Gary Cohn & Chris Sununu: The Fed, AI, & the Midterms 10/29/26

Anthropic

Across the shows: 70 speakers in other episodes, 74 bullish and 55 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookBearish

  Anthropic's business model has no moat, and the AI chain depends on its health.

  Eisman argues the AI chain, from chips to hyperscalers, depends on Anthropic and OpenAI being healthy, and he is convinced their models lack moats. Sorkin relays that Eisman is worried about reported slowdowns and discounting at Anthropic ahead of Q3 numbers, which is why he is wary of the broader market.

  “the whole chain depends upon the health of Anthropic and OpenAI, at least at this point. And they have business models that I am quite convinced have no moats.”at 24:11

• Gary Cohn · IBMBearish

  Anthropic looks like a commodity business with no lasting moat, facing price competition.

  Cohn groups Anthropic with OpenAI as foundation-model businesses in a highly competitive, commodity-like market where advantages last about seven days. Competition on price and rising data center supply, plus efficient open-weight models, mean less pricing power, and discounting for term contracts is what a commodity seller does.

  “They're in a highly competitive business. To me, they look like they're in a commodity business. No one really has a competitive advantage for more than, I don't know, seven days.”at 25:13

OpenAI

Across the shows: 27 speakers in other episodes, 13 bullish and 21 bearish calls, past 30 days

• Steve Eisman · The Real Eisman PlaybookBearish

  OpenAI's business model has no moat, and the AI chain depends on its health.

  Eisman says the whole AI chain, from Nvidia to hyperscalers, depends on the health of Anthropic and OpenAI at this point. He is quite convinced their business models have no moats, which makes the chain fragile. Andrew Ross Sorkin relays that Eisman has heard of a possible Q3 slowdown and discounts to keep selling.

  “the whole chain depends upon the health of Anthropic and OpenAI, at least at this point. And they have business models that I am quite convinced have no moats.”at 24:11

• Gary Cohn · IBMBearish

  OpenAI looks like a commodity business with no lasting moat, facing price competition.

  Cohn says frontier labs are in a highly competitive, commodity-like business where no one keeps an edge for long, since rivals' models learn from and catch up to each other. Historically commodity businesses earn poor returns and compete on price. Open-weight models are more cost-efficient and let users protect data, and more data centers add competition, so labs are racing to lock in capacity and term contracts.

  “They're in a highly competitive business. To me, they look like they're in a commodity business. No one really has a competitive advantage for more than, I don't know, seven days.”at 25:13

Southwest Airlines Co.

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Chris Sununu · Airlines for AmericaBullish

  Southwest is still doing great into the holidays as travel demand holds despite fuel costs.

  Sununu says Southwest, along with Delta, American and JetBlue, is still doing great going into the holiday travel period. He points to rising revenues and bookings across the carriers and says people are still buying tickets. Higher fuel prices are a headwind he attributes to the energy shock tied to the Iran war, but he argues demand is strong enough to offset it. He also cites near-record use of credit-card points and loyalty programs for free and discounted tickets as a sign of continued travel interest.

  “Delta, American, JetBlue, Southwest are still doing great going into the holiday.”at 43:06

Delta Air Lines

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

• Chris Sununu · Airlines for AmericaBullish

  Delta is still doing great into the holidays as travel demand holds despite fuel costs.

  Sununu says Delta, American, JetBlue and Southwest are still doing great going into the holiday travel period. He points to rising revenues and bookings across the carriers and says people are still buying tickets. Higher fuel prices are a headwind he attributes to the energy shock tied to the Iran war, but he argues demand is strong enough to offset it. He also cites near-record use of credit-card points and loyalty programs for free and discounted tickets as a sign of continued travel interest.

  “Delta, American, JetBlue, Southwest are still doing great going into the holiday.”at 43:06

American Airlines Group

• Chris Sununu · Airlines for AmericaBullish

  American Airlines is still doing great into the holidays as travel demand holds despite fuel costs.

  Sununu says American, along with Delta, JetBlue and Southwest, is still doing great going into the holiday travel period. He points to rising revenues and bookings across the carriers and says people are still buying tickets. Higher fuel prices are a headwind he attributes to the energy shock tied to the Iran war, but he argues demand is strong enough to offset it. He also cites near-record use of credit-card points and loyalty programs for free and discounted tickets as a sign of continued travel interest.

  “Delta, American, JetBlue, Southwest are still doing great going into the holiday.”at 43:06

JetBlue Airways

Across the shows: 6 speakers in other episodes, 1 bullish and 5 bearish calls, past 30 days

• Chris Sununu · Airlines for AmericaUncertain

  JetBlue's revenues and bookings are up, but fuel costs are crushing margins.

  Asked about including JetBlue in his list of strong airlines, Sununu says its revenues are up and bookings are up at almost all carriers, including JetBlue. He concedes that fuel prices are crushing airline economics. He says the carriers did not cause the fuel spike, which he ties to the Iran war, and that jet fuel and labor make up over half of costs. Despite that margin pressure, he argues people are still buying tickets, including through credit-card points and loyalty programs.

  “Their revenues are up on all of them. Bookings are up on, I believe, almost all of them. It's just that fuel prices are up... all prices are crushing them.”at 43:31

US inflation

• Steve Liesman · CNBC

  Inflation is in the pipeline and won't clear even if oil flows normally.

  Liesman argues that even if the oil supply normalizes, the Fed has to contend with inflation in the pipeline. He points to the PPI, where unprocessed and processed intermediate goods show a lot of inflation, so the supply shock may become the normal situation.

  “My concern is that there's inflation in the pipeline here.”at 11:02

• Gary Cohn · IBM

  Energy inflation turns zero to negative within six months on year-over-year base effects.

  Cohn argues that the Fed and the market judge inflation year over year. Oil prices from last spring are the base, so moving the calendar forward roughly six months (and by end of Q1 next year, oil inflation would be zero) means energy inflation falls to zero or negative, even though refined products remain elevated.

  “If they're solving for year over year, if we move the calendar forward six months, energy inflation will be zero to negative.”at 18:13

• Gary Cohn · IBM

  Current inflation is supply-driven, not demand-driven, so rate hikes won't fix it.

  Cohn contrasts today's inflation with post-COVID transitory inflation, when too many dollars chased too few goods. Now there is no demand-side excess; the problem is a lack of goods, so industrial policy and the Fed's blunt tools do little to solve it.

  “So we do not have too many dollars chasing too few goods... Today, we have a lack of goods out there.”at 22:57

US rates & the Fed

• Steve Liesman · CNBC

  The Fed will definitely hike in December, as markets have priced in.

  Liesman says Chair Warsh signaled a December hike if the data support it, and the market heard that and priced it: futures showed about an 85% chance of a December hike and 66% for March. Critics argue the Fed failed to give a coherent reason not to hike in October, which increases the case for tightening.

  “I think we're definitely getting a hike in December. That's what the market heard and that's how they're priced.”at 6:12

• Gary Cohn · IBM

  Data will lead the Fed to hike in December, though it remains data dependent.

  Cohn says the Fed is data dependent but expects the incoming data to lead to a rate hike. He argues the Fed is fairly confident it can tackle inflation over time, while noting the Fed's few levers do not produce oil or lower food prices and would raise mortgage rates in a housing-constrained market.

  “I believe it's data dependent, but I think the data will lead to a hike.”at 17:05

US elections & politics

• Gary Cohn · IBM

  Midterm outcome is nearly impossible to call, with polls and betting markets repeatedly wrong.

  Cohn says polls were dead wrong in the last two elections, and betting markets were wrong on Israel and Brazil, and Trump-era polling has been wrong before. So he can't say what happens. Whatever the result, it will drive policy in the lame-duck session, with the debt ceiling and funding deadlines, and a possible Republican reconciliation package.

  “If you look at the last two predictions of elections over the last week, the polls were wrong. They were just dead wrong.”at 19:07

• Chris Sununu · Airlines for America

  Polls and prediction markets are unreliable; pollsters still behave like it's 2015.

  Sununu argues prediction markets are worse than polls because the public feeds off what the media reports, which exacerbates the polls. He finds it most shocking that pollsters are still polling as they did in 2015, and he says no one has found a good way to get at how Americans decide.

  “What the most shocking thing I find is that we're still polling like it's twenty fifteen.”at 36:06

Oil & fuels

• Gary Cohn · IBM

  Refined product prices will stay elevated and feed into food and agriculture costs.

  Cohn notes the crack spread has widened dramatically and refined products are what the US consumes. Even as time helps, refined products will be higher than before, and that feeds into food, agriculture and essentially everything else, so the cost pressure won't go away.

  “You're right that the refined products will be higher than they were, and that feeds into... It feeds into food. It feeds into agriculture.”at 18:45

AI infrastructure & data centers

• Gary Cohn · IBM

  Data centers will be overbuilt, causing a glut and failures before equilibrium.

  Cohn says capacity is catching up to demand now, which is a peak of overinvestment, and once it catches up there will be equilibrium, but history shows the US overbuilds. He draws a fiber-optic analogy: the late-1990s builders did not survive, while later owners profited. Second or third owners will buy data centers at deep discounts to today's compute cost, and some current builders will fail.

  “We will go through a glut. Some of these companies will not make it.”at 28:35

AI & jobs

• Gary Cohn · IBM

  AI productivity gains will compound across finance, healthcare, transport and logistics.

  Cohn argues AI creates efficiency for companies that actually do things, driving productivity and economic growth, and that this time the build-out is much bigger than past capex waves. He sees efficiency gains in financial services, healthcare, transportation, infrastructure and logistics that could compound across the economy, though winners and losers remain unclear.

  “What does AI do? It creates efficiency. For the companies that actually do everything. Productivity, economic growth.”at 29:06

US deficit & government debt

• Gary Cohn · IBM

  US debt is $40 trillion and growing, with no sign of spending cuts from either party.

  Cohn says the US debt is about $40 trillion and growing, with no sign that either party will stop or curtail spending. He warns that a debt problem would hit pension funds, endowments, mutual funds and retirement accounts that hold this debt, and that low recoveries would dramatically reduce US consumption power. He notes the government would struggle to write a check this large, bigger than the mortgage-crisis bailout.

  “You can't deny that we're [$40 trillion] in debt and growing. And there's no signs on either side of the aisle that we're gonna stop spending.”at 31:41

US entitlements

• Gary Cohn · IBM

  Social Security trust fund will likely need deficit financing within five years.

  Cohn says the US is within a five-year window of having to deficit-finance the Social Security Trust Fund, because lawmakers will not cut benefits to retirees. This adds to the government's borrowing needs alongside a growing debt load.

  “the Social Security Trust Fund, which we know we're within a five years window of having to... Most likely deficit finance Social Security Trust Fund because we're not gonna cut benefits to retirees.”at 31:57

US Treasuries & yields

• Gary Cohn · IBM

  Government and AI data center borrowing demand is steepening the yield curve.

  Cohn argues the demand for capital to fund the US government and the capital needs of AI data centers drive forward markets, creating a dislocation between fed funds and the two-year and the curve is steep. The ten-year has stayed around 5% despite this.

  “the demand for capital to fund the US government, the demand for capital in the AI data centers, it is what is driving the forward market and why there's a dislocation.”at 32:06