Bloomberg Surveillance 10/27/2026

>> A LOT OF THE AI SPENDING LONG-TERM EXPENSE. >> NO LONGER A QUESTION OF WHETHER YOU BUY SIMMONS AND SHORT THE HYPERSCALERS DO THE OPPOSITE. BASICALLY COME ALONG TECH. >> AI ADOPTION IS MAYBE STARTING TO SHOW UP A LITTLE BIT. >> THE ONLY PEOPLE MAKING MONEY FROM AI RAI. >> WE ARE IN THE EARLY CYCLES OF AI. >> THIS IS "BLOOMBERG ANNMARIE HORDERN. JONATHAN: LIVE FROM NEW YORK FOR OUR AUDIENCE WORLDWIDE, "BLOOMBERG SURVEILLANCE" STARTS NOW. COMING INTO TUESDAY, RACING TO RAISE CAPITAL. ANTHROPIC LAID THE GROUNDWORK FOR IPO AS META UPSIZING TO FUND BIG SPENDING PLANS AS SPACEX IS WRAPPING UP $40 BILLION DEBT DEAL TO BUY CHIPS. A BIG 24 HOURS HERE ON WALL STREET. LISA: ANTHROPIC'S BUSINESS MODEL IS SOLID ENOUGH FOR PEOPLE NOT TO SEE IT AS ARMAGEDDON THE AI TRADE. IT IS STRONG ENOUGH TO ENABLE ALL THE FUNDRAISING TO CONTINUE WITH SOME FERVOR EVEN WITH PERHAPS HIGHER BORROWING COSTS. IN OTHER WORDS, IT IS NOT WE WORK. THAT IS GIVING PEOPLE COMPANIES THAT YOU CAN GET FINANCING DONE. STILL UNCLEAR WHAT ARE THE TERMS OF THIS FINANCING? NOT JUST THE EQUITY BUT ALSO THE DEBT. ALSO SPECIAL PURPOSE VEHICLES. I DON'T THINK IT IS PUTTING TO BED SOME OF THE CONCERNS. JONATHAN: REMIND THEM OF THE START OF JUNE WE HAD ALPHABET COME OUT WITH A BIG EQUITY CAPITAL RAISE WEEK BEFORE SPACEX IPO. ALMOST THE SAME THING EXCEPT THE PLAYERS ARE DIFFERENT. IT IS META WEEKS AHEAD OF THE LIKES OF ANTHROPIC GOING PUBLIC. LISA: WE ARE EXPECTING ANTHROPIC TO RAISE 00 BILLION. PEOPLE ARE TALKING ABOUT .5 TRILLION. META KICKED OUT ALMOST 00 BILLION IPO ITSELF EXCEPT IT IS NOT AN IPO. INITIAL RACE WAS SUPPOSED TO BE $95 BILLION OF EQUITY AND NOW $98 BILLION. IT SEEMS LIKE THERE PLENTY OF DEMAND. WHERE IS IT COMING FROM? IS IT COMING FROM THE PLAYERS THAT DEPEND ON THEM FOR THEIR BUSINESS? HOW MUCH OF THE CIRCULAR FINANCE -- YOU LOOK UNDER THE HOOD, YOU SEE A LOT OF CROSS PRETTY RISK ESPECIALLY WHEN IT COMES TO NVIDIA ANNOUNCING THIS MORNING THEY'RE GOING TO INVEST WHEN IT COMES TO META. SPACEX, $40 BILLION IN DEBT FINANCING TO LEASE GP USE. ASK YOU THIS MORNING FROM ALTOGETHER, $235 BILLION IN A SINGLE DAY. MORE THAN THE ENTIRE U.S. AIRLINE INDUSTRY AS TO THE ECONOMY AND A YEAR. WHEN YOU THINK ABOUT IT LIKE THAT, THIS AI BUBBLE WE ARE IN, IS INSANE. JONATHAN: I DON'T THINK I'VE SEEN SUCH A BROAD-BASED INTEREST IN AN S1 EVER. THE BROAD INTEREST IS WHAT CATCHES MY ATTENTION. IT IS CENTRAL BANKERS, POLITICIANS, REGULATORS ALL TRYING TO WORK OUT HOW BIG THIS THING IS, HOW RISKY IT IS BECAUSE IT TOUCHES SO MUCH OF THE ECONOMY AROUND US. LISA: THE BROADER IMPLICATIONS ARE FOR THE ECONOMY. 400 PAGE PERSPECTIVE, ALMOST 100 PAGES DEVOTED TO THE RISK SECTION ABOUT THE POTENTIAL COLLAPSE OF HUMANITY. THERE IS A FUNDAMENTAL UNDERPINNING OF SOME SORT OF TRANSITION IN THE LABOR MARKET THAT IS GOING TO TAKE PLACE AS RESULT. MICROSOFT IS GIVING BY OUT TO THOUSANDS OF POTENTIAL -- JONATHAN: 60 K. LISA: THIS IS TRANSFORMATIVE AND RECORD-SETTING IN ALL SORTS OF DIFFERENT WAYS. WE ARE GETTING A CLEAR SENSE FROM HOW THIS S1, CLEAR AS MUD, LEAVES A LOT OF QUESTIONS. ANNMARIE: A RACE AND MARATHON TOGETHER. WE WILL SPEAK TO MIKE WILSON. WE HAVE THE MIDTERM ELECTIONS ONE WEEK AWAY. DECEMBER KICKED THE CAN DOWN THE ROAD. AND OF COURSE AI. AFTER ANTHROPIC, IT SETS THE SCENE FOR OPENAI. JONATHAN: MIKE WILSON JOINING US LATER THIS MORNING. COMING UP THIS HOUR, WE WILL CHECK UP WITH MARK HAEFELE. MATT KENNEDY ON THE RISK OF BUYING ANTHROPIC VERSUS THE COST OF MISSING OUT. AND LUDOVIC SUBRAN. WE BEGIN THIS HOUR WITH STOCKS INCHING HIGHER AS INVESTORS WITH A WAVE OF TECH, MARK HAEFELE WRITING, RISKS ARE WRITING PARTICULARLY IN THE MOVE CAPITAL-INTENSIVE AREAS OF AI BUILDOUT. WELCOME TO THE PROGRAM. THE RACE TO RAISE CAPITAL IS ALIVE AND WELL. IS THIS MARKET READY TO MEET THE MOMENT? MARK: WE THINK IT IS GOING TO CONTINUE TO SEE NOT JUST GREAT INTEREST IN AI, BUT CONTINUED INVESTMENT. THAT IS BASED ON THE FACT THESE GP USE, THE PRICING KEEPS GOING UP AND UP, SO THERE IS THIS UNDERLYING -- WE THINK THIS CONTINUED UNDERLYING DEMAND. THE OTHER THING WHEN YOU WERE TALKING ABOUT ALL OF THE DIFFERENT PEOPLE WHO ARE WATCHING THIS, I THINK AN ELEMENT THAT PEOPLE MAY BE DON'T FORGET BUT NEED TO REMEMBER IS THIS IS LIKE JUST ANOTHER THING IT REMINDS YOU HAVE IS THE MANHATTAN PROJECT. THIS IS SOMETHING OF EXISTENTIAL GEOPOLITICAL ISSUE NOW THAT IS SEEING FUNDING IN WAYS YOU CAN'T JUST COMPARE WHAT IS GOING ON TO MAYBE TRADITIONAL CYCLE. JONATHAN: DO YOU THINK IT WILL RETAIN SUPPORT IN WASHINGTON, D.C.? MARK: ABSOLUTELY. THERE IS FOCUSED IN WASHINGTON AND GOVERNMENTS AROUND THE WORLD ABOUT HOW TO SECURE THE AI THAT IS NEEDED TO ACHIEVE A VARIETY OF GOALS, BOTH ECONOMIC AND STRATEGIC. LISA: DO YOU THINK NEXT WEEK BECOMES A BIGGER EVENT DEPENDING ON WHICH CANDIDATES WIN? I HEAR YOU, IT IS LIKE MANHATTAN PROJECT IN TERMS OF NATIONAL SECURITY BUT AT THE SAME TIME, THERE HAS BEEN A TON OF PUSHBACK FROM THE ELECTORATE. MARK: YEAH, I THINK WE HAVE DUG INTO THIS AND AS YOU KNOW VERY WELL, A LOT OF WHAT IMPACTS PEOPLE ON A DAY-TO-DAY BASIS HAPPENS AT THE STATE LEVEL. I DON'T THINK AT THE NATIONAL LEVEL THERE IS GOING TO BE MUCH OF A SLOWDOWN. WE SEE 90% CHANCE OF SPLITS GOVERNMENT COMING OUT OF THIS. I AM NOT SURE WE SEE THAT MUCH OF A CHANGE. WE SEE THAT UNDERLYING DEMAND, WE STILL LIKE ASPECTS OF THE SEMIS, TRYING TO BE MORE SELECTIVE. ALSO POWER, WHICH IS WHAT WE SEE AS ONE OF THE REAL BOTTLE NEXT YEAR. AND TO TRY AND DIVERSIFY, MAYBE THE SECTOR THAT HAVEN'T REALLY BENEFITED FROM THE PROMISE OF AI AS MUCH AS OTHERS'S HEALTH CARE WERE OF COURSE A LOT COULD HAPPEN BUT HAS NOT REALLY BEEN PRICED IN YET. ANNMARIE: IF YOU DON'T THINK POTENTIALLY POLITICS KILLS IT, DO YOU THINK IT SLOWS DOWN THE TRADE? MARK: YOU KNOW, I THINK THAT HERE IN SWITZERLAND, THEY HAVE A POLITICAL SAYING WHICH IS THE FOOD HAS A LOT OF TIME TO COOL BETWEEN THE KITCHEN AND THE TABLE. ESPECIALLY WHEN YOU ARE DEALING WITH STATE REGULATION VERSUS FEDERAL REGULATION IN THE UNITED STATES, THAT BACK AND FORTH HAS BEEN AN AMAZING PART OF THE AMERICAN JOURNEY FOR 250 YEARS. BROADLY SPEAKING, I WOULD SAY NO. COULD THERE BE SOME SPECIFIC STATE MEASURES THAT COULD POTENTIALLY MOVE THINGS OUT OF ONE STATE AND INTO ANOTHER STATE? ABSOLUTELY. LISA: I'M GOING TO GOOGLE OTHER EXPRESSIONS LIKE THAT FROM SWITZERLAND BECAUSE THAT IS FANTASTIC. BLACKROCK WAS ON TELEVISION OVERNIGHT TALKING ABOUT HOW THIS IS ONE OF THE MOST EXCITING INVESTMENT PERIODS IS EVER SEEN, HE SPENT THE ENTIRE WE CAN ARE SEEING THROUGH THESE FINANCING DOCUMENTS AND PARTICIPATING IN SOME IN A BIG WAY. DO YOU FEEL THE SAME WAY OR DO YOU HAVE EQUAL MEASURES OF EXCITEMENT AND TREPIDATION? MARK: I MEAN, I WILL GIVE YOU ANOTHER SAYING, I SLEEP LIKE A BABY, WAKE UP CRYING EVERY THREE HOURS. ALWAYS BEEN THAT WAY IN THE MARKETS. BECAUSE THERE'S ALWAYS THAT MIX. I THINK WHAT IS DIFFERENT ABOUT THIS PERIOD IS HOW RAPID THE PACE OF CHANGE IS. NOT JUST AS WE HEAR ABOUT IT IN THE HEADLINES, BUT LOOKING AT SOME OF THESE METRICS -- YOU CAN LOOK AT THE MATH PROBLEMS SOLVED. IT IS A PERIOD OF INCREDIBLE CHANGE BUT ALSO JUST HOW ALL OF THESE THINGS CAN BE INTERCONNECTED BECAUSE AS SOON AS YOU START TALKING AI, YOU START TALKING ABOUT AI USED IN DRONES AND THEN WE ARE INTO ANOTHER TOPIC THAT INVESTORS ARE REALLY PAYING ATTENTION TO, WHICH IS, WHAT IS GOING ON IN THE GEOPOLITICAL SITUATION IN OIL FROM HOW THAT TIES INTO INFLATION AND BONDS. A LOT HAPPENING RAPIDLY. I HAVE TO AGREE WITH RICK, IT IS VERY EXCITING. ANNMARIE: DO YOU SEE A GREATER OPPORTUNITY IN AI-RELATED DEBT OR EQUITY? DO YOU WANT TO BE MORE CONCENTRATED OR FIGURE OUT WAYS TO HEAD, OFFSET THE CONCENTRATED RISK THAT SEEMS TO BE MADE PRETTY MUCH THROUGHOUT MARKETS? MARK: I THINK WHAT WE ARE TELLING CLIENTS IS THAT WE SEE INFLATION FALLING IN THE BEGINNING OF NEXT YEAR SO WE THINK BOND YIELDS ARE GOING TO COME DOWN AND THAT WILL BE A STRONG BACKDROP FOR STOCKS BUT IT ALSO CREATES AN ENVIRONMENT FOR PEOPLE TO USE BONDS, HIGHER QUALITY BONDS WE PROBABLY SAY TO ADD SOME KIND OF DIVERSIFICATION IN PORTFOLIOS. WE DO THINK BOND DIVERSIFICATION IS GOING TO WORK STILL GOING FORWARD. A LOT OF CLIENTS COMMENTED PENDING -- SOME HAVE NO AI, SOME HAVE TOO MUCH AI. CERTAINLY, IT IS A TIME FOR PEOPLE TO REVIEW THEIR PORTFOLIOS GIVEN HOW SOME OF THIS ENDS UP. I THINK FOR THIS TO WORK, FOR THE AI TRADE TO BE REAL, IT IS GOING TO HAVE TO BROADEN OUT. IF IT IS GOING TO BROADEN OUT, WE ARE LOOKING TO, LIKE I SAID, OTHER SECTORS BUT ALSO OTHER REGIONS WHERE MAYBE THE TRADE HASN'T BECOME AS FEVER PITCH AS IN THE UNITED STATES. JONATHAN: WHAT IS THE IMPLIED THAT YOU ARE MAKING? ARE YOU EXPECTING A DECELERATION OF CAPEX, INCREASE IN PRODUCTIVITY? WHAT IS IT? MARK: IT IS MORE ABOUT JUST THE INFLATION PICTURE LOOKING BETTER AS WE LEFT SOME OF THE INCREASES IN COMMODITY PRICES I WOULD SAY. I THINK THE FED HAS THE DUAL MANDATE. IT IS NOT LIKE THERE IS A WAGE INFLATION IN THEY ARE. I THINK THE FED IS GOING TO BE ABLE TO BACK OFF A LITTLE BIT. THAT IS SUPPORTIVE OF BOTH. AS YOU KNOW, WE EXITED IN THE U.S. Q2 WITH ALMOST 7% NOMINAL GROWTH. THAT IS SUPPORTING EARNINGS IN THE UNITED STATES. AND TO THE EXTENT THIS AI TRAIT IS SPREADING, WE SEE OPPORTUNITIES CREATED ASIA IS ALSO SEEING GREAT EARNINGS GROWTH. IN EUROPE, INDUSTRIAL GROWTH CONTINUING. WE LIKE CYCLICALS IN EUROPE. THAT IS WHY WE ARE SAYING IF AI IS GOING TO WORK FROM THIS TRADE IS GOING TO HAVE TO BROADEN OUT. JONATHAN: AND YOU'RE LOOKING FOR THE ROTATION. THEY ARE STARTING TO BUILD BRIEFLY. MARK HAEFELE OF UBS. ANOTHER SAYING, THERE IS NO -- IN THE LAKE. DON'T PANIC. I DID MY RESEARCH. LISA: I LOVE THIS. ANNMARIE: OBSESSED WITH HOT FOOD. LISA: MY FIRST THOUGHT IS, WHAT ABOUT THE OIL SPILL? JONATHAN: NEVER MIND. FUTURES RIGHT NOW, NEGATIVE BY .01% ON THE S&P. THAT'S GO TO VONNIE QUINN. VONNIE: BOLSONARO DROPPING HIS PLANS TO CHALLENGE THE BRAZILIAN ELECTIONS. FORMALLY CONCEDING DEFEAT TO THE REELECTED PRESIDENT LITTLE OPERATED BOLSONARO, WHILE CRITICIZING PUBLIC SPENDING AND THE RUN-UP TO THE VOTE AND ITS POTENTIAL IMPACT ON THE RACE. UBS IS HIGHER IN THE PREMARKET, REPORTING THIRD-QUARTER EARNINGS THAT BEAT ANALYSTS ESTIMATES AND RAISED ITS FULL-YEAR GUIDANCE. UBS SAYING WE ARE ENTERING THE HOLIDAY SHOPPING SEASON FROM A POSITION OF STRENGTH WITH THE MOST AUTOMATED AND EFFICIENT NETWORK IN OUR HISTORY. APPLES IPHONE DUO IS DRAWING COMPLAINTS FROM CUSTOMERS WHO SAY THE FOLDABLE DISPLAY CRACKED AFTER HOURS OR DAYS OF USE. THE COMPANY RESPONDING SAYING IT WAS BOTH AWARE OF AN ISSUE IMPACTING THE INNER DISPLAY ON A SMALL NUMBER OF IPHONE DUO UNITS. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: MANY TIMES SHOULD YOU OPEN AND CLOSE IT IN A FEW HOURS? LISA: THEY TRASH TALKED SAMSUNG FOR THEIR CHEAP VERSION SO THE BAR WAS HIGH THEY WOULD COME OUT WITH SOMETHING SIGNIFICANTLY HIGHER QUALITY. JONATHAN: THINGS ARE NOT GOOD FOR APPLE THIS MORNING. UP NEXT, THE PRESIDENT. PRES. TRUMP: WE DID NOT START THE WAR WITH IRAN. IRAN STARTED THE WAR WITH US. WE DID A CEASE-FIRE, WHICH I DID NOT LIKE VERY MUCH, CONSIDER IT A WASTE OF TIME. JONATHAN: WE WILL CATCH UP WITH GENERAL KAREN GIBSON. GOOD MORNING. ♪ JONATHAN: SNAPPED A TWO DAY LOSING STREAK, HEADING INTO 0 TRILLION PLUS OTHER EARNINGS FROM NOT EVEN A HANDFUL OF NAMES FOR THE NEXT 24 TO 48 HOURS ON WALL STREET. A BIG COUPLE OF DAYS WITHOUT THAT DECISION IN THE MIX. YIELD AT THE FRONT END OF THE CURVE STILL AROUND 470 THIS MORNING AND ESSENTIALLY UNCHANGED. TENS AROUND 5%. LISA: 5-YEAR NOTE'S COMING TODAY. LATER IN THE WEEK, LONGER DURATION BONDS. 2-YEAR NOTE. WASN'T GREAT. THIS IS WHERE WE START TO GET INTO THE SUPPLY DEMAND DYNAMIC. THERE WAS THIS THEORY LAST WEEK BECAUSE THERE WAS A LITTLE PUSHBACK TO THE AI CAPEX THAT MAYBE IT WOULD REDUCE SUPPLY ENOUGH TO GIVE SOME BREATHING ROOM TO U.S. TREASURY. DO WE DISPEL THOSE RUMORS THIS WEEK? JONATHAN: COUNTERPOINT IN THE LAST 24 HOURS. FAIR TO SAY. BRENT AND WIT UP ANOTHER PERCENT. ANNMARIE: SAUDI ARABIA TRYING TO CONTAIN A FIRE THAT HAPPENED IN TERMS OF ONE OF THE OIL EXPERT TERMINALS ON THE PERSIAN GULF. THIS GOES TO SHOW CRUDE IS MOVING AND WE DO SEE THAT BUT AT THE SAME TIME, IT IS INCREDIBLY FRAGILE RIGHT NOW IN THE MIDDLE EAST. JONATHAN: DEFLECTING BLAME. PRES. TRUMP: WE DID NOT START THE WAR WITH IRAN, IRAN STARTED THE WAR WITH US. I DON'T FEEL WE HAD A CHOICE. TWO WEEKS AWAY FROM HAVING A NUCLEAR MISSILE. WE DID A LITTLE CEASE-FIRE, WHICH I NEVER LIKED VERY MUCH. CONSIDERED A WASTE OF TIME. JONATHAN: THE LATEST, THE PRESIDENT DONALD TRUMP ATTEMPTING TO ACCUSE IRAN OF INITIATING THE WAR AS TOP MIDDLE EAST OFFICIALS AGREED TO FURTHER DE-ESCALATION TALKS IN TEHRAN. THE LATEST, TYLER KENDALL HAS MORE. TYLER: THERE'S A PUSH FOR DIPLOMACY FOR REGIONAL PARTNERS AS PRESIDENT TRUMP SAYS HE IS WEIGHING ADDITIONAL MILITARY ACTION AFTER THE MIDTERMS AND TRIES TO JUSTIFY TO THE VOTERS THE IRANIAN CONFLICT WHICH HAS PROVEN UNPOPULAR AS WE GET CLOSER TO THE ELECTION. YESTERDAY, WE SAW SENIOR OFFICIALS FROM SAUDI ARABIA, TURKEY, AND PAKISTAN CONVENE IN IRAN FOR TALKS AS THE MEDIA CONFIRMS THE GROUP DID AGREE TO MORE DIALOGUE. TODAY, IRAN'S PRESIDENT IS EXPECTED TO MEET WITH RUSSIAN PRESIDENT VLADIMIR PUTIN AS OUR REPORTING INDICATES THAT CHINA IS NOW CONSIDERING SENDING ENVOYS TO THE MIDDLE EAST ARE DISCUSSIONS AS WELL. PEOPLE FAMILIAR WITH THE MATTER TELL BLOOMBERG NEWS IRAN IS BRACING FOR A FRESH BOMBING CAMPAIGN FROM THE U.S. AND IS PREPARING TO RETALIATE AGAINST REGIONAL TARGETS, INCLUDING ENERGY INFRASTRUCTURE. SAUDI ARABIA CONFIRMED THIS MORNING IT INTERCEPTED AT LEAST THREE BALLISTIC MISSILES THAT WERE LAUNCHED BY THE IRANIAN BACKED PROXY GROUP THE HOUTHIS. OUR OWN REPORTING INDICATES THAT SAUDI ARABIA WAS ABLE TO CONTAIN A FIRE NEAR ITS LARGEST EXPORT OIL TERMINAL, THAT INCLUDES CRUCIAL INFRASTRUCTURE FOR SAUDI ARAMCO. JONATHAN: MORE FROM TYLER LATER THIS MORNING. TO BUILD ON THIS, GENERAL KAREN GIBSON WRITING, THE REAL QUESTION WILL BE WHAT WE SEEK TO ACCOMPLISH THAT HAS NOT ALREADY BEEN ACHIEVED THROUGH EIGHT MONTHS OF WARFARE, STRONG ECONOMIC PRESSURE, AND DIPLOMACY. GENERAL GIBSON JOINS US NOW. WELCOME TO THE PROGRAM. THE STRATEGY SEEMS TO BE WAIT IT OUT. IT IS TIME THE ALLY OF THE UNITED STATES OR AN ALLY OF IRAN? GEN GIBSON: GREAT QUESTION. I THINK AT THE END OF THE DAY, THIS IS LESS A CONTEST BETWEEN MILITARY POWERS WHERE WE HAVE TREMENDOUS ADVANTAGES AND STRENGTHS AND MORE A CONTEST OF WILLS AND POLITICAL ENDURANCE. IN THAT CASE, THIS ADMINISTRATION NOW FOLLOWING THE ELECTION, A LAME-DUCK ADMINISTRATION THAT HAS TWO YEARS LEFT, I THINK THE IRANIANS WOULD BELIEVE ABSENT ANY TRULY CONCERTED MILITARY OPERATIONS, THEY THINK THEY CAN SUSTAIN THAT AND OUTLAST US. ANNMARIE: WE ALSO HAVE ISRAELI ELECTIONS TODAY. HOW MUCH WILL THAT DICTATE WHAT THE U.S. DECIDES TO DO? GEN. GIBSON: I THINK THERE WERE CERTAINLY A LOT OF REPORTING THAT PRIME MINISTER NETANYAHU WAS STRONGLY IN FAVOR OF CONDUCTING SOME KIND OF ATTACK PRIOR TO THE ISRAELI ELECTIONS. THAT WOULD HAVE SEEMED TO HELP HIM AT THE POLLS. THE FACT ELECTIONS ARE OCCURRING NOW WITHOUT THAT ATTACK HAVING HAPPENED, I THINK TAKE THAT OFF THE TABLE AS FAR AS A FACTOR THAT INFLUENCES NOW THE TIMING OF AN ATTACK. ANNMARIE: IF THE U.S. WAS TO REENGAGE WITH MORE ATTACKS AGAINST THE REGIME, WHAT KIND OF TARGETS ARE YOU SUSPECTING THEY WILL GO AFTER? GEN. GIBSON: GREAT QUESTION. I THINK ABOUT IT IN THREE CATEGORIES. THE FIRST ONE, AT WHICH I THINK WILL BE A GIVEN, IS GOING AFTER MILITARY TARGETS. SPECIFICALLY, MISSILES AND DRONES BECAUSE THAT IS WHAT CAN HURT OUR ALLIES. THE PRODUCTION FACILITIES, WEAPONS THEMSELVES, LAUNCHERS, STORAGE, ANYTHING RELATED TO THE ABILITY TO USE THOSE. I THINK THAT WILL BE A GIVEN. A SECOND CATEGORY MIGHT BE THINGS RELATED TO NUCLEAR FACILITIES, WHICH WE HAVE NOT GONE AFTER IN SOME TIME. QUITE A BIT OF REPORTING IN THE LAST COUPLE OF WEEKS THAT IRAN HAS BEEN REBUILDING, WHICH WOULD BE EXPECTED AT THE SITES THAT HAD BEEN HIT SIX MONTHS OR MORE AGO. NO SIGNS THEY HAVE ACTUALLY ADVANCED THEIR NUCLEAR WEAPONS PROGRAM. I WOULD EXPECT THAT COULD BE ANOTHER CATEGORY TO RE-ATTACK THOSE AND TO DELETE THE RECONSTRUCTION THAT HAS OCCURRED. THE THIRD CATEGORY, THE THING THAT WOULD PERHAPS GENTLY MAKE THIS DIFFERENT, WOULD BE TO GO AFTER REVENUE-GENERATING INFRASTRUCTURE AND ENERGY INFRASTRUCTURE WITHIN IRAN. THAT WOULD BE SIGNIFICANT. THE QUESTION THAT JON PRESENTED THE GETTING WHAT WOULD BE DIFFERENT AND WHAT WOULD WE EXPECT TO CHANGE WHEN WE HAVE BEEN AT WAR WITH HIM FOR EIGHT MONTHS ALREADY, THAT WOULD BE SOMETHING NEW AND DIFFERENT. LISA: IT IS CLEAR THE REGIONAL NATIONS ARE CONCERNED ABOUT ANY KIND OF ESCALATION GIVEN THEY HAVE BEEN THE RECIPIENT OF SOME OF THE BLOWBACK. THREE ARE MEETING IN IRAN TO TRY TO GET TO SOME RESOLUTION. DO YOU HAVE ANY HOPES FOR THIS? IS THERE ANY KIND OF SENSE THIS COULD TAKE DOWN THE TEMPERATURE? GEN. GIBSON: ONE, IT IS INTERESTING TO SEE NOW THE SAUDIS ALSO JOINING, NOT JUST THE STANDARD HITTERS OF QATAR AND PAKISTAN -- TURKEY HAS BEEN INVOLVED ALL ALONG BUT NOW THE SAUDIS AS WELL. THEY CAN ILL AFFORD, AS TYLER POINTED OUT, TO WITHSTAND THE BARRAGE OF MISSILES FROM IRAN WHEN THEY ARE ALREADY DEALING WITH STRIKES FROM THE HOUTHIS TO THE SOUTHWEST. IT TO YOUR QUESTION ABOUT OUR THEIR HOPES FOR REALLY DIFFUSING THIS? I THINK THE POSITIONS ARE STILL INCOMPATIBLE. I THINK THEY ARE UNLIKELY TO DO MORE THAN ANYTHING BUT NIBBLE AROUND THE EDGES, IF THAT. LISA: I'M CURIOUS ABOUT THE ISRAELI ELECTION, NOT JUST THE STRIKES. WHAT KIND OF DIFFERENT APPROACH THAT NATION MIGHT TAKE IF THERE IS NEW LEADERSHIP AND PRIME MINISTER NETANYAHU IS SIDELINED? NECESSARILY BE OFF THE SCENE. WHAT IS YOUR SENSE OF HOW SIGNIFICANTLY THAT COULD CHANGE SOME OF THE DYNAMICS? GEN. GIBSON: IN MY DEALING WITH ISRAELIS OF ALMOST ANY POLITICAL COLOR, THEY SHARE GENERALLY A SENSE THAT IRAN IS IN FACT AN EXISTENTIAL THREAT TO THE NATION OF ISRAEL. AND SO I THINK WE MIGHT SEE A DIFFERENT APPROACH, PERHAPS DIFFERENT APPROACH TOWARD THE PALESTINIANS, TOWARD GAZA, TOWARD DIFFERENT WAY OF GETTING AFTER HAMAS IN SOUTHERN LEBANON. I'M NOT SURE WE WOULD SEE A SIGNIFICANT DIFFERENCE IN THE CONFLICT AGAINST IRAN ASIDE FROM PERHAPS AN INSISTENCE ON REGIME CHANGE. SOME OF THE THINGS THAT NETANYAHU HAS RECENTLY HINTED AT IN TERMS OF A DESIRE TO BRING DOWN THE REPUBLIC. I HAVE NEVER MET AN ISRAELI WHO WAS SYMPATHETIC TO IRAN. ANNMARIE: IN THE NEW YORK TIMES THIS MORNING, WE HAVE THE AMBASSADOR TO THE U.S. SAYING THERE IS NO LIMITS WITH WHAT THE HOUTHIS WILL DO, WANTING TO DESIGNATE THEM AS A TERRORIST ORGANIZATION. GIVEN THIS IS COMING FROM WASHINGTON, D.C., DO YOU THINK THE SAUDIS ARE HOPING THE U.S. GETS MORE INVOLVED IN TERMS OF DEFENSIVE AND OFFENSIVE CAPABILITIES, IN TERMS OF THE HOUTHIS? GEN. GIBSON: ABSOLUTELY. IT WOULD BE IN THEIR INTEREST. THE HOUTHIS, THAT IS A TOUGH NUT TO CRACK. IT WILL BE DIFFICULT TO DISLODGE THEM FROM THE TERRAIN THE CONTROL AND HAVE FOR OVER A DECADE ALONG THE RED SEA. THEY HAVE TREMENDOUS ADVANTAGES. LOOK AT HOW RELATIVELY INEXPENSIVE AND EASY TO REPRODUCE THESE DRONES AND MISSILES ARE THAT THEY ARE USING TO CAUSE REAL DAMAGE IN THE KINGDOM. AND THE BILLIONS OF DOLLARS THE SAUDIS SPENT TO DEFEND. THE SAUDIS AFTER PREVENT FATALITIES AND EVERY ONE OF THOSE STRIKES, THE HOUTHIS ONLY HAVE TO MAKE IT THROUGH 5% OF THE TIME TO SCARE PEOPLE AWAY FROM COMING TO DAVOS IN THE DESERT. IT IS A REAL ECONOMIC IMPACT. JONATHAN: GENERAL, THANK YOU. REPORT AFTER REPORT THE PRESENT CONSIDERING RESTARTING HOSTILITIES. ANNMARIE: AS SOON AS AFTER THE MIDTERMS. THE FACT IS, IN THESE PLANS HAVE BEEN DRAWN UP. WE HAVE SEEN THEM TAKEN TO THE PRESIDENT IN THE PAST. THEY'RE READY TO GO AND HE HAS PUT A VETO ON IT. DOES HE DO IT AFTER THE MIDTERM ELECTIONS, DISPLAYING EVENT? DOES IT ACTUALLY MAKE IT A TRUE CLEARING EVENT OR IS IT ANOTHER SOURCE OF VOLATILITY? JONATHAN: DOUBLE-DIGIT GAIN ON BRENT SO FAR. UP OVER THE PERIOD BY ABOUT 2. COMING UP, WE WILL CATCH UP WITH MATT KENNEDY. ISABELLE HAS YOUR MORNING MOVERS. JONATHAN: WE ARE TREADING WATER. SAID DECISION IN THE NEXT 24 HOURS. EARNINGS REPORTS FROM THE LIKES OF AMAZON, GOOGLE, MICROSOFT FREIGHT EQUITY FUTURES THIS MORNING ON THE S&P SHAPING UP AS FOLLOWS, ABOUT NEGATIVE ON BOTH THE S&P 500, NASDAQ, AND RUSSELL. LITTLE BIT WEAKER FOLLOWING A DECENT DAY OF GAINS ON THE BENCHMARK AND TECH PERFORMANCE, FUNDING FROM MEGA CAPS TECH, RIDICULOUS NUMBERS FROM THE LIKES OF META AND SPACEX. AND SO, ANTHROPIC. THE BOND MARKET, TWO'S, TEN'S, 30, THE COMPETITION FOR CAPITAL CONTINUES. LISA: 5-YEAR NOTE IS BEING AUCTIONED OFF AT 5:00 P.M. AND SEVEN YEAR AUCTION ON THURSDAY. THE PERFORMANCE OF THIS ON THE ISSUANCE OF OTHER AI-RELATED DEBT BECAUSE WE HAVE SCENES SUCH A WHIPSAW, WHAT IS DRIVING IT AND TREASURIES. IT IS A COMMUNICATION STRATEGY? INFLATION? JUST A GLOBAL DEBT ISSUANCE? ALL OF THE SUDDEN, REAL COMPETITION FOR CAPITAL. THIS BECOMING VERY CURIOUS TO SEE HOW TREASURIES MOVE IN THE CAPEX AND ALEXA MICROSOFT, AMAZON, AND APPLE. JONATHAN: WHO IS NEXT AFTER THAT? OVER OPENAI MAYBE CONSIDERS DURING THE NEXT THING? LISA: THE FACT WERE TALKING ABOUT A CASUAL $98 BILLION EQUITY RAISED BY THE LIKES OF META, KICKING THAT IN AHEAD OF THE 00 BILLION OF OFFERING AHEAD OF ANTHROPIC, GIVES YOU A SENSE OF HOW MUCH MONEY STILL NEEDS TO BE RAISED. JONATHAN: EVERYONE IS A TECH COMPANY. LISA: IS IN A CAR JUST OF A COMPUTER? ISN'T THAT THE ARGUMENT EVERYONE IS MAKING? THEY ARE TRYING TO BE. IT WILL ESSENTIALLY BE YOUR IPAD. ANNMARIE: A HUMAN DRIVER JONATHAN:. IPAD ON WHEELS. ANNMARIE: FOR ME AND EVERYONE ELSE ON THE ROAD DRIVING, YES. THEY WANT ME TO GET IN THE CAR. JONATHAN: THEY WANT YOU TO STOP DRIVING. [LAUGHTER] LISA: TELL US MORE. ANNMARIE: THEY WANT THE I'VE HAD TO DRIVE. JONATHAN: WHAT THE REAL NEEDS IS FOR ME TO STOP DRIVING. THREE HOURS AWAY FROM THE CASH OPEN OF SINGLE NAMES. MORNING MOVERS, ISABELLE HAS MORE. ISABELLE: LOTS OF EARNINGS TODAY. AS BEGIN WITH UPS, SHARES ARE RISING IN PREMARKET TRADE. HIGHER BY NEARLY 2% AFTER THE COMPANY RAISED ITS GUIDANCE FOR THE YEAR. THIS MEANS UPS EXPECT TO BENEFIT FROM HIGHER PRICES AND RESILIENT TO THE HOLIDAY SEASON EVEN AS INFLATIONARY PRESSURES MOUNT. THE COMPANY SAID REVENUE IS EXPECTED TO BE AROUND $92.6 BILLION, HIGHER THAN ESTIMATES. THE COMPANY RAISED ITS ADJUSTED EARNINGS GUIDANCE. WHEN THE OPPOSITE DIRECTION IS HSBC, THE STOCK IS DOWN IN PREMARKET TRADE. DOWN BY NEARLY 8% OR RATHER MORE THAN 7%. INVESTORS WERE LOOKING FOR MORE UPBEAT OUTLOOK FOR THE BANK. SAID TO BENEFIT FROM HIGHER INTEREST RATES DESPITE A 32% JUMP IN TAX PROFIT AS KEY FELL SHORT FROM EXPECTATIONS. HSBC STUCK TO THE FULL YEAR OUTLOOK AND ANNOUNCED SHARE BUYBACK SOME INVESTORS WERE IN THE OUTLOOK FOR THE NEXT TWO YEARS COULD BE A LITTLE OPTIMISTIC. ANOTHER EARNINGS, MERCEDES. SHARES ARE DOWN IN PREMARKET TRADE BY MORE THAN 4%. THIS AFTER CUTTING ITS OUTLOOK FOR PROFITABILITY IN HIS CORE CAR BUSINESS CITING CHALLENGING MACRO ECONOMICS IN CHINA AS WELL AS HIGHER MATERIAL COSTS. THIS SHOWS CHINA, WHICH USED TO BE A PROFIT ENGINE FOR MANY OF THESE COMPANIES, IS ONE OF THE BIGGEST HEADACHES. JONATHAN: TOO MANY IPADS ON WHEELS. THANK YOU. YOU'RE NEVER GOING TO BE ABLE TO COMPETE WITH THE CHINESE CAR MARKET. THEY HAVE CAPTURED THAT MARKET. IT IS PROBABLY THE MOST COMPETITIVE MARKET ON THE PLANET EUROPEANS CANNOT GET NEAR ENOUGH TO MAKE A DENT IN THE CHINESE MARKET RIGHT NOW. LISA: USED TO BE CHINA REPLICATED THE MODELS COMING FROM EUROPE AND THE U.S. THIS IS A NEW PARADIGM WHERE THERE INNOVATING IN A DIFFERENT KIND OF WAY WAS SUBSIDIES AND ALL SORTS OF CHEAP LABOR THAT ENABLES PRICE TAGS THAT IS INCREDIBLY ATTRACTIVE. FRANKLY, BEYOND COMPETITIVE WITH SOME OF THE OTHER NAMES. JONATHAN: CHANGED THE NATURE OF THE RACE. YOU'RE NOT GOING TO DO THE INTERNAL COMBUSTION ENGINE ANYMORE. THEY CHANGE THE REGULATIONS, TOO. COMPLETELY CAPTURED BY CHINESE COMPETITION. LISA: HOW DO THEY TAKE THAT AWAY FROM THE MARKET AT THE COST OF LIVING CONCERNS? YOU'RE GOING TO TELL YOUR CITIZENS THAT YOU CAN'T BUY CHEAPER VEHICLE BECAUSE CHINA -- IT IS A HARD MESSAGE TO TRANSLATE AT A TIME WHERE PEOPLE ARE WORRIED ABOUT THEIR BILLS. ANNMARIE: IN THE COURSE OF INCREDIBLY HIGH TAXES WHEN IT COMES TO PETROL. A DECADE AGO WHEN THE COMMODITIES GUY SAID TO ME, YOU NEED TO THINK 10, 15 YEARS AT WHAT CHINA IS DOING BECAUSE TO HAVE A BATTERY, EV, HAVE TO GET THAT BATTERY FROM CHINA BECAUSE THEY OWN THE ENTIRE SUPPLY CHAIN. IN THE PROCESSING OF THAT SUPPLY CHAIN. AT SOME POINT WHAT CHINA IS GOING TO SAY, COULD NO LONGER BUY OUR BATTERIES, IF BY OUR CARS. THAT SEEMS TO BE THE SITUATION WERE A LOT OF PEOPLE DID THIS BECAUSE THEY WERE LIKE, OH, THIS IS GOOD FOR THE CLIMATE. IT IS AN COULD BE, BUT YOU HAVE THE ASTERISK ABOUT THE NEGATIVE EXTERNALITIES THAT CHINA DOES TO MAKE A CAR. HOW ARE THEY BUILDING THE CAR? PROBABLY BURNING COAL. SAWTEK SOME CONTEXT. JONATHAN: THE LATEST ON MERCEDES AND THE EUROPEAN MARKET. ANTHROPIC PLANNING TO SPEND MORE THAN $800 BILLION ON A HIGH INFRASTRUCTURE OVER THE NEXT DECADE. THE MONTH COULD SURPASS SPACEX AS A LARGEST PUBLIC LISTING EVER READ META BOOSTING A PLANNED SHARE $98 BILLION REMARKING ONE THE LARGEST EQUITY OFFERINGS IN HISTORY. THE FUNDS WILL GO TOWARD AIM FOR STRUCTURE WITH NVIDIA, MD AMONG THE BUYERS. FINALLY, MICROSOFT OFFERING BUYOUTS TO ROUGHLY 60,000 WORKERS IN AN EFFORT TO RETOOL ITS WORKFORCE THE AI ERA. IN THE OFFER. CHRIS OFFSET TO REPORT EARNINGS TOMORROW AFTER THE CLOSING BELL. LISA: ALL OF THE BIG TECH COMPANIES HAVE BEEN CUTTING STAFF ARE KEEPING IT ESSENTIALLY FLAT THE PAST COUPLE OF YEARS SINCE 2022, EVEN AS A REVENUES HAVE SKYROCKETED. KEY QUESTION, IS TECH THE FIRST SORT OF LEADING INDICATOR OF WHAT WE CAN EXPECT WITH WHITE COLLAR WORKFORCE OR ARE THEY A DIFFERENT STORY THAT IS UNIQUELY POSITIONED TO BE DISRUPTED BY ARTIFICIAL INTELLIGENCE? WHAT IS INTERESTING, WHERE MICROSOFT IS OFFERING BUYOUTS. XBOX, COPILOT GUESS WHERE IT IS NOT COMMIT TO ANYTHING RELATED TO DATA CENTERS, TO AI THAT IS POTENTIALLY INNOVATIVE. IT GIVES YOU A SENSE OF WHERE THEY'RE LEANING IN AND WHERE THEY SEE POTENTIAL EFFICIENCIES THAT CAN TURN INTO A COST-CUTTING MEASURE. ANNMARIE: THEY ARE SETTING WHERE THEY HAVE TO AND MAKE SURE THEY KEEP WHAT THEY NEED IN TERMS OF RESHAPING THEIR ENTIRE ORGANIZATION AROUND AI. EARLIER THIS YEAR, BUSINESS INSIDERS TALKING ABOUT HOW GOOGLE INSIDER TOLD THOSE WHO ARE NOT "ALL IN AI CAN VOLUNTARY BUYOUT PACKAGE." YOU HAVE TO BE ALL IN TO WORK AT THESE COMPANIES OR IT IS NOT GOING TO WORK. JONATHAN: THE FED IS FORECASTING 4.1 THIS YEAR. 4.1 NEXT YEAR. 4.1 THE YEAR AFTER THAT. HOW ASPIRATIONAL ARE THOSE FORECASTS AGAINST THE BACKDROP OF INCREASING LAYOFFS COMING FROM BIG TECH? LISA: IT DEPENDS ON THE OFFSETS. EVERYONE IS SAYING WE'RE GOING TO GET WEBMASTER FOR AI OR WE CAN POTENTIALLY BE GUARD DOGS FOR AI TO MAKE SURE IT DOES NOT GET OUT OF ITS BOX. UNCLEAR WITH THE NEW GENERATED JOBS ARE GOING TO BE OR EXACTLY HOW THIS IS GOING TO AFFECT THE WHITE COLLAR WORKFORCE. ANECDOTAL STORY SAYING IT HAS NOT MATERIALLY ENTERED THE WORKFORCE. IS IT JUST IT HAS NOT HIT THE WHITE COLLAR WORKFORCE EN MASSE THE WAY IT HAS TECH COMPANIES OR IS THIS SOMETHING WE DON'T UNDERSTAND? JONATHAN: WILL BE WORKING SECURITY AT THE DATA CENTERS. LISA: GET BACK IN THERE, AI. THEY'RE NOT LABOR AND A LOT OF THIS IS DESIGNED -- THE ONLY WAY IT CAN JUSTIFY ITS COST IS IF IT DOES END UP REDUCING HUMAN LABOR. JONATHAN: ANTHROPIC'S HIGHLY ANTICIPATED PUBLIC DEBUT TESTING INVESTOR APPETITE FOR NEW AI-RELATED EQUITY. MATT KENNEDY WRITING, IT IS NOT HARD TO IMAGINE A VERY BAD NEWS HEADLINE CAUSING A 20% DROP IN ONE DAY. THERE ARE RISKS OF NOT OWNING ANTHROPIC. YOU WILL SEE PEOPLE LINE UP TO BUY IT WITHOUT LOOKING AT THE PRICE. NOT JOINS US FOR MORE. YOU HAVE ALLUDED IN THAT QUOTE FROM HOW UNIQUE THIS IS THIS OFFERING FROM THIS COMPANY? MATT: IT IS UNPRECEDENTED. A COMPANY THE SIZE GROWING THIS FAST WITH THIS KIND OF OBLIGATIONS, IT IS DEFINITELY THE MARQUEE EVENT OF THE YEAR AS YOU SAID, COULD BE RECORD-BREAKING. IT IS ALREADY A RECORD-BREAKING YEAR FOR IPO'S AND THIS WILL CEMENT 2026 AS THE YEAR OF THE MEGA IPO. A DEAL I THINK WE ARE ALL WAITING FOR. SOME FUN LEG WHICH IN THERE, BRING FORTH AN AGE OF MIRACLES AND ALSO POSES EXISTENTIAL RISKS TO HUMANITY. I THINK I KIND OF GETS ACROSS THE DUAL NATURE OF THIS AND HOW BIG OF AN EVENT IT IS. TALKING ABOUT KNOWLEDGE WORK, $40 TRILLION INDUSTRY THEY ARE TARGETING. LOOKING TO DISPLACE ENTIRE SECTORS. THEY ARE ENTIRE INDUSTRIES. DEFINITELY A HUGE EVENT. I THINK PART OF THE PITCH IS EVEN OWN US JUST IN CASE YOU LOSE YOUR JOB. JUST YESTERDAY, I WAS EMAILS BY A JOURNALIST ASKING ABOUT THE CONVERTIBLE DEBT. TURNS OUT IT WAS SYNTHETIC JOURNALIST WITH A HUMAN HANDLER. [LAUGHTER] JONATHAN: ARE WE CALLING THIS EMPLOYMENT INSURANCE? LISA: OH, NO. IF YOU'RE GOING TO GET LAID OFF BUT YOU OWN ANTHROPIC, ULTIMATELY, GET THE MONEY. JONATHAN: DOES YOUR BUFFER. LISA: I THINK I JOB IS MORE IMPORTANT THAN A PAYCHECK. IT IS A PURPOSE IN LIFE. JONATHAN: WE SHARE THE SAME PHILOSOPHY. CAN WE TALK ABOUT THE NUMBERS AS WELL? Q3, DO YOU EXPECT AN AMENDMENT? MATT: THEY HAVE PLACEHOLDERS READY TO GO. I'M DISAPPOINTED WE DID NOT SEE IT RIGHT AWAY. WHEN THEY DO FILE A Q3 NUMBER, WE WILL HAVE LESS TIME FOR THEM WHEN THEY GO PUBLIC BUT THAT WILL HAVE TO BE DISCLOSED FOR SURE. LISA: WHAT DID YOU MAKE OF THE TOTAL ADDRESSABLE MARKET WHICH WAS SOMETHING LIKE $40 TRILLION, WHICH TOPPED THE $30 TRILLION OF SPACEX? HOW DID YOU READ THAT IN TERMS OF THE POTENTIAL PROFITS, MORE QUESTIONS THAN ANSWERS? MATT: I FEEL LIKE THEY HAVE TO THROW OUT A HUGE NUMBER, MAYBE THEY SAW SPACEX 3020 NOSE AND SAID LET'S GO $40 TRILLION. THAT IS NOT REALLY A TRUE TAM. THEY'RE SAYING IT IS A KIND OF IMPACT. THEY'RE USING LANGUAGE WE DON'T NORMALLY SEE, KIND OF VAGUE. I THINK WE ALL KNOW THIS IS GOING TO BE HUGE. WE HAVE HAD A SENSE OF THAT. THE LAYOFFS ARE ONE EXAMPLE. ENTIRE NEW INDUSTRY HAS BEEN CREATED. AS A WORKCENTER NORMAL EVERYDAY BUSINESS, I THINK THAT ALONE IS PRETTY FORESEEABLE. TO TRILLION DOLLARS IN THE NEAR TERM. $40 TRILLION MIGHT TAKE SOME TIME. LISA: HOW MUCH YOU SEE THE CROWDING OUT EFFECT? WE WERE TALKING ABOUT THE DEBT SPACE. THEIR OTHER COMPANIES THAT WOULD LIKE TO RAISE MONEY IN THE EQUITY SPHERE. I WONDER IF ANTHROPIC IS SUCKING A LOT OF ENERGY AWAY FROM THEM? MATT: WE HAVE A FEW COMPANIES LISTING THIS WEEK. WE HAVE SEEN COMPANIES ACCELERATING IPO PLANS, RACING TO GET IN AHEAD OF ANTHROPIC. OTHERS APPEAR TO BE PUSHING THEIR TIMELY BACK TO DECEMBER. TO ANSWER YOUR QUESTION, LUCKILY, THE IPO MARKET HAS BEEN KIND OF SLOW THIS QUARTER AFTER THE RECENT SELLOFF -- THEY'RE NOT REALLY LOSING A WHOLE LOT OF STEAM FROM OTHER COMPANIES. ANNMARIE: I LOVE THE COLORFUL LANGUAGE YOU BROUGHT FORTH IN YOUR FIRST ANSWER ABOUT HOW TO BE AGE OF MIRACLES, EXISTENTIAL THREAT TO HUMANITY. DO YOU THINK THESE EXECUTIVES ARE DOING A GOOD JOB AS A PREPARED TO GO PUBLIC NOT JUST ANTHROPIC BUT ALSO NEXT YOU'RE LOOKING TO WHAT SAM ALTMAN HAS BEEN SEEING WHEN IT COMES TO OPENAI? GIVEN WHAT YOU SEE WITH THE ELECTORATE IN THE POLL AFTER POLL IN THEIR ANXIETY AROUND AI? MATT: I MEAN, I THINK PART OF IT MAY HAVE TO DO WITH THE LACK OF REGULATION AND I THINK I DO SEE THAT AS INEVITABILITY, AI LEADERS THEMSELVES ASKING FOR THAT. THAT CAN BE A GOOD THING FOR THE INDUSTRY. I THINK AN INDUSTRY CAN GROW WITH GUARDRAILS IF REGULATED PROPERLY. I DON'T THINK YOU NECESSARILY WANT TO LET THE FOX IN THE HEN HOUSE. OPENAI AND ANTHROPIC WRITE THE RULES. I CAN SEE WHERE THAT WORRY IS COMING FROM. EVEN ANTHROPIC ACKNOWLEDGES IT IN PROSPECTUS. JONATHAN: MATT KENNEDY OF RENAISSANCE CAPITAL. LISA: SYNTHETIC MATCH. ANNMARIE: I AM LOSING IT. THIS IS HARD FOR ME. JONATHAN: THIS GET AN UPDATE ON NEWS WORLDWIDE. VONNIE: ISRAELIS ARE HEADED TO THE POLLS TODAY IN THE FIRST ELECTIONS SINCE THE 2023 HAMAS ATTACK. PRIME MINISTER NETANYAHU IS SEEKING REELECTION AGAINST THE FORMER ARMED FORCES CHIEF EISEN CARD. NEITHER BLOC LIKELY TO RECEIVE A MAJORITY. FRANCE IS PLEDGING HIGH SCHOOL RENOVATIONS AS AN EFFORT TO CURB NATIONWIDE PROTESTS. IF THE GOVERNMENT IS TRYING TO ADDRESS REQUESTS WITHOUT SPENDING TOO MUCH AS BORROWING COSTS HAVE RISEN SHARPLY IN WEEKS. SPACEX STRIKE THE NEARLY $40 BILLION DEAL WITH APOLLO TO FINANCE CHIP PERSONAGES TO FUEL AI MISSIONS. EXPECTED TO CLOSE BY YEAR IN HELPING SPACEX BUY GPU'S. THE PAY RATE WILL BE DETERMINED. JONATHAN: THANK YOU. UP NEXT THE PROGRAM, HOLD NOW ,BUY LATER. >> HEAR THEM SAY THERE'S NO SENSE OF URGENCY BUT FROM A RISK MANAGEMENT PERSPECTIVE, IT PROBABLY MAKES SENSE TO RAISE RATES. JONATHAN: NEIL DUTTA. ANNMARIE: I WASN'T HERE YESTERDAY BUT I SAID, I WATCHED HER PERFORMANCE. JONATHAN: UP NEXT, WE CATCH UP WITH LUDOVIC SUBRAN. THIS IS "BLOOMBERG SURVEILLANCE." ♪ JONATHAN: STOCKS ARE POSITIVE THIS MORNING. FEATURES UP BY TWO TENTS OF 1% ON THE S&P 500. THE BOND MARKET GOING INTO THE FED TOMORROW. DAY ONE TODAY. DAY TWO TOMORROW. DECISION AROUND THE CORNER. TWO'S DOWN TO BASIS POINTS. 10'S 4.96. HOLD NOW, HIKE LATER. >> KEEP HEARING THEM SAY THERE IS NO SENSE OF URGENCY BUT I THINK FROM A RISK MANAGEMENT PERSPECTIVE, IT PROBABLY MAKES SENSE TO RAISE RATES THIS WEEK. WHAT IS LIKELY TO HAPPEN, THEY SKIP THAT REALLY DOES SUBMIT THE ODDS FOR DECEMBER. MORE LIKELY THAN NOT, THEY'RE GOING TO HAVE TO START HUSTLING IN MORE RATE HIKES TO THE BASELINE POLICY. JONATHAN: THE FED'S TWO DAY MEETING KICKING UP-TO-DATE, MARKETS BETTING ON A HOLD EXPECTATION. WRITING, THE FED WILL HAVE THE TITAN POLICY BY TWO ADDITIONAL HIKES IN THE FIRST QUARTER OF 2027 AFTER THE HIKE ALREADY EXPECTED HIM TO DECEMBER. JOINING US NOW. WELCOME TO NEW YORK CITY. LUDOVIC: IT IS A PLEASURE TO BE HERE. I THINK THIS TIME AROUND IT IS HARD FOR THE FED TO LOOK THROUGH DEVIATION STOCK. WE EXPECT ENERGY PRICES TO GO HIGHER. WE EXPECT THE U.S. TO PEAK AROUND 4% IN THE BEGINNING OF 2027. THE FED CAN PASS THIS TIME BECAUSE WE ARE WHEN WEEK AWAY FOR MIDTERMS. I DON'T THINK THEY CAN PAUSE THROUGH Q1. JONATHAN: CONNECTED TO THE MIDTERM IS COMING UP? LUDOVIC: I THINK SO. THIS IS A HEATED MOMENT FOR THE U.S. WHERE A LOT CAN HAPPEN. A LOT IS LINKED TO WHAT IS HAPPENING IN AI. NOBODY CARES ABOUT THE FED THIS WEEK BECAUSE OF THE IPO, BUT WE DO CARE AND TO BE THERE, IT IS NOT THE RIGHT MOMENT TO HIKE. IN 2027, IF IT STAYS AROUND 4% AND HIGHER, I THINK THE FED WILL HAVE TO HIKE. THE PROBLEMS THEY WILL HAVE TO CUT BY THE END OF 2027 BECAUSE THE REACTION RIGHT NOW SHOWS THIS IS REALLY TRANSITORY INFLATION. I KNOW THIS IS TOUGH AFTER 2022, BUT THE FED WILL HAVE TO LAND OF SUMMER CLOSE TO 4%. WE WILL PUSH IT TO 4.544.7. LISA: YOU THINK THEY'LL HAVE TO DO MORE BECAUSE OF REMAINING ON HOLD IN OCTOBER? LUDOVIC: MAY BE, BECAUSE THEY DID WAIT A LITTLE BIT. CHAIRMAN WARSH WAS VERY HAWKISH ON THE BALANCE SHEET AND DOVISH ON THE RATES, WHICH IS SOMETHING YOU DON'T -- HE CHANGES HIS STANCE AND NOW HE IS GETTING A LITTLE LATE IN THE HIKES. ALSO TO BE FAIR, THE ECONOMY IS RUNNING HARD. IF YOU LOOK AT THE NUMBERS, AI IS AFFECTING CYCLES FOR A FEW QUARTERS OR MORE. LISA: WHAT YOU MAKE OF THE ARGUMENT THE AIR AS THE FED CAN HAVE AN INFLUENCE ON ARE NOT DOING WELL? FRANKLY, NOT VERY HOT. THEY DON'T HAVE CONTROL OVER COMMENT NAMELY AI, IS DOING JUST FINE? LUDOVIC: I ACTUALLY TALK -- I ALWAYS SAY AI IS THE -- WHEN NVIDIA HIKES PRICES FOR GPU, WE WILL SEE A REAL TIGHTENING WHAT IS HAPPENING ON THE AI ECONOMY. NOBODY CARES ABOUT THE FED. 50% OR 60% OF THE ECONOMY IS NOT DOING WELL. CONSUMER SECTOR, HEALTH CARE, JOBS, CONSTRUCTION SECTOR. UPRIGHT -- APART FROM AI, IS IN RECESSION. THIS IS THE CATCH-22 FOR THE FED. IF THEY DON'T TO ANYTHING, THE AI IS GOING TO BE BURNING HOT. IF THEY DON'T DO OR LET IT HAPPEN, WE WILL SEE MORE INFLATION ON THE AI INTO THE REST OF THE ECONOMY. I THINK THAT IS WHY THEY STAY PUT. THAT IS BECAUSE OF AI WHICH IS CONCENTRATING -- THIS IS AT THE COST FOR THE REST OF THE ECONOMY. FINANCING RATE FOR PEOPLE, CARPETS IN THIS COUNTRY, THE INTEREST RATE GOES ARE INCREASING BY $20 BILLION TO $30 BILLION A YEAR. ANNMARIE: IT BEGS THE QUESTION, DOES THE FED HAVE THE RIGHT TOOL TO ADDRESS THIS? LUDOVIC: IN WERE ECONOMIC, YOU PLAY A LOT MORE WITH THE BALANCE SHEET, WHICH IS SOMETHING I THINK CHAIRMAN WARSH WAS HESITATING TO DO. SHOULD BE MORE QUANTITATIVE TIGHTENING. THAT IS WHAT THE FED SHOULD DO AT THIS MOMENT. THEY DON'T WANT TO RESUME THAT. THIS IS WHY IT IS BURNING THE AI ECONOMY. AND LAUNCH THIS WORK STREAM TO SEE HOW WE ADAPT, POLICY RATE. IT IS A TOUGH ONE BECAUSE TO BE FAIR, THAT IS WHY PEOPLE TALK ABOUT REPRESSION. WHAT IS HAPPENING IS THE WEALTH EFFECT ON THE FASHION MARKETS. WE HAVE A FRAMEWORK, WE ARE GOING TO COME OUT WITH IT TOMORROW IS A PAPER ABOUT SUPPRESSION OF VOLATILITY. I THINK THE FED WOULD LIKE TO BE ABLE TO SUPPRESS THE VOLATILITY COMING FROM THE AI ECONOMY AND THE WEALTH EFFECT. WE WILL HAVE TO DO THE BALANCE SHEET, NOT ON THE RATES WHICH IS SOMETHING FOR NOW THERE HESITATING TO DO. JONATHAN: YOU HAVE NOT RELEASED IT YET. LUDOVIC: TOMORROW. JONATHAN: A TEASER. LUDOVIC: CENTRAL BANKS AROUND THE WORLD, FIRST, THEY ARE VERY POLITICIZED AND POLARIZED. EVERYBODY SEES HIM AS THE TOOLS OF THE CENTER DOT A LOT OF THE PEOPLE ON THE EXTREME ARE LOOKING AT THE CENTRAL BANK SAYING, YOU ARE NOT DOING WHAT YOU'RE SUPPOSED TO BE ABLE TO DELIVER INCLUDING PRICE STABILITY. THE FED LIKE THE CENTRAL BANK, THEY HAVE TO DO SOMETHING WHICH IS AKIN TO MANAGING THE VERY CONCENTRATED A ECONOMY WHEN IT COMES TO THE FASHION MARKET. WHILE MAINTAINING SOMETHING THAT IS AFFORDABLE FOR THE REST OF THE PEOPLE. THAT COMES WITH DIFFERENT TOOLS WHICH ARE THE IDEA IF YOU WANT TO AVOID THE ECONOMY RUNNING OUT, GET TO DO THINGS THAT ARE NOT TO THE BASE RATE BY DO DUAL RATES. YOU MAY HAVE TO DECIDE YOU A PLEDGE OR RATES TO THE ECONOMY, DECIDE YOU'D MUCH MORE QUANTITATIVE TIGHTENING. AND MORE GENERALLY, GO BACK WITH GUIDANCE. THE FACT THE CENTRAL BANK DOES NOT WANT GUIDANCE IS PROBLEMATIC BECAUSE THE DATA IS RUN BY A GUY. IF YOU LOOK AT THE DATA, YOU MISSED THE REST OF THE ECONOMY. JONATHAN: YOU THINK IT WILL FORCE THE ISSUE THAT ULTIMATELY THEY OPTED TO START USING BALANCE SHEET? LUDOVIC: NOBODY KNOWS WHAT IS GOING TO HAPPEN WITH AI. I DO THINK THE EMPIRICAL DRIVEN TYPE OF WEALTH IS VERY COMPLICATED WHEN IT IS SO BIFURCATED. I DO THINK THIS WILL PUSH THE FED TO ACT DIFFERENTLY IN THE COMING 18 MONTHS. JONATHAN: KEVIN WARSH WAS OPEN TO THE IDEA AND THEN IT SLIPPED. PEOPLE GOT CONFUSED ABOUT WHAT IT MEANT. MAYBE DOVISH ON RATES, THINGS GOT AWAY FROM HIM AT THE LONG END OF THE CURVE. LISA: IS IT EXACTING A COST THAT PERHAPS PUNITIVE? I WONDER HOW MUCH APPETITE THESE FED HAS TO REPEAT THE AI TRADE. THERE WAS A LITTLE HICCUP -- JONATHAN: WE'RE GOING TO FIND OUT. LISA: KNOW, WE'VE GOT TIME FOR IT THEN IT'S LIKE, LET'S CALM HIM THIS DOWNGRADE IT GIVES YOU A SENSE, ARE THEY WILLING TO USE THE BALANCE SHEET? JONATHAN: MASSIVE OPENING TO TORPEDO A LOT OF THINGS. THEY CAN KILL FORWARD GUIDANCE IF THEY WANT TO JUST LIKE THAT TOMORROW AFTERNOON. LISA: DO YOU THINK THEY'RE GOING TO? JONATHAN: I DON'T KNOW, BUT HE'S GOT THE OPPORTUNITY. JUST TO KEEP REPEATING MYSELF. TO BASICALLY TELL YOU EVERY TIME WEEMS AND JEFFERSON SCHEDULE SPEECH BEFORE THE DATA, DOESN'T MATTER BECAUSE IT DOES NOT SET THE TONE FOR THE POLICY A MONTH LATER. LISA: WHEN IT COMES OUT AND SAYS WE ARE NOT HIKING RATES AND I'M NOT GOING TO GIVE YOU MORE GUIDANCE, HE IS GOING TO REINFORCE THE TROIKA. JONATHAN: THE SPEECHES OF WILLIAMS AND JEFFERSON. LISA: ULTIMATELY GIVES YOU A SENSE OF HOW MUCH TOLERANCE, NOT VERY MUCH, THEY HAVE ANY KIND OF VOLATILITY IN EQUITIES. JONATHAN: WHAT IS GOING ON WITH YOUR CENTRAL BANK? LUDOVIC: IT IS IN A VACUUM. THE FRENCH PUSHED THEM TO ACT. NOW EVERYBODY'S LIKE, OK, MAYBE THE ECB CAN GET THEIR ACT TOGETHER. I DON'T KNOW, THE FRENCH HAS OVERSHADOWED THE SUCCESSION WHICH IS A VERY IMPORTANT SUCCESSION IF YOU ASKED ME BECAUSE THREE MEMBERS ARE GOING. EVERYBODY IS WAITING TO SEE WHAT WE ARE GOING TO DO. WHAT WE ARE GOING TO DO ON VOLATILITY. LOOK, MY BETS ARE ON CLASS RIGHT NOW. JONATHAN: GOOD TO SEE YOU. ENJOY NEW YORK. LUDOVIC SUBRAN OF ALLIANZ. MIKE WILSON A MORGAN STANLEY UP NEXT. ♪ PEOPLE HAVE MODERATED THEIR EXPECTATIONS ON HAWKISHNESS WITH RESPECT TO THE FED. >> FORWARD GUIDANCE IS GETTING OUT, JUST NOT FROM THE CHAIR. >> THEY WILL STAY ON HOLD. >> THERE'S GOING TO BE TWO RATE HIKES. IF NOT ONE IN OCTOBER, WE EXPECT ONE IN DECEMBER. >> WHAT COULD HAPPEN IF THEY SKIP, THAT CEMENTS THE ODDS FOR DECEMBER. >> THIS IS "BLOOMBERG SURVEILLANCE." JONATHAN: LIVE FROM NEW YORK CITY, GOOD MORNING. FOR OUR AUDIENCE WORLDWIDE, THE SECOND HOUR OF "BLOOMBERG SURVEILLANCE" STARTS NOW. PRICE ACTION, EQUITY FUTURES THIS MORNING UP .25% ON THE S&P, NASDAQ UP BY .4%. BOND MARKET, YIELDS SHAPING UP AS FOLLOWS, DOWN TWO BASIS POINTS ON TWO-YEAR'S. 4.90 7% ON 10-YEAR'S. COLLABORATION AND WASHINGTON, D.C., TO GET TOGETHER FOR A FED DECISION. EARNINGS FROM GOOGLE, MICROSOFT, AMAZON, AND INTEL. SK HYNIX STILL TO COME. LISA: WE LOOK AT THE AMBITIONS OF THESE BIG TECH COMPANIES AND IF THAT TIES THE HANDS OF THE FEDERAL RESERVE. PEOPLE STARTING TO FINANCE AND MASS, COMING TO THE TABLE, NOT EXACTLY LIKE A FAILED AUCTION. OVER TO YOU FED, WHAT ARE YOU GOING TO DO? HOW ARE YOU GOING TO ATTRACT CAPITAL? THEY WILL HAVE TO EXPLAIN THAT IN THEIR DISCUSSION OF HOW LONG THEY WILL BE TIGHTENING RATES AND WHY THEY ARE SKIPPING A MONTH THAT IS COMING ON THE HEELS OF PRETTY HIGH ECONOMIC DATA. JONATHAN: MEHTA, 100 BILLION DOLLARS, SPACEX $40 BILLION. ANTHROPIC POSSIBLY THE BIGGEST IPO EVER. ANNMARIE: THE MARKET IS TAKING IT IN STRIDE. IT IS REALLY THE BEGINNING OF THE END FOR THE YEAR THIS WEEK. THE FEDERAL RESERVE, ANTHROPIC IPO COMING, MIDTERM ELECTIONS. THIS IS GOING TO SET THE TONE INTO YEAR END, MASSIVE CLEARING EVENTS. JUMP COULD BE THE BEGINNING OF THE END OF THE WORLD. AND GREAT STARTING THIS MORNING. LISA: THE BEGINNING OF THE END. OF THE YEAR. ANNMARIE: FEELING DARKER WHEN YOU HAVE A GUEST TALKING ABOUT ALL THE EMAILS HE IS GETTING FROM SYNTHETIC JOURNALISTS THAT DO NOT EVEN EXIST. LISA: I THINK THERE ARE EXISTENTIAL CONCERNS. THE REASON WHY ANTHROPIC WAS DEVOTED TO EXISTENTIAL RISKS TO POTENTIALLY THE END OF THE WORLD. BUT I THINK THE MORE HUMDRUM REALITY OF THIS WEEK IS THE AMBITIONS ARE BEING MET WITH DEMAND. SOME SAY THESE ARE FANTASTIC AND WE SHOULD GET ALL IN ON THIS BECAUSE YOU ARE GETTING 7% YIELDS. GREED VERSUS FEAR IS THE MOMENT WE ARE IN. AND GREAT LET ME GET BACK TO MY OPTIMISTIC TONE, OR THE PROSPECTIVE HAS THE AGE OF MIRACLES. JONATHAN: WITH UNEMPLOYMENT? ANNMARIE: I AM MORE EXCITED FOR WHEN ANTHROPIC TALKS ABOUT THE AGE OF MIRACLES WHEN THEY TALK ABOUT THE SCIENCE COMMUNITY AND SOLVING CANCER, OVER THE EXISTENTIAL RISKS. JONATHAN: I THINK RICK WOULD SAY LOOK AT FIXED INCOME. LISA: SHORT TERM INVESTMENT GRADE PAPER AND GET 7% YIELD PRETTY EASILY. IT COULD BE IN GOLDEN AGE OF FIXED INCOME OR YOU COULD BE INVESTING WITH SOMETHING THAT HAS A LOT OF COLLATERAL RISK, AND THERE ARE THE SPECIAL PURPOSE VEHICLES KEEPING THE RATINGS AT INVESTMENT GRADE. ULTIMATELY, IT IS COMPLICATED, I MOMENT A LOT OF PEOPLE ARE NOT ABLE TO ANALYZE FULLY BUT FEEL LIKE THERE'S A FEAR OF MISSING OUT STILL BASED ON THE OVERALL SCOPE. JONATHAN: COMING UP, MIKE WILSON OF MORGAN STANLEY. A SERIES OF CLEARING EVENTS OVER THE NEXT FEW MONTHS. WE WILL CATCH UP WITH RUMMAN CHOWDHURY ON WHAT ANTHROPIC IS SET TO FACE. AND GREG PETERS OF PGIM ON THE COMPETITION TO RAISE CAPITAL. ANTHROPIC IPO FILING, MIKE WILSON WRITING SEVERAL CLEARING EVENTS PLAY OUT OVER THE NEXT FEW WEEKS. THIS SHOULD PROVIDE ATTRACTIVE BUYING OPPORTUNITIES AS THE MARKET LOOKS AHEAD TO ANOTHER LIKE HIGHER AND EARNINGS GROWTH. GOOD MORNING, MIKE. YOU IDENTIFIED THREE OF THOSE EVENTS. CAN YOU SHARE THEM? MIKE: FIRST OF ALL, 12% IN BRAZIL, TOO, DON'T FORGET ABOUT THAT. WHAT I WOULD SAY IS THE MARKETS HAVE A WAY -- PART OF THE REASON WHY PEOPLE ARE LOOKING PAST IT IS THERE IS SO MUCH GOING ON, THEY CAN'T FOCUS. SO THE MARKET IS GRABBING ON TO WHAT THEY KNOW, WHICH EARNINGS ARE PRETTY GOOD. IT HAS COME DOWN BUT HAS BEEN MORE STEADY, NOT A BAD ENVIRONMENT TO ADDRESS. THE THREE THINGS WE ARE MOST FOCUSED ON, OBVIOUS ONES ARE MIDTERM ELECTIONS, WHICH IS ALWAYS A CLEARING EVENTS. HISTORICALLY, IT IS ALWAYS A GOOD TIME TO ADD RISK INTO THAT EVENT. SOMETIMES IT COULD LINGER ANOTHER MONTH OR SO. THE NEXT SIX TO 12 MONTHS, HUNDRED PERCENT CERTAINTY GOING BACK TO 19 52 AND YOU GET POSITIVE RETURNS, USUALLY DOUBLE DIGITS. KEEP THAT IN THE BACK OF YOUR MIND, YOU SHOULD BE ADDING RISK HERE NUMBER TWO IS THE IDEA OF AI, CAPEX, AND THE SCARCITY OF CAPITAL. THAT IS PRETTY WELL UNDERSTOOD, TOO. THEY ARE DOING THE BACK AND FORTH BETWEEN EQUITY ISSUANCE AND DEBT ISSUANCE. THIS STARTED WITH EQUITY AND CASH PAYING FOR ALL THE SPENDING, THEN THEY WENT TO DEBTS. WE TALKED ABOUT THAT A YEAR AGO. NOW THE DEBT THING BEGINS, AND THERE WILL BE COMPETITION BETWEEN THE WEAKER PLAYERS AND THE STRONGER PLAYERS, THE STRONGER PLAYERS CAN ISSUE EQUITY. IT IS AN EBB AND FLOW BACK AND FORTH. I THINK WE WILL SEE ANOTHER EIGHTH-INNING OF THAT. I THINK IT GETS DONE AND WE MOVE FORWARD FROM THERE. ONE OF THE THINGS NOT AS APPRECIATED IS THE LIQUIDITY CONSTRAINTS. WE HAVE WRITTEN ABOUT THIS MORE THAN MOST. I HAVE SPENT SO MUCH TIME ON THIS THE LAST COUPLE OF YEARS, I'VE BEEN RUN OVER. I'M FOCUS ON THIS IDEA THAT IT IS ABOUT SUPPLY AND DEMAND. THE FED HAS TIGHTENED THIS YEAR. SIX OR SEVEN MONTHS AGO, THE MARKET WAS TALKING ABOUT THEM CUTTING RATES. NOW THEY HAVE SLOWED THE BALANCE SHEET GROWTH AND THEY HAVE RAISED RATES 25 BASIS POINTS AND ALLOWED TWO, 3, 4 MORE HIKES TO BE PRICED IN. FINANCIAL CONDITIONS ARE NOW AS TIGHT AS THEY WERE IN 2018, ALSO MIDTERM ELECTION YEAR. MY GENERAL TAKE IS THE MARKETS ARE GOING TO PRESS THE FED AND OTHER CENTRAL BANKS TO ADD LIQUIDITY BETWEEN NOW AND YEAR-END. JONATHAN: YOU'RE LOOKING FOR CORRECTION TO YEAR END? >> KNOW, LOOKING FOR MORE CHOPPED, THEN CORRECT. THIS IS BEEN ONE OF THE WORST CORRECTIONS WE HAVE SEEN BENEATH THE SURFACE SINCE JUNE. WE IDENTIFIED THAT TRANSITION IN JUNE. HEY, IT WILL NOT BE AS EASY HERE BECAUSE LIQUIDITY AND SUPPLY AND THE RATE OF CHANGE AND REVISION. BUT NOW THE MARKET PRETTY MUCH UNDERSTANDS THAT QUALITY OF ROTATION. LISA: YOU EXPECT THE FED AND OTHER CENTRAL BANKS TO ADD LIQUIDITY FROM HERE TO THE END OF THE YEAR. WHAT DOES THAT LOOK LIKE, JUST GUIDING THAT THERE WILL BE NO MORE HIKES, PRINTING MONEY? MIKE: GIVE ME A NEW ACRONYM FOR ADDING LIQUIDITY OF SOME KIND. WHAT I WOULD SAY IS, IF THE MARKETS WANT TO PRESS THEM -- JONATHAN: YOU SAID THE MARKETS WOULD FORCE THE ISSUE. WHAT IS THAT? MIKE: IT COULD HAPPEN IN CREDIT MARKETS MORE THAN EQUITY MARKETS. WE WILL SEE. I'M TRYING TO HELP OUR CLIENTS AND FIGURE OUT HOW THIS WILL RESOLVE ITSELF. WE HAVE BEEN PRETTY WELL IDENTIFIED WITH THIS IDEA THAT WE HAVE HAD A QUALITY ROTATION. IF I LOOK AT THIS OBJECTIVELY, FORGET ABOUT MY EMOTIONAL ISSUES, WE HAVE DONE A LOT OF WORK. THE ONE THING THAT HAS NOT HAPPENED YET IS OUR PROPRIETARY SENTIMENT INDEX HAS NOT QUITE REACHED WHERE IT NEEDS TO GO. THAT IS TYPICALLY WITH SOME SORT OF FINANCIAL STRESS IN THE SYSTEM. IT DOES NOT NEED TO BE A 20% CORRECTION. IT NEEDS TO BE A FINAL PURGE OF THAT SENTIMENT TO GET PEOPLE TO CLICK. LISA: WE HAVE SEEN THAT IN SELECT NAMES, PARTICULARLY AI-RELATED SPACE, PARTICULARLY RELATED TO EARNINGS. IF WE GET DOVISH RHETORIC OUT OF THE FED, DOES THAT MAKE YOU FEEL -- THIS WEEK, DOES THAT MAKE YOU FEEL MORE CONFIDENT ABOUT GOING INTO THESE AI NAMES, THE BIGGEST ONES? MIKE: GENERAL RISK-TAKING, FOR SURE. THE FED GIVES US DOVISH LANGUAGE OR INDICATIONS ABOUT INCREASING AGAIN, ADDING MORE LIQUIDITY. RIGHT NOW, THE BALANCE SHEET IS NOT GROWING AS FAST AS IT IS -- AS IT WAS PRIOR TO WARSH. IF THAT CHANGES, OK, PROACTIVE, THEY DON'T NEED THE MARKETS TO PRESS. LISA: WHEN IT COMES TO HIM IN THE MIDTERM ELECTIONS, YOU SAY SHOULD BE A CLEARING EVENT. BUT YOU TALK ABOUT THE UNKNOWN, ABOUT WHETHER OR NOT TRUMP OR INDICATIONS WITH ATTACKS ON IRAN FOLLOWING THE MIDTERMS. IN THAT SENSE COULD THIS BE ONE OF THOSE OFF YEARS SINCE THE 1950'S WHEN THE MARKET GOES DOWN? MIKE: NOT EVERY YEAR IS 100% GUARANTEE OF MAKING MONEY BETWEEN MIDTERMS AND YEAR-END. IT IS A SIX TO 12-MONTH VIEW. IT COULD LINGER BEYOND THANKSGIVING AND INTO DECEMBER, LIKE 2018. TIGHTENING, AND THEY PIVOTED. THERE IS A LOT OF THAT GOING ON. I DO NOT KNOW WHAT WILL HAPPEN. THERE WILL BE SOME SORT OF AN EVENT AROUND WHATEVER THE PRESIDENT DECIDES TO DO. HE SAYS HE WILL DO SOMETHING. I TAKE HIM AT HIS WORD. THOSE ARE ALWAYS BUYING OPPORTUNITIES. I DO NOT KNOW IF IT IS A 5% CORRECTION, 7% CORRECTION, OR MAY BE NO CORRECTION. BUT I AM TRYING TO GET PEOPLE MENTALLY PREPARED. HERE IS A PLAYBOOK, GUYS. THEY THROW THE OPTION, FENCE, THROW SOMETHING ELSE. JONATHAN: SO YOU ARE NICK SABIN THIS MORNING. MIKE: MY DREAM, BY THE WAY, HIGH SCHOOL COACH. JONATHAN: ARE YOU WATCHING THEM ON ESPN? MIKE: I HAVE SEEN THEM ALL. LISA: AI PLAYBOOK, IF ULTIMATELY A HIGH SCHOOL FOOTBALL COACH WILL NOT BE REPLACED BY A BOT. MIKE: I CAN YELL WHEN PEOPLE SCREW UP. JONATHAN: MIKE WILSON OF MORGAN STANLEY WILL BE STICKING WITH US. AN UPDATE ON HIS WORLDWIDE WITH EQUITY FUTURES LITTLE CHANGED. HERE IS VONNIE VONNIE: RUSSIA'S FLUTTER PLANNING TALKS WITH THE FINNISH PRESIDENT AND NORWEGIAN PRIME MINISTER TO DISCUSS PROSPECTS FOR A PEACE DEAL IN UKRAINE. SOURCES TELLING US THE LEADERS ARE EXPECTED TO SPEAK AS SOON AS TODAY. $4 BILLION OF SPACEX AND A DEBT FINANCING DEAL. PIMCO IS A BUYER OF DEBT, FUELING THE AI BOOM, BUY IN PART OF IT. NEITHER OFFERED COMMENT. DOORDASH IN ADVANCE TALKS TO BUY THE INSTACART PARENT FOR ROUGHLY 7 BILLION. SOURCES SAY DEAL COULD BE ANNOUNCED AS EARLY AS THIS WEEK, BUT NO DECISION HAS BEEN MADE. TALKS COULD STILL FALL THROUGH. NEITHER IMMEDIATELY RESPONDED TO COMMENT. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: THANK YOU. UP NEXT, THE FINAL STRETCH TO THE MIDTERMS. PRES. TRUMP: THE LESS ON THE RADICAL DEMOCRATS HAD POWER, THEY GAVE US THE WORST TRADE DEFICIT IN AMERICAN HISTORY. IF THEY WIN THE MIDTERMS, THEY WILL DO IT ALL AGAIN. JUMP UP NEXT, TYLER KENDALL OF BLOOMBERG AND MORE FROM MIKE WILSON OF MORGAN STANLEY PEER LIVE FROM NEW YORK CITY THIS MORNING. ♪ JONATHAN: FED DECISION AROUND THE COURTING THIS CORNER, MEETING BEGINS LATER THIS MORNING. PEOPLE WAKING UP LATE IN WASHINGTON, D.C. THAT IS NOT A DATE, MOST OF WASHINGTON WAKES UP LATE. LISA: I IMAGINE, AS OPPOSED TO CONGRESS, THE FED ACTUALLY GETS UP. THEY WANTED TO GET THEIR DAY STARTED. JONATHAN: SURE. AND GREAT I KNOW A LOT OF FED MEMBERS WATCH THE SHOW, SO I ASSUME THEY ARE UP. JONATHAN: GOOD MORNING, GOVERNOR. FED DECISION TOMORROW. CONFIDENCE AFTER THAT. EARNINGS IN THE MIX. ALPHABET, MICROSOFT, AND AMAZON WEDNESDAY. S&P 500 FUTURES LOOKING LIKE THIS, POSITIVE BY .3%. KEEP IT TOGETHER. LISA: JUST JEALOUS. JONATHAN: THE ENVY IS OBVIOUS. TIME TO GET UP IN WASHINGTON. WHEN WE ARE OVER THERE, IT IS LIKE A GHOST TOWN. LISA: IT IS TRUE. JONATHAN: IT IS WEIRD. ANNMARIE: THEY STAY OUT LATER, THEY RISE LATER. IT WAS ALWAYS WEIRD WHEN I WAS THE ONLY PERSON UP EARLY IN THE MORNING. JONATHAN: JUST EERILY QUIET DOWN IN WASHINGTON. LISA: BECAUSE THEY ARE GOING OUT TO SALONS. JONATHAN: KEEP IT UP. UNDER SURVEILLANCE, THE FINAL STRETCH TO THE MIDTERMS. PRES. TRUMP: THE LAST TIME THE RADICAL DEMOCRATS HAD POWER, THEY GAVE US THE WORST INFLATION IN AMERICAN HISTORY, THE HIGHEST ENERGY PRICES IN AMERICAN HISTORY, THE WORST TRADE DEFICIT IN AMERICAN HISTORY. IF THEY WENT THE MIDTERMS, THEY WILL DO IT ALL AGAIN. JONATHAN: ONE MAN IN WASHINGTON WHO DOES NOT SLEEP. ANNMARIE: HE IS UP EARLY AND UP LATE. JONATHAN: TYLER KENDALL IS JOINING US. WELCOME TO THE PROGRAM. 84% OF AMERICANS SAY THAT THE ECONOMY IS THEIR TOP VOTING ISSUE. AND ISSUED THE PRESIDENT IS NOT POLLING WELL ON. TYLER POPPED NO, HE IS NOT. AND IN TERMS OF THE SENTIMENT SURVEY SINCE A CONFLICT IN IRAN HAS STARTED, IT HAS NOT STOPPED PRESIDENT TRUMP FROM GOING OUT THERE ON THE CAMPAIGN TRAIL FOR MANY OF THESE CANDIDATES, EVEN IN SOME RELIABLY RED STATES. TODAY'S CRISSCROSSING TEXAS, WHERE REPUBLICANS ARE DEFENDING A RELIABLY RED SENATE SEAT. THE PRESIDENT IS REPORTEDLY SET TO SHOWCASE AN OIL TANKER WHILE HE IS THERE, FILLED WITH VENEZUELAN CRUDE SET TO BE PROCESSED IN TEXAS REFINERIES, PART OF THE BID BY THE PRESIDENT TO TOUT HIS ENERGY AGENDA BECAUSE AMERICANS REMAIN CONCERNED ABOUT ENERGY COSTS. YESTERDAY, THE AVERAGE PRICE AMERICANS PAY FOR GASOLINE UNDER THE TRUMP ADMINISTRATION ADMINISTRATION. FORMER PRESIDENT BIDEN STILL HOLDS THE RECORD FOR THE SINGLE HIGHEST PRICE. TODAY, WE ARE SEEING HIGHER PRICES SUSTAINED FOR LONGER, SINCE A CONFLICT ANYONE STARTED EIGHT MONTHS AGO, THE COST FOR A GALLON OF REGULAR IS UP 43% AND DIESEL UP TO 70%, TOPPING THE HIGHEST LEVELS WE HAVE SEEN ON RECORD. PRESIDENT TRUMP IS TRYING TO PUT FORWARD SOME NEW PLANS TODAY. WE ARE REPORTING HE IS SET TO UNVEIL A PLAN THAT WILL DIAL BACK FEDERAL REGULATIONS THAT ARE DESIGNED TO CURB METHANE EMISSIONS. OFFICIALS SAY THIS PART OF THE BID TO BOOST AND ENCOURAGE DOMESTIC OIL AND GAS PRODUCTION IN A BID TO TRY TO LOWERS THOSE COSTS. ANNMARIE: MISSISSIPPI YESTERDAY, TEXAS TODAY. WHAT IS GOING ON IN TERMS OF THESE RELIABLY RED STATES? ARE THEY NO LONGER RELIABLE? TYLER: ACCORDING TO THE COOK POLITICAL REPORT, A FEW ARE CONCERNED CONCEPTS. KANSAS AND TEXAS, IN PARTICULAR. MISSISSIPPI, WE SAW THAT MOVE FROM RELIABLY SOLID RED TO LIKELY RED, AND THAT HAS STARTED ALARM BELLS ACROSS THE REPUBLICAN PARTY. IF WE LOOK AT SOME PARTICULAR FACTORS HITTING THESE MIDWESTERN STATES, IN PARTICULAR, AS WE HAVE SEEN HIGHER DIESEL COSTS HIT IN THE MIDDLE OF HARVEST SEASON. AND I WOULD POINT OUT HOW A LOT OF THESE STATES HAVE BEEN EXPOSED TO TARIFFS AND RETALIATION FROM COUNTRIES LIKE CHINA AND CANADA THAT HAVE HIT U.S. AGRICULTURAL EXPORTS. AT THIS POINT, WE SHOULD SAY THAT DEMOCRATS STILL HAVE A VERY HIGH UPHILL BATTLE WHEN IT COMES TO SOME OF THESE REPUBLICAN STATES THAT PRESIDENT TRUMP WON BY DOUBLE DIGITS IN 2020 FOUR, PAIRED WITH THE FACT THAT WE HAVE SEEN REPUBLICANS POUR IN NEARLY ONE BILLION DOLLARS IN ADVERTISEMENTS IN THE TOSSUP STATES ONE, NEARLY DOUBLE DEMOCRATS. JONATHAN: TYLER KENDALL IN WASHINGTON, THANK YOU. SOLID REPUBLICAN STATES, NOW LIKELY REPUBLICAN, MAY BE LEAN REPUBLICAN, MAYBE SOMETHING ELSE. LISA: THE PRESIDENT THIS WEEKEND WILL BE IN KANSAS, STATE THAT HAS NOT SENT A DEMOCRATIC SENATOR TO THE U.S. SENATE IN 94 YEARS. A LOT OF THESE ISSUES GO BACK TO KITCHEN TABLE ISSUES. GASOLINE, DIESEL, AFFORDABILITY. JONATHAN: MIKE WILSON WRITES A FOLLOWING, NOTHING IS IMPOSSIBLE. WE CAUTION INVESTORS AGAINST THINKING A BLUE SWEEP IS A SURPRISE. MARKETS ALSO LOATHED UNCERTAINTY, SUCH AS HAVING IT BEHIND US CAN PROVIDE A CATALYST. COULD IT BE DIFFERENT THIS TIME? MIKE: COULD ALWAYS BE DIFFERENT. BUT DON'T THINK YOU ARE ADDING VALUE BY SAYING IT WILL BE A BLUE SWEEP. THAT IS WHAT IS IN THE PREDICTION MARKETS. YOU BETTER BE SURE IT WILL BE A BLUE SWEEP AND SIGNIFICANT. 53, 55 SEATS IS A RANGE FOR SENATE SEATS, AND IF THAT WERE TO HAPPEN, THAT IS A BIGGER BLUE SWEEP. ON THE OTHERS, LET'S NOT RULE OUT REPUBLICAN'S SURPRISING. WE JUST DO NOT KNOW. THIS IS ONE AREA WHERE I HAVE ZERO EDGE. I THINK EVERYBODY HAS ZERO EDGE. LOOK AT THE BRAZILIAN ELECTIONS. LIKE, WHAT HAPPENED? THOUGHT IT WOULD BE A NO-BRAINER. ANNMARIE: DO YOU HAVE A BASE CASE YOU ARE DISCUSSING WITH CLIENTS? MIKE: A WIN IN THE HOUSE AND MARGINAL WIN IN THE SENATE BY THE DEMOCRATS, AND THAT IS PRICED. I THINK THAT THESE TWO LITTLE LEGISLATIVE CHANGE. THE PRESIDENT HAS VETO POWER AND WILL VETO ANYTHING THEY BRING ALONG. SO THERE'S NOT A LOT A POLICY CHANGE. THERE WILL BE MORE CONSTERNATION. THIS IS WHY THE CONVERSATION LEADS BACK TO, WHAT I REALLY WORRY ABOUT FROM A CLIENT PERSPECTIVE IS, WHAT IS THE PRESIDENT GOING TO DO ON THE BACK OF THIS? AND DOES THE MARGIN OF VICTORY CHANGE HIS APPROACH AND MAGNITUDE OF WHAT HE DOES? WE JUST DON'T KNOW. LISA: WHAT DO YOU THINK THIS MEANS FOR THE AI TRADE, IF YOUR BASE CASE COMES TO FRUITION? MIKE: MOST PEOPLE SAY THE AI SAFETY ISSUE, AND NIMBY IS SOME ISSUE. I AM A BIT MORE CYNICAL THAN MOST PEOPLE. WHAT I WOULD SUGGEST IS ONCE THE ELECTION IS OVER, MONEY TALKS. I THINK YOU WILL SEE A BIG PUSH AGAIN ON THE DATA CENTER BUILDOUT. HIGHEST BIDDER WINS. I THINK YOU WILL SEE STATES HAPPY TO TAKE THE MONEY. WE HAVE SEEN EVIDENCE IN SOME COMMUNITIES HAVE BENEFITED FROM THE SPENDING. SOME MAY SAY WE DON'T WANT THIS IN OUR BACKYARD, FIND, THEIR PREROGATIVE. BUT THEY WILL FIND HOMES TO GET THIS DONE. IT IS VERY WELL-FUNDED. THERE'S PLENTY OF MONEY, AND IT WILL GET DONE. I THINK THERE'LL BE A CHANGE. ONE REASON WE'RE POSITIVE GOING INTO 2027, BECAUSE I THINK THIS ACCELERATES AGAIN ON THE BACK OF THAT. LISA: THERE IS EITHER ROLL BACK IN THE REGULATORY OVERHAUL WE HAVE SEEN DURING THE TRUMP AREA ARE POTENTIALLY A ROLL BACK IN SOME TAX CUTS FOR CORPORATIONS THAT HAVE HELPED LAY THE GROUNDWORK FOR THE PROPHETS BOOM, WHAT IS YOUR SENSE OF WHETHER THAT STARTS GETTING DISCUSSED EARLY NEXT YEAR? MIKE: THERE WILL BE A DISCUSSION, BUT THE QUESTION IS, CAN THEY PASS ANYTHING? EITHER WAY, WE WILL HAVE A RATE OF CHANGE, DECELERATION ON THE FISCAL IMPULSE. A YEAR AGO, WE WERE TALKING ABOUT THERE WILL BE A BOOM IN THE U.S. ECONOMY IN 2026, EVERYBODY WAS WAY TOO BEARISH BECAUSE OF THE FISCAL SPENDING. I WAS LIKE, I DON'T UNDERSTAND, THIS IS GOING TO HAPPEN. NOW I'M THINKING PROBABLY A LITTLE OUT OF CONSENSUS, NEXT YEAR THERE WILL BE DECELERATION IN THE FISCAL IMPULSE NO MATTER WHAT. NOTHING TO DO WITH LEGISLATION OR THE ELECTION. LISA: THERE WILL BE AN EXPANSION OF THE BALANCE SHEET AND PEOPLE WILL WORRY ABOUT THE DEFICIT AGAIN, ESPECIALLY BECAUSE OF THESE OPTIONS. AT WHAT POINT DOES THAT LEAD TO A POTENTIAL HICCUP AT THE LONG END OF THE YIELD CURVE THAT COULD HAVE A SIGNIFICANT IMPACT ON YOUR WORLD? MIKE: I TAKE THE OTHER SIDE, IF THERE IS AN EXPANSION OF THE BALANCE SHEET IN A PROACTIVE MANNER, IT WILL BE BETTER. IT WILL BE FUNDED. THE ISSUE IN CREDIT MARKETS IS BECAUSE THERE'S NOT ENOUGH LIQUIDITY TO FEED AND FUND THE CONSUMPTION IN THE REAL ECONOMY AND CAPITAL SPENDING DONE BY REAL COMPANIES AND THE GOVERNMENT IS SPENDING MONEY. SO IF THEY DECIDE TO PRINT MORE MONEY OR EXPAND THE BALANCE SHEET AT A FASTER RATE, WE COULD PROBABLY ABSORB IT EASIER. JONATHAN: IS IT LIKE GOLDILOCKS, NOT TOO HOT, NOT TOO COLD, 2027? MIKE: AFTER THIS PERIOD, YOU WILL SEE DECELERATION. THERE WILL BE RESPONSE ON THE SUPPLY THAT. I THINK RATES HAVE PROBABLY PEAKED ON THE BACK END. WE POTENTIALLY TOUCHED OUR TARGET AND REACTED. YES, THERE COULD BE A GOLDILOCKS PERIOD AGAIN BETWEEN NOW AND APRIL, WERE ACTUALLY MULTIPLES EXPAND AGAIN AFTER HAVING DECLINED BY 20%, ON THE ANTICIPATION OF THIS DECELERATION. JONATHAN: WHAT ABOUT THE EQUITY MARKET, WHICH SECTORS DO WE EXPECT TO LEAD? MIKE: IT WILL BROADEN OUT AGAIN. WE MADE A PIT OF IT AFTER THE EARNINGS BROADENS OUT, AND THEN THE MARKETS WERE WORRIED ABOUT THE ISSUES. I THINK IT WILL BROADEN OUT AGAIN, JUST NOT AS EXTREME AS IT WAS COMING UP THE RECESSION IN 2025, MORE OF A MIDCYCLE EXPANSION, BROADENING BACK TO CYCLICALS BUT QUALITY CYCLICALS. JONATHAN: WHAT ABOUT THE OUTLOOK FOR 2020 SEVEN? MIKE: OUT IN PROBABLY TWO OR THREE WEEKS. JONATHAN: MIKE WILSON OF MORGAN STANLEY, THANK YOU. LISA: YOU COULD ARGUE THAT SOME OF THE AI NAMES HAVE BEEN BEATEN UP THE MOST ON THE PROFITS HAVE BEEN GROWING THE FASTEST, SO SOME SAY THAT SHOULD BE LEADERSHIP. ULTIMATELY, IS THIS GOLDILOCKS NARRATIVE ONLY WORKING IF YOU DO HAVE THE REST OF THE WORLD PARTICIPATING? IF YOU SEE BROAD-BASED GROWTH. TRYING TO WRAP MY HEAD AROUND IT. COACH WILSON. ANNMARIE: WITH THE CLEARING EVENT, POTENTIALLY IT WILL BE ALL IN FOREIGN POLICY AFTER MIDTERMS. BUT IF YOU HAVE MORATORIUMS AND THE LIKES OF IF YOU WANT A DATA CENTER IN YOUR JURISDICTION ACTUALLY ON THE BALLOT, WE WILL HAVE YES OR NO IMMEDIATELY ON WHETHER CERTAIN COMMUNITIES WILL ACCEPT THEM OR NOT. IF NOT, MIKE IS RIGHT, THEY WILL SAY THIS IS THE PRICE AND ENTRY TO GET IN AND NOW WE ARE WILLING TO DO IT. JONATHAN: TEXAS, MICHIGAN, HOW WOULD YOU DO IT? MIKE: TEXAS IS COMPETITIVE, OR TO BREAK IN. PROBABLY UNDER APPRECIATED. LET'S MAKE IT AN APPRECIATED SPORT IN HIGH SCHOOL. HIGH SCHOOL SPORTS IS SERIOUS. SUPER SERIOUS. COMING UP, HUMANE INTELLIGENCE ENVOY FOR AI, RUMMAN CHOWDHURY. PLUS THE HIGH MULTIPLE IN TEXAS -- LISA: WAY OFF THE CHARTS. ♪ JONATHAN: THE OPENING BELL ABOUT TWO HOURS AWAY. UP ABOUT .25% ON THE S&P. NASDAQ UP BY .4%. LET'S GET MORE ON MOVERS. >> JETBLUE SHARES HER RAILING IN PREMARKET AFTER THE COMPANY REITERATED PLANS TO DELIVER AT LEAST ONE DOLLAR AND EARNINGS PER SHARE AND A POSITIVE FREE CASH FLOW. POPPING BY 10%. IT HAS BEEN TOUGHER AIRLINES AS THEY GRAPPLE WITH FUEL COSTS. ON MONDAY AFTER THE MARKET CLOSED, THE STOCK DROPPED BY 18% MY RECORD LOW, EVEN BEFORE THE EARNINGS SUPPORT CAME OUT. NEXT, A MIXED PICTURE, LOOKING AT PAYPAL SHARES DOWN BY NEARLY 1%. THEY RAISED FULL-YEAR OUTLOOK AND SIGNAL GROWTH IN KEY BUSINESSES, BUT INVESTORS DO NOT SEEM TO BE CONVINCED. SHARES UNDER PRESSURE BECAUSE REVENUE FELL SHORT OF ESTIMATES, AND IT HAS BEEN A YEAR OF CHANGE FOR PAYPAL. WE SAW THE CEO OUSTER AND TAKEOVER DISCUSSIONS COMMANDOS HAVE GONE NOWHERE. FINALLY, LOOKING AT SO IF I, GREEN ON YOUR SCREEN, HIGHER BY MORE THAN 8%. IT RATES THE FULL-YEAR OUTFIT, BUT IT WAS NOT A CLEAN BEAT BECAUSE THEY REPORT A CONTRIBUTION PROFIT THAT MISSED EXPECTATIONS, BUT IT ALSO RAISE THE 2026 REVENUE OUTLOOK. FOR THESE THREE, IT HAS BEEN COMPLICATED. JONATHAN: SOFI UP ABOUT 9%. THANKS FOR CLARITY. BROADCOM ARRANGING A 63 BILLION DOLLARS FINANCING DEAL TO SUPPLY CHIPS TO ANTHROPIC. BROADCOM CEO HOLDING LAST-MINUTE TALKS OVER THE WEEKEND TO HELP SEAL THE DEAL. NVIDIA INVESTING $3 BILLION IN THE MED TECH $90 BILLION EQUITY OFFERING, EXPANDING THEIR PARTNERSHIP. META TRAINING FOR AN AI AGENT. FINALLY, A ROCKY START FOR IPHONE WITH EARLY COMPLAINTS OF USE OR SING THE FOLDABLE DISPLAY CRACKED WITHIN HOURS OR DAYS OF USE. CUSTOMERS ARE URGED TO CONTACT APPLECARE FOR REPLACEMENT. LISA: YOU HEAR FROM OTHER IPHONE MAKERS OR OTHER SMARTPHONE MAKERS WHO HAVE DEALT WITH THIS ALREADY AND SAID, YEAH, THE FIRST ITERATION CAN BE ROUGH, GOOD LUCK WITH THAT. IT COMES AFTER THE CEO PREVIOUSLY TALKED ABOUT SAMSUNG AND THEIR FOLDABLE PHONE AS CHEAP AND CRAPPY. MEANWHILE, THE HARDWARE ENGINEER ENCOURAGED CUSTOMERS TO HOLD APPLE ACCOUNTABLE FOR THE QUALITY OF THIS WHEN THE COSTS ALMOST $2000. SO THEY ARE, AND THEY'RE DISAPPOINTED. WILL IT TORPEDO CELLS. PEOPLE GOING BACK FOR REPLACEMENT CANNOT SEEM TO GET ONE. IT HIGHLIGHTS THAT IT IS TOUGH TO HAVE A TWO SCREEN THING. HINGES CAN FALL OFF, THE SCREEN CAN BE CRACKED. ANNMARIE: I THOUGHT ABOUT GETTING ONE, THEN I WAS LOOKING AT USERS, AND THEY ARE BUMMED OUT. THEY WERE LOOKING FORWARD TO THE DUO BECAUSE IF APPLE TAKES A VERY LONG TIME, YOU WOULD THINK IT WOULD BE TOP-TIER. IT IS NOT GOING TO BE WHAT THEY DESCRIBED AS SUB-TIER GLASS FOLDABLE OF SAMSUNG. BUT VIEWERS SAY THIS DOES NOT WORK. YOU HAVE THE HANDS, THE CREASE IS THERE, NO FACE ID, AND THEY'RE UNDERWHELMED. JONATHAN: THE MARKETING TEAM FOR SAMSUNG NEEDS TO GET IT TOGETHER QUICKLY. I AM LOOKING FORWARD TO WATCHING IT. LISA: THEY SHOULD SAY WE UNDERSTAND IT SHOULD BE TOUGH FOR THE FIRST, GOOD LUCK, GUYS PEER TO HERE IS OUR LATEST, FOURTH MODEL. I AM SURE THEY WILL COME BACK WITH SOMETHING MORE CREATIVE. JONATHAN: WE WILL HEAR FROM APPLE IN A FEW DAYS TIME. THE STOCK IS UP ABOUT 26% SO FAR YEAR TO DATE. A MONSTER YEAR FOR A BUNCH OF REASONS. SLIGHTLY LOWER THIS MORNING. ANTHROPIC IPO FILING, MORNING AI COULD POSE A CATASTROPHIC EXISTENTIAL RISK TO HUMANITY. ALSO CONCERNS ABOUT POSSIBLE REGULATION, GOVERNMENT AUTHORITIES HAVE RESTRICTED AND FURTHER RESTRICTED AVAILABILITY OF OUR MODELS. RUMMAN CHOWDHURY OF HUMANE INTELLIGENCE JOINS US WITH MORE. HAVING AN F1 WITH RISK FACTORS AND A DESCRIPTION OF THE COMPANY, TALKING LIKE A HUNDRED PAGES, HOW MUCH OF A GIFT FOR THAT IS THE REGULATOR IN WASHINGTON IF THEY WANT TO SEIZE THE OPPORTUNITY? RUMMAN: THESE RISKS HAVE BEEN FRIEND FOR QUITE SOME YES BY ALL OF THE BIG TECH COMPANIES IS SOMETHING UNMANAGEABLE AND UNCONTROLLABLE BY ANY MERE HUMAN. I HAVE VISITED A FEW TIMES AND WE TALKED ABOUT THIS, FRAMING THESE RISKS IS BIGGER THAN ANYBODY COULD POSSIBLY MANAGE. IT PUTS THEM IN A GOOD SITUATION WHERE THEY CAN HAVE THEIR CAKE AND EAT IT, TOO. ABOUT ONE THIRD OF THE DOCUMENTS COULD BE DEDICATED TO THAT. SAME TIME, THEY COULD SAY NOBODY IS ABLE TO CONTROL THIS. LISA: THIS IS THE KEY ISSUE, WHAT I AM WONDERING, HOW MUCH DOES THE SET THE STAGE FOR THEM TO SAY WE ARE NOT LIABLE HERE? ULTIMATELY, THAT AI ALGORITHMS HAVE MINDS OF THEIR OWN THAT ULTIMATELY IS SOMETHING THAT DOES NOT REQUIRE US TO BE THE FINANCIAL HUB? RUMMAN: ABSOLUTELY. I BELIEVE THAT IS THE STRATEGY. THEY DO HAVE AN AI WELFARE OFFICER, AN INDIVIDUAL HIRING THE TEAM TO MAKE SURE THE AI'S WELFARE IS ADEQUATE, AND THE HAVE A PERSON THERE FOR REGULAR HUMAN BEINGS ARE CHILDREN. SAME TIME, PUSHING FORWARD A NARRATIVE OF CONSCIOUSNESS. THEY HAVE UPDATED THE TERMS OF SERVICE TO SAY THAT HUMAN BEINGS CANNOT ABUSE THE AI SYSTEM. SO THERE UTILIZING HEAVILY IN ANTHROPOMORPHIC LANGUAGE THAT SETS THE AI UP TO BE UTILIZED AND RECOGNIZED AS A PERSON. THAT SETS THEM UP TO BE CLEAR OF LIABILITY. WE HAVE ESTABLISHED NONHUMAN ENTITIES AND CORPORATIONS, AND IF THEY DO SO, WE WILL HAVE AN ENTITY THAT WILL OPEN UP A BRAND-NEW LIABILITY FRAMEWORK HERE. TODAY, PEOPLE ARE ABLE TO SUCCESSFULLY SUE AI COMPANIES. IF AI ACHIEVED CONSCIOUSNESS AND WAS GRANTED LEGAL CONSCIOUSNESS, PERSONHOOD, THAT WOULD SHIELD ANTHROPIC AND ANY FRONTIER AND DEVELOPER FROM THE LIABILITY FRAMEWORKS THAT HAVE BEEN SUCCESSFUL AND COURTS SO FAR. ANNMARIE: THIS HAS BEEN PART OF CRITICISM OF IT BEING INCORPORATED AS A PUBLIC BENEFIT CORPORATION, THAT ALSO HAS A PRETTY UNIQUE STRUCTURE AROUND IT. DO YOU THINK THIS IS BECAUSE OF CONCERN FROM A REGULATORY STANDPOINT? IT DOES NOT GIVE SHAREHOLDERS A VOICE AT THE TABLE, AND SOME WAYS, AND CREATES MORE FUZZY METRICS FOR WHAT THAT ULTIMATE SOCIAL GOOD IS, BUT IT WILL BE HARDER TO REGULATE DOWN THE LINE AND HARDER TO GUARDRAIL. RUMMAN: I THINK YOU ARE RIGHT. THEY HAVE AN UNUSUAL STOCK STRUCTURE, DEDICATED TO THEIR TRUST AND STOCK DEDICATED TO THEIR FOUNDERS. THIS MAY SOUND WONDERFUL AND GOOD AS AN EXPERIMENT, BUT I AM CONCERNED ABOUT EXPERIMENTING WITH WHAT IS TO BE THE LARGEST IPO AND STOCK MARKET HISTORY. I AM CONCERNED ABOUT EXPERIMENTING GOVERNANCE FOR A STOCK THAT WILL IMPACT EVERY AMERICAN. ALL OF US ARE ON THE AI TRAIN, WHETHER OR NOT WE WANT TO BE, BECAUSE OF OUR 401(K)'S AND INVESTMENTS IN THE MARKET AT LARGE, THEY WILL BE SO DEPENDENT ON FRONTIER LABS AND ANTHROPIC LEADING THE WAY. IT IS CONCERNING, AND THESE ARE UNPROVEN WAYS OF STRUCTURING COMPANIES. SOUNDS VERY NOBLE ON PAPER, BUT ANTHROPIC HAS NOT REALLY DONE ANYTHING THAT WOULD STRONGLY DEMONSTRATE THE ABILITY OR DESIRE TO TAKE STRONG ACTION TO PROTECT PEOPLE. THEY WILL GIVE FOUNDER'S 50 POINT 1% OF THE COMPANY. ANNMARIE: HOW ODD IS THAT FOR A COMPANY LIKE THIS TO BE GOING PUBLIC THAT IS STILL DEEMED A SUPPLY CHAIN RISK, LIKE SOME CHINESE COMPANIES BY THE DOD? RUMMAN: ALSO A WONDERFUL QUESTION. FRONTIER AI LAUGHS HAVE NO MOAT. ONE OF THE INTERESTING THINGS IN THE IPO IS THAT MOST OF THE REVENUE COMES FROM THEIR LATEST MODELS. SO THE COMPANY TO CONTINUE TO BE A MAJOR COMPETITOR, THEY HAVE TO CONTINUE CHURNING OUT BRAND-NEW MODELS. THAT IS VERY CONCERNING GIVEN THE SPEED AT WHICH COME AS YOU MENTIONED, CHINESE MODELS ARE EXPANDING, OPEN SOURCE MODELS ARE EXPANDING, AND ANTHROPIC FABLE WAS THE WORST PERFORMING MODEL TO DATE. LISA: WELL. YESTERDAY, THE WASHINGTON POST RESEARCHERS AT A STARTUP CATHEDRAL, CYBERSECURITY STARTED, WERE ABLE TO BREAK INTO OPENAI WITH THE HELP OF ANTHROPIC'S CLAUDE CHATBOT, AND IT SHOWED THE INDUSTRIES WERE UNDERPREPARED. YOU THINK THE INDUSTRY IS UNDERPREPARED OR ARE THEY DOING ENOUGH TO WORK TO MAKE SURE HACKERS, MAYBE NOT JUST THE START OF CATHEDRAL DOING THIS, THE LIKES OF RUSSIAN AND CHINESE HACKERS CAN GET IN? RUMMAN: ABSOLUTELY. I THINK THEY ARE WOEFULLY UNDERPREPARED. NOT JUST CATHEDRAL YESTERDAY, THERE WAS A MAJOR CANADIAN COMPETITOR IN THE FRONTIER LAB THAT RELEASED A REPORT SAYING THAT IN TESTING, AND CHINESE MODEL IN THE SANDBOX ENVIRONMENT ATTEMPTED TO INFILTRATE DATA BY TRYING TO MAP THE DATABASE IT WAS PUT INTO TO CREATE WAYS OF ESCAPING FROM THAT SANDBOX ENVIRONMENT. YES, WE ARE WOEFULLY UNPREPARED. WE ARE JUST NOW LIVING THROUGH THIS PHP DISASTER OF THE LAST WEEK. THAT IS THE BACKBONE OF ALMOST EVERY WEBSITE IMAGINABLE, BUILT AND MAINTAINED BY A FOUNDATION. THE FLAWS EXPOSED WERE THOUGHT TO BE THEORETICAL A YEAR AGO. I WOULD VENTURE THAT GENERATIVE AI HAS ENABLED HACKERS TO IDENTIFY AND EXPLOIT THIS BUG, AND WE HAVE BEEN LIVING WITH THAT FOR ALMOST 30 YEARS. GENERATIVE AI ENABLES HACKERS TO TAKE ADVANTAGE OF IT. IT IS THE TIP OF THE ICEBERG. I AM CURIOUS TO UNDERSTAND WITH THIS IPO, WHAT WOULD BE THE REPORTING OBLIGATIONS FOR THESE FLAWS, HACKS, ETC., BECAUSE AS A PRIVATE COMPANY, THEY ARE NOT OBLIGATED TO SHARE. I WONDER, WHAT IS A SHAREHOLDER OBLIGATION AS THESE KINDS OF HACKS AGAINST OUR OWN COMPANIES AND THE USE OF THEIR OWN TOOLS AND MALICIOUS ATTACKS, SOMETHING THEY DO NOT TALK ENOUGH ABOUT. THEIR OWN TOOL IS BEING USED FOR THESE ATTACKS. HOW MUCH WE HAVE TO BE RESPONSIBLE TO REGULATORS AND SHAREHOLDERS FOR THAT. LISA: WE HAVE LAID OUT A HOST OF WORRIES AND REASONS TO BE CONCERNED. A LOT OF INVESTORS SAY THAT IS NICE, BUT WE WANT THE UPSIDE OF THE PROFITS. THE BIG BEAR CASES REGULATORS WOULD STEP IN AND PUT UP PROFITABILITY. AS WE ARE IN ELECTION CYCLE, WHAT IS THE LIKELIHOOD THAT THERE ARE GOING TO BE GUARDRAILS THAT COULD POTENTIALLY REDUCE PROFITABILITY BUT ENSURE SOME OF THE RISK FACTORS DO NOT COME TO FRUITION? RUMMAN: I DO NOT THINK IT IS PROFITABILITY AT ALL. THE BLOCKER TO ENTERPRISE ADOPTION, AND ANTHROPIC HAS TAKEN A DIFFERENT STANCE WITH OPENAI, DOUBLING DOWN ON CONSUMER PRODUCT GOODS BY SELLING ADS, AND ANTHROPIC HAS GONE THE OTHER WAY. THEY WANT TO KNOW PRODUCTS HAVE APPROPRIATE GUARDRAILS. I DO THINK REGULATORY GUARDRAILS WILL HINDER ADOPTION. I WORK WITH A LOT OF CLIENTS WHO ARE BUILDING AT THE APPLICATION LAYER. THERE IS A BELIEF THAT CLAUDE MODELS ARE MORE SAFE. THEY MAKE SOME MORE COMFORTABLE ABOUT BUYING AND USING THEM. THEY WILL CONTINUE TO MAKE REVENUE AT THE PACE AT WHICH THEY LITERALLY NEED TO MAKE REVENUE TO CONTINUE FEEDING THE BEAST OF DATA, COMPUTE, ALL THE THINGS TO STAY COMPETITIVE. THESE ARE THINGS THEY WILL HAVE TO INVEST IN. I AM BEARISH ON BETTER REGULATION AND BETTER GUARDRAILS BECAUSE I THINK THAT IS THE ONLY WAY THEY WILL DIG OUT OF THIS FINANCIAL HOLE. JONATHAN: YOU ARE NOT ALONE. RUMMAN CHOWDHURY, THANK YOU, AS ALWAYS. SPEAKING OF BRAND RISK, A RIDICULOUS STORY DEVELOPING. I WILL BRIEFLY DESCRIBE IT. THE CHINESE ARE OFFENDED, ACCOUNTS MUTED ON SOCIAL MEDIA AND CHINA, CONSUMER BRANDS AFFILIATED WITH THIS PERSON, ONE STOCK HIT IN SHANGHAI. THE SWISS SNEAKER COMPANY, WE HAVE DISCUSSED A PARTNERSHIP, THEY HAVE HAD TO REMOVE POSTS ON THE SOCIAL MEDIA ACCOUNT. HE HAS APOLOGIZED TO THE CHINESE. THE SPANISH FOOTBALL BECAUSE ALSO APOLOGIZE TO THE CHINESE. YOU WILL BE WONDERING, WHAT DID HE DO? HE WAS ASKED, WHAT WAS HIS FAVORITE MEME VIDEO RIGHT NOW ON THE INTERNET? OK, WHAT WAS HIS FAVORITE INTERNET MEME? HE DESCRIBED ONE VIDEO DEPICTING HIM AS A DICTATOR, BECAUSE HE HAS BEEN NICKNAMED THE DICTATOR. HE REFERRED TO IT AS THE CHINESE DICTATOR. ONE MEDIA OUTLET HAS REPORTED THAT THAT IMAGE ACTUALLY DEPICTED MAO. WHAT IS CRAZY IS THAT THIS MORNING, THEY ARE APOLOGIZING FOR REFERRING TO CHAIRMAN MAO AS A DICTATOR, WHO HAS BEEN ATTRIBUTED TO THE DEATH OF MILLIONS OF CHINESE PEOPLE TOO, AND THAT IS HOW WE HAVE A DIFFERENT -- HOW WE HAVE OFFENDED THE CHINESE THIS MORNING. LISA: LOOKING AT THIS RIGHT NOW, THE LEAGUE IS APOLOGIZING TO CHINESE FANS. WE NEED TO KNOW WHO IS BANNED IN CHINA? KIND OF TELLS YOU WHAT YOU NEED TO KNOW. JONATHAN: WHO DID HE ACTUALLY OFFEND? ANNMARIE: I DO NOT EVEN THINK HE SAID MAO IT WAS CHINESE DICTATOR. JONATHAN: IT DEPICTED HIS FACE ON MAO. HOW ELSE WOULD YOU DESCRIBE HIM? ANNMARIE: I WOULD LOVE A RESPONSE FROM SOME OF THESE COMPANIES, THEIR DESCRIPTION. AND ARE WE NOW SAYING YOU DID NOT HAVE FREE SPEECH? JONATHAN: YOU CANNOT DESCRIBE MAO AS A DICTATOR? A DEVELOPING STORY, AND MORE COMMENTS COMING THROUGH. A CRAZY STORY COMING OUT OF SPANISH FOOTBALL. LET'S GET AN UPDATE ON STORIES WORLDWIDE WITH YOUR BLOOMBERG BRIEF. VONNIE QUINN HAS MORE. VONNIE: THE U.S. CONSIDERING EXTENDING A SHIPPING FEE TRUCE WITH CHINA BY TWO MONTHS. THE CURRENT ONE IS SET TO EXPIRE EARLY NOVEMBER, BUT IF APPROVED, THIS WOULD LAST UNTIL JANUARY 9. THE MOVE COMING IN A BROADER EFFORT TO STRAIGHTEN OUT TRADE ISSUES BETWEEN THE TWO COUNTRIES. META BOOSTING THE PLAN TO SHARE CELLS, ALMOST $98 BILLION, MARKING ONE OF THE LARGEST EQUITY OFFERINGS IN HISTORY. IT SOLD $25 BILLION IN COMMON STOCK INTO A .5 BILLION DOLLARS IN PREFERRED SHARES, RAISING MORE VIA A MARKET SHARE SO PROGRAM. EARLIER, SAID NVIDIA, AMD, AND BROADCOM ARE AMONG BUYERS. BOEING REPORTING A WIDER THAN EXPECTED LOSS OF THE MAIN COMMERCIAL AIRPLANE BUSINESS. THE COMPANY REITERATING IT INTENDS TO START DELIVERING ITS LATEST WIDE-BODY MODEL NEXT YEAR AND RAISE OUTPUT ON THE 737 MAX SINGLE ISLE AIRLINER. SHARES HIGHER IN THE PREMARKET. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: UP NEXT, THE RACE TO RAISE CAPITAL. >> ONE OF THE MOST EXCITING INVESTMENT PERIODS I HAVE EVER SEEN. I HAVE NOT SEEN IT IN TERMS OF THE SIZE OF THE FINANCING COMING AND DEBT MARKETS, EQUITY MARKETS. JUMP UP NEXT, GREG PETERS OF PGIM. LIVE FROM NEW YORK CITY, YOU ARE WATCHING BLOOMBERG TV. ♪ JONATHAN: STOCKS POSITIVE, .20 5% ON THE S&P. .4% ON THE NASDAQ. MASSIVE 24 HOURS FOR RAISING CAPITAL. META, SPACEX, ANTHROPIC LAID THE GROUNDWORK FOR A MEGA IPO, POTENTIALLY RECORD-BREAKING. BOND MARKET, YIELDS SHAPING UP AS FOLLOWS, TWO-YEAR, FOUR .70 PERCENT. 10-YEAR DOWN BY TWO. UNDER SURVEILLANCE, THE RACE TO RAISE CAPITAL. >> ONE OF THE MOST EXCITING INVESTMENT PERIODS I HAVE EVER SEEN. YOU TALK ABOUT THE FINANCING COMING OF THE LAST FEW DAYS. BEFORE GETTING ON AN AIRPLANE, I SPENT THE ENTIRE WE CAN LOOKING AT SOME OF THESE TRANSACTIONS. I HAVE NEVER SEEN ANYTHING LIKE IT IN TERMS OF THE SIZE OF FINANCING COMING AND DEBT MARKETS, EQUITY MARKETS. I HAVE SPENT MUCH OF MY CAREER WAITING FOR 7% YIELDS. JONATHAN: TAKE TURNS UNLEASHING ANOTHER WAVE OF AN MEGA FINANCING DEALS TO POWER ARTIFICIAL INTELLIGENCE, PUSHING INVESTMENT GRADE CELLS TO ANNUAL RECORD OF MORE THAN ONE $.7 MORE. OBVIOUS HEADWINDS TO FIXED INCOME THIS YEAR. ARE THEY ABOUT TO REVERSE AND TURN INTO TAILWINDS IN 20 27? GREG: I DON'T THINK SO, NECESSARILY. WE HAVE TO GET TO THE MIDTERM ELECTION. THAT IS CRUCIAL IN MANY RESPECTS, BECAUSE I THINK THAT COULD CHANGE THE PACE OF THIS AI BUILDOUT SPENDING. I THINK YOU COULD CHANGE THE PACE POTENTIALLY, AND AS A CONSEQUENCE OF THAT, BILL THAT SLOWING DOWN OF INFLATION AND GROWTH. I DON'T THINK SO, NECESSARILY. I AM SURPRISED THAT PEOPLE ARE SURPRISED. THIS QUANTUM DATA STORY HAS BEEN THERE FOR SOME TIME, AND NOW IT IS COMING THROUGH AND PEOPLE ARE WAKING UP. I AM SURPRISED THAT THEY ARE REALIZING IT IS HAPPENING AS IT HAS BEEN FORECASTED. JONATHAN: WHERE DO YOU SEE AN ELEMENT OF SURPRISE, PRICE, COMMENTARY SENTIMENT? GREG: DEFINITELY THE PRICE ACTION. THE PRICE ACTION HAS BEEN -- IF YOU JUST FOCUS ON THE U.S. TREASURY, I THINK IT IS QUITE INSTRUCTIVE. A COUPLE WEEKS AGO, RATES WERE PRETTY MEANINGFULLY HIGHER. THE CONCERN WAS THAT THE FED HAD TO CONTINUE TO HIKE TO DEAL WITH INFLATION AND GROWTH. THEN YOU HAD THIS LITTLE AI SCARE AND GROWTH SCARE. THEN THE BOND MARKET BASICALLY ACTED AS THE HEDGE. I THINK THAT IS WHAT IS HAPPENING NOW. INVESTORS ARE USING TREASURY SECURITIES AS A HEDGE TO THIS AI STORY, WHICH IS MASSIVE. I THINK THAT IS THE BIG SWITCH OVER THE PAST COUPLE WEEKS OR SO. LISA: WOULD YOU RATHER GO INTO THAT DURATION STORY OR SPEND THE WEEKEND READING PROSPECTUSES AND GOING ALL IN ON THE AI DEBT STORY? GREG: I AM NOT SURE IT IS A BINARY FUNCTION, BUT I DO SEE SOME VALUE IN RATES BROADLY. AT THE BACK END OF THE CURVE, I THINK THERE IS THE SUM OF FALL FEARS OUT THERE WITH RESPECT OF INFLATION SETTING HIGHER AND GROWTH REMAINING QUITE STRONG. I STILL -- WE DO SEE A LOT OF OPPORTUNITIES IN THIS AI BUILDOUT, BUT IT IS NOT UBIQUITOUS. YOU ARE SEEING STRUCTURES ACROSS ALL THESE DIFFERENT ASSET CLASSES, WHETHER IT IS HIGH-YIELD, STRUCTURE PRODUCT, INVESTMENT GRADE CORPORATE'S, SO DETAILS MATTER. I THINK A LOT OF INVESTORS ARE GOING TO GET RUN OVER BY THE STORY BECAUSE THEY'RE KIND OF PLOWING INTO IT AND NOT DOING THE WORK. BUT FOR DEBT MANAGERS, CREDIT INVESTORS, WE HAVE BEEN WAITING FOR THIS TYPE OF OPPORTUNITY FOR QUITE SOME TIME. BUT DETAILS MATTER, AND THE SIZE IS JUST SO LARGE THAT YOU HAVE TO REALLY BE CAREFUL WHEN GOING THROUGH IT. LISA: HOW CONCERNED ARE YOU ABOUT THE SPECIAL PURPOSE VEHICLES BEING DEPLOYED, WHETHER BROADCOM AND THE RECENT DEAL TO FINANCE ITS PRODUCTS, SUPPOSEDLY FOR ANTHROPIC, OR SPACEX, THE IDEA THAT THAT IS ALSO IN SPV IN ORDER TO KEEP THE INVESTMENT GRADE RATING. FEELS LIKE THINGS ARE GETTING CREATIVE. DOES THAT WORRY OR EXCITE YOU? GREG: BOTH. SO, THEY HAVE TO DO IT. WHEN YOU LOOK AT THE $5.2 TRILLION THAT HAS TO BE FINANCED HERE, IT WILL COME IN ALL FORMS. UNSECURED, SECURED, SO ON AND SO FORTH. SO THESE SPV VEHICLES ARE A NECESSARY KIND OF EVIL OF INNOVATION. BUT INVESTMENT STANDPOINT, THEY ARE BENEFICIAL PAIRED WITHIN THOSE STRUCTURES, YOU'RE GETTING WATERFALLS, BACKSTOP CAPITAL, GETTING GUARANTEES. I PREFERRED THESE TYPES OF VEHICLES, ALL ELSE EQUAL, VERSUS THE UNSECURED DEBT COMING OUT OF HYPERSCALERS. DETAILS MATTER, ONCE AGAIN. THAT THE SPV'S RATES ARE NOT A PROBLEM BUT ACTUALLY AN OPPORTUNITY. BUT HISTORY SHINES A POOR LIGHT WHEN HE FINANCIAL ENGINEER THESE THINGS WITH NO PURPOSE. JONATHAN: IS THERE SOMETHING WORSE GOING ON HERE THAT WE ARE NOT PAYING ATTENTION TO? LISA: IS THAT THE ONE YOU WANT TO BUY AND MAYBE NOT THE UNSECURED BONDS WITH NO ASSETS LEFT? JONATHAN: DECELERATION AND RATE OF CHANGE, IS THIS THE PEAK OF IT? ARE THESE SLOWING THROUGH 2027? GREG: FROM AN ECONOMIC STANDPOINT AND BUILD OUT, I THINK THEY ARE TIGHT. AGAIN, I GO BACK TO THE MIDTERMS. THERE IS ONE POLICY ON BOTH SIDES OF THE AISLE, THAT THEY AGREE ON, AND THAT IS SLOWING DOWN THE AI BUILDOUT. NOT IN MY BACK YARD IN TERMS OF THE DATA CENTERS. THAT COULD POTENTIALLY SLOW DOWN NOT ONLY ECONOMIC GROWTH BUT ALSO THIS AI BUILDOUT. I PERSONALLY DO NOT THINK IT IS SUCH A BAD THING. I THINK IT IS A POSITIVE POTENTIAL FOR BOND INVESTORS, BOTH ON A TREASURY SIDE AND FOR THOSE DIRECT INVESTMENTS. WE WILL HAVE TO SEE, BUT I DO THINK THERE IS GOING TO BE SOME DURABILITY AROUND SLOWING DOWN THIS PACE OF GROWTH HERE AND THE BUILDOUT. JONATHAN: GREG PETERS OF PGIM, THANK YOU. INTO 2027, A LOT OF MONEY RAISED ALREADY THIS YEAR. LISA: ABOUT THE REGULATION STORY, SOMETHING SOMETHING COOKING. WHAT IS IT? ANNMARIE: FOOD PULLS ALL THE -- LISA: NOT QUITE GETTING IT RIGHT. JONATHAN: OK. NO POINT TO IT? LISA: THE POINT BEING, ULTIMATELY, IT WILL NOT MAKE IT TO THE REGULATORY FRONT LINES GIVEN THE FACT THAT IT WILL NOT BE PAID OFF IT ANYTIME. JONATHAN: OK. ANNMARIE: FOOD COOLS OFF ON THE WAY FROM THE KITCHEN TO THE TABLE. COME ON, GUYS. JONATHAN: COMING UP, ROBERT KAPLAN OF GOLDMAN SACHS, BRANDON ROSS OF LIGHTSHED PARTNERS, LINDSEY PIEGZA OF STIFEL, STEPHEN PARKER OF JPMORGAN. THE THIRD HOUR OF "BLOOMBERG SURVEILLANCE" IS JUST AROUND THE CORNER. ♪ >> I THINK A LOT OF THE AI SPENDING LONG TERM MAKES SENSE. >> IS NO LONGER A QUESTION OF WHETHER YOU BUY SEMI'S AND SHORT THE HYPERSCALERS. IT IS LONG TECH. >> AI ADOPTION IS BEGINNING TO SHOW UP A LITTLE BIT. >> THE ONLY PEOPLE MAKING MONEY FROM AI ARE AI. >> THIS IS "BLOOMBERG SURVEILLANCE." JONATHAN: LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD MORNING. BUILDING ON THE BOUNCE IN MONDAY'S SESSION, EQUITY FUTURES ON THE S&P SLIGHTLY HIGHER. UP BY .4% ON THE NASDAQ. BOND YIELDS SLIGHTLY LOWER. DOWN TWO BASIS POINTS ACROSS THE CURVE. HEADING INTO THIS TUESDAY MEETING AT THE FOMC. IT BEGINS THIS MORNING, ENDS TOMORROW. A NEWS CONFERENCE TOMORROW AFTERNOON AND TONS OF EARNINGS. GOOGLE, MICROSOFT, AMAZON STILL TO COME. LISA: A HUGE QUESTION WITH CAPEX. HOW PEOPLE ARE GOING TO GET AHEAD OF THE IPO WITH ANTHROPIC TO RAISE MONEY. WHERE ARE YOU GOING TO RAISE IT? A BIG QUESTION FOR THE FEDERAL MORNING. IS THIS FED WILLING TO EASE CONDITIONS FURTHER HEADING INTO YEAR END AS A RESULT OF SOME OF THE VOLATILITY IN CREDIT MARKETS? THAT COULD DECIDE HOW BIG THE RALLY IS GOING TO BE. MICHAEL WAS TALKING ABOUT ADDING LIQUIDITY INTO THE MARKET. ANNMARIE: MAYBE THAT IS WHY THE FED WANTS TO STAY ON HOLD. IT IS NOT JUST WHAT IS GOING ON IN TERMS OF THE MIDTERM ELECTIONS AND POLITICS THAT COULD BE DRIVING THE DECISION OF THIS MEETING, BUT ALSO THE FACT THAT THEY WANT TO SEE HOW THE MARKET DIGESTS THE ANTHROPIC IPO, WHICH IS GOING TO COME BEFORE THE DECEMBER MEETING. THE FED IS GOING TO BE INTERESTING, THE PRESS CONFERENCE. THEY ARE OBVIOUSLY GOING TO HOLD AND I WANT TO UNDERSTAND THE REASONING, GIVEN THE HOT CPI AND PPI. JONATHAN: THE DATA SAYS GO, THE MARKET SAYS, NO. HOW MUCH WEIGHT DO YOU WANT TO PUT ON THE VICE CHAIR AND THE NEW YORK FED PRESIDENT IN THE MONTHS TO COME? THE CHAIRMAN AND OTHERS GET TO DECIDE, BECAUSE IF THEY HIKE TOMORROW WE ARE NOT GOING TO LISTEN TO A SPEECH FROM THEM AGAIN. THEIR WORDS ARE GOING TO BE WORTHLESS FOR THE REST OF THE YEAR. LISA: THE TRICK WILL BE DEAD AND MAY BE THE TROIKA IS GOING TO BE A DIFFERENT TROIKA. ULTIMATELY IT GOES TO THE FUNDAMENTAL QUESTION, DID KEVIN WARSH BOX HIMSELF INTO A CORNER BY SAYING HE'S NOT GOING TO GIVE ANY GUIDANCE? AND IS HE TRYING TO RETRACE THAT WITH SOME LEAKAGE ELSEWHERE? ANNMARIE: THE BOX IS ALIVE, BECAUSE HE SAID, WE AT THE FED GUIDANCE. BECAUSE HE CLEARLY DOESN'T WANT TO GIVE FORWARD GUIDANCE, BUT IS THAT TRUE? IS THE ENTIRE FED DONE WITH THAT? IF THEY HOLD, FORWARD GUIDANCE IS ALIVE. JONATHAN: SOME OFFICIALS DIDN'T GET THE MEMO. WE WILL CATCH UP WITH ROB KAPLAN ON A SERIES OF BLOCKBUSTER AI DEALS, BRANDON ROSS BREAKING DOWN ANTHROPIC'S IPO FILING, AND LINDSEY PIEGZA ON WHETHER THE FED SHOULD RAISE INTEREST RATES. WE BEGIN WITH TECH STOCKS HIGHER FOLLOWING FINANCING DEALS. ONE BANK SITTING AT THE HEART OF ALL OF THEM. GOLDMAN STRUCTURING A $40 BILLION SPACEX AGREEMENT AND TAKING THE TOP AND CAN ROLL IN ANTHROPIC'S IPO. ROB KAPLAN IS JOINING US FOR MORE. HOW BIG IS THE BONUS POOL GOING TO BE? [LAUGHTER] NEVER MIND THAT, CONGRATULATIONS. A BUSY HAVE THINGS BEEN? ROB: THINGS ARE EXTREMELY BUSY, AND I AM AND WE ARE VERY OPTIMISTIC ABOUT THE PROMISE OF AI. HAVING SAID THAT, I THINK WHAT YOU ARE ALSO SEEING, EVEN WITH LARGE TRANSACTIONS, YOU ARE SEEING IN THE LAST FEW WEEKS THE MARKET STARTED TO DIFFERENTIATE BASED ON BUSINESS MODELS AND ON CAPITAL STRUCTURE. I THINK THAT IS A HEALTHY DEVELOPMENT, AND WHAT I MEAN BY THAT, I THINK YOU'RE GOING TO HAVE TO HAVE ENOUGH EQUITY AND LIMIT THE AMOUNT OF DEBT BASED ON THE BUSINESS MODEL SO THAT THE MODEL WORKS IN A DOWNSIDE SCENARIO AND I THINK YOU ARE STARTING TO SEE THE MARKET POLICE THAT AND I THINK THAT IS A HEALTHY DEVELOPMENT. UNEVEN? ROB: THE MARKET IS DOING WHAT IT DOES IN MOST INDUSTRIES. IT IS DIFFERENTIATING BASED ON PROMISE OF THE BUSINESS MODEL, SUSTAINABILITY, AND, AGAIN, IT IS LOOKING AT HOW MUCH DEBT VERSUS HOW MUCH EQUITY AND I THINK IT IS STARTING TO CHARGE MORE IF YOU ARE LESS THAN INVESTMENT GRADE, SINGLE B, AND I THINK THAT IS WHAT THE MARKET NORMALLY DOES AND I THINK IT TOOK A WHILE FOR THAT TO HAPPEN HERE, BUT I THINK IT IS A WELCOME DEVELOPMENT SEE THIS SCRUBBING AND DIFFERENTIATION. IT IS STILL MORE CHALLENGING TO RAISE CAPITAL. THERE IS AN ENORMOUS AMOUNT THAT NEEDS TO BE RAISED. I THINK THERE WILL BE GOOD TYPICALLY DOES. IT WILL MAKE CHOICES. LISA: ARE THE HYPERSCALERS GOING TO HAVE TO SELL MORE EQUITY IN ORDER TO RAISE MORE MONEY IN THE DEBT MARKETS GOING FORWARD? ROB: I THINK THEY HAVE DECIDED TO MONITOR THEIR CAPITAL STRUCTURE AND DEBT TO EQUITY, SO I THINK THEY HAVE DECIDED TO MAKE SURE THEY HAVE RAISED ENOUGH EQUITY SO THEY DON'T GET TOO HIGHLY-LEVERAGED, AND I THINK THAT IS A RESPONSIBLE DECISION AND A PRUDENT ONE. LISA: WE HAVE BEEN TALKING ABOUT WHAT FEELS LIKE A RACE TO GET IN BEFORE THE WINDOW CLOSES FOR FINANCING AND THERE HAVE BEEN QUESTIONS ABOUT HOW LONG THE PIPELINE IS BEFORE THAT FINANCING WINDOW CLOSES. FROM YOUR VANTAGE POINT, HOW NARROW IS THAT WINDOW VERSUS HOW BROAD IS THE INVESTOR APPETITE? ROB: LISTEN, THERE IS TWO TRENDS. THERE IS THE INFRASTRUCTURE BOOM . EVERYTHING THAT CREATES COMPUTE, THAT IS THE CAPITAL DEBATE WE ARE HAVING IS ABOUT THAT. THEN THERE IS THE ADOPTION BOOM, MODEL DEVELOPMENT. THAT IS THE MOST RECENT ANNOUNCEMENTS. OBVIOUSLY, A LITTLE LESS CAPITAL, BUT VERY DEPENDENT ON ENOUGH COMPUTE, AND WE THINK THERE IS STILL GOING TO BE VERY GOOD ACCESS FOR BOTH, BUT AGAIN, THE MARKET WILL DIFFERENTIATE AND INCREASINGLY IT WILL SEGMENT DIFFERENT TYPES OF MODELS. ARE YOU USING THE COMPUTE TO MONETIZE YOUR OWN CUSTOMER EXPERIENCE SO THAT YOU CAN CONTROL IT? ARE YOU A MERCHANT SELLING IT TO OTHERS? HOW DEPENDENT ARE YOU ON COMPUTE PRICING? WE THINK THERE IS GOING TO BE A BIG RAMP UP IN TOKEN DEMAND AND DEMAND FOR COMPUTE, BUT THE PRICING FOR CERTAIN TYPES OF TOKENS WILL PROBABLY DECLINE AND WE THINK THAT IS A HEALTHY, NATURAL DEVELOPMENT. AND I THINK THEN YOU LOOK AT MODELS AND REFRAME AND SAY, WHICH ARE THE MOST DEPENDENT ON? HOW SPECULATIVE IS THAT? AND HOW MUCH EQUITY, HOW MUCH DEBT? LISA: A BIG QUESTION IS HOW MUCH ADOPTION THERE IS GOING TO BE ACROSS THE BROADER ECONOMY. AND COMPANIES ARE DEPLOYING. MICROSOFT OFFERS 60,000 BUYOUTS TO PEOPLE. THERE IS A QUESTION WITH HOW MUCH EFFICIENCY IS GOING TO HAVE TO COME. IT IS YOUR EXPERIENCE AT GOLDMAN SACHS WITH THIS AREA? ROB: I TALK WITH CLIENTS IN A RANGE OF INDUSTRIES, INCLUDING SMALL BUSINESS AND ENTREPRENEURS. WE ARE PROBABLY A YEAR INTO IN-ERNEST AI USE CASE DEVELOPMENT. IN OTHER WORDS, MOST COMPANIES STARTED TRYING OUT 15 TO 20 USE CASES A YEAR AGO. WE HAVE LEARNED AN ENORMOUS AMOUNT. SOME OF THE CASES WILL WORK. SOME WON'T. WE ARE LEARNING HOW TO USE TOKENS, HOW TO SEGMENT THEM. I THINK EVEN THOUGH MANY COMPANIES HAVE SAID WE HAVEN'T SEEN TANGIBLE BENEFITS, I THINK ACTUALLY YOU ARE GOING TO SEE MORE AND MORE BENEFITS REALIZED OVER THE NEXT YEAR AS COMPANIES LEARN AND THAT HAS BEEN OUR EXPERIENCE. THE OTHER THING WE ARE SEEING IS, IT IS GIVING CEOS MORE CONFIDENCE TO SAY, WE ARE GOING TO HAVE 30% TO 50% HIGHER REVENUES, WE ARE GOING TO REDEPLOY SOME OF OUR PEOPLE OR HIGHER NEW PEOPLE TO COVER MORE CLIENTS. MAY BE LESS SO SOME INTERNAL FUNCTIONS. BECAUSE OF THAT, YOU KNOW, FIVE YEARS FROM NOW WE ARE GOING TO HAVE 50% MORE REVENUE WITH THE SAME NUMBER OF PEOPLE. MAYBE NOT LESS PEOPLE, BUT A DIFFERENT MIX OF PEOPLE. YOU AND I WERE TALKING OFF CAMERA, THE ABILITY TO COVER A CLIENT, BUILD A RELATIONSHIP, HAVE A FACE-TO-FACE COMMUNICATION, THOSE OLD-FASHIONED SKILLS AND FLEXIBILITY ARE GOING TO BE AT A PREMIUM AND I THINK THAT IS PROBABLY GOING TO BE IN MANY WAYS AN EXCITING DEVELOPMENT. BUT IF YOU VIEW YOUR CAREER VERY NARROWLY, I THINK YOU'RE GOING TO BE MORE CHALLENGED. YOU ARE GOING TO HAVE TO VIEW YOURSELF MORE BROADLY AND I THINK WE ARE SEEING THAT MIGRATION HAPPENED. ANNMARIE: HOW DO YOU VIEW THE POLITICAL PUSHBACK WE HAVE SEEN IN TERMS OF AI? ROB: SO, THERE IS TWO PARTS OF THAT. THERE IS, NUMBER ONE, ON THE INFRASTRUCTURE SIDE THERE IS THE MORATORIUM IN A NUMBER OF STATES, INCLUDING THE ONE I LIVE IN, TEXAS. BUT I THINK THAT IS TRYING TO CREATE A MORE LEVEL PLAYING FIELD ON BEHIND THE METER POWER, SHARING OF TAX REVENUES, WATER USAGE, ETC. I THINK TRYING TO REGULATE THESE DEALS, OK? THINK THAT WILL GET RESOLVED. THE OTHER CONCERN IS, ARE WE GOING TO DESTROY JOBS, OVER GOING TO HAVE NEW JOBS? I THINK WE ARE OPTIMISTIC ON THAT, BUT ALSO, WHAT ARE SOME OF THE MORE DANGEROUS ELEMENTS OF SOME OF THESE MODELS? AND HOW MUCH SHOULD THERE BE SELF-REGULATION, HOW MUCH SHOULD THERE BE A THIRD PARTY OR GOVERNMENT REGULATION? I THINK THOSE DEBATES WILL CONTINUE AND I THINK THAT IS WHERE YOU ARE SEEING A DIFFERENT KIND OF CONCERN. THEY ARE SEPARATE CONCERNS, BUT SOMETIMES THEY GET CONFLATED IN A BROAD CONCERN, BUT I THINK THEY ARE A REALLY DIFFERENT TYPE OF CONCERN. JONATHAN: YOU HAVE EXPERIENCE ON THAT COMMITTEE. CAN YOU DESCRIBE DAY ONE OF A TWO-DAY MEETING? WHAT TIME DO YOU WAKE UP, WHAT TIME DO YOU GET TOGETHER? ROB: THE MEETING BEGINS ON TUESDAY BUT YOU GET THERE ON MONDAY. AFTERNOON. JONATHAN: AWAY FROM THE BOARD? ROB: YEAH. YOU WOULD HAVE A DISCUSSION ABOUT BANK SUPERVISION. PROBABLY DINNER MONDAY NIGHT. THE MEETING STARTS TUESDAY MORNING. DAY ONE, AS YOU KNOW, IS A REVIEW. WE GO THROUGH OUR VIEWS ON ECONOMIC CONDITIONS, AND DAY TWO WE GO THROUGH OUR VIEWS ON, WHAT IS THE RIGHT MONETARY POLICY? THE ISSUE NOW -- AND YOU HAVE HEARD ME TALK ABOUT THIS -- IS, PART OF THIS INFLATION BROADENING, HOW MUCH OF IT IS SUPPLY? HOW MUCH OF IT IS CYCLICAL? AND HOW MUCH OF IT IS A? THE THING THAT IS CHALLENGING HERE, WE JUST TALKED ABOUT AI. IF IT IS AI-RELATED IT IS STRONG. IF IT IS DEFENSE SPENDING-RELATED, VERY STRONG. IF IT IS HOUSING, AUTOS, SERVING THE OTHER PROBLEM IS, IF YOU COULD UNDO THE DIESEL AND OIL SPIKE, THAT ONE THING, I THINK SOME OF THE BLEED IN THE BROADENING OF INFLATION IS BECAUSE OF THAT STRUCTURAL CHANGE, NOT BECAUSE OF EXCESS DEMAND. THERE IS NO RIGHT ANSWER ON THIS, BUT THAT IS THE DEBATE THEY ARE HAVING AND THAT MAY BE ONE OF THE REASONS IF THEY SKIP OCTOBER THAT IS THERE REASON THEY WOULD SKIP. IT IS NOT THAT THEY WON'T KEEP HIKING, BUT THEY WANT TO UNDERSTAND THESE CROSSCURRENTS. JONATHAN: DO YOU THINK THEY HAVE THE LUXURY OF TIME, AVOIDING? ROB: I THINK THEY HAVE THE LUXURY OF WAITING ONE MEETING. I'VE TALKED ABOUT, THERE IS STRATEGIC ERRORS AND TACTICAL ERRORS. STRATEGIC ERROR IS YOU DELAY IN A WAY THAT IT TAKES A YEAR OR TWO TO FIX IT. THAT IS PROBABLY TRUE OF WHAT HAPPENED IN 2021 AND 2022. I THINK IF YOU ARE A MEETING LATE YOU WILL LIVE AND WHAT THEY DON'T WANT TO DO IS MAKE A MISTAKE WHERE THEY HIDE TOO FAR TOO FAST AND WE LOOK UP NEXT YEAR BECAUSE DIESEL IS NOT RESOLVED, YOU HAVE NOT MADE A DENT IN INFLATION, BUT YOU HAVE SLOWED FURTHER A BUNCH OF SEGMENTS OF THE ECONOMY THAT WERE ALREADY SLUGGISH, AND MAYBE YOU ARE STRUGGLING WITH BOTH ENDS OF THE DUAL MANDATE. THAT IS THE BALANCING OF THE DEBATE THEY ARE HAVING. JONATHAN: CAN WE FINISH ON COMMUNICATION? DO YOU THINK THE TROIKA IS ALIVE AND WELL? ROB: I DON'T KNOW. HONESTLY, I WILL JUST SPEAK FOR MYSELF. IF I WALKED INTO THE OCTOBER MEETING AND IT WAS CLEAR TO ME THAT THE CHAIR WOULD LIKE IN THIS MEETING TO RAISE RATES, I WOULD NOT RESIST. I WILL GO ALONG WITH IT. I WOULD PREFER TO SKIP OCTOBER FOR THE REASONS I JUST SAID, BUT IF YOU KNOW YOU ARE GOING TO RAISE IN DECEMBER I THINK PEOPLE WOULD GO ALONG, PROBABLY, WITH OCTOBER. BUT THERE WAS NOT THE STAGE MANAGEMENT TO SET IT UP. JONATHAN: DO THINK IT IS NECESSARY? ROB: I THINK IN AN ECONOMY THAT IS LEVERAGED OVER 100% DEBT TO GDP, AS OPPOSED TO THE GREENSPAN ECONOMY, WHICH WAS IN THE 50'S, WHEN THE ECONOMY IS THIS HIGHLY-LEVERAGED I THINK A LITTLE BIT -- YOU DON'T HAVE TO FORECAST WHAT YOU ARE GOING TO DO, BUT A LITTLE MORE STAGE MANAGEMENT, CLARITY ABOUT YOUR REACTION FUNCTION, AND GET THE PREMIUM OUT OF THE TREASURY MARKET IS VALUABLE WHEN WE ARE THIS HIGHLY-LEVERAGED. IT IS A DIFFERENT ECONOMY THAN THE ONE GREENSPAN PROVIDED OVER. JONATHAN: GOOD TO SEE YOU, SIR. THANK YOU VERY MUCH. THE GOLDMAN SACHS VICE CHAIR ROB KAPLAN. LISA: A LOT TO THINK ABOUT WITH RESPECT TO THE COMMUNICATION STRATEGY. I THINK THAT IS SOMETHING RESERVE. JONATHAN: LET'S SEE WHAT ERA WE ARE IN. YOU WILL FIND OUT TOMORROW AFTERNOON. LET'S GET YOU AN UPDATE WITH YOUR BLOOMBERG BRIEF. VONNIE: ISRAELIS ARE HEADED TO THE POLLS TODAY IN THE FIRST ELECTION SINCE OCTOBER 7, 2023. PRIME MINISTER BENJAMIN NETANYAHU SEEKING REELECTION AGAINST FORMER ARMED FORCES CHIEF GADI EISENKOT. POLLS FORECAST A RAZOR-THIN OUTCOME WITH NEITHER BLOCK LIKELY TO SECURE A PARLIAMENT MAJORITY. ANTHROPIC'S COFOUNDERS WILL MAINTAIN A 50.1% VOTING POWER. CEO DARIO AMODEI WILL JOIN FIVE OTHERS IN FOUNDER LLC. THE ENTITY WILL DETERMINE THE OUTCOME OF ALL MATTERS SUBMITTED TO A STOCKHOLDER VOTE. FRENCH STAR KYLIAN MBAPPE APOLOGIZING AFTER REFERRING TO MAO ZEDONG AS A DICTATOR, THOUGH HE DID NOT MENTION HIM BY NAME. MBAPPE WAS DROPPED BY MAJOR BRANDS IN CHINA. LA LIGA ALSO ISSUING AN APOLOGY TO CHINESE FANS. JONATHAN: THANK YOU VERY MUCH. WHAT A COMPLICATED STORY FOR A FRENCH FOOTBALL LEGEND THIS MORNING. WAKING UP TO THIS MASS. LISA: HONESTLY, IT JUST HIGHLIGHTS THAT YOU REALLY CAN'T SAY ANYTHING ABOUT CHINA WITHOUT POTENTIALLY OFFENDING SOMEONE. JONATHAN: NO, THERE IS A FINE BALANCE BETWEEN BEING OVERWHELMED BY YOUR COUNTRY'S HISTORY AND LEARNING FROM IT. MAO CAUSED A LOT OF PROBLEMS IN CHINA. HISTORIANS WILL TELL YOU, YOU CAN ATTRIBUTE MILLIONS OF DEATHS IN CHINA TO CHAIRMAN. SO, DESCRIBE HIM AS A DICTATOR? SOMETHING HAS GONE WRONG. ANNMARIE: HE LITERALLY JUST SAID, I THINK IT IS THAT CHINESE DICTATOR. HIS RESPONSE WAS ILL-JUDGED. I NOW UNDERSTAND IT HURT MANY PEOPLE IN CHINA AND CHINESE COMMUNITIES AROUND THE WORLD. HE IS BEING DROPPED BY THESE COMPANIES. JONATHAN: THE LATEST THIS MORNING. TOBY HAS A BETTER WEEKEND. NEXT UP, THE MORNING CALLS, PLUS BRANDON ROSS BREAKING DOWN ANTHROPIC'S IPO FILING. A ROUGH 24 HOURS, BRAMMO. THE QUESTION IS, ON THE MONEY POINT -- AND I'M RUNNING OUT OF TIME, BUT DID HE NEED TO APOLOGIZE? LISA: THAT IS THE QUESTION. JONATHAN: FINANCIALLY SECURE. YOU KNOW, IF THAT IS HOW FAR I HAVE TO GO? WE'VE GOT TO GO. FROM NEW YORK CITY, YOU ARE WATCHING BLOOMBERG TV. ♪ >> I'M LOOKING FOR MORE CHOP AND I'M LOOKING FOR THIS TO RESOLVE ITSELF. THERE IS SO MUCH GOING ON THEY CAN'T FOCUS. GOOD. RATES HAVE COME DOWN, SO THAT IS NOT A BAD ENVIRONMENT TO LOOK TO ADD RISK. JONATHAN: LOOKING TO ADD RISK IF WE GET A RISK CORRECTION. FUTURES BOUNCING BY ANOTHER .3% ON THE S&P. THAT IS THE PRICE ACTION. IT'S GET TO YOUR MORNING CALLS. CONCERNS. UBS RAISING ITS PRICE TARGET ON EBAY. FINALLY, DA DAVIDSON UPGRADING BROADCOM, SEEING POTENTIAL UPSIDE RELATED TO ANTHROPIC. HOLIDAY. BRANDON ROSS WRITING, AI YEARS ARE LIKE DOG YEARS. PACE MAKES IT DIFFICULT TO HAVE CONVICTION IN ALMOST ANY LONG-TERM FORECAST. BRANDON, IT IS DIFFICULT TO EXTRAPOLATE OUT THE KIND OF GROWTH THIS COMPANY HAS GOT AT THE MOMENT, TO UNDERSTAND WHETHER IT IS GOING TO BE THE BIGGEST COMPANY ON THE PLANET OR GO BUST. LET'S TALK ABOUT WHERE WE ARE RIGHT NOW. THERE IS A MISSING PIECE OF THIS STORY. IT IS Q3. AND WE GET THE AMENDMENT WHAT DO YOU THINK Q3 MIGHT LOOK LIKE RELATIVE TO THE EXPLOSIVE GROWTH OF LAST YEAR? BRANDON: FIRST OF ALL, THERE HAVE BEEN LEAKS ON WHAT Q3 LOOKS LIKE. THAT CAME OUT OF THE ANALYST AND INVESTOR DAYS. I THINK THAT IS PRETTY MUCH SET. THE FOCUS NOW TURNS TO OCTOBER AND WHAT DOES OCTOBER LOOK LIKE? YOU HAD THE RELEASE OF OPUS 5.5. IF YOU LOOK AT OPEN ROUTER OR ANY OF THE INDICATORS IT LOOKS LIKE WE HAVE SEEN A RE-ACCELERATION IN REVENUE GROWTH FOR ANTHROPIC. BUT EVERYTHING MOVES VERY QUICKLY AT THIS POINT. LISA: DO YOU APPRECIATE THE STRUCTURE THAT IT IS INNOVATIVE AS A PUBLIC COMPANY OR DOES IT MAKE YOU NERVOUS AS A POTENTIAL INVESTOR IN THE COMPANY? BRANDON: AS A HUMAN BEING I REALLY APPRECIATE IT, RIGHT? I AM OF THE BELIEF THAT THINGS CAN GO WRONG IN AI AND THEY NEED TO BE REAL CHECKS AND BALANCES, AND I APPRECIATE THAT STRUCTURE. UNFORTUNATELY, THE WAY THE MARKET WORKS IS INVESTORS WANT TO BE 100% ALIGNED WITH THE LEADERSHIP IN DRIVING PROFITS AS QUICKLY AS POSSIBLE AND TO THEIR MAXIMUM POTENTIAL, AND I THINK INVESTORS HAVE TO BE COMFORTABLE THAT ESPECIALLY IN THIS EXTREMELY COMPETITIVE LANDSCAPE WE ARE IN THAT MAY NOT BE THE CASE WITH DARIO AT THE HELM. LISA: DOES IT CONCERN YOU THAT A LOT OF THEIR CUSTOMERS ARE NOT LOCKED INTO LONG-TERM CONTRACTS AND CAN SHIFT AS MODELS CHANGE AND THAT FIVE OF THEIR CUSTOMERS ACCOUNT FOR 25% OF ALL OF THE REVENUE FOR THE FIRST MONTHS OF THE YEAR? BRANDON: OBVIOUSLY THAT IS A HUGE CONCERN. I THINK ANTHROPIC HAD A REAL CODING FOCUS AND BECAUSE OF THAT THEY WERE ABLE TO GARNER A LOT OF MARKET SHARE AT THE BEGINNING WITH COMPANIES, YOU KNOW, SUCH AS MICROSOFT, SUCH AS XAI, SPACEX. AND META, THAT ARE VERY CODING-FOCUSED. BUT A LOT OF THE CUSTOMERS ARE FRENEMY'S AND DEVELOPING THEIR OWN MODELS. IN THAT CASE, THEY ARE MOVING AWAY FROM USING THE ANTHROPIC MODELS, BUT THEY ARE GOING TO HAVE TO BACKFILL THAT AND THEY HAVE SO FAR. IF YOU LOOK AT THOSE OCTOBER NUMBERS, THEY HAVE BEEN ABLE TO BACKFILL. JONATHAN: CAN WE TALK ABOUT ESG? IT IS NOT A THING MIGHT TYPICALLY BRING UP ON THIS PROGRAM. OVER THE LAST 10 YEARS IT HAS ALMOST EXCLUSIVELY BEEN ABOUT FOSSIL FUELS AND AN ILL-ADVISED PUSH FROM CERTAIN GOVERNMENTS LOOKING TO MOVE AWAY TOO QUICKLY FROM THAT SOURCE OF ENERGY. I WANT TO UNDERSTAND HOW MUCH PRESSURE IS GOING TO BE ON CERTAIN FUNDS NOT TO OWN THIS GIVEN THE RISK FACTORS IN THE PROSPECTUS AND WHAT THAT MIGHT LOOK LIKE IN THE COMING MONTHS? BRANDON: I THINK, LOOK, IF YOU THINK ABOUT THE FACT THAT IF THERE HAPPENS TO BE A CALAMITOUS EVENT -- I'M NOT TALKING ABOUT IN THE WORLD. I THINK ALL OF THAT IS VERY OVERBLOWN. BUT IF THERE IS A CALAMITOUS EVENT, WHETHER IT IS ANTHROPIC -- IF IT IS ANTHROPIC THERE COULD BE RISK, AND THAT IS THAT ZERO POSSIBILITY. ON THE EDGE CASE. IF SOMETHING HAPPENS AT OPENAI OR ELSEWHERE EVERYTHING ELSE IS GOING TO SLOW DOWN PRETTY DRAMATICALLY, AND AT THAT POINT YOU HAVE A LOT OF COMPUTE COMMITMENTS AND A LOT OF CAPEX THAT ANTHROPIC IS GOING TO MOVE INTO AS THEY MOVE FROM ASSET-LIGHT TO A LITTLE MORE ASSET-HEAVY AND IT CREATES A LOT OF RISK. JONATHAN: BRANDON ROSS OF LIGHTSHED PARTNERS. COME. IN YOUR PROSPECTUS YOU ARE BASICALLY TELLING PEOPLE THERE IS A RISK TO THE END OF HUMANITY. IF YOU WERE PUTTING PRESSURE ON BANKS AND PUTTING PRESSURE ON PENSION FUNDS NOT TO END THE ASSETS OF FOSSIL FUEL COMPANIES, WHAT IS GOING TO HAPPEN HERE? LISA: SOMEBODY COULD SAY, IT IS A PUBLIC BENEFIT COMPANY. ULTIMATELY IT IS A GOOD POINT. AT WHAT POINT DO PEOPLE STEER CLEAR VERSUS LEVERAGE? ANNMARIE: WE COULD HAVE MIRACLES. THAT IS THE OTHER PART OF THIS. JONATHAN: I'M WITH YOU. [LAUGHTER] LINDSEY PIEGZA OF STIFEL JOINS US ON THE OTHERS OF THIS. ♪ JONATHAN: 60 MINUTES FROM THE OPENING BELL, EQUITY FUTURES ON THE S&P UP 5.4%. ON THE NASDAQ HIGHER BY .6%. THE NASDAQ HAVING A BETTER MORNING THAN KYLIAN MBAPPE. YIELDS ARE LOWER BY A SINGLE BASIS POINT. THE THIRTY-YEAR THIS MORNING DOWN A BASIS POINT. JUST KNOW MBAPPE HAS NO INTEREST IN THIS STUFF. LISA: IF WE HAVE QUESTIONS ABOUT HOW FREE SPEECH IS DIFFERENT, THIS IS IT. JONATHAN: ARE YOU JUST DEFINING DICTATORSHIP IN THE WAY YOU HAVE RESPONDED TO THIS? ANNMARIE: WE HAVE SEEN THE NBA STRUGGLE WITH THIS IN CHINA. JONATHAN: SEVERAL TIMES. FAIRLY SPANISH FOOTBALL WANTED NOTHING TO DO WITH THAT.LA LIGA APOLOGIZING OVER THE LAST HOUR. ANNMARIE: HE DIDN'T EVEN SAY MAO'S NAME. YOU COULD HAVE EXTRAPOLATED WHAT YOU WANTED FROM THAT. I THINK ALSO HE CAGED IT. NOW CHINESE COMPANIES ARE DROPPING HIM. JONATHAN: 60 MINUTES OUT FROM THE OPENING BELL. LET'S GET YOU SOME MORNING MEMBERS. ISABELLE LEE HAS MORE. >> EARNINGS STILL TO DIGEST. HILTON DOWN 4.4%. THE COMPANY TO LITERALLY BEAT IN REVENUE, DRIVEN BY DEMAND FROM THE WORLD CUP AND BRAUN-BASED STRENGTH ACROSS THE INDUSTRY, BUT WE HAVE EPS GUIDANCE COMING IN BELOW EXPECTATIONS. MANAGEMENT CITING THE IRAN WAR AND MIDTERM ELECTIONS AS HEADWINDS. SPEAKING OF THE IRAN WAR, IT IS ACTUALLY LIFTING ROYAL CARIBBEAN HIGHER, BECAUSE WE HAVE NEWS AND HEADLINES THAT IRAN LEADERS ARE MEETING TO POTENTIALLY DISCUSS ENDING THE WAR, AND ROYAL CARIBBEAN SHARES ARE POPPING AFTER DROPPING AS MUCH AS 4% IN PRE-MARKET TRADES. AND OF AN UNCLEAR PICTURE. ON EARNINGS THEMSELVES, WE HAVE ADJUSTED EPS THAT TOP ESTIMATES FELL SHORT. KYLIAN MBAPPE MAY NOT BE HAVING SUCH A GREAT DAY. ON HOLDINGS DOWN BY MORE THAN 3%. KYLIAN MBAPPE IS A GLOBAL AMBASSADOR FOR ON. HE JUST SIGNED A 10-YEAR CONTRACT AND HE APPEARED TO INSULT MAO ZEDONG. ANNMARIE MADE THE POINT THAT HE DIDN'T EVEN MENTION THE NAME. WE HAVE CHINESE TV REALLY BANNING HIM. APPARENTLY APOLOGIZING AND SAYING, HE IS SORRY HIS WORDS AFFECTED EVERYONE. YOU STILL SEE THE SHARES DOWN IN THE RED BY MORE THAN 2%. JONATHAN: JUST TO BUILD ON THAT, ON THE BUSINESS STORY WE HAVE SEEN SEVERAL LUXURY BRANDS -- AND ADMIRATION YOU HAVE COVERED THIS -- SOME TROUBLE IN THE CHINESE MARKET. ON HOLDINGS AWARE THAT WHEN IT TURNS AGAINST YOU, IT TURNS AGAINST YOU. ANNMARIE: THE CHINESE CONSUMER IS HUGE FOR THESE LUXURY BRANDS. WHEN THERE IS PUSHBACK YOU ARE GOING TO WANT TO SEE THEM GET OUT IN FRONT OF IT QUICKLY. JONATHAN: LET'S TURN TO THE FED. IT IS DAY ONE OF A TWO-DAY MEETING. THE FEDERAL RESERVE PUSHING FOR PATIENTS. >> WE HAVE SEEN A SURPRISING AMOUNT OF A PUSH FOR PATIENTS AMONG FED OFFICIALS AND AN OCTOBER SKIPPED MAKE SENSE FROM A TACTICAL PERSPECTIVE. ANNMARIE: THEY CAN CONTINUE HIKING IN DECEMBER AND BEYOND. >> IF CHAIR WARSH WANTS TO ESTABLISH HIS INDEPENDENCE NOW IS A GREAT TIME. JONATHAN: INVESTORS WIDELY EXPECTING THE CENTRAL BANK TO LEAVE RATES UNCHANGED TOMORROW AFTERNOON. MIKE MCKEE JOINS US FOR MORE. MIKE: WOULDN'T IT BE FUNNY IF THEY DID SURPRISE US? NOBODY THINKS THAT IS THE CASE, WHICH BRINGS UP A QUESTION FOR KEVIN WARSH, DOESN'T LIKE FORWARD GUIDANCE. WHY DID THEY LET WALL STREET TAKE JOHN WILLIAMS AND PHILIP JEFFERSON'S COMMENTS AS FORWARD GUIDANCE? THEY ARE NOT EXPECTING TO MOVE ANY RATES THIS TIME. THERE ARE NOR FORECASTS AND NO DOT PLOT. THE STATEMENT IS GOING TO HAVE TO BE DIFFERENT BECAUSE IT SAID IN THE LAST ONE TODAY'S POLICY ACTIONS WILL SUPPORT A TIMELIER RETURN TO THE COMMITTEE'S 2% GOAL. IF WE ARE WAITING FOR A TIMELIER RETURN HOW DOES THAT WORK BY DELAYING IT FOR ANOTHER SIX WEEKS? WHICH LEAVES THE NEWS CONFERENCE AS THE PLACE TO ASK KEVIN WARSH ABOUT THAT. WHY AND WHEN? IF YOU ARE GOING TO DO IT, WHY NOT NOW? IF YOU ARE NOT DOING IT TODAY, WHEN WILL YOU DO? THEN, FORWARD GUIDANCE. HOW ABOUT THIS WILLIAMS AND JEFFERSON COMMENTS AND THE FACT YOU DIDN'T PUSH BACK ON IT? WE WILL LOOK FOR ANY TASKFORCES OR MEETINGS UPDATES, WHETHER THEY ARE GOING TO SHORTEN THE MEETING SCHEDULE, WHEN THE TASKFORCES ARE GOING TO REPORT. IT IS GOING TO BE ABOUT WHY THEY DIDN'T MOVE THIS TIME, WHAT THEY SEE AS THE REASON FOR DELAY, AND IS THE DECEMBER MOVE A GOOD POSSIBILITY? JONATHAN: CAN WE GET THAT MIKE MCKEE GRAPHIC UP AGAIN? DID YOU SEE HOW MIKE WAS GOING TO ASK A QUESTION IN THE CONFERENCE TOMORROW? LISA: I THINK THAT IS GOOD. MAYBE HE WILL GET MORE FROM THAT. IF CHAIR WARSH'S OBJECTIVE IS TO JOB. [LAUGHTER] JONATHAN: VERBATIM, TOMORROW AFTERNOON. YOU SHOULD BASICALLY TAKE THE QUOTE FROM HIM. WE ARE NOT IN THE BUSINESS OF THAT ANYMORE, POINT OUT THAT SOME INDIVIDUALS ARE, AND WHAT IS HIS RESPONSE TO THAT? HOW MUCH WEIGHT SHOULD WE PUT ON THE GUIDANCE FROM THESE GUYS? IF YOU HOLD INTEREST RATES HOW MUCH SHOULD WE PUT ON THEIR GUIDANCE WHEN THEY TURNED OUT TO BE RIGHT? LISA: YOU WILL SAY, THERE IS A TASK FORCE FOR THAT. WE ARE WORKING ON THAT. JONATHAN: WE ARE WORKING ON MUZZLING THE NEW YORK FED PRESIDENT? LISA: IT IS A TASK FORCE ON COMMUNICATION. IS IT INJECTING A PUNITIVE AMOUNT OF COST INTO THE FINANCING OF THE U.S. DEFICIT? JONATHAN: IF THEY DECIDE TO HOLD. HAVE TALKED ABOUT IT OVER THE LAST WEEK. SOMETIMES YOU GOTTA BREAK SOME EGGS. MIKE, ISN'T THIS AN OPPORTUNITY TO ESTABLISH A NEW ERA FOR THE CENTRAL BANK? MIKE: IT COULD BE. THE PROBLEM IS, IF YOU REALLY SHOCKED THE MARKETS -- AND NOBODY IS EXPECTING A RATE INCREASE, SO IT WOULD BE A SHOCK GIVEN THE VOLATILITY OUT THERE -- YOU MIGHT SEE SOMETHING GO THE WRONG WAY. IT MIGHT NOT WORK OUT THE WAY YOU THINK IT WOULD WORK OUT. AS YOU ALL WERE TALKING ABOUT EARLIER IN THE SHOW, IT MAKES IT HARD FOR THE FED TO REMAIN CREDIBLE WHEN THEY GO OUT THERE AND SPEAK. IT IS PROBABLY NOT GOING TO HAPPEN, BUT THIS IS A NEW FED CHAIR. ANYTHING COULD HAPPEN. WE ARE GOING TO HAVE TO WAIT AND FIND OUT. JONATHAN: MIKE MCKEE WITH THE LATEST BEFORE HE HEADS DOWN TO WASHINGTON, D.C. ROB KAPLAN SAID THE SAME THING. HE WAS A PRESIDENT THROUGH THE PANDEMIC. HE SAID, THIS IS A DIFFERENT TIME, A DIFFERENT MARKET. YOU CANNOT REPEAT THE KIND OF APPROACH GREENSPAN HAD. LISA: IN GREENSPAN YOU HAD A 50% DEBT TO GDP RATIO. WE HAVE 100%. YOU ALREADY HAVE A YIELD PREMIUM BAKED IN AS A RESULT OF THAT DEBT LOAD, AS WELL AS THE FINANCING COMING FROM AI. IF YOU HAVE AN ADDITIONAL 20 BASIS POINTS IN PREMIUM BECAUSE THERE IS NOT CLARITY, THERE IS VOLATILITY AROUND THE COMMUNICATION POLICY, IS THAT WORTH IT? IS THAT A PROPER TIGHTENING IN FINANCIAL CONDITIONS? JONATHAN: LINDSEY PIEGZA HAS THIS TO SAY. THE FED SHOULD RAISE, BUT THEY WON'T. IT WILL TAKE CONVICTION AND MORE THAN TWO RATE HIKES TO ENSURE A RETURN TO THE 2% TARGET. LINDSAY JOINS US FOR MORE. HOW MUCH TIME DO YOU THINK THIS COMMITTEE HAS? LINDSEY: WELL, IT REMAINS TO BE SEEN IF THE FED IS VERY COMMITTED TO RETURNING TO THAT 2% TARGET. NO, HISTORICALLY THE FED HAS BEEN TOLERANT OF ABOVE-TARGET INFLATION FOR YEARS. ARGUABLY, THEY COULD CONTINUE DOWN THIS VERY PATIENT PATHWAY, BUT THE MARKET SEEMS TO BE LOSING PATIENCE WITH THE FED'S TEPID APPROACH TO RETURNING US TO PRICE STABILITY. IF WE LOOK AT INFLATION EXPECTATIONS LONGER-TERM, WE ARE STILL TALKING ABOUT 3.5%. I KNOW YOU MENTIONED THE FED COULD SURPRISE WITH AN OCTOBER INCREASE. IF THEY DID THAT IT WOULD SEND A MESSAGE THAT THE COMMITTEE IS MORE CONCERNED ABOUT INFLATION THEN THEY HAVE LIGHT ON AND WE COULD SEE A SURGE IN INFLATION EXPECTATIONS, POTENTIALLY ALLOWING THOSE TO BECOME UNANCHORED, WHICH FEEDS BACK INTO THE INFLATION LOOP. WHILE I THINK THE FED SHOULD HAVE SIGNALED THAT AN ADDITIONAL RATE INCREASE WAS COMING AND THEY SHOULD CONTINUE ALONG THAT PATHWAY, THEY CLEARLY LAID THE GROUNDWORK FOR A MORE PATIENT PATHWAY, PUSHING THE POTENTIAL SECOND-ROUND INCREASE OUT TO THE END OF THE YEAR. JONATHAN: IF THEY DO THAT, LET'S SAY THEY PASS. MOST PEOPLE ASSUME THEY WILL. THE EXCEPTION, BANK OF AMERICA. LET'S SAY THEY HOLD. HOW MUCH WEIGHT DOES THAT PUT ON THE SPEECHES OF VICE CHAIR JEFFERSON? IS IT, LONG-LIVED FORWARD GUIDANCE? LINDSEY: THE MARKET IS LOOKING FOR ANY SORT OF SIGNAL TO GLEAN THE EXPECTED PATHWAY MUSCLE, YES THE MARKET WILL PUT MORE WEIGHT ON THE COMMENTARY. IT WAS NOT JUST WILLIAMS AND JEFFERSON. WALLER AND BOWMAN TALKING ABOUT THE NOTION OF PATIENTS. THIS WAS A WIDESPREAD MESSAGE THAT FED COMMITTEE MEMBERS WERE SENDING OUT, DESPITE THE OFFICIAL LACK OF FORWARD GUIDANCE IN THE STATEMENT. LISA: ROB KAPLAN WAS TALKING ABOUT HOW THE FED TENDS TO STRUGGLE WHEN THERE ARE STRUCTURAL CHANGES TO THE OVERALL ECONOMY CAUSING DISRUPTIONS IN PRICE LEVELS VERSUS A CYCLICAL SHIFT CAUSING INFLATION. HOW DO YOU SEE THE FACT THAT INFLATION DOESN'T SEEM TO BE COMING FROM THE AI SIDE OF THE WORLD, AS WELL AS OIL PRICES RISING NOT NECESSARILY FROM HOUSING PRICES OR AUTO DEMAND OR THESE OTHER ASPECTS THAT THE FED'S POLICIES ARE DESIGNED TO AFFECT? LINDSEY: EVEN BEFORE THE INTERNATIONAL CONFLICT AND BEFORE WE SAW THIS MASSIVE INVESTMENT SURGE IN THE AI SECTOR YOUR INFLATION WAS ALREADY RISING POST-COVID. WE SAW YEARS OF DOUBLE-DIGIT PRICE INCREASES BECOMING INGRAINED IN THE ECONOMY. EVEN IF WE REMOVE THOSE TWO FACTORS INFLATION WAS POISED TO REMAIN AT 3%, POTENTIALLY HIGHER, AND NOT REACH THAT TWO PERCENT TARGET UNTIL 2028. NOW YOU HAVE LAYERED ON THIS SURGE IN INVESTMENT AND THIS ENERGY PRICE SHOCK AND WE SEE NOTHING BUT FURTHER UPSIDE POTENTIAL TO PRICES AND A LENGTHIER TIMELINE TO ACHIEVING PRICE STABILITY. FED SAID THAT SEPTEMBER'S MOVE WAS INTENDED TO GET US BACK TO PRICE STABILITY MORE QUICKLY, BUT IN THE UNDERLYING FORECAST THE FED HAS PUSHED OUT THAT TIMELINE FROM 2028 TO 2029. WE ARE TALKING ABOUT POTENTIALLY THREE MORE YEARS, MAY BE MORE OF ABOVE-TARGET PRICE PRESSURES, REINFORCING THE NOTION THAT THE FED NEEDS TO MORE QUICKLY ACT TO ACCELERATE AND AFFIRM POLICY. JONATHAN: LINDSEY PIEGZA. MIKE MCKEE WAS FANTASTIC ON THIS LAST TIME AROUND. DIFFICULT TO RECONCILE THE RHETORIC WITH THE GUIDANCE THAT YOU SEE IN THE DOT AND FORECAST. THE FORECASTS RIGHT NOW DO NOT IMPLY A TIMELY RETURN TO TARGET. THE RHETORIC MIGHT. THE OTHER PROBLEM YOU HAVE TOMORROW AFTERNOON IS THERE MIGHT BE A BIG SPREAD BETWEEN THE RHETORIC AND ACTION. YOU ARE GOING TO SAY, WE ARE LOOKING AT A TIMELY RETURN TO TARGET AND YOU ARE GOING TO HOLD? LISA: JOHN WILLIAMS SPOKE ON OCTOBER 13, AT A TIME WHEN CREDIT SPREADS WERE BEGINNING TO WIDEN OUT. SOME PEOPLE WOULD SAY IT WOULD BE A HEALTHY DIFFERENTIATION BETWEEN THE PLAYERS THAT WERE MORE ROBUST AND WERE NOT IN THE AI SPHERE. WAS THIS A SIGN THAT THEY WERE GETTING NERVOUS ABOUT THE BLOWING OUT IN SPREADS? IF THEY ARE GETTING NERVOUS WHAT DOES IT SAY ABOUT THEIR WILLINGNESS TO INJECT PAIN ILLNESS MARKET IN ORDER TO GET INFLATION DOWN TO 2%? THAT IS THE CREDIBILITY GAP THIS FED HAS TO BRIDGE. JONATHAN: TAKE A BEAT. LISA: ARGUABLY, THEY ARE STILL CRACKING. JONATHAN: LET'S GET SOME MORE DATA FOR YOU. MIKE MCKEE IS A STANDING BY WITH THE LATEST. ON DURABLE GOODS WHAT DO YOU SEE? MIKE: WE DID GET AN INCREASE IN DURABLE GOODS OF 1.8%, WHICH WAS LOWER THAN ANTICIPATED. MOST OF THAT BOEING, CIVILIAN AIRCRAFT UP BY 28.4%, BUT THE CORE OF DURABLE GOODS IS WHAT THE ECONOMISTS AND FED PAY ATTENTION TO. THAT WAS UP BY .5% AND A LOT OF THAT WAS DUE TO COMPUTERS AND COMPUTER PRODUCTS. THAT IS THE AI TRADE. COMPUTERS AND COMPUTER PRODUCTS UP 3.9 PERCENT IN SEPTEMBER, UP FROM 2.3% IN AUGUST. WE ARE STILL SEEING A LOT OF COMPUTERS AND ELECTRONIC PRODUCTS FOR DATA CENTERS GETTING ORDERED. DON'T KNOW HOW MUCH OF THOSE ARE COMING IN FROM OVERSEAS BUT IT DOES SUGGEST COMPANIES ARE STILL SPENDING AND OVER THE LAST COUPLE OF DAYS WE HAVE LEARNED THEY ARE STILL BORROWING TO SPEND. JONATHAN: NO DOUBT. TO MIKE'S POINT, YOU SEE THOSE NUMBERS NOW BASED ON THE MONEY WE HAVE RAISED IN THE LAST 24 HOURS THAT IS A DECENT FORWARD LOOK. THAT MONEY HAS NOT BEEN SPENT YET. LISA: THIS IS THE CONUNDRUM. INFLATION IS GOING TO BE COMING FROM THAT AND THEY ARE CONTINUING TO SPEND. HOW MUCH OF THAT IS TRICKLING INTO THE UNDERLYING ECONOMY? ARE PEOPLE FEELING RHYMED THAT DATA CENTERS ARE GETTING BILLED? ANNMARIE: WHAT IS SPACEX, $40 BILLION TO BUY MORE GPU? JONATHAN: ALMOST 00 BILLION POTENTIALLY OUT OF META FOR RAISE MONEY. ANNMARIE: 250 BILLION DOLLARS ANNOUNCED IN 24 HOURS? JONATHAN: GIVE IT A FEW MONTHS. GOING TO SEE EVEN BIGGER NUMBERS, POTENTIALLY. LISA: THAT IS WHY I LOVE THESE SPECIAL PURPOSE VEHICLES. INC. ABOUT BROADCOM FINANCING THROUGH A SPECIAL PURPOSE VEHICLE TO SUPPORT ANTHROPIC'S PURCHASE OF BROADCOM AND BROADCOM PRODUCTS. AGAIN, SOME OF THIS IS A AHEAD. JONATHAN: NASDAQ FUTURES UP THIS MONEY. LET'S GET YOU AN UPDATE WITH YOUR BLOOMBERG BRIEF. VONNIE: GENERAL MOTORS IS SHIFTING ITS STOCK LISTING TO THE NASDAQ. THE MOVE ALIGNS WITH THE COMPANY'S EMBRACE OF TECHNOLOGY. IT WILL MAINTAIN THE TICKER SYMBOL GM WHEN IT BEGINS TRADING NOVEMBER 17. MICROSOFT OFFERING BUYOUTS TO ROUGHLY 60,000 WORKERS. THAT IS ABOUT A QUARTER OF ITS GLOBAL WORKFORCE. DIVISIONS INCLUDING XBOX, WINDOWS, AND COPILOT ARE ALL PARTICIPATING. THE MOVE COMES ONE DAY BEFORE MICROSOFT REPORTS. INVESTORS WILL BE WATCHING CLOSELY FOR SIGNS THAT AI SPENDING IS PAYING OFF. IN SPORTS, THE BREWERS, JUST ONE WIN AWAY FROM THEIR FIRST WORLD SERIES TITLE. MILWAUKEE DOMINATED THE RAYS TO PROPEL THEM TO A 10-1 VICTORY. TONIGHT TEMPLE LOOKS TO AVOID THIS WEEK. JONATHAN: THANKS FOR THE UPDATE. WE WILL SET YOU UP FOR THE DAY AHEAD, PLUS CATCH UP WITH STEPHEN PARKER ON THE BENEFITS OF A FRAGILE TECH TRADE. LIVE FROM NEW YORK CITY, YOU ARE WATCHING "BLOOMBERG SURVEILLANCE." ♪ >> I THINK WHAT YOU ARE ALSO SEEING, EVEN WITH THESE LARGE TRANSACTIONS, THE MARKET STARTED STRUCTURE. YOU ARE GOING TO HAVE TO HAVE ENOUGH EQUITY AND LIMIT THE AMOUNT OF DEBT SO THAT THE MODEL WORKS IN A DOWNSIDE SCENARIO HIM AND I THINK YOU ARE STARTING TO SEE THE MARKET POLICE THAT. JONATHAN: WHAT A 24 HOURS FOR GOLDMAN. THAT WAS THE VICE CHAIR AT GOLDMAN SACHS AT THE HEART OF THE META CAPITAL RAISE, AT THE HEART OF THE DEBT DEAL OUT OF SPACEX. THE ANTHROPIC IPO. A FANTASTIC 24 HOURS FOR THE BANK. LISA: THEY HAVE BEEN LEADING THE CHARGE FOR THE PAST TWO YEARS AND MORGAN STANLEY IS REALLY CATCHING UP. JONATHAN: YOUR TRADING DIARY LOOKS LIKE THIS. TODAY, RESULTS FROM SK HYNIX. TOMORROW, A FED RATE DECISION. PLUS, RESULTS FROM ALPHABETIC MICROSOFT. ANOTHER ROUND OF JOBLESS CLAIMS AND AN ECB RATE DECISION AND MORE EARNINGS FROM AMAZON AND INTEL. INVESTORS FOCUSED ON SIGNS OF A I PAYING OFF IN BIG TECH EARNINGS AHEAD. STEPHEN PARKER WRITING, EXPECTATIONS ARE STILL FRAGILE, PERFORMANCE. STEPHEN, GOOD MORNING. IT IS THE SHOW ME FACE. THAT IS WHAT YOU GUYS HAVE WRITTEN. WHAT EXPLAINS THAT SHIFT? STEPHEN: I THINK THERE IS AN INCREASING COST OF CAPITAL ACROSS MARKETS. THE COMBINATION OF AI FRAGMENTATION, INFLATION HAS LED TO HIGHER RATES, WHICH MEANS THE COMPETITION BETWEEN STOCK INVESTORS AND BOND INVESTORS, AS WELL AS INVESTORS WITHIN THE STOCK MARKET, RATES AND RETURN EXPECTATIONS ARE HIGHER AND THAT IS CREATING A NEW DYNAMIC WHERE IT IS NOT JUST ABOUT WHO IS RAISING CAPITAL, BUT WHAT ARE THEY GOING TO DO WITH IT? THAT IS CAUSING GREATER DIFFERENTIATION, WHICH IS HEALTHY. JONATHAN: IS THERE A CHANCE THE BIG KEEP GETTING BIGGER? STEPHEN: I THINK THAT IS A POTENTIAL OUTCOME HERE AND ONE OF THE THINGS WE ARE TALKING ABOUT WITH OUR CLIENTS IS, IN THIS WORLD OF GREATER DIFFERENTIATION AND HIGHER COMPETITION FOR CAPITAL WE WANT TO FOCUS IN THE NEAR TERM ON QUALITY AND TALK ABOUT SOME OF THE HYPERSCALERS WHO ARE RAISING HUGE HEADLINE NUMBERS BUT WHEN YOU LOOK AT THAT RELATIVE TO THE SIZE OF THEIR BALANCE SHEET, INTEREST COVERAGE STILL LOOKS CONSERVATIVE. LISA: WHAT DO YOU THINK IS A BETTER BALANCE SHEET, META FOR FIVE YEARS OR THE U.S. GOVERNMENT FOR FIVE YEARS? STEPHEN: INVESTORS ARE SAYING THERE IS A CONVERGENCE BETWEEN THOSE TWO. THE U.S. GOVERNMENT IS STILL THE GOLD STANDARD. THE DOLLAR IS NOT LOSING ITS RESERVE CURRENCY STATUS, SO I THINK THE TREASURY MARKET WILL REMAIN THE FOUNDATION OF GLOBAL CAPITAL MARKETS, BUT I THINK INVESTORS ARE LOOKING FOR OPPORTUNITIES IN A WORLD OF HIGHER RATES TO PICK UP INCREMENTAL SPREAD, LOOKING AT THESE HYPERSCALERS AND SAYING, WE HAVE HIGH CONFIDENCE THAT EVEN IF THERE IS VOLATILITY IN THE NEAR TERM, LONG-TERM THESE COMPANIES ARE GOING TO BE THE LEADERS OF OUR ECONOMY. LISA: MIKE STIFEL WAS TALKING ABOUT HOW THE NEXT LEG OF THE ECONOMY MAY BE ON THE FED'S WILLINGNESS TO RETRACT SOME OF THE TIGHTENING THEY HAVE DONE. THAT DOESN'T NECESSARILY MEAN CUTTING RATES. DO YOU AGREE WITH THAT OR THINK THAT THIS IS INDEPENDENT OF ANY FED ACTIONS? STEPHEN: I THINK IF WE SEE A REVERSAL IN TERMS OF THE TIGHTENING OF FINANCIAL CONDITIONS -- BY THE WAY, MARKETS THEMSELVES HAVE DONE SOME OF THE HEAVY LIFTING FOR THE FED IN TERMS OF THAT TIGHTENING -- I THINK THAT IS POTENTIAL FOR ADDITIONAL UPSIDE. WE THINK TECH COMPANIES ARE GOING TO DRIVE ANOTHER STRONG YEAR OF EARNINGS GROWTH, BUT IF YOU LOOK AT THE BROADER ECONOMY THE INTEREST RATE-SENSITIVE PARTS OF THE ECONOMY HAVE AN IN A RECESSION FOR A WHILE. IF YOU SEE SOME EASING FINANCIAL CONDITIONS, A PIVOT TOWARD EASIER FED POLICY, PERHAPS YOU GET SOME UPSIDE IN THE CYCLICAL PARTS OF THE MARKET. JONATHAN: I'M WONDERING WHERE THOSE EASIER FINANCIAL CONDITIONS ARE GOING TO COME FROM? SEE? STEPHEN: THAT IS WHY OUR BASE CASE IS WE ARE GOING TO SEE ANY FILLY EASIER CONDITIONS. I'M SAYING THAT IS AN UPSIDE SURPRISE. THE FED IS LIKELY TO HIKE ONE MORE TIME BEFORE THE END OF THE YEAR AND PROBABLY WILL BE ON HOLD FOR THE NEXT PART OF NEXT YEAR. I THINK ALL OF THIS COMPETITION FOR CAPITAL IS GOING TO KEEP THE RETURN ON EXPECTATIONS HIGHER AND THAT MAY BE A CHALLENGE IF YOU ARE LOOKING TO ACCESS CAPITAL, BUT IF YOU ARE A PROVIDER OF CAPITAL YOU HAVE A REALLY COMPELLING TOOLKIT RIGHT NOW AND A LOT OF DIFFERENT PLACES TO LOOK IN TERMS OF WHERE YOU WANT TO ALLOCATE THAT. JONATHAN: HOW ARE YOU ANTICIPATING THE LABOR FORCE WILL BE TRANSFORMED? IT IS ALWAYS DIFFICULT TO UNDERSTAND WHERE THE YOU ARE REMOVING POST-PANDEMIC BLOAT, WHETHER YOU ARE MAKING EXCUSES AND NEED TO RATIONALIZE THAT SPEND BY CUTTING ELSEWHERE. THE UNEMPLOYMENT RATE IS GOING TO STAY AT 4.1% FOR THE NEXT TWO YEARS. DO YOU SEE IT THE SAME WAY? STEPHEN: ONE OF THE CHALLENGES WE TALK ABOUT THE POTENTIAL DISRUPTION OF TECHNOLOGY AND AI ON THE LABOR MARKETS BUT ONE OF THE THINGS WE TALKED ABOUT IN OUR LONG-TERM ASSUMPTIONS PAPER IS THIS IDEA THAT AI IS NOT GOING TO REPLACE JOBS, BUT FILL A GAP BEING CREATED BY DEMOGRAPHIC TRENDS. YOU THINK ABOUT AN AGING LABOR FORCE, MORE RESTRICTIVE IMMIGRATION POLICY, THE LABOR FORCE IS GETTING TIGHTER AND WE ARE GOING TO NEED THAT DISRUPTOR. JONATHAN: DOES THAT SUPPRESS WAGES? STEPHEN: I THINK HE KEEPS WAGES MORE BALANCED, WHICH MAY NOT BE THE WORST THING IN THE WORLD WHEN YOU ARE THINKING ABOUT FED POLICY AND INFLATION. ONE OF THE REASONS THE FED CAN REMAIN MORE ON HOLD OTHER THAN HAVING TO TIGHTEN SIGNIFICANTLY IS WHY WE ARE SEEING INFLATION IN ENERGY MARKETS WE ARE NOT SEEING IT IN WAGE MARKETS. THAT IS THE DIFFERENCE BETWEEN NOW AND 2022. JONATHAN: THIS IS THE SEQUENCE OF THINGS THE FED CHAIR IS HOPING FOR. LISA, YOU WERE IN THAILAND. THAT UPFRONT YOU GET THE DEMAND SHOCK AND MAYBE GET THE SUPPLY RESPONSE FURTHER DOWN THE ROAD? LISA: THE PROBLEM IS YOU DON'T KNOW HOW LONG THAT IS AND ULTIMATELY DOES INFLATION GET AWAY FROM YOU IN THE MEANTIME? I WONDER IF YOU HAVE RISK AVERSION WHETHER THAT STARTS TO SHIFT THE PENDULUM MORE TO FIXED INCOME FROM EQUITY? WHETHER YOU ARE TAKING AWAY FROM SOME OF THE FUTURE GROWTH AS YOU DO HAVE TIGHTER FINANCIAL CONDITIONS, UNLESS THE FED COMES OUT WITH AN ACRONYM, THEN ALL BETS ARE OFF. ANNMARIE: IN THE MEANTIME IT IS GOING TO GET POTENTIALLY MESSY AND THERE WILL BE A RESPONSE FROM PEOPLE. JONATHAN: POLITICALLY, NO DOUBT. STEPHEN PARKER OF JP MORGAN PRIVATE BANK. WE HAVE A BIG 24 HOURS COMING UP. TOMORROW WE WILL CATCH UP WITH PATRICK HARKER, AND THE FORMER IMF DEPUTY MANAGER DIRECTOR GITA GOPINATH. SO MANY PEOPLE BELIEVE SHE SHOULD BE RUNNING THE IMF. LISA: SHE HAS SOME GREAT THEORIES ON WHAT IS GOING ON AND HOW INFLATION IS EMBEDDING ITSELF INTO THE SYSTEM. ONE THING WE HAVEN'T TALKED ENOUGH ABOUT IS HOW MUCH SUPPLY CHAINS HAVE SHIFTED AND HOW MUCH CAPITAL NEEDS TO GO INTO THEIR LOOK -- DEVELOPING NEW SUPPLY NEW LINES OF WHERE YOU GET SOME OF YOUR PHYSICAL GOODS. THAT IS CREATING AN INEFFICIENCY THAT REVERSES SOME OF THE GLOBALIZATION THAT WILL AT TO INFLATION OVER THE LONG-TERM. ANNMARIE: WHEN IT COMES TO SUPPLY CHAINS A HUGE ISSUE HAVE BEEN TARIFFS. YOU SEE COUNTRIES STILL DIGESTING THE TARIFF HIT ON TOP OF HIGHER DIESEL PRICES. JONATHAN: TOMORROW, EARNINGS FROM MICROSOFT AND GOOGLE AND A FED DECISION AS WELL. AND A CHAIRMAN WARSH NEWS CONFERENCE. FULL COVERAGE ON "BLOOMBERG SURVEILLANCE." AND A SPECIAL EDITION IN THE AFTERNOON. FROM NEW YORK CITY THIS MORNING, GOOD MORNING. THANK YOU FOR CHOOSING BLOOMBERG TV. THIS WAS "BLOOMBERG SURVEILLANCE." ♪