Stanley Druckenmiller & SEC Chair Gary Gensler 05/07/24

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Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod.

I don't think anyone will ever again get 30 years of 30% average. Do you?

I don't know how I did it, so... Investor Stan Druckenmiller with one of the most successful track records around. He says the Fed has reignited hot inflation.

Don't go on 60 Minutes. You're not a rock star. Okay, you're the Fed chairman.

And while he might need a break from a big position in high-flyer Nvidia, he says AI's got legs.

If we were all sitting here in 1999 talking about the internet, I don't think anybody would have estimated it would be as big as it got in 20 years. AI could rhyme with the internet. The big payoff might be four to five years from now.

And SEC Chair Gary Gensler putting pressure on the crypto community, which is firing right back at him, how he views his role for investors.

We have a really important responsibility as being a cop on the beat and ensuring that people that are asking you to put your money in to buy or sell securities are following the law so you get disclosures, that you get certain protections.

Two big interviews, plus the rough couple of days for the CEO who said he wants to hire campus protesters.

What the hell is that company?

What's the Hers part? It's Tuesday, May 7th, 2024. Squawk Pod begins right now.

Standby, Andrew, in three, two, one. Cue, Andrew. Good morning, and welcome to Squawk Box right here on CNBC. I'm Andrew Ross Sorkin, along with Becky Quick and Joe Kernan. I'm in Washington, D.C., this morning, but we've got a big lineup ahead, a huge lineup on this broadcast, both from D.C. and the Nasdaq MarketSite this morning. From here, we're going to be talking to SEC Chair Gary Gensler. But then, Joe, you've got a biggie. I wish I could be at the table with you, but hoping to be part of the conversation because you've got Druck.

Well, we'll see. We'll see whether, you know, quid pro quo, Clarice. No, we're going to share everything, as we always do, of course. I think it'll be a half hour, so there's going to be time for 25 minutes or so. I think Stanley was last on in October. And I was just figuring how to start. How would you start? It's like six months, Andrew, in terms of the markets, the economy, and what we've heard from the Fed. Literally, it's like a Tolstoy novel. So, I mean, you could do a month, and it would take a half hour to try to go over everything that we've seen. And then you throw in AI and his investments around the world. And... You remind yourself 30 years, 30% plus every year, which is almost...

It's an amazing thing. Probably never be done again. But I don't know how it was done. I don't know how it was done once unless you, you know, like made some kind of deal with someone who knows these things. You know what I mean? And I mean, to do that well is spooky. It's scary. But I just, you know, I guess it comes from being smart, which... We're okay, but he's one of the smartest.

He's one of the smartest when it comes to these issues.

So that'll be 25 minutes of Stan. He's going to be, oh my God, he's going to be in your chair, I think. Is that all right?

You've got to cede your chair to someone.

If I could warm it up for somebody, I'd warm it up for Stan.

So let's get right to it. Stan Druckenmiller is chairman and CEO of Duquesne Family Office. As I said earlier, averaging 30% for 30 years, never had a down year. It's like, I think it might be like Pete Rose kind of—I don't think anyone will ever get 4,200 hits. I just don't, I don't, I don't think anyone will ever again get 30 years of 30% average. Do you?

I have no idea. I don't know how I did it. I don't even know who that person was.

You've got like five big bets. You do have some TIPS I saw, but it's just an amazing record. And for anyone who doesn't know who Stan Druckenmiller is, I just wanted to say that. Last time we spoke was October, I think, so six months or so. It's a lifetime, obviously, in the markets, the economy, and especially with the Fed. And I've been—and I know you watch—I've been perplexed, and we will talk about perplexity later, but I've been perplexed about the unwavering focus the Fed has had on cuts. It's been difficult to understand, because it's been the entire time, and I'm just wondering, how do you view this period, that six-month period, where the focus, that's all we've heard about, did cuts make sense the whole time?

What's causing that?

Thank you, and I'm happy to be here. Thanks for having me on. I was perplexed with the December pivot, if that's what you're referring to. It seemed to me the Fed was in a perfect position. Inflation was coming down, financial conditions were tightening, and to some extent, I feel like they fumbled on the five-yard line with the game on the line. I remember saying to some of my partners, that's the speech I thought we might hear in March as opposed to now because there's like four or five more months that potentially could lead to inflation coming down the way they needed to come down. Instead, they set financial conditions on fire again. Bitcoin, I can't remember where it started from, but it went from like $30,000 to $70,000.

Equities, obviously, credit, interest rates. Ironically, Duquesne was a major beneficiary of it because... I had spoken at a Robin Hood conference and like an idiot forgot that there was press there and revealed that I had a, Paul got me going in the interview and revealed that I had a massive leverage position in two years because I thought The risk reward, I think they were like 510 or 515. The risk reward with what was going on, we could potentially pull this thing off sometime in the next year, and the risk reward was terrific for that. I was a beneficiary because after their pivot, two years went down to 415. I didn't get the low, but I did get 430. But at that point, it was obvious, that financial conditions, which is one of the things that put me in them in the first place, were turning.

We were starting to get anecdotal from businesses that their businesses were picking up. So I exited the position. So I was a major beneficiary. But once financial conditions took off, it became very clear that this thing could go either way. So I didn't even understand why they put it on the table, but more curiously, why they and others continued to talk about, well, it's not going to be six cuts, it's only going to be three cuts or four cuts or two cuts. I'm going, why are we even talking about cuts? Because Inflation, if you remember, we did trillions of dollars of QE because it was 1.7 instead of two over a decade. But somehow now that we're at three versus two, we've got to start cutting rates to bring in a smooth landing.

So to me, it didn't make any sense. It was a huge mistake. But it goes back to—I don't know whether you remember, but Kevin Warsh, when he was in the running for the Fed job, used to talk about reforming the Fed, and I go, 'Kevin, well, what is the major reform we do?' He says, 'We've got to get rid of forward guidance.' All this talking and all this forward guidance—first of all, we're all wrong on the economy quite often, me included. And when you put forward guidance out, unlike me when I'm wrong, who tend to change my mind very rapidly, they sort of get trapped into the forward guidance and stuck in it. And to some extent, they were stuck in this talk about continuing to cut rates, so financial conditions just continued to melt up.

And finally, in... I guess a month or so ago, the Fed pivoted, but then bizarrely, the last press conference seems to still be hanging on to this asymmetric directive of, 'We're not going to hike and we expect to cut, but we're going to wait for the data. We're not guaranteeing we're going to cut, but it's weighted that way.' And for the life of me, I can't figure out why, because if you look at the six-month rate of inflation, the chart's very clear. It comes down from very rapid rates. And now, if anything, it looks like it's turned up. Look, I don't know where inflation's gonna be in a year. Jerome Powell doesn't know where inflation's gonna be. I don't think anybody knows. But they worked so hard and they did so much work when they went from basically zero to 5%.

I'd hate to see them all throw it away here.

The first time I noticed was when he said, 'Yeah, we're not going to do it today, but we're close. We're getting closer.' And I didn't know, how do you know that we're getting close? And that went from, 'But we're getting close,' to now, 'Yeah, it's definitely not going to be now, but we think things are going to work out.' He's never taken them off the table and never talked about even saying a hike is just—I mean, he took that off the table. And a hike is not—you think a hike is off the table? Definitely. Zero chance. Zero percent chance.

No, because there's not a zero percent chance that inflation has a bottom. I don't know. What I would do is just say nothing and do what Fed chairs used to do. When you need to raise rates, raise them. When you need to cut them, cut them. Don't go on 60 Minutes. You're not a rock star. Okay, you're the Fed chairman. You're supposed to be running monetary policy for the good of the country, not to be going on 60 Minutes and, you know, the whole thing. Bernanke did a lot of things that, by hindsight, I don't feel very good about. One of the worst was forward guidance. You got a bunch of academics talking about sending a message to the market. As a practitioner, I'd rather them just get rid of the whole forward guidance and just do their job.

When you need to raise rates, raise rates. When you need to cut them, cut them.

You are confounded on the reason, though. So I thought you were going to give me the reason. Is it similar to how long we stayed at zero in a hot economy and calling it transitory? It seems like the same side of that coin, not the flip side.

They're definitely... In their press conferences, the implication is it's transitory. I don't know what the reason is. I hope it's not political. I assume it's not political. Um, I do worry that this—this obsession with nailing the soft landing... Okay, my favorite central banker was Paul Volcker. He was not worried about nailing the soft landing. He put us into a terrible recession, and we got 20 years of prosperity because of the pain we took for 18 months. And I'd like to remind those who think this has been in their political interests, Reagan won 49 states in 1984 after the economy was absolutely in the tank in 1982 because he did the right thing. Honestly, if you think it's political, particularly the Treasury actions, Donald Trump should send them a thank-you note because the day Powell pivoted, gasoline was $2.

It went to $2.80. It's now at $2.55. This has been a wonderful period. Duquesne—it's the best start I've had in years, and I think a lot of wealthy people know how to manage this kind of thing. The average American cares a lot more about gasoline prices. Inflation is 20%, 21% higher than it was in 2019. To me, even politically, that's more consequential than keeping the markets up or, you know, trying to nail the soft landing and not having a recession.

Let me ask you how this plays into... It's another, I think, issue of being... Things are going well, and then we totally overspent in terms of fiscally as well in Bidenomics.

Bidenomics... If I was a professor, I'd give them an F. Basically, they misdiagnosed COVID and thought it was... we were going into a depression. The Fed did, too. I worried about it, too, in the early days. The Fed eventually pivoted—better late than never. Treasury is still acting like we're in a depression. It's interesting because I've studied the Great Depression, and you had a private sector crippled with debt with basically no new ideas. So interventionist policies were called for and were effective. The private sector could not be more different today than it was in the Great Depression. Their balance sheets are fine, they're healthy, and have you ever seen more innovative ideas that the private sector could take advantage of now?

You've got blockchain, you've got AI, you've got the whole thing. All government needed to do was get out of their way and let them innovate. Instead, they've spent and spent and spent. And my new fear now is that spending and the resulting interest rates on the debt that's been created are going to crowd out some of the innovation that otherwise would have taken place. We've got a 7% budget deficit at full employment. It's unheard of. You've got defense spending, you have data center spending, and then, of course, you have green. So this spending is going to take place. You're going to build the capital stock. How do you build the capital stock when government is intruding with regulations and all this spending?

And it's just sad because I think we're looking at one of the most exciting periods in terms of potential productivity-enhancing investments ever. And why we're spending like we're still in the Great Depression is beyond me. And they haven't stopped, as you know. They're trying to circumvent the Supreme Court to give money to kids who had the opportunity to go to college who haven't repaid their loans. You know, Harlem Children's Zone, our motto was always, 'Get them into college so they have a shot.' These are kids that went to college, and we're talking about spending hundreds of billions of dollars to put in their pockets. I assume it's because of the election. Even they're now floating ideas for Fannie and Freddie to change the rules so you can refinance.

You can take out a second-lien mortgage, and you get to keep the rate on the first mortgage at whatever you did during COVID. There's one spending program or another. We don't need spending right now. We just need the government to get out of the way and let the private sector do its thing.

How much of the inflationary pressures that we see are because of fiscal spending versus the Fed? I mean, it's kind of hard to break it down, but which would you think is the bigger problem?

I'd say it's definitely the fiscal, but the Fed's been the great enabler. And the latest thing is, We're going to apparently, well, we've already started. We're going to shrink QT from $60 billion to $25 billion. And we're going to land apparently at $7 trillion. Somehow, because of the plumbing, all of a sudden we need a $7 trillion balance sheet just to function. If you remember in Bernanke's speech when we started QE, he said, don't worry, this is temporary. The balance sheet will be back to $8. 800 billion. This is never going to grow again. So that is, I'd say it's mainly the Treasury because we just don't have room for all this and it could get worse because we need to build the capital stock.

But the Fed needs to stop helping them out. And I understand Chair Powell's statement that he wants to stay in his lane. Well, he didn't stay in his lane during COVID, and I don't blame him. He was encouraging fiscal spending, and that was totally appropriate. But now all of a sudden, oh, we don't comment on fiscal policy. Well, you commented on it when you wanted them to be more stimulative. You know, somebody's got to say something. It is interesting since... Since my last interview here in October, there does seem to be a lot more recognition by various people I see on your shows and elsewhere of the fiscal situation facing us. Everybody seems to get it but Yellen, who just keeps spending and spending.

And again, I think it's dumb politically because it's causing inflation. And it doesn't take a genius to figure out that the average American is getting hurt by the inflation.

Your excitement about AI sort of came into play with that discussion because you're worried that it's going to take a lot of investment and there's no savings. We've got to build up the defense. There's wars everywhere. You were early with Nvidia. You were early with AI. You've pared back a little bit but are not less bullish on the prospects for it, are you?

First of all, I wasn't early with Nvidia. My young partner was early with Nvidia. He called me in the fall of '22 and said that he thought all this excitement about blockchain was going to be far outweighed by AI. And I asked him how to play it, and he told me I should buy this company, Nvidia. I didn't even know how to spell it. I bought it. Then a month later, ChatGPT happened. Even an old guy like me could figure out, okay, what that meant. So I increased the position substantially. I said in an interview in June of that year that I expected to own Nvidia for two or three years, that this was a mega trend like I'd never seen, potentially bigger than the internet. But when the stock went from 150 to 900, I'm not Warren Buffett.

I don't own things for 10 or 20 years. I wish I was Warren Buffett. 150 to 900, yes, we did cut that position and a lot of other positions in late March. I just need a break. We've had a hell of a run. A lot of what we recognized has become recognized by the marketplace now. We expected Powell to come back and re-pivot, which he subsequently did, but no, long-term, we're as bullish on AI as we've ever been. I also just wonder, if we were all sitting here in 1999 talking about the internet, or anybody was talking about it, I don't think anybody would have estimated it would be as big as it got in 20 years. We didn't have the iPhone, we didn't have Uber, we didn't have Facebook, yada yada. And yet if you bought the Nasdaq in '99,

it went down 80% before that all came to fruition. That's not going to happen with AI, but it could rhyme. AI could rhyme with the internet as we go through all this capital spending we need to do. The payoff, while it's incrementally coming in by the day, the big payoff might be four to five years from now. So AI might be... a little overhyped now, but underhyped long-term.

You said you're not like Warren Buffett, but what you just did with Nvidia sounds an awful lot like what he did with Apple. He pared his position in Apple by 13% and then went on to say it's a better company than Coca-Cola or American Express or any of the other companies that they have in their portfolio. And he thinks Tim Cook is great.

Yeah, well, I will be very surprised if I don't own Nvidia on and off

the next 10 years. You're so bullish on AI. Andrew, you did a great interview with Perplexity.

We are an application layer company. We try to build a product that directly reaches every single user, every single person on the planet, giving them accurate, instant, reliable answers to any question that they can ask. The difference from other AI companies is we're not a foundation model builder. We rather take a model and shape it and package it into a great end-user-facing application.

That's where you decided might be a place that you want to be?

I love Perplexity. Again, a funny story. My young partner, the one who has basically been behind all our AI play with his staff, he told me, I don't know, in January, that all the kids on the West Coast weren't using ChatGPT or Google anymore. They were using this thing called Perplexity AI. I, of course, tried it out and it was just unbelievable. It's an answer machine, but the speed, but the depth of the answers and the quality, and then the fact that they give you the sources. If you want to go deeper, it was nothing like I've ever seen. If you don't believe me, just ask ChatGPT, Gemini, and Perplexity a question and get the answer, and you'll see exactly what I've talked about. I fell so in love with it.

We tried to get in on a round, and we were lucky enough to be accommodated. I love the founder, Aravind Srinivas. He's super aggressive and, with his team, super innovative, but he's also got humility. He's everything we love in a founder. So there's a land grab going on now in the answer machine business. It's obviously a big task to take on Google, but if you think about it, Google has 300 billion in sales. If Perplexity even goes to 2 billion in sales, it'll be a huge winner. Frankly, I'd say 95% of my searches now, I use Perplexity. Probably the best thing I could do for the viewers today, unless they're listening to all my other stuff, try this thing out. You'll love it.

Hey, Stan, I have two questions for you, one AI-related and then one market-related. On AI, in terms of these large language models, Perplexity is obviously a productized version of it. How concerned are you about the idea that many of these large language models may turn into just commodities, maybe just a feature, if you will, of all of these services, and how much economics can ultimately be extracted from them?

Great question. I'm concerned. I'm open-minded of that happening. I mean, it's one of the reasons we cut our positions back. You never know where we're going to be in two years or three years. I also wonder, Andrew, whether ChatGPT-3 was a huge leap over 2. 3 was a huge leap over—I'm sorry, 4 was a huge leap over 3. I'm sure 5 is going to be a lot better than 4. But the cost of these models and the incremental value you're getting out of it, at some point, you may hit a wall. So I don't know how long this training thing is going to go on, and it may separate into different verticals, so it's all to be determined. And it's why I'm glad I don't have Warren Buffett's problem, although it's a nice problem to have, having positions so big that I can't rotate.

And then, Stan, my other question, given I'm in D.C., I wanted to ask you a political question since we're in an election year, is how you see the two candidates as it relates to the markets and to inflation. On one hand, I know you've been very critical of this administration, the Biden administration, and how it's approached inflation. On the other hand, if former President Trump becomes the president again, of course, I imagine he will not only jawbone the Fed to have lower rates. There's obviously this article in The Wall Street Journal; we've talked a lot about whether they'll have independence in the future. And then there's issues around tariffs and the like on China and whether that will be inflationary.

So how do you, how do you measure both of those things?

One of the reasons I'm confused by all this asymmetric talk toward cuts is, if Trump were to get elected, I could see a scenario, if inflation is not squashed and eliminated by then, where—you mentioned it—tariffs, immigration, and animal spirits, because I think business will get very excited with the lack of regulation and the cessation of some of the things I talked about, inflation actually takes off again the way it did in the '70s. I am open-minded. I'm not predicting this, but I'm open-minded to say, under a Trump administration, inflation being 6% sometime in 2025. With Biden, I'm more worried about stagflation. With all the government spending, with all the tricks that Yellen's been using to manipulate the yield curve, with the way the Fed seems to have reignited financial conditions, I think the inflationary outcome could be there.

But I also fear regulation and everything else preventing productivity. So I'm basically... a guy without a candidate. I'm an old-style Reagan, free-market, pro-immigration, anti-tariff Republican. The only free-market leader in the world right now, bizarrely, is in Argentina, of all places. Javier Milei, it's going to be an interesting experiment. This is a highly, highly intelligent candidate, leader who was taught in the School of Austrian Economics. And it's funny, because the last time I was on, we talked about entitlements. What would I do? He cut Social Security 35% after he came to office. They've gone from a primary deficit of like 4% or 5% to a 3% surplus. They've taken a massive hit in GDP, basically a depression for a quarter.

And his approval rating has not gone down. In addition to being highly intelligent and knowing economics, he's a showman. And so far, he's been able to maintain the street because they like the showman part. And I think he's got a real shot. And I'm not only invested in Argentina. By the way, do you want to hear how I invested in Argentina? It's a funny story. I wasn't at Davos, but I saw the speech in Davos. And it was about 1 o'clock in the afternoon in my office. I dialed up Perplexity, and I said, 'Give me the five most liquid ADRs in Argentina.' It gave me enough of a description that I followed the old Soros rule: invest and then investigate. I bought all of them. We did some work on them.

I increased my positions, and so far it's been great, but we'll see. I don't know how much time... the populace is going to give this guy, but so far his popularity is maintained.

Elon Musk tweeting about it. He met with him, I guess, yesterday and then tweeted out, 'I recommend investing in Argentina.' I know you met with him as well, and I heard from you that this, I mean, it was just so, you were so impressed that you wanted to tell your friends about this guy.

Yeah, he's... He's over the top in terms of the spectrum, but the fact of the matter is the country's been so devastated for so long. I mean, they were the eighth richest country in the world, and now, I don't know, they're like 150. So Argentina was ready for this, but it took somebody... not crazy, but on the spectrum, to be able to do these kind of reforms. It's really the inverse of what's going on here. We're avoiding all the pain, we have no pain, we're the richest country in the world, and you just wonder if we continue to go down this path, toward the public sector over the private sector. Look, I agree we're always gonna be the place that you wanna invest in, but I just hate to see Argentina out-capitalizing America, and that's kind of where we're going with this.

Can I just ask, if you are worried about inflation being the potential problem in another Donald Trump administration, would you be advocating for a very tough Federal Reserve chairman in that case? And I ask because I don't think either of these candidates wants to see a strong Fed chair. Trump has been much more vocal about this in the past. I wouldn't even say browbeating Jay Powell. He was publicly flogging him when he was his Fed chairman. What should that next Fed chair look like? What would you say to Jay Powell, to Jerome Powell, if he's still in that position and continuing for a few years there?

Well, obviously, I'd like a strong Fed chair. But obviously, I'm not the one who's going to be appointing him. And both candidates, probably the last thing they want because of politics is a strong Fed chair. Even Ronald Reagan forced out Volcker and replaced him with Greenspan. It tends to be the way presidents think. If Donald Trump were elected, I would tell Powell just, again, run monetary policy and do what he thinks is right. And I hope he can bear listening to the tirade that would potentially happen if the president didn't agree with whatever medicine was needed at the time.

Well, you just tell Kevin not to listen to everything he says. I'm sure Kevin will be fine. Do you want to talk about copper or Japan, or do you want to leave? It's up to you. We're at 25 minutes. Do you want to just say a couple words about copper?

I'll just say we've been invested in Japan, oh, since middle to late last year. I was lucky enough to start Duquesne in 1981, and those were the era of Boone Pickens and Carl Icahn changing corporate governance, and just multiply that times 10x what's going on in Japan. It's an amazing situation. They've been in deflation for 20 years. Not unlike Argentina, they've been through the wringer so much that they're willing to try something much more capitalist. It's funny, I'm going over there in a couple weeks, and I told the brokerage firm that's helping me arrange meetings, make sure they know I'm not an activist. And they said, "Oh, no, no, they really like activists. They want you over there and they really like activists."

That's all you need to know. That and the fact that pricing has returned. It's a lot cheaper than here. And if you believe in change, there you go. Copper's a pretty simple story. It takes about 12 years, greenfield, to produce copper. And you've got EVs, the grid, data centers, and believe it or not, munitions. These missiles all got enough copper in them, and the world's getting hot, that we just think the supply-demand situation is incredible for the next five or six years.

And you'd invest in China when? "Never" is too strong a word?

We exited China in 2018. We haven't made a single trade in securities there other than their currency once in a while. I won't say which way. I will never invest in China as long as the current leader is there. The reason I'll never say "never" is if they had a change in leadership, I'd at least consider the situation. But to me, I didn't invest in Russia, and I'm not investing in China. There's so many exciting things going on in the United States, in Argentina, in Japan. Why in the world would I ever want to put money in China? And frankly, as an American, outside of my investment day job, I feel very good about that decision. Great. We didn't talk about colleges, Stan, and what's happening.

Maybe we'll see you again in three years and the protests will be over. Yeah, we'll see. But thanks for all the time. Becky, Joe, it's been great to be here. Appreciate it.

Great to have you, as always. Thank you. Thanks, Stan.

Coming up on Squawk Pod, the Securities and Exchange Commission has cracked down on crypto firms like Robinhood, Coinbase, and ConsenSys, which owns wallet MetaMask. SEC Chair Gary Gensler explains his motivation.

Investors get to decide as long as they get the full, fair, and complete and truthful, I would say, information. They're not getting that in crypto.

You think they're not getting it in crypto?

I genuinely think they're not getting that in crypto.

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All my smackeroos go to paying off the hefty value this little gas buggy lost the second I chugged out of the dealership. Toot, toot!

Okay, well, Flexcar includes maintenance and insurance, and I can switch to an F-150 or Mercedes anytime.

What are you, high on giggle juice? Buying a car is supposed to be the bum deal you pretend is the bee's knees.

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You're listening to Squawk Pod.

Up in Andrew, Q. Joining me now right here in Washington for an exclusive interview is SEC Chair Gary Gensler. We get to see each other in person this morning. It's nice to see you.

So one of the things I wanted to ask you is when you look at the headlines today around what the SEC is doing and what your priorities are, it's hard to tell how much of your focus today is on the stock market writ large versus the world of crypto and trying to figure out the future of Ethereum and other things. How do you see it?

Well, I see it this way. We oversee $110 trillion capital market. About half of that's the stock market. Half, as you might know, is the bond markets and other markets. Crypto is a small piece of our overall markets. But it's an outsized piece of the scams and frauds and problems in our markets because, without prejudging any one token, much of this field is noncompliant with the protections of our securities laws. And so thus, you end up with like an outsized ratio of journalist questions and crypto journalists to market cap.

But is that a function also of the fact that that's where your attention is too?

No, it's a function of where your attention is. Think about it. I've been on your show, what, a dozen times? And every show you ask about crypto. And my guessing is this will be a majority crypto interview while the capital markets are $110 trillion. So it's also about where the financial media is focused.

Well, I want to ask you actually about a whole bunch of things in the classic stock market. I'm looking forward to it. But let me ask you this. Vlad Tenev of Robinhood, you delivered a Wells notice to them. I know that you're not going to want to speak directly to them. But I do want to read you because what's interesting is literally just yesterday he put out a statement effectively attacking you and the SEC. Brian Armstrong from Coinbase said effectively, welcome to the club. I mean, all of this goes on. Just so—

So that the listeners, the American public can understand. We have a really important responsibility as being a cop on the beat and ensuring that people that are asking you to put your money into buy or sell securities are following the law. So you get disclosures that you get certain protections. And we have live in court litigation with at least one of those companies, Coinbase, in front of judges at this point in time.

What is the state of play, though, with Robinhood to the extent that you can discuss it? And for those investors out there who are watching this morning who might have money at Robinhood, what are they supposed to think about these news reports?

Look, I can't speak to any one company, but stepping back from it, the field of crypto assets, without prejudging any one of them, many of those tokens are securities under the law of the land as interpreted by the US Supreme Court. So we follow that law. And you, the investors, are not getting the required or needed disclosures about those assets. And so like this is earnings season right now, Andrew. Everybody's asking about what's the earnings release and how many companies are beating earnings or falling behind and so forth. Where are the disclosures from these crypto tokens similar to this season of earnings releases?

Let me ask you this. Ultimately, and I think this is the big question in crypto land right now. Is Ethereum a commodity or is Ethereum a security? And therefore, will there one day be an ETF? That's the fundamental question on the table in crypto land. You agree?

You're the one that's out there asking the questions. All I would say is, to me, the fundamental question is, is how do we ensure that the American investor is protected? And right now they're not getting the required or needed disclosures. And the intermediaries in the center of this rather centralized market, generally are conflicted and doing things we would never allow the New York Stock Exchange to do. The New York Stock Exchange is not allowed to trade against the investors.

Okay, but let me ask you about this. You've seen the Consensys lawsuit, and I know you have a Wells notice with them as well. This is Patrick McHenry saying the following, and I want you to respond to it. Just months after a federal judge sanctioned SEC enforcement lawyers for lying in court, new evidence shows that Chair Gary Gensler himself misled Congress. In testimony to the Financial Services Committee last April, Chair Gensler refused to answer questions about the SEC's classification of Ether, and new court filings show this was an intentional attempt to misrepresent the commission's position.

We speak to Congress directly in hearings like that, and also directly to members, and we share with them accurately what we're doing so that the viewers can also understand we don't speak about, uh, whether we have an investigation or whether we don't have an investigation and we don't speak about whether somebody is, in our opinion, not following the law unless we actually bring a case. So we stay quiet on many questions that you might ask at this live interview or even in a congressional hearing.

There's a lot of folks who bought Ethereum expecting that one day there will be potentially an ETF and that it will be considered a genuine security that's tradable on these exchanges. Will that happen?

Again, that's something in front of our commission right now. We're a five-member commission, and those filings we'll take up at the appropriate time.

Is that something from a timing perspective, though? This is an election year. This administration may be the administration come next year. It may not be the administration. How does that impact the work you're doing?

I'm just focused on how we can do the most for 330 million Americans, what we can do to drive efficiency, resiliency, competition in the equity markets, the Treasury markets, the fixed income markets, and, yes, also addressing some of the issuer activity in the crypto markets where actors are not uniformly following the law. A lot of people have lost their hard-earned funds in the field that you seem to be so fascinated with.

I'm going to go to something else that people are fascinated by that's not crypto that I think you can talk about because the case is closed. The auditing firm for Trump Media, and we've been following Trump Media as a stock now, which, of course, former President Trump is the majority shareholder, was charged with, quote, "massive fraud." This is the accounting firm, not the company itself.

BF Borchers.

Can you explain what the fraud was and to the extent that investors should be thinking about this?

Well, so we have a system here in the U.S. where if you want to raise money from the public, you have to get audited by a firm to check the numbers, to make sure that the numbers are accurate. And there's auditing standards. This small firm, BF Borgers, that had well over 300 public company clients, audit clients, was very small and did not follow the standards, didn't follow the standards of having extra partners reviewing their files. They, at times, as we put out in this settlement, had misled their clients about the actual work they were doing, even taking prior work and just copying and pasting into later work and the like. And so, yes, last week we settled, and those public companies, there was about 350 of them, their auditor

chose to settle and not appear before the SEC again.

Let me ask you about Trump Media. A lot of folks have watched this stock move in ways that seem to defy at least historical conventions of the kind of metrics that we're all used to. As the head of the SEC, as somebody who's responsible for the integrity of the markets, what do you make of something like that?

So we're also paid to be merit-neutral. Investors get to decide as long as they get the full, fair, and complete and truthful, I would say, information. They're not getting that in crypto.

You think? You think they're not getting it in crypto? You genuinely think?

I genuinely think they're not getting that in crypto. And if they are a crypto security, it's required and needed. Public companies need to do that as well. But their auditor, the gatekeeper, matters. And this is a case where a gatekeeper failed those 350 companies and the investors on the other side of those companies.

Let me just drill into this for one more second, though. There's an idea with Trump Media, for example, and sometimes with other meme stocks, that they are moving in ways that may not be attached to metrics because the metrics don't matter, because the, quote, investors are investing in it, if you even call it investing, for a different purpose. Does that make sense to you or not?

Look, I've been around capital markets for over four decades, and absolutely...

Some people would call it manipulating the market, though. That is the accusation, that some people would say there are people effectively trying to manipulate it for reasons that are other than just trying to get the highest value.

So manipulation is not allowed in our markets—in essence, misleading the public and with an intent to move that price and so forth. But you are allowed, every individual is allowed to form their own view. And that's one of the beauties of our capital markets: it's the tens of thousands and millions of people can do their own research and form their own views.

Again, I'm not going to speak, as much as you try, I'm not going to speak on any one company. But what's important is their disclosures are accurate and that folks aren't in the market front-running or trading on insider information or manipulating any one of the thousands of securities that trade.

Different question. Just this morning, we put out a report actually in DealBook around Blackstone and their BREIT fund around their valuations. There's lots of questions on Wall Street about how a lot of these REITs and semi-liquid REITs effectively mark their books. Some use third parties, and those numbers are defined by the third party with no optionality. In Blackstone's case, it appears that they have allowed themselves, disclosed, to have latitude in how they come up with those numbers, and they pay themselves based on those numbers. And so if you can actually make the numbers your own and you can pay yourself based on those numbers, how do you look at something like that?

So stepping back again from any one company, valuations are very important in the fund business, whether they're registered funds that you can buy in the public, called mutual funds, or even private funds like private equity and venture capital. Those valuations are really critical for—and the law says that you've got to do those in an appropriate way. And so that's what's critical. And why is it critical? It's for people who are investing, they don't overpay, and people that are redeeming, that they get the right valuation. And so that's how we look at it, really, is to make sure that any fund adviser who's doing the valuations is following the letter of those valuations.

I would love to sit with you here for a lot longer, but we're effectively out of time. I mentioned there's a presidential election year. Do you want to be part of this administration? If the president wins again, and would you want to remain the chair of the SEC? Would you want to be the Treasury Secretary? What do you want to do next?

I'm just focused on this job, but this is one of the greatest privileges. I mean, anybody who's listening, I'm honored to serve my third president as the 33rd Chair of the SEC, overseeing $110 trillion capital markets. This is a terrific job where we can actually help Americans, investors, and issuers for decades to come. So my term is well into 2026. And if I have the honor to continue to serve, I look forward to it.

Hims & Hers, and the high stakes of social media. The online wellness company's CEO is walking back his offer to hire pro-Palestinian protesters after pushback on him and his stock. He's saying he's simply a supporter of peaceful protest.

Yeah, we all agree with that. We just don't like when Jewish kids can't go to school and someone might get hurt.

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Welcome back to Squawk Pod with Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Here's Andrew.

Shares of HIMSS and HERS Health are rising this morning. The company reported earnings of five cents per share, beating estimates by a penny or of a penny, I should say. Revenue also beating and subscribers arose by 41 percent to around one point seven million. The company raised its full year guidance. But a lot of folks got on that call to listen to this. CEO Andrew Dunham addressed his recent comments in which he praised pro-Palestinian protesters and said he and other executives were eager to hire them. This is what he had to say about it.

I'm deeply saddened that my support for peaceful protest has been interpreted by some as encouraging violence, intimidation, or bigotry of any kind. I do believe deeply in the right for people to use their voices in peaceful protests to drive change. This right is critical to our democracy and must be protected. Our world today is more just because students throughout history have courageously taken to their campuses and used their voices to force change.

In response to an analyst's question, the CEO said he didn't expect his comments to have any material impact on the company's business, though we did see the stock fall after those original comments and a whole flurry of comments on Reddit and Twitter and others of customers saying that they had no interest in using the service anymore. So we're going to have to watch to see next quarter what things look like, Joe.

that was like wrote uh... yeah we all agree with that we just picture just don't like when jewish kids can go to school and they're they're they're not someone might get her eventually and you know that there's no classes and that's what we're doing and we know that we all agree we know about the right to protest we got that i don't even know i keep seeing ads for that company. I don't know what the hell that company is. I think it's, I mean, if you need ED, they got that. If you're bald, they got that. If you're depressed, if not, if being infinite and bald make you depressed, they got something for that. Do you know what the hell that company does, Sorkin? Do you know? You know it well. i don't i don't need to just i don't want to describe what they hold on that i'm not bald but i didn't know what what the hell with that company what's the hardest part what i don't think it's a two million dollar company that what's that

I think they sell a whole bunch of products that are somewhat similar on the other side for women.

You're pretending you're totally, like, naive about this company. And you know every other company. You know AI. You've got SPACs. I do know about this company, but I just... You're feigning total ignorance about this one.

I'm feeling uncomfortable already. You are? I'm looking for a safe space. I'm looking for a safe space. I mean, seriously.

They've got, like, cradle to... I watch, it's like... What do you do? It's like they talk about curing everything. It's so weird. I don't know. I get up a lot at night. You got anything for that? I mean, it's crazy.

Melatonin. Melatonin.

Then I'm going to need something from Procter & Gamble if I'm, like, totally asleep because I do need to get up, Andrew. I don't know. That's called coffee. That's called coffee.

That is Squawk Pod for today. Thanks for listening. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin, who share everything. You can tune in weekday mornings on CNBC at 6 Eastern, but get the best moments, the newsmaking interviews, and the analysis you need. Get all of that, the very best of Squawk Box, in an easy-to-listen-to podcast when you follow Squawk Pod. Get it every day and listen whenever you want. That's it. We'll meet you right back here tomorrow.

We are clear. Thanks, guys.

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