one that makes him more nervous about its debt issuance for AI build-out.

  “If I look at debt issuance and you had a couple names up there before, the one that gets me a little bit more nervous would be Oracle over this one.”at 31:51

Carvana Co.

• Michael Khouw · OpenInterest.PROBearish

  Carvana is effectively a finance company, and high used-car loan rates pressure its payment-focused buyers.

  Mike thinks of Carvana as largely a finance company. The average used-car finance rate is around 11%, not counting prime borrowers. Like housing, many buyers shop on monthly payments rather than price, so higher rates squeeze them. He says he is not crazy about Carvana, and Steve Grasso agrees that the pressure will persist.

  “I'm not real crazy about Carvana either. I mean I think of Carvana as kind of a finance company, right?”at 37:23

Ford Motor Company

• Steve Grasso · Grasso Global Inc.Bullish

  He would buy Ford, as its pricing holds up on high-margin trucks even as used-market dynamics flip.

  The auto market is inverted: EVs are wanted in the used market but subsidized new, while Ford's new-car finance deals are around 0% and some models carry 7.5% rates. Ford is passing cost increases through on high-priced diesel Super Duty trucks sold to fleets, which he sees as holding up well. On that basis he would be a buyer of Ford.

  “But when you look at the used market, it's on its head. I'd be a buyer of Ford.”at 38:35

General Motors Company

• Tim Seymour · Seymour Asset ManagementBullish

  GM is cheap at under six times earnings, pays a dividend, and keeps getting more profitable.

  Tim says Ford and GM are trading very well given what is happening in industrials, and new-car sales have been resilient for months. GM trades at a probably low-five P/E, pays a dividend, and has done a lot to become more profitable. He says he has held GM for a long time, though Karen Finerman says she is no longer in it.

  “Gets back to GM is a company that less than six times, it's probably low five PE handle and is paying a dividend and has done a lot of great things to become more profitable. That's where I've been for a long time.”at 39:05

Alphabet

Across the shows: 5 speakers in other episodes, 3 bullish and 2 bearish calls, past 30 days

• Karen Finerman · Metropolitan Capital AdvisorsBullish

  Alphabet has lagged recently, but its valuation is attractive.

  Alphabet has not participated much in the recent rally, and Karen thinks its valuation is attractive. She offers no specific multiple or earnings evidence, so the case rests on the lagging performance and the view that the price is cheap.

  “I like Google hasn't really participated so much recently but I think valuation is attractive.”at 45:46

US Treasuries & yields

• Steve Liesman · CNBC

  Rising long yields are driven by heavy AI-related debt issuance, not by inflation expectations.

  Liesman asks whether the rise in the 10-year is driven by growth or issuance, and answers issuance. Inflation expectations look calm (5y5y forwards), yet yields keep rising alongside oil, which doesn't fit an inflation story. He points to a large wave of AI-linked debt issuance. He argues that large AI borrowers barely care about a quarter point of rates, while landowners preparing sites for data centers care a lot, so the rate move matters most to the people at the bottom of the AI build-out.

  “I'm gonna say yes, and I think I'm gonna be mean, I think it's issuance. You've got a lot of issuance coming from AI”at 5:03

• Tim Seymour · Seymour Asset Management

  Japanese life insurers repatriating funds at higher JGB yields is a key risk for Treasury financing.

  Seymour says Japan has been a major financier of US and global deficits, and Japanese investors have been a big buyer of Treasuries. Yields in Japan are now more attractive, and real money has less reason to hold foreign debt. If Japanese life insurers and other real money lock in higher returns at home, the US Treasury loses a key source of funding, which is the risk he sees.

  “So to me, the story is as much about concern when Japanese life insurance and real money decides to come back home to Japan and say, I will lock in on [3.20%] in a ten year JGB. That is the risk for the treasury.”at 10:16

• Steve Liesman · CNBC

  Leveraged bond traders are offside, and Treasury yields may need to rise further near term.

  Liesman says hedge funds have increased their Treasury holdings and use leverage, so they are exposed and often forced in and out of positions. The MOVE index shows volatility near levels last seen around Liberation Day tariffs. Because traders are offside, he doesn't think the move has to reverse soon and says yields feel as though they need to go higher in the short term.

  “people are very offsides in these trades. And in the short term, I don't know that that any of this has to change. In fact, it it feels like it needs to go higher.”at 12:44

• Jim Bianco · Bianco Research, L.L.C.

  Five-to-30-year yields around 5% are fair value, so Bianco has moved back into bonds.

  Bianco says the 5-to-30-year part of the curve yielding 5% or more for the first time in twenty years reflects the economy: roughly 3% inflation plus 2% real growth gives a nominal rate of about 5%. He calls that fair value, and after six years of bearishness he has begun moving back into bonds, starting from the five-year point and out.

  “that's fair value. And that's why after six years, I finally said, okay, now is the time to start moving back into the bond market.”at 17:46

US stock market outlook

• Tim Seymour · Seymour Asset Management

  Industrials, staples and consumer discretionary will keep underperforming in a higher-rate environment.

  Seymour says interest-rate-sensitive sectors are heading lower, and he expects industrials, staples and consumer discretionary to continue to underperform while rates stay high. He notes that industrial names tied to the AI build-out are in relative trouble, even after a strong run.

  “I do think industrials, staples, consumer discretionary will continue to underperform in a higher rate environment.”at 15:35

• Michael Khouw · OpenInterest.PRO

  Mega-cap tech is well placed to handle higher rates because it doesn't rely on borrowed money.

  Khouw says the leading mega-cap companies generate massive cash flow and don't depend on borrowed money, so higher rates don't hurt them much. He notes that a lot of that cash is being spent on capex rather than reaching free cash flow, but he says that spending is largely discretionary, which still leaves them in a good position.

  “a lot of the leading trades that we have seen especially from the mega cap companies many of these are generating massive amounts of cash flow... They don't depend on borrowed money. And so they're in a fairly good spot when you think about where rates are.”at 16:04

• Steve Grasso · Grasso Global Inc.

  Large-cap tech earnings are outrunning higher discount rates, so stocks and bonds can both rise.

  Grasso says bonds aren't hurting equities right now because earnings have outpaced the discount-rate effect for large-cap tech. With little competition from bonds for capital, both stocks and bonds can rise together, even though the auction caught people off guard.

  “for now, earnings have trumped the discount rate for large cap tech. So when you're looking at it, there's not any real competition. So both of them can move up at the same time.”at 22:18

Europe's economy

• Tim Seymour · Seymour Asset Management

  Bond vigilantes are targeting France and Italy, and the pressure will persist until clarity emerges.

  Seymour argues that bond vigilantes are going after France and Italy, and the Bund and sovereign spread pressure in Europe is visible when European trading hours end and the Treasury market rallies. He expects this pressure to continue until there is clarity on European sovereign credit.

  “Bond vigilantes are going after France and they're going after Italy. And that's gonna continue until we get some clarity even on,”at 11:19

• Steve Liesman · CNBC

  France is not the new Greece; its wealth makes sovereign default fears overdone.

  Liesman says the market narrative that France resembles Greece is wrong. France has far more wealth than Greece, so it has more capacity to service its debt. He acknowledges a blowout in French yields and a flight to US Treasuries, and warns that people may be too offside in sovereign trades, but he does not see France as a default candidate.

  “people wanna sell this story that France is the new Greece. France is not the new Greece. Okay? There's more money in France.”at 14:34

Credit markets

• Jim Bianco · Bianco Research, L.L.C.

  AI-related hyperscaler borrowing is re-leveraging corporates, but the market can absorb it.

  Bianco notes corporate debt as a share of GDP has been falling for fifteen years, so corporates have deleveraged. Now the hyperscalers and the broader AI trade are re-leveraging, which adds to the margin. He argues the market can handle it because the bonds carry higher yields and higher expected returns, and the market is not seizing up.

  “Corporations have been deleveraging for a long time. So now we're getting one sector, maybe the hyperscalers... is releveraging itself. Okay. I think the market can handle that.”at 19:04

• Jim Bianco · Bianco Research, L.L.C.

  Higher rates are starting a credit cycle in the lowest-rated CCC credits, a watch-list risk.

  Bianco says CCC spreads are rising, while single-B credits are unchanged. The CCC companies, including gaming, over-levered cable and lottery operators, refinanced at much lower rates, and now the market fears they cannot refinance at higher rates. He does not see it as a problem for now, but says it is on his watch list if rates keep rising and companies must refinance maturing debt at higher rates.

  “I think you're just gonna start seeing your credit cycle, and you're seeing it in the lowest rated credits in the triple c credits.”at 20:47

Autos & EVs

• Phil LeBeau · CNBC

  Used car market is healthy but not robust; prices slipping, while EVs and small cars rise.

  LeBeau cites the Manheim used vehicle index, which fell 0.6% year over year, the first decline since early last year, led by pickups and SUVs. The average used price is around $27,000, so the market is not cratering. EV and small car prices rose 4.3% year over year in September, showing those are the strong segments. He links the sluggish overall market partly to the first September since 1994 without an East Coast hurricane, which usually boosts replacement demand for flood-damaged vehicles.

  “Bottom line is this, Melissa, it is a relatively healthy market, but not a robust market where people are moving into new vehicles or moving into used vehicles at a big clip.”at 35:50

• Phil LeBeau · CNBC

  New-car demand is holding up better than expected, and automakers are restraining supply, so fewer trade-ins.

  New-vehicle sales hold around 16.2 million units annualized, a little better this year than many expected. Automakers are being judicious and not adding supply beyond what the market wants. Because the new market drives the used market, fewer owners are trading in vehicles, and one dealer called it an 'okay' market.

  “the demand holds around 16,200,000 vehicles in terms of an overall sales rate. That's actually a little better for this year than many people were expecting.”at 36:30

US rates & the Fed

• Steve Liesman · CNBC

  The Fed has at least one more rate hike left this cycle, despite officials signalling patience.

  The minutes show most officials think another hike this year is appropriate as insurance against persistent inflation from supply shocks and strong demand. Several members saw policy as only mildly restrictive. Inflation is still above target with upside risk, and the labor market is near full employment. Markets price about 17% odds of an October hike and 82% for December, and the two-year yield sits about 90 basis points above the funds rate, which Liesman says means something must give. He concludes the Fed is more likely to need another hike than to stop.

  “What's your bet on what resolves? How it resolves? I I think there's at least one more hike left in the Fed”at 3:32

US deficit & government debt

• Steve Liesman · CNBC

  US debt risk is a political problem, not a financial one; the US can afford its debt.

  Liesman argues US debt is around 100% of GDP, but the US has ample capacity: banks' coverage ratios are four to six times, so the country has plenty of resources. The real challenge is political will to use that capacity to pay down debt and to address the large bill coming from retirement and healthcare costs. He rejects default fears, noting that people who bet against sovereign default have often made money.

  “Ultimately, what we are talking about is a political problem, not a financial problem.”at 11:37

US growth & recession risk

• Michael Khouw · OpenInterest.PRO

  A healthy US economy can sustain high rates, and the jobs picture is fairly good.

  Khouw compares today's rate level with the late Clinton era, when rates were this high and the economy was healthy. He says the economy can sustain this level of rates, and the current jobs picture is fairly good, so he thinks the market is alright on that score.

  “And a healthy economy can sustain this. And right now, jobs picture is fairly good.”at 16:37

US housing

• Michael Khouw · OpenInterest.PRO

  Housing stays stuck until home prices fall steeply enough to match current affordability.

  Khouw says higher rates are slowing homebuilding and existing-home sales, which feed home-improvement sales. He notes that some areas have seen price declines, but prices haven't fallen far enough for a house once priced at 650,000 to be affordable at 450,000. Until prices reflect the rate-driven affordability gap, the housing market will keep struggling.

  “And so these higher rates are really... I'm not exactly sure at what point we get to see this alleviated. We really need to see a pretty steep correction in home prices.”at 23:56

AI regulation & safety

• Nikesh Arora · Palo Alto Networks

  AI safety is an engineering problem; the race is won by deploying fast with guardrails.

  Arora argues that safety and security are an engineering challenge that can be solved, as much as building frontier models is. He says the superintelligence race will not be won unless AI is deployed quickly with the right safety and security guardrails in place.

  “It's as much of an engineering problem as it is to build these amazing frontier models. I think we're not gonna win the superintelligence race if we don't focus on making sure this stuff gets deployed at speed but with the right safety and security guardrails.”at 26:33

Cybersecurity

• Tim Seymour · Seymour Asset Management

  Cybersecurity demand is real, but valuations like CrowdStrike at 125x forward make him cautious.

  Seymour believes in the cybersecurity trade and the demand, and says security names held up well even when software was under pressure. The difference from semis and memory is that valuations are expensive: CrowdStrike trades around 125 times forward and Palo Alto around 95 times. He says he is cautious and is writing calls against his long positions because the stocks may be called away.

  “I believe in the trade. I believe in the demand. What's different about this... The valuations are really expensive. CrowdStrike's 125 times forward.”at 27:50

Healthcare system & insurers

• Steve Grasso · Grasso Global Inc.

  GLP-1 drugs may extend lifespan by reducing inflammation, the source of many diseases.

  Steve argues that GLP-1s are an answer to inflammation, which he calls the source of many diseases that cause premature death. He also says the open question is whether the effect comes from the drug or from weight loss in general. The early data Melissa describes is not a formal study.

  “GLP-1s are an answer for inflammation, which is the source of a lot of diseases, which cause premature”at 41:38