AI Debt Binge Fueling Private Bond Market — The Close 7/1/2026

[00:00:01] Speaker 1: THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE [00:00:09] Speaker 2: MARKET DAY. THIS IS THE CLOSE. AND JUST LIKE THAT, THE SECOND HALF OF THE YEAR HAS STARTED LIVE FROM STUDIO 2. [00:00:19] Speaker 3: HERE AT BLOOMBERG HEADQUARTERS IN NEW YORK, I AM KATIE GREATFELD. WE ARE KICKING YOU OFF TO THE CLOSING BELLS HERE IN THE U.S. WITH THE BEST HOUR OF BLOOMBERG TELEVISION. THE BEST HOUR OF THE BEST HOUR, THE BEST HOUR OF THE SEMICONDUCTOR STOCKS, THEY HAD BEEN RALLYING BUT KIND OF A DANCE BACK AND FORTH BUT KEEPING AN EYE ON THE PHILADELPHIA SEMICONDUCTORS INDEX DOWN MORE THAN 6%. A LOT OF WEAKNESS, A LOT OF JITTERS IN PART DRIVEN BY THE FACT THAT META ACCORDING TO BLOOMBERG NEWS POTENTIALLY EYEING THEIR ABILITY TO SELL OFF SOME OF THEIR AI COMPUTE. BIG NEWS FOR THE COMPANY TO THE UPSIDE UP ABOUT 10% BUT WEIGHING ON THE CHIPMAKERS AND BUSINESS, THAT'S THE BEST HOUR OF THE S&P 500 IN THE LAST TWO DECADES. [00:01:05] Speaker 2: THIS IS A BEST MONTH FOR THE S&P 500 IN THE LAST TWO DECADES. THE INDEX, IT'S EXPERIENCED ITS LAST LOW LOST BACK IN 2014. QUITE A TRACK RECORD BUT THIS YEAR THAT TRACK RECORD MEETING WORRIES THAT THE CONFLUENCE OF MARKET MOVING EVENTS WILL WHIP VOLATILITY IN THE BACK HALF OF THE MONTH. THAT'S THE SAME TIME THE NEXT EARNING SEASON KICKS OFF AND ALSO THE SAME TIME AS THE FEDERAL RESERVE'S NEXT INTEREST RATE DECISION. AND SPEAKING OF THE FED, CHAIRMAN KEVIN WASH SAYING TODAY AT A CONFERENCE THAT INFLATION RISKS HAVE COME DOWN. ON THE OTHER SIDE, THOUGH, CINNEDEL SECURITIES SAYING THAT INVESTORS ARE ACTUALLY UNDERESTIMATING THE LIKELIHOOD THAT THE FED COULD RAISE INTEREST RATES AS SOON AS THIS MONTH DUE TO WASH'S ADAPTIVE FRAMEWORK. [00:01:53] Speaker 4: I DO WANT TO SAY, AT LEAST FOR THE UNITED STATES, THIS IS A TIME OF HUGE OPPORTUNITY. AND IF THE FED CAN DELIVER ON ITS REMIT TO DELIVER PRICES, I'VE NEVER BEEN MORE OPTIMISTIC ABOUT WHAT THE GROWTH ENGINE OF THE U.S. COULD PRODUCE. [00:02:07] Speaker 2: AND DATA OUT TODAY SHOWING ECONOMIC STRENGTH WITH THE MANUFACTURING DATA HOLDING CLOSE TO A FOUR-YEAR HIGH IN JUNE AND JOBS DATA SHOWING PRIVATE SECTOR JOB CREATION WAS SOLID AGAIN THIS MONTH. TOMORROW WILL BE THE REAL MEASURE OF THE LABOR MARKET WITH THAT JUNE JOBS REPORT COMING ON A THURSDAY, NOT ON A FRIDAY. [00:02:26] Speaker 3: NOT ON A FRIDAY WHEN I WILL STILL BE HERE IN THE STUDIO ON THURSDAY HELPING TO BREAK DOWN THE CLOSE ON THAT JULY 2ND. BUT, KATIE, I WANT TO TALK ABOUT THE MARKET. AS YOU CAN SEE, AT LEAST TODAY, THE MAG-7 OUTPERFORMING, AGAIN, REALLY DRIVEN BY THAT RALLY FOR META. BUT KEEPING AN EYE ON THE MONTH THAT WAS JUNE, TERRIBLE, TERRIBLE, TERRIBLE MONTH FOR THE MAG-7 LARGE CAP TECH COMPANIES. WORST MONTH PERFORMANCE RELATIVE TO THE MARKET SINCE LATE 2022, HOPING TO RIGHT THOSE WRONGS, KATIE. BUT THIS IS A MARKET THAT MAYBE HAS BEEN EXPANDING. WE ARE SEEING MAYBE A LITTLE BIT OF OUTPERFORMANCE FOR EQUAL WEIGHTED STOCKS AS THE BIG BOYS LAG. BUT THE BIG QUESTION IS, IS THIS A MARKET THAT CAN CONTINUE TO PUNCH HIGHER WITHOUT THE PERFORMANCE FROM THOSE BIG SEVEN [00:03:09] Speaker 2: COMPANIES? THANK YOU FOR JOINING US. SHE IS CHIEF INVESTMENT STRATEGISTS AT CHARLES SCHWAB. YOU THINK ABOUT SEASONALITY, CERTAINLY ON THE SIDE OF THE BULLS HERE. BUT SHOULD WE CONTINUE TO MARCH HIGHER WHEN IT COMES TO THE S&P 500? REALLY CURIOUS TO HEAR YOUR TAKE ON WHAT THAT LEADERSHIP ACTUALLY LOOKS LIKE. [00:03:33] Speaker 5: BECAUSE BELOW THE SURFACE OF THE INDEX, CERTAINLY IT'S BEEN A PRETTY INTERESTING MIX. THAT'S WHY WE HAVE BEEN REFERRING TO IT AS THE DUCK HIGHER. WE HAVE BEEN REFERRING TO THE DUCKS. WE HAVE BEEN REFERRING TO THE DUCKS. WE HAVE BEEN REFERRING TO THE SURFACE AND PADDLING LIKE THE DICKENS UNDERNEATH. I THINK THAT WAS A MICHAEL CAYNE PHRASE INITIALLY. AND THESE RAPID-FIRE ROTATIONS. WE'VE SEEN A BLOWOUT ON THE UPSIDE IN TERMS OF DISPERSION, A BLOWOUT ON THE DOWNSIDE IN TERMS OF CORRELATION. THAT'S HAPPENING NOT JUST BROADLY ACROSS THE MARKET BUT WITHIN SECTORS AND INDUSTRIES. I THINK THAT KIND OF BACKDROP WHERE YOU CONTINUE TO GET A [00:04:08] Speaker 2: MASSIVE ROTATION THAT WE ARE SEEING. AND YOU POINT OUT IN YOUR NOTES THAT YOU TAKE A LOOK AT MEGA CAPS, THE S&P 500, THE MOMENTUM FACTOR. TYPICALLY THEY TEND TO TRADE TOGETHER. CERTAINLY WE'VE SEEN THAT CORRELATION DISCONNECT OVER THE PAST YEAR OR SO. THEN YOU TAKE A LOOK OVER THE PAST TWO WEEKS, MOMENTUM REALLY PAST YEAR. I WONDER WHAT YOU MAKE OF THAT SLIPPage THERE AND WHETHER [00:04:32] Speaker 5: OR NOT YOU WOULD EXPECT IT TO CONTINUE. THAT'S THE NATURE OF ROTATION. I THINK THERE'S SOMETHING MISUNDERSTOOD ABOUT THE MOMENTUM FACTOR WHEN PEOPLE TALK ABOUT IT. I THINK WHEN PEOPLE HEAR MOMENTUM, THEY AUTOMATICALLY ASSUME IT'S HIGH BETA TECH STOCKS. WHEN YOU LOSE THAT CONTINUOUS OUTPERFORMANCE AND YOU MOVE INTO A RAPIDLY ROTATING MARKET, THAT'S WHEN YOU SEE THAT DISCONNECT BETWEEN THE MOMENTUM FACTOR IS WORKING. IT'S MORE OF A CONCEPT. IT JUST MEANS THAT THINGS THAT HAVE BEEN WORKING CONTINUE TO WORK. YOU CAN HAVE MOMENTUM IN UTILITY STOCKS. YOU CAN HAVE MOMENTUM IN CONSUMER STABLE STOCKS. IT'S NOT ALWAYS THE HIGH BETA. WHEN YOU LOSE THAT CONTINUOUS OUTPERFORMANCE AND YOU MOVE [00:05:09] Speaker 3: INTO A RAPIDLY ROTATING MARKET, THAT'S WHEN YOU SEE THAT INVESTORS. THE INDEX IS DOWN 6%. HOW SHOULD INVESTORS BE THINKING ABOUT THIS VOLATILITY ON AN INDUSTRY BY INDUSTRY BASIS? OSTENSIVELY WHEN YOU HAVE HIGHER DISPERSION, LOWER [00:05:26] Speaker 5: CORRELATIONS, EQUAL WEIGHT OUTPERFORMING CAP WEIGHTED, RUSSELL 2000 HANDILY OUTPERFORMING THE S&P, YOU WOULD THINK OF IT AS A STOCK PICKER'S MARKET, AS A STOCK PICKER'S MARKET, AS A STOCK PICKER'S MARKET, AS A STOCK PICKER'S MARKET, AS A PLAYING FIELD THAT IS MORE LEVELED FOR ACTIVE MANAGEMENT VERSUS PASSIVE MANAGEMENT. BUT IT ALSO SENDS A MESSAGE THAT IT'S A TRADING-ORIENTED MARKET, WHICH IN FACT IT IS. BUT FOR INDIVIDUAL INVESTORS, I WOULD SAY BE MINDFUL OF NOT TRYING TO TRADE MEANING ANTICIPATE SOME OF THESE REALLY SHORT-TERM MOVES. THERE'S SO MUCH SHORT ATTENTION SPAN MONEY IN THE MARKET RIGHT NOW, AND TO YOUR POINT, BAILEY, NARRATIVES CAN CHANGE ON A DIME. AND YOU HAVE ANOTHER EXAMPLE WOULD BE COMMUNICATION SERVICES DOWN ALMOST 8% IN THE MONTH OF JUNE, UP ALMOST 3% TODAY. TRYING TO GAUGE WHEN YOU HIT THOSE, YOU KNOW, DAY-TO-DAY OR INTRA-DAY INFLECTION POINTS I THINK IS REALLY, REALLY TRICKY. WHICH IS, AS MUCH AS IT'S KIND OF BORING TO TALK ABOUT, REINFORCES THE NOTION OF DIVERSIFICATION AND THEN MAYBE MORE FREQUENT REBALANCING IN ORDER TO TAKE VANTAGE OF SOME OF THESE BIG SWINGS SO THAT YOU'RE TAKING PROFITS WHEN PROFITS ARE GIVEN TO YOU. [00:06:33] Speaker 3: WELL, YOU MAKE AN INTERESTING POINT BECAUSE, AGAIN, STARTING OF THE SECOND HALF YOU HAD YESTERDAY ENDING THE QUARTER, ENDING THE HALF, ENDING THE MONTH. HOW MUCH OF THIS IS WINDOW DRESSING IN TERMS OF THESE KIND OF VOLATILE ONE-OFF MOVES? IS IT PARTLY BECAUSE THERE'S THINNER LIQUIDITY OR IS IT STILL PEOPLE TRYING TO CHASE THE NEXT NARRATIVE OR THOSE SHIFTS THAT ARE EVOLVING HERE IN THE U.S. OR PARTICULARLY AS IT RELATES TO MEMORY STOCKS, WHAT'S BEEN [00:06:55] Speaker 5: COMING OUT OF ASIA? I THINK IT'S A BIT OF BOTH, BUT THERE'S ALWAYS A LOT OF WINDOW DRESSING WHEN YOU'RE TALKING ABOUT THE FINAL WEEK OF A CALENDAR QUARTER BECAUSE THAT'S WHEN THE TRADITIONAL FUND COMPLEX, FOR THE MOST PART, DOES THEIR REBALANCING. SO IT'S HARD TO SEPARATE WHAT PORTION OF WHAT WE'RE SEEING FROM A ROTATION STANDPOINT IS DRIVEN BY THAT MARKET FORCES THAT ARE IN PLAY RIGHT NOW AND THE POWERFUL COHORTS OUTSIDE OF THAT TRADITIONAL FUND COMPLEX LIKE THE COMMODITY TRADING ADVISORS AND THE SYSTEMATICS AND THE LONG SHORE HEDGE FUND COMMUNITY AND THEN THE RETAIL TRADER COHORT WHICH HAS BECOME SORT OF A POWER HORSE FOR THE MARKET IN AND OF ITSELF. YEAH, ABSOLUTELY. [00:07:34] Speaker 2: AND WE'VE CERTAINLY FELT THE INFLUENCE OF THAT RETAIL COHORT. I WANT TO TALK A LITTLE BIT ABOUT, YOU KNOW, FED POLICY HERE BECAUSE WE DID HEAR FROM FED CHAIRMAN KEVIN WORSH SPEAKING IN PORTUGAL TODAY. AND I'D LOVE TO HEAR YOUR THOUGHTS ON BASICALLY WORSH SAYING THAT INFLATION RISKS ARE DOWN, OF COURSE, STILL COMMITTING TO PRICE STABILITY HERE. AND THEN YOU TAKE A LOOK AT THE MARKET, STILL NOT RULING OUT THE POSSIBILITY THAT WE'RE GOING TO SEE AN INTEREST RATE RISE FROM HERE. WE'D LOVE TO HEAR, FIRST OF ALL, JUST YOUR THOUGHTS ON THAT AND ALSO HOW THAT SORT OF MAKES ITS WAY INTO THE EQUITY MARKET BECAUSE, AGAIN, YOU THINK ABOUT THE OUTPERFORMANCE THAT WE'RE SEEING FROM SMALL CAPS, FOR EXAMPLE, I WONDER WHETHER OR NOT THAT CAN SUSTAIN ACTUALLY AN INCREASE IN RATES FROM HERE. [00:08:16] Speaker 5: YOU KNOW, LET ME ANSWER THE SECOND PART OF THE QUESTION FIRST, THAT'S AN INTERESTING ONE. I THINK THE INITIAL SURGE IN SMALL CAPS WAS ON THE BASIS OF EASIER MONETARY POLICY ON THE PART OF THE FED. OBVIOUSLY, THAT IS NOT THE NARRATIVE RIGHT NOW. AND THAT MAY BE PART OF THE REASON WHY WITHIN THE RUSSELL 2000, YOU'VE SEEN A CATCH UP ON THE PART OF THE PROFITABLE STOCKS WITHIN THE RUSSELL RELATIVE TO THE UNPROFITABLE STOCKS. I THINK IT WAS THAT UNPROFITABLE ZOMBIE-TYPE COHORT THAT, FOR OBVIOUS REASONS, TENDS TO BENEFIT WHEN YOU'RE IN EASIER MONETARY POLICY BACKDROP. THAT IS NOT THE CASE RIGHT NOW. I THINK WHAT WAS INTERESTING ABOUT WORSH'S COMMENTS IS HE ALMOST PROVIDED A LITTLE BIT FOR EVERYBODY. GAVE A LITTLE BIT OF THE HANDOUT TO THE DOVES BY SAYING, YOU'VE SEEN SOME EBBING INFLATION RISK. HE FOR THE MOST PART FOCUSED ON INFLATION EXPECTATIONS. BUT AT THE SAME TIME, HE WANTED TO REINFORCE THOSE SORT OF HAWKISH CREDENTIALS THAT HE, FOR MANY, HE ESTABLISHED WITH THE JUNE FOMC MEETING BY SAYING, WE ARE STILL VOWING TO GET INFLATION BACK DOWN TO THE 2% TARGET. AND I THINK YOU'RE GOING TO SEE SOME MOVEMENT IN TERMS OF EXPECTATIONS FOR WHETHER THE FED HIKES IN JULY OR NOT. BUT EVEN THOUGH WORSH IS USING ADAPTIVE AS A WORD RIGHT NOW, I THINK THE BOTTOM LINE IS THE FED AND ITS REACTION FUNCTION IS STILL VERY DATA DEPENDENT. THE NEXT BIG ONE, OF COURSE, COMES TOMORROW MORNING. [00:09:41] Speaker 2: ABSOLUTELY, LOOKING FORWARD TO THAT JOBS REPORT. LIZ-ANNE, REALLY GREAT TO SPEND SOME TIME WITH YOU. THAT IS LIZ-ANNE SAUNDERS, SHE IS CHIEF INVESTMENT STRATEGIST OVER AT CHARLES SCHWAB. NOW COMING UP, THE IPO MARKET KICKING OFF THE SECOND HALF OF THE YEAR WITH A STRONG START FOLLOWING THAT SPACEX IPO. WE DISCUSS WITH TED SMITH, PRESIDENT AND COFOUNDER AT UNION SQUARE ADVISORS. [00:10:01] Speaker 3: AND MOVING FROM A HOT IPO MARKET TO EXPECTATIONS OF HOT JUNE JOBS REPORT OUT TOMORROW, A FULL BREAKDOWN OF WHAT TO EXPECT WITH DANA PETERSON OF THE CONFERENCE BOARD. [00:10:12] Speaker 2: AND FROM PAYCHECKS TO PLAYTIME, A DISCUSSION ON THE CHILD ENTERTAINMENT ECONOMY WITH AN AMERICAN CLASSIC. THE CHUCK E. CHEESE CEO HAS BIG PLANS FOR A BIG EXPANSION. ALL THAT AND MORE COMING UP. THIS IS THE CLOSE ON BLOOMBERG. [00:10:31] Speaker 3: META IS TAKING ITS AI EFFORTS TO THE CLOUD. THANK YOU FOR JOINING US. THIS IS A PATH TO COMPETING WITH THE LIKES OF AMAZON WEB SERVICES, MICROSOFT, AZURE AND GOOGLE CLOUD. PEOPLE FAMILIAR WITH THE MATTER TELL BLOOMBERG. JOINING US LIVE IS ONE OF THE REPORTERS BEHIND THAT BIG MARKET MOVING SCOOP, CURT WAGNER OF BLOOMBERG NEWS. CURT, I WANT TO START WITH, IS THIS A SHIFT FOR THESE [00:11:01] Speaker 6: COMPETING COMPETING COMPETING COMPETING COMPETING COMPETING COMPETING COMPETING COMPETING COMPETING COMPETING COMPETING COMPETING? I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. IT IS A CLOUD BUSINESS ALREADY ESTABLISHED OR SET UP. IT IS NOT REALLY LIKE THEY HAVE A LOT OF OPTIONS. [00:11:49] Speaker 2: I THINK THIS IS AS MUCH AN EDGE FOR THE FUTURE THAN IT IS A WARNING SIGN OF THINGS IN THE IMMEDIATE GOINGS-ON. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. I WANT TO TALK ABOUT IT. 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[00:21:32] Speaker 3: WELL, VERY QUICKLY, IN ABOUT 20 SECONDS, WHEN WE DO GET THE NEXT QUARTERLY REPORT FROM SOME OF THESE MEGA CAP COMPANIES LIKE META, ARE WE GOING TO SEE KIND OF RIGHT SIZING OF CAPEX EXPECTATIONS NOW THAT WE ARE HAPPY THROUGH THE YEAR? NO. [00:21:44] Speaker 7: NO. I MEAN, META JUMPING INTO THE CLOUD MARKET, TO US, SUGGESTS THEY HAVE TO SPEND MORE, NOT LESS. THAT THEY WON'T PULL BACK. ALL OF A SUDDEN, EVERYONE IS LIKE, HEY, THE MARKET HAS SHIFTED AND THIS IS A PULLBACK MOMENT FOR THE REST OF THE INFRASTRUCTURE. I THINK THAT IS WRONG. WE LEARNED FROM GOOGLE. GOOGLE REQUIRED A LOT OF TIME AND ENERGY TO GET THIS RIGHT. SO IF THEY REALLY WANT TO MOVE INTO THIS IN A BIG WAY, NOT DIP THEIR TOE IN TO DO A FULL CANNIBAL, THEY ARE GOING TO REQUIRE MORE, NOT LESS CAPITAL. [00:22:10] Speaker 2: ALL RIGHT, BRENT, THAT IS A GOOD PLACE TO LEAVE IT. GREAT TO GET SOME TIME WITH YOU. THAT IS BRENT THILL OVER AT JEFFREY'S. COMING UP, WE WILL TAKE A LOOK AT SPACE SES LAUNCH INTO PUBLIC MARKETS, REALLY MADE HISTORY IN THE FIRST HALF OF THE YEAR. WE WILL TAKE A LOOK AT THE IPO MARKET IN THE NEXT SIX MONTHS WITH TED SMITH OF UNION SQUARE ADVISORS. THIS IS THE CLOSE ON BLOOMBERG. JUST ABOUT 3:30 P.M. IN NEW YORK, THIS IS THE COUNTDOWN TO THE CLOSE. I'M KATIE GRIEFELD. [00:22:43] Speaker 3: AND I'M BAILEY LIPSCHULTZ. AN INTERESTING START TO THE QUARTER SECOND HALF OF THE YEAR. NOT MUCH GOING ON AT THE INDEX LEVEL, BUT I KNOW THE SURFACE IS SOME ACTIVITY. [00:22:51] Speaker 2: ABSOLUTELY, ESPECIALLY WHEN IT COMES TO THE IPO MARKET, WHICH IS WHERE YOU LIVE. [00:22:55] Speaker 3: NEAR AND DEAR TO MY HEART, BENDING SPOONS, THE PARENT COMPANY AND OWNER OF AOL, VIMEO, A NUMBER OF OTHER PORTFOLIO COMPANIES, ABSOLUTELY RIPPING TODAY, UP ABOUT 29% FROM THE IPO PRICE. THIS IS A DEAL THAT PRICED ABOVE THE MARKETED RANGE, WHICH SURPRISED PRETTY MUCH EVERYONE I TALKED TO ON THE BUY SIDE. AT LEAST DAY ONE, HERE WE ARE, A NUMBER OF HOURS INTO TRADING, ABOUT $21, $25 BILLION MARKET CAP. [00:23:17] Speaker 2: THIS IS A COMPANY THAT I HAD TO ASK YOU WHAT EXACTLY THEY DO. THE NAME ITSELF DOES NOT GIVE ANYTHING AWAY. YOU DESCRIBED THAT THEY JUST SORT OF SERIALLY BUY COMPANIES. [00:23:26] Speaker 3: THEY BUY COMPANIES, THEY OWN EVERNOTE, THEY OWN RIMINI, THEY BASICALLY BUY, HAVING TALKED TO THE CEO A LITTLE WHILE AGO, THEY BASICALLY BUY IN RIGHT SIZE OPERATIONS, KIND OF STREAMLINING THE TOP AND BOTTOM LINE AND ALSO KIND OF TRIMMING THE FAT TO AN EXTENT. ABSOLUTELY. [00:23:40] Speaker 2: WELL, BENDING SPOONS, THE MARKET WELCOMING THAT IPO WITH OPEN ARMS. LET'S TALK ABOUT WHAT THE RECEPTION COULD LOOK LIKE FOR SOME OF THE OTHER PIPELINE CANDIDATES OVER THE NEXT SIX MONTHS WITH TED SMITH. HE IS PRESIDENT AND COFOUNDER OVER AT UNION SQUARE ADVISORS JOINING US IN STUDIO. [00:23:56] Speaker ?: TED, IT'S GREAT TO SEE YOU. [00:23:56] Speaker 2: YOU TOO, KATIE. [00:23:57] Speaker 8: THANKS FOR HAVING ME BACK. [00:23:59] Speaker 2: WE HAVE SPACE X OUT OF THE WAY. IT SEEMS LIKE BY ALL MEASURES THAT WENT PRETTY SMOOTHLY WHEN YOU THINK ABOUT THAT TRADING DEBUT. TALK TO US ABOUT THE NEXT SIX MONTHS BECAUSE WE HAVE A LOT OF IPO-TYPE CONVERSATIONS ON THIS SHOW AND IT SEEMS LIKE IT'S OFF TO THE RACES HERE IS TYPICALLY WHAT WE HEAR. IS THERE ANY NUANCE THAT YOU WOULD ADD? [00:24:20] Speaker 8: I THINK THE ONE NUANCE THAT COULD BE TALKED ABOUT IS WHAT'S THE REGULATORY BACKLOG GOING TO BE. BECAUSE WHEN WE WENT THROUGH THE GOVERNMENT SHUTDOWN LATE LAST YEAR THAT PUT A LOT OF FOLKS SORT OF IN THE HOLDING PATTERN AND RIGHT NOW BY OUR ESTIMATE THERE'S ALMOST 1,000 COMPANIES THAT ARE IN THAT BACKLOG. SO HOW FAST THE SEC CAN GET THROUGH THE PAPERWORK THAT'S A BIT OF AN UNKNOWN. I PRESUME SOME OF THE COMPANIES THAT ARE THE HEADLINE NAMES MAY GET FAST TRACKED A LITTLE BIT BUT NOT EVERYBODY WILL. SO IT'S GOING TO TAKE A LITTLE LONGER I THINK TO WORK THROUGH THAT BACKLOG. I THINK WE'RE GOING TO HEAR AN AWFUL LOT NOW ABOUT THE FACT THAT ANTHROPIC IS VERY LIKELY TO BE NEXT OUT AND OPEN AI IS MAY DELAY TILL 2027 BY ALL BETS AT THIS POINT. SO IT'S GOING TO BE A LOT ABOUT ANTHROPIC AND THEN IT'S GOING TO BE A LOT ABOUT THE OTHER BOTH AI MAJORS AS WELL AS AI-INFUSED SOFTWARE COMPANIES THAT WE'RE GOING TO SEE I THINK. [00:25:07] Speaker 2: WELL YOU LET US EXACTLY WHERE I WANTED TO GO AND THAT IS THAT OPEN AI DELAY OF COURSE. THAT IS SOMETHING THAT BILLY HAS SPENT A LOT OF TIME REPORTING ON. WHAT DID YOU MAKE OF IT? IS THIS REALLY IDIOSYNCRATIC TO THE COMPANY THEMSELVES? WHAT THEY'RE WORKING THROUGH WHEN IT COMES TO THEIR ACTUAL BUSINESS OR IS THERE ANYTHING THAT WE SHOULD EXTRAPOLATE OUT FROM THAT? [00:25:25] Speaker 8: I THINK WE LEARNED TWO THINGS. I THINK WE LEARNED THAT WHEN SARAH FRIER SAYS I DON'T THINK WE'RE READY TO GO PUBLIC YOU SHOULD LISTEN TO HER. AND WHEN YOU HAVE SAM SAYING IT'S A TRILLION DOLLARS OR BUST FROM A VALUATION PERSPECTIVE HE'S WILLING TO WAIT. SO I THINK IT'S A COMBINATION OF THEY NEED TO GET THEIR INTERNAL HOUSE IN ORDER TO BE READY AND NOBODY KNOWS THAT BETTER THAN SARAH AND SAM DOES NOT WANT TO COME OUT AND BE ANYTHING LESS THAN A TRILLION-DOLLAR COMPANY AND SO HE'S WILLING TO HANG OUT UNTIL HE THINKS HE CAN BE ASSURED OF THAT. [00:25:50] Speaker 3: I THOUGHT IT WAS INTERESTING THAT SOME OF THE REPORTING SUGGESTED THEY WERE POINTING TO WEAKNESS IN SPACEX. IT WAS STILL UP LIKE 20% IN MARKET CONDITIONS WHICH I DON'T KNOW HAVING COVERED THE INDUSTRY FOR A NUMBER OF YEARS IT'S KIND OF HARD TO SAY FIVE MONTHS FROM NOW THE MARKET IS NOT GOING TO BE AS RECEPTIVE TO YOUR COMPANY. HOW ARE YOU THINKING ABOUT RECEPTIVITY AS RELATES TO AN ANTHROPIC POTENTIALLY IN THE FALL AND KIND OF WHAT THAT PATH COULD LOOK LIKE? [00:26:09] Speaker 8: I THINK ANTHROPIC IS GOING TO DO VERY WELL AS A PUBLIC COMPANY AND I THINK IT'S GOING TO BE A GREAT IPO. I THINK THE ONE THING THAT WE DIDN'T REALLY OR HAVEN'T REALLY LEARNED YET IS WAS THE SPACEX STRATEGY OF DRAMATICALLY EXPANDING THE RETAIL INVESTOR BASE. HOW HAS THAT WORKED? HAS THAT CONTRIBUTED TO THE RAPID UPDRAFT AND THEN JUST AS RAPIDLY THE DOWNDRAFT? TO YOUR POINT, KATIE, IT'S TRYING VERY WELL. BUT IF YOU'RE ONE OF THE RETAIL INVESTORS WHO DECIDED TO BUY ON THE WAY UP AND GOT IT AT 225, YOU MAY NOT BE SO INCLINED TO PARTICIPATE IN THOSE NEW IPOS. [00:26:41] Speaker 3: WELL, DO YOU GET THE SENSE THAT THERE'S ENOUGH CAPACITY FROM RETAIL TO, YOU KNOW, DIVIDE ANOTHER 30%, 20% OF AN IPO FOR AN ANTHROPIC WHERE IT'S TENS OF BILLIONS OF DOLLARS JUST AFTER A FEW MONTHS AFTER SPACEX OR DO YOU THINK THERE WILL BE SOME TYPE OF KIND OF TAPPING OUT OF RETAIL? [00:26:58] Speaker 8: I THINK FOR THE NEXT ONE OR THE NEXT FEW, THERE'S PLENTY OF RETAIL DEMAND THAT'S OUT THERE. THE QUESTION IS, CAN WE GET THROUGH THE LIST OF THE 20 OR 30 OR SO TECH NAMES THAT MAY COME IN THE NEXT 12 MONTHS? [00:27:08] Speaker 3: WELL, THINKING ABOUT KIND OF THE BROADER BACKLOG, IS THIS A MARKET WHERE YOU HAVE TO HAVE SOME TYPE OF AI STORY TO GET REAL INVESTOR RECEPTIVITY OR CAN YOU TAKE KIND OF A REGULAR WAY SOFTWARE COMPANY PUBLIC? [00:27:19] Speaker 8: I THINK IT'S GOING TO BE TOUGH. I WAS LISTENING TO THE PRIOR SEGMENT WITH MY FRIEND, AND I AGREE. IT'S A TOUGH STORY IN JUST PURE SOFTWARE RIGHT NOW. WE WILL SEE SOME SOFTWARE NAMES OVER THE COURSE OF THE NEXT 12 MONTHS, BUT YOU DO HAVE TO HAVE AN AI STORY. [00:27:33] Speaker 2: IT'S FUNNY HOW MUCH JUST PSYCHOLOGY INFORMS WHAT WE ARE TALKING ABOUT, THAT YOU HAVE A VERY SHINY OBJECT OVER HERE. IT'S GOING TO BE HARD TO TEAR THOSE EYES AWAY TO LOOK AT THIS OBJECT OVER HERE. BUT I DO WANT TO TALK A LITTLE BIT MORE ABOUT THE REST OF THE PIPELINE BECAUSE, OKAY, I COULD SEE HOW IT WOULD BE TOUGH FOR A SOFTWARE COMPANY IN THIS AI WORLD TO SORT OF WIN THAT ATTENTION OVER. WHAT ABOUT FOR THOSE COMPANIES IN THE PIPELINE IN THAT BACKLOG WHO ARE TOTALLY OUTSIDE OF THE WORLD OF TECH? MAYBE THEY HAVE ACTUALLY PHYSICALLY PRODUCED REAL PRODUCTS. I MEAN, WHAT SORT OF CHANCE DO THEY STAND IN A MARKET LIKE THIS ONE? I THINK THEY CAN STILL GET [00:28:10] Speaker 8: OUT. I THINK WHAT WE LEARN THROUGH SPACEX AND BENDING SPOONS AND SOME OF THE OTHER IPOs THAT HAVE ALREADY HAPPENED THIS YEAR IS THERE IS APPETITE. I FOCUS ON TECH. THAT'S WHAT EVERYBODY WANTS TO TALK ABOUT THE SHINY OBJECT BUT I THINK WHAT WE HAVE LEARNED IS THERE IS CAPITAL TO GO AROUND FOR NEW STORIES THAT HAVE GOOD FUNDAMENTALS. YOU HAVE TO HAVE GROWTH AND PROFITABILITY AND YOU HAVE TO BE OF A CERTAIN SIZE. WE DON'T OFTEN SEE THE SMALLER IPOs ANYMORE THE WAY WE USED TO WHEN I FIRST STARTED IN THIS BUSINESS. THEY ARE GOING TO BE LARGER COMPANIES AND BIGGER RAISES BUT THEY ARE NOT ALL GOING TO BE 75 BILLION AT A POP. [00:28:41] Speaker 3: THAT'S BEEN THE INTERESTING THING IS JUST BEEN KIND OF THE SCALE AND SCALE OBVIOUSLY MATTERS WHEN YOU TALK TO INVESTORS AND I'VE EVEN HAD A FEW BASICALLY SAY WE DON'T WANT TO PARTICIPATE IN SMALL CAP IPOs ANYMORE BECAUSE WE WANT THAT EXPOSURE WHEN THEY ARE PRIVATE. IF A COMPANY IS GOING PUBLIC AND IT'S SMALL IN THEIR VIEW THE UPSIDE ISN'T QUITE THERE. IF YOU ARE TALKING TO A PERSPECTIVE CLIENT WHO IS A SMALLER COMPANY AND WANTS TO IPO, WHAT IS THE PITCH? [00:29:04] Speaker 8: THE PITCH FOR THEM IS THAT FOR VENTURE BACKED COMPANIES, STILL MORE THAN 98% OF THE COMPANIES WHO GET AN EXIT GET IT THROUGH M&A WHICH IS WHY MY FIRM FOCUSES ON M&A. SO THERE ARE THE 2% THAT CAN SQUEEK THROUGH THE DOOR BUT IT'S VERY UNLIKELY THAT THEY ARE GOING TO GET TO THE SCALE. AND FRANKLY, FOR SOME INDIVIDUALS IT'S STILL A BELL THEY WANT TO RING BUT FOR A LOT OF FOLKS RECOGNIZING THAT THE LIQUIDITY EVENT IS M&A DRIVEN AND NOT IPO DRIVEN, THEY ARE FOCUSED ON BUILDING A GREAT COMPANY. [00:29:33] Speaker 3: HOW ARE COMPANIES THINKING ABOUT SALES? IF I'M IN THE SOFTWARE SPACE AND I WANT TO GO OUT AND ACQUIRE A PRIVATE COMPANY, I'M PROBABLY SAYING I DON'T KNOW WHAT THREE YEARS LOOKS LIKE. I ACTUALLY DON'T WANT TO PAY A PREMIUM TO WHAT YOU ARE EXPECTING. HOW ARE THOSE DIALOGUES PLAYING OUT IN THE M&A PERSPECTIVE? [00:29:48] Speaker 8: WE HAVE A LOT OF CONVERSATIONS ABOUT DOING OUR BEST OR HELPING OUR CLIENTS DO THEIR BEST AND PUT THEIR BEST FOOT FORWARD WITH RESPECT TO WHAT THEY THINK THE NEXT YEAR OR TWO OR THREE WILL LOOK LIKE. BUT YOU'RE RIGHT. THERE'S A LOT OF UNKNOWN PARTICULARLY GIVEN WHAT AI COULD DO TO THE SOFTWARE SECTOR. SO THAT'S CAUSING LONGER DILIGENCE CYCLES. IT'S TAKING A LOT LONGER TO GET M&A DEALS DONE RIGHT NOW. [00:30:03] Speaker 3: IT'S GOING TO BE INTERESTING TO SEE HOW M&A PLAYS OUT IN 2026 AND HOW THOSE IPOs PLAY OUT. OBVIOUSLY ALL EYES ON ANTHROPIC. OUR THANKS TO TED SMITH, PRESIDENT AND COFOUNDER OVER AT UNION SQUARE ADVISORS. COMING UP, INVESTORS RUNNING TO NIKE IN TODAY'S SESSION DESPITE A CAUTIOUS OUTLOOK AND WARNING ABOUT WEAKNESS IN THE LATEST QUARTERLY REPORT. IT'S TODAY'S STOCK OF THE HOUR. UP NEXT, THIS IS THE CLOSE ON BLOOPIRD. TIME NOW FOR OUR STOCK OF THE HOUR. SHARES OF NIKE MOVING HIGHER DESPITE EXECUTIVES GIVING A CAUTIOUS OUTLOOK AND WARNING ABOUT ELEVATED CONSUMER ANXIETY AND ITS LATEST EARNINGS RESULTS. HERE TO BREAK IT ALL DOWN FOR US FROM THE WALL STREET SIDE OF INVESTORS. WE'VE BEEN TALKING ABOUT THIS. THIS IS THE BOTTOM FEEDING, AND SENIOR ANALYST OF RETAIL AND E-COMMERCE OVER AT Guggenheim PARTNERS. I WANT TO LOOK AT THIS STOCK CHART, DOWN 42% IN THE LAST 12 [00:31:05] Speaker 9: MONTHS. IS THIS BOTTOM FEEDING, IS THIS SHORT COVERING? WHY ARE INVESTORS BIDDING UP NIKE TODAY? A LOT OF DESCRIPTIONS. GOOD TO SEE YOU. THIS IS STILL NIKE. PEOPLE ARE TRYING TO FIGURE OUT YOUR POINT. IS IT BOTTOM FEEDING OR EARNING STABILIZATION? THIS IS THE BOTTOM FEEDING. IT IS A BOTTOM FEEDING. IT IS A BOTTOM FEEDING, AND WITH SEVERITY IN THE LAST SEVERAL REPORTS. THIS QUARTER, IT WAS A LITTLE BIT MORE MUTED. IF PEOPLE FEELING LIKE THE EARNINGS START STABILIZING, WE [00:31:34] Speaker 2: NEED TO SEE STABILIZATION BEFORE WE SEE GROWTH, I THINK THAT'S WHAT YOU'RE SEEING PEOPLE COME TO RIGHT NOW. THAT'S A LITTLE BIT MORE EARNING. I THINK THAT'S A LITTLE BIT MORE EARNING. THAT'S A LITTLE BIT MORE EARNING. THAT'S A LITTLE BIT MORE EARNING. THAT'S A LITTLE BIT MORE EARNING. IT WAS JUST THAT EXPECTATIONS FOR NIKE ARE REALLY, REALLY LOW. OR AT LEAST THEY WERE THIS TIME YESTERDAY. IT SOUNDS LIKE WHAT YOU'RE SAYING IS THAT WE HAVEN'T NECESSARILY REACHED THAT INFLICTION POINT. [00:31:53] Speaker 9: THAT MAYBE THIS WAS A BETTER THAN FEARED SORT OF REPORT ALTOGETHER. I THINK IT'S A FAIR ASSESSMENT. IF WE THINK ABOUT WHERE NIKE IS VERSUS IT'S UP 3 PERCENT TODAY, THAT'S A LONG WAY OFF FROM WHERE IT WAS. I THINK PEOPLE STILL HAVE FEARS, PEOPLE STILL HAVE CONCERNS. AND FRANKLY THE COMPANY IS ACKNOWLEDGING THEM TOO. I THINK RIGHT NOW THE QUESTION BECOMES DO YOU SEE ON THE -- IS THERE A LIGHT AT THE END OF THE TUNNEL EVEN IF THAT TUNNEL IS REALLY, REALLY LONG. I THINK THAT'S THE QUESTION. I THINK PEOPLE STILL HAVE A LOT OF FEARS THAT A, NUMBERS ARE COMING DOWN AND B, STOCK IS NOT CHEAP. FROM A MULTIPLE PERSPECTIVE, YOU CAN CREATE FEAR. I THINK AFTER TONIGHT, MAYBE THE QUESTION BECOMES, OK, IS IT JUST THAT THE STOCK IS NOT CHEAP, RATHER THAN IS THERE STILL A MEANINGFUL RESET ON THE NUMBERS AHEAD? [00:32:35] Speaker 3: AND WHAT'S THE VIEW RIGHT NOW OF ELLIOTT HILL? [00:32:38] Speaker 9: THAT'S A GREAT QUESTION. I THINK IN GENERAL, PEOPLE -- I AM -- THESE ARE BIG BUSINESSES. I THINK ELLIOTT CAME IN KNOWING HOW TO RE-ESTABLISH RELATIONSHIPS WITH THE PARTNERS AND THEY'RE DOING THAT. THE BIGGEST ISSUE WAS THEY HAD GONE DIRECT AWAY FROM WHOLESALE, LEFT THE PEOPLE THAT LEFT THE PARTNERS THAT MADE THEM WHO THEY ARE, AND HE'S OBVIOUSLY RE-EMBRACED THAT. I THINK THE STOCK WILL TELL YOU IN GENERAL HOW PEOPLE FEEL ABOUT THE COMPANY. AND SO I THINK ELLIOTT WOULD TELL YOU THIS IS HARDER, LONGER THAN HE THOUGHT IT WOULD BE, BUT HE STILL FEELS THE FUEL. HE STILL BELIEVES THAT EVERYTHING IS GOING TO MOVE IN THAT DIRECTION. I WOULD SAY THE STUFF WE WERE TALKING ABOUT BEFORE, OF CAN WE SEE THE STABILIZATION, THAT'S OBVIOUSLY UNDER HIS TENURE. WE'LL HAVE A NEW CFO, AND SO THAT WILL BE WORTH WATCHING AND FIGURE OUT WHAT DOES THAT CHANGE, HOW MUCH OF THIS HAS BEEN OPERATIONAL. IF YOU ARE SHIFTING YOUR CHANNEL, IF YOU FOCUS ON WHERE YOU'RE SELLING INSTEAD OF WHAT YOU'RE SELLING, THERE'S AN ELEMENT THERE WHERE THE CFO WILL HAVE A VERY STRONG ROLE, SO I THINK THAT IS A YET TO BE DETERMINED. BUT, YEAH, I MEAN, CLEARLY, THE NEXT CHAPTER HASN'T BEEN WRITTEN YET. [00:33:37] Speaker 2: RIGHT. WELL, IT'S INTERESTING. SO YOU THINK ABOUT ELLIOTT HILL, HE JOINED IN OCTOBER 2024, SO WE'RE APPROACHING THAT TWO-YEAR MARK. AND THE CONTOURS OF THE TURNAROUND THAT THEY WOULD LIKE TO EXECUTE OVER AT NIKE, THEY'RE WELL ARTICULATED AT THIS POINT. IT'S CLEAR WHAT THEY NEED TO DO. YOU TAKE A LOOK AT SHARES, THERE SEEMS TO BE SKEPTICISM THERE. WE WERE TALKING TO A GUEST YESTERDAY WHO MADE THE POINT THAT MAYBE ELLIOTT HILL HAS MAYBE A YEAR OR TWO LEFT OF RUNWAY BEFORE THE MARKET REALLY TAKES IT AWAY. I WONDER IF YOU AGREE WITH [00:34:07] Speaker 9: THAT. I HOPE YOU AND I HAVE A YEAR OR TWO LEFT. A YEAR OR TWO IS A LONG TIME. I THINK THE REALITY IS A LOT OF THINGS CAN CHANGE. BUT I THINK WHAT YOU ARE -- STOCKS ARE POWERFUL INDICATORS. I THINK SEEING THE STOCK GO DOWN, IT'S VERY HARD TO CONTEST OR ARGUE THAT PEOPLE HAVE BEEN VERY HAPPY WITH HOW NIKE HAS PERFORMED IN THE LAST FEW YEARS AND HIS TENURE IS INCLUDED IN THAT. I WOULD SAY THERE IS AN INTERESTING DYNAMIC AND THIS IS A LITTLE BIT DANGEROUS BECAUSE IT'S GOING TO SOUND REALLY BULLISH AND I DON'T KNOW IF WE'RE AT THE REALLY BULLISH STAGE YET. BUT WE DO HAVE TO ACKNOWLEDGE THAT IF YOU WERE TO BEAR HUG THIS BUSINESS, IF YOU WERE TO START THIS BUSINESS, YOU WOULDN'T TURN THE LIGHT ON EVERYTHING AT ONCE. YOU WOULD TRIASGE IT. YOU WOULD SAY NORTH AMERICA IS THE MOST IMPORTANT REGION. I NEED TO TAKE CARE OF THAT FIRST. THEN I WOULD PROBABLY FOCUS ON CHINA. THEN I WOULD PROBABLY FOCUS ON EUROPE. THEN MAYBE AFTER THAT, I WOULD MAKE MY WAY TO CONVERSE. IT'S JUST ORDER OF IMPORTANCE. SO WHAT THAT NATURALLY MEANS IS EVEN IF IT WORKS, WHAT IT'S GOING TO LOOK LIKE IS A HOUSE ON FIRE FALLING DOMINOES. EVERY TIME YOU GET ONE IN FAVOR AND ORDER, THE NEXT ONE GOES. WHEREAS IF WE ARE ACTUALLY OBSESSED WHAT'S HAPPENED, NORTH AMERICA WAS NEVER GOING TO GROW AND IT'S ALREADY GROWED. [00:35:11] Speaker 2: ALL RIGHT, SIMEAN, WE HAVE TO LEAVE IT THERE. GREAT TO GET SOME CONTACT WITH YOU. THAT IS SIMEAN SIEGEL, SENIOR MANAGING DIRECTOR OVER AT Guggenheim. THIS IS THE CLOSE. [00:35:26] Speaker 5: THESE RAPID FIRE ROTATIONS, WE'VE SEEN A BLOWOUT ON THE DOWNSIDE IN TERMS OF DISPERSION, A BLOWOUT ON THE DOWNSIDE IN TERMS OF CORRELATION. THAT'S HAPPENING NOT JUST BROADLY ACROSS THE MARKET, BUT WITHIN SECTORS AND INDUSTRIES. I THINK THAT KIND OF BACKDROP WHERE YOU CONTINUE TO GET A GRIND HIGHER, BUT YOU REALLY HAVE TO LOOK UNDER THE SURFACE TO GET A FULLER STORY OF WHAT'S HAPPENING GIVEN THIS MASSIVE ROTATION. [00:35:51] Speaker 2: THAT WAS LIZANNE SAUNDERS, CHIEF INVESTMENT STRATEGIST OVER AT CHARLES SCHLAB HELP US TO KICK OFF THE CLOSE ON THIS FIRST TRADING DAY OF JULY. A MONTH THAT TYPICALLY IS PRETTY KIND TO THE STOCK MARKET. [00:36:03] Speaker 3: TYPICALLY PRETTY KIND, BUT YOU WERE POINTING OUT THE EXPECTATION OR I GUESS THE PERFORMANCE THAT WE SAW LAST QUARTER, WHICH WAS PRETTY ROBUST. BUT LOOKING AT TODAY'S MOVE, DOWN SIX POINTS ON THE S&P 500, PRETTY DARN SNOOSELY, BUT SEMICONDUCTORS REALLY WEIGHING THERE, DOWN MORE THAN 5%, KATIE. AND THAT'S IN PART DUE TO THE BIG NEWS FROM META PLATFORMS. [00:36:21] Speaker ?: ZUCK. [00:36:21] Speaker 2: THAT WAS REALLY INTERESTING. BASICALLY, YOU THINK ABOUT META AND THEIR AMBITIONS HERE TO MAYBE ENTER THE CLOUD BUSINESS, START UP A CLOUD BUSINESS TO SELL AI COMPUTING POWER, REALLY ROCKETING THE SHARES HIGHER, SORT OF CAST THEIR BIG CAP BACK SPENDING IN A DIFFERENT LIGHT. [00:36:39] Speaker 3: DIFFERENT LIGHT AND REALLY KIND OF BEGS THE QUESTION, ARE WE OVERBUILDING FOR SEMI'S JUST YET? MAYBE, MAYBE NOT, KATIE. [00:36:45] Speaker 2: IT'S A LOT OF BIG EXISTENTIAL QUESTIONS OUT THERE. LET'S MAKE SENSE OF SOME OF THEM WITH JULIE BEAL. SHE IS PORTFOLIO MANAGER AND SENIOR RESEARCH JOURNALIST OVER AT KAINE ANDERSON RUDNICK. JULIE, GREAT TO HAVE YOU WITH US. JUST TO START BROAD HERE. I MEAN, YOU THINK ABOUT THE QUARTER. WE JUST CLOSED THE BOOKS ON. THE S&P 500 POSTING ITS BEST QUARTERLY PERFORMANCE SINCE 2020. WHEN YOU THINK ABOUT ALL THE DIFFERENT CROSS CURRENTS IN THIS MARKET, DO THE FUNDAMENTALS MATCH THE NUMBERS HERE? IT'S INTERESTING. I WOULD SAY BROADLY, YES. [00:37:14] Speaker 10: THE FUNDAMENTALS DO MATCH THE NUMBERS TO THE EXTENT THAT WE ARE SEEING SOLID GROWTH. IT IS STARTING TO REALLY BROADEN OUT BEYOND THE DEPENDENCY WE HAD ON THE HYPERSCALERS. AND FOR SURE, IF YOU HAVE TO BE ABLE TO BE ABLE TO SEMI CONDUCTORS IN THE HERE AND NOW IS INCREDIBLY ROBUST. THEY ARE GETTING THE PRICING. THEY ARE BUILDING OUT FOR VOLUME. THE QUESTION I THINK ON EVERYONE'S MIND IS HOW SUSTAINABLE ARE SOME OF THESE DEVELOPMENTS? CAN WE RELY ON THIS EARNINGS GROWTH FOR THE LONG TERM? I THINK AS WE GET MORE BREATH IN EARNINGS GROWTH, PARTICULARLY ON THE SMALL CAP SIDE, I THINK THAT'S GOING TO GIVE PEOPLE MORE CONFIDENCE THAT THIS IS A MARKET THAT'S NOT JUST DEPENDENT ON A SINGLE THEME. I THINK THE VOLATILITY WE ARE SEEING IS THAT WE ARE REALLY TIED TO ONE THEME. YEAH. [00:38:00] Speaker 2: WE WERE JUST TALKING ABOUT THIS WITH BRENT THILL. THAT YOU THINK ABOUT THE PROBLEM FOR SOFTWARE STOCKS RIGHT NOW IS BASICALLY THE FACT THAT INVESTOR ATTENTION IS ELSEWHERE. IT IS MONOFOCUSED ON THE SINGLE THEME AS YOU ARTICULATE AS WELL. SO WHAT SORT OF BROADENS THAT INTEREST? YOU ARE SEEING POCKETS OF OUTPERFORMANCE OUTSIDE OF BIG TECH. BUT WHAT SORT OF GETS INVESTORS TO MAYBE BROADEN THEIR APERTURE A LITTLE BIT? [00:38:27] Speaker 10: WELL, I THINK SOME INVESTORS ARE LOOKING FOR A LITTLE BIT MORE OF STABILITY. THEY WANT A BALLAST IN THEIR PORTFOLIO TO DIVERSIFY. AND I THINK THAT GOOD OPPORTUNITIES EXIST IN HIGHER QUALITY BUSINESSES WHERE YOU HAVE SOME RELIABILITY, SOME DURABILITY TO THE COMPANY'S EARNINGS. AND THAT WAY YOU ARE NOT QUITE SO EXPOSED. BECAUSE IF YOU'RE JUST PASSIVELY INVESTING RIGHT NOW, YOU HAVE INDICES THAT ARE, WHAT, 20% SEMICONDUCTORS? THAT'S BEEN UNHEARD OF FOR A VERY LONG TIME. AND I THINK PEOPLE MAY UNDERESTIMATE THE RISKS OF THAT BECAUSE TYPICALLY WE'VE BEEN TOLD, YOU KNOW, INVESTING PASSIVELY IS THE BEST YOU CAN DO. SO I THINK IT'S REALLY IMPORTANT FOR PEOPLE TO BE ABLE TO RECOGNIZE THE EXPOSURES THAT THEY HAVE AND TRY TO FIND OPPORTUNITIES TO ADD MORE DURABILITY TO EARNINGS IN CASE THIS THEME PLAYS OUT DIFFERENTLY THAN WE EXPECT. JUST LIKE EVERY OTHER TECHNOLOGY TRANSITION. IT'S RARELY THE EARLY WINNERS THAT ARE THE LONG-TERM GAINERS. [00:39:22] Speaker 3: BUT JULIE, JUST WONDERING HOW FROTHY THIS MARKET IS GETTING AWAY FROM TECH. I LOOK AT SHARES OF CATERPILLAR UP 155% IN THE LAST 12 MONTHS. IT'S KIND OF PRETTY MUCH NECK AND NECK WITH NVIDIA DEPENDING ON HOW MUCH -- HOW YOU LOOK AT IT IN THE LONGER-TERM SCALE. INVESTORS ARE CHASING ENERGY. THEY'RE CHASING INDUSTRIALS. WHICH ARE ARE RELATIVELY CHEAPER CAN YOU BELIEVE IN THE LONGER-TERM AND MEDIUM-TERM EARNINGS EXPECTATIONS? [00:39:44] Speaker 10: I THINK ONE OF THE CHEAPEST SECTORS IS ONE OF THE MOST UNLOVED IS HEALTHCARE AND IT CONTINUES TO BE UNLOVED. AND I THINK BROADLY THE SPACE SHOULD BE UNLOVED BECAUSE IT HAS A LOT OF THEMES THAT MAKE IT UNSTABLE. WE DON'T REALLY KNOW HOW THE FDA IS GOING TO CONTINUE TO APPROVE. IT'S A TRICKY ENVIRONMENT FOR BIOTECH. SO I UNDERSTAND THAT A LOT OF HEALTHCARE IS PRETTY UNATTRACTIVE. BUT I THINK THAT THERE ARE POCKETS. YOU KNOW, WE OWN A COMPANY, WEST PHARMACEUTICAL, THAT JUST DOES THE ELASTOMERS FOR ANY KIND OF INJECTABLE DRUG. YOU'RE NOT DEPENDENT ON ANY ONE DRUG BEING APPROVED. THEY SERVE ALL OF THEM. SO THOSE TYPES OF BUSINESSES, THESE KIND OF STEADY, RELIABLE BUSINESSES THAT ARE NOT DEPENDENT ON A SINGLE THEME OR A SINGLE COMPANY TO DRIVE THEIR FORTUNES, THAT TO ME IS A BETTER BET THAN A COMPANY THAT IS SOLELY FIXATED ON DATA CENTER BUILDOUT. I DON'T THINK WE REALLY UNDERSTAND THE SIZE AND SCALE AND HOW LONG IT'S GOING TO CONTINUE FOR. [00:40:38] Speaker 3: WELL, HOW ARE YOU FILTERING FOR COMPANIES LIKE WEST? JUST PULLING IT UP ON THE TERMINAL. IT'S A $26 BILLION COMPANY. DOING PRETTY DARN WELL IN THE LAST 12 MONTHS. THIS YEAR ALONE AS WELL. BUT KIND OF HOW ARE YOU FINDING THESE OPPORTUNITIES PICKING THROUGH AREAS THAT YOU THINK MAYBE ARE MORE INSULATED THAN KIND OF EVERYTHING AROUND AI? [00:40:55] Speaker 10: I THINK ONE OF THE THINGS THAT WE REALLY TRY TO SCREEN FOR IS THINKING ABOUT THE RETURNS ON EQUITY, THE DURABILITY OF THE COMPETITIVE PROTECTIONS, AND ALSO HOW VARIABLE ARE EARNINGS FOR EACH INDIVIDUAL COMPANY. IT TELLS US HOW THEY DO THROUGH ANY ECONOMIC CYCLE, BECAUSE WHAT WE WOULD LIKE TO DO IS OWN COMPANIES FOR A DECADE OR MORE. THEY'RE COMPANIES WE'VE OWNED HERE FOR TWO DECADES. AND THAT'S THE HOME RUN FOR US, RIGHT? WE KNOW THE COMPANY REALLY WELL, AND THAT ENABLES US TO REALLY BUILD STRONG, LONG-TERM POSITIONS IN THESE COMPANIES. IT'S DIFFICULT FINDING THEM, REALLY, IF YOU FOCUS SOLELY ON THE QUANTITATIVE FACTORS. THE QUALITATIVE FACTORS, WHAT ACTUALLY PROTECTS THE BUSINESS QUALITATIVELY, THAT'S HARDER TO DISCERN. IT TAKES MORE TIME. IT'S WHY OUR RESEARCH PROCESS IS A LITTLE SLOW, AT TIMES AGGRAVATINGLY SO. BUT FOR LONGER-TERM INVESTORS, THOSE WHO CAN HAVE A LONGER-TERM PERSPECTIVE, BEING THOUGHTFUL ABOUT THAT ALLOWS YOU TO TRADE LESS AND KNOW YOUR COMPANIES BETTER. [00:41:51] Speaker 2: JULIE, WE HAVE ABOUT A MINUTE LEFT WITH YOU, BUT I WANT TO GET YOUR BROAD THOUGHTS ON SUPPLY AND DEMAND IN THIS MARKET, BECAUSE YOU THINK ABOUT NET EQUITY SUPPLY IN THE U.S., IT'S BEEN GOING DOWN FOR THE PAST NUMBER OF YEARS. YOU LOOK AT THE U.S. I PO'S AND SHARE SALES, TOTALING MORE THAN $250 BILLION THROUGH THE FIRST HALF. HOW ARE YOU SORT OF THINKING ABOUT THAT SHIFTING DYNAMIC? [00:42:14] Speaker 10: YEAH, I THINK THAT'S SO MUCH OF WHAT HAS ACTUALLY HELPED THIS MARKET STAY RESILIENT WITH GEOPOLITICAL RISK AND ALL OF THE ISSUES WITH TARIFFS. AND EVEN THE PANDEMIC IS THAT THE SUPPLY OF EQUITY, GOOD EQUITY, IS JUST PRETTY LIMITED. AND I THINK THAT THAT'S CREATED THIS LIQUIDITY FLUSH THAT HAD TO HUNT FOR PLACES ANYWHERE, ANYWHERE REALLY. AND I THINK THAT NOW WE'RE REALLY GETTING THIS INFLUX OF SUPPLY THAT'S MEANINGFUL. AND TO ME, IT ALMOST LOOKS A LITTLE COMPETITIVE IN TERMS OF HOW THESE COMPANIES ARE GOING TO COME TO MARKET. YOU GUYS WERE TALKING EARLIER ABOUT THIS RUSH OF OPEN AI AND ANTHROPIC, WHO'S GOING TO MAKE IT FIRST. I THINK IT REALLY MATTERS WHO'S GOING TO COME FIRST. BECAUSE THE ABILITY TO SOAK UP SOME OF THAT EXCESS SUPPLY IS GOING TO BE PRETTY IMPORTANT. I THINK THAT'S KIND OF WHY GOOGLE DECIDED TO RAISE EQUITY. I HAVE THE SUSPICION THAT THAT WAS MORE COMPETITIVE THAN ABOUT REALLY RAISING ANY KIND OF FINANCING THAT THEY NEED. [00:43:07] Speaker 2: ALL RIGHT, JULIE, I REALLY APPRECIATE YOUR TIME. THAT IS JULIE BEAL. SHE IS PORTFOLIO MANAGER AND SENIOR RESEARCH ANALYST OVER AT KANE ANDERSON RUDNICK. AS WE COUNT DOWN TO THE CLOSE, A GLOBAL SIMULCAST STARTS RIGHT NOW. [00:43:21] Speaker 11: THE CLOSING BELL, BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. [00:43:30] Speaker 2: ABOUT TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. KATIE GREYFELD AND BAILEY LIPSHOLDS. HERE TO HELP TAKE US THROUGH THE CLOSING BELL, WE ARE JOINED BY A GLOBAL SIMULCAST. CAROL MASTER AND TIM STANOVIC, WE BRING TOGETHER ALL OF OUR VARIOUS AUDIENCES TO TALK ABOUT THE FIRST TRADING DAY OF JULY. CAROL MASTER, A MONTH WHICH IS PRETTY GOOD FOR THE EQUITY BULLS, BUT A LITTLE BIT OF A SELL-OFF INTO THE CLOSE. [00:43:55] Speaker 12: ABSOLUTELY, BUT I HAVE TO SAY, NOT A GREAT START TO THE THIRD QUARTER OR THE SECOND HALF FOR SEMICONDUCTORS. PHILADELPHIA STOCK EXCHANGE, SEMICONDUCTOR INDEX THE SOCKS. IT IS DOWN ABOUT 6.2% AS WE SPEAK. SO WE ARE SEEING ONCE AGAIN, IT HAS BEEN A VOLATILE SECTOR AS OF LATE, BUT YOU ARE SEEING SOME INTENSE SELLING TODAY. [00:44:14] Speaker 13: DID YOU SEE THIS NEWS FROM MARK GERMAN AND MAGGIE EASTLIN THAT APPLE IS LOOKING TO BUY CHINESE-MADE MEMORY CHIPS WITH THIS LOBBYING PUSH? [00:44:22] Speaker 2: WOW. [00:44:23] Speaker 13: MICRON SHARES WERE DOWN. THEY ACTUALLY REACHED SESSION LOWS AFTER THIS STORY WAS PUBLISHED. MICRON SHARES DOWN, JUST HEADING INTO THE CLOSE. DOWN ABOUT 10% RIGHT NOW. APPLE SHARES SPIKED HIGHER, UP ABOUT 1.5%. [00:44:36] Speaker 3: IT'S BEEN A TOUGH -- AS CAROL MENTIONED, TOUGH GO FOR SOME OF THESE CHIPMAKING COMPANIES. AGAIN, THE ROTATION, THEY ARE UP, THEY ARE DOWN, THEY ARE UP, THEY ARE DOWN. ADDING TO THAT NEGATIVE SENTIMENT IS THE POTENTIAL FOR CROSS-SELLING AND COMPETITION FROM CHINA. YEAH, ABSOLUTELY. [00:44:50] Speaker 2: IT'S GOING TO BE INTERESTING TO SEE HOW THE OVERALL TECH TRADE DEVELOPS IN THE SECOND QUARTER WHEN IT COMES TO CHIPS, WHEN IT COMES SPECIFICALLY TO MEMORY CHIPS, WHEN IT COMES TO SOFTWARE, OF COURSE, WHICH HAS BEEN SORT OF THE POSTER CHILD OF INVESTOR DISTASTE OVER THE PAST SEVERAL MONTHS. BUT AT LEAST FOR TODAY, WE WRAP UP THE FIRST TRADING DAY OF JULY OF THE QUARTER OF THE MONTH. THE S&P 500 LOOKS LIKE IT'S GOING TO FINISH ABOUT 2/10 OF A PERCENT LOWER HERE. THE NASDAQ, A LITTLE BIT MORE SELLING PRESSURE WHEN IT COMES TO SOME OF THOSE TECH NAMES. NASDAQ COMPOSIT DOWN ABOUT 6/10 OF A PERCENT. THE DOW JONES, PRETTY MUCH FLAT ON THE DAY. DO WITH THAT WHAT YOU WILL. THEN WE TAKE A LOOK AT THE SMALL CAPS, FOR EXAMPLE, NOT ESCAPING THE SELLING PRESSURE EITHER BECAUSE IT LOOKS LIKE CAROL, THE RUSSELL 2000 GOING TO FINISH JUST A LITTLE BIT LOWER ON THE DAY AS WELL. ALL RIGHT. [00:45:38] Speaker 12: SO THAT'S A LOOK AT THE BIG PICTURE THERE FROM KATIE. I'M GOING TO GO BACK TO THE S&P 500. YOU'VE GOT 299 NAMES IN THE S&P 500. HIGHER HERE AT THE CLOSE, ABOUT 204 TO THE DOWNSIDE, ONE UNCHANGED. [00:45:51] Speaker 3: WE ARE LOOKING A LITTLE BIT UNDER THE HOOD ON A SECTOR BY SECTOR BASIS. SEEING SOME STRENGTH FOR COMMUNICATION SERVICES AND FINANCIALS AS WELL AS CONSUMER DISCRETIONARY. BUT THE BIG DRAGS, INFORMATION TECHNOLOGY AND ALSO SEEING SOME WEAKNESS ACROSS UTILITIES AND INDUSTRIALS. SO AN INTERESTING BIFURCATED MARKET. ALL RIGHT, GUYS. [00:46:09] Speaker 12: LET'S GET TO SOME INDIVIDUAL GAINERS, IF I MAY. AND I'M LOOKING AT THE NUMBER THREE GAINER IN THE S&P 500 TODAY. AND IT'S THE NUMBER TWO GAINER IN THE NASDAQ 100. WE ARE TALKING ABOUT META PLATFORMS. THIS ONE AT ITS HIGHS INTRADAY, UP ABOUT 11.5%. SETTLING DOWN, THOUGH, WITH JUST UNDER A 9% GAIN IN THE SESSION. THIS HAS THE COMPANIES DEVELOPING PLANS FOR A CLOUD INFRASTRUCTURE BUSINESS TO SELL ACCESS TO AI, COMPUTING POWER AND MODELS, COMPETING WITH INDUSTRY LEADERS SUCH AS AMAZON WEBSERVICES AND GOOGLE CLOUD. SO REALLY LEADING INTO THE HYPER SCALER MODE, IF YOU WILL. A COMPANY CONSIDERING SELLING ACCESS TO VARIOUS AI MODELS HOSTED ON ITS EXISTING AI INFRASTRUCTURE AS WELL AS RAW COMPUTING CAPACITY AS PART OF ITS META COMPUTE INITIATIVE. SOME OF THIS HAS TO BE AS A RESULT OF THE PRESSURE ON THE COMPANY TO BASICALLY JUSTIFY ALL OF THE SPEND THAT IT HAS DONE ON BUILDING OUT SOME OF THEIR DATA CENTERS. SO NOW MAYBE KIND OF RENTING OUT, IF YOU WILL, ITS EXCESS CAPACITY. SO AN INTERESTING ONE ON THIS. WE TALKED WITH OUR MANDEEP SINGH OF BLOOMBERG INTELLIGENCE. HE'S LIKE, IS THIS A TEMPORARY THING? IS THIS SOMETHING MORE SUBSTANTIAL? SO WE'LL LOOK FOR SOME MORE CLARITY FROM THE COMPANY ON THAT ONE. OVER TO ANOTHER MAG 7 I GO. GOT TO TALK ABOUT MICROSOFT COMING OFF ITS WORST MONTH IN YEARS DUE TO CONCERNS ABOUT HOW THE COMPANY WILL FAIR IN A WORLD MARKED BY AI. THE STOCK WAS DOWN 17 PERCENT IN THE MONTH OF JUNE. BOUNCING BACK A LITTLE BIT HERE ON THE FIRST TRADING DAY OF JULY, UP ABOUT 3 PERCENT IN TODAY'S SESSION. MICROSOFT PLANNING TO ANNOUNCE THOUSANDS OF LAYOFFS AS THE COMPANY AIMS TO INCREASE SPENDING ON AI. TECH GIANT IS EXPECTED TO CUT LESS THAN 2.5% OF ITS OVERALL WORKFORCE OF ABOUT 220,000 PEOPLE. THIS IS ACCORDING TO PEOPLE FAMILIAR WITH THE MATTER. THIS WAS COMING FROM BUSINESS INSIDER. THEY REPORTED THIS LATE YESTERDAY. SO THE STOCK BOUNCING BACK TODAY. AND THEN, BAILEY, YOU WERE LIKE, YOU'RE ALL OVER THE PLACE. YOU WERE ON AIR WITH US IN THE 2:00 HOUR. WE CAUGHT UP WITH ONE OF THE COFOUNDERS OF ONE OF THE IPOS TODAY, BENDING SPOONS, AN IPO AT THE CLOSE, UP ABOUT FOUR PERCENT IN ITS FIRST DAY OF TRADING HERE. AND THIS COMPANY, ITS BACKERS RAISING ABOUT 1.68 BILLION. MARKET VALUE OF -- I SHOULD PULL IT UP. IT WAS ROUGHLY ABOUT $21 BILLION. [00:48:23] Speaker 3: 26 RIGHT NOW AT LEAST OF THE CLOSE, CAROL. SO PRETTY DARN BIG MOVE. [00:48:26] Speaker 12: NOT TOO SHABBY, RIGHT? ALTHOUGH I FEEL LIKE YOU AND ME AND TIM, WE WERE TRYING TO PRESS THIS GUY, ONE OF THE COFOUNDERS. LUCA FERRARI? LUCA FERRARI. I LIKE WHAT THE BUSINESS MODEL IS AND KIND OF WHERE GROWTH COMES FROM GOING FORWARD. SO A LOT OF QUESTIONS. I'M ALREADY LOOKING FORWARD TO ITS FIRST EARNINGS DAY. [00:48:44] Speaker 13: YEAH, YOU AND I BOTH. [00:48:45] Speaker 12: YEAH, EXACTLY. [00:48:46] Speaker 13: BAILEY HAD GREAT COVERAGE ON THE BLOOMBERG TERMINAL TOO. CHECK OUT HIS STORIES THERE. HEY, I WANTED TO GET TO DECLINERS. AND I KIND OF WANT TO PLAY OFF OF WHAT CAROL SAID ABOUT META PLATFORMS. CORWEAVE SHARES TODAY FALLING 14%. SO META SURGING, YOU KNOW, AFTER OUR BLOOMBERG NEWS TEAM REPORTED THAT THEY'RE GETTING INTO THIS NEW BUSINESS. BUT IT'S CORWEAVE'S TERF, SPECIFICALLY CONSIDERING SELLING ACCESS TO VARIOUS AI MODELS HOSTED ON ITS EXISTING AI INFRASTRUCTURE AS WELL AS SO-CALLED RAW COMPUTING CAPACITY. THAT WOULD BE PART OF ITS META COMPUTE INITIATIVE. AND THAT IS WHAT CORWEAVE DOES. WE ALSO SAW NEBIUS FALL DOUBLE DIGITS TODAY, ANOTHER NEO CLOUD PROVIDER. ALSO, CHECK OUT SHARES OF CATERPILLAR. SPEAKING OF AI PLAYS, YES, CATERPILLAR HAS BEEN AN AI PLAY. DOWN 6.9% JUST TODAY. MICHAEL BURY, YOU KNOW HIM FROM THE BIG SHORT FOR HIS BETS AGAINST THE U.S. HOUSING MARKET AHEAD OF THE 2008 FINANCIAL CRISIS. HE SAID IN A POST LATE ON TUESDAY ON SUBSTACK THAT HE SHORTED CATERPILLAR SHARES FOR THE FIRST TIME. HE ALSO SHORTED NVIDIA, APPLIED MINIS. APPLIED MATERIALS, I SHARE SEMICONDUCTOR ETF, TESLA SAYING THAT THE SOX ITSELF IS A PURE FORM OF OVERVALUATION IN AN INDEX. OKAY. CATERPILLAR SHARES DOWN TODAY BY 6.9%. AND FINALLY, LET'S GET INTO RETAIL AND WITH WALMART. SHARES FALLING TODAY BY CLOSE TO 4%. IT CLOSED AT ITS LOWEST INTRA DAY GOING BACK TO NOVEMBER OF 2025, OR ACTUALLY LOWEST CLOSE NOW SINCE NOVEMBER OF 2025. DOWN FOR SIX DAYS IN A ROW. THE LONGEST STRING OF DOWN DAYS SINCE OCTOBER 31. CLEVELAND RESEARCH ISSUED A REPORT THAT SAYS THAT QUARTER QUARTER DATE TRENDS HAVE SLOWED. SEPARATELY, JEFFREY'S U.S. CONSUMER STRATEGIST WROTE THAT WHILE HE'S UNSURE IF IT'S THE BOTTOM FOR WALMART SHARES, HE HAS NO IDEA WHEN NEW MONEY WILL STEP IN GIVEN THE DROP TODAY AND THE 20% DECLINE FROM THE PEAK. HE SAID HE WOULD NOT BE SHOCKED IF WALMART EXECUTIVES ARE DISCUSSING IS THERE SOMETHING WE SHOULD DO OR SAY THIS WEEK OR NEXT GIVEN THE VIOLENCE IN THE MOVE LOWER. DOWN CLOSE TO 20% FROM THOSE JUNE HIGHS. [00:50:44] Speaker 2: LET'S TAKE A QUICK LOOK AT THE BOND MARKET. WE DID HEAR FROM FRED CHAIRMAN KEVIN WORSH SPEAKING IN CENTRA EARLIER TODAY SAYING THAT INFLATION RISKS ARE DOWN, NOT MAKING TOO MUCH OF AN IMPACT IN THE MARKET OVERALL. YOU CAN SEE WE'RE TALKING ABOUT BASIS POINT MOVES IN EITHER DIRECTION. WE KNOW WE HAVE THAT BIG JOBS REPORT COMING ON TOMORROW. A RARE THURSDAY JOBS REPORT. SO MAYBE LYING IN WAIT FOR THAT. BUT I JUST I REALLY WANT TO TALK ABOUT TAYLOR SWIFT. [00:51:08] Speaker 12: WELL, I WAS GOING TO SAY, YEAH, THERE'S THE JOBS REPORT. THAT'S IMPORTANT. BUT YOU KNOW WHAT'S REALLY IMPORTANT. WHAT? IS TAYLOR SWIFT, ARE THEY GETTING MARRIED REALLY AT THE GARDEN? I DON'T KNOW. I CAN'T BELIEVE IT. I FEEL LIKE -- YOU DO BELIEVE IT, KIDIE? NO, I CAN'T BELIEVE IT. I FEEL LIKE IT'S A MAJOR, MAJOR DISTRACTION. [00:51:24] Speaker 2: IT'S ALMOST TOO OBVIOUS, RIGHT? I DON'T KNOW. I HOPE IT'S A RED HERRING. IF IT'S A RED HERRING, THEY PUT A LOT OF PLANNING, A LOT OF LOGISTICS INTO THIS. BUT SHE'S GOOD WITH THIS KIND OF STUFF. [00:51:35] Speaker 12: SHE IS. DISTRACTING YOU. SHE IS. [00:51:38] Speaker 2: SO THE NEW YORK TIMES HAS REPORTED THAT THERE'S A PLANNED GATHERING OF 100 PEOPLE AT MADISON SQUARE GARDEN ON JULY 2, WHICH IS TOMORROW, FOLLOWED BY A SECOND EVENT FOR ABOUT 1,000 GUESTS ON JULY 3. SO IT HASN'T ACTUALLY BEEN CONFIRMED THAT THIS IS THE WEDDING. [00:51:52] Speaker 13: WOULDN'T YOU JUST LIKE DO MAYBE A CONCERT OR A PARTY AND THEN -- [00:51:55] Speaker 12: I THINK SHE'S GOING TO DO A CONCERT. [00:51:57] Speaker 13: AND THEN MAYBE GET ALL YOUR GUESTS ON SOME PLANES OR SOMETHING AND BRING THEM TO RHODE ISLAND. [00:52:02] Speaker 12: OR YOU GO TO WATCH HER WHERE SHE HAS A BEAUTIFUL ESTATE UP ON THE HILLS OVERLOOKING THE OCEAN. YEAH. THAT'S WHAT I'M HOPING HAPPENED. [00:52:10] Speaker 2: BAILEY, WHAT DO YOU THINK? I CAN'T BELIEVE THAT SHE WOULD DO IT. [00:52:13] Speaker 3: I THINK IT'S A HEAD FAKE. BUT I ALSO WANT TO GIVE TRAVIS SOME LOVE. I FEEL LIKE ALL WE DO IS CALL IT TAYLOR'S WEDDING. THERE HAVE TO BE TWO PEOPLE TO BE PART OF A WEDDING. WHO? [00:52:20] Speaker 12: BAILEY, YOU'VE BEEN MARRIED. DON'T YOU KNOW THE WEDDING IS ALL ABOUT THE BRIDE? [00:52:24] Speaker 3: HE'S BEEN MARRIED AND HE'S CURRENTLY MARRIED. [00:52:26] Speaker 12: YOU ARE MARRIED. SORRY, SORRY, SORRY. IT'S ALL ABOUT THE BRIDE. [00:52:29] Speaker 3: MY FIRST WIFE IS A BIG FAN OF ME. [00:52:31] Speaker 12: OH, MY GOD. [00:52:32] Speaker 2: MY FIRST WIFE. I ONLY HAVE ONE. FIRST WIFE. MY EX-GIRLFRIEND, FIRST WIFE. YEAH. THAT'S FUNNY. WE'LL SEE, THOUGH. I MEAN, IT'S KIND OF EXCITING BECAUSE WE'RE GOING TO FIND OUT IN THE NEXT FEW DAYS WHAT EXACTLY IS HAPPENING HERE. BUT IT JUST SEEMS -- [00:52:46] Speaker 3: I THINK THE BEST PART IS, KATIE, YOU WANT TO TALK ABOUT IT, BUT YOU'RE LIKE, I CANNOT WAIT TO NOT BE IN MANHATTAN TO FIND OUT. I KNOW. [00:52:53] Speaker 2: THAT'S THE THING. GETTING OUT OF THE CITY IS THE THING TO DO. IT'S FUNNY, ACTUALLY, NEW YORK CITY MAYOR HAS BEEN ASKED MULTIPLE TIMES ABOUT THIS. HE'S USED THOSE OCCASIONS TO SIDESTEP THE QUESTION AND JUST ENCOURAGE EVERYONE TO STAY COOL DURING THE HEAT WAVE AS THAT HEAT DOME DESCENDS UPON US ALL. [00:53:11] Speaker 12: I'M JUST GOING TO SAY SHE'S KNOWN FOR HER 4TH OF JULY PARTIES. I KNOW. [00:53:15] Speaker 2: SO SHE'S KIND OF LIKE LEADING UP TO IT. AND YOU KNOW, AGAIN, WE'RE JUST TALKING ABOUT JULY 2ND, JULY 3rd, SO MAYBE THE WEDDING REALLY IS ON JULY 4th. MAYBE SHE ISN'T REALLY GETTING MARRIED AT MSG. THAT WOULD BE INSANE. [00:53:24] Speaker 12: ALL I KNOW IS YOU'VE GOT TO GET IT DONE BEFORE THE NEXT FOOTBALL SEASON STARTS. WHEN DO THEY START TRAINING? [00:53:29] Speaker 13: WHY WOULD YOU LOOK AT ME? I KNOW. [00:53:32] Speaker 12: I KNOW. ALTHOUGH YOU'VE BEEN ALL IN ON SOCCER. ASK BAILEY. [00:53:35] Speaker 3: HE'S GOT SOME TIME. HE'S GOT SOME TIME BEFORE HE'S GOT A REPORT FOR CAMP. GOT TO DO A HONEYMOON. A HONEYMOON, YEAH. YOU KNOW. [00:53:42] Speaker 12: ALL RIGHT. WELL, I HOPE YOU AND YOUR FIRST WIFE ARE OKAY. WE GOT TO RUN. THAT IS A WRAP BUTTER CROSS PLATFORM, GUYS. RADIO, TV, YOUTUBE, BLOOMBERG AND RADIALS. WE DO IT ALL. IT IS CALL OFF THE CLOSING BELL. BAILEY AND KATIE, OF COURSE, CONTINUING ON THE CLOSE ON TELEVISION. TIM AND I BACK HERE ON BLOOMBERG BUSINESS WEEK DAILY, ON YOUTUBE, ON RADIO AND OF COURSE ON BLOOMBERG ORIGINALS. WE WILL SEE YOU. NOT ME. I'M GOING TO BE OFF. BUT MOST OF THESE GUYS WILL BE HERE. SAME TIME, SAME PLACE TOMORROW. [00:54:09] Speaker 2: COMING UP, THE AI BOOM, GETTING A REALITY CHECK. RASHAN REID OF BANK OF AMERICA JOINS US NEXT TO DISCUSS. THIS IS THE CLOSE ON BLOOMBERG. [00:54:18] Speaker 1: THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS THE CLOSE. [00:54:29] Speaker 2: WELCOME BACK TO THE CLOSE. I'M KATIE GREYFELD. LET'S TAKE A LOOK AT HOW MARKETS CLOSED OUT ON THE DAY. THE FIRST TRADING DAY OF JULY, END OF THE NEW QUARTER. THE S&P 500 ACTUALLY FALLING A LITTLE BIT ON THE DAY. A LOT OF THAT PAIN CAME FROM BIG TECH. WE KNOW THAT THAT RAN INTO SOME TROUBLE. EVEN THOUGH JULY HISTORICALLY A PRETTY GOOD MONTH FOR THE S&P 500. BUT YOU THINK ABOUT THE BOND MARKET, PRETTY QUIET AS WE WAIT FOR THAT JOBS REPORT TOMORROW MORNING. DROPPING AT 8:30 A.M. A RARE THURSDAY JOBS REPORT. THERE IS THE BOARD. THEN YOU TAKE A LOOK AT BRENT CRUDE, ALSO FALLING A LITTLE BIT ON THE DAY, DOWN BY ABOUT 2.4%. LET'S TAKE A LOOK AT SOME OF THE INDIVIDUAL MOVERS THOUGH AND SEE WHAT ACTION HAPPENED UNDER THE HOOD HERE. WE HAD META, OF COURSE, SURGING IN A BIG WAY. THAT WAS THE BIG STORY COMING. META POTENTIALLY GETTING INTO THE CLOUD BUSINESS, SENDING SHARES HIGHER BY ABOUT NEARLY 9%. THAT WAS BAD NEWS FOR THE LIKES OF CORWEAVE, FOR EXAMPLE. A POTENTIAL THREAT TO THEIR BUSINESS. SHARES DROPPING ABOUT 14%. THEN ONE OF YOUR BIG LOSERS ON THE DAY WAS ONE OF THIS YEAR'S BIG WINNERS, MICRON. SHARES DOWN ABOUT 10.6%. MEANWHILE, LET'S GET TO OUR TOP STORY THIS HOUR. SOUNDING THE ALARM ON THE AI BOOM. THE IMF'S TOBIAS ADRIAN WARNING THAT AI DEBT ISSUANCE MAY POINT TO MORE OF A FINANCIAL STABILITY CONCERN THAN STOCK VALUATIONS ALONE, SAYING, QUOTE, THERE'S A POTENTIAL MATURITY MISMATCH IN BETWEEN THE DURATION OF THE PHYSICAL ASSETS AND THE DURATION OF THE DEBT. NOW, THOSE COMMENTS ADD TO A GROWING COURSE OF CAUTION, WITH THE BANK OF INTERNATIONAL SETTLEMENTS ALSO FLAGGING THE TECHNOLOGY AS ONE OF THE FOUR PRESSURE POINTS THREATENING GLOBAL PROSPERITY. RASHAN REID, CO-HEAD OF GLOBAL FIXED SALES OVER AT BANK OF AMERICA, SHE JOINS US NOW. RASHAN, GREAT TO SEE YOU. GREAT TO SEE YOU. THANKS FOR HAVING ME. I WOULD LOVE TO GET YOUR THOUGHTS ON THOSE COMMENTS COMING FROM THE IMF, THAT YOU THINK ABOUT ALL OF THIS DEBT ISSUANCE THAT WE'RE CUTTING FROM THESE TECH COMPANIES TO FUEL THESE AI AMBITIONS. I MEAN, DO YOU HARBOR SOME OF THOSE SIMILAR CONCERNS WHEN YOU THINK ABOUT WHAT WE'RE TALKING ABOUT IN TERMS OF DURATION OF THE ASSETS AND THE DURATION OF THE DEBT ITSELF? YEAH. [00:56:37] Speaker 14: SO I THINK WHEN YOU THINK ABOUT SOME OF THE AI BOOM, AND IT'S CERTAINLY A BOOM, BUT I WILL SAY THAT INVESTORS HAVE BECOME INCREASINGLY CAUTIOUS IN TERMS OF HOW THEY LOOK AT THE SPACE, AND THEY REALLY ARE LOOKING AT THE PROJECT ITSELF, THINKING ABOUT FINANCING CONTRACTED REVENUES, YOU KNOW, GOOD SPONSORS, YOU KNOW, WHERE THERE'S LONG-TERM STABILITY AND CASH FLOW. AND SO I THINK WHAT WE'RE SEEING IS THAT THE MARKETS HAVE BEEN OPEN FOR ALL THE FINANCING THAT NEEDS TO OCCUR. AND I THINK WE'RE GOING TO NEED TO USE ALL THE MARKETS. SO WHETHER THAT BE CREDIT MARKETS, SORT OF PRIVATE MARKETS, AS WELL AS SECURITIZATION MARKETS. WE'RE SEEING AN EVOLUTION OF VARIOUS SOLUTIONS THAT CAN BE USED TO REALLY ALLOW INVESTORS TO PLAY IN THE STRUCTURAL THEME AND TAP THE MARKETS IN VARIOUS WAYS. SO I DO THINK WE HAVE A BREATH OF FINANCING RESOURCES AND SOLUTIONS. AND I THINK INVESTORS ARE BEING VERY KEEN ABOUT HOW THEY PLAY AND LOOKING AT SOME OF THE THINGS AND TOPICS THAT WERE MENTIONED IN TERMS OF DURATION, MATCHING, ET CETERA. [00:57:32] Speaker 2: WELL, TALK TO US A LITTLE BIT ABOUT THE SUPPLY-DEMAND DYNAMICS BECAUSE YOU THINK ABOUT, AGAIN, ALL THE DEBT THAT'S COMING TO MARKET FROM, YOU KNOW, A COHORT OF COMPANIES THAT REALLY DIDN'T DO TOO MUCH IN THE WAY OF DEBT ISSUANCE. YOU THINK ABOUT BIG TECH, IT'S HISTORICALLY BEEN PRETTY CAPITAL LIGHT, THAT SEEMS TO BE CHANGING RIGHT NOW. WHAT DOES THAT MEAN POTENTIALLY FOR SPREADS? COULD WE SEE SPREADS WIDEN OUT A LITTLE BIT JUST AS THE MARKET TRIES TO DIGEST ALL OF THESE DIFFERENT DEALS? [00:57:58] Speaker 14: YEAH, I THINK WHAT WE'RE GOING TO SEE IS IT'S GOING TO BE IDIOSOCRATIC. I THINK IT'S GOING TO MATTER LIKE WHO THE SPONSOR AND THE ISSUER IS. AND I THINK THAT'S HEALTHY FOR THE MARKETS, RIGHT? WE WANT TO MAKE SURE WE KEEP GOOD UNDERWRITING STANDARDS AND DIFFERIATION IN THE MARKET SUCH THAT IT'S PRICED ACCORDINGLY. BUT AS I MENTIONED, I THINK THE ABILITY TO BE ABLE TO TAP MULTIPLE SOURCES WITHIN FINANCIAL MARKETS, PARTICULARLY WITHIN FIXED INCOME AND USING DIFFERENT FORMS OF FINANCING, INCLUSIVE OF PROJECT FINANCE, ET CETERA, GIVES US A LITTLE BIT MORE VARIETY AND ALLOWS SPREADS TO BE HOPEFULLY A LITTLE BIT MORE RESILIENT. [00:58:35] Speaker 2: YEAH, SO FAR CERTAINLY WE'VE SEEN THAT RESILIENCY ON DISPLAY HERE. AND I DO WANT TO HEAR WHERE THE INVESTOR APPETITE IS RIGHT NOW BECAUSE IF YOU THINK ABOUT INFRASTRUCTURE, I MEAN, THAT IS WELL ARTICULATED AS ONE OF THE HOT SPOTS IN THE MARKET, THOUGH THE CONCERNS DO EXIST THAT PERHAPS WE'RE IN THE MIDST OF A FANTASTIC OVERBUILD WHEN YOU THINK ABOUT ALL THE DIFFERENT PROJECTS THAT ARE ONGOING OR SET TO BEGIN. WHAT ARE YOU HEARING ON THAT FROM? WHAT ARE YOUR CONVERSATIONS WITH CLIENTS AND INVESTORS SOUND LIKE? [00:59:03] Speaker 14: YEAH, I THINK IN ADDITION TO JUST THE AI THEME, THERE'S A BIG MACRO STORY AT PLAY HERE. WE OBVIOUSLY KNOW WE HAVE A NEW FED CHAIR IN PLACE, AND THERE'S BEEN VARIOUS WAYS THAT THE MARKET IS READING WHAT WE MAY SEE ON A GO FOR IT BASIS. OUR OWN BANK OF AMERICA RESEARCH TEAM JUST PUT OUT A BOLD CALL BUT BACKED BY REALLY GOOD, STRONG, SOLID THOUGHT IN TERMS OF EXPECTATIONS OF THREE HIKES, SO 75 BASIS POINTS THIS YEAR. BUT THERE'S A DEBATE IN THE MARKET ABOUT THAT. SOME INVESTORS FEEL CERTAINLY THAT WE ARE GOING HIGHER AND WE WILL GET A RATE HIKE, AND SO THEY'RE PLAYING THAT IN THE SHORT END OF THE MARKET. OTHERS ARE A LITTLE BIT MORE SKEPTICAL AND THINK WE MAY BE MEASURED AND ON HOLD THIS YEAR OR JUST UNCERTAIN ABOUT THE PATH OF RATES. AND SO THEREFORE, WHEN YOU THINK ABOUT THE BELLY OF THE U.S. TREASURY CURVE, WE'VE SEEN SOME DEMAND THERE. SO WE ARE HAVING A LITTLE BIT OF A DICHONOMY AND CONVERSATION IN THE MARKET IN TERMS OF WHERE WE'RE GOING TO LAND ON THE FORWARD PATH OF RATE. AND SO THAT MACRO PICTURE HAS BECOME A LITTLE BIT MORE FRONT AND CENTER. AND WE'RE ALSO SEEING THAT PLAY OUT IN FX MARKETS AS WELL AS THE MARKET HAS MOVED TO REPRICING A HAWKISH STANCE. AND THE FX VOLATILITY WE'VE SEEN IN TERMS OF THE DOLLAR BEING BACK. CERTAINLY IN FAD. AND LISTEN, I THINK IT WILL BE MEASURED. I DON'T KNOW THAT WE WILL CONTINUE TO SEE A STRAIGHT LINE IN TERMS OF A MOVEMENT UP. BUT IT IS SUPPORTIVE OF A HAWKISH RATE ENVIRONMENT IN TERMS OF HIGHER RATES. AND SO I DO THINK THE DOLLAR NOW IS BACK IN FOCUSED. AND WE'RE SEEING THOSE FLOWS. [01:00:34] Speaker 2: LET'S TALK ABOUT THAT A LITTLE BIT MORE BECAUSE ESPECIALLY THINK ABOUT SOME OF THE RUCTIONS THAT WE SAW WITH THE YEN THIS WEEK SORT OF FALLING TO THAT 40-YEAR LOW VERSUS THE DOLLAR. I MEAN, THE SIZE AND SCOPE IS JUST FANTASTIC HERE. SO I MEAN, WHEN YOU THINK ABOUT FX BACK IN FOCUS, TALK TO US ABOUT THE EXPECTATIONS FOR THE DOLLAR. ARE YOU EXPECTING BROAD DOLLAR STRENGTH OR WILL IT REALLY BE ON A PAIR-BY-PAIR BASIS? [01:00:57] Speaker 14: I THINK THE PAIRS ARE CERTAINLY IMPORTANT, PARTICULARLY WHEN YOU LOOK AT IT VERSUS EIA MARKETS. I DO THINK THE UNDERPENDING OF A HAWKISH ENVIRONMENT IS OVERALL GOOD FOR DOLLAR-DENOMINATED ASSETS. AND SO THEREFORE WE SHOULD SEE IN THE NEAR TERM THE DOLLAR BEING SUPPORTIVE. BUT I DO THINK EVEN WITH THE FLOWS THAT WE SAW, WE EVEN SAW AT THE BEGINNING OF THE WEEK A LITTLE BIT OF A PULLBACK. PEOPLE ARE BEING MEASURED IN HOW THEY REALLY PLAY OR INVEST IN THE FX MARKETS. SO I DO THINK WE ARE ALSO SEEING THE USE OF GOOD HEDGING STRATEGIES AND INSTEAD OF SORT OF OUTRIGHT LARGE BEDS, THOSE ARE HAPPENING IN SOME WAYS. BUT MOSTLY PEOPLE ARE BEING REALLY CAUTIOUS AND CONSERVATIVE AND CREATIVE ABOUT USING OPTION STRATEGIES IN FX MARKETS AS WELL AS, YOU KNOW, PUTTING ON HEDGE STRATEGIES AS WELL. SO THEY CAN REALLY MANAGE THE RISK IN TERMS OF THE VOLATILITY WE MAY CONTINUE TO SEE INSTEAD OF A STRAIGHT LINE MOVE HIGHER IN THE DOLLAR ON A CONSISTENT BASIS. AND BY THE WAY, WE ARE SEEING THAT WITH CORPORATE CLIENTS AS WELL. WE ARE BEING VERY, VERY CAUTIOUS BUT ALSO VERY CREATIVE ABOUT HOW THEY ARE MANAGING THEIR FX RISKS. BUT IT IS IN FOCUS. I THINK THE PAIRS MATTER. CERTAINLY, YOU KNOW, TO YOUR POINT AROUND JAPAN, WE SAW IT IN FX BUT WE ALSO SAW IT IN THE RATES MARKET IN JAPAN AS WELL. SO WE ARE ALWAYS WATCHING THAT IN TERMS OF THE IMPACT IT COULD HAVE IN BROADER MARKETS AND TREASURY MARKETS. [01:02:22] Speaker 2: AND BEFORE WE LET YOU GO, I DO WANT TO TALK A LITTLE BIT MORE ABOUT DURATION WHEN IT COMES SPECIFICALLY TO THE TREASURY MARKET BECAUSE, YOU KNOW, YOU HAVE SEEN THAT BIG DEMAND WHEN IT COMES TO THE FRONT END, ESPECIALLY WHEN IT COMES TO CASH LIKE INSTRUMENTS. IT SEEMS LIKE THERE'S THIS REAL RETICENCE TO EVEN CONSIDER GOING OUT THE CURVE, ESPECIALLY WHEN YOU THINK ABOUT REALLY THE FAR FOREIGN PLACES WHEN IT COMES TO SORT OF LONG DURATION ASSETS. WHAT CHANGES THAT PERCEPTION? IS THAT SOMETHING THAT YOU SEE CHANGING SOMETIME SOON? [01:02:52] Speaker 14: YEAH, I THINK IT'S GOING TO BE ALSO WHAT WE SEE OUT OF THE FED, RIGHT? I MEAN, WE KNOW THEY HAVE VARIOUS TOOLS IN ADDITION TO POTENTIALLY HIKING RATES. I THINK OUR NEW FED CHAIR HAS BEEN VERY VOCAL ABOUT THE USE OF THE BALANCE SHEET. SO I THINK THAT'S GOING TO BE IMPORTANT AS WELL TO DETERMINE SORT OF WHAT WE'RE GOING TO GET IN TERMS OF INVESTMENT IN THE LONG IN, ET CETERA. BUT RIGHT NOW, I THINK WE'RE SEEING VIEWS BEING EXPRESSED ON BOTH THE SHORTEN OF THE CURVE IN TERMS OF BEING PAID RATES. FOR THOSE THAT THINK THE HIKE IS IMMINENT AND WE WILL GET A COUPLE OF HIKES THIS YEAR. AND IN THE BELLY OF THE CURVE, WE'RE SEEING ALSO SOME INVESTMENT FROM THOSE THAT ARE A LITTLE BIT MORE CAUTIOUS ON HOW QUICKLY A HIKE MAY HAPPEN OR JUST UNCERTAIN ABOUT RATES. BUT I DO THINK THE TOOLS THAT THE FED USES AND HAS IN THEIR TOOLKITS, WE HAVE TO WATCH AND SEE. AND I THINK WE'RE GOING TO BE GETTING A LITTLE BIT LESS FOR GUIDANCE. YEAH. IT WILL BE INTERESTING TO SEE HOW IT PLAYS OUT. BUT IT WILL ALSO MAKE THE DATA THAT MUCH MORE IMPORTANT. RIGHT. [01:03:52] Speaker 2: WELL, WE GET ANOTHER BIG DOSE OF DATA TOMORROW MORNING WITH THAT JOBS REPORT. RASHAN, GREAT TO GET SOME TIME WITH YOU. THAT IS RASHAN REID. SHE IS COHEAD OF GLOBAL FIXED SALES OVER AT BANK OF AMERICA. NOW COMING UP, WE KEEP THE CONVERSATION GOING ON THE A.I. DEBT BINGE. IT IS FEELING THE 100-YEAR-OLD PRIVATE BOND MARKET. THAT STORY, NEXT. THIS IS THE CLOSE ON BLOOMBERG. [01:04:16] Speaker ?: A.I.'S DEBT BINGE IS FEELING THE 100-YEAR-OLD PRIVATE BOND [01:04:21] Speaker 2: MARKET WITH ISSUANCE CLIMBING TO RUN $81 BILLION FROM THE START OF THE YEAR THROUGH MAY. THAT IS THE MOST FOR THAT PERIOD GOING BACK TO 2016, ACCORDING TO DATA FROM PRIVATE PLACEMENT MONITOR. JOINING US LIVE IS THE REPORTER BEHIND THAT STORY. HER NAME IS EMILY GRAFFEO. EMILY, GREAT TO SEE YOU. GIVE US THE LAY OF THE LAND HERE. [01:04:48] Speaker 15: WE ARE TALKING ABOUT A CENTURY-OLD MARKET. WHAT ARE THE NEW FORCES COMING INTO IT? WE ARE TALKING ABOUT THE PRIVATE PLACEMENT MARKET. WE HAVE A LITTLE BIT OF DEBT. THEY ARE TALKING ABOUT THE DEBT. THEY ARE TALKING ABOUT THE DEBT DIRECTLY FROM INSTITUTIONAL INVESTORS. THOSE INSTITUTIONAL INVESTORS DON'T TRADE THE DEBT. IT IS TYPICALLY A BUY AND HOLD MARKET. YOU SAID IT. IT HAS BEEN AROUND FOR OVER A CENTURY. LONG BEFORE THE SEC WAS EVEN CREATED, RAILROADS, MINING COMPANIES, CANALS NEEDED DEBT. THEY WERE GOING TO THE PRIVATE PLACEMENT MARKET TO GET THAT. BUT IT IS GETTING A RESURGENCE NOW BECAUSE OF THE MASSIVE NEEDS FOR A.I. WE SAW A CHIP FINANCING DEAL. WE SAW A CHIP FINANCING DEAL. JUST KIND OF THAT NEED FOR CAPITAL MEANS THAT THIS MARKET THAT HAS BEEN AROUND FOR A WHILE IS REVING UP AGAIN. [01:05:36] Speaker 2: IT IS INTERESTING TO HEAR YOU SAY THIS MARKET PREDATES THE CREATION OF THE SEC. HOW DOES THAT ACTUALLY WORK? HOW IS THE SEC INTERACTING WITH THIS MARKET TODAY IN 2026? [01:05:51] Speaker 15: NOT TO GET TOO TECHNICAL BUT THERE IS AN EXEMPTION. HERE IS THE STAGE TO DO IT. THERE IS AN EXEMPTION FOR A TWO. BASICALLY WHAT IT SAYS IS THAT IF YOU WANT TO ISSUE DEBT IN THIS MARKET IN A PRIVATE PLACEMENT YOU DON'T HAVE TO REGISTER WITH THE SEC. THAT IS BECAUSE YOU ARE JUST SELLING THE BONDS TO INSTITUTIONAL INVESTORS, MOSTLY LIFE INSURANCE COMPANIES. SO IF YOU ARE A PRIVATE COMPANY AND YOU WANT TO ISSUE DEBT, YOU WANT INVESTMENT GRADE FINANCING BECAUSE IT IS MOSTLY INVESTMENT GRADE RATED IN THIS MARKET. BUT MAYBE YOU DON'T WANT YOUR FINANCIALS SPILLING OUT INTO THE OPEN. YOU CAN GO TO THIS MARKET AND KEEP EVERYTHING RELATIVELY PRIVATE. YOU CAN KIND OF CUSTOMIZE THE DEALS TOO. FOR EXAMPLE, THE BIGGEST PRIVATE PLACEMENT DEAL ON RECORD THAT WE'VE SEEN IN THE TRADITIONAL SENSE WAS DONNAHER, $3 BILLION. THEY DID IT ALL IN SWISS FRANKS. SO THEY WERE ABLE TO CUSTOMIZE FOR A CURRENCY. SOMETIMES YOU CAN GET A TENNER THAT MAYBE YOU WOULDN'T BE ABLE TO GET IN IG. AND THAT HAS BEEN REALLY HELPFUL FOR THESE AI DEALS WHEN THERE IS COMPLEX FINANCINGS. [01:06:52] Speaker 2: AND SO SOMETHING WE TALK ABOUT IN RELATION TO PRIVATE CREDIT IS SORT OF THE ILIQUIDITY PREMIUM. WHEN WE ARE TALKING ABOUT PRIVATE PLACEMENT, IS THAT PREMIUM EVEN HIGHER? YEAH. [01:07:01] Speaker 15: YOU TYPICALLY DO SEE A LITTLE BIT OF A PREMIUM ABOVE A CORPORATE BOND IN THE PRIVATE PLACEMENT MARKET. AND AGAIN, THE INSURERS LIKE THIS, THEY HAVE LONG-DATED ASSET LIABILITY MATCH THAT THEY NEED TO DO. AND WE'VE ALSO SEEN ANNUITY SALES HIT A RECORD HIGH LAST YEAR. SO THAT'S HELPING PROPEL THE MARKET, TOO. JUST SUDDENLY THESE INSURANCE COMPANIES NEED TO DEPLOY THEIR CAPITAL SOMEWHERE. [01:07:26] Speaker 2: AND JUST QUICKLY HERE, SO AS I MENTIONED, WE'RE TALKING ABOUT THE BIGGEST NUMBER SINCE ABOUT 2016 OR SO. I HAVE TO IMAGINE THAT, YOU KNOW, FOLKS ARE EXPECTING THESE NUMBERS ARE JUST GOING TO GET BIGGER AND BIGGER. [01:07:36] Speaker 15: YEAH, 81 BILLION WAS THROUGH MAY, BUT AGAIN, WE'VE SEEN INDIVIDUAL DEAL SIZES, TOP 2 BILLION, 3 BILLION, LIKELY GOING TO BE A RECORD HERE IN ISSUANCE THIS YEAR. ALL RIGHT. [01:07:46] Speaker 2: WELL, YOU'RE GOING TO HAVE A WHOLE BUNCH OF FUN COVERING IT. THAT IS EMILY GRAFFEO OF BLOOMBERG NEWS COVERING THE SPACE FOR US CLOSELY. NOW, COMING UP ON THE CLOSE, WALL STREET BRACING FOR THE NEXT BIG MARKET CATALYST IN TOMORROW'S JOBS REPORT. RAMP ECONOMIST ARA CARAZIAN AS WELL AS DANA PETERSON OF THE CONFERENCE BOARD. THEY JOIN US NEXT FOR THE LATEST READ ON THE LABOR MARKET. THIS IS THE CLOSE ON BLOOMBERG. FORGET THE AI JOBS-POCALYPSE. NEW RESEARCH FROM RAMP ECONOMICS LAB SUGGESTS THAT COMPANIES INVESTING MORE HEAVILY IN AI, THEY ARE ALSO HIRING MORE. ARA CARAZIAN, HE IS ECONOMIST OVER AT RAMP. HE JOINS US NOW. ARA, GREAT TO HAVE YOU WITH US. [01:08:31] Speaker 16: THANK YOU FOR HAVING ME. [01:08:32] Speaker 2: THANK YOU. I FEEL LIKE YOU'RE HERE TO DO SOME MYTH BUSTING. YOU THINK ABOUT ALL OF THE DOOM AND GLOOM AND SORT OF THE WORST-CASE PREDICTIONS ABOUT THE EFFECT THAT AI WILL HAVE ON THE LABOR MARKET. IT'S THAT IT'S GOING TO RESULT IN JOB LOSSES BROADLY HERE. BUT YOUR RESEARCH ACTUALLY SHOWS SOMETHING A LITTLE BIT DIFFERENT. [01:08:47] Speaker 16: I THINK IF YOU'RE A MARKET PARTICIPANT WHETHER YOU'RE A READER OF THE NEWS OR YOU'RE A COLLEGE GRADUATE WHO'S ON THE JOB MARKET NOW OR YOU'RE AN ENGINEER OR A BUSINESS OWNER, IT'S REALLY HARD TO UNDERSTAND HOW IS AI GOING TO AFFECT OUR JOBS AND OUR ECONOMY. SO THIS LATEST RESEARCH COMES FROM RAMP. IT'S A BUSINESS SPEND PLATFORM SO WE GET TO SEE THE CARD AND BILL PAY SPEND OF ALL FIRMS INCLUDING THEIR AI SPEND. WE WERE ABLE TO JOIN THAT WITH WORKFORCE DATA FROM REVELIO LABS. AND HERE WE FOUND THE FIRST FIRM LEVEL DATA SET THAT SHOWS WHAT HAPPENS WHEN FIRMS ADOPT AI. SO A 10% INCREASE IN HEAD COUNT OVER THE FOLLOWING TWO YEARS INCLUDING A 12% INCREASE IN ENTRY LEVEL HEAD COUNT. SO VERY GREAT FINDINGS ESPECIALLY IF YOU'RE TRYING TO UNDERSTAND WHERE THE ECONOMY IS HEADED GOING FORWARD. [01:09:30] Speaker 2: YEAH, IT'S INTERESTING. SO FIRMS THAT ADOPT AI, THEY GREW HEAD COUNT 10.2% OVER THE TWO YEARS THAT FOLLOW ADOPTION. BUT THE LOW INTENSITY ADOPTERS SAW NO STATISTICALLY SIGNIFICANT CHANGE. HOW ARE YOU MEASURING SORT OF THE INTENSITY OF ADOPTION? [01:09:46] Speaker 16: WELL, THAT WAS ONE OF THE GREAT INNOVATIONS OF THIS RESEARCH IS UNDERSTANDING THAT NOT EVERY FIRM THAT TRIES AI NECESSARILY SEES THESE KINDS OF GAINS. IF YOU EMPLOY A CHATCHIP D-SUBSCRIPTION ACROSS YOUR EMPLOYEE BASE, YOU NOTICE THAT IT'S KIND OF NICE TO HAVE, BUT IT'S NOT NECESSARILY THAT PRODUCTIVITY ENHANCING. AMONGST THE HIGH INTENSITY BUSINESSES, WE FOUND THAT THEY WERE USING PARTICULARLY MORE ADVANCED SOFTWARE AND SERVICES THAT COULD INCLUDE THE CODING AGENTS OR API SERVICES, SOMETHING BEYOND CHATGPT AS A CHATBOT ITSELF. IN ADDITION, THERE SEEMED TO BE SOME AMOUNT OF A LEARNING CURVE BEFORE YOU SEE THE GAINS, THAT FIRMS DON'T TYPICALLY SEE THE GAINS OF ADOPTION WITHOUT SOME SUSTAINED USE, MAYBE ABOUT 6 TO 12 MONTHS OF ADOPTION BEFORE THEY ACTUALLY GET THESE HEAD COUNT GAINS. [01:10:28] Speaker 2: SO TALK TO ME ABOUT WHY THIS MAKES SENSE. WHY, IF YOU KNOW, YOU'RE A COMPANY THAT'S REALLY AGGRESSIVELY ADOPTING A.I., WHY DOES IT THEN MAKE SENSE THAT YOU WOULD ALSO BE HIRING MORE PEOPLE? [01:10:39] Speaker 16: THAT'S ONE OF THE CHALLENGES OF UNDERSTANDING WHERE TO GO NEXT IN THE RESEARCH IS THAT, YOU KNOW, WE KNOW THAT A.I. MUST BE SOMEWHAT PRODUCTIVITY ENHANCING AND THAT BUSINESSES KEEP INVESTING MORE AND MORE INTO THAT. THEY MUST BE DOING THAT RATIONALLY. AND YET THE FIRMS THAT ARE USING A.I. WELL HAVE NO INCENTIVE TO PUBLISH THEIR PLAYBOOK AND TELL OTHER BUSINESSES, PARTICULARLY THEIR COMPETITORS, HOW TO GROW MORE QUICKLY. SO THE FOCUS OF OUR RESEARCH IS UNDERSTANDING, WELL, FIRST OF ALL, ARE THEY SEEING HEAD COUNT GAINS AND SECONDARILY ARE THEY HIRING DIFFERENT KINDS OF EMPLOYEES? NOW THE FIRST RESULT WE HAVE THERE IS THIS GROWTH IN ENTRY LEVEL HEAD COUNT. IT IS SO OUTSIZED AT 12% VERSUS 10 THAT WE BELIEVE THAT THE FIRMS USING A.I. INTENSELY ARE NOW STARTING TO HIRE A NEW KIND OF EMPLOYEE. LIKELY SOMEONE MORE A.I. NATIVE WHO CAN EMPLOY THE TOOLS MORE PRODUCTIVELY. AND WHAT BETTER PLACE TO LOOK THAN RECENT GRADS AND FOLKS JUST COMING OUT OF COLLEGE ON THE JOB MARKET WHO HAVE ALREADY BEEN USING A.I. VERY NATIVELY. [01:11:30] Speaker 2: ALSO COUNTERINTUITIVE BECAUSE, YOU KNOW, AGAIN, YOU THINK ABOUT SOME OF THE EXISTENTIAL FEARS OUT THERE IS THAT IT IS GOING TO SORT OF REPLACE THE NEED FOR THOSE ENTRY LEVEL FOLKS, YOU KNOW, JUST LOOKING TO START THEIR CAREERS. BUT TALK TO US A LITTLE BIT ABOUT, YOU KNOW, WHAT TYPES OF COMPANIES TEND TO ACTUALLY AGGRESSIVELY ADOPT A.I. BECAUSE YOU ALSO MAKE THE POINT THAT WHEN WE'RE TALKING ABOUT THESE GAINS, IT'S PRETTY UNEVENLY DISTRIBUTED IN THIS LABOR MARKET. [01:11:54] Speaker 16: EXACTLY. YOU KNOW, WE FOUND IN OUR RESEARCH THAT WHO FUNDED YOU AS A COMPANY IS A BETTER PREDICTOR OF YOUR A.I. ADOPTION THAN THE SECTOR YOU'RE IN. TECH COMPANIES IN CALIFORNIA ARE MORE LIKELY TO USE A.I. THAN TECH COMPANIES IN NEW YORK. THERE'S NO OBVIOUS REASON FOR THAT OTHER THAN THE FACT THAT A.I. ADOPTION TENDS TO PROLIFERATE THROUGH THESE NETWORKS OF BOTH WHO YOU KNOW AND THE KIND OF LABOR POOL YOU CAN HIRE FROM. BUT THAT IS AN ECONOMICALLY SUB OPTIMAL OUTCOME. SMALL BUSINESSES, FOR EXAMPLE, ARE LESS LIKELY TO USE A.I. IN THE FIRST PLACE. BUT WHEN THEY DO, THEY USE IT MORE INTENSELY AND THEY TEND TO DRIVE OUTSIZED GAINS FROM IT. SO I THINK THE CHALLENGE FOR POLICYMAKERS AND PARTICULAR BUSINESSES IS UNDERSTANDING, WELL, HOW CAN WE RESOLVE SOME OF THESE UNEVEN DISTRIBUTIONS OF A.I.? BECAUSE TODAY, THESE GAINS SEEM TO BE CONCENTRATED AROUND TECH COMPANIES THAT ARE MORE LIKELY TO USE THE TOOLS IN THE FIRST PLACE AND FOR WHOM THE TOOLS WERE ALREADY INITIALLY DEVELOPED. OF COURSE, SOME OF THE BEST COMMERCIALLY ADVANCED FORMS OF A.I. THAT ARE PRODUCTIVITY ENHANCING, CODING AGENTS SPECIFICALLY, WE'RE TARGETED FOR SOFTWARE ENGINEERS. SO IT'S AN OPEN QUESTION WHETHER OR NOT THAT KIND OF ADOPTION AND THAT SOFTWARE DEVELOPMENT WILL BE ABLE TO EXPAND INTO OTHER SECTORS. [01:13:01] Speaker 2: ALL RIGHT. IT'S REALLY FASCINATING RESEARCH. IT'S GOING TO BE INTERESTING TO SEE WHAT ELSE DEVELOPES HERE. REALLY APPRECIATE YOU MAKING TIME FOR US. THAT IS ARA KARAZARIAN. HE IS ECONOMIST OVER AT RAMP. NOW, STICKING WITH THE JOBS MARKET, THE U.S. JUNE PAYROLS REPORT, IT'S DUE TOMORROW AT 8:30 A.M. EASTERN. AND OUR NEXT GUEST NOTING THAT THE LABOR MARKET IS LIKELY STILL CLOSE TO FULL EMPLOYMENT AS COMPANIES LARGELY REMAIN ON THE SIDELINES DUE TO ONGOING UNCERTAINTIES. DANA PETERSEN, SHE IS CHIEF ECONOMIST AND LEADER OF THE ECONOMY STRATEGY AND FINANCE CENTER OVER AT THE CONFERENCE BOARD JOINS US NOW. DANA, GREAT TO HAVE YOU WITH US. SO THIS LANDS AT A VERY INTERESTING TIME WHEN IT COMES ESPECIALLY TO WHAT THE MARKET IS THINKING ABOUT IN TERMS OF THE FEDERAL RESERVE'S RATE PATH TRAJECTORY. SO GIVE US THE LAY OF THE LAND HERE. WHAT ARE YOU EXPECTING TO SEE AT 8:30 TOMORROW? [01:13:51] Speaker 17: WELL, IT'S QUITE POSSIBLE THAT WE WILL SEE A STRONG NUMBER. BUT AGAIN, IT'S PROBABLY GOING TO BE VERY MUCH LOCATED IN THE AREAS THAT ARE EXPERIENCING LABOR SHORTAGES AND ALSO AREAS THAT ARE JUST KIND OF WAKING UP FROM THE COLD WINTER. SO THAT WOULD INCLUDE HEALTH CARE AND SOCIAL ASSISTANCE, AS WELL AS LEASURE AND HOSPITALITY. LEASURE AND HOSPITALITY MIGHT ALSO BE BOLSTERED BY THE WORLD CUP BEING IN THE UNITED STATES AND LOTS OF PEOPLE GETTING HIRED. BUT WE COULD ALSO SEE SOME SEASONALITY ACTION IN EDUCATION. AND WHEN I LOOK AT GOVERNMENTS, MAINLY STATE LOCAL GOVERNMENTS ARE HIRING PEOPLE. BUT WE'LL PROBABLY CONTINUE TO SEE CONSOLIDATION IN TECH AND FINANCE. LIKE THE GENTLEMAN BEFORE ME, HE MENTIONED THAT, YOU KNOW, THOSE ARE THE COMPANIES THAT ARE SHEDDING WORKERS, BUT HIRING WORKERS WITH DIFFERENT SKILLS. SO WE PROBABLY WILL CONTINUE TO SEE THAT AS WELL AS FEDERAL GOVERNMENT CUTS. [01:14:47] Speaker 2: WE'LL SEE THAT AS FEDERAL RESERVE. IT'S INTERESTING, YOU THINK ABOUT THE DIFFERENT PREDICTIONS ON WHAT AI WILL MEAN FOR THE LABOR MARKET. AND IT SEEMS LIKE A LOT OF CHURN, BUT DRAWN OUT OVER QUITE A LENGTHY TIMELINE HERE. I DO WANT TO TALK A LITTLE BIT ABOUT HOW THIS MOVES THE NEEDLE, IF AT ALL, FOR THE FEDERAL RESERVE, BECAUSE WE HAVE A NEW FED CHAIRMAN. WE HAVE A NEW CONFERENCE UNDER OUR BELT. WE HEARD FROM KEVIN WARSH AGAIN TODAY. IT SEEMS LIKE THIS IS A FEDERAL RESERVE THAT IS MUCH MORE FOCUSED ON THE INFLATIONARY SIDE OF THINGS, NOT NECESSARILY ON THE LABOR MARKET. IT DOESN'T SEEM CLEAR WHETHER OR NOT WE COULD GET [01:15:28] Speaker 17: ANYTHING OR EXPECTING TO GET ANYTHING THAT WOULD CHANGE THAT FOCUS FOR THE CENTRAL BANK. YES, IT IS CLEAR THAT NEW CHAIR WARSH IS PRIMARILY FOCUSED FOR THE FEDERAL RESERVE. THERE WASN'T MUCH MENTION OF THE LABOR MARKET IN HIS PRESS RELEASE, IN THE FOMC PRESS RELEASE. AT LEAST IN THE PRESS RELEASE -- I'M SORRY, IN HIS PRESS CONFERENCE. IN THE PRESS RELEASE, YES, THERE WAS MENTION OF THE DUAL MANDATE. BUT I THINK RIGHT NOW THERE IS NOT REALLY MUCH FOR THE FED TO WORRY ABOUT. THE LABOR MARKET IS MORE OR LESS IN BALANCE WITH RESPECT TO SUPPLY AND DEMAND. THERE IS STILL UNCERTAINTY OUT THERE THAT IS CAUSING WORKERS NOT TO QUIT AND ALSO COMPANIES NOT TO LAY OFF PEOPLE OR HIRE THEM. AND I THINK THAT FOR THE MOST PART THE UNEMPLOYMENT RATE HAS STAYED VERY LOW BECAUSE YOU DON'T HAVE THIS CHURN. IT'S NOT THE CASE THAT EVERYONE WHO IS UNEMPLOYED CAN'T FIND A NEW JOB. IT'S VERY SECTORAL. SO I WOULD EXPECT THAT AS LONG AS THE LABOR MARKET DOES NOT SHOW ANY SIGNS OF STRESS, THE FED WILL CONTINUE TO FOCUS ON INFLATION. AND INDEED, WASH SAID TODAY THAT RISK TO INFLATION EXPECTATIONS HAVE EASED. AND IT'S ALSO OUR EXPECTATION THAT INFLATION WILL START EASING AGAIN. AND THAT THE FED WILL NOT NEED TO DO ANYTHING IN TERMS OF INTEREST RATE CHANGES THIS YEAR. RIGHT. [01:16:49] Speaker 2: SO THE FED IS SORT OF ON THE SIDELINES HERE. EMPLOYERS ON THE SIDELINES AS WELL. IT FEELS LIKE WE HAVE BEEN IN THIS LOW HIRE, LOW FIRE SORT OF LABOR MARKET FOR A WHILE NOW, DANA. AND I WONDER IN YOUR VIEW WHAT YOU THINK MIGHT BREAK US OUT OF THAT AND WHAT SORT OF TIMELINE WE ARE TALKING ABOUT WHEN YOU THINK ABOUT SORT OF THE COURSE OF THE REST OF THE YEAR. [01:17:10] Speaker 17: SURE, I THINK THE WORD OF THE LAST TWO YEARS HAS BEEN UNCERTAINTY AND CERTAINLY LAST YEAR WE HAD A LOT OF CHANGES IN FISCAL POLICY. WE DID HAVE SOME CHANGES IN MONETARY POLICY, BUT THE BIGGER ISSUES WERE THINGS LIKE TARIFFS, WHICH WAS KIND OF A BRAND-NEW THING ESPECIALLY ON JUST ABOUT EVERY OTHER COUNTRY. AND THEN, YOU KNOW, WE PRETTY MUCH I THINK WERE BEYOND THE TARIFF SHOCK. BUT THEN EARLIER THIS YEAR, STARTING IN LATE FEBRUARY, WE HAD THE CONFLICT IN THE MIDDLE EAST, WHICH ALSO HAD A GLOBAL IMPACT AND REALLY AFFECTED WHAT WAS GOING ON IN THE ECONOMY. AND SO THAT LEVEL OF UNCERTAINTY HAS BASICALLY KEPT A LOT OF PEOPLE IN STASIS, NOT ONLY WORKERS, NOT ONLY COMPANIES, BUT ALSO THEIR WORKERS. BUT AGAIN, THE INFLATIONARY IMPACTS OF TARIFFS ARE PROBABLY ALREADY HIT A PEAK THAT'S COMING OFF. AND THE CONFLICT IS NOT AS HOT AS IT WAS. AND SO WE ARE ANTICIPATING THAT, YOU KNOW, CERTAINLY WE'VE SEEN OIL PRICES COME BACK DOWN, NOT EXACTLY $60 PER BARREL, BUT SOMETHING MUCH CLOSER THAN 100. AND THAT'S GOING TO FILTER THROUGH OVER TIME. AND WE'LL SEE LOWER INFLATION HOPEFULLY BY THE END OF THIS YEAR. ALL RIGHT, DANA. [01:18:30] Speaker 2: REALLY GREAT PREVIEW OF THE REPORT WE'RE EXPECTING TOMORROW. THAT IS DANA PETERSEN. SHE IS CHIEF ECONOMIST AND LEADER OF THE ECONOMY STRATEGY AND FINANCE CENTER OVER AT THE CONFERENCE BOARD. MEANWHILE, LET'S TAKE A LOOK AT HOW MARKETS CLOSED OUT ON THE DAY, ON JULY 1ST. THE S&P 500 SELLING OFF A LITTLE BIT INTO THE CLOSE, DOWN ABOUT 2/10 OF A PERCENT. YOU CAN SEE THE HIT WAS MUCH LARGER WHEN IT COMES TO BIG TECH. NASDAQ 100 OFF BY ABOUT 1.5%. ON A PRETTY QUIET DAY FOR THE BOND MARKET. 10-YEAR YIELDS RISING JUST ABOUT ONE BASIS POINT AS BRENT CONTINUED TO DROP DOWN ABOUT 2.4%. THIS IS THE CLOSE ON BLOOMBERG. WE KNOW THAT CONSUMER SPENDING HAS REMAINED RESILIENT IN THE FACE OF INFLATION. PART OF THAT IS GOING TO EXPERIENCE SESSIONS CHUCK E CHEESE. IT IS A COMPANY THAT HAS EVOLVED THROUGHOUT THE YEARS AND IS NOW FAST AT WORK ON YET ANOTHER EXPANSION. THIS TIME WITH ITS ADVENTURE WORLD PLAYGROUND CONCEPT. WE GOT A CHANCE TO SIT DOWN WITH CEO SCOTT DRAKE TO TALK ABOUT WHAT'S NEXT FOR THE BRAND. TAKE A LISTEN. [01:19:38] Speaker 18: WE HAVE THE BLESSING AND CURSE OF BEING ALMOST A 50-YEAR-OLD BRAND. AND WE'VE DEFINED KIDS. WE'VE DEFINED SAFE, FUN ENVIRONMENTS FOR KIDS. AND THAT'S STILL WHERE WE LIVE. WE DON'T KIND OF GET LOST WITH DISTRACTIONS. WE ARE WHO WE ARE. WE LIKE TO THINK WE OWN THAT SPACE. WE'RE THE BIRTHDAY CAPITAL OF AMERICA AND GLOBALLY IN A LOT OF COUNTRIES AS WELL. AND THAT'S WHAT WE FOCUS ON. WE'RE JUST FINDING WHAT DO KIDS AND FAMILIES WANT AND NEED TODAY, WHAT IS OF INTEREST TO THEM, WHAT IS RELEVANT TODAY. THE BRAND HAS MASSIVELY CHANGED. THE BIGGEST THING WE HAVE IS ALL THE CHANGE PEOPLE ARE UNAWARE OF. [01:20:12] Speaker 19: TALK ABOUT WHAT YOU WANT TO CHANGE. YOU WERE OBVIOUSLY CFO FOR A WHILE AND YOU JUST RECENTLY BECAME CEO. GIVE ME A SENSE AS TO EXACTLY WHAT YOU WANT TO DO. [01:20:20] Speaker 18: RIGHT. SO THE BEAUTY OF COMING IN A CFO IS THEY HAD AN AMAZING TEAM, AMAZING INITIATIVES THAT WERE DRIVING TRAFFIC, DRIVING THE BUSINESS. WE HAD A BRAND THAT NEEDED REFRESHING COMING INTO COVID. AND THE BEAUTY IS OUR PARTNERS INVESTED OVER $400 MILLION. WE HAVE REIMAGINED EVERY STORE IN THE U.S. IF YOU HAVEN'T BEEN IN THE LAST FOUR YEARS, YOU DON'T KNOW CHUCK E CHEESE TODAY. SO I GOT KIND OF THE BLESSING OF CFO OF THAT MASSIVE INVESTMENT, DRIVING TRAFFIC. WE HAD A SUBSCRIPTION MODEL, TWO MONTH SUMMER FUN PASS AS WELL AS AN ANNUAL SUBSCRIPTION MODEL DRIVING LOTS OF TRAFFIC. WE WERE THE INNOVATORS BACK IN 2004. WE'RE CONTINUING TO GROW THAT PART OF THE BUSINESS. ACTIVE PLAY. WE'VE GOT MINI BOUNCE PADS. WE'VE GOT A KIDS OBSCAL COURSE, CHUCK E CHEESE SUPERHERO PLAYGROUND. HUGE ATTRACTION AS WELL. DRIVEN A LOT OF TRAFFIC. AND ON TOP OF THAT, WE CAME OUT WITH VALUE. OUR CONSUMER IS THE LOWER PART OF THAT K-SHAPED ECONOMY. DOLLARS ARE REALLY, REALLY TIGHT AS WE ALL KNOW, AS YOU TALK ABOUT EVERY DAY. WE FOUND WAYS TO RELATE TO THEM. FAMILY FUN, CLEAN, SAFE FUN. $99 BIRTHDAY IS A GREAT EXAMPLE. ROLL THAT OUT IN 2004. WE'VE GROWN OUR BIRTHDAYS ALMOST 40% SINCE THEN. OVER HALF A MILLION BIRTHDAY PARTIES LAST YEAR AT CHUCK E CHEESE. [01:21:27] Speaker 2: WELL, SCOTT, AS YOU MENTIONED, YOU ARE THE BIRTHDAY CAPITAL. YOU DEFINE KIDS. I WONDER, DO YOU TRY TO APPEAL TO ADULTS AT ALL? YOU THINK ABOUT DAVE AND BUSTERS, FOR EXAMPLE. THEY HAVE THE FULL BAR SET UP. IS THAT SOMETHING THAT YOU'VE LOOKED AT OR ARE YOU REALLY STICKING CLOSE TO THE KIDS LANE? [01:21:44] Speaker 18: BEING A PARENT, I KNOW THAT WHEN YOUR KIDS ARE THERE, YOU'RE THERE TOO. SO WE DO. WE HAVE PHENOMENAL WI-FI. WE HAVE AMAZING HAND TOSS PIZZA. WE MAKE OUR DOUGH FROM SCRATCH IN EVERY LOCATION. PROPRIETARY SAUCE, CHEESE. SO IT'S A HANDMADE PIZZA. IT'S A GREAT FOOD PRODUCT. WE HAVE DRINKS, BEVERAGES. WE DO HAVE SOMETHING FOR THOSE ADULTS. SOME OF THE GAMES AS WELL, THE SKI BALL CHALLENGES, SOME OF THE BASKETBALL AND FOOTBALL TOSSES THAT GO ON FOR THE ADULTS. WE LIKE TO THINK WE'VE GOT SOMETHING FOR THEM AS WELL. [01:22:10] Speaker 2: YEAH, AND IT'S FUNNY THAT YOU MENTIONED THE PIZZA, BECAUSE OBVIOUSLY THAT TOOK OFF IN AN INTERESTING WAY DURING THE PANDEMIC. SO KEEPING THAT MOMENTUM GOING. BUT LET'S TALK A LITTLE BIT ABOUT WHAT THE FUTURE LOOKS LIKE. YOU HAVE SOME NEW CONCEPTS COMING OUT IN VENTURE WORLD, FOR EXAMPLE. YOU MENTIONED TO US BEFORE WE STARTED THAT YOU'RE ON THE HUNT FOR REAL ESTATE. SO, YOU KNOW, TALK US THROUGH THE CHOREOGRAPHY THERE. AND WHEN YOU'RE LOOKING FOR THAT REAL ESTATE, YOU KNOW, WHERE ARE YOU LOOKING? [01:22:34] Speaker 18: RIGHT. SO WHAT WE DID WAS -- THESE INITIATIVES I TALKED ABOUT. I GOT TO COME IN AS CFO TO A VERY HEALTHY BUSINESS WITH ALL THESE DRIVERS. NOW THAT CAPITAL INVESTMENT CYCLE HAS EBBED. SO WE COULD SPEND A MINIMAL AMOUNT OF CAPITAL, FREE CASH FLOW ENGINE. BUT WE OPENED A VERY FIRST CHUCK-E-CHEES ADVENTURE WORLD IN THE DALLAS AREA. IT'S AN ENORMOUS INDOOR PLAYGROUND, AGAIN, FOR KIDS AND FAMILIES. THE DIFFERENCE IS, AT OUR ACTIVE PLAY IN STORE, IT'S 56 INCHES AND BELOW. IT'S LITTLE KIDS. THIS, ANY SIZE KID, ADULTS CAN COME IN WITH THEIR CHILDREN. SO WE CAN KIND OF STRETCH THAT AGE GROUP A LITTLE BIT. BUT THE FIRST UNIT WE OPENED HAS FAR EXCEEDED EXPECTATIONS. SO IT'S THIS ENORMOUS WHITE SPACE POTENTIAL FOR THE BRAND. SO WE'RE OPENING THEM AS FAST AS WE CAN. WE NEED A SIMILAR SIZE BOX, BUT BECAUSE THERE'S A THREE-STORY PLAY STRUCTURE IN MOST OF THESE FACILITIES, IT NEEDS A HIGHER CEILING. WE DON'T WANT TO GO TO WAREHOUSE DISTRICTS. WE WANT TO STAY IN RETAIL AREAS. SO WE'RE ON THE HUNT FOR THOSE. AND IT'S GOING TO BE ABOUT FOUR TO SIX EVERY QUARTER AFTER THAT. WE CALL IT TEST AND LEARN. WE'VE GOT TO LEARN WHERE IT WORKS, WHERE IT DOESN'T WORK. EVERYTHING WE'RE SEEING SO FAR IS EXACTLY WHAT PARENTS WANT. THAT ACTIVE PLAY ELEMENT, IT'S OUR HISTORY. IT'S THE BALL PITS AND THE SKYTUBES, WHICH WE HAVEN'T HAD FOR ABOUT 20 YEARS. BUT WE PUT IN MINI BOUNCE PADS, THE OBSTACLE COURSE, HUGE RESPONSE TO THOSE, AND THAT'S WHY WE KEPT MOVING INTO THIS. [01:23:51] Speaker 19: SO YOU'RE FOCUSING MORE ON RETAIL SPACES RATHER THAN THAT. DO YOU NEED THAT SORT OF CONNECTION TO OTHER TYPES OF RETAILERS IN ORDER TO DRAW TRAFFIC? OR CAN YOU STAND ON YOUR OWN? [01:24:01] Speaker 18: YOU KNOW, IT'S INTERESTING, CHUCKY, BECAUSE WE'RE REALLY AN INDUSTRY OF ONE. NOBODY DOES KIDS 3 TO 9, YOU KNOW, KIND OF 2 TO 12, LIKE WE DO. WE REALLY OWN THAT SPACE. SO WE ARE A DESTINATION. PEOPLE WILL COME ON AVERAGE 30, 45 MINUTES TO A CHUCKY CHEESE. BUT WE DO LIKE BEING IN THOSE BUSIER TRAFFIC CENTERS WHERE THERE'S A LOT OF TRAFFIC COMING THROUGH. IT'S, HEY, LET'S STOP AND HAVE SOME FUN FOR A BIT. THE KIDS YOU HUNG WITH ME THROUGH THE OTHER STORES, LET'S GO HAVE SOME FUN AND WE'RE THE PLACE FOR THAT. [01:24:24] Speaker 19: DO YOU HAVE THE CAPITAL FOR THIS EXPANSION OR ARE YOU GOING TO NEED TO BORROW MORE TO DO IT? NO. [01:24:28] Speaker 18: WE RECENTLY REFINANCED OUR DEBT LAST YEAR. AND AS I SAID, NOW THAT WE'RE THROUGH WITH THE HEAVY CAPITAL, WE'RE FREE CASH FLOW POSITIVE. WE CAN AFFORD TO BUILD A LOT OF THESE LOCATIONS, SELF-FUND ALL OF THAT. IS THAT GOING TO BE EXPANSIVE, THE MARGINS, YOUR GENERAL IDEA? ABSOLUTELY. THESE UNITS, THEY'RE ABOUT HALF THE COST TO BUILD OF A TRADITIONAL CHUCKY CHEESE. THE RETURN MODEL IS OUTSTANDING. IT'S WHY WE'RE SO EXCITED AND LITERALLY WE'VE GOT TO DEFINE THE WHITE SPACE. IT COULD LITERALLY DOUBLE, TRIPLE THE SIZE OF THE ENTITY WITHIN A FEW YEARS. [01:24:56] Speaker 2: AND, SCOTT, WE'VE TALKED A LITTLE BIT ABOUT THE COMPETITIVE LANDSCAPE. I WANT TO TALK ABOUT THE COMPETITION FOR ATTENTION OUT THERE. YOU THINK ABOUT CHUCKY CHEESE, IT WAS ALSO THE BIRTHDAY CAPITAL WHEN I WAS GROWING UP AS WELL. WE'VE SEEN NOSTALGIA PLAY TAKE OVER WHEN IT COMES TO RETAIL AND APPAREL AS WELL. HOW DO YOU STAY RELEVANT? HOW DO YOU APPROACH MARKETING AS SUCH TO WIN THAT ATTENTION AUCTION, IF YOU WILL? [01:25:22] Speaker 18: I THINK IT'S A COUPLE WAYS. WHEN YOU'RE A 50-YEAR-OLD BRAND, PART OF WHAT WE HAVE TO DO IS WE'RE NOT A NEW KID TO THE BLOCK. WE KNOW CHANGE. WE KNOW BEING RELEVANT WITH THE CURRENT AGES AND THE CURRENT Psyche OF THE WORLD. AND THAT'S WHAT WE'VE DONE. OUR MARKETING TEAM IS PHENOMENAL. PART OF THAT IS DATA. IT'S INSIGHTS. IT'S THE AI ENGINES WE HAVE ON GUEST SATISFACTION, WHAT'S WORKING IN STORE, WHAT'S NOT, WHAT THEY LIKE ABOUT BIRTHDAYS, WHAT THEY DON'T. THAT'S HOW WE'RE ABLE TO MODIFY. IT'S WHERE THE $99 BIRTHDAY CAME FROM THAT DROVE SO MUCH TRAFFIC THROUGH THE STORES. WE'LL JUST KEEP LEVERAGING THAT AND DOING THAT, STAYING RELEVANT. [01:25:53] Speaker 19: GEOGRAPHICALLY, THOUGH, ARE YOU LOOKING INTO CERTAIN AREAS? I KNOW YOU'RE KIND OF SPREAD OUT ACROSS A WIDE VARIETY OF STATES. YOU DO HAVE A HEAVIER CONCENTRATION LIKE CALIFORNIA AND TEXAS. [01:26:03] Speaker 18: YEAH, CALIFORNIA, TEXAS, FLORIDA, THE NEW YORK AREA, WE'RE MORE CONCENTRATE. BUT WE'RE IN ABOUT 45 STATES. WE'RE WITHIN THE MAJOR MARKETS OF 96% OF THE POPULATION IN THE U.S. SO WE'RE KIND OF WHERE EVERYONE WANTS TO BE. THE BEAUTY OF OUR NEW ADVENTURE WORLD CONCEPT WE OPENED IS, FOR THE FIRST TIME, NORMALLY IF WE OPEN WITHIN A 30 MINUTE DRIVE OF ANOTHER CHUCKY, IT CANNAPOLIZES THE OTHER STORE AND SHARES SOME OF THAT TRAFFIC. THIS ONE DIDN'T. SO IT'S AN AMAZING OPPORTUNITY. [01:26:28] Speaker 19: HAVE YOU THOUGHT ABOUT DOING ANY OTHER WAYS TO LEVERAGE THE BRAND? OBVIOUSLY, FOR PEOPLE OF A CERTAIN GENERATION, CHUCK EACHE HIMSELF IS SORT OF ICONIC. YOU PROBABLY KNOW WHERE I'M GOING WITH THIS. CAN IT BE MORE THAN JUST A STORE? CAN IT BE MERCHANDISE? CAN IT BE INTELLECTUAL PROPERTY IN SORT OF A MOVIE, TV FORMAT, ANYTHING LIKE THAT? [01:26:49] Speaker 18: ABSOLUTELY. YOU LED ME RIGHT INTO THAT ONE. IN 2020, WE BROUGHT IN A GURU IN THAT SPACE. HER WHOLE CAREER HAS BEEN MEDIA AND LICENSING. WE ARE A LICENSING MEDIA ENGINE. WE'VE GOT FOOD PRODUCTS. WE'VE GOT CLOTHING, APPAREL, TOYS. BUT THE MOST EXCITING PIECE IS, AS YOU SAID, THAT MEDIA. IF YOU LOOK AT CHUCK EACHE, HIS Q SCORE, HIS AWARENESS AMONG FAMILIES AND KIDS, IT'S ON PAR WITH EVERY OTHER CHARACTER YOU'VE EVER HEARD OF. WE CAN LIST THEM ALL OUT. SUPERHEROES, ALL THE OTHER ENTERTAINMENT CHARACTERS, HE'S JUST AS WELL KNOWN AS THEY ARE. AND KIND OF THE PROOF IN THE PUDDING FOR THAT WAS WE HAD OUR VERY FIRST HOLIDAY SPECIAL. IT RELEASED LAST THANKSGIVING, 45-MINUTE ANIMATED SPECIAL, CHUCK E AND ALL OF HIS FRIENDS. AND IT WAS AN ASTOUNDING SUCCESS ON THE BROADCAST PARTNERS THAT WE HAD. SO NOW, FINALLY, PEOPLE ARE SAYING, WOW, THERE IS A THERE THERE, BECAUSE IF YOU LOOK AT THAT OTHER CAST OF CHARACTERS, THEY ALL HAVE MULTIPLE FEATURE FILMS. THEY ALL HAVE AN ENTIRE CATALOG OF DVDs AND ANIMATED SPECIALS. CHUCK E DOESN'T. WE'VE GOT ALL OF THAT POTENTIAL TO UNPACK WITH A CHARACTER KNOWN AROUND THE WORLD. [01:27:48] Speaker 2: AND OUR THANKS AGAIN TO CHUCK EACHE'S CEO, SCOTT DRAKE. IF YOU WERE WONDERING, THE MOUSE'S FULL NAME IS CHARLES ENTERTAINMENT CHEESE. HE BEGAN HIS LIFE AS A RAT, BUT HE HAS BEEN A MOUSE SINCE 1993, ACCORDING TO WIKIPEDIA. STILL HEAD ON THE CLOSE, WHAT INVESTORS NEED TO WATCH FOR OVER THE NEXT 24 HOURS, WE'LL TELL YOU NEXT. THIS IS THE CLOSE ON BLOOMBERG. LET'S TAKE A LOOK AHEAD TO WHAT ELSE WE ARE WATCHING OVER THE NEXT 24 HOURS. THE DAY STARTS AT 8:30 IN THE MORNING WITH THAT U.S. JUNE JOBS REPORT COMING OUT ON A THURSDAY, OF COURSE. AT A VERY INTERESTING TIME FOR THE FEDERAL RESERVE. THAT BRINGS US TO 10:00 A.M. WHEN WE GET MORE IN THE WAY OF ECONOMIC DATA IN THE FORM OF FACTORY ORDERS. WE'LL ALSO GET AN UPDATE ON DURABLE GOODS AS WELL. SURPRISE, 2:00 P.M. EASTERN, THE U.S. BOND MARKET POSES EARLY AHEAD OF THE JULY 4 HOLIDAY. DON'T WORRY, YOU'LL STILL BE ABLE TO TRADE EQUITIES A NORMAL DAY WHEN IT COMES TO EQUITIES. WE'LL TALK ABOUT THE RARE THURSDAY JOBS REPORT. IT WILL BE INTERESTING TO TUNE IN AND SEE WHAT HAPPENS THERE. BUT THAT DOES IT FOR US ON THE CLOSED. BALANCE OF POWER IS UP NEXT. HAVE A GREAT EVENING.