Microsoft Surges, Meta Slides — Open Interest 7/30/2026

[00:00:00] Speaker 1: We rally after the Warsh and Zuckerberg push back 30 minutes until the start of your cash equity trade. [00:00:06] Speaker 2: I'm Danny Berger. And I'm David Gurra. Bloomberg Open Interest starts right now. [00:00:20] Speaker 1: Coming up, Microsoft soars, meta struggles. Apple and Amazon take the spotlight next. [00:00:25] Speaker 2: Long bond yields climb around the world on concern that the Fed will fail to rein in inflation. [00:00:31] Speaker 1: And Brent hovers near $90 a barrel as the U.S. launches new strikes against Iran. [00:00:37] Speaker 2: Some stocks to watch this morning. Microsoft rallying after earnings signaled that its AI investments are starting to generate returns. Its cloud computing paying off. On the flip side, we talked about soaring, suffering. Meta delivering a disappointing quarterly revenue forecast supporting the lowest free cash flow in years. And Qualcomm, that chip maker, giving a weak outlook citing component shortages and rise in costs difficulties, Danny, with its supply chain. [00:01:01] Speaker 1: We are in the midst of the busy earnings season. That's tech on one side. I'm looking at some of the consumer names this morning. David, Starbucks and Chipotle. They both raised their guidance after stronger than expected quarters. Both of them rallying Chipotle by eight and a quarter of a percent, largely thanks to trendy new items on their menu and revamped loyalty programs. Also on the consumer side, MasterCard reporting a 21% profit surge. They're expanding beyond its traditional payment networks. [00:01:26] Speaker 2: I want to turn back to the Fed now if we could share Kevin Walsh reiterating the Fed's commitment to tackling inflation. [00:01:33] Speaker 3: Let me reiterate, there is no soft inflation target. There is no soft implicit target, not on this committee's watch. I don't believe that either part of our mandate is generally at war with the other part. Prices reacted in real time to incoming information. And the reduction in forward guidance may have been a factor. CapEx is preparing the ground for future growth. Nonetheless, the precise timing and magnitude of effects on the supply side remain hard to predict. The five plus years of inflation above target cannot be cured in nine weeks or by a single month of modest price decreases. This Fed will not waver. [00:02:23] Speaker 2: Investors evidently struggling to understand what all of that meant. They're dumping 30-year Treasuries after those comments from the Fed chair, sending the yield to a 19-year high. Fresh data this morning showed the U.S. economy grew at a weaker than expected pace while the Fed's preferred inflation gauge cooled in the month of June. Joining us now is Michael McKee, Bloomberg's International Economics and Policy Correspondent. Maybe we can dissect some of that language there in just a minute, Mike. But let's start with the GDP figures and what you took away from those numbers that we got this morning. [00:02:50] Speaker 4: Well, the interesting thing about GDP is it was certainly weaker than expected, but a lot of that was in government and inventories. Consumer spending held up for the quarter. Now, the question is, where are consumers going from here? Because the numbers for consumer spending, the June number, was much weaker than what we saw for May. May was up nine-tenths. Consumer spending up only three-tenths in June. So our consumers falling off disposable personal income down and the savings rate has fallen significantly, 2.7% in June from 4.4% in January and even higher in 2025. So that's the, I think, worrying figures in there. The PCE numbers for inflation were as expected, basically. We knew that they were going to be down because of energy prices falling, and in the month of June, we saw weaker PPI and CPI. So no surprise there. But I'd keep an eye on what consumers are going to be doing going forward. [00:03:52] Speaker 1: Well, when it comes to Chairman Walsh, I mean, why give forward guidance when you can instead talk in circles? It's something ironic that he comes out and says, look, the markets are finally playing the ball, not the referee. They're reacting to the data, not to us. And then, as he's speaking, we get the biggest market reaction since April of last year with 30-year yields reaching their highest in decades. How is the market interpreting this? Is this just a loss of confidence and credibility with this Fed? [00:04:16] Speaker 4: I think so. You know, when he said that, I thought of you immediately because Danny is a big soccer fan. [00:04:22] Speaker 1: That is true. [00:04:22] Speaker 4: And that was a World Cup reference. But I think a lot of people have made this point that the Fed is not the referee. The Fed is a player in the game. And that's one reason the markets are disappointed, because the monetary policy works through the markets. And you look here at what's happened in terms of the Fed hike rate bets. They dropped when the Fed yesterday basically said, we're not doing anything today. And then they've come back down again for the two-year and for September. But the numbers for beyond that, right now, we're pricing in a full rate hike for October. And the point I want to make about that chart, by the way, is that it is cumulative. So the reason it dropped was because the July numbers fell out of it. There was a 65% chance that the Fed would raise rates in September. And that's still the case. [00:05:24] Speaker 1: Yeah. I mean, the Fed literally sets short-term rates. So in that way, it's like it's the striker almost. Like it is scoring goals. It is making a difference. Mike, thank you so much for joining us. [00:05:33] Speaker 4: So Kevin Walsh needs to wear number 10 on his back. He does. [00:05:36] Speaker 1: Wow. Really deep knowledge, Mike. I like that. He does need a number 10. Thank you so much, Bloomberg's Michael McKee. And we're going to get more on this morning's economic data and that Fed presser with the White House National Economic Council Director Kevin Hassett in about 10 minutes' time. Did you know that most, like, the star players wear 10? [00:05:52] Speaker 2: Why is that? [00:05:53] Speaker 1: Like, I'm trying to remember exactly. There is some sort of lore that, like, the best players have 10. So when you're the best on your country's team, you try to get a 10. [00:06:00] Speaker 2: Get the 10. [00:06:01] Speaker 1: Get a 10 on your jersey. [00:06:01] Speaker 2: Get one for Mr. McKee, maybe. Yeah, yeah. [00:06:03] Speaker 1: I think that's, he is the best player on our team. All right, let's turn now to tech. Microsoft soaring on strong cloud growth while Meta slides as CEO Mark Zuckerberg defends the company's AI spending. [00:06:14] Speaker 5: Our investments in AI are accelerating every major part of our core business. They're improving the experience for people using our apps, driving better performance, performance for advertisers, and helping our teams build new experiences and ship faster. Second, we are developing new personal agents that will be the foundation for our next wave of products and revenue lines in the months and years ahead. [00:06:37] Speaker 1: Joining us now is Bloomberg tech host Ed Ludlow. Ed, what did Meta get wrong that Microsoft got right? [00:06:44] Speaker 6: Well, not necessarily getting it wrong, but they tried to defend the transition to AI, which is a departure from the core business model of social media. And the story to this point has been, well, how is AI going to improve that core business now? Basically, what Meta is pitching is monetizing the infrastructure that they've invested in through cloud services and not as simple as renting out GPU capacity, not as simple as just being literally a cloud player, but offering a pretty wide range of enterprise AI services on top of it. And there's, like, not that much line of sight to that. So that's a summary of what Mark Zuckerberg said. And, you know, in an extension of that clip, he basically defended, saying, like, we see this going in a good direction. The CapEx math was important. They lowered the bottom end of the range for the year to $130 billion and the ceiling still $145 billion. But one part of that 9% drop is that, you know, Susan Lee, the CFO said, we are not going to say anything about 2027 CapEx. And so, you know, that's the formula still for this earning season. Growth in the quarter gone was good, 28% on the top line. But in the outlook for the current fiscal third, it just was tepid. It was sort of in line to below consensus, and it wasn't good enough. [00:08:00] Speaker 2: Ed, let me do something really shameless here, and that is steal a question from Lisa Bromowitz when she asked on surveillance this morning, which is, what does Meta want to be when it grows up? And so we've lived through the name change and the emphasis on the metaverse, and here we are now with this giant AI spend. Is that at all clear from Mark Zuckerberg and his team, sort of where this company is in a year or five years from now? [00:08:21] Speaker 6: I thought you were going to ask me why playmakers wear number 10. This is the issue, right, is that when you cover Meta from a sort of technology beat perspective, a lot of the CapEx story to this point was very closely tied to what they were doing internally. That's a really big story. So, like, to Wall Street, they're like, okay, capital expenditures is the investment. What's the ROI on the other side? But the companies have always said we need this capacity for the work we're doing internally. There's not sort of a linear or direct line to revenue growth in the existing businesses. When Meta grows up, it wants to be a quasi or hybrid frontier lab and still have its existing social media businesses and have a hardware business, the modus operandi by which people engage with their AI in the smart glasses realm. That's a really good point that you've made, David, because they're trying to tell all those stories at once while guiding, like, the direction of travel for CapEx is to make the most of that infrastructure that's being built. [00:09:22] Speaker 1: So, what then is the story that Microsoft told that the market is rewarding this morning? [00:09:26] Speaker 6: Yeah, much easier. Cloud growth is excellent. 43% on Microsoft Azure. It's fastest pace of growth since 2022. But it's so much easier to compare and contrast Microsoft with Alphabet and maybe with Amazon tonight. Microsoft said, OK, this was our top line growth on cloud. And here are some other data points. So, Copilot had 30 million installed seats. Let me check that. 30 million paid users at the end of the quarter. That's an ad of 10 million from the March quarter. So, they're showing tangible evidence that the net result of their AI investment is getting traction in the real world. [00:10:01] Speaker 1: All right. Ed, thank you so much for joining us. Bloomberg Tech host Ed Ludlow and Don't miss Ed's interview with Qualcomm CEO, 1140 A.M. New York Time. By the way, Matt Mailey of Miller-Tayback writes in to say that Pele wore number 10. OK, all right. And then since then, all the other top players have just to... [00:10:16] Speaker 2: I see. They just want to emulate him. Yeah, just to set the record straight. [00:10:18] Speaker 1: I would as well. That's good. Yeah, I agree. Let's bring in Anastasia Amoroso, chief investment strategist at Partners Group, not on soccer. I promise. Look, it feels like some of the key pillars of this market have gone missing. Oil isn't as cheap as it once was with the reignition of the war. We're questioning this Fed and longer-term rates have become unmoored. And now this question around AI and the return is really coming home to roost. Does this make you any less bullish on this market to have these three key pillars come under question? [00:10:46] Speaker 7: I mean, I think, yes, investors should question all of those things. And I guess on the margin, it does make us more cautious on the public markets. You know, first of all, on the price of oil, look, we don't know where this ultimately shakes out, you know, two or three months down the road. And I think investors are still assuming that some sort of straight-of-home re-opening will still be the end result. And so for that reason, I think we're largely discounting the price of oil. So I probably don't see that as the biggest headwind to equities right now. You know, the second thing on rates, you know, it's interesting because what Fed chair Warsh said is, I think he's happy for the bond markets to do the heavy lifting. And so if the bond markets are doing that, that's certainly going to spill over to equity valuations. And so, yes, on the margin, that does really kind of deter the S&P from perhaps having a greater breakout than it would have had otherwise. And then the last point on AI, I guess that's probably the biggest risk to the market in my mind right now, because, look, 50% of the S&P exposure in some sort of way is related to AI hyperscale or semiconductors and so forth. And, you know, part of why the trade has come under pressure is rates. But the other part is there's just more competition in terms of models. And so if all of a sudden, if your best customers perhaps are not seeing as much use of tokens, you know, what does this mean for the demand for semiconductors? What if we don't, what if we don't need the highest, you know, sort of quality semiconductors? What if we can do more with less? And so that really, I think, what investors are starting to question. And, you know, to the extent that plays out, I think that does pressure the overall market. [00:12:28] Speaker 2: There was a time when we were kind of frustrated with the Magnificent Seven is kind of a definition for all of it. All of these living under that umbrella wasn't working out as well as I think it was intended at the beginning. And I wonder if we're kind of going through the same thing with hyperscalers now that there isn't kind of a unifying theme through a lot of these different companies. Maybe Microsoft and Meta kind of illustrate that. [00:12:43] Speaker 7: I think one unifying theme is capex. You know, there's a lot of capex. All of these companies are clearly deploying right now and putting in the ground. But I think what you're seeing is this bifurcation and, you know, the case in point, Meta versus Microsoft. Very different story because one was able to show the monetization. One was able to show the trajectory of cloud revenue growth and the other, sort of, as you were pointing out, still struggling to find that path. And look, for hyperscalers, I think at the moment, they might be in this precarious phase where, yes, credit spreads are widening because free cash flow is falling. But what's happening right now is there's a timing mismatch. You have to put a lot of this capex into the ground. And then the payoff is likely to come a few years down the road. Again, Microsoft seems to be on that trajectory. But I'm actually optimistic on hyperscalers, let's say, one or two years down the road. Because if that scenario I talked about earlier plays out, if we actually need, perhaps, you know, less advanced semiconductors or pricing is lower, capex will decline for these hyperscalers. [00:13:40] Speaker 1: All right, Anastasia, you're going to stick around with us. That's Anastasia Amoroso of Partners Group. Up next, Kevin Hassett from the White House National Economic Council. Welcome to our global TV and radio audiences. I'm Danny Berger alongside David Gurra. Data showing the U.S. economy grew at a weaker than expected pace, while the Fed's preferred inflation gauge cooled in June. Let's bring in White House National Economic Council director Kevin Hassett. Kevin, we can talk about the state of this economy in just a moment, but I want to begin with what you discussed yesterday. Yesterday, before this Fed decision, saying that you have full confidence in chair Kevin Warsh. Now, it is a market that is rethought that is losing confidence with long-term yields pushing at their highest in more than two decades. And at the same time, economists giving counsel that they don't think that they are fully confident in this Fed either. Director Hassett, do you still have full confidence in Fed chair Warsh? [00:14:38] Speaker 8: Of course. And there's a natural transition time where a new leader comes in and tries to get the house in order. I think that, you know, that there were three dissensions or three dissents, but, you know, that happened to Jay Powell in the past as well. The dissents all came from regional Fed presidents, not from the actual governors. And so it sounds like he's got his house in Washington in order. And we'll look forward to seeing how it's going forward. But I think that his job just got a little bit easier if you looked at the PCE data that just came out, which was actually a top line of negative, which is very unusual. Core dropped a lot. And so I think that inflation numbers have continued to head in the direction that we saw with the previous CPI number, which is, you know, an objective of the Fed is to get those numbers down. [00:15:21] Speaker 2: And we heard from him after the last CPI report not to look at one set of data discreetly. But picking up on what Danny was asking about just a moment ago, there does seem to be some concern here that there is no clear reaction function at this time, no clear analytical framework from this Fed. Is that a concern to you? Is it something that you think that the Fed sure has to work to remedy here in meetings ahead? [00:15:39] Speaker 8: Well, well, again, I think that the Fed's old political reaction function was based on outmoded science regarding the Phillips curve. And if you get a little bit of growth, then you got to hike rates. But that, you know, that model assumes that the growth is coming from demand side factors. And I think what Kevin Warsh has done is he's brought in a brain trust of some of the smartest people on earth to help rethink what's, you know, given all the science we've had on what happens with their supply versus demand shocks, what should the Fed be doing? And it's a lot different than what the Fed staff has been advising people to do over the last few years. And so I would say we're going to have a new, improved and much better reaction function and that that's happening relatively quickly because Kevin's putting some of the smartest people been working on this their whole career, like Karen Dynan at Harvard, to help him think about how to do that. [00:16:30] Speaker 1: He might have his house in order, as you say, Director Hassett. But again, it's a market that is not in order. It is a long end yield, the 30-year yield, which yesterday closed at its highest since 2007 at 520. Are you concerned that this is a Fed chair that does not have control of these markets because, Director Hassett, that makes your life much harder. It makes this economy and consumers who want to buy a house, it makes their life much harder than you as you look at the cost of servicing debt. [00:16:57] Speaker 8: Look, the bottom line is that Kevin Warsh was there before. He's an incredibly experienced guy. He's well respected and well liked by his colleagues, even the Democrats up on the board. And he'll do what the data say he should do. And he'll be independent. And the fact is that the data right now are taking the pressure off the Fed. And I think that the markets will get around to seeing that. Maybe they need another couple of prints like the one we saw today from PCE. But we should also talk about the GDP numbers today a little bit, because I think that they've been miscovered quite a bit. The fact is that final sales were up almost 4%. We had a big boom in consumption, a big boom in investment. We even had big positive housing numbers. And those were offset in the bottom line because the capital spending that we're doing is imported capital goods, which you subtract imports from that. And then also because of technical changes in the price of oil, they revalued the oil inventory. So that subtracted from GDP as well. So I think that the final sales number of 3.9 is really what I would say is the signal. So it's not a half full glass of GDP. It's a full glass. Full glass of GDP. I want to pick up on something you said. [00:18:07] Speaker 2: You've known Kevin Warsh for an awful long time through Republican policy circles and certainly your time at the Hoover Institution. And I'm curious, I think an open question here is, is Kevin Warsh a hawk or a dove? What would your answer to that [00:18:18] Speaker 8: question be? I think he's a realist. But he's really serious about getting inflation back to its target. That's his job. He's a very, very pragmatic person who understands the responsibility of the Fed is a dual mandate. And the part of the mandate that's been out of control recently is inflation. And most of that was not the Fed's fault. Most of that happened or at least not directly. Because remember what happened was that right after Joe Biden took office, we had this massive stimulus, even though the COVID episode had mostly ended. And that massive stimulus was like a helicopter drop of cash into the economy. The thing is that the Fed was in denial that that that would cause inflation for almost a year. And that's how inflation got out of control. But the stimulus that actually caused the inflation was the reckless spending by Joe Biden. And, you know, I can promise you that this administration is not going to do anything like [00:19:11] Speaker 1: that. I mean, again, director Hassett, I would point out that we've had a lot of stimulus from this administration as well, be it COVID checks themselves or what we've seen in the one big, beautiful bill. Even so, it is a president who yesterday echoed what you're saying, his confidence in chair Hassett, but at the same time said that it's a difficult task because this is a Federal Reserve who is political. Director Hassett, who is political at the Fed? Would you view the three dissents as we saw in favor of a hike? Were those political votes by those FOMC members? [00:19:38] Speaker 8: Well, I can't climb inside the heads of those folks. But as you know, before Kevin came into the Fed that many times, even, you know, on this network, I talked about the sort of befuddling movements of the Fed. So Joe Biden is stimulating the economy like crazy and the Fed saying it's transitory supply disruption when obviously, you know, I had interviews in May of that year where I said it looks like inflation is going to be around 7% because of the big chunk of demand that was being thrown into the economy by the Bidens. The Fed ignored that. They didn't really start tightening until Jay Powell was reappointed as Fed chair. And then they cut rates sharply right before the election in order to help Kamala Harris when President Trump, in contrast, was elected. Then even before the he was inaugurated in the first term, the Fed started hiking rates in that December. And so that the patterns of their movements have been very, very suspicious. And so I don't want to speak to specific people, but those patterns are very suspicious. And I think that's the kind of thing that's going to end now with Kevin. I just have to push back against this. [00:20:44] Speaker 1: It's a Fed that cut rates since since Trump's been in office. So I don't see how that is necessarily suspicious. I don't want to rehash the conversation we had last time. But that I don't know. The patterns are not there, as you say. Sure, they cut before Trump came into office. But it's a Fed that eased rates with Trump as president. [00:21:02] Speaker 8: Look, look, the pattern I described is not in dispute. And, you know, I think that what's going to happen going forward is that the Fed will be responsive to the economic data and be independent because Kevin is going to be there. And he's going to manage the people who would try not to be independent. And so I'm very, very bullish about the prospects of the Fed policy moving forward in the proper direction, the nonpartisan and independent [00:21:28] Speaker 2: direction. I'm struck by how much we're talking about the Biden administration looking back and perhaps can look forward here in the minutes that we have left. There is a war going on in the Middle East. There's still war in Ukraine. And we have an administration now for which you work that's imposed these new tariffs under Section 301. What do you say to American consumers who acknowledge the fact the inflation level is higher than the Fed's target and are worried that those two inflationary issues could make inflation more troublesome, more nettlesome, or even go higher here in the months ahead? Well, I think that if you look at the positive [00:21:59] Speaker 8: prints we've had for CPI and PCE, you can see that energy is just a small part of the inflation story. So we've seen drug prices come down because of Trump Rx. We've seen our deregulatory efforts lower prices for just about everything. We've seen the great work of Brooke Rollins and the Ag Department help food prices get under control. The only thing everybody was talking about when we first got here was egg prices. Egg prices are at an almost all-time low because we've done a much better job managing the avian flu than the previous administration. And so I think that the price pressure is easing all around. And energy prices have for sure blipped up again for a while. But I think that if you look at futures markets, they expect that to recover relatively quickly. And that's our hope as well. Why isn't that what we [00:22:44] Speaker 1: heard from chair Warsh? She talked about that inflation still being an issue. They're committed to 2% said that they're watching it. Kevin Warsh did. Director Hassett, it doesn't sound like a federal reserve that's or a chair that's on the same note as you are. No, I disagree. I said things are heading in the right [00:23:02] Speaker 8: direction. And that's reassuring for the Fed. And I think that he's saying that he still has work to do and saying you have work to do and things are heading in the right direction. They're not contrasts at all. [00:23:12] Speaker 2: Kevin Hassett, let me pull an audible here. You wrote a book in 2002 called Bubbleology. And as you look at the AI sectors we've been doing over the course of the morning, are there warning signs that you see that we could be in bubble territory [00:23:24] Speaker 8: here? You know, the difference I first know. And the difference between the dot-com boom of the 90s and what we're seeing now with AI is that the AI companies are actually making money. So remember back then we had insane valuations for firms that had yet to make any money at all. And so you wonder, well, are they ever going to make money? Pets.com, are they ever going to make money? No, it turns out the bottle of taking dog food to your house has worked pretty well for Amazon. But back then, you know, the early firms that were doing that, you know, they all went out of business. And so it ended up being that there was enthusiasm about the Internet that in the long run was good enthusiasm. But it created a lot of failure, business failure. Here we've got like a few companies that have this remarkable investment that's increasing the productivity of firms all across the country. And they're charging their customers for the service in the terms of, you know, billions of billions of dollars. And so when you see real money and real success and real productivity growth and so on, then there's a rational explanation for why the increase in value is happening. Now, whether it goes too high or too low, that's something the market will figure out. But it's much harder to have a rational expectation for why things are going up when you don't see the money. [00:24:40] Speaker 1: All right, Director Hassett, we really appreciate your time this morning as we always do. Thank you for joining us. White House National Economic Council Director Kevin Hassett, thank you. Still with us around the desk is Anastasia Amoroso of Partners Group. Anastasia, Kevin Hassett there saying that he still fully has confidence in this Fed chair. What was your read after a Fed decision where, again, even though he said that markets were listening to the data, not the Fed, it was a huge reaction, a very, very big steepening from this bond market. [00:25:08] Speaker 7: It was. And I know one way to interpret that is to say, well, maybe the markets have lost confidence in this Fed. But actually, there's two things that he said, why the long-term yields may be rising. And one is because growth is actually pulling in the right direction. And I do actually agree with the assessment, the growth based on this GDP print. I mean, the consumption is strong. CapEx is strong. So I do agree that if growth is going to be greater, then that warrants a higher real interest rate. And then the other side, of course, is inflation expectations. And I think that's what we have to be a little bit careful because five-year, five-year inflation swap, for example, moved lower post the first FOMC meeting that he chaired. And now it moved a little bit higher. So I think that's the undesired market direction. But look, I would give him time. I think he is playing for time. And I think he's going to run out of that time when it comes to the next meeting. But if you think about the next six weeks, you know, we've got to get two more inflation prints. And if the trend does continue that we saw in June, then maybe that gives him cover to not actually hike interest rates. I also do think that he actually revealed the reaction function as a central banker. He said as a central banker, if you're not worried about the labor market and we do think it's stable today, if inflation is going up, you raise interest rates. If inflation is going down, you lower them. So if he sees inflation go down in the next couple of months, perhaps it doesn't actually pave the way for rate hikes. [00:26:31] Speaker 2: We have about a minute left. But he, Kevin Hassett, mentioned the task forces that Kevin Warsh has convened here. And one of them has to do with inflation and looking at inflation. So as we look at the PCE read today, there could be a world in a few months' time in which that isn't the Fred's preferred gauge for inflation again. How does that change your perspective or the way that you look at inflation, knowing that it might not be the one that they're going to use in the future? [00:26:50] Speaker 7: You know, look, clearly, this has been the yardstick for a long time, the official one. But at the same time, unofficially, I think all of us as a market community have been looking at a range of metrics. And this has been a conversation for a long time that if you look at real time, real world inflation data, it might be showing something different versus what we have in the backwards looking data. In case in point, one of the biggest reasons why inflation is still above 3% in the case of core PCE is because of housing. If you look at the owner equivalence rent, they're running above 3%. But is that the reality today? Because if you look at Zillow, if you look at CoStar, those rent increases are running minus one to plus 1%. So is it possible that once we adjust for the real time data that real inflation actually comes down? So I would not be surprised if we started to have those conversations in the fall. And look, looks like there's going to be a flurry of activity from the Fed in the fall. [00:27:41] Speaker 1: Yes, there is. Hey, Anastasia, stick with us. Let's first get through this market open and some earnings conversations as well. The S&P and Nasdaq rebounding this morning. It is thanks to Microsoft. Without this, we might be looking at a very different picture after that sell-off of stock exchange for the Nasdaq after chair Warsh. And again, disappointment from Meta, but Microsoft outweighing it. Down at the New York Stock Exchange, we have Charlie Morrison and the rest of the team at Jersey Mike's. They are IPO-ing today. And come on, Danny DeVito, the real star. Put him in the middle of the Jersey Mike shot, I say. I will be down at the New York Stock Exchange at around 2:40 p.m. today to interview the CEO of Jersey Mike's as their company starts to trade. We have a boxing group here. There's some merger going on. Look, I don't like stereotypes, but like, come on. This guy looks like such a boxer. Like, he's from the north somewhere in England, maybe. I'm sure he's probably not. I'm probably going to need to, like, dig myself out of this hole. But, yeah, it's a merger of a boxing promotion company ringing the bell at the Nasdaq, which is just pretty cool. [00:28:41] Speaker 2: It's very cool. I want to look at a handful of the movers we've been watching over the course of this morning. Of course, this contrast is the most evident one that between Microsoft and Meta, both of which reported earnings yesterday, we see Microsoft here up more than 11% this morning on news that it's cloud computing here has yielded results in a way that it hasn't for other companies. Case in point, Meta platforms. And we had Mark Zuckerberg yesterday defending his company's strategy going forward here. But markets clearly thinking that that's lacking, not getting enough meat on the bone from Mark Zuckerberg. But, sir, what Meta's plans are as we see this enormous CapEx from that company. And then, lastly, just pointing to Qualcomm here down almost 5% this morning. Qualcomm, of course, the chip maker used in so many smartphones across around the world, I should say. It's suffering here from supply chain issues. We see it then down about 4.4%. [00:29:23] Speaker 1: Danny. Some other earnings results that we're also watching this morning. With MasterCard, they reported a 21% surge as the company expands beyond traditional payment network services. Chipotle and Starbucks, both of them raised their guidance after stronger than expected quarters, thanks to trendy new menu items and revamped loyalty programs. All those stocks up across the board. But let's dive deeper into Starbucks. Romaine Bostic, co-host of "The Close," is joining us this morning alongside the CEO of Starbucks, Brian Nicol. [00:29:51] Speaker 9: That's right. Brian Nicol joining us right now. Fresh off of last night's earnings report, 7.9% comp growth, Brian. Obviously, the street likes what they hear. But I do need to get a little bit more color as to exactly where that is coming from. Transactions, 4.2%. That's foot traffic, Brian. Is that just favorable comps? Are you truly getting more people into the store? Yeah, no. Great to be here. [00:30:14] Speaker 10: And, look, the reality is what's terrific to see is the growth is coming from more companies. customers coming into Starbucks more often. And, you know, that's just a foundational strength. And the good news is we're seeing it across all income groups and really all age groups. So just really terrific strength moving through our stores. [00:30:33] Speaker 9: With regards to the tickets as well, that was also up about 3.5% in the most recent quarter. So it's a function of both foot traffic coming into the store, but also people spending more. Are they buying more? Are these add-ons? What gets that ticket price up to that 3.5% jump? [00:30:48] Speaker 10: Yeah, so what you're referring there is we're seeing people add more food, so a higher attach rate. And then what we're also seeing is people modifying more of their drinks with things like our cold foam, adding an espresso shot. So it really is terrific to see people using our menu to get them the customized experience that they want out of their drink. And then also attaching what is really some terrific food to go along with their beverage. [00:31:14] Speaker 9: Do you have any concerns about maintaining this momentum? And I don't necessarily mean that from an operational perspective. We just got a GDP report for the second quarter. Backwards looking, much lighter than what folks had been looking for. Consumer spending holding up right now. But you've referenced in the past that you had seen some strain, at least among the lower income, lower income consumers. Are you concerned that some of that weakness might be spreading beyond just the lower income folks? [00:31:39] Speaker 10: You know, actually, we're seeing strength across all income groups at Starbucks. And, you know, what we continue to see is when we give people a great experience, they come back more often. And when we do it consistently, they really reward us with their business. And so, you know, we've not seen the customer move back as it relates to Starbucks. They've been really resilient. We're very optimistic about where we're headed. You know, we exited the quarter with really strong performance. And we're excited about how we're heading into our fourth quarter. And we're really optimistic about the plans we have for 2027. So, you know, look, we're just getting started. It's great to see the strength across all of these customer, you know, demographics. And we're confident we're going to continue to have [00:32:24] Speaker 9: success with them. Well, let's talk about 2027. Obviously, we've seen the revenue numbers. At least I say the sales numbers start to come up a little bit. There's still some concerns about whether we can see more meaningful profitability. How much of the lag between those two is tied to the revamp of the stores? I mean, you've done a thousand so far for this fiscal year. I think you're, what, still guiding towards 1500 for the next fiscal year. There's a huge cost attached to that, right? [00:32:49] Speaker 10: Well, you know, look, I think the thing that we've done here is we were really smart about what we spent on these uplifts and the implications on the store. So, you know, we can do these things for roughly $150,000. We do not close the store at all. So, operations continue to perform. And then the experience that our partners have, because now they've got a new, really great-looking coffeehouse. And what our customers have results in, you know, frankly, more transactions. So, it's been a great program. We'll continue to push the program forward. We're going to accelerate it into 2027, because we know when we create a great coffeehouse and we have that great partner slash barista to customer experience. We're rewarded with more business. And, you know, it's not a big investment, but it's a meaningful investment. And then it gets us great, great results. [00:33:34] Speaker 9: Is there any way you can share with me what the difference in comp sales is for a revamped store relative to the stores that [00:33:43] Speaker 10: haven't been uplifted? You know, we haven't shared that publicly, but what I can tell you is we see a move in a positive direction as it relates to transactions. And because of what we're seeing, we are accelerating the program. [00:33:52] Speaker 9: I think the last time we talked with regards to transactions, you talked a lot about improving the in-store experience by also improving the speed of which those orders get out the door, whether it's in the cafe or in the drive through. I know there was some color on the conference call about some of the time that you shaved off of that. We're talking seconds here, but it seems like those seconds matter to you. How much progress have you made? [00:34:13] Speaker 10: Yeah, look, this is one where I'm really excited because we set out right from the go that we wanted to improve the speed that our customers experience and then do it consistently. And kind of behind that is really this drive towards more throughput. And we've seen just that. So we've got better throughput in the mornings. We also have better throughput in the afternoons. And frankly, as a result, all day long, our transactions are up throughout the day. And when you kind of pull that back, yes, customers are loving the experience, but our partners are doing a great job of being staffed as a team, deployed correctly, and then consistently executing the Green Apron service model, which then results in better speed at the drive-thru, better speed in the cafe, more on time and mobile frankly, pretty good speed in the delivery channel as well. So it is having the effect that we would want. We're in totality. The Starbucks business now, I think, is providing people the great experience that they want at the speed that people need based on the [00:35:09] Speaker 9: occasion where they're visiting us. Is there any conflict, though, with getting that number down in terms of the time down and this idea of these add-ons and other things that I would assume would complicate the process for the baristas just a bit? [00:35:22] Speaker 10: Yeah, look, we're very intentional. So everything that we do, we have an eye towards what is the implication on our ability for our customers to get the product, the food that they want in the speed terms that they desire. And we also have a really close eye to make sure that our partners are set up to be able to provide the customization, the drink, the craft, the way that they would want to do it themselves. And so that is part of our development process. And that's part of the rigor that we go through to make sure before it gets to the store. It's been vetted such that we know we can still deliver on the great experience at the speed that our customers expect. [00:35:59] Speaker 9: You've introduced a lot of new products. I know you even talked on the conference call about a s'mores drink, not necessarily my bag, but I can understand why some folks might like it here. Have you tried it? Not yet. Not yet. I have tried the orange cream and it is good here. But and look, I mean, probably the s'mores drink isn't targeted towards my demographic. I mean, you've clearly gone after the younger demographic with the Gen Z, the pink drinks, the s'mores, et cetera, here. But with these types of drinks, you know, the complexity that that maybe adds to the process, but also this idea if these aren't going to be permanent menu items, just sort of limited time offers, do you run into sort of some issue in terms of sort of how you forecast out comp sales growth if you know s'mores might be gone and, you know, whenever a few [00:36:41] Speaker 10: weeks or whatever. Yeah, look, I think the menu innovation that comes out as like limited time offers versus the menu innovation that ends up being permanent on our menu. They serve two different purposes. And yes, we're able to forecast this with accuracy. I mean, as a result, I think you saw in the release our supply chain were 99% of the time in stock with the items that people want. And I think if you look at our beverages, it's almost close to 100%. So we are able to forecast correctly, supply it correctly. And then most importantly, we build it in such a way that our partners are able to do it consistently and give people the experience that they want. You know, as you mentioned, like the orange cream cold foam that's going on the cold brew. I mean, look, the good news is, yes, it's orange cream, but it's exactly the same way that we always do cold brew. It's exactly the same way that we always do cold foam. So the consistency, the standardization of the build so that people can get to the quality experience that they want at the speed that we know they desire is really important to the to this to the work that we do on this. What's what's the best selling product out there right now? I mean, look, we still are selling, you know, right now our ice shaken espresso is a huge popular drink. Our Americano is a very popular drink. Obviously, the ice caramel macchiato is one of our top drinks. Macho lattes is a top drink. So the good news is it's not just one item. We actually have the breath that I think really resonates with people's [00:38:08] Speaker 9: palates. I do have to ask you, Brian, about a report that Bloomberg had about three weeks ago citing internal documents that you were actually looking to replace some of your in-house software tools, particularly those made by Microsoft and IBM. Your chief technology officer has talked a lot about how you can maybe get some of those software costs down. Any credence to that report? Yeah, look, I [00:38:33] Speaker 10: think you would expect us to be looking with a critical eye towards any product that we use and whether or not we're getting the best cost proposition and also are we getting the best outcomes from that proposition. And that's basically what we're doing here is we've got some great partners. But at the same token, we need to make sure that we are getting the best output for the best pricing. And I think, you know, as probably everybody's doing with the advent of AI, it gives you an opportunity to rethink what we're doing and how we're doing it. And you know, that's literally the exercise that we're going through. And I think you would expect that from all organizations to have the cost discipline tied to making sure that you're getting the right outcomes that you want. Well, that cost discipline is obviously also [00:39:15] Speaker 9: increase the amount of cash you have on hand at the same time your debt obligations are down. Where's that cash going to go? Is that next dollar going to go to buybacks? Is it going to go to acquisitions? Is it just going to go back into the stores? You know, so the good news is for us as the business [00:39:31] Speaker 10: the business continues to recover. You know, the balance sheet gets stronger and stronger. It gives us terrific opportunities to invest in growth. Obviously, some of that growth is going to be the store remodels and then obviously building new stores. And then we'll look around to figure out what is the right next growth vehicle for us. You know, buybacks may be part of it. Obviously, we've got a dividend that, you know, has always been there. So we're always thinking through what is the best way to deploy that cash so that we get growth in the business and get a great return for our shareholders and all of our partners. [00:40:02] Speaker 9: Hey, Brian, appreciate it. I need you to do one last thing for me and settle a debate that my niece wanted me to ask you. When officially does pumpkin spice season start? It's coming. Get ready. [00:40:14] Speaker 10: We're not too far away. So I'm anxious for it as well. All right, Brian, really appreciate you taking time for us. [00:40:20] Speaker 9: Brian Nichols there, CEO over at Starbucks. Danny? I mean, I think the answer is it's like Christmas. [00:40:25] Speaker 1: It comes earlier every single year. I just assume Starbucks, they just have this cabal. [00:40:29] Speaker 9: They just meet, right, and close door rooms and decide when it's time. [00:40:32] Speaker 1: Right now, now is the time. I love, I love this. This is the best conspiracy I've heard. I mean, thank you so much for bringing us that excellent interview. That's Bloomberg's Romain Bostic with Starbucks CEO. Brian Nichols. Thank you all both so much. And Estacia Amoroso, a partners group, is still with us. Pumpkin spice and smores and all. I mean, the consumer is willing to pay up, I guess, for really sweet sugary drinks that maybe are not Romain's bag. But you have those earnings and contrast it with PNG still struggling, not being able to get consumers to pay up for label products. What is your read on the consumer thus far this earnings season? Look, the read on the consumer is that the consumer continues to spend. [00:41:07] Speaker 7: The consumer continues to have the means to spend. And like we just heard the CEO of Starbucks say, is the consumer across all categories is actually boosting their spending to different, to varying degrees, certainly higher at the top end, you know, lower at the low end. But I think that's sort of the norm. What I would say, if you look at the performance of the consumer discretionary index, it sort of hasn't gone anywhere this year. But underneath, you have a lot of winners. You have a lot of losers. And when I think about our business, when I think our private equity portfolio and the consumer companies that we have, you know, we actually kind of do cater to this K-shaped recovery. You know, on the one hand, we may have a Brightling brand portfolio company that clearly caters to the ultra luxury segment. And on the other hand, we have invested in the cat food business. And fun fact, there are 75 million cats in the United States. And apparently that number is greater than the number of dogs. As you know, in New York, for example, it's pretty hard to have space to host a dog. So the cat food business has been growing very nicely for us. And so I think the point is that, you know, if you lean into certain themes within the consumer, if you follow certain trends, I think that's really the way to approach investing in that segment versus just expecting the overall index to perform. [00:42:17] Speaker 2: Let me dovetail what you just said with what we heard from Kevin Hasson, what we saw on the data this morning. And I'm curious of how long you see the resilience of the consumer lasting. I brought up with him the fact that this war is ongoing. Energy prices are higher. There are new tariffs in place. And we have midterms coming up here. There are a lot of factories here that I think could, if not lead to uncertainty for the consumer, be a real drag on them as [00:42:35] Speaker 7: well. You know, one reassuring thing that I heard from chair Warsh yesterday is that he's not trying to bring down aggregate demand. And, you know, that was sort of the concern going into the press conference. Because if you try to bring down inflation, probably the best way to do that is to raise interest rates and bring down demand. But the fact that he's not doing that, that's quite reassuring. So that tells me that maybe we can continue to have the unemployment rate around 4.3 percent. We can continue to have wage growth at around 3.5 percent. If you think about it, that's not a bad place to be. If inflation is running at 3.5, hopefully getting lower, that means in real terms, consumers still have spending power that they can allocate. So I actually think that's the tailwind that we have. And the tax cuts are still working their way through the system. And as long as we have strength in corporate spending, APEX spending, which we do have, as long as we have record corporate margins, which we also have for the S&P 500 companies, I think all of that fuels kind of the strength of the consumer as well. [00:43:34] Speaker 1: ANASTASIA, we're going to have to end it there. Thank you so much for spending this morning with us. Really appreciate your time. ANASTASIA AMOROSO, A PARTNERS GROUP. Let's get a check on your equity market about 15 minutes into your trading day. And it really is Microsoft that's lifting up this overall index. We're now trading higher by 1 percent after falling yesterday on some of these tech and AI nerves and what we heard from the Fed. Microsoft itself is adding 50 points to the S&P 500, which itself is up 79 points, rallying 15 percent. I mean, just a huge move for such a large cap company. Micron and all of the other chip stocks doing well in today's trade, too. Amazon will report earnings after the bell today, rallying ahead of that. Apple, though, is down ahead of their earnings. They've had a good run. They just barely kissed $5 trillion in market cap now trading back below that, dropping 2 percent. But the real drag on this index is meta, down 9 percent after some confusion over just exactly what Mark Zuckerberg wants to do with their AI business. Are they becoming a neocloud? Are they using that capacity for themselves? Overall, that's translating into a market where tech is up because of Microsoft, because of how the chip players are moving this morning. If we look at the various sectors, communication services, though, that will be at the bottom because meta sits in this category, I feel like we need to redo sectors again, just given how these hyperscalers have changed. Consumer discretionary, industrials, those are doing well. Staples, health care, so it's a real kind of like safety trade that is unwinding that we saw yesterday. So it's full risk on this morning, David. [00:45:03] Speaker 2: All right, coming up here, we'll speak with analyst Michael Nathanson as meta-investors look for clearer signs that its AI bets are indeed paying off. This is Bloomberg Open Interest. [00:45:15] Speaker ?: We'll be right back. We'll be right back. [00:45:23] Speaker 2: We'll be right back. We'll be right back. Meta is slipping after a softer outlook and higher spending forecast. Analysts say investors still want proof that the company's massive AI investments are paying off. Saying investors need proof points that meta AI investments are working. And he joins us now. Michael, great to have you with us. Going through your note this morning, there's a point that you make, which I want you to reiterate here. That is, this goes beyond a company or a chief executive having a failure to communicate or some communications issues. This is more deeply rooted than that. Yes, it is. [00:45:57] Speaker 11: People have been saying, look, this is just fixed by a good conference call or maybe a podcast. The issue is, as you move into these new businesses that are not tied to your core ad support businesses, you're facing new competition. You have no history of success here. So you need to give us proof points, evidence that these bets are showing some signs of returns, right? It's so early in the process. But I just think, look, we're in a strange place where we're all relying on the company to allocate capital really, really well without getting any data points back of how the roadmap is moving in terms of ROIC basis. [00:46:41] Speaker 1: So Zuckerberg can't just don a new chain or a new haircut and solve this problem for the market, because the market is punishing them for not having that clear message. Michael, I mean, was there any takeaway you got from what direction Meta is going in? Are they going to be a neocloud player? Are they going to use the capacity for themselves? Do you get any sense with the direction of travel is for them? [00:47:01] Speaker 11: Yeah, good question. It was reported heading into the quarter. They were approached by Anthropic, I think, to do a $10 billion deal over a couple of years. They acknowledged on the call that they've been receiving offers for their compute. And they may, depending on the offers, depending on their own internal use, accept some of those bids. It was very vague. Right. And the point is, in 26, 27, they're still capacity constrained. But they're saying in the out years, maybe they become more aggressive in their build out and use some of their compute power for third parties. Right. So then you go all the way to say, we're going to be a hyperscaler. But they open the door to say that if we can't use the compute ourselves, we will rent it out. Now, the question I asked in the callback with the CFO is, look, at some point the bottlenecks of compute will probably ease and everyone's going to overbuild. And then at that point of overbuilding, the idea of getting these premium rents for, you know, for compute may fall apart. Right. We've seen this in other types of markets. So the problem we have is we have to wait to 28 to see really what the CapEx is going to look like to power this new hyperscaler model. And then we'll see what the man looks like. Right. So it's kind of it's put no pun intended a cloud over the story because you have to wait for the more details of CapEx spend. And then some evidence of what they're going to do on the hyperscaler side. Some opacity there. I want to turn to history, if I could. [00:48:35] Speaker 2: And I wonder what lessons we can learn from the last time Mark Zuckerberg took the company on an errand in the wilderness like this. So we saw him go all in on the metaverse, legless virtual bodies and all. And we saw the market reaction to that, the skepticism that was inherent there at the beginning. What what is can we take any lessons from that? Is that a playbook that's useful here this time around as he gets into A.I. Yeah. [00:48:58] Speaker 11: So I have maintained a buy on the stock and you know I've I knew this is going to be rocking. I kind of kicked myself for you know for not being a little bit more cautious. But here's what I've learned. Right. In 2022 there were two things going on. It was the metaverse and there was a shift from Instagram and Facebook's stories to reels short form video. You know which they were looking at tick tock as a model. You go back to 2022 the stock bottomed out at 100 bucks a share and people had real doubts about can they convert to more of a tick tock model. And they did really really well. At the same time the metaverse has not paid dividends. But this stock in 2022 is on sale. People were so negative and I was a seven bagger from 2022 to 2024. So what I've learned is look these guys build great products. Zuckerberg does have an amazing track record of figuring things out. And we have to be a little bit more patient. But it's not a great feeling to kind of fly blind and wait for some data points from them to prove that this is working. Right. But that's why we kept the buy on because we kept the buy on 2022. [00:50:10] Speaker 1: That was a right call. You're way back. Michael I hate to rush you but we only have about 45 seconds here. You're willing to be patient. But is this market considering what's different this time as they've already made a mistake in those years past and having to do a pivot for 2022. Will the market be less patient this time around. [00:50:30] Speaker 11: Yeah. The matter is a great question. The metaverse is hanging over us too because if people feel ugly they've turned a blind eye to the metaverse spending. So I think some of the grace they've had in the past has worn out. So that's a really great great question. And that's why the stock is trading below 17 times earnings next year. [00:50:44] Speaker 1: All right. Michael thank you so much for joining us this morning. Michael Nathanson of Moffitt Nathanson coming up in our two of open interest. Joanne Feeney of Advisors Capital as markets digest those big tech earnings. Derek Wood of TD Cowan reacts to Microsoft results. And the CEO of Kendra Scott joins us about AI adoption in the jewelry industry. He'll tell us what exactly that means. All of that coming up in our two. We are 30 minutes into your trading day. Welcome to Bloomberg open interest. I'm Danny Berger alongside Dave Agura. It's a market that's in rally mode after Microsoft earnings. The Nasdaq headed for its best day in over a month. Coming up on the show we're going to talk about the Microsoft soars while meta struggles. Apple and Amazon take the spotlight next. [00:51:38] Speaker 2: Long bond yields climb around the world I'm concerned that the Fed will fail to rein in inflation. [00:51:43] Speaker 1: And Brent hovers near $90 a barrel as the U.S. launches new strikes against Iran. We begin though with the AI trade under scrutiny. Here's what White House National Economic Council Director Kevin Hassett said on whether he's seeing signs of a bubble. [00:51:58] Speaker 8: The difference between the dot com boom of the 90s and what we're seeing now with AI is that the AI companies are actually making money. So remember back then we had insane valuations for firms that had yet to make any money at all. And so you can wonder why they ever going to make money. [00:52:15] Speaker 1: That's what we're seeing. That's what we're seeing. [00:52:24] Speaker ?: Joanne Feeney advisor capital management portfolio manager and partner writes [00:52:24] Speaker 1: the S&P 500 is resilient because it remains dominated by TMT at approximately 45% of its market cap. And TMT has strong earnings growth drivers. She joins us now. Some strong earnings growth but I wonder if something else is going on with this market. There have been reports of hedge funds getting asked to provide more collateral by banks because of AI exposure. CNBC reporting this morning that one of the stars of the AI trade a 24 year old who runs situational awareness is now all of a sudden dumping all of his AI exposure. Has this market started to revolt? Is this a trend that's going to be difficult to undo? [00:52:56] Speaker 12: It's hard to tell Danny. You know we always see times when after a big surge in stocks you know managers reassess and they try to determine whether they're overexposed to a sector. We're seeing that massive exposure in the S&P 500 and that's going to continue to be pulled around by AI. But you know overall what's what's appealing in the AI space you know continuing today we saw it in Microsoft results last night is that there's just a lot of earnings growth there. There's a lot of cash being generated. There are strong foundations for many of the companies in the space not all but many. And so even while there's been a pullback we're seeing the response of Microsoft today to their pullback. You know they're still down year to date but we're seeing some recovery because investors are realizing Microsoft has very strong foundations in providing services of AI and also in its recurring revenue from its usual products like Microsoft 365 which it can now integrate with AI. [00:53:55] Speaker 2: Joanne if you look at Microsoft and kind of the broader complement of these hyperscalers are there lessons to be learned from Microsoft by these other hyperscalers. In other words is it doing something right or something's right that should be replicated by these other companies. Are we simply too far out of the gate now for them to change course. [00:54:11] Speaker 12: You know I think what we're seeing is the success of a company that has some integration of AI with their core businesses that preceded AI. Right Microsoft had that 365 it's integrating AI through copilot was off 50 percent increase in copilot subscribers just in the last three months. You know other companies like Google also are fairly well vertically integrated in the AI space building on its foundations in search and enhancing that capability through AI. So it includes the full stack. It's got its own chip design. It has obviously the data centers and it has applications of AI. We're seeing some of that in Microsoft. Whether other companies can pivot is a good question but Amazon similarly has a strong vertical integration of AI and we're seeing them be successful. So it seems like you know that is a successful path to follow regardless of what investors do in the short run. It has to look at the last three years of appreciation to put this in context. [00:55:05] Speaker 1: I was going to say that this market certainly doesn't have as much patience as you do or perhaps believes that Zuckerberg has has a clear message. And it's not just this equity market. It's the bond market to Joanne. You can see it in CDS spreads. We'll leave Oracle off the chart because if you did it would distort everything and make everyone look like they haven't had a move. But we have started to see spreads widen materially. You can see Meta at the top of the pile there with the spending that they continue to do. Many market participants point to this and say the stress begins in credit markets as they do in CDS right now. And eventually spreads to equity markets. Are you concerned that there is a revolt that's happening over spending in the bond market that will soon take hold in wider markets? [00:55:46] Speaker 12: Yeah it's certainly hard to tell. I mean clearly the these companies went out and took advantage of very generous lending opportunities to raise capital. And they shifted their business models right. These are all companies that more or less used to be asset light. They've become asset heavy and they've decided to spread around the source of funding. And I think it was smart of them to do so. I mean go tap the bond markets. But the response has been to recognize that these are not risk free bonds and that they warrant a bit of a higher credit spread. And that's not so much a revolt as sort of a you know come come down to reality recognition that these are not risk free bonds. And they should be priced accordingly. I don't think it undermines the central thesis though which is that AI is starting to pervade the economy. We're seeing more and more applications of it across you know industrials financials and elsewhere in health care. And so that's why we're seeing the strong growth in Azure that Microsoft reported last night up 43 percent and anticipated to grow even faster next quarter. So there's just a lot of strong foundations here for growth in the AI space. And you know I can see investors wanting to play both sides both on the bond side and the equity side as we're doing by the way with Oracle. We like the preferred in some places in our portfolios and we like the equity in other places. And we think that the concerns by the way over Oracle's so-called concentrated exposure to open AI is a little bit misplaced given the strength of overall demand for AI compute capacity. [00:57:18] Speaker 2: Joanne curious as you were listening to the Fed chair yesterday if you were scratching your head as much as I was as he made his comments about the Fed's attitude toward the economy where things are going from here so much as even opined on that. A day later sort of what is your sense of what this Fed is prioritizing where things are headed. [00:57:33] Speaker 12: Yeah it's it's certainly not what some investors were hoping for. I think there was a hope that there be a clear commitment to trying to bring inflation under control. And so the market got a mixed message. On the one hand he's Kevin Warsh talks a good game. We are committed to that 2 percent inflation target. On the other hand his press conference I think left people really puzzled in that he's not willing to talk about what what they're waiting for to raise rates. He doesn't want to communicate that. But the market clearly is saying look you're not raising rates now. That means that we're going to have higher inflation into the future. And hence you see that pretty significant steepening of the yield curve. I think it's going to be hard to for Warsh and the committee to navigate the next few months the next couple of meetings because of unfortunately because of election consideration. So it leaves us in a hold pattern probably for longer than you know bond market investors think is is warranted given where inflation is. [00:58:35] Speaker 1: At one point though this market in futures was pricing in 100 percent odds that we'd get a hike in the next meeting. Now that's only about 60 percent there. I mean there's some irony and in war saying basically that one of the reasons that they didn't hike and maybe the only reason we could really discern from what he was saying is that the bond market is doing the work for them. Joanne do we get to a point where that ceases to be true and instead of just tightening conditions it's a bond market that bullies the Fed into acting that causes them to have to hike in September in order to retain any credibility. [00:59:09] Speaker 12: So I think that's a tough one for the committee and for chair Warsh to navigate. It is clearly the case that look beyond the federal funds rate but beyond really short term rates. It is the market that determines rates. And what we're seeing is the market recognizing that inflation remains a risk. And so longer term rates are up. And in that sense the market is doing the Fed's job. It's saying OK we're going to have higher rates. It's going to tighten you know credit markets. That's going to make obviously lending is now more expensive. It's going to curtail some borrowing. It's going to depress economic activity. In that sense the market is doing the Fed's job. The Fed could never control long term rates. All they could do is nudge around the very short term rate. And so with a short rate you know remaining where it is we have this steeper yield curve which is going to constrain economic activity because most borrowing by corporations occur at the long end of the curve. [00:59:58] Speaker 1: All right Joanne we're going to have to leave it there. Thank you so much for joining us this morning. Always appreciate your time Joanne Feeney of advisors capital management. A check on your equity markets this morning about 40 minutes into your trading day. And it's a rally again thanks to Microsoft largely that the Nasdaq outperforms up nearly 3 percent putting on track for its best day in about a month after entering a correction yesterday falling 10 percent from its peak. The S&P also higher as tenure yields fall by one basis point. The long end of the curve has largely been under pressure. This was higher yields yesterday after the 30 year yield reached its highest since 2007 at the same time Brent crude at $89 a barrel. David also just want to look at the yen this morning. It is gaining versus the dollar by the larger extent since last since this past April notably this past April is when the BOJ and the MOF intervened. So yet again this has sparked rumors or at least thoughts that perhaps the MOF that Japan has yet again intervened in this currency. Yeah it seems like it has and we'll see what happens here over the course of the [01:00:58] Speaker 2: next few hours. I'm just going back to that you should oil there just a moment ago. We saw the U.S. Pursuing more kinetic action in the Middle East over the course of the evening. That kind of been obfuscated by what we had from the Federal Reserve and the spate of earnings here. But certainly something that bears watching over the course of the day sort of what this leads to when it comes to the U.S.'s policy and attitude toward the Middle East going forward. [01:01:15] Speaker 1: Yes certainly. So those are some of the macro movers. We also have some single stocks that are moving. Starbucks and Chipotle they both raise their guidance. So a good read from the consumer. A sales boost. They had trendy new menu items and revamped loyalty programs both those shares. [01:01:29] Speaker 2: Starbucks at 1 percent Chipotle up 11 percent. I want to highlight Norwegian cruise lines cutting its first sorry its full year outlook for the second straight quarter company citing internal execution challenges along with the ongoing conflict in the Middle East. And then there was Hyatt. So a different sort of read on the consumer. [01:01:44] Speaker 1: As well cutting its full year profit forecast despite posting a profit in the second quarter. Demand for luxury travel did though help to offset some of the geopolitical headwinds. All right. Coming up here we're going to speak with TD Cowan's Derek Wood on what he [01:01:57] Speaker 2: calls a Goldilocks quarter for Microsoft. This is Bloomberg Open Interest. Not a high interest to look at what's making headlines around the world. Intercontinental Exchange or ICE the parent company. The New York Stock Exchange announced it's buying the bond trading platform market access in roughly six billion dollar all cash deal. Shareholders receive one hundred and sixty seven dollars a share at 33 percent premium. The deal gives ICE a bigger presence in the bond market. Blue Owl says fundraising slowed in the second quarter as investors pulled back from private credit despite weaker inflows. The alternative asset manager top turning expectations and grew assets under management kept its quarterly dividend unchanged calling the results a sign of resilience in a tougher market. Meta disclosing two hundred seventy nine billion dollars in future AI related data center lease commitments. That is up 53 percent from last quarter with another 68 billion dollars added in July alone. The spending ramps up pressure on Mark Zuckerbergers to prove that Meta's massive AI investments will generate returns especially without a major cloud business. Danny. [01:03:11] Speaker 1: David let's stick with big tech because Microsoft on the other side of things surging on strong cloud growth. Didi Cowan analyst Derek Wood calling the results a Goldilocks print that should support a sustained rally in the stock. Derek I'm pleased to say joins us now. Derek great to see you. What made this a Goldilocks print. Thanks for having me. [01:03:30] Speaker 13: Thanks for having me. This really was the best outcome scenario we could have had. We had the biggest upside in Azure growth we've seen in four quarters. And actually CapEx guide was lowered for calendar 26. I don't think anyone expected that. There's been a lot of sensitivity around the direction of CapEx. And for Microsoft to be able to deliver such good growth acceleration with CapEx in check was a great surprise to the market. And I think this stock has been under owned. And these results are attracting money flows back in. [01:04:01] Speaker 2: Derek and you know you point out that Microsoft has been successful extending the life of its data centers. How has it been able to do that. [01:04:07] Speaker 13: And what does that mean for the company's prospects going forward. They did make a reclassification from 15 years to 25 years. And that is going to extend the payment terms over a long period longer period of time. That does help the cash flow. Now that they've been in the data center business for about 15 years. They've got more operating history. They have the ability to show there's longer useful life. So that certainly we've seen that with changing useful life and chips moving from four years to five years to six years. And that's spread out. The amortization of CapEx equipment CapEx and cogs. Now we're seeing that more on the land and buildings. And you know it's certainly helpful for the financial statements and investors. [01:04:49] Speaker 1: So even so these companies Microsoft included are spending a lot even if it's not as large as perhaps was was initially feared into doing so that they're often topping these debt markets. I mean you cover Oracle as well. And the market has been pushing back against the spending they're doing for some time. But you're starting to see it in companies like Microsoft too. Derek does it make their life more difficult if the cost of capital continues to creep up. I mean I think that's what was weighing on Microsoft stock recently. [01:05:17] Speaker 13: Last quarter there was a very different scenario. They raised CapEx in a big way. We took down our free cash flow numbers. And actually in fiscal 28 we started modeling free cash flow burn. That started bringing up questions as to will Microsoft need to go to the debt markets to the equity markets to raise more money to fund the dividends still that they've got to fund. And with with last night's print I think that some of those concerns are definitely being put to rest. I mean our free cash flow for this year went from 4 billion to 35 billion. We no longer have them going into free cash flow burn territory. I think that's taking the risk of having to go to the debt markets really off the table. So hence why we see the stock getting so rewarded. [01:06:02] Speaker 2: Microsoft copilot 30 million seats. What can we take away from that. What can other companies take away from that the way that they've kind of found a way to make the use of that product sticky for so many of its consumers. [01:06:15] Speaker 13: Yeah. And I'd say when we look at the application space they're doing probably the best in terms of monetizing AI through software applications. That 30 million number was fantastic. Ten million sub ads. That was more than double than five million last quarter. The quarter before that I think was only one or two million. I mean there's clearly big inflection in momentum. I think we've they've come a long way in improving the mark of the product over the last 12 to 18 months. They talked about their user satisfaction scores are up three acts up two acts over the last three quarters. And at all time highs. I think they've really improved the product and they're starting to see that payoff. It's only six and a half percent of subscribers that have copilot today. We're expecting that they get the 30 percent by the end of 2030. So there's a long way to go. And it drives nice ARPU uplift. It's a $30 price point for copilot. E5 is a $60 price point. So it's a 50 percent uplift if they're cross selling copilot. And again momentum has really started to inflect. [01:07:20] Speaker 1: With all with all this integration of AI Derek as you're talking I was thinking about the story the FT had out yesterday talking about Amazon that they've found all of these cases within the company where AI spending has just gotten out of control because employees were doing different tasks and not tracking tokens. You note in your coverage of Microsoft that they are looking for cheaper models that they started to integrate into open source models. Is Microsoft ahead of the curve here when it comes to big tech spending on their AI products. [01:07:51] Speaker 13: Yeah I mean Microsoft has brought out some of their own models called my and I think those have been really focused on cost efficient usage of tokens. They are also embracing open source models like deep seek open weight models as well. And they're in the position to be able to you know bring in different models actually become a model router within their infrastructure. So they can let enterprises choose or they can automate based on various workloads. What's the right model and what's the most cost efficient use of all this AI. They're doing that internally. They're doing that within their application products. They offer the infrastructure layer to do that for companies that are building their own AI. So and they're leaning into open source and open weight. Now that the relationship with open AI has changed that's given them more liberty to do that. And it's put them in a better position given what you're talking about. [01:08:47] Speaker 2: With Microsoft shares up 14 percent Derrick Wood of TD Cowan Derrick thank you very much appreciate it. Still ahead consumer IPOs are making a comeback. Jersey Mike's and Reformation both make their Wall Street debut today. We're going to break down what this says about investor appetite for new listings. This is Bloomberg open interest. It's open interest to consumer brands are making their public debut today. Jersey Mike's raised $1 billion in its IPO while sustainable fashion brand Reformation raised $211 million in its. Bloomberg senior reporter Bayley Lipschelts joins us now for more on what these deals say about the IPO environment. Let's start with Jersey Mike's and I love this from the Bloomberg News write-up. Sandwiches and other hand-held meals are having a moment. Struggle to think what they were. I suppose it's a hot dog or a hamburger. A British hand pie. Sure. Sausage rolls? I don't know. Bailey why is this happening now? What does this IPO tell us about the health of the IPO marketplace? [01:09:47] Speaker 14: Well we've been seeing kind of a push back towards real companies and so we these are two consumer companies. Consumer had a brief moment earlier this year and then in quite poorly Bob's discount would public as a Jennifer Garner's once upon a farm. Both have traded fine consumer deals have traded mixed well poorly to be honest and flat kind of on average at best. So it is kind of a signal that we're seeing an expansion or at least a shift away from the AI infrastructure push that really has dominated the market for the last few months. And also keep in mind these are two P.E. back deals. So they need to get kind of deals through the door. Blackstone has called this the year of the IPO. They have to call it that. Exactly. So this is their third deal this year. So pretty solid background in the U.S. But still not what many were expecting so far. [01:10:31] Speaker 1: How does the pricing look for Jersey Mike's. What are we expecting. The price the midpoint fine 15 times oversubscribed pretty solid. [01:10:38] Speaker 14: They did zero out about 20 percent of the book. So from a fundamental standpoint it looks solid but it is still an interesting kind of path to going public. When Wingstop was seen as their best comp from when we reported in January that they lined up this deal. Wingstop shares down about 50 percent. We're still dealing with kind of the pushback for some of these consumer names that are already public. And then a lot of the debate internally and externally on these ECM desks. If you bought SK Hynix or SpaceX and are down double digits do you really want to keep leaning into deals when we're talking about broader macro volatility. [01:11:09] Speaker 2: The show really pushing me in my comfort zone. We've got Kendra Scott CEO coming up reformation I wanted to ask you about as well. [01:11:15] Speaker 14: Why is this a moment for reformation. What what niche does it see here. They target high end females and that's kind of been their niche. The big thing that's been interesting. This is a company that wanted to go public right before Trump's initial tariffs. And that put that deal on ice. So with the kind of walk back and refunds around tariffs that was a bit of a boost for the company. It really is a bet on the high end consumer. They're really the top of that K shaped economy continuing to show up and wanting to pay up for goods. [01:11:41] Speaker 1: I have at one point and look I hate to be this person because I've heard people love this at Jersey Mike's to it's like once P.E. buys you the quality goes down because you have to save costs. I haven't had a Jersey Mike since Blackstone bought them. So I can't I can't pass any judgment. But is there some degree to which we're about to hit August. It's going to be the low. So you have to rush out. It doesn't seem like just what you're describing Bailey doesn't seem like a good environment to be [01:12:07] Speaker 14: IPO into for these companies. No one we saw Cumberland farms which is another P.E. backed deal. They did not rush out. They were on the same schedule. They filed publicly the same almost power as Jersey Mike's. They haven't rushed to go out the door. So it is it is a discussion of OK we know investors want to go on vacation. We know we're broadly speaking in a market that outside of today has been pulling back. People have been losing money buying and chasing alpha IPOs or alpha generators. So when you look at a market in the calendar saying all right maybe we take some chips off the table. We don't need to from the buy side lean into these deals. Maybe we'll circle back post Labor Day. [01:12:42] Speaker 1: All right Bailey looking forward to your continued coverage as these companies start trading. Bailey Lipschultz and I will be speaking with Charlie Morrison the CEO of Jersey Mike's today. That will be at 2:40 New York time. Also hearing from the CEO of Reformation at 3:15. [01:13:04] Speaker 2: Robinhood falling after posting second quarter declines in crypto volumes but it saw strength in equities options and prediction markets. Or let's bring in Bloomberg consumer finance reporter Paige Smith. Paige great to have you with us as we kind of go through this busy earning season. What stood out to you from the report from from Robinhood today. This is a moment where we're talking so much about prediction markets and so many companies Robinhood among them seeing the potential to get into that that game. [01:13:25] Speaker 15: Yeah Robinhood has really been a big player in the production market space and is continuing to grow and expand in the space. A really interesting thing that they pointed out during earnings yesterday last last evening was really how their own product has actually expanded. And really where they saw the boost from events like FIFA World Cup but also foreshadowed just how much volume they would like to see from events like the midterm elections because you know you have to keep in mind the prediction markets of course are not isolated to sports. [01:14:02] Speaker 1: It's also politics and other sorts of events like weather. So if you live in France you can go mess with the weather machine. That's right. Yeah. Allegedly. Allegedly. And to be fair that allegedly did not happen on Robinhood on a different exchange. Yeah. You've also been looking at MasterCard earnings which strong results from them to stock rallies. How much of this is the traditional card spending business a strong consumer versus other verticals that they've moved into. Yeah. You know it's an interesting story right for a lot of these bigger more traditional [01:14:31] Speaker 15: payments firms because there are so many opportunities for them out there right now. Certainly there are the more traditional you know consumer payments and B2B business payments opportunities. But you have things like stablecoin technology of things like agentic commerce. You have you know security and anti-fraud efforts out there. And these are all areas where MasterCard and its rivals like Visa and and other payments firms play in. So there are a lot of opportunities right now. It's really kind of a question of how these firms are taking advantage and where they're really investing significant sums. [01:15:02] Speaker 1: Paige thank you so much for joining us. That's Bloomberg's Paige Smith. And thank you David from saving me from the lawyers. No it's all good. Let's let's continue the conversation on where the consumer is at this moment. We have rising precious metal prices and terrorists. They are pressuring jewelry makers even as high income consumers keep spending. And at the same time retailers are racing to adopt AI. But Kendra Scott CEO Chris Blakeslee says that the technology should make stores more human not less. He joins us now. Chris great to see you. Good to be here. And look you said a really interesting intersection with the consumer because you have both sort of middle offerings in jewelry. You have higher end too. You're in a lot of different markets here in the United States. What is your read on this consumer at the moment. [01:15:50] Speaker 16: You know it's it's been very interesting trying to read it. As you said we are an attainable luxury brand. We do a significant amount of our volume at prices below a $200 price point. But we also have prices up to $10,000 as well. And so we do sit at that intersection of consumer. What we're finding in the lower end consumer the lower income consumer. They're being a bit more discerning. They're a little less frequent. But when they're shopping they're spending more on those transactions. The other thing that we're seeing for example in our stores every one of our stores has something we call the Kendra Scott color bar. And you can go in and customize a piece of jewelry make it very personalized. Consumers usually go in and do that in groups. So it's an activity. It's a form of entertainment. We're actually finding that color bar performance is way over indexing in our stores because that consumer is looking for the blend of shopping but also an entertainment experience. At the same time the fastest growing segment of our product is fine jewelry. So the upper end consumer is doing really well. I think because of precious metal prices that consumer is thinking about I want to buy a beautiful item. I'm marking a milestone in my life. But I'm also making an investment because this item has a higher value. I've got a 13 year old daughter familiar with the color bar. [01:17:02] Speaker 2: Look I think there's an association with your brand. It's Texas based very popular in the south for a long time as you kind of cast your eyes to your graphically look across the country. [01:17:11] Speaker 16: Where do you see opportunities to to expand the brand here. We have we have incredible opportunity. Right now we have 165 Kendra Scott stores in the U.S. We have five yellow rose by Kendra Scott stores. Yellow roses are newer brand about three years old western inspired fashion multi-category brand too. I've got to say I was in Austin in South Congress. There was Kendra Scott then across the street. It's a massive store across the streets massive store. We're going to open another flagship in Fort Worth in October of this year. Interestingly in yellow rose less than half of the revenue that we're doing in stores is jewelry. We're doing revenue in apparel boots hats accessories leather goods. But we have the ability to go to probably 300 Kendra Scott stores in the United States. We're earlier in that analysis in yellow rose. But I think yellow rose is probably going to be 100 stores in the U.S. And what's amazing about our business is we're 24 years old and we're one of the largest jewelry brands domestically. But almost all of our business is domestic. So the opportunity for us to go into Latin America into Canada into Western Europe and other places is really significant. [01:18:12] Speaker 1: Chris your background itself is very fascinating. You helped grow allo into the behemoth that it is much to the chagrin of Lululemon. You were at Athleta too when Gap was in need of a turnaround. You come into Kendra Scott to start this year. And I wonder how much you are pursuing at the moment a strategy shift much like you did at the other companies you worked for. [01:18:31] Speaker 16: Yeah. I'd say I would describe it more as an evolution than a shift. What Kendra and the team here have built over these 24 years is incredible. Purpose driven brand founded on family fashion and philanthropy. Those cultural pillars are still throughout our business. They're very important. But we're at that place where we want to evolve into this multi-billion dollar global multi-category brand. So a lot of the work that I've been doing over the last six months is making sure we have the right leadership team to take the business into the future. So we've we've had some new team members arrive and some changes in our team. But also what is that long range plan and how does it how does it come together. We've been spending a lot of time on that at the end of August. We're actually going to have a big reveal moment with our board and with Kendra on a lot of that work so that we can really set that course for the future. [01:19:16] Speaker 2: Chris I was listening as Danny brought you in. She talked about AI and you trying to preserve the humanness of this industry. Talk a bit more about that. What are the applications of AI as you see them. Is it to design jewelry. Is it to boost the customer experience. How are you thinking about it as somebody in the jewelry business. [01:19:32] Speaker 16: A lot of people say what does AI have to do with jewelry. Sure. I think that we like to start with the philosophy around AI and our philosophy around it is power not replace. And I mentioned those pillars a few moments ago. Family fashion philanthropy in family. Kendra wanted to always make sure that our people could be all in and work and all in at home because that's what she endeavored to do. She was raising a family while raising this brand in the early days. And so I want to use AI to power our people to be more connected to consumers at the point of making great decisions not gathering information or spending time on the analysis to make those decisions. And so we're looking for ways to apply that. But to your point where that shows up is all over our business at the moment. We're using it in design to get faster to you know being able to confirm it's the actual design that we want. We're using it to personalize our digital experiences and our story experiences to localize our inventory so that when consumers come into a store they're seeing the most relevant product for them. And then of course all the back end functions inventory optimization etc. We're excited about its potential but its potential to make our people better and to give them more balance. [01:20:41] Speaker 1: I'm glad you explained that because when I saw this idea that you're all touting about AI helping you become more human I was like how it how does that make sense. But I understand. I understand. I understand what you're saying now. Look I got to ask and just to buzzmark it myself have a show every Wednesday called Bloomberg for a couple of years at noon eastern. Kendra Scott still majority owned by Kendra herself. Yes other private equity backers too. Would you ever IPO. We're getting a few consumer IPOs today. It seems like the market might be open for it. Is that could that be in the future of the company. You know I think all options are on the table. [01:21:09] Speaker 16: It's very important to Kendra that she maintain a majority ownership over the over the business. She views this as a legacy business that should go on. She wants to protect those values. I want to protect those values as well. I think the answer to that question is going to be it's going to come down to what is the best way to actuate on the full value of this brand. So as we start to push beyond our borders we're going to look at all those options. We'll make the best decision at the time. Who do you see as your main competitors. [01:21:36] Speaker 2: You talked about how you have these kind of tears for different types of consumers. Is there a company doing what you're doing or is that what sets you apart. [01:21:42] Speaker 16: The fact that you're able to play all those different levels. You know this might sound funny or strange but I'm six months in this and I'm still trying to decide who I think like the number one most relevant competitor is because the fact that we play across all of these price points in all these segments. It's a very fragmented market when you look at it in that picture. The people we're competing with at the $10,000 price point is a whole different group than the people we're competing with at a $500 to $1,000 price point. [01:22:10] Speaker 1: That's a different group from the less. Like that would be hard to have a coherent brand right when you have such a large separation. How do you have something that's unified when there are just so such different offerings in one store. Yeah. Yeah. Yeah. [01:22:22] Speaker 16: The answer to that question is where do we pull inspiration from. So if you go back to the roots of this brand. What Kenra found magic in was being able to interpret inspiration from art architecture nature travel and destinations and cultures. Those four areas of product design inspiration cut across all of our products. So you're going to see that in high jewelry. You're going to see it in our demi fine jewelry going to see it in fashion. That's the thread through. And the idea behind that is if we make beautiful products connected to those cultural themes. Our customers almost get to live vicariously through these beautiful designs which in the early days is what Kenra was doing when she was creating that jewelry. [01:23:00] Speaker 2: That's how we create what we call the yellow thread through everything I should say from experience. The fashion aficionados then push for the demi fine. That's right. [01:23:07] Speaker 1: That's right. Your daughter is going to be asking for that $10,000. What is the $10,000 item? What is that that you have? There are a few items. [01:23:15] Speaker 16: So you know rings obviously necklaces. When you get into that category you're often in things that would be classified as engagement and other. [01:23:22] Speaker 1: OK. The daughter not asking for that yet. I think you're safe David. Thank you so much for joining us. Appreciate your time. That's Kenra Scott CEO Chris Wakeslee. Let's get a check on your markets over an hour into your trading day. And it is a rally that we have thanks to Microsoft powering the Nasdaq up more than 3 percent for its best day in a month. The S&P up 1.3 percent after declines had brought the Nasdaq into a correction down 10 percent from its peak tenure yields. Those come down after rallying yesterday. The long end of the curve also pushed higher in one of the most stark steepenings of this yield curve post a Fed conference. In some time in Brent crude that declines by 1.1 percent. Some of the single stocks that we're looking at this hour. Apple and Amazon preparing to report earnings after the bell. Apple results are set to test the [01:24:06] Speaker 2: stock status as an AI safety play. Carvana said full year earnings may fall short of Wall Street's expectations due to slower growth in the [01:24:13] Speaker 1: most recent quarter. And Stellantis delivering disappointing results. Profitability under pressure from intensifying competition with Chinese brands in Europe. [01:24:22] Speaker 2: Coming up, the U.S. launches a fresh wave of strikes on Iran as the conflict spreads across the Middle East. More on that next here on [01:24:29] Speaker ?: Bloomberg's Open Interest. [01:24:29] Speaker 17: We're going to be hitting them very hard because it's our turn to hit them. They know it's coming. They're asking us not to do it. But, you know, they tried shooting. So we had five rockets shot going 8,500 miles an hour and all five rockets were knocked down to the ground. But they nevertheless took a shot. So it's our turn. And we'll see if we get there with an agreement. [01:25:00] Speaker 2: President Trump in the Oval Office on Wednesday. The U.S. launched new strikes on Iran after Tehran attacked an American military base in Jordan. For the latest now we go to Bloomberg Washington correspondent Tyler Kendall who was at the White House. And Tyler, we heard the president there promising he was going to go after them hard to use his words. In fact, that's what happened overnight. What are we learning from the administration about the next steps here. There was this pause in strikes. Now it seems like they're back on. Are you hearing anything about where this leads to more strikes or perhaps renewed effort here at some diplomacy. Well, David, the administration hasn't taken either of those options off the [01:25:34] Speaker 18: table. I will point out that we heard from Pakistan's foreign ministry earlier today. Of course, the key mediator in this conflict seeming to indicate that negotiations between the U.S. and Iran are ongoing in terms of the ministry's words. But we didn't really get much detail beyond that except for that they are focused on trying to reopen the Strait of Hormuz, which, of course, at this point remains one of the perhaps biggest blockade to trying to get diplomacy back on track. The issue is, it feels like we're stuck in this cycle of retaliation and strikes. As Iranian state media reported, new this morning that the IRGC fired at U.S. forces in both Kuwait and Jordan coming after, of course, we saw the lull in the fighting this week re-escalated after Iran issued that surprise attack on a U.S. military base. The potential for the conflict to widen at this point increases as we're seeing disruptions to commercial shipping also extend and continue to extend beyond the strait of Hormuz. I will point out that last night we saw two LNG tankers off the coast of Egypt hit, marking the first such attack in Egyptian waters since the conflict began. And there had been this renewed focus on Egypt's Mediterranean coast because that is where Saudi Arabia has been rerouting ships in a bid to avoid the threat that has been posed by the Houthis in the Red Sea. Danny and David, we're getting some mixed data on exactly where commercial shipping stands. Research from Kepler out today saying that 14 ships transited through the strait yesterday up from double digits compared to last week. However, it appears that those ships are exclusively using that Iranian coordinated route and not the U.S. coordinated one that would get them closer to [01:27:16] Speaker 1: Oman. Tyler, as you've been following this president, we've also had Benjamin Netanyahu in the U.S. this week. What difference has there been if there has been any of conversations between the two countries? Well, Danny, at this point publicly, we got a read out yesterday from Israeli Prime Minister Benjamin Netanyahu's [01:27:30] Speaker 18: office, who said that the U.S. and Israel are aligned on strategy going forward. Though, of course, there has been that reporting that there's been some disagreements behind closed doors, including the fact that the U.S. has moved forward with some potential green lights when it comes to Turkey F-35 fighter jets. That was another headline that we were watching closely in recent weeks. At this point, the Israeli Prime Minister's office has said that there are different options on the table in terms of how to continue this conflict, whether that means negotiations ramping up the economic pressure or a resumption of full combat operations. Danny, we did hear from a senior administration official who outlined that last night's strikes did extend beyond the scope of what we had been seeing during that consecutive 14-day period of strikes, but that the U.S. is not classifying what happened yesterday as resuming those full [01:28:21] Speaker 2: combat operations. Tyler, should we deal with the legacy of those meetings the president had this week. He also met with President Zelensky. There was news this morning of a missile from Russia landing in Poland and we saw Europe kind of rally around that in short order. Any indication from the White House of a response to that or more broadly speaking, sort of what we've learned about that attack and potential attack and what it might mean? Well, David, we're waiting for what the White House's response would be, but we [01:28:43] Speaker 18: know that the administration's patience has been wearing very thin when it comes to the conflict in Russia and President Trump's push to try to get the negotiations perhaps back on track. We did see some movement earlier this week when it came to Ukrainian President Zelensky's visit here to the White House. Again, didn't really get much of a read house from the U.S. side, but the Ukrainian president said that they had a good conversation and that they did discuss the use of a general license to allow Ukraine to build those Patriot missile launchers that have been essential to trying to bolster the country's air defense systems. Of course, I'm sure you saw the headline yesterday that the U.S. did a purchase order agreement with Lockheed Martin to try to boost the U.S.'s domestic stockpile Patriot missiles, which have been dwindling at this point and has sort of served as a reluctance from the Trump administration to send those weapons abroad. We'll see where it goes from here. The U.S. Congress is working to advance that Russian sanctions package, which, of course, could add to the pressure campaign to try to get some sort of resolution when it comes to this conflict. Now, many years in the making. [01:29:47] Speaker 1: Tyler, thank you so much for that reporting. That is Bloomberg's Tyler Kendall at the White House. Coming up, we're learning more about FIFA's plans to sell a stake in its new media division. That's coming up next. We'll be right back. This is Bloomberg Open Interest. FIFA's controversial plans to sell a stake in its new media division started with secret talks with Joshua Kushner. Kushner, a venture capitalist with family ties to President Trump, met with FIFA present Gianni Infantino last year to try and find ways for FIFA to maximize revenue from its commercial assets. Joining us now is Bloomberg Sports Editor Giles Turner. Giles, really excellent reporting here. A decision from FIFA that has caused much controversy. How did it come together? [01:30:41] Speaker 19: Well, I think the issue really is looking at how FIFA makes money. It really wants to make more money. FIFA has been terrible historically at making money. If you compare it to the NFL, for example, it takes me for 24 years to make what the NFL makes in just one year. So they've been thinking for a long time. But how can we can increase revenue? And I think these talks started last year when they started planning for the World Cup this year in the U.S. They really started to see how much money they could possibly make. This led to them studying or thinking about saying the media division, bringing in investors, which is very common throughout the sports world. Obviously, very rare for an organization like FIFA, which really deals in national tournaments with a lot of passion. [01:31:21] Speaker 2: And it's notoriously a nonprofit organization, we should add, as well. Talk about Joshua Kushner, Mr. Carly Kloss. We know of him for his health care investments. To what extent has he has his firm thrive and its holding company, kind of gotten into sports here in recent. How is this part of that plan that he has? [01:31:40] Speaker 19: Well, I think it's probably a pretty recent thing for him. Obviously, he's done very well in the past year with a lot of these venture capital investments. A lot of these types of investors are looking to expand into sports. Obviously, his family has a quite a long history with sport. Obviously, his brother helped plan the World Cup. So definitely looking into whether there's links there. But also, he, Joshua Kushner, launched for maternal, which is this sort of iconic sports investment vehicle that kind of termed it entertainment vehicle. And they really want to look at buying stakes in iconic names for a long term. They've looked at various investments. Now they're looking potentially at trying to bid for the new basketball team in Vegas. So these are going to be big assets. FIFA really fits, I think, what they're trying [01:32:26] Speaker 1: to do there. You can see why this would be an attractive asset for someone like Kushner. But for the others who have table stakes in this, UEFA has been incredibly outspoken, saying that soccer football is not for sale and threatening to boycott various FIFA tournaments. Giles, could they really throw a wrench in this? Does UEFA and perhaps some of the other organizations have the ability to stop this? It's going to be really, really hard to stop this. [01:32:53] Speaker 19: Infantino has a lot of support, especially amongst the small member associations, which certainly don't make anywhere near as much money as the larger ones that make up a lot of UEFA's power. The only real way that I think this can be stopped is if UEFA or some of the other nations find a different candidate to stand up against Infantino in the upcoming FIFA elections in March next year. However, so far, he's running unopposed. He's got over 200 of these member associations already writing letters to back him. But you're going to find out to find something really credible in order to stand up to him. [01:33:28] Speaker 2: How about a minute left here. What about a populist revolt? I've got to speak for the people here. The soccer fans who find this distasteful, I was joking about the nonprofit status, but in fact, it is there. Any chance that that kind of groundswell of opposition to this could lead to any changes? [01:33:42] Speaker 19: I don't think so this time. It's a lot different from Super League, which happened five years ago. Fans are incredibly passionate for their club teams. They're still passionate, of course, their national teams. But it's much harder for them to get behind something. I think the issue is with sport, and especially football, you've got to balance who makes the rules to who makes the money. And at FIFA right now, those two sort of driving factors are in the same organization. It's very hard to see which one is more powerful. And the belief from the fans is certainly in the moment, especially after the World Cup, that FIFA cares far more about money than it does about rules and regulations. [01:34:19] Speaker 1: GILES, again, excellent reporting. Really recommend everyone go out and read his work. Bloomberg sports editor Giles Turner. And later today, away from the sports world, you can catch my interview with Charlie Morrison, the CEO of Jersey Mikes, at 2:30 PM New York time. Tomorrow on Open Interest, more on Big Tech, we'll talk with TD Cowan's John Blackledge, Baird's Willpower, and PNC's Amanda Agati plus Simplifies Paisley Nardini. David, thank you for joining us. [01:34:44] Speaker 11: Happy to be here. [01:34:45] Speaker 1: See you tomorrow, same time, same place.