Biggest Earnings Report this quarter. What is at stake when nvidia delivers results tomorrow . Im melissa lee, coming to you live from studio b at the nasdaq. On the desk tonight tim seymour, karen finerfinerma steve grasso, and guy adami. And we begin with a staggering result. 103 million americans cannot afford a newly built home. Thats 30 million plus since 2021. We just got results from Toll Brothers, which beat earnings andsales estimates and raised fullyear delivery guidance. That stock is higher by a percent. For more on both these stories, lets bring in diana olick. First, that pop in toll. Yeah, toll did really well, beat expectations, but i have to say, Toll Brothers are not emergency dependent. In fact, theyve said that 25 of toll buyers buy in all cash, so, even though Mortgage Rates went up, you didnt see the effect that you may see on some of the other Home Builders. But you were talking about affordability. Lets get to that. When you combine higher home prices with higher Mortgage Rates, the sum total is a whole lot of pain for potential home buyers, especially those who want to buy new construction. So, home prices overall nationally are 46 higher than they were at the start of the pandemic in 2020. The average right on the 30year fixed is still stubbornly over 7 after hitting a record low of 2. 76 at the start of 2021. Now, as a result, nearly 67 million american households cant afford a 250,000 home today. They just wouldnt qualify for the mortgage. A whopping 103 million cant afford the nations median priced newly built home, which is about 496,000, according to the nahb. That is 82 of american households. If you were to raise that price by just 1,000, and additional 106,000 buyers would be priced out. If you compare that back to the same metric in 2021, when rates were at record lows and home prices were lower, that 103 million dropped to 75 million households unable to afford a new home. So, nearly 30 million potential buyers have been priced out in three years. The Home Builders have been buying down Mortgage Rates in order to get more buyers in the door, but thats eating into their margins. And we did hear from ceo doug yearley last quarter that theyre not answering to any buyers who want buydowns. They just want some of the added bonuses going into the fixins in the Toll Brothers house. Diana, in terms of the rate at which more homes would come onto the market from the existing home segment, what rate is that in general . Is that 5 , 6 . How do we view that . Okay, so, the total amount of homes on the market right now is about 40 higher compared to last year. But but still very low. And the rate of new listings is actually coming down. So, we saw this kind of surge going into spring of more homes coming onto the market, and they just sat. Why did they sit . Theyre too expensive and nobody can afford them. But were not getting more listings now. Part of that is that rate lockin. When you have 2. 75 , why would you sell . But in terms of that do people think 6 is going to move a lot of homes . We did see rates come down, i think in the first quarter, the second quarter, that area, did we see more velocity in the market at that time . We did. At the beginning of this year, when rates were around 6. 5 , we saw an early surge. We thought the Spring Market was starting in january, because people were really coming in. The trouble was, there wasnt a lot on the market to buy. Then, all the supply came into the market in march and april, but thats when rates started shooting up again. So, now a lot of that is now sitting. Diana, thank you. I guess the question for us here tonight is, what do you do with the home builder trade . Were just off of highs in the sector, and so, are we, you know, if were looking at a fed thats going to cut rates, thats probably the next move here at some point in time, is the best behind the Home Builders . Are we sort of in a goldilocks period . The last six months or so, i am sort of scratching my head. People talk about valuation, theyve been compelling. I dont know if valuation matters in this space. I understand that Interest Rates matter. The thing thats going to matter most is going to be the Unemployment Rate. A lot of these revisions start to make their way in. Its a supply side thing, but whatever people are going to move when they start losing jobs. Counter intuitivety, i mean, this is going to sound crazy. The best thing for the supply side is a spike in the Unemployment Rate. I agree with that. The most important thing is a job, but i also think the question you asked diana, if we start to cut rates, i think people will start to nibble, and maybe take out a mortgage and then they can always refinance. But they have to see they have to be sure that those rates have topped out and that they are coming in. Toll brothers has outperformed. So, if you look at dhi, theyre speck builders. That was great during the pandemic. Not so much now. I would stay back from the trade. Yeah, i think its a combination of the Home Builders are more profitable, even when they are picking up some of the margins. I wonder if the wealth effect and stock markets at alltime highs and essentially household Balance Sheets never being better is also creating a little bit more of a frenzy. A lot of these folks who are cash buyers, doesnt really matter. You just lift it off the top. But i also do think that for those people that are out there in terms of going through a mortgage process, if thats easier or harder, the dynamic here, i think, it is helping people. They had better Balance Sheets. If you see any deterioration in the stock market, and ultimately in where weve seen Housing Prices, i think its going to be selffeeding. I think a lot of these loans that no one is going to walk away from have a shelf life. People maybe lock into 30 years, good for you, thats probably for too long of an outlook for this show. But if you think about ten ones and five ones, five ones are pretty much toast. If you think about the environment where the consumer hasnt really begun to weaken, because the job market hasnt begun to weaken, thats going to happen, too. How much . Were awful trying to handicap that. Thats a really important point. Whats the whats the life left on those loans, do people wait until the very end . Maybe not quite the very end. But its interesting, you know in the energy markets, the cure for Higher Oil Prices isHigher Oil Prices. That is not the cure here. That hasnt been helping. Its you know, its such an odd scenario, where you have so much locked up inventory that just will not hit the market, because people cant afford to leave their houses, but ive been thinking for awhile, the Home Builders had had enough of a run, it wasnt but i mean, these numbers that came out tonight, they are very good. I can just tell you that i havent liked them. Ive been wrong on this for six to nine months. My view is, when you dont have any velocity of trading, prices have to come down. I still think that. Thats been the wrong the dynamic is that the home prices the home values have not come in. Right. In relationship to the mortgage usually when rates go higher, home prices have to come down and that has not been happening. But thats why we asked diana, if we know that the next move for the fed is going to be a rate cut, maybe the end of the year, beginning of next year, when do we start looking ahead to believe that theres going to be more velocity, especially on the existing home side, particularly when you factor in a five one or ten one arm and people have to do something. Theyre going to be paying up and theres household formation that is happening. Yeah. And people do have to move at some point. So, do you think ahead to that point, maybe six months out, seven months out, when that velocity starts happening once again, i mean, diana mentioned 6 1 2, beginning of the year, there were homes being sold. I feel like the stocks are discounted. Theyre trading as if thats going to happen. At least thats the moves that theyve seen. So but i totally get it. Whats interesting, i think, is the fact look at home depot and lowes. Effectively the same chart. Lowes traded a little bit bitter. They both made their alltime highs in december 2021, which actually made sense at the time. If you think about what was going on. Those stocks have not traded well now for the better part of three years on whats been a very good broader market. So, i think theres a tell there in terms of, everybody that needed to spend money, they basically did it. Now theres sort of this sideways action, and again, ill come back to the Unemployment Rate. If things stay here, this is just going to continue to sort of go sideways. If the Unemployment Rate moves higher, which is probably going to mean thats what that will force the fed to move, that will get some inventory, i think, into the system. All right, lets talk markets now, with less than 24 hours until nvidia reports earnings, an investor known for the big short Sees Opportunities in the entire a. I. Space. Steve iseman is with us. Great to see you. Thanks for having me. Looking sharp today, too. Real take a second. Its true. All right. Lets just compliment my wife. She dresses me. Lets move on. Nicely done. On her game. Unbelievable. I was going to comment on steves mood, which is generally good. So, you are listening to our conversation, how do you feel curious, how do you feel about the housing trade, if you are a believer that the economy is in good shape, the consumer is in pretty good shape . The problem with the Housing Market is, you know, people are stuck in their homes because they have 3 mortgages, and they have jobs. So, somebodys going to get a 7. 5 mortgage to have the same Monthly Payment as the person with a 3 mortgage. The Housing Price has to get cut in half. Somebody with a job going to sell their house and cut in half . No. So, existing home sales are very weak. New home sales take share. And thats been the Housing Market for the last two years or so. I dont see it changing at all. Okay. You are optimistic about a. I. , and we often talk about how apple is perceived as sort of the laggard in a. I. You think that theres i think apple is the hidden a. I. Play, not exactly today, but will be, because everybodys focused on the chips and everybodys focused on the cloud, but at the end of the day, when there will be apps, and i have no idea when thats going to be, but when there will be apps that the consumer can use, theyre going to want to use it on their phone. I have a new iphone, and when i know when the apps come on, ill need a new phone and ipad and laptop. So, when the apps show up, the biggest probably beneficiary is going to be apple, because theyre going to have a refresh of everything they sell. Does that same sort of, you know, trade happen with microsoft, who just unveiled its sort of hardware lineup that is a. I. Equipped . Partially, i mean, thats going to happen. But i dont know how much apple i mean, youre going to need to see people start to buy their laptops and its going to be more than just microsoft doing what theyre doing. The apps havent come yet. When they will, i have no idea when, but thats when the refresh cycle is going to take off. So, expanding on the a. I. Discussion, last time you were here, you talked about nvidia. I think you said you had never seen an executive as confident as jensen huang. Happier than me. Quite a thing. But do you see thats obviously not the hidden one, it is the most obvious one, but is that one that you still feel Comfortable Holding . I mean, look, right now, the easiest way to play a. I. Is nvidia, amd, a few other chip players, and then anybody who is in the cloud or with a massive data base. Beyond that, theres apple, which i just mentioned, and after that, its not clear, because so much of whats going to happen is unknown. I you know, theres no way to know at this point. Steve, to change gears just a little bit, wed be remiss not to ask you your view on the consumer, if you see weakening. As someone thats played that, and that manifestation in the past was through the banks, someone thats so successful for having made a call, so many people are trying to make that same call over the last year and a half, and on some level, its actually even more impressive that you kind of have been the other way. The inclination for many investors, this was just a time bomb waiting to blow up. Whats the latest update from the front . Theres no time bomb. I mean, the on the credit side, credit quality is fine. Credit card delinquencies are starting to come down. Chargeoffs are kind of sticky, but theyre at low levels. In terms of the health of the consumer, the upper end consumer is in great shape. The lower end consumers having trouble with inflation, and its showing up in their spending. And the middle consumer is kind of treading water. Its kind of the way its been for a very long time. So, i just dont see the consumers impact it impacts certain sub sectors, but theres not an issue for the overall economy. Theres that scene in when harry met sally, ill have what shes having. Look at him. Happy steve. Its fantastic. Congratulations on the transformation. Thank you. This is not a political show, and were not getting into politics, however, you have a very strong view about this election coming up. I do. What does it mean for the markets if youre right . My call is that with as much certainty as i can have, i think trump wins every single swing state and becomes president. And i dont think that has much implications for the market at all. Really . I mean, it will have implications for certain sub sectors, there will be more tariffs that will impact certain sub sectors. Do you think its already effecting the market . Not at all. I mean, the way i think this is going to play out, in august, when the Democratic Convention convenes in chicago, ironically, all the protesters from the campuses are going to convene in chicago and theyll burn the israeli flag and burn the American Flag and scream their heads off and the whole country is going to watch and the country is going to be aghast and at that point, everybody will understand the election is over. So, in you know, when youre thinking about policies of a President Biden versus a President Trump again, you dont think that china trade wars will be any worse under trump versus biden . I mean, there will be a little bit worse, but think of it this way, trump created the solar tariffs, and biden reaffirmed them. So, are they going to make the solar tariffs os even bigger . Maybe. Does that have a big impact on the overall economy . I dont think so. So, no in terms of inflation, doesnt move the needle . My instincts would suggest that a Trump Presidency would be inflationary. Not good or bad, just inflationary. I mean, on the margin, maybe slightly. But it youd be reading tea leaves to see it. Why would it be inflationary . Well, the protectionist stuff that we talk about for awhile. My sense is there will be tax cuts, which are by definition all those Different Things would be inflationary. But again, steve says maybe on the margins. Well see. So, one other thing you talked about last time you were here was the infrastructure trade, that you were very bullish on. Nothings changed. Its the same. I mean valuation on a Trump Presidency, you know,margins, some sectors might do better than others, maybe some of the gas plays come back, but overall should copper be over five bucks a pound . I dont do precious metals. But its infrastructure. Theres a whole list of things i dont do, and thats one of them. Hes got a lane. All right. So, if theres really no basically, youre saying for the markets, it does not make a difference if President Biden or President Trump is in office, which seems really counterintuitive. Why . Because theyre completely different candidates. But think about the big policies they both have. I mean, is trump going to is trump going to get rid of the i. R. A. Or the iij . But you need 60 votes in the senate to do it. Nobodys going to have that. So, its going to stay the same. So, this is actually a great scenario for the markets . Certainty. In either case. Certainly, because i dont know if its a great case for the markets, im just making an election call. No, but its a fascinating call. How do you think things play out on campuses, youve been vocal when it comes to our alma mater, university of pennsylvania. On that, im extremely pessimistic. Okay. And the reason why is because it goes far beyond just protests. I remember when i was at penn, i had a professor who taught intellectual history. I took him price. And he would teach a book a week and teach it from the perspective of the author. I didnt know that this guy was a conservative until i knew him for two years. If you go through the penn course catalog or the harvard course catalog or the columbia course catalog and you read the descriptions of the courses in the humanities that theyre teaching, i think theres only one conclusion you can reach, which is, these kids arent being taught, theyre being indoctrinated. So, ask yourself, what would it take to move these universities back to what they once were . Well, you have to expel all the students that are to testing, every single professor who is protesting needs to be fired. Every tenured professor who is protesting, you cant fire them, but you have to let them teach. And you have to go through the course catalog and just change the courses to be to teaching as a posed to indoctrination. Now, do i think whats the probability of that happening . Its not going to happen, because the people who administer these schools believe in this stuff.