Bloomberg Surveillance 6/11/2026

[00:00:00] Speaker 1: There are a lot of non-fundamental factors that are going to interfere with markets and cause volatility. The market is finite and we've already seen some volatile days. [00:00:13] Speaker 2: It's a little white knuckle moment that we're going through intact. [00:00:16] Speaker 3: Liquidity is the most important factor for these markets to keep on rallying. [00:00:21] Speaker 4: I think this year we have the chance that we beat earnings nicely. [00:00:23] Speaker 5: This is Bloomberg Surveillance with Jonathan Farrow, Lisa Abramowitz and Anne-Marie Horderne. LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD MORNING. [00:00:33] Speaker 6: FOR OUR AUDIENCE WORLDWIDE, Bloomberg Surveillance starts right now. COMING INTO THURSDAY, TECH STOCKS BOUNCE, EQUITIES LOOKING FOR A FIRMER FOOTING GOING INTO THE SPACEX IPO. AS HIGHER EXPECTED CAPEX AT ORACLE IS SPOOKING SOME INVESTORS, OPEN AI IS REPORTEDLY CONSIDERING DRASTIC PRICE CUTS IN A RENEWED PUSH TO TAKE ON [00:00:52] Speaker 7: ANTHROPIC. THERE ARE TWO SIDES OF A SIMILAR STORY. BOTH OF THESE INDICATE THAT THE PACE OF SPENDING IS INCREASING DISPROPORTIONATELY. THE STORY WITH OPEN AI SHOWS WHO IS GOING TO PAY FOR THIS BECAUSE ULTIMATELY CUSTOMERS ARE PUSHING BACK. YOU SAW THIS WITH UBER CUTTING BACK SOME OF THEIR TOKEN USAGE AS A RESULT OF JUST REALLY HIGH COSTS. IS THIS THE DEATH NOW? HOW CAN A PLACE LIKE OPEN AI END UP FINANCING THE INCREDIBLE CAPEX INVESTORS THAT THE LIKES OF ORACLE JUST KEEP ACCELERATING [00:01:22] Speaker 6: WITHOUT THE REVENUES FROM HIGHER FEES? JUST FRAME THIS MOMENT. IT IS AN IMPORTANT MOMENT. WE ARE QUESTIONING BOTH THE PRICE OF THE PRODUCT AND THE COST OF INCREDIBLE CAPITALS. THINK ABOUT THE PUSHBACK WE HAVE SEEN SO FAR IN JUST THE LAST WEEK. METER IN THE FT CONSIDERING RAISING EQUITY CAPITAL. STOCK MARKET PUSHES BACK. SUPER MICRO YESTERDAY LOOKING TO RAISE $7 BILLION IN EQUITY. STOCK GETS ABSOLUTELY HAMMERED. [00:01:51] Speaker 7: ORACLE, SPENDING CARE THAT EXPECTED, PUSH BACK AGAIN THIS MORNING. THAT PUSHBACK IS BUILDING. YOU HAVE BEEN ASKING AND WE HAVE ALL BEEN DISCUSSING WHEN THEY ARE GOING TO MAKE SURE. THIS IS WHAT PEOPLE HAVE TO START ASKING AHEAD OF ALL OF THESE HUGE IPOs, OPEN AI AMONG THEM AS THEY CUT PRICES AND POTENTIALLY MARGINS. THE KEY ISSUE IS THAT THE SPENDING IS ACCELERATING AND ORACLE JUST HIGHLIGHTS THAT. $20 BILLION MORE IN CAPEX THAT THEY ARE EXPECTED TO DO FOR THIS FORESEEABLE FUTURE. GOLDMAN SAX COMING OUT WITH A REPORT SAYING CAPEX SPENDING PROBABLY IS GOING TO EQUAL SOMETHING LIKE $1.4 TRILLION NEXT YEAR VERSUS LESS THAN $1 TRILLION. YOU WONDER HOW MUCH THIS WILL CURB THAT AI ENTHUSIASM. [00:02:31] Speaker 8: IT IS SO BIG SO QUICKLY WHAT THE MARKET NEEDS TO DIGEST. WHEN IT COMES TO OPEN AI IT IS LIKE THEY ARE CHASING THE ENTERPRISE CUSTOMERS THAT ANTHROPIC ALREADY HAS. THEY ALMOST HAVE NO CHOICE IF THEY WANT TO KEEP UP WITH WHERE ANTHROPIC IS. I LOVE THIS PART BECAUSE I FOCUS ON POLICY. THE U.S. GOVERNMENT AND WASHINGTON NEED TO START REGULATING BETTER AND WE MIGHT HAVE TO HAVE SOMETHING LIKE THIS. THAT IS WHAT THEY ARE DOING. [00:02:59] Speaker 7: LISA IS SHAKING HER HANDS. IT IS SAYING EVERYBODY ELSE, YOU GUYS CAN FREEZE. WE ARE AHEAD. LET'S STOP THE CLOCK. [00:03:05] Speaker 6: WE ARE ABLE TO TALK ABOUT THE COMPANY. I'M ALWAYS SKEPTICAL OF COMPANIES ASKING FOR THE REGULATORS TO STEP IN. LET'S TALK ABOUT CRUDE. THIS IS THE SCENE RIGHT NOW IN THE COMMODITY MARKET. WTI STILL TRADING IN THE 80s EVEN THOUGH THE U.S. AND IRAN HAVE BEEN TRADING STRIKES. [00:03:23] Speaker 8: THE PRESIDENT SAYS HE IS GOING TO CONTINUE IF IRAN REFUSES TO COME TO THIS PEACE DEAL. THE PRESIDENT SAYS TWO OR THREE DAYS WOULD BE A PEACE DEAL. NOW WE ARE BACK TO HOSTILITIES. KINETIC WARFARE RIGHT NOW. POTENTIALLY THIS COULD PUSH IRAN TO THE NEGOTIATING TABLE. THE PRESIDENT PUT OUT A TRUTH YESTERDAY SAYING MORE BARRELS ARE GETTING TO MARKET. THAT IS AN INTERESTING STORY AND IT WILL BE GOOD TO PUT SOME [00:03:46] Speaker 6: NUMBERS ON THAT. LET'S TALK ABOUT THE MORNING AHEAD OF US. WE ARE TALKING ABOUT THE LIST OF POLICY MISTAKES. LET ME REMIND YOU OF SOME DATES. JULY 2008, APRIL 2011, JULY 2011. CAN YOU ADD JUNE 2026 TO THAT LIST OF POLICY MISTAKES? THE ECB HIKED INTO GFC, THE ECB HIKED INTO THE EUROZONE DEBT [00:04:11] Speaker 7: CRISIS NOT ONCE BUT TWICE. ULTIMATELY THE MARKET IS PRICING IN SOMETHING SIMILAR THIS TIME. THE IDEA NOT JUST OF A RATE HIKE BY THE EUROPEAN CENTRAL CENTRAL BANK OF THE EUROPEAN CENTRAL BANK. THE ECB HIKES WILL BE PRICED IN BOTH TODAY AND AGAIN IN SEPTEMBER. EVEN THOUGH THE GROWTH OUTLOOK IS SOURING, EVEN THOUGH YOU DON'T SEE THE SAME MOMENTUM IN THE EUROPEAN REGION THAT YOU DO IN THE UNITED STATES, DOES THIS REQUIRE A RETHINK OF THE SINGLE MANDATE CENTRAL BANK OR IS THIS JUST SORT OF THE DESTINATION AND THE PATH OF TRAVEL? HOW DOES THE CURRENCY RESPOND? [00:04:43] Speaker 6: DO THEY REWARD RATE HIKE OR THE POTENTIAL GROWTH THAT COMES FROM BEING LESS RESTRICTED? EQUITY FEATURES THIS MORNING POSITIVE BY THREE QUARTERS OF 1% ON THE S&P 500. COMING UP THIS HOUR, WE WILL CATCH UP WITH JULIAN EMMANUEL OF EVERCORE AS WALL STREET AWEITS THE MEGA SPACE X IPO. MAHA YAHYAH OF THE CARNEGY ENDOWMENT OF INTERNATIONAL PEACE AS THE U.S. CARRIES OUT ANOTHER ROAD OF STRIKES ON IRAN. ANGELO ZINO OF CFRA AS ORACLE FALLS ON PLANS FOR A MASSIVE CAPEX PUSH. WE BEGIN THIS OUT WITH STOCKS RECOVERING AS SPACE X IS PUTTING TOGETHER ITS HISTORIC PUBLIC OFFERING. JULIAN EMMANUEL OF EVERCORE SUGGESTING THE BULL MARKET HAS ROOM TO RUN. HIGHER PRICES. JULIAN JOINS US NOW FOR MORE. JULIAN, GOOD MORNING. IT IS HARD FOR PEOPLE TO INTERNALIZE GIVEN THE MOVE WE HAVE SEEN OFF THE LOW THAT MAYBE THE FOMO AND THE MELT UP IS AHEAD OF US AND NOT BEHIND US. DO YOU THINK IT IS AHEAD OF US? [00:05:40] Speaker 9: IT HAS BEGUN. BUT ACTUALLY IF YOU LOOK AT THE LAST FIVE DAYS AND THE SORT OF BUTTONING UP OF SENTIMENT AND THE CAUTION THAT WE HAVE SEEN AGAIN IN THESE LAST FIVE DAYS, I WOULD SAY THAT THE TRUE FOMO, THE WILD EYED, BUY AT ANY COST, WHATEVER IT IS, I'LL TAKE IT, IS STILL POTENTIALLY AHEAD OF US. BUT IF YOU THINK ABOUT IT THOUGH, THE MARKET IS REALLY DIGESTING ALL OF THIS PRETTY WELL. THINK ABOUT THE HEADLINES THAT WE'RE DEALING WITH THIS MORNING. WE HAD STRIKES OVERNIGHT. WE'VE GOT THE PREMIER AI COMPANY TALKING ABOUT PRICE WARS. WE'VE GOT THE MARQUEE SOFTWARE COMPANY THAT IS DEALING WITH CAPEX ISSUES. ALL OF THAT NEGATIVE. AND YET THE STOCK MARKET IS INCREDIBLY RESILIENT IN FRONT OF REALLY A LANDMARK MOMENT. [00:06:32] Speaker 6: LET'S SIT ON THE THIRD POINT. THE SIGNS OF FRAGILITY, THE PUSHBACK TO ORACLE, THE PUSHBACK TO SUPERMICRO, THE PUSHBACK TO META. THAT'S ADDING UP, IS IT NOT? [00:06:41] Speaker 9: LOOK, AND I THINK WE'VE SAID THIS IN PASS, IT'S BECOME A MARKET WHERE IT'S NOT ACTUALLY EVEN BILLIONS ANYMORE. IT'S TRILLIONS THAT WE'RE TALKING ABOUT. AND, YEAH, 85 BILLION HERE, 75 BILLION THERE. IT REALLY DOES ADD UP, BUT IT ALSO SPEAKS TO THE INCREDIBLE LIQUIDITY CONDITIONS THAT WE'RE SEEING. AND, IN FACT, AND PART OF THE REASON THAT DESPITE THE GEOPOLITICAL DISTURBANCES OF THE LAST SEVERAL MONTHS, IS THAT THE ECONOMY CAME INTO THIS INCREDIBLY RESILIENT. AND WHAT DID WE FIND OUT LAST FRIDAY? THE LABOR MARKET IS A LOT STRONGER THAN WE COULD HAVE EVER IMAGINED IT WOULD BE. [00:07:20] Speaker 7: DO BONDED STOCK INVESTORS WANT TO KEEP PAYING FOR SOMETHING THAT CUSTOMERS DON'T EVEN WANT TO PAY FOR? I MEAN, ULTIMATELY, ISN'T THAT THE MESSAGE COMING FROM OPEN AI, THAT PEOPLE DON'T WANT TO PAY THE PRICES THAT ARE BEING CHARGED, EVEN THOUGH THAT'S WHAT'S BEING FINANCED ESSENTIALLY IN BONDED STOCK MARKETS? [00:07:36] Speaker 9: SO THERE'S CERTAINLY A PUSHBACK TO THE -- LOOK, THERE'S A PUSHBACK TO EVERY ASPECT OF INFLATION IN OUR ENVIRONMENT RIGHT NOW, WHETHER IT'S, YOU KNOW, TOKEN PRICES OR CATTLE PRICES OR GASOLINE PRICES. BUT I THINK WHEN WE LOOK AT HOW AI HAS PROGRESSED OVER THESE LAST SEVERAL YEARS, THE JEVENS PARADOX SEEMS TO CONTINUE TO BE OPERATIVE. IF TOKEN PRICES COME DOWN, WHICH THERE'S EVERY INDICATION THAT THEY WILL, YOU'RE PROBABLY GOING TO GET INCREASED USAGE. [00:08:07] Speaker 7: IS IT TELLING TO YOU THAT WE'VE SEEN THIS BOUT OF VOLATILITY REALLY COME ALONG WITH YIELDS BEING THE HIGHEST RELATIVE TO THE EARNINGS YIELDS AND THE S&P 500 RELATIVE METRIC GOING BACK TO 2003? I MEAN, ESSENTIALLY BONDS ARE OFFERING A MORE ATTRACTIVE PROPOSITION. AS YIELDS GO UP AND AS SOME OF THE VALUATIONS GO UP, AND YOU SEE THIS RELATIONSHIP KIND OF BECOME A LITTLE BIT MORE EVEN. [00:08:32] Speaker 9: WELL, AND ACTUALLY, IT'S A RATIONAL RESPONSE, RIGHT? IF YOU LOOK AT CLASSICAL FINANCE THEORY, THE POINT IS LONG DURATION ASSETS, HIGH VALUE ASSETS, LIKE TECHNOLOGY STOCKS, SHOULD BE MORE SENSITIVE TO HIGHER YIELDS. AND THAT'S WHAT WE'RE SEEING. BUT ULTIMATELY, WHEN YOU LOOK AT PAST EPISODES OF STRUCTURAL BULL MARKETS LIKE THE ONE THAT WE'RE IN, YOU KNOW, COMPARED TO, LET'S SAY, THE INTERNET IN THE LATE 1990s, OR FRANKLY, JAPAN IN THE LATE 1980s, YOU HAD A TOLERANCE FOR HIGHER YIELDS AS LONG AS THE ECONOMY WAS CONTINUING TO MOVE FORWARD AND CONFIDENCE, WHICH HAS BEEN LACKING ON THE CONSUMER SIDE, EVEN THOUGH THERE'S BEEN SPEND, REMAINS STALWARD. [00:09:19] Speaker 8: CAN WE TALK ABOUT THE CONSUMER SIDE FOR A SECOND? THE WASHINGTON POST HAS A STORY OUT THIS MORNING THAT OIL EXECUTIVES ARE GOING TO THE WHITE HOUSE AND SAYING THEY'RE CONCERNED THAT GAS PRICES ARE GOING TO RISE. WHAT HAPPENS WHEN WE HIT $5 A GALLON? [00:09:30] Speaker 9: THAT, FOR US, IS WHITE KNUCKLE TIME. WE HAVE MADE IT CLEAR THAT THE WORK THAT WE DID AROUND PRIOR OIL PRICE SPIKES WHEN THE WAR STARTED IN MARCH REALLY SHOWED THAT THE WINDOW, GIVEN THE STRENGTH THAT WE CAME INTO AT THE WAR IN TERMS OF THE ECONOMY AND THE STRENGTH THAT'S REMAINED, YOU'VE GOT ABOUT SORT OF FOUR MONTHS AND LITERALLY $4.50 OR TRIPLE-DIGIT WTI, THE STRAINS WILL START TO SHOW IN THE ECONOMY AND LIKELY THE STOCK MARKET, WHICH, AGAIN, IS WHY I THINK THERE'S SUCH A SENSE OF URGENCY COMING FROM WASHINGTON TO FIGURE OUT HOW TO SOLVE THIS. [00:10:15] Speaker 6: IMPRESSIVE, 92 ON BREN, 89 ON WTI. [00:10:21] Speaker 9: IT IS QUITE IMPRESSIVE AND I THINK PERHAPS SPEAKS TO THE PRESIDENT'S STATEMENT YESTERDAY THAT WE ARE ABLE TO GET BARRELS OUT OF THE STRAIGHT ONE WAY OR ANOTHER. [00:10:34] Speaker 6: WE'VE GOT TO GET A LITTLE BIT OF THE STRAIGHT AND WE'VE GOT A LITTLE BIT OF THE STRAIGHT AND WE'VE GOT ANOTHER. EQUITIES HIGHER, UP BY THREE QUARTERS OF ONE PERCENT. [00:10:44] Speaker 10: JULIAN EMMANUEL WILL BE STICKING WITH US THIS MORNING. LET'S GET YOU AN UPDATE ON NEWS WORLDWIDE WITH YOUR BLOOMBERG BRIEF. BONNIE QUINN HAS MORE. ORACLE SHARES TRADING LOWER IN THE PRE-MARKET AS ITS DATA CENTER COSTS OVERSHADOW ITS A.I. GROWTH. THE COMPANY REPORTING CAPITAL EXPENSES THAT CAME IN HIGHER THAN WALL STREET ESTIMATES. WE'VE GOT TO HIGHER THAN WALL STREETS. THE ECB RATE DECISION HAS BEEN HIGHER THAN 20 YEARS. THE ECB RATE DECISION WILL HAVE COVERAGE AT 8:15 EASTERN. THE ECB RATE DECISION WILL HAVE COVERAGE AT 8:15 EASTERN. THE CEO SHOWING SUPPORT FOR GOVERNMENT REGULATION OF A.I. THE GOVERNMENT SHOULD HAVE THE POWER TO BLOCK A.I. THE GOVERNMENT REGULATION OF A.I. TESTIMATES SAYING THERE SHOULD BE MANDATORY TESTING BY THIRD [00:11:36] Speaker 6: PARTIES. THAT IS YOUR BLOOMBERG BRIEF. MORE FROM VONNIE IN ABOUT 30 MINUTES TIME. WE'LL BE TALKING ABOUT THE LATEST IN THE MIDDLE EAST. ESCALATING PRESSURE ON IRAN. WE WILL BE ATTACKING THEM VERY HARD. WE WILL SEE WHAT HAPPENS WITH THE DEAL. [00:12:01] Speaker 11: WE WERE REALLY CLOSE TO A DEAL BUT THEY KEEP TAPPING US ALONG. [00:12:11] Speaker 6: THEY KEEP PLAYING US FOR SUCKERS. JOINING US IN A MOMENT, MAHA YAHYAH OF THE CARNEGUE ENDOWMENT FOR INTERNATIONAL PEACE PLUS MORE WITH JULIAN EMMANUEL. THANK YOU FOR JOINING US. [00:12:29] Speaker ?: YOU ARE WATCHING BLOOMBERG TV. [00:12:46] Speaker 6: 8:30 EASTERN TIME. THANK YOU FOR JOINING US. WE WILL BE ATTACKING A LITTLE BIT LATER THIS MORNING. HEADING INTO THIS AT 8:15, AN ECB RATE DECISION. 30 MINUTES LATER, A NEWS CONFERENCE WITH CHRISTINE MCGARB. I MENTIONED THE HAWKISH POLICY MISTAKES THAT THIS INSTITUTION MADE PREVIOUSLY IN 2008 AND 2011. GO BACK TO THE 08 DECISION IN EARLY JULY. THAT HIKE CAME ON THE SAME DAY THAT OIL PEAKED. BECAUSE BELIEVE IT OR NOT, BACK THEN THEY WERE ALSO CONCERNED AND FREAKING OUT ABOUT CRUDE. THE ECB MADE A SERIES OF MISTAKES HERE. NEVER MIND THAT THAT WAS GOING INTO THE GFC AND THAT THEY REPEATED THE ACT IN 2011 NOT ONCE BUT TWICE. THESE ARE THE QUESTIONS BEING ASKED IN EUROPE RIGHT NOW ABOUT THIS INSTITUTION GOING INTO THIS HIKE THAT IS WIDELY EXPECTED. [00:13:30] Speaker 7: AND IT IS NOT JUST GOING TO LIKELY BE A HIKE. IT WILL BE A RATE HIKING CYCLE. PEOPLE ARE TALKING ABOUT THE POTENTIAL THAT OIL PRICES ARE PEAKING EVEN THOUGH MAYBE WE HAVEN'T GOTTEN A RESOLUTION YET AND THAT INFLATION WILL LIKELY COME DOWN IN THE REGION. [00:13:46] Speaker 6: HOW MUCH HISTORY CAN RHYME? THANKS FOR JOINING US. THANKS FOR JOINING US. A TWO-DAY LOSING STREET LONGEST OF THE MONTH SO FAR. IN THE BOND MARKET WE ARE BEHAVING JUST A BIT. THE RUNAWAY MOVE AT THE BACK END OF THE CURVE HAS SETTLED [00:14:09] Speaker 7: DOWN AS WELL. THERE IS A RATE RATE RECEPTION THAT WENT PRETTY WELL. IT ACTUALLY PERFORMED IN THE AFTER HOURS. TODAY WE GET MORE. AND DO WE GET THE SAME KIND OF RECEPTION IS GOING TO BE KEY ESPECIALLY FOR A 20-YEAR AUCTION THAT TYPICALLY IS A LITTLE BIT HAIRY. ULTIMATELY IS THIS A WAY OF PEOPLE SAYING SUDDENLY BONDS ARE LOOKING A LITTLE BIT BETTER AS THE PROPOSITION FOR A.I. IS LOOKING MAYBE A LITTLE BIT MORE SKEPTICAL UNDER THE [00:14:32] Speaker 6: EYES OF ALL OF THIS CAPEX SPEND. WTI PUT HIM BACK JUST A BIT WITH DOWN ONE PERCENT EVEN WITH THIS TAKING PLACE IN THE MIDDLE EAST. [00:14:45] Speaker 11: UNDER SAVANNAH THIS MORNING ESCALATING PRESSURE ON IRAN. WE ARE GOING TO BE ATTACKING THEM VERY HARD. WE HIT THEM HARD YESTERDAY AND WE ARE GOING TO HIT THEM AGAIN HARD TODAY AND WE WILL SEE WHAT HAPPENS WITH THE DEAL. WE WERE REALLY CLOSE TO A DEAL BUT THEY KEEP TAPPING US ALONG. THEY KEEP PLAYING US FOR SUCKERS. ALL THEY HAVE TO DO IS START SIGNING A PAPER. IT IS FULLY NEGOTIATED. [00:15:05] Speaker 6: WE ARE GOING TO TELL YOU WHAT IT IS. WE ARE GOING TO TELL YOU WHAT IT IS. HERE IS THE LATEST THIS MORNING. THE PRESIDENT VOWING MORE ATTACKS ON IRAN IF IT DOES NOT AGREE TO AN INTERIM PEACE DEAL. THE PRESIDENT TELLING FOX NEWS IRANIAN OFFICIALS CALLED HIM DIRECTLY LAST NIGHT ASKING HIM TO STOP THE BOMBING. [00:15:19] Speaker 12: THE WHITE HOUSE IS FRAMING THIS LATEST ESCALATION AS A WAY TO FORCE IRANIAN CONCESSIONS AT THE NEGOTIATING TABLE AFTER PRESIDENT TRUMP ACCUSED IRAN OF DRAGGING ITS FEET TO MAKE A DEAL. NOW WE SHOULD SAY THAT IRANIAN STATE MEDIA DID DENY THAT IRANIAN LEADERSHIP HELD A DIRECT CALL WITH PRESIDENT TRUMP YESTERDAY AFTER U.S. FORCES LAUNCHED STRIKES AGAINST DOZENS OF MILITARY TARGETS. WE SAW IRAN RETALIATE TOO, LAUNCHING STRIKES AGAINST MULTIPLE U.S. BASES ACROSS KUWEIT, BARAIN, AND JORDAN IN WHAT IS NOW THE WORST FLARE-UP IN FIGHTING SINCE THE CEASE-FIRE WAS ANNOUNCED BACK IN APRIL. IRAN'S FOREIGN MINISTRY IS SAYING THAT THIS LATEST WAVE OF STRIKES MEANS THAT THE CEASE-FIRE IS QUOTE EFFECTIVELY MEANINGLESS, BUT THE MESSAGE FROM THE U.S. IS THAT PRESIDENT TRUMP IS STILL COMMITTED AND THINKS THAT A DIPLOMATIC DEAL CAN GET DONE. THE ISSUE IS WE KNOW THAT THERE ARE JUST STILL SO MANY STICKING POINTS THAT HAS BEEN FUELING THIS MOUNTING FRUSTRATION FROM THE WHITE HOUSE, MAINLY INCLUDING THE STRAIGHT OF HERMUZ. AS YOU MENTIONED EARLIER ON THE PROGRAM, PRESIDENT TRUMP YESTERDAY SAID THAT SO FAR THE U.S. HAS HELPED TO GUIDE 200 SHIPS CARRYING 100 MILLION BARRELS OF OIL, HE SAYS, THROUGH THE STRAIGHT IN RECENT WEEKS. AS CENTCOM NEW THIS MORNING IS DENYING, IRANIAN STATE MEDIA REPORTING THAT THE IRGC IS TRYING TO TIGHTEN ITS GRIP OVER THE WATERWAY AND HAS STOPPED ALL COMMERCIAL TRAFFIC IN THE WAKE OF THE U.S. STRIKES. THIS IS DEFINITELY, JOHN, RAISING THE ALARM, OF COURSE, ACROSS THE REGION AS WE START TO SEE SOME MORE REGIONAL PARTNERS ENTER THE CONVERSATION. IRAN HAS CONFIRMED THAT A QATARI DELEGATION LANDED THERE YESTERDAY IN A BID TO HELP THE PEACE PROCESS GET BACK ON TRACK. [00:16:56] Speaker 6: TYLER KENDALL IN WASHINGTON, MORE FROM TYLER IN THE NEXT HOUR. THANK YOU. LET'S BUILD ON THIS CONVERSATION. THE CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE WRITING THE FOLLOWING, NEITHER THREATS NOR AN ESCALATING MILITARY CONFRONTATION WILL SWAY IRAN AT THIS POINT. THE REGIME HAS ADJUSTED AND IS DOUBLING DOWN EVEN FURTHER. THANKS FOR JOINING US NOW FOR MORE. WE'RE LOSING TRUST BY THE DAY. [00:17:19] Speaker 13: HOW CAN WE NEGOTIATE AND FIND A DEAL WITH A LACK OF TRUST? VERY DIFFICULT. GOOD MORNING, FIRST. THANK YOU FOR HAVING ME. IT'S VERY DIFFICULT TO FIND A DIPLOMATIC OUTCOME THAT IS SATISFYING TO EVERYONE WITH THE ONGOING MILITARY CONFRONTATION. I THINK THE ONGOING MILITARY CONFRONTATION, THE ESCALATION IN MILITARY TARGETING IS GOING TO MAKE A DIPLOMATIC OUTCOME LESS LIKELY RATHER THAN MORE LIKELY. THE LACK OF TRUST BETWEEN THE TWO PARTIES WAS VERY MUCH THERE EVEN PRIOR TO THE U.S.-ISRAELI ATTACKS AGAINST IRAN EARLIER THIS YEAR. AND NOW THEY'VE EVEN -- THEY'VE DEEPENED MUCH FURTHER. IRAN VIEWS THE U.S. AS AN UNRELIABLE PARTNER AND ONE THAT HAS PULLED OUT OF A PREVIOUS AGREEMENT, THE JCPOA, THAT THEY CANNOT TRUST WHAT THE UNITED STATES IS SAYING. AND THE UNITED STATES SEEMS TO BE UNWILLING TO NEGOTIATE OR TO ACQUIESCE TO SOME OF IRAN'S, IF YOU WANT, NON-NEGOTIABLE FROM ITS END, DEMANDS. SO IT MAKES IT VERY DIFFICULT. SO IT MAKES IT VERY DIFFICULT. IT MAKES IT VERY DIFFICULT. I THINK THE BEST OF WHAT THE U.S. IS OFFERING IS STILL NOT MEETING THE BARE MINIMUM OF WHAT IRAN WANTS. [00:18:44] Speaker 8: AND THAT MAKES THE GRAB ONLY GROW WIDER IN MANY CASES. AND THAT MAKES IT VERY DIFFICULT. I WANT TO MAKE SURE THAT THERE IS A SEVERE CRISIS. AT ONE POINT, WILL THAT HIT THE TOP LAYER OF THE REGIME [00:18:56] Speaker 13: AND THE INDIVIDUALS THAT ARE IN CHARGE WITH MAKING DECISIONS? IT'S NOT CLEAR, TO BE HONEST. IT'S NOT CLEAR. THE REGIME HAS FOUND WAYS. THEY WERE ALREADY PREPARING FOR THIS SINCE THE LAST ROUND, I THINK IT WAS APRIL 2025, WHEN ISRAEL AND IRAN HAD THE 12-DAY WAR. SO IRAN WAS ALREADY PREPARING FOR THE EVENTUALITY OF A CONFLICT, A DIRECT CONFLICT THAT WOULD INVOLVE THE UNITED STATES. IT'S NOT CLEAR AT WHAT MOMENT THIS WILL HIT AND WHETHER IT WILL BEGIN IMPACTING THEM. AT THIS POINT, WITH THE DIRECT ATTACKS BY THE U.S. AND ISRAEL ON IRANIAN INFRASTRUCTURE, WE HEARD THIS MORNING THAT WATER FACILITIES HAVE BEEN TARGETED WITH PRECISION MISSILES WHICH ACTUALLY COULD CONSTITUTE ALSO A WAR CRIME. THE IRANIAN PEOPLE ARE RALLYING AROUND THEIR COUNTRY. I WOULDN'T SAY THE REGIME, BUT THEIR COUNTRY. THEY SEE IT AS AN EXTERNAL ATTACK AND THEREFORE THE POTENTIAL OF PEOPLE TAKING TO THE STREET, THAT'S THE WAY IT WOULD START HITTING. IF PEOPLE START PROTESTING, TAKING TO THE STREET, ET CETERA, IT'S NOT GOING TO HAPPEN. [00:20:18] Speaker 8: MAHA, DO YOU THINK THIS GOES TO THE MIDTERMS? [00:20:20] Speaker 13: DOES THE REGIME HOLD ON UNTIL THROUGH NOVEMBER? THEY MOST LIKELY CAN HOLD ON THROUGH NOVEMBER, WHEREAS PRESIDENT TRUMP WANTS THIS OVER SOONER RATHER THAN LATER. EVERYTHING WE'VE BEEN HEARING IS THEY WERE ON A CUSP APPARENTLY OF A VERY VIABLE DEAL PRIOR TO THE LAUNCH OF THIS WAR. I'M SPEAKING THE FIRST ROUND, NOT THIS CURRENT ROUND. BUT WITH THE ASSASSINATION OF KAME'NI, WITH THE ASSASSINATION OF LARINJANI AND OTHER KEY MEMBERS, THE REGIME HAS SHIFTED. IT'S RESHUFFLED THE DECISION-MAKING PROCESSES. ALL INDICATIONS ARE THAT MUSHTABA KAME'NI IS HOLDING THE LEVERS OF POWER. THEY'VE BECOME A LOT MORE HAWKISH THAN THE PREVIOUS REGIME, IF YOU LIKE. THEY'VE BEEN HOLDING THE ENDOWMENT FOR INTERNATIONAL PEACE, NOVEMBER. NOVEMBER. NO ONE IS THINKING ABOUT NOVEMBER RIGHT NOW. [00:21:37] Speaker 6: NOT IN THIS OIL MARKET. MAHA YAHHA THERE OF THE CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE, NOVEMBER. CHECK THIS OUT FROM THE WASHINGTON POST. OIL AND GAS EXECUTIVES HAVE WARNED THE WHITE HOUSE THAT GASOLINE PRICES COULD SURGE IN THE COMING MONTHS AS FUEL INVENTORIES FALL TO CRITICAL LOWS. JULIAN EMMANUEL IS STILL WITH US. THAT'S THE TENSION RIGHT NOW. OIL MARKET IS TELLING YOU ONE THING, NOT MUCH IS HAPPENING. WE ARE DRAWING DOWN INVENTORY SO QUICKLY AND THE EXECUTIVES ARE STILL ON EDGE. IF YOU ARE IN THE EQUITY MARKET, YOU HAVE HEARD IT A MILLION TIMES OVER THE LAST THREE MONTHS. WHEN DO YOU HAVE TO START PAYING ATTENTION AGAIN? [00:22:15] Speaker 9: I THINK REALLY, AGAIN, WE HAVE SORT OF TARGETED THE 4TH OF JULY AS KIND OF A SEMINAL DATE IN THINGS THAT ARE HAPPENING. IF WE ARE TAKING THE SAME APPROACH THAT WE'RE TALKING ABOUT RIGHT NOW, YOU KNOW, IN AN UNMOVING, HARDENING REGIME IN IRAN, AND WASHINGTON WHO REALLY DOESN'T SEE HOW THE END GAME EVOLVES, THAT'S LIKELY GOING TO FURTHER SEND THE PRICE OF OIL HIGHER. AND IN OUR MIND, THAT'S THE BIGGEST THREAT, FRANKLY, TO THE ENTIRETY OF THIS BULL MARKET. IT ISN'T THE CAPITAL RAISING. IT ISN'T THE QUESTIONS AROUND CAPEX. IT'S WHETHER THE ECONOMY CAN WEATHER A PERSISTENT OIL PRICE SHOCK. SO FAR, IT HAS. THERE ARE TWO WAYS TO LOOK AT THIS. [00:23:08] Speaker 7: ON ONE HAND, THAT MORE BARRELS ARE GETTING THROUGH THE STREETERFER MOVES THAN PEOPLE REALIZE. AND THAT ACTUALLY THERE IS A LEAKAGE HERE THAT IS EASING SOME OF THE SUPPLY CONSTRAINTS. THE SECOND IS THAT NO ONE WANTS TO TRADE OIL BECAUSE YOU'RE JUST GOING TO GET BLOWN OUT. IT IS A VERY DIFFICULT MOVE. WHICH IS IT? [00:23:21] Speaker 9: IT'S BOTH. IT'S ABSOLUTELY NOT HAPPENED THIS MORNING. NO, THINK ABOUT IT. A COUPLE -- YOU KNOW, WHEN THE PRESIDENT FIRST SAID THAT THERE WERE GOING TO BE FURTHER ATTACKS, THE PRICE OF OIL WENT FROM DOWN $3 TO DOWN $2.50. AND I MEAN, IT WAS LIKE THERE WAS NO PULSE WHATSOEVER. [00:23:43] Speaker 6: THERE IS SOME ENERGY GETTING THROUGH. WE'VE SEEN SOME OF THE HEADLINES COMING THROUGH. IN FACT, THE PRESIDENT ADDRESSED THAT JUST YESTERDAY. THE PRESIDENT SPOKE ABOUT IT. [00:23:49] Speaker 8: BUT THEN YOU LOOK AT WHAT ADNOC IS GETTING THROUGH. KUWAIT IS STARTING TO SEND MORE BARRELS TO CHINA. I SAW SOME WORK BEING DONE IN IRAQ AS WELL TRYING TO GET OIL THROUGH. BUT IT'S NOT WHERE WE WERE PRE-CRISIS. THE ISSUE IS GOING TO BE THIS RACE AGAINST TIME WHERE INVENTORIES ARE BECAUSE THEY ARE VERY LOW RIGHT NOW. [00:24:06] Speaker 6: JULIAN, IT'S GOOD TO SEE YOU. IT'S GREAT TO CATCH UP. THIS STORY IN THE MIDDLE EAST RIGHT NOW IS RATINGS DEATH. IF YOU WANT RATINGS RIGHT NOW, JUST SURROUND YOURSELF WITH ROCKETS AND SIT DOWN AT THE NASDAQ. NEW YORK/NIX. [00:24:24] Speaker 14: NEW YORK/NIX. [00:24:26] Speaker 6: WHAT DO YOU SAY ABOUT IRAN, HEADLINE ON, HEADLINE OFF. THANK YOU. FUTURES BOUNCED THIS MORNING, FOLLOWING TWO DAYS OF LOSSES UP BY 3/4 OF 1% ON THE S&P AND NASDAQ UP BY 1%. ON THE RUSSELL UP BY 1.3%. PLENTY OF REASONS OUT THERE RIGHT NOW FOR THE STOCK MARKET TO STILL BE DOWN. WE'VE SEEN TO THE FED NEXT WEEK AND THE FED NEXT WEEK. IT IS CRAZY TO THINK THAT THE ECB WITH THE ECONOMY THEY HAVE IN THE EUROZONE RIGHT NOW IS HIKING INTEREST RATES BECAUSE OF AN ENERGY SHOCK AND INFLATION WHEN WE'VE SEEN THAT ACT NOT ONCE BUT TWICE IN 2011 AND IT DIDN'T END WELL AT ALL. [00:25:16] Speaker 7: RIGHT NOW I'M LOOKING AT THE ECONOMIC PROJECTIONS FOR THE EURO REGION AND WE'RE LOOKING AT 1.2% GROWTH IN GDP SO FAR FOR THIS YEAR, 1.5% NEXT YEAR, 1.6% THE FOLLOWING YEAR WITH CPI EXPECTED TO COME DOWN TO 2% BY 2028 AND THEY ARE GOING TO BE HIKING INTO THAT AND THIS IS THE REASON WHY PEOPLE ARE SAYING WAIT A SECOND, HOLD ON, THIS IS GOING TO BE A POLICY ERROR AND YET IF YOU ARE A SINGLE MANDATE CENTRAL BANK, HOW DO THEY GET AHEAD OF INFLATION THAT IS CREEPING HIGHER WITHOUT TAKING A MOVE AND THAT IS PART OF THE ISSUE OF BEING A SINGLE MANDATE CENTRAL BANK. [00:25:45] Speaker 6: THAT DECISION AT 8:15 EASTERN TIME, 30 MINUTES LATER, NEWS HIGHER, NEWS CENTER, NEWS CENTER, NEWS CENTER. LET'S FINISH ON CRUDE. ON MONDAY, SESSION HIGH, 98. SINCE MONDAY, THINGS HAVE GOT WORSE, NOT BETTER, AND YET BRENT CRUDE IS AT 92. [00:26:03] Speaker 8: SINCE MONDAY, THINGS ARE GOING TO BE INFLATION. IT IS CRAZY TO LOOK AT THIS BOARD AND SEE WTI BELOW $90 A BARREL. AS YOU SEE IN "THE WASHINGTON POST," OIL EXECUTIVES ARE GOING TO THE WHITE HOUSE AND SAYING WE ARE CONCERNED. THERE IS REASON TO BE CONCERNED GIVEN WHERE WE ARE IN INVENTORY LEVELS. I THINK THE MARKET IS JUST SAYING MAYBE WE CAN LIVE WITH THIS. EVEN IF THE STRAIGHT IS CLOSED LONGER, THE PRESIDENT SAYS MORE CRUDE IS GETTING OUT. WE ARE GETTING OUT OF THIS. WE ARE GETTING OUT OF THE [00:26:29] Speaker 7: COUNTRY. THE PEOPLE ARE GETTING OUT OF THE COUNTRY. THE ISSUE IS PEEP DRIVING SEASON, THIS CAN GET TENUOUS IF THE STRIKES CONTINUE. NO ONE BELIEVES THE HEADLINES. SAY WHATEVER YOU WANT, [00:26:40] Speaker 6: THIS IS HAPPENING, THAT IS HAPPENING. PEOPLE ARE LIKE, TELL ME WHEN IT'S OVER OR TELL ME WHEN IT ACCELERATES. I BELIEVE IN PRICE. PARTICULARLY IN COMMODITY MARKETS AND THE PHYSICAL MARKET BECAUSE YOU HAVE TO CLEAR DEMAND OF SUPPLY AT SPOT. PARTICULARLY IN PARTICULARLY INTO THE END OF THE COUNTRY. THE PARTICULARLY INTO THE COUNTRY IS GOING REALLY QUICKLY. YOU CAN STABILIZE PRICE FOR NOW. THIS IS WHAT THE ENERGY EXECUTIVES ARE WORRIED ABOUT. ONCE YOU GET TO CRITICAL LEVELS, YOU GET THIS NON-LINEAR MOVE IN THE OTHER DIRECTION. IT'S LIKE THE PANDEMIC IN REVERSE. THAT'S THE STORY HERE. [00:27:13] Speaker 7: DON'T GET TOO COMFORTABLE WITH WHERE THINGS ARE AT RIGHT NOW. THINGS CAN CHANGE QUICKLY. THIS IS A POINT THAT JEFF CURRY HAS BEEN MAKING. YOU CAN SEE THEM IN THE COUNTRY. YOU CAN SEE THEM IN THE COUNTRY. YOU CAN SEE THEM IN THE COUNTRY. YOU CAN SEE THEM IN THE COUNTRY. YOU CAN SEE THEM IN THE COUNTRY. YOU CAN SEE THEM IN THE COUNTRY. [00:27:43] Speaker 6: YOU CAN SEE THEM IN THE COUNTRY. YOU CAN SEE THEM IN THE COUNTRY. NOT A COUNTRY. NOT A COUNTRY, BRAMO. [00:27:51] Speaker 8: YOU KNOW WHAT SHE MEANT. IT'S A SOARCE SUBJECT. [00:27:56] Speaker 6: ITALY IS NOT IN THIS WORLD CUP. IT'S SAD. IT'S LIKE PATHETIC. BRKT ON THE BLOOMBERG TERMINAL. [00:27:59] Speaker 8: WHO DO YOU HAVE WINNING? [00:28:00] Speaker 6: I HAVE A BRAZILIAN AT HOME. I HAVE BRAZIL WINNING. WHETHER I BELIEVE BRAZIL WINDS OR NOT. [00:28:04] Speaker 8: HAPPY WIFE, HAPPY LIFE. [00:28:05] Speaker 6: PRECISELY. THEY NEED TO WIN. [00:28:15] Speaker 15: THREE HOURS AWAY FROM THE CASH OPEN. MORNING MOVERS. YAHARA HAS MORE. DESPITE ANOTHER QUARTER OF BLISTERING AI GROWTH, WE ARE SEEING ORACLE SHARES FALLING 7.3% IN THE PREMARKET. AFTER THE COMPANY SAID IT WILL SPEND MORE THAN PROJECTED TO BUILD OUT AI DATA CENTERS. THAT CAME AS ORACLE LEFT ITS SALES OUT LOOK LARGELY UNCHANGED, LEAVING INVESTORS THAT ADDITIONAL SPENDING. MOVING ON TO THE CHIP STOCKS, THEY ARE STAGING A COMEBACK TODAY WITH NVIDIA UP 1.2%. SOME OF THAT HAVING TO DO WITH ORACLE SPENDING PLANS HELPING TO REINFORCE THE DEMAND STORY. YOU ALSO HAD A NOTE OUT FROM MORGAN STANLEY ON THE MEMORY NAME, MICRON AND SANDERS SAYING THAT A CORRECTION WAS NECESSARY AFTER A MASSIVE RUN AND THAT THEY DO NOT SEE THE MEMORY CYCLE OVER FOR NOW. THANK YOU. WE WILL END ON J.D.COM AND ALIBABA, THE CHINESE E-COMMERCE GIANTS BOTH ARE WEAKER IN THE PRE-MARKET AFTER CCTV REPORTED THAT CHINESE REGULATORS SPOLDED THE COMPANIES PUBLICLY FOR WHAT THEY ARE CALLING MISLEADING PROMOTIONS AHEAD OF A BIG HOLIDAY SHOPPING DAY NEXT WEEK. THEY ARE CALLING THE MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADED PROMOTIONS AHEAD OF [00:29:27] Speaker 6: A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A [00:29:31] Speaker ?: MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A [00:29:31] Speaker 6: MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A DEMOCRATS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A MISLEADING PROMOTIONS AHEAD OF A COST OF SO-CALLED TOKENS IN ANTICIPATION OF A SIMILAR MOVE FROM ANTHROPIC. [00:30:07] Speaker 7: THIS IS GETTING A LOT OF ATTENTION BECAUSE IT'S RAISING THE ULTIMATE QUESTION OF IS A.I. GETTING TO BE TOO EXPENSIVE AT LEAST THE MOST EXTREME AND CUTTING-EDGE MODELS FOR RANK AND FILE COMPANIES. IN OTHER WORDS IS THE TARGET AUDIENCE MAYBE NOT AS BIG THE ADDRESSABLE MARKET NOT AS BIG AS SOME PEOPLE HAVE BEEN PROJECTING AS THEY INCREASE THEIR CAPEX DRAMATICALLY. CITADEL PUT OUT A GREAT NOTE TALKING ABOUT THIS. ARE WE GOING TO SEE A BIFURCATION IN THE A.I. SPHERE WHERE SUDDENLY THE FRONTIER A.I. MODELS ARE GOING TO GO TO A COUPLE OF WELL-YIELD CUSTOMERS AND THE REST OF THE UNIVERSE IS GOING TO LOOK FOR COMMONDITIZED CHEAPER VERSIONS TO EXECUTE BASIC THINGS LIKE PICKING YOUR BRACKET FOR YOU. SO ULTIMATELY WE'RE GOING TO SEE HOW THIS SHAKES OUT BUT IT'S A WARNING SHOT AT A TIME WHERE SOME PEOPLE ARE GETTING WORRIED ABOUT COSTS. THAT'S GOOD. I SHOULD MAYBE USE CLAWD TO PICK MY BRACKET. [00:30:52] Speaker 8: ALSO IN THIS WALL STREET JOURNAL STORY THEY SAID THE MOVE WOULD BE IN ANTICIPATION OF SIMILAR CUTS THE COMPANY EXPECTS AT ANTHROPIC. SO AT THE SAME TIME THESE COMPANIES ARE GOING TO MARKET THEY'RE GOING TO BE HAVING TO CUT PRICES. WE'RE CUTTING PRICES AND AT THE SAME [00:31:04] Speaker 6: TIME WE'RE PUSHING BACK AGAINST THE PRICE OF THE BUILDOUT. SOMETHING DOESN'T WORK THERE LISA. SOMETHING DOESN'T WORK. [00:31:11] Speaker 7: THEY'RE GOING TO TAKE A LITTLE BIT MORE THAN 10% THIS MORNING. AT THE SAME TIME OVERALL THE NASDAQ IS RALLYING. OVERALL PEOPLE ARE FLOODING BACK TO THIS MARKET. THERE'S JUST A BREAK IN THE NARRATIVE. IS THIS AN OPEN AI STORY OR IS THIS A BROADER STORY FOR AI. [00:31:32] Speaker 6: AND THAT I THINK IS REALLY THE KEY QUESTION. LET'S SPEND SOME TIME ON THAT. THE STOCK IS DOWN BY MORE THAN 7% THIS MORNING. ANGELO ZINO OF CFRA MAINTAINING A HOLD RATING ON THE STOCK AND A 12-MONTH PRICE TARGET OF 194. WE EXPECT CAPEX TO REMAIN AGGRESSIVE IN THE FORSEEABLE FUTURE WHICH IS MORE BURDENSOME TO ORACAL INVESTORS COMPARED TO BETTER CAPITALIZED HYPERSCALERS. ANGELO JOINS US NOW FOR MORE. ANGELO, GOOD MORNING. GOOD TO SEE YOU. IS THIS PUSHBACK GOING TO CHANGE THE STRATEGY OF THE COMPANY? [00:32:00] Speaker 16: YEAH, JOHN, THANKS FOR HAVING ME. YOU KNOW, I THINK WHEN YOU LOOK AT THE ORACAL STRATEGY AND YOU LOOK AT THE METRICS OVERALL. THERE WERE A LOT OF GOOD THINGS THAT HAPPENED, RIGHT? I MEAN, MOST IMPORTANTLY, I WOULD SAY THAT RPO NUMBER DID INCREASE. THEY ARE -- IT DOES APPEAR LIKE THAT INCREASE IN RPO IS A BIT OF A DIVERSIFICATION ALSO AWAY FROM OPEN AI. THAT'S A GOOD THING TO SEE. BUT ALSO, IMPORTANTLY, THEY DIDN'T NECESSARILY BOOST THEIR FORWARD EXPECTATIONS IN TERMS OF REVENUE, RIGHT? WHICH, TO ME, MIGHT ALSO TELL ME THAT MAYBE SOME OF THOSE OPEN AI COMMITMENTS MIGHT BE BEING PUSHED OUT FURTHER DOWN THE LINE. BUT THAT BEING SAID, I MEAN, YOU LOOK AT WHAT'S HAPPENING RIGHT NOW, YOU LOOK AT THE GPU UTILIZATION RATES WITHIN ORACLE'S DATA CENTERS, THEY CONTINUE TO BE HIGH 90s. THOSE METRICS ARE EXTREMELY -- THEY ARE IMPORTANT IN THE SENSE THAT, HEY, LISTEN, EVERYBODY IS BUYING THEIR CAPACITY. SO THEY NEED TO CONTINUE TO SPEND AGGRESSIVELY. SO I THINK THAT IT JUSTIFIES THE HIGHER SPENDING. BUT THAT BEING SAID, I MEAN, AND YOU LOOK AT THE REVENUE RUN RATE RIGHT NOW, YOU'RE LOOKING 20% PLUS, YOU KNOW, THIS QUARTER. EXPECTATIONS IN THE FOLLOWING YEAR NORTH AT 30%. AND WE THINK NORTH AT 40% THE FOLLOWING YEAR THEREAFTER. BUT, YOU KNOW, MAYBE TO THE POINT YOU GUYS HAVE JUST REFERENCED, ONE, IS THE DEMAND GOING TO BE THERE AS WE KIND OF LOOK AHEAD? BUT, RIGHT NOW, EVERYTHING IS TELLING YOU THAT IT IS GOING TO BE THERE. [00:33:17] Speaker 7: WELL, ANGELO, TO THAT POINT, THERE ARE EXPONENTIAL INCREASES IN CAPEX AT THE SAME TIME THAT CUSTOMERS ARE STARTING TO PUSH BACK ON THE MARGINS. AND MAYBE THESE ARE ANECDOTAL STORIES. BUT DO YOU THINK THAT IT'S A WARNING SHOT THAT OPEN AI IS THINKING OF CUTTING PRICES AT A TIME WHEN CAPEX BILLS ARE JUST GOING TO THE MOON? [00:33:36] Speaker 16: IT'S A WARNING SIGN IN THE SENSE THAT, HEY, LISTEN, I MEAN, IF DEMAND WAS AS STRONG AS IT WAS, RIGHT? I MEAN, YOU WOULDN'T NECESSARILY NEED TO CUT PRICES. BUT IN THE SAME RESPECT, I MEAN, YOU KIND OF THINK ABOUT THE LONGEVITY OF AI AND HOW THIS KIND OF WORKS OUT OVER TIME. I MEAN, PRICES DO NEED TO COME DOWN. ADOPTION RATES NEED TO CONTINUE TO INCREASE. AND YOU KIND OF GET THIS CIRCULAR PATTERN IN MANY RESPECTS WHERE OVER TIME, THE GREATER ADOPTION RATES WILL CONTINUE TO FILL THOSE DATA SETTERS. AND AS A RESULT, YOU NEED TO CONTINUE TO AGGRESSIVELY SPEND. AND AS YOU GET THAT VOLUME CONTINUE TO TAKE UP, THAT HOPEFULLY DOES JUSTIFY THE INVESTMENTS. SO A LOT OF MOVING PARTS. BUT, YOU KNOW, AS LONG -- AGAIN, I THINK RIGHT NOW THE PLACE YOU WANT TO BE IS ON THE CHIP SIDE OF THINGS, BECAUSE IT DOESN'T SEEM LIKE THERE'S ANY END AS FAR AS SOME OF THE SPENDING GOES. AND WHEN YOU KIND OF LOOK AT SOME OF THESE IPOs THAT ARE GOING TO COME OUT HERE OVER THE NEXT COUPLE OF MONTHS, I MEAN, CLEARLY, ALL OF THOSE PROCEEDS ARE GOING TO BE REINVESTED RIGHT INTO THAT AI INFRASTRUCTURE BUILD, RIGHT? SO, AGAIN, THE PLACE TO BE CONTINUES TO BE SEMIS. [00:34:45] Speaker 7: ANGELO, IT'S NOT WHETHER AI IS REAL AND WHETHER IT IS TRULY TRANSFORMATIVE. IT'S WHAT PRICE INVESTORS ARE WILLING TO PAY FOR IT AND HOW MUCH MONEY THEY'RE WILLING TO FORK OVER AND, FRANKLY, HOW MUCH CASH IS STILL, QUOTE, ON THE SIDELINES, AS PEOPLE HAVE BEEN SAYING FOR THE PAST 30 YEARS. AND THEY KEEP SAYING, DO YOU THINK WE'RE REACHING THE LIMITS IN TERMS OF JUST VALUATIONS, GIVEN THE FACT THAT PEOPLE BELIEVE IN THE STORY, YES, BUT THEY'RE GETTING A LITTLE SKEPTICAL OF HOW MUCH THEY'RE GOING TO BE ON THE HOOK FOR ULTIMATELY WHAT COULD BE SOMETHING NOT ONLY OF A COMMODITY, BUT JUST UTILITY. [00:35:13] Speaker 16: YEAH, I MEAN, I THINK YOU'VE GOT A POINT THERE. I MEAN, WHEN WE THINK ABOUT -- YOU KIND OF LOOK AT JUST THE TOKEN GENERATION THAT WE'VE SEEN HERE OVER THE LAST COUPLE OF MONTHS, RIGHT? I MEAN, CLEARLY, TO YOUR POINT, AI IS REAL. DEMAND IS EXPLODING. ENTERPRISE COMPANIES ARE BLOWING OUT THEIR BUDGETS, YOU KNOW, IN A SHORT PERIOD OF TIME, AND THEY CONTINUE TO INCREASE THEIR AI BUDGETS. SO, YOU KNOW, FROM THAT TRAJECTORY, EVERYTHING CONTINUES TO, YOU KNOW, TO BE GOOD, AND AS A RESULT, YOU CONTINUE TO JUSTIFY THAT HIGHER SPEND AS WE KIND OF LOOK AHEAD. YOU KNOW, TO THE EXTENT OF HOW THIS ALL PLAYS OUT, I THINK IN MANY RESPECTS, I MEAN, IF YOU'RE A HYPER SCALER AND YOU'RE GENERATING THE TENS OF BILLIONS OF DOLLARS THAT YOU ARE IN CASH FLOW, YOU'RE GOING TO CONTINUE TO BLOW OUT, YOU KNOW, YOUR CASH FLOW TO CONTINUE TO INVEST IN AI. IN MANY RESPECTS, BECAUSE YOU'VE GOT ALL THESE NEW EMERGENT ENTRANCE OUT THERE THAT IS REALLY KIND OF TAKING BUSINESS THAT, IN SOME RESPECTS, SHOULD BE YOURS, WHETHER THEY'RE NEOCLOUDS, WHETHER THEY'RE NEW IPOs THAT ARE COMING OUT, THAT'S BUSINESS THAT'S POTENTIALLY YOURS. SO BIG TECH, IN MANY RESPECTS, DOES HAVE A BIG PROBLEM IN THE SENSE THAT THEY NEED TO CONTINUE TO AGGRESSIVELY SPEND, NO MATTER THE CIRCUMSTANCE, AS WELL AS THE FACT THAT YOU'VE GOT NEW COMPETITIVE PRESSURES THAT ARE ENTERING THE MARKET. SO YOU'VE GOT, YOU KNOW, A NUMBER OF KIND OF MOVING PARTS THERE AS WELL. [00:36:29] Speaker 8: ANGEL, HOW FAR BEHIND IS OPEN AI FROM ANTHROPIC WHEN IT COMES TO THE ENTERPRISE CUSTOMER BASE? I MEAN, IT'S TOUGH, RIGHT? [00:36:37] Speaker 16: IT'S TOUGH TO REALLY SAY. I MEAN, WE'LL SEE, I GUESS, IN THE COMING WEEKS, HOPEFULLY, WHEN WE SEE SOME OF THESE S-1 FILINGS OUT THERE. I WOULD SAY, LISTEN, WHEN YOU LOOK AT OPEN AI, CLEARLY, THEY'VE BEEN FULL THROTTLE IN TERMS OF ON THE ENTERPRISE SIDE OF THINGS. SO THEY'RE CLEARLY A STEP AHEAD. BASED ON ANYONE YOU'LL TALK TO, CLEARLY, MOST ENTERPRISES WILL CONTINUE TO FAVOR SOME OF THE APPLICATIONS THAT OPEN AI HAS ROLLED OUT, NOT TO MENTION WHAT THEY'VE DONE ACROSS THE STACK GOING FROM THOSE LLMS TO THE ENTERPRISE APPLICATIONS THAT THEY'VE ROLLED OUT. I THINK IT'S SIGNIFICANTLY SUPERIOR TO WHAT WE'VE SEEN FROM OPEN AI THUS FAR. OPEN AI REALIZES THEY DO NEED TO CATCH UP IN MANY RESPECTS. AGAIN, TO WHAT MAGNITUDE THEY CAN CUT THAT DOWN, WE'LL SEE. BUT CLEARLY, THE FOCUS ON OPEN AI UP UNTIL A COUPLE OF MONTHS AGO HAS BEEN EQUALLY OR MAYBE A LITTLE BIT MORE TILTED TOWARDS THE CONSUMER SIDE OF THINGS. WE'RE NOW REALIZING AS FAR AS MONETIZATION OF AI, MAYBE THEY SHOULD HAVE TILTED A LITTLE BIT MORE TO THE EXTENT THAT ANTHROPIC HAS. [00:37:41] Speaker 6: WHAT DO YOU MAKE OF THEIR PUSH, THEIR OPENNESS, IF YOU WILL, TO HAVE A CONVERSATION ABOUT GIVING UP EQUITY TO THE U.S. GOVERNMENT? IS THAT AT THE GOODNESS OF THEIR HEART TO SHARE THE PROFIT OR IS THIS ABOUT SHARING THE BURDEN? [00:37:51] Speaker 16: IT'S PROBABLY SHARING THE BURDEN A LITTLE BIT, RIGHT? I ALSO THINK, YOU KNOW, POTENTIALLY THERE IS AN OPPORTUNITY HERE FOR OPEN AI TO GET A LITTLE BIT MORE ENTRENCHED AND CONNECTED WITH THE U.S. GOVERNMENT. I MEAN, WE'LL SEE WHAT THE OPPORTUNITIES ARE GOING TO BE OUT THERE AS FAR AS SOVEREIGN AI INITIATIVES GOES, RIGHT? BUT AS FAR AS OPEN AI IS CONCERNED, I THINK KIND OF DEVELOPING, YOU KNOW, A STRONGER CONNECTION WITH THE U.S. GOVERNMENT IS PROBABLY A GOOD THING FOR THEM ON A NUMBER OF FRONTS, WHETHER IT BE KIND OF SHARING SOME OF THE OBLIGATIONS OUT THERE OR WHETHER IT BE POTENTIALLY FINDING NEW REVENUE OPPORTUNITIES THAT MAYBE THE U.S. GOVERNMENT CAN HELP THEM WITH. [00:38:32] Speaker 6: ANGELA, APPRECIATE IT. THANK YOU, SIR. ANGELA ZINO, OF CFRA, MIGHT BE GOOD FOR OPEN AI. IS IT GOOD FOR THE U.S. GOVERNMENT? [00:38:39] Speaker 7: IT'S GOOD FOR US, RIGHT? I MEAN, ULTIMATELY, IF THEY ARE GOING TO BE SHARING THE BURDEN AT A CERTAIN POINT, GREAT, IT WOULD BE GOOD FOR THEM. IS THAT REALLY WHAT WE WANT TO SEE? [00:38:46] Speaker 6: YEAH, NASDAQ FUTURES THIS MORNING UP BY MORE THAN 1%. NO ONE REALLY WANTS TO SAY IT, DO THEY? THEY'RE KIND OF HESITANT. THEY KNOW WHAT THEY THINK, BUT THEY DON'T WANT TO SAY IT RIGHT NOW. [00:38:52] Speaker 7: NOBODY WANTS TO COME OUT AND SAY THAT OPEN AI IS OVERVALUED AND PERHAPS IS THE STORY THAT IS A BIT OF THE TROSIAN HORSE. PEOPLE HAVE BEEN SAYING THAT ANECDOTALLY FOR ABOUT A YEAR NOW. [00:39:00] Speaker 6: SUDDENLY ARE WE SEEING THE BEGINNINGS OF THE CRACKING? [00:39:06] Speaker 10: SPEAKING IN MIND, LET'S GET AN UPDATE ON NEWS. THE SECOND STRAIGHT DAY OF STRIKES ON IRAN. THE ATTACK COMING AFTER PRESIDENT DONALD TRUMP ACCUSED THE COUNTRY OF DRAGGING OUT PEACE TALKS. TRUMP TELLING FOX NEWS THE U.S. WILL HIT IRAN AGAIN TODAY IF IT DOESN'T SIGN A DEAL. OIL AND GAS EXECUTIVES TELLING THE TRUMP ADMINISTRATION GAS PRICES COULD SPIKE IN THE COMING MONTHS. THE WASHINGTON POST REPORTING INDUSTRY OFFICIALS ARE CAUTIONING THE WHITE HOUSE INVENTORIES COULD BE GONE WITHIN WEEKS AS SUMMER TRAVEL SEASON IS IN FULL SWING. THE WASHINGTON PUTTING UP TO THE WASHINGTON PUTTING UP. IN SPORTS, THE NICKS ARE ONE WIN AWAY FROM THEIR FIRST NBA CHAMPIONSHIP IN MORE THAN 50 YEARS. NEW YORK MAKING AN HISTORIC COMEBACK TO BEAT THE SAN ANTONIO SPURES 107-106 WITH 1.2 SECONDS LEFT IN THE GAME. [00:39:55] Speaker 6: GAME FIVE IS ON SATURDAY IN TEXAS. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: I KNOW WE SPENT TONS OF TIME TALKING ABOUT THE PRICE OF ENTRY, GETTING PRICE TO GO TO SOME OF THESE GAMES. WHAT ABOUT THE VALUE OF SPORTS CONTENT? THAT'S ONLY GOING UP AFTER THINGS LIKE THIS. [00:40:09] Speaker 7: PEOPLE WANT TO BE PART OF THAT EXCITEMENT. ALSO, YOU SEE ALL THE CELEBRITY ROLES OF ALL THE PEOPLE WHO ARE THERE AND YOU SEE THE SORT OF SITUATION. MIKE GROVER GOT TO SIT NEXT TO TIMOTHEY. TIMOTHEY IS THE SAME THING. AND KYLIE. THE POINT BEING THAT THIS KIND OF RAW JOY AND EXCITEMENT AND UNCERTAINTY AND HUMANITY IS GOING TO BE IN PREMIUM. [00:40:31] Speaker 6: HOW MANY MORNINGS HAVE I SAT HERE AND SAID BAD PRODUCT? [00:40:33] Speaker 7: 100%. I WAS GOING TO SAY. REALLY? YOU STILL THINK SO? [00:40:37] Speaker 6: THIS IS THE DREAM FINAL, RIGHT? TO TURN AROUND WHAT OTHERWISE HAS BEEN BAD PRODUCT. [00:40:41] Speaker 14: IS THAT YOUR LINE NOW? [00:40:43] Speaker 6: I THINK THEY WANT TO EXTEND IT. LET'S JUST PUT IT THAT WAY. [00:40:47] Speaker 14: I THINK THEY WOULD LIKE IT TO GO BEYOND GAME FIVE. NO. YOU THINK THAT THIS IS RIGGED? NOT WHAT I'M SUGGESTING. [00:40:53] Speaker 6: BUT YOU THINK THAT -- WHO IS THEY? THE NBA. I'M SUGGESTING THEY WOULD LIKE IT TO GO FURTHER. BY WHAT MEANS? THAT IS UP TO YOU. [00:40:59] Speaker 14: YOU USED THE WORD RIGGED. I DIDN'T USE THE WORD RIGGED. [00:41:01] Speaker 6: ALL RIGHT, ALL RIGHT. LET'S HOPE THEY WIN. [00:41:03] Speaker 8: THAT'S NOT WHAT I SAID. GOOD JUJU ONLY, NIXON FIVE. [00:41:07] Speaker 17: WE'VE SEEN THE WORD RIGGED. WE ARE SEEING DISTINCT UPSIDE PRESSURES ON INFLATION. [00:41:21] Speaker 6: AND CENTRAL BANKS AROUND THE WORLD ARE DEBATING ABOUT WHAT TO DO ABOUT IT. [00:41:25] Speaker ?: IAN STABY OF JP MORGAN JOINS US NEXT. [00:41:37] Speaker 6: I'VE GOT A MESSAGE FROM A BLOOMBERG SUBSCRIBER. THE ABSOLUTE WORST NIGHTMARE FOR BRIDES GETTING MARRIED ON [00:41:43] Speaker 7: SATURDAY IN THE NEW YORK AREA WITH THE NYX GAME TAKING PLACE. [00:41:47] Speaker 6: MAYBE IT IS ON PURPOSE. [00:41:49] Speaker 8: MAYBE THE BRIDES WILL BE WATCHING A GAME TOO. THEY COULD DO ORANGE AND BLUE FLOWERS. AND ALSO, AS TRUMP WOULD SAY, THAT IS LIFE. [00:41:55] Speaker 6: WEDDING PLANNERS EVERYWHERE RUSHING TO BUY ORANGE AND BLUE FLOWERS. [00:41:59] Speaker 14: LEAN INTO THE THING. [00:42:05] Speaker 6: SWIFT TO MSG GETTING MARRIED THERE. THAT IS CRAZY. DON'T THINK MUCH OF THAT. [00:42:09] Speaker 7: A PRIVATE WEDDING. [00:42:11] Speaker 8: THAT IS PRETTY TACKY. ABOVE PENN STATION. IT IS FINE FOR THE NYX TO WIN AN MSG BUT TO GET MARRIED ABOVE -- AND NEW JERSEY TRANSIT. [00:42:21] Speaker 6: THE STATEMENT DOES NOT SIT WELL WITH ME EITHER. FEATURES ON THE S&P, POSITIVE BY THREE QUARTERS OF 1%. IN THE BOND MARKET FOCUSED ON THE ECB THIS MORNING. [00:42:41] Speaker 17: UNDER SURVEILLANCE THIS MORNING, CENTRAL BANKS IN A BALANCE OF GATT. WE ARE SEEING DISTINCT UPSIDE PRESSURES ON INFLATION. CENTRAL BANKS ARE LIKELY TO BE MORE AGGRESSIVE. YOU ARE NOT GOING TO HEAR THAT TRANSITORY WORD UTTERED BY [00:42:57] Speaker 6: A SINGLE CENTRAL BANK. HERE IS THE LATEST THIS MORNING. GLOBAL CENTRAL BANKS WALKING A TIGHTROPE AHEAD OF A PIVOTAL RATE DECISION STARTING WITH THE ECB THIS MORNING. EXPECTED A HIKE FOR THE FIRST TIME SINCE 23. IN LINE WITH MARKET PRICING, WE EXPECT A 25 BASIS POINT HIKE IN SEPTEMBER AND NEXT MARCH WERE PRICED. IAN JOINS US NOW FOR MORE. WHAT ARE YOU EXPECTING FROM LAGUARD LATER THIS MORNING? [00:43:25] Speaker 18: I THINK IN A PERFECT SITUATION SHE IS GOING TO WANT TO COME OUT OF THIS MEETING WITH EFFECTIVELY THE MARKET WHERE IT IS TODAY. SO THEY ARE GOING TO HEIGHT RATES. WE KNOW THAT. I THINK WHAT THE MARKET IS GOING TO BE FOCUSING ON VERY MUCH SO IS THE FORECAST BECAUSE WE ARE GOING TO EXPECT GROWTH TO BE COMING DOWN. WE EXPECT INFLATION TO BE COMING UP. HOW MUCH DO THEY MOVE? AND THEN, OF COURSE, THE PRESS CONFERENCE. DOES SHE TRY TO STEER AWAY FROM EFFECTIVELY FORWARD GUIDANCE? DOES SHE SAY, LOOK, WE ARE DATA DEPENDENT, WE ARE GOING TO CONTINUE TO WATCH THE DATA? THEY DON'T KNOW WHAT IS HAPPENING WITH THE STRAIT IN THE NEXT FEW WEEKS OR SO. SO THEY ARE GOING TO SIT ON THEIR HANDS AND SAY, WE ARE DONE TODAY. LET'S SEE WHAT HAPPENS GOING FORWARD. I THINK THAT IS WHAT SHE WANTS TO COME OUT WITH. [00:44:01] Speaker 6: JULY 08, APRIL 2011, JULY 2011. THREE BAD DECISIONS FROM THE ECB. DOES JUNE 2026 GET ADDED TO THAT LIST? WHY IS THIS DIFFERENT? [00:44:12] Speaker 18: SO THE ECB IS A DIFFERENT SITUATION TO THE FED OR THE BANK OF ENGLAND BECAUSE THEY HAVE TAKEN RATES DOWN TO 2%. THEY HAVE TAKEN RATES DOWN TO WHAT THEY PERCEIVE TO BE NEUTRAL. YOU TALK TO THE FED, YOU TALK TO THE BANK OF ENGLAND, THE ECB WILL TELL YOU WE ARE STILL MILDLY RESTRICTIVE. YOU MAY OR MAY NOT BELIEVE THAT. BUT THAT IS WHAT THEY WILL SAY. THE ECB, THEY ARE STUCK NEUTRAL. SO THEY HAVE THE ABILITY TO JUST EFFECTIVELY LEVER THE RATES UP A LITTLE BIT. BECAUSE LAGARDE SAID IT AT THE END OF MARCH, THE PUBLIC NEEDS TO KNOW WHAT THE REACTION FUNCTION IS AND NEEDS TO KNOW THAT THEY ARE GOING TO BE ABLE TO REACT TO IT. INFLATION IS GOING UP. THERE IS A SINGLE MANDATE IN CENTRAL BANK THAT EFFECTIVELY FIGHTS INFLATION. I THINK 25 BASIS POINTS ISN'T GOING TO EFFECTIVELY BE THE END OF THE EURO ZONE AS A WHOLE. I THINK THEY JUST WANT TO HAVE THAT CREDIBILITY IN THE SYSTEM. [00:44:56] Speaker 7: AT THIS POINT, THEY HAVE THE CREDIBILITY. IF YOU TAKE A LOOK AT WHAT THE EXPECTATION IS FOR INFLATION, IT IS EXPECTED TO COME DOWN TO 2% IN THE NEXT TWO YEARS AND THEN POTENTIALLY BELOW THAT FOR THE EUROPEAN REGION. YOU ARE ALSO LOOKING AT GDP THAT IS DECELERATING, NOT ACCELERATING. THEY HAVE A VERY THIN MARGIN TO WORK WITH. WHY DO YOU THINK THAT ULTIMATELY INFLATION COULD GET EMBEDDED COMING FROM A SUPPLY SHOCK GIVEN THE WAY THAT THE EURO REGION IS SET UP? [00:45:20] Speaker 18: I THINK THEY WILL COME OUT OF THIS. I'M NOT SURE INFLATION IS GOING TO COME EMBEDDED. I THINK ULTIMATELY THERE WILL BE MORE OF AN IMPACT ON GROWTH LATER DOWN THE LINE BUT WHAT THEY ARE WANTING TO DO IS TO HAVE THAT CREDIBILITY, TO HAVE THE MARKET CONTINUE TO BELIEVE THAT THEY ARE AN INFLATION FIGHTING CENTRAL BANK. LOOK AT WHAT HAS GONE ON IN ASIA OVER THE LAST FEW WEEKS OR SO. CENTRAL BANKS THAT WERE PAUSING OR DELAYING WHAT WAS EFFECTIVELY INEVITABLE, THEY HAVE NOW HAD TO PLAY CATCH-UP. I THINK THE ECB DO NOT WANT TO BE IN THAT POSITION. SO LET'S GO EARLY AND HOPEFULLY NOT HAVE TO DO TOO MUCH. AND THEN LET'S SEE WHAT HAPPENS. [00:45:57] Speaker 7: WOULD YOU RATHER BE IN EUROPEAN BONDS RIGHT NOW THEN THE U.S.? DEFINITELY. RIGHT NOW DO YOU THINK THE U.S. IS LOSING THAT CREDIBILITY? [00:46:03] Speaker 18: I THINK THE U.S. HAS GOT A DIFFERENT SITUATION GOING ON WHERE ACTUALLY YOU ARE SEEING WHAT LOOKS LIKE A RE-ACCELERATION IN THE LABOR MARKET. YOU HAVE GOT THE AI TRADE OVER HERE AND THE TECH TRADE OVER HERE. WE DON'T HAVE THAT IN EUROPE. YOU DON'T, BUT YOU HAVE GOT CLOSE TO 50 BASIS POINTS PRICE VERSUS EUROPE HAS GOT 70 BASIS POINTS PRICE. IT'S NOT A HUGE DIFFERENCE NOW. THERE'S BEEN A BIG CATCH UP IN THE FRONT END OF THE U.S. RELATIVE TO EUROPE OVER THE LAST FEW WEEKS OR SO. I JUST THINK THE U.S. IS A MUCH BETTER STORY. I THINK ACTUALLY EUROPEAN FRONT END RATES, I DO THINK THERE'S VALUE TO BE HAD THERE. I DON'T THINK THEY'RE GOING TO BE HIKING THREE TIMES OVER THE NEXT YEAR OR SO. [00:46:37] Speaker 6: THE U.S. IS A MUCH BETTER STORY. DOES THAT MAKE THE U.S. BOND MARKET A MUCH WORSE STORY? HOW BEARISH ARE YOU ON TREASURYS RIGHT NOW? [00:46:43] Speaker 18: I THINK YOU'RE LOOKING AT THE TREASURY MARKET WHERE ACTUALLY YOU'D ARGUE MORE AROUND FAIR VALUE. AND I THINK THE STARTING POINT IS SO IMPORTANT. I WAS JUST LOOKING THIS MORNING. SO WE'RE 35 BASEPOINTS HIGHER IN THE 10-YEAR YIELD YEAR-TO-DATE. IF YOU LOOK AT THE U.S. AG, IT'S EFFECTIVELY FLAT. THAT YIELD CUSHION IS SO MUCH DIFFERENT. FOR ALL THE PEOPLE THAT ARE CONCERNED ABOUT FIXED INCOME, REMEMBERING 2022, IT'S JUST THE STARTING POINT. IT'S SO MUCH DIFFERENT. THE YIELD YOU'VE GOT, THE CARRY YOU'VE GOT, THE STEEPENESS OF CURVES, THE ROLL DOWN, IT ALL HELPS. SO, YES, YOU CAN HAVE RATES MOVE A LITTLE BIT HIGHER, BUT ACTUALLY YOU STILL HAVE RETURNS. AND I THINK WE'RE 35 BASEPOINTS HIGHER. WE'RE 4.5% OR SO ON THE 10-YEAR. I COULD BUILD YOU A GLOBAL PORTFOLIO OF BONDS THAT YIELDS YOU 6%. I THINK THAT'S PRETTY ATTRACTIVE. [00:47:24] Speaker 6: QUICK YES OR NO, HAVE YOU GOT THE FED HIKING THIS YEAR? [00:47:26] Speaker 18: I THINK THE FED WILL DO WHAT THEY CAN TO BE ON HOLD OVER THE COURSE OF THIS YEAR. OKAY. [00:47:31] Speaker 6: GOOD TO SEE YOU. THANK YOU, SIR. IAN STEADY THERE OF J.P. MORGAN ASSET MANAGEMENT. 4.50 ON 10s, AROUND 5% ON 30s. [00:47:37] Speaker 7: THE IDEA THAT THE U.S. DOESN'T HAVE TO HIGH RATES, EVEN THOUGH IT HAS A MUCH BETTER ECONOMIC PROJECTION, AND YET IT'S MAINTAINING CREDIBILITY IS THE REASON WHY PEOPLE'S HEADS, LIKE MINE, ARE TIED UP IN KNOTS. [00:47:49] Speaker 6: THAT'S THE REASON WHY PEOPLE'LL TALK TO THEM. WE'VE GOT A LITTLE BIT OF THEM. KEVIN WALSH NEXT WEEK, THE NEW FED SHARE IN HIS FIRST FED MEETING. UP NEXT, WE'LL CATCH UP WITH FRANCIS DONALD OF RBC, ED MILES OF JAMES, [00:48:06] Speaker ?: TED MORLINSON OF BED, MIKE PARL OF BLACKROCK. THE SECOND HOUR OF BLOOMBERG SURVEILLANCE JUST AROUND THE CORNER. WE'LL CATCH UP WITH MORE. THE SAFEST THING THE FEDERAL RESERVE CAN DO POLITICALLY AND [00:48:26] Speaker 19: ECONOMICALLY, I THINK, IS JUST TO DO NOTHING. YOU DO HAVE THIS HIGHER RESTING HEART RATE FOR INFLATION. MOST FED OFFICIALS, OF COURSE, ARE GOING TO BE FINE LEAVING RATES [00:48:38] Speaker 20: AS THEY ARE. CORE INFLATION IN THE U.S. STILL LOOKS LIKE IT'S ON A TRAJECTORY THAT EVENTUALLY SHOULD BE OKAY FOR THE FED. [00:48:45] Speaker 21: WE NEED TO SEE THE FED REMOVE THE EASING BIAS AND ULTIMATELY REMOVE THE INSURANCE CUT FROM LAST YEAR. [00:48:52] Speaker 22: THIS IS THE FEDERAL RESERVE. [00:49:00] Speaker 6: LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD MORNING FOR OUR AUDIENCE WORLDWIDE. THE SECOND DOW OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. TREASURY DOWN BY 0.7% ON THE NASDAQ UP BY ONE FULL PERCENTAGE POINT AND CHANGE. IN THE BOND MARKET RIGHT NOW, CHECK IT OUT, TREASURY'S 2s, 10s AND 30s, YIELDS LOWER BY TWO BASIS POINTS ON 2s, DOWN 3 ON 10s, STILL AROUND 450 ON A 10-YEAR WITH CRUDE STILL DEPRESSED EVEN WITH FRESH STRIKES IN THE MIDDLE EAST. DOWN BY 1% ON BRENT. WTI WITH AN 89 HANDLE. LATER THIS MORNING, DATA AT 8:30 EASTERN TIME, JOBLESS HIGHER IN THE MIDDLE EASTERN TIME, THE ECB INTEREST RATE DECISION AT 8:15 AND 30 MINUTES LATER, A NEWS CONFERENCE [00:49:44] Speaker 7: WITH CHRISTINE LAGARDE. SHE HAS QUITE THE JOB TO DO GIVEN THE FACT THAT RIGHT NOW THE MARKET IS BAKING IN 70 BASIS POINTS OF RATE HIKES BY THE ECB FOR THE REST OF THIS YEAR. THIS IS A RATE HIKING CYCLE THAT IS GETTING PRICED IN. NOT JUST ONE AND DONE, AND IT COMES AS INFLATION, YES, IS ELEVATED IN THE REGION, BUT GROWTH IS NOT. AND THEY DON'T HAVE THE DRIVERS, INCLUDING THE NICS THAT SOMEBODY HAS TO POTENTIALLY GENERATE SOME OF THE HOPES AND DREAMS THAT WE SEE COMING OUT OF THE STOCK MARKET. IS THIS GOING TO BE A MISTAKE? AND ULTIMATELY, EVERYONE IN THE U.S., I'M GETTING MESSAGES ALL MORNING, HUGE MISTAKE, IDIOTIC. [00:50:17] Speaker 6: WE WERE TALKING ABOUT HIKING NOT ONCE AND EVERYONE IS WAITING FOR THE GUIDANCE TO GO TWICE AND GO THREE TIMES. PPI IN AMERICA LATER THIS MORNING IS EXPECTED TO HAVE A SIX HANDLE. JOBLESS CLAIM IS EXPECTED TO COME AT AROUND 220. WE ARE HAVING THESE FUN AND GAMES IN AMERICA TALKING ABOUT REMOVING AN EASING BIAS. IT IS CRAZY, ISN'T IT? WE ARE TALKING ABOUT REMOVING AN EASING BIAS IN AMERICA WITH DATA LIKE THAT. [00:50:42] Speaker 7: THE ECB IS TALKING ABOUT HIKING NOT ONCE AND EVERYONE IS NOT ONCE AND EVERYONE IS NOT ONCE AND EVERYONE IS COMING INTO IT. IT IS LIKE TWO DIFFERENT MARKETS WE ARE TALKING ABOUT ON ONE HAND. IN EUROPE, THEY HAVE TO ANCHOR INFLATION EXPECTATIONS THAT ARE FULLY ANCHORED. IF YOU LOOK AT THE INFLATION EXPECTATIONS FOR 2028, IT IS 2%. IT IS NOT 2% IN THE UNITED STATES, AT LEAST NOT BY MARKET EXPECTATIONS. WE JUST HAD THE FIRST WAR HANDLE ON CPI GOING BACK TO 2023 WHEN THE FED WAS ENGAGING IN A RATE HIKING CYCLE. SOMEHOW PEOPLE THINK THE FED CAN GET AWAY WITH IT. IT IS NOT GOING TO HURT THE PEOPLE THAT ACTUALLY NEED INTEREST RATES TO COME DOWN. IT IS NOT GOING TO HURT THE PEOPLE THAT ACTUALLY NEED INTEREST RATES TO COME DOWN. IT IS NOT GOING TO STOP THE MASSIVE AIR SPEND AND MAYBE THE [00:51:22] Speaker 8: FED DOES NEED TO LOOK THROUGH THIS OIL SHOCK BECAUSE YOU LOOK AT THE OIL PRICE BOARD, IT IS PRETTY INSANE THAT WE HAVE FRESH STRIKES BETWEEN WASHINGTON AND TEYRAN AND WE HAVE WASHINGTON AND TEYRAN AND WE HAVE WTI UNDER $90 A BARREL. DOWN JUST 1% ON A SESSION RIGHT NOW. LET'S BRING UP A SINGLE NAME, ORACLE IN THE PREMARKET. [00:51:42] Speaker 6: CHECK OUT THE PUSHBACK TO HIGHER SPENDING FROM ORACLE. THAT NAME IS DOWN BY CLOSE TO 9%. YESTERDAY WE WERE TALKING ABOUT SUPER MICRO. THAT NAME FINISHED LOWER BY 28%. ONE SESSION, 28% BECAUSE THEY ARE LOOKING TO RAISE EQUITY CAPITAL. WHAT DID WE SEE FROM META LAST WEEK, REPORT FROM THE F.T. LOOKING TO RAISE EQUITY CAPITAL CONSIDERING THAT PUSHBACK IN THE STOCK MARKET. THIS IS MY FOCUS RIGHT NOW, IT IS OUR FOCUS, THE PUSHBACK YOU SEE IN CAPITAL MARKETS. [00:52:12] Speaker 7: WE HAVE BEEN ASKING WHEN WOULD THAT HAPPEN AND MAYBE THAT MOMENT IS STARTING TO COME TO THE FOR. IT IS NOT LIKE ORACLE DELIVERED BAD EARNINGS, THEY ACTUALLY INCREASED THE EARNING EXPECTATION. A LOT OF THIS MONEY, THE FINANCING OF SOME OF THEIR CAPEX IS COMING FROM FORWARD ORDERS, SO IT IS NOT NECESSARILY EVEN GOING TO BE RAISED IN THE DEBT MARKET. HOWEVER, THEIR CAPEX SPEND CAME AT $55 BILLION VERSUS THE EXPECTED $50 BILLION. GOING FORWARD, THEY WILL HAVE TO RAISE AN ADDITIONAL $20 BILLION ON TOP OF WHAT THEY PREVIOUSLY EXPECTED. OH, AND BY THE WAY, ORACLE HAS $117 BILLION OF DEBT IN THE INVESTMENT GRADE INDEX. THAT IS THE MOST FOR ANY NON-FINANCIAL ISSUE AND IT HAS ALL COME IN THE PAST COUPLE OF YEARS. IT IS GOING TO THE MOON IN TERMS OF CAPEX EXPENDITURES. IT IS GOING TO BE ABLE TO MAKE SURE THEY ARE PULLING BACK ON [00:52:56] Speaker 6: SOME OF THEIR AI BUDGETS. ALL OF THAT AHEAD OF THE BIGGEST IPO WE HAVE EVER SEEN. COMING UP ON THE PROGRAM, WE WILL CATCH UP WITH FRANCIS DONALD OF RBC AS TECH STOCKS FIND A FIRM OF FOOTING. WHAT ARTIFICIAL INTELLIGENCE COULD MEAN FOR THE MIDTERMS AND MIKE POWELL OF BLACKROCK AS INVESTORS GEAR UP FOR A RECORD-BREAKING YEAR OF IPOS. WE BEGIN THIS WITH STOCKS RECOVERING AFTER HITTING A FIVE-WEEK LOW. FOR THE PAST SIX YEARS, U.S. INVESTORS WELL, THAT CHAPTER MAY NOW BE ENDING. FRANCIS JOINS US NOW FOR MORE. [00:53:26] Speaker 20: FRANCIS, WELCOME TO THE PROGRAM. WHAT IS CHANGING? THE CONSUMER IS LOSING THE CAPACITY TO ABSORB ANY ADDITIONAL SHOCKS. THAT SAVINGS RATE IS DOWN. REAL WAGES ARE NOW NEGATIVE. WHAT IS CHANGING? THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO, THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO. THE PAST SIX YEARS AGO. OVER HALF A DECADE NOW IN THE MACRO ENVIRONMENT, MAY NEED TO PIVOT, AND WE COULD SEE IT AS EARLY AS THREE TO FOUR MONTHS FROM NOW. [00:54:24] Speaker 6: THE BACKDROP YOU DESCRIBED, FRANCIS, TO ME AT LEAST LISTENING TO IT, WOULD MAKE IT DIFFICULT FOR ANY CENTRAL BANK TO HIKE INTEREST RATES. WHERE DOES IT LEAVE KEVIN WASH AND HIS COMMITTEE? [00:54:32] Speaker 20: WELL, CERTAINLY VERY CHALLENGING. WE'RE HEARING A LOT FROM CENTRAL BANKS LIKE THE BANK OF CANADA YESTERDAY ABOUT THE POLICY DILEMMA OF WHAT HAPPENS WHEN YOU HAVE HIGHER PRICES THAT WEIGH ON GROWTH. TO ME, THE REAL POLICY DILEMMA IS THAT MONETARY POLICY IS JUST NOT AS FUNCTIONAL AND WAY MORE COMPLICATED WHEN YOU HAVE A SUBSTANTIAL K-ECONOMY. YOU HAVE A TOP END CONSUMER THAT COULD WITHSTAND AND PROBABLY NEEDS HIGHER INTEREST RATES, AND THEN YOU HAVE A BOTTOM END CONSUMER THAT IS GOING TO GO THROUGH SOME CYCLICAL WEAKNESS AND MAYBE EVEN SOME STRUCTURAL WEAKNESS HERE. SO HOW THE CENTRAL BANK AND WHAT WE HEAR FROM KEVIN WASH AND HOW HE THINKS ABOUT THIS AND THIS POLICY DILEMMA IS GOING TO BE VERY IMPORTANT MOVING FORWARD. NOT JUST WHAT ACTION THEY TAKE BUT THE PHILOSOPHY AROUND A GROWING DIVIDE WITHIN AMERICAN CONSUMERS AND HOW DOES MONETARY POLICY BEST SERVE THEM. I THINK AN UNDERAPPRECIATED QUESTION WE SHOULD BE ASKING KEVIN WASH. [00:55:23] Speaker 7: FRANCIS, DO YOU THINK THAT THE ECB COULD POTENTIALLY HIKE RATES EVEN IF THE U.S. DOESN'T BECAUSE OF THE K-SHAPED ECONOMY THAT THERE ISN'T SUCH A MARKET DIVIDE IN THE EURO REGION AS THERE IS IN THE UNITED STATES? [00:55:35] Speaker 20: WELL, THIS IS THE DIFFERENTIATOR BETWEEN THE UNITED STATES AND THERE IS A FEW OF THEM. ONE IS THAT BIG DIVIDE BETWEEN THAT TOP 10% THAT HAS ACCUMULATED MASSIVE SAVINGS, MASSIVE AMOUNTS OF BENEFITS FROM FINANCIAL MARKETS DOING WELL THAT WE DON'T SEE IN THE REST OF THE DEVELOPED WORLD. THAT'S TRUE. BUT THERE'S ALSO A DIFFERENT GROWTH DYNAMIC THAT'S HAPPENING HERE WHICH IS THE UNITED STATES GROWTH DYNAMIC HAS BEEN UPHELD BY STRUCTURAL GUARD RAILS. THE AI STORY, BIG GOVERNMENT SPENDING, THAT TOP 10% VERY WEALTHY CONSUMER. BUT NOW WE'RE STARTING TO SEE A BROADENING OF THAT GROWTH DYNAMIC IN THE UNITED STATES. NOW SOME OF IT MIGHT BE FIFA, SOME OF IT MIGHT BE SOME MOVEMENT AROUND TARIFFS, THAT IEPA RULING COMING DOWN, SOME DISTORTIONS. BUT THERE'S ENOUGH HAPPENING IN THE U.S. ECONOMY RIGHT NOW THAT SUGGESTS THAT THEIR ECONOMY IS ACTUALLY BECOMING STRONGER WHILE DEM ECONOMIES OUTSIDE OF THE UNITED STATES ARE SUFFERING UNDER THE WEIGHT OF THIS ENERGY SHOCK. SO CERTAINLY HOW CENTRAL BANKS CHOOSE TO RESPOND TO THAT WILL BE INTERESTING. BUT THE DIVERGENCE OCCURRING BETWEEN U.S. GROWTH, WHICH IS BEING ALLOWED TO RUN HOT, AND THE REST OF THE WORLD THAT IS CHALLENGED WITH MORE OF STAGFLATIONARY DYNAMICS IS INTERESTING AND ALSO A NEW DYNAMIC THAN WHAT WE'VE SEEN OVER THE PAST ONE TO TWO YEARS. [00:56:42] Speaker 7: FRANCIS, YOU TALK ABOUT THE TIPPING POINT WHERE EITHER POTENTIALLY YOU'RE GOING TO START TO SEE PEOPLE PULLING BACK BECAUSE THEIR SAVINGS ARE OUT OR THEY'RE GOING TO DEMAND HIGHER WAGES AND GET THEM IS A REALLY INTERESTING ONE ESPECIALLY AS WE GET PPI LATER TODAY, AND YOU HAVE HEARD ABOUT PROFIT MARGINS EXPANDING AT A NUMBER OF COMPANIES. WHY WON'T WORKERS GO TO THEIR BOSSES AND SAY THE NUMBER OF TOKENS YOU WOULD NEED TO PAY TO DO WHAT I DO IS ACTUALLY MORE THAN I'M GETTING PAID, SO PAY ME THE AMOUNT THAT MY TOKENS WOULD BE WORTH. WHY IS THIS A VALUE PROPOSITION NOT GOING TO NECESSARILY LEAD TO HIGHER WAGES? [00:57:14] Speaker 20: WELL, IT'S ACTUALLY INTERESTING. MY TEAM THIS WEEK HAS ALL BEEN TALKING ABOUT TOKEN USE, THE COST OF TOKENS. ARE WE GOING TO REACH THAT MOMENT WHERE WE SAY ACTUALLY THERE IS A COST OF LABOR AND THERE'S A COST OF ACTUALLY SUBSTITUTING OUT OF LABOR AS WELL. THIS IS CRITICAL. AND THE MOST IMPORTANT DATA THAT WE'RE WATCHING RIGHT NOW IS WHAT ARE COMPANIES PLANNING TO DO WITH PASS THROUGH. SO NUMBERS LIKE PPI ARE MORE IMPORTANT, SMALL BUSINESSES INTENTIONS TO PASS THROUGH, BUT ALSO CONSUMERS ABILITY TO ABSORB THAT. SO THE RELATIONSHIP BETWEEN BUSINESS COSTS, HOW THEY'RE USING THOSE VERY LARGE CORPORATE MARGINS, AND THE CHOICES AROUND THEM ARE GOING TO BE CRITICAL. FROM TRANSCRIPTS TO SURVEY DATA, THIS IS A MOMENT TO REALLY ZERO IN ON DO BUSINESSES SEE THE CAPACITY TO REDUCE COSTS IN OTHER AREAS, AND DO THEY HAVE THE CAPACITY OR ARE THEY SEEING ANY SIGNS THAT THEY'RE GOING TO HAVE TO SLOW THROUGH THE PASS THROUGH. TO ME THAT'S THE BIGGEST Q3 QUESTION. [00:58:00] Speaker 8: YOU TALK ABOUT IN YOUR NOTE HOW BUSINESSES CHOOSE TO CARRY THIS WILL DEFINE THE NEXT CHAPTER OF THE CYCLE WHEN IT COMES TO HIGHER PRICES. MOHAMMAD ALARINE HAS TALKED ABOUT THIS IN THE PAST. LISTEN TO WHAT THE C-Suite SAYS. WHAT ARE THEY TELLING YOU RIGHT NOW? [00:58:12] Speaker 20: THEY'RE STILL TALKING ABOUT PASS THROUGH. THEY'RE TALKING ABOUT A SLIGHTLY MORE FRAGILE CONSUMER, BUT PARTICULARLY AT THE LOWER END OF THE SPHERE. SO THIS IS AN EARLY DEVELOPMENT. WE'RE NOT QUITE THERE YET, BUT IN OUR VIEW, WE ONLY HAVE A COUPLE MORE MONTHS OF SAVINGS WITH THE CONSUMER BEFORE YOU START TO SEE THAT CONSUMER START OF BREAK DOWN. SO AS I SAID, Q3, Q4, WATCH FOR THIS TRANSITIONAL MOMENT COMING THROUGH. SO FAR, SURVEYS ARE SAYING, WELL, WE'RE GETTING A LITTLE BIT MORE CAUTIOUS, BUT NOT QUITE THERE YET. AGAIN, WE REALLY TRY TO DOWNPLAY SOFT SURVEYS TYPICALLY, BUT WE'RE GOING TO HAVE TO WATCH FOR SOME DYNAMIC ON THAT FRONT MORE THAN WE HAVE IN THE PAST. IT WILL SHOW UP A LITTLE BIT MORE BEFORE THE HARD DATA. [00:58:49] Speaker 8: FRANCIS, WHERE IS THE SAVINGS COMING FROM? I REMEMBER DURING CHRISTMAS, PEOPLE WERE SAYING THAT THE CONSUMERS ARE GOING OUT AND THEY'RE SPENDING THEIR SAVINGS RIGHT NOW ON -- AND ALSO THEIR TAX -- THEIR HIGHER TAX REFUNDS. AND THEN IT WAS EARLY IN THIS YEAR, THEY'RE SPENDING THAT ON HIGHER ELECTRICITY BILLS. NOW EVERYONE IS SAYING THEY'RE SPENDING THAT ON HIGHER GAS PRICES. HASN'T THIS DRYED UP? [00:59:07] Speaker 20: IT HAS. SO WE'VE SEEN -- WE HAVE NEAR RECORD LOW SAVINGS RATE RIGHT NOW. WE'VE SEEN A LOT OF PEOPLE WHO ARE GOING TO BE IN THE STOCK OF AVAILABLE CONSUMPTION. THIS IS EXACTLY WHY IT DOESN'T MATTER WHETHER YOU BELIEVE INFLATION HAS PEAKED OR NOT. THE STOCK OF AVAILABLE CONSUMPTION NOW IS NOW BEGINNING TO DECLINE. IF YOU GO BACK SEVERAL YEARS, CONSUMERS HAD GOVERNMENT TRANSFERS COMING THROUGH FROM THE PANDEMIC. THEY HAD WAGES THAT WERE REAL IN POSITIVE TERMS. THOSE HAVE NOW DEPLETED. SO, AGAIN, WE'RE NOT TALKING ABOUT A VERY BEARISH CONSUMER OUTLOOK. THERE ARE STILL ELEMENTS OF STRENGTH. WE'RE NOT TALKING ABOUT A COMPLETE COLLAPSE. WHAT WE'RE TALKING ABOUT IS THAT THE BATON HAS TO BE PASSED ON PRICE PASS THROUGH FROM THE CONSUMER TO BUSINESSES. BECAUSE BUSINESSES ARE GOING TO SEE IT IN REAL TIME THAT THE CONSUMER SAYS, I CANNOT -- I DO NOT HAVE THE CAPACITY TO CONTINUE PURCHASING. THERE'S BEEN SUCH A PSYCHOLOGICAL FOCUS. WE'VE BECOME SO ACCUSTOMED TO THIS IDEA THAT INFLATION AND PRICES RISE FROM TARIFFS TO GEOPOLITICAL SHOCKS THAT THEY ROLL THROUGH TO CONSUMERS WITH A LAG. THIS IS THE POINT THAT WE'RE TRYING TO MAKE IS THAT THAT SIX-YEAR PARADIGM MAY BE ON THE EDGE OF SHIFTING IN THE OTHER DIRECTIONS. SOMETHING WE ALL NEED TO WATCH. [01:00:12] Speaker 6: FRANCIS, APPRECIATE YOUR TIME. I WAS LISTENING TO YOU TALKING ABOUT THE COST OF AI, THE PRICE OF IT, THE ACTUAL PRICE OF IT, WHAT IT SHOULD BE. I WAS THINKING BACK TO THAT VERY CLUMZY LINE FROM STANDARD CHARTER WHICH THEY'VE SINCE APOLOGIZED FOR. LOW-VALUE HUMAN CAPITAL AND REPLACING SO-CALLED LOW-VALUE HUMAN CAPITAL. NEVER MIND THE WORDING. LET'S FOCUS ON THE STRATEGY. MAYBE YOU HAVE TO DEDICATE REALLY THE COMPUTE TO THE HIGH-VALUE TASKS. WITH THAT IN MIND, YOU'RE REALLY GOING TO DEDICATE IT TO REPLACING WHAT THEY CONSIDER TO BE A VERY CLUMZY LINE, LOW-VALUE HUMAN CAPITAL. THE CONCEPT OF VALUE IS GOING TO SHIFT. [01:00:46] Speaker 7: IF YOU'RE ESSENTIALLY ABLE TO DO THE HIGHLY TECHNICAL STRUCTURAL CALCULATIONS AND PROGRAMMING THAT HIGHLY PAID INDIVIDUALS USED TO DO, DOES THAT LEAD TO THAT BEING WHERE A LOT OF THE CUTS COME FROM? INCREASINGLY PEOPLE ARE TALKING ABOUT HOW MUCH TOKENS COST. AND THAT'S THE REASON WHY OPEN AI IS CUTTING PRICES BECAUSE THEY WANT TO BECOME DEPLOYED MORE WIDELY. AND IF THAT'S THE CASE, MAYBE THESE ADVANCED AI MODELS AREN'T GOING TO COME FOR OUR JOBS. BECAUSE GUESS WHAT? MAYBE WE'RE WORTH IT. [01:01:12] Speaker 6: THAT'S KIND OF WHAT I'M GETTING AT. YEAH. [01:01:14] Speaker 7: MAYBE WE'RE WORTH THE MONEY BECAUSE -- [01:01:16] Speaker 6: SOUNDS LIKE A MAKE-UP COMMERCIAL. [01:01:18] Speaker 7: THE AMOUNT -- SO BUY YOUR -- YOU ARE WORTH IT. [01:01:21] Speaker 6: MASCARA. YOU'RE SO WORTH IT. [01:01:23] Speaker 7: YOU'RE WORTH IT. VERSUS THE TOKEN COST, WHICH, YOU KNOW, ENERGY COST SOMETHING, WATER COST SOMETHING. I NEED TO BE FED AS WELL. BUT, LIKE, YOU KNOW, ULTIMATELY, MY FOOD MIGHT BE CHEAPER. [01:01:33] Speaker 6: POSSIBLY. LET'S GET YOU AN UPDATE ON STORIES THIS MORNING. SO WORTH IT. WITH YOUR BLOOMBERG BRIEF, BONNIE QUINN HAS MORE. [01:01:42] Speaker 10: THE U.S. CARRYING OUT A SECOND STRAIGHT DAY OF STRIKES ON IRAN AFTER PRESIDENT DONALD TRUMP ACCUSED THE COUNTRY OF DRAGGING OUT PEACE TALKS. TRUMP TELLING FOX NEWS THE U.S. WILL HIT IRAN AGAIN TODAY IF IT DOESN'T SIGN A DEAL. BEFORE THE ATTACKS, TEHRAN WARNING IT WOULD TARGET NEW U.S. ASSETS IF WASHINGTON TOOK ACTION. ANTHROPIC CEO SHOWING SUPPORT FOR GOVERNMENT REGULATION OF A.I. THE GOVERNMENT SHOULD HAVE THE POWER TO BLOCK A.I. DEVELOPERS FROM DEPLOYING NEW MODELS IF THEY PRESENT RISKS. THE NEW YORK NYX PULLING OFF A RECORD COMEBACK AGAINST THE SAN ANTONIO SPURS TO WIN GAME FOUR OF THE NBA FINALS. NEW YORK COMING BACK FROM A 29-POINT DEFICIT TO WIN BY A SINGLE POINT. THE NYX ARE NOW ONE WIN AWAY FROM THEIR FIRST NBA TITLE IN MORE THAN 50 YEARS. GAME FIVE IS ON SATURDAY NIGHT IN SAN ANTONIO. [01:02:32] Speaker 6: THAT'S YOUR BLOOMBERG WEEK. JONATHAN: [01:02:37] Speaker 8: I'M GOING TO BE IN HOUSTON TOMORROW. [01:02:44] Speaker 6: VERY CONVENIENT. TRAVELING OVER THE LAST WEEK OR SO. [01:02:47] Speaker 7: WHAT AM I GETTING WRONG HERE? [01:02:49] Speaker 6: THE INCREASED MARGINS GO TO SOMETHING, JOHN. AND YOUR TRAVEL BUDGETS APPARENTLY. [01:02:57] Speaker 11: I'M NEXT ON THE PROGRAM, COSING UP TO A.I. I'M GOING TO HAVE MEETINGS WITH THE TOP 12 OR 15 EXECUTIVES VERY SHORTLY. AND WE'RE TALKING ABOUT GIVING BACK SOMETHING TO THE PUBLIC. [01:03:10] Speaker 6: AND IF WE DO THAT, THE PUBLIC WILL BECOME VERY RICH. ED MILLS OF RAYMOND JAMES JOINS US NEXT LIVE FROM NEW YORK [01:03:18] Speaker ?: CITY THIS MORNING. GOOD MORNING. HERE'S THE BOUNCE THIS MORNING UP BY 0.6 ON THE S&P. [01:03:41] Speaker 6: NASDAQ HIGH BY ONE FULL PERCENTAGE POINT. JUST A TOUCH OF OUTPERFORMANCE ON RUSSELL UP BY 1.2. [01:03:56] Speaker 11: THE FOCUS ON TECH CONTINUES UNDER SAVANNAH THIS MORNING. COSING UP TO A.I. I'M GOING TO HAVE MEETINGS WITH A.I. EXECUTIVE. WE'RE TALKING ABOUT SOMETHING TO THE PUBLIC. AND IF WE DO THAT, THE PUBLIC WILL BECOME VERY RICH. THE PEOPLE IN OUR COUNTRY, BECAUSE THAT'S THE KIND OF MONEY [01:04:19] Speaker 6: WE'RE TALKING ABOUT. I THINK THEY'LL DO THAT AND I THINK IT WILL MAKE IT VERY POPULAR. WE'RE TALKING ABOUT WHEN WE'RE TALKING ABOUT IT. WE'RE TALKING ABOUT IT. A NEW POLL BY REUITERS AND IPSOS, FINDING 53% OF AMERICANS WORRY THE TECHNOLOGY COULD COST THEM OR SOMEONE AT HOME THEIR JOB. [01:04:40] Speaker 12: JOINING US NOW IS BLOOMBERG'S TYLER KENDALL FROM WASHINGTON. HEY, TYLER. HEY, JOHN. GOOD MORNING. HOW TO BALANCE THE POTENTIALLY MASSIVE GAINS FROM THE A.I. BOOM WITH THE POTENTIAL RISKS IS INCREASINGLY BECOMING A WEEK THAT PRESIDENT TRUMP EXPRESSED AN INTEREST IN THE U.S. GOVERNMENT TAKING EQUITY STAKES IN A.I. FIRMS. HE SEEMED TO SUGGEST THAT HE'S ALREADY HAD SOME OF THESE CONVERSATIONS, THOUGH DECLINED TO GIVE SPECIFICS OR HOW EXACTLY THIS WOULD WORK. THOUGH A PERSON FAMILIAR WITH THE MATTER DOES CONFIRM TO BLOOMBERG NEWS THAT OPEN A.I. CEO SAM ALTMAN DID FLOAT THE IDEA OF GOVERNMENT STAKES IN A.I. COMPANIES TO THE TRUMP ADMINISTRATION BACK IN EARLY 2025. BUT MORE RECENTLY ATTMAN WAS JUST ON CAPITOL HILL LAST WEEK MEETING WITH LAWMAKERS ON BOTH SIDES OF THE AISLE AFTER SENATOR BERNIE SANDERS REIGNITED THE IDEA ON CAPITOL HILL FLOATING A NEW PROPOSAL THAT WOULD SEE THE FEDERAL GOVERNMENT LEVY A ONE-TIME 50% TAX ON A.I. COMPANIES PAID FOR IN STOCK AND KEPT IN WHAT HE CALLED A SOVEREIGN WEALTH FUND THAT WOULD SEEK TO REDISTRIBUTE THE GAINS TO THE PUBLIC. IT'S ALL TAKING ON THIS NEW URGENCY AS WE GET CLOSER TO NOVEMBER. AND YOU MENTIONED THE JOBS MARKET. BUT, JOHN, WE ALSO SAW THIS REUTER IPSOS POLL GO ON TO CITE CONCERNS AMERICANS HAVE WHEN IT COMES TO RISING ENERGY COSTS. THE SURVEY FOUND THAT 77% OF AMERICANS FEEL THAT A.I. WILL MAKE THEIR ELECTRICITY BILLS GO UP. LAST WEEK, I MET WITH 10 OF THE U.S.'S TOP ELECTRICITY CEOS, ALL OF WHO TOLD ME THAT ENERGY AND AFFORDABILITY IS THE NUMBER ONE ISSUE THAT THEY HEAR FROM THE PUBLIC. [01:06:08] Speaker 6: HEADING INTO THE MIDTERMS, HEADING INTO THE GENERAL, ONLY A FEW YEARS AWAY, THANK YOU. TYLER KENDALL WITH THE LATEST IN WASHINGTON. IF DEMOCRATS WIN A HOUSE AND OR SENATE MAJORITY, EXPECT CALLS FOR FEDERAL LAWS LIMITING DATA CENTERS TO BE NEAR THE TOP OF THE AGENDA. ED JOINS US NOW FOR MORE. WELCOME TO THE SHOW. IT'S GOOD TO SEE YOU ONCE AGAIN. LET'S FOCUS ON THIS. [01:06:28] Speaker 23: THANK YOU. WHO IS CHANGING HEADING INTO THE MIDTERMS? WE HAVE ARGUED THAT AI POLICY IS PROBABLY THE BIGGEST MARKET EVENT FROM THE MIDTERM ELECTIONS. YOU GO BACK TO LAST NOVEMBER, JOHN, DEMOCRATS DID REALLY WELL IN VIRGINIA AND NEW JERSEY, ARGUING THAT ENERGY COSTS ARE TOO HIGH, ARGUING AGAINST DATA CENTERS. YOU'RE SEEING BERNIE SANDERS AGAINST IT. YOU SEE HAKIM JEFFRIES, THE DEMOCRATIC LEADER IN THE HOUSE, SAYING THIS WILL BE A PRIORITY. THEY'RE TRYING TO MAKE THOSE DATA CENTERS THE DEATH STAR TO THE AMERICAN PUBLIC AND SAY THAT'S THE PROBLEM AND THEN BUILD UPON THAT, TRYING TO HAVE NEW HAWKISHNESS ON CHINA AND A WHOLE BUNCH OF NEW AI POLICIES, TRYING TO WRAP THIS AGAINST TRUMP AND AGAINST REPUBLICANS, ESPECIALLY IF THEY WIN A MAJORITY, THAT'S GOING TO BE THE MARKET CONCERN. ED, WHAT'S ACTUALLY GOING TO BE THE POLICY WHEN IT COMES TO [01:07:17] Speaker 8: WHAT SOME CONSERVATIVES AND FREE MARKET INDIVIDUALS ARE SAYING THAT THIS GOVERNMENT IS TRYING TO NATIONALIZE SOME OF THESE COMPANIES? [01:07:25] Speaker 23: YEAH, WELL, THIS HAS BEEN A WEIRD PUSH-PULL, BECAUSE THERE HAS BEEN A GENERAL ANGST ABOUT GOVERNMENT STAKES IN U.S. COMPANIES. BUT WITH PRESIDENT TRUMP, HE'S HAD THE SUPPORT OF REPUBLICANS IN CONGRESS BECAUSE THEY GENERALLY SUPPORT HIM. I DO LOOK AT THE AI EXPORT PROGRAM THAT SHOULD HAVE SOME OF THEIR FIRST ANNOUNCEMENTS THIS MONTH, WHICH IS GOING TO GET SOME GOVERNMENT FINANCING TO BACK AI PROGRAMS AROUND THE WORLD. MAYBE WE TAKE SOME OF THAT FINANCING THAT WE'RE PROMOTING AND SUPPORTING SOME OF THESE HYPER SCALERS AND USING THAT AS THE HOOK TO GET THAT EQUITY STAKE. I DON'T THINK WE HAVE THAT PROPOSAL THAT BERNIE SANDERS TALKS ABOUT. THAT WOULD REQUIRE CONGRESSIONAL ACTION. THAT'S NOT GOING TO HAPPEN. I DO THINK THAT BECAUSE DONALD TRUMP HAS CREATED THIS PRECEDENT, IT IS MORE ACCEPTED THAN IT OTHERWISE WOULD HAVE EVER BEEN. ABSOLUTELY. [01:08:17] Speaker 8: HE'S ALSO TALKING ABOUT A MEETING THAT IS UNCONFIRMED, HASN'T TAKEN PLACE YET. WHY IS HE DOING THIS? I MEAN, THE AI COMPANIES ARE SAYING THERE'S NO MEETING RIGHT NOW. WHY IS HE JUST PUTTING THIS OUT THERE? [01:08:27] Speaker 23: WELL, ANNE MARIE, HE LOVES TO BE AT THE CENTER OF THE MOST IMPORTANT DEBATES TO THE EXTENT THAT HE CAN BE ON THE WORLD STAGE WITH PUTIN OR SHE OR WITH THE LEADERS OF AI, ESPECIALLY AS WE'RE SEEING SOME OF THESE MAJOR IPOS IN THE PIPELINE. INSERTING HIMSELF INTO THAT POLICY IS REALLY IMPORTANT. SECONDLY, RECENTLY WE GOT AN AI EXECUTIVE ORDER AND WE'RE SEEING A MASSIVE POLICY SHIFT WITH PRESIDENT TRUMP WHERE AT THE BEGINNING OF HIS TERM HE DID AWAY WITH THE BIDEN EXECUTIVE ORDER THAT LOOKED AT THINGS THROUGH A NATIONAL SECURITY LENS. HE'S STARTING TO DO THAT AS WELL AND HE'S STARTING TO ENGAGE HERE BECAUSE HE'S NOT QUITE SURE IF THE FREE RELEASE OF THESE MODELS IS THE RIGHT POLICY OR SHOULD WE HAVE A GOVERNMENT REVIEW. THE MORE HE'S GOING TO WANT TO MEET WITH THESE AI EXECUTIVES. THE MORE HE'S GOING TO WANT TO MEET WITH THESE AI EXECUTIVES. THE MORE THIS BECOMES A POLITICAL PROBLEM. THE MORE HE'S GOING TO WANT TO INSERT HIMSELF INTO THAT, TRYING TO NEUTRALIZE THAT POLICY. [01:09:22] Speaker 7: ED, TO THAT POINT, IS PRESIDENT TRUMP LEADING THE CHARGE FOR REPUBLICANS IN TERMS OF SUPPORTING AI DEVELOPMENT? OR IS HE OFFSIDE WITH SOME OF HIS REPUBLICAN COLLEAGUES WHO ARE VERY CONCERNED ABOUT THIS, HEARING FROM THEIR CONSTITUENTS AND LOOKING FOR MORE REGULATION? [01:09:37] Speaker 23: LISA, IT MIGHT BE BOTH. WE'VE SEEN A HUGE PUSH AT THE BEGINNING OF THIS ADMINISTRATION TO CHANGE SOME OF THE POLICY TOWARDS CHINA, MAKING AN ARGUMENT THAT UNLESS WE GET THESE LEADING-EDGE CHIPS TO CHINA, CHINA WILL DEVELOP THEIR OWN. WE HAD THE DEEP SEEK MOMENT. THEN HE STARTED TO SAY, ALL RIGHT, WE COULD ALLOW CHINA TO GET MORE CHIPS, THE H-200. THOSE HAVEN'T BEEN DEVELOPED OR THEY HAVEN'T BEEN SOLD TO CHINA AT THE LEVELS HE THOUGHT THEY WOULD. AND THEN ON CAPITOL HILL, THAT'S WHERE YOU'VE GOTTEN THE PUSHBACK. WE'VE HAD INTRODUCTION OF LEGISLATION, THE MATCH ACT THAT HAS ALREADY CLEARED COMMITTEE ON A PRETTY DECENT VOTE THAT WOULD RESTRICT SOME OF THE SEMICONDUCTORS GOING TO CHINA, WOULD RESTRICT SOME OF THE SEMICAP EQUIPMENT GOING TO CHINA. AND REPUBLICANS ARE TELLING HIM, YOU HAVE GONE TOO FAR IN EASING UP SOME OF THESE RESTRICTIONS. WE DON'T LIKE THE FACT THAT YOU'VE MERGED THE NATIONAL SECURITY AND ECONOMIC LANES. WE UNDERSTAND THAT WE NEED TO WIN THIS AI RACE. BUT GIVING IT TO CHINA, BEING TOO FAST AND LOOSE ON SOME OF THE NATIONAL SECURITY ISSUES, THAT IS A CONCERN FOR US. ESPECIALLY IF THIS IS KIND OF GETTING DEPLOYED IN THE WAY IN WHICH WE HEAR A LOT OF FOLKS IN THE MARKET TALK ABOUT IT. [01:10:45] Speaker 7: THERE'S ALSO A CONCERN ABOUT THE PERSONNEL AND THE BRAIN TRUST CLOSE TO THE WHITE HOUSE RIGHT NOW. THERE HAVE BEEN A NUMBER OF DEPARTURES. THOMAS LIND, THE MOST RECENT ONE. IS THAT CONCERNING GIVEN HOW QUICKLY THIS IS MOVING AND THE NEED FOR EXPERTISE TO UNDERSTAND HOW IT'S WORKING AND WHAT EXACTLY THE POTENTIAL APPLICATIONS, POTENTIAL DANGER, POTENTIAL BENEFITS COULD BE? [01:11:03] Speaker 23: YEAH, WE HAVE A LOT OF TURNOVER IN GOVERNMENT AS A GENERAL SOURCE. IT HAS BEEN AN UPTICK LATELY ON SOME OF THE AI POLICY INDIVIDUALS. I'VE TALKED TO A NUMBER OF THEM AFTER THEY HAVE LEFT OR KIND OF WHEN THEY'VE BEEN DOING THESE THINGS. I'VE ACTUALLY BEEN RELATIVELY IMPRESSED WITH THE AI POLICY INFRASTRUCTURE THAT HE HAD PUT INTO PLACE. AND I DO THINK THE FACT THAT WE HAD AN AI ACTION PLAN THAT CAME OUT PRETTY EARLY IN THE ADMINISTRATION. NOW WE HAVE AN AI EXECUTIVE ORDER. IT'S BEEN AN AREA THAT THEY'VE BEEN FOCUSED ON. LET'S SEE WHAT THAT STAFF GETS REPLACED WITH. BUT SO FAR IT'S BEEN PRETTY ROBUST. AND WHEN I'VE TALKED TO THAT STAFF, ONE OF THE THINGS THAT THEY'VE TOLD ME IS, A, THEY WANT TO FLOOD THE ZONE. THEY WANT TO MAKE U.S. TECHNOLOGY THE DEFAULT TECHNOLOGY FOR THE WORLD. AND JUST AS THE DOLLAR IS THE RESERVE CURRENCY OF THE WORLD, THEY WANT THAT U.S. BASED TOKEN TO BE THE RESERVE TOKEN OF THE WORLD. AND THAT'S WHY THEY'RE TRYING TO EXPORT THIS GLOBALLY. IF THEY WIN THAT, THEY TELL ME THAT'S THE MOST IMPORTANT NATIONAL SECURITY ISSUE THAT THEY CAN ACTUALLY ACHIEVE IN THIS ADMINISTRATION. SO I'M HOPING THEY'RE RIGHT. ED, THANK YOU, SIR. [01:12:07] Speaker 6: APPRECIATE IT. ED MILLS THERE OF RAIMON JAMES. IT'S NOT A GREAT MESSAGE, IS IT? WE'RE GOING TO TAKE YOUR JOB AND PUSH UP THE PRICE OF YOUR [01:12:15] Speaker 7: BILLS. THE PUBLIC IS NOT GOING TO BE HAPPY WITH THAT. THEY AREN'T HAPPY WITH IT, WHICH IS WHY ED SAID IT'S GOING [01:12:21] Speaker 6: TO BE THE KEY ISSUE HEADING INTO THE MIDTERMS. A LOT OF PEOPLE AGREE WITH HIM. IT'S NOT GOING TO BE HAPPY WITH HIM. IT'S NOT GOING TO BE HAPPY WITH HIM. IT'S NOT GOING TO BE HAPPY WITH HIM. [01:12:34] Speaker ?: IT'S NOT GOING TO BE HAPPY WITH HIM. THE STOCK IS UP BY MORE THAN 4%. [01:12:41] Speaker 6: WE'VE GOT TO BE HAPPY WITH HIM. TWO DAY LOSING STREAK ON THE S&P 500. YOUR BOUNCE LOOKS LIKE THIS. UP BY 0.6 ON THE S&P. UP BY ONE FULL PERCENTAGE POINT ON THE NASDAQ. THERE IS A LOT OF PEOPLE THAT ARE GOING TO BE HAPPY WITH SOMEBODY. A 5% POINT PLUS RANGE FOR CHIP NAMES ONCE AGAIN. [01:13:11] Speaker 7: VOLATILITY IS STARTING TO CREEP INTO THE EQUITY MARKET. IT IS VOLATILITY. IT ISN'T A WHOLESALE SELL-OFF. THAT'S THE POINT. PEOPLE ARE STILL BULLISH. THEY STILL THINK CHIPMAKERS ARE GOING TO DO WELL. IF YOU SEE A DIP, IT'S BUYABLE. THAT'S ESSENTIALLY WHAT WE SEE EVERY SINGLE TIME. WHETHER THE SAME STORY CAN BE TOLD ABOUT HYPERSCALERS INCREASINGLY WILL BE THE QUESTION. WEALTH TRANSFER FROM ONE TO THE OTHER, CHIPS ON ONE SIDE, [01:13:33] Speaker 6: AND HYPERSCALERS ON THE PAYING SIDE CONTINUES. A MAJOR WEALTH TRANSFER FUNDED BY YOU AND I IN THIS BOND MARKET, THIS EQUITY MARKET TOO. [01:13:40] Speaker 7: NOT SO MUCH ME BUT YOU AT HOME, OF COURSE. [01:13:43] Speaker 6: US TOO. IF YOU HAVE A 401K, YOU ARE PAYING FOR THIS. IN THE BOND MARKET RIGHT NOW, YOU ARE GETTING ON THE CHIP SIDE IF YOU HOLD THEM. FIXED INCOME, BONDS, 2s, 10s, 30s. WE ARE INVOLVED IN THE BORDER MARKET JUST FOR NOW. WE ARE DOWN FOUR BASIS POINTS ON 10s, 4:51. THE NEXT STOP FOR THIS MARKET, THERE IS A MIX OF THINGS IN THE NEXT HOUR. ECB RATE DECISION IN THE MIX. REMEMBER WHAT CAN MOVE THE EUROPEAN BOND MARKET CAN MOVE GLOBAL BOND MARKETS. [01:14:11] Speaker 7: PPI DATA, JOBLESS CLAIMS, TWO BIG DATA POINTS, 8:30 EASTERN TIME. WE HEARD FROM FRANCIS DONALD AT THE BORDER MARKET. SOME OF THE COMPANIES CONTINUE TO PASS ALONG THE COSTS GIVEN THE SAVINGS RATE. COMPANIES EITHER START TO PAY THEIR EMPLOYEES MORE, WAGE PRICE SPIRAL, OR DO CONSUMERS START PUSHING BACK AND SAY WE WILL NOT BUY IT IF THE PRICES GO UP THAT MUCH. [01:14:38] Speaker 6: MARGIN COMPRESSION, THAT WILL BE A PROBLEM FOR THE STOCK MARKET AND GROWTH. WE ARE AT THE TIPPING POINT. WE ARE AT THE TIPPING POINT. WE ARE AT THE TIPPING POINT. WE ARE AT THE TIPPING POINT. IS THIS LABOR MARKET TIGHT ENOUGH? DOES IT HAVE STRONG ENOUGH MOMENTUM TO WORRY ABOUT THE PROSPECT OF WAGES PICKING UP? THE ONLY PEOPLE THAT WORRY [01:14:59] Speaker 8: ABOUT HIGH WAGES ARE ECONOMISTS. [01:15:02] Speaker 6: RUN WITH ME. DISTRACTED THIS MORNING. THE MARKET SHOULD HAVE BEEN CLOSED TODAY. I'M SORRY. DID THEY HAVE TO WORRY ABOUT THE LABOR MARKET IN THE SAME WAY THEY USED TO? BACK WHEN WE HAD UNEMPLOYMENT AROUND 3.5% IN THE SAME WAY. WE HAD UNEMPLOYMENT IN THE MID-THREES. THAT WAS WHY RATES WERE SO MUCH HIGHER IN THE FIVES COMPARED TO THE 3.75 WE ARE AT [01:15:19] Speaker 7: RIGHT NOW. IT IS HARD TO GET A REAL READ ON THE LABOR MARKET. THIS IS WHY INITIAL JOBLESS CLAIMS WILL BE INTERESTING, ALTHOUGH THEY HAVEN'T BEEN VERY INTERESTING FOR THE PAST COUPLE OF MONTHS. AT THE SAME TIME, PEOPLE ARE LOOKING AT THE LABOR MARKET DATA AND PAINTING COMPLETELY DIAMETRICALLY OPPOSED IDEAS. ON ONE HAND, YOU COULD SAY YOU ARE STARTING TO SEE SLACK IN CERTAIN AREAS. TAKE A LOOK AT WAGES EARNED AND THE FACT THAT THEY ARE NOT KEEPING PACE WITH INFLATION. ON THE OTHER HAND, LOOK AT JOLTS DATA. LOOK AT THE JOB OPENINGS DATA. LOOK AT THE ANECDOTAL COMMENTARY COMING FROM HEADHUNTERS SAYING THAT ACTUALLY YOU ARE SEEING A REACCELERATION AND THEY ARE BROADENING OUT IN SOME OF THE LABOR MARKET [01:15:49] Speaker 6: GAINS. PICK YOUR POISON. [01:15:59] Speaker 7: RIGHT NOW IT IS UNCERTAIN. LISA TALKING TO HEADHUNTERS. [01:16:04] Speaker 6: JUST SLIP THAT OUT. LETTING YOU KNOW. BECKY FRANKOWITZ, WE ALL TALK TO HER. [01:16:11] Speaker 15: GOOD MORNING, THANK YOU. DESPITE ANOTHER QUARTER OF MASSIVE AI GROWTH, WE ARE SEEING ORACLE SHARES DOWN NEARLY 8% IN THE PRE-MARKET AFTER THE COMPANY SAID IT WILL SPEND MORE TO BUILD AI DATA CENTERS. THAT CAME AS ORACLE LEFT ITS REVENUE OUTLOOK LARGELY TO BUILD BACK. WE ARE SEEING CHIP STOCKS BOUNCE BACK TODAY, BUT INTEL IS GETTING A MAJOR BOOST FROM B OF A. THEY DOUBLE UPGRADED THE STOCK, ARGUING THAT INVESTORS MAY BE UNDERESTIMATING ITS GROWTH IN THE CHIP SERVER BUSINESS AS WELL AS ITS FOUNDARY. THEY ALSO SAY THAT INTEL REMAINS UNDEROWNED COMPARED TO ITS PEERS, LEAVING ROOM FOR INVESTORS POTENTIALLY TO PILE IN. WE END ON THE SPACE STOCKS. THEY ARE REBOUNDING AFTER A RECENT PULLBACK. YOU ARE SEEING NAMES LIKE ROCKETLAB UP 4% IN THE PREMARKET. AS WE COUNT DOWN TO TOMORROW'S HISTORIC SPACEX IPO, SET TO BE THE BIGGEST EVER WITH A $75 BILLION RAISE. AS FOR WHAT COMES NEXT IN THE IPO PROCESS, WE ARE WAITING TO SEE HOW SHARES ARE ALLOCATED WITH REPORTS, INCLUDING FROM US, [01:17:27] Speaker 6: THAT DEMAND IS FAR EXCEEDING THE NUMBER OF SHARES AVAILABLE. WE ARE GOING TO SEE WHAT HAPPENS. WE ARE GOING TO SEE WHAT HAPPENS IN THE NEXT HOUR. ON OUR RAIDAR THIS MORNING, ORACLE SHARES FALLING. THE TECH GIANT REPORTING CAPITAL SPENDING PLANS WELL OVERESTIMATES. ORACLE EXPECTING CAPEX FOR THE FISCAL YEAR TO TOTAL $70 BILLION, FUELING FRESH CONCERNS ON A.I. PROFITABILITY AND THE AMOUNT OF MONEY BEING SPENT. ORACLE IS DOWN BY 8% IN THE $25 BILLION IPO. PEOPLE FAMILIAR WITH THE MATTER TELLING US HERE AT BLOOMBERG THAT FIRMS INCLUDING MIZUO AND SOGGEN HAVE BEEN HANDED MINOR ROLES WITH FEWER FEES AND BRAGGING RIGHTS. FINALLY, ANTHROPIC CEO DARYO AMODI CALLING FOR STRONGER GOVERNMENT OVERSIGHT OVER A.I. AMODI ARGUING REGULATORS SHOULD BE ABLE TO BLOCK DEVELOPERS FROM DEPLOYING NEW A.I. MODELS IF THEY POSE RISKS [01:18:13] Speaker 7: TO THE PUBLIC. ESPECIALLY IF THOSE RISKS STEM FROM OPEN A.I., SAY, OR X.I. OR SOME OF THESE OTHER A.I. DEVELOPERS THAT POTENTIALLY COULD HAVE PROBLEMATIC MODELS VERSUS THE ANTHROPIC MODELS WHICH ARE PROBABLY ON THE UP AND UP. LOOK, ON ONE HAND, WE MOCK. THERE ARE TWO WAYS TO UNDERSTAND THIS. THERE ARE MANY MORE THAN THAT PROBABLY. BUT THE WAY THAT I'M TRYING TO UNDERSTAND THIS IS, IS THERE TRULY A RISK THAT SOMEHOW SOME OF THESE MODELS ARE GOING TO GO FULL STAR WARS AND START UPGRADING THEMSELVES AND TAKING OVER THE WORLD WHICH IS THE FEAR THAT SOME PEOPLE HAVE OR IS THIS A COMPETITIVE EDGE THAT THEY'RE HOPING TO KEEP THE MOAT AROUND THEIR PARTICULAR SOFTWARE, THEIR PARTICULAR LARGE LANGUAGE MODELS THAT COULD POTENTIALLY GIVE THEM AN EDGE WITH THE LIFE OF OPEN A.I. [01:18:50] Speaker 8: OR IS THE WRITING ALREADY ON THE WALL? SO YOU PUT OUT A LETTER LIKE THIS BECAUSE YOU WANT WASHINGTON TO COME AND DEAL WITH YOU AS OPPOSED TO EVERYONE ELSE AS YOU TRY TO WRITE THIS REGULATION. IN THIS LETTER HE SAYS THE BEST ANALOGY IN THE CURRENT STAGE IS COMPARING IT TO CARS, AIRPLANES, DRUGS, POWERFUL TECHNOLOGIES ESSENTIAL TO THE MODERN ECONOMY CAPABLE OF KILLING LARGE NUMBERS OF PEOPLE IF DESIGNED OR OPERATED POORLY. MAYBE THEY JUST WANT TO GET IN ON THE GROUND LEVEL AS THE GOVERNMENT BEGINS. THE GOVERNMENT IS GOING TO HAVE TO REGULATE THIS. THEY'RE GOING TO HAVE TO. THE PUSHBACK IN THE MIDTERM ELECTIONS IN 2028 IS GOING TO BE SEVERE. [01:19:23] Speaker 6: THAT'S THE KIND OF REGULATION AND TAXES THEY PROBABLY WON'T LIKE. TECH STOCKS LOOKING TO REBOUND AFTER HITTING A FIVE WEEK LOW AHEAD OF TOMORROW'S HISTORIC SPACEX IPO. THE CAPITAL PULL IS LARGE ENOUGH TO PULL SOME CAPITAL AWAY FROM TECH WINNERS. WELCOME BACK TO THE PROGRAM. DO WE HAVE SPACE FOR ALL THIS [01:19:45] Speaker 24: PEOPLE? THAT'S THE MILLION-DOLLAR QUESTION. ORACOL LAST NIGHT JUST POPS 70 BILLION. IF YOU LOOK AT ENTROPIC, YOU LOOK AT OPEN AI, YOU LOOK AT SPACEX, IT'S A BIG NUMBER. PORTFOLIO MANAGERS ARE NOW STRUGGLING ON HOW TO ALLOCATE THESE NEW OFFERINGS GOING FORWARD. [01:20:06] Speaker 6: WHAT ARE YOUR THOUGHTS ON HOW WE SHOULD DEPLOY SOME OF THAT CAPITAL FROM HERE? SHOULD YOU BE BUYING SOME OF THESE NAMES? SHOULD YOU TAKE IT AWAY FROM THE WINNERS, THE GUYS THAT HAVE BEEN RUNNING UP SO QUICKLY? [01:20:15] Speaker 24: HOW DO YOU THINK THIS CYCLE IS SO POWERFUL THAT YOU HAVE TO BE INVOLVED IN THESE? IT'S JUST A MATTER OF HOW MUCH AND WHAT THE TIMING IS. AND I THINK FROM MY STANDPOINT, OTHER SECTORS THAT DON'T HAVE THIS MACRO ASSOCIATED WITH THEM, THEY NEED TO BE DRAINED A LITTLE BIT. AND PORTFOLIO MANAGERS HAVE TO GET INTO THESE NAMES JUST BECAUSE THE FORWARD WAITINGS ARE GOING TO BE SO DYNAMIC THAT IF THEY DON'T PLAY, THEY'RE GOING TO UNDERPERFORM. [01:20:44] Speaker 7: LET'S GET A LITTLE MORE SPECIFIC. IS THERE ROOM FOR OPEN AI AND A POTENTIAL IPO GIVEN THE FACT THAT THEY'RE CUTTING PRICES TO GET SOME OF THE CUSTOMER BASE OF ANTHROPIC? [01:20:53] Speaker 24: MY OPINION IS YES. IF YOU LOOK AT WHAT'S HAPPENING, JUST ON THIS CYCLE AND THE AMOUNT OF INFRASTRUCTURE PULL IN, THE SOFTWARE AREA IS GOING TO GO ALONG FOR THE RIDE. PROBABLY NOT UP FRONT LIKE THE INFRASTRUCTURE IS. BUT OVER THE LONG TERM, YOU'RE GOING TO SEE A LOT OF FREE CASH FLOW GENERATED FROM THESE NEXT GENERATION SOFTWARE COMPANIES. [01:21:16] Speaker 7: DO YOU THINK THERE'S GOING TO BE A BIFURCATION? WE WERE TALKING ABOUT THE CITADEL NOTE JUST MOMENTS AGO, WHERE THEY'RE TALKING ABOUT A BIFURCATION WHERE YOU'VE GOT THE FRONTIER AI CONCENTRATED AMONG A FEW FIRMS WITH BALANCE SHEETS THAT ARE BIG ENOUGH TO ABSORB IT. AND THEN YOU HAVE OTHERS LOOKING FOR COMMONDITIZED MODELS THAT ARE CHEAPER AND CAN PERFORM MORE BASIC TASKS. DO YOU THINK THAT THAT'S THE WORLD OF AI THAT WE'RE GOING TO BE LIVING IN FOR THE NEXT YEAR OR TWO? [01:21:41] Speaker 24: I THINK IT'S GOING TO BE VERY, VERY VOLATILE. IT'S VERY HARD TO PUT YOUR FINGER ON HOW THESE MODELS ARE ACTUALLY GOING TO SETTLE OUT. THERE IS A FAIR AMOUNT OF DEFLATION GOING ON AS IT RELATES TO MODELS. IF YOU LISTEN TO PALANTIER, FOR EXAMPLE. ALSO ON TOKEN PRICING, I THINK WE JUST GOT TO LET IT PLAY OUT AND WE'RE SPECULATING. THE MACRO, THOUGH, FROM A FROM A AI STACK PERSPECTIVE, IS SO DISRUPTIVE THAT I THINK WE'VE GOT TO LOOK AT IT MORE FROM A LONG-TERM AND REACT TO THE MODELS AS THEY MATERIALIZE. [01:22:20] Speaker 8: TED, YOU RIGHTFULLY POINT OUT IN YOUR NOTE THAT TECH CEO MESSAGING IS OUT OF TOUCH WITH 80% OF THE POPULATION. IS THAT WHY WE HAVE THIS LETTER OVERNIGHT FROM ANTHROPIC? [01:22:29] Speaker 24: I THINK SO. I MEAN, YOU KNOW, I WISH SOME OF THE TECH VISIONARIES WOULD REALLY DEFINE NOT HOW THEIR COMPANIES ARE DOING, BUT HOW AI WILL AFFECT HUMANITY IN A POSITIVE WAY. WHETHER IT BE PRODUCTIVITY OR INSTEAD OF JOB LOSS, JOB EXPANSION, I THINK WHEN YOU LOOK AT THE BOTTOM 70% OF THE POPULATION, THEY'RE GETTING HIT NOT ONLY ON INFLATION, BUT I THINK THERE'S AN ANGST THAT AI COULD CONTROL THEIR DESTINY FROM A WORK AND QUALITY OF LIFE ISSUE. THIS IS HAPPENING SO QUICKLY THAT I THINK THAT LEADERSHIP HAS TO TAKE IT UNDER THEIR WING TO ACTUALLY COMMUNICATE TO THAT [01:23:18] Speaker 8: BOTTOM 70% AND NOT THE TOP 30%. I THINK THERE'S A LOT OF THINGS THAT ARE GOING TO DO, ESPECIALLY WHEN PRESIDENT TRUMP IS TALKING ABOUT MAYBE HE DOES LINE UP WITH SENATOR BERNIE SANDERS AND THEY SHOULD BE [01:23:30] Speaker 24: TAKING EQUITY STAKES. BOY, THAT'S A LOADED QUESTION. I'M NOT A BIG BELIEVER IN GOVERNMENT CHOOSING WINNERS AND LOSERS. I THINK THERE'S GOING TO BE SOME MECHANISM THAT IF A.I. IS THAT THE BOTTOM 70% WILL BE TAKEN CARE OF? I THINK IT'S CONJECTURE AT THIS POINT ON WHAT THAT MODEL LOOKS LIKE. TED, I WONDER IF WE CAN TURN THAT AROUND. [01:24:02] Speaker 6: THE GOVERNMENT PICKING WINNERS AND LOSERS. THERE IS A LOSER RIGHT NOW AND IT APPEARS TO BE OPEN A.I. THEY ARE PICKING THE GOVERNMENT. I WONDER WHY. I'M TRYING TO WORK THAT OUT. WHAT ARE THEY GETTING AT HERE? THERE'S BEEN THIS TALK REPORTEDLY IN THE LAST YEAR AS WELL. THEY WERE TALKING ABOUT SOME INDIVIDUALS IN THE C-Suite THAT MAYBE THE GOVERNMENT SHOULD BE INVOLVED TO SUPPORT ANY POTENTIAL LOSSES BECAUSE THIS IS GETTING TOO BIG TO FAIL. [01:24:28] Speaker 24: HOW DO YOU THINK ABOUT THAT DYNAMIC? TO BE HONEST WITH YOU, JONATHAN, I DON'T THINK ANYBODY REALLY HAS THE REAL VIEW HERE. I THINK THERE'S GOT TO BE A LOT OF DISCUSSIONS COMPANY TO COMPANY AND WITH THE GOVERNMENT TO FIGURE THIS OUT. IT'S MOVING SO QUICKLY AND IT IS SO DISRUPTIVE THAT, QUITE FRANKLY, I DON'T THINK ANYBODY REALLY HAS THE ANSWERS. I THINK WE ARE TRYING TO NAIL AN ANSWER THAT MAY NOT EXIST RIGHT NOW BECAUSE OF THE PACE OF INNOVATION. I THINK IT'S GOING TO PLAY OUT OVER THE COURSE OF THE NEXT COUPLE QUARTERS. I THINK WE JUST HAVE TO GO WITH HOW THE MARKET DEVELOPTS AND, QUITE FRANKLY, HOW WE MAKE THE COUNTRY AS A WHOLE FUNCTION. HOLD ON TIGHT. IT'S GOOD TO SEE YOU. [01:25:18] Speaker 6: IT'S GREAT TO CATCH UP. THANK YOU, SIR. TED MALDINSON, ON THE RELATIONSHIP, DEVELOPING ONE BETWEEN THE GOVERNMENT AND THESE MASSIVE TECH FIRMS. [01:25:27] Speaker 7: HIS TAKE IS WE DON'T KNOW. THIS IS DEVELOPING SO QUICKLY. I WAS SPEAKING TO ONE BANKER WHO SAID THAT HE'S BEEN THROUGH SEVERAL OF THESE INDUSTRIAL REVOLUTIONS, INTERNET AND SOME OF THE OTHER SORT OF INDUSTRIAL BUILDSOUTS. HE SAID THIS IS COMPLETELY DIFFERENT BECAUSE WE DON'T KNOW THE END POINT. WE DON'T KNOW. I JOKE ABOUT FULL STAR WARS. WE DON'T KNOW WHETHER THIS IS GOING TO BECOME AUTONOMOUS IN SOME CAPACITY, WHETHER IT'S GOING TO BE ABLE TO REPLACE US, WHETHER WE'RE GOING TO BE IN SPACE, WORKING ON THE DATA CENTERS THAT ARE FUELING THE ROBOTS ON EARTH. IT SOUNDS EXISTENTIAL AND PIE IN THE SKY. SOME WAYS IT IS. THAT'S ESSENTIALLY WHAT PEOPLE ARE TALKING ABOUT. THEY'RE LITERALLY DOING AN IPO TO DO JUST THAT. [01:26:02] Speaker 6: YOU HEAR LOTS ABOUT THE RAILROADS, RIGHT? RIGHT. BUT AT LEAST YOU KNOW YOU WERE BUILDING SOMETHING TO SOMEWHERE. [01:26:07] Speaker 7: CORRECT. [01:26:08] Speaker 6: I'M NOT SURE IF THAT'S THE CASE THIS TIME AROUND. [01:26:10] Speaker 7: WE DON'T KNOW WHAT THE ULTIMATE GOAL IS. IS IT TO AUTOMATE ALL OF THE WORK? IS IT TO CREATE A BETTER FUTURE FOR THE 70% OF PEOPLE WHO AREN'T GOING TO HAVE JOBS? IS EVERYONE GOING TO BE MORE EMPLOYED AND DOING MORE INTERESTING, FULFILLING THINGS? WILL WE ALL HAVE MORE TIME TO TAKE OFF TO GO TO RIO? I DON'T KNOW THE ANSWER TO THIS. [01:26:24] Speaker 6: I DON'T KNOW THE ANSWER TO IT. I DON'T KNOW THE ANSWER TO THE ANSWER TO THIS. AND WATCH SPORT. STAY UP LATE AND WATCH THE NICKS, WHICH IS WHAT EVERYONE SEEMED TO DO LAST NIGHT. I SAW A GREAT CLIP OF TAYLOR SWIFT GETTING ALL EXCITED. THERE'S A GUY IN THE BACKGROUND. THERE'S A GREAT TWEET OUT THERE, POST-X, WHATEVER. I SAW THIS. [01:26:40] Speaker 7: IT SAYS, I DON'T KNOW WHO SHE IS, BUT I KNOW PAUL TUDOR JONES [01:26:42] Speaker 6: WHEN I SEE HIM SAT RIGHT BEHIND HER. I SAW THAT. FINANCE RIGHT BEHIND HER. [01:26:49] Speaker 10: LET'S GET YOU AN UPDATE ON NEWS WORLDWIDE WITH YOUR DEMOCRATS. THE COMPANY IS CONSIDERING DRASTIC PRICE CUTS TO WIN CUSTOMERS FROM ITS RIVAL. THE JOURNAL SAYING PRICE CUTS COULD POTENTIALLY ERODE THE PROFIT MARGINS OF BOTH COMPANIES. UK DEFENSE SECRETARY JOHN HEALEY ANNOUNCING HIS RESIGNATION JUST MOMENTS AGO. HEALEY CITING PRIME MINISTER AND THE U.K. TREASURY'S INABILITY TO COMMIT SUITABLE RESOURCES TO THE COUNTRY'S DEFENSE NEEDS, HE SAYS, DURING A TIME OF SETS FOR HIS DEPARTURE. THE NEW YORK NICKS PULLING OFF A RECORD COMEBACK AGAINST THE SAN ANTONIO SPURES TO WIN GAME FOUR OF THE NBA FINALS. NEW YORK COMING BACK FROM A 29-POINT DEFICIT TO WIN BY A SINGLE POINT. THE NICKS NOW JUST ONE WIN AWAY FROM THEIR FIRST NBA TITLE IN MORE THAN 50 YEARS, GAME FIVE ON SATURDAY NIGHT IN SAN ANTONIO. [01:27:41] Speaker 6: THANK YOU. [01:27:50] Speaker 21: UP NEXT ON THE PROGRAM, THE SPACEX IPO COUNTDOWN. AI IS THE BIGGEST TECHNOLOGY, EVERYBODY IS INVESTING IN IT. [01:27:56] Speaker 25: THERE WILL BE SELLING IN A LOT OF OTHER TECHNOLOGY STOCKS AS [01:27:58] Speaker 6: THEIR FIRST BUSINESSES. TEMPTED. [01:28:27] Speaker 7: REALLY TEMPTED. DON'T DO THAT. [01:28:30] Speaker 6: WE ARE FRIENDS HERE, FAMILY. EVERYONE WANTS TO KNOW, BUT I'M NOT GOING TO. EQUITY FUTURES RIGHT NOW POSITIVE. STILL TEMPTED BY 0.7. THE NASDAQ UP BY 1.2. THE SPACEX IPO COUNTDOWN. [01:28:46] Speaker 21: AI IS THE BIGGEST TECHNOLOGY THAT WE HAVE SEEN PROBABLY IN OUR LIFETIME. EVERYBODY IS INVESTING IN IT. THERE WILL BE SELLING IN A LOT OF OTHER TECHNOLOGY STOCKS AS WE GET THESE IPOs. AS LONG AS THE CAPITAL MARKETS REMAIN OPEN TO THESE REALLY MASSIVE MARKET CAPS, THAT IS THE OPPORTUNITY. [01:29:03] Speaker 25: THE NEED FOR LIQUIDITY IS MASSIVE. [01:29:06] Speaker 6: I'M JUST GOING TO SAY, AND YOU CAN DECIDE WHO IT WAS, SOMEONE AROUND THE TABLE THOUGHT SCOTTY PIPPEN WAS A NEW YORK NICK BACK IN A DAY. I THINK WE ARE TALKING ABOUT IPOs RIGHT NOW. IT'S THE LATEST THIS MORNING. WALL STREET BRACING FOR THE RECORD SETTING SPACEX DEBUT TOMORROW ACCORDING TO DATA COMPILLED BY BLOOMBERG. THE EXPECTED LIST OF MEGA IPOs COULD ADD $84 TRILLION IN MARKET CAP TO U.S. EXCHANGES. THANK YOU FOR JOINING US. WE'LL TALK ABOUT HOW MUCH MONEY IS BEING ISSUED RIGHT NOW, HOW MUCH MONEY IS BEING ISSUED RIGHT NOW, HOW MUCH MONEY IS BEING RAISED, HOW MUCH EQUITY IS BEING ISSUED, AND WHAT WE COULD SEE OVER THE NEXT YEAR OR SO. HOW THIS MARKET WILL MAKE SPACE FOR IT IN THE NEXT 12 MONTHS? [01:29:53] Speaker 26: I WOULD START KIND OF WHERE YOU DID, WHICH IS JUST THE SCALE OF THE CAPITAL RACES HERE. I THINK ONE THING IT HIGHLIGHTS FOR US IS, OF COURSE, COMPANIES ARE STAYING PRIVATE LONGER. OF COURSE, PRIVATE MARKETS CAN FINANCE A DEPTH OF INVESTMENT IN A WAY THAT THEY HAVEN'T BEEN ABLE TO IN THE PAST. BUT AT SOME POINT, PUBLIC MARKETS ARE STILL REQUIRED TO FINANCE CAPEX OF THIS SCALE, AND MORE OVER TO THE POINT YOU HIGHLIGHTED ON SCREEN, THE DURATION OF CAPITAL THAT NEEDS TO BE DEPLOYED HERE. THIS IS GOING TO BE A MARATHON ON A SPRINT, LIKE FINANCING THIS BUILDOUT AND THEN THE ABILITY TO TURN THAT INTO CASH FLOW THAT WILL PAY OFF FOR INVESTORS. THAT IS A KIND OF MULTI-YEAR PHENOMENON, AND IT IS REALLY PUBLIC MARKETS THAT ULTIMATELY ARE THE PLACE WHERE THAT CAPITAL RAISE CAN BE MADE. [01:30:43] Speaker 6: ARE YOU SEEING BIG ENOUGH SIGNS OF PUSH BACK TO WORRY THAT [01:30:47] Speaker 26: THINGS ARE TURNING? LISTEN, I WOULD SAY WE BELIEVE VERY MUCH IN THE AI THESIS AS A KEY PART OF INVESTORS' PORTFOLIOS OVER THE MEDIUM AND LONG TERM. THERE IS GOING TO BE VOLATILITY ALONG THE WAY. WE HAVE CERTAINLY SEEN THAT OVER THE PAST COUPLE OF WEEKS, EVEN WITH SOME OF THE BIG WINNERS PULLING BACK A BIT AND THEN STEPPING FORWARD AGAIN. AND YOU KNOW, I THINK THE IMPORTANT THING IS FOR INVESTORS TO HAVE AI EXPOSURE IN THEIR PORTFOLIO THAT'S BALANCED, THAT'S WELL SIZED AGAINST THE TOTALITY OF THEIR PORTFOLIO. BUT THAT'S LIKE THE KEY THING THAT WE'RE ADVISING INVESTORS IS TAKE A LOOK AT THE WHOLE PORTFOLIO, TAKE A LOOK AT YOUR AI EXPOSURES AS A WHOLE, AND BE SURE THAT THOSE ARE SIZED APPROPRIATELY GIVEN THE GOALS YOU HAVE. [01:31:28] Speaker 7: DO YOU HAVE TO SEE THE REST OF THE ECONOMY START TO CATCH UP FOR THE PROFITABILITY OF SOME OF THESE AI COMPANIES TO CONTINUE INCREASING AT THE PACE THAT THEY HAVE BEEN? [01:31:37] Speaker 26: YEAH, I MEAN, I THINK THAT YOU'RE SEEING A PRETTY EXTRAORDINARY PACE OF DEPLOYMENT OF AI TOOLS. I DO THINK THAT, YOU KNOW, THE CONVERSATION IS SHIFTING ACROSS CORPORATE AMERICA FROM ONE THAT HAS BEEN FOCUSED ON SPEED AND PACE OF DEPLOYMENT TO, YOU KNOW, WHERE ARE WE GETTING VALUE FOR MONEY, HOW ARE WE GOING TO BE DISCIPLINED ON COST TO ENSURE THAT THE TOOLS THAT WE'RE PAYING FOR AT DIFFERENT PRICE POINTS ARE DELIVERING RETURN ON INVESTMENTS THAT WE SEE IN TERMS OF REDUCED COSTS, IN TERMS OF ENHANCED REVENUE. SO I DO THINK THE CONVERSATION IS SHIFTING. YOU KNOW, I DO THINK WE HAVE CONFIDENCE THAT, AGAIN, OVER THAT MEDIUM TO LONG TERM, WE'RE GOING TO FIND A PLACE WHERE THESE TOOLS ARE REALLY DRIVING PRODUCTIVITY IN A MEANINGFUL WAY, AND THAT'S ULTIMATELY GOING TO SUPPORT THE SECTOR AS A WHOLE. [01:32:24] Speaker 7: I GUESS WHAT I'M TRYING TO GET AT HERE IS ARE WE AT AN INFLECTION POINT TO A STRONGER ECONOMY AND A STRONGER LABOR MARKET AS PRODUCTIVITY GENERATES MORE GROWTH AND PEOPLE'S ABILITY TO REQUEST HIGHER WAGES BECAUSE, GUESS WHAT, THEY'RE WORTH MORE THAN THE TOKENS THAT THEY OTHERWISE WOULD BE REPLACED WITH. AT A TIME WHEN POTENTIALLY INFLATION IS RUNNING A LITTLE BIT HOTTER, WHERE CAPITAL MARKETS ARE WIDE OPEN, AND WHERE THERE'S A FED THAT SEEMS TO BE PEGED ON PAUSE. I MEAN, IS THAT THE SCENARIO THAT YOU'RE EXPECTING? [01:32:49] Speaker 26: YEAH, SO I THINK THE FED CLEARLY HAS A PRETTY COMPLICATED DYNAMIC THAT IT'S FACING. SHARE WORSH IS GOING TO FACE COMING AT OFF. AND I THINK YOU HIGHLIGHT THE KEY PIECES. I MEAN, YOU KNOW, INFLATION, AS WE SAW YESTERDAY, YOU KNOW, ON THE CORE READING MAYBE A LITTLE BETTER THAN EXPECTED, BUT I THINK THERE'S SOME UNDERLYING PIECES THAT ARE STICKY AND ARE LIKELY TO BE. AND, MORE OVER, WHEN IT COMES TO TARIFFS STILL BEING A PART OF THE PICTURE. WHEN IT COMES TO ENERGY CLEARLY BEING A PART OF THE PICTURE. AND, IMPORTANTLY, WHEN IT COMES TO THIS AI STORY. OVER THE MEDIUM TO LONG TERM, YOU KNOW, WE THINK THAT'S PRODUCTIVITY DEHANSING. WE THINK THAT THAT'S DISINFLATIONARY. BUT IN THE HERE AND NOW, THAT'S PUTTING UPWARD PRESSURE ON PRICES, UPWARD PRESSURE ON CAPACITY UTILIZATION. ONE OF THE STATS I'VE BEEN CITING IS, YOU KNOW, HYPERSCALAR CAPEX PLANS HAVE GONE UP BY ABOUT 30% SINCE THE START OF THE YEAR. ABOUT HALF OF THAT IS INCREASED VOLUME OR INCREASED UNIT ECONOMICS FROM THE AI BUILDER. ABOUT HALF OF THAT IS JUST INCREASED PRICES. SO, I THINK THAT HIGHLIGHTS THAT THEY'RE REALLY CLIMBING UP A PRETTY STEEP PART OF THE SUPPLY CURVE AND JUST UNDERSCORES THAT THERE'S A LOT OF PRESSURE IN THIS ECONOMY, INCLUDING INCREASINGLY FROM LABOR. [01:33:51] Speaker 8: MIKE, WHAT DO YOU MAKE OF THE POTENTIAL GOVERNMENT INTERVENTION, ESPECIALLY GIVEN THE FACT THAT YOU WERE PART OF THE BIDEN ADMINISTRATION WHEN THERE WAS A PROPOSAL TO MAKE SOME SORT OF SOVEREIGN WEALTH FUND, ESPECIALLY WHEN IT CAME TO FOLKS ON NATIONAL SECURITY INTERESTS? [01:34:02] Speaker 26: YEAH, SO LISTEN, YOU KNOW, LISTEN TO THE INTERVIEW WITH THE PRIOR GUESS, I THINK REALLY IDENTIFIED WITH WHAT HE WOULD SAY. I WOULD OBSERVE, YOU KNOW, IT IS CLEAR THAT AI IS A ISSUE THAT THE AMERICAN PEOPLE ARE PAYING INCREASED ATTENTION TO. IT IS ROCKETING UP THE LIST OF ISSUES VOTERS HAVE THEIR EYES SQUARELY ON. MOREOVER, I THINK SKEPTICISM, IT'S FAIR TO SAY, LOOKING AT THE PUBLIC OPINION POLLING DATA IS PRETTY SIGNIFICANT. YOU KNOW, WHAT DOES THAT ADD UP TO? I THINK IT ADDS UP TO A WORLD WHERE THIS IS A TOPIC THE POLICYMAKERS, THE POLITICIANS ARE TALKING ABOUT A LOT IN THE COMING YEARS, AND THERE'S VERY LIKELY TO BE, I THINK, SOME MEANINGFUL POLICY STEPS IN THE SPACE. I THINK, BUT I THINK HIS CORE POINT WAS THE CODE OF UNCERTAINTY ON WHAT THOSE POLICY STEPS MIGHT BE, I THINK, IS INCREDIBLY WIDE, AND I DON'T THINK IT'S POSSIBLE TO REALLY VENTURE A GUESS AS TO WHERE THIS IS GOING TO LAND, OTHER THAN TO SAY, THIS IS GOING TO BE A FIRST ORDER ISSUE, AND THERE'S GOING TO BE, YOU KNOW, POLICY ACTION. [01:34:57] Speaker 6: I THINK YOU CAN WORK OUT THE REACTION ON THE LEFT, WHICH IS TAX AND REDISTRIBUTE. IT'S THE REACTION ON THE RIGHT THAT I'M MORE INTRIGUED BY. NOT THE POPULIST RIGHT, I THINK THEY HAVE MORE IN COMMON WITH THE LEFT, LISA HAS TALKED ABOUT THAT EXTENSIVELY. MORE THE CONSERVATIVE RIGHT, WHICH TYPICALLY WOULD EMBRACE CREATIVE DESTRUCTION. ARE THEY GOING TO BE ABLE TO DO THAT WITH A TECHNOLOGY LIKE THIS THAT THREATENS TO TAKE PEOPLE'S JOBS? [01:35:15] Speaker 8: WE SPOKE RECENTLY TO FORMER VICE PRESIDENT MIKE PENCE. HE WAS DEFINITELY NOT IN FAVOR OF THE U.S. GOVERNMENT TAKING EQUITY STAKES OF ANY COMPANY. AND HE SAID ALSO HE BELIEVES IN LOWER TAXES. SO I THINK YOU'RE GOING TO HAVE A REAL DIVIDE WITHIN THE REPUBLICAN PARTY. [01:35:30] Speaker 7: I LOVE THE TAKE FROM MARKETS, WHICH IS ESSENTIALLY -- THIS IS GREAT. ANY REGULATION COMING DOWN THE PIKE, SO GOOD. IT'S ACTUALLY A BULL CASE FOR THE INVESTMENT, BECAUSE THE DATA CENTER THAT I BUILD TODAY WON'T HAVE AS MUCH COMPETITION TOMORROW. THAT ESSENTIALLY IS THE TAKE FROM WALL STREET, WHICH IS LIKE THROW IT AT US. WE ARE FINE. JUST STOP THE OTHER MODELS. WE ARE GOOD. [01:35:50] Speaker 6: MIKE, IT'S GOOD TO SEE YOU. THANK YOU, SIR. YOU STAY UP LATE LAST NIGHT? I MIGHT HAVE. A LITTLE BIT. THANK YOU, SIR. I APPRECIATE IT. COMING UP NEXT, JAMES ATHEE OF MARBORAH AND NEILA RICHARDSON OF ADP. UP NEXT, AN ECB RATE DECISION. INFLATION DATA, MORE OF IT. PPI AND JOBLESS CLAIMS, ABOUT 35 MINUTES AWAY FROM NEW YORK. [01:36:21] Speaker ?: PPI AND JOBLESS CLAIMS, ABOUT 30 MINUTES AWAY FROM THE AMERICAN PEOPLE. THERE ARE A LOT OF NON-FUNDAMENTAL FACTORS THAT ARE GOING TO INTERFERRE WITH MARKETS AND CAUSE VOLATILITY. [01:36:34] Speaker 1: THE MARKET IS FINITE AND WE'VE ALREADY SEEN SOME VOLATILE DAYS. [01:36:49] Speaker 3: IT'S A LITTLE WHITE KNUCKLE MOMENT THAT WE'RE GOING THROUGH INTACT. [01:36:53] Speaker 4: WE'RE GOING THROUGH THE MARKETS TO KEEP ON RALLYING. [01:36:56] Speaker 22: I THINK THIS YEAR WE HAVE THE CHANCE THAT WE BEAT EARNINGS NICELY. THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA [01:37:04] Speaker 6: IBRAMOWITZ AND ANNE-MARIE HORDERNE. LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING. NEW YORK CITY. WE'RE UP BY THREE QUARTERS OF 1% ON THE S&P, HIGH BY 1.2. THE BOND MARKET YIELDS DECLINING ACROSS THE CURVE. WE'RE DOWN BY TWO BASIS POINTS. PPI DATA AT 8:30 EASTERN TIME, ALONGSIDE JOBLESS CLAIMS IN AMERICA. BEFORE WE GET THERE, AT 8:15, WE'RE GEARING UP FOR A RATE [01:37:37] Speaker 7: HIKE AT THE ECB. WE'RE GOING TO RECOVER THE ECB. WE'RE GOING TO BE HIKING AHEAD FOR THE EUROPEAN CENTRAL BANK AT A TIME WHERE GROWTH IS RUNNING BELOW WHERE IT IS IN THE UNITED STATES, AT A TIME WHERE INFLATION IS EXPECTED TO PEAK OUT SOON AND THEN COME DOWN, AT A TIME THAT DOESN'T HAVE THE GROWTH ENGINES IN THE PLACES LIKE EUROPE THAT THE U.S. HAS WITH THE LIKES OF ARTIFICIAL INTELLIGENCE. WILL THIS BE A POLICY ERROR OR WILL THIS BE THE REQUIRED STEP TO SUPPORT THE EURO AT A TIME WHEN THERE ARE A LOT OF QUESTIONS ABOUT WHY YOU WOULD WANT TO INVEST IN THAT [01:38:05] Speaker 6: CONTINENT. THAT'S WHAT WE'RE LOOKING FOR, CPI TO FOUR HANDLE. [01:38:13] Speaker 7: WE WOULD BE LOOKING AT THE HIGHEST LEVEL GOING BACK EVEN BEYOND WITH CPI TO 2022, RIGHT BEFORE THE FED ENGAGED WITH A MASSIVE RATE HIKING CYCLE. ULTIMATELY, FED CHAIR WARSH IS GOING TO HAVE TO CONVINCE US THAT IT'S ENOUGH TO REMAIN ON HOLDS BECAUSE THAT ULTIMATELY IS THE MOST HAWKISH THAT THE MARKET IS EXPECTING. THE MARKET IS PRICING IN RIGHT NOW SOME RATE HIKES. [01:38:39] Speaker 8: MAYBE HE GOT AN ENDORSEMENT YESTERDAY TO REMAIN ON HOLD FROM THE PRESIDENT OF THE UNITED STATES. I WAS SHOCKED THAT THE PRESIDENT DECIDED TO SAY THESE WORDS INTO A MIDTERM ELECTION YEAR, QUOTE, I LOVE THE [01:38:47] Speaker ?: INFLATION. [01:38:47] Speaker 8: WHAT DID HE MEAN BY THAT? I'LL TELL YOU, YOU KNOW WHAT I REALLY LOVE? I LOVE THE INFLATION. YOU KNOW WHY? BECAUSE AS SOON AS THIS WAR IS OVER, YOU KNOW I CAN SAY IT NOW. YOU KNOW WE'VE BEEN TALKING TAKING OUT 1 MILLION BARRELS OF OIL. NOBODY KNOWS IT. YOU KNOW WHO DOESN'T KNOW ABOUT IT? NOBODY KNOWS IT. NOBODY KNOWS IT. HE'S BASICALLY SAYING HE LIKES IT NOW BECAUSE IT SOUNDS LIKE IT'S WORRIESOME FOR THE IRANIANS. AS SOON AS THE WAR IS OVER, IT'S GOING TO DROP. I THOUGHT MAYBE WHEN I FIRST SAW THAT HEADLINE, HE WAS TALKING ABOUT CORE. I WAS LIKE OKAY, HE'S GIVING A [01:39:21] Speaker 6: MORE NUANCED APPROACH TO HIS INFLATION DATA. THAT IS NOT THE MESSAGE YOU WANT GOING INTO NOVEMBER. I WANT TO TALK ABOUT WHATEVER IS GOING INTO THE MIDTERMS. [01:39:27] Speaker 7: I WANT TO TALK ABOUT WHATEVER IS GOING INTO THE MIDTERMS. PEOPLE HATE THE INFLATION. THE SAVINGS RACE GOING DOWN. PEOPLE FEEL IT EVERY TIME THEY GO TO THE GROCERY STORE. THEY SEE IT WHEN THEY GO TO FILL UP THEIR GAS TANKS. ULTIMATELY, YOU ARE RIGHT, NUANCE DOESN'T PLAY. IT ALSO IS THE TIPPING POINT WE ARE TALKING ABOUT. EITHER WAGES HAVE TO START KEEPING UP OR PEOPLE WILL PULL BACK SPENDING. RIGHT NOW, REAL WAGES HAVE BEEN [01:39:51] Speaker 6: DECLINING AT THE FASTEST PACE GOING BACK TO 2023. THE EQUITY MARKET COMING UP THIS HOUR WE WILL CATCH UP WITH SAVITA SABRAMANIUM OF BANK OF AMERICA WARNING OF TOO MANY RED FLAGS FOR EQUITIES. THE ECB GEARS UP FOR A RATE HIKE. WE BEGIN THIS OUT WITH STOCKS SHAKING OFF ANOTHER SLIDE IN TECH AS WALL STREET AWAITS THE MASSIVE SPACE X IPO. SAVITA SABRAMANIUM OF BANK OF AMERICA WITH A NEAR STREET LOW 7100 YEAR END PRICE TARGET ON THE S&P WRITES THE EQUITY MARKET TARGET. RED FLAGS HAVE EMERGED. TAKE PROFITS. [01:40:31] Speaker 27: SAVITA JOINS US NOW FOR MORE. GOOD MORNING. LET'S GET TO THE RED FLAGS. WHAT CAN YOU IDENTIFY THIS MORNING? GOOD MORNING. WE'VE BEEN TAKING DOME DOMINOS SLOWLY. IN MARCH, WE SAW 4 OUT OF 10 TRIGGERED BY MAY. LAST MONTH, WE HAD 7 OUT OF 10 TRIGGERED. I THINK WHAT WORRIES ME IS THAT WE ARE AT THE POINT WHERE THE STUFF YOU GENERALLY SEE AHEAD OF MARKET PEAKS HAS HAPPENED. THINGS GENERALLY GET TIPPED BEFORE YOUR AVERAGE BEAR MARKET THAT WE'VE SEEN OVER THE LAST 10 OR 20 OR 30 YEARS. SO THAT'S ONE THING TO WATCH. I THINK WHAT'S INTERESTING IS THERE STILL IS A LOT OF CASH SITTING ON THE SIDELINE. I THINK THAT'S WHAT GIVES ME SOME SOLACE THAT IT'S NOT LIKE PRIOR CYCLES WHERE EVERYBODY WAS ALL IN, IN ALL EQUITIES, AND THERE WAS NOT A LOT OF DRY POWDER ON THE SIDELINE. THAT SAID, WHAT WE'VE SEEN IN THE MARKET IS REALLY JUST A VERY STRONG SPECULATIVE BID. SO A COUPLE OF THINGS TO NOTE. LONG-TERM GROWTH EXPECTATIONS FOR EARNINGS ARE THE HIGHEST WE'VE SEEN IN A COUPLE OF YEARS, AND THEY'RE APPROACHING ALL-TIME HIGHS, HIGHER THAN WHAT WE SAW DURING THE TECH BUBBLE. SO SPECULATION IS ALIVE AND WELL. EXPECTATIONS ARE VERY HIGH. AND THIS REALLY SETS UP THE STAGE FOR DISAPPOINTMENT. THE SECOND THING I WOULD LOOK AT IS JUST THE PERFORMANCE. SO HIGH PE STOCKS WITH LOFTY EXPECTATIONS HAVE MASSIVELY OUTPERFORMED LOW PE STOCKS. AND THIS IS GENERALLY NOT WHAT YOU SEE IN THE MARKET. AND ALSO SIGNALS A LITTLE BIT MORE OF A SPECULATIVE BID THAT'S TAKING PLACE. YOU KNOW, OTHER THINGS THAT WE'VE TALKED ABOUT ON THE PROGRAM ALREADY, I THINK THE CONSUMER IS IN AN ODD SPOT. WE'RE SEEING HIGHER-PAYING JOBS ON PAUSE IN TERMS OF DEMAND BECAUSE OF AI. WE ARE SEEING A BIT OF AN UPTICK IN WAGE GROWTH FOR THAT LOWER INCOME COHORT. SO I THINK THAT'S THE OTHER BRIGHT SPOT. ONE OF THE REASONS THAT WE STILL LIKE CONSUMER STAPLES OVER CONSUMER DISCRETIONARY. BUT I THINK WE'RE IN A TRICKY MARKET ENVIRONMENT AND YOU'VE REALLY GOT TO PICK YOUR SPOTS. [01:42:40] Speaker 6: ONE HEADWIND I WANT TO TALK ABOUT WITH YOU BECAUSE I THINK YOU'VE BEEN OUT FRONT ON THIS PARTICULAR ISSUE TALKING ABOUT THIS EARLY IN THE YEAR WHEN IT WASN'T REALLY ON THE HORIZON FOR MANY. THE TIDAL WAVE OF EQUITY SUPPLY. [01:42:49] Speaker 27: SUPPLY, SUPPLY, SUPPLY, SUPPLY. [01:42:52] Speaker 6: HOW MUCH SPACE DO WE HAVE WITH IT? THAT'S A QUESTION WE'VE REPEATED THROUGHOUT THIS WEEK. YEAH. [01:42:56] Speaker 27: I MEAN, I THINK WHAT'S UNNERVING IS THAT IN ONE SECTOR, THE BIGGEST SECTOR IN THE S&P, THE HYPER SCALERS IN TECH, YOU'RE SEEING BUYBACKS SLOWING, YOU'RE SEEING ISSUANTS INCREASING, AND YOU'RE SEEING NEW MONEY COMING TO MARKET. SO THAT'S ALL GREAT IN TERMS OF, YOU KNOW, NEW, EXCITING, SHINY ISSUES. BUT I THINK THAT WHAT THAT MEANS IS THIS SHRINKAGE STORY THAT WE'VE ENJOYED FOR PUBLIC EQUITIES FOR SUCH A LONG TIME IS STARTING TO EBB RATHER THAN FLOW. I DON'T THINK IT'S THE END OF THE WORLD, BUT I DO THINK IT'S SOMETHING TO WATCH WHEN WE THINK ABOUT THE DRIVERS THAT HAVE CREATED THIS WONDERFUL BULL MARKET THAT WE'VE ENJOYED OVER THE LAST, YOU KNOW, 10, 15 YEARS NOW. [01:43:36] Speaker 7: SO PEOPLE WOULD ARGUE THAT THE REASON WHY SHRINKAGE WORKED WAS BECAUSE WE WERE IN A PERIOD OF SECULAR STAGNATION. AND SOME PEOPLE ARE ARGUEING, PIMCO IN PARTICULAR, THAT WE'RE EMERGING FROM THAT INTO A STICKIER INFLATION ENVIRONMENT WITH HIGHER GROWTH AND HIGHER INFLATION. AND IN THAT SCENARIO, SOME OF THESE VALUATIONS CAN CONTINUE CLIMBING, ESPECIALLY WHEN OVERLAID WITH A TECHNOLOGICAL REVOLUTION. HOW DO YOU REBUT THAT? [01:44:00] Speaker 27: I MEAN, I THINK THAT MIGHT BE TRUE OVER THE LONG HALL, BUT I THINK IN THE NEAR TERM, IT COULD BE A LITTLE BIT COMPLICATED. SO LET'S THINK ABOUT WHAT WORKS IN A HIGH GDP GROWTH, HIGH INFLATION ENVIRONMENT, IT'S USUALLY CYCLICAL COMPANIES. AND WHEN YOU LOOK AT THE WEIGHT OF CYCLICAL COMPANIES IN THE S&P 500, PRETTY SMALL. SO I'M BULLISH ON MANUFACTURING, CYCLICALS, THAT WHOLE COHORT. BUT I DON'T KNOW IF THEY'RE BIG ENOUGH TO KIND OF DRIVE THIS MARKET MEANINGFULLY HIGHER OVER THE NEXT 12 TO 24 MONTHS. AND THEN WHEN I LOOK AT TECHNOLOGY, I THINK WHAT'S GETTING A LITTLE BIT TRICKIER IS THERE'S A LOT OF COMPETITION NOW FOR, YOU KNOW, WHAT'S THE BEST AI PLAY. AND WE STILL DON'T KNOW EXACTLY HOW THIS WILL BE MONETIZED, HOW IT WILL AFFECT CONSUMPTION. SO I THINK THOSE ARE SOME OF THE QUESTIONS WE NEED TO ANSWER ALONG THE WAY IN ORDER TO SAY THESE MULTIPLES CAN STICK. I ALSO THINK, JUST REAL QUICK, THE LEVERAGE AND THE ISSUANCE THAT WE'RE SEEING IS MOVING IN THE OPPOSITE DIRECTION THAN WHAT WE WANT TO SEE. SO, YOU KNOW, THE ONE SELLING POINT OF THE S&P 500 AFTER THE GLOBAL FINANCIAL CRISIS WAS ALL THESE COMPANIES PAID DOWN DEBT. THEY HAD SOLID BALANCE SHEETS. AND THAT'S STARTING TO REVERSE, ESPECIALLY FOR TECHNOLOGY IN SOME OF THESE GROWTH AREAS. [01:45:16] Speaker 7: CAN YOU SEE A BROADENING OUT? SO IT MIGHT BE AN UNDERPERFORMANCE OF TECH, NOW PERFORMANCE OF SOME OF THESE OTHER AREAS THAT HAVE LAGGED BEHIND. CAN YOU SEE THAT WITHOUT RATE CUTS? CAN YOU SEE THAT WITH EVEN POTENTIALLY A RATE HIKE? SURE. [01:45:29] Speaker 27: I THINK WE COULD SEE A BROADENING OUT WITH A RATE HIKE. I THINK THAT IT WOULD BE IN AREAS THAT BENEFIT FROM HIGHER NOMINAL GDP GROWTH AND HIGHER INFLATION. SO WE LOVE ENERGY. WE LOVE MATERIALS. REAL ESTATE, I THINK, COULD DO OKAY IN THAT ENVIRONMENT. I THINK THE WORST PLACE TO BE IN THIS SCENARIO IS CASH. CASH REAL YIELDS ARE TERRIBLE RIGHT NOW. IF WE GET A HIKE, IT MEANS THAT THEY'RE STILL GOING TO BE TERRIBLE BECAUSE WE'RE HIKING BECAUSE OF INFLATION. SO, YOU KNOW, I DO SEE MONEY, THE OPPORTUNITY TO DEPLOY CASH IN AREAS LIKE LARGE CAP VALUE, DIVIDEND INCOME PLACE WHERE YOU'RE PROTECTED AGAINST INFLATION, BUT ALSO HAVE THIS GROWING CASH RETURN COMPONENT. I THINK THAT THOSE ARE THE AREAS THAT WE REALLY WANT TO FOCUS ON GOING FORWARD. AND IF YOU LOOK AT WHAT WORKED DURING THE 70s AND 80s, LARGE CAP VALUE CRUSHED IT. WE HAD A MARKET ENVIRONMENT WHERE HIGH DIVIDEND YIELDING CYCLICAL COMPANIES LIKE ENERGY, MATERIALS, YOU KNOW, INFLATION PROTECTION REALLY WORKED. AND I THINK THAT MIGHT BE WHERE WE GO. I THINK ENERGY IS SEEN AS JUST A HEDGE AGAINST GEOPOLITICAL RISK, BUT I THINK IT'S A LOT MORE THAN THAT. WE'RE IN AN ENVIRONMENT WHERE POWER IS THE BOTTLENECK FOR AI. AND THAT MEANS WE'RE GOING TO BE DOING A LOT OF MOVING THINGS AROUND. WE'RE GOING TO BE DOING A LOT OF BUILDING. THAT IS BULLISH FOR COMMODITIES RIT LARGE. AND I THINK THAT'S WHAT WE REALLY WANT TO THINK ABOUT ANGLING OUR EXPOSURE. [01:46:58] Speaker 6: THANK YOU VERY MUCH. [01:47:04] Speaker ?: GOOD TO SEE YOU. [01:47:04] Speaker 6: THANK YOU VERY MUCH. EQUITY FUTURES UP BY 0.7% ON THE S&P WITH AN UPDATE ON [01:47:12] Speaker 10: NEWS WORLDWIDE WITH YOUR BLOOMBERG BRIEF. ORACLE FALLING IN THE PREMARKET AFTER REPORTING ABOUT $70 BILLION IN NET CAPEX OVER THE NEXT FISCAL YEAR. THE SOFTWARE COMPANY ALSO ANNOUNCING PLANS TO RAISE ON THE COUNTRY. SENATOR ELIZABETH WARREN CALLING FOR THE SEC TO DELAY THE SPACEX IPO. IN A LETTER TO SEC CHAIR PAUL ATKINS, WARREN SAYING SHE'S WORRIED ABOUT THE COMPANY'S STOCK VALUATION, GOVERNANCE STRUCTURE AND THE POTENTIAL IMPACT ON MILLIONS OF AMERICANS WHO WILL BE FORCED TO OWN SHARES IN THEIR RETIREMENT ACCOUNTS. THE NICS MAKING THE LARGEST COMEBACK IN NBA FINALS HISTORY, OVERCOMING A 29 POINT DEFICIT TO BEAT THE SAN ANTONIO SPURS IN GAME FOUR. THE NICS LOOKING TO WIN THEIR FIRST CHAMPIONSHIP IN MORE THAN 50 YEARS ON SATURDAY IN TEXAS. THAT IS YOUR BLOOMBERG BRIEF. [01:48:00] Speaker 6: UP NEXT ON THE PROGRAM IS THE RATE HIKING CYCLE ABOUT TO BEGIN AT THE ECB. [01:48:14] Speaker ?: WE'LL CATCH UP WITH JAMES ATHIE OF MARBORAH. [01:48:30] Speaker 16: THE PLACE YOU WANT TO BE IS ON THE CHIP SIDE OF THINGS, BECAUSE IT DOESN'T SEEM LIKE THERE IS ANY END AS FAR AS SOME OF THE SPENDING GOES. WHEN YOU LOOK AT SOME OF THESE IPOs THAT ARE GOING TO COME OUT HERE OVER THE NEXT COUPLE OF MONTHS, CLEARLY ALL OF THOSE PROCEDES ARE GOING TO BE REINVESTED RIGHT INTO THAT AI INFRASTRUCTURE BUILD. [01:48:47] Speaker 6: AGAIN, THE PLACE TO BE CONTINUES TO BE SEMINESSED. THE LATEST EQUITY MARKET MOVES. STOCKS POSITIVE THIS MORNING UP BY 3/4% ON THE S&P 500. THAT'S THE EQUITY MARKET STORY IN THE BOND MARKET GOING INTO THIS ECB RATE DECISION JUST AROUND THE CORNER. YIELDS ARE LOWER BY TWO BASIS POINTS ON TWO STATESIDE. BIG FOCUS WILL BE ON EURO DOLLAR GOING INTO THIS ONE. LOOKING FOR A 25 BASIS POINT HIKE FROM THE ECB. [01:49:19] Speaker 7: KEY QUESTION WILL BE HOW IS MESSAGE GOING FORWARD. IS THIS GOING TO BE PART OF A RATE HIKING CYCLE OR IS IT GOING TO BE A ONE AND DONE WITH A LET'S WAIT AND SEE AND BE DATA DEPENDENT. ULTIMATELY WE HEARD FROM IAN STEELY THAT HE THINKS THAT IF THE FED IS MORE DOVISH ONE AND DONE THAT IT WOULD ACTUALLY BE PUNITIVE FOR THE EURO. OTHER PEOPLE THINK POTENTIALLY TORPEDO GROWTH WITH A RATE HIKING CYCLE AND THAT COULD BE A [01:49:39] Speaker ?: PROBLEM. [01:49:39] Speaker 6: THERE IS THAT RATE HIKE. 2.25 ON THE DEPOSIT FACILITY AT THE EUROZONE AT THE EUROPEAN CENTRAL BANK. THE ECB DEPOSIT RATE AT 2.25 TO DO THAT BREAKING WHOOSH NOW. BREAKING NEWS? NO, NOT BREAKING NEWS. WE WERE LOOKING FOR 2.25. THERE WE GO. WIDELY ANTICIPATED, MAYBE NOT BREAKING NEWS FOR MANY PEOPLE [01:50:02] Speaker 7: OUT THERE. IT IS THE NEXT MOVE IN THE GUIDANCE THEY ARE LOOKING FOR. WE WERE TALKING ABOUT THE RATE HIKES OF THE MARKET. WE ARE TALKING ABOUT THE RATE HIKES. WE ARE TALKING ABOUT THE RATE HIKES OF THE MARKET. THEY ARE NOT SEEING MUCH OF A RESPONSE FROM MARKETS BECAUSE [01:50:25] Speaker 6: THEY DON'T KNOW WHAT TO MAKE OF THIS. OLLI CROOK IN FRANKFURT, GERMANY, TRACKING THE DECISION. WE GOT THE FIRST MOVE. THE FOCUS TODAY IS ABOUT THE [01:50:37] Speaker 28: HIKES OF THE MARKET. THAT IS RIGHT. THERE IS A LOT OF CONSENSUS GOING INTO THIS. THERE YOU HAVE THE ECB, THE FIRST MAJOR CENTRAL BANK TO HIKE RATES IN THE WAKE OF THE IRAN WAR TO DEAL WITH THAT INFLATIONARY SHOCK COMING OUT OF IT. THE 25-POINT BASIS POINT INCREASE IN RATES IS AS THE INFLATIONARY SHOCK IN FRONT. WE ARE TALKING ABOUT HOW MUCH TONE ARE WE GOING TO GET FROM CHRISTINE LAGARDE IN ABOUT 30 MINUTES TIME. I WOULD LIKE TO TAKE YOUR ATTENTION TO SOME OF THE OTHER THINGS WE ARE SEEING. THE OTHER THING THE ECB IS PUTTING OUT RIGHT NOW IS THE FORECAST ON INFLATION FOR THE YEAR GOING FORWARD. THIS IS CRUCIAL. WE'RE GETTING THAT INFLATION READJUSTMENT HIGHER AND HIGHER AND HIGHER. AS WE HAVE BEEN TALKING ABOUT, IT IS NOT JUST THE HEADLINE NUMBERS, NOT JUST THE SORT OF ENERGY INFLATION FIGURE THAT THE ECB IS LOOKING AT. WE'VE SEEN CORE ARISE SUBSTANTIALLY. WE SAW IT ACCELERATE AT A FASTER PACE AND A FASTER ACCELERATION IN THE MONTH OF MAY THAN THE HEADLINE NUMBERS. THESE ARE ALL THE ISSUES THAT ARE GOING TO BE CONFRONTING THE ECB. THE QUESTION IS, IS THIS THE BEGINNING OF A RATE HIKING CYCLE? WE SPOKE TO JEFFREY YUE A LITTLE BIT EARLIER IN THE WEEK. IF YOU RAISE RATES THIS WEEK, YOU WILL BE CUTTING BY Q4. [01:51:50] Speaker 6: THEY CLEARLY DON'T WANT TO BE ARTICULATING THE BEGINNING OF A RATE HIKING CYCLE. LISA, JUST LOOKING AT THE LANGUAGE AND GOING THROUGH THE STATEMENT AND THE HEADLINES FROM IT AND LISTENING TO WALLEY, THE CENTRAL BANK WANTS TO TAKE IT MEETING BY MEETING. BASED ON THAT, THAT IS WHAT YOU WOULD EXPECT TO HEAR FROM CHRISTINE LAGARDE IN ABOUT 20 MINUTES OF TIME. [01:52:06] Speaker 7: WHICH IS WHY THEY INCREASE THEIR INFLATION EXPECTATION OVER THE NEXT COUPLE OF YEARS. POTENTIALLY, YOU COULD INTERPRET THIS AS THEM NOT WANTING TO CRUTAIL GROWTH TOO QUICKLY AND RAISE HIKES TOO SIGNIFICANTLY. IT IS REALLY GOING TO BE UP TO HER IN TERMS OF HOW SHE MESSAGES THIS. RIGHT NOW, YOU CAN READ THIS IN DIFFERENT WAYS. DATA DEPENDENCY, NOT COMMITTING TO ANY PATH, COULD BE TAKEN AS A MORE DOVISH TAKE AT THE SAME TIME IF SHE COMES OUT AND SAYS, WE ARE LOOKING SQUARELY AT CPI AT X LEVEL AND WE ARE GOING TO HIKE AGAIN IF IT STAYS THERE, THAT WILL BE [01:52:36] Speaker 6: VIEWED AS HAWKISH. JONATHAN: HOW HAUNTED IS THIS INSTITUTION, THIS COMMITTEE BY 2008 AND 2011 AND THE HIKES THEY MADE IN THOSE YEARS? [01:52:44] Speaker 28: WHAT IS INTERESTING, JOHN, THEY SEEM CURRENTLY MORE HAUNTED BY 2022, WHICH IS ACTING TOO SLOWLY ON THE INFLATION SIDE OF THINGS. WHEN YOU THINK ABOUT THE STAGFLATIONARY DYNAMIC, THE MESSAGE THAT THE ECB IS SENDING RIGHT NOW IS THAT THEY ARE LESS WORRIED ABOUT STAG, THEY ARE MORE WORRIED ABOUT FLATION AND THAT IS REALLY THE MESSAGE THAT YOU ARE GETTING FROM THE ECB AND JUST ANOTHER LINE CROSSING HERE LOOKING AT THE 2026 GDP FORECAST, THE STAGFLATION SIDE OF THAT, THE SORT OF GROWTH SIDE, THAT THEY SEE GROWTH AT 0.8%. THE PRIOR FORECAST WAS 0.9%. SO THAT IS JUST A REDUCTION OF GROWTH FORECAST BY ABOUT 10 BASIS POINTS. THAT IS NOT SOMETHING TERRIBLY DRAMATIC. SO I DO THINK THAT FOR THE ECB, SOMETHING THAT THEY ARE HAUNTED BY 2011, THAT IS THE BIG QUESTION. THEY HIKED TOO EARLY, THEY HAD TO CUT RATES IMMEDIATELY, BUT THE OTHER QUESTION IS 2022, AND I THINK THAT IS PROBABLY MORE PRESENT IN THEIR [01:53:27] Speaker 6: MINDS RIGHT NOW. IT IS GOOD TO SEE YOU, OLLIE. AS ALWAYS, THANK YOU, SIR. OLLIE CROOK THERE IN FRANKFURT, GERMANY ON THE ECB. THESE ARE THE KIND OF HEADLINES THAT NO CENTRAL BANK WANTS TO BE READING OR WRITING RIGHT NOW WHEN YOU HAVE TO CUT THE OUTLOOK FOR GROWTH AND YOU HAVE TO RAISE THE OUTLOOK FOR INFLATION, NOT JUST FOR THIS YEAR, BUT THE NEXT YEAR OUT AS WELL. [01:53:49] Speaker 7: THAT IS THE POSITION THE ECB IS IN THIS MORNING. IF THEY WERE A DUAL MANDATE CENTRAL BANK, THEIR CALCULUS WOULD BE COMPLETELY DIFFERENT. RIGHT NOW, IN THE FACE OF STAGFLATION, DO THEY CONTINUE TO RAISE RATES? THEY SAID THE DECISION TO RAISE THE DECISION TO RAISE THE DECISION. THE DECISION TO RAISE THE DECISION TO RAISE THE DECISION. THE DECISION TO RAISE THE DECISION. THE RISK TO INFLATION STILL REMAINS TO THE UPSIDE. HOW MUCH OF THIS IS DEPENDENT ON THE SITUATION WITH THE STRAIGHT OF REMOVES? HOW MUCH IS THIS COMPLETELY [01:54:16] Speaker 6: OUT OF CHRISTINE LAGARDE'S HANDS ALTOGETHER? HOW MUCH IS SHE WATCHING THE HEADLINES AND BEING LIKE, PICK ONE, GUYS. WE NEED TO COME UP WITH SOME SORT OF FORMULA FOR WHAT WE DO. CLOSE TO A DEAL OR NOT. THERE IS A LOT OF PROGRAM IN THE NEXT MOVE. JAMES JOINS US NOW FOR MORE. JAMES, WELCOME TO THE PROGRAM. WE'VE GOT THE HIGH, 25 BASIS POINTS. IT'S NOT THE NEWS. WE WERE LOOKING FOR THAT. IT'S ABOUT THE GUIDANCE FOR THE NEXT MOVE AND THE ONE AFTER THAT. HOW NEUTRAL DO YOU THINK THE [01:54:40] Speaker 29: CENTRAL BANK PRESIDENT WILL BE IN THE NEWS CONFERENCE 15 MINUTES AWAY? HI, JOHN. GOOD TO SEE YOU AGAIN. I THINK SHE WILL TRY. I THINK WE HAVE LEARNED FROM PRIOR EXPERIENCE THAT SOMETIMES MADAME LAGARDE DOES STRUGGLE WITH THE NUANCE OF THE COMMUNICATION. THERE'S DEFINITELY A CHANCE THAT THERE'S A MISINTERPRETATION. GENERALLY, WHAT WE SEE IN THOSE INSTANCES IS THAT SOMEBODY ELSE FROM THE EXECUTIVE, PROBABLY SOMEBODY LIKE PHILIP LANE, WILL COME OUT AND MODERATE THE MESSAGE AS NEEDED. BUT CERTAINLY, THIS IS A REALLY DIFFICULT, FLUID SITUATION. UNCERTAINTY AROUND THE MIDDLE EAST TODAY, LET ALONE THE FORECAST HORIZON IS INCREDIBLY HIGH. CLEARLY NO CENTRAL BANK, INCLUDING THE ECB, WANTS TO BOX THEMSELVES IN. [01:55:20] Speaker 7: JAMES, IF YOU COULD CHANNEL CHRISTINE LAGARDE WITH JUST A FEW WORDS, WHAT WOULD YOU SAY IF SHE WERE ACTUALLY GOING TO BE PITHY? [01:55:26] Speaker 29: I TRY AND SAY AS LITTLE AS POSSIBLE. I'VE GOT TO BE HONEST. I'M SORT OF IN KEVIN WASH'S CAMP IN THE SENSE THAT I THINK CENTRAL BANK COMMUNICATION HAS JUST BECOME A CACOPHONY OF NOISE AND IT DOESN'T HELP ANYONE. IT DOESN'T HELP MARKETS BECAUSE IT'S AN INCREDIBLY DIFFICULT MACRO SITUATION THAT WE'RE LIVING THROUGH. AND IT'S VERY EASY TO GET FORECAST WRONG VERY QUICKLY. AND SO COMMUNICATION BASED ON, LET'S BE HONEST, ROUGHLY A SORT OF GUESS AS TO WHAT HAPPENS TWO YEARS HENCE IS VERY LIKELY TO BE VERY WRONG VERY QUICKLY. SO I THINK SHE SHOULD SAY VERY LITTLE, EXPLAIN THAT OPTIONS ARE OPEN AND THEY STAND READY TO DO WHAT'S NEEDED. AND I THINK THAT'S BROADLY WHAT SHE WILL DO. [01:56:05] Speaker 7: DOES IT MAKE SENSE TO YOU, JAMES, THAT YOU HAVE AN ECB THAT'S FACING BOTH A GROWTH SHOCK AND A PRICE SHOCK MORE SIGNIFICANTLY THAN THE UNITED STATES, THAT THEY'D BE HIKING RATES AT A TIME WHERE THE U.S. WITH ROBUST GROWTH AND LESS OF A PRICE SHOCK BUT STILL A SIGNIFICANT ONE, WOULD YOU EVEN CONSIDER A RATE HIKE IN THE NEAR FUTURE? [01:56:25] Speaker 29: HOW LONG HAVE YOU GOT, LISA? THE ANSWER TO THAT QUESTION, I COULD BE HERE FOR ABSOLUTELY HOURS. I'M GOING TO SLIGHTLY PUSH BACK ON SOMETHING YOU SAID JUST A FEW MINUTES AGO WHEN YOU SORT OF EXPLAINED THAT THIS MIGHT BE TO DO WITH THE ECB'S SINGLE MANDATE. I THINK POTENTIALLY, IF THAT IS THE CASE, THAT'S ECB REALLY MISINTERPRETING THEIR OWN MANDATE TO A SIGNIFICANT DEGREE. BECAUSE IF YOU BELIEVE ANY OF THE THEORIES AND MODELS THAT THESE CENTRAL BANKS USE, THEN INFLATION OVER THE LONG TERM, OVER THE FORECAST HORIZON, IT'S GOING TO BE A FUNCTION OF THESE SORT OF GROWTH, POTENTIAL GROWTH, NATURAL RATE, NEUTRAL RATE, UNEMPLOYMENT SITUATION. SO ALL OF THE BROAD ECONOMIC SITUATION, OF COURSE, HAS TO FEED BACK INTO THE INFLATION OUTLOOK OVER A POLICY-RELEVANT HORIZON. I THINK THE GET OUT FOR A LOT OF THESE CENTRAL BANKS IN RECENT YEARS HAS BEEN INFLATION EXPECTATIONS. I'M A BIG SELLER OF THAT AS A SIGNIFICANT DRIVER. REALLY WHAT MATTERS IS THE LABOUR MARKET, LABOUR MARKET STRENGTH, AND NOT JUST WHAT PEOPLE THINK ABOUT INFLATION, BUT THE EXTENT TO WHICH THEY CAN ACT ON THAT, I.E. CAN WORKERS DEMAND HIGHER WAGES. THAT IS WHERE TODAY COULD NOT BE REALLY ANY MORE DIFFERENT FROM THE SITUATION IN 2022, WHERE IT WASN'T JUST RUSSIA, UKRAINE, AND THE ENERGY SHOCK. THAT CAME ON TOP OF JUST A CRAZY SITUATION OF CLOSING AND THEN RE-OPENING THE GLOBAL ECONOMY AND MASSIVE, MASSIVE CYCLICAL FORCES. [01:57:43] Speaker 6: JAMES, I'VE GOT TO JUMP IN. GOT SOME HEADLINES COMING FROM THE PRESIDENT. LET'S GET TO THIS SOCIAL MEDIA POST FROM THE PRESIDENT. THE LANGUAGE IS CHANGING QUICKLY IN THE LAST 24 HOURS. THE UNITED STATES WILL BE HITTING IRAN, WHOSE NAVY AIR FORCE WILL BE HAPPENED. HE SAYS, WE WILL BE TAKING CARG ISLAND AND OTHER OIL INFRASTRUCTURE POINTS AND ASSUME TOTAL CONTROL OF THEIR OIL AND GAS MARKETS, MUCH LIKE WE HAVE WITH VENEZUELA, WHICH IS WORKING OUT BRILLIANTLY FOR BOTH VENEZUELA AND THE UNITED STATES OF AMERICA. SO, THEY ARE THE WORDS OF THE PRESIDENT THIS MORNING. THIS IS THE MOVE. BRENT CRUDE WAS A LITTLE BIT LOWER, NOW IT'S A LITTLE BIT HIGHER. IT'S A MAJOR MOVE. WE ARE CLOSE TO 94, WTI IS AROUND 91. BUT THEY ARE PRETTY BIG HEADLINES FROM THE PRESIDENT THIS MORNING ABOUT TAKING CARG ISLAND, TALKING ABOUT THAT IN A WAY THAT WE HAVEN'T HEARD HIM TALK ABOUT IN QUITE A WHILE. [01:58:37] Speaker 8: THESE ARE VERY BOLD STATEMENTS AND IT'S A U-TERN FROM THE PRESIDENT SAYING WE COULD SEE A PEACE AGREEMENT IN TWO TO THREE DAYS, POTENTIALLY, AND OFF THE HEELS OF THE UNITED STATES ALREADY HAVING FRESH STRIKES WHEN IT COMES TO GOING AFTER IRGC TARGETS. THE PRESIDENT IS SAYING THEY ARE WILLING TO TAKE CARG ISLAND. OBVIOUSLY, THIS IS SOMETHING WE DISCUSSED MONTHS AGO WHEN THE CONFLICT FIRST BEGAN. THE PRESIDENT IS NOW SAYING NOT ONLY THAT IS GOING TO HAPPEN, THEY ARE GOING TO BE HITTING THEM VERY HARD. POTENTIALLY, OIL IS NOT MOVING THAT MUCH HIGHER FOR THE FACT THAT, YOU KNOW WHAT, JONATHAN, WE HAVE BEEN HERE A FEW TIMES WITH THREATS FROM THE PRESIDENT, BUT AT SOME POINT, YOU CAN'T BE THE BOY THAT CRY WOLF ALL THE TIME. [01:59:12] Speaker 6: JAMES ATHEE IS STILL WITH US. JAMES, HOW MUCH WEIGHT DO YOU PUT ON THOSE HEADLINES THIS MORNING? [01:59:18] Speaker 29: AGAIN, THIS IS LIKE -- THIS IS REALLY, REALLY DIFFICULT BECAUSE WE HEAR SO MUCH FROM THE PRESIDENT, HE CONFUSES AND CONTRIBICS HIMSELF. BUT WHAT I WILL SAY, AND I THINK YOUR OWN HAVIA BLAST WROTE AN INTERESTING PIECE ON THIS, AND IT'S A DYNAMIC WHICH IS BEING INCREASINGLY TALKED ABOUT, IS THAT ACTUALLY IT LOOKS LIKE THE SUPPLY RESPONSE AND THE DEMAND RESPONSE ARE MUCH CLOSER. SO WE'VE HAD THIS MASSIVE NEGATIVE SUPPLY SHOCK, OF COURSE, BUT IT SEEMS THAT THE WORLD ECONOMY HAS BEEN ABLE TO DIAL DOWN THAT DEMAND PICTURE SIGNIFICANTLY. SOME OIL IS GETTING THROUGH THE STRAITS IN A WAY THAT WE DON'T YET UNDERSTAND, BUT PARTICULARLY CHINA, THE EXTENT TO WHICH THEIR IMPORTS OF OIL AND OIL PRODUCTS HAS PLUMMETED, HAS REALLY HELPED TO BALANCE THE MARKET, AND I THINK THAT'S WHAT TRUMP IS RESPONDING TO. [02:00:03] Speaker 6: I THINK THAT IS GOING TO PARTICULARLY. THIS ADDS AN EXTRA WRINKLE TO A NEWS CONFERENCE WITH THE ECB PRESIDENT IN THE NEXT 20 MINUTES OR SO. THE ECB HIKING INTEREST RATES 25 BASIS POINTS, THE PRESIDENT CLAIMING HE WILL HIT IRAN HARD AND VERY HARD, AND AT SOME POINT IN THE NOT TOO DISTANT FUTURE, TAKE CARG ISLAND. [02:00:26] Speaker ?: WE'LL GET INTO THE DETAILS IN JUST A MOMENT FROM NEW YORK CITY. YOU ARE WATCHING BLOOMBERG TV. [02:00:33] Speaker 6: THANK YOU FOR JOINING US. APRIL 17, THE PRESIDENT TOLD US THE STREET OF HUMURS WAS ABOUT TO REOPEN. IT DIDN'T. WE HAVE BEEN TOLD REPEATEDLY WE ARE GETTING CLOSER AND CLOSER TO A DEAL. WE HAVEN'T GONE ONE. THE PRESIDENT MOMENTS AGO SAYING THE U.S. WILL HIT IRAN VERY HARD AND HE WENT ONE STEP FURTHER. AT SOME POINT IN THE NOT TOO DISTANT FUTURE, WE WILL BE INVOLVING THE STREET OF AMERICANS IN JUST A MOMENT. MOMENTS AGO, A 25 BASIS POINT HEIGHT FROM THE ECB, A NEWS CONFERENCE 15 MINUTES AWAY, SOME DATA THIS MORNING IN AMERICA, [02:01:14] Speaker 30: AND PPI COMES IN HOTTER THAN EXPECTED. MIKE MCKEY HAS MORE. MIKE MCKEY HAS MORE. MIKE MCKEY: EXPECTED TO FALL OFF A LITTLE BIT TO 7/10 OF A PERCENT GAIN. SO FOR YEAR OVER YEAR, WE'RE AT 6.5% NOW FOR PPI FOR FINAL DEMAND. THE CORE RATE IS UP 4/10 ON THE MONTH, AND THAT PUTS IT UP 4.9% FOR THE YEAR. AND THE CORE X TRADE IS UP BY 5.1%. THE CORE X TRADE IS UP BY 3/10 OF A PERCENT. THE CORE X TRADE IS UP BY 3/10 OF A PERCENT. THAT'S THE CATEGORY THAT INCLUDES MARGINS FOR WHOLESALERS AND RETAILERS. THE BIG ISSUE IN APRIL WAS THAT WE SAW A BIG JUMP IN SERVICES PRICES. AND THEY'RE SAYING THIS MONTH THAT IT'S A 2.8% RISE IN GOODS PRICES, PRICES FOR FINAL DEMAND SERVICES ONLY UP 3/10 OF A PERCENT. SO THIS IS PROBABLY -- AND I CAN CHECK THIS VERY QUICKLY, BUT I'M SURE THIS IS BASICALLY ENERGY PRICES GOING UP. THIS IS INTERESTING. FINAL DEMAND GOODS UP 2.8% IN MAY, THE LARGEST INCREASE SINCE THE DATA WERE FIRST CALCULATED IN DECEMBER OF 2009. 80% TRACE TO A 10.7% JUMP IN PRICES FOR FINAL DEMAND ENERGY. SO THE HEADLINE THAT CAUGHT MY EYE FROM THE ECB WAS THAT THE WAR IS CREATING INFLATION PRESSURES IN EUROPE. CERTAINLY SEEMS TO BE DOING [02:02:45] Speaker 6: THE SAME HERE. MIKE MCKEE, THANK YOU. WE'LL COME BACK TO YOU IN JUST A MOMENT. NOT A GREAT MIX. THE WRONG KIND OF UPSIDE SURPRISE ON CLAIMS AS WELL. THAT CAME IN AT 2.29. THE ESTIMATE WAS 2.20. PREVIOUSLY, 2.25. HISTORICALLY, STILL VERY LOW IN THE 2.20s, BUT NOT A GREAT MIX. WHEN YOU LOOK AT PPI COMING IN HOTTER THAN EXPECTED THIS MORNING. [02:03:03] Speaker 7: TO THE IDEA THAT THE U.S. IS COMPLETELY DISTINCT FROM EUROPE, THIS IS STAGFLATIONARY LIGHT. ON THE MARGINS, NOT STAG LIGHT, BUT THE IDEA THAT YOU'RE HAVING SLOWING GROWTH OR POTENTIALLY A SLIGHT INCREASE IN JOBLESS CLAIMS WHILE ALSO SEEING THE HIGHEST PRODUCER PRICES OR PRODUCER PRICES RISING AT THE FASTEST PACE SINCE 2022, GIVES YOU A SENSE OF WHAT WE'RE DEALING WITH HERE. DO WE REACH THAT TIPPING POINT WHERE THE U.S. CONSUMER CAN'T KEEP PACE? [02:03:28] Speaker 6: WE'RE FACING AN ENERGY SHOCK BECAUSE OF THE SITUATION IN THE MIDDLE EAST. THE EXTRA WRINKLE THIS MORNING, THIS STATEMENT FROM THE PRESIDENT JUST MOMENTS AGO OUT ON SOCIAL MEDIA, I'LL SHARE THE QUOTE WITH YOU. "THE UNITED STATES WILL BE HITTING IRAN VERY HARD TONIGHT. AT SOME POINT IN THE NOT TOO DISTANT FUTURE, WE WILL BE TAKING CARG ISLAND AND OTHER OIL INFRASTRUCTURE POINTS AND ASSUME TOTAL CONTROL OF THEIR OIL AND GAS MARKETS." TYLER KENDALL, TRACKING THE STORY. HEY, TYLER. [02:03:55] Speaker 12: HEY, JOHN. CLEARLY A SIGNIFICANT THREAT AND ESCALATION THAT'S BEEN PUT ON THE TABLE FROM PRESIDENT TRUMP, BUT ALSO ONE THAT WE'VE HEARD FROM THE WHITE HOUSE BEFORE. WE HAVE TO KEEP IN MIND THAT ABOUT 90% OF IRANIAN CRUDE EXPORTS FLOW THROUGH CARG ISLAND. AND WHILE THE COUNTRY DOES HAVE OTHER EXPORT TERMINALS, NONE ARE CONSIDERED TO MATCH THE SORT OF CAPACITY THAT CARG ISLAND FILTERS THROUGH EVERY DAY. THIS IS RAISING QUESTIONS THOUGH ABOUT WHAT THIS ACTUAL OPERATION WOULD INVOLVE, INCLUDING WHETHER THAT WOULD MEAN AMERICAN BOOTS ON THE GROUND. WE'VE PREVIOUSLY HEARD THE ADMINISTRATION FLOAT THE IDEA THAT IF THEY HAD TOTAL CONTROL OVER THE AIR, THAT MAY MAKE SUCH AN OPERATION SAFER ACTUALLY GOING INTO CARG ISLAND. BUT WE'LL GOING TO HAVE TO SEE HOW THIS ACTUALLY PLAYS OUT. AS WE KNOW THAT SIGNIFICANT RISKS STILL REMAIN WHEN IT COMES TO THE STRAIGHT OF HOMEWS. AND AS IRAN THREATENS THAT IT IS ONLY GOING TO TIGHTEN ITS GRIP OVER THE WATERWAY. A STATEMENT FROM THE IRGC OVERNIGHT SAYING THAT THEY WERE GOING TO STOP ALL COMMERCIAL SHIPPING AS THEY RAMP UP THEIR OWN THREATS IN RESPONSE TO THE U.S.'S AIR STRIKES OVERNIGHT. JON, AT THIS POINT WE'LL HAVE TO SEE WHERE IT GOES. THIS HAS LONG BEEN IN PRESIDENT TRUMP'S SIGHTS OF COURSE. AND JUST YESTERDAY THE ADMINISTRATION DID CONFIRM THAT IT IS TRYING TO HELP MORE OIL GET THROUGH THE WATERWAY. PRESIDENT TRUMP SAYING THAT SO FAR THE U.S. HAS GUIDED NEARLY 200 VESSELS SINCE THE CEASE FIRE BEGAN. THANK YOU. THIS WAS A MARCH [02:05:15] Speaker 6: APRIL CONVERSATION. IT IS JUNE AND IT IS BACK ON THE TABLE WHEN MOST PEOPLE IN THIS MARKET BELIEVE AND MANY STILL DO THAT THIS PRESIDENT IS COMMITTED TO DEESCALATION AND NOT A RESUMPTION OF HOSTILITIES. THE PRESIDENT CONTINUOUSLY [02:05:27] Speaker 8: DOES SAY THIS CAN END THE EASY WAY LIKE A PIECE OF PAPER AT THE NEGOTIATING TABLE OR A HARD WAY. HAS HIS PATIENTS WORN TOO THIN RIGHT NOW AND HE IS WILLING TO BEGIN HOSTILITIES ONCE AGAIN. YOU HAVE TO LOOK NOW AT THE DIRECTION OF TRAVEL NOT WHAT HE SAYS BUT ACTUALLY WHAT HE DOES. WHAT DOES HAPPEN OVERNIGHT AND WHAT HAPPENS IN THE NEXT FEW DAYS AND WEEKS TO THE UNITED STATES MAKE A MOVE ON KARG ISLAND AND THEN WE WILL REALLY KNOW THE DIRECTION OF TRAVEL FOR THIS ADMINISTRATION. ALL THESE STORIES GO TOGETHER. [02:05:53] Speaker 6: PPI COMING IN HOTER THAN EXPECTED OFF THE BACK OF AN ENERGY SHOCK. THE PRESIDENT TALKING ABOUT GOING INTO IRAN AND TAKING KARG ISLAND. WHAT THAT LOOKS LIKE I HAVE NO IDEA. BUT THREATENING TO DO JUST THAT. THAT COULD EXACERBATE THE ENERGY SHOCK THAT WE SEE IN THE DATA ALREADY. WHERE DOES IT LEAVE THE CENTRAL BANKS? CAN THEY LOOK THROUGH ALL OF THIS? THIS IS A SIGNIFICANT MOMENT. NOT ONLY IS THIS THE FIRST ECB HIKE SINCE 23, IT IS ALSO THE FIRST HIKE BY ONE OF THE MAJOR GLOBAL CENTRAL BANKS IN RESPONSE TO THE ENERGY SHOCK THAT WE ARE DISCUSSING. THE ECB IS SAYING THAT A LOOK THROUGH STRATEGY IS NOT A ROBUST RESPONSE. NEILA RICHARDSON OF ADP IS WITH US AROUND THE TABLE. NEILA, GOOD MORNING. GOOD MORNING. CAN YOU MAINTAIN A LOOK THROUGH STRATEGY AS A CENTRAL BANKER RIGHT NOW? [02:06:37] Speaker 31: RIGHT NOW LOOKING THROUGH IS LOOKING AS CLEAR AS MUD. WE'RE SEEING THE INFLATION PICK UP IN THE GOODS SECTOR. THAT IS A SECTOR THAT HAD BEEN HAVING SOME STABILITY IN TERMS OF INFLATION. THE INFLATION WAS IN THE SERVICE SIDE. AND IF I COULD LINK THE PPI WITH THE CPI FROM YESTERDAY, WE ALSO SAW A PICK UP IN HOUSING INFLATION. REMEMBER HOUSING INFLATION WAS DOMINATING THAT PRINT JUST A YEAR AND A HALF AGO. SO IF YOU'RE SEEING A RISE IN HOUSING AND A RISE IN GOODS INFLATION, THAT IS A NOTABLE CHANGE. AND I THINK IT'S GOING TO BE HARD TO LOOK AROUND. [02:07:13] Speaker 7: JOHN WAS TALKING ABOUT MARK WALL FROM DEUTCHE BANK. HE WENT ON TO SAY THE QUESTION IS HOW FAR CAN THE TIGHTENING CYCLE GO? AND HE'S TALKING ABOUT THE EUROPEAN CENTRAL BANK. HE SAID NOT FAR BECAUSE WHILE THERE IS UPSIDE RISK TO INFLATION, THERE'S DOWNSIDE RISK TO GROWTH. IS IT THE SAME HERE IN THE UNITED STATES OR RIGHT NOW BASED ON WHAT YOU'RE SEEING IN THE LABOR MARKET, IS THERE POTENTIALLY UPSIDE TO GROWTH THAT PEOPLE ARE NOT PRICING IN? [02:07:33] Speaker 31: THE STARTING PORT HERE IN THE UNITED STATES IS EXCEPTIONAL. AND IT HAS BEEN FOR YEARS. THERE IS -- THERE'S SOMETHING ABOUT THIS ECONOMY THAT KEEPS WANTING TO GROW. DESPITE UNCERTAINTY, DESPITE GEOPOLITICAL CONFLICT. IT KEEPS GROWING. AND THAT'S CERTAINLY TRUE IN THE LABOR MARKET. WHEN YOU LOOK AT ALL PHASES OF THE LABOR MARKET, WHETHER IT'S -- WELL, LET'S JUST FOCUS ON PAY. THE PAY RATE HAS BEEN VERY STABLE. THERE'S NO SENSE OF ANY KIND OF INFLATIONARY CYCLE GOING ON IN WAGES. AND FIRMS ARE HIRING. WE SAW TWO MONTHS OF BACK-TO-BACK SOLID PRINTS. SO IT'S HARD TO SAY THAT THE LABOR MARKET IS FEELING THE TENSION THAT WE'RE SEEING GEOPOLITICALLY. BUT THERE IS SOME SIGNS THAT CONSUMERS ARE WITHDRAWING A BIT. THEY ARE RESPONDING TO HIGHER GAS PRICES. AND HOW THEY LOOK THROUGH GAS PRICES IS REALLY THE QUESTION. NOT WHAT THE FED CAN LOOK THROUGH, BUT WHAT CAN MAIN STREET LOOK THROUGH WHEN IT COMES TO SUMMER TRAVEL. [02:08:28] Speaker 7: WELL, TO THAT POINT, IT'S CONNECTED TO THE JOBS PICTURE. WE'VE BEEN HEARING ALL MORNING THAT ULTIMATELY WE'RE AT A TIPPING POINT WHERE EITHER WAGES GO UP OR SPENDING COMES IN SIGNIFICANTLY. WHICH IS IT? [02:08:39] Speaker 31: WELL, IF YOU LOOK AT WAGES, THEY ARE GOING UP. THEY ARE GOING UP YEAR OVER YEAR AT A REALLY STEADY CLIP. AND IN FACT, IF YOU LOOK AT BASIN GROSS, THEY CONTINUE TO GROW. BUT WHERE THEY'RE REALLY SURGING, IRONICALLY OR MAYBE RELATEDLY, IS IN THE GOOD SECTOR. WHEN I LOOK AT WAGES FOR JOB CHANGES IN CONSTRUCTION, NATURAL RESOURCES AND MANUFACTURING, THEY'RE ALL DOUBLE-JIDGETS AND THEY'RE ALL HIGHER IN TERMS OF THEIR ACCELERATION RATE THAN THEY WERE LAST YEAR. WHEN I LOOK AT SERVICES, FLAT TO DECLINING. SO WE ARE SEEING A LITTLE BIT OF AN INPULSE TIED TO LABOR SHORTAGES IN THE GOOD SECTOR. AND YOU MATCH THAT WITH WHOLESALE PRICES TODAY, YOU'RE STARTING TO SEE THESE THINGS COME TOGETHER IN A WAY THAT YOU'D RATHER THEY STAY APART, WHICH IS AN ACCELERATION IN PRICE POINTS. [02:09:27] Speaker 8: ARE WAGES GOING UP OR BONUSES GOING UP? [02:09:29] Speaker 31: RIGHT NOW, JUST WAGES. AND, WELL, SORRY. RIGHT NOW, BONUSES. FIRMS ARE REALLY RELUCTANT TO CUT WAGES. AND SO THEY'D RATHER, TO KEEP THEIR TALENT, ESPECIALLY IN LABOR SHORTAGES, THEY'D RATHER JUST GIVE A BONUS. BUT THE MORE SUSTAINED THAT SHORTAGE IS, THEY'RE GOING TO HAVE TO RESPOND WITH A MORE PERMANENT LURER, AND THAT'S GOING TO BE AN INCREASE IN THE BASE PAY. AND THAT, YOU KNOW, THAT'S PERMANENT. AND EVERY OTHER BONUS IS BASED ON BASE. SO THAT INCREASES LABOR COSTS BROADLY. FIRMS ARE RELUCTANT TO DO THAT. THAT'S KIND OF THE LAST RESORT. BUT YOU MIGHT START SEEING THAT OVER THE SUMMER IF THESE LABOR SHORTAGES IN THE GOOD SECTOR CONTINUE. [02:10:11] Speaker 6: ALWAYS GOOD TO SEE YOU. IF YOU LOOK AT THE MARKET, THE MARKET IS NOT REALLY BLINKING IN THE FACE OF SOMEBODY'S WRISTS RIGHT NOW. STILL POSITIVE ON THE SESSION, RAISING SOMEBODY GAINS, BUT STILL UP BY A THIRD OF 1% ON THE S&P 500. IF YOU CHECK OUT THE BOND MARKET, FRONT END OF THE YIELD CURVE, YIELDS ARE UP BY A SINGLE BASIS POINT, JUST 415. AND AS FOR CRUDE, WCI AND BRENT UP BY NOT EVEN 1% OFF THE [02:10:37] Speaker 7: BACK OF THOSE HEADLINES FROM THE PRESIDENT. THERE ARE SO MANY DIFFERENT THINGS BEING THROWN AT THE MARKET AND THE MARKET. IT ALMOST FEELS LIKE, YOU KNOW, WHEN YOU HAVE ALL THE PISTONS FIRING LIKE THIS, AND EVERYTHING JUST GOES STRAIGHT. IT'S SORT OF LIKE THE PADDLING DUCK. AT WHAT POINT ARE PEOPLE SORT OF UNABLE TO PRICE IN ONE DIRECTION BECAUSE THERE ARE SO MANY NARRATIVES THAT ARE COMPETING WITH ONE ANOTHER? WHAT NILO WAS JUST SAYING ABOUT THE INFLATIONARY IMPULSE IS IMPORTANT, AND IT LOOKS LIKE A LOT OF PEOPLE ARE GOING THROUGH THIS. [02:11:05] Speaker 6: NOT NECESSARILY THE ECB THAT IT'S LOOKING AT A LOT OF [02:11:07] Speaker ?: DOWNSIDE RISKS TO GROWTH. [02:11:07] Speaker 30: MIKE MCKEE STILL STANDING BY GOING THROUGH THE DATA. MIKE, HAVE YOU GOT MORE? WHAT DO YOU SEE ON A SECOND [02:11:11] Speaker ?: LOOK? [02:11:11] Speaker 30: I THINK THE THING THAT REALLY STANDS OUT TO LOOKS AT THE END OF THE COUNTRY, AND IT'S NOT HOT, INCLUDING A VERY BIG INCREASE IN DIESEL PRICES. THAT'S TO BE EXPECTED. BUT IT LOOKS LIKE WE'RE STARTING TO SEE SOME OF THESE WAR-RELATED COSTS SPREAD BEYOND THE ENERGY SECTOR IN FINAL DEMAND GOODS. WE'RE SEEING IT IN PLASTICS, WE'RE SEEING IT IN MATERIALS, INDUSTRIAL CHEMICALS, AND NATURAL GAS LIQUIDS ALSO ROSE. SO THIS IS THE KIND OF THING THAT THE FED HAS BEEN MORE AFRAID OF, THAT IT'S NOT JUST A PASSING ENERGY THING, THAT IT'S NOT JUST A PASSING ENERGY THING, BUT IT'S NOT JUST A PASSING ENERGY THING, BUT IT'S NOT JUST A PASSING ENERGY TO OTHER PARTS OF THE ECONOMY. WE ALSO SAW A BIG RISE, 4.8% IN THE PORTFOLIO MANAGEMENT SERVICES AREA, WHICH DOES FEED INTO THE PCE. SO GOOD NEWS FOR JAMIE DIAMOND AND HIS FRIENDS ON WALL STREET. BAD NEWS FOR THE FOLKS WHO [02:12:00] Speaker 6: ARE TRACKING INFLATION FROM THE PCE TARGET SIDE. JAMIE DIAMOND AND HIS FRIENDS ON WALL STREET MAKING LOTS OF MONEY FROM A CERTAIN IPO. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. [02:12:28] Speaker 7: THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. IT STARTS TO TRAIN TOMORROW. THE IDEA OF RETAIL INVESTOR PARTICIPATION GOES TO THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. THE FRIENDS ON THE PCE TARGET SIDE. IT HIGHLIGHTS THE DIFFERENT COMPOSITION OF THE INVESTOR BASE OF THIS PARTICULAR ISSUE. WHETHER IT COMES TO RETAIL INVESTORS OR THE GENERAL [02:12:54] Speaker 6: FRIENDS ON THE PCE TARGET SIDE. WHAT A MOMENT FOR FINANCIAL MARKETS WORLDWIDE. WE ARE GOING TO SEE ONE OF THE BIGGEST IPOs WE HAVE EVER SEEN. IF NOT THE BIGGEST IPO WE HAVE EVER SEEN IN THE NEXT 24 HOURS. WE ARE PUSHING A LOT OF EQUITY DOWN THE THROAT OF THIS EQUITY MARKET AT A TIME WHERE PRICES STARTED TO RISE. OFF THE BACK OF AN INFLATION SHOCK THAT MIGHT BE EXACERBATED FURTHER BY PRESIDENTIAL ACTION. AND CENTRAL BANKS ARE STARTING TO RESPOND. THE FIRST MAJOR CENTRAL BANK, THE ECB, HIKING RATES BY 25 BASIS POINTS. WE ARE LOOKING AT THE INFLATION MARKETS RIGHT NOW. WE ARE LOOKING AT THE INFLATION MARKETS RIGHT NOW. WE ARE LOOKING AT THE INFLATION MARKETS RIGHT NOW. [02:13:29] Speaker 32: DO WE HAVE THE SPACE FOR ALL OF THIS? ARE THESE CENTRAL BANKS GOING TO SIT BY AND WATCH? OR WILL THEY FOLLOW WHAT THE ECB HAS JUST DONE? I THINK THE FEDERAL RESERVE IS GOING TO PUSH AND PULL HERE BECAUSE THERE ARE A LOT OF DOVES WHO ARE LOOKING AT SOME UNDERLYING INFORMATION AND DATA IN THE LABOR MARKET AS WELL AS SOME OF THIS INFLATION DATA AND SUGGESTING THAT THIS IS THE PEAK. WE HAVE TO KEEP IN MIND THAT THEY ARE GOING TO BE INFLATION MARKETS RIGHT NOW. WHEN YOU EVEN LOOK AT THE INFLATION MARKETS RIGHT NOW AND YOU LOOK AT WHAT THE MARKET IS PRICING, THIS IS SUPPOSED TO BE THE HIGH THIS MONTH IN MAY AND THEN IT WILL MODERATE OVER THE COURSE OF TIME. THE MARKET WILL BE SIT ON ITS HANDS FOR MOST IF NOT ALL OF THIS YEAR. BUT I THINK THERE IS THE INCREASING RISK THAT IF THE ECONOMY DOES REMAIN GOOD AND WAGES CONTINUE TO CLIMB AT A REASONABLY DECENT PACE THAT THE FED'S NEXT MOVE MIGHT BE A HIKE. IT MIGHT NOT BE UNTIL 2027 BUT THE MARKET IS GOING TO PRICE THAT WELL IN ADVANCE. [02:14:20] Speaker 6: WHAT IS YOUR REACTION TO THE ECB THIS MORNING? YOU HAVE BEEN AROUND FOR A WHILE. WE REMEMBER THE HIKES FROM 2011, 2008. DO YOU THINK THEY SHOULD BE CONDITIONED BY THAT? THE MISTAKE THEY MADE ALL THOSE YEARS AGO OR CONDITIONED BY HOW SLOW THEY WERE COMING OUT OF THE [02:14:36] Speaker 32: PANDEMIC? I THINK FOR THE ECB IT'S A LITTLE BIT DIFFERENT. KEEP IN MIND THEY HAVE A SINGLE MANDATE. THEIR MANDATE IS PRICE STABILITY. THEY HAVE TO TAKE THAT INTO ACCOUNT. I THINK THEY ARE NOT GOING TO BE OVERLY AGGRESSIVE, HOWEVER, BECAUSE THEY ALSO REALIZE THAT IF THEY GO TOO FAST THAT THAT COULD ACTUALLY HARM THE ECONOMY MUCH MORE. BUT THIS WAS WELL TELEGRAPHED. WE ALL KNEW THEY WERE GOING TO INCREASE RATES THIS MONTH. HUGH WORTHINGTON, MY COLLEAGUE IN LONDON WHO COVERS THE ECB, ONE OF THE THINGS THAT HE'S NOTED IS, YOU KNOW, THEIR INFLATIONARY ENVIRONMENT IS ACTUALLY MUCH WORSE THAN IT IS HERE IN THE U.S. IN MANY RESPECTS BECAUSE ENERGY IS ACTUALLY A LARGER PART OF THEIR BASKET. AND THEY DON'T HAVE AS MUCH DOMESTIC PRODUCTION AS WE DO HERE IN THE UNITED STATES. SO THERE ACTUALLY ARE SHORTAGES IN SOME PLACES AND IN SOME INDUSTRIES. SO IT IS MUCH DIFFERENT. THEY NEED TO CRIMP DEMAND A LITTLE BIT THERE IN ORDER TO [02:15:29] Speaker 6: MAKE SURE THAT THEY MEET THEIR MANDATE. GOOD TO SEE YOU. AS ALWAYS, YOU'VE TALKED ABOUT THAT REPEATEDLY, ENDLESSLY. [02:15:36] Speaker 7: WELL, YEAH, AND I APPRECIATE THAT JAMES ATHEE PUSHED BACK ON THAT, SAYING THAT IF YOU HAVE A SINGLE MANDATE, THE IDEA THAT SLOWER GROWTH IS GOING TO LEAD TO LOWER INFLATION COULD BE ACTUALLY OFFSETTING AND CREATING A DUAL MANDATE. OKAY. BUT MOVING FORWARD, THERE IS A REAL KEY QUESTION HERE, WHICH IS, IS THIS THE APPROPRIATE RESPONSE TO CRUTALED DEMAND, ESPECIALLY AT A TIME -- REMEMBER, A LOT OF THESE GOVERNMENTS ARE BORROWING MORE MONEY TO FINANCE THE GAPS IN TERMS OF HELPING PEOPLE PAY FOR MORE GASOLINE. SO, IN OTHER WORDS, IT'S NOT GOING TO NECESSARILY CREATE MORE OF A PRICE RESPONSE OR SLOW DEMAND, IT'S JUST GOING TO INCREASE THE BILL FOR ALL OF THE GOVERNMENTS THAT ARE GOING TO TRY TO PLUG THIS BY BORROWING MONEY AND THEN GIVING HANDOUTS. THIS IS A REALLY INTERESTING MOMENT. [02:16:19] Speaker 6: WHAT A CRAZY 30 MINUTES FOR FINANCIAL MARKETS. RIGHT NOW, JUST IGNORING IT ALL, FEATURES STILL JUST ABOUT POSITIVE. LET'S GET YOU AN UPDATE ON NEWS WORLDWIDE IN JUST THE LAST 30 MINUTES OR SO WITH YOUR BLOOMBERG BRIEF, BONNIE QUINN HAS MORE. [02:16:30] Speaker 10: THANK YOU, JOHN. WE'LL START WITH RECAPPING THE DATA WE JUST GOT. PRODUCER PRICES COMING IN JUST SLIGHTLY HOTTER THAN EXPECTED, 6.5% YEAR-OVER-YEAR COMPARED TO ESTIMATES FOR 6.4%. INFLATION INFLATION INFLATION INFLATION INFLATION. THE U.S. WILL BE TAKING CONTROL OF KARG ISLAND AT SOME POINT IN A TRUTH SOCIAL POST, ADDING THAT HE IS ALSO PLANNING TO ASSUME CONTROL OF THE ISLAND'S OIL AND GAS MARKETS AND VOWING TO STRIKE IRAN VERY HARD TONIGHT. THE EUROPEAN CENTRAL BANK ALSO HIKING INTEREST RATES FOR THE FIRST TIME SINCE 2023. THE CENTRAL BANK RAISING INFLATION EXPECTATIONS WHILE LOWERING GROWTH PROJECTIONS IN THE YEARS AHEAD. THE ECB PRESIDENT CHRISTINE LAGARDE SAID TO SPEAK IN JUST A [02:17:19] Speaker 6: FEW MINUTES AND THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: THANK YOU FOR THAT. IN JUST A MOMENT WE WILL TAKE THAT NEWS CONFERENCE WITH THE ECB PRESIDENT CHRISTINE LAGARDE. WE CAN TAKE PICTURES OF THAT RIGHT NOW. YOU CAN SEE THE PHOTOS THAT HAVE JUST STARTED. YOU'LL GET THE INTRODUCTORY REMARKS. WHEN IT BEGINS, WE'LL ACTUALLY GO TO IT. IN THE MEANTIME, WE'VE GOT TO TRACK THE LATEST DEVELOPMENTS INVESTMENT. WE'VE BEEN TALKING ABOUT [02:17:39] Speaker 8: INVESTMENT IN THE LAST 20 MINUTES. ONE STEP FURTHER SAYING POTENTIALLY VERY SOON WE COULD BE TAKING CARGILAND. A VIEWER MESSAGED ME AND SAID WHICH ISN'T AMERIE. IS IT WE'RE VERY CLOSE TO A DEAL WHICH THE PRESIDENT CONTINUES TO REPEAT OR ARE WE EMINENTLY ABOUT TO TAKE CARGILAND? THANK YOU FOR YOUR ATTENTION TO THIS MATTER. WE DON'T KNOW RIGHT NOW WITH THE PRESIDENT BECAUSE HE IS DOUBLING DOWN ON WANTING TO GO AFTER IRAN TODAY AFTER HIS MESSAGING YESTERDAY AS WELL AS KINETIC CONTINUES. [02:18:10] Speaker 6: THIS IS A VERY BOLD STATEMENT. AT THIS POINT YOU HAVE TO WATCH WHAT HE DOES NOT WHAT HE SAYS. BRENT CRUDE, BRING UP THE PRICES RIGHT NOW. WE'RE UP BY JUST A HALF OF 1% IN THE COMMODITY MARKET. [02:18:29] Speaker ?: I'VE TALKED ABOUT THIS LEVEL REPEATEDLY. [02:18:29] Speaker 7: 98 IS THE HIGHER THE WEEK. IT WAS ON MONDAY. THINGS HAVE GOT WORSE, NOT BETTER SINCE THEN. WE'RE TRAINING AT 93 ON BRENT. VERBAL INTERVENTION ISN'T WORKING ANYMORE. THAT'S THE TAKEAWAY. IN EITHER DIRECTION, EITHER ENOUGH TIMES WHERE IT HASN'T COME TO FRUITION THAT PEOPLE HAVE LEARNED TO IGNORE IT. AT A CERTAIN POINT THERE IS THIS FEELING THAT IT IS TO ESCALATE TO DEESCALATE AND THAT SEEMS TO BE WHAT PEOPLE ARE BANKING ON RIGHT NOW. [02:18:49] Speaker 6: HOW FAR CAN THESE TIGHTENING CYCLES GO AT CENTRAL BANKS? IT'S QUITE A MOMENT. IT'S THE FIRST RATE HIKE FROM A MAJOR CENTRAL BANK, 25 BASIS POINTS. TO YOUR POINT FROM DEUTCHE BANK THIS MORNING, NOT FAR IS THEIR ANSWER. [02:19:00] Speaker 7: THEY ONLY THINK THAT ONE MORE RATE HIKE CAN GET INTO THE PIPELINE, THAT IS IN SEPTEMBER, AND THEN AFTER THAT NOT SO MUCH AS PEOPLE LOOK TO THE DECELERATION AND GROWTH IN THE REGION. [02:19:09] Speaker 6: HOW VULNERABLE ARE THEY TO EVENTS TAKING PLACE HUSWAY RIGHT NOW? THESE HEADLINES CROSSING. THE PRESIDENT ON THE PHONE TO FOX NEWS AT THE MOMENT SAYING MY PREFERENCE HAS ALWAYS BEEN TO TAKE CARG ISLAND.