Squawk Pod: Treasury Sec. Bessent: a deal with Iran - 08/04/26 | Audio Only

Bring in show music, please. >> Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod, two big interviews, Treasury Secretary Scott Bessant. >> Sorry, Joe. A day late and a yen short. >> On the historic joint market intervention between the US and Japan. And here's news. He says a deal with Iran for freedom of movement in the clogged [music] straight of Hormuz is close. I think there is a chance we may have a deal today or tomorrow to open the straight and move towards a more normalized position in this [music] conflict. >> And Snap CEO Evan Spiegel, he's built [music] glasses or specs for this new artificial intelligence-driven era, and he's ready for the next [music] big invention. >> What I'm really looking for are those sort of leading signs of, you know, what are the new consumer products that are being invented? What are the new experiences that are going to drive more demand? All that ahead. It's Tuesday, August 4th, 2026. Squawk Pod begins right now. >> Stand back to you by in three, two, one, queue please. >> Good morning everybody. Welcome to Squawkbox right here on CNBC. We are live from the NASDAQ market site in Times Square. I'm Becky Quick along with Joe Kernan. Andrew will join us later from the annual Aspen Economic Strategy Group meeting. Yesterday, the Dow closed at a record high. You're going to see this morning it's pulling back by about seven points. Energy prices pulled back yesterday and once again this morning you are looking at prices a little bit higher up by about a$150 81.82. Brent crude is up by about 2 and a.5% to 8582. >> S&P's 7600 closed. >> Uh you start getting uncomfortable if you got a 7,000 target for the end of the year >> perhaps. See, I would think I I would think that if you had a 7,000 target to start the year with, you'd still be thinking, you know what, I'm sticking with my 7,000 because we don't know the war and everything else that that's going on. And that's just the mentality of people that are wrong a lot. And and they will probably ride this 7,800 if it does if it goes or or 8,000 and then finally the towel gets thrown in when it just becomes. But I think at this point they can still sort of >> wishfully think, you know, I think there's so many things still staring us in the face that it could easily go and it could easily go and and we just said Tom, you know, Leo in this thing there's going to be some type of pullback before we he thinks we we end at 8,000 for 2026. But in the meantime, he thinks a six handle possibly, >> right? Look, oil prices spike, something happens in the Middle East and you can see some very quick moves on some of these AI. >> Yeah. >> Chips, chips, software. I mean, >> just think about how different the narrative looks today than it did a week and a half ago, two weeks ago. >> Was that it? >> That was it. >> That was the the the buy that was the dip. >> I'm still convinced that this was that situation, situational awareness that that was a a huge blip that came from that. But >> but did we get >> people get nervous? Did we did we get it out of our system? The worry that companies are spending too much in on AI and >> I don't know. You had the CEO of Hugging Face yesterday saying that he thinks China could catch up with this year. And by the way, they're already ahead. He thinks in the open AI mountains. >> Well, we better spend some more money. Palunteer surging uh in the pre-market. The company beat second quarter earnings and revenue uh and said commercial revenue more than doubled from a year ago. US government revenue grew 90% to more than $800 million. In a CNBC interview, CEO Alex Karp reiterating his criticism of Frontier AI uh Labs, arguing that businesses shouldn't be forced to give up their intellectual property to work with the companies. He also uh didn't blame Chinese open- source AI companies for distilling Frontier Labs' work. How do you think the models got their value? They distilled all the value of IP everywhere including enterprise everywhere. Like we're in a battle here. Those things have to work. There's only one way for them to work ethically and that's called an application layer on the back of your own compute where you control the model. There's what a way to get it. It's not the only way, but the best way to do it is you buy Palanteer, you install it, you have us do it. Palanteer also lifted its fullear revenue uh guidance and prior to last night's earnings, the stock was down about 29% this year. Um, but it's been a a big winner over the past couple of years. And >> yeah, >> if you were in, you were happy you were in Palunteer early, >> right? >> I I still go back to what Alex Karp told us. Uh, must have been June when he came on to talk about that. I think it was right before July 4th, just talking about the idea that those models that we have here are not beloved. In fact, they're pretty um Silicon Valley does not feel very kindly towards them and and and that there is a lot of >> right >> antagonism and concern and questions about what happens because that is something that every technologist, every CEO I've kind of spoken with since has has verified his thoughts on that. It's hard to find somebody who disagree >> the tokens. >> Yeah. President Trump criticizing Chevron and Exon Mobile for making, in his words, too much money as oil prices have risen throughout the Iran war. On Friday, Chevron reported a nearly 400% increase in second quarter profits. Uh, Exxon's earnings more than doubled. >> They're making too much money. Okay, based on a shortage, they're making too much money. I don't like it. And I'm I should be the last one to say cuz I'm a big free enterprise guy. Nobody bigger. And you know we're you're going to see oil when we're finished with Iran. You're going to see the prices drop through the floor. But they made too much money. Too much money. >> I don't know. President called on oil majors to lower the cost of gasoline saying is his words that they better cut the retail price. There's they could discuss this on so many different levels. Um, but we'd sound like we were we were talking about Elizabeth Warren. Uh, if if we did this >> a populist angle that comes in. >> I I mean, you know, I get it. I know this is how this is how the president rolls. I understand how it happens. But, you know, when there's something like a pandemic where oil goes to $20, no one comes in and says, "We're going to help you at that point." It it it is they're in that business. Uh there there are people that risk their their capital to to to invest in oil companies and something like this happens and the price goes where it is. What do we is he going to Would we have a Republican talk about a windfall profits tax >> potentially? I mean that certainly sounds like something that he seems to be >> exactly what it sounds like. The the one thing I will say is these major oil companies, Chevron and Exxon in particular, have been the reason that oil prices haven't gone higher with the refinery output that they've been putting through. Yeah. They like they have been not just producing higher amounts of oil and energy to try and keep these prices down during the Middle East, but they have been refining at 96 97 98% of capacity. And if you did not have that, you would have seen much higher spikes because of the war in the Middle East that the president started. >> And the shareholders and pension plans and whomever it is are the actual own. You think of companies not just as monoliths and CEOs, you know, raking in cash, but the people that have risk their dollars to to like capitalism works when things like this happen. Okay. Either the company explores more, either the company hires more people, that would be good. The company returns more cash to shareholders, does buybacks, does dividends, whatever it is. It's that's the way that's what you sign up for when you go into a capitalist system. Now, the whole capitalist system is under assault from these DSA nut jobs. So, I it's just a bad time not understanding. >> What do you think the profit margins are for Exxon Mobile? >> I don't think they're exorbitant. Probably >> 8.8%. Right. >> Okay. What do you think the profit margins are for Nvidia? >> 88.8. >> Well, right now it says 63, but I think you're right. We've I've heard profit margins above 80% for some of these companies. >> So, on a lo none of it makes sense on a You know what? Does anything that that's really populist ever make sense on a logical basis? >> No, but they are the issues that hit voters the most. Whether it's the gas you're paying at the at the pump, whether it's the medicine prices that you have to pay. >> Okay. Okay. So, you have a choice. You have a choice of either pushing back and explaining it or just going ahead with it and realizing that that's what elections are are based on. It's I guess it's the world that but I criticize the other side enough the the you know for it. So, I can't just look just say oh well in this case it makes sense. No, it's look, it's >> I'd like to, >> but again, if you if you push back too hard on these companies and they they slow their production or they slow their refining capability, >> what if they do return it to shareholders? shareholders are the ones that that when you know when climate activists want to shut down they or you know block the entrance to a a fossil fuel company that you know you you risk your your money and if it works out that's way it works and your rewards >> and you want those shareholders risking that money so that you can in turn >> exactly instead of having the government the higher >> they want the government running against it >> too will be Next. >> Coming up on SquawkPod, a newsmaking conversation with the Treasury Secretary Scott [music] Bessant. The yen, oil prices, and the Fed leadership under new chairman Kevin Worsh. I think every meeting should be live and that [music] market participants should make their own judgments. [music] >> Welcome back to Squawk Pod from CNBC. A split show today between the NASDAQ market site in Times Square and the Rocky Mountains. >> Hey guys, it is uh just past 700 a.m. on the East Coast. Uh I'm in Aspen, Colorado where it is 5:00 a.m. You're watching Squawkbox right here on CNBC. I'm Andrew Sorcin along with Joe Kernan and Becky Quick. As I mentioned, I'm in Colorado today at the uh annual Aspen Economic Strategy Group meeting. Uh we've got a huge lineup, guys, of folks that we're going to be talking to uh here today and tomorrow. Uh I was at dinner last night. Jay Powell is here, Jonathan Gray from uh from Blackstone, uh John Waldron. We're going to see Janet Yellen, by the way, uh tomorrow on the broadcast. And then also uh Neil Qashqari. Uh lots of uh you could describe it as nerd debates about uh what's happening uh inside the Fed. >> Is it cold, Andrew? >> It's actually not cold, guys. What do we think it is here? aboutif no 50s. We think we're in the 50s. It's been we've done this before at at this hour and it has been freezing. Uh so it's it's a lot better than it has been uh dry in the past. In fact, >> it was in the 90 it was super hot here. Yet last night uh people were sweating through their shirts at dinner. Uh it was maybe like >> bring layers for the mountains, right? >> Mhm. >> Lots of layers. >> It's great. >> Awesome. [music] The US and Japan uh confirmed a coordinated yen buying intervention. Joining us now with the details of how it came together, Treasury Secretary Scott Bessant. Mr. Secretary, it's good to see you uh this morning. >> Joe, always good to be with you. >> You uh you know about uh about the yen. I guess you you had some experience in the private sector uh maybe from the other side of the trade at one point. Is there anyone who uh who is at has adept at at working with with yen? I don't know. Is it manipulation? What is it support or in the in the last case it wasn't support? It was actually shorting it, I think. >> Uh well, Joe, I I think it's important to have a framework here. And just just to level set here, the the framework begins with the strong relationship between President Trump and the prime minister. And you know I I have an extremely good working relationship with my counterpart uh the finance minister Katyama. And you know I I have been I've been going to Japan uh since uh I think 1989 and have have more than 50 or 60 visits here. So I'm I'm well verssed. But what's important here is we've been in close contact with our uh Japanese allies and they are great allies in the region both uh militarily and economically and you know we we understand that they are making serious efforts to uh stem the un substantial undervaluation in their currency and Joe this is more than just a market intervention that through our conversations with them we believe that they are going to uh continue to put the right policies in place that will lead the yen to get back to more of a normal equilibrium price. >> Yeah. I was wondering whether you've got some ideas uh about how Japan needs to do that because there there obviously are still some problems. Rates are probably negative uh there at at with the short-term rate at at 1% and we think we've got a tough year in terms of debt as a percentage. Um to the I think what they're at 230% right now. That's that's almost hard to believe. Um Mr. Secretary, >> well the there there are a lot of ways of counting it because you most most excuse me much of it is held uh by Japanese citizens and by their pension system. So you know I think if you net it down it doesn't look like that. And the other thing too is look they're they're moving toward budget discipline. they're going to have a primary surplus uh for the the first time. And Joe, you know, if I put on my economic historian hat and look back that you know I I in the late 90s 9798 uh the Asian financial crisis in my opinion uh part of it was triggered by an overly weak yen. So I think a stable yen is not only uh important for the the US but very important uh for the entire region because you know if the yen were to weaken substantially then the other currencies would follow it you know we'd seen excess volatility uh in the Korean Juan uh many people believe that the Chinese R&B is undervalued so you know gi given the trade flows given the size of the economy given their contribution to the global savings market very important to have a stable yen that the Japanese government understands that and we are proud to stand with them in implementing their policies and help them stabilize the region. >> It's obviously that for a lot of reasons it's probably in in United States best interests that that we don't see a run on the or a continued uh run on the yen. And I I just got to ask you when you you're a slide dog. When when when you wrote that down by 5 to 10 billion and and it the printing looked so big. You've done this before, haven't you? Where you know people are looking over your shoulder. Uh you don't did you need to be reminded of things to do. Buy 10 to billion 5 to 10 billion in in yen. Tell me what was really going on there, Mr. Secretary. Well, I just wanted to make sure that all the reporters looking on over my shoulder knew also knew the symbol JPY for the Japanese yen. So, [laughter] >> okay. >> Instead of shorthand to yourself. >> Yeah. You you know, I I was going to finish the list. You know, the the the rest of the list was, you know, like go go and have lunch with the Supreme Leader, play tennis with Putin, you know, uh but I I thought I would just leave it at the uh buy 5 to 10 billion of Japanese yen. Well, it's got a much better chance a coordinated um probably intervention because Japan blew through about I don't know how much of they did they blow through in April and May that didn't really stem the decline. A and speculators are on notice now. Uh if they lean too too hard on on the carry trade, they're going to get it handed to them. Uh and that's part of the rationale, I guess. Well, Joe, you know, I I think in 2011 2012 when the when the yen, which was substantially overvalued at that point, it was, you know, about 78. >> Uh yeah, but the even then pre-abonomics that the yen was bouncing around 78 to 82. And at the end of the day, uh you can give market signals with intervention, but it's policy that turns it. So, it was the beginning of a nomics. Prime Minister Shinszu Abi uh you know it's been a resounding success. Japan has come out of deflation and they're back and I think here we can give market signals but at the end of the day it's going to be policy and fundamentals and the the US decided to join because we are very optimistic on their policy path. >> Would it also require a rate hike by the Bank of Japan? Do you think? Uh, I think that the uh the the policy path I I'm not going to uh prejudge what the BOJ should do. I've known Governor UEA for more than 15 years and I believe that he will do what what is needed and you know I think that the the prime minister who is doing a fantastic job and you know if if we look back uh one of the little notice things in aomics was something called womenomics. uh Japan had traditionally had a very low participation relative to Europe, relative to the US uh of women in the workforce and now you know in Japan we have women with two of the top three jobs. Uh but you know it it is going to require uh policy to follow up with the intervention and I'm highly confident we're going to see that. I guess one thing we we we definitely don't want uh is Japan selling treasuries to do this. So um you have encouraged uh the Federal Reserve to to upsize. Can we call it a FEMA? Do is there an acronym for this? The Foreign and International Monetary Authorities Repo Facility. Have you ever called it a FEMARF? Can I coin that? Can I trademark that? >> Uh sorry, Joe. uh a day late and a yen short. Uh it's called the FEMA facility. >> And the um we we'll we'll give you something. We'll come up with something for you next time. And look, the the the what >> the facilities that the Federal Reserve has, whether it's the FEMA facility or the swap lines, uh the purpose is to protect the US economy and to keep any uh volatility offshore, prevent it from happening before it reaches our US shores. And you the the FEMA facility was done in 2020. Size of the bond market was much smaller then. So I think it would be reasonable for the Fed to consider upsizing the facility. Uh I'm happy that the Japanese government wants to use it and draw on it and it's a completely secure lending facility. Uh we have swap lines outstanding. So, it's really no different than a swap line that the the country post uh collateral and we we lend them the money to uh intervene in this case and I think it is a very robust facility and I think it was set up for occasions just like this. >> Mr. Secretary, you you spoke about this as kind of a currency intervention as diplomacy because we have a close relationship with Japan, because we're trying to work with them on a lot of things. But the Treasury Department actually um sold euros to buy those yen. The the sale of the euros, is that kind of collateral damage in this or was there diplomacy that was at work there too for for partners we may not be as happy with lately? Uh no, the the the Europeans obviously in close contact with our uh European partners including at the central bank, including some of the uh finance ministers of the the nation states and you know I assured them that it was just a reallocation the of our reserves. Seems to me that the euro is much closer to an equilibrium price. You know, I'm not going to uh talk about where the euro should or should not trade. Uh but, you know, it's really the substantial undervaluation of the the yen here and the policies that uh the Takichi government is push putting in place to change that. >> The the idea of the carry trade, um obviously you're protecting against people relying on that carrying trade too heavily. Do you think it would be a bad thing if the carry trade went away entirely or does it depend on if that's an orderly move? >> Well, I don't think the carry trade's ever going to go away entirely. The Japan has a gigantic surplus of foreign assets and they provide liquidity to the rest of the world. Japan Inc. since the 70s, 80s, all all through the 90s up until now, uh, has accumulated substantial overseas assets. And I see no reason for that to stop. And, you know, it it's just the the level of the yen that could trigger other problems or trigger competitive devaluations, which is unhealthy. >> A lot of things uh making it sort of tough on on Japan uh right now. Uh, Miss Secretary, I'm just I'm just wondering whether just purely fiscal and even monetary changes can really help. I mean, there's a lot of capital inflow. It's good for us. AI, all the money's coming here around the world because this is where the returns are. Uh, and AI, you know, the war in Iran makes they're importers of energy in Japan. I mean, it just what's the Shakespeare quote? How all occasion doesn't form against us. It just seems like one thing after another has has put additional pressure. Could could they raise rates like they should? Could they end QE or would would that just compound their problems? >> Well, a lot to unpack there, Joe. So, uh let let's start with in my expost over the weekend, I said, you know, I believe the Japanese government understands that we're at the end of aomics or one phase of it and now we're in the implementation stage. uh it has been wildly successful in reflating the Japanese economy, normalizing the economy, bringing them out of deflation and I think now we're going to see uh you know strong strong growth they've had strong wage growth the economy is quite strong uh Japan's tech sector uh while it doesn't match the US uh is very very strong Japan Korea uh two of the the strongest in the world and then you know when when you talk about uh the energy price. Japan is a substantial importer of energy from the Gulf. And you know, we we've seen uh President Trump last week uh threatened what would have been one of the largest military campaigns or the largest military campaign since World War II uh against the Iranians. And now we are in because of that we are in talks with the Iranians. And I think there is a chance we may have a deal today or tomorrow uh to uh o open the strait and you know move towards a more normalized position in this conflict. And you know that's because uh their air force is wiped out, their navy is wiped out. Substantial portion of their missiles are wiped out. More importantly their missile uh production capability is wiped out. So, you know, any anything that happens uh in the Gulf will benefit Japan and indeed the rest of the world. Joe, >> just to to clarify on that, Mr. Secretary, the idea of having a deal today or tomorrow to reopen the straight, would that be reopening the straight but the Iranians somehow having the ability to charge a toll on that? Or would that be reopening the straight and it's free and clear and anybody could move through? I I think it would be freedom of movement and uh e even though things are still a little dicey there over the past few days, you know, we we've saw uh quite a few ships coming out uh e even now. So, you know, I'd expect the energy prices to settle back down, which as I said will be good for the entire world. And you know, once the street reopens, there are, you know, hundreds, if not a thousand ships sitting in there waiting to go out. And you know, Becky, it's not just energy. It's it's fertilizer. Uh it's uh refined products. It is the uh uh v various industrial gases. So, you know, I think that we could see a you big uh relief trade as those prices go down. >> In fact, as you've been speaking, Mr. Mr. Secretary, the WTI price is dropping. We were looking at oil >> 82 >> at 82 earlier this earlier this morning. Now it's trading at about 78. Um I guess you watch those levels pretty closely. What do you watch on a daily basis? Is it oil? Is it the 10ear? Is it the 30-year, the 2-year? Is it the yen? What what are the things that you're watching most closely? All all the above Becky the but uh you know what what I really watch is how the US economy is doing and the economic numbers have been strong. Uh we had manufacturing ISM uh strongest since 2022 when we came out of CO and manufacturing is back in the US. We are seeing substantial non-residential uh building going on. So those are construction jobs. With overall manufacturing, if I look at my hometown, Charleston, South Carolina, uh Boeing is doing a 50% increase in their production there. So those are construction jobs, but those are going to morph into a thousand great uh high-paying industrial jobs. So you know, we're seeing this manufacturing renaissance happen. You know what what wouldn't help the yen is if if uh wars and co raised rates in September. I I just wonder whether that uh should we be thinking should we be thinking about that and and just opine on on what you saw at the last meeting that the lack of uh you know the lack of any sort of uh guidance and and the criticism about no transparency and we don't know what the road maps are and we don't we don't need a cheat sheet on the test but we need to know what's going to be covered in the test and it's causing volatility in the bond market because of a 13 basis point move. What do you make of all that this this sector? >> Well, Joe, you know, I I think of this as a detox that the both the financial markets, financial journalists, the no one on this screen uh but many many others, especially the uh >> uh especially uh in print had just become stenographers and same for many of the Wall Street firms. Look, I I I began on Wall Street 1984 and you didn't you never knew what the Fed was going to do and you had to be positioned accordingly and you actually had to do your own work and you know I I think we are seeing a detox here and you know all all this with for forward guidance that you know I think every meeting should be live and that market participants should make their own judgments because I can tell you you in my opinion what caused the great inflation the the Fed was late raising rates but the reason they were late raising rates is that you november of 21 it was clear uh that the economy was hot and the Fed needed to do something but they kept QE going they until the month before they started hiking rates so they were buying hundreds of billions of dollars of bonds and they that was because they felt locked in with forward guidance. So I think Chair Walsh wants to maintain optionality for optimal outcomes and I am sure that under his leadership the Fed will uh balance between their growth mandate and their inflation mandate. >> There is a lot of question though of of how to orchestrate a a stand pat on rates uh for for the chairman with the economy you described. I mean if if you uh you know back out all the imports of infrastructure for AI what's that other uh that other number was 3.9 or or something I think wasn't it for for prices uh uh charge I mean that's strong uh inflation still above target will the promise of AI in terms of productivity will that arrive quickly enough for for chair Walsh to to bring down the inflation rate in a way other in trying to slow the economy with higher rates. >> Well, I I I think we have to look and think what does an increase in the short-term rate actually do. Um so so we'll we'll see on that. But you the the other thing too is I think that there are a lot of short-term indicators here u much of it energy related that will work its th way way through the system when energy when we had the uhou with the Iranians in early June uh you know from June for the June inflation numbers we saw one of the biggest drops in years so you know there's a very noisy component in there but what what gives me the uh confidence is that the underlying numbers they are are very tame. So core core inflation away from you know the fastmoving segments that are impacted by energy you know have been very quiescent and I think we're going to continue to see that. >> Secretary Besson just we we've been watching the AI trade so closely and there are some people including Steve Eisman who was with us last week who said he thinks everything is an AI trade right now and it's either going to go very well or very badly depending on how that shakes out. Oh, I think it's all one trade. >> So, if this is a binary situation where AI succeeds and the market continues to push higher and higher, what happens if AI doesn't succeed? >> I think we have a big correction. >> How big? >> Now, now that's a hard question. He related it through to companies even like a Caterpillar which by the way is up more than 8% this morning on stronger than anticipated earnings but it's been down over the last month as people worried about whether the AI trade could continue. Everything in AI is related pretty closely to interest rates if interest rates rise and it's harder to get debt or it's more expensive to get debt as a result and and and that data boom and the the rest of it kind of slows down. Do you think that impacts the overall economy in a big way or do you think that's more of a market play? >> Well, Becky, we've seen interest rate rise and we've seen no letup in in this AI capex. And look, I I I like Steve, but I think that category cate to categorically say that everything's an AI trade is an incomplete thought that I think the underlying dynamics of the economy are very strong. And I one thing that uh is very interesting to me uh is we are seeing this small business formation and we can see it as we talk to uh the nation's banks as we see the the filings at the IRS and for new startups we are seeing like this big main street and small business revival and I think a lot of that may be due to uh AI. Uh Wall Street Journal had an interesting story. I believe it was last week or the week before that said you're seeing the rise of the one-person startup and a lot of that is AI enabled. And the the professor from Notre Dame was talking about uh what we're seeing in terms of AI implementation. And uh I'm old enough to remember what happened in the '9s when we saw the office tech boom and you you saw this whole uh cottage industry spring up uh that didn't previously exist of I think they were called system integrators and they were bringing uh you know the the office modernization revolution into both small medium and large businesses and I would expect we could see a boom in that the uh over the coming years. So uh you know but on the other side we are seeing the the rest of the economy is performing very well also. you know, the ism and I mean the stock market uh obviously inflation is still one of the things that especially during a war with with a closed straight at least as of the day uh is still something that if there if there is anything that that we're going to be a bump in the road it's still worries about inflation. Are there indications to you that that the underlying uh problem with shelter or with services or with wages, are there signs that that maybe the the good numbers we just saw and in on the past reports, will that continue even though oil's back up and and give Chair Wars some leeway in in September? Well, again, I I don't think that Chair Walsh or indeed the overall FOMC you you got to remember, Joe, when they raise rates here, uh you know, if they raise rates, uh they're looking at long and variable lead time. So, they've got to be thinking what what's going on uh 9 12 18 months out. And I I do think that there are a lot of things going on there. you know, we're we're seeing uh shelter uh owner's equivalent rent rent rents come down and that that's where core inflation is and the the media doesn't want to report it. But uh President Trump has done it again uh same as he did in his first term. Uh in the president's first term uh hourly workers did better than supervisory workers. And now what we're seeing now is the the bottom uh cortile of wage earners have had year-over-year 5.5% wage gains and that's three times more than the top cortile. So, uh, look that this inflation and this affordability crisis that the the Biden era got us, you know, this big, uh, increase in or step function increase in price levels. There are two ways to combat that. there's you can they slow the inflation which I do believe the core inflation is slowing but for working Americans real wage gains and you know we we can see that the bottom uh 25% of workers had a 2% wage gain and wi with everything that we're seeing in the media it's difficult to discern uh but we think that the American people will be feeling that over time and they're also feeling the benefits of the working families tax cuts. I I'm the uh also oversee the IRS and 44% of American households had one of the president's signature policies. No tax on tips, no tax on overtime, reduce taxes for our seniors on social security and deductibility of auto loans. So, we are starting to see I I I got sick of hearing about this K-shaped economy. I I can say here definitively the K-shaped economy is over and we're seeing more of a C economy where the the lower end of wage earners are finally calling it back just like they did in President Trump's first term. >> Before we let you go, just to return to the Yen one more time, have you written anything down while while we're talking like uh I'm good for another another 10 if necessary or or tell the Fed to to to increase the femarf. I'm calling it the fearf. I don't like your your FEMA. I I don't know. But I will rarely in the past does one or two interventions solve the problem if the if the underlying problems aren't like if they don't raise rates in in Japan, we may need to put more. Are you willing to are we willing to do more? >> Uh we're we're in close close contact. And Joe, you got to think that the the US would not have joined if we were uh not very very optimistic about the policies uh that the Takahichi government's going to implement. And I think they well well understand what needs to be done here. And you they're getting out of this vicious cycle because do they have an inflation problem? Yes. Is part of the inflation problem due to the weak in uh because of the pass through? Yes. So, you know, one one of the ways to give self-help as they've been doing is to stop uh this excess volatility in the end, and we're in constant communication with them. And you we we will do uh what whatever it takes to support them uh in in a way that helps the American economy, the American taxpayer, and stabilizes the global economy. >> All right. Just wondering if there's a crush like behind you at uh of reporters when you're sitting there, you know, for person to get the best seat that the >> Yeah. to check out the to-do list. >> To check out the the to-do list. Uh >> well, I I I can tell them what's on my to-do list. It's get to the grocery store this evening. I haven't been in a while. [laughter] >> I know you probably have a lot of other things to do. We appreciate all your time this morning. Uh Mr. Secretary, as as usual, thanks. Thank you. >> Good good to see both of you. >> Okay. Hey, very quickly, let's take a look at some of the boards because oil moved pretty drastically on what the secretary was saying. He said that we could see an opening. He believes we'll see a deal potentially today or tomorrow to reopen the straight. As a result, take a look at oil prices. WTI moving pretty rapidly. We had been at $82 a barrel earlier this morning. At the top of that interview, we were trading at $80 a barrel. Now, it's off by $355 to 7679. That in turn has impacted the futures pretty rapidly as well. The Dow was up by about 300 points earlier this morning. Now you're looking at the Dow up by 513 points. S&P had been negative. It's now indicated up by about five points. And the Nasdaq is up even more than it had been earlier at 227 points. You've also got Treasury yields that moved on this. The 30-year in particular. We were looking at a 32 30-year yield of 525 when the show began at 6 a.m. It's now trading at 521. And in fact, the entire complex had been yielding higher. It's now lower across the board. The 10-year is at 465 and the 2-year is at 422. >> How's the Dow? >> Dow's up 500 points. It was up 300 before. >> Yeah, I saw that. >> Well, I saw it was up 500. >> Oh, you were. >> No, it just >> Oh, now Dow announced again. >> Coming up next, shares of Snap are riding an earnings wave. CEO Evan Spiegel is in Aspen [music] with Andrew Ross Sorcin and he's betting on his own product innovations. >> We've been working for more than 12 years to reinvent the computer and make it feel more human. I think today people are spending more than [music] 7 hours on average staring at screens. Specs represent the opportunity to bring computing into the world. >> The specs on specs right after this. >> You're listening to Squawk Pod. Here's Andrew Ross Sorcin in the mountains [music] at the annual Aspen Economic Strategy Group meeting. >> We are in Aspen, Colorado. Uh social media company Snap reporting Q2 results after the bell on Monday. They scored an earnings beat with 1.6 billion in revenue. It's 19% higher than just one year ago. And joining us right now uh for more, Snapsio Evan Spiegel. He did not bring his glasses on the set, but we're going to talk about those glasses in just a minute because I think that's been a big part of the story. But um you beat uh across the board, not just by the way on the revenue piece, but on the margin piece, which is what I think the market was actually looking for. >> Yeah. Well, first of all, thanks so much for having me on, Andrew. Such a beautiful morning here uh in Aspen. It was a great quarter uh for Snap. And I think what folks are seeing is that the free cash flow in the business is really starting to inlect, which is allowing us to offset dilution, to strengthen our balance sheet, and of course to continue investing in the future, which is so important to us. >> Okay, let's talk about the future because there's a couple different pieces of that story. I mentioned glasses. We'll get there in a second. And I think glasses is actually what's had people a little anxious uh more than anything. But there's the advertising piece of the business. Um and increasingly there's the subscription piece of the business which I don't know if people appreciate. Only 3% of your users are paying money to subscribe now. Uh but that seems to be a huge growing piece of the business. >> Yeah, advertising growth accelerated really nicely in the quarter and I think one of the most important inputs which are conversions across the platform. You know, we've invested so much in driving better lowerfunnel performance for advertisers. We saw conversion growth of 56% year-over-year. And so I think that's a really strong leading input uh into the business because it shows we're using our inventory a lot more efficiently. In terms of the, you know, direct revenue business, that's a huge growth opportunity for us. It was more than 300 million in revenue in the quarter. It's growing about 85% year. >> So if 3% of your users are paying, and by the way, what do they get to pay if if you're a paying customer, what do you get? >> Yeah, it's less than 3% uh today, but it's across uh things like our Snapchat Plus subscription uh product. We just released a new uh subscription business called Lens Plus which provides access to AI powered creative tools that's been really successful and that that's a slightly you know higher arpoo product and and been driving some nice growth for us. >> Okay. So what would you like to see that number get to? You said three if you said it's just under 3% now. If we're sitting together in a year from now what do you think it could be? >> Well you know as we look at the competitive set over the long term it seems like they're able to convert about you know 7 to 12% of monthly active users to paying subscribers. We've got about 970 million monthly active users. So, you know, maybe a medium-term goal would be about 7% of that. >> Okay. I mentioned glasses cuz that's a huge part of the story and it's I think your true love here. Um to try to like create the next operating system, the next hardware, the next everything. Uh these glasses cost what 20 about 2,200 bucks right now? 21,100 bucks is what they're going to come in. >> 21.95. [snorts] >> Okay. So the question I keep thinking about is how quickly those can come to market in a way at a in a way and at a price point that people buy them uh you know on mass and how you think about the competition coming from whatever you think Apple is ultimately going to create whatever you think Google is working on and whatever you think Meta is going to do next. >> Well we've been working for more than 12 years to reinvent the computer and make it feel more human. I think today people are spending more than seven hours on average staring at screens. Specs represent the opportunity to bring computing into the world to make it a shared experience and ultimately uh to help you know bring all the productivity gains we saw in desktop computing and laptop computing to the real world and to real world jobs which is the vast majority of jobs about 60% uh of jobs. So I I think this computing transformation is incredibly exciting. We're certainly the the leader in the space. I think specs represent a a totally new category. Right? If you look at the landscape today, you have very bulky uh but capable headsets and then you have very limited uh but lightweight AI glasses and specs represent, you know, the capability of some of these VR headsets and in terms of the immersiveness and the ability uh to really have a full workstation experience but with the wearability of some of these lighter weight glasses products. >> But do you say to yourself Apple's going to come and do the same thing and Meta is going to go? I mean, so how do you think about that given the cost of of putting this all out there and the amount of money that some of these big companies can actually throw at this? >> Yeah. Well, I think, you know, as we look at the history of of innovation, I I actually think one of the things that helps power innovation are constraints, right? And and one of the things that makes Snap so unique is that we've been so laser focused on specs for such a long uh period of time. So I think this focus our history uh of innovation you know and our first mover advantage in the space backed by our augmented reality platform which already has hundreds of thousands of developers who have built millions of lenses gives us a real ecosystem advantage. >> Um you're here hanging out with people like Hank Pollson and Tim Gner and and all sorts of other economists and and folks. I'm curious um what you think and what you're actually seeing in the economy. Um the Treasury Secretary was on earlier and he said you know it's really not a K-shaped economy anymore. It's it's a C-shaped economy. Um, are you of the are you of the sense that things are getting a lot better? They're a lot worse. We're in an AI bubble. We're not. What What do you actually think yourself? >> Well, I I think it's it's pretty important to sort of look at the the changes happening with AI sort of separately from, you know, uh, the the broader economy. I I think the economy is stronger than I would have expected, frankly. There's a lot of geopolitical instability. There's a lot of fiscal instability. And I think those are big risks sort of overhanging uh the market in general. But it's in the United States, it's been a lot more resilient than I than I would have expected. I think, you know, as I look at the AI transformation and the investment that's happening there, the big questions in my mind are, you know, is the long-term revenue there to support the capex assumptions? And then, you know, when you sort of break down the the capex growth, are folks really building out more capacity or are they just paying more for, you know, the capacity they already plan to build? And so I I do think that, you know, we need to sort of see over the coming years, how does demand materialize? >> What do you think of that? What what is your answer to that that question you're asking? No, it's that is the central question. >> Well, I I I think to me the what I'd really like to see looking forward is what sorts of new businesses and new products will be built on top of this technology. Right? If we look at, you know, for the railroads, for example, it was really the oil business that leveraged the railroads to grow and become far bigger uh than the railroad business itself. Obviously, electrification transform manufacturing. So, what I'm really looking for are those sort of leading signs of, you know, what are the new consumer products that are being invented? What are the new experiences that are going to drive more demand for AI? The reason I ask is, you know, I think last week when Google announced its earnings or maybe two weeks ago now, it's really the first time that the market actually said, "We actually think you're spending too much." Um, and it was an interesting moment and I I wonder just about the dynamics in the business right now between openweight models and closed models. Whether we think that's actually going to break the economics of the business, you have anthropic and uh, you know, open AI which are so much I mean sort of like they are the support of all this. If you believe in their valuations, you believe in everybody else's valuations. If you don't believe in their valuations, I don't know if the whole thing breaks apart. >> Well, I I think fundamentally we we want to see pricing come down and performance improve so that AI can permeate the economy and drive the productivity benefits that we really want to see, right? That I think will lift growth overall. So, so I think that is a good sign that we are seeing real progress there that you know tokens consumption is reducing while performance improves. So, so ultimately uh you know looking forward it it's hard to say how uh that demand will materialize over the long term but that's why I think one of the leading indicators will be what sorts of new products services and businesses are being built on top of this technology >> have you okay that's the big last final question which is is there a product you have seen yet built with AI that has sort of broken the mold for you >> well I I think as we look at our long-term vision for computing that's really what specs represent right a new type of operating system we call it an intelligence system that lives in the world with you and helps you get things done and you know help you helps you get ahead on a day-to-day basis. And so if we move to a world where your primary usage of your computer is actually accessing intelligence that could drive the sort of demand growth uh that that could sustain you know the revenue projections that people have. >> Claude Chat GPT Gemini or XAI what are you using? >> All of the above. >> All the above. Evan, thank you. Appreciate it. It's good to see you. >> Thanks so much. Great to see you. >> Very good political answer. >> And that is SquawkPod for today. Thanks for listening. Squawkbox is hosted by Joe Kernan, [music] Becky Quick, and Andrew Ross Sorcin. Tune in weekday mornings on CNBC at 6 Eastern. To get the smartest takes and analysis from our TV show right into your ears, please follow SquawkPod wherever you get your podcasts. [music] We will meet you right back here tomorrow. >> We are clear. Thanks, guys.