"Bull Market Could Last Through 2030:" Bartels — Open Interest 8/3/2026

[00:00:00] Speaker 1: So much for a quiet summer weekend. Stocks are higher to start the day 30 minutes until the start of your cash equity trade. I'm Danny Berger and I'm Michael McKee. Bloomberg Open Interest starts right now. Coming up on the show talk of a blockbuster pharma deal kicks off the weekend packed with earnings and macro catalysts. Oil falls as President Trump calls off strikes on Iran and says that talks on a deal are set to start again. And the U.S. and Japan stand ready to defend the yen again after their first joint intervention in 15 years. Some of the stocks that we are watching this morning big deal in the pharma space AstraZeneca down 7 percent Bristol Myers up 2.7 after the company is reportedly held early stage talks for a potential merger. That combination would create the world's biggest drug maker with about 107 billion dollars in annual revenue. Let's bring in Bloomberg intelligence senior pharmaceutical analyst Sam Fezzelli for more on this. Sam what would be the reasoning. What would be the logic behind forming such a behemoth of a drug company. [00:01:10] Speaker 2: None zero. There's really no. I mean every client that I've spoken to is looking at this saying it's either false or there's an element that that maybe they have talked to each other about a possible business combination or a part of a business combination that has been known in pharma before where you put your cardiovascular business together your oncology business together. But honestly most people are scratching their head saying this just doesn't make any sense. AstraZeneca has got very strong double digit growth going forward to 2030. Bristol Myers by their own admission because of patent expiries are not going to have that are going to have at least at best a flat period if not a declining earnings. Why would you want to merge those those two elements together. It makes sense from Bristol Myers. What sense does it make from AstraZeneca. One of the reasons I've heard for at least [00:02:05] Speaker 3: to considering this plan is that it gives each of the each of the drug makers who are based in different continents more access to [00:02:14] Speaker 2: the others. Is there anything to that. I don't buy that at all. AstraZeneca has had a fantastic time in the U.S. as it has in China as it has in Europe. And if anything. Bristol Myers has a similar business. These are international pharma companies. They're the reason to put to buy access is really a very weak reason to go and dilute your earnings growth and create this uncertainty during these times of these mega mergers which Pascal. So you have always been saying are value destroying or really don't help your pipeline is is to at best to cost cutting. The rest of it really doesn't fit together at all. And you know after doesn't need this unless there's something going on that we haven't been told. And we just had the earnings. Yeah. It looks like this market would agree with [00:03:03] Speaker 1: you. AstraZeneca getting slammed today. Your frank analysis always appreciated. That's Bloomberg intelligence is Sam Fuseli. Let's turn to one of our other top stories this morning in the Middle East Brent plunging after President Trump said new talks with Iran are beginning today. Iran also signaled progress in Oman mediated talks over shipping through the Strait of Hormuz. President Trump spoke [00:03:23] Speaker 4: yesterday after calling off plan strikes. What we're doing is we're talking to them in the form of a negotiation. It begins tomorrow afternoon. And we'll see if it's you. I'd love to do that. Save a lot of lives. Save a lot of a lot of a lot of unnecessary power to be honest with you take many many years to ever build it back. If it could. I don't think it would be even buildable back. So we've had a we had an attack that would be the biggest attack since World War Two. [00:03:53] Speaker 1: Joining us now from London is Bloomberg Middle East editor John Boker. John it's a pattern that we're used to threat of escalation from the president and then a backing off. To what degree is there a diplomatic off ramp at the moment. [00:04:06] Speaker 5: It's a good question. I mean Trump preferred to talks yesterday. But it's never quite clear what kind of talks he's referring to and at what level they'd be there. They're being held. The one set of talks we do know is happening is between Iran and Oman about how to manage the Strait of Hormuz. And we're sort of waiting to which we're trying to get some breaking news on exactly what they will let what they will end up agreeing and whether that will be enough to keep the U.S. on side. So to buy more time for whenever you know more formal talks can resume again. But it's been some weeks since we've heard about major formal talks taking place. And that hasn't [00:04:48] Speaker 3: doesn't really look like starting today either. Well does Oman want to also charge fees the way Iran does. In other words if they agree to do that both countries then how does the U.S. get anything out of this. Well that's that's a good question. [00:05:06] Speaker 5: And the the the final proposal which they which they will come up with will detail whether they're going to charge fees and to who and how much. But ultimately what it is about is Iran wanting to retain some kind of control over Hormuz. Oman's obviously geographically the other side. So they have to be involved. And what the U.S. wants is for Iran to to revert the Strait back to how it was before February 28th and this war starts. But at the moment that looks like a very distant [00:05:37] Speaker 1: prospect. All right. John thank you very much for joining us. That's Bloomberg's John Boker. Now plenty of attention also on currency markets this morning after a rare joint intervention between Japan and the U.S. sent the yen sharply higher. Let's discuss with Bloomberg macro strategist Cameron Christ Cameron a lot to unpick here. For one it's not exactly like there was a lot of volatility to step in. The sell off had been quite orderly. And to the U.S. decides to do this in euros. What do you make of this joint [00:06:04] Speaker 6: intervention. Yeah. I think it says it's more about the level of the end than than the rate of change. Normally the rate of changes is a primary consideration. But you know we got as high as what 164 or something in in dollar yen the other the other week. And that's I mean you're you're talking 30 plus year and then 40 plus year year highs for a country like the U.S. that's trying to narrow its trade deficit. That's that that makes it that makes it quite difficult. And for for Japan that is struggling with an inflation problem is struggling with the problem of how to manage the long end of its of its of its of its government bond curve given inflation and given the impact of the currency on inflation. I you know it kind of it kind of makes sense in that regard. Now why the U.S. has done euros is an interesting question. And I'll be honest I'm not really sure why they've decided to do that because it's not like the euro is massively out of line in in either direction. So we would have seemed to have made more sense I think for the U.S. to to have sold dollars because after all the U.S. has a dollar [00:07:24] Speaker 3: printing press. Well most of the explanations for why this joint intervention took place focus on the idea that the Bank of Japan needs to raise interest rates faster because the interest rate differential is causing the end to fall. But there also is an argument isn't there that the flows from Japan have been heading overseas for many many years. The retirement flows the government investments and they need to change some of their domestic policies to try to keep money at [00:07:54] Speaker 6: home. Yeah. I mean it's absolutely the case that the a the BoJ has been raising interest rates but in an extremely measured fashion. They met at the end of last week. And while they signaled that they're going to go in September. I mean they could have they could easily have gone. They could easily have gone last last last last week. You you also make a very good point about the lack of home bias when it comes to government bond investors. And what's interesting is that for domestic Japanese bond investors to to capture higher yields say in the Treasury market. They can't hedge the currency if they do that because essentially they lock in a negative interest rate. Certainly a lower interest rate relative to what they can get at home. And so the alternative is to buy treasuries and other foreign bonds on an unhedged basis which obviously has a currency implication. They buy dollars. They buy euros whatever. And they don't bring the money back. They don't hedge the currency back into the end. And that is one of the reasons why we've seen this this move in the end as well as sort of the negative terms of trade shock from higher energy prices resulting from some of this this Middle East stuff. Now there has been some speculation that the GPIF which is the big you know huge public pension fund in Japan is going to alter its asset allocation to a higher J.G.B. weight. And the thinking is is that the private sector pension industry would follow suit if they do that. That would certainly encourage less of an outflow from Japan to other to other bond markets. And when on the margin obviously would would imply an inflow if they reduce their foreign bond holdings to bring the money back home. Now what that might mean for the Treasury market is is another question. And there the answer might not be so so pleasant for for for Scott Besson and his colleagues at the U.S. [00:10:11] Speaker 1: Treasurer. All right Cameron. Thank you very much for joining us. A lot to unpack Bloomberg's Cameron Christ. And Mike the other thing that I know kept you busy this weekend is what we heard the reporting from The New York Times originally that we might see fewer meetings from worse floating what just six a year. Just how much would that transform things if that's what we got from. It would transform things a lot because there's a rhythm to now what the Fed [00:10:32] Speaker 3: is doing and when they're doing it that the markets are accustomed to. And they would have to get used to having fewer meetings. They're talking about four for monetary policy and two that would not involve policy making. And if they just did that then are they reacting in real time to what's going on. And will that mean we would have more surprise meetings and announcements of rate moves that just come in the middle in [00:10:58] Speaker 1: between all of that. How would the rest of the FOMC feel because I was struck by John Williams talking to Reuters saying I never liked the phrase that the markets are doing the work for us because I know that we have to do the work ourselves. Feels like a direct challenge to the chair. Well [00:11:11] Speaker 3: Mark Cabana was on surveillance this morning and he had a brilliant comment. He said if you don't tell us what you're going to do. And we he means reaction function not forward guidance then the bond is not going to listen to you. It's not going to believe you. And the bond is never wrong. And so I think that the market is trying to push back hard on this and we shall see how far this idea goes. August 19th Fed minutes and we may learn more about what they talked about. Mike it's so great to have you all week and what a week [00:11:44] Speaker 1: also to have you on board. I know we're also going to get a lot of jobs data. We'll cover that throughout the hour. But first let's get a check on your markets 20 minutes to go until the start of your cash equity trade. We rebound this morning a tepid one. But we are up six cents of one percent for the S&P 500 after we ended higher last week despite the fact that semis were lower tenure yields get some reprieve with the price of oil dropping 5.6 percent. Again it's what we're speaking with John Broker about the idea that Trump is no longer going to attack Iran at least for now in hopes of an off ramp to diplomacy. That's going to look at some of the other [00:12:16] Speaker 7: things. We'll see you next time. We'll see you next time. We'll see you next time. Good morning. Good morning guys looking at shares of Marriott right now pointing lower by about 2.8 percent. This comes after the company gave a forecast that fell short of expectations on Wall Street. Still peers like Hilton Hyatt. We're still seeing travel demand that remains resilient across some of these companies. But strength in North America really offsetting the weakness that we've seen sparked by the conflict in the Middle East. Meanwhile also looking at shares of circle to the down about 5.7 percent. This comes after Morgan Stanley slashed its recommendation on the stock to underweight. Analysts over there pointing to lower expectations for stable coin volumes and saying the business model needs to shift toward transaction based revenue with the USDC stable coin showing little growth. And last up it is merger Monday after all. KKR higher about 2.7 percent. On some news that it will be buying integer a US medical device maker in an all cash deal valued at more than $5 billion. The deal underscores continued demand for health care assets and a rebound in large scale M&A. [00:13:21] Speaker 1: Those are your morning movers. Danny. Thank you very much. Coming up more headaches for Jeffries. As problems mounted the fund it was already closing. That's next. This is Bloomberg open interest. Let's get you some high interest stories. A look at what's making headlines around the world. New York's rent freeze is creating a headache for Wall Street. A $506 million investment tied to rent stabilized apartment buildings is already in trouble. Analysts say though that freezing rents could make losses even bigger by squeezing landlords and making investors think twice about funding affordable housing. The New York Post is reporting that FIFA President Gianni Infantino is expected to speak with [00:14:19] Speaker ?: the secretary of state Marco Rubio this morning. The paper says Infantino is seeking help from the Trump administration as he faces [00:14:19] Speaker 1: pressure after a failed effort to sell a stake in the World Cup. But State Department spokesperson Dylan Johnson disputes the report posting on X that there are no plans for Rubio to speak with Infantino and there is no call this morning. Jeffries dealing with another headache tied to its point Bonita investment fund. The bank is reviewing its nearly $300 million exposure to iron ore trader Radiant World after concerns surfaced over questionable invoices used in trade financing. Several big commodity firms have already stopped doing business with Radiant World although the company denies any wrongdoing. For more on this story Bloomberg finance reporter Catherine Dougherty joins us now. It's painful especially after they already experienced first brands. What exactly are the details about what happened with Radiant World [00:15:05] Speaker 8: and Jeffries exposure to it. So there's still a lot of questions that the company and point Bonita specifically is trying to answer. As of now there are these documents that they are reviewing their invoices between Radiant World and the trading firms that we have referenced today. Vitol Cargill moving forward there is a lot of questions around the exposure. So we've reported today that Jeffries and through Point Bonita which is a fund in the Lucadia asset management arm of Jeffries the investment bank. That exposure was at a time at its peak 500 million. As of today less than 300 million. Now a lot of questions remain about what will be recovered and how is the situation going to unfold. So in terms of reporting points we're looking to see what type of recovery that point Bonita is going to see in terms of the payments moving forward. We've also reported that these questions started to emerge when the payments themselves started to slow down. The last payment was received around three weeks ago. This is sort of based on their business model. But as you say a lot of questions that I would imagine that one question for investors is with Jeffries. How does this happen again. That's a great question. I think that the firm is saying and has said with first brand specifically you had the CEO the president come out and say that this was a fault that they are taking responsibility for. But they are also saying that the underlying business and Jeffries as a whole is able to withstand these losses the exposures the potential exposures that they have identified. They continue to say that this is something that they can handle. But in terms of moving forward they're also saying that they are being diligent about their review. And I think a lot of these exercises that they're going through today is again identifying potential exposures and open invoices that they need to recover and want to make sure that they receive payments for in the future. [00:17:06] Speaker 1: What do we know about the wider finances world exposure to radiant world because first brands for example I mean the list was a who's who of who was involved in it. Does it seem that radiant brand also reached out to many other radiant world rather or was this very Jeffries and then some of the commodity giants that were exposed to this. There are many banks that [00:17:23] Speaker 8: are involved in this and that's something that is being reported out in terms of the widespread exposure to other banks. There was an Italian bank that was named in our story over the weekend. So yes that is another big open-ended question for reporters and for the street at large. [00:17:43] Speaker 1: Catherine thank you so much for joining us. Always love having you on and hearing about your reporting. Bloomberg's Catherine Dougherty. Coming up city's Stuart Kaiser joins us to discuss how earnings growth is overshadowing economic and geopolitical instability. That's next. This is Bloomberg. [00:18:00] Speaker ?: We'll be right back. We'll be right back. [00:18:10] Speaker 1: City's Stuart Kaiser is watching two events this week. He says equity supply around SpaceX earnings and the July payrolls print will be top catalyst when it come to momentum. City head of U.S. equity trading strategy Stuart Kaiser joins us now. Does one stand out to you as more impactful for this market than the other. Honestly it might be the equity supply side of things. [00:18:29] Speaker 9: To be completely honest with me. I mean payrolls matters. But as we saw from the press conference last week probably the inflation print maybe a little bit more important than payrolls in this case. If you look where consensus is it's pretty solid from the payrolls perspective anyway. Whereas this equity supply thing I think you could argue that that's what kicked off. You know this pullback to begin with. And look once you clear earnings you may also get some secondary you know announcements type. You know more supply might get announced beyond SpaceX is my point. So we'll be focused on that one. I think. Well there's a theory that the back in 2000. [00:18:57] Speaker 3: The slump was caused by all of the equity supply coming in as a lot of stocks were unlocked. So does that kind of risk portend right now. A lot of shares in SpaceX are going to come unlocked. And from what I understand a lot of people need that money. Yeah. [00:19:16] Speaker 9: Yeah. 100 percent. I think the equity supply has gotten people's attention. First you have SpaceX but then had all these secondary announcements. Then you had convertibles and you had IG issuance as well. And look finance 101 is if you're issuing stock instead of issuing debt you must think that's the cheaper way to finance which from an equity perspective might mean you think your stock's a little bit rich. Now that's not the clean way that the market's interpreting it. But I think big picture equity investors kind of like wait like this applies to us as well. Like you know we thought this was a bond issue. So yeah I do think the equity supply stuff is clearly in focus and it's gotten people's attention given the strength of the rally. [00:19:49] Speaker 1: I thought you might also point to in terms of more technical factors versus fundamentals what happened with situational awareness and the unwind there. Mike Wilson calling it the worst sell-off momentum in history. Does that mark something of a bottom. The fact that that unwind can happen. And maybe you can lump that in with an unwind in South Korea as well. Yeah look it's definitely been one of the worst momentum performances we've [00:20:10] Speaker 9: seen in the last 25 or 30 years in our data. So 100 percent agree with that. In terms of like you know the liquidation of the positioning we do think positioning got rebalanced pretty significantly over the course of the last couple weeks whether that's Korea whether that's momentum whether it's levered ETFs in the U.S. So we do think the positioning setup is much cleaner today. And that's why we do think risk reward is actually a lot better post hyperscale earnings and post that drawdown. But risk reward in what categories now. You're not going to go back into SpaceX immediately. Look I think I think I think our view coming into the year is you want to follow the money. And this is sort of trickle down economics. A ton of capex spending and a sort of permeates throughout the market and throughout the earnings complex. So our view is you want to own where that money is being spent. So pick your favorite bottleneck. It could be semiconductors. It could be memory for us. It's power generation. But I think you want to reengage in the parts of the market that will be recipients of that money on a go forward basis. We would be all full all in. Probably not. But but we do think it makes sense to start adding some risk back into the system. And in that sort of tech AI [00:21:11] Speaker 1: bottleneck category. All right Stuart stay with us. We have an opening bell to get through that Stuart Kaiser of city and a check on your markets as we're just minutes away from that opening bell. We rally this morning after the S&P managed to get a 1 percent gain yesterday to end the week. Semis though and the week down 4.3 percent. It's the S&P leading tech this morning. Ten-year yields down about five basis points. So that lends some support to this market as Brent crude drops by 5 percent. On the other side of this commercial break it's your opening bell. Just seconds until the start of your cash equity trade. You're watching Bloomberg open interest. I'm Danny Berger. It's a market that's pushing higher this morning for the S&P. The Nasdaq though unchanged overall markets being helped by yields that are starting to come in as the price of oil also falls this morning. Down at the New York Stock Exchange Forbes. Their CMO is bringing the opening bell. They're celebrating the world's most influential CMOs. Something that Forbes does for for every single year. And then down at the Nasdaq we have Mama. Mama's creation. They're a frozen food company whose shares have more than doubled so far this year giving a very infomercial feel to ringing the opening bells. They have all their some of their products over there. I'm sure they're delicious whatever they are. We're also keeping an eye on some stocks to watch this morning. AstraZeneca and Bristol Myers. The companies held early stage talks for potential merger. That combination would create the world's biggest drug maker with about $107 billion in annual revenue. AstraZeneca down 7 percent off the back of that news. Let's get back to these overall markets. Joining us is city head of U.S. equity trading strategies. Stuart Kaiser who's still with us. Stuart one element of this market. We're talking about the parts you like an AI. There has been a real pushback not just in equity but in debt markets too. We're talking about Oracle in the break. It spreads have widened precipitously but so have all the other hyperscalers too. Our CDS spreads and credit markets sending a signal of risk that the entire market should be heating right now. I mean they're [00:23:21] Speaker 9: definitely setting an element of risk. I mean I even talk to U.S. Treasury bond investors that are worried all the IG issue which is good is going to push those yields higher. But look I think if you took last week's earnings in particular the CapEx spending intentions were hardcore reiterated and both those companies came out and made great pains to talk about the 30 percent type return on investing capital they expect to earn. And look if you're lending to a company that's borrowing at six and earning 30 you know that that's an investment they're going to make all day. So I do think there's pockets there. You might argue there's you know a tier one and a tier two. But the tier one guys the big hyperscalers they're going to keep spending because they think they're earning outsized returns on that spending and they think you know medium to long term it makes a lot of sense. But the issue that came up with [00:24:01] Speaker 3: Oracle at New York Times had a big article on it this weekend is that the spending is going on now and the borrowing to fund the spending is going on now. But those revenues are a year or two away. And can they bridge that gap. It's a great question. I mean [00:24:16] Speaker 9: in all cases you invest for future revenues. Right. I think I think the question here is is what how much faith do you put on those revenues two to three years out. And what return on investment capital do you assume is attached to that. Because look at any time you're doing CapEx right. It takes time to build the factory. It takes time to build the data center. So to me this is more these companies need to do a better job of communicating what they think the return on investment capital is. And secondly I think what is the forward CapEx spending path look like. If you go back to Google they just said significantly higher. Well in this environment where credit spreads are rising significantly isn't enough. Right. I think investors want more clarity on to your point you're doing this huge upfront spend. What does that spend look like three to five years out. And what do you think the returns are going to be on that. And if investors can get comfortable with that then I think the credit spreads will stabilize and things will be fine. But to your point clearly people are asking that question about what is that return and when do I expect to see it. And if investors don't [00:25:12] Speaker 1: see that in these earnings they have been punishing. But on the flip side also hugely rewarding when they see what they like the numbers have been staggering. Microsoft adding 500 billion dollars worth of market cap in two days. Amazon 400 billion in one day. Apple loses that amount in one day. So these are huge swings in ones you don't see in trillion dollar plus companies. What do you make just just of the reaction and the huge amounts of volatility that we've had this earning season in these big [00:25:36] Speaker 9: companies. Yeah look I think the direction of those moves tells you where positioning was you know kind of going into those prints. You know Apple was an all-time high. It's been kind of a favorite. Microsoft obviously had been underperforming and provided some good news. But again I think it just speaks to the level of uncertainty around it. And to Mike's point to you have this huge rally you're kind of all-time highs in a lot of these stocks. Your bar is high and the reaction function is very sharp in both directions. So I do think that reflects positioning. And frankly I think the last month of market turbulence has largely reflected positioning kind of coming under pressure. Well we're seeing it again this morning because we just [00:26:11] Speaker 3: had Amazon has jumped this morning and they're up to three trillion in market cap. So it continues the volatility. I'm just wondering if you think the past is somewhat prologue. You go back to the Internet years of the 1990s and there were a lot of PC makers. And then they all got winnowed out because only some only the strong can survive as they say. And I'm wondering at what point when you're talking about you have to evaluate the earnings potential down the road. At what point did the market start saying there's too many AI companies and we need to start focusing on a couple. I think it's a great question whether it's the [00:26:47] Speaker 9: Internet or whether it's like the telecom build out with all the you know what you know in installation of wires etc. that happened back then is you're doing a massive upfront investment and clearly some of those investments are not going to pay off to your point. Some of these companies are going to survive and some of them aren't. I think the idea of there's a winner take all in AI that lot that argument has kind of calmed down a little bit. I think there's a view that multiple of these you know you know can exist on a go forward basis. But can 10 or 15. No. So ultimately there's going to have to be there's some consolidation or some winners and losers in the space. And I think that's what the market is trying to suss out right now. I I would argue that the mag seven for instance are not going away. Right. And they can obviously accept a bit of a bad investment here and there. So I think they're a little bit cleaner. It's that tier two guy that tier two borrower where I think the real potential stresses. And this is why earlier in the year you know it was the private credit discussion and you had some of these data center deals that didn't get financed. And that definitely was a shot across the bow. So yes that'll happen. I think we first need to see real monetization so we can judge who's getting the monetization and who's not. So you know this is probably not a next one or two quarter issue. I think it's probably out into next year. And we'll see. You know a lot of these data centers that were scheduled to be one queue of next year are now getting guided to three or four queue of next year. So that may be flattening the curve and pushing that decision further into the future which unfortunately for us means uncertainty. Well how does higher yields impact all of this [00:28:14] Speaker 1: because already tech was a long duration asset. Now future cash flow which fuels even further into the future is going to be needed to be needed to be discounted even further. And they're now huge infrastructure investors to an infrastructure gets challenged in a rising rate environment. So what changes now with 30 year yields now their highest since 2007. Yeah it's a great question. I think you know the third year yield to me is a [00:28:35] Speaker 9: huge sort of risk premium and tail risk for the market. Most of these companies you're probably borrowing more in the belly of the curve. And look I think really the question there is again these top tier guys have the money and they have the credit rating. They're going to keep spending and they're going to keep doing this. I would argue increasing credit spreads 50 basis points or even increasing rates 100 basis points is not going to stop them from spending. If they think they're borrowing at six or eight and earning 25 or 30. So again I think you get into that that tier two competitor who may be under a little bit more pressure from borrowing. But look the big six call it you know the the big six hyperscalers. They're not going to be affected in the near term in their spending and they're going to spend on our forecast upward of a trillion dollars next year on CapEx. So again that's why we think you follow the money and maybe you want to avoid that tier two borrower. But the big guys are going to borrow and you just want to know you know what they're borrowing to spend on and own [00:29:28] Speaker 3: that essentially. Just a quick question on a slightly different subject Friday we went home expecting a big war with Iran. And then we come in Monday morning and we're talking about peace talks again. When does the market care anymore about what's going on in the tweets and in the [00:29:45] Speaker 9: Middle East. The market cares. But to your point I mean you get whiplash trying to try to keep up with these things. So I think the the story there is actually pretty straightforward. We know this is going to be an on off type risk when it turns up turns off you know put your head just on and when it turns on kind of pull them back. You know our view is generally with the Middle East been the equity markets are going to ignore that as much as they can. And the only thing that's going to make them not ignore it is if oil kind of taps you on the shoulder. So I think once you get you know TI up into the mid to high 80s equity markets will pay attention again. And then you know they'll kind of get bored and go back go back away from it. So I think you're almost at the point now where equity markets markets have grown callous to that. And you're going to need sort of substantial types of react to escalation TI 85 or above to really get U.S. [00:30:29] Speaker 1: equity markets attention. So brilliant is always so wonderful to kick off the week. Thank you for joining us. That's city's Stuart Kaiser. About nine minutes into your trading day. Let's get a check on your equity market. That is in rally mode up six tenths of one percent. So adding about 50 points to this market. What is gaining a lot of the hyperscalers are doing well. Mike mentioned this Amazon now crossing three trillion dollars in market cap. So Amazon the second biggest gainer in terms of points added. Microsoft still up there though after seeing huge hundreds of billions of dollars added in its market cap. In fact the amount Microsoft added is bigger than every single European company except for ASML. Just to give you a scale to reference and the fact that Europe maybe just has smaller companies in general alphabet meta Tesla. So a lot of the mag seven doing well. Boeing is up there too. I don't see it in the gainers however it is up there after a double upgrade from BNP Paribas chips are under pressure this morning. A report that one of the Chinese chip makers is opening a second chip making facility. So you see Broadcom Micron all of them down this morning. Apple falls again just six tenths of one percent. In terms of how the sectors are looking energy is also down as the price of oil plummets this morning over hopes that peace talks will resume. Mike was just mentioning that the back and forth. So that's your worst performing sector. Utilities real estate. So some of the bond proxies are lower. Communication services again that's higher. Thanks to those hyperscalers doing well. Consumer discretion and financials also moving higher this morning. Coming up more earnings to get through Palantir the first major tech firm reporting this week and has plenty to prove with shares down 30 percent this year. This is Bloomberg open interest. Let's get you some top calls. Here's Norah Melinda with some of the analyst action that we are following this morning. Norah. Hey let's kick things off with [00:32:23] Speaker 7: Stellantis getting a downgrade at UBS. The firm saying the turnaround in the U.S. just isn't happening for fast enough. Cars are piling up at dealerships. New models aren't selling as expected. And UBS says the company may have to cut production. You are seeing shares though up about 1.7 percent. Now over to crypto. Morgan Stanley downgrading circle. The concern growth in its U.S. stablecoin is starting to slow. That means less interest income and more reliance on transaction fees going forward. Shares down about 6.8 percent. And finally Birkenstock. Williams trading downgrading the stock to hold saying that shoppers are thinking twice before paying full price. Now I don't own a pair myself but the firm says that Birkenstocks may have misjudged what shoppers wanted in Europe making too many narrow with shoes. Danny I didn't realize you with could move a stock but apparently it can. We are seeing shares though to the upside up about [00:33:18] Speaker 1: 4.4 percent. Excuse me. Norah thank you very much for that. Norah Melinda. You'll be back with some of our other movers throughout the rest of the next hour. Some more big tech earnings this week will determine momentum in the A.I. trade with expectations running high. Even strong results may not be enough to impress traders unless companies can prove A.I. spending is translating into growth. Palantir on deck after the bell with shares down more than 40 percent from a peak in November. And then tomorrow we get SpaceX Bloomberg intelligence head of global tech coverage man deep Singh joins us now. It's not just the earnings from SpaceX but then shortly thereafter we have a lockup to what will matter more for the stock the actual results themselves or the fact that more supply of SpaceX is going to be coming onto the market. I mean the results matter because of what the [00:34:01] Speaker 10: hyperscalers did last week and it was pretty strong set of results from Amazon and Microsoft. So from that perspective if SpaceX and come out and say you know we benefited from compute deals that they signed with anthropic and Google and they are expanding more supply of compute over the second half that will be positive. But there's no doubt you know if the float is getting doubled then certainly we'll put [00:34:27] Speaker 3: pressure on the stock. Well the lockup is going to be probably getting as much attention as the report earnings they know to have. But they do have a lot of people who are lined up to sell shares. How's that going to affect them going forward. I mean I think this is a stock that is clearly trading based on you know what they're going to do in the [00:34:45] Speaker 10: out years. And if SpaceX is able to let's say add four gigawatt of compute capacity this year another you know five to six gigawatt of compute capacity. And the equation right now is for every gigawatt you can generate up to 15 to 20 billion dollars in revenue. Then suddenly you know they could end up being 100 billion dollar revenue run rate company over the course of the next three to four years. And that's huge in the context of what was price at the time of IPO. But clearly right now we are seeing hyperscalers do very well and hyperscalers have the balance sheet to finance even if interest rates go up you know with all the yields going up hyperscalers would be in a great spot. We can't say the same about SpaceX. I mean yes there is Elon Musk but they need to raise a lot of capital to add these four to five gigawatts of capacity. I was going to say just on that is [00:35:44] Speaker 1: SpaceX a catalyst for wider tech movement or not really because they are in this unique position where truly all of their future earnings or valuation is tied to [00:35:52] Speaker 10: to timelines that are very far out. Yes. And also I think because it's an Elon Musk company if let's say valuation continues to go down then the pressure will mount. When are Tesla and SpaceX going to merge. And that could very well be a catalyst because of how much it has come down since the IPO. [00:36:12] Speaker 1: Mandy why is the sell side like willing to die on this hill of SpaceX. Everyone loves defending them. There's a Jeffrey story out over the weekend of an alien saying like your governance concerns are silly. Everyone has a buy on this thing like five hundred dollars or what some people are targeting. It feels like the sell side absolutely loves the stock. [00:36:27] Speaker 10: I mean the valuations are were stretched at the time of IPO. It never was supposed to be a two trillion dollar company. I doubt it's supposed to be even a trillion dollars company at this run rate. But that Elon Musk factor is huge when it comes to combining the two entities. Let me ask about Palantir quickly because it is the one that's on deck here. [00:36:48] Speaker 3: They're in a kind of a different space even though they use AI and they are AI. They've got an established business with a lot of revenue. What happened to the stock. And does it get a chance to rebound now with Congress likely to pass a big increase in defense spending. Yes. So you're right. [00:37:05] Speaker 10: They are exposed to defense spending. But competition has really come from all fronts when it comes to Palantir and these large language model companies. The fact that they are growing so fast. A lot of these projects are ad hoc custom projects which is what Palantir specializes in with its ontology. And look with Palantir the French government recently replaced Palantir here because of sovereign concern. So there's always that factor when it comes to using a U.S. based product by other sovereigns. They haven't done very well. And I think there is more and more emphasis on using local large language models when it comes to defense related spend. So I think expectations are high. And it will be hard to beat them given the dynamics that are at play in terms of competition from LLMs and the sovereign aspect. [00:37:57] Speaker 1: Thank you so much for joining us ahead of a busy week yet again. Mandeep Singh from Bloomberg Intelligence. Coming up KKR raising over 19 billion dollars to invest in AI infrastructure. That's coming up next. This is Bloomberg open interest. 20 minutes into your trading day. We move higher this morning up seven tenths of a percent for the Nasdaq trading at its highest since July 15th. So a couple weeks high there on a closing basis. The Russell doing even better. It's probably an overall market that's outperforming versus tech because of what you're seeing in tenure yields coming down by five basis points. Yen continues to rally after the U.S. confirms joint intervention and Brent crude down nearly six percent. A tough day for some of the AI space. Micron is moving lower after reports of China's chip making company opening up a second plant. AstraZeneca falls after reports of its bid for Bristol Myers confusion over why it would do that and create such a behemoth. And then meanwhile KKR buying integer and at the same time raising a behemoth infrastructure fund. That's coming in at 19.2 billion dollars. That's its largest ever for the strategy. Bloomberg private equity reporter Alison McNeely broke this story and joins us now. Alison I mean it feels like the flavor of the month or maybe flavor of the years for these infrastructure funds. Has this really been the bright spot both for KKR and for the private capital world as a whole. Yes. [00:39:28] Speaker 11: I mean there's been a lot of jitters about AI lately and sort of the CapEx and the sort of risk that might be in that asset class. But talking to the private capital firms you'd have no sense that they're well I shouldn't say no sense. But they are they are able and willing to look through some of those jitters because they see a long term trend here. Demand for power demand for compute as they say. And really this mega fund which is KKR's largest infrastructure fund ever is sort of [00:39:56] Speaker 3: reflective of that ambition. Well if they raise that amount of money to go back to something we were talking about with Mandeep Singh just a short time ago. Can they spend it. Is there enough build out at the moment where you can actually get an investment that will then start paying you back. [00:40:13] Speaker 11: Yes. They say that there's more demand than they can keep up with. And also worth noting KKR a big part of their strategy is they're not only building data centers but they're building the infrastructure around it. So power you know services. They launched a helix digital infrastructure earlier this year which is a company within their infrastructure strategy that is essentially trying to be a solutions to provider. You know you are a hyperscaler that wants to build a data center. You can hire helix and they'll do everything for you. They'll get the land. They'll build the data center. They'll get the power. They'll run the thing. And so it's not just about data centers. It's about everything around it. And then also KKR has identified industrials and renewable energy as other big themes even [00:40:55] Speaker 1: outside of sort of digital assets. Well even outside of infrastructure they've had a busy morning at least in terms of announcements taking private integer. What is the company. Why take this private. Yeah. So this is a medical device company. [00:41:06] Speaker 11: They make pacemakers and sort of other medical equipment. They've been under pressure over the last say six months from an activist investor to to look for a sale and to do some leadership turnover. They have done that. So this is really a cold moment culmination of sort of that activist process I guess and a victory for that firm. You know the KKR is acquiring the firm at a valuation of 5.7 billion through their private equity business. And this is really you know a core theme that we're seeing with private equity firms is kind of going after health care is sort of the device and services space. KKR does have a health care equity business. And so this is kind of a typical transaction for them. Well that's an interesting way of putting a typical transaction for them [00:41:48] Speaker 3: because there's so much concern now in the private credit private equity space about over leveraged companies. [00:41:54] Speaker 11: They don't seem to have a problem. They don't seem to have a problem. I covered KKR's earnings last week and they reported second quarter earnings and they had record exits. They sold the most number of or they generated the most earnings from selling assets like in their 50 year history. And they really I spent the past few years covering a lot of anxiety in the industry about a lack of exits about private credit this year. And they so far have seemed really immune to that. And they're buying a lot of things and selling a lot of things and really kind of looking through. [00:42:27] Speaker 1: That's not only a minute left here. But Apollo announcing that their second HQ will be in Texas. I know Miami was in contention to Texas wins out. What does it seem like they're planning with the second headquarters and why in Texas. So they're [00:42:38] Speaker 11: moving some senior folks from the New York office in their capital solutions business and a theme their insurance business. So that kind of shows you that they really see an opportunity down there to kind of grow those business lines in the south. I think we can also read this office opening as as much as sort of talent and culture decision as anything else. I'm hearing more and more from people in the industry that they don't want to live in New York anymore. I still think New York is going to be you know the most important for finance and Wall Street. But there is sort of a sense talking to folks that some people long term would like to move to Texas or to Florida to raise a family have maybe a different lifestyle. And this could be seen as much as a talent thing I [00:43:22] Speaker 1: think is a strategic business. Well hopefully Apollo comes into Austin and makes that airport bigger and more accessible. I think that would be a good outcome for everyone involved. Alison thank you so much Bloomberg's Alison McNeely. Coming up it is hour two of 30 minutes into your trading day. Welcome to Bloomberg open interest. I'm Danny Berger alongside Michael McKee with a market that is rallying after we ended the week higher at least for overall stocks software stocks or rather semis continue to get punished. We're up by almost one percent this morning on the S&P 500 that outperforms the NASDAQ which at this moment is up just 0.8 percent. So still putting in some numbers. And Mike we have some breaking news just crossing through the [00:44:18] Speaker 3: terminal. We're getting ISM's coming through this. Yeah. The manufacturing PMI is coming out which a little bit less important than they have been because the Fed is focused much more on inflation. But let's go right to the prices paid index. It does drop to 71.1 from 73. So marginal good news. No 71.1 is still pretty high. The overall ISM number is at 55.6 from 53.3. So some improvement there. New orders are up as well. 56.7 from 56.6. And the employment index crosses into positive territory. 52.8 from 49.7. So overall it looks sort of like a better report. But you would figure this is a July number. So we had seen the the peace talks underway at the beginning of July. Things improved a little bit. We still don't know what's going on over there. But which is probably why we don't have a big move in prices paid. But we do have some [00:45:10] Speaker 1: improvement in the manufacturing outlook. Right. Well that employment number we're only going to get more color on it throughout the rest of the week. But we're going to have a little bit more on it. We're going to have ISM's but we'll have jolts of ADP jobless claims and then jobs numbers. What are you looking for this week Mike. I mean Stuart was just telling us from Citi that it just doesn't matter as much [00:45:29] Speaker 3: anymore. So if we hold the status quo it's good. And right now it's still early for because all those other numbers coming in for economists to have their forecast finished. But basically people are thinking we're going to see somewhere between 80 and 100 thousand jobs which is what we've had and no change in unemployment. So it's status quo on the labor side. Yeah. [00:45:48] Speaker 1: Maybe the more move for this Fed has been there just their decision to change the status quo at least Kevin war. So let's bring in Mary Ann Bartels for more on this conversation sanctuary wealth chief investment strategist. And I bring that up because I know Mike spent his entire weekend covering a Fed that The New York Times reported that they're going to be meeting last Marianne. How does it change this market in terms of adding more risk premium more volatility. If this is a Fed that is going to be less [00:46:13] Speaker 12: less communicative and hold less meetings for this market. We did say under a wars regime that we might have more volatility because he's changing the game of how the Fed communicates. So I grew up during Greenspan. So I'm used to having a Fed that's not very direct in their communication. Obviously Greenspan spoke but he really spoke kind of in tongue. You know that there was one time he was very happy because there were two different news reports out was completely two different interpretations with what he said. And he thought that was a success. And that's what wash I should actually got out of his last meeting is really a market confused. I don't think he wants to continue to have a market confused. I think if you give him some time. This is only a second meeting. He'll once he gets through his task force and has a plan or a business plan for the Fed. I think we'll have a better idea of the direction of the Fed. Well his argument is that by being more [00:47:13] Speaker 3: Delphic like Alan Greenspan the market will have to face the data and make decisions about what prices will be. And that will help the Fed because they don't have to follow the market's lead. But is it good for the markets. I think the market already trades on data. So I don't think that's new. It [00:47:29] Speaker 12: trades on the Fed and it trades on the data. I thought we did have to sometimes too much communication from the Fed and too much not consistent information from the Fed. So if we can dial that back a little bit more have a little bit more consistency of what comes out of the [00:47:46] Speaker 1: Fed. The market's always going to trade on data. I thought a really interesting argument came from Tobin angle over at the FT who said perhaps what Warsh wants to achieve is you increase volatility. And that means that there's less of a safety net to take leverage. That low volatility means that this market can take on more leverage. And then when you have more leverage there's more ability for it to sell off. I mean add in situational awareness is case a point a if you want to. I wonder if that could be an outcome of this that just less risk is taken in the market because of that volatility when you don't have a Fed that literally holds the market's hand through every decision. I could see as the market tries to [00:48:20] Speaker 12: interpret our new Fed chair that they're willing to take less risk. But over time markets always take risk. I don't think it's one where [00:48:28] Speaker 3: it's a permanent de-risking of the market. When I take you back because you mentioned the Greenspan era and we had the intervention over the weekend and people were sending me my stories that I wrote from those days. And I was thinking these are crazy days now. But it always seems that way. Is it when you do your modeling when you do your charts. Is it any harder now because of the way the market is structured and because we have social media etc. Or is it just always going to be as Roseanne Roseanne said one thing [00:48:58] Speaker 12: after another. It's going to be one thing after the other. I don't really see anything dynamically changing. And of course I've been in the in the business for a while. So I remember coordinating an intervention in the currency markets. We just haven't had it in a really long time. But if you really study intervention it doesn't change the trend necessarily. It changes the pace. You really need like policy change in order to really get significant change. So we've had a couple of interventions. And I think that's to stem how fast the yen has been depreciating. But I'm not convinced over the long term that it's actually reached its low. What about for this market for this equity market to be specific. What are the [00:49:38] Speaker 1: technicals telling you after somebody leveraging both from South Korea be it from the equities or to bring it back to social awareness the unwind of that hedge fund. Does it look like we've reached something of a bottom. And the majority of the unwinding is done. And that will allow for market rally. [00:49:53] Speaker 12: Well I don't have data yet for the unwind. I really like looking at margin debt. And it's not very timely. But we definitely did have some good really deleveraging in the market. So we have a good oversold in the S&P. We're almost almost oversold in the semiconductors. And I really want to see the markets respond to that because that means the the correction is completed. Looks like today the market wants to rally. So that's a really good sign. And because we don't really have the actual oversold in semis I'm not surprised that they're still a little weak. But I think they [00:50:23] Speaker 3: could be getting to a bottom where we can get a good rally. How much more room though is there given what we're been talking about all day here. But the fact that you can't spend so much so fast. It just there's just not enough infrastructure to absorb the money. Is it just does that push out the horizon for being able to invest and think you're going to go up. Or do you reach a point at some point where you say well [00:50:45] Speaker 12: we've got to see some return here before we keep going. Well I look at earnings for the return. And if you look at earnings they're really strong. I mean facts that reported that you know it like 61 percent out of 61 percent of the S&P reporting you're at like 47 48 percent earnings. Now if you take out Alphabet and if you take out Amazon. OK. Now you're closer to 28 29 percent. But these are amazing numbers. These are great earnings. I mean I'd be outside celebrating these earnings. So that's when you're talking about tech and you're talking [00:51:18] Speaker 3: about AI. I'm wondering how much more room there is to run. If if my calculation is correct and that's assuming my calculation is [00:51:25] Speaker 12: correct. The secular bull market will go out to the end of the decade. So about 20 29 2030 led by tech and semis because they are the leaders. And then I think we do get a peak. And then you'll have the end of the tech cycle. And your new cycles already starting to emerge. It's coming out of financials particularly in the banks. It's coming out of energy commodities some of the metals small cap. And the real big one that surprised me. It's the international markets. Normally the international markets for most of my career you wanted to be in for a year or two and then out. I think now you have a whole new secular trend in Europe in Asia. And it's it's quite significant. And even in the emerging markets. But it's ex China. So driving that. I you know I think this whole AI thing for Japan I think they're going to exporter. Hence why they do want a weaker yen does help the export side. But you just don't want something depreciating very very quickly. And we're starting to see some earnings revisions in a positive way in Europe. They're spending on defense. So you're at least getting some government spending on that. So I think you finally reached a turn where the international markets have entered a brand new cycle that we haven't really [00:52:47] Speaker 1: seen in my lifetime. Marianne so great to have you on. Thank you so much for joining us. Marianne Bartels of Sanctuary Wealth. Let's get a check on your equity markets as Marianne said they want to be rallying this morning after the sell off of the past few weeks. It's an S&P that's outperforming up nine tenths of one percent. Also being aided by lower yields this morning which moved down by about four and a half basis points to four sixty eight ninety eight. And Brent crude also helping intern tenure yields come down. That's falling five and a quarter with President Trump backing off his threat of attacks on Iran. Let's get to some of your single name movers this morning with that is Nora. Good morning Nora. Good morning. [00:53:24] Speaker 7: A few stocks in focus this morning. We're looking at shares of AstraZeneca and Bristol Myers squib both lower. This could be the biggest pharma deal ever between the two. AstraZeneca exploring the purchase of Bristol Myers squib. We are seeing that the companies have held early stage talks about a potential combination. You are seeing AstraZeneca seeing the most of the pressure down more than seven percent. Now from there over to hotels. Marriott is heading for its worst day in 16 months. The company actually beats second quarter expectations but investors are looking ahead and they don't like its outlook for the third quarter. So you are seeing shares of Marriott down more than five percent as we speak. And finally over to some food. Tyson is cutting its profit outlook as a historic shortage in cattle pressures the U.S. beef industry. Meanwhile the company's chicken business is continuing to be a key growth driver. Understandable I did used to love some chicken nuggets back in the day. Those are your morning movers. Danny. Why back in the day. Why not anymore. You know I can still do some dinosaur nuggets. [00:54:20] Speaker 1: I love a dino nugget. Nora thank you very much. Coming up PIMCO president Christian Strack is going to be joining the show as AI concentration begins to build in debt markets. We'll get his take coming up next. Now to high interest a look at what's making headlines around the world. Apollo is opening a second headquarters in Austin Texas according to Texas governor Greg Abbott. The New York based alternative asset manager has been weighing Texas against South Florida as it looks to expand beyond Manhattan and tap a broader talent pool. A major hack hit one of Bitcoin's must must most most trusted trusted rather hardware wallets. A software bug made user secret recovery phrases easier to predict. Letting hackers steal about 110 million dollars in Bitcoin from roughly 5000 wallets. The company has released a fix. But the attack shows that even offline crypto storage isn't foolproof. And the men's national team manager Mauricio Pochettino is staying on through the 2030 World Cup. The federation says billionaire Citadel founder Ken Griffin is funding a significant portion of the new deal alongside diameter Scott Goodwin and others. Pochettino helped the U.S. men's team reach the round of 16 before falling to Belgium for one. Loan investors are pushing back for the first time in years forcing heavily indebted tech companies like Corweave and Proofpoint to sweeten their terms. Borrowing costs are also beginning to creep higher as the amount of AI related debt starts to balloon. Let's discuss this with PIMCO president Christian Strack. Christian, always great to have you on. I know this is a market you follow very closely. We are seeing it. CDS spreads are starting to widen. Credit spreads creeping ever so slightly higher, though they are well behaved. Is this a market that is starting to push back on the amount of spending we're seeing from these hyperscalers? [00:56:18] Speaker 13: And is it warranted? Should there be pushback? Well, thanks, Danny, and great as always to be with you. You know, I'd say put it a little bit differently rather than pushing back. The market is just being a little more selective. There is a lot to choose from in the digital infra lending space from very, very high quality lending opportunities to some of the hyperscalers to some of the below investment grade chip financed type of issues. So there's a lot to do there. There's a lot to sift through. There is a lot of risk, but there's a lot of opportunity. On balance, we see this widening as more of an opportunity. Because you're able to deploy into this space and high single digit seven, eight, nine percent yields in some of these opportunities, sometimes for a very strong investment grade type of quality. So if anything, we'd see it as more of an opportunity. But yes, there's a lot that needs to get financed. There's a lot of lending that has to happen. And we're really only in the early early innings of this whole wave of financing and digital infra space. [00:57:20] Speaker 3: Well, you're seeing a lot of dispersion differences between various asset managers because of the way this is all developing. [00:57:28] Speaker 13: Yeah, I think what you're seeing is the need to be able to deploy in size. These are very large lending opportunities. You know, you're talking about building data centers that need 10, 20, 25 billion dollars of debt to build them out. And then you then you need chips that need to get finance to go into the data centers. I mean, this is a very significant. So really, unlike anything we've seen in our careers. And so, you know, where you can really add additional value as an asset manager to be able to speak for multi-billion dollar pieces of these financing. And that's naturally something that only a handful of asset managers can do. So that really is leading to that dispersion that you mentioned, Mike, between asset managers. [00:58:14] Speaker 1: And PIMCO is certainly one of those that are able to do so with different landmark projects like Oracle's Michigan Campus. How do you think about, though, how you manage AI concentration risks as you see this opportunity and want to participate more in these jumbo-sized deals? [00:58:29] Speaker 13: No, it's a great question, Danny. And yes, this has been a real focus for us. And we have deployed a lot of capital into this space. But Dan Iveson, our group CIO, has been laser focused on this concentration risk. And it's really two things. It's the underlying credit risk that you're taking. And in many cases, it's very different. You know, in some cases, you're very close to your single A, double A, even triple A rated hyperscaler in terms of the structure of the lease that you have. In some cases, you're further away. So you're taking more credit risk the further away you are from that hyperscaler. So that's one thing, is what really is the credit risk that you're taking. The other is the concentration risk that you mentioned. I mean, the beauty of AI is that it's disrupting technology and it's generating a lot of excitement through that disruption. Of course, the downside risk is that it's disrupting through its technology. And so you could see a lot of disruption risk down the road. So you don't want to have too much risk in any one project or in the whole complex. So that's something that we're very much keeping an eye on. It's a great opportunity. But you want to be moderate and measured in how you deploy into it and always with a keen eye to the credit underwriting and making sure that you're not having taking sneaky credit risks that are embedded somehow in the structure of what you're doing. [00:59:46] Speaker 1: Christian, I know that this is something you noted that as more investors are looking to lend into this space that you're already starting to see underwriting get more relaxed. Where are you seeing that? Where are you seeing undue risk being taken? [00:59:58] Speaker 13: Yeah, you're seeing it in a couple of different ways. And so it'll be things like it when when you're doing a data center financing. By how much is that data center insured? You're generally not insuring 100% of the value of the data center. But you're you're insuring some significant portion of the data center that gives ultimately gives the lender protection or things like in chip financing. These are very detailed elements. But you really have to get into the granularity of these things in chip financing. Do you have the right on day one when you lend the money out to go in and inspect that the chips are actually there and they're actually working. When you're lending against an Nvidia chip, that's a rapidly depreciating asset. You want to make sure that it's there, that is working, that's getting taken care of, these types of things. So this is not your grandfather's oldsmobile. This is not just general IG credit risk. It's very granular. It really takes going through the documents and the structure with a fine tooth comb. We think that when you do it right, it's it's some of the best risk adjusted rewards out there in credit and in fixed income in general right now. Of course, if you do it wrong, you're taking a lot of credit risk that you may not be getting paid for. Are you able to set up hedges for all of these risks that you're talking about? [01:01:09] Speaker 3: I know in Michigan, you had a very unusual one that Dan put in place matching the lease to the contract. Yeah, there's a lot of different ways that you can mitigate the risk. [01:01:20] Speaker 13: I mean, ultimately, you you are ultimately taking some credit risk. You're taking the credit risk of the hyperscaler that you're ultimately lending to. So you are. You are taking a bet on AI. You're taking a bet on on this technology cycle. It's one we think, though, that is that is quite reasonable. If you look at the hyperscalers, they have still have very, very low debt to enterprise value. If you look at at a Google or a Microsoft or even a meta, you're talking about just gross debt, not even giving them credit for the cash that they have on balance sheet. Gross debt that is, you know, in the low single digits, maybe mid single digits of total enterprise value. So you've got a lot of equity cushion there. Now, when you're doing data center financing, of course, you're lending to the data center rather than directly to the to the hyperscaler. And so you do have to structure that in a way that you're very close to the hyperscaler. But ultimately, we think that this is really good risk adjusted reward. [01:02:15] Speaker 1: Christian, I wonder when you sort of look out on a longer term time horizon, when you look at the attractiveness of this, what are sort of the level of these big data center financings you think PIMCO is going to undertake? Is there a certain percentage, for example, of your portfolio, you think that might start to gear more towards this AI ecosystem? Well, it's it's going to matter by by portfolio and some strategies are going [01:02:39] Speaker 13: to have very little exposure. They're not really designed to take this kind of type of credit risk and others are going to be designed to take a lot more. So it's really going to depend on the strategy and the client and what have you. If you look right now, the hyperscalers are only about call it five ish percent of the investment grade corporate bond index. We see that going to 10 percent of the index and maybe a little bit more than that. So I'd say in those strategies that are directly focused on these types of risks. Yeah, you'll probably see around 10, maybe as much as 15 percent of portfolios in these. But that'll be at the upper end again because there is so much. First of all, there's a lot of else of other things to do in the world. There's a lot of other ways to to lend into this CapEx cycle. There's the utilities. There's transmission. There's energy, et cetera. So there are a lot of different opportunities out there, but also because you are ultimately taking disruption risk and you want to you want to scale that [01:03:34] Speaker 3: accordingly. Speaking of other opportunities out there, the federal government is selling a lot of paper these days and we're going to get the refunding announcement on Wednesday. Is there a crowding out going on? And I'm wondering when you look at the term premium for basically across the curve, they've all been going up for the last 12 to 18 months. And I wonder how much of that is federal borrowing versus what's going on in the oil markets in the Middle East and what the competition is from AI and other private credit. Yeah. Thanks for that, Mike. I mean, I [01:04:08] Speaker 13: think if you if you listen to some of the interviews that that rich clear at a former vice chair of the Fed and our chief economic advisor has had with you with Bloomberg and with others, he's spoken about this really well where it's more of the latter. It's more of the competition for all of the financing opportunities that are out there in the economy right now. We are in a CapEx wave like we haven't seen in decades and generations. This CapEx wave on the one hand leads to higher growth, but on the other hand really needs financing. And so the government is competing ultimately with all of this private sector financing that has to happen because there is all of this private sector financing because there is projections of higher economic growth of higher productivity that raises the neutral real rate of interest that raises real interest rates, which pushes borrowing rates for everybody higher across the board. You know, on the one hand is a challenge for governments. It's a challenge for some borrowers. But on the other hand is a great opportunity for investors who are lending into this broader CapEx cycle. It's pushing up returns in fixed income across the board. And now you're seeing yields in diversified income strategies of call it seven seven and a half percent without taking undue credit risk. It really is a really interesting opportunity set right now. But ultimately, there is this crowding. Ultimately, there is a demand for financing across the board, public sector, private sector. Ultimately, it's healthy. It's driving growth higher. It's driving productivity higher. But it does mean a crowding out in financing sectors. And it comes after the [01:05:48] Speaker 1: shakeout. As we started this conversation talking about Christian where there has been differentiation between different managers. I remember when we spoke earlier this year around March when we were really in the thick of it of concerns about what people were selling with those managers were doing. You said, look, I don't like what loans are being sold right now. It's not great. It's not good opportunities for us. What about now? Are there still stresses that are present and selling into this [01:06:12] Speaker 13: market that you think does present a good opportunity? Yeah, I mean, you're starting to see opportunities in repriced traded leverage loans. So the in the below investment grade. So, you know, below investment grade, there's the high yield bond market and there's the traded leverage loan market. And that traded leverage loan market has a lot of different things that are that are driving yields higher. But right now, if you look at single B leverage loans, you're getting eight and a half, nine, nine, nine and a half percent yields on a pretty resilient and diversified profile of liquid. And that's really important of liquid opportunities. And that's much higher. That's a few percent higher than what you would have gotten a few years ago. Now, what's going on there is in part, it's competition from and the turmoil that's going on in direct lending. So the volatility that you're seeing in direct lending is creating contagion into these traded bank loans. In part, it's because of the concerns around software. So there's a lot of that market is is loans from software companies. So what's going to happen with all that disruption? And what is it going to do to the credit quality of some of the software issuers? In part, it's just the general what we just talked about. It's a general rise in yields across the board. But you pull it all together and you get a pretty diversified opportunity set in this below investment grade space without having to go into the deeply illiquid part of the market, which is private credit direct lending. So yes, we would say we are starting to see opportunity now. [01:07:38] Speaker 1: A perfect note to end it on. Never enough time with you. Thank you so much for joining. We really appreciate it. PIMCO President, Christian Strack. Coming up, we'll be speaking with the Stagwell CEO, Mark Penn, on how global marketing, the global marketing firm is using AI to drive growth and win clients. This is Bloomberg Open Interest. Global marketing company Stagwell posted a record 171 million in net new business and raised its full year earnings outlook. CEO Mark Penn credits the company's AI strategy for the momentum and he joins us now. Mark, great to see you. And look within these earnings, it's not even just the numbers, it's the anecdotes to winning over IBM, taking them away from Ogilvy after 32 years at the firm. What's changed at Stagwell that's given you the ability to wrestle away some of these very, very large companies with historic relationships. Well, you know, [01:08:37] Speaker 14: Stagwell is only about 10 years old compared to competitors that are 50 to 100 years old. And we really are hitting our stride when it comes to technology, the application of AI. But at the same time, we've combined premium creativity with the best in technology and a nimbleness that we have at our size compared to some of the others in terms of adapting technology that I think is all of those things were cited by IBM as to why they were switching to us. But then we've got brands like Heineken and Mondelez and Navy Federal Credit and so many brands now in the last few few months in particular saying, you know, Stagwell really is the alternative, the challenger company, the company we can turn to for the right kind of marketing [01:09:29] Speaker 3: services for the modern marketer. Can you give us an idea, though, of how you use AI? Everybody says AI is great and it adds to our business. But how are you using it in a ways that maybe these other companies aren't? Well, you know, I came from being [01:09:44] Speaker 14: chief strategy officer at Microsoft and Steve Bomber actually is our core investor with with me. So when when I started Stagwell, the first thing I said is, you know, we need a core tech team for the company itself. Right. And so that really distinguished us. And we've been working with AI before AI became as big as it has become. And and so we apply it in a number of important ways. Obviously, the easy applications are kind of internal back office. Then you have kind of the front office applications in terms of better research analysis, easier, easier production, better targeting. And then you look at the series of AI applications we put together with our code and theory network and our partners Palantir and Adobe in what we call the machine, the targeting machine, the knowledge machine, the media machine, which constitute now a suite of AI application products that we are bringing to the marketplace so that so that we will cover everything from global full service down to platform self-service for large marketers and in the. And then also have a small business offering around the marketing cloud. Mark, are you [01:11:02] Speaker 1: though seeing a lot of businesses small and otherwise that have said, look, maybe we can do some of this ourselves with the tools of AI. We can write our own marketing. We can produce content via AI. And maybe we just need to use a company. Yes, like [01:11:16] Speaker 14: Stagwell, but maybe use them less. Well, I think that's been true for about a thousand years. I think we will have have always said, well, OK, we could do some of this ourselves, particularly small business. But I'll go back to the to the vision of Stagwell. The vision of Stagwell was global full service down to platform self-service, meaning that regardless of your choice, we we have the service or product offering for you. And we understand that in some companies they will choose to do it themselves. Mostly small business will will use like Facebook or meta and and and Google. But large enterprises are so complex. Just think about a large enterprise for for just a minute. It might have, let's say, five or six divisions. Each divisions might have 10 core products. Each each core product might have 10 core skews. Each one could be sold in 50 countries. You get up to 10,000 marketing campaigns pretty quickly. You get up to an enormous kind of task for whom a large company is like us offer kind of a full service, the best expertise, the best technology, the lower lower cost. And then typically people take it inside. Then when it comes cost cutting time, they throw it back outside only to take it inside. In any event, yes, there's a lot of back and forth on that particular issue. In the AI global marketing world, the large large clients, I think, have a growing partnership with companies like us in terms of creativity, technology, media placement, you know, global transcreation, all of those things together. So so I think we've positioned ourselves well, both in in if you want to do it yourself, we will help you. There's sort of an in-between. We find a lot of clients want managed services. We will bring the tech stack into them. We will then provide engineers to help them implement it and get the most out of it. That that's also a kind of happy medium we're seeing more [01:13:23] Speaker 3: of. We've only got about a minute left, but I can't let you go without asking about your background in politics and how doing work for political candidates has changed in this social media AI world. Well, I think the biggest change is when I did that [01:13:43] Speaker 14: because of the pandemic. And by the way, we have an active advocacy division. It's it's it's you know, if you look at us, AI creativity and advocacy. But when I used to do it, I used to lament, gosh, we spend more on marketing a hamburger than on all our political campaigns. And now we spend a lot more on our political campaigns than we do marketing hamburgers. And so we've seen a tremendous explosion in the expenditures on politics in our society. And that that growth continues unabated. [01:14:14] Speaker 1: Mark, should we be worried, though, about AI slop deepfakes this election season? Is that something you're worried about? [01:14:20] Speaker 14: Well, no more so. No, no more so than usual. I think that social media itself has fragmented our political system. And that that's kind of the biggest issue. How do we come together as one nation under one core set of values? And then politics, you know, makes the decisions in the directions that we go. But it still serves as a unifying, still serves a unifying purpose. When I work with President Clinton, he had almost a 75 percent approval rating. You don't see any president, Democrat or Republican getting anywhere near that kind of unity right now. And I think I think social media is a big issue here in that. All right, Mark, we're going to have to end it [01:15:06] Speaker 1: there. Thank you so much for joining us. We appreciate your time. Stagwell CEO, Mark Penn. Let's get a check on your equity markets more than an hour into your trading day. We continue to push higher helped by yields now down five basis points after the president held back on attacking Iran. That's allowing Brent crude to also move lower down five and a quarter of one percent at $83 a barrel. So in turn, the S&P at session highs up one percent. The Nasdaq up more than one percent as Amazon hits $3 trillion in market value. Let's get a look at some of the movers this morning with that is Nora Melinda. Hey, Nora. Hey, Danny. Good morning. [01:15:41] Speaker 7: We're looking at shares of Ferguson Enterprises and Electronic Arts. Let's talk about plumbing and HVAC. We are seeing the company Ferguson expected to replace electronic arts in the S&P 500 ahead of the earned opening bell on Wednesday. We are seeing shares surging more than seven percent as we look at the action this morning. Next, moving over to some M&A activity. KKR agreeing to buy medical device company integer in an all cash deal valued at more than five billion dollars. The transactions expected to close by the end of the year, but shares of both companies [01:16:14] Speaker 1: climbing on the news. All right, Nora, thank you very much for covering those market movers for us. We'll have more throughout the hour. Coming up, backlash against FIFA's Gianni Infantino grows after his failed privatization push. That's coming up next. This is Bloomberg. Gianni Infantino is facing growing backlash after his failed plan to privatize FIFA's commercial business. Sky News reporting that England and Wales have withdrawn support for Infantino's reelection. Bloomberg sports editor Giles Turner joins us now from London. And you add to that the weirdness of the New York Post reporting that Infantino was going to be meeting with Marco Rubio and then the State Department of the U.S. denies that and says that's not true. Giles, I mean, just to what degree is Infantino's job under threat now? Oh, I think it's certainly under threat. [01:17:14] Speaker 15: Certainly to compare to what it used to be like. I mean, he was a shoo-in for his next tenure. He's already had a decade in power and FIFA. He was looking at another four years. He said during the World Cup, he had 200 member associations. These are all these nations and football associations that vote for him. Yeah, 200 of 211 ready to vote for him. He was unopposed. The election was going to be in Morocco in March, where the next part of the next World Cup is going to be held. And then you compare that to one week later and everything has changed. It's very, very rare to get member associations to come out, especially individual member associations and say they're not happy. They want to get rid of the boss of FIFA. You've had the England and Wales say that over the past 24 hours. UEFA is pushing to get other member associations, certainly to come out and do similar things, and I expect they will do. You've also got the North American member associations. They're sort of mobilizing, we understand, to make these statements. He's certainly -- he's not out. He's still got at least half of the member associations. He says backing him, but he's certainly nowhere near as secure as he was. [01:18:24] Speaker 3: What set this off in the sense that it became such a big thing. He immediately backed off in the wake of the criticism of him. But you look at the other story Danny was talking about this morning. Mario Pochettino extending his contract paid for by private equity guys. So whose privatization is bad? And why is everybody so upset about this at the infantino level? [01:18:49] Speaker 15: I think the real problem is the lack of consultation from everyone. This was done in a very closed group between very powerful people. And football is incredibly emotive sport. And the heads of football associations in each country of each 211 or the member associations, they see themselves as powerful people with a lot of domestic influence. They've always come out and backed infantino, even with the political risks that he brings, certainly with him getting so close to President Donald Trump over the past year and giving the peace prize. These are things that member associations might not be too happy with because they come from all different political walks of life. So if you're going to do this huge change, you really need to get them involved and feel like they're part of the process. And they had no idea. Large parts of FIFA itself had no idea this privatization plan was coming. So I think really it's a huge PR disaster rather than worrying perhaps about who was doing it. [01:19:48] Speaker 1: And again, it maybe makes this this turn of Secretary Rubio's involvement or non-involvement more interesting with the U.S. previously with their relationship with infantino. Giles, thank you so much for joining us on this story. I'm sure you will be back again. Bloomberg's Giles Turner. Coming up, Todd Blanche moves closer to becoming Attorney General after two key Republican senators dropped their opposition. We're going to have more on that next. This is Bloomberg Open Intros. Two key Republican senators have dropped their opposition to Todd Blanche's nomination for Attorney General. John Corrin and Thomas Tillis said that they'll vote to advance his nomination out of the Senate Judiciary Committee, clearing a major hurdle towards Senate confirmation. Let's get the latest from Bloomberg White House correspondent Jeff Mason. Jeff, why the change in heart from these two senators? Well, because Todd Blanche offered basically a change and the change that they were looking for, which was to essentially put in writing. [01:20:54] Speaker 16: That this deal that this deal that they objected to and that honestly a lot of Republicans objected to, not to mention the Democrats into writing. But that comes in the context of President Trump is continuing to say that he wants it. He said that out loud at Camp David on Friday. He referenced it again on Air Force One last night. But it was the key criteria for these two senators to get over the hurdle of giving their support to Todd Blanche. [01:21:20] Speaker 3: Now we have to ask you about headlines across just a short time ago that the White House is calling in a bunch of AI officials come from companies to a meeting this week. Yeah. What's that about? Yeah. Well, I don't know. But the [01:21:34] Speaker 16: because as you said the headlines just came out. But I think in the context of the president and this White House and AI generally they're very, very interested in the sector. The president has a pretty close relationship with the top heads of the of the big technology companies. It's not unusual for him to be meeting with them. I don't know what this particular meeting is about. But they're watching it closely. Let's just do a whistle stop tour of all the issues in Washington, D.C. [01:21:55] Speaker 1: Let's do it. While we have you here. Let's do it. It feels like we keep repeating the same period. We go into the weekend with threats from this president and further attacks on Iran. We get through the weekend and then before the market open. Lo and behold he's backed off and there are hopes for peace talks. Just as this is this time any different from the other times that this sort of pattern has repeated itself. My answer to [01:22:17] Speaker 16: that is basically you're repeating your question back to you which is they keep keeps doing it. And so I don't know. I don't know how people in the market can or should interpret that. I can say as a White House reporter we interpret it as OK. Here we go again. And I think I think what it means is the president has a lot of competing pressures. A lot of competing factors into his decision making. Certainly one of them is he is sensitive to the market and pretty excited when he can say there's a new high or there's a new record. So he's very aware of the timing of his words and how that impacts oil markets stock markets all markets generally. But he also wants to be able to portray himself as a winner from this Iran war. And so if Iran strikes or does something that obviously did not fit with the MOU or what he considers to be their understanding then he considers striking again and often does. And that sort of back and forth and those competing desires I guess in his head have animated this entire conflict for the last five six months. Senate passes a continuing [01:23:24] Speaker 3: resolution to keep the government funded until December and punt past the midterms. But the bill that the Senate passed takes out a lot of what the president wanted goes to the House now. How likely is it the two sides will agree enough to even bring the president into it. And if they do is he going to accept that given how firmly he seems to want the SAVE Act as part of it. [01:23:48] Speaker 16: Terrific question. He's been pushing for the SAVE Act for months now. He's been sort of upset that the Senate and the House are leaving at all in August when they haven't passed that. But he just doesn't have the votes for the SAVE Act. So this has been a little bit of a way to get around some of that. Bring in a few of the aspects of the SAVE Act that he wants. It's hard for me to say whether he will agree to it. But if he looks at the politics of a the votes that he has now and be the fact that Congress is going to turn over completely in January he may determine I'll take what I can get. But I say that with the full knowledge that that is absolutely not what he's been saying up until now. But I suspect that's at least what his advisers early lawmakers in Congress would like to see him do. [01:24:30] Speaker 1: Jeff such a joy to have you in New York. Thank you. Thank you for stopping by. That's Jeff Mason from our White House team. Now it's time for our metal spotlight and standard charter expects gold to rebuild its gains in months ahead partially on those geopolitical risks we're just talking about and central banks continuing to buy. Joining us now is standard charter global head of commodities research. Suki Cooper. Great to have you on. Thank you so much for joining. So 4200 is your price target for gold. We are though seeing a Fed that doesn't seem as willing to cut as it once was. What gives you the confidence that there are still more gains to go for the [01:25:03] Speaker 17: precious metal. There's a few factors here. When we're looking at the gold market the structural drivers are still very much intact. And here we're looking at the central bank demands. We're also looking at that wider investor appetite to want to buy gold. And those drivers are still very much they're suggesting that investors are really looking for an opportunity to rebuild their positioning rebuild those price gains. But also gold is factored in a lot of the headwinds already. As you mentioned at the start of the year the market was looking at right cuts and now it's pricing in rate hikes. But we've also seen gold switching its focus away from some of those structural drivers and also towards a rate cut expectations or rate hike expectations. But we think a [01:25:41] Speaker 3: lot of those headwinds are already priced in. Well how much do you have to factor in what's going on outside of gold in the sense that bond yields are still much higher more attractive at this point and they don't seem to be going down. The Fed if anything is going to be going to be raising interest rates. So isn't the risk against a rebound in gold. We have seen that correlation between gold [01:26:02] Speaker 17: and real yields gold and the dollar starting to strengthen again to levels that we last saw back in 2022. So certainly in the near term we think some of these macro drivers have become much more important. But if also we go back to the start of this conflict gold was a prime candidate to meet liquidity needs. Positioning was choppy prices were scaling record highs. So it was coming under a lot of pressure amid liquidity needs. That has now moved on. And we're now much more focused on some of these macro drivers. But we think gold is very much focused on these risks and is priced in. I would also say that our house view our base case scenario is that we don't expect the Fed to increase rates. So we think that once that positioning nervous position starts to unwind we'll see gold focusing on the structural drivers again. Well to that point you point out in your [01:26:46] Speaker 1: calculations that over 200 tons of gold ETFs are currently sitting at a loss. Is the bulk of the unwind over or does that loss in itself threaten more force [01:26:53] Speaker 17: liquidations. It's really interesting because we like to look at the price levels that these positions were established. And a lot of the position was built around 4,500 and above. So we've been sitting at this loss making level for quite a number of weeks. And we've seen some of that downward pressure certainly in June and in July. But we're now in the midst of a season week period for consumption. India's demand is on the weaker side. And we're still seeing gold hold up very well around that 4,000 level. So we think that's actually a positive for gold. The fact that we still have these negative ETF positioning. We're in the middle of a season week period for consumption and prices are holding up relatively well. So we do think it's a headwind for the gold market. We think it's likely to cap some of that upside risk. But we think that this base has been tested a number of times. [01:27:40] Speaker 3: So you've set a base. But how high can it go at this point. Do you rally back to where you were when the war started and everything changed or do [01:27:47] Speaker 17: you just get somewhere in between. We see 4,200 as our Q3 average. But going into Q4 we expect prices to average 4,650. So we do expect some of that upside risk to re-materialize. We do expect a retest of the 5,000 level. But we think it will be a slower track higher now. We're not expecting that sharp move higher that we saw at the start of the year that was really being driven by retail investor appetite. We think some of that has moderated. We think we're more likely to see structural drivers and steady demand now pushing gold higher as we still see that re-evaluation when it comes to portfolio diversification and looking for that hedge in the market as well. [01:28:26] Speaker 1: For the other commodities that you track what seems most exposed to the upside in the AI infrastructure. But where are you seeing that theme play out most. [01:28:33] Speaker 17: I'd say the two metals mostly across the precious metals are silver and platinum across the metals as a whole. It's really copper that we see a lot of that playing out. For silver in particular I think what's really interesting is that yes there's higher content that could boost silver demand higher. But we've also looked at the analysis and the broad industrial demand picture. And we find that the substitution risk that the solar industry is facing at the moment could actually offset some of those gains in terms of AI demand consumption. So it's quite a murky picture when we're looking at the industrial look. And of course it's factoring in the risks around whether the AI demand boost will continue or whether it will start to moderate. But we do still see strong demand growth for silver and platinum in the back of AI demand. [01:29:16] Speaker 1: Thank you so much for joining. Really appreciate your time. That is Suki Cooper of Standard Charter Bank. Coming up tomorrow Nimrik Kang of Northstar Asset Management and Johnny D of Footsie Russell and Amanda Leinum of Golden Sachs. And we'll talk space ahead of SpaceX earnings with phantom space CEO Jim Cantrell. This is Bloomberg Open Interest.