Democrats Sweep in Midterm GOP Implosion

[00:00:00] Speaker 1: This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy, plus global business, finance and tech news as it happens. Bloomberg Business Week Daily with Carol Masser and Tim Stenevek, live on Bloomberg Radio, television and Bloomberg Originals. [00:00:27] Speaker 2: And a very good afternoon, everybody, live on radio, on TV, on YouTube and Bloomberg Originals. This is Bloomberg Business Week Daily for this Wednesday, November 4th, 2026, the day after the big election. [00:00:39] Speaker 3: Yeah. A hangover for some, maybe. Yes. Not so for equity markets. Surging higher. [00:00:44] Speaker 2: Yeah. I mean, the indices are higher, and most names in the S&P and NASDAQ 100 are definitely higher. But you look at something like semiconductor names, they've been taking a bit of a beating in today's session. We're looking at most names, well, yeah. We're a little bit lower. Okay. [00:01:00] Speaker 3: I'm going to let you go with it. [00:01:02] Speaker 2: So that's why my fingers work too fast. Yeah, the SOX is down 3.6%. [00:01:05] Speaker 3: Okay. So, some names lower. I got the wrong name. You got there. You got there. [00:01:09] Speaker 2: No, but, yeah. And I mean, the big tech, whether it's Meta, whether it's Microsoft, whether it's Amazon, Alphabet, all rally in today's session. Look at some of those neoclouds. It's a bit of a different story. [00:01:18] Speaker 3: Right. So, maybe some data center concerns. We'll talk about those throughout the program today. Totally. And all the implications of last night's, what do you call it, blue wave, blue tsunami. In the words of Barack Obama in one of his midterm election beatings, that was absolutely shellacked, is what he said. [00:01:37] Speaker 2: Yeah, I think it's very interesting. And what the markets may be seeing is that this is gridlock, perhaps. And markets, equity markets, financial markets tend to like gridlock, meaning it's not going to be any kind of drastic moves. But time will tell. So, are we looking -- it feels like a new day, a new era in Washington. I got to say, though, there's an old problem that continues to persist, and that is the fiscal state of the U.S. government. [00:02:02] Speaker 3: Oh, that old thing? $40 trillion? [00:02:05] Speaker 2: It's a lot and growing. Yeah. We all own a piece of it. And we all are helping to pay for it. Maya McGinnis of the Committee for a Responsible Federal Budget has followed this for a long time. And sometimes it's part of the narrative, sometimes it's not. So, curious to see whether she thinks, yes, indeed, it will have to become a priority. And if so, what does that mean? [00:02:25] Speaker 3: I mean, today's big take, and one of the most read stories on the Bloomberg terminal, it's what President Trump has to govern through. What we report is a meltdown of his own making. We got one of the reporters on that byline in just a few minutes. [00:02:37] Speaker 2: And while the President may have missed or misread what was on the voters' minds, the prediction markets largely did not. Nicole Kagan, head of research at Cauchy, will join us. So, looking forward to that. We are also going to get into what's going on with data centers. It's an important read because we are seeing a trade off of that today. [00:02:55] Speaker 3: All that and more coming up over the next hour right here on Bloomberg Business Week Daily. First up, though, check on the day's trade and top business stories. Here he is, Charlie. All right, I thank you very much, Tim and Carol. [00:03:03] Charlie Pellett: Yes, substantial gains for the U.S. equity market. Got to begin with hydrocarbons with West Texas Intermediate crude at 88.11 a barrel. Crude, WTI, down now by 8.3%. Brent, the global benchmark, below $95 a barrel now. 94.80 on Brent, barrel of Brent crude, down by 8.5%. U.S. stocks, they are pushing higher. S&P 500 index off-session highs still up 129 now. That is a gain of 1.7%. The S&P 500 index currently trading at 76.98. Dow Industrials up 1,513. On the Dow, a gain right now of 2.9%. NASDAQ higher by 1.7%. The NASDAQ 100 index up 1.5%. Carol mentioned the SOX, the Philadelphia Stock Exchange Semiconductor Index, on the day when the rest of the market is ripping higher. The SOX right now down by 3.6%. The VIX right around 17, 10-year, 4.89%. I'm Charlie Pellett. Carol and Tim, that is a Bloomberg Business Live. All right, Charlie, thanks so much. [00:04:10] Speaker 2: We'll be checking back with Charlie a little bit later on. Hey, riding a tide of voter angst. Democrats, as you know, swept into power in Congress with outrage over the cost of living. The war in Iran leading to a thundering rebuke of President Donald Trump and his party just two years after his dominant White House comeback. We've been reporting this out, of course, as you know, here at Bloomberg. The blue wave and Senate winners. Tim, it's quite a list. [00:04:34] Speaker 3: Yeah, Annie Andrews in South Carolina, James Tallarico in Texas, John Ossoff in Georgia, Josh Turek in Iowa, the longtime Republican stronghold of Kansas, Adam Hamilton coming through. Likely, the next speaker of the House of Representatives, Hakeem Jeffries, all weighing in. [00:04:49] Speaker 2: I think we just made some history. [00:04:53] Speaker 3: We just took back Texas. Tonight, Iowa, we outvoted the billionaires. [00:05:02] Speaker 5: The American people have rebuked the depravity, corruption, and incompetence of the failed lame duck President Donald J. Trump. Of course, a war nobody wanted, terrorists, these two things together added $250 a month to the cost of the average family in Kansas. [00:05:19] Speaker 6: You declared loud and clear that you will wait no longer for a new chapter that restores the voice of the people. America is back. [00:05:31] Speaker 2: All right, that last voice again. The likely next speaker of the House of Representatives, Hakeem Jeffries, is preceded by the many big Democratic Senate wins last evening. Now, in many ways, the baton, I think you could say, has passed to the architect of the Republican midterm collapse, who stepped out from the rubble on Tuesday night and insisted it wasn't his fault. We were talking about President Trump and writing about how the president now has to govern through a meltdown of his own making, is our own Josh Wingrove. He's Bloomberg News senior White House reporter, and he joins us from the Washington, D.C. News Bureau. Josh, good to have you here. Hi. There is -- it's fascinating because we just heard from President Trump about an hour or so ago. He was talking once again, the construction site, the ballroom. He did admit the Iran war did impact the outcome. But looking forward, he said he's willing to reach across the aisle. We just want to play that for everyone, and then we want to come back to you. [00:06:26] Speaker 7: Look, I mean, I'll get along probably with the Democrats, unless they want to be destructive, but they have the power of the veto. So if we don't like what they're doing or they'll -- they've already called, and they want to talk about things, and that's fine. But, yeah, people -- the Iran thing we had to do, and we continue to do it. We have tremendous oil flowing out of the almost right now. At the beginning, there was none. And probably that's the primary reason. The price, not the war, the price. [00:06:56] Speaker 2: All right, that was President Trump roughly about an hour or so ago on the construction site of the White House ballroom. Hey, Josh, the focus of the president -- he did address a couple issues, and he did finally answer some reporter questions about the outcome of the elections, but largely, once again, focusing on, you know, his construction projects and things that seem to be near and dear to him. Does that kind of illustrate a little bit of how he got here? [00:07:18] Speaker 8: Yeah, it felt like a bit of a, you know, self-induced sort of therapy session for the president. He wants to go tour the new ballroom. He signed one of the beams, wrote love on it. You know, he's just working through it, I guess, right now. And it's basically -- let's start by just saying last night was a drubbing. I mean, I don't know what else to call it. It is a blue tsunami. These are generational numbers that we're seeing in some of these states. It's way worse than 2006. It's way worse than 2018. It is bad, bad, bad, bad, bad. And it's bad for Trump, and it's bad for J.D. Vance. We can talk about that in a little bit as well. But Trump sort of held court saying, look, you know, I would have done Iran anyway, and the prices were part of it. He mused about whether J.D. Vance may or may not run, which is interesting. But he continues to sort of distance himself. And what we've seen is pretty different responses from Trump to the 2020 election, when he's on the ballot, and the 2018 and the 2026 elections, which he's sort of chalked up to every other candidate failing. But really, his fingerprints are all over the Republican record that voters had in mind when they went to the polls, including in some of those states that you mentioned, where it was his hand-picked candidates that did not win and gave Democrats breakthroughs in states that, you know, no one really ever thought was really on the radar. And I should note, we're still counting in Mississippi. And, you know, I'm not a data expert, but right now it looks like that could flip. That's crazy, Josh. The last I checked, the Democrat was leading. [00:08:49] Speaker 3: Did you ever think you'd be sitting here talking about the state of Mississippi having a Democratic senator? [00:08:56] Speaker 8: The three jaw-droppers, I think, last night were Governor Abbott losing in Texas. That is a stunner. That is a stunner. Everyone thought Tallarico, I think, had a chance, but Abbott losing is wild. Mississippi, if it flips, and then South Carolina as well. But some of the margins, too, are crazy. Roy Cooper won in North Carolina by 20 points. This is wild. John Ossoff, who you saw in your clip there, bit of a funny package. You can pretty much see who's running for president there. We have good editors. What can we say? Striking a slightly different tone than the other two, or other ones. You know, he won by 18 points. I think Tallarico won by 12 points in Texas. This is wild. Everything is in the air now. Like, is Texas a swing state? Who knows? Does money in politics matter anymore? Who knows? Elon Musk spent hundreds of millions of dollars in Texas and got a generational Democratic victory for it. The gubernatorial candidate for the Republicans in Georgia spent almost $200 million of his own money on his own race and lost. So, just so many questions swirling out of last night. We'll be parsing this for days, weeks, months, years. And it's just an absolute seismic shift. The Democrats, if you believe J.D. Vance, will now hold the Senate for at least six years in his estimation. I mean, this is just such a crucial thing. And, of course, so many Republicans who were slow to get on board with President Trump saw, you know, delivering the Senate and confirming the Supreme Court. That kind of thing is really a core part of that. All that, again, is up in the air. What do Justice Alito and Justice Thomas do now, for instance? So, you know, there's just so many threads to this, which is why I'm rambling. It's not just the caffeine and the lack of sleep. [00:10:32] Speaker 3: Well, let's talk about the future of the Republican Party and where it goes from here. Two years ago, we were sitting here talking about the future of the Democratic Party and where Democrats go from here. Is this a time for Republicans to get together and try to chart a new course? Or is this completely tied to President Trump? And when he is done in two years, they can turn over a new leaf? [00:10:57] Speaker 8: I think it's going to be very difficult for the party to change course with the president still in office. And I think the big question is, who runs in 2028? We've seen some critics who've been on the Shire end until today pop out, including Governor DeSantis in Florida, who called this a near-death experience or something. Extinction-level event. That was it. He called it an extinction-level event for the Republican Party. And, you know, we don't know who's going to jump in and who's going to run. [00:11:26] Speaker 3: It seems like based on the rhetoric from Governor DeSantis, he's trying to draw a distinction between what he views as the path forward versus what the core "Make America Great Again" views as it. Yeah. [00:11:37] Speaker 8: But also yesterday, he said, "I might run for president, but probably not in 2028." And so, you know, I think it seems like a lot of the Republicans are sort of putting their money on 2032 being maybe a good chance to run and sort of thinking that things are not going their way in 2028. But no one knows. But the Vance thing, if you're J.D. Vance, you had a really bad night. Not only did you lose the Ohio Senate race, which was your seat that you campaigned on and the president campaigned very aggressively for, and you lost the gubernatorial race, including Vivek, Ramaswamy. Vance doubled down on Ramaswamy's controversial ad as much as anyone. And now he, of course, is tied to a president who's pretty unpopular, has been sent a message from the public. But it really puts Vance in a very tricky position here going forward. You know, he cannot stray too far from Trump, although that post today was a real eyebrow-raiser and he's trying to. And at the same time, he's wearing so many of the decisions of the Trump-Vance administration that make it really tricky for him going forward at a time when, in particular, his own state swung to the Democrats. [00:12:39] Speaker 2: You know, Josh, as we continue to think about forward and before we get, you know, to the presidential elections, the president seemed to say that he will reach across the aisle. You know, now it's still about governing. He's got two more years. I'm assuming Democrats would like to get some things done, and I'm assuming the president would. So how does that happen? Can it happen? Should we expect it to happen? [00:13:02] Speaker 8: The president says all the time with foreign leaders that he's open to deals. Sometimes they come. More often than not, they don't. I'm not putting a lot of weight on those comments necessarily, but there are windows for them to cooperate on things. You know, Jim Messina, Obama's 2012 campaign manager, told me yesterday he thinks, like, extending the Affordable Care Act tax credits or expanding them is a good place to start. I think you'll see Democrats in the new Congress push forward sort of very sort of targeted cost bills and really, you know, force Trump to make a decision about whether to sign them or not. Of course, we also have the debt ceiling issue coming back again next year. That would be a window for sort of a grand compromise if there is, you know, fertile ground for that. And more immediately, we have the government funding, you know, milestone, let's call it, coming up in the lame duck here. And so we'll see something there. And I mentioned to the Supreme Court, you know, I don't want to go too inside baseball in Washington here, but the two oldest justices are both conservatives. Alito and Thomas. And so questions will swirl about whether either one of them wants to sort of snap retire here in the lame duck session to be replaced by a younger conservative jurist. Otherwise, they're looking at quite a long time before Republicans can expect to hold the Senate again, certainly at least two years. But as I said earlier, Vance thinks it could be at least six. [00:14:17] Speaker 2: Amazing. Yeah, right. You got to think about that stuff in terms of the duration. Josh, thank you so much. Yeah, exactly. I know you've had a long night like so many out there in our D.C. Bureau. Thank you so much. Josh Wingrove, an incredible story. It's among our most read. He and Josh Green putting this story together. So it's on the Bloomberg. He's Bloomberg News senior White House reporter Josh Wingrove. [00:14:39] Speaker 3: Well, let's stay on the elections and how the AI data center boom is likely set for upheaval after the election route in Blue Wave last evening. I'm looking at shares of CoreWeave down 9.5 percent. Nebius Group, another neocloud company down about 6.4 percent. But some of the Mag7, as you said, Carol, they're rallying. [00:14:56] Speaker 2: Yeah. Amazon, Meta, Microsoft, Alphabet, they are rallying in today's session. But it is those AI data center pure plays that really are taking a hit in today's session. Let's see what we can expect. Brody Ford is with us. He's Bloomberg News tech reporter Brody Ford joining us out there in our San Francisco bureau. Brody, we talked to him. Be tech. But I mean, this is a sector everybody's talking about. [00:15:20] Speaker 5: Like what what might happen to the data center build. Man, we knew that the average voter didn't like data centers, but it was resounding last night. Right. I think we counted something like 40 ballot measures in towns that would in some way restrict data center development. And by our count, all but one of them went against data centers. The big race that everybody's watching was the Texas governor race. Most people didn't expect that to go blue. It did. She campaigned very aggressively against data centers, talking about how she'll put a moratorium until we get stronger regulations. So, yeah, most people I know in this space are feeling pretty uncertain today and trying to work out what this means. [00:16:04] Speaker 3: So then where do data centers go, Brody? If they don't go to Texas, if they don't go to New York, where will they be built? [00:16:11] Speaker 5: Consensus view I'm seeing is that a lot of the big projects we've been talking about probably still will go on, right? I mean, a lot of the projects we talk about already are permitted in a number of ways, but are they going to need to spend more time in local community meetings? Are they going to need more concessions to the Boys and Girls Club, pay additional local tax revenue? To really get approvals from a more, you know, oppositional regulatory environment? That seems the most likely scenario. As you said, if business really gets closed in a state like Texas, you have to imagine they look where regulations are even less strict, right? They look for a Mississippi or a Louisiana, something like that. [00:16:52] Speaker 2: Yeah, I know you do have to think about whether or not it's going to be much more part of community meetings, right? Or local town discussions about, okay, what's the impact on power on water? And so how do we maybe do this a little bit differently? Elon Musk has said we'll just, you know, do them up in space. So he's kind of come out. Easy solution. Exactly. Exactly. Exactly. But there are some states like Texas, super vulnerable. If you think about the exposure that they have. I saw a stat that Texas accounts for nearly 30% of the U.S. data center capacity set to come online in 2028. That's according to semi-analysis. I mean, you know, particularly vulnerable. And it's interesting considering the spend that Elon did on political campaigns there. [00:17:35] Speaker 5: Yeah, absolutely. And I think it's very interesting because we've seen this again and again where the data center companies are having to open up the money cannon locally. One that I've watched a lot is Oracle out in New Mexico. One of the most important data centers for open AI has just become one of the most disputed sites for a number of reasons. And, man, everything in that town has Oracle's name on it these days, right? They've sponsored so many events. They've sponsored so many kind of Boys and Girls Club type events. And it's interesting to see whether or not it's working. As you've said, so far it's not, right? People really see data centers as this symbol of big money coming in. There's a lot of ideas out there about what it does to the environment. On the other side, we need job creation. And people often want jobs and industry in their areas. And so it's a difficult line to walk for government officials because they do want industry and jobs. But they also have to respond to their constituents feeling so concerned about them. Yeah, exactly. [00:18:39] Speaker 2: And as you say, the raise, the capital raise, whether in the debt or equity markets among these big tech for the AI bill continues. Brody, thank you so much. Brody Ford, Bloomberg News tech reporter out there in San Francisco. Well, coming up next, AI data centers may have a problem. So, too, may the U.S. fiscal house. We'll get to that. [00:19:04] Charlie Pellett: It's 2:21 on Wall Street. We do check markets all day long here at Bloomberg. 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We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. We're going to talk a little bit about it. What are you anticipating as a result of the midterms, if anything? [00:22:16] Speaker 9: Well, it certainly wasn't a central issue in the midterm elections. There's a lot going on. It's a very crowded agenda. But fiscal policy is something that underrides all other policies. So despite it not being a major topic of discussion, it may push itself on the agenda. One thing that you were saying, it used to be that all lawmakers understood we had to make changes and they came really close to putting in place a big debt reduction deal. And when that didn't happen, people just walked away from the issue. Interest rates stayed low. People tried to find new excuses to keep borrowing. And as you just pointed out, the situation is now much worse. That's what happens when you delay and you punt. And we now have a much tougher situation to deal with. I think the affordability agenda, which was front and center throughout the election, is so highly dependent on us being responsible fiscally that once people come to understand you cannot bring interest rates down, you cannot bring prices down, you cannot bring wages up when your deficit is this high. Once that linkage becomes more clear, it may be easier to start talking about this issue. But we are in a moment of political pandering where people are going to want to keep giving away things. It's a hard time economically. People are going to want to have fiscal giveaways. There's a real risk, despite how awful our deficit and debt situation is, that we see policies that make things worse before we get around to making them better. [00:23:38] Speaker 3: Is there a way to do this without raising taxes or cutting spending? [00:23:44] Speaker 9: No. You sound like every politician who asks. That's the first question. Every politician says, like, how do we do this without doing any of the hard policies? No. And that's how we've gotten ourselves in this situation. If we had made these changes when the deficits were large, but not frighteningly large, we could have made small incremental changes on both the tax and the spending side. But now, with a huge national debt, near record levels of debt, fastest growing part of the budget is interest payments, these will have to be changes on both sides of the budget, tax increases and spending reductions, and they'll have to be large. We are in such a big fiscal hole, we can't even really talk about balancing the budget in any immediate amount of time. The best we can do is sort of aim to what a lot of people are shooting for, cutting the deficit in half, getting it from 6% where it is today of GDP down to 3%. But no, for all the wishful thinking, for all the pretend, don't worry, we can borrow our way out of it, tax cuts pay for themselves, MMT, like whatever the storyline, you have to come down to aligning our spending and our revenues if we're going to bring our borrowing down. And if we don't do that, the affordability situation is going to continue to deteriorate. Do you remember Doge, Carol? [00:24:54] Speaker 3: I do remember it very well. [00:24:55] Speaker 9: Okay. [00:24:56] Speaker 3: So why are we -- that didn't -- I guess that didn't -- I guess that didn't work. I don't know. [00:25:01] Speaker 2: That's a great point. Like, where were those cuts? I thought that was supposed to, like, help clean things up. [00:25:05] Speaker 9: Doge basically generated no cuts. I mean, the problem with Doge is that it was a good idea. The idea of going through line by line and using AI in any ways that it's able to, to figure out how to streamline our programs, streamline our regulations, make sure that programs are effective and efficient. Some kind of tracking we do right now, but we don't put in the budget process. Great ideas. It wasn't implemented that way at all. Like, we probably don't have time to go through all the things that went wrong with Doge. But it is the basic point. There are lots of areas for savings in the federal budget. If Doge had focused on probably the biggest areas where you can generate savings, the national security budget, defense procurement, and healthcare, where there are so many areas we could do things more efficiently, we could have generated savings. But what I want to make really clear is it's never going to be a free lunch. It's never going to, like, somebody's profit is somebody else's waste. So it will be a hard deal. And until our politics is willing to compromise and make hard choices, we're going to continue to punt and procrastinate on this issue. And it's going to make our economy weaker, and it's going to make our national security position weaker as well. [00:26:13] Speaker 3: You know, you're saying this stuff, and I just, in my head, I'm thinking term limits, term limits, term limits. And the reason I'm doing that is because it feels like some of these decisions will have to be so hard that they will have to be made by somebody who doesn't care about getting reelected. And, look, we have to put aside what could, you know, the implications would be on a specific political party. But would term limits, in your view, help with this issue? [00:26:33] Speaker 9: I think term limits have pros, and I think they have cons. I think definitely it would free people to make harder choices when they're not just worried about getting reelected. People all the time all talk about how you fix Social Security, and somebody will say, well, is that popular? And the point is, no, the fixes are not popular. The giveaways are what were popular. And so it would free people from those constraints. But on the other hand, one of the things we've seen is a lot of the loss of expertise in Congress and on the Hill, where it takes years to build up an understanding these aren't easy issues, right? I'm only following one issue. These members of Congress are following hundreds of issues. They need the expertise to really be able to make wise decisions. So I think there's a trade-off there. But I do think one of the things that you can do to insulate members from the politics is look at commissions. Commissions have a mixed record, but oftentimes they generate the best policy ideas that are used over the subsequent years. And so some kind of a fiscal commission or a commission to fix Social Security, those could put full-fledged plans on the table. And then members would be more able to say, well, it's not my first choice. I would have done it much better. But we do have to fix the problem. So we'll go ahead and accept these recommendations. [00:27:39] Speaker 2: You know, Maya, that's a great idea. I think about car czars that we've had or AI czars or crypto czars or what have you. Like, why don't we prioritize that? I think it's fair to say that any institution that's been around for a long time, whether it's private or public, gets big and just things that never go away in terms of departments or levels. And there is a point where you've got to take a look at it and figure out what works, what's productive, what's great. And same thing for a government in terms of its citizens. I mean, do other governments do that? Do they go inside and take a look line by line and say what's working, what's not? What makes sense? [00:28:12] Speaker 9: Where are we wasting money? Absolutely. I mean, it absolutely makes sense. There are so many entrenched programs that people never revisit, never look at the effectiveness. A great example is we lose two and a half trillion dollars a year in tax breaks, credits, deductions, exemptions, exclusions. There is basically no oversight of whether they're actually working, of whether what their objectives are still even exists today. So we could build that into our budget process. Many countries have better budget rules, better constraints than we have. But in our defense, I guess our budget is much more complicated, which is why the kind of Doge idea, the idea of using something that could help us look through the massive, massive line items in a seven and a half trillion dollar budget is still a good idea, despite the shortcomings of the way that this Doge effort was implemented. And there are things to learn from other countries, particularly kinds of constraints they have, like debt breaks, debt limits, other things we need to work back into our own budget process. [00:29:10] Speaker 3: Yeah, there's so many directions I want to go with you. But in terms of numbers here, thinking about how much taxes would have to go up at a federal level to start digging ourselves out of this hole. Like if we were to get on some sort of payment plan here, like what would you say to Americans about what they would face in terms of higher taxes? [00:29:30] Speaker 9: It's going to be significant. It's so it is absolutely dependent on how it would be, whether it's across the board, which I think it probably wouldn't or whether it'd be more focused on the top end, though. I think that there is a exaggeration of we can fix this all by taxing the wealthy. There's no way we can get out of this on taxes alone unless you actually include the middle class in that problem as well. But just to put some basic numbers out there, we have seven and a half trillion dollars in spending, about five and a half trillion in revenues. We don't have to close that entire deficit, but to bring the deficit down by half as a share of GDP over 10 years, you'd have to save about ten trillion dollars over a decade or a trillion dollars a year. So taking a trillion dollars out of seven and a half trillion or adding it five and a half trillion, these are expensive changes. Those are very rough numbers, very expensive changes. You will get some benefit because right now we pay a trillion dollars in interest a year and that will start to cut those interest costs and it will have a positive effect both in terms of growth and lowering interest rates. But these are not small tax hikes we're talking about. And one of the things I would warn is we're about to enter. We just finished the midterm. So, of course, we're about to enter a presidential race. You're going to have people laying out massive promises. Yes, I'll raise taxes, but I'm going to use it for these five new spending programs. And we can't be doing that. We cannot afford to do more tax cuts or new spending programs before we get the debt deal in place. Again, ten trillion dollars in savings, that's a huge amount. That's where the focus needs to be before we use any money for other priorities, I would argue. [00:31:00] Speaker 2: But, Maya, you know, I feel like we have had this conversation before and you do have to have politicians and policymakers make some really hard decisions that are going to impact constituents in their own state. And if they're facing re-election, it's really hard to get these things done. How do you get a public, a society, many who feel like government hasn't worked for them in a long time to say, I get it. I got to pay it more. We got to get our fiscal house in such, you know, in a better way. Like, how do we get there? [00:31:29] Speaker 9: Yeah, we're stuck in kind of a circular, a doom loop of this issue where politicians will say, voters never talk to me about the issue. They don't care about the deficit. And meanwhile, voters are hearing from their politicians, I'll give you this tax cut. Oh, no, I'll give you this spending program. Oh, I'll give you both. And even if they have this nagging feeling that you can't be borrowing $2 trillion a year, who's going to say no to free money? And so you have this problem where all sides are kind of agreeing to make it worse. You need political leadership. It's not the hardest thing to know can change the entire national discussion. But it's been really hard to break out of this pander competition with people saying, here's why it matters, not only for our economy, affordability, your own economic security, but for our national security and the well-being of your children. Right. Being prepared for next emergencies. These are all the reasons. And these are the things we have to do. We have to get rid of some of these tax breaks. We have to fix Social Security. Talk about raising the retirement age. There are a lot of savings we have to squeeze out of health care. We need to put spending caps in. Those are the things I can say because I'm not elected. Politicians need to be able to say them, too. And we have to socialize that that's the kind of discussion we should be having. And you mentioned national security. [00:32:40] Speaker 2: Japan, the largest foreign holder of U.S. Treasuries, at about $1.1 trillion, followed by the United Kingdom at over a trillion dollars. Mainland China at $591 billion. So just a little context in terms of who's holding all of the debt. We do, too. We all hold a lot of that debt. But it just reminds us of where it all falls, especially when it comes to foreign holders. Maya, thank you. Maya McGinnis, President of the Committee for a Responsible Federal Budget, joining us from D.C. [00:33:06] Speaker 3: In just a moment. Well, some may have misread voters yesterday and going into this election. The prediction markets largely did not. We're going to be speaking to Nicole Kagan, head of research at Kalshi, in just a minute. First up, though, a check of the day's trade and top business stories. Here he is in the Bloomberg Businessweek studio, Charlie Pellett. Thank you very much, Tim and Carol. [00:33:24] Charlie Pellett: We've got stocks pushing higher right now. A lot of uncertainty taken out of the market right now. The S&P advancing by 1.7 percent, holding right at 7,700 even. That is a gain of 131 points. Again, S&P has a baseline up 1.7 percent. The Dow doing a whole lot better. Dow Industrials up by 3 percent right now. We are looking at a gain of 1,560 points on the Dow. NASDAQ is up by 1.8 percent. The NASDAQ 100 index up 1.1 percent. Not everything is rallying. The stocks, the Philadelphia Stock Exchange's Semiconductor Index, it is down now by 3.5 percent. Bloomberg Mag 7 index, by the way, up right now by 3 percent. Ten-year at 4.88 percent. We've got gold at 4,058 the ounce, up 3.3 percent. A major sell-off in West Texas Intermediate Crude. That is adding to the equity rally. WTI down 8.1 percent. 88.35 a barrel. Brent 94.84. It is down by 8.5 percent. Kraft Heinz is divesting its North American coffee business. The private equity firm One Rock Capital Partners. Enterprise Valley there, 650 million. Kraft's coffee brands include Maxwell House and Javalia. Kraft Heinz shares are up more than 5 percent. McDonald's, meanwhile, is reporting that its U.S. sales fell less than feared in the third quarter. McDonald's shares, they're rallying by 6.4 percent. Qualcomm after the close of trading. Carol and Tim, that is the Bloomberg Business Flash. [00:34:58] Speaker 2: All right, Charlie. [00:34:59] Speaker ?: Thank you so much. [00:34:59] Speaker 2: Well, President Trump may have misread voters. Prediction marks, however, did not. Kalshi is out with some research today that says the platform saw more than $2.5 billion in trading volume for its midterm markets. Midterm markets up from $1.3 billion for the 2024 election cycle. And then our own Joe Wiesenthal, the co-host of Odd Lots, writing in his newsletter today that, quote, "The only thing I want to say about the election is that I think the prediction markets were huge winners last night for two reasons. The first is that unambiguously there was no better way to understand the state of the race in real time than following the prediction markets. Beyond that, he says, the prediction markets moved decisively towards the Dems in the final days of the race." Again, that's from our own Joe Wiesenthal of Odd Lots. [00:35:45] Speaker 3: Here with more in an analysis of the accuracy of the markets on Kalshi is Nicole Kagan, head of research at Kalshi. She joins us here in the Bloomberg Businessweek studio. Welcome, welcome. How accurate were the prediction markets? [00:35:57] Speaker 10: Yeah, well, thank you so much for having me. Well, the answer to that question is extremely accurate. So of the 487 races that had been processed by 6:00 this morning, if we look at what the markets were saying before the closure of polls, Kalshi was directionally accurate in 479 of those 487. So we're talking about accuracy in the realm of about 98-plus percent across the elections we saw last night. [00:36:21] Speaker 2: How did the accuracy change as you got closer to the election? [00:36:24] Speaker 10: Yeah, so accuracy increases as a function of time to the election. You know, as more information comes out about the candidates, as more polling comes out, as more alternative data is revealed, traders may change their positions. And I think one thing that we saw last night that was really interesting and isn't included in this accuracy release, but is an interesting thing to look at is just how the closure of polls in certain states in Kentucky closing first influenced the way that traders were trading other markets. So once we saw polls close, once we saw early voting results come in, other voting results come in and come in very blue, we saw traders reposition in other markets and begin to reposition in the House and the Senate races as well. That's called making a trade with more information, right? Exactly right. Exactly right. Yeah. [00:37:07] Speaker 3: There were some markets that moved in a very big way very late. So I'm thinking of South Carolina, for example, or the Texas governor's race, for example. What was unique about those races that caused such big movements to happen so late? And I don't recall if they were after the actual polls closed in those ones, but it really flipped. Well, they moved really quickly. [00:37:33] Speaker 10: The flip in South Carolina for Andrews happened within five minutes of polls closing in the state. So you actually saw the market response move decisively very, very early, right as the votes were beginning to be counted in the state of South Carolina. And so you saw traders reposition and ultimately correctly call that race well before networks were calling it. I think part of it is, you know, as you saw this early vote come in and as you gained information from the way that other states had been voting, it bled into a little bit the perception of what might happen there as well. I see. [00:38:03] Speaker 2: Yeah, kind of an understanding of the environment, right, and how voters were doing it. So how different were the bets? I don't know. Do you go a month out, two months versus as you got really close to the elections? [00:38:14] Speaker 10: Yeah, well, so the trades that we saw on our platform in the terms of the accuracy that we were talking about earlier increased from about 95% to about 98% in the months leading up to the election to the date of the election itself to just before poll closure. So two or three months ago, they were like 95% accurate. Exactly right. And we know that when we're comparing to polling, you know, both averages that single out the best rated polling and also polling that it just takes all polling as a simple average. We were outperforming polling three months ahead of the election with the directional accuracy of the calls we were making. But you're pulling on data from those polls, right? [00:38:50] Speaker 3: Well, I mean, I guess the traders are polling on. Oh, the traders are. Yeah, they're the ones who are taking all the information in the available universe and making that a decision based on that. So essentially it should be an aggregate, and correct me if I'm wrong, it should be an aggregate of all the information out there, right? [00:39:07] Speaker 10: That's exactly right. And I think one thing that we'll see in research that is to follow is, you know, which pieces of information did traders seem to pay the most attention to? So were there certain endorsements? Were there certain polls that came out that meaningfully moved trader perception? And were there others that they ignored? And if they did ignore them, why did they seem to ignore them? [00:39:25] Speaker 3: So going into the midterms, there was some concern that there was a miss with Brazil's election recently, or Kalashie and the other prediction markets didn't quite get the Israeli election right recently. What's the distinction between those? Was it a volume issue? Was it who was placing the trades and where they were based in the world? Like, what was unique about those that weren't necessarily so accurate, but these were? Well, it's a good question. [00:39:50] Speaker 10: And I think it fundamentally comes down to what the markets represent. You know, so earlier I spoke a little bit about accuracy, which is probably one of the more naive ways of viewing our markets. It's the simplest way to understand them. If you round up from 50%, you know, do you end up with the correct candidate or not? But really what markets are providing to you is a probability of an event happening, right? And so for the Brazilian election, what we saw was that there was an 80% chance of Flavio Bolsonaro winning that election, according to the Kalashie markets in advance of that election happening and a 20% chance for Lula. But what that would mean, you know, to a person living their daily life is like you might expect something to happen one of five days of the week that you go to work. So it's actually really not that unlikely a scenario that occurs. And we know from the research that we've done in the past that if you take kind of over two million markets over the context of the entire history of the exchange and you look at, you know, if we say something happens 60% of the time, does it actually happen 60% of the time? The answer is yes. You know, we are very, very good at forecasting in those probabilistic terms. And so taking just one example like what happened in Brazil is not quite the best way of representing what should really be viewed in a large sample context. [00:40:56] Speaker 2: I am curious, we're talking with Nicole Kagan, head of research at Kalashie. So Nicole, what are you and your team after a big event like this? Yeah. What do you do and go back and kind of look at the variety of trades, the accuracy of those or those that were like, what do you do after an event like this? [00:41:14] Speaker 10: Well, lots of things. It's very exciting for us. I think it's like a data based Christmas for us because we're looking through our data and we're thinking, you know, who is trading each of these races? Is it people that are within that state? Is it people outside of that state? When are they choosing to trade those races? So are they coming in quite early? Well, we had called races quite early. So for example, markets had Tallarico favoured from more or less, you know, weeks ago, August onwards. You know, you might ask questions as to why markets were so confident in that outcome so early, what kind of information they might have been looking at before you really saw supportive polling come out in Texas and then later in Kansas, which the markets have favoured for the past week or so. And so part of it is, you know, who's trading and what are they trading on? And then part of it is, you know, on election day, what seems to be happening? So as polls close east to west, how are we seeing traders reposition, as we were discussing earlier, I think is a really interesting question. And how does that information really bleed into the markets that we have live on our exchange? [00:42:12] Speaker 3: You mentioned the number of markets you have live on the exchange, Kalshi certainly in the news for the prediction markets regarding the midterms, but also notable for sports and other culture contracts as well, Wall Street contracts as well. Is there something unique about elections contracts that in terms of how accurate they are, in terms of how right they end up being versus other categories of markets? [00:42:38] Speaker 10: Well, I think that across the board, Kalshi's markets are very well calibrated. And that's the concept that I was talking about earlier, where we price as a probability, we say, you know, something is said to happen 60% of the time, does it actually happen 60% of the time? That's across categories. [00:42:52] Speaker 3: Exactly right. [00:42:53] Speaker 10: You know, but it varies in degrees. So you see the best calibration in our economics markets. And part of the reason for that is because there's a really, really well rehearsed way of receiving information for big macroeconomic signals, right? There are ways that different institutions and individuals might forecast CPI prints. And that is quite well established as a part of the financial infrastructure. [00:43:12] Speaker 3: So in other words, the probabilities on those markets are the ones that most likely reflect the outcome of the event. Exactly right. [00:43:19] Speaker 10: That's exactly right. [00:43:20] Speaker 3: Okay, sorry, I couldn't continue. I just want to translate a little bit. No, no, that's great. Like you said, I think a lot of people look at these markets and sort of take away the elementary view, but they're much more complicated when you look at the actual probabilities. [00:43:31] Speaker 10: Yeah, I mean, there's a lot to take out of our markets. And I think that one thing that our markets provide that basically did not exist prior to these markets existing is even for the big macro signals that we think about. So think about non-farm payrolls or unemployment. There is no financial instrument that exists that has ever allowed you to trade cleanly on that thing. You know, we know that that moves public markets, but there's never been a way for you to trade that. We know that election outcomes move public markets. We saw S&P 500 futures dip overnight. [00:43:57] Speaker 2: You can trade on it ahead of on what you think it might be, right, though? You can as an investor. Yes, that's right. [00:44:04] Speaker 10: You're saying on the actual... That's right. But public markets are quite noisy. You know, if you're trading the S&P 500, you might be pricing in something that's happening in an election. But you actually might be wrong about the S&P impact, you know, of you trading that thing. But what? [00:44:17] Speaker 3: I think people were last night. I mean, this is kind of the Kalshi origin story and what Tarek talks about all the time and the surprise in 2016 when Hillary Clinton lost to President Trump in the way that there wasn't actually a way to bet on that apart from, you know, just buying S&P 500. Exactly right. [00:44:31] Speaker 10: You know, and when I used to be a macro investor myself at a hedge fund, sometimes I'd sit there and I'd think, you know, we take these really indirect proxy positions when the thing that I actually have a view on is who's going to win an election. You know, if I might not know, you know, what's going to happen in Turkey with interest rates, but I might have a very strong view that Erdogan will win or lose the next election. But there's never really been a way for me to trade that until now. And so I think there's a really useful price discovery component of the probabilities that we're producing from our markets that are really applicable to the way that institutional investors, but also, you know, individual people are thinking about the future. [00:45:03] Speaker 2: But is it, you know, in terms of how we think of it, is it kind of like gaming, though? Or like, you know what I'm saying? You're making a bet on an outcome on something. So it's kind of entertaining, right? Well, I would say like, you know, just because a product is interesting or fun. Yeah, I'm not saying that's bad, but I'm just trying to understand in terms of an investing audience or, you know, the usefulness. This obviously was useful in terms of figuring out the election outcome. [00:45:30] Speaker 10: Well, yeah, I mean, there's a price discovery piece. There's also the risk hedging piece, which is that businesses carry material risk that's tied to legislative and policy decisions that happen in certain states. And we saw this come up, you know, there's been some discussion of data centers and AI being an issue for many voters coming out, particularly of Texas. You know, same can be said of gas prices and tariffs. And so you can get at these policy issues that people have unique idiosyncratic exposures to. And I think that the thing that I would say is, you know, fundamentally, in all financial markets, what are you doing? When you buy a share of Apple, you're speculating on the future value of the stock that you hold. In the same way, instead of placing that position on an equity like Apple, which may go up or down in time, you hope that it might go up if you hold it, you might buy, you know, a share of Tallarico winning the election in Texas. And if and when that happens, or even along the way, as that becomes more likely, you might make a return from that position as well. [00:46:20] Speaker 3: Nicole, before we let you go, we know that these get more accurate as the event becomes closer. What about in terms of total volume? You mentioned the Tallarico Senate race that had a close to $200 million in volume, which is like almost 10% of the total volume. How big does a market have to be for it to be accurate in an election? We just have about 30, 40 seconds. [00:46:38] Speaker 10: Yeah, well, the answer is not very big. You know, we see, you know, tens of thousands of dollars being present in our election markets and leading to really, really high degrees of calibration. And that's because the incentive in our markets is to be right and to be right quickly, which is why you saw our markets, you know, and our projections go 99.1 in probability in our markets well before you saw the networks call that. And that's an area also that we'll be investigating in future research what made our traders trade with such high conviction so early relative to when everybody else was beginning to call. [00:47:09] Speaker 2: Right. You kind of want to get inside their head. Exactly right. And understand that. So that's Nicole's job. When you figure out how you are doing that, come, come, come share more. I'll be right back. Fascinating. Nicole Kagan, she's head of research at Cal Street, joining us right here on BW Daily. Hey, stick around, folks. Another check on the trading day and stocks on the move. We're back in a moment. [00:47:31] Speaker 1: This is Bloomberg Business Week daily with Carol Masser and Tim Stenevec on Bloomberg radio and television. [00:47:40] Speaker 2: All right, everybody, we are getting ready for the final hour of trading on this Wednesday, November 4th, 2026. [00:47:47] Speaker 3: What? I want to talk to Denise Seikova about prediction markets real quick because you got to see the end of that chat. That we had with Nicole Kagan over at Cal Street. You've been covering prediction markets for years. Big secret that I have to reveal to everybody is when I have questions about prediction markets, I go to Denise and she gives me all the answers. What did you what did you think of like sort of this election postmortem and like how these markets got it right? [00:48:10] Speaker 11: It's been very fascinating. I think there has been a lot of talk about how early they had like 99 to 100 percent. And, you know, the majority of the races they called were pretty accurate. It was pretty early on. Like a lot of the states that flipped, we saw the flips pretty early, like August, July, you know, and at that time the posts weren't necessarily showing the results. So it's pretty fascinating to see them at work. That said, there were a few markets that were wrong with lower liquidity, but we saw in the high liquidity markets they worked pretty well. [00:48:38] Speaker 3: Yeah, I mean, one thing I wanted to, we don't have time to talk about it with Nicole, but like the reason why networks, just to take people behind the scenes a little bit with how this stuff gets called by like the Associated Press and stuff like, you know, I think a lot of networks learned the hard way in 2000 that you want to be 100 percent right. Yes. When you call an election. [00:48:56] Speaker 2: I saw last night on some of the coverage of people getting, you know, checking with sources and being like, wait. [00:49:01] Speaker 3: So there's a history of like being super careful about doing this stuff. And that hit, that's not present with prediction markets because there are no rules. [00:49:09] Speaker 11: I think we also have to remember that prediction market, you're going to look at their resolution and it's going to be according to media organization, according to. Yes, you raise such a good point. So it's a much higher bar to declare as a news organization, not to defend my own job, but you know. [00:49:23] Speaker 3: Yeah, yeah. No, you said it perfectly. [00:49:25] Speaker 2: But it does make you wonder these people who are getting it so accurate in the trades where there is a lot of volume, right? Like where, what's their information? Where are they pulling information from, right? It's the wisdom of the crowd. [00:49:38] Speaker 11: I guess it's working. It's like all those people with different points of view putting money on the line. And people say it's more accurate than post when you put the money on the line and you have hundreds and hundreds of people trading them. [00:49:48] Speaker 3: But if you just look at what's happening in real time, you know, people are putting in $100 or $10 or $5. So it's like it's a very small amount of money and a lot of people. [00:49:57] Speaker 11: It's, ah, it's just fascinating. Yeah, but you get very different demographics. You get people from different states. You get people from different age groups, maybe different countries as well, and that helps. All right. [00:50:05] Speaker 2: All right. We'll continue to keep an eye on that. I'm Carol Masser along with Tim Stanovic. Let's get to some stocks on the move. Denitza Sokova is with us. She is Bloomberg News' cross-asset reporter. She does so much in terms of the financial markets here, including watching a few stocks on the move like CVS. [00:50:22] Speaker 11: Yeah, very different from prediction market, but CVS is having a pretty rough day. Shares plunged as much as 15%. Now those losses are being paired about 11% loss. Of course, I've been talking a lot about the two different businesses, and this is the first time we get big news of them spinning off their retail pharmacy business and their healthcare industry business. So we're going to have, in 2028, we're going to have CVS Pharmacy, which is the drugstore business, which is already massive. This is about in the first half of 2028. And then we're going to have CVS Health, which is going to be their Caremark prescription business and ethne insurance. It's very interesting the reaction we're getting today. Yeah. J.P. Morgan says big surprise, but nevertheless, they're going to be the number one biggest brand and it's beating world grease already with 9,000 locations. So it's really fascinating, but everyone's pretty sure it came today. But we've been here before. J.P. We've talked about it before. [00:51:14] Speaker 2: J.P. And the whole idea was it's almost like a supermarket for like pharmaceuticals, right? J.P. Yeah. J.P. And drug programs and the pharmacy benefit management. J.P. It's all a cycle. J.P. Come on. J.P. It was supposed to be so great. J.P. Yeah, it was supposed to be great. [00:51:24] Speaker 11: J.P. And now it's like, not so much. J.P. Yeah, the trend has been in the opposite direction. [00:51:26] Speaker 2: J.P. All right, so that's a good one. Let's go on over to a favorite of Tim's. [00:51:30] Speaker 11: J.P. Very different topic. And a favorite of mine, Duolingo. J.P. Oh! J.P. So it's working. J.P. The strategy is working. J.P. Shares jumped as much as 36%. J.P. Now it's a little bit lower, but still more than 30%. J.P. We're seeing a really strong customer acquisition. J.P. The number that is really lifting the stock is user growth of 29% over the third quarter. J.P. So they have a really interesting models. J.P. They're prioritizing user growth than monetization, which you can argue long term. J.P. Maybe it can bring some problems. J.P. Wow. J.P. But they're really getting those users. J.P. They're extending their free trial. J.P. People are staying long. J.P. They're changing the tiers. J.P. So the most expensive tier, they're actually phasing it out. J.P. Moving people into lower costs. J.P. Like the idea is to get as much possible customers as you can. J.P. There is a lot of AI competition. J.P. And then start to charge them more. J.P. They're very intense with notifications. J.P. Once Instagram is like, did you join today? J.P. So maybe once they get the users, they can keep them. J.P. Maybe that's the strategy. J.P. I don't know. [00:52:26] Speaker 3: J.P. I mean, this stock, like we talked about yesterday, J.P. has come a long way from those all time highs a few years ago. J.P. It's been a very volatile name. J.P. 529, trading at 529 back in 2025. J.P. And yeah, now down at 164, even with today's increase. [00:52:42] Speaker 11: J.P. Even with today. J.P. I'm a big Duolingo guy. J.P. This is the best day since 2020. J.P. 2022. J.P. So let's not take it away from that. J.P. 18% of the float is short. J.P. Yeah, definitely. J.P. Volatile name, retail favorite, lots of short interest. J.P. Yeah. J.P. When we talk Mickey D's. J.P. Yeah. J.P. I know they don't like that, but... J.P. You know, they're having a great day as well. J.P. Not as great as 36%, but they're up more than 6%. J.P. Ticker is MCD. J.P. Shares fell, the sales fell less than feared in the U.S. J.P. The number we got for comparable sales is just 0.2% lower. J.P. So that's pretty good. J.P. We're seeing some strong regions, like growth in Germany, Australia. J.P. And other regions are mixed, like there is weakness in China and France. J.P. Nevertheless, that's some good news for the chain. J.P. That was already down 14% before that report. J.P. So obviously it's been a very volatile time. J.P. They're trying some new approaches when it comes to value. J.P. They had this whole under $3 item and it didn't work quite well. J.P. So they're trying new things. [00:53:43] Speaker 2: J.P. Bring back the Happy Meal. J.P. Bring back the Happy Meal. J.P. No, they're still here. J.P. Bring back the Happy Meal. J.P. Donizah, thank you. J.P. Check out Stock Movers Podcast, wherever you get your podcasts. J.P. The Close starts now.