About this transcript: This is a full AI-generated transcript of Bloomberg Surveillance 10/12/2026 from Bloomberg Television, published October 13, 2026. The transcript contains 30,058 words with timestamps and was generated using Whisper AI.
"You're increasingly relying on earnings to continue to grow. Look at U.S. large caps. Earnings estimates have gone up by more than 20 percent. It's really an earning story rather than a risk story. The fundamentals are so strong. I still do not think that money wants to leave the asset class of..."
[00:00:00] Speaker 1: You're increasingly relying on earnings to continue to grow. Look at U.S. large caps. Earnings estimates have gone up by more than 20 percent. It's really an earning story rather than a risk story. The fundamentals are so strong. I still do not think that money wants to leave the asset class of equities and find a new home. This is Bloomberg Surveillance with Jonathan Farrow, Lisa Abramowitz and Anne-Marie Hordern.
[00:00:29] Speaker 2: Live from New York City this morning, good morning, good morning. For our audience worldwide, Bloomberg Surveillance starts right now. Coming into Monday, teeing up a big week ahead. Investors assessing the prospect of a wider war in the Middle East, putting a ton of weight on the shoulders of quarterly earnings season, heading into the last read on inflation before the Fed's next meeting. We begin this morning assessing the risk of a wider conflict. Saudi Arabia coming under attack from Iranian-backed Houthi militants following deadly strikes at Riyadh's international airport over the weekend, leaving President Donald
[00:00:59] Speaker 3: Trump considering whether the U.S. Should intervene. We may. We're going to look at it. We just found out about the recent attack. So we'll make a decision. We move very quickly.
[00:01:12] Speaker 4: Escalation risk top of mind through this morning. Yeah. And the U.S. has been building up troops in the region. It's notable to remember that there was a third aircraft carrier that was sent to the area with 10,000 with 10,000 troops among them. A real question about how far the president is willing to go. He said he doesn't want to have any kind of additional strikes ahead of the midterm election. That said, Saudi Arabia is a key ally. The entire Gulf region, the Gulf cooperation countries have been trying to band together to prevent terrorist attacks. This has got to start getting some conversations going on Washington. At the same time, this is also the central bank of oil.
[00:01:45] Speaker 5: So at the same time, they are coming under increased attack. And it's not just their airports. Of course, they're also fending off drones and missiles when it comes to their energy infrastructure. We heard from Prince Abdulaziz today. There's a massive energy event taking place that a lot of CEOs actually said we cannot go because the security risk, he says there's there's no way that someone will break our back. We are like a phoenix. We will come out of the ashes all the time and every time. Check out the moving crude this morning. It's not a big move.
[00:02:12] Speaker 2: Brent crude this morning around 105 advancing about 9 tenths of 1% at the upper end of a very recent range. The president reluctant to get involved in any kind of hostilities. I think the fact that we've got a very controversial embrace of Russian diesel underlines and highlights where the priorities are heading into the midterms at the moment.
[00:02:29] Speaker 4: People are taking more of a cue from that than the actual conflagration that's going on in the Middle East. And ultimately, even if you know, Russia does go ahead with this release of 300,000 tons of diesel every single day, a real question here about what that will actually do in terms of easing the deficit. Nonetheless, the oil market is become by the idea that exactly as you're saying, the president doesn't want to get involved if he doesn't have to.
[00:02:52] Speaker 5: It's going to make a difference very small on the margins, which is why you see even so much pushback from the likes of Republican senators over the weekend like Senator Tom Tillis saying this is not who we are and this is unnecessary because it's not even going to make a dent and it is a gift to Vladimir Putin.
[00:03:09] Speaker 2: The market is pretty calm at the moment in the face of all of this. The future is just about positive by a tenth of one percent on the S&P. Bear in mind, the U.S. bond market is closed today for Columbus Day. We'll be looking elsewhere for our cubes in fixed income. Coming up this hour, we'll catch up with the former senior U.S. intelligence official, Norman Ruhl, as the U.S. wades joining Saudi strikes against the Houthis. We'll speak to Amrida Sen of energy aspects as President Trump declares an energy ceasefire in the Ukraine war. And we'll speak to Jeff Yu of BNY as Wall Street kicks off a risk-heavy week over the next few days. We begin this hour with stocks rising as crude whipsaws. President Donald Trump now considering U.S. military support for Saudi Arabia following a series of strikes, deadly attacks on Riyadh. Bloomberg's Abir Abou Amar joins us now from Dubai for more. Abir, welcome to the program. Give us the latest, if you can, please.
[00:03:55] Speaker 6: Yeah, good morning, John. Devastating attacks over the weekend, subsequent attacks, really, against King Khalid's Airport, of course, in the capital city, Riyadh, in Saudi Arabia, killing over a dozen people, injuring several hundred people. This is, of course, a continuation of those strikes that started a few weeks ago by the Yemen-based Houthis against Saudi Arabia. They've been taking assets along the Red Sea, along Bab al-Mandeb Saudi Arabia at the beginning of last week, saying that it will set out to eliminate the Houthi threat. And that, of course, started these tit-for-tat attacks. But just to note here that this was, on Saturday, the deadliest incident, single-day incident since this whole war started between the U.S. and Iran. So to put it in the context of the bigger war, this is a parallel conflict that's been going on for over a decade right now. It affects energy. It affects those crude supplies, of course. And to note what Prince Abdulaziz was saying earlier at the WPC, of course, the World Petroleum Congress that is taking place this morning, he did say that this is beyond spare capacity. It's the ability for Saudi Arabia to repair, reroute, substitute and recover. He did assure markets slightly, but we're seeing Brent crude prices edging a little bit higher this morning. John, the big question right now is about the U.S. involvement. Saudi Arabia has resorted to the help of European countries, namely France and the U.K. And to some degree, they are helping. But analysts are telling us that the U.S. may have to get directly involved and that Saudi Arabia may ask President Trump for direct involvement in Yemen, hitting those Houthi targets directly. Saudi Arabia on its own has already retaliated by heading the Sana'a airport in Yemen, which is, of course, under the Houthi control. But for now, we keep an eye on the situation that is very volatile and that is happening at a time, as you guys have mentioned, where Saudi Arabia is gearing up for major, major events, one already taking place, one the FII, of course, in a couple of weeks' time.
[00:05:54] Speaker 2: I appreciate your time this morning. Thanks for making time for us. Bloomberg's Abir Abut Omar leading our coverage in the region this morning. To build on this, the former senior U.S. intelligence official, Norman Ruhl, joined us now for more. Norman, welcome to the program. This is a very complicated issue. We all understand that. Could you explain to us what the Saudis need right now to contain the threat posed by Houthi militants?
[00:06:13] Speaker 7: Good morning. Well, to begin, the Saudi air defense forces are capable and they're quite experienced, and they routinely prevent multiple Houthi attacks on their cities and energy infrastructure from succeeding. No air defense will be perfect, no matter what support is provided, but the Saudi air defenses obviously always can improve. The question becomes what exactly the U.S. should provide that the Saudis don't have. Targeting is not strategy and additional air defense equipment does not fix the situation. So no doubt there are consultations going on right now to say what exact equipment, technology, intelligence, guidance do the Saudis need from the United States government, as well as the private sector, which has multiple counter drone, counter cyber and other defensive capabilities to offer the kingdom. These conversations have been ongoing for some time, but will intensify. However, in the end of the day, you can shoot down the arrows, but you do want to aim for the archer. And the question therefore becomes, do the Saudis have what they need to neutralize all of the firing in Yemen, a large, complicated topography, or do we need to involve the United States? What we don't want to do is turn a war that is essentially between the Yemeni government and the Houthis, supported by the Yemeni government, supported by the Saudis, into a U.S.-Yemen conflict. So the White House will want to balance support against involving the United States. And the reason that's important is Iran wants us to be involved in Yemen.
[00:07:40] Speaker 5: Norm, when I hear you speak, it sounds very defensive in nature in terms of what the U.S. might be willing to provide. Do you think the United States would come to help the Saudis in terms of directly striking Houthi targets?
[00:07:54] Speaker 7: It is increasingly likely. However, the question becomes, what does that achieve that the Saudis can't do? And again, if you're Iran, you want the United States embroiled in another regional conflict because it distracts U.S. forces. It weakens U.S. forces that Iran itself would face. So Iran's external strategy in Iraq, as well as in Yemen, is to push regional partners into those conflicts because it weakens their focus on Iran itself.
[00:08:21] Speaker 5: What about Pakistan? Didn't they just sign a strategic mutual defense agreement with Saudi Arabia months ago?
[00:08:28] Speaker 7: That is true. And there's also the Mecca agreement that involves the Turks as well. Integrating these other forces, their aircraft, into this system will be complicated. It's not only that they come in with aircraft that can conduct attacks, but you're going to want to integrate them into the electronic targeting systems and to the intelligence flow that allow those attacks to take place. That involves integration with the United States, essentially, as well, because of what we're doing between CENTCOM and the Saudi government. So this is more complicated than just planes showing up. However, these countries could provide support in other parts of the kingdom that would allow the Saudis to free up forces to move against Yemen, the Yemeni-Houthi threat.
[00:09:11] Speaker 4: We've heard from a number of sources that members of the Saudi leadership are pretty upset that the U.S. hasn't gotten more involved and come to the defense more directly, even in a statement saying that, yes, they will get more intricately involved. What's your sense of what it will do to the alliance between the U.S. and Saudi Arabia if the U.S. continues to provide intelligence and sort of peripheral aspects rather than a true military force?
[00:09:35] Speaker 7: Well, again, it depends upon what the Saudi leadership and our leadership believe we can do that the Saudis themselves can't do, and the Saudis understand that Iran is the main target. So I've read the same reports, but my understanding, which is informed, is that the relationship between the United States and the military and the Saudi military is superb. It's actually closer than it's ever been, and that's common throughout the Gulf. Now, again, if you're involving the United States in the conflict, the question becomes, what does that actually achieve and where is that going? And for the United States, that is a serious consideration. But for the Saudis as well, they're going to want something that changes the situation, not just that exacerbates it. So it's complicated, but at the same time, we must provide additional support to the kingdom right now, and we need to be public about it so that we can show that the relationship is important.
[00:10:25] Speaker 4: We were noting earlier that oil prices aren't responding as significantly to this as you might assume if there was this fear of a broadening out of the conflict. Is this a correct interpretation that there won't be some sort of broader regional warfare that's going to further damage oil supplies?
[00:10:40] Speaker 7: For now, correct, for several reasons. First, we have to look at the Houthis in the Red Sea. The Yemeni government, supported by the Saudis, have pushed back the Houthis from a number of areas, and even Param Island, which the Houthis had taken in the middle of the Red Sea, is now contested. So the Houthis, which -- who never would have controlled the -- I mean, stopped the Red Sea flow because of Russian and Chinese shipping, which they would support. The Houthis are not in a position right now to contest the Red Sea as extensively as the past. And, likewise, the Saudi system is enormous. They have storage abroad. They have shipping that's holding oil in the Arabian Sea. So the east-west pipeline, the various entities the kingdom have got, are part of a bigger system. So you've got to look, is the system going to operate, or is it just one element, is all we're going to talk about.
[00:11:31] Speaker 2: Noam, there are two wars ongoing at the moment. There is one in the Middle East. There is another in Ukraine. Russia. We understand Russia's direct involvement in Ukraine. That is obvious. Can you help us understand just a little bit more how involved they are in this situation in the Middle East? There were reports several months ago that they helped the Iranians with targeting of U.S. troops. What do we know about where things stand now?
[00:11:53] Speaker 7: It's about the same. And, in fact, Russia has a political and, reportedly, a military agreement with the Houthis as well, which is why the Houthis have not attacked Russian shipping in the Red Sea for at least two years. And we need to keep in mind that Russia sends a significant amount of its oil to India and Asia through the Red Sea. China, similarly, receives about 11 to 12 percent, the numbers vary, of its energy from the Red Sea, from Saudi Arabia, Egypt, Libya, a variety of sources. And the Houthis have not attacked those actors as well. Russia and China are not significant players in the region. Their goal is that Iran survives, but it does not win. And you've had each of these countries provide some support to Iran while also calling for a general containment. But words are cheap. Actions are expensive. And Russia and China have been essentially irrelevant in this conflict.
[00:12:41] Speaker 2: We appreciate your time, sir. As always, Norman Raw, the former senior U.S. intelligence official on the latest in the Middle East, perhaps underlining just how controversial that decision was to embrace Russian diesel over the last several days.
[00:12:54] Speaker 5: Absolutely. Very controversial, which is why you're seeing immediate pushback from Congress. Some are even weighing whether it's legal, given the fact we just had the recent Lindsey Graham Act. It is not just allowing Russian crude to hit the national market. It's pulling up the waiver. It's granting a waiver and basically ended the sanctions that the United States has on Russian crude products.
[00:13:13] Speaker 2: We'll get into that story a little bit later this hour. In the meantime, in the meantime, let's get you an update on news worldwide with your Bloomberg Brief. Bonnie Quinn has more. Hey, Bonnie. Good morning, John.
[00:13:22] Speaker 8: A man is being detained in Poland over an alleged plot to assassinate Prime Minister Donald Tusk and his defence minister. The arrest came after authorities received a tip with Polish media reporting an effort to recruit members of a radical anti-government group. The US-based economics will share the Nobel Prize in economics this year. The US-based economics will share the Nobel Prize in economics this year. Robert Lee Hall and Michael Woodford, receiving the $1.2 million award for their work on microeconomic foundations of macroeconomic stabilization. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford.
[00:14:11] Speaker 2: The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford.
[00:14:17] Speaker 3: The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford.
[00:14:33] Speaker 2: The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford.
[00:14:37] Speaker ?: The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford.
[00:14:56] Speaker 2: The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford.
[00:15:22] Speaker 4: The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford.
[00:15:46] Speaker 2: The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford.
[00:15:59] Speaker 3: The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The US-based economics will share the Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford.
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[00:27:02] Speaker 11: The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford.
[00:28:37] Speaker 2: The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford. The Nobel Prize in economics at Stanford.
[00:29:17] Speaker 4: And there was some lack of clarity around what was agreed on both sides. Ukraine has said that they are willing to comply with a ceasefire on energy resources if Russia does. And then there were reports overnight that Russia did attack certain facilities, particularly in Kharkiv. And they were saying, ultimately, we are going to continue if they continue attacking us. Ultimately, what is President Trump's response? And ultimately, it comes down to, you know, how much can he affect the price of oil? And how much is that dictating a lot of decisions that are being made right now?
[00:29:46] Speaker 5: This was the big topic during the U.N. General Assembly. And everyone was trying to work towards getting an energy ceasefire. The president announced it. And according to President Zelenskyy, he only found out when the president announced it on Truth Social. And he went on to say this earlier this morning that it's clear that Putin doesn't read Truth Social. If Russia doesn't agree to energy ceasefire, we will respond. Ukraine is basically saying, we're willing to sign up for this ceasefire. We're willing to help you out under four weeks away from midterm election. But not if Russia continues to send jihadi drones over our way.
[00:30:16] Speaker 2: It's a curious decision to embrace diesel exports. Because you maximize controversy with minimal benefits. Because it's unclear whether either side has actually signed up to it. So why go forward to it? The other thing I'd point out that was curious about the weekend in this decision. This administration has pointed out repeatedly how the Europeans have been buying Russian energy throughout this war. And the hypocrisy of doing something like that. And then you've got the U.S. essentially doing the same thing. The Treasury Secretary was incredibly vocal about what the Europeans have been doing over the last several years.
[00:30:46] Speaker 5: Absolutely. Trump 1.0. I was at the NATO meeting when he blasted the Germans saying that you have been held captive to Russian oil and gas. You need to wean yourself off the Russian energy infrastructure. And now the United States for a very small amount. And we're going to send we're talking about two million barrels for October for the amount of diesel. She called it extremely desperate measures. But sometimes we see this in American politics. And this isn't apples to oranges. But remember when gasoline hit a record under the Biden administration. He did say he was going to make Saudi Arabia pariah. Then he went over and had the fist bump. We are mere weeks from a midterm election. And the president is making a very controversial foreign policy deal to try to ease some pressure domestically.
[00:31:28] Speaker 2: The controversy is obvious. The benefits are less clear this morning. Brent crude around 105 WTI at 92. Wall Street bracing for a big week ahead. A high stakes week loaded with bank earnings inflation data and highly anticipated comments from the Fed chair Kevin Walsh. Jeff U of BNY writing inflation data this week is not expected to show anything extraordinary. But that also means a surprise could be disruptive. Jeff joins us now for more. Jeff welcome buddy. Good to see you. A lot of people think month end is not a live meeting. It's a dead meeting. What could bring some life to that meeting this Wednesday when we get CPI.
[00:32:02] Speaker 12: Well anything well in excess of say 0.5.6 month on month. I think that's sort of the threshold all central banks globally are looking at right now. We know that the last few months have been difficult for sequential inflation. Energy really is driving that. But also need to point out the gap between headline and core. So core I think the Bloomberg consensus right now is 0.2 month on month. We maintain that gap. Central banks can say well inflation expectations in terms of core inflation. They are well anchored right now. It's being realized. If core starts to drift higher then you need to revisit. But let's be clear I think every single central bank meeting globally right now should be live but take it on a case-by-case basis.
[00:32:44] Speaker 2: Jeff also on the dashboard for us because it's on the Fed shares dashboard is the percentage of components that are above the Federal Reserve's target. Is that something you're focused on too given the Fed share seems to be hyper focused on that as well.
[00:32:57] Speaker 12: So I think investors the way they are positioned right now is just wanting to maintain that credibility for central bank decisions. Right. So if inflation whatever component it is is above target then you need to push against that. You need to send a clear policy message that you are on top of it as well. But then again you run into this and I would say for the ECB as well. How do you condition markets in the short term on a spot basis versus medium to longer term expectations. I think that's where if I look six to 12 months ahead where the Fed will be you know where the US economy will be. And that given the volatility and energy prices and right now and the news flow that is driving that that's a bit harder to see. Yes monitor but be cognizant of the volatility.
[00:33:41] Speaker 4: Jeff there's been some discussion that the higher yields in the sell off that we have seen in the fixed income space will sort of do the work of central banks for them and will actually mitigate or limit how much they personally will have to hike interest rates.
[00:33:54] Speaker 12: Is there any credence in that at all to you. I'm 100 percent behind that actually especially within Europe. If you look at financial conditions you know how they tighten in 2022 as on bond yield spiking due to supply conditions as well. And on top of that right now there's a realization by governments now they may not do it. But if they are going to follow through with some fiscal adjustments more fiscal restraint that is actually doubling up on the restraint. And I think central banks will be very happy with that as well. So I think it's less of an issue in the US right now because the US is genuine demand driven growth. But in Europe in particular we need a lot of rate hikes being taken out. And I think bond yields right now really help with that.
[00:34:34] Speaker 4: Jeff do you think that you actually are seeing signs of deterioration in consumer spending or even a pullback when it comes to CapEx spending. The different nodes that have supported growth so far that potentially could lead to the slowdown that would justify fewer rate hikes.
[00:34:48] Speaker 12: So I'm in two minds about this. I think equity markets are saying one thing. But if I look at the PMI's for example they're saying expansion. So on the manufacturing side expanding services and close to flat or expanding. So there really isn't any pullback. So it makes you wonder a you know who's actually being polled within these surveys. And be what is the real data actually show especially when it comes to labor market transmission as well. But going back to labor markets have we really seen recessionary behavior in labor markets. We're still in this no high no fire phase as long as wages especially real wages and managed to sustain a healthy clip. Economically actually don't see any reason for things to come off. One thing I think the UK is a bit unique here with savings rates are very very high right now. So that's one thing I'm monitoring in the US and the UK across Europe. If you start to see extraordinary gains in savings rates means people are still making money but they are saving it. They're not spending it. I think that will register within central banks. But I'm not really seeing it across the board right now.
[00:35:43] Speaker 5: Jeff you mentioned fiscal restraint. Who is doing such a thing.
[00:35:48] Speaker 12: The bond market is telling governments to do it. So I think that response that reaction function is really important right now. If we didn't have bond markets doing what they're doing right now we wouldn't see for example in France where you have senior officials almost every morning right on cue at the market open trying to reassure markets and that fiscal restraint will take place. So I think that markets are sending the right message and governments are reacting as well. Next text test case is in the UK of course with a budget coming through. But I think we're going to see it across the board. I think that is healthy as long as it's not done in a destabilizing manner. So far that is the case. Jeff do you think the credit market is beginning to tell the hyperscale is to slow down as well. So I think that if you look at yields if you look at how so we're tracking how volatility in bond markets are really starting to affect credit markets and beyond. I think the message is being come through is coming through. But in the short term it feels like there's only enough attention span for one area of the markets. If we believe that central if we believe that governments have achieved credibility let's say with some restraint then the next phase I think will be on the corporate sector. So I certainly will not call it out.
[00:36:52] Speaker 2: Interesting. Jeff thank you. Jeff you there of BNY. It's a major call for this equity market. Rates don't matter. The ultimately earnings will support everything. And the CapEx build out is right insensitive. I think it would be a mistake to suggest you're not seeing any pushback right now and seeing some companies respond. The failed IPO in Australia. One example. The widest spreads we've seen on hyperscale debt over the last several weeks.
[00:37:16] Speaker 4: Another example that pushback is getting traction. I was struck by some headlines by Broadcom CEO overnight where he came out and said the capital could be a major issue in the AI build out and started to talk about the fact that AI compute demand was outstripping supply for the next two years. So ultimately it need to be a gap have plugged the gap with capital. And he said ultimately most companies spend on AI compute without return at least right now. So they can't necessarily fuel this with cash flow. You're starting to see the beginnings of a recognition that rate insensitivity is perhaps have been vastly exaggerated.
[00:37:49] Speaker 2: It's happening slowly slowly and then all at once but not all at once just yet. Just very slowly. Example after example. Futures right now on the S&P positive by about a tenth of one percent. Let's give you an update on news worldwide this morning with your Bloomberg brief.
[00:38:01] Speaker 8: Vonnie Quinn has more. Hey Vonnie. Hey John. Thank you. President Donald Trump making a deal with Russian leader Vladimir Putin deepening his rift with Ukraine.
[00:38:10] Speaker 3: You've lost 30 percent of your country and you've had met over a million people killed between the two of them over two million people killed. That's a war that should have never started. And I think it's time for Ukraine to get a new president.
[00:38:24] Speaker 8: So let's keep previously blasting the U.S. decision to help release Russian diesel fuel. India bracing for a third day of unrest as youth led protests continue over the revision of the country's voter rolls. After a weekend of mass detentions in Delhi opposition parties plan to march to the Supreme Court today to demand an end to alleged electoral manipulation. China and the EU reaching a 16 point consensus after trade talks ended Friday. Sources telling us here at Bloomberg the EU says China agreed to slash millions of hybrid car exports. The agreement is seen as a strategic win for Beijing which conceded little. And that is your Bloomberg brief. John. Hey Vonnie. Thank you. Thanks for this morning.
[00:39:05] Speaker 2: More from Vonnie in the next hour. Up next on the program global markets under pressure.
[00:39:10] Speaker 13: I am especially distressed about what I'm seeing in France every day. It's symptomatic. I mean it's it's a more intense version of what we're seeing across the Western world.
[00:39:19] Speaker 2: You want some good news. The respond market close today. The Columbus Day. There's some good news. Needed a rest. Just a day off. Jay Foley of rubber banks going to join us next live from New York City. You're watching Bloomberg TV. We'll see you next time. We'll see you next time. We'll see you next time. We'll see you next time. We'll see you next time. We'll see you next time.
[00:40:10] Speaker 4: Everyone's talking about Kelly Clarkson and a toy shop in Brooklyn. Yeah. Like that's where the attention is. It's actually vastly more interesting frankly right now than trying to worry about, you know, global conflagrations and work. But a $15,000 mechanical singing bird automaton. We'll see you next time. Molly has a name on the quest to buy it. But it was rebuffed. And, you know, whatever kills me doesn't make me stronger. THE BIRD WAS, WHICH IS WHY THERE WAS A PRICE TAG FOR 15,000.
[00:40:46] Speaker 5: ULTIMATELY, THEY ARE GOING TO DUKE IT OUT ON TWITTER. I WANT TO KNOW, WAS SHE WILLING TO PAY $15,000 FOR THIS BIRD? APPARENTLY, THE SALES REPRESENTATIVE
[00:40:56] Speaker 2: WAS TRYING TO HELP HER GET A $2,000 VERSION OF THIS BIRD. WENT TO BUY A $15,000 TOY.
[00:41:10] Speaker 4: WENT TO BUY A $15,000 TOY.
[00:41:13] Speaker 2: WEREN'T GIVEN DUE RESPECT BECAUSE YOU WERE TREATED LIKE PRETTY WOMAN.
[00:41:17] Speaker 4: IN THE BUSINESS FOR A SERIOUS TOY. I CAN'T WAIT TO GO TO THE SHOP.
[00:41:25] Speaker 5: THERE IS NO PUBLICITY.
[00:41:29] Speaker 2: I'M GOING TO BROOKLYN TODAY. WE'VE BEEN EXPLAINING IT. WE ARE TALKING ABOUT THE BUSINESS CLEAR ON THE HEADLINES
[00:41:38] Speaker 13: AS THEY CROSS. UNDER SURVEILLANCE THIS MORNING, A FOCUS ON MARKETS, GLOBAL BOND MARKETS UNDER PRESSURE. I AM ESPECIALLY DISTRESSED ABOUT WHAT I'M SEEING IN FRANCE EVERY DAY. THE BOND MARKET IS SAYING WE ARE OUT OF PATIENCE WITH THIS MODEL OF LOW GROWTH, LARGE DEFICITS. IT IS SYMPTOMATIC. IT IS A MORE INTENSE VERSION OF WHAT WE ARE SEEING ACROSS THE WESTERN WORLD.
[00:41:56] Speaker 2: THE GOOD NEWS FOR THE U.S. IS WE ARE GROWING. GOOD MORNING. POLITICAL AND FISCAL UNREST IN FRANCE CLOUDING THE OUTLOOK FOR THE SINGLE CURRENCY. WE SEE SCOPE FOR SHORT COVERING TO SUPPORT THE EURO A LITTLE FURTHER IN THE WEEKS AHEAD AND A FORECAST A MOVE BACK TO THE 1.13 LEVEL ON EURO DOLLAR. JANE, GOOD MORNING AND GOOD TO SEE YOU. IT IS INTERESTING TO ME THAT WE DIDN'T BREAK 1.10 AND MAKE A MOVE DOWN TOWARDS PARITY GIVEN THE HEADLINES WE HAVE SEEN IN THE LAST MONTH OR SO. WHAT DO YOU THINK EXPLAINS THE DEGREE OF RESILIENCE THAT SOME
[00:42:28] Speaker 14: PEOPLE MIGHT HAVE FOUND UNEXPECTED? WHAT DO YOU THINK ABOUT THAT? THE MARKET CONSENSUS WAS THAT EURO DOLLAR WAS GOING TO 1.20. IN FACT, THAT CONSENSUS STAYED THERE FOR QUITE A LONG TIME. 1.10 WOULD HAVE BEEN TOTALLY OFF THE MARK IN TERMS OF WHAT PEOPLE WERE ANTICIPATING AND ACTUALLY WHAT A LOT OF FORECAST ARE SEEN AS LONG-TERM VALUE AS WHAT THEY ARE SEEN AS FAIR VALUE. THEY THINK RIGHT NOW THE EURO LOOKS -- THE EURO-DOLLAR EXCHANGE RATE SHOULD BE HIGHER IF WE ARE GOING TOWARDS FAIR VALUE. I THINK IT IS A LONG TIME WHERE THE EURO-DOLLAR EXPECTIVE PERHAPS THAT EXPLAINS THE RESISTANCE BUT ALSO PEOPLE HAVE ALREADY BUILT UP IN PRETTY LONG DOLLAR POSITIONS AND I THINK RIGHT NOW PERHAPS WE NEED SOME CONSOLIDATION. PERHAPS WE NEED TO GO BACK TO 1.13 JUST TO START AGAIN TO TAKE
[00:43:16] Speaker 2: SOME OF THAT POSITIONING OUT AND REEVALUATE. JANE, WE SAW A MOVE ON THE BANKS, ALMOST A CORRECTION. THE BANKS ON THE EURO STOCKS 50 DOWN BY ABOUT 9%. BUT THAT IS IN LINE WITH THE SELL-OFF WE SAW IN THE U.S. WHEN WE SAW THE EUROZONE DEBT CRISIS WHEN WE SAW THE BANKS TRADE MUCH LOWER AS WELL. IN FACT, THE BANKS ARE MUCH FIRMER YEAR-TO-DATE. THE BANKS ON THE BANKS AND THE BANKS OF THE BANKS OF THE
[00:43:45] Speaker ?: COUNTRY.
[00:43:45] Speaker 14: HAVE WE MANAGED TO INSULATE WITHIN FINANCIAL MARKETS THE FRENCH SOVEREIGN PROBLEMS FROM THE BROADER EUROZONE STORY? IF YOU RECALL, THE FRENCH BUDGET A YEAR AGO BROUGHT DOWN THE GOVERNMENT AGAIN. AND CERTAINLY THE CURRENT PRIME MINISTER, HE WAS BACK IN HIS POSTER REALLY QUITE QUICKLY. BUT TWO YEARS AGO AGAIN, WE HAD LOTS OF ISSUES WITH RESPECT TO FRANCE NOT BEING ABLE TO GET THIS BUDGET THROUGH, EVENTUALLY BEING ABLE TO GET IT THROUGH, BUT LOTS OF ISSUES. NEITHER TIME DID WE SEE THE EURO BEING PARTICULARLY AFFECTED, EVEN THOUGH WE DID SEE A MODEST WIDENING IN THE BUNDOAT SPREAD, FOR INSTANCE. NOW, IT WOULD APPEAR THAT TWO YEARS AGO WE HAD INVESTORS WHO WANTED TO SELL OATS MOVING BACK INTO OTHER EUROPEAN ASSETS, OTHER EURO DENOMINATED ASSETS. SO THERE WAS NO CURRENCY STORY THERE. IT'S DIFFERENT THIS YEAR. AND THAT'S THE INTERESTING PART. WHY IS IT DIFFERENT THIS YEAR? WHY ARE PEOPLE TALKING ABOUT CONTAGION? AND I THINK IT'S BECAUSE THERE'S A WHOLE STRING OF PROBLEMS AFFECTING THE EURO. THE TONE OF THE EURO HAS BEEN POOR SINCE THE START OF THE WAR. EUROPE IS AN ENERGY IMPORTER. THERE'S TALKS OF A HYBRID WAR WITH RUSSIA. THERE'S LOTS OF DIFFICULT POSITIONS AND ALSO THE POLITICS. NOT ONLY DO WE HAVE THAT FRENCH PRESIDENTIAL ELECTION IN THE SPRING, WHICH IS LIKELY TO BRING IN A FAR RIGHT GOVERNMENT, WHICH BRINGS UNCERTAINTY FOR THE MARKETS. BUT POLITICS IN GERMANY IS VERY MUCH ON THE UNCERTAIN SIDE AS WELL.
[00:45:03] Speaker 4: THERE'S A FEELING THAT POSSIBLY THE ECB WILL HOLD OFF ON HIKING RATES AS QUICKLY AS A RESULT OF THE FEARS OF CONTAGION COMING FROM FRANCE. DO YOU THINK THAT ULTIMATELY WILL SUPPORT THE EURO FOR THE EXPECTATION THAT MAYBE THERE WILL BE A BETTER GROWTH BACKDROP? OR DO YOU THINK THAT ULTIMATELY THAT WILL CAUSE THE EURO TO WEAKEN VERSUS THE DOLLAR?
[00:45:20] Speaker 14: I THINK IT SORT OF DEPENDS ON LOTS OF DIFFERENT THINGS. FOR INSTANCE, HOW LONG IS THIS WAR GOING TO GO ON FOR? WHAT IS GOING TO HAPPEN WITH ENERGY PRICES? IS EUROPE GOING TO HAVE A COLD WINTER, WHICH COULD MAKE ENERGY PRICES A LOT WORSE? WHAT IS GOING TO HAPPEN WITH RESPECT TO THE ECONOMIC DATA? WHAT IS GOING TO HAPPEN WITH THE ECONOMIC DATA? IN THE YEAR, CERTAINLY SINCE THE START OF THE IRAN WAR, IT HAS BEEN A SORT OF RESILIENCE, BETTER THAN EXPECTED GROWTH IN THE EUROZONE, BUT ALSO IN THE UK AND SWITZERLAND AND SWEDEN ALL AROUND. THAT HAS BEEN PRETTY GOOD. IS THAT STORY GOING TO DETERIORATE? I THINK ALL OF THESE FACTORS ARE REALLY GOING TO FEED IN, NOT JUST TO WHAT THE ECB DID, BUT THE WHOLE TONE OF THE EURO, WHETHER OR NOT IT CAN SETTLE DOWN. BUT RIGHT NOW, THE WAY THINGS ARE LOOKING NOW, THE WAY OPTICS ARE CLEARLY GOOD FOR THE EURO, AND YOU CAN SEE THAT IN THE POSITION, YOU CAN SEE THAT ON THE DRAG ON THE EURO IN RECENT WEEKS, AND I THINK THE ECB KNOWS IT NEEDS TO BE CAREFUL. IT CAN'T DO ANYTHING WITH RESPECT TO FRANCE NOW, BECAUSE IT WOULD IMPACT ITS CREDIBILITY. FRANCE NEEDS TO GET AN AUTERITY BUDGET THROUGH. WE KNOW FROM THE STREET PROTES THAT'S GOT TO BE DIFFICULT, BUT IF IT CAN'T DO THAT, I THINK THE PROBLEMS ARE GOING TO COMPOUND FOR THE EURO.
[00:46:32] Speaker 4: JANE, JUST REAL QUICKLY, ARE YOU ENCOURAGED AT ALL BY WHAT YOU HEARD OVERNIGHT ABOUT LIMITING SOME CHINESE IMPORTS OF HYBRID VEHICLES TO THE EURO AREA, AT LEAST IN THE SHORT TERM?
[00:46:42] Speaker 14: YOU KNOW, I THINK IT IS GOOD THAT THEY'RE TALKING THAT THE EUROPEANS AND THE CHINESE ARE TALKING THAT THERE'S A LOT OF TENSION HERE BETWEEN THE EU AND CHINA. WE KNOW THAT CARS IS A VERY SENSITIVE TOPIC BECAUSE OF, YOU KNOW, GERMANY'S INDUSTRIAL MACHINE. THE AUTO SECTOR HAS BEEN PERFORMING REALLY QUITE POORLY IN GERMANY, WHEN ACTUALLY OTHER PARTS OF THE GERMAN ECONOMY, OTHER PARTS OF THE INDUSTRIAL SECTOR HAVE BEEN DOING WELL, PARTLY BECAUSE OF THAT GOVERNMENT SPENDING THAT WE'VE HAD COMING THROUGH THIS YEAR FROM THAT LOOSENING OF THAT DEBT BREAK LAST YEAR. SO PARTS OF THE GERMAN ECONOMY DOING WELL, NOT THE AUTO SECTOR. VERY SENSITIVE, LIGHTLY TO HAVE HEADLINES. SO THE FACT THAT THERE IS AN AGREEMENT THERE, YOU KNOW, IT'S GOOD. IT'S GOOD BECAUSE IT BRINGS SOME CERTAINTY WITH RESPECT TO AUTO'S. BUT IT ALSO MEANS THAT THESE TWO SIDES ARE TALKING.
[00:47:33] Speaker 2: JANE, IT'S GOOD TO SEE YOU. THE EUROPEANS TREMENDOUSLY LATE TO THIS EFFORT. THE EUROPEANS ARE TALKING ABOUT THE EUROPEAN. THE EUROPEANS ARE TALKING ABOUT THE EUROPEAN. THEY GOT CHINA AS CLOSEST AS I'VE SEEN CHINA COME TO
[00:47:47] Speaker 4: ACKNOWLEDGE THEY ARE PART OF A PROBLEM AND THEY NEED TO DO SOMETHING ABOUT IT. IN RETURN FOR LIMITING THE IMPORTS OR JUST ALLOWING SOME IMPORTS AT ALL, CHINA IS ACTUALLY REDUCING
[00:47:57] Speaker 2: TARIFFS ON A WHOLE SLEW OF GOODS TIED TO EUROPE AND DOING A COUPLE OF OTHER THINGS AS WELL. IT'S NOT ENOUGH IN THE MINDS OF MANY BUT ACCEPTING THAT THEY ARE PART OF AN ISSUE IS QUITE A STEP FORWARD. COMING UP NEXT ON THE SECOND HOUR OF BLINBERG SURVEILLANCE JUST AROUND THE CORNER.
[00:48:24] Speaker 13: IT'S GOOD TO SEE STABILITY IN THE BOMB MARKET. IT'S ALREADY UNCOMFORTABLE AND IT'S PROBABLY GOING TO GET EVEN MORE UNCOMFORTABLE FROM HERE. I THINK THESE HIGHER RATES WILL START TO IMPACT THE ECONOMY.
[00:48:33] Speaker 11: THE ECONOMY IS HIGHER RATES. IT'S GOING TO BE HIGHER RATES. MANY FOLKS ARE SORT OF OUT OF PATIENCE WITH THE LEVEL OF
[00:48:38] Speaker 15: INFLATION. THE FED IS STILL INCLINED TO BE HIKING. THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA ABRAHMOWITZ AND ANNE MARIE HORDERN.
[00:48:48] Speaker 2: LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD MORNING. FOR OUR AUDIENCE WORLDWIDE, THE SECOND AIRE OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. THANKS FORWARD. EQUITY FUTURES ON THE S&P 500 POSITIVE BY ABOUT A TENTH OF 1%. LOOKING TO BUILD ON THE GAINS OF LAST WEEK ON THE NASDAQ PULLING FURTHER BACK FROM ALL-TIME HIGHS. IN THE COMMODITY MARKET, BRENT AND CRUDE SHAPING UP AS FOLLOWS. TENSIONS IN THE MIDDLE EAST RISING OVER THE WEEKEND. BRENT CRUDE AROUND 106, HIGHER BY 1%. LAST WEEK ON WEDNESDAY, PPI ON THURSDAY. BEFORE WE GET THERE, BANK EARNINGS, FULL SWING. TUESDAY, WEDNESDAY, PICK A BANK ON WALL STREET, THEIR REPORTING EARNINGS ACROSS THOSE 24, 48 HOURS.
[00:49:35] Speaker 4: IT'S REALLY IMPORTANT TO SEE WHAT THEY SAY ABOUT FINANCIAL CONDITIONS. HOW MUCH ARE FINANCIAL CONDITIONS TIGHTENING? HOW MUCH ARE CONSUMERS AND COMPANIES STARTING TO PULL BACK AS THEY SEE RATES CONTINUING TO GO HIGHER? AND TO THE DEGREE THAT THAT ACTUALLY HELPS THE MECHANISM OF TRANSMISSION THE FED IS TRYING TO ACHIEVE, HOW MUCH DOES THAT LIMIT THE POTENTIAL RATE HIKES COMING DOWN THE PIKE EVEN WITH INFLATION RUNNING ABOVE 2% FOR MORE THAN FIVE YEARS?
[00:49:57] Speaker 2: WE'RE DOWN BY MORE THAN 10% FROM THE MIDDLE OF AUGUST. IS IT THE TECH DISRUPTION? IS IT THE CAPEX STORY? THE IDEA THAT THE IPOs ARE BEING PUSHED BACK? MAYBE YOU'RE NOT GOING TO SEE THE DEBT BONANZA THAT WE'VE SEEN THROUGH THE SUMMER CONTINUE FROM HERE. WHAT WAS IT THAT WEIGHT ON THE FINANCIALS? THAT'S WHAT I WANT TO GET INTO IN THIS EARNINGS SEASON. FIND OUT FROM THE EXECUTIVES WHAT IS SLOWING DOWN, WHAT ISN'T SLOWING DOWN, WHAT CAN CONTINUE INTO 27?
[00:50:19] Speaker 4: ARE THEY JUST EARNING LESS ON SOME OF THEIR LOANS CONSIDERING THAT SUDDENLY THEY'LL HAVE TO START PAYING PEOPLE UP TO HAVE DEPOSITS CONSIDERING THAT YOU CAN GET IN A MONEY MARKET ACCOUNT CLOSE TO 5% OR 4.5%. THAT CHANGES THE CALCULUS. THEY'RE GOING TO HAVE TO GIVE SOME SORT OF SENSE OF THE PIPELINE. I THINK THAT'S THE KEY QUESTION. ESPECIALLY WITH FIRMUS, THAT AUSTRALIAN FIRM THAT PULLED THE IPO, HOW MUCH MORE OF THAT IS COMING DOWN THE PIKE? YOU ARE SEEING A SLOWDOWN IN THE PACE OF SOME OTHER DEALS IN TERMS OF BOND ISSUANCES AS WELL AS STOP OFFERINGS.
[00:50:44] Speaker 2: IT'S THE ONE-TWO PUNCH OF THE EARNINGS AND THE DATA. I MENTIONED CPI AND PPI. THE ENERGY STORY IS GOING TO BE A BIG FEATURE OF THE CONVERSATION AS WELL. IT IS A REAL RISK A POTENTIAL AND WE ARE CONFRONTING THAT RISK AND POTENTIAL THIS MORNING THAT THE CONFLICT OF THE
[00:51:00] Speaker 5: MIDDLE EAST SPREADS, BROADENS, WIDENS AND INVOLVES MORE COUNTRIES THAN WE WOULD LIKE TO SEE. IT WAS REALLY A DEADLY WEEKEND FOR SAUDI ARABIA. SUFFERED ITS DEADLIEST STRIKE SINCE THIS CONFLICT BEGAN. AT LEAST 14 PEOPLE WERE KILLED. THE HOUTHIS ARE GOING AFTER CIVILIAN INFRASTRUCTURE. THEY ARE GOING AFTER AIRPORTS THROUGHOUT THE KINGDOM. THIS IS WHY EVERYONE IS QUESTIONING WHETHER THE UNITED THE UNITED STATES AND THE UNITED STATES INVOLVED. AT THE SAME TIME YOU DO SEE DOMESTIC CONCERNS REALLY PILING ON THE PRESIDENT BECAUSE FRIDAY NIGHT HE ANNOUNCED THIS DEAL WITH RUSSIA THAT HIS OWN PARTY IS EVEN PUSHING BACK ON THIS SAYING THIS IS NOT WHAT WE SHOULD BE DOING AT THIS MOMENT. AMRITA SAID IT IS VERY TINY IN TERMS OF ACTUALLY HOW MUCH PRODUCT WE'LL GET TO MARKET AND SHE CALLED IT AN EXTREMELY
[00:51:40] Speaker 2: INFRASTRUCTURE. THANK YOU VERY MUCH.
[00:51:49] Speaker ?: THANK YOU VERY MUCH.
[00:51:49] Speaker 2: THANK YOU VERY MUCH. THANK YOU VERY MUCH. THANK YOU VERY MUCH. THE IDEA THAT WE HAVE SEEN A NUMBER OF DEATHS OVER THE WEEKEND AT AN INTERNATIONAL AIRPORT IN RIyAD THAT ALSO
[00:52:02] Speaker 4: UNDERMIND SOME OF THE IIF AND SOME OF THESE FII KINDS OF CONFERENCES THAT ARE HAPPENING NOW AS WELL AS THE BIG ENERGY CONFERENCE. ULTIMATELY, IF THE U.S. IS AN ALLY, HOW DO THEY STEP IN IN A WAY THAT GIVES SAUDI ARABIA SUPPORT THAT THEY HAVE THEIR BACK RIGHT NOW. ULTIMATELY, NORMAN RULE EARLIER THIS MORNING WAS SAYING THEY HAVE TO DO IT. THE U.S. IS AN ALLY, HOW DO THEY STEP IN IN A WAY THAT DOES THE U.S. HAVE TO DO IT IN A DISCIPLINED MANNER BECAUSE THEY CAN'T GET DISTRACTED FROM THE WAR WITH IRAN. RIGHT NOW THE PERCEPTION IS THAT THE U.S. IS SITTING ON THE FENCE BECAUSE PRICES OF OIL NEED TO COME DOWN AHEAD OF THE MIDTERM ELECTIONS. WHAT DOES THE U.S. HAVE TO DO TO FIGHT THAT PERCEPTION?
[00:52:46] Speaker 5: THE ENERGY CONFERENCE GOING ON RIGHT NOW THAT AMRITA SEN MADE IT TO, SHE HAD TO TRAVEL BY LAND OVERNIGHT TO GET TO THIS ENERGY CONFERENCE. A NUMBER OF EXECUTIVES FROM THE INDUSTRY THAT NORMALLY WOULD GO DECIDED THEY COULDN'T ATTEND TO THIS, THE FII IS AT THE END OF THE MONTH. THIS IS HUGE FOR THE KINGDOM IN TERMS OF DIVERSIFYING THEIR ECONOMY. WHAT EXECUTIVES DECIDED THEY HAVE TO PULL OUT OF THAT? YOU HAVE THE U.S. EMBASSY IN RIAD TELLING STAFF THAT THEY WANT TO USE THE INTERNATIONAL AIRPORT OR JEDDA AIRPORT. THEY HAVE TO GET SPECIAL AUTHORIZATION TO DO SO. CLEARLY THERE ARE A NUMBER OF RISKS RIGHT NOW OPERATING
[00:53:18] Speaker 2: IN THE COUNTRY. KEEPING CRUDE AT THE TOP END OF A RECENT RANGE. COMING UP THIS OUT WE WILL CATCH UP WITH JASON DRAHA OF UPS WITH STOCKS NEARING FRESH RECORDS AHEAD OF EARNING SEASON. PRESIDENT DONALD TRUMP'S PLAN TO BUY RUSSIAN DIESEL. THANKS FOR JOINING US. JASON DRAHA OF UPS WRITING, WE EXPECT U.S. MACRO FUNDAMENTALS TO REMAIN BENIGN AND SUPPORTED FOR RISK ASSETS WITH GROWTH AND INFLATION GRADUALLY MODERATING TOWARDS 2% OVER THE NEXT YEAR.
[00:53:57] Speaker 16: JASON JOINS US NOW FOR MORE. WHAT IS THE SOURCE OF DISINFLATION YOU AND THE TEAM ARE LOOKING FOR? IF YOU STRIP OUT SOME OF THE SHOCKS WE HAVE SEEN FROM ENERGY PRICES, SOME OF THE SOFTWARE AND AI RELATED, THE FUNDAMENTAL COMPONENTS DON'T INDICATE DEMAND-DRIVEN INFLATION IS LOWER. THE INFLATION IS NOT GOING LOWER.
[00:54:17] Speaker 2: ANY ASPECTS THAT ARE NOT, YOU CAN POINT TO ONE-OFF FACTORS, THOSE ALL INDICATE THAT INFLATION IS GOING LOWER
[00:54:21] Speaker 16: AND IS LIKELY TO CONNUE TO GOING LOWER. IS THAT NECESSARY TO COMPLETE YOUR BET, THE EQUITY MARKET THAT WE START TO SEE SOME REAL BREATH? THE EQUITY MARKET YOU SEE HAS BEEN VERY CONCENTRATED. THE UNDERPERFORMANCE HAS BEEN CONCENTRATED ON THINGS THAT ARE MORE ECONOMICALLY SENSITIVE, RATE-SENSITIVE, LIKE SMALL CAP STOCKS. IF YOU GET A SITUATION WHERE THEY ARE RELUCTANT TO DO ANYTHING BUT THINGS THAT ARE HIGHER QUALITY, WHERE THEY HAVE SOME CONVICTION.
[00:54:41] Speaker 4: DO YOU HAVE CONFIDENCE THAT RATES HAVE PEAKED AND THAT YOU'RE GOING TO SEE A BROADENING OUT FROM HERE?
[00:54:45] Speaker 16: I HAVE CONFIDENCE THAT WE THINK THE FED IS GOING TO HIKE ONE MORE TIME IN DECEMBER AND THEY DON'T DO ANYMORE. I THINK I HAVE A PRETTY GOOD CONFIDENCE ON THAT. I THINK THE FED IS GOING TO BE HIGHER. I THINK THE FED IS GOING TO BE CONFIDENCE. ON THE 10-YEAR, THE BACK END OF THE CURVE, 10-YEAR-PLUS, AT SOME POINT YOU CAN EASILY GET TO 5.5%. THE CHALLENGE FOR THE BACK END OF THE CURVE IS THAT INVESTORS, IT LOOKS ATTRACTIVE, ESPECIALLY IF YOU'RE A LONG-TERM INVESTOR. YOU CAN SEE THAT INVESTORS, YOU CAN SEE THAT INVESTORS AND YOU CAN SEE THAT INVESTORS, YOU CAN SEE THAT INVESTORS BEFORE YOU HAVE CONVICTION THAT, YES, THE FED IS NOT GOING TO DO MORE OR OIL PRICES ARE STABILIZED. THERE'S A RELUCTANT BUYERS. I THINK THAT'S THE CHALLENGE RIGHT NOW. PEOPLE DON'T WANT TO STEP IN AND BUY. THE MOMENT THAT FLIPS BECAUSE POSITION IS SO SHORT, I THINK YOU CAN SEE A REALLY RAPID MOVE IN THE 10-YEAR LOWER
[00:55:24] Speaker 4: TO CLOSER TO 5% IN A MATTER OF A FEW DAYS. BUT WE NEED THAT CLEAR CATALYST FOR THAT TO HAPPEN. WHAT WILL IT TAKE TO REALLY THREATEN SOME OF THE CAPITAL RAISING AND HOW CONTINGENT IS ANY CALL ON EQUITY MARKETS REALLY BASED ON THE IDEA THAT THIS CHAIN CAN KEEP ON CHUGGING? HOW HIGH IS YOUR CONVICTION ON NO CAPITAL MARKETS PUSH BACK TO ALL THIS DEBT?
[00:55:45] Speaker 16: IN TERMS OF THE COST OF CAPITAL, I THINK FOR THAT, IT'S GONE UP TO 100 BASIS POINTS FOR THESE COMPANIES. THAT'S NOT GOING TO MOVE THE NEEDLE FOR THEM. IF YOU EVER LOOK AT INVESTMENT BANKING, THE HURDLE RATES, IT'S NOT GOING TO MOVE THE NEEDLE FOR THE ISSUES IN TERMS OF THAT. I THINK THE BIGGER QUESTION WOULD BE, YOU KNOW, ARE YOU SEEING SIGNS OF LACK OF RETURN ON INVESTMENT? SO COMPANIES THEMSELVES DECIDE, DO WE NOT WANT TO INVEST? SO IT'S GOING TO BE MORE OF A SUPPLIER PULLBACK BECAUSE THEY DON'T GET THE RETURNS VERSUS INVESTORS RAISING THE COST THAT WOULD CAUSE COMPANIES TO WANT TO HALT THE ISSUANCE.
[00:56:19] Speaker 5: I KNOW YOU THINK THE MIDTERMS IS GOING TO BE THIS RISK CLEARING EVENT. BUT WHAT IF THAT'S ACTUALLY THE TIMELINE IN TERMS OF WHEN THE PRESIDENT RESTARTS STRIKES IN THE MIDDLE EAST?
[00:56:27] Speaker 16: I THINK THAT'S THE WILD CARD BECAUSE WE'RE DISCUSSING IT THIS MORNING. BEFORE THE MIDTERMS, YOU DON'T THINK THE REPUBLICANS AND TRUMP WANT TO ESCALATE. IF YOU'RE ON THE OTHER SIDE, YOU MIGHT WANT TO ESCALATE BECAUSE YOU WANT TO MAKE IT HARDER AND MORE DIFFICULT FOR TRUMP. POST MIDTERMS, DOES IT REVERSE? THEN DOES TRUMP THINK THAT RIGHT NOW WE CAN MOVE FORWARD WHERE THE IRANIANS SAY WE GOT WHATEVER RESULT HAPPENED, LET'S NOT ESCALATE. THAT'S THE GAME THEORY BEHIND THE CALCULATIONS ON BOTH SIDES. THAT'S HARD TO KNOW. THAT'S THE UNCERTAINTY.
[00:56:53] Speaker 2: AT THIS POINT, WE'RE ALL FAMILIAR WITH THE DRILL. YOU CAN IGNORE ENERGY. YOU CAN IGNORE RATES. EARNINGS SEASON IS GOING TO BE SO GOOD. WHAT DOES DISAPPOINTMENT LOOK LIKE THIS EARNINGS SEASON? AS WE STARTED A LOT OF SHOWS OVER THE LAST SEVERAL WEEKS, IT JUST FEELS LIKE WE'RE PUTTING MORE AND MORE WEIGHT ON THE SHOULDERS OF QUARTERLY EARNINGS SEASON GOING INTO YEAR-END.
[00:57:10] Speaker 16: THE BOTTOM-UP CONSENSUS IS ABOUT 27% EARNINGS GROWTH FOR Q3. I THINK THE KEY THING THAT'S GOING TO MOVE THE MARKETS, AND IF YOU THINK RIGHT NOW IT'S AN AI TRADE, THE GUIDANCE FOR THE HYPER SCALERS IN TERMS OF CAPEX, THEY DON'T HAVE TO KEEP GOING UP 80% LIKE THEY'VE GONE THIS YEAR, BUT IF YOU SEE NOT A PICKUP THERE, I THINK THAT WOULD BE A DISAPPOINTMENT FOR INVESTORS. MORE SO THE GUIDANCE GOING FORWARD ON THE AI SPEND. IF YOU SEE DISCIPLINE ON CAPEX, THAT'S A NEGATIVE FOR THE MARKET IN YOUR MIND? DEFINED DISCIPLINE IN THIS CASE. IF YOU SEE A FLATTENING OF THE GROWTH, WE ALL KNOW THAT THE GROWTH RATE OF CAPEX IS GOING TO GO HIGHER, BUT IT'S GOING TO MODERATE. IF THIS YEAR IT'S 80%, NEXT YEAR IT'S 30%, BUT IF IT LOOKS LIKE IT'S GOING TO BE 15% OR 20%, THIS SPENDING TRANSLATES INTO EARNINGS FOR SEMICONDUCTOR COMPANIES. IT'S NOT GOING TO GO HIGHER, BUT IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER.
[00:58:03] Speaker 4: IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER.
[00:58:23] Speaker 16: IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. I WOULDN'T SAY SMALL COMPANIES. YOU CAN LOOK AT THE ADOPTION RATES. IT'S GOING TO BE A BIGGER COMPANIES. THEY HAVE THE MONEY TO INVEST. WE NEED TO SEE SIGNS THAT THEY WILL GET THE BENEFITS. IF THERE ARE BENEFITS THERE, THE COST OF ACQUIRING AGENTS IS GOING TO GO LOWER OVER TIME. THAT WOULD ALLOW ADOPTION TO BROADEN OUT. I THINK IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER.
[00:59:17] Speaker 2: IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S NOT GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO GO HIGHER. IT'S GOING TO BE LATER THIS MONTH. BACK END OF OCTOBER. YOU HEAR FROM THE MAJOR TECH FIRMS. THIS IS WHERE IT COMES TO CAPEX. WHAT IS THE GLIDE PATH FOR CAPEX FROM HERE? IS DISCIPLINE A BAD THING? IS IT A BAD THING FOR WHO? IT'S OBVIOUSLY A BAD THING FOR THE CHIP PLAYERS. WHAT ABOUT EVERYBODY ELSE?
[00:59:53] Speaker 4: WHAT ABOUT THE DEBT MARKET GIVEN THE FACT THAT IT WILL TAKE SOME OF THE PRESSURE OFF? WE'LL GET A DRUMBEAT TO THAT BECAUSE BANK EARNINGS ARE A PREVIEW OF TECH EARNINGS. NOT ONLY WITH RESPECT TO CAPITAL MARKETS BUT ALSO THEIR OWN CAPEX WHEN IT COMES TO TECH. THAT'S BEEN A BIG STORY FOR THE BANKS SO FAR THIS YEAR. HOW MUCH MONEY HAVE THEY HAD TO SPEND ON CYBERSECURITY BECAUSE OF MYTHOS? IT'S BEEN OFF THE CHART. WHERE DO YOU GET GAINS THAT CAN OFFSET AN EXPENSE THAT'S SKYROCKETING? YOU SEE THIS NOT ONLY AT BANKS BUT ALL COMPANIES. THAT'S WHY THE CYBERSECURITY BILLS ARE GOING THROUGH THE
[01:00:23] Speaker 2: ROOF. EXECUTIVE AFTER EXECUTIVE, WHENEVER THEY ARE QUOTED ON MYTHOS, AND YOU CAN SEE IT IN THEIR FACES HOW SHOCKED THEY WERE THE DAY THEY GOT ACCESS TO THAT.
[01:00:32] Speaker 5: ABSOLUTELY. AND IT'S WHY THE GOVERNMENT HAD TO STEP IN. THE TREASURY DEPARTMENT, THE FEDERAL RESERVE STEP IN, HAVE THESE MEETINGS WITH THE BANK EXECUTIVES BECAUSE THEY WERE SO CONCERNED ABOUT HOW QUICKLY MYTHOS SHOWED ALL OF BASICALLY ALL OF THESE LITTLE HOLES THAT HACKERS COULD GET INTO AND ESSENTIALLY DISRUPT THE FINANCIAL SYSTEM.
[01:00:49] Speaker 2: THAT WAS THE ONE OCCASION WHERE I FELT LIKE THE DOOMER ISM JUST WASN'T PART OF THE IPO ROAD SHOW. THAT FELT LIKE THE REAL DEAL BECAUSE WE WERE HEARING IT DIRECTLY FROM THE EXECUTIVES ON WALL STREET ABOUT THEIR OWN BUSINESSES AND THE RISKS AROUND IT.
[01:00:59] Speaker 4: THEY HAD CONVICTION THAT THEY HAD SAFETY. THEY HAD CONVICTION THAT THEY HAD CREATED A MOAT AROUND THE SECURITY OF THEIR DATA AND OF THEIR WEALTH. ULTIMATELY THAT SAFETY SENSE WAS COMPLETELY UNDERMINED IN ONE DAY AND THAT ULTIMATELY WAS THE SEAT CHANGE.
[01:01:15] Speaker 2: EQUITY FEATURES JUST A LITTLE BIT SOFT THIS MORNING. WE'RE DOWN BY A QUARTER OF 1% ON THE NASDAQ. JUST ABOUT UNCHANGED ON THE S&P WITH AN UPDATE ON NEWS WORLDWIDE THIS MORNING.
[01:01:25] Speaker 8: WITH YOUR BLOOMBERG BRIEF, BONNIE QUINN HAS MORE. THANK YOU FOR JOINING ME. THE VATICAN SAYS HE WILL UNDERGO SURGERY IN THE COMING DAYS TO REMOVE A LUNG NODULE DISCOVERED IN WHAT HE CALLS A QUOTE VERY INITIAL PHASE. THE VATICAN SAYS THE SURGERY WILL BE IN THE COMING DAYS AND RECOVERY IS EXPECTED TO TAKE A WEEK. HSBC IS SHIFTING ITS PAY STRUCTURE TO THE WALL STREET MODEL WHERE A BIGGER PART OF COMPENSATION IS IN THE FORM OF BONUSES. THE LONDON BASE BANK WILL PHASE OUT THE FIXED PAY SYSTEM FOR SENIOR STAFF, SWITCHING TO THE NEW SYSTEM AT THE GENERAL. A LONDON BASE BASED ON THE FIXED PURCHASE. A LONDON BASE BASED ONTO GORGEL HEDERY'S EFFORTS TO OVERHAUL THE BANK. AMAZON IS IN TALKS TO ACQUIRE AI STARTUP DECARTH. DECARTHARY AIR FOR ABOUT $6 BILLION.
[01:02:17] Speaker 2: THAT IS YOUR BLOOMBERG BRIEF. THE PRESIDENT STRIKING A DIESEL DEAL.
[01:02:21] Speaker 3: YOU HEARD ABOUT THE OIL DEAL WITH RUSSIA. THAT IS A BIG DEAL. I WANT TO THANK PRESIDENT PUTIN TO BE HONEST WITH YOU. WE HAVE MASSIVE AMOUNTS OF OIL COMING INTO OUR COUNTRY.
[01:02:33] Speaker 2: WE WILL GET INTO THAT CONTROVERSY IN JUST A MOMENT WITH HENRY LUTRAYS OF VEDA PARTNERS ALONE FROM NEW YORK CITY THIS MORNING. GOOD MORNING. I KNOW WE SIT HERE MOST MONDAY MORNING AND SAY BIG WEEK AHEAD, BIG WEEK AHEAD, BUT IT IS KIND OF A BIG WEEK AHEAD. SPEAKS FOR ITSELF. TONS OF BANK EARNINGS. WELLS, GOLDMAN, CITY, BANK FOR AMERICA, MORGAN STANLEY AND OTHERS ALL REPORTING THROUGH THE WEEK. SOME DATA AS WELL, CPI, PPI AND THE MAN HIMSELF, KEVIN WASH, FED CHAIR, SPEAKING IN THAILAND. LOOKING OUT FOR THAT LATER THIS WEEK. EQUITY FUTURES SHAPING UP AS FOLLOWS ON THE S&P 500. FUTURES THIS MORNING JUST ABOUT UNCHANGED ON THE S&P. SLIGHTLY SOFT AND NEGATIVE ON THE NASDAQ DOWN BY 2/10 OF 1%. A CHECK-IN ON CRUDE GIVEN THE HEADLINES OVER THE WEEKEND. YOU MIGHT HAVE EXPECTED A BIG POWERFUL MOVE. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND.
[01:03:43] Speaker 4: WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND.
[01:04:15] Speaker 2: WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND.
[01:04:24] Speaker 3: WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A LITTLE BIT OF THE WEEKEND. WE ARE SEEING A BIG DEAL. THAT IS MASSIVE AMOUNTS OF OIL COMING INTO OUR COUNTRY.
[01:04:40] Speaker 2: I WANT TO THANK PRESIDENT PUTIN TO BE HONEST WITH YOU. WE HAVE MASSIVE AMOUNTS OF OIL COMING INTO OUR COUNTRY. AND IT IS DIESEL WHICH IS WHAT WE WANT. HERE IS THE LATEST THIS MORNING. PRESIDENT DONALD TRUMP ANNOUNCING A DEAL WITH RUSSIA TO INCREASE MOSCOW'S DEAL EXPORTS.
[01:04:55] Speaker 9: U.S. LAWMAKERS PUSHING BACK. A PERSON GROUP OF SENATORS IS DEMANDING THAT THE U.S. IMMEDIATELY REVERSE COURSE ON THIS PLAN TO RELEASE RUSSIAN DIESEL STOCKPILES. THE LAWMAKERS ARE ARGUING THAT THE WHITE HOUSE FAILED TO CONSULT WITH CONGRESS OR SUBMIT A JUSTIFICATION FOR THE DEAL AS REQUIRED UNDER THAT 2022 STATUTE. OF COURSE, THIS UPENDS YEARS OF SANCTIONS PRACTICE HERE IN THE U.S. AND A BID TO CURB PRICES AHEAD OF THE MIDTERMS, AS THE NATIONAL AVERAGE FOR GALLON OF DIESEL TODAY STANDS AT $6.26. THOUGH THERE ARE OF COURSE QUESTIONS ABOUT THE POTENTIAL IMPACTS OF THE PLAN. AS A NEW REPORT THIS MORNING FROM OUR ANALYST AT BLOOMBERG INTELLIGENCE SAYS THAT INITIAL VOLUMES ARE UNLIKELY TO CLOSE MUCH OF THE SUPPLY GAP. AND THE REAL QUESTION IS IF DAMAGED RUSSIAN REFINERIES CAN RECOVER TO LIFT OUTPUT. THAT IS PART OF WHY PRESIDENT TRUMP HAS BEEN DEMANDING THAT UKRAINE HALT ITS ATTACKS ON RUSSIAN REFINERIES. EVEN AS JUST AFTER, HOURS AFTER PRESIDENT TRUMP ANNOUNCED THAT ENERGY CEASE FIRE, WE GOT REPORTING FROM UKRAINE THAT RUSSIA HAD TARGETED UKRAINIAN GAS INFRASTRUCTURE AND POWER PLANTS. NOW, JOHN, FRESHED OUT THIS MORNING FROM BOTH SIDES IN THE CONFLICT THAT WE REALLY WILL SEE THAT POTENTIAL ENERGY TRUCE PUT INTO EFFECT. WE HEARD FROM RUSSIAN STATE MEDIA SAYING THAT THE KREMLIN ISN'T LOOKING FOR A CEASE FIRE BUT IS INSTEAD LOOKING FOR WHAT THEY CALL THE LASTING PEACE. AND UKRAINIAN PRESIDENT ZELENSKYY SAYS HE'LL AGREE TO A TRUCE BUT ONLY IF RUSSIA DOES TOO.
[01:06:19] Speaker 2: TYLER KENDALL WITH THE LATEST IN WASHINGTON. TYLER, THANK YOU. UNCLEAR WHETHER ANY DIESEL FROM RUSSIA WILL ACTUALLY ARRIVE HERE. UNCLEAR WHETHER WE ACTUALLY HAVE AN ENERGY TRUCE BETWEEN THE UKRAINE AND RUSSIA THIS MORNING.
[01:06:31] Speaker 5: WELL, IT SOUNDS LIKE ZELENSKYY WAS CAUGHT OFF GUARD. NOW WE'RE JUST HEARING FROM DIMITRY PESKOV, WHICH IS PUTIN'S LONGTIME HEAD OF COMMUNICATIONS. AND THEY'RE SAYING THE KREMLIN HAS NOTHING YET TO SAY ON AN ENERGY TRUCE. SO IT SOUNDS LIKE THE RUSSIANS WERE ALSO UNAWARE OF THIS. AND IT SOUNDS LIKE THE PRESIDENT IS JUST SAYING WHAT HE SAID LITERALLY A MONTH AGO, SEPTEMBER 14TH, HE SAID THERE WAS AN ENERGY TRUCE. CLEARLY WE'VE ALL SEEN THE STRIKES. THERE HASN'T BEEN AN ENERGY TRUTH.
[01:06:57] Speaker 2: THIS IS THE TAKE THIS MORNING FROM HENREDA TREIS OF VEDA PARTNERS. SHE WRITES THE FOLLOWING, THE MIDDLE EAST AND RUSSIA CONFLUENCE IS SHAPING UP TO BE THE OCTOBER SURPRISE WE'VE BEEN FAIRFUL OF. HENREDA JOINS US NOW FOR MORE.
[01:07:08] Speaker 17: HENREDA, WELCOME BACK TO THE PROGRAM. HOW DO YOU SEE THIS PLAYING OUT INTO THE MIDTERMS? THANKS FOR JOINING US. THANKS FOR JOINING US. I'M CERTAINLY IN THE MINORITY. I KNOW THE BETTY MARKETS BELIEVE THE OPPOSITE. BUT WHAT WE'RE FACING HERE RIGHT NOW IS A FRACTURE WITHIN THE REPUBLICAN CONFERENCE. THANKS FOR JOINING US FOR JOINING US. THERE'S A LOT OF PEOPLE IN THE AMERICA DELEGATIONS, SUSAN COLLINS IN MAINE, MIKE ROGERS IN OHIO, AND A NUMBER OF OTHER SENATORS BESIDES, WHO ARE SAYING THAT THIS DEAL THE PRESIDENT HAS STRUCK TO IMPORT RUSSIAN DIESEL IS A DIRECT VIOLATION OF THE LAW, RUNS CONTRARY TO WHAT 74% OF AMERICANS WOULD LIKE TO SEE WITH RUSSIA. THEY HAVE AN UNFAVORABLE VIEW OF THE COUNTRY. AND IT'S OBVIOUSLY NOT BRINGING DOWN DIESEL PRICES RIGHT NOW. IT'S NOT BRINGING DOWN CRUDE PRICES. IT'S DIESEL, GAS, INFLATION, TOP OF MIND FOR AMERICAN VOTERS. AND IT'S GOT A DIRECT TIE TO THE WAR WITH IRAN AND THE RUSSIA-UKRAINE WAR THAT THE PRESIDENT PROMISED TO END WHEN HE TOOK OFFICE AND IS NOW GOING INTO ITS FIFTH YEAR. SO GETTING THESE ENERGY PRICES BACK IN THE SPOTLIGHT, DEFLECTING AWAY FROM THIS NARRATIVE AROUND SUPERINTELLIGENCE AND MAYBE TALKING ABOUT WHAT WE COULD EXPECT OPTIMISTICALLY FROM THE TECH SIDE IS POTENTIALLY GOING TO DEPRESS REPUBLICAN TURNOUT EVEN FURTHER AND GIVE THE DEMOCRATS THE WINS THEY'RE LOOKING FOR IN STATES THAT THEY SHOULDN'T EVEN BE PLAYING BALL IN LIKE ALASKA AND TEXAS. THIS IS A REAL PROBLEM AND MAYBE THE OCTOBER SURPRISE.
[01:08:33] Speaker 5: IF LAWMAKERS LIKE REPUBLICAN SENATORS ARE SAYING THAT THIS IS POTENTIALLY AGAINST THE LAW, WHAT'S THE OFFRAMP THEN FROM THE WHITE HOUSE?
[01:08:41] Speaker 17: I THINK MAYBE THEY JUST IGNORE IT. BUT TREASURY SECRETARY BESSET SPECIFICALLY, YOU KNOW, LIFTED AND AUTHORIZED A GENERAL LICENSE TO RUSSIA TO IMPORT THESE PRODUCTS. MY QUESTION IS WHAT DOES CUSTOMS AND BORDER PATROL DO? WHEN ANY DIESEL, IF IT DOES MAKE IT OVER HERE, HOW DO THEY RESPOND?
[01:08:58] Speaker 5: WELL, THEY LEGALLY HAVE TO ACCEPT IT.
[01:09:00] Speaker 17: HAVE TO ACCEPT IT, BUT CAN WE THEN SELL IT? WHAT IS THE SANCTION? DO WE GET EXPOSED TO THE TARIFF? I MEAN, IT'S A REALLY UP IN THE AIR DYNAMIC.
[01:09:08] Speaker 5: I IMAGINE NO U.S. COMPANY IS GOING TO WANT TO TOUCH THIS. AND I THINK A LOT OF PEOPLE KNOW THAT THIS DIESEL IS GOING TO END UP IN ASIA ANYWAY. WHEN IT COMES TO THE PATH FOR YOU AND THE MINORITY, THE REPUBLICANS TO MAIN CONTROL OF THE SENATE, WHAT SEATS ARE YOU LOOKING AT THAT YOU THINK THEY'RE GOING TO BE ABLE TO HOLD ON TO?
[01:09:22] Speaker 17: ALASKA, MAIN, TEXAS, KANSAS, NEBRASKA. THE ONES THAT TRUMP WON BY ANYTHING MORE THAN 10 PERCENTAGE POINTS, WHICH IS THE BULK OF THE ONES WE'RE TALKING ABOUT RIGHT NOW. I THINK REPUBLICANS ARE IN A POSITION WHERE THE BLUE WAVE IS REAL. BUT D+8 IS NOT THE SAME AS D+14 OR 22. AND WHEN I GO TO WALL STREET AND I TALK WITH INVESTORS, THEY'RE THINKING, YOU KNOW, LOUISIANA AND ALABAMA ARE SERIOUSLY IN PLAY. AND I MEAN, I LIVE DOWN HERE IN LOUISIANA, IT'S NOT REALISTIC TO ANTICIPATE THAT. BUT I DO THINK THAT THIS IS A SCENARIO WHERE YOU GET DEMOCRATS MAYBE SLICING OFF ALASKA, MAYBE MAINE NOW. YOU CAN SEE IT FROM COLINS AND THE ALASKA DELEGATION. AND THAT'S ENOUGH TO GIVE DEMOCRATS THE SENATE.
[01:10:05] Speaker 4: YOU KNOW, A LOT OF PEOPLE WOULD SAY THAT ULTIMATELY THE AVERAGE AMERICAN DOESN'T WANT TO SEE MORE WARS OVERSEAS AND MIGHT NOT BE AS AGAINST THE IDEA OF NOT GETTING MORE INTIMATELY CONNECTED WITH EITHER THE SAUDI ARABIANS OR GOING AGAINST THE HOUTHIS OR EVEN JUST TRYING TO GET SOME SORT OF CEASE FIRE BETWEEN RUSSIA AND UKRAINE. WHAT'S THE PUSHBACK TO THAT? HOW INVESTED ARE AMERICAN VOTERS IN THIS?
[01:10:30] Speaker 17: WE DON'T CARE. IT'S REALLY ONE OF THOSE THINGS WHERE I WOULD SAY IT'S A TOP CONCERN. I THINK IN THE LATEST POLL I SAW 7% OF AMERICANS. SO THAT PUTS IT ABOVE AI AND BELOW EVERYTHING ELSE BY A WIDE MARGIN. THE AMERICAN PUBLIC FAMOUSLY IGNORES FOREIGN POLICY. THE DIFFERENCE WITH THIS ONE, THE REASON I THINK IT COULD BE DIFFERENT THAN OTHER FOREIGN POLICY DEVELOPMENTS WE'VE SEEN IS BECAUSE IT'S DIRECTLY HITTING VOTERS WHERE IT HURTS. DIESEL, GAS, THAT COMES ON TOP OF THE TARIFS. IT COMES ON TOP OF THE FED HAVING TO HIGH INTEREST RATES, HIGH MORTGAGE RATES. IT'S JUST COMPOUNDING. AND THE PROBLEM FOR THE PRESIDENT IS THAT IT'S ALL RELATED TO EXECUTIVE ACTIONS, THE TARIFFS AND THE WAR, THE DECISION TO SUSPEND THE LICENSE ON RUSSIA ARE ALL ACTIONS THAT HE HAS TAKEN UNILATERALLY. IT'S PURELY REPUBLICAN POLICY. YOU DON'T HAVE AN OPPORTUNITY TO ALSO BLAME DEMOCRATS FOR THIS. AND NOW THE REPUBLICANS OWN PARTY ARE TURNING AGAINST THE PRESIDENT'S POLICY HERE. SO IT MAKES IT A TOXIC BREW THAT WILL BREAK THROUGH TO THE AMERICAN PUBLIC, IN MY OPINION.
[01:11:32] Speaker 2: WE ARE LESS THAN A MONTH AWAY. HENREITER, THANK YOU. HENREITER TRAINS THERE, AVAIDA PARTNERS. THERE ARE SOME BIG CALLS OUT THERE ABOUT FLIPPING SOME PLACES THAT WE WOULDN'T EVEN THOUGHT OF A COUPLE OF YEARS BACK. PLACES THAT THE PRESIDENT WON BY DOUBLE DIGITS. THEY CAMPAIGNED ON LOWERING PRICES. PRICES AREN'T COMING DOWN AT THE PUMP. AND PRICES AREN'T COMING DOWN AT THE PUMP PRECISELY, AS HENREITER SAID, BECAUSE OF EXECUTIVE ACTIONS OVER THE LAST 12 MONTHS THAT HAVE LED TO HIGHER PRICES.
[01:11:56] Speaker 4: ULTIMATELY, IS THERE ANYTHING THAT YOU CAN DO OR ANYTHING THAT PRESIDENT TRUMP CAN DO TO COUNTERACT THIS IN THE NEXT FOUR WEEKS? INCREASINGLY, PEOPLE ARE SAYING UNCLEAR BECAUSE ANY KIND OF MEASURE, EVEN ONE AS DRASTIC AS ACCEPTING RUSSIAN DIESEL, WOULD TAKE THREE WEEKS FOR THOSE BARRELS TO EVEN GET HERE, LET ALONE TO START AFFECTING PRICES.
[01:12:13] Speaker 5: TO HENREITER'S POINT, NEW POLLING OUT OF TEXAS ACTUALLY SHOWS THAT THEY ARE NECK-AND-NECK, KEN PAXTON, TELARICO, AND ACTUALLY YOU HAD THE INDIVIDUAL CONDUCTING THAT POLL SAYING JAMES TELARICO WASN'T EVEN BORN THE LAST TIME A DEMOCRATIC WON THAT SEAT.
[01:12:25] Speaker 2: IT'S KIND OF SHOCKING. I'D STILL BE VERY SHOCKED. EVEN THOUGH THE POLLS HAVE GOT THINGS VERY TIRED, I'D STILL BE VERY, VERY SHOCKED IF THAT'S HOW THINGS TURNED DOWN. COMING UP NEXT ON THE PROGRAM, DREW MATTIS OF MEDLIFE SAYING FEARS OF AN AI APOCALYPSE ARE OVERDONE. THE EARNINGS STORY HAS BEEN ABSOLUTELY TREMENDOUS OVER THE LAST YEAR. THE OPEN ABOUT TWO HOURS AWAY, FUTURES JUST ABOUT POSITIVE ON THE S&P, LOOKING TO ADD TO SOME GAINS OVER THE LAST WEEK OR SO ON THE S&P 500. THE EARNINGS STORY HAS BEEN ABSOLUTELY TREMENDOUS OVER THE LAST YEAR. EVERY QUARTER AFTER QUARTER AFTER QUARTER, DOUBLE-DIGIT EARNINGS GROWTH AND SOME. WE ARE LOOKING FOR THE SAME STORY INTO YEAR-END BRAMO. THAT BAR IS REALLY QUITE HIGH STILL, EVEN WITH THE LITTLE BIT OF A TICK-LOW THAT WE SAW FOR THE FINANCIALS OVER THE LAST MONTH.
[01:13:28] Speaker 4: TECH COMPANIES HAVE BEEN SORT OF A LEADING INDICATOR ON THIS. LAST QUARTER WHEN THEY REPORTED EARNINGS AND THEY BLEW THEM OUT. REMEMBER SAMSUNG AND TSMC COMING OUT WITH THESE UNBELIEVABLE STOCKS UP TO YOUR POINT ABOUT HOW HIGH THE BAR IS. WE HAVEN'T HAD THE SAME KIND OF TREND IN THE BANK STOCKS. YOU HAVE BEEN POINTING TO THIS FOR THE PAST FEW WEEKS. I THINK IT IS THE RIGHT POINT. THESE STOCKS HAVE GOTTEN HAMMERED. WHY?
[01:13:55] Speaker 2: WHAT CAN THE EARNINGS SHOW THAT PEOPLE WILL WELCOME AND SAY, MAYBE WE GOT A LITTLE BIT AHEAD OF OUR SKIES? WE HAD THE BARCLES FINANCIALS CONFERENCE SEPTEMBER TIME AND THE LIKES OF BRIAN MOORE AND THE BANK OF AMERICA BOSS CAME OUT AND RESET THE BAR. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK.
[01:14:37] Speaker 5: WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK.
[01:14:40] Speaker 2: WE HAVE A LOT OF PEOPLE WHO ARE GOING TO BE IN THE BANK. IT'S DIFFICULT TO PROCESS THE NUMBERS FROM THE FINANCIALS. THIS TIME, THOSE EARNINGS CALLS, TRYING TO WORK OUT THAT PIPELINE, TO YOUR POINT, FOR THIS CAPEX STORY FOR TECH, IT'S GOING TO BE QUITE A BIG DEAL.
[01:14:53] Speaker 4: I'M LESS INTERESTED IN THE TRADING VOLUMES. WE HAVE HEARD THAT FIXED INCOME TRADING MIGHT BE A LITTLE LIGHTER THAN PEOPLE PREVIOUSLY EXPECTED. EQUITY IS STILL GOING GANGBUSTERS. THAT SAID, I'M MORE INTERESTED IN THE PIPELINE. I'M MORE INTERESTED IN JUST HOW MUCH DEPOSIT BETA THEY WILL HAVE TO GIVE UP. IN OTHER WORDS, HOW MUCH DO THEY HAVE TO PAY PEOPLE TO KEEP CASH IN THOSE DEPOSIT ACCOUNTS, GIVEN WHERE MONEY MARKET FUNDS ARE, AND ULTIMATELY, THE STATE OF THE CONSUMER. THEY HAVE A GREAT READ ON IT, ALBEIT A HIGHER INCOME CONSUMER.
[01:15:19] Speaker 2: HOW RESILIENT ARE THEY IN THE FACE OF INFLATION? WE HAVE DAN GREENHOUSE COMING UP LATER. DAN ALWAYS POINTS THE VISA TO MASTERCARD TO POINT OUT HOW MUCH THE CONSUMER IS STILL SPENDING. THEN YOU LOOK TO DISCRETIONARY, HAD A GREAT STORY OUT FROM BLOOMBERG OVER THE WEEKEND ON THIS, JUST HOW MUCH POORLY DISCRETIONARY HAS TRADED RELATIVE TO THE CONSUMER. IT IS A TALLE OF DIFFERENT
[01:15:40] Speaker 4: CONSUMERS. YOU CAN SEE THIS AT MCDONALD'S AND A NUMBER OF OTHER FAST FOOD STORES. THAT SAID, THE HIGH END ISN'T JUST A MATTER OF STOCK MARKETS COMING DOWN TO TORPEDO THE WEALTH EFFECT FOR HIGH-END CONSUMERS TO KEEP SPENDING BECAUSE ULTIMATELY BANK OF AMERICA CAME OUT WITH THEIR CONSUMER CHECKPOINT. IT IS SO ROBUST. THE FASTER GROWTH IN SPENDING HAS BEEN AT THE LOWER END. THE FEDERAL STOCK IS TALKING ABOUT IT. THE FEDERAL STOCK HAS BEEN AT THE LOWER.
[01:16:10] Speaker 2: IT IS AN ENIGMA WRAPPED IN A MYSTERY WRAPPED IN A RIDDLE. I'M CONFUSED. THAT IS YOUR FAVORITE? I KNOW. I GO TO IT. EVERY SINGLE TIME. I LIKE IT WHEN YOU DO IT.
[01:16:23] Speaker 11: FUTURES RIGHT NOW, THE S&P 500 JUST ABOUT UNCHANGED. THE STOCK IS RISING 4% IN THE PRE-MARKET. ON THIS REPORT IN THE INFORMATION, IT HAS SIGNED A MULTI-YEAR CLOUD DEAL WITH ANTHROPIC. WE DON'T HAVE A LOT OF DETAILS ON IT, BUT WE KNOW THIS IS A BIGGER TREND FOR ANTHROPIC. WE ARE SEEING SALES FOR SHARES RISING 4% ON SELL SIDE ACTION. BANK OF AMERICA, UPGRADING THE STOCK FROM UNDERPERFORM ALL THE WAY TO A BUY. THEY HAVE BEEN HESITANT ON THE STOCK DUE TO A BUY. THEY HAVE BEEN HESITANT ON THE STOCK DUE TO AI DISRUPTION FEARS, BUT IT NOW SAYS THAT BIG COMPANIES ARE UNLIKELY TO REDUCE PLATFORM -- REPLACE PLATFORMS THAT ARE HOLDING THEIR DATA AND WORKFLOWS ALREADY, AND THAT AI COULD EVEN DEEPEN THEIR PARTNERSHIPS. AND WE END ON THE CHIP STOCKS. DESPITE THE MAG-7 BEING UP IN THE PRE-MARKET, WE ARE SEEING WEAKNESS ACROSS THE CHIP SECTOR. THANKS FOR THE UNITED STOCKS. THANK YOU FOR THE UNITED STOCKS. THE CEO OF INTEL AND BROADCOM WARNED THAT ACCESS TO CAPITAL COULD BECOME THE AI BOOM'S BIGGEST BOTTLINECK. NOT ACCESS TO POWER, NOT CHIPS, BECAUSE IT IS HIGHER RATES THAT COULD MAKE THESE PROJECTS EVEN MORE EXPENSIVE AND
[01:17:58] Speaker 2: MAYBE MAKE LENDERS HESITANT TO LEND. JONATHAN: BRAMMA MENTIONED IT EARLIER THIS MORNING. WE TALKED ABOUT THIS REPEATEDLY ON THIS PROGRAM. IT IS INTERESTED TO SEE ONE OF THE BIG CHIP PLAYERS COME OUT AND
[01:18:10] Speaker 4: ACTUALLY SAY IT. I THINK THIS IS REALLY BIG NEWS, SAYING THAT CAPITAL COULD BECOME AN ISSUE IN THE AI BUILDOUT AND POINTING TO THE FACT THAT MOST COMPANIES SPEND ON AI COMPUTE WITHOUT RETURN.
[01:18:19] Speaker 2: THAT IS THE LATEST FROM BROADCOMM THIS MORNING. ON OUR RAIDAR THIS MORNING, THE MICROSOFT BASTER CEO SATY NADELLA CALLING FOR AN AI FAILSAFE, WRITING COMPANIES "MUST ASSUME A MODEL IS COMPROMISED AND CONTAIN IT FROM THE START LIKE AN EMERGENCY BREAK." NADELLA USED IN THE WHITE HOUSE'S PREFERRED TERM SUPER INTELLIGENCE. AS TO AI AGENTS GO ROGUE ONCE AGAIN, ANTHROPIC DISCLOSING ONE OF ITS MODELS SUBMITTED A FALSE HOMICIDE TIP TO THE PHILADELPHIA POLICE DEPARTMENT IN JULY. THE CLAWMAKER DISCOVERING THE INCIDENT IN LATE SEPTEMBER AND NOTIFYING AUTHORITIES NINE DAYS LATER. AND FINALLY, DELIVERING A STARK WARNING TO THE JOBS MARKET.
[01:18:56] Speaker 18: LOVE IT, HATE IT, FEAR IT, IT IS HERE. AND WE ARE ALREADY SEEING THE FIRST WAVE OF IMPACT. IT IS A SLOW-MOVING TUNAMI, BUT TUNAMI, NONETHERLESS.
[01:19:11] Speaker 2: THE IMF MANAGING DIRECTOR IS CALLING ON POLICYMAKERS TO RETHINK EDUCATION, ESTIMATING MORE THAN 40% OF JOBS WILL BE AUGMENTED, DOWNGRADED OR ELIMINATED DUE TO AI.
[01:19:22] Speaker 4: NOTABLE THAT THIS IS HAPPENING IN THAILAND. IN SOUTHEAST ASIA, A LOT OF THE JOBS THAT HAVE REALLY COME, AND A LOT OF THE ECONOMIC BOOM THAT HAS COME, HAS RESULTED FROM JOBS THAT POTENTIALLY COULD GET DISINTERMEDIATED BY ARTIFICIAL INTELLIGENCE. THAT IS CLEARLY THE CONCERN FOR A LOT OF FINANCE MINISTERS IN THE AREA. HOW DO WE GET AHEAD OF THAT? HOW DO WE INVEST AT A TIME WHERE WE ARE ALSO BEING CRIMPED BY THE FACT THAT OIL PRICES ARE HIGH? AND THERE IS INCREDIBLE INTERNATIONAL COMPETITION AND THERE IS FRAGMENTING OF THE GLOBAL TRADE SYSTEM. ALL OF THESE THINGS DEFINITELY ARE CRYSTALLIZED BY THE ONGOING THREAT THAT AI COULD REALLY UNDERMINE SOME OF THE OUTSOURCED ECONOMIES THAT THEY HAVE REALLY DEVELOPED.
[01:19:56] Speaker 5: IT SOUNDS LIKE CRYSTALINA GORGEVA IS ALMOST SIGNING UP TO HOW BERNIE SANDERS AND STEVE BANNON IS THINKING ABOUT HOW AI IS GOING TO BE A MASSIVE IMPACT ON THE JOB MARKET AND THE LABOR FORCE. THE ISSUE OF COURSE IS IF ALL OF THESE JOBS ARE DISRUPTED, ARE THERE GOING TO BE NEW JOBS THAT AI CREATES OR ARE WE GOING TO HAVE TO START TAXING AI SO HEAVILY BECAUSE PEOPLE ARE GOING TO BE LEFT WITHOUT HAVING JOBS.
[01:20:19] Speaker 2: I HOPE IT'S THE FORMER AND NOT THE LATTER. DREW MADIS OF MET LIFE SEES THE OTHER SIDE OF THE STORY. HE WRITES THE FOLLOWING, FEARS OF A JOB APOCALYPSE CAUSED BY AI TOOLS ARE OVERSTATED, JOB LOSSES COULD BE SIZABLE IN OUR OPINION. HOWEVER, WE WOULD EXPECT THAT TO BE MADE UP FOR BY JOB GAINS IN OTHER SECTORS. DREW JOINS US NOW FOR MORE. WELCOME TO THE PROGRAM.
[01:20:44] Speaker 19: HAVE YOU GIVEN THOUGHT TO THE SEQUENCING, IS IT ONE THEN THE OTHER OR IS IT BOTH AT THE SAME TIME? WELCOME TO THE IMF'S COMMENTS, RIGHT? AUGMENTED VERSUS ELIMINATED ARE TWO VASTLY DIFFERENT THINGS. AND TO LUMP THEM IN THE SAME BUCKET AND SAY, OH, 40% OF JOBS, THAT SCARES THE HECK OUT OF PEOPLE. AND THE REALITY OF IT IS, IF YOU GIVE ME PEOPLE WITH AI TOOLS AND I CAN ANSWER THE FIRST HUNDRED QUESTIONS I HAD TODAY WHEN I GOT INTO THE OFFICE, IT'S JUST GOING TO CREATE 200 MORE QUESTIONS FOR ME TO ANSWER BECAUSE, YOU KNOW, EVERY TIME I ANSWER A QUESTION, I'M EXPANDING MY KNOWLEDGE BASE. THE ENTIRE KNOWLEDGE BASE EXPANDS, AND THEN THAT'S JUST MORE KNOWLEDGE FOR ME TO MINE. SO KNOWLEDGE IS AN INFINITE RESOURCE, AND THIS IDEA THAT WE'RE GOING TO RUN OUT OF KNOWLEDGE THAT WE WANT TO LEARN ABOUT, I THINK IS THE MAIN PROBLEM WITH THE ARGUMENT THAT THERE'S GOING TO BE AN AI APOCALYPSE.
[01:21:29] Speaker 2: DREW, HOW DOES YOUR VIEW ON THE JOBS MARKET AND HOW THIS WILL PLAY OUT INFORM YOUR VIEW OF WHAT WILL HAPPEN WITH REGULATION AND TAXES OVER THE NEXT SEVERAL YEARS?
[01:21:38] Speaker 19: WELL, I MEAN, I THINK RIGHT NOW WE'RE IN THE FEAR PHASE. AND I THINK EVENTUALLY WHAT WE'LL REALIZE IS THERE ARE SEGMENTS THAT ARE GOING TO BE DISRUPTED. EVERY NEW TECHNOLOGY DISRUPTS SOME JOBS. AND THEN THE REAL QUESTION BECOMES IN THE AGGREGATE WHAT HAPPENS. YOU KNOW, I THINK ONE OF THE PROBLEMS THAT WE'RE FACING IS THAT EVERYONE HAS A STORY ABOUT SOMEONE THEY KNOW WHO JUST GRADUATED FROM COLLEGE, CAN'T FIND A JOB. BUT ALL THOSE ANECDOTAL STORIES DON'T ALWAYS ADD UP TO A MACRO IMPACT. THEY ADD UP TO A BUNCH OF ANECDOTAL STORIES. AND WHAT WE DON'T HEAR IS THE KID WHO GOT A JOB BECAUSE THEY HAD AI SKILLS AND THEY PUT THEIR RESUME IN AND THEY WENT TO THE TOP OF THE PILE AND THE FIRM HIRED THEM BECAUSE THEY KNEW HOW TO USE THE NEW TECHNOLOGY AND THE FIRM WAS CONFIDENT THAT THEY WOULD BE ABLE TO PUT THAT NEW TECHNOLOGY TO WORK MORE QUICKLY.
[01:22:23] Speaker 4: THE FEAR, DREW, IS THAT THERE AREN'T AS MANY OF THOSE PEOPLE THAT WILL BE NECESSARY. AND THIS WAS SOMETHING THAT CRYSTALINA GERGEVO WAS REFERRING TO OR REFERENCING, WHICH IS THE IDEA THAT WHITE-COLLAR JOBS MIGHT BE MANY FEWER GOING FORWARD. AND BLUE-COLLAR JOBS, CONSTRUCTION JOBS, ARE THE ONES THAT ULTIMATELY ARE GETTING CREATED. SHE SAID THAT IS NOT A STORY TO CELEBRATE. DO YOU AGREE?
[01:22:42] Speaker 19: WELL, I DON'T THINK THAT'S THE WAY IT'S GOING TO PLAY OUT. I THINK THAT THE WHITE-COLLAR STORY IS KIND OF OVERDONE. I THINK PEOPLE ARE TOO AFRAID OF IT. IF YOU'VE USED THE TECHNOLOGY, YOU SEE WHAT IT CAN DO. YOU SEE WHAT TASKS IT CAN AUTOMATE FOR YOU. AND WHAT I LIKE TO TELL PEOPLE IS, IF YOU THINK YOU CAN BE REPLACED BY AI, YOU ARE PROBABLY RIGHT. BUT IF YOU THINK YOU CANNOT BE REPLACED BY AI, YOU ARE PROBABLY ALSO RIGHT. THE REALITY OF IT IS THAT WE ALL KNOW THE TASKS IN OUR JOBS THAT WE DON'T LIKE TO DO THAT WE MIGHT BE ABLE TO AUTOMATE. AND THE FACT OF THE MATTER IS, EVEN IF I GET RID OF THOSE TASKS, IT JUST GIVES ME TIME TO FOCUS ON THE TASKS THAT I ACTUALLY ENJOY DOING, I'M BETTER AT, AND I CAN GET PAID MORE FOR.
[01:23:26] Speaker 4: AND WHAT'S THE JUSTIFICATION FOR A LOT OF COMPANIES TO KEEP INVESTING IN ARTIFICIAL INTELLIGENCE IF ULTIMATELY THEY CAN'T GET THE COST SAVINGS FROM REDUCING HEAD COUNT AND ARGUABLY BILLS ARE GOING UP REALLY SIGNIFICANTLY WHEN IT COMES TO CYBER SECURITY.
[01:23:39] Speaker 19: SO I'VE BEEN IN FINANCE FOR A LONG TIME, AND THERE'S AN OLD ADAGE, YOU HAVE TO PAY MONEY TO MAKE MONEY, OR SPEND MONEY TO MAKE MONEY. AND I THINK THERE'S TOO MUCH FOCUS ON THE EXPENSE MANAGEMENT SIDE OF THIS, AND NOT ENOUGH ON WHAT IT MIGHT ENABLE FIRMS TO DO, HOW IT MIGHT ENABLE THEM TO DO IT, THE POTENTIAL FOR MASS CUSTOMIZATION OF CERTAIN PRODUCTS. THERE'S A LOT OF WAYS THAT AI CAN POTENTIALLY HELP FIRMS EXPAND. AND IF ALL YOU'RE DOING IS FOCUSING ON COST CONTAINMENT, YOU'RE PROBABLY GOING TO LOSE OUT TO A FIRM THAT'S FOCUSING ON HOW TO USE THE TECHNOLOGY TO EXPAND OR TO SERVE THEIR CLIENT BASE BETTER.
[01:24:13] Speaker 5: DREW, THIS ANXIETY AROUND AI IS COMING AHEAD OF A MIDTERM ELECTION, AND THEN ONCE WE GET THE COMPOSITION OF CONGRESS, IT'S GOING TO BE TWO YEARS OUT, BASICALLY AFTER THE MIDTERMS, EVERYONE KNOWS IT'S OFF TO THE RACES IN TERMS OF 2028. HOW DO YOU SEE THIS SHAPING UP POTENTIALLY REGULATION, OR WHAT WE CAN SEE FROM EITHER PARTY IN TERMS OF THE ELECTION, BECAUSE THERE'S A LOT OF PUSHBACK AROUND THE COUNTRY?
[01:24:36] Speaker 19: WELL, I MEAN, I THINK WE HAVE TO TAKE A STEP BACK. I MEAN, I THINK THAT THERE'S A LOT OF NOISE AND THERE'S A LOT OF FEAR, AND IT'S NOT HELPED BY FOLKS THROWING OUT THE ARGUMENT ABOUT 40% OF JOBS BEING DISRUPTED WITH NO CONTEXT, RIGHT? I SAW RECENTLY SOMEONE WAS SAYING, OH, 43% OF YOUTH ARE UNDEREMPLOYED. THAT'S A GREAT NUMBER, AND IT'S THE NUMBER THE U.S. GOVERNMENT TRACKS, BUT THE LONG-TERM HISTORY IS 45 OR HIGHER. SO WE'RE ACTUALLY BELOW THE LEVEL OF UNDEREMPLOYMENT WE'VE USUALLY SEEN, DESPITE THE AI STORY. BUT PEOPLE DON'T PUT IT IN THE CONTEXT BECAUSE THEY WANT TO SCARE PEOPLE AND THEY SAY, OH, 43% ARE UNDEREMPLOYED. THAT'S MUCH LESS SCARY WHEN YOU REALIZE THAT'S BELOW AVERAGE RATHER THAN BEING SO FAR ABOVE AVERAGE THAT, YOU KNOW, WE HAVE TO WORRY ABOUT IT.
[01:25:21] Speaker 2: DREW, WHY DO YOU THINK THEY WANT TO SCARE PEOPLE? WHAT'S THE INCENTIVE BEHIND THAT?
[01:25:25] Speaker 19: IT'S CALLED THE SELL SIDE FOR A REASON. AND, YOU KNOW, I MEAN, YOU KNOW, IF YOU THINK ABOUT --
[01:25:33] Speaker 2: BUT NOT JUST THE SELL SIDE, DREW, ALSO THE EXECUTIVES THEMSELVES, OF THE LIKES OF ANTHROPIC, MAKING THE SAME CLAIMS.
[01:25:38] Speaker 19: AND, YOU KNOW, WHAT DO YOU WANT TO DO? WELL, YOU DON'T NEED A FERRARI TO GO TO THE GROCERY STORE, RIGHT? AND I THINK SOME OF THESE MODELS ARE FERRARIS AND MOST OF US ARE DRIVING AROUND IN THE HONDA VERSION AND PERFECTLY CONTENT. BUT THE HONDA VERSION ISN'T AS EXCITING AND IT'S PROBABLY NOT AS REWARDING FROM A FINANCIAL STANDPOINT, POTENTIALLY, RIGHT? AND SO, YOU KNOW, YOU HAVE COMPANIES THAT, YOU KNOW, DO YOU WANT TO PUT THE GATE UP? DO YOU WANT TO PUT THE GATE UP BEHIND YOU? DO YOU WANT TO PUT THE GATE UP BEHIND YOU? DO YOU WANT TO PUT THE GATE UP BEHIND YOU? DO YOU WANT TO PUT THE GATE UP BEHIND YOU? DO YOU WANT TO PUT THE GATE UP BEHIND YOU? YOU KNOW, PEOPLE ARE FOCUSED ON WHAT YOU'RE DOING AND THE VALUE THAT YOU'RE CREATING. BECAUSE EVERY TIME ONE OF THESE COMPANIES COMES OUT AND SAYS, LIKE, OH, WE CAN'T RELEASE THIS MODEL, IT'S TOO POWERFUL. THAT'S A GREAT MARKETING EFFORT RIGHT THERE, RIGHT? IT'S TOO POWERFUL FOR US TO RELEASE. AND, YOU KNOW, YOU SHOULD PAY ATTENTION TO WHAT WE'RE DOING IN EVERYTHING.
[01:26:27] Speaker 2: WE'RE GOING TO PAY ATTENTION TO THAT. WE'RE GOING TO PAY ATTENTION TO EVERYONE ELSE. THIS IS THE IPI ROADSHOW WE'VE BEEN TALKING ABOUT ALL YEAR. DREW, IT'S GOOD TO SEE YOU. DREW MATTIS OF METLIFE. TO YOUR POINT, YOU'VE RAISED IT MANY TIMES. YOU HAVE AS WELL. I'M NOT SURE IF IT HELPS IN QUITE THE SAME WAY AS IT USED TO. YOU'RE GOING TO PAY ATTENTION TO THE SAME WAY. WE'RE GOING TO PAY ATTENTION TO THE SAME WAY. WE'RE GOING TO PAY ATTENTION TO THE SAME WAY.
[01:26:47] Speaker 4: THE SENTIMENT HAS SHIFTED REALLY QUICKLY. SURPRISINGLY SHIFTED AGAINST SOME OF THESE EXECUTIVES. ARE YOU REALLY THAT SURPRISED WHEN YOU'RE TALKING ABOUT ERADICATING HALF THE JOBS? THAT SAID, THEY'VE DOUBLED DOWN. I'VE HEARD MIXED THINGS WHEN I TALK TO DIFFERENT CEOs. I'VE RAISED THAT QUESTION WHEN I SAY, IS THIS JUST A ROADSHOW? DO YOU THINK THIS IS ACTUALLY TRUE? AND THEY SAY, NO, IT IS TRUE. THAT IS NOT THE SAME THING AS A JAVA COPALIST.
[01:27:18] Speaker 5: THESE EXECUTIVES WANT REGULATORY CAPTURE WHEN IT COMES TO HOW THEY WANT WASHINGTON TO THINK ABOUT THIS. THE FACT OF THE MATTER IS I THINK THE MIDTERM ELECTIONS ARE GOING TO BE IMPORTANT. BESIDES THE COMPOSITION OF CONGRESS, SEVEN STATES HAVE MEASURES ON THE BALLOT REGARDING
[01:27:37] Speaker 2: CONSTRUCTION, MORATORIUM, ALL OF THIS TO DO WITH DATA CENTERS. I THINK THAT'S WHAT WE ARE DOING. THE PRESIDENT CRUSHED THE IDEA THEY WERE GOING TO PACE THE FRONTIER. THEY ARE RUNNING AROUND LIKE
[01:27:53] Speaker 5: LAB DOGS. SOME OF THE MOST POWERFUL EXECUTIVES ON THE PLANET. THEY ARE DOING REBRANDS.
[01:28:00] Speaker 2: AGAIN, THEY MISSED AN OPPORTUNITY. THEY COULD HAVE KEPT IT AI AND CALLED IT AMERICAN INTELLIGENCE. THE NASDAQ FUTURES DOWN BY 2/10 OF 1%.
[01:28:07] Speaker 8: MAYBE THEY WILL CHANGE IT. LET'S GET AN UPDATE ON NEWS FORWARD. HE IS WORKING WITH RUSSIAN LEADER VLADIMIR PUTIN ON A DEAL TO RELEASE THE COUNTRY'S DIESEL SUPPLY INTO GLOBAL MARKETS, UPENDING YEARS OF SANCTIONS. TRUMP'S LATEST BID TO EASE FUEL COSTS AHEAD OF THE MIDTERMS BEING MET WITH STRONG OPPOSITION FROM EUROPEAN ALLIES. TRUMP'S LATEST BUSINESS OF THE MIDTERMS. THE WHITE HOUSE ARGUES THEIR PUBLIC SERVICE ANNOUNCEMENTS. THANKS FORWARD. THE JETS WERE ABLE TO ESCAPE WASHINGTON WITH A 27-27 TIE, DESPITE A COSTLY FUMBLE IN OVERTIME.
[01:28:57] Speaker 2: THANKS FORWARD.
[01:29:03] Speaker 5: THAT IS YOUR BLOOMBERG REACH. WHAT A WEEKEND OF NFL AND COLLEGE FOOTBALL. THE JETS WON, THAT IS ALL I KNOW. MY DAD WAS VERY HAPPY. MOHAMMAD ALERIAN WAS VERY HAPPY. FINALLY GOT A WIN.
[01:29:15] Speaker 2: IT'S THE LEAST YOU CAN DO, GIVEN THE FACT THAT THEY HAVE TO PLAY IN EVERY CONDITION.
[01:29:19] Speaker 4: I SAW THE RAIN POURING DOWN AND THEY ARE JUST THROWING IT. HONESTLY, IMPRESSIVE.
[01:29:27] Speaker 2: CONTROVERSIAL DECISIONS AS WELL IN THE GAME. HAVE YOU WATCHED THE NICK SABIN DOCUMENTARY YET ON ESPN? CHECK IT OUT. GREAT DOCUMENTARY. YOU MIGHT ENJOY IT. IT'S ABOUT EXCELLENCE. I ALWAYS WONDERED WHAT ROLL TIDE MEANS. WHAT DOES IT MEAN? WHAT DOES IT MEAN? THEN HE WENT THROUGH WHAT HE THINKS IT IS. ANY TIME I HAVE EVER SEEN SABIN SPEAK ABOUT ANYTHING WITH SUCH LOW CONVICTION AND IT WAS WHAT DOES ROLL TIDE MEAN? HE'S SO FOCUSED ON EXCELLENCE IN OTHER PLACES.
[01:29:59] Speaker 20: UP NEXT ON THE PROGRAM, INFLATION. THE FED'S PATH. WE WILL DO WHAT WE NEED TO DO TO GET INFLATION BACK DOWN. TO BRING INFLATION BACK TO TARGET IN A TIMELY MANNER,
[01:30:09] Speaker 21: MORE MONETARY POLICY FIRMING WILL BE REQUIRED. THAT IS A LONGER RETURN OF INFLATION TO OUR 2% GOAL.
[01:30:17] Speaker 2: UP NEXT, WE WILL CATCH UP WITH VERONICA CLARK OF CITY RESEARCH.
[01:30:23] Speaker ?: THANK YOU.
[01:30:35] Speaker 2: LIVE FROM NEW YORK CITY, WELCOME TO THE PROGRAM. UNDER SAVANNAH'S THIS MORNING, INFLATION MUDDLING THE FED'S PATH.
[01:30:43] Speaker 20: INFLATION MUDDLING THE FED'S MEDDLING THE FED.
[01:30:49] Speaker 22: WE'VE BEEN MISSING ON THE INFLATION SIDE OF OUR MANDATE FOR SO
[01:30:50] Speaker 20: LONG. WE WILL DO WHAT WE NEED TO DO TO GET INFLATION BACK DOWN. A LOT OF FURTHER TIGHTENING MAY BE WARRANTED. TO BRING INFLATION BACK TO TARGET IN A TIMELY MANNER,
[01:30:57] Speaker 21: MORE MONETARY POLICY FIRMING WILL BE REQUIRED.
[01:30:59] Speaker 2: INFLATION BACK TO THE FED'S OCTOBER MEETING. IT IS A TIMELY RETURN OF INFLATION TO OUR 2% GOAL. BUT THERE IS SOME FLEXIBILITY ABOUT WHEN THOSE HIKES WILL OCCUR. INVESTORS COUNTING DOWN TO THE LAST READ ON INFLATION BEFORE THE FED'S OCTOBER MEETING. ECONOMISTS SURVEYED BY BLOOMBERG EXPECTING SEPTEMBER CPI TO SHOW THE BIGGEST PRICE JUMP IN FIVE MONTHS. A MODEST INCREASE IN SEPTEMBER CORE CPI WOULD SOLIDIFY SEPTEMBER IN FIVE MONTHS. AND THE ECONOMISTS HAVE CHANGED IN DECEMBER, TOO. WHAT GIVES YOU THE CONFIDENCE WE ARE IN THE ZIP CODE OF RESTRICTIVE?
[01:31:35] Speaker 23: I THINK IF YOU LOOK AT THE RATE-SENSITIVE SECTORS, CERTAINLY NOT THE AI PART OF THE ECONOMY, YOU DO SEE THE ACTIVITY IS SLOWING DOWN. YOU ARE ALREADY SEEING THAT IN SOME OF THE WEEKLY HOUSING DATA. SO I THINK FOR A LOT OF THE REAL ECONOMY, RATES ARE RESTRICTIVE AND HAVE BEEN RESTRICTIVE. CERTAINLY THEY ARE NOT FOR THE AI PART OF THE ECONOMY. BUT I DON'T REALLY SEE THAT CHANGING EITHER.
[01:31:55] Speaker 4: AT WHAT POINT ARE YOU LOOKING FOR ANY KIND OF DOWNSTREAM EFFECTS OF THE HIGHER GAS PRICES? BECAUSE THAT ULTIMATELY WILL BE THE BIGGEST PUSH TOWARD THIS READ THAT WILL BE THE HIGHEST IN FIVE MONTHS IF IT COMES IN AS EXPECTED.
[01:32:04] Speaker 23: YEAH, NO, IT'S THE FIRST THING WE'RE LOOKING FOR EVERY MONTH WHEN WE GET THE INFLATION DATA. OBVIOUSLY YOU SEE IT IN THINGS LIKE AIRFAIRS, RIGHT? THOSE ARE PRICES THAT ARE VERY SENSITIVE TO ENERGY. BUT YOU'RE REALLY NOT SEEING IT IN OTHER COMPONENTS. WE REALLY DON'T SEE IT IN CORE GOODS PRICES THAT ARE RISING. OF COURSE, YOU WOULD WORRY THAT THE LONGER GAS PRICES, DIESEL COSTS STAY HIGH. MAYBE YOU DO GET MORE OF THAT PASS THROUGH. BUT I ALSO DO THINK THAT THE CONSUMER SITUATION MIGHT BE GETTING A BIT SOFTER. YOU KNOW, BACK IN THE SPRING, CONSUMERS HAD SOME OF THOSE LARGER TAX REFUNDS THAT PROBABLY HELPED SUPPORT SPENDING FOR A WHILE. THAT'S NOT TRUE ANYMORE. SO THERE PROBABLY IS MORE PUSHBACK ON ANY ABILITY TO RAISE PRICES NOW.
[01:32:39] Speaker 4: WHAT KINDS OF EMPIRICAL EVIDENCE DO YOU SEE FOR THAT, GIVEN THAT BANK OF AMERICA CAME OUT WITH THEIR CONSUMER CHECKPOINT SHOWING ROBUST SPENDING ACROSS THE INCOME SPECTRE?
[01:32:47] Speaker 23: YEAH, YEAH. I MEAN, WE'RE LOOKING AT THE OFFICIAL DATA, OF COURSE, RIGHT? AND YOU REALLY DON'T SEE ANY SLOWING IN CONSUMPTION YET. ALTHOUGH I DO PICK OUT THE POCKETS OF YOUR SERVICES CONSUMPTION THAT ARE A BIT STRONG, AND THERE ARE THINGS LIKE HEALTH CARE, WHICH IS REALLY NOT PAID FOR BY CONSUMERS DIRECTLY. YOU DO SEE REAL INCOME GROWTH THAT IS BASICALLY CLOSE TO ZERO NOW FOR THE LAST SIX MONTHS. AGAIN, YOU DON'T HAVE THAT TAX REFUND TO REALLY BUFFER THAT SPENDING ANYMORE. WE DID HAVE SOME SOFT UNIT AUTO SALES IN SEPTEMBER. WE'LL GET RETAIL SALES DATA THIS WEEK. COULD LOOK A BIT SOFTER THAN IT DID IN AUGUST.
[01:33:16] Speaker 5: AT THE SAME TIME, YOU HAVE A LOT OF BANKS COMING OUT TO LISA'S POINT ON ENERGY SAYING THAT THEY ARE NOW LIFTING THEIR YEAR-END PRICE TARGETS. ALL OF THAT IS GOING TO TRICKLE THROUGH AT SOME POINT, ISN'T IT, EVEN TO THINGS LIKE FOOD? YEAH.
[01:33:27] Speaker 23: AT SOME POINT, WE'LL BE WATCHING FOR IT. CERTAINLY, FOOD IS VERY SENSITIVE. IF YOU LOOK AT THE HISTORICAL EVIDENCE, IT IS REALLY NOT SO CLEAR THAT YOU DO SEE A PASS THROUGH IN A TIMELY MANNER. THAT HIGHER FOOD COSTS, HIGHER ENERGY COSTS, WE TEND TO LOOK THROUGH THOSE WHEN WE'RE LOOKING AT UNDERLYING INFLATION. AND IF PEOPLE HAVE TO SPEND MORE ON THOSE, THEY HAVE LESS TO SPEND ON OTHER THINGS.
[01:33:47] Speaker 2: YOU'RE BULLISH DISINFLATION, BUT IT'S A CARVE OUT FOR EVERYTHING YOU'VE SAID. YOU HAD AN ATERRICT. EVERY TIME YOU MENTIONED IT, YOU SAID, ACCEPT THE AI STORY. ACCEPT THE AI STORY. WHY ACCEPT THE AI STORY? DOESN'T THE FED WANT THE AI STORY TO SLOW DOWN?
[01:34:00] Speaker 23: I DON'T KNOW. I DON'T KNOW. DO THEY? I THINK IF YOU'RE LOOKING AT WHERE THERE IS DEMAND THAT IS TOO STRONG IN THE ECONOMY RIGHT NOW, AND THAT'S THE POINT OF RAISING RATES, TO COOL INFLATION IS VIA SOFTER DEMAND. WE'VE PRICED 100 BASIS POINTS OF HIKES AND WE'VE NOT REALLY DONE ANYTHING TO COOL THAT AI STORY. BUT THOSE HIKES ARE NOT COSTLESS. SO CAN I JUMP IN?
[01:34:19] Speaker 2: WHY AS A HOUSE HAVE YOU DECIDED THAT MEANS THEY WON'T DO ANYTHING INSTEAD OF THEY'LL HAVE TO DO MORE? YEAH.
[01:34:25] Speaker 23: WELL, BECAUSE I DON'T ENTIRELY UNDERSTAND HOW WE'RE HERE IN THE FIRST PLACE. I THINK I LOOK AT CORPACE, WHICH IS OF COURSE THEIR TARGET. THAT IS WHAT IS STICKY. THAT'S WHAT'S AROUND 3%. BUT THEN I LOOK AT EVERY OTHER WAY THAT YOU MEASURE UNDERLYING INFLATION, CORPACE, THAT'S THE LOWEST IT'S BEEN SINCE MARCH OF 2021. YOU LOOK AT WAGE GROWTH, YOU LOOK AT HOME PRICES, ALL THOSE TRIMMED MEAN PCE MEASURES, ALL OF THEM ARE BACK TO WHERE THEY WERE IN 2019 OR MAYBE ONLY 20 BASIS POINTS STRONGER. I THINK CORPACE IS A BIT OF THE OUTLIER. IF I'M LOOKING AT EVERYTHING ELSE, I DO THINK INFLATION IS SLOWING.
[01:34:55] Speaker 2: THERE IS SOME SYMPATHY WITH SOME OF THE THINGS YOU ARE SAYING, BUT THIS IS WHERE I'M STUCK. THE FED CHAIR HAS SAID INFLATION IS A CHOICE, AND CITI HAVE MADE THE CALL THAT ULTIMATELY THEY WILL JUST CHOOSE TO ACCEPT IT.
[01:35:05] Speaker 23: I DON'T THINK THEY ARE CHOOSING TO ACCEPT IT. I THINK CORPACE IS GOING TO BE SLOWING. I THINK IT IS THE OUTLIER. I THINK IF YOU LOOK AT ALL THE OTHER UNDERLYING INFLATION MEASURES, IT IS TELLING YOU CORPACE IS GOING TO COME DOWN. WE HAD THOSE BIG REVISIONS LOWER TO CORPACE A COUPLE OF WEEKS AGO. WE ARE TRACKING 40 BASIS POINTS BELOW WHERE THEY THOUGHT IT WAS A COUPLE OF WEEKS AGO. THAT WOULD HAVE HAPPENED IF YOU DIDN'T HIKE.
[01:35:25] Speaker 2: BACK TO TARGET OR THE MID-2'S?
[01:35:27] Speaker 23: I THINK WE CAN GET SOMETHING CLOSE BACK TO TARGET, YEAH. BUT I THINK THERE IS ALWAYS A TRADE-OFF OF POLICY, RIGHT? THEY ARE GOING TO BE HAPPY, I THINK, ENOUGH WITH 2.5%. IF 2% MEANS CRASHING THE REST OF THE ECONOMY.
[01:35:38] Speaker 2: LET'S SEE HOW HAPPY THEY ARE WITH THAT 2.5%. VERONICA CLARK OF CITY WITH THE LATEST LOOKING FOR AN UNCHANGED FED INTO YEAR-END.
[01:35:45] Speaker 4: IT IS A DIFFICULT SCENARIO BECAUSE PEOPLE SAY IF OIL PRICES HADN'T BEEN WHERE THEY WERE, THEY WOULD BE CUTTING RATES. AND THEY WOULD BE CUTTING RATES POSSIBLY A COUPLE OF TIMES BECAUSE THERE IS ENOUGH DISINFLATION COMING DOWN THE PIKE AND PEOPLE SAY THE LABOR MARKET DOES NOT LOOK LIKE IT DID BACK IN 2022. SO ULTIMATELY, DO THEY LEAN INTO THAT?
[01:36:05] Speaker 2: CAN THEY AFFORD TO, GIVEN THE RHETORIC OF THE FED SHARE IN THE PAST? THIS IS THE JUDGMENT CALL. ARE YOU WILLING TO GO THE FINAL MILE FROM 2.5 TO 2? ARE YOU WILLING TO ACCEPT THE PAIN THAT MIGHT CAUSE GOING
[01:36:15] Speaker 4: AFTER THE AI TRADE, THE CAPEX BUILDOWN? ARE YOU WILLING TO GO THAT FAR?
[01:36:19] Speaker 2: OR DO YOU HOPE FOR THE HAIL MARY? YOU WILLING TO GO THE POSSIBLY. THAT IS THE POSSIBLY POSSIBLY, THE POSSIBLY. UP NEXT ON THE PROGRAM, WE WILL CATCH UP WITH DAN GREENHOUSE OF
[01:36:31] Speaker ?: SOLOS, TORSTON SLACK OF APOLLO, MICHELLE WEAVER OF MORGAN STANLEY.
[01:36:39] Speaker 1: YOU'RE INCREASINGLY RELYING ON EARNINGS TO CONTINUE TO GROW. LOOK AT US LARGE CAPS, EARNINGS ESTIMATES HAVE GONE UP BY MORE THAN 20%. IT'S REALLY AN EARNINGS STORY, RATHER THAN A RISK STORY.
[01:36:49] Speaker 24: THE FUNDAMENTALS ARE SO STRONG. I STILL DO NOT THINK THAT MONEY WANTS TO LEAVE THE ASSET CLASS OF EQUITIES AND FIND A NEW HOME.
[01:36:57] Speaker 15: THE FUNDAMENTALS OF EQUITIES IS RELATED.
[01:37:09] Speaker 2: LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING. THE THIRD HOUR OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. EQUITY FUTURES JUST ABOUT UNCHANGED ON THE S&P POSITIVE BY NOT EVEN A TENTH OF ONE PERCENT ON THE NASDAQ 100. FULL OF BANK EARNINGS, KICKING OFF TOMORROW MORNING WITH J.P. MORGAN. THEN WE HEAR FROM WELLS, CITY, GOLDMAN, BANK FOR AMERICA, MORGAN STANLEY AND OTHERS THROUGH THE WEEK.
[01:37:37] Speaker 4: $4.7 TRILLION OF MARKET CAPITALIZATION IS REPORTING EARNINGS THIS WEEK, SOMETHING LIKE 7% OF THE OVERALL S&P 500. ULTIMATELY, THIS WILL GIVE US A SENSE OF SOME OF THE BIGGEST QUESTIONS THAT WE HAVE, THE CAPEX PIPELINE THAT'S COMING FROM AI, WHAT THE CONSUMER ACTUALLY LOOKS LIKE. THERE IS SPECULATION THAT THE CONSUMER HAS GOT TO BE GETTING EXHAUSTED WITH ALL THIS INFLATION AND WITH THE NEGATIVE SENTIMENT READINGS. YET, A LOT OF THE PERIPHERAL DATA HAS NOT BEEN SUGGESTING THAT THAT ACTUALLY IS THE CASE. AND THEN THERE IS A REAL QUESTION ABOUT COMPETITION FOR CAPITAL FOR BANKS AS WELL, GIVEN THE FACT THAT ULTIMATELY THERE ARE MORE TOOLS NOW LIKE NEWS TO POTENTIALLY COMPARE AND CONTRAST THE DIFFERENT RATES.
[01:38:09] Speaker 2: LOOK AT THE BANK STOCK SO FAR YEAR TODAY, JUST ABOUT UNCHANGED POSITIVE BY AROUND 1%. IN THE MIDDLE OF AUGUST, WE WERE TRADING AT RECORD HIGHS FOR THE BANKS ON THE S&P 500. WE ARE DOWN BY MORE THAN 10% SINCE THEN. THIS CAME FROM CHRIS HARVEY OF CIBC JUST MOMENTS AGO. HE SAID THE S&P BANK INDEX HAS UNDERPERFORMED THE S&P 500 BY AROUND 8% SINCE THE START OF THE FED TIGHTENING CYCLE. OVER THE LAST FIVE FED TIGHTENING CYCLES, THE BANK INDEX HAS UNDERPERFORMED BY 10% TO 15%. WE THINK THE UNDERPERFORMANCE IS RELATED TO RISING RATES WEIGHING ON NET INTEREST MARGINS. LISA, SOMETHING YOU TALKED ABOUT EARLIER THIS MORNING. LISA:
[01:38:43] Speaker 4: ULTIMATELY, IF THEY HAVE TO PAY MORE FOR CAPITAL THAT EATS INTO THEIR PROFITS, AT WHAT POINT DO THEY GIVE A SENSE OF THAT? I EXPECT SOMEBODY, ONE OF THE ANALYST COMMUNITY TO ASK THAT QUESTION. HOW MUCH HAVE YOU HAD TO INCREASE PAYMENTS TO KEEP THE DEPOSIT BASE AND HOW MUCH ARE YOU SEEING SOME OF IT
[01:38:58] Speaker 2: MIGRATE ELSEWHERE? THAT IS THE BANK EARNINGS. CPI ON WEDNESDAY, PPI COMING ON THURSDAY. THIS IS WHAT WE SEE IN THE INFLATIONARY STORY THIS MORNING. BRENT AROUND 106, WTI AROUND 93 AND EVERYWHERE YOU LOOKED
[01:39:15] Speaker 5: ACROSS THE MIDDLE EAST OVER THE WEEKEND, THE PROSPECT OF ESCALATION. ABSOLUTELY. I THINK IT IS A WIDER CONFLICT. SAUDI ARABIA IS SUFFERING ITS DEADLIEST STRIKE SINCE THE IRAN WAR BEGAN. YOU HAVE THE HOUTHIS GOING AFTER KING KAHLED AIRPORT IN RIYAD OVER THE WEEKEND THAT LEFT A NUMBER OF INDIVIDUALS DEAD AS WELL AS HUNDREDS THAT ARE INJURED AS WELL AS GOING AFTER THE AIRPORTS AND DIMAM AS WELL. THIS IS WHERE THE ARAMCO HEADQUARTERS IN. THIS IS WHY THERE ARE A LOT OF CONFERENCES IN THE WEEKEND. POTENTIALLY, ARE WE GOING TO SEE A WIDER CONFLICT BECAUSE THE
[01:39:50] Speaker 2: PRESIDENT OF THE UNITED STATES GOING TO SAY, OKAY, NOW IT IS TIME TO POTENTIALLY REENGAGE WITH THE HOUTHIS AND IRAN BEFORE THE MIDTERM ELECTION. I THINK DELTA IS A WARNING SHOT ABOUT WHAT COULD POTENTIALLY HAPPEN. I THINK DELTA IS A WARNING SHOT ABOUT WHAT COULD POTENTIALLY HAPPEN, GIVEN THAT OIL PRICES AREN'T JUST HIGHER THAN THEY WERE EXPECTED TO BE, BUT THEY ARE HIGHER FOR LONGER WHEN YOU LOOK AT THE FUTURE'S CURVE. WHAT YOU ARE SEEING IS
[01:40:12] Speaker 4: COMPANIES THAT ARE MOST DIRECTLY AFFECTED BY IT, STRUGGLING TO POTENTIALLY BEFORE THE FUTURE. I THINK DELTA WAS A WARNING SHOT ABOUT WHAT POTENTIALLY COULD HAPPEN, GIVEN THAT OIL PRICES AREN'T JUST HIGHER THAN THEY WERE EXPECTED TO BE. I THINK DELTA IS MOST IMPORTANT. I THINK DELTA IS A LITTLE BIT. THE IDEA OF HOW IT IS LEADING TO MARGIN COMPRESSION, DO YOU
[01:40:36] Speaker 2: START TO SEE THAT IN A MORE ROBUST FASHION ACROSS THE RETAIL, ACROSS THE CONSUMER INDUSTRY? WHAT DOES THAT DO, GIVEN HOW HIGH THE BAR IS? FUTURES THIS MORNING GOT BY NOT EVEN A TENTH OF 1%. COMING UP THIS HOUR, WE WILL CATCH UP WITH EQUITIES APPROACHING FRESH ALL-TIME HIGHS. ERIK NAGERIN OF UBS WITH HER OUTLOOK FOR BANK EARNINGS. THE ECONOMIC DATA THROUGH THE WEEK. UPCOMING EARNINGS REPORTS ARE LIKELY TO SHOW A RESILIENT ECONOMY, A HEALTHY CONSUMER AND AN AI INVESTMENT STORY THAT REMAINS UNIMPEDED. DAN, JOIN US FOR MORE. GOOD MORNING. GOOD MORNING TO YOU, SIR. I MENTIONED YOU EARLIER THIS MORNING THAT WHENEVER WE TALK ABOUT THE CONSUMER, YOU POINT TO MASTERCARD TO VISA, THE CONSUMER IS STILL SPENDING. OTHERS ARE POINTING TO DISCRETIONARY AND
[01:41:19] Speaker 25: OIL GASOLINE PRICES WILL BE. I DON'T THINK MUCH HAS CHANGED ON THE CONSUMER FRONT. WE'RE GOING TO TALK ABOUT BANKS, I'M SURE. THERE WERE A COUPLE OF CONFERENCES RECENTLY AND THE COMMENTARY OUT OF THE BANKS WAS FAIRLY POSITIVE AS IT RELATES TO CONSUMER SPENDING. THE BANK OF AMERICA SPENDING REPORT, WHICH I'M SURE YOU'VE DISCUSSED ON AIR, WAS FAIRLY POSITIVE. OBVIOUSLY, EVERYBODY IS UPSET HAVING OIL GASOLINE PRICES WHERE THEY ARE AND CONSUMER PRICES IN GENERAL WHERE THEY ARE. BUT FROM MY VANTAGE POINT, THE CONSUMER CONTINUES TO SPEND. AND THEN AS IT RELATES TO EARNINGS MORE GENERALLY, I THINK THINGS ARE GOING TO BE FINE. I MEAN, WE'RE ALL FOCUSING ON THE RIOTS IN FRANCE AND THE IRAN WAR, AND DESERVEDLY SO. BUT UNDERNEATH THAT, WE'RE GOING TO HAVE A PRETTY POSITIVE EARNINGS SEASON. WHETHER IT'S 25% OR 35% IS NOT REALLY AS IMPORTANT AS THE FACT THAT FOR ANOTHER QUARTER IN A ROW, IT'S GOING TO BE PRETTY GOOD.
[01:42:08] Speaker 2: AND I DON'T THINK REALLY MUCH IS GOING TO CHANGE THAT. THIS HAS BEEN THE RIGHT BET FOR THE YEAR SO FAR. AND IT DOESN'T MATTER, THE CONSUMER IS STILL SPENDING, RATES DOESN'T MATTER, BECAUSE THE CAPEX STORY IS LARGELY RATE INSENSITIVE. BUT ON THE CAPEX STORY, ARE YOU STARTING TO SEE SIGNS THAT CERTAIN COMPANIES, CERTAIN CAPITAL RAISES, WHETHER IT'S EQUITY OR DEBT, IS RESPONDING TO WHAT'S HAPPENING WITH
[01:42:25] Speaker 25: INTEREST RATES? YES AND NO. DOESN'T MATTER A HIGH LEVEL WHERE I LIVE WITH RESPECT TO THE AI INVESTMENT STORY, THE ANSWER IS NO. WHOEVER YOU HEAR FROM, NVIDIA ON DOWN TO EATON, THEY STILL TALK ABOUT DEMAND EXCEEDING SUPPLY. ALL THE CHIP PRODUCERS, THE SEMICAP COMPANIES, ET CETERA, ALL ARE TALKING ABOUT DEMAND EXCEEDING SUPPLY. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. I THINK IT'S A HIGH LEVEL. LIKE NOT EVERYTHING IS A HUNDRED PERCENT. BUT AT THE SAME TIME I COME BACK TO THE FACT THAT WHETHER IT'S NVIDIA OR EATON OR INSERT COMPANY HERE IN THE SUPPLY CHAIN IN THE INVESTMENT CHAIN. EVERYONE KEEPS SAYING EVERYTHING IS GOOD TO GO FOR NOW. AND I DON'T HAVE ANY REASON TO BELIEVE THAT HEADING INTO THIS EARNING SEASON THAT'S NOT STILL THE CASE.
[01:43:18] Speaker 4: HOW DO YOU VIEW THE CAPEX PLANS OF SOME OF THE BIG TECH PLAYERS. DO YOU VIEW AN INCREASE TO THE CAPEX AS A POSITIVE FOR THE STORY. ONGOING FAITH OR POTENTIALLY A NEGATIVE BECAUSE OF THESE HEADWINDS.
[01:43:29] Speaker 25: WELL BOTH. AGAIN I ALWAYS SAY WE'RE GOING WE'RE OVERBUILDING. THERE'S GOING TO BE EXCESS CAPACITY. THERE'S GOING TO BE A QUOTE UNQUOTE BUBBLE THAT BURST DOWN THE ROAD. I THINK THE PROBLEM FOR A LOT OF INVESTORS, ESPECIALLY INVESTORS THAT FOCUS SO MUCH ON THE 1990S AND THE AFTERMATH, IS THAT THERE'S NO WAY TO TIME THAT ENDING. AND AS LONG AS ALL THESE COMPANIES ARE SPENDING AND AS LONG AS DEMAND EXCEEDS SUPPLY, ET CETERA, ET CETERA, THERE'S NO REASON TO BE PARTICULARLY NEGATIVE. NOW THAT'S NOT TO SAY THAT MEANS THAT ALL THE STOCKS GO UP AND TO THE RIGHT. WHETHER YOU LOOK AT VERTIV OR GE VERNOVA, A LOT OF THOSE COMPANIES HAVE RUN INTO SOME TROUBLE LATELY, PARTIALLY BECAUSE OF WHAT'S HAPPENED WITH INTEREST RATES AND PARTIALLY FROM A ROTATIONAL STANDPOINT. BUT IN A MACRO SENSE, SO TO SPEAK, I JUST, AGAIN, POINT ME TO THE COMPANY THAT SAYS WE'RE NOT SEEING X OR WE ARE -- I HAVEN'T SEEN ANYTHING EVEN REMOTELY CLOSE TO SUGGESTING THAT THERE'S EVEN A SLOWDOWN IN DEMAND, LET ALONE A CESSATION OF DEMAND.
[01:44:26] Speaker 4: ALTHOUGH BROADCOM CEO DID SAY OVERNIGHT THAT CAPITAL COULD BECOME A MAJOR ISSUE IN THE AI BUILDOUT. AND ULTIMATELY, HOW MUCH OF A TELL IS THIS GOING TO BE FOR THE BIG BANKS, RIGHT? YOU WERE SAYING THAT THIS IS GOING TO BE A REALLY IMPORTANT PLACE. WHAT'S THE GUIDANCE GOING TO BE IN TERMS OF THE PIPELINE?
[01:44:38] Speaker 25: SO THE IMPORTANT WORD IN THE SENTENCE YOU JUST READ FROM THE CEO IS COULD. YEAH, LOTS OF THINGS COULD BE. I DEAL IN THE WHAT IS FOR NOW. AND WHAT IS FOR NOW IS DEMAND IS QUITE ROBUST. YEAH, CAPITAL COULD BECOME A PROBLEM. DEMAND COULD BECOME A PROBLEM. AN ASTEROID FROM SPACE COULD BE A PROBLEM.
[01:44:56] Speaker 4: HOLD ON. YOU'VE SEEN SPREADS BLOW OUT. THIS ISN'T EXACTLY TALKING ABOUT UFOS COMING DOWN TO THE UNITED STATES.
[01:45:01] Speaker 25: NO, IT'S NOT, ALTHOUGH THAT WOULD BE FAR MORE INTERESTING. BUT WITH RESPECT TO SPREADS, EVERYONE IS FOCUSED ON WHAT'S GOING ON IN TRIPLE C. AND BLOOMBERG DOES -- CERTAINLY BLOOMBERG TV DOES A MUCH BETTER JOB THAN OTHER NETWORKS IN COVERING. TRIPLE C'S ARE NOT AN INVESTIBLE ASSET CLASS. IT'S NOT AS IF SOMEONE IS A TRIPLE C INVESTOR AND THEY'RE GOING TO ROTATE OUT OF IHEART INTO GRAY. THESE ARE IDEOCYNCRATIC NAMES THAT ARE OVERLEVERED THAT HAVE IDEOCYNCRATIC STORIES THAT HAPPEN TO BE LUMPED TOGETHER BECAUSE OF HOW THE RATING AGENCIES RATE THE DEBT. THIS IS NOT AN INVESTIBLE CLASS. SO I WOULDN'T LOOK AT, OH, TRIPLE C'S ARE BLOWING OUT. THAT'S AN EXAMPLE OF X, Y, AND Z. IT'S AN EXAMPLE OF A BUNCH OF COMPANIES THAT AREN'T DOING PARTICULARLY WELL, THAT HAVE A LOT OF LEVERAGE, AND THOSE SPREADS ARE BLOWING OUT. NOW, THAT'S NOT TO SAY THAT THERE'S NOTHING IN SINGLE B OR DOUBLE B OR TRIPLE B, ETC, BECAUSE THERE IS. SPREADS ARE A LITTLE BIT WIDER. BUT ALSO THE S&P, THE EQUAL WEIGHT S&P 500 WAS DOWN 6 OR 7% FROM THE HIGHS. SO IS WHAT'S GOING ON IN SPREADS TELLING YOU SOMETHING THAT THE EQUITY MARKET ISN'T? I WOULD ARGUE NO. THERE ARE TWO SIDES OF THE SAME COIN, WHICH IS AS RATES SPIKED UP IN THIS LAST CALL 50, EXCUSE ME, 60 BASIS POINTS, RISK ASSETS SOLD OFF A LITTLE BIT. NOW, THAT'S HIDDEN BY THE MARKET WEIGHT S&P 500, WHICH IS SO OBVIOUSLY WEIGHTED TO MICROSOFT AND APPLE, WHICH ARE SITTING PRETTY CLOSE TO HIGHS, AND SOME OF THE OTHER NAMES, WHICH ARE BARELY DOWN. BUT WHEN YOU LOOK AT THE EQUAL WEIGHT OR YOU LOOK AT SPREADS, THEY'RE TELLING YOU THERE'S A LITTLE BIT OF TROUBLE HERE IN THE SHORT-TERM.
[01:46:28] Speaker 2: SO LET'S PARK THE DISTRESS IN TRIPLE SEASON AND FOCUS ON THE HIGH-YIELD INDEX. SO WE'RE STILL AROUND 300 BASIS POINTS WHICH HISTORICALLY IS PRETTY TIGHT. BUT TO YOUR POINT, WE SAW A MOVE OF SOMETHING LIKE 50 TO 60 BASIS POINTS OF WIDENING IN THE SPACE OF A WEEK. AND WITHIN THE EQUITY MARKET, YOU SAW IT HITTING THE BANKS, YOU SAW IT HITTING THE SMALL CAP STORY AS WELL. WHAT WE'RE TRYING TO FIGURE OUT, IS THAT A SIGN OF INTEREST RATES BITING THAT IS SUFFICIENT FOR THE FEDERAL RESERVE TO BACK OFF TO SIT HERE AND SAY OUR EFFORT IS WORKING, OR ARE THEY GOING TO KEEP ON PUSHING UNTIL THE CAPEX STORY ULTIMATELY SLOWS? WELL, THE DECISION HAS TO GET MADE.
[01:47:00] Speaker 25: I WAS OF THE BELIEF THAT THEY SHOULD NOT HAVE RAISED INTEREST RATES AT THE LAST MEETING. I DON'T THINK THEY SHOULD RAISE INTEREST RATES AND THEY PROBABLY WON'T AT THE NEXT MEETING. BECAUSE WHEN YOU SEPARATE OR TRY TO, AS BEST AS WE CAN, SEPARATE OUT THE MACRO, OIL, TARIFFS, ET CETERA, THE UNDERLYING DEMAND IS NOT, I WOULD ARGUE, SUFFICIENT THAT I NEED TO CHOKE IT OFF. EXCEPT FOR THIS ONE AREA. I MEAN, YOU LOOK AT PRIVATE INVESTMENT, RESIDENTIAL INVESTMENT, OBVIOUSLY IS GOING THROUGH ALL ITS ISSUES, AND ANY NUMBER OF OTHER COMPONENTS IN GDP ARE NOT DOING SCREAMINGLY WELL. THE ONE AREA IS EQUIPMENT, INTELLECTUAL PROPERTY, THE AI TRADE. THE OTHER COMPONENTS, THE OTHER COMPONENTS, THE OTHER COMPONENTS, THE OTHER COMPONENTS, THE OTHER COMPONENTS, THE OTHER COMPONENTS, DO WE AS A SOCIETY, DO WE AS THE FEDERAL RESERVE, SEE IT AS SO OVERWHELMINGLY INFLATION INDUCING, AND IT VERY WELL MIGHT BE FROM CERTAIN POINTS OF VIEW, THAT WE NEED TO STOP THAT FROM HAPPENING. THAT'S A REALLY DIFFICULT CONVERSATION ECONOMICALLY AND POLITICALLY, BECAUSE OBVIOUSLY THIS IS A RACE TO SI, A RACE TO SUPER INTELLIGENCE. WE'RE ALL HAVING FUN HERE. WITHOUT A DOUBT. SO DO WE AS AMERICA, AS THE UNITED STATES OF AMERICA, WANT TO POTENTIALLY CRIMP THAT RACE OR HAMSTRING OURSELVES IN THAT RACE? THAT'S A QUESTION MAYBE, BECAUSE THAT TO ME IS THE ONE AREA WHERE THERE IS SUCH "EXCESSIVE DEMAND" THAT HIGHER INTEREST RATES MIGHT ULTIMATELY, NOT YET, MIGHT ULTIMATELY HAVE AN EFFECT.
[01:48:24] Speaker 2: ISN'T THAT PROBABLY THE MOST IMPORTANT QUESTION? OF COURSE. THAT'S WHY I SAID IT. AND IF THERE IS A DISCONNECT AT THE MOMENT, ARGUABLY IT'S WHAT WE'RE PRICED FOR IN INTEREST RATE HIKES. AND THE IDEA THAT I THINK CONSENTER STILL BELIEVES THE FED WON'T GO ALL THE WAY. THAT THEY'LL STOP SHORT OF THE FINAL MILE BECAUSE THEY WON'T GO AFTER THE CAPEX.
[01:48:39] Speaker 25: AND AGAIN, I THINK THIS IS A REALLY IMPORTANT POINT. AND IT GOES BACK TO SOMETHING I WAS TALKING ABOUT IN 2013. AND I'M SORRY, IN 2023, WHEN THE FED'S PROJECTIONS CAME OUT AND THEY SAID AT THE TIME THAT WE WILL NOT GET INFLATION BACK TO TARGET UNTIL 2026. AND AT THE TIME, TO ME, THAT WAS A GIANT GREEN FLAG FOR INVESTING. THE MARKET HAD ALREADY BOTTOMED IN 2022. BUT TO ME, IN THE FALL 23, THE FED SAID, WE'RE ON A GLIDE PATH HERE, NO HARM, NO FOUL. AND THEY ARE STILL OF THAT VIEW NOW. THEY ARE NOT QUOTE UNQUOTE -- IF YOU BELIEVE THAT THEY CAN CRIMP DEMAND, AND I THINK WE WOULD ALL ARGUE IF RATES TOMORROW WENT TO 50, THEY WOULD, OF COURSE, CRIMP DEMAND. IF YOU BELIEVE THAT THEY ARE WILLING TO DO THAT, FINE. I DON'T BELIEVE, AS YOU JUST SUGGESTED, THAT THEY ARE WILLING TO SHUT OFF THE AI INVESTMENT CYCLE TO THE EXTENT NECESSARY, SUCH THAT RATES WOULD GO UP 100 OR TWO. BECAUSE EVERYONE COMES ON AIR, I'M SURE, MYSELF INCLUDED, AND SAYS 25 OR 50 BASIS POINTS ISN'T GOING TO MEAN GOOGLE IS GOING TO DO X OR APPLE IS NOT GOING TO STOP DOING Y. YOU WOULD NEED 100, 200, 300 BASIS POINTS OF INCREASES TO REALLY MAKE THAT IRR OR MOEC OR WHATEVER METRIC BY WHICH THEY ARE JUDGING THIS TO BE CRIMPED. AND THERE IS NO DISCUSSION OF ANYTHING LIKE THAT RIGHT NOW.
[01:49:52] Speaker 2: IT'S CERTAINLY NOT IMPLIED BY THE FORECAST. WHEN YOU LOOK AT THE FORECAST FROM THE FEDERAL RESERVE, IT'S CERTAINLY NOT IMPLIED.
[01:49:57] Speaker 4: NO, THE STATEMENT OF ECONOMIC PROJECTION STILL HAS THEM NOT GETTING DOWN TO 2% FOR A NUMBER OF YEARS.
[01:50:05] Speaker 25: THEY GOT ASKED ABOUT THIS THE OTHER DAY AND THEY SAID, YEAH, WE ALWAYS JUST ROLL IT FORWARD THREE YEARS. THEY SAID, BUT ULTIMATELY WHAT THEY DO, IT'S WHAT THEY DO.
[01:50:12] Speaker 2: PUT UP THE VIDEO, IT'S PRETTY CLOSE TO WHAT THEY SAID. DAN, IT'S GOOD TO SEE YOU. DAN, THANK YOU VERY MUCH. UNEMPLOYMENT, 4.1% EVERY YEAR LOOKING OUT TO 2028. THAT'S THE CALL FROM THE FEDERAL RESERVE. IF YOU BELIEVE THAT WE'RE GOING TO GO AFTER AI AND PUSH RATES HARD ENOUGH TO CHOKE THAT OFF, YOU'D HAVE TO ALSO
[01:50:30] Speaker 4: BELIEVE THAT UNEMPLOYMENT IS GOING TO BE MUCH HIGHER THAN 4.1%. THEY'RE GOING TO TELL US ABOUT THIS, BUT NOT BELIEVING THEY'RE GOING TO GO THROUGH WITH THAT. ULTIMATELY, THAT'S WHY MEMBERS OF THE FED, LIKE GOVERNOR CHRIS WALLER, ARE SO IMPORTANT, AND JOHN WILLIAMS, I WOULD ARGUE, IN TERMS OF HOW FAR THEY'RE WILLING TO GO, GIVEN
[01:50:47] Speaker 2: THAT THEY'VE REALLY BEEN THE SWING PLAYERS. FUTURES THIS MORNING, JUST ABOUT POSITIVE BY A 10th OF 1%.
[01:50:53] Speaker 8: WITH AN UPDATE ON NEWS WORLDWIDE WITH YOUR BLOOMBERG BRIEF. VONNIE QUINN HAS MORE. VONNIE QUINN HAS MORE. THE IRANIAN-BACKED MILITANTS LAUNCHED TWO DEADLY ATTACKS AT THE AIRPORT IN RIYAD OVER THE WEEKEND, KILLING AT LEAST 14. MICROSOFT CEO SAYS THERE SHOULD BE AN EMERGENCY BREAK SYSTEM FOR ADVANCED AI TO REMEMBER MODELS FROM GOING ROGUE. IN A POST ON X, HE CALLED ON COMPANIES TO TREAT POWERFUL AI MODELS AS POTENTIAL INSIDER THREATS AND ASSUME THEY COULD BE COMPROMISED RIGHT FROM THE START. IN SPORTS, THE NATIONAL LEAGUE CHAMPIONSHIP SERIES BEGAN LAST NIGHT WITH THE MILWAUKEE BREWERS DEFEATING THE LOS ANGELES DODGERS 2-1 TO TAKE THE FIRST GAME OF A BEST OF SEVENS SERIES. THE ALCS BETWEEN CLEVELAND GUARDIANS AND THE TAPA BAY RAYS WILL KICK OFF TONIGHT.
[01:51:40] Speaker 2: THANK YOU VERY MUCH. UP NEXT, THE MORNING CALLS PLUS, ERIKA NAJERAN OF UPS
[01:51:53] Speaker ?: WITH HER OUTLOOK FOR BIG BANKS.
[01:51:55] Speaker 16: THANK YOU VERY MUCH. IF YOU GET A SITUATION WHERE INVESTORS HAVE CONFIDENCE RATES HAVE PEAKED, THEY ARE GOING TO HEAD LOWER, THEN YOU GET THE BROADING OUT TRADING. INVESTORS HAVE BEEN RELUCTANT TO DO ANYTHING BUT THINGS THAT ARE HIGHER QUALITY WHERE THEY HAVE CONVICTION. YOU CAN SEE A RAPID MOVE IN THE TEN YEAR LOWER. JONATHAN:
[01:52:24] Speaker 2: THAT WAS JASON DRAHOV, LOOKING FOR LOWER INTEREST RATES AND DISINFLATION INTO 27, WHICH HAS ENERGIZED A BROADER TRADE IN THE EQUITY MARKET AWAY FROM THAT CONCENTRATED HANDFUL OF BIG TECH NAMES. EQUITY FUTURES ON THE S&P 500, JUST ABOUT UNCHANGED ON THE S&P DEPOSITIVE, A 10th OF 1%. WE HAVE BEEN THAT WAY FOR THE LAST SEVERAL HOURS THIS MORNING. LAST SEVERAL HOURS. THIS IS THE EQUITY MARKET. WELLS FARGO CUTTING ITS PRICE TIGER ON AMAZON, CITING POTENTIAL HEADWINDS FOR OPERATING INCOME AHEAD. A SECOND CALL FROM BANK OF AMERICA, DOUBLE UPGRADING SALESFORCE TO A BUY, NOTING TAILWINDS FROM AI ADOPTION. THAT NAME IS UP BY MORE THAN 4%. INITIATING COVERAGE OF CHARLES SWAB WITH AN INLINE RATING CITING CONFIDENCE IN ITS EARNINGS OUTLOOK. WELL, WE WILL TALK ABOUT TOMORROW. ERIKA NAJERA OF UBS HIGHLIGHTING WHAT COULD REVIVE SENTIMENT, REASSURANCE THAT THE CAPITAL MARKET'S PIPELINE IS STILL REBUST, LOAN GROWTH IS GENERALLY INTACT AND THE DEPOSIT COSTS AREN'T ACCELERATING BEYOND MARKET EXPECTATIONS. ERIKA JOINS US NOW FOR MORE. ERIKA, GOOD MORNING. LET'S GET INTO IT. WE TOUCHED ON IT BRIEFLY IN THE LAST MONTH OR SO. WHAT HAS BEEN WEIGHING ON THE BANKS? THAT'S A GOOD PLACE TO START.
[01:53:41] Speaker 22: WHAT IS IT? TECH DISRUPTION, INTEREST RATES, THE PIPELINE? WHAT IS IT? THE BOND MARKET WAS ALWAYS GOING TO BE THE COP THAT WAS GOING TO PULL THE KEG AT THE CAPITAL MARKET'S PARTY. BECAUSE AT THE END OF THE DAY, WHAT THE MARKET IS REALLY WORRIED ABOUT IS THAT, YOU KNOW, IF THIS BOND MARKET ROUTE CONTINUES, AND THEY'LL SAY, OKAY, THERE'S A LOT OF DEMAND FOR CAPITAL FROM BOTH PRIVATE SECTOR AND PUBLIC SECTOR GOVERNMENTS. AND THEN, YOU KNOW, THE BOND MARKET IS TELLING US THAT THE SUPPLY IS ESSENTIALLY SHRINKING. AND IF YOU JUST THINK ABOUT CAPITAL BROADLY FOR BOTH EQUITIES AND FIXED INCOME, YOU CLEARLY HAVE THE OVERHANG OF LARGE, LARGE IPOs. AND SO THERE'S A LITTLE BIT OF A FREEZE IN THE MARKET IN TERMS OF, OKAY, WHAT'S THE DIRECTION OF TRAVEL FOR THE TENURE? AND ALSO, YOU KNOW, WHAT IS A TEMPORARY -- IS THAT, YOU KNOW, A MORE PERMANENT FREEZE OR A TEMPORARY FREEZE? AND OBVIOUSLY, IF, YOU KNOW, THESE PROJECTS DON'T GET FUNDED, RIGHT, AND GOVERNMENTS HAVE A HARD TIME, YOU KNOW, RAISING CAPITAL, THEN OBVIOUSLY THE NEXT CONCLUSION IS THAT YOU'LL HAVE A GLOBAL ECONOMIC SLOWDOWN.
[01:54:45] Speaker 2: HOW MUCH VISIBILITY DO YOU THINK THEY HAVE RIGHT NOW? OR ARE WE ALL WAITING FOR THE SAME THING, FOR RATES TO COME BACK DOWN?
[01:54:51] Speaker 22: LOOK, I'M -- SO I'M A LITTLE BIT NERVOUS THAT, YOU KNOW, JAMIE DIMON OBVIOUSLY SETS THE TONE FOR EVERYBODY, NO MATTER WHO ELSE IS REPORTING THAT DAY. AND HIS PREVIOUS MEDIA APPEARANCES HAVE, AS USUAL, BEEN A LITTLE BIT MORE CONSERVATIVE RATHER THAN OPTIMISTIC. AND SO I THINK THAT, YOU KNOW, THE VISIBILITY IS OKAY. BUT IF THEY'RE TALKING ABOUT PIPELINES THAT ARE LESS ROBUST, THEN THAT SORT OF JUST, YOU KNOW, CONFIRMS THE FEARS IN THE MARKET IN TERMS OF WHAT THE BOND MARKET IS DOING FOR, YOU KNOW, CAPITAL MARKETS.
[01:55:26] Speaker 4: DO YOU THINK THAT'S A FEAR THAT'S BEEN EXPRESSED IN THE STOCK MARKET DECLINE FOR BANK STOCKS? OR DO YOU THINK THAT IT'S A FEAR OF SOMETHING ELSE, LIKE DEPOSIT COMPETITION OR HAVING TO PAY UP MORE AS A BANK AS A RESULT OF HIGHER RATES? I MEAN, HOW DO YOU PARSE OUT THE PIPELINE VERSUS JUST WHAT HIGHER RATES AT THE FRONT END MEANS?
[01:55:45] Speaker 22: SO I THINK IT'S PROBABLY -- IT SOUNDS SO PRECISE -- 85% THE TENURE. AND THE REST, LIKE AGENTIC AI FEARS. THERE ARE SOME AGENTIC FEARS IN THERE? ABSOLUTELY. I WILL SAY THIS, HOT MONEY GETS HOTTER. WHATEVER, MONEY MARKET AND CDS, THAT DOES GET HOTTER. BUT KEEP IN MIND THAT THE AVERAGE BALANCE IN THESE 0% CHECKING ACCOUNTS ARE $11,000. THAT'S THE SAME IF YOU ADDRESS FOR INFLATION AS IT WAS IN 2018 AND 2019. SO THERE'S NOT A LOT OF EXCESS, YOU KNOW, FUNDS FOR MEWS TO, YOU KNOW, SWEEP AWAY. BUT IF YOU ARE VERY RATE CONSCIOUS IN YOUR SAVINGS ACCOUNT AND YOUR CD ACCOUNT, THEN DEFINITELY IT MAKES IT EASIER FOR YOU.
[01:56:31] Speaker 4: AT WHAT POINT ARE WE JUST IGNORING THE CONSUMER BECAUSE WE EXPECT IT TO BE ROBUST AT THE HIGHER END AND ULTIMATELY THAT'S NOT REALLY PLAYING INTO THE BANK STORY RIGHT NOW?
[01:56:39] Speaker 22: SO THE CONSUMER IS ACTUALLY OKAY. I WAS SHOCKED AT THE SEPTEMBER UPDATES FROM THE FULL SPECTRUM CREDIT CARD LENDERS, YOU KNOW, IN TERMS OF HOW MUCH SPENDING IS STILL HAPPENING. SO THEY'RE TALKING ABOUT SPENDING ON VACATIONS AND, YOU KNOW, ALL SORTS OF THINGS AND IT FEELS LIKE IT'S HOLDING UP WELL. SO, SO FAR THERE ARE NO CRACKS IN THE CONSUMER YET. BUT IF WE DO GET ANY SORT OF CRACK IN SPENDING OR CREDIT, THEN IT'S GOING TO BE VERY, VERY TOUGH FOR, YOU KNOW, ANY BALANCE SHEET FINANCIAL TO REALLY DISPROVE THE NEGATIVE. WHAT ABOUT POTENTIAL JOB
[01:57:13] Speaker 5: LOSSES? WE HEARD THAT FROM SOME OF THE BANKS THAT POTENTIALLY THEY'RE TRIMMING ON THE MARGINS BECAUSE OF A.I. DO YOU THINK WE'RE GOING TO HEAR EXECUTIVES TALK ABOUT THAT?
[01:57:21] Speaker 22: I FEEL LIKE FOR EVERY, YOU KNOW, CALL CENTER PERSON OR TELLER THAT THEY'RE THINKING ABOUT, YOU KNOW, GETTING RID OF, THEY'RE HIRING A FEW INVESTMENT BANKERS. RIGHT NOW THERE'S STILL A TALENT WAR, YOU KNOW, IN BANKING, RIGHT? SO THEIR HEAD COUNT MAY BE FLAT OR GO DOWN A LITTLE BIT, BUT THEIR COSTS AREN'T GOING ANYWHERE. AND I ACTUALLY THINK THAT YOU'LL HEAR ABOUT HIGHER EXPENSES FROM ALL OF THE BANKS TOMORROW. SO IT SOUNDS GREAT AND IT'S LIKE A GOOD HEADLINE THING, BUT YOU'RE NOT REALLY SEEING THAT HAPPENING RIGHT NOW. YOU'RE SOUNDING QUITE
[01:57:59] Speaker 2: CONSERVATIVE INTO EARNINGS SEASON IN A WAY THAT I HAVEN'T HEARD FROM YOU FOR A WHILE, AT LEAST NOT FOR THIS YEAR.
[01:58:05] Speaker 22: CAN'T FIGHT THE TEN YEAR, RIGHT? LIKE, YOU KNOW, LOOK, THE FUNDAMENTALS ARE GOING TO BE SOLID. BUT THE REASON I'M CAUTIOUS IS BECAUSE THERE ISN'T REALLY A WAY FOR THE BANKS TO DISPROVE THE FORWARD NEGATIVE NARRATIVE THAT COULD BUILD AROUND HIGHER RATES. AND SO, YOU KNOW, IT WAS NEVER THE DIRECTION OF TRAVEL OF THE FED. IT WAS ALWAYS GOING TO BE WHETHER OR NOT, YOU KNOW, THERE WAS GOING TO BE ALL THIS RECIPTIVITY FOR CAPITAL DEMAND.
[01:58:34] Speaker 4: DO YOU THINK THAT BANKS ARE GOING TO GET PENALIZED FOR INCREASING THEIR BUDGETS OR DO YOU THINK THAT IT WILL BE VIEWED AS THEM INVESTING IN AI, INVESTING IN CYBERSECURITY, INVESTING IN
[01:58:44] Speaker 22: TALENT? HONESTLY, I THINK THAT, YOU KNOW, FOR U.S. BANKS THAT'S BEEN LESS OF A CONCERN AS LONG AS THE REVENUES ARE COMING THROUGH. AND I THINK MOST OF WHAT YOU'RE GOING TO HEAR ABOUT FROM, YOU KNOW, THE BIG BANKS ARE GOING TO BE ABOUT NOT JUST PAYING FOR THE REVENUES THAT ARE COMING THROUGH, BUT ALSO INVESTING IN THE FUTURE. SO FAR, THAT'S OKAY. BUT IF WE, YOU KNOW, IF EXPENSES ARE STILL GOING UP, AND THEY'RE TALKING ABOUT A MUCH SOFTER PIPELINE FOR GROWTH, THEN THAT'S GOING TO BE, YOU KNOW, TOUGHER FOR INVESTORS TO SWALLOW.
[01:59:13] Speaker 2: JUST BRIEFLY, WHO IS YOUR FAVORITE?
[01:59:16] Speaker 22: MORGAN STANLEY, AS ALWAYS. YOU KNOW, CITI COULD ACTUALLY SNEAK IN THERE AS WELL IN TERMS OF OUTPERFORMANCE, BUT REALLY, YOU KNOW, THOSE TWO STOCKS CAN SORT OF DELIVER WHAT THE MARKET WANTS, WHICH IS, YOU KNOW, STRONGER THAN, YOU KNOW, EXPECTED RESULTS, PARTICULARLY IN WEALTH FOR MORGAN STANLEY AND FOR, YOU KNOW, CITIES, GLOBAL BUSINESSES THAT TEND TO BENEFIT FROM HIGHER GLOBAL RATES. WHEREAS I FEEL LIKE THE LONG CASE FOR EVERYBODY ELSE RIGHT NOW IS ABOUT SORT OF THE FUTURE, RIGHT? LIKE WHAT 2027 EARNINGS COULD LOOK LIKE.
[01:59:45] Speaker 2: ERIKA, GOOD TO SEE YOU. AS ALWAYS, THANK YOU.
[01:59:51] Speaker 4: ERIKA NAJERY IN THERE OF UBS, A NOD TO JAMES FRASER AND TED PICK AT THE END THERE OF CITY AND MORGAN STANLEY. POTENTIALLY HOW THEY COULD LEVERAGE THIS TO THEIR BENEFIT. ULTIMATELY, THOUGH, OTHERS THAT ARE BUILDING FOR 2027 ARE
[02:00:02] Speaker 2: GOING TO HAVE A TALL ORDER IN TRYING TO TELEGRAPH WHAT THAT 2027 LOOKS LIKE.
[02:00:05] Speaker 4: YOU CAN'T FIGHT THE BOND. I LOVE IT. I THINK IT'S GREAT AND IT'S NICE THAT THE BOND MARKET IS CLOSE TODAY, I SUPPOSE FOR SOME PEOPLE, ALTHOUGH I KIND OF MISS IT. YOU'RE TAKING A BREAK. 24 HOURS IS GOOD.
[02:00:14] Speaker 2: IT'S GOOD TO TAKE A LONG WEEKEND SOMETIMES. THANKS. TORSON SLACK OF APOLLO JOINS US NEXT. LOOKING AHEAD TO KEY INFLATION DATA THIS WEEK, CPI AND PPI. PLUS YOUR HIGHER HAS YOUR MORNING MOVES. MICRON FALLING ON NEW COMPETITION OUT OF CHINA. LIVE FROM NEW YORK CITY, YOU'RE WATCHING BLOOMBERG TV. LIVE FROM NEW YORK CITY. USUALLY IN THE COMMERCIAL BREAK, BEFORE THE SHOW COMES BACK, SOMEONE LIKE TORSON SLACK OF APOLLO WILL COME ON AND PEOPLE WILL TALK ABOUT SERIOUS THINGS WITH HIM. WHAT ARE YOU EXPECTING FOR INFLATION THIS WEEK? CPI, PPI, BIG STUFF. KEVIN WASH FED CHAIRS SPEAKING. TORSON HAS BEEN TO THE TOY SHOP THAT KELLY CLARKSON IS IN A FIGHT WITH RIGHT NOW. TORSON, YOU WANT TO SHARE YOUR THOUGHTS? WHAT IS THE SHOP EVEN LIKE? YOU'RE GOING CRAZY ABOUT IT.
[02:01:06] Speaker 26: I HAVE NO VIEWS ON THAT. BUT I THINK IT SAYS SOMETHING ABOUT DISCRETIONARY CONSUMPTION THAT A SPECIAL STORE LIKE THAT IS GETTING SO MUCH ATTENTION.
[02:01:12] Speaker 2: 15K FOR A BIRD. IS THAT HOW MUCH THE BIRD IS?
[02:01:14] Speaker 4: IT'S A DIRECT REFLECTION ON THE K-SHAPED ECONOMY.
[02:01:16] Speaker 2: TALKING ABOUT OUTING YOURSELF AND HOW DETACHED YOU ARE FROM REALITY. IT WAS A VERY COOL BIRD. YOU'RE FIGHTING ABOUT HOW YOU WERE TREATED WHEN YOU WENT TO TRY AND BUY A $15,000 TOY.
[02:01:28] Speaker 4: IT COULD BE CONSIDERED CONVERSATION.
[02:01:31] Speaker 2: YOU KNOW WHO WILL BE THE FIRST TO GO TO THIS STORE? THIS ONE. SHE HAS ALREADY PLANNED HER TRIP. STRAIGHT AWAY. YOU'RE ALREADY GOING TODAY, AREN'T YOU? WE'VE ALREADY GOING TODAY. WE ARE DOWN BY ABOUT 2/10 OF 1%.
[02:01:54] Speaker 11: LET'S GET YOU SINGLE NAMES FOR MORNING MOVERS. WE ARE SEEING MEMORY NAMES LIKE MICRON AND SK HYNICS LOWER IN THE PREMARKET ON A REPORT THAT CHINA'S CXMT IS PLANNING TO LAUNCH A CHIP BY YEAR-END THAT CAN PACK MORE MEMORY. THEY ARE PUTTING PRESSURE ON THE HIGH PRICES AND HIGH PROFITS THAT THESE COMPANIES HAVE ENJOYED. ON TOP OF THAT, OF COURSE, YOU ALSO HAVE THE CEOs OF INTEL AND BROADCOM SAYING THAT FINANCING WILL BE THE BIGGER THREAT TO THE AI BUILDOUT THAT POTENTIALLY COULD LIMIT CHIP DEMAND. THAT IS WHY YOU'RE SEEING NOT JUST THESE NAMES, BUT THE ENTIRE CHIP SECTOR WEAKER THIS MORNING. MEANWHILE, NOT WEAKER IS IRAN. THOSE SHARES UP 3.75% IN THE PREMARKET. ON A REPORT IN THE INFORMATION THAT IT IS PARTNERING WITH ANTHROPIC ON A CLOUD DEAL. IT IS PART OF A BIGGER TREND FOR ANTHROPIC. BASICALLY PARTNERING WITH BITCOIN MINERS LIKE THIS ONE THAT ALREADY HAVE ESTABLISHED POWER CAPACITY. JUST REMEMBER THAT LATER THIS WEEK ON WEDNESDAY, ANTHROPIC WILL MEET WITH POTENTIAL IPO INVESTORS ON WEDNESDAY. WE ARE SEEING STALANCIS SHARES ALSO RISING THIS MORNING UP MORE THAN 1% DUE TO A COUPLE OF DEVELOPMENTS. FIRST, WE HAVE OUR REPORTING THAT THE EU WILL LIMIT HYBRID CAR IMPORTS FROM CHINA. MEANWHILE, CEO ANTONIO IS PUSHING BACK ON BREAKUP SPECULATION, TELLING US AT THE PARIS MOTOR SHOW THAT SPLITTING ITS EUROPE AND U.S. BUSINESSES IS NOT PLAUSIBLE. JONATHAN:
[02:03:30] Speaker 2: THE LATEST THERE FOR STALANCIS, THAT NAME IS UP BY 1%. THAT COMPANY HAS SOME WORK TO DO. HAVE YOU EVER LOOKED AT THE LIST OF BRANDS AT STALANCIS AND HOW LONG IT IS?
[02:03:38] Speaker 4: SORRY, MY BRAIN DOESN'T GO THAT FAR. IT IS CRAZY. IT IS PAGE AFTER PAGE AFTER PAGE.
[02:03:43] Speaker 2: EVERY QUARTER IS ASKED THE SAME QUESTION.
[02:03:46] Speaker 4: WHAT ARE YOU DOING ABOUT THE AMOUNT OF BRANDS YOU'VE GOT? THE ANSWER IS NOTHING. EACH ONE HAS A PLACE IN ITS PANTHEON OF THE STALANCIS REPERTOIR. ULTIMATELY, HOW DO THEY CONTINUE DOING THAT WHILE INVESTING IN A JOINT VENTURE WITH THE CHINESE WHILE ALSO INCREASING THEIR COMPETITIVE EDGE AHEAD OF THE END OF THIS EXPORT LIMITATION ON CHINESE VEHICLES?
[02:04:02] Speaker 2: WHAT DID YOU THINK OF THAT, THE AGREEMENT POTENTIALLY BETWEEN THE CHINESE AND EUROPEANS?
[02:04:06] Speaker 5: THE CHINESE WERE BASICALLY GIVING A BIT OF THE CHINESE. WE WANT TO GIVE THEM BREAD CRUMBS TO SOME BIRDS TO KEEP THEM AT BAY FOR A LITTLE BIT BECAUSE THEY FELT LIKE IF YOU DON'T DO THIS, IT MIGHT GET MUCH WORSE.
[02:04:22] Speaker 2: WE'LL GIVE THEM BREAD CRUMBS, AT LEAST WE SHOW WE CARE. THE FACT OF THE MATTER IS, IT IS A DECADE TOO LATE. IT IS LATE, IT IS NOT ENOUGH, BUT I THINK IT WAS
[02:04:29] Speaker 4: INTERESTING THAT THE CHINESE HAVE ACKNOWLEDGED THAT THEY ARE PART OF A PROBLEM IN A WAY THEY HAVEN'T DONE FOR A LONG TIME. THE CHINESE WERE PART OF THE CHINESE WERE VERY PRESENT AND THEY WERE SAYING WE'LL WORK WITH YOU. AT THE SAME TIME, THEY ALSO WANT ACCESS TO THE FACTORIES TO BE ABLE TO MANUFACTURE ON THE GROUND IN EUROPE. YOU CAN SEE AT THIS AUTO FAIR IN PARIS THAT THE CHINESE WERE VERY PRESENT AND THEY WERE SAYING WE'LL WORK WITH YOU. AT WHAT POINT IS IT JUST ANOTHER WAY OF GETTING ACCESS TO A MARKET? LET'S SEE WHAT THEY DO WITH BUYING TIME.
[02:04:59] Speaker 5: THEY ARE TAKING A PAGE OUT OF PRESIDENT TRUMP'S PLAYBOOK. HE HAS BEEN TALKING ABOUT THIS LITERALLY FOR YEARS WHEN IT
[02:05:06] Speaker 2: COMES TO THE EUROPEANS. IT IS SO INTERESTING LISTENING TO THE EUROPEANS TALK ABOUT THE DEFICIT WITH CHINA AS A PROBLEM. WHEN THE PRESIDENT FIRST BROUGHT IT UP, 2015, 2016, HE WAS TALKING ABOUT THIS REPEATEDLY HEADING INTO THAT ELECTION. THE ECONOMISTS AND THOSE GROUPS OF PROFESSIONALS WOULD COME OUT AND SAY DON'T FOCUS ON THE DEFICIT, IT HAS NOTHING TO DO WITH THE ECONOMIC HEALTH OF THE COUNTRY, BUT IT MATTERED FOR THE POLITICS. IT HAS TAKEN THE EUROPEANS A DECADE PLUS TO GET TO WHERE
[02:05:36] Speaker 4: AMERICAN POLITICS WAS A DECADE AGO. ULTIMATELY, HOW QUICKLY CAN THEY TRY TO REPAIR THEIR MANUFACTURING SECTOR IN THE FACE OF A HUGE THREAT, GIVEN THAT
[02:05:45] Speaker 2: ISSUES IN THE ELECTION. WE HAVE BEEN MISSING ON THE
[02:05:55] Speaker 20: INFLATION SIDE OF OUR MANDATE FOR SO LONG. WE WILL DO WHAT WE NEED TO DO TO GET INFLATION BACK DOWN. TO BRING INFLATION BACK TO TARGET IN A TIMELY MANNER, MORE
[02:06:04] Speaker 21: MONETARY POLICY FIRMING WILL BE REQUIRED. I ANTICIPATE ADDITIONAL HIKES TO SUPPORT A TIMELYER RETURN OF INFLATION TO OUR 2% GOAL.
[02:06:12] Speaker 2: THEN THOSE HIKES WILL HAPPEN. THE FINAL MAJOR READ OF INFLATION BEFORE THE OCTOBER FED DECISION COMING THIS WEEK WILL ALSO GET COMMENTS FROM FED CHAIR KEVIN WASH IN THE DAYS AHEAD. LUBEX ANDER CURRENT JOINS US NOW FOR MORE FROM WASHINGTON. MOST PEOPLE BELIEVE ASSUME THE DOOR IS CLOSED TO A HIKE IN
[02:06:30] Speaker 27: OCTOBER. WHAT ARE YOU EXPECTING TO SEE IN THE DATA IN THE NEXT FEW DAYS? THE HEADLINE INFLATION DATA, JOHN, IS EXPECTED TO COME IN STRONG, 0.6 ON THE MONTH, 3.6 ON THE YEAR. THE ENERGY AND OIL STORY THAT WE'RE ALSO FAMILIAR WITH. CORE INFLATION IS EXPECTED TO MODERATE A TOUCH BECAUSE OF SOME ONE-OFFS ON THE PREVIOUS READING. BUT THE BIGGER QUESTION MARK WITH THE INFLATION DATA WE'LL GET THIS WEEK WILL BE HOW BROAD-BASED ARE THE INFLATION PRESSURES? ANY SIGNS OF SPILL OVER NOW FROM THE OIL STORY? AND ESPECIALLY KEEP AN EYE ON SERVICES. YOU'VE GOT SOME PARTS OF THE INSURANCE SECTORS THERE. THERE'S BEEN SOME DISINFLATION, OTHER AREAS REMAINING PERSISTENT. KEEP AN EYE ON POCKETS SUCH AS HEALTH CARE COSTS, AIRFAIRS. AIRFAIRS ARE UP 23 PERCENT NOW ON YEAR. SO I THINK IT'S A QUESTION OF HOW BROAD-BASED THE OVERALL INFLATION PICTURE WILL LOOK WHEN WE GET THESE NUMBERS. AS YOU SAY, THE FED OFFICIALS HAVE BEEN GUIDING THEY'RE HAPPY TO STAY ON HOLD FOR THE MONTH OF OCTOBER AT LEAST. IT WOULD TAKE A VERY HOT NUMBER TO CHANGE THAT. AND OF COURSE, IF IT IS A VERY HOT NUMBER, WE WILL HAVE CHAIRMAN WORSH HIMSELF SPEAKING AFTER THOSE NUMBERS AT IMF MEETINGS IN BANCOCK WHERE HE MAY OR MAY NOT GIVE SOME GUIDANCE ON HIS VIEWS OR HOW HE WILL REACT TO THAT.
[02:07:38] Speaker 2: ALL OF THAT A FEW DAYS AWAY. AND A THANK YOU. LOOKING AHEAD TO THIS DATA, THIS IS A TAKE FROM TORSTEN SLOCK OF APOLLO. HE WRITES THE FOLLOWING RECENTLY. HIGH RATES CHOKE OFF CONSTRUCTION, WHICH PUSHES RENTS AND INFLATION UP AND KEEPS RATES HIGH. A PROBLEM FOR THE FED GIVEN THE OWNERS EQUIVALENT RENT IS ROUGHLY A QUARTER OF CPI. TORSTEN JOINS US NOW FOR MORE. TORSTEN, GOOD MORNING. IT MIGHT NOT BE THE CURE, IT MIGHT BE THE PROBLEM.
[02:08:02] Speaker 28: THE ISSUE IS THAT, OF COURSE, WHEN YOU RAISE INTEREST RATES, YOU LOWER SUPPLY OF HOUSING. WHEN YOU LOWER SUPPLY OF HOUSING, RENTS START GOING UP. AND THAT'S EXACTLY WHAT WE'RE SEEING IN A LARGE PART OF THE COUNTRY. NAMELY THAT RENT INFLATION IS BEGINNING TO ACCELERATE. AND IF THAT COMES AROUND, THEN WE HAVE THIS REALLY SOMEWHAT PERVERSE SITUATION WHERE ON THE ONE HAND RATES GOING HIGH SHOULD BE SLOWING THE ECONOMY. BUT NOW RATES GOING HIGH IS SLOWING THE SUPPLY OF HOMES. AND AS A RESULT OF THAT, INCREASING RENT FOR HOMES.
[02:08:27] Speaker 2: WE OFTEN TALK ABOUT NEGATIVE FEEDBACK LOOPS. ARE WE ABOUT TO ENTER A POSITIVE FEEDBACK LOOP OF HIGHER INTEREST RATES?
[02:08:32] Speaker 28: WELL, THE RISK, OF COURSE, IS NOW THAT IF THIS CONTINUES FOR TOO LONG, THEN WE WILL HAVE A RISK THAT WE WILL SEE MUCH MORE UPWARD PRESSURE ON INFLATION IF WE REALLY HAVE A SHRINKAGE IN THE HOUSING PART OF THE ECONOMY. AND ON TOP OF THAT, WE ALSO HAVE THE AUTO PART OF THE ECONOMY. IS ALSO INTEREST RATE SENSITIVE. AND LET'S NOT FORGET, WE NORMALLY TALK ABOUT AI AS THE INSENSITIVE PART OF THE ECONOMY. BUT REMEMBER ALSO THE EMPLOYMENT REPORT. WE HAVE STRONG JOB GROWTH IN HEALTH CARE, STRONG JOB GROWTH ALSO IN EDUCATION, WHICH ARE ALSO NOT VERY INTEREST RATE SENSITIVE SECTORS. SO THE OVERALL SETUP IS THAT THERE'S STRONG GROWTH, WHICH IS NOT VERY STRONG FOR EMPLOYMENT, BUT STRONG FOR GDP GROWTH IN THE AI WORLD. AND THERE'S ALSO STRONG GROWTH IN EMPLOYMENT, IN EDUCATION AND HEALTH CARE. SO BOTH THOSE TWO SETUPS AND COMPONENTS RESULT IN A SITUATION WHERE RATES HIGHER IS JUST NOT SLOWING THINGS DOWN THE WAY THAT THEY NORMALLY WOULD.
[02:09:16] Speaker 4: WE JUST HAD A CONVERSATION ABOUT THE BANK STOCKS AND POTENTIAL SLOWDOWN IN THE UPCOMING PIPELINE FOR AI-RELATED FINANCING AND HOW THE IPOs OF ANTHROPIC AND OPEN AI ARE HANGING OVER THE WHOLE MARKET. DO YOU NOT BUY THAT? DO YOU NOT SEE ANY SIGNS OF A SLOWDOWN?
[02:09:30] Speaker 28: I DO THINK THAT THAT'S A VERY IMPORTANT PART OF THE DEBATE. BUT THAT REALLY HAS VERY LITTLE TO DO WITH INTEREST RATES AND HAS MUCH MORE TO DO WITH THE DEBATE OF WHEN IS THE AI PAYOFF COMING, WHAT IS THE MAGNITUDE OF THE PAYOFF IN AI, AND WHAT IS THE SIZE AND THE SPEED OF THAT PAYOFF. BECAUSE IF THAT REVENUE INCREASE THAT'S EXPECTED TO COME IN THE TRILLIONS OF DOLLARS AS A RESULT OF AI IS NOT ARRIVING QUICK ENOUGH, THEN THAT WILL CERTAINLY HAVE IMPLICATIONS FOR A LOT OF VALUATIONS TODAY, INCLUDING ALSO IN PUBLIC MARKETS.
[02:09:57] Speaker 4: SO YOU DON'T THINK IT'S A RATE STORY AND THAT THAT'S TIED TO A QUESTION ABOUT COMPANIES WILLING TO TAKE THE LEAP AND INVEST IN AI BECAUSE THEIR BUSINESSES ARE DOING SO WELL AND THEY SEE THIS PROSPECT, RATHER THAN DOUBLING DOWN AND CUTTING SPENDING IN THE FACE OF ADVERSITY WHEN IT COMES TO CONSUMERS.
[02:10:12] Speaker 28: NO, I ACTUALLY THINK THAT'S MORE A TOKEN STORY, THAT IN THE BEGINNING OF THE YEAR, COMPANIES PAID A LOT OF MONEY FOR TOKENS. NOW COMPANIES REALIZE THAT TOKENS ARE VERY EXPENSIVE ON THEIR BUDGETS. SO NOW COMPANIES, OF COURSE, HAVE BEEN MORE RELUCTANT TO PAY FOR TOKENS. AS A RESULT OF THAT, TOKEN SPENDING HAS STARTED TO FLATTEN OUT BECAUSE TOKEN PRICES HAVE GONE DOWN, DEMAND HAS GONE UP. SO THE CONCLUSION IS THAT, YES, THERE'S TWO THINGS GOING ON. THERE'S BOTH, THE RATES ARE GOING UP, BUT THERE'S ALSO THIS VERY IMPORTANT STORY LIVING ITS OWN LIFE. NAMELY, THAT'S WHAT'S GOING ON WITH TOKEN PRICES, COMPUTE, HOW PEOPLE THINK ABOUT THE TRILLIONS OF DOLLARS THAT SHOULD BE COMING IN THE FUTURE, WHETHER THAT'S HAPPENING OR NOT.
[02:10:46] Speaker 5: YOUR PIECE ON AN AGENTIC BANKRON SPARKED A LOT OF INTEREST. DO YOU THINK THAT'S GOING TO MAKE ALL THESE BANKS A LOT MORE COMPETITIVE?
[02:10:53] Speaker 28: WELL, I THINK THAT THE KEY ISSUE, OF COURSE, IS THAT WHEN NEWS CAME OUT AND, OF COURSE, ALSO SIMILAR PERSONAL AGENTS, A LOT OF INTENTION WERE PAID TO WHAT CAN THIS DO TO SUBSCRIPTIONS THAT WE MAY BE HAVING THAT COULD BE CANCELED EASILY. BUT I THINK THE DISCUSSION NOW IS MOVING MORE TOWARDS, WELL, WHAT ABOUT A WORLD WHERE YOU COULD HAVE THAT DEPOSITS COULD BE SWIPED IN AND OUT MUCH MORE QUICKLY THAN WHAT THEY CAN TODAY. AND, OF COURSE, THAT RAISES A NUMBER OF ISSUES AROUND HOW, OF COURSE, THE BANK FUNDING MODEL WORKS. THAT BANKS ARE FUNDED ON DEPOSITS, WHICH ARE VERY SHORT-TERM, AND THEY LEND THAT OUT IN THE VERY LONG-TERM. AND THAT MISMATCH IN LIABILITIES IS, OF COURSE, THE KEY CHALLENGE THAT'S NOW COMING FROM AGENTIC AI. SO, NO, I DON'T THINK WE'LL GET AN AGENTIC BANK RUN. BUT I THINK THAT THIS CONTINUES TO BE A VERY IMPORTANT PART OF THE CONVERSATION. BECAUSE ESPECIALLY AS WE GET MORE ON CHAIN AND MORE DEPOSITS THAT ARE MOVING INTO THE TECH WORLD, THEN THIS COULD BECOME A MUCH MORE IMPORTANT DEBATE.
[02:11:41] Speaker 2: IT WAS A PROVOCATIVE PIECE. THANK YOU FOR IT. BECAUSE WE CHEWED OVER IT FOR WEEKS AFTER YOU PUBLISHED IT. PROVOCATIVE PIECE IS ONE OF THE JOURNAL THIS MORNING WITH THE CLEVELAND FED PRESIDENT, BETH HAMMACK, ON THE DEGREE OF RESTRAINT IN THIS ECONOMY. I SUGGEST EVERYONE GO AND HAVE A READ OF IT IF YOU GET THE CHANCE. HAVE YOU READ THAT PIECE THIS MORNING? YEAH, I HAVE. WHAT DOES SHE THINK OF IT?
[02:11:57] Speaker 28: I THINK SHE'S VERY GOOD BECAUSE SHE ACTUALLY GOES OUT AND ASK CONSUMERS. THE CLEVELAND FED IS VERY FAR AHEAD OF A LOT OF PEOPLE IN TERMS OF UNDERSTANDING NOT ONLY ACTUAL MEASURES OF INFLATION, BUT ALSO INFLATION EXPECTATIONS. AND WHAT SHE HAS DONE SO WELL, NOT ONLY IN THIS PIECE, BUT ALSO SHE SPOKE ABOUT THIS ALSO IN JACKSON HOLE. THIS WAS INDEED ALSO A BIGGER DISCUSSION AROUND, WELL, WHAT ARE COMPANIES ACTUALLY THINKING IN TERMS OF INFLATION. AND GIVEN WE HAVE INFLATIONARY PRESSURES AT THE MOMENT COMING FROM ENERGY PRICES. WE STILL HAVE DELAYED EFFECTS OF TARIFFS ACCORDING TO NEW YORK FED SURVEYS. WE ALSO HAVE RESTRICTIONS ON IMMIGRATION, PUTTING UP WITH PRESSURE ON WAGE INFLATION, ESPECIALLY FOR THE GROUPS WHERE UNAUTHORIZED IMMIGRANTS WORK, NAMELY CONSTRUCTION, AGRICULTURE, HOTELS AND RESTAURANTS. SO THOSE SOURCES OF INFLATION WHEN SHE GOES AND ASK BUSINESSES, SHE'S BASICALLY TELLING US WHAT SHE'S HEARING ON THE GROUND, AND WE SHOULD TAKE THOSE ANECDOTES VERY SERIOUSLY.
[02:12:42] Speaker 2: THANK YOU VERY MUCH. SHE DOESN'T SEE RESTRAINT. SHE DOESN'T SEE RESTRAINT. SHE SAID THIS SEVERAL TIMES NOW. THIS IS ONE FED OFFICIAL. I THINK AN INCREASINGLY IMPORTANT VOICE ON THE FOMC. WE'RE TRYING TO WORK OUT WHERE THE REST OF THE COMMITTEE IS. HOW FAR ARE THEY WILLING TO TAKE THINGS? IS THAT SPREAD BETWEEN THE TWO YEAR AND THE POLICY RATE? ARE WE MAKING TOO MUCH IN OR IS THAT A DECENT GUESS RIGHT NOW OF WHERE THIS COMMITTEE MIGHT BE HEADING?
[02:13:02] Speaker 28: WHAT'S REALLY INTERESTING ABOUT FED SPEAK AT THE MOMENT IS THAT THEY'RE A LITTLE BIT UNWILLING TO DEBATE IT IN THE FRAMEWORK OF WHAT'S INTEREST RATE SENSITIVE AND WHAT'S NOT INTEREST RATE SENSITIVE. BECAUSE THIS DISCUSSION IS ULTIMATELY ABOUT PUTTING UP ON THE SCALE WHAT'S INTEREST RATE SENSITIVE. AND IT'S VERY CLEAR HOUSING IS NOT IN GOOD SHAPE. AUTOS ARE NOT IN GOOD SHAPE. BUT IT'S ALSO VERY CLEAR THAT A.I. AND ALSO EDUCATION AND ALSO HEALTH CARE IS ACTUALLY IN GREAT SHAPE. SO THAT'S WHY UP ON THE SCALE THE FED HAS TO CONSIDER WHICH OF THESE THINGS ARE MOST IMPORTANT. SO FAR GDP GROWTH HAS BEEN DRIVEN MAINLY BY THE A.I. BOOM IS ADDING IN OUR CALCULATION ABOUT ONE PERCENTAGE POINT TO GDP GROWTH AT THE MOMENT. GDP IS NORMALLY TWO. SO NOW ROUGHLY HALF OF GDP GROWTH COMES BECAUSE OF A.I. BUT AS WE CONTINUE TO LOOK AHEAD, IF THOSE SECTORS OF THE ECONOMY THAT ARE MOST INTEREST RATE SENSITIVE, IF THEY BECOME MORE HEAVY, IF THEY COME A BIGGER TRACK AND AT THE SAME TIME THE TOKEN ISSUE BEGINS TO SLOW DOWN, WE COULD HAVE THAT SLOW DOWN IN 2027 WHICH COULD BECOME VERY IMPORTANT FOR THE FED DEBATE TODAY. BUT THIS IS A VERY DIFFICULT CONVERSATION FOR FOMC MEMBERS TO HAVE IN THE SPEECHES BECAUSE THAT GOES INTO INDIVIDUAL SECTORS AND TALKING ABOUT INTEREST RATE SENSITIVITY AND THIS DEBATE AROUND, WELL, IS IT THE CASE THAT A.I. IS COMPLETELY INSENSITIVE TO INTEREST RATE OR NOT?
[02:14:07] Speaker 4: AS IS, UNLESS YOU HAVE ONE OF THOSE EXOGENOUS SITUATIONS WHERE OIL PRICES COME IN OR INFLATION NATURALLY DISINFLATES. DO YOU THINK THAT THE FED OFFICIALS WOULD HAVE TO TORPEDO THE U.S. ECONOMY AND SEND IT INTO RECESSION TO GET INFLATION DOWN TO 2% IN THE NEXT COUPLE OF YEARS?
[02:14:21] Speaker 28: YEAH, SO THE REAL NIGHTMARE SCENARIO IF WE JUST THINK INTO 2027 IS NOW THAT THE INTEREST RATE SENSITIVE SECTORS OF THE ECONOMY BEGIN TO SLOW DOWN AND AT THE SAME TIME AI BEGINS TO SLOW DOWN BECAUSE OF TOKEN PRICES, TOKEN SPENDING ALSO GOING DOWN AND AT THE SAME TIME ALL THE PRICES ALSO GO DOWN BECAUSE THEN YOU WOULD BOTH HAVE GROWTH GOING DOWN, INFLATION GOING DOWN AND IF THAT IS THE CASE THE FED WILL CERTAINLY NOT HIKE THE THREE
[02:14:41] Speaker 2: TIMES THAT IS PRICED INTO MARKETS AT THE MOMENT. TORSTAN, GOOD TO SEE YOU AS ALWAYS BUDDY, THANK YOU. LOTS TO THINK ABOUT THIS MORNING. EQUITY FUTURES JUST ABOUT UNCHANGED. NO DRAMA IN THIS EQUITY MARKET THIS MORNING, NO DRAMA IN THIS BOND MARKET WITH THE CASH TREASURY MARKET CLOSED FOR COLUMBUS STATE.
[02:14:59] Speaker 8: LET'S KEEP AN UPDATE ON NEWS WORLDWIDE THIS MORNING WITH YOUR BLOOMBERG BRIEF. VONNIE QUINN HAS MORE. RUSSIAN LEADER VLADIMIR PUTIN ON A DEAL TO RELEASE THE COUNTRY'S DIESEL SUPPLY INTO GLOBAL MARKETS, UPENDING YEARS OF SANCTIONS. TRUMP'S LATEST BID TO EASE FUEL COSTS AHEAD OF THE MIDTERMS IS BEING MET WITH STRONG OPPOSITION FROM EUROPEAN ALLIES. MICROSOFT CEO SATYA NADELA SAYS THERE SHOULD BE AN EMERGENCY BREAK SYSTEM FOR ADVANCED AI TO PREVENT AGENT TECH MODELS FROM GOING ROGUE. IN A POST ON X, HE CALLED ON COMPANIES TO TREAT POWERFUL AI MODELS AS POTENTIAL INSIDER THREATS AND ASSUME THEY COULD BE COMPROMISED FROM THE START. TWO U.S. BASED ACADEMICS WILL SHARE THE NOBEL PRIZE IN ECONOMICS THIS YEAR. ROBERT E. HALL AND MICHAEL WOODFORD RECEIVING THE $1.2 MILLION AWARD FOR THEIR WORK ON THE MICRO ECONOMIC FOUNDATIONS OF MACRO ECONOMIC STABILIZATION.
[02:15:51] Speaker 2: THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: THANK YOU. UP NEXT ON THE PROGRAM WE WILL SET YOU UP FOR THE DAY AND A WEEK AHEAD.
[02:16:07] Speaker ?: ALL THE CHIP PRODUCERS, THE SEMICAP COMPANIES, ET CETERA, ALL ARE TALKING ABOUT DEMAND EXCEEDING SUPPLY.
[02:16:25] Speaker 25: AT THE SAME TIME YOU DO KIND OF SEE SOME OF THESE HEADLINES WHICH DO RAISE THE SPECTRE THAT NOT EVERYTHING IS 100%. WE ARE OVERBUILDING. THERE IS GOING TO BE EXCESS CAPACITY. THERE IS GOING TO BE A QUOTE UNQUOTE BUBBLE THAT BURSTS DOWN THE ROAD. JUST NOT NOW. THAT WAS DAN GREENHOUSE.
[02:16:45] Speaker 2: STILL CONSTRUCTIVE ON THIS EQUITY MARKET. EVERYTHING IS OKAY. EVERYTHING IS OKAY. IT HAS BEEN HIS MESSAGE NOW FOR MOST OF THIS YEAR. THAT HAS BEEN THE RIGHT MESSAGE.
[02:16:54] Speaker 4: IT HAS BEEN THE RIGHT MESSAGE. IT HAS BEEN THE RIGHT MESSAGE UP AND TO THE RIGHT. PEOPLE ARE STARTING TO SNIFF OUT MAYBE SOMETHING DIFFERENT. TORSTEN'S LOCK WAS RAISING CONCERNS ABOUT A SLOWDOWN IN ARTIFICIAL INTELLIGENCE AND THE VALUATIONS THAT ARE CURRENTLY BEING PLACED BASED ON THE FACT THAT A LOT OF COMPANIES ARE CUTTING BACK ON
[02:17:14] Speaker 2: TOKEN USE AND CERTAINLY THE EXPENSE. I THINK THAT IS AN INTERESTING PLACE TO WATCH. DAN ACKNOWLEDGED IT HIMSELF TOGETHER WITH VERONICA CLARK. THERE IS A BET HERE. IT IS A BET HERE. THIS IS THE LINE THAT GETS THROWN AROUND THAT THE CAPEX BUILDOUT IS RATE INSENSITIVE. IT IS SOMEWHAT RATE INSENSITIVE. NOBODY IS TRULY RATE INSENSITIVE BECAUSE AT SOME POINT THE RATE IS SO HIGH THAT YOU START TO SEE SOME RESPONSE TO IT.
[02:17:42] Speaker 4: THERE IS A BET.
[02:17:49] Speaker 2: THE FUTURES THIS MORNING JUST ABOUT UNCHANGED ON THE S&P. FUTURE ON THE NASDAQ PULLING BACK FROM ALL TIME HIGHS. FUTURES A LITTLE BIT SOFTER ON THE NASDAQ THIS MORNING. WE ARE DOWN BY 0.15. WE WILL GET SOME FED SPEAK LATER ON TODAY. LOOK OUT FOR IT. WE MENTIONED BETH HAMMICK OF THE CLEVELAND FED. WE SHOULD HEAR FROM HER LATER INSENSITIVE. FED SHARE INSENSITIVE.
[02:18:29] Speaker 4: WHERE YOU WILL BE IN THAILAND. SPEAKING ON THE REACTION FUNCTION AFTER THAT SLEW OF DATA AMID A SLEW OF FINANCE MINISTERS AND CENTRAL BANKERS WHO ARE CRAPPLING. WHAT DOES HE THINK ABOUT THAT? UNCLEAR WHAT HE IS GOING TO SAY, WHETHER HE WILL SAY ANYTHING, WHETHER HE WILL TALK ABOUT SOMETHING THAT IS INCREDIBLY ESOTERIC AND IRRELEVANT.
[02:18:52] Speaker 2: NONETHELESS, PEOPLE ARE LOOKING FOR SOME GUIDE ABOUT HOW HE IS LOOKING AND HOW FAR HE IS GOING TO GO. WHAT A WEEK WE HAVE COMING UP. ON EARNINGS SEASON, MICHELLE WEAVER OF MORGAN STANLEY WRITING EARNINGS QUALITY AND THE EARNINGS REVISION FACTOR IS CONTINUING TO BE REWARDED BY THE MARKET.
[02:19:07] Speaker 29: HOW DOES HE TALK ABOUT THAT? THE BAR IS QUITE HIGH. 30% YEAR-OVER-YEAR GROWTH IS EXPECTED. WHAT WE HAVE TO DO WHEN WE THINK ABOUT THE MARKET IS DECOMPOSE INTO VALUATION AND EARNINGS. ON VALUATION, WE HAVE SEEN A PRETTY SUBSTANTIAL RERATING. WE HAVE SEEN A PRETTY SUBSTANTIAL RERATING. A PRETTY SUBSTANTIAL RELATIONSHIP. 18.5 IS ABOUT FAIR VALUE ON THE S&P MULTIPLE GIVEN IF WE LOOK AT THE ERP AND TRIANGULATE WHERE PMIs ARE ALONG WITH WHERE RATES ARE. VALUATION HAS RESET. EARNINGS EXPECTATIONS QUITE HIGH.
[02:19:39] Speaker 2: BUT THE MARKET IS CONTINUING TO REWARD THOSE EARNINGS QUALITY AND EARNINGS STABILITY FACTORS. WHAT DO YOU THINK OF A MIX OF THAT 30%, THE CONTRIBUTION FROM, SAY, ENERGY VERSUS TECH VERSUS DISCRETIONARY?
[02:19:47] Speaker 29: IT'S QUITE RIGHT SPREAD. AND WHAT WE'RE SEEING NOW IS WE'RE SEEING INCREMENTAL BENEFITS FROM AI ADOPTION ACTUALLY STARTING TO FLOW THROUGH INTO SOME OF THESE NUMBERS. AND SO THAT'S WHY WE THINK THAT THIS CAN CONTINUE ON. WE DO A PROPRIETARY MAPPING OF EVERY STOCK WE COVER. WE HAVE OUR ANALYSTS RANK THEM ON BOTH THEIR EXPOSURE TO AI AND THE MATERIALITY OF AI. WHEN WE LOOK AT COMPANIES THAT ARE HIGH MATERIALITY AI ADOPTERS, WE'VE FOUND AN EXPECTED 460 BASIS POINTS OF EBIT MARGIN EXPANSION THROUGH YEAR END. THAT'S RUNNING AHEAD OF THE MARKET. WE THINK THAT CAN CONTINUE ON INTO NEXT YEAR.
[02:20:18] Speaker 4: IS THAT ENOUGH TO JUSTIFY A CONTINUATION OF THE SPENDING AT THE PACE THAT IT HAS BEEN ON TECHNOLOGY?
[02:20:23] Speaker 29: SO WE WERE TALKING A LITTLE BIT ABOUT TOKENS IN THE LAST SESSION. AND I THINK WHAT'S IMPORTANT IS TO DECOMPOSE WHAT'S GOING ON WITH THE POWER USERS VERSUS WHAT'S GOING ON WITH THE TYPICAL USER. SO RAMP HAS SOME DATA HERE SHOWING THAT THE TOP 1% OF USERS SPEND AROUND $7,500 PER PERSON ON TOKENS AT AN ENTERPRISE. THE MEDIAN USER, IT'S AROUND $11 PER MONTH. SO THERE'S A BIG DISCONNECT THERE. SO I WOULDN'T SAY THAT, OKAY, ENTERPRISES ARE VASTLY SPENDING WAY TOO MUCH MONEY ON TOKENS HERE. WE'VE SEEN TOKEN PRICES FALL. WE'VE SEEN TOKEN SPENDING START TO NORMALIZE. AND FOR THE EVERYDAY USER WHERE A LOT OF THE VALUE IS COMING FROM, IT DOES LOOK MUCH MORE IN CHECK.
[02:20:59] Speaker 4: HOW DO YOU DISTILL GAINS BEING MADE FROM AI ADOPTION AT A TIME WHEN A LOT OF COMPANIES ARE GETTING CRIMPED BY OIL PRICES AND THERE'S A REAL QUESTION AROUND CONSUMER SPENDING? HOW DO YOU DISTILL THESE DIFFERENT INPUTS?
[02:21:12] Speaker 29: YEAH. SO ON THE CONSUMER SIDE, I WOULD SAY THEY HAVE A LITTLE BIT LESS TORQUE THERE FROM THE AI ADOPTION. BUT WHAT WE'RE SEEING ON THE CONSUMER, WE RUN OUR PROPRIETARY MONTHLY CONSUMER SURVEY, SENTIMENT HAS FALLEN, BUT SPENDING IS STILL HOLDING UP. THE TOP END OF THE K ECONOMY, THEY'RE STILL OUT THERE. THEY'RE STILL SPENDING. SO EVEN THOUGH SENTIMENT AND OIL IS A PROBLEM FOR THE CONSUMER, THEY'RE CONTINUING TO SPEND.
[02:21:36] Speaker 5: WE SAW THIS AHEAD OF THE 2022 MIDTERM ELECTIONS AS WELL. THAT'S WHY JOE BIDEN WENT TO SAUDI ARABIA AND GAVE A FIST BUMB TO THE CROWN PRINCE. NOTHING HAS REALLY CHANGED, HAS IT?
[02:21:46] Speaker 29: SO, YEAH. INFLATION IS STILL A HUGE PROBLEM FOR PEOPLE. PRICE LEVELS ARE STILL A HUGE PROBLEM FOR PEOPLE. WHEN WE TALK ABOUT WHAT CONSUMERS ARE THINKING ABOUT TOWARDS THE AI BUILDOUT, THERE'S A LOT OF CONCERN AROUND POWER BILLS. WHAT DOES THAT MEAN FOR THE CONSUMER WALLET? SO ANYTHING THAT HAS TO TOUCH ON AFFORDABILITY IS STILL A HUGE ISSUE FOR THE CONSUMER.
[02:22:03] Speaker 2: BANK EARNICS, DO YOU THINK THE BANKS ARE A TECH TRADE, A CONSUMER?
[02:22:12] Speaker 29: I THINK THERE'S A BIG COMBINATION THERE. YOU HAVE THE M&A PIPELINE, YOU HAVE WHAT'S GOING ON IN TECH. THERE ARE ALSO STAR AI ADOPTERS. THERE'S A LOT OF THINGS IN THE BACK OFFICE THAT CAN BE MADE A LOT MORE EFFICIENT VIA AI ADOPTION. RATES IS, OF COURSE, AN OVERHANG ON THE STORY. SO I THINK WHAT'S REALLY IMPORTANT TO SEE, DO WE GET GOOD NEWS AND DOES THE MARKET TREAT GOOD NEWS AS GOOD NEWS OR IS GOOD NEWS BAD NEWS AND THERE'S SOME SORT OF RATE OVERHANG. I THINK WATCHING THAT OUTCOME ON FINANCIALS AND THEN BOMB VOLATILITY IS WHAT'S GOING TO BE REALLY IMPORTANT. INTERESTING, MICHELLE. THANK YOU.
[02:22:40] Speaker 2: APPRECIATE IT. MICHELLE WEAVER OF MORGAN STANLEY GOING INTO EARNINGS SEASON. SHE WAS NEVER GOING TO BITE ON THE FISTBUNP STORY FROM BIDEN BACK IN THE DAY. MY POINT IS, A LOT OF PEOPLE
[02:22:48] Speaker 5: ALSO THINK THAT THIS IS GOING TO BE THE DRIVING FORCE OF THE MIDTERM ELECTIONS, AND IT IS. BUT AT THE SAME TIME, ACTUALLY, THE DEMOCRATS HELD UP PRETTY WELL IN 2022, EVEN THOUGH THEY HAD ALL THESE INFLATION ISSUES WITH GASOLINE AT ITS RECORD HIGH GOING INTO THAT MIDTERM ELECTION. SO POTENTIALLY, IT'S NOT GOING TO BE THIS, YOU KNOW, BLUE BLOWOUT THAT EVERYONE IS EXPECTING.
[02:23:07] Speaker 2: WAS THIS THE PRESIDENT'S VERSION OF HIS FIST BUMP OVER THE WEEKEND? IS THAT HOW YOU'RE FRAMING THINGS?
[02:23:11] Speaker 5: I DON'T THINK IT'S APPLES TO APPLES, BUT YES, THIS WAS, YOU KNOW, SOME FOREIGN POLICY MANEUVER TO TRY TO ASSUAGE A
[02:23:18] Speaker 2: DOMESTIC CONCERN. GOT A MASSIVE WEEK COMING UP. CPI, PPI, BANK EARNINGS, THE FED SHARE, KEVIN WALSH, COMING UP TOMORROW, GERALD CASSIDY OF RBC, MIKE WOLSON OF MORGAN STANLEY, AND A WHOLE LOT MORE. THAT DATA, THOSE EARNINGS SETTING THE TONE GOING INTO YEAR-RAND.
[02:23:34] Speaker 4: YEAH, AT A TIME WHERE PEOPLE ARE REALLY TRYING TO UNDERSTAND WHETHER THE CONSUMER CAN KEEP SPENDING, WHETHER THERE HAS BEEN ANY EFFECT OF HIGHER RATES, AND ULTIMATELY WHETHER THIS REALLY COMES DOWN TO THE HAILMARY OF OIL PRICES COMING DOWN TO SAVE THE FED FROM HAVING TO GO THE
[02:23:47] Speaker 5: FULL MILE. HIGHER RATES ARE GOING THROUGH THE HIGHER RATES.
[02:23:57] Speaker 2: WE WILL SEE YOU THROUGH THE WEEK AT SOME POINT IN THE MIDDLE OF THE NIGHT IN THAILAND.
[02:24:02] Speaker 4: SORT OF A ZOMBIE LOOKING FOR SOME CLUES. THAT IS A LITTLE BIT OF A HIGHER RATES.
[02:24:18] Speaker 2: WE HAVE A RECOMMENDATION, HAVEN'T YOU? WE SPEND TOO MUCH TIME WITH TK. LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING.
[02:24:22] Speaker ?: THANK YOU FOR CHOOSING BLOOMBERG TV. THIS WAS BLOOMBERG SURVEILLANCE.