Bloomberg Surveillance 10/26/2026

[00:00:01] Speaker 1: I THINK THAT THE EARNINGS STORY IS STILL THERE. WE ARE PROBABLY EXPECTING HIGH TEAMS EARNINGS GROWTH. [00:00:10] Speaker 2: YOU ARE HEARING THESE EARNINGS REPORTS AND THEY WANT A BLANK CHECKBOOK. [00:00:13] Speaker 3: FOR THINGS TO CALM DOWN, THOSE EARNINGS COLLECTIVELY WOULD HAVE TO BE BETTER THAN EXPECTED. IT IS NOT ENOUGH TO JUST HAVE EARNINGS THAT CONTINUE AT THAT PACE. [00:00:20] Speaker 4: THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, [00:00:23] Speaker 5: LISA ABRAHAMOWITZ AND ANNE-MARIE HORDERN. LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD [00:00:29] Max Ketner: MORNING, GOOD MORNING, GOOD MORNING, GOOD MORNING. FOR OUR AUDIENCE WORLDWIDE, BLOOMBERG SURVEILLANCE STARTS RIGHT NOW COMING INTO MONDAY, TEAING UP A BIG WEEK AHEAD. EQUITY MARKETS LOOKING TO RECOVER FROM ANOTHER BAD ATTACK JITTERS, HEADING INTO THE NEXT DOSE OF QUARTERLY EARNINGS FROM THE MEGA CAPS AND A FED DECISION STUCK BETWEEN HOT INFLATION AND SOME MIDTERM ELECTIONS. [00:00:49] Speaker 7: FED CHAIR KEVIN WALSH, TWO DAYS AWAY. THIS IS SUCH A PIVOTAL WEEK. I KNOW THAT WE OFTEN SAY THAT, BUT REALLY THIS CANNOT BE OVERSTATED IN TERMS OF HOW DECLINING THE LAST TIME THE FED MET. IT FELT LIKE FOR SURE THE FED WAS GOING TO HIKE RATES IN OCTOBER. THERE WAS A 51% CHANCE BEING BAKED INTO MARKETS. WE WERE LOOKING AT A TENURE AROUND 5%. PEOPLE THOUGHT, OH, MY GOODNESS, THAT'S SO HIGH. TODAY IT'S ALMOST AROUND THE SAME LEVEL, EXCEPT NOW WE'RE PRICING IN LESS THAN A 10% CHANCE OF A FED RATE HIKE. WHAT HAS CHANGED? HOW DOES THE FED SIGNAL IT? [00:01:28] Max Ketner: THE DATA SAYS GO, THE MARKET SAYS NO, ARGUABLY BECAUSE WE'VE BEEN GUIDED TOWARDS THAT DECISION FROM A COUPLE OF INDIVIDUALS, KEY COMMITTEE MEMBERS, THE VICE CHAIR AND THE NEW YORK FED PRESIDENT, WHICH INTRODUCES THE OPPORTUNITY FOR THE FED CHAIR TO DO SOMETHING THAT HE WOULD QUITE LIKE TO DO, TORPEADO FORWARD GUIDANCE AT THIS INSTITUTION AND RESET THE FED IN THE WAY HE WANTS TO. JUST HOW MUCH OF A NEW FED IS [00:01:48] Speaker 7: THIS? OR IS THIS THE OLD FED THAT IS CLOAKED WITH NEW RHETORIC? AND ULTIMATELY, DOES KEVIN WARSH REGRET THE IDEA OF DROPPING FORWARD GUIDANCE AND CREATING THIS STRANGE RUBRIC WHERE HE ULTIMATELY IS OUTSOURCING IT TO JEFFERSON AND WILLIAMS OR DOES HE COME IN AND SURPRISE AND SAY THIS IS A NEW FED? PROBABLY ABOUT THREE OF THEM SAYING THAT THERE SHOULD BE A HIKE, PROBABLY LORI LOGAN, I'M EXTRAPOLATING FROM SOME OF THEIR COMMENTARY BEFORE SOME OF THE HOT PRINCE. NONETHELESS, IF YOU DO GET ENOUGH OF A CRITICAL MASS DISSENTING, IT PUTS MORE OF THE ONUS ON KEVIN WARSH TO [00:02:21] Max Ketner: EXPLAIN HIS THINKING. JONATHAN: THE FED DECISION THIS WEDNESDAY, LOOK OUT FOR THESE EARNINGS TOO. $10 TRILLION PLUS OF EARNINGS IN AMERICA ACROSS TECH THROUGHOUT THE WEEK. BRAMO SAID IT LAST WEEK, IF I TELL YOU THE NUMBERS, CAN YOU GUESS HOW THIS MARKET WILL REACT? PEOPLE ARE BECOMING MORE AND MORE CONFUSED ABOUT WHAT THIS MARKET IS TEAING OFF AT THE MOMENT. PEOPLE ARE GETTING OFF AT THE MOMENT. THIS CAME FROM MAX KETNER THIS MORNING OF HSBC. HE HAS CHANGED HIS CALL. HE WAS BULLISH AND NOW HE IS [00:02:59] Speaker 7: NOT ANYMORE. HE IS CALLING IT NARRATIVE BINGO. WE ARE LOOKING FOR SOMETHING WHERE CAPEX IS REWARDED OR CAPEX IS PUNISHED. IT SEEMS LIKE ALL CYLINDERS ARE BLAZING. PEOPLE FOCUS ON AN EQUITY RAISE THAT MAY BE DILUTE THE STOCK VALUATIONS AND THE STOCK PLUMMETS. PEOPLE FOCUS ON EARNINGS. THE THREE BIG TECH NAMES ARE REPORTING EARNINGS THIS WEEK, ALPHABET, MICROSOFT AND AMAZON, ARE EXPECTED TO HAVE $650 BILLION OF CAPEX THIS YEAR. IT IS SUPPOSED TO INCREASE BY ABOUT A THIRD NEXT YEAR. IS THAT GOOD? IS THAT BAD? ARE THEY THE BIG KAHUNAS THAT CAN RAISE THAT KIND OF MONEY? IT DEPENDS ON WHAT THE PROFITABILITY IS, WHAT THE UPTAKE IS, HOW ROBUST THOSE STREAMS OF REVENUE ARE. WHAT DOES HE SAY? IS THE WAR IN IRAN CONTINUING WITH A SIGNIFICANT AMOUNT? [00:03:58] Max Ketner: ARE PEOPLE NOT EATING THEIR WHEATIES THAT MORNING? WE ULTIMATELY DON'T KNOW. IT IS GOING TO BE A LONG WEEK. AT A TIME WHEN ACCESS TO CAPITAL IS INCREASINGLY UNEVEN, EQUITIES LOOKING TO BOUNCE BACK ON THE S&P 500, FIRMER BY A THIRD OF 1%. COMING UP THIS HOUR, AS INVESTORS BRACE FOR KEY RISK EVENTS THROUGH THE WEEK. WE'VE BEEN ADDED TO HEDGE NOW AND THEN RELOAD IN 27. WE BEGIN THIS HOUR WITH STOCKS HOLDING STEADY TO KICK OFF A BUSY WEEK OF TECH EARNINGS AND GLOBAL RATE DECISIONS. RUSS COSTRICK OF BLACKROCK WRITING, WE HAVE TACTICALLY REDUCED AI EXPOSURE AS THE MARKET DIGESTS COMPETING NARRATIVES AROUND CAPITAL SPENDING AND FREE CASHFLOW. RUSS JOINS US NOW FOR MORE. RUSS WELCOME, IS THAT A SOPHISTICATED WAY OF SAYING THINGS [00:04:45] Russ: ARE GETTING CONFUSING AND QUICKLY? PROBABLY. I AGREE WITH THE NOTION THAT EVEN IF YOU HAD PERFECT FORESIGHT INTO WHAT EARNINGS ARE GOING TO LOOK LIKE THIS WEEK, THE EARNINGS ARE GOING TO MAKE SURE THAT THE EARNINGS ARE GOING TO MAKE SURE THAT THE EARNINGS ARE ALL DISCUSSED. IT'S GONE INTO A LOT OF ISSUES THAT AREN'T ABOUT THAT SINGLE EARNINGS NUMBER. IT'S ABOUT THE REVENUE. IT'S ABOUT THE PROFITABILITY AND IT'S ABOUT CAPEX. AND I DO THINK TO ANSWER ONE OF THE QUESTIONS YOU POSED IN THE INTRO, THE MARKET HAS BECOME MORE SKEPTICAL OF THESE [00:05:16] Max Ketner: ASTRONOMICAL CAPEX NUMBERS, THEIR IMPACT ON FREE CASHFLOW AND THEIR IMPACT ON BORROWING COSTS. AND WHAT UNDERPINS THAT CAPEX, RUSS, AS YOU KNOW, HAS BEEN INCREASED DEMAND FOR CAPITAL, AND THAT'S COMING CLEARLY FROM THE HYPERSCALERS, OTHER PARTS OF THE A.I. VALUE CHAIN. WE'VE GOT A LOT OF ATTENTION. ON THE DEBT MARKETS, HE SAID THIS, "DEBT MARKETS HAVE ALMOST ENTIRELY SHUT OFF ACCESS TO MONEY FOR ANY COMPANY THAT DOESN'T HAVE SUBSTANTIAL REVENUE INDEPENDENT OF A.I. [00:05:45] Russ: DATA CENTERS." RUSS, WHAT'S YOUR READ ON WHAT'S HAPPENING IN CREDIT AND THE PUSHBACK THAT'S EMERGING? I THINK THE SIMPLE ANSWER IS WE'RE SEEING INCREASED DEMAND INCREASED DEMANDS THAT WE'RE SEEING INCREASED DEMANDS. WE'RE SEEING INCREASED DEMANDS OF THE VALUE CHAIN. IT'S ALSO OBVIOUSLY COMING FROM SOVEREIGN BORROWERS. IT'S IMPORTANT TO REMEMBER THAT THIS IS NOT HAPPENING IN A VACUUM. WE ALSO HAVE SIGNIFICANT STRESS IN SOVEREIGN DEBT MARKETS, PARTICULARLY IN EUROPE, NOTABLY FRANCE. WHILE I THINK A LOT OF THE A.I. SPENDING LONG-TERM MAKES SENSE. IT'S HAPPENING IN A TIME WHERE COMPANIES ARE COMPETING WITH GOVERNMENTS AND GOING TO THE CAPITAL MARKETS REPEATEDLY. AND THAT, NOT SURPRISINGLY, IS PUTTING UPPER PRESSURE ON RATES. [00:06:27] Speaker 7: A LOT OF PEOPLE LAST WEEK SAID, OKAY, THAT STORY HAS PEAKED OUT. MAYBE RATES HAVE GOTTEN AHEAD OF THEMSELVES. WE TALKED TO BLACKROCK LAST WEEK SAYING, MAYBE WE ACTUALLY HAVE REACHED A LEVEL THAT MAKES SENSE ON THE 10-YEAR AND THEY'RE LEGGING INTO DURATION. HOW MUCH ARE YOU SEEING THAT? THIS IS FROM THE BLACKROCK INVESTMENT INSTITUTE. HOW MUCH ARE YOU EXPERIENCING THAT ON YOUR END, TOO? LEGGING INTO DURATION ON THE MARGINS? BECAUSE A LOT OF THIS HAS GOTTEN PRICED IN. [00:06:51] Russ: I CAN'T THINK THERE ARE A COUPLE OF THINGS. IT HAS BEEN OBVIOUSLY HAD A PRETTY SIGNIFICANT PULLBACK IN LONG-TERM YIELDS LAST WEEK. FIRST OF ALL, THERE'S BEEN AN INTERESTING DYNAMIC THIS WEEK, PARDON ME, THIS MONTH, WHICH IS THAT FOR THE FIRST TIME REALLY IN YEARS, AT LEAST IN THE VERY SHORT TERM, BONDS HAVE ACTUALLY BEEN MOVING IN THE OPPOSITE DIRECTION OF STOCKS. AND IF YOU LOOK AT THE STOCK BOND CORRELATION, IT LOOKS VERY DIFFERENT IN OCTOBER THAN IT HAS FOR MOST OF THE LAST THREE YEARS. I'M NOT SURE THERE'S A LOT TO EXPLAIN THAT, BUT IT HAS BEEN A CHANGE IN THE WAY THE ASSETS ARE TRADING. BUT THE THING I WOULD SAY IS THAT IN GENERAL, IT'S BEEN VERY EASY TO BECOME PESSIMISTIC ON THE BOND MARKET. BUT THE REALITY IS, AND RICK READER HAS SPOKE ABOUT THIS MANY TIMES, FOR THE FIRST TIME, ARGUABLY IN 17, 18, 19 YEARS, YOU CAN BUILD A DIVERSIFIED PORTFOLIO, GET A 7% YIELD, NOT TAKE A TON OF CREDIT OR DURATION RISK. AND THAT'S SOMETHING TO THINK ABOUT IN MULTI-ASSET PORTFOLIO IS BECAUSE AS STOCKS HAVE BECOME MORE VOLATILE, A BOND PORTFOLIO HAS BECOME MORE COMPETITIVE IN THE ENVIRONMENT WE'RE IN. [00:07:55] Speaker 7: DO YOU THINK THAT THE RECENT JITTERS IN AI ARE UNDERPINNING HOW TREASURIES ARE A BETTER BET THAN EVEN HIGHLY RATED AI-RELATED CREDIT? [00:08:05] Russ: YOU KNOW, I'M NOT WILLING TO SORT OF MAKE THAT BET YET, BECAUSE AGAIN, I THINK WHAT WE'VE SEEN IS A VERY SHORT-TERM DYNAMIC. AND WHAT IT DOES SUGGEST IS THAT PEOPLE ARE A LITTLE BIT MORE AT THE MARGIN CONCERNED ABOUT GROWTH. YOU KNOW, WHEN YOU SEE THAT SHIFT, WHERE STOCKS AND BOND CORRELATIONS START TO GO NEGATIVE, NORMALLY IMPLIES THAT THE MARGIN MAY BE A LITTLE LESS CONCERNED ABOUT INFLATION, A LITTLE BIT MORE CONCERNED ABOUT IF WE HAVE SLOWER GROWTH. AND THAT COULD BE DRIVEN BY THE LABOR MARKET, ALTHOUGH WE SEE ABSOLUTELY NO SIGNS OF IT. IT COULD ALSO BE DRIVEN BY SOME SLOWDOWN IN THE AI-TAILWIND. AGAIN, I DON'T SEE A LOT OF SIGN OF THAT. SO FOR NOW, I SAY THAT'S MORE NOISE THAN SIGNAL. [00:08:42] Max Ketner: WELL, RUSS, LET'S JUST FINISH ON THAT NOISE OR SIGNAL. ON THE AI SLOWDOWN. THAT'S WHERE THE QUESTION IS FOR MANY PEOPLE, WHETHER THAT RUNWAY IS COMPROMISED BY WHAT'S HAPPENING IN CAPITAL MARKETS, BUT ALSO THE POLITICS. RUSS, HOW DO YOU THINK ABOUT POTENTIAL CONSTRAINTS, EITHER CAPITAL MARKETS OR POLITICAL CONSTRAINTS, IN THE COMING MONTHS? [00:08:59] Russ: I THINK THERE'S A BIG DIFFERENCE BETWEEN THE SHORT-TERM AND THE LONG-TERM. OBVIOUSLY, THERE'S BEEN A LOT OF PUSHBACK ABOUT DATA CENTERS. THERE ACTUALLY MAY BE A SOLUTION TO THAT WITH DATA CENTERS IN SPACE, WHICH IS NOT AS CRAZY AS IT SOUNDS. BUT I DO THINK IN THE NEAR TERM, SOME OF THE CONCERNS ARE GOING TO REMAIN FRONT AND CENTER. HAVING SAID THAT, WE'RE STILL IN THE VERY EARLY INNINGS OF THE AI STORY. THESE COMPANIES ARE STILL PRODUCING SIGNIFICANT EARNINGS GROWTH. VALUATIONS HAVE COME DOWN. SO, YOU KNOW, AS WE TALKED ABOUT IN THE INTRO, NEXT ONE, TWO, THREE MONTHS, I UNDERSTAND THE CONCERN. THEIR TACTICAL ISSUES, THEIR POSITIONING ISSUES. IF YOU HAD A TWO, THREE-YEAR HORIZON, I STILL THINK MANY OF THESE STOCKS, AT THESE LEVELS IN PARTICULAR, OFFER AN INTERESTING RETURN. [00:09:40] Max Ketner: RUSS, YOU KNOW, YOU HALF-JOKED, AND I THINK YOU WERE REALLY JOKING, LISA SAID IT IN THE LAST WEEK, IT MIGHT BE EASIER TO BUILD DATA CENTERS IN SPACE RIGHT NOW THAN ON PLANET EARTH, GIVEN THE POLITICAL BACKDROP. [00:09:50] Speaker 7: SO, THE FIRST PROTOTYPED DATA CENTER SATELLITES THAT ARE SLATED FOR SPACE ARE SET TO LAUNCH IN EARLY TO LATE 2027. THOUGH, MEANINGFUL LARGE-SCALE COMMERCIAL OPERATION IS EXPECTED TO TAKE ANOTHER DECADE OR LONGER. SO, ON ONE HAND, IT'S CLOSER THAN EXPECTED. ON THE OTHER, IT'S LONGER THAN EXPECTED. I WOULD LIKE TO DO A DEEP DIVE. I WILL GO DOWN THIS RAVAT. [00:10:09] Max Ketner: I LOOK FORWARD TO THAT. I HAVE NO DOUBT YOU WILL. RUSS, THE ONE THING WE HAVEN'T MENTIONED IS THE FED DECISION THAT'S COMING WEDNESDAY. [00:10:14] Russ: WHAT IS A NON-EVENT FOR YOU AND A TEAM? I DON'T THINK IT'S A NON-EVENT. I THINK THE MARKET HAS PUT A LOWER PROBABILITY ON IT. BUT, AT THE END OF THE DAY, I THINK WE'RE PROBABLY MOSTLY ALONG WITH THE MARKET. THE FED IS LIKELY TO HIKE ANOTHER COUPLE OF TIMES. PROBABLY NOT IN OCTOBER. THERE IS A LOT OF THESE CONCERNS ABOUT WHAT DOES THE LONG END OF THE CURVE DO? DO WE CONTINUE TO SEE STRONG NOMINAL GDP? AND, OBVIOUSLY, WHAT WE GET OUT OF Q3 EARNINGS, I THINK THOSE ARE GOING TO BE MORE IMPORTANT DETERMINANTS OF WHERE THE MARKET TRADES IN SIX MONTHS' TIME THAN WHETHER OR NOT IT'S [00:10:48] Max Ketner: ONE OR TWO MORE HIKES. RUSS, GOOD TO SEE YOU. AS ALWAYS, THANK YOU. ON THE LONG END, GOOD FOR A BUNCH OF REASONS TO SEE THE 30-YEAR CLOSER TO FIVE THAN SIX THIS MORNING. [00:10:57] Speaker 7: FIVE THIRTY ONE. PEOPLE WERE WORRIED THAT IT WAS GETTING UNMOREED. HOW MUCH DEMAND IS COMING THOUGH ALSO FROM PEOPLE WHO PREVIOUSLY WERE GOING INTO LONG DURATION, SAY FRENCH BONDS OR LONG DURATION BRAZILIAN BONDS? AND HOW MUCH WAS THE POLITICAL RISK IN THE U.S. OVERSHADOWED BY POLITICAL RISK ELSEWHERE AS WE SEE ELECTIONS COMING THROUGH THAT INCREASEDLY UNDERSCORE THAT, YES, THINGS LOOK MESSY IN THE U.S., BUT MAYBE THEY LOOK MESSIER IN OTHER PLACES. [00:11:19] Max Ketner: SOME LONG DURATION HYPERSCADER CREDITS AS WELL. [00:11:21] Speaker 7: WHAT RATE DO YOU THINK THAT $40 BILLION FROM ELON MUSK IS GOING TO COME AT? IS FUNDING TRULY SECURED? EXACTLY. THAT'S WHAT EVERYBODY WANTS TO KNOW. ULTIMATELY, IF FUNDING IS SECURED, THOSE SPREADS ARE GOING TO BE SO INSTRUMENTAL FOR MARKETS TO UNDERSTAND WHAT THE CLEARING PRICES IS. BIG TIME. [00:11:38] Max Ketner: WE ARE DOING OUR WORK HERE ON OUR END, TRYING TO WORK OUT WHAT THOSE TERMS WERE. LET'S GIVE AN UPDATE ON NEWS WORLDWIDE THIS MORNING WITH YOUR BLOOMBERG BRIEF. LET'S CROSS OVER TO VONNIE QUINN FOR MORE. [00:11:48] Speaker 9: FOURTH TERM AS PRESIDENT, THE 80-YEAR-OLD WINNING 51.8% OF THE VOTE, DEFEATING FLAVIO BOLSONARO, WHO RECEIVED JUST MORE THAN 48%. BOLSONARO IS REFUSING TO CONCEED DEFEAT AND ASKING FOR THE ELECTION RESULTS TO BE ANNULLED AFTER A LAST-MINUTE DECISION TO EXTEND VOTING BY TWO HOURS. FRANCE, AVOIDING A REPEAT OF LAST WEEKEND'S LARGE-SCALE VIOLENCE AND LOOTING DURING NATIONWIDE PROTESTS SATURDAY. OFFICIALS SAY OVER 400,000 PEOPLE DEMONSTRATED ACROSS THE COUNTRY. POLICE CONTAINED THE CLASHES AND PREVENTED DAMAGES TO SHOPS AND BUILDINGS. WHITE HOUSE ECONOMIC ADVISOR KEVIN HASSETT SAYS TRADE TALKS BETWEEN THE U.S. AND CANADA HAVE PICKED UP. THE COMMENTS COME JUST DAYS AFTER THE TRUMP ADMINISTRATION MODIFIED CANADIAN TARIFFS TO BENEFIT SOME MAIN BUSINESSES FOLLOWING LOBBYING BY SENATOR SUSAN COLUMNS. [00:12:42] Max Ketner: THAT IS YOUR BRIEF. JONATHAN: WE'LL PUT THAT IN THE GUIDEBOOK TO BE PRESIDENT OF WHATEVER NATION. DON'T MAKE YOU A PERSONAL ATTORNEY. [00:12:51] Speaker 7: SUPREME COURT JUSTICE. IT COULD BE A SMALL PROBLEM. [00:12:54] Max Ketner: IT COULD BE A NUCLEAR WEAPON. THERE ARE THINGS NOT TO DO THIS YEAR IN POLITICS. JONATHAN: THE LATEST ON THE GROUND TO GUIDE YOU THROUGH WHAT HAPPENED [00:13:05] Speaker 10: OVER THE WEEKEND. UP NEXT ON THE PROGRAM NEARING A FINAL DECISION ON IRAN. WE DEFEATED THEM MILITARILY, FINANCIALLY AND OTHERWISE AND NOW WE ARE ENSURING THAT IRAN [00:13:16] Speaker 11: WILL NEVER HAVE, EVER, EVER, EVER A NUCLEAR WEAPON. [00:13:20] Max Ketner: YOU WILL SEE THAT ENDING QUITE SOON. YOU WILL SEE YOU THIS MORNING. GOOD MORNING. [00:13:30] Speaker ?: GOOD MORNING. THIS IS USUALLY MY FAVORITE WEEK EVERY QUARTER. THIS WEEK RIGHT HERE. STAX OF EARNINGS FROM BIG TECH, THE BIGGEST NAMES ON THE PLANET, INCLUDING ALPHABET, [00:13:47] Max Ketner: MICROSOFT AND AMAZON, SANDWICHED IN BETWEEN CENTRAL BANK DECISIONS, INCLUDING FROM THE FED, KEVIN WASH ON WEDNESDAY, AND THE ECB AND PRESIDENT LAGARDE THIS THURSDAY. [00:14:10] Speaker 7: WEDNESDAY ALWAYS INTERESTING, THURSDAY A LITTLE BIT MORE. THANKS FOR JOINING US. WE ARE GOING TO SEE THE CENTRAL BANK DECISIONS TO REMAIN ON HOLD. DO THEY SIGNAL POTENTIALLY THAT THE REASON WHY THEY ARE NOT INCLINED TO MOVE IS BECAUSE OF SORT OF AN UNDUE WIDENING AND SPREADS GIVEN THE FACT THAT FRENCH YIELDS HAVE GAPPED OUT? [00:14:31] Max Ketner: THERE IS A LOT OF PLANTS THERE. ONE, CAN YOU REALLY DESCRIBE THIS AS AN UNWARRANTED GAP OUT IN FRENCH YIELDS, SPREADS, GET INTO THAT. TWO, I'M RIGHT THERE WITH YOU, CLEAN IT UP. SERIOUSLY, CLEAN IT UP. HEADING INTO 27. THEY NEED TO SORT THAT OUT QUICKLY. [00:14:50] Speaker 7: I'M TALKING ABOUT THE INSTITUTION, NOT JUST ABOUT THE LEADERSHIP RIGHT NOW. IF SHE IS GOING TO LEAVE, THEY NEED TO PUT IN PLACE CLEARLY WHO IS GOING TO REPLACE HER AND WHAT THE GUIDE FORWARD IS IN TERMS OF THEIR UNDERSTANDING OF THE FISCAL SITUATION. WHAT WARRANTS AN INTERVENTION, LET ALONE WHAT INTERVENTION WOULD BE NECESSARY? THEY HAVE A WHOLE HOST OF TOOLS. YOU HAVE LAID THEM OUT WELL. WHERE IS THE ELIGIBILITY GIVEN THAT SOME PEOPLE ARE SAYING [00:15:11] Max Ketner: THIS IS JUST A FUNDAMENTAL REFLECTION OF THE FISCAL SITUATION IN FRANCE? ON WEDNESDAY, THE FED DECISION, THE ECB ON THURSDAY, DOJ IN THE MIX AS WELL THIS COMING FRIDAY. EQUITY FUTURES ON THE S&P, FURMER BY A QUARTER OF 1% ON THE S&P 500 THIS MORNING, FOLLOWING TWO DAYS OF DECLINE ON THE BENCHMARK STATE SIDE. A LOT IS HAPPENING BENEATH THE SURFACE. WE WILL SPEND SOME TIME ON THAT, PARTICULARLY THE UNDERPERFORMANCE ATTACK, THE OUTPERFORMANCE OF THE EQUAL WEIGHT, AND EVERYTHING ELSE, THE LIKES OF STAPLES, UTILITIES THAT ARE PERFORMING SO WELL FOR THE MONTH OF OCTOBER. THE EQUAL COUNTRY, THE EQUAL WEIGHT, THE EQUAL WEIGHT ON BROADLY, YIELDS DOWN JUST ON THE MARGIN THIS MORNING AT THE LONG END, UP ON THE MARGIN AT THE FRONT END, TENS, JUST AROUND [00:15:51] Speaker 7: 5% THIS MORNING, 4.98 HEADING INTO THE FED. IT'S BEEN SUCH A ROUND TRIP THAT IT'S HARD TO IMAGINE THAT WE'RE ALMOST BACK TO WHERE WE WERE, THE LAST FED BEATING. NONETHELESS, THE ROUND TRIP AND EXPECTATIONS VELIES THE QUESTION, WHAT HAS BEEN DRIVING IT? IS IT THE PRICE OF OIL? IS IT THE SITUATION WITH [00:16:06] Max Ketner: IMAGINE THAT THE PRICE OF OIL? IMAGINE THAT THE PRICE OF OIL? [00:16:14] Speaker 10: LET'S TURN TO THE PRICE OF OIL. BRENT CRUDE THIS MORNING, AROUND 1:15, WCI AROUND 101. UNDER SURVEILLANCE THIS MORNING, NEARING A FINAL DECISION ON IRAN. WE OBLITERATED IRAN'S NUCLEAR ENRICHMENT CAPACITY WITH OPERATION MIDNIGHT HABER AND OPERATION EPIC FURY. WE DEFEATED THEM MILITARILY, FINANCIALLY AND OTHERWISE. [00:16:33] Speaker 11: IMAGINE THAT THE PRICE OF OIL IS A NUCLEAR WEAPON. [00:16:37] Max Ketner: YOU WILL SEE THAT ENDING QUITE SOON. HERE IS THE LATEST THIS MORNING. PRESIDENT DONALD TRUMP SUGGESTING THE U.S. MAY RESUME STRIKES ON IRAN FOLLOWING THE MIDTERM ELECTIONS NEXT WEEK. TELLING FOX NEWS THAT HE IS UNSURE IF HE WILL STRIKE A DEAL OR FINISH IT OFF. [00:16:55] Speaker 12: IMAGINE THAT IMAGINE THIS MORNING. WE JUST HEARD PRESIDENT TRUMP STILL ADAMANT ON THE FACT THAT IRAN WILL NEVER EVER BE ABLE TO OBTAIN A NUCLEAR WEAPON. OF COURSE WE'RE STILL GEARING UP FOR WHAT POTENTIALLY COULD BE AN ESCALATION IN THE REGION. THE NOVEMBER 3 MIDTERM ELECTIONS ARE KEY FOR US HERE IN THE REGION. OF COURSE A LOT OF COUNTRIES IN THE REGION SO WE COULD BE GEARING FOR IRAN RETALIATING AGAINST ANY POTENTIAL U.S. ATTACKS AGAINST ITS GROUND. AGAIN, WE STILL DON'T KNOW IF THAT WILL HAPPEN OR NOT. BUT IRAN MADE IT QUITE CLEAR THAT IT WILL RETALIATE AGAINST COUNTRIES IN THE REGION. SO WE COULD POSSIBLY BE GEARING FOR ANOTHER ESCALATION SIMILAR TO THE ONE THAT WE SAW IN MARCH WITH A FULL-SCALE KINETIC WARFARE RETURNING TO THE MIDDLE EAST, UNFORTUNATELY. BUT PERHAPS WHAT IS MORE TIMELY RIGHT NOW IS THIS MEETING, TRILATERAL MEETING THAT WE'RE REPORTING EARLIER TODAY TURKEY. SO MINISTERS OF THOSE THREE COUNTRIES, THE ONES THAT ARE INVOLVED AT THE MECKAH PACT, WILL BE VISITING TEHRAN LATER TODAY WITH THE MOST SENIOR OFFICIAL THERE, KHALED BIN SALMAN. OF COURSE, THAT'S THE SAUDI DEFENSE MINISTER AND BROTHER OF MOHAMMAD BIN SALMAN, THE CROWN PRINCE. THEY WILL BE HEADED TO TEHRAN LATER TODAY. WE'RE NOT SURE WHAT EXACTLY THEY'RE GOING TO BE DISCUSSING. ONE COULD GUESS IT'S PROBABLY ABOUT THE WIDER WAR, THE NUCLEAR WEAPON THAT PRESIDENT TRUMP WAS TALKING ABOUT, AND OF COURSE THE ESCALATING ATTACKS AGAINST SAUDI ARABIA. WE STILL ARE MONITORING JUST WHAT EXACTLY THOSE TALKS WILL INCLUDE. THE LOCATION OF THIS MEETING IS PERHAPS WHAT IS MOST INTERESTING IN TEHRAN, IRAN. AND ALL THE MEANWHILE, ALL PRICES ARE TICKING DOWN SLOWLY, LOWER BUT STILL WELL ABOVE THAT HUNDRED DOLLAR PER BARREL MARK THAT WE'VE BEEN MONITORING OVER THE COURSE OF THIS WAR. ABIR, THANK YOU. TO ABIR'S POINT, BRING UP THE [00:18:37] Max Ketner: PRICE OF CRUDE THIS MORNING. WE MENTIONED IT'S AROUND 1:15. YOU HAD A BIG GAP HIGHER INTO THE WEEKEND LAST WEEK, ANOTHER 6-PERCENT-PLUS GAIN FOR BRENT CRUDE. DECLINING TODAY, THE RETRIC OVER THE WEEKEND NOT EXACTLY CONDUCIVE TO LOWER PRICES FOR OIL. BUT THIS STORY IS AND COULD POTENTIALLY MOVE THE DALVE FOR MANY PEOPLE. THE IDEA, WE'VE GOT THE SAUDI DEFENSE MINISTER, THE ARMY CHIEF OF PAKISTAN, AND THE SO-CALLED SPYMASTER OF TURKEY VISITS IN IRAN. THAT GETS YOUR ATTENTION? [00:19:02] Speaker 7: THEY WANT TO GET IT DONE. THEY WANT TO GET SOME SORT OF DEAL, SOME SORT OF TRANSACTION THAT TAKES SOME OF THE KINETIC WARFARE OFF THE TABLE. THIS IS DAMAGING A LOT OF RESOURCES IN THE AREA AND HAS THE POTENTIAL TO REALLY DAMAGE REPUTATION AS A BUSINESS HUB. YOU'D IMAGINE THEY WANT TO [00:19:17] Max Ketner: AVOID WHAT MIGHT COME AFTER THE MIDTERMS. JOINING US NOW FOR MORE IS COLONEL WAYNE SANDERS OF BLOOMBERG INTELLIGENCE. COLONEL, WELCOME TO THE PROGRAM. WHAT'S YOUR UNDERSTANDING OF WHAT'S BEHIND THAT MEETING TODAY? [00:19:29] Speaker 13: YEAH, I THINK PRESIDENT TRUMP'S TIE INTO THE MIDTERM ELECTION END UP BEING ONE OF THE BIGGEST CATALYSTS THAT WE'VE SEEN IN A WHILE RIGHT NOW. AND THAT IS BECAUSE REGARDLESS OF THE OUTCOME OF THE MIDTERM ELECTIONS, ONCE HE'S DONE WITH THAT, HE STILL HAS AUTHORIZATION. THE AUMF, AS THEY CALL IT, RIGHT? THE AUTHORIZED USE OF MILITARY FORCE. AND HE'S ALSO GOING TO HAVE THREE CARRIER STRIKE GROUPS THAT ARE GOING TO BE IN THE REGION DURING THAT TIME FRAME. SO AT THAT POINT IN TIME, IF I WAS IRANIAN LEADERSHIP, I'M LOOKING AT IT AS I WOULD BE EXPECTING SOME TYPE OF EPIC FURY MIDNIGHT HAMMER TYPE OPERATION THAT WOULD BE COMING FORWARD BECAUSE THERE HAS BEEN SUCH A LONG DELAY IN KINETIC STRIKES THAT IF YOU'RE GOING TO SEE AMERICA HIT, THEY'RE GOING TO HIT HARD. AND SO AT THAT POINT IN TIME, YOU KNOW, TYLER WAS ON EARLIER ON TALKING ABOUT PICKAX MOUNTAIN AND WHETHER OR NOT, YOU KNOW, PRESIDENT TRUMP KEEPS BRINGING UP THE NUCLEAR WEAPON PIECE. SO YOU MIGHT SEE SOME BUNKER BUSTERS TIED IN THERE WITH, AS WELL AS NATANS FORDO AND ISFAHAN BEHIND SOME OF THESE PIECES. SO RIGHT NOW IS THE TIME WHERE I THINK, YOU KNOW, PAKISTAN, SAUDI ARABIA AND TURKEY ARE REALLY PUSHING TO SAY WE NEED TO GET A DEAL GOING ON HERE. BECAUSE ALL WAR GAMES, REGARDLESS OF HOW YOU LOOK AT IT, IF THE U.S. STRIKES, IRAN WILL RETALIATE. THEY'RE GOING TO RETALIATE AGAINST KUWAIT, U.A.E., AGAINST ISRAEL AND OTHERS. THOSE ARE THE AREAS THAT THEY'RE GOING TO STRIKE WITH. AND SO AS YOU MENTIONED ABOUT THE COMMERCIAL HUB, U.A.E. ENDS UP BEING ONE OF THOSE KEY PIECES BECAUSE OF THEIR VERY CLOSE PROXIMITY, ENDS UP BEING ONE OF THOSE COMMERCIAL HUB TARGETS IN THE REGION AS WELL. [00:20:56] Speaker 7: COLONEL SANDERS, HOW ALIGNED ARE U.S. OFFICIALS AND THEIR IDEA OF WHAT A DEAL SHOULD LOOK LIKE WITH OFFICIALS FROM PAKISTAN, SAUDI AND TURKEY? [00:21:05] Speaker 13: I THINK THEY ALL UNDERSTAND, ESPECIALLY THE GULF STATE SIDE OF THE HOUSE, ESPECIALLY FROM THE TRUMP ADMINISTRATION HAS REALLY FOCUSED A LOT ON GULF STATE, NOT ONLY STABILITY BUT ALSO FINANCIAL DEALS, YOU KNOW, PROVIDING SOME ADDITIONAL LEVELS OF SECURITY COOPERATION IN THE AREA. BUT WHAT PRESIDENT TRUMP'S NOT GOING TO DO IS WALK AWAY WITH, YOU KNOW, WITH A LOSS HERE. SO I THINK WHATEVER THAT STRIKE ENDS UP BEING, IF IT WAS, IF THEY HAD A STRIKE KINETICALLY, IT'S GOING TO BE SOMETHING THAT WAS LARGE AND THEN IT'S GOING TO PULL OFF. OR, HEY, RIGHT NOW HE'S PRETTY MUCH PROBABLY WORKING WITH THEM AND SAYING IF WE'RE GOING TO END UP REACHING A DEAL, THIS IS SOMETHING THAT HAS TO INCLUDE THE TIMING OF NUCLEAR, THE NUCLEAR MATERIAL INSPECTIONS. THAT IS ONE OF THE BIGGEST THINGS THAT HAS BEEN THE STICKING POINT BETWEEN IRAN AND THE U.S. UP UNTIL THIS POINT, IS THAT THE U.S. WANTS ANYTHING THAT'S DEALING WITH NUCLEAR MATERIALS TO BE THE FIRST THING THAT IRAN THROWS ON THE TABLE. AND IRAN WANTS TO MAKE SURE THE BLOCKADE IS OFF FIRST BEFORE THEY END UP DOING THAT. SO THAT'S BEEN THE ISSUE UP UNTIL NOW. AND I THINK THAT'S PROBABLY ONE OF THE BIGGEST THINGS THAT THE GULF STATES ARE TRYING TO PUSH TERRAN TO DO. COLONEL SANDERS, HOW DOES THE [00:22:06] Speaker 7: ISRAELI ELECTION, WHICH HAPPENS TOMORROW, PLAY INTO THIS? [00:22:10] Speaker 13: WELL, YOU KNOW, THAT'S A GREAT QUESTION BECAUSE I GUARANTEE YOU THAT EVERY WAR GAMER IN THE PENTAGON HAS STARTED TO LOOK AT THIS IN TERMS OF WHETHER OR NOT THERE'S ANY TYPE OF STRIKE THAT'S IN SUPPORT OF THAT AND WHAT THAT ACTUALLY LOOKS LIKE BOTH ON THE MILITARY SIDE OF THE HOUSE AS WELL AS ON THE DIPLOMATIC AND POLITICAL SIDE OF THE HOUSE, RIGHT? YOU KNOW, THE TRUMP ADMINISTRATION PROBABLY DOESN'T WANT TO LOOK RIGHT NOW LIKE IT IS SOME TYPE OF PUPPET TO ISRAEL. AND SO THAT COMES INTO THIS PLAY AS WELL. BUT AS BEING ONE OF THE STRONGEST ALLIES IN THE REGION, IF THERE WAS SOMETHING, SECRETARY OF DEFENSE, HEGSATH, DID MEET WITH BENJAMIN NETANYAHU. SO IN TERMS OF COORDINATED ABILITY AND STRIKES, I THINK THAT SAYS A LOT IN TERMS OF THE TIMING OF THE ELECTION. BUT ALSO THEN, HEY, EVEN IF NETANYAHU DOESN'T WIN AT THAT POINT IN TIME, NO MATTER WHAT HAPPENS ON THAT NEXT PIECE, THERE ARE MILITARY OPTIONS ON THE TABLE FOR THE ISRAELI DEFENSE [00:23:01] Max Ketner: FORCES TO WORK WITH THE U.S. COLONEL, GOOD TO SEE YOU. AS ALWAYS, IN THE NATION'S CAPITAL, COLONEL WAYNE SANDERS OF BLOOMBERG INTELLIGENCE LOOKING AHEAD TO TWO KEY POLITICAL EVENTS IN THE MIDTERM IN THE NEXT WEEK OR SO. AND YOU MENTIONED, BRAMO, THE ISRAELI ELECTIONS AS WELL. ANOTHER REPORT IN THE LAST FEW DAYS SUGGESTING THAT THE ISRAELI LEADER PUSHED FOR A STRIKE ON IRAN TOGETHER WITH THE PRESIDENT BEFORE THE ELECTION. THE PRESIDENT APPARENTLY DECLINED THAT OFFER BUT SIGNALLED THERE COULD BE SOME JOINT ACTION AT SOME POINT SOON. AND WE'VE SEEN REPORT AFTER REPORT SUGGESTING THE SAME THING. [00:23:27] Speaker 7: THE THINKING HERE IS THAT BENJAMIN NETANYAHU IS SLIGHTLY BEHIND, ALTHOUGH THE POLLS ARE INCONCLUSIVE IN THIS RACE. A LOT OF PEOPLE IN ISRAEL VIEW THIS AS EXISTENTIAL IN TERMS OF CHARTING THE COURSE FOR THE NATION AND, FRANKLY, THE RELATIONSHIP WITH THE REST OF THE WORLD. NETANYAHU HAS SORT OF -- THE IDEA WOULD BE IF HE DOES GET A MAJORITY, PEOPLE WOULD EXPECT A MUCH MORE AGGRESSIVE ACTION VERSUS IRAN, VERSUS A MORE HANGING BACK, WAIT AND SEE OR POTENTIALLY OTHERWISE CALIBRATED RESPONSE. [00:23:57] Max Ketner: THE EVENTS ON THE HORIZON BOTH STAYSIDE AND IN ISRAEL THROUGH OVER THE NEXT FEW DAYS AND AN IMPORTANT MEETING TAKING PLACE IN TEHRAN POTENTIALLY THROUGH TODAY. COMING UP NEXT ON THE PROGRAM WE'LL CATCH UP WITH NEIL CHRISTIANI OF JP MORGAN PRIVATE BANK AS A SURPRISE LUNA VICTORY IN BRAZIL LEAVES INVESTORS VERY MUCH ON EDGE. PLUS ISABELL HAS YOUR MORNING MOVERS. NEIL CLOUD IS FALLING ON A GRAVE WARNING FROM ELON MUSK. [00:24:22] Speaker ?: LIVE FROM NEW YORK CITY, YOU ARE WATCHING BLOOMBERG TV. EQUITY FUTURES POSITIVE HERE LOOKING TO BOUNCE BACK FROM A [00:24:35] Max Ketner: SECOND WEEKLY DECLINE ON THE S&P 500 ON THE S&P THIS MORNING. POSITIVE BY ABOUT A TENTH OF ONE PERCENT. STILL AROUND 2.5 PERCENT AWAY FROM ALL-TIME HIGHS ON THE S&P AND JUST ABOUT FLAT ON THE MONTH SO FAR. WITHIN THAT, THE CHURN HAS BEEN UNREAL. THE EQUAL WEIGHT ON THE S&P PUTTING TOGETHER THREE WEEKS OF GAINS AND THE POWER OF THREE IS ALMOST EVERYWHERE. THREE WEEKS OF GAINS FOR THE EQUAL WEIGHT, THREE WEEKS OF GAINS FOR STAPLES, THREE WEEKS OF DECLINES FOR TECH. YOU WILL SEE THAT SECTOR TO SECTOR AND YOU SEE THAT IN RELATION CROSS ASSET AS WELL. THREE WEEKS OF LOWER 10-YEAR YIELDS TOO. THAT'S AN IMPORTANT FACTOR IN ALL OF THIS, THE SPILL OVER FROM TECH INTO THE BOND MARKET. THIS MORNING, ON A YIELD BASIS, AROUND 5% FOLLOWING THOSE DECLINES WE'VE SEEN, BRAMO, AT THE LONG END OF THE CURVE. [00:25:22] Speaker 7: WHAT'S CHANGED? ULTIMATELY, IT HAS TO DO WITH CREDIT. CREDIT SPREADS HAVE BEEN WIDENING FOR THREE WEEKS AND PEOPLE HAVE STARTED TO PENALIZE, STARTING WITH CORWEAVE, THIS IDEA THAT THERE ARE MORE LEVERAGED PLAYERS, PARTICULARLY THE NEO CLOUDS, WHERE THE FINANCIALS DON'T WORK AT LEVELS AT THIS PACE. THINKING BACK TO WHAT HE SAID, RATES DON'T MATTER TO THE AI TRADE, BUT YIELDS DO, AND YIELDS ARE SPEAKING. [00:25:44] Max Ketner: CREDIT IS STARTING TO BITE. ELON MUSK IS STARTING TO BITE AS WELL. LET'S GET TO YOUR SINGLE NAMES, ISABELLE LEE HAS MORE. [00:25:54] Speaker 14: ELON MUSK IS DEFINITELY STARTING TO BITE, AND THAT IS WHY YOU ARE SEEING NEW CLOUD CHAIRS IN THE RED, UNDER PRESSURE THIS MORNING, WITH THE LIKES OF NEVIA'S CORWEAVAN APPLY DIGITAL, ALL LOWER BY MORE THAN 2%. SO, MUSK RAISED THE ALARM ON SOCIAL MEDIA. HE SAID THAT THE DEATH MARKET HAS ALL BUT CLOSED FOR COMPANIES THAT RELY ON AI DATA CENTERS FOR REVENUE. HE ALSO SAID ON SOCIAL MEDIA THAT MORE THAN 200 OF THESE NEO CLOUD COMPANIES WILL FACE WHAT HE CALLS A QUOTE, GUPPY-LEVEL DEATH AND CONSOLIDATION. HE ALSO ADDS THAT SOME WILL SURVIVE, SURE, BUT NOT MANY. AND STICKING WITH THE MUSK'S THEME, LET'S TAKE A LOOK AT ONE OF HIS COMPANIES, TESLA. YOU SEE SHARES HERE HIGHER IN PRE-MARKET TRADE, UP BY MORE THAN 2%. AND THIS COMES AFTER BARCLAYS UPGRADED THE STOCK TO AN OVERWEIGHT AND INCREASED THE PRICE TARGET TO $450 A SHARE. THAT IMPLIES A ROUGHLY 20% UPSIDE FROM THE LAST CLOSE. THE ANALYST THERE, DAN LEVY, CITED THE IMPROVEMENT IN TESLA'S CORE BUSINESS AND A POTENTIAL MERGER WITH SPACEX, WHICH HE SAID COULD COME AT A PREMIUM FOR TESLA SHAREHOLDERS. AND FINALLY, LET'S TAKE A LOOK AT FAIR. ISAX SHARES ARE LOWER IN PRE-MARKET TRADE, DOWN BY MORE THAN 7%. WE HAVE WEALTH VARGO DOWNGRADING THE STOCK AND ALSO SETTING A NEW PRICE TARGET OF $735. THAT IS A 10% DOWNSIDE. ON FRIDAY, AFTER THE MARKET CLOSE, JOHN, WE GOT NEWS THAT FICO IS HOLDING ITS WHOLE SAME MARKET CREDIT SCORE PROGRAM AT $10. BASICALLY, SOME INVESTORS SEEM TO BE DISAPPOINTED BECAUSE A LARGE DRIVER OF FICO'S GROWTH IS AN INCREASE IN PRICING POWER. [00:27:16] Max Ketner: ISABEL, THANK YOU. HOW MANY PEOPLE HAD TO GOOGLE WHAT DOES GUPPY LEVEL DEATH MEAN? [00:27:20] Speaker 7: ALL I KNOW IS I JUST DID IT. [00:27:22] Max Ketner: WHAT DOES IT MEAN? [00:27:23] Speaker 7: THE FUNNIEST THING IS THAT IT CAME UP. IT WAS SUGGESTED, WHICH MEANS THAT EVERYBODY IS GOOGLING THIS. GUPPY LEVEL DEATH IS A PHRASE COINED BY ELON MUSK. THAT IS NOT HELPFUL, BUT THIS IS THE ISSUE. IN THE CONTEXT OF FISH KEEPING, GUPPY IS NOTORIOUS FOR SUDDENLY AND EASILY DYING IN MASS IF THERE IS EVEN A MINOR SHIFT IN THEIR WATER CHEMISTRY OR ECOSYSTEM. [00:27:43] Max Ketner: THANK YOU, ELON MUSK, FOR THAT. THANK YOU. ON THE RAIDAR THIS MORNING, GOLDMAN SACS SLASHING ITS 12-MONTH TARGET FOR SOUTH KOREA'S COSPY BY 25%, CITING GROWING INVESTOR FEARS OVER THE SUSTAINABILITY OF THE AI INFRASTRUCTURE SPEND. THE INDEX SINKING IN TODAY'S SESSION FUELLED BY A SELL-OFF IN ELECTRONICS. ELON MUSK CLAIMING SPACEX HAS LOCKED IN A $40 BILLION DEBT DEAL TO BUY NVIDIA GPUs WITH RECENT MARKET TURBULENCE THAT PRICING NEGOTIATIONS ARE ACTUALLY STILL UNDERWAY. AND FINALLY, ANTHROPICS CLAWED MODEL REPORTLY BYPASSING A PAYWALL TO ACCESS PUBLIC GEORGIA VOTER DATA. ACCORDING TO AXIOS, THE AGENT ACTED WITHOUT HUMAN AUTHORIZATION. ANTHROPICS SAYING NO VOTER RECORDS WERE BREACHED OR MODIFIED. [00:28:25] Speaker 7: THIS IS ACCESSING A DATABASE THAT IS APPLICABLE TO PEOPLE IF THEY PAY A FEE FOR IT. SO IT WASN'T EXACTLY AS IF IT'S THAT HIGHLY SENSITIVE. NONETHELESS, THE FACT THAT THEY CAN FIND BREACHES, AGAIN, UNDERSCORES THE CONCERN THAT SOME OF THESE AGENTS ARE GETTING OUT OF CONTROL. THEY'RE OUT OF CONTROL OF HUMAN UNDERSTANDING OF THEIR ABILITY TO RESTRAIN THEM. AND WE'RE HEARING THIS SORT OF MARCH OF CONCERNS AHEAD OF THE ACTUAL IPOs OR EVEN THE PUBLIC DOCUMENTATION THAT WE COULD BE GETTING TO UNDERSTAND WHAT THE UPSIDE IS. EVERYONE KEEPS SAYING THERE'S THIS INCREDIBLE UPSIDE FOR HUMANITY. WE KEEP HEARING ABOUT HOW THERE ARE POTENTIAL PRETTY SIGNIFICANT DOWNSIZES TO HUMANITY, DRUMBEAT AFTER DRUMBEAT AFTER DRUMBEAT. [00:29:05] Max Ketner: I'M SEEING MORE ABOUT WITHDRAWING CASH AND PREP IN BRAMO, PLANTING FOOD AND BOTTLED WATER. [00:29:12] Speaker 7: I MEAN, I GUESS THAT SAYS A LOT ABOUT YOU. [00:29:19] Max Ketner: I WANT TO SEE WHEN THEY CURE CANCER, THAT'S MY GOAL. THAT'S CLEARLY MUCH BETTER THAN WHAT WE'RE TALKING ABOUT [00:29:25] Speaker 7: RIGHT NOW. THAT'S CORRECT. INSTEAD OF PREPPING, I'M PREPPING FOR CANCER-FREE [00:29:29] Max Ketner: EXISTENCE. LET'S HOPE THAT'S ACHIEVABLE. LET'S TALK ABOUT SOME OF THE POLITICS. INVESTORS BRACING FOR VOLATILITY IN LATIN AMERICA'S LARGEST ECONOMY FOLLOWING A STUNNING RESULT IN BRAZIL'S PRESIDENTIAL ELECTION OVER THE WEEKEND WITH DEFEATING FLAVIA BOLSONARO. JULIA, WELCOME. THIS IS NOT WITHOUT CONTROVERSY. CAN WE START WITH THE RESULTS AND WHAT WAS REQUESTED BY EACH CANDIDATE FOR AN EXTENSION AND WHO GOT WHAT? [00:29:57] Speaker 15: ABSOLUTELY. LAST NIGHT, WE GOT THE FIRST -- WE GOT A VERY FEW FIRSTS, A BUNCH OF FIRSTS, ACTUALLY, FOR BRAZILIAN ELECTIONS. IT WAS THE FIRST TIME THAT WE EXTENDED. LULA'S TEAM REQUESTED HOURS BE EXTENDED BECAUSE THERE WERE A LOT OF TRANSPORTATION ISSUES REPORTED ACROSS THE COUNTRY. NOT ENOUGH BUSES TO TAKE VOTERS TO POLLING STATIONS. WE HAD REPORTS OF PEOPLE STANDING IN LINE FOR HOURS AND HOURS WAITING FOR TRANSPORTATION TO GO VOTE. AND THAT WAS WHAT LULA'S TEAM REQUESTED. FLAVIO'S TEAM REQUESTED AN EXTENSION BECAUSE OF HEAVY RAINS THAT WE'VE SEEN, ESPECIALLY IN THE SOUTHEAST AND SOUTH OF THE COUNTRY THAT ALSO CAUSED SOME FLOODING AND CHANGES IN VOTING STATIONS. SO THOSE WERE THE TWO REQUESTS. IT TOOK A LONG TIME FOR THE COURTS TO DECIDE TO ACCEPT THE REQUEST. AND BY THE TIME THEY ACCEPTED IT, SOME OF THE POLLING STATIONS WERE ALREADY CLOSED. AND IT IS VERY COMPLICATED IN BRAZIL'S ELECTRONIC VOTING SYSTEM. ONCE IT'S DONE, IT'S VERY HARD TO REOPEN. AND IT HAD NEVER HAPPENED. SO IT CREATED A LOT OF CONFUSION. PEOPLE TRYING TO VOTE. SOME COULD, SOME COULDN'T. AND SO WE GOT -- WE USUALLY TALLY VOTES PRETTY FAST. IT TOOK MUCH LONGER THAN EXPECTED. BUT IN THE END, THE RESULT THAT CAME OUT WAS LULA AHEAD AGAINST ALL POLLS, ALL ODDS, BY A LARGER MARGIN THAN ANYBODY REALLY HAD EXPECTED. AGAIN, FLAVIO WAS EXPECTED TO WIN THE RACE AFTER WINNING THE FIRST ROUND. IT WENT ANOTHER SURPRISE. AND SO THIS IS KIND OF WHERE THINGS STAND. AND AS YOU WERE SHOWING, JOHN, A LITTLE BIT EARLIER, THE MARKET REACTION THAT WE'RE EXPECTING FOR TODAY IS PRETTY DIRE. THE ETF IS DOWN ALMOST 30% IN NEW YORK. A SIMILAR ETF FELL 15% IN JAPAN. SO WE ARE BRACING FOR A DAY OF CIRCUIT BREAKERS AND A LOT OF SUPERLATIVES HERE IN BRAZIL MARKETS. [00:31:57] Max Ketner: AND JULIA, COULD YOU EXPLAIN SOME OF THE PRICE ACTION FOR US? WHAT WERE THE CHANGES THAT PEOPLE WERE ANTICIPATING BY THE FRONT LUNNER AT THE TIME AFTER THE FIRST VOTE? WHAT WERE THE CHANGES THEY WERE ANTICIPATING THAT LED TO THE MONEY GOING IN IN THE FIRST PLACE THAT WON'T MATERIALIZE NOW? [00:32:14] Speaker 15: CONSOLADO CAME OUT AHEAD IN THE FIRST ROUND. TRADERS JUMPED TO PRICE IN MORE MARKET FRIENDLY ADMINISTRATION CONSOLADO CAME OUT OF THE COUNTRY. HE WAS COMMITTED TO DOING A FISCAL ADJUSTMENT. CUTTING GOVERNMENT SPENDING AND GETTING BRAZIL'S FISCAL ACCOUNTS AND SOARING DEFICITS BACK IN CONTROL. HE HADN'T OUTLINED MUCH OF HOW HE WOULD DO THAT. BUT THE HOPE WAS THAT HE WOULD DO MORE THAN LULA HAS DONE IN THE PAST FEW YEARS TO ADDRESS THE FISCAL SITUATION. I THINK THAT THE FISCAL WENT UP FIVE PERCENT THE DAY THAT BOLSONADO WON THE FIRST ROUND. RATES TUMBLED. EVERYBODY JUST RUSHING INTO PRICE IN LOWER INTEREST RATES AHEAD. AND NOW WHAT WE'RE SEEING IS THAT WHOLE TRADE WILL BE UNWOUND. A LOT OF IT ON THE FIRST DAY FOLLOWING THE ELECTION MUCH LIKE WE SAW IN THE FIRST ROUND. SO NOW YOU'RE GOING TO PRICE IN FOR HIGHER RATES AHEAD, A MORE DEPRECIATED CURRENCY AND ALL THE FORECASTING WITH STOCKS, WITH MARKETS COMING BACK TO LIFE, WITH LOWER RATES MAKING STOCKS MORE ATTRACTIVE. NOW YOU'RE GOING TO HAVE TO UNDO ALL OF THAT IN ONE FELL SWOOTH. [00:33:31] Max Ketner: WE'RE EXPECTING SOME GAPY PRICE SECTION THROUGH THIS MORNING. JULIA, THANK YOU. A BUSY WEEKEND FOR YOU AND THE TEAM. JULIA LECHER DOWN IN SAUPALO. WE EXPECT TODAY'S REACTION TO SHARPLY BRING THE VIVESPA BACK TO AT LEAST SEPTEMBER LEVELS WITH STRONG DECLINING MOMENTUM. FOR THE CURRENCY AND RATES, WE EXPECT A MORE MODERATE REACTION. GOOD MORNING. HOW MESSY IS THIS INTERIM GOING TO BE AS THIS ELECTION IS INCREASINGLY LOOKING LIKE IT WILL BE CONTESTED? [00:33:56] Speaker 16: IT WILL BE CHALLENGING. I THINK THAT THE MOST IMPORTANT CONCERN THAT THE MARKET IS GOING TO HAVE IS WHAT IS IT GOING TO LOOK LIKE FROM HERE. BEYOND WHETHER IT'S GOING TO BE CONTESTED OR NOT, THE MARKET WANTS TO HEAR FROM THE ELECTED GOVERNMENT A LITTLE BIT MORE CLARITY ON HOW THE FISCAL IS GOING TO LOOK LIKE, HOW THE LEGACY IS GOING TO LOOK LIKE. AND WITH THAT IN MIND, THAT'S WHERE WE CAN ENGAGE THE MARKET REACTION. [00:34:17] Speaker 7: THERE'S SOME SPECULATION THAT BRAZIL'S CONGRESS LEANS STILL MORE TO THE RIGHT AND THAT THAT COULD ACT AS SOME SORT OF CHECK ON ANY POLICIES THAT MIGHT BE MARKED UNFRIENDLY THAT COME FROM PRESIDENT LULA'S FOURTH TERM. WHAT'S YOUR SENSE OF THAT? [00:34:30] Speaker 16: THAT'S KIND OF TELLINGING TO FORCEE BECAUSE ON ONE END, THE FORMER OR THE INCUMBENT ADMINISTRATION HASN'T NECESSARILY BEEN THAT EXTREME WHEN IT COMES TO SOME OF THE FISCAL MEASURES THAT THEY HAVE TAKEN, ESPECIALLY IN THE PREVIOUS ONE, GIVEN THE FACT THAT THEY WERE BALANCED OUT IN CONGRESS BY MORE CENTRAL LEANING PARTIES. NOW, THE FACT THAT WE HAVE A CONGRESS THAT'S RIGHTER LEANING ALSO COULD ACT AS SOME SORT OF HURDLE FOR ADDITIONAL CONSTITUTIONAL AMENDMENTS THAT THE NEW ADMINISTRATION MIGHT WANT TO PUSH THROUGH THAT COULD SORT OF ALIGN WITH A MORE ORTHODOX FISCAL FRAMEWORK. SO POLITICS BECOMING AN OBSTACLE FOR FINANCES, FOR ECONOMICS. [00:35:17] Speaker 7: WHY IS THIS WORSE FOR STOCKS THAN FOR BONDS IN THE AREA? [00:35:20] Speaker 16: MOSTLY BECAUSE OF VALUATIONS. THE SHARPEST REACTION THAT WE SAW BEFORE, AFTER THE PRIMARIES, CAME ON THE BACK OF STOCKS. NOW, FOR FIXED INCOME AND FOR RATES AND FOR THE CURRENCY, THE REACTION COULD BE A LITTLE BIT MORE TEMPERED, NUMBER ONE ON THE BOND SIDE, BECAUSE THEY DIDN'T REACT AS MUCH BACK ON THE PRIMARIES. AND FOR THE CURRENCY, ONE IMPORTANT THING THAT HAS BEEN HOLDING UP LATIN AMERICAN CURRENCIES IN GENERAL, BUT MORE IMPORTANTLY SO THE REAL IN RECENT WEEKS, HAS BEEN THE CARRY TRADE. AND IN FACT, ACTUALLY, IF YOU ANALYZE THE PERFORMANCE THAT WE'VE SEEN IN THE BRAZILIAN REAL, IT SHARPLY APPRECIATED, THEN IT GAVE BACK A LITTLE, AND THEN IT APPRECIATED AGAIN, DESPITE THE FACT THAT WE WERE ALREADY STARTING TO SEE ON THE POLLS SOME OF THE RESULTS THAT WE GOT LAST NIGHT. SO, TO SOME EXTENT, SEEMS LIKE THE CURRENCY IS ANTICIPATING A CONTINUATION OF THE HIGHER RATE ENVIRONMENT THAT COULD KEEP THE [00:36:11] Max Ketner: CARRY TRADE ALIVE. A LONG LIST OF COUNTRIES IN LATIN AMERICA FLIPPED CONSERVATIVE MORE RECENTLY. [00:36:18] Speaker 16: SO, IT WAS A BIG SURPRISE, TO BE HONEST. WE WERE ANTICIPATING A FLIP TO THE RIGHT, AND THAT HAS BEEN PART OF OUR CENTRAL THESIS FOR LATIN AMERICA FOR THE MAJORITY. [00:36:27] Max Ketner: WHAT UNDERPINS THAT THESIS FOR YOU AND THE TEAM? WHAT UNDERPINS THAT THESIS? WHY IS THAT HAPPENING? [00:36:32] Speaker 16: THERE'S A LOT OF APPETITE FOR CHANGE AMIDST POPULATION, AMIDST POPULATION, AMIDST POPULATIONS IN LATIN AMERICA. AND IT'S COMMON DRIVERS THAT ARE PUSHING THIS THROUGH. IT'S EITHER SECURITY, IT'S INEQUALITY. IT'S SOME OF THE USUAL SUSPECTS, TO BE HONEST. THE WAY THINGS TURNED OUT IN BRAZIL WAS QUITE SURPRISING, GIVEN THAT SOME OF THESE SAME MARKERS WERE THE ONES THAT WERE ALIVE OR THAT WERE PRESENT IN BRAZIL. [00:36:55] Speaker 7: SO HOW DO YOU PRICE WHAT HAPPENS NEXT? YOU WERE ALLUDING TO THIS. THIS CHALLENGING POTENTIALLY OF THE ELECTION RESULTS BY BOLSONARO, A QUESTION ABOUT JUST WHAT HAPPENED WITH THE RAINY DAY VERSUS THE BUSES THAT WERE DELAYED. WHAT'S THE ANATOMY OF THE NEXT COUPLE OF WEEKS? UNCERTAINTY. UNCERTAINTY. [00:37:13] Speaker 16: HOW DO YOU PRICE THAT? VALUATIONS ARE GOING TO KEEP DEPRESSED, TO STAY DEPRESSED. THE CURRENCY IS PROBABLY GOING TO BE RANGE BOUND, I'D SAY, BETWEEN, YOU KNOW, FIVE, MAYBE FIVE, TWENTY. ESPECIALLY IF WE DO SEE SOME MESSAGES FROM AUTHORITIES, ESPECIALLY THE CENTRAL BANK CALLING FOR HIGHER RATES FOR LONGER. AND IN THE MEANTIME, ANY ANNOUNCEMENT, ANY HINT TO SOME SORT OF FISCAL ORTHODOXY THAT MIGHT COME FROM THE RECENTLY ELECTED ADMINISTRATION. [00:37:44] Max Ketner: A LOT OF FUNDS POORLY POSITIONED GOING INTO THIS ONE. BIG SURPRISE FOR MANY. [00:37:47] Speaker 7: ESPECIALLY BECAUSE BRAZIL IS SO RICH IN NATURAL RESOURCES. THEY HAVE RARE EARTH MINERALS. THEY HAVE EVERYTHING THAT THIS WORLD SEEMS TO WANT RIGHT NOW. [00:37:55] Speaker 16: THEY'VE GOT IT ALL. [00:37:56] Speaker 7: THEY'VE GOT IT ALL. NOW HOW DO YOU MONETIZE THAT? HOW DO YOU CREATE A SORT OF BUSINESS-FRIENDLY ENVIRONMENT THAT ALLOWS THE INVESTMENT TO COME IN? AND IF THAT REALLY DOES GET OVERTURNED, SOME OF THE THESES THAT PEOPLE HAVE HAD ABOUT INVESTING IN LATIN AMERICA, WHERE DOES THAT GO? BUT IT DOESN'T NECESSARILY CHANGE. [00:38:09] Speaker 16: I'M SORRY FOR INTERRUPTING, BUT IT DOESN'T NECESSARILY CHANGE BECAUSE THE REALITY IS THAT THERE'S A PRICE TO EVERYTHING. AND IF VALUATIONS COME DOWN SIGNIFICANTLY ENOUGH, THERE'S STILL APPETITE FOR ALL OF THESE COMPETITIVE ADVANTAGES THAT YOU JUST POINTED OUT. IT'S JUST A MATTER OF UNDERSTANDING HOW BUSINESS DOING [00:38:24] Max Ketner: IS GOING TO LOOK LIKE IN THE NEXT FOUR YEARS. YOU CAN INTERRUPT ANYTIME. FUTURES THIS MORNING ON THE S&P SLIGHTLY POSITIVE FOLLOWING LAST WEEK'S LOSSES. LET'S GET YOU AN UPDATE ON [00:38:41] Speaker 9: NEWS WORLDWIDE WITH YOUR BLOOMBERG BRIEF. SINGAPORE WILL STORE SAUDI OIL UNDERGROUND BEGINNING IN THE SECOND HALF OF NEXT YEAR. IT'S PART OF THE PLAN TO MANAGE FLOW DISRUPTIONS FROM THE WAR IN THE WEEKEND. IT HAS BEEN HAPPENING IN THE LAST WEEKEND. IT WAS HIS SECOND VISIT IN JUST MORE THAN A YEAR. HE COMES AHEAD OF PRESIDENT DONALD TRUMP'S VISIT TO THE REGION NEXT MONTH. TRUMP HAS DOWNPLAYED EXPECTATIONS FOR A MEETING WITH KIM AFTER EARLIER INDICATING HE WOULD LIKE ONE TO HAPPEN. VENEZUELAN OPPOSITION LEADER MARIA CARINA MACHADO MAKING A SURPRISE RETURN TO THE COUNTRY. HER TEAM THANKS PRESIDENT DONALD TRUMP AND SECRETARY OF STATE MARCO RUBIO FOR THEIR SUPPORT. TRUMP SAYS HE WASN'T AWARE OF HER RETURN. [00:39:30] Max Ketner: THAT IS YOUR BLOOMBERG GRIEF. UP NEXT ON THE PROGRAM, SOURING EQUITY SENTIMENT. [00:39:37] Speaker 2: IT'S A GREAT TIME TO PRUNE RISK. [00:39:46] Max Ketner: UP NEXT, MAX KETNER IS NO LONGER MAX BULLISH. THE CHANGE THIS MORNING, THE WHY, UP NEXT. WE WILL SEE IF THIS HOLDS. EQUITY FEATURES JUST ABOUT UNCHANGED FOR NASDAQ, JUST ABOUT POSITIVE ON THE S&P 500. UNDER SURVEILLMENT THIS MORNING, SOURING EQUITY SENTIMENT. [00:40:26] Speaker 2: THIS MORNING, YOU HAVE TO BE CAREFUL BECAUSE THE INDEX CONCENTRATION IS AT ALL-TIME HIGHS ALL OVER THE PLANET. IT'S A GREAT TIME TO PRUNE RISK. BONDS ARE WORKING AGAIN. AT THE END OF THE DAY, YOU COULD DO HIGH SINGLE DIGIT, [00:40:41] Max Ketner: LOW DOUBLE DIGIT RETURNS AT A FIXED INCOME FROM HERE. THANKS FOR JOINING US NOW FOR MORE. IT'S GOOD TO SEE YOU. IT'S A CHANGE, AT LEAST FOR THE NEAR TERM. THREE THEMES WILL DOMINATE THE MIDDLE EAST, A POSSIBLE TURN IN FED HAWKISHNESS AND HYPER SCALER, FREE CASH FLOW. MAX, WELCOME. IT'S GOOD TO SEE YOU. [00:41:11] Speaker 17: IT'S A CHANGE, AT LEAST FOR THE NEAR TERM. WHAT'S CHANGED IS, WHEN YOU LOOK AT MAYBE THE NEXT COUPLE OF WEEKS, REALLY, WHEN YOU LOOK, FOR EXAMPLE, THIS WEEK, AT THE HYPER SCALER EARNINGS, I STRUGGLE TO SEE HOW THEY CAN HAVE A BULISH NARRATIVE. IF THEY START CUTTING CAPEX, I THINK THAT WOULD BE PROBABLY INTERPRETED AS THE FIRST ADMISSION OF, WELL, HAVE WE OVERSPENT? IS THIS THE PEAK OF THE CAPEX CYCLE? THAT'S NOT GOOD FOR THE HYPER SCALERS. THAT'S NOT GOOD FOR THE TECH TRADE. IF YOU LOOK AT THE OPPOSITE, IF THEY SAY, LOOK, WE'RE GOING TO DO EVEN MORE, WE'RE GOING TO EXTEND CAPEX BY 10%, 20%, PROBABLY DEATH MARKETS, BOND MARKETS, SPREAD, CDS. THEY WILL BLOW UP EVEN MORE. AND AGAIN, THAT WILL WEIGH ON THE EQUITY SIDE. SO IT'S ALMOST LIKE A HEADS YOU WIN AND TAILS I LOSE SCENARIO FOR THE NEAR TERM. IT'S THE SAME THING FOR THE MIDTERMS NEXT WEEK. IF WE GET A BLUE WAVE, ARE THERE GOING TO BE CONCERNS AROUND AI REGULATION? AS MUCH AS I FUNDAMENTALLY DISAGREE WITH IT. BUT THE NARRATIVE WILL PROBABLY, THE FIRST INITIAL NARRATIVE WILL BE LIKE THAT. SO THEN PROBABLY, IT WILL BE A BIT LIKE LAST THURSDAY, WHERE BONDS WILL RALLY MORE AND WE'LL BE TAKING THAT IN STRIDE AND WE'LL BE PLAYING PROBABLY THOSE GROWTH CONCERNS AND THE CONCERNS THAT THE CAPEX CYCLE IS OVER. WHEREAS IF WE DO HAVE A GRIDLOCK, IF WE DON'T HAVE A BLUE WAVE, IF WE HAVE GRIDLOCK, THEN PROBABLY, AGAIN, BONDS WILL BE DOING QUITE WELL BECAUSE YOU HAVE THEN A SORT OF SCENARIO WHERE YOU'RE GRIDLOCKED. NOTHING'S REALLY GOING TO HAPPEN. YOU KNOW, MAYBE THERE'S GOING TO BE A BIT MORE FISCAL RESTRAINT. AND THAT IS A PRETTY GOOD NEAR-TERM OUTLOOK FOR BONDS. I JUST FEEL LIKE RIGHT NOW, THE BONDS SIDE OF THINGS, THE RATE SIDE OF THINGS, IS PROBABLY THE EASIER TRAIT TO BE IN. [00:42:39] Max Ketner: MAX, WHY DID THIS FLIP? HOW DID WE GET TO THIS POINT OF NARRATIVE BINGO AND A LOSS OF CONVICTION AND CONFIDENCE? WHAT'S THE ORIGINAL SOURCE THAT LED TO THIS? [00:42:48] Speaker 17: YEAH, I THINK THAT NARRATIVE BINGO, LET'S BE HONEST, THAT'S BEEN WITH US AT LEAST FOR THE NEXT FIVE, AT LEAST FOR THE LAST FIVE MONTHS. YOU KNOW, I REMEMBER JUST THREE WEEKS AGO, ONE OF YOUR COLLEAGUES IN PRINCE WAS ASKING ME, CAN YOU GIVE ME A QUOTE FOR, YOU KNOW, THE U.S. EQUITY MARKET BEING ON AN ALL-TIME HIGH. THAT'S BEEN THREE WEEKS AGO. HERE WE SAID THREE WEEKS AFTER, THE END IS NIGHER, THE WORLD IS ENDING. SO, YOU KNOW, THAT SORT OF NARRATIVE BINGO, THAT'S BEEN WITH US MINIMUM FOR THE LAST FIVE MONTHS. IT'S JUST THAT THE HEADLINE INDEX, RIGHT, THE S&P, IS REALLY MASKING THAT. BUT, YOU KNOW, THINK ABOUT JULY. JULY WAS ALREADY THE END OF THE AI TRADE. AND THEN AUGUST, SEPTEMBER, WE HAD THE ENTIRE OPPOSITE. IT'S JUST, I THINK, WHAT IT IS NOW IS, WE NEED TO GO INTO THE YEAR END, AND WE NEED TO LOOK AT, OKAY, IS THIS ACTUALLY REALLY GOING TO BE A RISK-CLEARING EVENT, THE MIDTERMS? AS SO MANY PEOPLE ARE SAYING. AND I FEAR IT'S NOT, BECAUSE WE HAVE THESE AI CAPES CONCERNS. WE HAVE THE CONCERNS AROUND THE MIDDLE EAST AS WELL. YOU KNOW, IS THERE SOMETHING MAYBE HAPPENING IN THE NEXT COUPLE OF WEEKS, COUPLE OF MONTHS? AGAIN, WE CANNOT RULE THAT OUT 100%. SO I FEAR THAT THE CONCENTER'S OPINION AROUND THAT BEING A RISK-CLEARING EVENT, AND THEN WE GET THE TYPICAL POST-MIDTERM WINDOW-DRESSING RALLY, PARTICULARLY WITH THE DAMAGE THAT'S BEEN DONE TO P&L'S BOTH ON THE MACRO SIDE BEFORE LAST WEEK ALREADY, BUT PARTICULARLY NOW TO THE LONG SHORTS LAST WEEK, WITH THE DAMAGE THAT'S BEING DONE, I REALLY FEAR WE'RE MORE AT P&L PROTECTION MODE NOW AMONG THE FAST-MONEY ACCOUNTS, RATHER THAN IN THE PROPER WINDOW-DRESSING PERIOD THEN AFTER THE MIDTERMS. [00:44:17] Speaker 7: SOMETHING HAS CHANGED, THOUGH, AND CLEARLY IT'S CHANGED ENOUGH FOR YOU NOT TO BE MAX BULLISH, WHICH IS A HUGE CHANGE. THERE'S BEEN A CHANGE IN THE CREDIT MARKETS. PEOPLE ARE PUTTING UP THE WALLS AND SAYING NO MOSS FROM CERTAIN ISSUERS, AND IF YOU ARE A GOOD ISSUER, WE'RE GOING TO REALLY CHARGE YOU. STILL, A LOT OF THE BIG HYPERSCALERS ARE COMING TO MARKET. META JUST FILLED ANOTHER PLATFORM FOR MIXED SECURITY SHELF. IN OTHER WORDS, THEY'RE GOING TO PROBABLY SELL BONDS AND STOCKS IN SOME ITERATION COMING DOWN THE PIKE. NOT A SURPRISE GIVEN THEIR EXPECTATIONS FOR CAPEX. AT WHAT POINT CAN THESE COMPANIES JUSTIFY THEIR EXPECTED SPEND LEVEL THAT WE ALREADY KNOW IS [00:44:52] Speaker 17: VERY HIGH? YEAH, LOOK, I THINK THAT IS A STORY FOR AGE ONE. SO FUNDAMENTALLY, NOTHING IS REALLY CHANGING. LET'S BE HONEST. WE LOOK AT THE EARNINGS SEASON RIGHT NOW. WE'VE GOT A QUARTER OF THE S&P 500 HAVING ALREADY REPORTED. WE'VE GOT AN 85% EARNINGS BEET RATE. SO, YOU KNOW, WHEN YOU LOOK AT THINGS OR PLACES TO HIDE OUT, I STILL THINK THE EQUAL WEIGHT AT S&P OR YOU LOOK AT THINGS LIKE THE TOPICS, NOT THE NIKEY, WHICH IS MORE AI AND TECH HEAVY, BUT MORE THE TOPICS. LOOK AT THE UK EQUITY MARKET WITH ITS MORE DEFENSIVE VALUE CHARACTERISTIC. THEY ARE PROBABLY QUITE A GOOD PLACE TO HIDE OUT. AND WE ARE ONLY NEUTRAL EQUITIES. WE REALLY, REALLY WERE NOT GOING ALL THE WAY DOWN TO, LIKE, MEDIUM OR EVEN MAXIMUM BEARISH, BECAUSE THERE'S ALREADY BEEN SO MUCH DAMAGE. BUT HAVING SAID THAT, LISA, JUST LIKE YOU SAID, WHEN CAN WE REALLY SAY THAT THE NARRATIVE AROUND DEATH MARKETS, AROUND EVEN HIGHER CDS, THAT THAT WILL END? I DON'T THINK THAT WILL BE THE NEXT COUPLE OF WEEKS, RIGHT? I REALLY DON'T THINK SO, BECAUSE THERE IS NO REAL INCENTIVE FOR THE HYPERSCALERS, YOU KNOW, OVERALL TO SUDDENLY SAY, AND WE'RE GOING TO SLASH CAPEX BY 20% NOW. WHY WOULD YOU DO THAT? WHY WOULD YOU DO THAT? THERE'S NO INCENTIVE RIGHT NOW. [00:45:58] Speaker 7: AND THAT MIGHT ACTUALLY BE VIEWED AS NEGATIVE BY THE STOCK MARKET IN THIS NARRATIVE ROULETTE THAT WE'RE TALKING ABOUT. ARE YOU COMFORTABLE BUYING AI-RELATED DEBT FROM THE HYPERSCALERS? IS THAT ACTUALLY THE BEST WAY TO PLAY THE STORY NOW, NOT THE EQUITY? [00:46:10] Speaker 17: I DON'T THINK QUITE YET. I THINK, AGAIN, THAT WILL BE AN AGE ONE STORY. BECAUSE IF IN AGE ONE, I THINK THAT WILL BE REALLY, REALLY THE BIG STORY FOR 2027. ASIDE FROM THE MIDDLE EAST AND IRAN, RIGHT? AND THEN WHAT'S HAPPENING WITH OIL. AND ASIDE, MAYBE ALSO AROUND THE FISCAL IMPULSE THAT THAT WILL BE, YOU KNOW, THE FISCAL IMPULSE TURNING NEGATIVE THAT WILL, I THINK, HELP RATES, WILL HELP TREASURIES, ALSO LONG-END TREASURIES. AND THAT SHOULD FREE UP REALLY NOT ONLY MULTIPLES, BUT REALLY REST ACROSS THE BOARD. BUT ON THE AI SIDE, THE BIG STORY FOR 2027 WILL BE, WHEN IS THE ABSOLUTE TROUGH IN FREE CASH FLOW, IN THAT FREE CASH FLOW DYNAMIC? WHEN WILL THE FREE CASH FLOW DYNAMIC, THE RATE OF CHANGE THERE, THE SECOND DERIVATIVE, WHEN WILL THAT IMPROVE? ONCE WE START TO SEE THAT TURN POSITIVE, I THINK THEN YOU CAN REALLY SAY, HOLD ON, NOW THEY'VE NOT CUT CAPEX, THEY'RE DOING UNCHANGED HIGH AMOUNTS OF CAPEX, BUT ACTUALLY THEY'RE NOW EITHER EARNING MORE MONEY ON UNCHANGED REVENUES OR IT'S A MIX OF HIGHER REVENUES AND HIGHER EARNINGS. AND THAT ACTUALLY MAKES FOR SLIGHTLY BETTER OR AT LEAST LESS BAD FREE CASH FLOWS. AND IF THAT HAPPENS, THAT WILL BE HUGELY POSITIVE THAN IN 2027, BECAUSE IT'S NO LONGER A QUESTION OF WHETHER YOU BUY SEMIS AND YOU SHORT THE HYPERSCALERS OR YOU DO THE OPPOSITE. BUT IT'S BASICALLY JUST LONG TECH. IF THAT'S AS A FUNCTION OF NOT CUT AND CAPEX, BUT AS A FUNCTION OF HIGHER PROFITABILITY OR HIGHER SALES, THEN THAT WILL BE HUGELY, HUGELY POSITIVE FOR THE TECH TRADE AND THEN ALSO FOR THE HYPERSCALER DEBT. THAT'S MUCH MORE ON BRAND. [00:47:38] Max Ketner: MAX, THANK YOU. IT'S GOOD TO SEE YOU. AS ALWAYS, THANK YOU, BUDDY. MAX KITTNER OF HSBC ON A CHANGE, AT LEAST IN THE SHORT TERM AND THEN LOOKING TO RELOAD ON ANY CORRECTION WE DO GET. LISA, TO YOUR POINT, YOU'VE TALKED ABOUT IT CONTINUOUSLY. THE NARRATIVE ROULETTE, THE NARRATIVE BINGO, AS MAX CALLS IT, THE LACK OF CONFIDENCE AND CONVICTION ABOUT WHAT INDIVIDUAL DATA POINTS WILL MEAN TO THIS [00:47:57] Speaker 7: MARKET. HOW DO YOU GET BULLISH WHEN YOU TALKED ABOUT WHAT THIS THING MEANS? [00:48:05] Max Ketner: ULTIMATELY, YOU CAN'T READ AN EARNINGS REPORT AND PREDICT HOW THE STOCK IS GOING TO MOVE. UP NEXT, WE WILL CATCH UP WITH NOAH WEISBERGER OF BCA RESEARCH, JESSICA TAITOR OF THE COOK POLITICAL REPORT, BEN [00:48:14] Speaker ?: WILSON OF JP MORGAN, NEIL DUTTER OF RENMACK. [00:48:18] Speaker 3: FROM THE FED, WE EXPECT THEM TO SKIP IN OCTOBER. [00:48:28] Speaker 18: YOU'LL HAVE A CONSENSUS, BUT YOU'RE NOT GOING TO HAVE [00:48:29] Speaker 19: WIDESPEARED AGREEMENTS. FOR WHATEVER REASON, IF THE FED WERE TO SURPRISE, THAT WOULD BASICALLY TELL YOU THAT DETROIK IS DEAD. THEY SAY THEY ARE DATA DEPENDENT, BUT THEY ARE GUIDING BEFORE THE DATA COMES. [00:48:38] Speaker 20: THE DATA DOES SAY GO. IT'S UNCLEAR WHETHER OR [00:48:39] Speaker 4: NOT THEY WILL. THIS IS BLOOMBERG SURVEILLANCE [00:48:42] Speaker 5: WITH JONATHAN FERRO, LISA ABRAMOWITZ, AND ANNE-MARIE HORDERN. GOOD MORNING, GOOD MORNING. [00:48:52] Max Ketner: GOOD MORNING, GOOD MORNING. FOR OUR AUDIENCE WORLDWIDE, THE SECOND ERA OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW IN YOUR PRICE SECTION. IT LOOKS LIKE THIS. WE'RE STRUGGLING TO BOUNCE FOR BIG TECH. THE NASDAQ DOWN BY A 10TH OF 1%. WE'LL GET TO THAT MOVE IN JUST A MOMENT. IN THE BOND MARKET, 2s, 10s, 30s, YORDS DECLINING ON 10s FOR THREE CONSECUTIVE WEEKS THIS MORNING, DOWN ANOTHER BASIS POINT. WEDNESDAY, GOOGLE, MICROSOFT, THURSDAY, AMAZON. THIS MONDAY MORNING, A FOCUS ON THIS STOCK, META. THAT STOCK THIS MORNING, BRAMO SLIDING. [00:49:23] Speaker 7: ANNOUNCING FILING FIRST, A MIXED PURPOSE SHELF. NOW IT'S SAYING THEY MAY SELL UP TO $60 BILLION OF CLASS C STOCK. REMEMBER, CLASS C STOCK IS THE NON-VOTING SHARES THAT MARK ZUCKERBERG WILL PROBABLY RECEIVE SO THAT HE CAN SELL THEM IN CASE THERE IS A WEALTH TAX, A ONE-TIME WEALTH TAX IN CALIFORNIA WHERE HE DOESN'T HAVE TO GIVE UP VOTING CONTROL. IT ALSO, THOUGH, INCLUDES $22.5 BILLION OF CLASS A COMMON STOCK. THIS ISN'T JUST A FUNDRAISE FOR MARK ZUCKERBERG. THIS IS A BROADER FUNDRAISE [00:49:56] Max Ketner: AT A TIME WHERE CAPEX CONTINUES TO CLIMB. THE COMPETITION FOR CAPITAL CONTINUES. THE TIMING IS INTERESTING. ANY DAY NOW, ACCORDING TO REPORTS, WE GET AN S-1 FROM ANTHROPIC AND WE GET A MAJOR OFFERING FROM THEM IN THE NEXT COUPLE OF MONTHS. REPORTS INDICATING THAT IPO COMES BEFORE THANKSGIVING. YOU TALKED ABOUT THE PRESSURE THAT IS BUILDING ON THE CREDIT SIDE. HIGH-YIELD SPREADS ARE GOING TO TELL US ABOUT HOW THEY NEED TO COME TO THE EQUITY MARKET AND HOW THE PRESSURE WOULD CONTINUE TO BUILD ON THE EQUITY SIDE OF THINGS. YOU SEE A SIGN OF THAT THIS [00:50:30] Speaker 7: MORNING FROM AN INDIVIDUAL NAME AND POTENTIALLY FROM OTHERS, TOO. I WAS TALKING WITH A DEBT TRADER THIS MORNING WHO WAS MENTIONING THAT INCREASINGLY THE MODEL MIGHT BE TO SELL BOTH BONDS AND STOCK AT THE SAME TIME. THAT YOU MIGHT DO A CREDIT FUNDRAISE BUT AT THE SAME TIME LEAN ON EQUITY TRADERS. ULTIMATELY, DOES THAT S-1 FROM ANTHROPIC BECOME A CLEARING EVENT OR DOES THAT DOES THAT GIVE THE MARKET A BIT MORE CONFIDENCE. I THINK THAT IS A GOOD CONDITIONAL RISK EVENT. A LOT OF PEOPLE HAVE SPECULATED THAT THE PUSHBACK IN DEBT MARKETS IS IN PREPARATION OF THIS SLOO OF OFFERINGS FROM THE LIKES OF ANTHROPIC AND OPEN AI AND CONFIDENCE. IF YOU DO HAVE A SENSE OF THE KNOWN UNKNOWNS, IF YOU DO HAVE THE NUMBERS IN HAND AND NOT JUST THE LEAKS ABOUT DIFFERENT SECURITY BREACHES, DOES [00:51:10] Max Ketner: THAT GIVE THE MARKET A BIT MORE CONFIDENCE? JONATHAN: THESE ARE THE GUYS THAT ATTRACT THE CAPITAL RIGHT NOW. JUST THINK ABOUT WHAT ELON MUSK SAID OVER THE WEEKEND. DEBT MARKETS HAVE ALMOST ENTIRELY SHUT OFF ACCESS TO MONEY FOR ANY COMPANY THAT DOESN'T HAVE SUBSTANTIAL REVENUE INDEPENDENT OF AI DATA CENTERS. [00:51:28] Speaker 7: THE HANDS ARE STRUGGLING. THE HANDS ARE STRUGGLING. THE HANDS ARE STRUGGLING BECAUSE META SHARES ARE PLUNGING IN RESPONSE TO THESE OFFERINGS. AT THE SAME TIME, ELON MUSK SAYS FUNDING IS SECURED. WE DON'T NECESSARILY KNOW WHAT THE TERMS ARE FOR HIS LATEST $40 BILLION DEAL. HE MIGHT HAVE ACCESS TO CAPITAL MARKETS BUT AT WHAT PRICE? INCREASINGLY, THAT VERY MUCH IS ON THE TABLE FOR BOTH THE [00:51:54] Max Ketner: COMPANIES DECIDING WHERE TO ISSUE AND ALSO THE INVESTORS COMPANIES. THE HANDS ARE TALKING ABOUT THAT. THE EARNINGS ARE DOWN. IT'S NEGATIVE IN EARLY TRADING BY ABOUT 2.5%. COMING UP THIS HOUR, WE'LL CATCH UP WITH NOAH WEISBURGER OF BCA RESEARCH WITH STOCKS BOUNCING BACK GOING INTO KEY TECH EARNINGS. JESSICA TAYLOR OF THE COOK POLITICAL REPORT AS PRESIDENT TRUMP MAKES HIS FINAL MIDTERM PUSH. NEIL DUTTER OF RENMACK PREVIEWING STOCKS JUST ABOUT EDGE AND HIGHER ON THE S&P 500 ON HOPES THAT EARNINGS CAN PULL CHIP MAKERS OUT OF THE WORST WEEKLY STRETCH OF THE YEAR SO FAR. NOAH WEISBURGER OF BCA RESEARCH WRITING STAY OVERWEIGHT TECH BUT GO FOR QUALITY WITHIN IT. THE Q3 TESTS OF WHETHER CAPEX GROWTH IS NORMALIZING OR FALLING OFF A CLIFF. NOAH JOINS US NOW FOR MORE. NOAH, GOOD MORNING. GOOD MORNING. GOOD TO BE HERE. IT'S GOOD TO SEE YOU. IT'S BEEN A RACE TO RAISE CAPITAL ALL YEAR. IT'S THE MARKET STARTING TO PUSH BACK A BIT MORE. [00:52:41] Speaker 21: I THINK YOU'VE DEFINITELY SEEN THE WAY THE MARKET IS TRADING. WE'RE DOWN A LITTLE BIT AT THE INDEX. THERE'S A TREMENDOUS AMOUNT OF NERVOUSNESS AMOUNT OF THE CLIENTS WE SPEAK TO. AND I THINK YOU'RE SEEING -- IF I HAD TO ARGUE BACK AGAINST THAT BROADER NERVOUSNESS, I THINK YOU'RE SEEING A MARKET THAT'S BEEN PRETTY DISCIPLINED BENEATH THE INDEX LEVEL, RIGHT? SO THE CORE WEAVES, THE NEVIUSES, THE NEOCLOUDS ARE REALLY GETTING PUNISHED. BUT I THINK THE QUALITY STOCKS ON A RELATIVE BASIS, THE HYPER SCALERS IN PARTICULAR, SOFTWARE NAMES ARE DOING BETTER. I THINK THAT'S PROBABLY A RATIONAL WAY TO TRADE RIGHT HERE. DO YOU THINK THAT PAIN REMAINS ISOLATED OR SPREADS? I WOULD BET ON RIGHT NOW WE'RE STILL BETTING ON THAT PAIN REMAINS ISOLATED. I THINK, AS YOU ALLUDED TO IN YOUR OPENING COMMENTS, EARNING SEASON IS RIGHT AROUND THE CORNER. I THINK WE'LL LEARN A LOT ABOUT HOW COMPANIES ARE SEEING THEIR OWN CAPITAL RAISES AND POSITIONING IN CAPITAL MARKETS, AND I THINK THAT'S PRETTY IMPORTANT. [00:53:29] Speaker 7: SO DO YOU THINK THAT THE EARNINGS PLUS POTENTIALLY AN S-1 FROM ANTHROPIC COULD BE THE CLEARING EVENT THAT THIS MARKET NEEDS? [00:53:36] Speaker 21: I THINK THAT THAT'S HOW WE'RE THINKING ABOUT IT. AGAIN, I DON'T THINK THIS IS OFF TO THE RACES. BUY EVERYTHING A HIGH BID A MOVE. I THINK WE PREFER TO FOCUS ON LARGE CAP STOCKS. WE WOULDN'T PLAY THIS THROUGH SMALL CAP OR A FULL RISK ON. AND I THINK IF WE STILL SAW PRESSURE ON THE LESS QUALITY PARTS OF THE TECH COMPLEX, THAT WOULDN'T BOTHER ME EITHER. I REALLY DO THINK THIS IS GOING TO REMAIN A BIT OF A HEADWIND. [00:53:59] Speaker 7: I DO WONDER IF THE PENDULUM IS SWITCHING A BIT BACK TO FIXED INCOME FROM STOCKS. ABOUT THREE MONTHS AGO, WHENEVER YOU ASK SOMEBODY HOW DO YOU HEDGE STOCKS, HOW DO YOU HEDGE RISK, THEY SAY BUY MORE STOCKS, BECAUSE ULTIMATELY THAT WAS WHERE THE POTENTIAL GROWTH IS. NOW SUDDENLY YOU HAVE ISSUANCE PRESSURES THAT ARE CREATING A VERY DIFFERENT DYNAMIC IN THE STOCK MARKET AT THE SAME TIME THAT THE DEBT MARKET IS PUTTING UP THE WALLS TO A NUMBER OF LOWER RATED DEBT. DOES THAT MAKE YOU PREFER FIXED INCOME TO EQUITY WHEN IT COMES TO A RISK REWARD ADJUSTED BASIS? [00:54:29] Speaker 21: I THINK THE OTHER HALF OF THAT EQUATION ENDS UP BEING VOLATILITY AS WELL AS YOU SAID RISK REWARD AND THERE I THINK YOU'VE SEEN A LOT OF UNCERTAINTY IN THE BOND MARKET. SO WE LOOK AT MAYBE NOT THE DEBT MARKETS BUT THE RATE MARKETS WHERE THE MOVE INDEX HAS MOVED HIGHER PRETTY DRAMATICALLY. AND I THINK THERE'S A LOT OF UNCERTAINTY ABOUT THE STANCE OF POLICY. THAT ALSO HAS RANIFICATIONS FOR STOCKS AS WELL. I THINK THAT'S A VALUATION QUESTION FOR STOCKS. I DON'T KNOW THAT I WOULD ABANDON STOCKS RISK REWARD BUT AN INCREMENTAL DOLLAR GOING TO A HIGH QUALITY EVEN A HYPERSCALAR DEBT NAME I THINK THEY'LL BE GOOD ON THAT CREDIT. MEANING THEY COULD TURN THE TAP OFF ON CAPEX IF THEY DO HAVE A DEBT PROBLEM. THAT'S MONEY GOOD. I WOULD SAY HIGHER UP THE CAPITAL STRUCTURE. SO I'M A LITTLE BIT INDIFFERENT ON WHERE THAT MARGINAL DOLLAR GOES BUT I WOULD SAY EQUITY MARKET VOLATILITY AT THE INDEX LEVEL HAS BEEN PRETTY WELL CONTAINED. WE'VE SEEN A LOT OF VOLATILITY IN OTHER ASSET MARKETS. [00:55:19] Max Ketner: JUST TO BE CLEAR INDIFFERENT ABOUT WHETHER IT GOES TO A HYPERSCALAR CREDIT OR THE TREASURY MARKET. [00:55:26] Speaker 21: EQUITY AND CREDIT RIGHT NOW. EQUITY AND CREDIT RIGHT NOW WHICH IS A LITTLE BIT OF A CHANGE IN MY OWN THINKING. PART OF IT IS THE BIG SELL OFF WE SAW IN CREDIT OVER MOST OF THE SUMMER. [00:55:33] Max Ketner: CAN YOU DESCRIBE THE BACKUP WE HAVE SEEN IN SPREADS AND WHY YOU BELIEVE NOW YOU MIGHT BE COMPENSATED FOR THE RISK ASSUMED GOING INTO SOME OF THOSE CREDITS. [00:55:41] Speaker 21: I THINK MOSTLY IT HAS TO DO WITH THE FACT THAT THIS IS CAPEX PLANNED CAPEX SPENDING. THAT'S A CHOICE THAT COMPANIES ARE MAKING. I THINK HIGHER UP THE CAPITAL STRUCTURE. I DON'T THINK THERE'S A LOT OF DEFAULT RISK IN SOME OF THESE HYPERSCALAR NAMES. THEY'RE MASSIVE. THE REVENUES ARE MASSIVE. THIS IS A VERY DIFFERENT WORLD THAN 2008 OR 2009. THIS IS A DEMAND STRENGTH DRIVEN TIGHTENING IN THE CREDIT MARKET VERSUS A SUPPLY CONSTRAINT LIKE WE WON'T LEND AT ANY PRICE WORLD WHICH WE SAW, WHICH WE ALL LIVED THROUGH IN 2008 IN THE GREAT FINANCIAL CRISIS. [00:56:09] Max Ketner: DEFAULT IS EXTREME BUT HAVING A BALANCE SHEET THAT MIGHT BE MORE CONSISTENT WITH BBB THAN AA IS THE CONVERSATION WE'RE HAVING HERE NOW. [00:56:15] Speaker 21: AND I THINK YOU'VE SEEN THAT IN THE NEO CLOUDS BUT NOT THE HYPERSCALERS. I THINK THAT WOULD BE THE DISTINCTION I WOULD MAKE. AND ONE OF THE THINGS THAT WE'VE LOOKED AT VERY CAREFULLY, YOU'RE CONSTRAINED TO HISTORY BUT IF YOU LOOK BACK AT RETURN ON INVESTED CAPITAL, ROIC FOR THESE COMPANIES, THE MARKET IS TRADIED OVER THE LAST MONTH OR TWO ON A RELATIVE BASIS VERY MUCH IN LINE. HIGH ROIC COMPANIES HAVE DONE BETTER THAN LOW ROIC COMPANIES WITHIN THE TECH SECTOR. THAT'S NOT SOMETHING I WOULD FADE. I WOULD IMAGINE THAT PATTERN PERSISTS. [00:56:42] Speaker 7: THERE IS A FEAR, AND THIS HAS BEEN CROPPING UP FOR MONTHS NOW ABOUT CIRCULAR FINANCING, ABOUT THE IDEA THAT ALL OF THE AI PLAYERS ARE INTERTWINED AND IF ONE GOES DOWN, IT'S GOING TO REALLY RAISE A SERIOUS RISK FOR THE OTHERS. THERE WAS JUST IN THE FILING, NVIDIA, AMD, AND BROADCOMM ARE AMONG THE ONES WHO HAVE ALREADY PROMISED TO BUY SOME OF THESE CLASSY SHARES FROM META JUST TO SORT OF INCREASE THE CIRCULARITY HERE. I JUST WONDER HOW YOU VIEW THAT. WHO IS THE LYNCHPIN IS THIS? IS IT ANTHROPIC THAT WHEN WE FIND OUT WHAT THE EARNINGS ARE AND HOW MUCH THEY CAN OVERCOME THE FACT THAT TOKEN COSTS ARE GOING DOWN, HOW MUCH THEY ACTUALLY ARE BRINGING IN REVENUE TO SUPPORT THEIR CAPEX, THAT COULD STAVE OFF SOME OF THESE CONCERNS OR IS ULTIMATELY THIS DEEPER? I THINK THAT'S A GREAT POINT. [00:57:22] Speaker 21: YOU ASKED ME BEFORE IF IT WAS A CLEARING EVENT. I DON'T WANT TO BE DISPASSIONATE AND HISTORICAL. IF ANTHROPIC'S IPO STRUGGLES OUT OF THE GATE, THAT'S WHAT IPOs DO. THEY'RE PRICED WELL BY THE BANKERS. THAT'S NOT WHAT'S GOING TO BE INTERESTING TO ME. I THINK WHAT'S GOING TO BE INTERESTING TO ME IS EXACTLY WHAT YOU HIGHLIGHT, WHICH IS HOW DOES ANTHROPIC, WHEN THEY COME TO MARKET FOR THEIR QUARTERLY REPORTS, WHAT ARE THEY SAYING ABOUT THEIR EARNINGS BREATH, WHO'S BUYING, WHAT'S HAPPENING IF TOKEN PRICES MODERATE, WHAT ARE THEY SEEING ON THE QUANTITY SIDE OF THAT EQUATION, I THINK THAT BECOMES IMPORTANT. THE THING THAT WE HAVE TO BE CAREFUL WHEN WE READ IT IS, IF THE TOTAL MARKET IS RISING BUT ANTHROPIC OPEN AI ARE COMPETING WITH OPEN SOURCE MODELS, THEN ANTHROPIC'S NUMBERS ALONE WON'T BE COMPLETELY DISPOSITIVE ABOUT THE STATE OF DEMAND. IT WILL BE ONE OF THE END MARKETS. SO MAYBE NEGATIVE FOR THEIR MARGINS BUT GOOD FOR THE OVERALL PICTURE. THAT WOULD BE THE ONE CAVEAT I WOULD PUT OUT THERE. BUT, YEAH, WE'RE GOING TO BE LOOKING VERY CAREFULLY. I THINK IF THEY DO NOT COME TO MARKET, THAT WOULD BE A PRETTY NEGATIVE SIGN. AND THEN LET THEM COME TO MARKET AND LET'S SEE WHAT'S IN THERE. [00:58:20] Speaker 7: DO YOU GET THE SENSE THAT OTHER COMPANIES ARE ABLE TO PRESENT RETURN ON INVESTMENT ENOUGH TO CONTINUE THE SPENDING CYCLE TO JUSTIFY SOME OF THE TOKEN EXPENSE THAT UNDERPINS A LOT OF THE AI TRADE? [00:58:31] Speaker 21: IT'S A GREAT QUESTION. I THINK WE WERE PROBABLY A LITTLE BIT MORE CONFIDENT A COUPLE OF MONTHS AGO, MAYBE A COUPLE OF QUARTERS AGO. AND I THINK WE WROTE ABOUT THIS AT THE START OF THE YEAR. WE WERE SEEING THE HYPERSCALERS RETURN ON EQUITY FALL. AND THE QUESTION WAS HOW LONG WOULD THE MARKET GIVE THEM THE ROPE TO REVERSE THAT? WE KNEW THIS IS A BIG BUILDOUT PHASE. THE PATH BACK ON A RETURN ON EQUITY IS BY GROWING REVENUES AND EXPANDING MARGINS. WE HAVE SEEN SOME OF THAT. BUT THE MARKET I THINK IS QUESTIONING IT. THE ONE BALANCING FACTOR I WOULD SAY IS THAT VALUATIONS HAVE COMPRESSED PRETTY SIGNIFICANTLY OVER THE LAST COUPLE OF MONTHS WITH EARNINGS STILL STRONG. SO THIS IS NOT A TOPPY MARKET. I THINK THE MARKET HAS BEEN RIGHTLY WANTS TO GO TO SHOW ME PHASE. AND ARE WE GROWING AT 20% EPS GROWTH FOR SOME OF THESE NAMES OR 30? I DON'T THINK NO ONE BELIEVES 50. BUT 20 IS STILL A PRETTY GOOD NUMBER. AND THE OTHER THING I WOULD SAY IS, YES, THIS IS A CONCENTRATED EARNINGS DOLLAR STORY, BUT GROWTH IS A LITTLE BIT MORE DEMOCRATIC, DEMOCRATICALLY DISTRIBUTED ACROSS THE MARKET. EARNINGS GROWTH, NOT EARNINGS DOLLARS. DO YOU THINK THERE IS SOME EARNINGS RISK FOR THE CHIP PLAYERS? I DON'T WANT TO SAY NO. BUT THE REVENUES ARE STRONG. CONSENSUS SAYS NO, OVERWHAMMEDLY. THEN I'LL SAY NO, TOO. BUT I THINK WE'RE AT A POINT IN TIME WHERE I THINK ONE OF THE WORST THINGS YOU CAN SAY ABOUT THE MARKET RIGHT NOW IS WE'RE IN EARNINGS BUBBLE. IF EARNINGS BUBBLES LAST A LONG TIME, I CUT MY TEETH IN THE EARLY 2000'S WHERE IT WAS THE GREAT BRICKS AND CHINA TRADE. WE KNEW THAT WAS A BUBBLE IN COMMODITY MARKETS, BUT IT LASTED A LONG TIME. DO WE NEED TO SEE 30%, 40%? NO. BUT WE ARE AT THE KINK POINT IN THE SUPPLY CURVE. WE'RE AT THE KINK POINT IN THE SUPPLY CURVE. WE'RE AT THE KINK POINT IN THE SUPPLY CURVE. WE'RE AT THE UPPLY CURVE. AND AS DEMAND GOES UP, THAT'S STRAIGHT PROFIT TO THE BOTTOM [01:00:12] Max Ketner: LINE FOR SOME OF THESE COMPANIES. CONFUSING TIME, ISN'T IT? IT IS A CONFUSING TIME. WE'VE HEARD THIS A NUMBER OF TIMES. WE'VE HEARD IT FROM LISA, FROM A SERIES OF GUESTS, FROM MAX KETNER, NARRATIVE BINGO, NARRATIVE ROULETTE, AS [01:00:24] Speaker 7: WE'VE HEARD IT. WHAT DOES A BUBBLE MEAN? [01:00:36] Max Ketner: ULTIMATELY HOW DO YOU GET YOUR HEAD AROUND TRILLIONS OF DOLLARS OF FINANCING THAT YOU'LL HAVE TO PAY FOR AT SOME POINT THAT WILL YIELD SOME AMAZING RESULTS THAT WE DON'T KNOW ABOUT YET. [01:00:44] Speaker 9: WE'LL HAVE THE LATEST ON META WITH YOUR BLOOMBERG BRIEF. THANK YOU. META HAS NOW REVERSED AND IS TRADING HIGHER IN THE PREMARKET. FACEBOOK PARENT ANNOUNCING THE LAUNCH OF PUBLIC OFFERINGS OF DEPOSITORY SHARES AND CLASS A COMMON STOCK. NVIDIA, BROADCOMM AND AMD HAVE INDICATED INTEREST IN BUYING AN AGGREGATE $5 BILLION OF THE SERIES A OFFERING. NET PROCEEDS FROM ALL OF THE OFFERINGS WILL TOTAL ABOUT $35 VEHICLES IN THE COUNTRY. VERSION ADDED 137,000 POST-PAID NET ACCOUNTS IN THE THIRD QUARTER, MARKING THE COMPANY'S BEST PERFORMANCE IN MORE THAN A DECADE. VOLKSWAGEN PLANS TO BUILD A NEW $4 BILLION FACTORY FOR ITS PREMIUM AUDI BRAND IN GEORGIA. AUDI SAYS THE NEW PLANT WILL BE ABLE TO PRODUCE ABOUT 200,000 VEHICLES PER YEAR. PRESIDENT DONALD TRUMP SAYS IT SHOWS THE IMPACT OF TARIFFS LEVIED BY THE U.S. ON AUTO IMPORTS. VONNIE, THANK YOU VERY MUCH FOR THE UPDATE. [01:01:44] Max Ketner: MORE FROM VONNIE IN ABOUT 30 MINUTES TIME. UP NEXT ON THE PROGRAM, THE PRESIDENT'S MIDTERM PROMISE. [01:01:50] Speaker 10: IF THE DEMOCRATS WIN, YOU WILL HAVE A 1929 STYLE ECONOMIC DEPRESSION. IF THE REPUBLICANS WIN, YOU WILL EACH HAVE $5,000 IN YOUR POCKET. AN ECONOMIC SUCCESS FOR OUR COUNTRY LIKE WE HAVE NEVER SEEN [01:02:04] Max Ketner: BEFORE. WE WILL GET TO THE REACTION ON THAT IN JUST A MOMENT WITH JESSICA TAYLOR OF THE COOK [01:02:12] Speaker ?: DEMOCRATS. THANKS FOR JOINING US. [01:02:34] Max Ketner: THE CHAN CONTINUES JUST ABOUT POSITIVE ON THE S&P 500 BY A TENTH OF 1%, AROUND 2.5% AWAY FROM ALL-TIME HIGHS. THAT IS AN ANGSTY, ANGSTY 2.5% DECLINE ON THE S&P. AROUND 3.5% DECLINE ON THE S&P. META IN THE PRE-MARKET WAS LOW AND NOW HIGHER BY 0.7%. AROUND $35 BILLION IN COMMON AND PREFERRED STOCK OFFERINGS COMING FROM THAT NAME. INVIDIA AND BROADCOM INDICATING INTEREST IN PURCHASING UP TO AN AGGREGATE OF $5 BILLION OF [01:03:22] Speaker 7: CLASS A COMMON STOCK. A LOT OF THE TYPICAL DANCE INDICATING THE CHIP PLAYERS TRYING TO GET INTO HELP FINANCE PURCHASES OF THEIR CHIPS THAT THEY SELL BY THE HUGE INVESTORS IN THE DATA CENTER BUILDOUT. ULTIMATELY THAT COMES WITH THE HYPER SCALERS. INTERESTING, A TOTAL OF $95 BILLION STOCK COMING AHEAD OF A SLEW OF IPOs, WHETHER IT BE ANTHROPIC THIS YEAR, OPENAI NEXT. AGAIN, LEANING MORE ON THE STOCK MARKET THAN THE DEBT MARKET. THIS IS INTERESTING GIVEN HOW MUCH PUSHBACK YOU ARE SEEING IN THE DEBT MARKET. THE END OF THE END OF THE THREE YEARS, NOT THE GUPPIES, BUT [01:03:56] Max Ketner: THE OTHERS, STARTING TO TAKE A LOOK AT ALTERNATIVE MODES OF [01:03:58] Speaker 7: FINANCE. WE ARE GOING TO HEAR THAT WORD A LOT. [01:04:02] Max Ketner: HE IS GOOD AT COINING THESE. GETTING AHEAD OF SOME OF THIS STUFF. GETTING AHEAD OF SPACEX, AHEAD OF ANTHROPIC, GETTING AHEAD OF THIS THIS MORNING AND RAISING A TON OF MONEY ON THE EQUITY [01:04:12] Speaker 7: AND DEAD SIDE. WILL THIS PROVE TO BE A HICCUP IN TERMS OF THE ENTHUSIASM OR [01:04:24] Max Ketner: THE BEGINNING OF ONGOING EXT? POLITICS IN FOCUS TOO. THE SITUATION WITH POLITICS COULD SET THE TONE FOR THIS TRADE IN THE NEXT FEW MONTHS. [01:04:32] Speaker 10: IF THE DEMOCRATS WIN, YOU WILL HAVE A 1929 STYLE ECONOMIC DEPRESSION BECAUSE JUST LIKE ALL OF THEIR OTHER POLICIES ARE SO INSANE, THEIR FINANCIAL POLICIES ARE WORSE. IF THE REPUBLICANS WIN, YOU WILL EACH HAVE $5,000 IN YOUR POCKET. AN ECONOMIC SUCCESS FOR OUR COUNTRY LIKE WE HAVE NEVER SEEN BEFORE. [01:04:54] Max Ketner: HERE IS THE LATEST THIS MORNING. PRESIDENT DONALD TRUMP WARNING OF ECONOMIC DISASTER OF THE DEMOCRATS SWEEP IN THE MIDTERM ELECTIONS. PRESIDENT TRUMP HAS THE LATEST. TYLER, WHAT IS THE RESPONSE FROM DEMOCRATS TO THAT? [01:05:08] Speaker 22: JOHN, AT THIS POINT, THEY ARE REALLY HIGHLIGHTING WHAT HAS BEEN VOTER DISCONTENT WITH PRESIDENT TRUMP'S ECONOMIC POLICIES AS THEY CONTINUE TO CREATE HEADWINDS AND A DRAG ON THE GOP NATIONWIDE. PERHAPS UNDERSCORED BY THE FACT THAT THE PRESIDENT CONTINUES TO HIT THE CAMPAIGN TRAIL, YES, IN SOME BATTLEGROUNDS LIKE MICHIGAN OVER THE WEEKEND, BUT ALSO IN SOME RELIABLY RED STATES LIKE MISSISSIPPI LATER TODAY WHERE THE COOK POLITICAL REPORT RECENTLY SHIFTED A U.S. SENATE RACE THERE FROM SOLID REPUBLICAN TO LIKELY REPUBLICAN. WE'VE REALLY SEEN DEMOCRATS HONE IN ON WHAT IS THIS DISSATISFACTION WITH HIGHER GAS PRICES. FOR EXAMPLE, AS TODAY, THE NATIONAL AVERAGE FOR A GALLON OF GAS STANDS AT $4.29. FOR A GALLON OF DIESEL, IT'S AT $6.35. THOUGH, OF COURSE, IT GOES BEYOND THAT. A NEW ANALYSIS BY BLOOMBERG ECONOMICS FINDS TWO OF THE SEVEN SENATE RACES CONSIDERED TOSS-UPS HAVE SEEN NET EXPORTS FALL OVER THE LAST TWO YEARS AMID TERRIF RETALIATION BY CHINA AND CANADA. DEMOCRATS AT THIS POINT ONLY NEED A NET GAIN OF FOUR SEATS TO RETAKE THE U.S. SENATE. THOUGH, JOHN, TO BE SURE, THEY STILL FACE AN UPHILL BATTLE IN MANY OF THESE PLACES WHERE PRESIDENT TRUMP WON BY DOUBLE DIGITS IN 2024. AND RIGHT NOW, REPUBLICANS ARE ON TRACK TO SPEND $1 BILLION IN ADVERTISING IN JUST THE SENATE BATTLEGROUNDS. THAT'S NEARLY TWICE AS MUCH AS DEMOCRATS ARE EXPECTED TO SPEND. [01:06:31] Max Ketner: TANA KENDALL WITH THE LATEST IN WASHINGTON. TANA, THANK YOU. IN THE MIDTERMS ABOUT A WEEK AWAY, JESSICA TAYLOR OF THE COOK POLITICAL REPORT JOINS US NOW FOR MORE. JESSICA, WELCOME TO THE PROGRAM. IN WHICH RACES ARE YOU SEEING THINGS CHANGE FROM SOLID REPUBLICAN TO LIKELY TO MAYBE NOT AT ALL? [01:06:45] Speaker 23: SHE MENTIONED MISSISSIPPI, AND THIS IS ONE THAT DEMOCRATS HAVE BEEN BULLISH ABOUT FOR A WHILE. BUT WE REALLY HAVE SEEN CLOSER POLLS IN COMING WEEKS AND THE FACT THAT NATIONAL REPUBLICANS, THE NATIONAL REPUBLICAN SUPER PAC SENATE LEADERSHIP FUND IS SPENDING THERE. SOUTH CAROLINA IS ANOTHER ONE. WE SHIFTED THAT RACE FROM LIKELY REPUBLICAN TO LEAN REPUBLICAN WHERE YOU HAVE THE APPOINTED SENATOR DARLENE GRAHAM THAT IS UNDERPERFORMING THERE. SHE HAS SORT OF LIKELY REPUBLICAN, SHE HAS STRUGGLED TO RAISE MONEY. SHE DOESN'T SORT OF HAVE HER BROTHER'S FUNDRAISING OR CANDIDATE SKILLS. DEMOCRAT ANNIE ANDREWS HAS BEEN RAISING A TON OF MONEY AND HAS BEEN ABLE TO OUTSPEND THEM ON AIR. SO THE REPUBLICAN CAVALRY HAS KIND OF COME IN FOR GRAHAM. BUT THE FACT THAT THEY ARE TRYING TO SHORE UP THESE SOLID RED STATES JUST TELLS YOU IT'S A COMBINATION, I THINK, OF A DRAG ON TRUMP AND A COMBINATION OF WEAK INCUMBENTS IN BOTH MISSISSIPPI AND SOUTH CAROLINA BUT IT'S MAKING HEADACHES FOR REPUBLICANS THAT ARE ALREADY PLAYING DEFENSE IN DUPLE-DIGIT TRUMP STATES LIKE ALASKA, OHIO, IOWA AND TEXAS. [01:07:40] Speaker 7: JUST HOW SIGNIFICANT WAS THE CONTROVERSY OVER VIVEK RAMASWAMI'S ADVERTISEMENT IN THE OHIO GOVERNOR'S RACE? PEOPLE WERE TALKING ABOUT THIS BEING DAMAGING. OTHER REPUBLICANS HAVE COME OUT AND CONDEMNED IT. HAS IT BEEN A BIGGER ISSUE IN THE BROADER ELECTION OR ARE PEOPLE [01:07:58] Speaker 23: JUST MAKING TOO MUCH OF IT? I THINK IT IS A BIG ISSUE BECAUSE IT'S CERTAINLY BREAKING THROUGH EVERYTHING THAT WE SEE INDICATIONS OF THERE IN OHIO. ONE OF RAMASWAMI'S CRITICAL PROBLEMS WAS THAT HE COMES ACROSS AS VERY UNLIKABLE AND HAS A POPULARITY AND FAVORABILITY PROBLEM. WHEN YOU ARE RUNNING AN AD LIKE THIS, IT DOESN'T DO MUCH TO SOLIDIFY YOUR OWN FAVORABILITIES. NOW, AMY ACTON'S FAVORABILITIES HAVE TAKEN A HIT WITH ALL OF THE MILLIONS, HUNDREDS OF MILLIONS OF DOLLARS THAT VIVEK BETWEEN HIS SUPER PAC AND THE RGA HAVE SPENT. BUT THIS IS ANOTHER TEST OF CAN MONEY SORT OF OVERCOME THE HEADWINDS THAT REPUBLICANS ARE FACING THIS CYCLE. BUT I THINK THIS IS A UNIQUE CASE AND I THINK THAT THIS IS GOING TO BENEFIT ACT AND SO MUCH THAT WE SHIFTED OUR RACE ON OUR RACE RATING ON FRIDAY FROM TOSS-UP TO LEAN DEMOCRATS THAT WE NOW SEE ACT AND NOW THIS COULD STILL BE A VERY CLOSE RACE BECAUSE IT IS OHIO. BUT WE SEE ACT AND AS A SLIGHT FAVORITE. [01:08:52] Speaker 7: JESSICA, HOW MUCH OF A TAKE AWAY DO WE GET ABOUT 2028 GIVEN THE FACT THAT A LOT OF THE CHALLENGERS THAT POTENTIALLY COULD UPSEAT SOME OF THE INCUMBENT POLITICIANS ARE NOT LEANING INTO THEIR CONNECTION WITH ANY KIND OF FIGUREHEAD IN THEIR PARTY. IN OTHER WORDS, PEOPLE WHO ARE REPUBLICANS ARE LEANING AWAY FROM PRESIDENT TRUMP. PEOPLE WHO ARE DEMOCRATS ARE LEANING AWAY FROM BIDEN. PICK YOUR POLITICAL FIGUREHEAD. [01:09:23] Speaker 23: DO YOU THINK THE DEMOCRATIC GOVERNORS HAVE DEMOCRATIC GOVERNORS HAVE DEMOCRATIC GOVERNORS? WELL, I THINK THERE ARE SOME PEOPLE THAT I'M WATCHING FOR 2028 THAT COULD BE IN THE MIX ON THE DEMOCRATIC SIDE THAT IF THEY POSE SORT OF BIG WINDS, WE EXPECT JOSH SHAPIRO IN PENNSYLVANIA TO HAVE A BIG WIN. WE EXPECT WEST MOORE IN MARYLAND, J.B. PRITSKER IN ILLINOIS, IN KENTUCKY, THE DEMOCRATIC GOVERNOR THERE, ANDY BESHEAR IS NOT ON THE TICKET, BUT HE IS HEAD OF THE DEMOCRATIC GOVERNORS CHANCES TO PICK UP A MAJORITY OF GOVERNORSHIPS. THEY WERE DECIMATED AFTER 2010 DURING THE OBAMA YEARS. HE HAS FACED CRITICISM FOR NOT INVESTING ENOUGH IN LATINO RACES, PARTICULARLY IN TEXAS, SO THERE COULD BE SOME BLOWBACK FROM THAT. SO, AGAIN, I THINK SOMEONE LIKE JOSH SHAPIRO, IF THEY ARE ABLE TO FLIP SEVERAL HOUSE SEATS, YOU CAN SAY, LOOK, I HAD COATTAILS, I CAN HELP THE PARTY. [01:10:12] Max Ketner: I'VE HEARD SEVERAL PROMINENT REPUBLICANS SUGGEST, JESSICA, WE SHOULD IGNORE THE POLLS, THAT THEY ARE MISLEADING. I THINK THAT RESONATES WITH SOME PEOPLE WHEN THEY LOOK AT THE RACE IN TEXAS, ACCEPTING THAT THERE ARE SOME CANDIDATE QUALITY ISSUES WITH THE LIKES OF PAXTON, BUT LOOKING AT TALERICO AND THINKING SOME OF THIS DOESN'T ADD UP, THERE MUST BE SOMETHING WRONG WITH THE POLLING. WHAT DO YOU SEE, JESSICA, IN THE POLLING, AND WHAT GIVES YOU CONFIDENCE THAT THEY ARE GIVEN A [01:10:36] Speaker 23: POLLING? WHAT GIVES ME CONFIDENCE IS THAT IN HIGH QUALITY POLLING, WE HAVE SEEN TRAJECTORIES THAT ARE PRETTY SIMILAR IN THEIR WAY. WE HAVE LITERALLY SEEN FAKE POLLING FIRMS OUT THERE POP UP AND TRY TO INFLUENCE THE TWITTER SPHERE AND DIFFERENT THINGS, AND THAT IS UNFORTUNATE. WE HAVE A LOT OF POLLING. I THINK IT IS MORE IMPORTANT TO LOOK AT THE TRAJECTORY AND SORT OF THE TREND LINES OF POLLING THAN IT IS FROM ONE SPECIFIC POLL. I THINK IT IS MORE IMPORTANT TO LOOK AT THE TRAJECTORY AND SORT OF THE TREND LINES OF POLLING THAN IT IS FROM ONE SPECIFIC POLL. I HAVE A GREATER CONFIDENCE IN SORT OF HIGHER. I THINK WE HAVE A LOT OF THINGS THAT ARE GOING TO GET, BUT I DO ACKNOWLEDGE THAT PERHAPS IN THESE RURAL AREAS, PARTICULARLY LIKE OHIO OR [01:11:36] Max Ketner: IOWA OR KANSAS, THEY MIGHT BE UNDERSAMPLING REPUBLICANS. INTERESTING. JESSICA, THANK YOU. [01:11:42] Speaker 7: I THINK A LOT OF REPUBLICANS WOULD SPEAK TO THE SAME THING POTENTIALLY HAPPENING AS WELL. THAT IS WHY YOU HAVE HEARD SOMETHING LIKE MIKE JOHNSON COME OUT OVER THE WEEKEND AND SAY VERY PUNCHY. IT IS JUST NOT RIGHT AND SAYING THAT REPUBLICANS CAN STILL HOLD THE MAJORITY. A REAL QUESTION, THOUGH, ABOUT HOW PEOPLE ARE MESSAGING THINGS AND THE TOP OF THE TICKET VERSUS JUST THE IDEAS THAT THEY WANT TO PUT FORWARD, THIS IS A FASCINATING MIDTERM ELECTIONS. JONATHAN: [01:12:05] Max Ketner: CONCLUDES A WEEK TOMORROW. LOOKING FORWARD TO WRAPPING IT UP. STARTING THE RACE TO 28. [01:12:08] Speaker 7: SERIOUSLY. I THINK WILL IT BE A CLEARING EVENT? [01:12:15] Max Ketner: WHAT KIND OF LESSONS WILL WE LEARN FROM THE RESULTS? MARIE GETTING SOME REST. SHE WILL BE BACK WITH US TOMORROW MORNING AHEAD OF THAT BIG EVENT IN A WEEK'S TIME. COMING UP NEXT, WE WILL CATCH UP WITH BEN WILSON OF JAMIE'S JP MORGAN. EXPECTING THE RISE OF TECH DEALS TO CONTINUE FOR YEARS AHEAD. WE WILL TAKE THE RISE OF THE S&P 500. [01:12:37] Speaker ?: WE WILL TAKE THE RISE OF POSSIBLE FOR A SPACEX MERGER. [01:12:40] Max Ketner: THAT IS UP BY CLOSE TO 2%. LIVE FROM NEW YORK CITY, WELCOME TO THE PROGRAM. EQUITY FUTURES LOOKING TO BOUNCE FROM TWO WEEKS OF LOSSES ON THE S&P 500. ON THE S&P THIS MORNING, POSITIVE BY ABOUT 1% ON THE NASDAQ, UP TWO OVER THE LAST THREE WEEKS. HIGH-YIELD CREDIT SPREADS WIDER FOR SIX STRAIGHT WEEKS. A LOT OF TECH JITTERS IN THE MIDDLE OF ALL OF THAT. BRAMO HYPERSCALER CREDITS MUCH WIDER OVER THE PAST FEW WEEKS. AND THE PROSPECT OF MORE COMING FROM THE EQUITY SIDE FROM META JUST MOMENTS AGO, KEEPING EVERYONE FOCUSED ON A RACE TO RAISE CAPITAL. THE CHANGE IN THE CREDIT [01:13:18] Speaker 7: MARKET REALLY DID START TO FORTELL THE WEAKNESS THAT WE SAW IN THE EQUITY MARKETS WITH PEOPLE SAYING, WAIT A SECOND, THEY CAN'T KEEP RAISING CAPITAL. THEY CAN'T KEEP RAISING BILLIONS AND HUNDREDS OF BILLIONS OF DOLLARS WITHOUT SOME SORT OF PUSHBACK. AND THE CORE WEAVE OF THE WORLD, THE GUPPY-LIKE NEOCLOUDS, AS ELON WESK TALKED ABOUT, THAT REALLY IS THE QUESTION. ARE THERE GOING TO BE EITHER TIE-UPS AND SOLVENCIES OR SOME [01:13:44] Max Ketner: SORT OF RECKONING IN SOME OF THE WEAKER PLAYERS? ALPHABET CAME OUT AND RAISED A LOT OF EQUITY CAPITAL AHEAD OF THE SPACEX IPO. WE ARE UNDERSTANDING FROM FOX BUSINESS THE ANTHROPIC S1 COULD BE RELEASED AT 9:00 A.M. [01:14:00] Speaker 7: TRYING TO GET AHEAD OF THAT WITH A $95 BILLION EQUITY RAISE. VERY CURIOUS ABOUT THIS S1 AND HOW MUCH OF A CLEARING EVENT THAT IS GOING TO BE. NOAH WAS TALKING ABOUT THAT. THERE ARE SO MANY QUESTIONS ABOUT THE NEGATIVES. WE HAVE HEARD THAT DRIP FEED OF WHAT IS GOING ON WITH THE POTENTIAL RISKS. WHAT ABOUT THE ACTUAL REVENUE [01:14:17] Max Ketner: PROPOSITION? HAS THERE EVER BEEN THIS MUCH ATTENTION ON THE RISK FACTORS IN S1? WE MIGHT END THE WORLD. [01:14:26] Speaker 7: THERE IS A 10% CHANCE. THAT HAS BEEN REPORTED. WHAT HAS NOT BEEN REPORTED IS WHAT THE EARNINGS ARE. HOW GOOD IS THEIR CASH INCREASE? HOW BIG IS THEIR CASH FLOW? [01:14:39] Max Ketner: THAT IS THE BIG QUESTION. HOW ARE YOU MONETIZING THIS? HOW DOES THEIR CASH FLOW? THEN THAT IS A REAL RISK. WE HAVE TO TALK ABOUT TESLA BECAUSE THE STOCK IS IN THE [01:14:53] Speaker 14: GREEN HIGHER BY SOMETHING LIKE NEARLY 2% AFTER BARCLAYS UPGRADED THE STOCK TO OVERWEIGHT. DAN LEVY ALSO INCREASED HIS PRICE TARGET TO $450 A SHARE. THAT IMPLIES A ROUGHLY 21% INCREASE FROM THE LAST CLOSE. HE CITED TESLA'S IMPROVING CORE BUSINESS AS ONE OF HIS REASONS AS WELL AS THE POTENTIAL MERGER WITH TESLA, WHICH HE SAID COULD BE A PREMIUM FOR THE STOCK. UP NEXT, LET'S TAKE A LOOK AT CORE WEAP. THIS IS NOW HEADING THE OPPOSITE DIRECTION. THE STOCK IS DOWN BY NEARLY 5%. AND, OF COURSE, IT'S ELON MUSK WHO SET THE FIRE STORM THIS MORNING. HE SAID ON TWITTER THAT A LOT OF THE DEBT MARKETS HAVE BEEN ALL BUT SHUT FOR COMPANIES THAT RELY ON AI DATA CENTERS FOR THEIR REVENUE. AND HE SAID THAT MORE THAN 200 NEO CLOUD COMPANIES WILL FACE, QUOTE, WHAT HE CALLS A GUPPY-LIKE DEATH AND CONSOLIDATION. AND HE ALSO SAYS THAT, SURE, SOME WILL SURVIVE, BUT CERTAINLY NOT MANY. AND FINALLY, LET'S TAKE A LOOK AT META. THIS IS INTERESTING BECAUSE IT SANK AS MUCH AS 5% IN PRE-MARKET TRADE WHEN WE GOT THE HEADLINE BUT NOW IT'S IN THE GREEN. THE COMPANY ANNOUNCED PLANS TO RAISE BILLIONS OF DOLLARS TO A PAIR OF STOCK OFFERINGS TO FUND ITS AI AMBITION. 22 BILLION OF THOSE WILL BE IN COMMON STOCK AND 12.5 BILLION WILL BE IN MANDATORY CONVERTIBLE PREFERRED SHARES. WE HAVE NVIDIA, AMD AND BROADCOM EXPRESSING INTEREST TO BUY SOME [01:16:11] Max Ketner: OF THOSE COMMON STOCK TO AS MUCH AS $5 BILLION. THE PRESIDENT SAYS THE U.S. IS NEARING A DECISION ON IRAN [01:16:19] Speaker 10: TELLING FOX NEWS QUOTE, DO I FINISH IT OFF, WHICH WOULD BE VERY EASY TO DO, OR DO I MAKE A DEAL? THAT'S ALL. THE U.S. CLOSED ON THE RADAR THIS MORNING DEFINITIVELY DEFEATING IRAN. WE DEFEATED THEM MILITARILY, FINANCIALLY AND OTHERWISE, AND NOW WE ARE ENSURING THAT IRAN [01:16:35] Max Ketner: WILL NEVER HAVE, EVER, EVER, EVER, EVER A NUCLEAR WEAPON. AND YOU'LL SEE THAT ENDING QUITE SOON, ONE WAY OR THE OTHER. PRESIDENT DONALD TRUMP SAYING THE U.S. CLOSING IN ON A TRADE DEAL, POTENTIALLY WITH CANADA. [01:16:47] Speaker 24: NEGOTIATIONS HAVE PICKED UP, THEY ARE GATHERING STEAM. SECRETARY LUTNICK HAS BEEN TALKING TO HIS CANADIAN COUNTERPARTS ALL WEEK. I THINK VERY CLOSE TO FINALLY HAVING A DEAL ON THAT. PRESIDENT TRUMP ECHOING THE [01:16:58] Max Ketner: TONE TELLING A LOCAL FOX STATION QUOTE, WE ARE GETTING CLOSE TO A DEAL AND A DEAL COULD HAPPEN THAT IS GOING TO BE VERY GOOD FOR EVERYBODY. AND FINALLY, SPACEX CLOSING ITS $40 BILLION DEBT DEAL FOR CHIPS. THE CEO ELON MUSK TOUTING THE PROGRESS ON X AND SUGGESTING DEBT MARKETS HAVE CLOSED FOR MANY OTHERS. SOURCES TELLING US HERE AT BLOOMBERG TALKS ARE STILL ONGOING AND A DEAL HAS NOT YET BEEN FINALIZED. [01:17:18] Speaker 7: KEY QUESTION HERE, WHAT ARE THE TERMS? HOW WIDE ARE THE SPREADS? YES, SOME OF THE STRONGER PLAYERS CAN ISSUE DEBT STILL, BUT AT WHAT COST? AND THAT REALLY IS THE KEY QUESTION. ULTIMATELY, HIS CONCEPT ABOUT THE GUPPIES ARE REALLY IMPORTANT HERE. IT DOES HIGHLIGHT THAT THE WEAKER PLAYERS ARE GOING TO STRUGGLE TO THE POTENTIAL TO NOT HAVE THE SAME KIND OF PLACE. WE ARE GOING TO TALK ABOUT THE GUPPIES. A GUPPY IS A FISH THAT TENDS TO DIE EASILY IF THERE IS ANY ALTERATION IN ITS ECOSYSTEM. IT WAS ACTUALLY PRETTY POETIC IN TERMS OF HIS ASSOCIATION OF WEAKER PLAYERS WITH GUPPIES AND THE GUPPY-LIKE MASS EXTINTION, WHICH IS WHAT HE WAS SORT OF REFERRING TO. [01:17:58] Max Ketner: THAT WILL HELP YOU UNDERSTAND THIS QUOTE FROM ELON MUSK. WARNING, IN HIS POST, THE 200-PLUS NEOCLOUDS ARE GOING TO SEE GUPPY-LEVEL DEATH AND CONSOLIDATION AS MAJOR TECH DEALS ARE ON THE RISE. BEN WILSON, THE CO-HEAD OF NORTH AMERICA M&A AT J.P. MORGAN, EXPECTS TO CONTINUE THE COMPANIES. IT MAKES INCREASING SENSE FOR BIG COMPANIES TO GET BIGGER. WHILE MARKET TURMOIL COULD SLOW THE PIPELINE AT SOME POINT, IT IS NOT ENOUGH YET TO MOVE THE NEEDLE. [01:18:27] Speaker 25: I THINK COMPANIES COMBINE FOR ALL SORTS OF REASONS. THE TWO THINGS THAT NEED TO HAPPEN ARE YOU HAVE TO HAVE THE INDUSTRIAL LOGIC, THE STRATEGIC SENSE OF IT ALL, AND THE MARKET WINDOW NEEDS TO BE OPEN. SO WHETHER IT'S COMBINING BECAUSE THEY NEED GREATER SCALE, WHICH IN THIS ENVIRONMENT EVERYBODY DOES, OR GETTING BIGGER BECAUSE INVESTORS VALUE SCALE AND ARE WILLING TO PAY A PREMIUM FOR IT, ALL OF THOSE ARE PARTS OF WHY THEY ARE GOING TO COMBINE. SO I DON'T THINK ANY -- YOU CAN'T DEFINE IT AS FROM WEAKNESS OR FROM STRENGTH. I THINK IN THIS MARKET, YOU ARE SEEING PEOPLE BE WAY MORE PROACTIVE THAN REACTIVE, WHETHER IT'S STRENGTH OR WEAKNESS DRIVING THEM. [01:19:03] Max Ketner: WHEN THEY'VE BEEN PROACTIVE, AHEAD OF WHAT? WHAT ARE THEY BEING PROACTIVE ABOUT? [01:19:06] Speaker 25: ALL KINDS OF THINGS. IF YOU THINK ABOUT THE SCALE OF INVESTMENT REQUIRED AS IT RELATES TO AI, YOU THINK ABOUT COMPANIES USING THEIR COMPETITIVE ADVANTAGES TO BROADEN THE SCOPE OF INDUSTRIES THAT THEY APPLY IT TO. YOU THINK ABOUT THE WAVE OF SUPPLY COMING FROM PRIVATELY OWNED BUSINESSES, WHETHER IT'S DRIVEN BY DEMOGRAPHIC CHANGE OF FAMILY OWNED BUSINESSES OR PRIVATE EQUITY SUPPLY. I THINK ALL OF THEM ARE TRYING TO GET AHEAD OF THAT. ALTHOUGH IT'S HERE. AI IS HERE. THE INVESTMENT NEEDED IS NOW. AND SO I THINK THAT'S WHAT THEY'RE TRYING TO DO. [01:19:36] Speaker 7: MARKING CONDITIONS HAVE MADE IT DIFFICULT OR A LITTLE BIT MORE DIFFICULT FOR WEAKER PLAYERS. ARE YOU SEEING THAT LIKELY TO CONTINUE TO EMPHASIZE THE BIGGER DEALS, THE TIE-UPS BETWEEN BIGGER, BETTER CAPITALIZED COMPANIES THAT ARE TRYING TO GET AHEAD OF WHATEVER HAPPENS DOWN THE PIKE? [01:19:54] Speaker 25: SO I THINK THE REALITY IS WE'VE HAD MORE MEGA DEALS THIS YEAR THAN ANY OTHER DEAL. M&A VOLUMES ARE VERY HIGH. THEY'RE GOING TO BE RECORD-SETTING POTENTIALLY. CROSS-BORDER ACTIVITY, NEAR RECORDS OR AT RECORD-SETTING. AND SO BIGGER, BETTER, TRUE. AND YOU'RE GOING TO CONTINUE TO SEE THESE LARGE PLAYERS COMBINE, TO YOUR POINT. BUT I ALSO THINK YOU'RE GOING TO SEE SMALL PLAYERS COMBINE. IF YOU LOOK AT THE LAST QUARTER, WE ACTUALLY SAW INCREDIBLE STRENGTH IN THE 2-10 BILLION DOLLAR SIZE RANGE. AND SO I THINK IT'S GOING TO BE ALL OF THE ABOVE AS PEOPLE THINK ABOUT WHAT TO DO NEXT. [01:20:28] Speaker 7: JUST FAST-FORWARDING TO THE END OF THE YEAR. HOW DO YOU SEE THE PACE OF M&A TRANSACTIONS COMING OUT? DO YOU EXPECT IT TO SPEED UP? DO YOU EXPECT IT TO SLOW DOWN? SORT OF HOW IS IT GOING TO BE RELATIVE TO THE REST OF THE YEAR? [01:20:40] Speaker 25: I THINK THE CADENCE OF M&A THAT WE'RE OBSERVING, THE PIPELINE IS STILL INCREDIBLY STRONG. WE SAW A SOFTER QUARTER IN THE THIRD QUARTER. BUT REALLY THAT WAS REPRESENTATIVE MORE OF THE GOLDILOCKS ENVIRONMENT THAT WE SAW IN THE FIRST AND SECOND QUARTER. WHEN YOU THINK ABOUT SOME OF THE VOLATILITY PEOPLE ARE TALKING ABOUT, I WOULD ARGUE THAT'S MORE NORMAL MARKET CONDITIONS. IN A NORMAL MARKET, NOT EVERY DEAL HAPPENS, NOT EVERY IPO HAPPENS, NOT EVERY DEBT DEAL GETS DONE, NOT EVERY M&A DEAL GETS DONE. SO WE'RE JUST OBSERVING A MORE NORMAL MARKET RIGHT NOW THAN MAYBE WE DID IN THE FIRST HALF OF THE YEAR. [01:21:14] Max Ketner: IS THE POLITICAL WINDOW CLOSING? [01:21:16] Speaker 25: NO, I DON'T THINK THE POLITICAL WINDOW IS HAVING AN IMPACT IF YOU'RE TALKING ABOUT LEADING UP TO THE MIDTERMS. YOU KNOW, M&A CYCLES COME IN MONTHS AND YEARS, NOT DAYS AND WEEKS. AND SO, YES, IT'S THE POLITICAL ENVIRONMENT IS ON PEOPLE'S MINDS, BUT THEY'RE THINKING ABOUT IT MUCH LONGER TERM THAN THE NEXT COUPLE OF WEEKS LEADING UP TO THE MIDTERMS. [01:21:34] Max Ketner: WE'RE THINKING ABOUT THE POTENTIAL FOR SOME MEGA, MEGA DEALS. AND I'M SURE YOU CAN'T TALK ABOUT THEM BY NAME, BUT, LIKE, SPACEX, TESLA IS IN THE MIX. WHAT WAS THE AIRLINE DEAL THAT ALMOST HAPPENED AND DIDN'T HAPPEN? UNITED AMERICA. AND THAT WAS, LIKE, REALLY THROWN OUT. MAJOR, MAJOR POTENTIAL FOR M&A. AND THOSE ARE THE KIND OF BIG DEALS THAT PEOPLE ARE THINKING ABOUT BECAUSE THEY THINK OVER THE NEXT COUPLE OF YEARS THEY JUST WON'T BE POSSIBLE. [01:21:52] Speaker 25: WELL, I THINK THOSE DEALS ARE PERFECTLY EMBLEMATIC OF WHAT WE ARE TALKING ABOUT, RIGHT? IF TWO OF THE LARGEST AIRLINES IN THE WORLD OR TWO OF THE LARGEST COMPANIES ON PLANET EARTH ARE TALKING ABOUT THE NEED TO COMBINE FOR SCALE AND TO TACKLE THE PROBLEMS AHEAD, THAT REALLY SHOULD TELL US ABOUT THE NEED OF INVESTMENT GOING FORWARD. I ALSO THINK THAT SOME OF THOSE COMPANIES ARE REALLY GOOD EXAMPLES OF A BROADER THEME THAT WE'RE SEEING, WHICH IS COMPANIES REALLY LOOKING AT THEMSELVES, DEFINING WHAT THEIR COMPETITIVE ADVANTAGES ARE, AND THEN BROADENING THE INDUSTRY SCOPE AT WHICH YOU WANT TO APPLY THOSE ADVANTAGES. SO TESLA IS NOT JUST A CAR COMPANY. SPACEX IS NOT JUST A ROCKETS OR SATELLITE COMPANY. SO I THINK THOSE ARE TWO THEMATICS THAT WE'RE GOING TO SEE THAT WILL CONTINUE TO BE TAILWINDS FOR THE BROADER MARKET. [01:22:43] Speaker 7: THERE'S SOMETHING THAT'S KIND OF TANGENTIAL, BUT I KNOW THAT YOU'RE FOCUSED ON THAT I THINK IS REALLY INTERESTING. ALL THE BOOMERS OUT THERE THAT STARTED THEIR BUSINESSES FOR THEIR BUSINESSES AND WERE VERY SUCCESSFUL AND NOW HAVE NEPOBABIES THAT DON'T WANT TO RUN THEIR BUSINESSES AND ESSENTIALLY ARE GOING TO HAVE TO SELL THOSE BUSINESSES. THIS IS ACTUALLY TURNING INTO SOMETHING OF A SEA CHANGE FOR THE M&A BUSINESS AND WILL LIKELY LEAD TO A WATERSHOOD MOMENT IN TERMS OF BUSINESSES BEING SOLD. WHAT KIND OF SCOPE AND SCALE ARE YOU SEEING THERE? [01:23:09] Speaker 25: I THINK IT'S A GREAT POINT AND I DON'T THINK PEOPLE ARE TALKING ABOUT IT ENOUGH. YOU KNOW, THE SILVER TSUNAMI, YOU'RE SEEING A LOT OF -- [01:23:16] Max Ketner: LOVE THAT PHRASE. [01:23:18] Speaker 25: YOU'RE SEEING A LOT OF REALLY SMART MONEY GOING INTO THINGS LIKE NURSING HOMES AND YOU'RE SEEING A LOT OF ACTIVITY IN THE REAL ESTATE SPACE. BUT THAT'S JUST THE TIP OF THE ICEBERG. YOU KNOW, SOME ESTIMATES SAY THERE'S 6 MILLION PRIVATELY OWN BUSINESSES IN THE U.S. THAT ARE GOING TO UNDERGO OWNERSHIP CHANGE IN THE NEXT DECADE, SPECIFICALLY FOR DEMOGRAPHIC REASONS. AND SO WHILE THERE'S A LOT OF TALK AROUND PRIVATE EQUITY SUPPLY AND THE $4 TRILLION OF TRAPPED VALUE IN PRIVATE EQUITY WORLD THAT WE ALSO THINK WILL BE A TAILWIND, WE'RE TALKING ABOUT 5 TRILLION-PLUS, A MILLION-PLUS BUSINESSES THAT ARE GOING TO BE NEED OWNERSHIP CHANGES DUE TO DEMOGRAPHIC REASONS. AND THE THING ABOUT THAT IS THAT'S A LIFE CYCLE. THAT'S NOT A MARKET CYCLE. THERE'S NOT GOING TO BE MARKET VOLATILITY. THOSE BUSINESSES ARE GOING TO HAVE TO TRANSFER OWNERSHIP. AND SO I THINK IT'S A MASSIVE TAILWIN THAT PEOPLE AREN'T FOCUSED ON. [01:24:08] Speaker 7: DO YOU THINK THAT THE BUYERS ARE GOING TO BE PRIVATE EQUITY? DO YOU THINK THAT THERE'S GOING TO BE JUST ANOTHER PERSON WHO WANTS TO TAKE IT OVER? I MEAN, IT SEEMS LIKE IT'S NOT JUST A GENERATIONAL TRANSITION. IT'S A TRANSITIONAL OF BUSINESS OWNERSHIP IN A MORE CONCRETE WAY. [01:24:20] Speaker 25: I THINK IT'S GOING TO BE ALL OF THE ABOVE. SOME OF THOSE BUSINESSES WILL MAKE SENSE FOR LARGE CORPORATES. SOME WILL MAKE SENSE FOR OTHER FAMILY-OWNED BUSINESSES. AND SOME WILL CERTAINLY MAKE SENSE FOR PRIVATE EQUITY. BUT I DO THINK THAT'S GOING TO BE A MASSIVE TAILWIND OVER THE NEXT DECADE. [01:24:31] Max Ketner: WELL, SOME OF THE KIDS, BRAM, RUN THE BUSINESS. [01:24:35] Speaker 7: WELL, I KNOW. LOOK, I'M BEING A LITTLE TONG-IN-CHEEK HERE, BUT NOT REALLY. BECAUSE YOU THINK ABOUT SOMEONE WHO STARTS A CAR DEALERSHIP NETWORK OR WHO STARTS A SANITATION INDUSTRY AND THEY MAKE A LOT OF MONEY AND THEN THEY HAVE A KID AND WANTS TO BE AN ARTIST. JOHN ADAMS DID SAY, I FARM SO MY CHILDREN CAN GO OFF AND BECOME ARTISTS. SO THERE IS A SENSE THAT THAT IS PROGRESS. THE QUESTION IS NOW, YOU KNOW, GIVEN THE GENERATIONAL SHIFT, WHO TAKES OVER THE BUSINESS? [01:25:00] Max Ketner: IT'S VERY DIFFICULT TO EXPLAIN THE DEGREE OF WEALTH IN AMERICA TO PEOPLE WHO DO NOT LIVE IN THIS COUNTRY. [01:25:05] Speaker 7: THAT'S A FAIR ASSESSMENT. [01:25:06] Max Ketner: THE BEST EXAMPLE I CAN GIVE IS THAT YOU CAN LAND AT ANY RANDOM AIRPORT, ANY RANDOM STATE, ANY RANDOM CITY, AND YOU CAN SEE A RANCH SOMEWHERE THAT'S WORTH 40 MILLION DOLLARS. OH, YEAH. LIKE, GO TO JACKSON HALL. IT'S CRAZY IN JACKSON HALL. THAT'S NOT A RANDOM PLACE, BUT YOU'RE LIKE, TAKE YOUR PICK. [01:25:22] Speaker 7: GO TO MISSOURI, GO TO WISCONSIN, GO TO ANY OF THESE STATES THAT PEOPLE WOULD JUST SORT OF GO BY. SOMEONE YOU'VE NEVER HEARD OF. YEAH, AND PEOPLE, YOU KNOW, HAVE MADE A TON OF MONEY. THEY'VE GOT A TIRE SHOP. [01:25:30] Max Ketner: THEY'VE GOT, LIKE, 20 OF THEM. YEAH. OR, LIKE, 50, 100. I DON'T EVEN KNOW. [01:25:34] Speaker 7: YOU'VE NEVER HEARD THEIR NAME. YEAH, AND THEY HAVE A PRIVATE CHAT. [01:25:36] Speaker ?: OR TWO. [01:25:37] Speaker 25: AND ALL THEIR KIDS LIVE IN NEW YORK AND DON'T WANT TO WORK AT THE TIRE SHOP. EXACTLY. THAT'S THE ISSUE. [01:25:42] Speaker 7: EXACTLY. [01:25:43] Max Ketner: BUT SOMEONE'S GOT TO TAKE IT OVER. [01:25:47] Speaker 7: WEST VILLAGE, WHICH IS WHY THE RENTAL PRICES ARE SO HIGH. [01:25:51] Max Ketner: I'M GOING TO DRAW BEN INTO THAT. THANK YOU. I APPRECIATE YOU. THANK YOU VERY MUCH. BEN WILSON THERE OF JP MORGAN. LET'S GIVE YOU AN UPDATE ON NEWS WORLDWIDE THIS MORNING. WITH YOUR BLOOMBERG BRIEF, BONNIE QUINN HAS MORE. [01:25:59] Speaker 9: HEY, BONNIE. HEY, JOHN. THANK YOU. THANK YOU. THE REVICE FORECAST STILL IMPLIES A MORE THAN 60% UPSIDE FROM CURRENT LEVELS. THE EU PLANNING NEW MEASURES TO CURB IMPORTS FROM CHINA, TARGETING SECTORS INCLUDING CHEMICALS, FURNITURE AND MACHINERY. SOURCES TELLING US HERE AT LOOMBERG THE MEASURES COULD WEARING THE APP ON FEWER DAYS EACH MONTH, AND THE AVERAGE CUSTOMER IS SPENDING LESS TIME WATCHING. THE COMPANY IS INCREASING ITS PROGRAMMING BUDGET AND EXPANDING INTO PODCASTS AND LIVE SPORTS TO TRY AND ATTRACT AND RETAIN CUSTOMERS. THANK YOU. [01:26:51] Max Ketner: UP NEXT ON THE PROGRAM WEIGHING ACTION ON INFLATION. AT THE FEDERAL RESERVE WE MADE VERY CLEAR THAT WE WOULD [01:26:57] Speaker 26: DELIVER PRICE STABILITY. RATES OUGHT TO BE GOING UP FURTHER. THERE IS SOME FLEXIBILITY ABOUT WHEN THOSE HIKES WILL OCCUR. [01:27:08] Max Ketner: ARE WE TEEING UP A SKIP FOR THE MONTH OF OCTOBER? THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL [01:27:18] Speaker ?: RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE [01:27:24] Max Ketner: TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE. THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE [01:28:03] Speaker 7: THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL BELIEVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A [01:28:29] Max Ketner: LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL RESERVE WE WILL TAKE A LOOK AT THE FEDERAL WE ARE TALKING ABOUT THIS UNEVEN ACCESS TO CAPITAL. [01:28:45] Speaker 7: WHAT HAPPENS TO THE NEO CLOUDS RIGHT NOW? HOW DO THEY JUSTIFY THEIR EXISTENCE GIVEN THE AMOUNT THAT THEY CHARGE HAS A CERTAIN LIMIT ON IT AND THE COSTS ARE GOING UP EXPONENTIALLY AND THEY CAN'T BRIDGE THE GAP WITH CHEAP CREDIT ANYMORE. CREDIT IS GETTING VERY EXPENSIVE. WATCH ALL OF THESE PLAYERS ISSUE DEBT AND EQUITY COMING OUT [01:29:04] Max Ketner: AFTER THEIR EARNINGS AND HOW WILL IT BE RECEIVED? WE ARE EXPLAINING FOR THE FED. THE FED, THE DATA SAYS GO, THE GUIDANCE SAYS NO. THE RECENT PRICE ACTION AND THE UPCOMING MIDTERMS MAY REINFORCE THAT STARTS OF THIS COMMITTEE. THIS NEWS CONFERENCE IS GOING TO BE INTERESTING FOR FED CHAIR [01:29:27] Speaker 26: KEVIN WALSH IN A FEW DAYS' TIME. AT THE FEDERAL RESERVE WE MADE CLEAR THAT WE WOULD DELIVER INFLATION BACK DOWN TO OUR TARGET. RATES OUGHT TO BE GOING UP FURTHER. THERE IS SOME FLEXIBILITY ABOUT WHEN THOSE HIKES WILL OCCUR. [01:29:48] Max Ketner: WE ARE GOING UP FURTHER. THE MARKET IS EXPECTING THE FED TO HOLD AT ITS MEETING ON WEDNESDAY AS POLICYMAKERS FACE SOME STUBBONN DATA. NEEDS TO BE A GOOD EXCUSE FOR WAITING. HE COULD POINT TO FINANCIAL CONDITIONS. WE ANTICIPATE ADDITIONAL RATE HIKES PENCILLED INTO THE OUTLOOK FOR EARLY NEXT YEAR. NEIL JOINS US NOW FOR MORE. [01:30:15] Speaker ?: NEIL, WELCOME. [01:30:16] Speaker 27: WHY THE SKIP IN A FEW DAYS' TIME? I THINK THE WAY YOU COULD SAY IT IS THAT WASH SAID HE WAS GOING TO REMOVE A DOSE OF ACCOMMODATION. AND SINCE THE MEETING, A DOSE OF ACCOMMODATION HAS BEEN REMOVED. WE HAVE SEEN CREDIT SPREADS WIDEN A LITTLE BIT. SO FINANCIAL CONDITIONS MAYBE ALLOW THEM TO CATCH THE BREATH. THE DATA DON'T. SO YOU KEEP HEARING THEM SAY THERE IS NO SENSE OF URGENCY. BUT I THINK FROM A RISK MANAGEMENT PERSPECTIVE, IT PROBABLY MAKES SENSE TO RAISE RATES TODAY -- EXCUSE ME, THIS WEEK. SO I THINK WHAT IS LIKELY TO HAPPEN IS THEY SKIP, BUT THAT REALLY DOES CEMENT THE ODDS FOR DECEMBER. AND IF THE INFLATION DATA CONTINUE TO REMAIN FIRM, JOHN, IT IS UNLIKELY, AT LEAST IN MY OPINION, THAT THEY CAN KIND OF KEEP ON THIS SORT OF EVERY OTHER MEETING PACE. [01:31:04] Max Ketner: AND I THINK IT IS IMPORTANT TO RECOGNIZE WHY WE ARE HERE, WHY WE DON'T EXPECT A MOVE ON WEDNESDAY. AND IT IS NOT BECAUSE OF THE DATA, IT IS BECAUSE OF THE GUIDANCE FROM THE VICE CHAIR AND THE NEW YORK FED PRESIDENT. HOW ALIGNED DO YOU THINK THOSE TWO ARE WITH THE FED CHAIR? [01:31:19] Speaker 27: WELL, IT DEPENDS. THIS IS KEVIN WASHES FED. I MEAN, IF IT WAS JEROME POWELL'S FED, I WOULD SAY THAT IT IS HIGHLY LIKELY THAT THEY ARE SPEAKING FOR THE CHAIR, RIGHT? WASHES FED, BUT WE ARE STILL TRYING TO FIGURE OUT WORSH. I DON'T KNOW. I MEAN, IF THEY SURPRISE THE MARKET, YOU KNOW, BECAUSE OBVIOUSLY THE FED KNOWS A LOT MORE ABOUT THEIR OWN REACTION FUNCTION THAN THE MARKETS DO. IF THEY END UP HIKING, THEN THAT BASICALLY MEANS THE SO-CALLED IS DEAD. AND, YOU KNOW, WORSH IS REALLY THE ONE THAT IS STRINGING THE COMMITTEE ALONG, NOT THE OTHER WAY AROUND. [01:31:54] Speaker 7: IF THEY DON'T HIKE THOUGH, THEN IT RAISES A QUESTION ABOUT WHETHER THE MARKET SHOULD FOLLOW THE DATA OR WHETHER THE MARKET SHOULD STILL FOLLOW FED OFFICIALS. JUST MAYBE NOT KEVIN WARSH, WHO ISN'T GIVING FORWARD GUIDANCE. [01:32:03] Speaker 27: EXACTLY, EXACTLY. THIS SORT OF SPEAKS TO SOME OF THE FLAWS IN HIS COMMUNICATIONS APPROACH. SORT OF THIS FORWARD GUIDANCE FOR THEE, BUT NOT FOR ME. YOU KNOW, AT SOME POINT HE'S GOING TO HAVE TO -- I DON'T THINK IT'S SUSTAINABLE, BY THE WAY. AT SOME POINT HE'S GOING TO HAVE TO TELL US WHAT HE THINKS ABOUT THINGS. BUT I WILL SAY, YOU KNOW, LOOK, I MEAN, HE HAS PROVIDED A VERY BLUNT FORM OF FORWARD GUIDANCE, WHICH IS THE COMMITTEE WILL DELIVER PRICE STABILITY. AND, YOU KNOW, SO FAR, HE'S DEFINING THAT AS 2% ON PC INFLATION. WE'RE STILL VERY, VERY FAR FROM THAT GOAL. AND, YOU KNOW, I THINK GIVEN THE DATA AS IT'S BEEN COMING IN, REMEMBER, THE FED'S BEEN OVERLY OPTIMISTIC ON THEIR INFLATION VIEWS FOR THE BETTER PART OF THE LAST YEAR. I MEAN, THEY'VE BEEN REVISING UP THOSE ESTIMATES AT EVERY SINGLE MEETING, I THINK, GOING BACK TO DECEMBER OF LAST YEAR. SO, YOU KNOW, I THINK THE FED'S BEEN OVERLY OPTIMISTIC ON THEIR LAST YEAR. I THINK THEY'VE BEEN TOO OPTIMISTIC FROM THE JUMP. AND I THINK AS THEY KEEP REVISING THOSE ESTIMATES HIGHER, WHICH I THINK IS MORE LIKELY THAN NOT, THEY'RE GOING TO HAVE TO START PENCILING IN MORE RATE HIKES INTO THEIR BASELINE POLICY PATH. [01:33:11] Speaker 7: THERE'S A LINE OF ARGUMENT RIGHT NOW SAYING THAT THE MARKET'S DOING THE WORK FOR THE FEDERAL RESERVE, THAT THE RECENT DECLINES THAT YOU'VE SEEN IN EQUITY MARKETS AND JITTERS AROUND THE AI BUILD OUT WILL HOLD BACK THE NEED FOR THE FED TO ACT OVERLY QUICKLY. IMAGINE YOU DISAGREE. HOW DO YOU DISAGREE MOST CONSTRUCTIVELY, GIVEN THE FACT THAT YOU HAVE SEEN A REAL CORRECTION IN CERTAIN PARTS OF THE CREDIT MARKET? [01:33:35] Speaker 27: YEAH, IN CERTAIN PARTS OF THE CREDIT MARKETS, YOU DO STILL NEED TO SQUINT TO SEE THAT WIDENING IN CREDIT SPREADS. I MEAN, CREDIT SPREADS HAVE WIDENED. I WOULDN'T SAY THEY'RE WIDE. AND EQUITY MARKET PRICES REMAIN FAIRLY BUYANT. I THINK YOU DEFINE -- IF FINANCIAL CONDITIONS ARE TIGHTENING, I'D EXPECT THE OUTLOOK FOR INFLATION TO IMPROVE. I DON'T THINK IT REALLY HAS. SO THAT'S SORT OF WHERE I'M AT WITH THIS. [01:34:04] Max Ketner: FORMER VICE CHAIR CLARITY USED TO SAY THINGS LIKE AN OUNCE OF PROTECTION IS WORTH A POUND OF CURE. AT THE TIME THEY WERE TALKING ABOUT RATE CUTS. IF YOU MOVE EARLY IN SMALL INCREMENTS, YOU WON'T HAVE TO DO [01:34:16] Speaker 27: LOTS LATER. DOES THE SAME APPLY TO HIKING? ABSOLUTELY. YOU'RE SAYING THAT IT'S NOT URGENT. DO YOU WANT TO WAIT UNTIL IT IS? I THINK THIS IS SOMETHING THAT CLAUDIA SAID, AND I AGREE WITH HER. IT MAY NOT BE URGENT, BUT IT'S PRUDENT, RIGHT? YOU WANT TO WAIT UNTIL IT. YOU WANT TO WAIT UNTIL IT. YOU WANT TO WAIT UNTIL IT. YOU WANT TO WAIT UNTIL IT. IT'S MUCH EASIER TO TELL A STORY FOR WHY INFLATION REMAINS PERSISTENTLY ABOVE TARGET, AT LEAST THROUGH MARCH, THAN IT DOES FOR INFLATION TO MAGICALLY IMPROVE WITHOUT ADDITIONAL SORT OF MONETARY TIGHTENING. SO THE OTHER THING, OF COURSE, IS THINK ABOUT THIS. I MEAN, WE'RE BASICALLY SAYING THEY'RE GOING TO HIKE IN DECEMBER, NO MATTER WHAT, RIGHT? SO YOU MIGHT AS WELL JUST DO IT NOW. [01:34:57] Max Ketner: NEIL DANTA. MANY PEOPLE AGREE WITH THAT SENTIMENT. NO DOUBT. IF THEY SKIP IN OCTOBER, MOST PEOPLE ASSUME THEY'RE GOING TO GO IN DECEMBER. SO WHY SKIP OCTOBER? WHAT KIND OF COMMENTARY DO WE ACTUALLY GET? [01:35:08] Speaker 7: WE'RE NOT EXPECTING TO GET THAT MUCH. HOW LONG DO YOU THINK THE NEWS CONFERENCE IS GOING TO BE? [01:35:13] Max Ketner: I SAY 30 MINUTES IS WHAT IT WAS LAST TIME. [01:35:16] Speaker 7: I THINK IT COULD BE EVEN POTENTIALLY SHORTER. AND THIS COMES AT A TIME WHERE PEOPLE REALLY HAVE A LOT OF QUESTIONS ABOUT WHAT THE REACTION FUNCTION IS. IF THE MARKET IS SUPPOSED TO WATCH THE DATA, THE DATA IS SCREAMING ONE THING. IF THE MARKET IS NOT SUPPOSED TO GET ANY GUIDANCE, FORWARD GUIDANCE FROM THE FED, WELL, IT DID, JUST NOT KEVIN WARSH. [01:35:36] Max Ketner: SO WHAT IS THE COMMUNICATED MESSAGE HERE? WE KNOW THE STRATEGY FOR THE PRESS CONFERENCE NOW. IT'S MUCH, MUCH TIGHTER. PICK OUT THE INDIVIDUAL NAMES. THEY'RE ALL SITTING IN ALPHABETICAL ORDER. ONE QUESTION, NO FOLLOW-UPS. YOU RIP THE MIC AWAY. YOU KEEP THE RESPONSE VERY, VERY TIGHT. AND YOU TAKE SOME OF YOUR OWN ADVICE. IF YOU'VE GOT NOTHING TO SAY, DON'T SPEAK. AND CLEARLY, HE DOESN'T WANT TO SPEAK TOO MUCH IN THESE PRESS CONFERENCES. [01:35:54] Speaker 7: THE PROBLEM IS, HE KIND OF NEEDS TO SAY SOMETHING IF HE DOESN'T WANT TO LET OTHER OFFICIALS DO THE SPEAK BEFORE HIM. [01:36:00] Max Ketner: THAT'S BEEN THE STORY OF THE LAST WEEK. THIS IS THE OPENING NOW TO ABSOLUTELY DEMOLISH IT. [01:36:06] Speaker 7: BLOW IT UP. [01:36:07] Max Ketner: I KNOW WHAT YOU WANT. [01:36:09] Speaker 7: LIVE AWAY FROM THE OLD FED TO THE NEW FED. COME ON, YOU CAN TALK STRAIGHT INTO THE CAMERA. [01:36:14] Max Ketner: YOU CAN TALK STRAIGHT. [01:36:26] Speaker ?: COMING UP, CATHY BOSCHANTIC OF NATIONWIDE. THE THIRD HOUR OF BLOOMBERG SURVEILLANCE JUST AROUND THE [01:36:32] Speaker 1: CORNER. I THINK THAT THE EARNINGS STORY IS STILL THERE. [01:36:40] Speaker 2: WE ARE PROBABLY EXPECTING HIGH TEENS EARNINGS GROWTH. YOU ARE HEARING THESE EARNINGS REPORTS AND THEY WANT A [01:36:43] Speaker 3: DEMOCRATS. IT IS NOT ENOUGH TO JUST HAVE EARNINGS THAT [01:36:50] Speaker 4: CONTINUE AT THAT PACE. [01:36:52] Speaker 5: THIS IS BLOOMBERG SURVEILLANCE. LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING. [01:37:02] Max Ketner: THE THIRD HOUR OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. THE PRICE ACTION LOOKS LIKE THIS. EQUITY FUTURES LOOKING TO BOUNCE BACK FROM TWO WEEKS OF BUSINESSES. THE FED DECISION ON WEDNESDAY AND LOTS OF TECH EARNINGS THROUGH THE WEEK. GOOGLE, MICROSOFT, AMAZON, AT THE SAME TIME WE ARE RAISING A LOT OF CAPITAL. ELON MUSK CLAIMING TO HAVE CLOSED THE $40 BILLION DEBT DEAL. THE S-1 FROM ANTHROPIC SAID TO BE COMING IN 60 MINUTES TIME. [01:37:46] Speaker 7: WE ARE FILLING FOR A $95 BILLION EQUITY OFFERING THIS MORNING, INCLUDING THAT NON-VOTING PIECE THAT WE TALKED ABOUT AFTER ITS EARNINGS. THE PEOPLE HAD SPECULATED THAT THIS WAS THE REASON WHY META SHARES DROPPED AFTER REPORTING EARNINGS THAT BY ALL ACCOUNTS WERE PRETTY GOOD. NOW WE ARE SEEING WHEN THEY ACTUALLY COME TO MARKET WITH A $95 BILLION PLAN OF EQUITY, THE SHARES ARE RALLYING. PICK YOUR NARRATIVE, PICK YOUR EXPLANATION. WHAT IS THE MARKET GOING TO DO WITH ALL THIS INFORMATION? THAT MIGHT BE THE MOST INTERESTING PIECE OF THE EARNINGS THAT WE GET LATER THIS WEEK, HOW THE MARKET RESPONDS TO THEM AND WHAT THEY PICK OUT FROM FREE CASH FLOW VERSUS CAPEX. [01:38:23] Max Ketner: WE ALWAYS SAY YOU CAN LEARN SOMETHING FROM THE DATA AND YOU CAN LEARN SOMETHING FROM HOW THE MARKET RESPONDS TO THE DATA. PEOPLE ARE LOOKING FOR A CLEARING EVENT. IF YOU RAISE CAPEX, YOU GET HIT, YOU DROP CAPEX, YOU GET [01:38:42] Speaker 7: HIT. IT'S WHY MAX KETNER CAME ON A PROGRAM AND CALLED IT "NARRATIVE BINGO" AND LIGHTENED UP ON RISK. PEOPLE ARE LOOKING FOR A CLEARING EVENT. IS IT GOING TO BE THE CASH FLOW GENERATION? ARGUABLY, IS IT GOING TO BE HAPPENING FOR A CLEARING EARLY? DOES THAT CALM SOME OF THE NERVES OR ON THE OTHER SIDE, IF YOU SEE THAT SUDDENLY THEIR REVENUE PROPOSITIONS HAVE BEEN [01:39:09] Max Ketner: GOING DOWN IN TANDEM WITH THE COST OF TOKENS, DOES THAT LEAD TO A NEW RISK-OFF WAVE OF SELLING? JONATHAN: IT FEELS LIKE THE WHOLE YEAR HAS BEEN A ROAD SHOW FOR [01:39:20] Speaker 7: ANTHROPIC. THE LAST TWO YEARS. THE S1 HAS BEEN LEAKING THROUGH THE WALL STREET JOURNAL FOR THE LAST SEVERAL MONTHS. WHAT IS LEFT TO KNOW? WHAT IS LEFT TO KNOW ABOUT THE LAST SEVERAL MONTHS? IS IT JUST A COUPLE OF HYPER SCALERS THAT ARE GIVING THEM BILLIONS AND BILLIONS OF DOLLARS? OR IS THIS BROAD-BASED THROUGHOUT A RANGE OF BUSINESSES? HOW MUCH ARE PEOPLE WILLING TO PAY FOR FRONTIER VERSUS THE OPEN MODELS AND THE COMPETITIVE FORCE FROM CHINA? [01:39:45] Max Ketner: HOW MUCH ARE PEOPLE WILLING TO PAY FOR THE RISKS? [01:39:53] Speaker 7: WE ALL MIGHT DIE. WHAT IS THE UPSIDE? THROUGH THAT OUT THERE AND MOVE ON. [01:40:01] Max Ketner: WHO CARES ABOUT THAT? YOU MIGHT HACK MY PERSONAL INFORMATION AND PUT MY RUMBAY AGAINST ME. HOW MUCH ARE YOU MAKING? [01:40:11] Speaker 7: YOU CAN MAKE A LOT OF MONEY. [01:40:13] Max Ketner: YOU BAR BILL YOUR RISK. YOU DIE OR MAKE A LOT OF MONEY. THANK YOU VERY MUCH. THE NUMBERS IN THE SCALE THAT WE ARE TALKING ABOUT, LISA, JUST ASTRONOMICAL. [01:40:33] Speaker 7: IT IS PUTTING THE SQUEEZE ON A LOT OF OTHER PEOPLE WHO DO NOT HAVE ACCESS TO CAPITAL MARKETS THE SAME WAY THESE COMPANIES DO. I'M CURIOUS TO SEE THE DEAL DOCUMENTS OF THIS GIVEN THAT IT IS AN EQUIPMENT FINANCE LEASE WITH APOLLO. THIS IS ASSET-BACKED FINANCING. THIS IS AN ASSET-BASED LEASE. YOU CAN SEE HOW MUCH THE CREDIT CONDITIONS ARE TIGHTENING. THAT IS INTERESTING. DEALS ARE GETTING DONE, BUT THE TERMS MATTER. ARE THERE HARD ASSETS TO BACK IT? ARE THERE HARD LINES OF REVENUE? [01:41:02] Max Ketner: THAT IS THE WAY THAT DEALS ARE GETTING DONE. THAT TELLS YOU JUST HOW MUCH CREDIT CONDITIONS ARE TIGHTENING. SPACEX UP 0.8% OF 1% IN THE PREMARKET. COMING UP THIS OUT, WE WILL CATCH UP WITH BANK FOR AMERICA WITH ALL EYES ON BIG TECH CAPEX. BIG FAT DECISION. WE BEGIN THE SOUTH WITH STOCKS RISING AHEAD OF SEVERAL KEY TECH REPORTS. ALL EYES WILL BE ON A.I. MONETIZATION VERSUS SPENDING WITH 27 CAPEX ESTIMATES ALREADY REVISED UP BY NEARLY 90% YEAR TODAY. SAVITA JOINS US NOW FOR MORE. SAVITA, GOOD MORNING. GOOD MORNING. HEY, I MIGHT KILL US, BUT PLEASE TELL US HOW TO MAKE MONEY. [01:41:37] Speaker 18: I KNOW. DEATH OR CASH. YEAH, YEAH, YEAH, YEAH. IT'S PRETTY BINARY. WELCOME TO 2026. WHAT'S THE TECH TRADE NOW? THAT MIGHT BE THE TITLE OF OUR YEAR AHEAD REPORT. [01:41:47] Speaker 17: I'M NOT KIDDING, BUT THIS IS HANGING UP. [01:41:49] Speaker 18: EXACTLY. PROFITABLE. LOOK, I THINK IT'S -- WE'RE IN AN INTERESTING TIME. I DO THINK THERE'S ONE KIND OF POINT OF SANITY IN THE DATA THAT WE'RE SEEING. SO IT FEELS LIKE WE DON'T KNOW HOW COMPANIES ARE BEING REWARDED. BUT IF YOU LOOK AT THIS MONTH, THE PERFORMANCE OF COMPANIES WITH HIGH FREE CASH FLOW TO ENTERPRISE VALUE HAVE CRUSHED IT. NUMBER ONE FACTOR. AND I FEEL LIKE THAT KIND OF TELLS YOU WE'RE LOOKING FOR CAPEX, BUT ALSO MONETIZATION. AND THAT FREE CASH FLOW NUMBER IS BECOMING VERY, VERY IMPORTANT. HOW MUCH ARE YOU PAYING FOR FREE CASH FLOW? [01:42:26] Max Ketner: A LOT OF THESE COMPANIES HAVE FLIPPED INTO NEGATIVE FREE CASH FLOW IN THE LAST YEAR OR SO. MET ARE THE LATEST OF THE BIG PLAYERS. DO YOU SEE IT FLIPPING BACK SOMETIMES? [01:42:33] Speaker 18: SO THIS IS WHAT'S INTERESTING. NEXT YEAR, IF YOU LOOK AT JUST FORECAST, WE GET TO KIND OF POSITIVE FREE CASH BY THE END OF THE YEAR. AND I DON'T KNOW IF THAT HAPPENS. SO FAR, AS YOU SAID, WE'RE SEEING CAPEX SURPRISE BY 90% FOR NEXT YEAR. THIS YEAR, WE SAW REVENUE SURPRISE A LITTLE BIT, BUT ONLY BY 20%. SO I THINK THE BIG QUESTION FOR 27 IS WHAT SURPRISES MORE, CAPEX OR REVENUE GENERATED BY AI? AND SO FAR, IT'S DEMONSTRABLY BEEN CAPEX. DO YOU THINK THE MARKET IS GOING TO FORCE THE ISSUE ONE WAY OR [01:43:06] Max Ketner: THE OTHER? [01:43:07] Speaker 18: I THINK IT ALL HINGES ON THE COST OF CAPITAL. BECAUSE RATES HAVE RETRACED A LITTLE BIT. CREDIT SPREADS ARE STILL OKAY. IT FEELS LIKE THINGS SHOULD BE A LOT WORSE GIVEN HOW WE'RE TALKING ABOUT TECH AND ALL THESE BALANCE SHEET ITEMS, ET CETERA. BUT I FEEL LIKE THINGS ARE MANAGEABLE RIGHT NOW AND AS LONG AS RATES DON'T GET UNMOARED, AS LONG AS WE DON'T SEE A REAL CREDIT CYCLE, THINGS COULD ACTUALLY BE OKAY. WE COULD JUST SORT OF MUDDLE THROUGH. MAYBE WE DON'T GET THAT CLEARING EVENT. I FEEL LIKE THAT'S THE THING THAT IS KIND OF WORRISOME, IS THAT YOU SEE THE MARKET JUST SORT OF CHUG ALONG, RETRACE. I MEAN, WE'RE ONLY 2.5% OFF THE HIGHS OF OCTOBER, YET IT FEELS LIKE THINGS HAVE DONE MUCH WORSE. IN CERTAIN AREAS, IT HAS DONE MUCH WORSE. [01:43:55] Speaker 7: THERE HAVE BEEN POCKETS THAT HAVE FALLEN OUT. YEAH. I JUST WONDER HOW MUCH YOU'RE SEEING IN THE OTHER EARNINGS, THIS IDEA THAT THERE'S BEEN A BROADENING OUT OF THE BENEFITS OF A.I. VERSUS JUST SIMPLY INCREASING YOUR EXPENSES TO CLOUD FLARE. [01:44:10] Speaker 18: YEAH. I MEAN, I THINK THAT WHAT WE'RE SEEING NOW IS AN ENVIRONMENT WHERE A.I. ADOPTION IS MAYBE STARTING TO SHOW UP A LITTLE BIT. SO IF YOU LOOK AT HEALTHCARE OR AREAS OF FINANCIALS, I.T. SERVICES, YOU ARE ACTUALLY SEEING SOME MONETIZATION, SOME PRODUCTIVITY, IF YOU WILL, NOT MONETIZATION OF A.I., BUT PRODUCTIVITY GAINS FROM USING A.I., WHICH I THINK IS THE NEW THE NEW THEME THAT FOLKS ARE KIND OF PIVOTING TO, YOU KNOW, WHO KNOWS WHAT'S GOING TO HAPPEN WITH THESE HYPER SCALERS, WHO KNOWS HOW MUCH THEY'RE GOING TO SPEND, HOW MUCH THEY'RE GOING TO MAKE, HOW MUCH IT'S GOING TO COST. BUT IT'S A LITTLE BIT EASIER TO BUY COMPANIES THAT ARE ACTUALLY USING A.I. TO BECOME MORE PRODUCTIVE. AND WE ARE SEEING THAT IN POCKETS OF THE MARKET. [01:44:54] Speaker 7: HOW MUCH IS THERE A STRUCTURAL HEADWIND INCREASINGLY GROWING AGAINST THE EQUITY MARKET? AND YOU'VE TALKED ABOUT THIS, THE FACT THAT THERE AREN'T AS MANY BUYBACKS AND NOW THERE'S ACTUAL SHARE ISSUANCE ON MASS SCALE. WE'RE SEEING THIS WITH $95 BILLION OF ADDITIONAL EQUITY SALES COMING FROM META. WE'RE POTENTIALLY GOING TO SEE THAT MUCH MORE LATER ON THIS YEAR AND INTO NEXT WITH AMBITIOUS CAPEX PLANS. HOW MUCH DOES THAT REALLY AFFECT THE FUNDAMENTAL STORY FOR EQUITIES? [01:45:21] Speaker 18: LOOK, I THINK THE FUNDAMENTAL STORY IS POTENTIALLY STILL PRETTY GOOD, BUT YOU'VE GOT, YOU KNOW, IF YOU THINK ABOUT IT, FOR THE LAST 15 YEARS, A PERCENTAGE POINT PER YEAR WAS ADDED FROM BUYBACKS TO EPS GROWTH, RIGHT? SO IT'S BEEN THIS SORT OF MACHINE THAT'S BEEN RUNNING QUIETLY IN THE BACKGROUND, AND NOW IT'S REVERSING. SO IF YOU LOOK AT ISSUANCE VERSUS BUYBACKS FOR TECH, WE'RE NOW IN NEGATIVE TERRITORY. FREE CASH FLOW IS IN NEGATIVE TERRITORY. A LOT OF THINGS ARE IN NEGATIVE TERRITORY THAT WE HADN'T NECESSARILY THOUGHT WOULD BE THE CASE AT THIS POINT. SO TECH, I THINK, IS IN A -- IT'S IN A TOUGH SPOT. I MEAN, YES, IT'S THE GROWTH SECTOR. IT'S GOING TO RULE THE WORLD AND MAYBE KILL US ALL. BUT IT'S ALSO GONE FROM BEING THIS PERFECT STORY OF SECULAR GROWTH, FREE CASH, GREAT BALANCE SHEETS, BUYBACKS, ALL SORTS OF OPTIONS, TO NEGATIVE ON A LOT OF NUMBERS. [01:46:15] Max Ketner: THAT DOESN'T SOUND LIKE AN INDEX THAT DESERVES A MULTIPLE IN THE 20s. [01:46:18] Speaker 18: I MEAN, I MEAN, IT DEPENDS. SO LET'S SAY WE ARE IN THE THROWS OF WHAT COULD BE THE BEST PRODUCTIVITY CYCLE WE'VE EVER SEEN, THEN A 20 MULTIPLE IS PROBABLY WARRANTED, RIGHT? I MEAN, I THINK THAT'S THE THING THAT KEEPS US BULLISH AND KEEPS US THINKING THE MULTIPLE CAN REMAIN AT THESE LEVELS IS THE IDEA THAT PRODUCTIVITY ACTUALLY IS A GAME CHANGER FOR MULTIPLES. LIKE, IF YOU LOOKED AT THE COST OF EQUITY CAPITAL DURING PERIODS OF STRONG PRODUCTIVITY, IT WAS QUITE LOW. SO THAT'S WHAT TELLS ME THAT AS LONG AS WE ARE SEEING THIS ADOPTION HAPPENING SLOWLY IN THE BACKGROUND, AND WE ARE ALL USING IT, COMPANIES ARE USING IT, IT'S HAPPENING. IT JUST DOESN'T FEEL THAT EXCITING. [01:46:59] Max Ketner: THE REASON I ASK IS BECAUSE YOU HAVE WRITTEN ABOUT THIS. [01:47:01] Speaker 18: THIS IS NOT THE SAME INDEX AS IT WAS 10 YEARS AGO. [01:47:04] Max Ketner: IT'S CHANGED RADICALLY AND YOU'VE GONE THROUGH ALL THE DIFFERENT METRICS AND YOU'LL WORK TOGETHER WITH YOUR TEAM AS TO HOW IT'S CHANGED. IT'S CHANGED. DOES THAT MEAN WE SHOULD CHANGE HOW WE VALUE THE OVERALL INDEX? [01:47:11] Speaker 18: WELL, THE PROBLEM IS THE STUFF THAT'S REALLY EXPENSIVE, OR THE BIGGEST PARTS OF THE INDEX ARE GETTING WORSE RATHER THAN BETTER. SO, YOU KNOW, TECH IS GETTING MORE LEVERED, MORE CAPITAL INTENSIVE, AND THESE ARE THE THINGS THAT WE TEND TO PAY A LOWER MULTIPLE FOR. MEANWHILE, THE REST OF THE INDEX HAS THE POTENTIAL TO BECOME LABOR LIGHT, YOU KNOW, REALLY EFFICIENT, MARGINS STABLE, REPLACING PEOPLE WITH PROCESSES. LIKE, THERE'S ALL SORTS OF WONDERFUL THINGS THAT CAN HAPPEN TO THE OVERALL CORPORATE SECTOR. AND I THINK THAT'S WHERE THE PRODUCTIVITY THEME KICKS IN. BUT TECH IS ALREADY REALLY LABOR LIGHT. LIKE, HOW MANY MORE PEOPLE ARE THEY GOING TO FIRE, RIGHT? I MEAN, THEY'VE ALREADY BEEN THE BIGGEST SOURCE OF LAYOFFS OVER THE LAST, YOU KNOW, YEAR. [01:47:54] Speaker 7: WE HAVEN'T EVEN TALKED ABOUT THE FED. THERE'S GOING TO BE A FED MEETING LATER THIS WEEK. IN DAYS, YES. HOW MUCH DO RATES MATTER TO THIS STORY, OR IS THIS COMPLETELY SOMETHING DUE TO THE SECULAR CHANGE IN TECHNOLOGY? [01:48:07] Speaker 18: WELL, I THINK RATES MATTER A LOT. IT MIGHT NOT BE CASH YIELDS. IT'S PROBABLY MORE THE LONG-END. AND I THINK IT'S GOOD THAT IT SEEMS LIKE POLICYMAKERS ARE REALLY FOCUSED ON KEEPING THE LONG END OF THE CURVE UNDER CONTROL. SO YOU'VE GOT WORSH FIGHTING INFLATION. YOU'VE GOT, YOU KNOW, OUR TREASURY SECRETARY POTENTIALLY READY TO STEP IN AND BUY BONDS. WE'LL SEE. BUT I THINK THE IDEA THAT THE LONG-END IS ON WATCH, THAT'S WHERE I THINK THE RISKS ARE MOST ACUTE. SO IF YOU LOOK AT THE COST OF DEBT FOR THE HYPERSCALERS, IT'S GONE UP A LOT, NOT NECESSARILY BECAUSE OF CREDIT BUT BECAUSE OF THE RISK-FREE RATE. WHEREAS THE COST OF EQUITY IS ACTUALLY CLOSING IN ON THE COST OF DEBT. SO WHAT I THINK IS REALLY INTERESTING RIGHT NOW IS A YEAR AGO IT MADE A LOT MORE SENSE TO RAISE DEBT THAN EQUITY. TODAY IT'S KIND OF NECK AND NECK. YOU'VE SEEN MULTIPLE COMPRESSION. YOU'VE SEEN THE RISK PREMIUM STAY PRETTY LOW FOR STOCKS. AND MEANWHILE THE RISK-FREE RATE IS SIGNIFICANTLY HIGHER. I DON'T KNOW ABOUT TODAY BUT A WEEK AGO IT WAS. [01:49:11] Max Ketner: THINGS CHANGED QUICKLY. THINGS MOVE. THANK YOU VERY MUCH. THANKS FOR INDULGING US. WE APPRECIATE IT. BANKFOR AMERICA ON THE PROSPECT OF AI KILLING US ALL. [01:49:19] Speaker 7: OR BEING REALLY PROFITABLE. [01:49:21] Max Ketner: AND THE OPPORTUNITY TO MAKE MONEY. [01:49:23] Speaker 7: CLEARLY. IT'S POTENTIALLY THE TRADE THAT WE'RE GOING TO BE ANALYSING TODAY AT 9:00 A.M. EASTERN TIME BECAUSE THAT ESSENTIALLY IS THE ONE PIECE OF THE EQUATION THAT WE HAVEN'T ANSWERED. WHAT YOU SAID THERE WAS REALLY INTERESTING THAT IT USED TO BE THAT THE EQUATION TO RAISE DEBT WAS OBVIOUS OVER EQUITY. AND NOW IT'S ABOUT NECK AND NECK. AND IT'S CLEAR FROM CORPORATE BEHAVIOR. INCREASINGLY ISSUING EQUITY. YOU JUST WONDER ABOUT WHAT THE DYNAMIC IS. FOR A LONG TIME THE EQUITY MARKET WAS SHRINKING. NOW WE'RE EXPANDING AT A REALLY RAPID CLIP. THAT CHANGES THE BACKDROP. [01:49:51] Max Ketner: THERE'S A LOT OF SUPPLY COMING AND SOME BIG I.P.O.'s. JUST THINKING OF OPEN AI AS WE'RE HAVING THIS CONVERSATION AND ALL THIS MONEY IS BEING RAISED AND OPEN AI'S I.P.O. HAS JUST BEEN DELAYED INTO 27. HOW BIG IS THAT WINDOW? YEAH. [01:50:03] Speaker 7: UNCLEAR. AND ANTHROPIC IS TRYING TO GET IN NOW. IS THIS A GOOD TIME? IS THIS A BAD TIME BECAUSE OF THE JITTERS? WE'LL SEE. I MEAN, HOW DO THEY EVEN QUANTIFY THAT RISK? I MEAN, 10%? [01:50:12] Max Ketner: WHAT, KILLING THE WORLD? YEAH. HOW DO YOU COME UP WITH 10%? [01:50:15] Speaker 7: I KNOW. [01:50:16] Max Ketner: WHERE DOES THAT NUMBER COME FROM? [01:50:17] Speaker 7: WELL, SOMEONE IN THERE WITH A CHAT. BASICALLY, FINGER IN THE WEAR. [01:50:23] Max Ketner: SEVITA WASN'T ON CAMERA THEN. I DON'T KNOW, SIR. FEELS THAT WAY. IT'S THE MOST ANCISIFATED S1 IN QUITE A WHILE. WE'RE WAITING FOR IT TO DROP ATTENTION IN ABOUT 45 MINUTES TIME. LET'S GET YOU AN UPDATE ON NEWS WORLDWIDE THIS MORNING WITH YOUR BLOOMBERG BRIEF. [01:50:35] Speaker 9: PRESIDENT DONALD TRUMP SAYS IT'S NEARLY DECISION TIME ON IRAN, SAYING IT'S EITHER TIME TO QUOTE FINISH IT OFF OR MAKE A DEAL. TRUMP HAS SUGGESTED U.S. STRIKES COULD RESUME AFTER THE NOVEMBER 3 MIDTERMS AND HAS SENT ADDITIONAL FORCES TOWARD THE PERSIAN GULF IN PREPARATION. THE 8-YEAR-OLD GARNERING 51.8% OF THE VOTE, DEFEATING FLAVIO BOLSONARO, WHO RECEIVED JUST OVER 48%. BOLSONARO IS REFUSING TO CONCEDE AND ASKING FOR THE ELECTION RESULTS TO BE ANNULLED AFTER A LAST-MINUTE DECISION TO EXTEND VOTING BY TWO HOURS. IN SPORTS, THE FIRST TWO GAMES OF THE WORLD SERIES BELONG TO THE RUERS. MILWAUKEE CAME FROM BEHIND ON SATURDAY TO WIN 5-4 AND TAKE A COMMANDING LEAD OVER THE RAISE. THE SERIES SHIFTS NOW TO TAMPA FOR GAME THREE TONIGHT. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: [01:51:31] Max Ketner: THANK YOU VERY MUCH. UP NEXT WE WILL GET YOU SOME MORNING CALLS PLUS WE WILL CATCH UP WITH SARAH COUNST OF CLEO CAPITAL WITH ANTHROPICS IPO FILING LESS THAN ONE HOUR AWAY FROM NEW YORK CITY THIS MORNING. GOOD MORNING. [01:51:52] Speaker 17: GOOD MORNING. WHEN YOU LOOK FOR EXAMPLE THIS WEEK AT THE HYPERSCALAR EARNINGS, I STRUGGLE TO SEE HOW THEY CAN HAVE A BULLISH NARRATIVE. THAT WOULD BE PROBABLY INTERPRETED AS THE FIRST ADMISSION OF HAVE WE OVERSPENT? IS THIS THE PEAK OF THE CAPEX CYCLE? THAT IS NOT GOOD FOR THE [01:52:23] Max Ketner: HYPERSCALERS, THAT IS NOT GOOD FOR THE TECH TRADE. IS IT THE PEAK OF THE CAPEX CYCLE? IT IS NOT THE PEAK OF THE CAPITAL RAISING. THAT NUMBER KEEPS RISING. WE HAVE A DEAL FROM SPACEX ANNOUNCED, $40 BILLION TO BUY GPUs, I BELIEVE. UPWARDS OF $95 BILLION ON THE EQUITY SIDE AND ABOUT 40 MINUTES TIME, WE ARE GOING TO HEAR FROM ANTHROPIC. THEIR HANDS ARE STILL OUT AND LATER THIS WEEK WE ARE GOING [01:52:48] Speaker 7: TO HEAR FROM AMAZON, MICROSOFT AND GOOGLE ABOUT THEIR FINANCING PLANS AND HOW MUCH CAPITAL THEY PLAN TO RAISE JUST WITH THEIR CAPEX PLANS. THE EXPECTATION IS JUST THOSE THREE COMPANIES ALONE FOR THIS YEAR, $650 BILLION, ADD 30% TO THAT FOR NEXT YEAR AND THAT IS WHAT WE ARE LOOKING FOR, THAT IS WHAT WE ARE EXPECTING. HOW MUCH APPETITE DOES THIS MARKET HAVE TO ABSORB IT AND WHERE ARE THE POCKETS WHERE INVESTORS ARE GOING TO BE WILLING TO GIVE MONEY OVER? [01:53:16] Max Ketner: THE CAPITAL RAISING IS CRAZY. THE AMOUNT OF NUMBERS GOING INTO THIS ECONOMY RIGHT NOW. THE FED IS A PLAYER IN ALL OF THIS. [01:53:27] Speaker 7: IS HE GOING TO SIT AND WATCH ALL THIS HAPPEN AND INFLATION CONTINUE TO LINGER OR ATTEMPT TO DO SOMETHING ABOUT IT? AND WHERE ARE ALL OF THESE BUILDING PLANS SQUEEZING LABOR RESOURCES AWAY FROM OTHER AREAS OF THE ECONOMY? THINK ABOUT HOUSING. THE FACT THAT A LOT OF HOUSES DOESN'T EXPECT ANYTHING ABOUT THAT. I THINK THE FACT THAT A LOT OF THESE TEAMWORKERS ARE IN SHORT SUPPLY BECAUSE THEY ARE ALL GOING OVER THERE TO BUILD DATA CENTERS. IT IS A COMPLETELY LOP-SIDED ECONOMY RIGHT NOW. HOW DOES ANYONE JUDGE IT? [01:53:54] Max Ketner: HOW DOES ANYONE DECIDE WHAT TO DO IN TERMS OF TRADING IT? HOW DOES ANYONE GIVE THEM TO DO THIS? EXACTLY. LET'S GET BACK TO IT. IN DECEMBER, WHEN WE PUT OUT SOME NEW FORECAST, APPARENTLY THAT ANTHROPIC S1 SHOULD BE DROPPING IN ABOUT 45 MINUTES TIME. EQUITY FUTURES RIGHT NOW IN THE S&P POSITIVE BY 4/10. A LITTLE BIT OF 2.5% COULD OFFSET AI PRESSURE. THE SECOND CALL FROM BARKLEY'S, UPGREADING TESLA TO OVERWEIGHT, CITING ITS POTENTIAL MERGER WITH SPACEX. THAT NAME IS UP BY 2.3%. FINALLY, BERNSTEIN RAISING ITS PRICE ON SPACEX, NOTING ITS "TERRESTRIAL AI BUILD PLANTS." THE STOCK IS UP BY 0.9% THIS MORNING. ELSEWHERE, THE MAIN EVENT LATER ON THIS MORNING, ANTHROPIC EXPECTED TO DROP ITS S1 AT 9:00 A.M. EASTERN TIME, KEEPING THE COMPANY ON TRACK FOR WHAT COULD BEEN ABLE TO COMPANY ON TRACK. HE JOINS US NOW FOR MORE. [01:54:51] Speaker 20: WELCOME TO THE PROGRAM. WHAT ARE YOU EXPECTING TO SEE? WHAT ARE YOU LOOKING FOR IN ABOUT 40 MINUTES TIME? I FEEL LIKE WE ARE DOING A COUNTDOWN TO NEW YEAR'S HERE. I THINK THE BIG THING THAT PEOPLE SHOULD KEEP THEIR EYE ON IS WHAT DOES THAT DEBT LOOK LIKE? PARTICULARLY THE OFF-BALANCE GEE, RIGHT? WE KNOW THERE HAS BEEN A LOT OF SLEIGHT OF HAND SAYING, NO, NO, DON'T WORRY ABOUT HOW MUCH DEBT WE HAVE HAD TO TAKE ON HAND. I THINK IT IS A RISK FACTOR. YOU HAVE TO PAY THE PIPER SOME TIME. I AM REALLY CURIOUS. WE KNOW A LOT ABOUT CLAUDE. WE KNOW A LOT ABOUT WHAT ANTHROPIC DOES WELL. I AM MUCH MORE INTERESTED TO UNDERSTAND HOW THEY ARE [01:55:29] Max Ketner: APPROACHING THEIR FINANCIAL SITUATION ON THE DEBT SIDE. WE KNOW THAT IT HAS GOTTEN ATTENTION. IT HAS GOTTEN ATTENTION OVER THE LAST SEVERAL MONTHS. THE POTENTIAL TO END THE WORLD. IS THAT A DISTRACTION OR DO YOU THINK IT IS MATERIAL? [01:55:40] Speaker 20: I THINK IT IS A DISTRACTION. I THINK THE REAL RISK FACTORS ARE THINGS LIKE GOD FORBID ANYONE EVER SUES THEM FOR THEIR AI HACKING INTO THEIR COMPANIES. THAT IS A REALLY BIG LINE ITEM THAT SO FAR NO A.I. COMPANY HAS REALLY HAD TO DEAL WITH. AND I DON'T THINK THAT THAT IS LIKELY TO STAY THE COURSE. I THINK EVENTUALLY WE WILL SEE WHAT THE COURTS THINK ABOUT ALL OF THIS MASSIVE LARGE-SCALE HACKING THAT THESE COMPANIES ARE DOING ESSENTIALLY WITH IMPUNITY. [01:56:07] Speaker 7: ZARA, DO WE KNOW MORE ABOUT THE POTENTIAL LIABILITIES RIGHT NOW TIED TO ANTHROPIC OR MORE ABOUT THE REVENUE PROPOSITION THAT THEY POTENTIALLY PRESENT? [01:56:16] Speaker 20: I THINK THEY HAVE REALLY BEEN PUSHING THE REVENUE PROPOSITION. THERE IS A HUGE QUESTION ABOUT WHAT THAT ACTUALLY LOOKS LIKE AT SCALE BECAUSE WHAT WE DO KNOW IS THERE IS A RECENT REPORT OUT FROM AN APOLO ECONOMIST THAT SAID, HEY, LOOK, THE ONLY PEOPLE MAKING MONEY FROM A.I. ARE A.I., RIGHT? THE REST OF THE ECONOMY, ENTERPRISE, S&B, INDIVIDUALS ARE NOT SEEING SORT OF PRODUCTIVITY GAINS. THEY ARE NOT SEEING REVENUE GAINS FROM IT. AND A LOT OF BIG COMPANIES THAT ARE SPENDING ON A.I. ARE FRANTICALLY LOOKING FOR WAYS TO SPEND LESS, TO USE OPEN SOURCE OR OPEN WEIGHT MODELS, YOU KNOW, TO JUST SWITCH AND ROUTE TO CHEAPER MODELS. THIS IS A RACE TO THE BOTTOM, WHICH ISN'T REALLY THE GROWTH STORY THAT ANTHROPIC AND OPEN A.I. AND OTHERS NEED TO PUSH RIGHT NOW. [01:56:59] Speaker 7: ANOTHER QUESTION THAT PEOPLE HAVE IS HOW MUCH ARE THEIR BIGGEST CUSTOMERS, THE BIGGEST COMPETITORS, HOW MUCH ARE THE HYPER SCALERS THAT HAVE BEEN PAYING THE TOKENS TO USE THEIR PRODUCT, DEVELOPING THEIR OWN PROTOTYPES, USING OPEN SOURCE MODELS? HOW MUCH DO YOU EXPECT THAT TO COME CLEAR? HOW MUCH DO YOU THINK THAT REALLY DOES FUNDAMENTALLY CHALLENGE SOME OF THE CLOSED SOURCE FRONTIER MODELS COMING FROM THE LIVES OF ANTHROPIC AND OPEN A.I.? [01:57:23] Speaker 20: I MEAN, YOU'RE SAYING ROUND TRIP LIKE IT'S A BAD THING, RIGHT? AND WE KIND OF KNOW THAT THAT'S THE FLIP SIDE. WHEN YOU DIG INTO ANTHROPIC A QUARTER OR TWO AGO, TWO OF THEIR BIGGEST CUSTOMERS WERE ESSENTIALLY MICROSOFT VIA GAT HUB AND THEN, YOU KNOW, SPACEX VIA CURSOR. IS THAT SUSTAINABLE? THAT FEELS HARD TO SAY LONG-TERM. SO, YOU KNOW, NOT ONLY DO THEY HAVE THE RISK OF THESE HUGE CUSTOMERS, BUT A LOT OF TIMES THE HUGE CUSTOMERS DO NOT HAVE THEIR BEST INTEREST AT HEART. AND THAT'S EVEN BEFORE YOU REMEMBER THAT ELON MUSK IS IN CHARGE OF ONE OF THOSE BIG CUSTOMERS. AND SO, YOU KNOW, THERE'S A LOT OF RISK THERE TO UNPACK. AND THEY ARE GOING TO BE SELLING US A STORY OF, HEY, THIS IS GOING TO GO UP AND TO THE RIGHT FOREVER. BUT WE ALREADY KNOW THAT'S NOT TRUE. [01:58:11] Max Ketner: SARAH, ARE YOU SENTING SOME URGENCY HERE TO RACE CAPITAL? DO YOU THINK THEY SENSE THE WINDOW MIGHT BE CLOSING? [01:58:18] Speaker 20: IT FEELS EVEN DIFFERENT THAN URGENCY, RIGHT? IT IS LIKE BEING IN STOP AND GO TRAFFIC. IT IS ONE THING TO SAY WE GOT TO GET OUT, WE GOT TO GO FUN, YOU KNOW, WE GOT TO GO IPO, LET'S GO DO THIS. IT'S BEEN ABSOLUTELY -- HOW MANY TIMES HAS THE S-1 BEEN LEAKED, RIGHT? HOW MANY TIMES HAVE WE BEEN SITTING HERE READY TO SEE IT DROP? AND THEN IT DOESN'T. THERE'S CLEARLY SOME NERVOUSNESS INTERNALLY ABOUT THEIR ABILITY TO SELL THIS THING. OTHERWISE THEY WOULD HAVE ALREADY DONE IT BECAUSE THEY DO REALLY NEED THE CASH. [01:58:44] Max Ketner: SARAH, THANK YOU ON THE MAD PUSH TO RAISE A LOT OF MONEY. YEAH, AND THE RACE IS AN IMPORTANT QUESTION. [01:58:50] Speaker 7: AND THE FACT THAT -- AND TO SARAH'S POINT THERE, WHY HAVE THEY BEEN LEAKING IT OUT OR WHY HAS IT BEEN LEAKING OUT WITH THEM JUST NOT COMING PUBLIC, RIGHT? WHAT HAS BEEN THE HOLD OFF? AND ULTIMATELY, AGAIN, IT GOES DOWN TO THE QUESTION, IS THIS THE CLEARING EVENT THAT WE ARE LOOKING FOR? HOW DOES ANTHROPICS IPO DO? WHAT DOES THE S-1 SHOW? AND ULTIMATELY, HOW BELIEVABLE IS THE STORY THEY ARE TELLING UP AND TO THE RIGHT IN TERMS OF PROFITABILITY? [01:59:14] Max Ketner: IS THIS A CLEARING EVENT? SPEAKING OF GAPPY MOVES, BRAZIL, HAVE YOU SEEN THIS MOVE OF THE CURRENCY? SO, AT THE START OF THE YEAR, JAN 1, 542, OKAY? WE'RE BACK TO 542. WE'VE GOT A 9% MOVE ON THE CURRENCY TODAY. THAT'S A MAJOR MOVE OFF THE BACK OF THIS ELECTION SURPRISE. [01:59:30] Speaker 7: YEAH, TAKING OUT SOME OF THE GAINS THAT YOU HAD BEEN SEEING WHEN PEOPLE THOUGHT THAT BOLSONARO WAS TAKING OUT THE WHOLE YEAR'S RALLY, BECAUSE PEOPLE WERE ANTICIPATING THAT THE SHIFT RIGHT WOULD CONTINUE TO BRAZIL. THIS ELECTION WAS A HUGE SURPRISE TO A LOT OF PEOPLE. THE FACT THAT PRESIDENT LULA HAS WON A FOURTH TERM. THE IMPLICATIONS OF THAT ARE GOING TO BE MESSY, AND I THINK THAT ALSO IS ONE REASON WHY PEOPLE ARE HIGHLIGHTING THE SKIDISHNESS. IF YOU DO HAVE BOLSONARO CHALLENGING THAT, THIS IS GOING TO BE A TOUGH COUPLE OF MONTHS. [01:59:59] Max Ketner: COMING UP ON THE PROGRAM, WE'LL TALK ABOUT THE REALITY HERE IN THE UNITED STATES, AHEAD OF THAT FED DECISION. WE'LL TALK ABOUT IT, BUT WE'LL TALK ABOUT IT. IT'S A LITTLE BIT OF A FED DEMOCRATIC OF NATIONWIDE. LOOKING AHEAD TO THAT, PLUS ISABELLE LEE HAS YOUR MORNING MOVERS. LOOKING TO RAISE UP TO $95 BILLION [02:00:18] Speaker ?: ON THE FED DEMOCRATIC. [02:00:34] Max Ketner: 60 MINUTES OUT FROM THE CASH OPEN, EQUITIES POSITIVE BY 4/10 OF 1% ON THE S&P, ON THE NASDAQ UP BY 3/4 OF 1%. WITH TONS OF NEWS OUT THERE FOR TECH. A LOT OF MONEY BEING RAISED ACROSS SPACEX, META, AND SOME PEOPLE ARE LOOKING AT THE S&P. THE S&P IS THE S&P IS THE [02:00:52] Speaker 7: S&P. THE S&P IS THE S&P IS THE S&P. THE S&P IS THE S&P IS THE S&P. THE S&P IS THE S&P IS THE S&P. THE S&P IS THE S&P IS THE S&P. I FEEL LIKE THIS IS A LYNCHPIN MOMENT. WE ARE SEEING A SHIFT IN THE PREFERRED FINANCING FROM DEBT TO EQUITY FOR SOME OF THE BIG TECH COMPANIES. WE HAVE SEEN IT TRANSITIONING S&P IS THE S&P WHERE PEOPLE ARE FULLY EMBRACING THE EQUITY SALES ABOVE SOME OF THE DEBT SALES GIVEN SOME OF THE PUSHBACK [02:01:23] Max Ketner: THAT WE'VE SEEN FROM CREDIT MARKETS. JONATHAN: THE DEBT CHANNEL IS GETTING BACKED UP. THE DEBT CHANNEL IS GETTING BACKED UP. WE HAVE BEEN INCREASINGLY MORE ABOUT OPEN AI THIS MORNING. EVERYONE IS FRONT RUNNING, ATTEMPTING TO FRONT RUN THE [02:01:48] Speaker 7: OTHER FROM ALPHABET INTO SPACEX, AND NOW FROM THE LIKES OF META INTO ANTHROPIC. WHAT IS LEFT FOR OPEN AI? THEIR BED IS TRYING TO GET AHEAD OF WHATEVER HAPPENS NEXT. IT DOES NOT SEEM LIKE IT IS AS GOOD FINANCING CONDITIONS AS IT WAS EARLIER. THEIR BET IS TRYING TO GET AHEAD OF WHATEVER HAPPENS NEXT. WHAT HAPPENS WITH FRONTIER MODELS GIVEN THE INCREASE IN USE OF OPEN SOURCES AND TOKEN [02:02:13] Max Ketner: PRICES KEEP GOING DOWN? WE CAN'T NEGLECT THAT. [02:02:17] Speaker 14: THANK YOU, IZABEL. IT IS A TECH-HEAVY MONDAY. WE HAVE TO START WITH META. SHARES ARE DOWN BY 7/10% IN PRE-MARKET RATE. THIS IS INTERESTING BECAUSE THE STOCK FIRST DROPED WHEN THEY ANNOUNCED PLANS TO RAISE AS MUCH AS $95 BILLION IN COMMON AND PREFERRED SHARES. THEN IT ROSE AND NOW IT IS BACK IN THE RED. THE COMPANY ANNOUNCED THAT IT WANTS TO RAISE AT LEAST $35 BILLION OF COMMON AND PREFERRED SHARES, AROUND $60 BILLION SHARE PROGRAM. YOU SEE THE STOCK HIGHER IN PRE-MARKET TRADE BECAUSE WE HAVE THE LIVES OF INVIDIA AND BROADCOMP AGREEING TO PARTICIPATE IN THE PROGRAM AND OFFERING AS MUCH AS $5 BILLION WHEN IT COMES TO COMMON SHARES. YOU SEE THE STOCK HIGHER BY MORE THAN 1%. FINALLY, LET'S TAKE A LOOK AT EXP SHARES. THIS IS A WEALTH MANAGER IN BRAZIL. THE STOCK IS DOWN, DOWN BAD BY NEARLY 50% IN PRE-MARKET TRADE. THIS COMES AFTER THE SURPRISE WIN OF PARTICIPATES, THE STOCK HIGHER IN OCTOBER, DURING THE FIRST ROUND, IT WAS BOLSONARO IN THE WIN. THAT TRIGGERED A RALLY THAT DREW IN BILLIONS OF DOLLARS FROM FOREIGN INVESTORS. BIG BANKS OF JP MORGAN AND MORGAN STANLEY PUTTING OUT BULLISH CALLS FOR BRAZILIAN ASSETS. [02:03:30] Max Ketner: PARTICIPATES, ELECTIONS OF ELECTIONS. THAT IS GOING TO HURT. SOME PAINFUL MOVES OUT OF BRAZIL. LET'S TALK ABOUT THE FED DECISION IN A FEW DAYS' TIME. INVESTORS ARE WAITING A RATE DECISION, FOLLOWED BY A CHAIR DATE DATA LATER IN THE WEEK. [02:03:52] Speaker 28: MIKE MCKEE HAS MORE. GOOD MORNING, MIKE. GOOD MORNING, JOHN. NOBODY EXPECTS THE FED TO DO ANYTHING. I CAN'T COMPETE WITH ANTHROPICS S1 THIS MORNING. WE HAVE A COUPLE OF AI-RELATED DATA POINTS COMING OUT BEFORE THE FED MEETS. TOMORROW WE GET DURABLE GOODS ORDERS AND WE WILL SEE IF THERE IS ANOTHER BIG INCREASE IN ORDERS FOR ELECTRONICS AND COMPUTERS AND THINGS LIKE THAT. ON WEDNESDAY ADVANCED TRADE, LAST WEEK WE TALKED ABOUT THE CONTRIBUTION TO GDP FROM AI AND A LOT OF THAT COMES IN IMPORTS. WE WILL SEE WHAT THAT SITUATION IS. WEDNESDAY, THE FED MEETING. THURSDAY, AS YOU SAID, THE PCE. WE KNOW WHAT LIKELY IT IS GOING TO BE. IT IS GOING TO SHOW INFLATION GOING IN THE WRONG DIRECTION. IT JUST COMES A DAY TOO LATE FOR THE FED TO DO ANYTHING ABOUT IT. THEN THIRD QUARTER GDP, WE WILL SEE WHAT THE AI IMPACT IS. FRIDAY, WE GET ECI. THE FED HAS BEEN TALKING ABOUT HOW WE ARE NOT SEEING WAGES AND BENEFITS AS AN INFLATION THREAT AT THE MOMENT. WE WILL GET THE LATEST READ ON WHAT IS HAPPENING THERE. AS FAR AS THE FED IS CONCERNED, AS I MENTIONED, NOT MUCH THOUGHT THAT THE FED IS GOING TO DO ANYTHING. WE WILL TALK ABOUT HOW IT IS GOING TO DO ANYTHING. WE WILL HAVE A 9% CHANCE THAT THEY WILL RAISE RATES THIS WEEK ACCORDING TO FED FUNDS FUTURES. THERE IS AN 80% CHANCE IN DECEMBER. YOU PUT THOSE TWO THINGS TOGETHER, YOU HAVE A 90% CHANCE. THERE ARE NO ECONOMIC FORECASTS, NO DOT PLOTS. NOT A LOT TO TALK ABOUT. WE WILL GO BACK TO THE OLD FORMAT A LITTLE BIT LATER. BUT HE IS GOING TO HAVE THE TOUGHEST JOB OF THE DAY EXPLAINING WHY THE FED DID WHAT IT DID. IF INFLATION IS NOT GETTING BETTER, WHY DID THEY GO ON HOLD? IS THIS RISK MANAGEMENT? IS THIS JUST SPACING THINGS OUT? IT WILL BE UP TO THE FED CHAIR. AND THEN EVERYBODY IS GOING TO BE ASKING THE QUESTION IS THIS POLITICS OR IS THIS PRUDENCE? IS IT POLITICS? PROBABLY NOT. THEY ARE NOT GOING TO LET POLITICS INFLUENCE THEIR DECISION. BUT THE DECISION NOT TO MAKE A DECISION COULD BE PRUDENCE ON THEIR PART, NOT GET INVOLVED IN ALL THE POLITICAL BACK AND FORTH JUST FIVE DAYS BEFORE THE ELECTION. [02:05:51] Max Ketner: THAT IS TRUE. IT MIGHT BE PRUDENT NOT TO TALK ABOUT ANY GIVEN POTENTIAL IPO. BUT WE SHOULD TALK ABOUT FINANCIAL CONDITIONS. INCREASINGLY UNEVEN. CAPITAL MARKETS, DEBT EQUITY, OPEN FOR SOME, CLOSE FOR OTHERS. HOW DO YOU THINK THE FED WOULD RESPOND TO THE AMOUNT OF CAPITAL BEING RAISED THIS MORNING ALONE POTENTIALLY, MIKE? HOW IT MIGHT GETS PUT TO WORK AND WHETHER IT IS A THREAT TO INFLATION? [02:06:13] Speaker 28: THAT IS WHAT THEY HAVE TO KEEP AN EYE ON IS WHAT THE INFLATION IMPLICATIONS ARE. AND AS WE DID GO THROUGH LAST WEEK, MUCH OF WHAT WE ARE SPENDING ON AI, SOME OF THAT WOULD HAVE BEEN SPENT ANYWAY ON BUILDINGS AND STRUCTURES. NOW WE ARE CALLING THEM DATA CENTERS BUT THE WAREHOUSES ARE ALWAYS GETTING BUILT. AND THEN A LOT OF THE ELECTRONICS ARE COMING IN FROM OVERSEAS. SO THE IMPACT IS GOOD, BUT IT IS NOT OVERWHELMING AT THIS POINT. WE WILL SEE IF THAT CONTINUES. AND WE WILL SEE IF ALL OF THIS AI STUFF STARTS TO FEED INTO INFLATION. THE FED IS WATCHING FOR IT. THEY THINK IT IS PUTTING SOME UPWARD PRESSURE ON INFLATION. BUT IS IT GOING TO BE SIGNIFICANT ENOUGH THAT THEY HAVE TO MOVE AGAINST IT? THAT WILL BE A QUESTION FOR KEVIN WARSCH. MIKE MCKEY, THANK YOU. [02:06:52] Max Ketner: LOOKING FORWARD TO YOUR COVERAGE. AS ALWAYS, MIKE MCKEY ATTEMPTED TO ASK THE SECOND QUESTION IN THE NEWS CONFERENCE, NO DOUBT, A FEW DAYS' TIME. WE ARE DOWN TO SINGLE QUESTIONS AND NO FOLLOW-UPS. AND HAND BACK THE MICROPHONE. MAYBE. [02:07:03] Speaker 7: MAYBE HE CAN PUSH IT IN THERE. IMAGINE IF YOU DO THAT, NOW YOU PROBABLY DON'T GET [02:07:07] Max Ketner: INVITED BACK. [02:07:08] Speaker 7: AND IF YOU DO A TWO-PART QUESTION, HE JUST CHOOSES THE ONE HE WANTS TO ANSWER. YES, HE DOES. I THINK PEOPLE ARE MOVING AWAY FROM THAT AS WELL. THE STRATEGIES HAVE TO CHANGE. [02:07:15] Max Ketner: THE STRATEGY IS WE DON'T HAVE NEWS CONFERENCES ANYMORE. I THINK THAT FEELS INCREASINGLY LIKE THE STRATEGY INTO 27. THAT OR WE HAVE VERY FEW NEWS CONFERENCES THROUGH NEXT YEAR. [02:07:25] Speaker 7: OR WE LET JUST A COUPLE OF PEOPLE SPEAK AND SIGNAL TO MARKETS EXACTLY WHAT'S GOING TO HAPPEN AND GIVE FORWARD GUIDANCE. IT'S GOING TO BE HARDER TO DO THAT. ULTIMATELY, YOU'RE NOT MUZZLING THEM. SO IF YOU GO ALONG WITH WHAT THEY SAY, YOU'RE ESSENTIALLY SAYING, GUESS WHAT? I AGREE. [02:07:40] Max Ketner: LET'S TALK ABOUT THE KEY OFFICIALS. THE TROIKA HAVE TELEGRAPHED THEY WANT TO KEEP THE FED FUNDS RATE STEADY. HOWEVER, WITH INFLATION READINGS MOVING IN THE WRONG DIRECTION, PRESSURE WILL BE ON FED CHAIR WALSH TO EXPLAIN WHY, IF INDEED, THEY DO. KATHY JOINS US NOW FOR MORE. YOU SAID THE TROIKA IS TWO OF THE THREE. IT'S THE VICE CHAIR AND THE NEW YORK FED PRESIDENT. THE FED CHAIR HIMSELF HASN'T SAID MUCH AT ALL. HOW MUCH DISTANCE DO YOU THINK THERE IS BETWEEN HIM AND [02:08:06] Speaker ?: THOSE OTHER TWO? [02:08:07] Speaker 29: GOOD MORNING, JONATHAN. HISTORICALLY, NO DISTANCE. THE NEW YORK FED PRESIDENT AND VICE CHAIR OF THE FOMC WOULD BE VERY MUCH IN LINED WITH THE CHAIR. I SUSPECT THAT'S STILL THE CASE. BUT WE'LL FIND OUT, RIGHT, IF FOR SOME REASON THERE'S A SURPRISE ON WEDNESDAY, WE HAD A RATE INCREASE. OR MAYBE WARSH SAYS SOMETHING IN THE PRESS CONFERENCE. I DON'T ANTICIPATE THAT, BUT SAYS SOMETHING TO KIND OF DISPEL THAT. SO I THINK, YOU KNOW, TO THE POINT YOU WERE MAKING EARLIER, I THINK FORWARD GUIDANCE IS GETTING OUT. IT'S JUST NOT COMING FROM THE CHAIR. [02:08:43] Max Ketner: KATHY, THAT'S THE PROBLEM. IS IT THE NEW FED OR THE OLD FED? BECAUSE IF THIS IS ABOUT THE DATA AND THEIR RESPONSE TO IT, ISN'T THIS A FED THAT HIKES IN A FEW DAYS' TIME? [02:08:53] Speaker 29: I MEAN, IT WOULD BE LOGICAL FOR THEM TO HIKE. I WAS SURPRISED TO SEE THE COMMENTS FROM WILLIAMS AND JEFFERSON. IT JUST SEEMS LIKE THIS IS EXACTLY WHAT WARSH TALKED ABOUT AT JACKSON HALL, RIGHT? HE SAID INFLATION NEEDED TO CONTINUE TO IMPROVE IN A TIMELY MANNER. WELL, THIS IS JUST THE OPPOSITE. SO MAYBE HE CAN MAKE THE CASE, WELL, WE NEED MORE THAN ONE MONTH'S WORTH OF INFLATION READINGS. AND WE DO KNOW, YOU WERE TALKING ABOUT THE PRESS CONFERENCES, BUT WE ALSO DON'T KNOW THE NUMBER OF MEETINGS. HE HAS BEEN ADVOCATING GOING FROM EIGHT TO SIX. SO MAYBE THIS IS PART OF THAT PUSH. [02:09:32] Speaker 7: KATIE, HOW MUCH DOES IT MATTER WHETHER THEY HIKE RATES IN OCTOBER OR DECEMBER? [02:09:38] Speaker 29: IT'S NOT A BIG DIFFERENCE IN TERMS OF THE ECONOMIC IMPACT. BUT I THINK IT'S A SIGNALING MECHANISM. IT ALSO IS AT THE TIME THAT IT'S HAPPENING, RIGHT? SO I DO THINK IT'S QUITE INTERESTING THAT THE COMMENTS FROM WILLIAMS AND EVEN WALLER AND JEFFERSON CAME WHEN THE BOND MARKET WAS SELLING OFF QUITE SHARPLY. WE SAW LONG-TERM RATES GOING UP AND THE MARKET PRICING IN MORE RATE HIKES THAN THE SEP DID. IT MAY BE THAT THEY GOT A BIT UNNERVED AND SAID, OH, GOSH, THE BOND MARKET IS MOVING QUICKER THAN WE INTENDED. WE JUST WANT TO TAKE SOME OF THE ACCOMMODATION OUT. WE DON'T WANT TO BE TOO RESTRICTIVE. SO MAYBE THAT'S PART OF THE THINKING. IF WE GO A LITTLE SLOWER, THE MARKET WILL CALM DOWN. AND THEY HAVE, MAYBE FOR THE WRONG REASON. WE HAD THE FLAKED EQUALITY BECAUSE OF CONCERNS ABOUT THE TECH MARKET. [02:10:29] Speaker 7: IF THAT WAS ENOUGH TO UNNERVE THE FED, HOW WILLING ARE THEY ACTUALLY TO BRING RESTRICTIVE FINANCIAL CONDITIONS INTO PLAY TO BRING INFLATION UNDER CONTROL? [02:10:39] Speaker 29: GREAT QUESTION. SO I THINK AS OF NOW, THEY DON'T INTEND TO BE VERY RESTRICTIVE OR AGGRESSIVE. I THINK IF YOU ESPECIALLY LOOK AT THE SEP AND YOU LOOK AT JOHN WILLIAMS, NEW YORK FED PRESIDENT, WE JUST NEED ONE MORE RATE HIGH, WHICH IS A PRETTY BOLD CALL. BUT I THINK IT WAS ALL AN ATTEMPT TO CALM THE MARKET. SO I THINK RIGHT NOW, NO INTENTION TO REALLY HURT THE ECONOMY. AND THERE'S PROBABLY A THINKING THAT SOME OF THESE INFLATION READINGS WILL MOVE OUT OF THE YEAR-ON-YEAR COMPARISON COME NEXT YEAR. ENERGY, AS LONG AS GASOLINE PRICES DON'T KEEP GOING UP, OIL PRICES NOT BY A LARGE AMOUNT, YOU'LL GET THE YEAR-ON-YEAR COMPARISON KIND OF COOLING. AI, THOUGH, IS THE ONE SECTOR I THINK WHERE WE COULD CONTINUE TO SEE UPWARD PRESSURE, BUT IT'S NOT CONTRIBUTING AS MUCH AS OIL AND EVEN THE TERRORISTS AT THIS POINT. [02:11:29] Speaker 7: HAS OIL REACHED THE POINT WHERE IT IS DEMAND DESTRUCTIVE RATHER THAN JUST SIMPLY INFLATIONARY? IT SEEMS LIKE, AT LEAST IN TERMS OF THE MARKET REACTION, THERE'S BEEN A FLIP IN THE LAST COUPLE OF WEEKS. [02:11:41] Speaker 29: HOW DO YOU THINK THE RENEWED INCREASE IN ENERGY PRICES REALLY HAS THAT STICKER SHOCK? WHEN YOU START TO SEE BREN AND WESTSEX IS BACK TO DOUBLE DIGITS AND GASOLINE PRICES, DIESEL PRICES NOT MOVING MATERIALLY LOWER, I THINK IT DOES THEN START TO -- I THINK IT'S ALWAYS BEEN A CONSTRAINT, BUT NOT A BIG ONE, BECAUSE AI IS KIND OF IMMUNE TO THE ENERGY, AT LEAST THAT ENERGY PORTION. AND THEN THE CONSUMERS KIND OF SLOW THEIR SAVINGS, AND THEY HAVE THE WEALTH EFFECT. SO AS LONG AS THAT CAN STAY IN PLACE, I THINK IT'S NOT A BIG HEADWIN, BUT IT IS CERTAINLY A HEADWIN. [02:12:22] Max Ketner: KATIE BOLCHANSKYK ON A FED DECISION JUST DAYS AWAY FROM A MIDTERM ELECTION WHERE THE POLITICS COULD CHANGE. ON THE POLITICS, REALLY INTERESTING STORY JUST DROPPING FROM AXIOS, ON A LETTER SIGNED BY SENATORS COONS, WARREN, WEIDEN, WHITE HOUSE, ALL OF THOSE NAMES, OF COURSE, IN LINE TO REMAIN ON AND BE ON VERY POWERFUL COMMITTEES TO LEAD THEM, POTENTIALLY, FOR FOREIGN RELATIONS, BANKING, FINANCE AND JUDICIARY. THIS LETTER WAS SENT TO BANKS INCLUDING J.P. MORGAN, BANK OF AMERICA CITY, WELLS, GOLDMAN AND MORGAN STANLEY, NOT ACCUSING THEM OF WRONGDOING, BUT RAISING THE QUESTION, AND HERE'S THE QUOTE. ANY IMPORTATION OF RUSSIAN DIESEL INTO THE U.S. RAISES SIGNIFICANT LEGAL QUESTIONS AND MAY BE SUBJECT TO LEGAL ACTION, AS WELL AS CONGRESSIONAL INVESTIGATIONS. THAT LETTER DROP IN OVER THE WEEKEND AND COMING FROM AXIOS, THEY'RE REPORTING JUST MOMENTS AGO. [02:13:12] Speaker 7: IT'S AN INTERESTING TO SEE SORT OF A PLAYBOOK OF THE INQUIRIES POST-ELECTION, PARTICULARLY OVER THIS INCREDIBLY DEVISIVE DEAL WITH RUSSIA TO RELEASE DIESEL. A QUESTION OF WHO HOLDS THE CARDS HERE. THE GRAM ACT REALLY PROHIBITED SOME OF THE ACTIVITY THAT SEEMED TO BE SIGNED OFF ON BY PRESIDENT TRUMP. PRESIDENT TRUMP DID HAVE THE AUTHORITY TO NOT TAKE THAT UP. NOW THERE'S A QUESTION OF WHERE CONGRESS IS GOING TO FLEX ITS MUSCLE. IT'S A WARNING SHOT FROM [02:13:37] Max Ketner: DEMOCRATS. STAY WELL CLEAR OF THIS. DON'T GET INVOLVED BECAUSE IF WE WIN AND WE LEAD THE SENATE AND WE LEAD THESE COMMITTEES, YOU'RE GOING TO HAVE SOME PROBLEMS IF YOU GET INVOLVED IN THIS. CORPORATIONS BETWEEN A ROCK [02:13:46] Speaker 7: AND A HARD PLACE RIGHT NOW IN TARDS OF HOW THEY NEGOTIATE. DO THEY CATER TO THE AGENDA BY THE ADMINISTRATION? DO THEY TRY TO REMAIN OUT OF POLITICS? THEY CAN'T. RIGHT NOW EVERYTHING IS POLITICAL AND BANKING IS A POLITICAL MOVE PARTICULARLY. IT'S NOT GOING TO BE FUN, IS [02:14:03] Max Ketner: IT, IN A FEW WEEKS' TIME, OVER THE NEXT COUPLE OF YEARS? [02:14:06] Speaker 7: IT'S GOING TO BE INTERESTING TO SEE HOW THEY FRAME IT. THERE'S A LOT OF PUSHBACK IN DEMOCRATS AGAINST SOME OF THE INQUIRIES, SAYING YOU'VE GOT TO BE PROACTIVE, YOU'VE GOT TO PUSH TOWARD THE AFFORDABLE -- AFFORDABLE -- AFFORDABILITY OF LIVING, THAT HAS TO BE A PROACTIVE TYPE OF AGENDA. AND THEN YOU'VE OTHERS BEING LIKE, YES, BUT THIS COULD BE PART OF THAT. HOW THIS GETS SPUN IS GOING TO BE [02:14:23] Max Ketner: INTERESTING. THE ELECTION IS ABOUT A WEEK AWAY. FUTURES THIS MORNING ON THE S&P, POSITIVE BY A THIRD OF 1%. [02:14:35] Speaker 9: LET'S GET YOU UP TO SPEED ON NEWS WORLDWIDE. THESE MOVES COMING AFTER 80-YEAR-OLD LULA DA SILVA WON HIS RECORD FOURTH TERM AS PRESIDENT. HIS OPPONENT, FLAVIO BOLSONARO, REFUSING TO CONCEDE AND ASKING FOR THE ELECTION RESULTS TO BE ANNULLED, SETTING UP FOR MONTHS OF CONTENTION. SPACEX SIGNING AN APROXIMATELY $40 BILLION FINANCE LEASE WITH APOLLO FOR GPUs AND RELATED EQUIPMENT. THE FIXED RATE THE COMPANY WILL PAY WILL BE DETERMINED AT PRICING WHICH HASN'T HAPPENED YET. ELON MUSK SAYS IT WILL DELIVER NVIDIA VERO RUBEN CHIPS FOR SPACEX'S COMPUTE POWER BUILDOUT FOR A SUPERINTELLIGENCE FUTURE. ANTHROPIC PLANNING TO FILE PUBLICLY FOR ITS HIGHLY ANTICIPATED INITIAL PUBLIC OFFERING AT 9:00 A.M. THIS MORNING. SOURCES TELLING US HERE AT BLOOMBERG THE CLAWD MAKER IS SET TO BEGIN FORMAL MARKETING AS SOON AS THE WEEK OF NOVEMBER 9. ANTHROPIC EXPECTS TO MATCH OR BEAT THE SIZE OF SPACEX'S IPO. THAT IS YOUR BLOOMBERG GRIEF. [02:15:38] Max Ketner: JONATHAN: IT HAS BEEN A LONG, LONG WAIT. ABOUT TO GET OUR HANDS ON THAT IN 15 MINUTES TIME. THANKS FOR JOINING US. [02:15:55] Speaker ?: FROM NEW YORK CITY THIS MORNING, GOOD MORNING. NEW YORK CITY THIS MORNING, GOOD MORNING. [02:16:15] Speaker 18: IF YOU LOOK AT THIS MONTH, THE PERFORMANCE OF COMPANIES WITH HIGH FREE CASH FLOW TO ENTERPRISE VALUE HAVE CRUSHED IT. NUMBER ONE FACTOR. I FEEL LIKE THAT KIND OF TELLS YOU WE ARE LOOKING FOR CAPEX BUT ALSO MONETIZATION AND THAT [02:16:38] Max Ketner: FREE CASH FLOW NUMBER IS BECOMING VERY, VERY IMPORTANT. THIS MORNING. EQUITY FUTURES ON THE S&P 500 IS STILL POSITIVE. WHAT A MORNING WE HAVE HAD SO FAR. FUTURES THIS MORNING UP BY THIRD ON THE S&P AND NASDAQ HIGHER BY 0.6%. HERE IS THAT WEEK AHEAD. LOOKING AHEAD THROUGH THE WEEK, LOTS OF EARNINGS, INCLUDING FROM SK HILUX AND JET BLUE. THAT COMES TOMORROW. THE BIG ONES COME ON WEDNESDAY. THEY START TO COME FROM ALPHABET AND MICROSOFT. WE GET A FED DECISION THE SAME DAY. THEN ON TO THURSDAY, YOU HEAR FROM AMAZON AND YOU GET A MORNING FULL OF DATA THAT DAY AS WELL. PCE AND ANOTHER ROUND OF JOBLESS CLAIMS. ALL OF THAT IS LATER THIS WEEK. IT'S HAPPENING IN ABOUT 10 MINUTES TIME. THE HIGHLY ANTICIPATED IPO, THE FILING FROM ANTHROPIC, THE S1, IN JUST UNDER 11 MINUTES TIME. THE CLAWDMAKER EXPECTED TO MATCH OR BEAT THE SIZE OF SPACEX'S IPO LATER THIS YEAR AND POTENTIALLY IN THE NEXT FEW WEEKS. NATE TURTH OF MANUALIFE JOINS [02:17:45] Speaker 19: US NOW FOR MORE. NATE, GOOD MORNING. HOW IMPORTANT IS THIS TO SET THE TONE FOR THIS TRADE? I DEFINITELY THINK IT'S IMPORTANT FOR THE MARKETS. I THINK IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. [02:18:15] Max Ketner: IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. [02:18:23] Speaker 19: IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. IT'S IMPORTANT FOR THE MARKETS. I MEAN, KEEP IN MIND, BIG CHANGES AND BIG TECHNOLOGY ADVANCEMENTS DON'T JUST HAPPEN OVER A COUPLE OF YEARS. THEY'RE TYPICALLY SEVEN, EIGHT, TEN YEAR TYPE OF CYCLES. SO WE'RE STILL IN THE EARLY PHASES OF THAT. THE REALITY IS A LOT OF THIS IS VERY DEMAND-DRIVEN. AND THE DEMAND IS STILL OFF THE CHARTS RIGHT NOW WHEN IT COMES TO THE DESIRES FOR MORE AI AND MORE OF THE INFRASTRUCTURE TO HAVE IT. THE MARKET IS PUSHING BACK, IT'S NOT HOLISTICALLY PUSHING BACK. IT'S BEING MUCH MORE DISCERNING AND MUCH MORE SELECTIVE ON THE WINNERS AND LOSERS. AND CERTAINLY THOSE THAT DON'T HAVE THE PERCEIVED BENEFITS OF GETTING THE BENEFIT OUT OF IT AND OR HAVE DETERIORATING RETURN ON CAPITAL OR FREE CASH FLOW, THEY'RE GETTING HURT. BUT THE ONES THAT CAN DEMONSTRATE THAT THEY'RE STILL OKAY, THEY'RE NOT BEING HURT AS MUCH. [02:19:15] Speaker 7: I JUST THINK THAT THE MARKET IS SAYING FOOL ME ONCE, SHAME ON YOU, FOOL ME TWICE, SHAME ON ME. YES, I'M GOING TO GET IT RIGHT THIS TIME. DID YOU GOOGLE IT BEFORE YOU SAID IT? [02:19:23] Max Ketner: I DIDN'T THINK ABOUT IT. [02:19:24] Speaker 7: I ALWAYS HAVE TO CHECK THAT ONE, TOO. [02:19:27] Max Ketner: I DIDN'T GOOGLE IT. [02:19:28] Speaker 7: THERE WAS A FORMER PRESIDENT STRUGGLE WITH THAT AS WELL. [02:19:30] Max Ketner: I KNOW. [02:19:31] Speaker 7: YOU KNOW WHAT THIS SAYING IS. I COULD HAVE GOTTEN THAT ROOT, TOO. LOOK, I JUST WONDER IF THE MARKET IS SAYING WE SAW THE RAILROADS, THAT A NUMBER OF TRACKS THAT WERE LAID WERE USELESS. WE'VE SEEN EVERY SINGLE BOOM AND BUST AND THE TEARS THAT HAPPENED AFTERWARDS. WE DON'T WANT TO BE ON THE TEARS END. IF THAT'S HAPPENING NOW, DO WE REALLY HAVE A SEVEN TO TEN YEAR CYCLE AHEAD OF US? [02:19:51] Speaker 19: WE HAVE A SEVEN TO TEN YEAR CYCLE, I THINK, IN THE IDEA THAT THIS IS A REAL TECHNOLOGY THAT PEOPLE WANT AND THE DEMAND IS THERE. BUT TO YOUR POINT, I THINK THE MARKETS ARE SNIFFING OUT THE CHALLENGES PROBABLY EARLIER BECAUSE OF PRIOR EXPERIENCES. AND THEY ARE NOT GOING TO LET IT GET OUT OF CONTROL. I THINK THE PERFECT CASE IN POINT TO PROVE IT'S NOT GOING TO GET OUT OF CONTROL IS THAT WE HAVE SEEN EQUITY VALUATIONS GO DOWN MATERIALLY, EVEN THOUGH EARNINGS HAVE CONTINUED TO GO HIGHER. AND SO THE FACT THE MARKET, I THINK, IS BEING PRETTY THOUGHTFUL ABOUT HOW THEY'RE VALUING THESE COMPANIES BECAUSE THEY ARE NOT JUST INCREASING MULTIPLES THROUGH THE ROOF. [02:20:30] Speaker 7: THAT SAID, THEY'RE ALSO CHANGING THEIR BUSINESS MODEL TO BECOME A LOT MORE CAPITAL INTENSIVE, A LOT MORE ASSET INTENSIVE. AND WE HAVE YIELDS GOING UP. [02:20:37] Speaker 19: AND YIELDS GOING UP. [02:20:38] Speaker 7: AND THERE'S EQUITY ISSUANCE IN A WAY THAT WE HAVEN'T SEEN FOR YEARS. HOW DOES THAT DYNAMIC SHIFT THE VALUATION PROPOSITION? [02:20:45] Speaker 19: IT DOES SHIFT THE VALUATION PROPOSITION. OBVIOUSLY, YIELDS GOING UP DOES CAUSE VALUATION DAMAGE BECAUSE PEOPLE USE YIELDS AS ONE OF THE INPUTS INTO HOW YOU DETERMINE LONG-TERM VALUE FOR A COMPANY. AND THEN TO YOUR POINT, BECAUSE THEY ARE MOVING FROM COMPANIES THAT WERE HISTORICALLY MASSIVE FREE CASH FLOW GENERATORS TO COMPANIES THAT ARE NO LONGER THE CASE, THAT ALSO CHANGES THE EQUATION. BUT AT THE SAME TIME, WHEN YOU START TO THINK ABOUT THE BROADNESS OF THE ECOSYSTEM, THE NEXT REAL STEP FOR AI IS GOING TO BE, CAN THESE COMPANIES CONTINUE TO SPEND THE MONEY THEY ARE SPENDING AND START TO SEE SOME LEVEL OF STABILIZATION IN THEIR FREE CASH FLOW. NOT NECESSARILY OUTRIGHT IMPROVEMENT, BUT JUST TO START TO SEE SOME FLAT LINING OF THE DOLLARS WE ARE SPENDING ARE NO LONGER DETERIORATING OUR FREE CASH FLOW. THEY ARE KEEPING US WHERE WE ARE AT OR MAYBE YOU START TO SEE IT BECOME A BIT BETTER. YOU EXPECT THAT IN 27? IT IS GOING TO HAPPEN, I THINK, OVER THE COURSE OF THE NEXT COUPLE OF YEARS. AND IT IS NOT GOING TO HAPPEN UNIVERSALLY. AND THE MARKETS ARE SNIFFING THAT OUT. THIS IS WHY SOME COMPANIES ARE BEING PENALIZED A LOT WHEN THEY ANNOUNCE NEW SPENDING AND OTHER COMPANIES ARE NOT. THE MARKETS HAVE BEEN PENALIZED. THE MARKETS HAVE BEEN PENALIZED IN THIS EARNINGS CYCLE IN PARTICULAR, IT IS A VERY FINE LINE BETWEEN ANNOUNCING ADDITIONAL CAPEX SPENDING FOR AI BY ANNOUNCING TOO MUCH [02:22:01] Max Ketner: VERSUS NOT ANNOUNCING ENOUGH. THEY HAD TO HIT THE SWEET [02:22:05] Speaker 7: SPOT. WASN'T THAT LAST WEEK? THE SAME THING THIS WEEK. ALTHOUGH THEY HAD NEGATIVE FREE CASH FLOW FOR THE FIRST TIME GOING BACK TO 2012. WAS THAT THE REAL RISK EVENT RATHER THAN THE SHARE SELLS? THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. [02:22:21] Max Ketner: THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. [02:22:27] Speaker 19: THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. THE REAL RISK EVENT RATHER THAN THE SHARE SELLS. WE'VE TALKED A LOT ABOUT WHAT WE CALL THE LIFT SECTORS, WHICH ARE LIFE SCIENCES, HEALTH CARE, WHICH HASN'T PARTICIPATED FOR YEARS BUT IS NOW FINALLY STARTING TO SEE SOME LIFE IN HEALTH CARE. AND THEN WE'RE STICKING WITH THE INDUSTRIALS TRADE, WHICH HAS KIND OF WORKED BUT HAS FITS AND STARTS. AND FINANCIALS IS THE F AND LIFT. [02:23:06] Max Ketner: AND THE T IS TECHNOLOGY. YOU CAN'T DISMISS TECHNOLOGY. THANK YOU. [02:23:19] Speaker 7: STAY TUNED, FIVE MINUTES AWAY, THE S1 FROM ANTHROPIC. EXPECTED A DROP AT 9:00 A.M. EASTERN TIME. LET'S SEE WHAT THE FREE CASH FLOW IS. LET'S LOOK AT THEIR SPENDING PLANS, THEIR CUSTOMER BASE. HOW DIVERSE IS IT? I'M JUST WAITING FOR WHEN HEALTH CARE ACTUALLY SEES THE BENEFIT FOR THIS. [02:23:32] Max Ketner: I KNOW I KEEP TALKING ABOUT THIS, BUT EVERY NIGHT WHEN YOU GO [02:23:34] Speaker 7: TO SLEEP SCARED ABOUT CANCER, YOU DON'T HAVE TO BE SCARED ANYMORE. THAT WOULD BE A MASSIVE CHANGE. IT WOULD GO DOWN SIGNIFICANTLY BECAUSE OF HOW EFFICIENT THEY COULD GET OR POTENTIALLY HAVE A ROBOT THAT JUST MONITORS ME ALL THE TIME IF I GET OLDER. IT COULD BE REALLY GOOD. [02:23:48] Max Ketner: RISK FACTORS IN FOCUS IN FOUR MINUTES TIME. THE LINE OUTSIDE OF COSTCO GETTING LONGER FOR THE [02:23:52] Speaker 7: PREPPERS. WHAT DO YOU THINK? [02:23:54] Max Ketner: WHAT ARE THEY GETTING? THE BARS? [02:23:56] Speaker 7: WHAT DO YOU THINK? [02:24:06] Max Ketner: WHAT DO YOU THINK? WOULD YOU JUST AT THAT POINT WANT TO PACK IT IN, IF THAT'S WHAT YOU WERE LEFT WITH BY YOURSELF? WHAT DO YOU THINK? WHAT DO YOU THINK? [02:24:17] Speaker ?: you