Oil Tops $105, Goldman Execs Eye Massive Bonuses

On track for a second day of selling 30 minutes until the start of your trade. I'm Danny Burger. I'm Mike ball. Bloomberg open interest starts now. Coming up on today's show. Oil jitters return. Brent tops 105 fueling fresh selling in stocks and bonds. Another mega eye financing deal is taking shape as the chorus of bubble warnings start to grow, and Goldman's top executives are in line for one of the bank's biggest bonus payouts ever. Now some of the stocks are watching. Pepsi is up in the premarket, even though there was a little bit of concern about how much people are spending with higher prices, they did beat Wall Street's beat Wall Street expectations both on the earnings and revenue side, international sales. That's what helped them because there was softer demand in North America. The company did, though, cut its full year profit outlook as higher cost pressure pressures margins I'm elsewhere. The big driver of this market is oil that is rising. Take a look at the price action here. Up 2.5%. Middle East tensions stoking concerns about inflation. Let's head back over to the desk where Michael Paul joins once again this morning. And Mike it's again oil really dominating things this morning. And that's sending yields higher. Too high a couple things going on. For one the Atlantic reporting that perhaps this president is going to strike on Iran before the midterm elections. And concerns just ratcheting up of tensions in the region to yeah, good yields taking the cue and oil again in the driver's seat. It's funny. We had a good ten year auction yesterday. The minutes didn't really change the narrative. Lawler sounded a little more hawkish said things because of growth being strong. Things can go a little quicker below. And behold, here we are again talking about oil. We don't know. And again, it's not just the Middle East. I keep pointing this out. The actual attack in the Black Sea sort of also set this off because the Russian barrels now are more in question. So there's a bigger geopolitical risk premium. On top of that, of course, we have a financing right there with the yield tire. That's exactly where I was going to go next. We're going to get into this with Sarah Fryer in just a moment. But it's another day of another company looking to borrow tens of billions of dollars to fund their AI spending. It was SpaceX yesterday. Broadcom today. And by the way not just companies. This government too. We had a ten year auction yesterday. It went well. But we're going to get a 30 year auction today right. And the 30 year is actually more important in a lot of ways because it's more about the fed credibility, which we have rebuilt. But the worry is now if they kind of pause, and we've seen this in other parts of the world, if they pause and it becomes more unhinged again and more pressure on all the financing of everything, let's talk about the financing and start with that tech story. Because as we mentioned, Broadcom already looking at another massive AI financing deal, this one tied to open AI. The company has held early talks about ranging $30 billion in debt to help OpenAI pay for the custom AI chips that the two companies are developing together. Let's discuss with Bloomberg Tech editor Sarah Fryer. And Sarah, it's another day with this type of deal. Nvidia does this a lot to the sort of chip financing, secular financing, concern type deals. But what are the details behind Broadcom yet again arranging raising money to fund the purchase of chips that it's co-developing with OpenAI? I mean, we're seeing this over and over. Um, they're working also with anthropic. They're working also with Google. Um, this is uh, I'll say it again, an extremely expensive business to build in. You need new chip. Your chips only have a certain lifecycle. You need to keep developing new ones. You need to buy chips to house in the data centers. You need to furnish the data centers in, in, uh, different communities. Uh, make sure that they are that you have the energy resources. It is a lot. Um, and and this is this is, uh, OpenAI, uh, fresh off of, um, deciding or declaring that they're going to IPO next year. I know that happened a couple months ago, but in our in our minds, you know, that's still pretty recent. Um, they have the need for more money, for more financing to fund their growth if they're not going to IPO this year. So they're working here with Apollo and Black. So I'm just looking at my notes here at 20GW of eye computing capacity by 2028. This number keeps changing. Like how much confidence does the market have. I mean every week it just keeps growing. It's not even monthly anymore. It's just going so quick. It's growing quickly. And I think we also need to think about the different factors involved in that growth. Right. It's not just, um, the demand in the market for I, it's also the cost of these chips. It's it's the, the supply calculation. There just aren't as many of them to go around. They need more and more training around. They need to get their product to be better and better. Um, and this is you're right. It's going to accelerate. And then you get to a question of, of when does this collide with reality? When or when do we just or are we just fundraising? Um, until there is no there's no more funders willing to do private debt deals and, and, um, complicated creative financing deals, um, in the public market can't withstand it, you know, where when do we get to that point? You know, I don't think that we're at that point yet. Um, but it's certainly something that that we're looking at, we're looking at, you know, when people are skeptical of public market, uh, events, for example, if there's an earnings where a company is extremely well, but it's not good enough, um, as we saw recently, um, you know, I think we're going to see a lot more of that this quarter. This earnings season is going to be very telling. Yeah, it's very expensive. And then consumers don't want to pay up for this stuff, which doesn't help either. Sarah, thank you so much for joining us. Bloomberg's Sarah Fryer. Let's turn to earnings now. And PepsiCo beat third quarter expectations. But it cut its outlook. The company is facing higher costs in North America that are weighing on margins. But international business was strong enough to help shares move higher this morning. Joining us now is Ken Shea, senior consumer products analyst at Bloomberg Intelligence. Ken what was your reaction to the earnings figures this morning? Yeah. Hi, Danny. Um, as you said, it's kind of a mixed bag. You know, the International Division now, 45% of its sales is really, well, you know, 8% topline organic growth. Wonderful. The problem is that Pepsi Food North America continues to be a sluggish performer, well below company expectations. You know, earlier in the year, they said we're going to revamp the products, uh, making more healthy, functional, uh, attributes and so on. And they have to their credit. It just hasn't resonated yet with consumers to to move that top line fast enough yet. And so, as you alluded to, the company cut its guidance primarily because of its low performing PepsiCo North America division. And I think the company's going to have to face some, uh, tough decisions going forward. You know, it's clearly underperforming, and they have a lot of far flung assets, and it'll be interesting to see how extensive they addressed the situation. So it sounds more like a sort of brand specific issue. Maybe they're a little behind consumer trends here in America, or is this sort of something we can still say has a little bit of a macro pulse to it, where you're generally seeing consumers pulling back from this category? Oh, sure. That that's definitely part of it. Uh, no doubt. I mean, consumers feel the pinch, you know, and PepsiCo to their defense, which are not the only, uh, consumer goods or food manufacturers for that matter, are facing these pressures we saw from General Mills and ConAgra. There's many others that are facing the same macro pressures. Uh, you can't ignore also the secular pressures of the GLP one drugs out there is a change in consumer mindset, how they perceive the foods that they eat every day. And so it just provides Pepsi an opportunity to continue to innovate as they are. It's just a matter of pushing faster, particularly in the macro environment we're in, as you mentioned. All right. Let's talk about everyone's favorite topic, the GLP ones. And that's probably playing a large part into it I guess is what you're saying. So not only do we have maybe pressure from higher pump prices, uh, and then we also have changing dietary behavior looking at like Halloween and some of the upcoming holiday season. This is really a big time for them. And they're still getting very defensive into it. I mean, do we think this is really going to be a tell for as we go through this period of we really broken some normal trends here. Well, PepsiCo doesn't really kind of candy aisle per se, but Halloween certainly will be a period uh, of their snacks and other, uh, related goods, um, as a barometer to see how they're doing. Um, you know, the company said it's not going to change from its knitting that they said earlier in the year. Look, we need to upgrade the products. Clearly, it's a very competitive battlefield, and we feel we have the brands that we can do it by adding more functionality. Fiber, uh, advanced hydration on the soft drink side, protein across both beverages in foods. And it's going to continue to do that. I think some of the, um, concerns the analysts expressed on today's call was what does execution things. And, uh, one of the things you actually can do with your, uh, relationship with retail is just to move this faster. Can I think I would be very much okay if Pepsi stops putting protein in literally all of their products, we don't need protein drinks. Ridiculous. Can. Thank you so much for joining us, Ken Shea of Bloomberg Intelligence. Let's turn now to Wall Street. Goldman's top executives are poised to collect special bonuses totaling more than $500 million. It would rank among the biggest payouts the firm has ever awarded. Let's get more with Bloomberg's chief Wall Street correspondent. Shrewd are not arrogant. I mean, I would hope so, Shery considering that they've had blowout results. Yeah. Well, what's really interesting about this is this was never meant to be like every other bank. This award that was put in place in 2021 was only supposed to be for the top 2 or 3 executives. But there was some pushback from shareholders. There was a lot of concern among employees as to why David Solomon and his deputy were getting a special bonus grant. At a time when, you know, just a few months earlier, that same Goldman Sachs board had docked $10 million from David Solomon Speer because he was in charge of the banking group. When that one MDB bribery scandal happened. Goldman's role in helping that loot of that investment fund in Malaysia and some senior executives had to, you know, there was penance for it and $10 million was Solomon's Price. So after the pushback, what happened was Goldman Sachs board decided to expand these awards to their top roughly 20 executives. At least 20 are still remaining a little more back then. And as a result, as you come through to 20, 26, five years on with what we've seen in markets, the incredible environment it has been for capital markets across the IPO market, dealmaking, the trading activity. Goldman's in a really sweet spot for all of that. So of course the stock has done really well. It is now close to $900 per share, roughly the same level where it was a year ago. But over the last five years it has gone up quite a bit, 150% returns over the last five years, and as a result, this bonus pool will number well above $500 million if the share price holds or even goes up heading into the next two weeks when the stock awards will be finalized, worker's compensation for the rest of the rank and file. And this has put pressure on that to go up as well. You have note you can be assured that come end of this year, bonus figures across the street will be phenomenal. I think we had a report yesterday from the state of New York or the City of New York, which talked about what the bonus figure could be if we are headed for another record. When you look at the numbers put up by all the banks, it has been a phenomenal year. You're seeing that in the results that are posting, not necessarily in the share price because again, stock investors are starting to look ahead. And so if you actually look at the stock price for all the big banks this year, year to date is has not been great. We are lagging the S&P 500 and other broad indexes pretty significantly. Goldman Sachs is flat. Bank of America's negative for the year. Morgan Stanley is up about 7%, but nothing like what we've seen in the broader index. So while the bonus figures at the end of the year for the rank and file will also be pretty healthy, maybe not $500 million healthy, but plenty million dollars for sure. The question is 2728. Can you maintain this momentum that you've seen over the past five years? We've had plenty of strategists come on this show and say that financials have been beaten up too much, so maybe they will get some love to end the year. Thank you so much for joining us. Straight out. Not Rajan from our finance team and a check on your markets. We're heading for a second consecutive day of losses. Two things feeding into higher yields and higher oil prices. Those two are certainly related with concerns that this is a president who might, according to The Atlantic, draw up plans to strike Iran before the midterm elections. Shares. Uh, rather, Brent crude is up four and a quarter of 1%. And at the same time, we get a 30 year auction plus more hyperscalers looking to tap these debt markets. The Nasdaq underperforms the S&P down by a third of 1%. Let's take a look at some of the other movers this morning. With that is Norah. Good morning Norah. Hey Danny. First off, Levi Strauss may have leaned a little bit too much into baggy jeans, the company posting its slowest direct to consumer growth since late 2022. And the CEO says that Levi's went too heavy on baggy styles for Back-To-School, just as shoppers were actually shifting back toward low rise jeans. Apparently, those are back in style. The company still raising its earnings outlook, though for the year, but shares down by more than 4% in the premarket trade. Next up, Wolf speed is potentially getting a lifeline. That's after filing for bankruptcy just last year. The Defense Department issuing a more than $1 billion loan for the chip maker to continue operations, citing national security. And Wolf Speed will offer the U.S. a stake up to about 7.5%. Shares of Wall Street higher double digits, a higher by about 14% in the premarket trade. And finally, Goldman Sachs upgrading pallets here to buy from neutral. Following the stock's underperformance this year, the firm thinks that Palantir could be gearing up for another run as demand grows for its more specialized AI software. Shares of Palantir hire by about 2.5%. Those are your morning movers, Danny. Nora, thank you very much. Coming up on the show, the Bet Tiger Global made on open five years ago, is about to pay off in a massive way. We're going to bring you the details next. You're watching open interest. Let's get you some high interest stories a look at what's making headlines around the world. Saudi Arabia is considering a major change to its oil contracts. Instead of buyer sending tankers through the Strait of Hormuz to pick up crude, Aramco could deliver cargoes outside the strait or directly to Asia. The company is also weighing Brent based pricing, giving customers more flexibility as war disrupts Gulf shipping. Josh Kushner, the founder of VC firm Thrive Capital and brother of Jared Kushner, is building a much broader investment empire. Thrive now manages over $65 billion, expanding beyond startup bets into public companies, eye focus, acquisitions and major sports assets. Bloomberg estimates Kushner's fortune at about $17.5 billion. Elsewhere, Tiger Global could score one of its biggest wins ever from an early bet on open AI. The firm invested $150 million years ago now, with OpenAI reportedly seeking a $1.4 trillion valuation. Tigers paper profit could reach about $5 billion. For more, we're joined by Bloomberg investing reporter Hema Parmar, who wrote the story. Fantastic reporting. How far back does this relationship go between Tiger Global and OpenAI? So we know that Chase Colman and Sam Altman knew each other at least until 2021. Probably before then too, as, um, Sam had called Chase Coleman saying, you know, would you like this opportunity to invest back in 2021. Uh, incredibly lucrative. Now, the funding round back then or the valuation of, um, the investments back in 21 was just $15.7 billion. Just is still a lot. But back then, compared to the $1.4 trillion mark that's on the company now, um, or is poised to be as a pursue the next funding round, pretty significant um, investment and great to be in that early, which is what these firms are looking to do make the bets early and sizable. And how much is this really drive the top line performance number and how are they going to monetize it? What are they playing to do as far as exiting and actually really getting the cash? Yeah. So this already the investment is boosting the hedge fund, uh, which makes mostly public investments. But some privates, uh, it's boosting the crossover fund, which says both public and private. And they also have a private investment vehicle. So like a venture capital fund, and it's sitting in the latest one as well as the one previous to that. So we've seeing we've seen the hedge fund up about 9% this year. The crossover up more than that. Uh, the um private investment fund 16 up 44% native fees. That includes all the all the investments that are in there. But OpenAI is a pretty significant one, including an investment in Waymo and Anthropic. So some of these big names in their venture capital fund. I remember post like 20 and 2021 when private markets were in a frenzy. There was this narrative that started to crop up. That was, uh, Tiger Global and all the tiger cubs, they were tourists in private capital. They got in at the wrong time at the highest prices. Um, they shouldn't have been there. They need to wind down operations. I wonder if this narrative has now been sort of flipped on its head, just because of the success of the LMS that many of them invested in. So what we saw in the wake of that period, which was very tumultuous, was Tiger Global shifting back to the way it used to do things sort of back in the day. Which is make fewer investments, make them make them more concentrated. So this latest venture capital funds called Pep 16. That fund is $2.2 billion, which is the smallest it's been in many, many years. And it's a lot more concentrated. So Tiger Global back in the day, like they invested in JD.com well before it became the big investment that it is. And they actually made more than $6 billion on that investment alone because you want to get into these things early. So um, for them and many of their peers were a lot more active ahead of that curve down, which you referred to in 2022. Um, and so we are seeing a bit more moderation and how they pursue the space. Fantastic reporting. Thank you for bringing us this story. That's Bloomberg's Hema Parmar. Coming up Cameron Dawson on rising oil prices. How that will impact earnings and the market outlook. That's next. This is open interest. Oil jumping this morning as supply risks builds. Middle East tensions are raising concerns about flows through the Strait of Hormuz, while the Gulf storm threatens production and reporting suggests that the president could strike Iran before the midterms. New edge Wells Cameron Dawson writes A drop in oil prices that drives a drop in rates would breathe new life into everything else, but this means that a broadening out trade becomes an implicit bet on the Iran war. Let's bring Cameron in. She is the new Edge Wealth chief investment officer. I mean, Cameron, that feels like bad news. It feels like the broadening out trade will take some time to materialize then. Well, it means that the broadening out trade really is dependent on getting some easing pressure with lower yields, meaning a peak in yields would certainly help breathe new life into this market, because we're at a point where we hit a new all time high in three quarters of the market is trading below its 50 day moving average. A very rare kind of setup, and we have been able to have a resilient market in the face of soaring yields in the face of higher oil because of that cohort of Mag seven at the top, keeping that resilience. But in order to see other things participate, we do think you have to see that peak in yields peak in oil prices, which kind of makes it a binary. But in order to get broadening out some oil, uncertain, let's give it that. We know though that growth also driving yields higher and obviously deficits and all this I CapEx spending. When does it kind of discipline the market. And then that aspect of it I mean oil we can't really do much about it. But that aspect actually cap sort of where yields can go. This is the question of we know rates are higher, but are they at the point that they are too high where they're actually weighing on the outlook for earnings and the outlook for growth. You can say the same thing for financial conditions. Financial conditions have tightened a little bit, but they are nowhere near two tight or tight even at all. If you look at the Bloomberg Financial Conditions Index, it's still just a hair away from the easiest level since 2021. So yes, we're seeing the cost of capital go up, but this isn't necessarily deterring companies from raising capital to continue to spend. We got that with SpaceX yesterday. With this $40 billion, we're seeing many multi-billion dollar deals continue to come through. And I think the really big question is, as we turn our minds to 2027, will this higher cost of capital actually cause some of the hyperscalers to pull back on their plans, on their spending plans, which of course would feed into things like semiconductors, which is the big source of earnings upside this year. Less than a minute here. But you did see credit default swaps five years on space. Trump 195 basis points yesterday. Is that just hedging or is that the start of a market push back? Look, I think that you're starting to see pain certainly within high yield spreads as well. They're up about 46 basis points. That is not a wide spread for high yield spreads, but a lot of pain within something like Triple C's. So you are starting to see cracks in this credit market. They are not so acute or so extreme that it's emblematic of widespread stress. But certainly this market is becoming more discerning. All right Cameron, we're going to continue this conversation after the opening bell. That's Cameron Dawson and I check on your markets. Just minutes to go until we get that opening bell. Uh, you are looking at stocks continuing to fall for a second consecutive day as the Nasdaq underperforms your opening bell after this. Let's get your trading day started on this Thursday. You're watching open interest. I'm Dani Burger Matt Miller is still off and it is a negative start to the day on track for a second consecutive day of losses, down a third of 1%. The Nasdaq falls half a percent, but we're still hovering around all time highs. It's a big jump in oil this morning that seems to be pressuring think things and continued spending from hyperscalers down at the New York Stock Exchange. This is a Q1 sky dance. They've officially listed going away from the Nasdaq now with their merger onto the New York Stock Exchange. You can see David Ellison there, the new CEO, uh, Inon Crites, who they took away from metal. Ringing the opening bell. Uh, we're going to be catching up with Lynn Martin, who you see over here in the next hour about this big win for the New York Stock Exchange. Um, elsewhere down at the Nasdaq. You have ever spin. Uh, they do components for defense tech, the technology that goes in it. Uh, and they look very happy. Good for them. Uh, and our opening bell. We've got Pepsi on the move this morning. Uh, Pepsi is up about 9/10 of a percent. It beats Wall Street expectations on both earnings and revenue. The news for them is that international sales helped to offset softer demand in North America. But the company did cut its full year profit outlook as higher cost pressures margins. Let's get back with new Hedge Wealth chief investment officer Cameron Dawson. And again, it's sort of this dynamic of of the issues with higher oil and higher yields, and especially with earnings around consumer companies. What are you expecting this earnings season? Are we going to see not just margin pressures but consumers really pushing back? That is the big ultimate question because the consumer has been so very resilient in the face of these higher oil prices, mostly in the context of a world where wage growth has continued to decelerate. And we've now effectively been in a world where income growth transfers after inflation has been negative for a year. So there's been a lot of reasons for consumers to come under the pressure, but they continue to reach very deep in their pockets to continue to be able to spend. One of the reasons they are able to do that is because of the wealth effect. When you have a surging stock market and house prices that remain resilient, that allows people or encourages people to spend down more of their savings or save less. And so the end result is you can kind of outspend your income growth because you're dipping into savings more, which just means that the consumer's ability to spend does require the stock market to keep on chugging along. So how important is that consumer really? Because obviously we know the I CapEx has been the broader story for earnings. But here we go. We got savings rates kind of falling. We know that to your point there is a wealth effect. But we're seeing money market funds kind of come down. Well indicating maybe people are pulling a little money out there to keep their lifestyles going. We got a decent breath explosion out of Q2 earnings, which really helped because it wasn't just a AI anymore. I mean, is this really what we need for this rotation to kind of come back into vogue? Well, if you had asked me at the beginning of the year, we have an oil price shock with a consumer with decelerating wage growth, what direction would household consumption forecasts go? The answer probably would not have been up, but we started this year expecting 1.9% growth based on consensus estimates on the Bloomberg 1.9% growth for household consumption. They're now sitting at 2.2%. So this overall economy has been so resilient to the macro shocks. And of course that has translated into resilient earnings. Now on the earnings front it is much more concentrated. Look at earnings growth this quarter, 29% is the expected earnings growth rate. That's because energy up 114%, benefits from the higher oil prices, but tech growing 65% in earnings growth. And that is because semiconductors are expected to grow 130% in their earnings growth this quarter. So it's a very, very bifurcated market where you still see cohorts such as financials and consumer discretionary, consumer staples, utilities all very much at the bottom end of the pack. JP Morgan out with a note this morning just underscoring that that AI related stocks are 49% of the index. And we're expected to get anthropic and space isn't in the S&P. Yeah. And open AI. So it's going to get even worse. But we've lived through past periods of concentration. Is there anything about the nature of this one given I maybe given the spending and the importance of the economy, that it's different this time around, that the concentration is more or less concerning? It's never different this time. The question is always just about timing. So if you look at the concentration within the market, we are back to prior peaks of concentration that we saw prior to other periods of market weakness. You go back to the 1990s, you have the Nifty 50 in the late 60s, of course, in the late 1920s, all at times of peak concentration that were then followed by two big things a period of weak market returns and massive rotations in leadership. But we can observe that we're at high concentration. That doesn't mean it's necessarily going to imminently unwind. So the timing, unfortunately, is everything, which just means you have to respect the trend in the near-term. You respect the earnings, you respect the price momentum. But you know that at some point, likely in the next decade, we see a period of lower returns and you see big rotations. So you see all the overnight leading into the growth story, giving the fed cover to maybe remove the Powell cuts, the risk management cuts, not really going to materially change the financial conditions story compared to the oil compared to yields. In my opinion, do you think that's true or do you think the fed is something we really do need to pay attention to is it's still a little early. Well, I think that we did hear from Warsh back in the last couple of speeches that he had that he talked about financial conditions not being tight. And that is absolutely true. Look at that Bloomberg Financial Conditions Index. Yes, we've seen some wobble in markets. And even with this movement higher up in rates, you're still nearly at those 2021 levels. When financial conditions are easy, it's expected that they are stimulative to growth supportive of growth, which just suggests that it is unlikely that you will get your inflation target back to where you want it to be, or inflation readings back to target when you have financial conditions this easy. The question is, does the fed really want to tighten conditions that much? It would be a rather pyrrhic victory because of what we were just talking about the US economy, the U.S. consumer relying so much on equity market strength. So to tighten conditions you have to see more equity volatility, more equity weakness. But of course that comes at a great cost. Also the fed minutes yesterday speaking of how they're viewing this market, talked about I investments leading to inflation and I wonder to what degree. Getting back to our earlier conversation of what level of yields finally cracks the market. If this is a fed that wants to test that, that realizes that in order to rein in, uh, financial inflation and make financial conditions more severe, that they need to do something that sort of puts the brake on the AI narrative. I think that there are two cohorts of borrowers, one that is pretty much impervious to yields. Look at somebody like Google. Google has a net cash position, meaning they have more cash than they have debt, which just suggests that in upward movement and interest rates of about 100 basis points probably doesn't deter them. Now somebody like Oracle, who has a lot of debt and is seeing their spreads widen out that much more probably is more sensitive. Now, the other aspect is that a lot of this CapEx spending is dependent on the frontier labs continuing to spend a lot of money, which itself is dependent on them being able to IPO. So anthropic and OpenAI IPOs is sensitive to financial conditions. One question is because we've seen this higher volatility. Is that one reason why we've seen OpenAI and anthropic delay? The IPO is that a lot of people thought would have already come in the third quarter. So if financial conditions do tighten, the IPO market slows even further than what people were expecting it to be gangbusters this year. That could trickle into the hyperscalers CapEx forecasts and thus trickle into lower inflation because they're not spending nearly as much money. So we're talking a lot about levels here, but the rate of change is always important as well, especially the rate of change in the curve. So we had a decent amount of flattening subsequently. Now steepen which usually indicates a better growth pulse. But then to your point we're not seeing the breadth in equities. So again what's kind of your thoughts here on this rate of change. Is it maybe a leading indicator to everything into the earnings season. Because we kind of laid out a lot of thoughts here. Yeah. We wrote a piece over the weekend inspired by Tina Turner, saying it's simply the best. You have had the best earnings growth over the course of 2026, you're running at about a 35% growth rate. That growth rate is likely to slow to more than half of that, or less than half of that. As we go into 27 slowing to about 14%. So your point is exactly right. The equity market cares about the rate of change. It cares about the second derivative. And so how do we think about a world where the pace of earnings growth is getting cut in half? We think that's one reason why equity valuations are lower. You have a market that's gone from 23 times this time last year to sub 19 times today. That's reflective of higher yields. But it's also reflective of the fact that earnings growth is likely to slow materially going forward. Tim one of the best. Thank you so much for joining us Cameron Dawson with the latest on these markets. And let's get a check on them because we're about ten minutes just under that into your trading day. And you are looking at another day of set for losses down a third of 1%. A lot of it really is the pressure of higher oil prices. But because of that, in the winning column, you are going to see a lot of energy companies doing well. Exxon, Chevron. Um, Philip Morris I noted notice that Philip Morris and some of the other tobacco companies are doing well. It appears that the FDA is reviewing some of their processes for approval. So that's helping them. But alphabet up there, too. Google unveiling a new agent. Taking on muse, taking on Dodd. So that's pushing the shares higher this morning to the downside. Broadcom is there as they look to tap these debt markets for yet another round of financing. This one to help open I partner with them to buy Broadcom chips AMD also down this morning a new report coming out from CNBC that President Trump sold some of his shares in AMD and bought shares in meta. So that's impacting those stocks. And more broadly the semis are down this morning. So taking a look at your sectors how they're shaping up on this negative day. The only things doing well are energy communications and staples. Staples some of the big gainers and their one Pepsi doing well but two also those tobacco companies I mentioned. Again energy is higher as the price of oil moves higher to. Rounding out your bottom is health care, infotech and industrials. Coming up on the show. New details emerge about the lengths the Ellison family went to close the Paramount Warner Brothers deal. We're gonna have that next. This is open interest. Let's get some top calls here with what the selling side has to say is normal into. Hey, Nora. Hey, Danny. Good morning. First up, Goldman Sachs lifting Collins here to buy from neutral and saying the stock's lagged this year. But I demand could actually drive another leg of growth. This all especially as governments and businesses look for more tailored AI tools. And next up is upgrading Booz Allen Hamilton to buy and saying its government consulting business may be close to actually bottoming out, but strengthen national security being overlooked. And finally, JPMorgan starting coverage of Hilton Grand Vacations at Neutral. The firm says that the stock looks cheap, but a tough economy and high interest rates could keep weighing on the timeshare business more broadly. Shares of Hilton Grand Vacations down by about 3/10 of a percent. Those are your top calls, Danny. Nor, thank you very much. We'll catch up with you in the next hour. Now we have some new details emerging about the formation of Skydance. David Ellison and his family invested approximately $17 billion to complete the $110 billion Paramount Warner Brothers merger. That's according to public filings. Let's discuss with Bloomberg's Dylan Sloan. Um, Dylan, I mean, they've just poured money into this thing. This is just another amount on top of what the Ellison's have already put into Paramount. Skydance. Exactly. Yeah. You know, in the year since that, uh, this deal was initially agreed to. The real question along the whole time has just been, what's the financing mix will look like $110 billion enterprise value. And we've known for a long time that that was going to be split roughly 5050 between debt and equity. But of course, uh, something that came up during the negotiations and we've known for a long time is that that equity portion was going to be backstopped by the Ellison family and Redbird, one of their longtime investors in Skydance. $47 billion is a lot of money, even for Larry Ellison, you know, was briefly the richest man in the world last year. Currently worth about $194 billion. But we've known that there's going to be some outside investors coming in. And we now know from filings released recently that Ellison and his family ended up contributing about $17 billion. We had some sovereign wealth funds coming in, a South Korean company coming in, and Redbird kicked in a little bit of extra as well. Just how realistic is this 6 billion of cost savings in three years? The synergies they claim. I mean, we've heard this so many times throughout the history of corporate acquisitions. Definitely. Yeah. I mean, uh, that's definitely something that investors have been zeroing in on. The company is going to be, you know, sitting on a pretty significant debt load, um, around $80 billion in net debt, um, as was they started trading yesterday. And yeah, I mean, Ellison himself is verbally committed to cutting down on costs and trying to address that leverage. So that's something the company is certainly going to be looking at closely. But we'll see on that front. I was going to say it's just such a tall order for them. It's something Mike and I have discussed before the movie slate that they're committed to building out the fact, as you mentioned, that they have so much debt. I mean, Dylan, how fine of a line are they walking in order to make this thing work? And not to mention already they've been met with skepticism, with shares falling since this deal closed? Exactly. Yeah. Speaking specifically to the debt side of the financing, I mean, it was really a sprint to the finish line. They closed $52 billion debt deal in just over a week, which is really pretty exceptionally fast for a deal of this size. Um, what stands out here to my colleagues reporting that, you know, usually in a deal like this, you'd be relying primarily on speculative grade debt. There was also a large tranche of investment grade debt here as well. That doesn't come with the covenants that would definitely typically come with that speculative grade debt. So, you know, offering some of those investors a little bit less protection than they might normally expect. Um, you know, initially we saw as soon as these bonds started trading, they did trade down. There was definitely some skepticism from the market. But they've recovered since then. And, you know, again, significant debt load. But they've said, you know, verbally they they've committed that that's something that they're going to be tackling keeping that leverage down. So we'll see where it goes from there. So how much like governance and sort of strategy influence are these sovereign wealth funds and other large investments coming in? About 3 or 4 guys. That's a great question. Yeah. Honestly, we're still waiting on most of the filings to see exactly how that equity is split up. We know it was three sovereign wealth funds. Collectively, they kicked in about $24 billion. Redbird, who had already backed, uh, Skydance previously. They put in another 4 billion, bringing their total investment to about 6 billion. And then it was a South Korean retailer. Shinsegae Group put in another billion dollars as well. Um, so, yeah, after this private placement, you know, we're still seeing exactly waiting to see how it's going to split down in terms of the equity. Um, these are preliminary numbers that we're relying on, um, from, from this filing so far. But again, you know, Ellison is going to be a significant shareholder. Um, they're going to, you know, have significant operational control over the company there. So they'll be leading the pack. Dylan, thank you so much for joining. Great to have you on. That's Bloomberg's Dylan Sloan. Coming up on the show. Oil is on the rise as traders tune out Trump's rhetoric around Iran. That's coming up next. This is open interest. 20 minutes into your training day. Another day of pressure for this equity market, which just on Wednesday was trading at all time highs, or rather leading into Wednesday. We're down a third of a percent and half a percent, respectively, for the S&P and Nasdaq. Russell 2000 underperforming even more because of the pressure from Brent crude. That is up 4.3%. Yields, though those are hanging tight in about the last 40 minutes or so. It seems like a bid came into French bonds. And that's helping bring some calm across this global bond market to some of the individual companies this morning. Nvidia and Broadcom both down. Broadcom tapping these markets again this time reportedly for an open AI financing deal. Levi's they are down because apparently they were just marketing baguette baggy jeans. People want uh low hanging jeans which like come on why we got to go back there? I'm. I don't want to be back in that era. Um, Pepsi shares are up 2%. Even though they're citing some concerns around North America. International sales were strong for them. Uh, Oxy and Exxon, all of those higher this morning because, as I mentioned, the price of oil. Let's get into it. Brent is nearing $105 per barrel this morning. Alex Langley, Bloomberg's reporter covering oil and shipping markets, joins us now. Alex, it feels like, uh weather geopolitics all the contributing to oil this morning. What is the latest in terms of what's driving this most recent like higher. Yeah I think as you said we've got a combination of factors. As you say, the geopolitics has been the overarching thing for all of this year. We've seen both an increased pace of attacks in the Straits of Hormuz in recent weeks. And then we had headlines yesterday kind of talking about potential for a fresh escalation from the US. On top of that, we've got a hurricane brewing for the first time this year in the in the Gulf of Mexico. And I think probably in the broader context, we we have to think about what's working well here as well. We've we've had a big kind of inflationary push. And that often brings kind of a tailwind of inflation hedges back into the oil market. And I think that's been another factor that's been driving us higher in the last couple of weeks. Alex implied vol call skew open interest. All of them are actually, well kind of on the downside of the recent range since let's say March. What is actual physical oil selling for? If I'm in Asia or ARM in Europe, I think that's not getting enough attention. Yeah. And I think when you kind of when you look at the market, you're spot on. You're split in two senses here. When we see what's going through the options trades here, it's generally kind of people hedging against the downside, against, uh, a more of a kind of peace or at least a situation that sees more barrels getting out of the Middle East. When you look at the kind of the real world markets right now. Um, I was talking to an analyst yesterday, and, um, tends to agree with this. The best place to start is refined products, which have been trading up near $200 a barrel. And then you take off the cost of moving crude around the world. Depending on where you are, that can be anywhere between 30 or $40 a barrel at the moment. You take off a refining margin, the profit those guys are making. And that's what gets you back to $100 crude. But the delivered cost of that crude and shipping is the real constraint here when, as I mentioned before, you think about, I think 30 to $40 a barrel to the cost of moving it. That's where the sort of the real world hit is starting to is starting to appear and dated. Brent yesterday, the world's physical oil benchmark, not the futures price, but the market for actual barrels in the North Sea that was trading closer to $130 a barrel than 100. Then how does it make a difference, then? What the Saudis are doing, Alex, looking for ways around the Strait of Hormuz, using shuttles, using land routes. Does that move the needle at all? The Saudis always move the needle, I think, whatever they're doing. But, uh, I think the reality is the situation on on the ground isn't super clear. And and the nature of the conflict in the Middle East means that the kind of the information flow has been more opaque than it was beforehand from countries across the region, for obvious reasons. Uh, if Saudi Arabia does ramp up production significantly, then that adds more barrels to the market. And even in a conflict environment, crude markets can only be oversupplied for so long if the Saudis did a big ramp up. Equally, if we continue to see attacks on Saudi infrastructure, then that's that's kind of where you start to see, as we saw last month, hits to supply reduction in Saudi flow. I think the big thing the market is pricing in here in terms of the Middle East, is the risk of further escalation going forward. Not necessarily to say that's happening now. You see it a little bit. And um, as I mentioned before, this kind of higher pace of tanker attacks. But the risk that these these attacks move from tankers to infrastructure on land and the attack on the east west pipeline was really kind of the clearest reminder of that recently. So it's I took some encouragement from the weekly data yesterday. Obviously, it's only one week Cushing built. We saw 40 million barrels of production a day, which was a new record, I believe, for the U.S. and still diesel exports were going up. Refineries were sucking down a lot of that. What does this hurricane mean? Sort of. We slowly seem to be making a little progress. Is this hurricane going to be a big deal, and do we need to really watch it closely? I think we should be okay in the scheme of things that are going on in the global oil market at the moment, it's a relatively short term thing. It's going to impact Gulf of Mexico production for the next few days. It's unlikely. I mean, it depends on obviously how bad you see hits the field, but for the most part, it feels relatively unlikely that this is going to be something that drags on for weeks and weeks. And the storm itself is avoiding the kind of its avoiding the heartland of, say, for example, Texan refinery capacity. There aren't that many Gulf Coast oil refineries in the path of the storm, so we shouldn't have to worry too much about hits to hits to supply on the Gulf Coast. Um, I think perhaps one of the more interesting market relevant things at the moment is the US. Uh, the US issued a tender or sort of sought to sell the remaining, uh, clip of its emergency reserves last week. And if they do sell 40 million barrels of crude onto the market, that's likely to be a much more meaningful impact in the next few weeks than, uh, than this storm. But as ever, with the weather, uh, it really depends on the impact on infrastructure and if anything, lost. But refining wise we should be fine. Gulf coast shut ins tend to just be a few days. Alex we appreciate it. That's Bloomberg's Alex Langley and it's a market that is still feeling the pressure of higher, higher oil. It should be noted, Mike, that even though oil markets are higher by a significant amount for a third of a percent this morning, it's only the front end that's moving. Two year yields are up two basis points. But you're seeing flattening. There's a bid emerging for the long end. And that will be interesting ahead of a 30 year auction to see whether yields are rich enough to entice buyers. And I think we're all are healthier because basically we're saying here fed independence, fed credibility again is a bigger part of the long and than we've been recently paying attention to. That was a big story a couple of weeks ago. It faded. And now we have to think about that a little again. If they continue to cut. Excuse me. Hike. It's a positive in some ways, although again, as we were talking with Cameron, it will have real impact in the real economy. Mike, thank you for joining us. Always a pleasure. See you tomorrow morning. Coming up in the next hour, Marianne Bartels discusses technicals in today's market and Lynn Martin of the New York Stock Exchange. 30 minutes into your trading day. Welcome to Bloomberg open interest. I'm Dani Burger Matt Miller is still off stocks on track for another day of losses coming off oil jitters. Brent tops $105, fueling fresh selling in stocks and bonds, at least on the front end. Goldman's top executives are in line for one of the biggest bank bonus payouts ever. Plus, New York Stock Exchange president Lynn Martin on the listing landscape and what's next for the exchange. We begin, though, with fresh fed speak out in the very early hours of this morning. Governor Chris Waller sees some flexibility on rate hike timing. He spoke at the Istanbul Economic Forum. If the economic data continue to come in as expected. I anticipate additional hikes to support a timely return Of inflation to our 2% goal, but there is some flexibility about when those hikes will occur. The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time. Joining us now is Michael Mickey Bloomberg's international economics and policy correspondent. Mike, it's kind of I guess interesting signaling to say, yeah, if everything goes to plan we'll need to hike. But like maybe not right away. Well, when we came out of the meeting, the last fed meeting and Chair Warsh was so hawkish sounding. We saw a big spike up in the idea that we were going to get a rate increase in October. And so then you had the fed leadership other than Warsh coming out, John Williams and uh, Philip Jefferson saying, well, we're going to raise rates, but we don't have to do it in October. And now you've got the sort of outlier economist in the sense that he's sort of seen as a counterweight to Kevin Warsh saying the same thing. So you can pretty much bet that they're still planning on raising interest rates by the end of the year, but they're probably not going to do it unless we get a really bad number in the CPI coming up. And that's what we have to watch is the calendar. Same thing we were doing last month. We're looking at CPI coming up next week. We're looking at PPI coming up next week. And if those tell us something we do get there tomorrow. The University of Michigan inflation expectations. And I bring that up because we saw yesterday the New York Fed's inflation expectations number for one year jump scares the fed. We get some confirmation of that from the Michigan numbers. And then maybe you get a strong CPI. We could be back to talking about rates rising in October. You just mentioned um you know the fed speakers kind of coming more together in their opinions. Who do we have left to hear from that maybe could be an outlier. Give us something different. Well, we've really heard from the two people who are the most, uh, hawkish, shall we say, uh, Beth Hammack in Cleveland and Laurie Logan and Dallas, both of them saying, we need to raise rates. We need to raise rates more than once. And so that implies that they would maybe even dissent at this next meeting. It was interesting that every member of the Open Market Committee, not just the voters, supported the rate rise in September, according to the minutes that came out yesterday. But we may not have the same unanimity coming up. Mike, thank you so much for joining. That's Bloomberg's Michael McKee. And of course, don't miss Mike's conversation with the Saint Louis Fed President Alberto Muslim at Bloomberg's Future of Fixed income event. That's at 1:30 p.m. New York time. Joining us now is Mary Ann Bartels, Sanctuary Wealth chief investment strategist. Marianne, great to have you on. Thank you. So even in the face of expected higher yields, maybe not in October, but still at some point, higher oil prices and some of the geopolitical risk. You are still bullish on this equity market. What underpins that bullish thesis. It's all about earnings right. And you had Samsung uh overnight with an astounding 800% improvement in earnings. And the stock went down because it didn't beat expectations. I mean, I would have never dreamt of that ever happening, uh, in the history of the market, but it is happening. So we're looking for a really strong third quarter earnings. And I think with the earnings, uh, we can still powerhouse higher. Eventually, maybe if the fed continues to raise rates it will become a problem. But I don't think it's this year I think it's next year. Um, watching the ten year a little bit more closely and oil, uh, if we can get that ten year down, I think the equity markets will really have, uh, a Santa Claus rally into the end of the year. Just just on this idea of another earnings season where you get really stellar results in the stock sold off. I understand that sort of dynamic in a market where stocks have been rallying and yes, stocks are trading at all time highs. But valuations have come down as earnings have outperformed. So I wonder if it will be different for this earnings season if the bar is more in tune with reality or you expect it to be. You need to have something better than a beat in order to get your stock moving to the upside. It's interesting. I think it's going to be accompanied by company depending on the expectations, but we're moving back into a mac seven market right at the breadth of the market is starting to narrow again. And you know, so I think that's going to be interesting. The stocks outside of the Mag seven can can they um outperform in an earnings cycle and get the breadth of the market moving again. I'm not concerned about breadth here. It's a condition. It's not a good timing tool. Um but it is a signal, um, that you do have to pay attention to. But again, I think that if we continue to have narrow breadth, that might be a signal for next year, not this year. And what exactly would that signal be for for next year? So what my concern. Right. If I have have a worry outside of I doing something that you report on that the markets don't like. Um is eventually the fed is known for taking the punchbowl away from the party, and we have an old saying on Wall Street, three steps in a stumble, that it takes three rate hikes before the equity market really responds. So I think, you know, the fed is really committed obviously, to getting inflation down. And if they continue to tighten monetary conditions, the risk is, as we go into next year that the equity market response to that. So does that mean that you can't have the all clear for the broadening out trade that you need to wait to see oil prices come down, and you need to see confirmation from the fed that they've stopped any sort of hiking cycle. Well, we were recently at highs. I think the market is telling you it wants to be at highs. If we can just resolve what's happening in the Middle East. I mean, that's that's a big yes. Maria, I know we've been f ING that for months now. Um, trying to will it at this point because I do think if you can get those yields down on the back end, the equity market really wants to rally. I think that's what the market is trying to tell you. but it keeps bumping up into this ten year yield that keeps trying to rise with higher oil prices. Just on that are midterms a risk maybe to the upside even if you get more Democrats, if they push back against the war in Iran or for the I build out to how are you broadly thinking about that? So I would say a couple of months ago, the market was really looking for a split government where we would have the Senate Republican and the House flip Democrat. I think the risk is rising. You get a flip in both houses to Democrat. Not sure the equity market will like that in the beginning. Um, but it's still a split government. So I don't think the midterms can really derail the rally. I think it's more about oil prices and ten year yields, um, that are going to really let the market either rally or not rally. Because one of the arguments that I've just heard is this push. And to be fair, you've seen it from both Democrats and Republicans, but against the eye data center build out. And so much hinges on that, whether it be the economy or this equity market too. Is there any fragility in it, or is this just a train that cannot be stopped, especially when yields are going higher and we're still getting all these companies coming? I'm kind of in the camp that the train has already left the station. I think it's a political, um, conversation, but I, you know, look at cell towers. I remember there was a lot of backlash against cell towers and how ugly they were, and they even tried to make them pretty look like trees. But we still got cell towers. Um, what I'm finding more interesting is, are we going to have data centers in space? So that's, you know, data centers are going to happen because it's all about data. We're moving down the path of AI. We need that compute. Um, so I think right now it's more of a political weapon than, uh, the train stopping again. And in the meantime, they're tapping these debt markets in a really big way. Space. Uh, reports of a big offering that they're looking funded by Apollo. You see their five year CDs spike, 194 basis points off the back of that today it's Broadcom getting hit in public markets. What are you sort of looking at for any cracks in credit markets that might translate over to the equity market. Well I generally look at the high yield market to see if spreads are blowing out in a bad way. We haven't gotten that yet. But um, if you do get that again, that would be a shot across the bow that something can happen seasonally that shouldn't well, seasonally the next couple of weeks, things can happen once you get to the last week of October. Generally, that's when the year rally begins. So I would say from a risk standpoint, for the first couple of weeks of October, and then once we get through that, um, I think the markets will be able to rally as long as you don't get a big breakout in that ten year, if you get a big breakout in the ten year, what I'm concerned about is you're going to start here in forecasts to six. Not sure the equity market wants six. And say what what what classifies a big break at? Are you looking for absolute level or rate of change? So if you get to about five four you're going to start hearing five five. And then once you get to 55I think people are going to start talking six. So those are the kind of the levels that I'm paying attention to. I mean, thank you so much for joining. Thank you for having me. Great to have you. That's Marianne Bartels of Sanctuary Wealth. Let's get a check on your equity market. And bonds are well behaved, at least in the long duration part. It's been helped by Chris Waller coming out and maybe sounding a little bit more hawkish, lending itself to fed credibility. Ten year yields come in by about one basis points. We're also getting a rally in Europe that's helping us too, even though the front end is under pressure. But equities are under pressure because Brent crude is higher by 4.5%. Uh, at the same time, uh, the S&P is down 2/10 of 1% and the Nasdaq 100 is down half of 1%. By the way, just want to show you two stocks that are on the move this morning. This is a really interesting one. This is reporting from the Ft that Starbucks has explored a takeover of Chipotle. You can see the reaction to make sense. Chipotle. Up. Starbucks. Down. Chipotle had been a winner of this equity market. Then it started to struggle with pushback from consumers on how much they paid. Chipotle trying to introduce things like protein. Would Starbucks take this company over? That would certainly be an interesting move. So those are the price actions this morning on some of the news coming from the FTC. Let's take a look at some of the other movers this morning with that is normal. Linda. Hey, Norah. Hey, Danny. First off, Pepsi cutting its profit outlook. That's as its North American turnaround takes longer than expected. And it's not just snacks. The CEO says the company doesn't really feel good about its soda business either. Results, though, were better than feared, and that's helping shares Pepsi higher by about 2%. And turning to tech, Broadcom is already looking at its next blockbuster ideal. Sources telling Bloomberg that the company's held early talks about financing that could help OpenAI pay for the custom AI chips that the two are developing together. Shares of Broadcom go down by about 2.4%. And finally, Google wants you to give its new AI agent objectives, not instructions. The company launching its Gemini Universal work agent today, with Google saying it can answer questions, handle knowledge work, create media, and even write and run code. Shares of alphabet higher by about 4/10 of a percent. Those are your morning movers. Danny, your thank you very much. Coming up on the show, Citi says that private equity isn't slowing its poaching of bankers. We're going to bring you part of my interview with the firm's co-head of North America investment banking and discuss the talent war on Wall Street. That's next. This is open interest. Let's get you some high interest stories and look at what's making headlines around the world. Brazil's presidential frontrunner Flavio Bolsonaro is lining up high profile finance veterans from Credit Suisse and Bank of America to help fund Brazil's economy If he wins the presidential runoff runoff later this month, the next team would face a tough job cutting spending, common debt worries and dealing with a budget deficit that's close to 10% of GDP. CNBC reporting that President Trump brought up to $25 million in stock, and as much as 5 million in space. In August, the space purchase came two days before he signed a policy aimed at expanding U.S. commercial space transportation. The president disclosed 517 security transactions for the month. And Tiger Global could score one of its biggest wins ever from an early bet on open AI. The firm invested $150 million five years ago now, with OpenAI reportedly seeking a $1.4 trillion valuation. Tigers paper profit could reach about $5 billion. Elsewhere, Citi's co-head of North American investment banking, David Friedland, says private equity firms are still aggressively poaching talented young bakers from Wall Street. I spoke to him yesterday on Bloomberg deals. I do think how early in somebody's career. Other firms, whether it's private equity or elsewhere, start to recruit these younger bankers. It's unfortunate, uh, and it's unfair to them. And I'm hopeful that it slows down and gets delayed. I'm not sure we've seen that much of it. Uh, and this change, despite some of the things that have been written, isn't really about preventing that. The reality is, we have an obligation when all these really talented folks come into our organization to have the experience be terrific, have them have exposure to senior bankers, to clients, to real deal activity, and for them to see a long term career path. But we other banks, we all have top talent and top talent has opportunities, right? Maybe that opportunities. Private equity. Look, I've been doing this for almost 30 years. If I think back to when I first started, there were opportunities that people left for that were other than private equity, and we're just trying to make it. If people want to write more interesting. More rewarding to stay. Meanwhile, the talent war on Wall Street and among private equity is facing a new competition front, maybe from AI startups. Premier advisors co-CEO Brian Rutter says that private equity still has the leg up. I asked him what gave the industry an edge. When you see people that are going, a lot of the younger generation that want to go and be a part of these I native platforms. The lifestyle for that is insane. Like, I worked in investment banking, you know, 30 plus years ago, starting my career out and used to pull all nighters. And it was really tough to do. That is what that lifestyle is like in a lot of these startups. But the difference is what no analyst at an investment bank had to deal with was the bank doubling in revenue every six months. And so the job, the kind of volume of stuff coming in at the people that are work in these companies, um, it's pretty insane the lifestyle. Joining us now is Bloomberg finance reporter Todd Gillespie. Todd, I'm just so amused by this idea that, like, private equity and maybe even banking is pretty chill compared to working at an AI lab. Yeah. I mean, I think that's, you know, that might be right these days. One thing that Brian Rhoda didn't say is that because of the revenue doubling every few months of these AI startups, you know, your equity options that you get when you join might also be doubling at the same time, or like, you're, you know, surging in value maybe perhaps faster than a young analyst at Premier might be getting from you know, that you know that that stock packages that they're getting as well. So the incentive structures here, the incentives to get in early for these young people who are willing to work hard and who let's be honest, and, you know, they've always been willing to work hard, whether it's investment banking, whether it's private equity, whether theirs, whether it's tech. Now they want to be on the next big thing. You know, getting that win for that psychology on Wall Street, whether it's on Wall Street physically in New York, or whether it's on the West Coast, in San Francisco, in this in Silicon Valley, you know that that is going to be a hit that is pervasive across generations. I think one of the interesting things about this dynamic, though, is if you go work for an AI lab, you're needed. You're building this technology. But if you're starting maybe both at PE or banking, there is this question. You've been doing really good reporting on this to how much you're needed. A Goldman executive was speaking in Asia talking about the differences to that class. Do we have an idea that these banks yet have a handle on just how much entry level jobs are going to be changing, and how much they're shifting them because of the new technology being introduced? Yeah, I think the straightforward answer is no. Still, I think there is so much change happening now. You know, you're looking at, uh, you know, these these AI labs rolling out improved tools, constantly finance specific tools emerging. You know, in particular, you know, firms like Rogo heavy out on Wall Street that are being picked up by the major banks. That young analysts are now being tasked with using. You know, that being monitored is that, you know, the hours that they're doing. But at the same time, you have an expanding deals environment. So the, you know, the top that these banks need more juniors anyway. So at the same time, they're saying, you know, an arguable trend towards more efficiency, but also a trend towards needing more young people anyway. So they're trying to balance those two things at the same time. And it's quite hard at this stage, this early stage, to sort of see what wins out and what the sort of end point of that is. By the way, speaking of banks doing really well, you've had some great reporting out this morning, just about the top executives at Goldman getting a big payout, $500 million. Uh, what did you find? Well, that was, uh, that was a big bonus, uh, package that was announced in late 2021 and expanded in early 2022 to more executives at Goldman Sachs, after various observers noted that this was only really available to David Solomon and John Waldron, the top two executives at Goldman Sachs. John Will, has been over the news in the past week or so because of speculation that he'll be taking over from David Solomon sometime in the next year or two. Um, but we've we've not you know, we basically calculated, uh, you know, through our sourcing and through regulatory filings that the total value of these, um, these awards will exceed $500 million. And that's for, um, you know, the about 20 top executives at Goldman Sachs combined and that are set to unlock these payouts basically later this month in one of what will be really one of the biggest payouts of its kind on Wall Street, and particularly for Goldman Sachs, you know, in history, does it say something that these were set in the past frenzy of 2021 that they're paying out in this frenzy? Certainly. Yeah. I mean, I mean, that's a frenzy. You know, it's sort of convenient timing, maybe that everyone is making money. You know, everyone was making money then. Everyone's making money now. But one, you know, perhaps ironic thing is, back in 2021 when these were paid out, that same board to approve these, these stock awards for David Solomon. Also, doctors pay by $10 million earlier that year for the one MDB scandal. Goldman now in a much better place. David Solomon having written a very nice, you know, stock price boom for the bank, um, besting all of its peers on Wall Street apart from BNY Mellon, which for some reason was included in the the pay group set. Uh, when the board set this set this award in terms of evaluating, uh, the return, the, you know, the eventual payout that was going to be given to these executives. But thanks to that stock price boom that he's overseen, these executives are going to be sitting very, very pretty and probably going to be able to afford a lot of nice Christmas presents and Thanksgiving presents for that family coming forward. That's really got a hike, don't they, Tom? Thank you so much for joining us. The mind body was in my talk last. Be really great reporting all week this week. Uh, from our finance team. Still ahead, we have an exclusive interview with NYSE Group president Lynn Martin as a newly formed Skydance makes its debut on the exchange. That's coming up shortly. This is Bloomberg open interest. You're watching Bloomberg open interest. Let's get a check on your equity markets just about an hour into your trading day and we're off the lows of the morning. The S&P down one tenth of 1%. The Nasdaq falls by a quarter. Russell 2000 underperforms feeling the pressure of higher oil prices. You can see Brent crude there jumping 4.2%. Weather issues a hurricane forming in the Gulf and at the same time concerns of escalation in the Middle East. That's not impacting ten year yields. After we got a Chris Waller yesterday confirming that there does need to be more hikes. Didn't say one. Some flexibility. Even so ten year yields little change. The front end does move higher tech feeling the pressure of just more issuance. Broadcom coming to market again for more financing for open AI to build buy their chips. Yesterday it was space. The hits keep coming for this market Starbucks and Chipotle. Super interesting for reporting that Starbucks is Brian Niccol might be eyeing his former company to buy it that is Chipotle. So Chipotle jumped. Starbucks is down. Pepsi a set of earnings for them, up 2.3% after international sales. Looking good and Sky dance up 5% after they completed their merger. Coming up, we're going to talk with the New York Stock Exchange president, Lynn Martin, who's going to join us live from the trading floor at the opening bell. We saw Paramount, Sky dance now just sky dance ringing the opening bell, celebrating their merger and their move to NYC. We'll discuss all of that with Lynn coming up after this break. We welcome our Bloomberg TV audience and radio listeners worldwide. A big win for the New York Stock Exchange, with the newly formed Sky dance making its debut on the exchange. You can see the company's top executives there, David Ellison, among others, ringing the opening bell just an hour ago alongside Lynn Martin. And pleased to say that joining us now from the trading floor is Lynn Martin, president of the NYSE Group. Lynn, thank you so much for joining us. And as I mentioned, a big win. The biggest merger in Hollywood history. Now on the New York Stock Exchange. What did it take to win them over? Well, thanks for having me on today. It's always great to be with you guys, and it's an absolute honor to welcome Skydance to our platform. As you say, it is one of the biggest media acquisitions of all time, mergers of all time. And certainly from a studio perspective, the biggest, uh, it's it's been an absolute honor to work with David. Um, he's a tremendous human, uh, in addition to being a wonderful executive. And, of course, we're thrilled to welcome you on to the exchange as well. So this is just one in a recent string of companies coming over the New York Stock Exchange, AstraZeneca, Kraft Heinz, among the recent ones. Are there any other conversations? Should we be expecting any other large cap companies to be making their way to the New York Stock Exchange? Well, we're always open for business. Um, so and accepting uh, applications both IPO's and transfers. But to your point, we've welcomed about half $1 trillion in market cap to the exchange so far this year. In fact, three companies have left a index that is run by our competitor, uh, voluntarily and made the decision that NYSE was the better platform for a variety of reasons. Can you just get into that? Because that is a big undertaking to I'll say the names so you don't have to to leave the Nasdaq to leave that index. What does it take to win them over? What convinces them to move to the New York Stock Exchange? So it's a variety of options, and it's really down to the platform that we've deliberately curated. It's our services that we offer, both consultative as well as, you know, helping them blow out their experience from, um, marketing and communications perspective, but that importantly, it's also the market model and the community that you want to be aligned with. On the market model side. That's something we have deliberately curated over 234 years. It is something that has withstood significant periods of volatility and companies value that. Of course, you know, the Nasdaq would would argue for a lot of reasons why they would be the home. And I think when there's this question for these mega IPOs, it's one that you are used to. They manage to win over space. And I wonder how you're thinking about the anthropic IPO. Is the New York Stock Exchange still in the conversation with them. Well I can't really comment on any specific IPO. You know, we talk to companies throughout their lifecycle from series, even sometimes from stealth all the way through to IPO. It's one of the privileges I have in my job. I meet the most amazing humans, these founders, these innovators who are really changing our lives for the better. By the way, improving the way we work, improving the way we operate our personal lives, and looking to really make a difference for the betterment of the world. When I know you've been on this program several times this year and have been really bullish about the prospect of IPOs, and we have gotten a lot, especially in the first half of this year. But something feels slightly different in this fall. We had Ora delay their IPO, CVC, CVC backed Bambu, whole Tech nuclear. Both of those on the same day citing market conditions Lin has had something changed. Well I think when you look back in at this year and you look to the projections many of us made for the start of the year, probably one thing we didn't consider was interest rates and an interest rate rise, which the fed, understandably given macro conditions, acted quickly in September. Uh, so I think the overall macro conditions is really what is impacting firms plans to go public. But importantly the markets open. The market's been open. The market's been open for years. It's just a question of the valuation that some of these companies want to accept as part of their IPO. Some other companies are saying, heck, I just want to get public because of the currency that gives me that gives me the ability to raise additional equity. It gives me the ability to raise debt at different levels. So it really comes down to each company making the decision as to what valuation they want to go public with. And that is a very specific decision that founders and management teams make for a variety of reasons. So open but not open for all. And I've also been really interested in the competition that you all are facing in Texas. Of course, you have your Texas offering too, but there's also the SEC and Energy Transfer Incentive Co announced last month that they would be moving over to them. What is the plan to make sure that those are just two isolated cases. And it's not the start of Texas companies abandoning your offering in order to go to this new competitor? Yeah, I mean, that's a great question. So we started NYSE, Texas last year. Uh, we announced in February of last year, brought the exchange live in March of last year, just recently opened our office, which is a beautiful office and old parkland, the top floor of old parkland, Harlan Crowe's iconic facility down in Dallas. Currently, we have 130 dual listed companies on NYSE Texas. We're very much open for primary raises as well as the dual listings. I think it's important, though. And Danny, I've known you for a long time to look at data. I'm a data person, and if I look at the data, the exchange's job is to perfectly curate the open and the close for every public company. And if I look at what the NYSE has done over its history, we have withstood significant bouts of volatility, wars, pandemics, macro shocks, geopolitical events. And every single time our open and our close has become more robust, we've made improvements. Now, if I look at this past week, that's not been the case with some other exchanges. But I also wonder if part of your sort of push, again, not just your battle tested you could do this, but is integrity. This is something you've spoken about before, specifically when it came to the this listing, and I wonder how you view that with your Texas rival, because part of HTC's pitch to companies is we have a less burdened alternative, less regulatory, maybe lower compliance kind of pitch. Does that concern you, Lynn? You know, our job at the NYSE, we are the home of the global capital markets, and our job is to responsibly innovate and never stray from the gold standards of our listings requirements. And that is why we spent so much time focused on market quality and focused on deliberately curating the optimal platform for issuers. That doesn't mean a quick win. That means growth for the medium to long term. For the best issuers in the market. Just quickly, though, is there an element that maybe you're moving in opposite direction to the regulators, though, who want to make for more easy guidelines to allowed companies to list? Are you maybe missing a moment where your competitors are moving one direction and you're moving the opposite? I'm so glad you asked that question because we are absolutely not missing a moment. We have had such great dialogue with Chair Akins and the Head of Trading and Markets, Jamie Selway, on how to encourage more companies to go public. It is our North Star, the public markets, and allowing companies to have a less burdensome obligation. But importantly, still balancing that with the best transparency for shareholders, for investors, for mom and pops. That's the right way to do it. And as a result of the regulation that Chair Atkins has put forward. We have been extraordinarily supportive of that regulation. If you think about things such as semiannual reporting or an on ramp. Those conversations started real early in this administration, and we're going to have to leave it there. We really appreciate your time. Congratulations again. Great to see you alongside the Skydance team at the opening bell. That's Lynn Martin of the NYSE. Let's get a check on your markets this morning. We are still down, but we are off of the lows. The Nasdaq down 2/10 of 1%. The S&P down one tenth ten year yields. They've been floating around unchanged at 528. The conversation only about a week ago was about ten basis points higher than we are. So we have come off the front end still feeling pressure. The dominating movements have been Europe, European bonds also under less pressure this morning, even with Brent crude above $105 a barrel, both weather and geopolitics feeding into that. Let's take a look at some of our movers this morning with that is normal into. Hey, Nora. Hey, Danny. First off, TSMC reporting a 51% rise in quarterly revenue. That's as high demand continues to hold up. But the results failing to impress investors who are questioning how long I spending can actually last. Shares of TSMC lower by about 5/10 of a percent. Next up, this could be quite the reunion. The Financial Times reporting Starbucks exploring a takeover of Chipotle. You'll remember Starbucks CEO Brian Niccol used to run Chipotle before jumping to Starbucks in 2024. And this will be no small deal. Chipotle is worth nearly $40 billion. Shares of Chipotle. Higher Starbucks falling, though on the news. And finally, apparently baggy jeans are out of style and low rises in. At least that's what Levi's is saying. The company went too heavy on baggy Back-To-School styles when shoppers actually wanted low rise jeans. Now that's weighing on sales at its stores and its websites. Shares of Levi's down about 3.4%. Those are your morning movers, Danny. Nora. Thank you very much. That trend upsetting me deeply. I don't want to go back to those days. I feel like it's my fault. I'm going to leave it there. Norah, thank you so much. And for all your work this morning. Coming up, harbinger inks a $30 million deal with Fedex. We're going to speak to the company's co-founder and CEO, John Harris. That's after this break. This is Bloomberg. Harbinger Motors has landed a major order with Fedex. The delivery giant is buying 2000 all electric trucks from harbinger in a deal valued at more than $300 million. The trucks are expected to be delivered by the end of next year. Joining us now to discuss is John Harris, CEO of Harbinger Motors, which makes medium duty electric and hybrid vehicles. John, thanks for joining us. This is a big undertaking. It's one you've described, two calling it unprecedented. So in order to scale up from you just finished your thousandth vehicle to now deliver 2000 in about 18 months. How are you going to get there? Well, we actually have the capacity in place today to build this order over the next 18 months. We're currently at about 3000 trucks a year for capacity and production rate. So this is a big order, but it's very much lower than the current capabilities of the company. So Fedex also co-led your series C fundraise. And now they're becoming your biggest customer too. John how are you thinking about just customer concentration and the risk that both on the funding side and just on the way revenue is forming, that so much of it is concentrated around Fedex? You know, it is. But for me it's all about customer quality. If I look at that Fedex, you know, we're looking at one of the largest 2 to 3 fleets in North America. They've got about 200,000 trucks in the combined corporate and service provider fleet. You know, for for Fedex to be taking 2000 trucks from harbinger, it doesn't really worry me because I know that their actual need is more like 10,000 trucks a year. So it's the sustainability of that order size that I'm really focused. What does the pipeline then look like for for other fleet customers at the moment? John. When we look at a big fleet customer like this, it's normally a multi-step approach where we start from a couple vehicles in a demo, some somewhere 50 to 100 vehicles, just like we did with Fedex last year. And those orders tend to grow year over year. Yeah, what we're seeing in this current environment with staggeringly high fuel prices is that those orders are growing step to step, much faster than we've seen in the past. So we have quite a robust pipeline of other large fleets for this. Yeah, John, that's what I wanted to get into. I mean, energy prices are rising and diesel prices too. Has that had what sort of noticeable impact has that had not just on demand but but even things like production is the really noticeable impact to me is that customers that were talking to us about their next order being 52. 100 are talking about 4 or 5 times that. We're just seeing people move up that order ladder very, very quickly. Um, they're sort of skipping steps over where we've seen in the past. These fleets are generally very conservative around, uh, building that confidence in the product over years. When we look at the current fuel prices, it's incredibly destructive to the ability of these businesses to generate profits. And electrification becomes a more and more attractive option as a result. Is diesel though, impacting you at all on the production side of things, John, very, very limited. Um, we move the vast majority of our building materials content, either by sea freight or scheduled in advance long haul freight, um, truckload. So there's an impact. But the overall cost of fuel in the form of that transit price is within our cost of production. It's pretty modest. Uh, definitely single digit points. Um, I also don't think we've seen that fully feed forward into pricing yet in, um, and component markets. Um, how much worse do you expect it to get done if you haven't seen it fully, uh, feed through to the component market. What's it tends on on for a given item. How much of the cost of that is in transit? Uh, I think in our market where we're buying, you know, commodities, we're buying copper wire, we're buying fairly, um, competitive items that can transit. Well, that could take a long time to reach their destination. Uh, I don't think it's going to be a big jump. If I look at markets more like, uh, grocery or consumer products, where the transit tends to be more time sensitive and it's a bigger portion of the goods cost. I think we're still in for for more impacts, John. We are just under a month away from the midterm elections. And I wonder how the regulatory landscape, this change has impacted you with uncertainty, for example, on things around Environmental regulations. How has that altered the landscape for demand? You know, people have assumed that that would be the case. Um, but what I've seen over and over again is that you can't regulate people into buying something for some kind of sustainability reasons. Uh, you can twist arms as much as you want. People are making economically grounded decisions. And what we're seeing right now is there's dramatically more demand for electrification today under this administration than any previous administration. And it's because it's all grounded in the economics that that are affecting the market, which of course is mostly the price of fuel. So surprisingly, the answer is not as much as you would expect. Hey, John, we're going to have to leave it there. Thank you so much for joining us. John Harris of Harbinger Motors. Coming up, coffee and burritos under one roof. Starbucks has reportedly explored buying Chipotle and what would be the biggest restaurant deal ever. At least it could be. We're going to break that down next. This is Bloomberg. Ft reporting that Starbucks has explored a potential takeover of Chipotle. The deal would reunite Starbucks CEO Brian Niccol with the company he previously led. Let's get more with Michael O'Hanlon, senior restaurant analyst for Bloomberg Intelligence. Michael, would you see any any logic to the sort of tie up? There is some logic. You know, um, Brian Niccol clearly knows Chipotle very well. Um, you know, I think he'd be a great guy to, to, um, turnaround sales for the second time here. Uh, you know, and in our opinion, Brian, um, Scott wrote, right. The current CEO has not done a very good job replacing Brian Niccol. So there are some reasons to think that, um, you know why? There's some reasons why they're thinking about it, basically. Right. But, um, you know, we don't see a lot of synergies. We, uh, are concerned about the strain this would would put on, uh, the current Starbucks management team. And then it also makes us question, you know, how optimistic they are about continuing to drive same store sales and traffic. They've done a good job to this point. There's still work to be done. Right. Is this a signal that, you know, maybe they're not so positive on their ability to continue, uh, comping these comps? Maybe. Not sure, but I think that's why you're seeing the price action in the stock, right? Chipotle. They could use some help. Starbucks. Yeah. We thought there was kind of still some low hanging fruit here, but maybe not. What would that low hanging fruit be if you were to get in the room with Brian Niccol, what would you say? Instead of saying, hey buddy, don't go after Chipotle, Here's what you can do. Oh man. That's above my pay grade. But my girl you know you got to continue to do what they're doing. I think they're pressing the right buttons at Starbucks. Right. Like it's continuing to improve the operations. Right. Like they've done a good job in improving the speed of service. Um, but there's still strides that can be made. Um, you know, they can continue to, to make improvements here on the marketing side, right? As the operations get better, you can continue to spend more on marketing, because now you're more confident that people will have a good experience when they come back to Starbucks. Right? You have to continue to innovate, uh, around your products. Right? So, um, you know, it's basic blocking and tackling, uh, of the restaurant, right? But, you know, although it's easy to say and know what a chain needs to do, it's very difficult to execute. I just wonder, though, and I want to get into this point that you were making just a moment ago about what it signals, because Starbucks right now is the company is the Starbucks brand. It's not like they have a whole host of other type of restaurants that are underneath the umbrella. Could this possibly be a pivot to act more like, you know, to get to a future where they're like a yum brands, where they own multiple brands? How big of a pivot would that be? And does that make sense for Starbucks and their leadership to be something that owns something beyond just the Starbucks brand? Yeah. You know, in recent years we've seen deals like this. And it's really to gain scale because we're in this commodities boom bull market. And and Clos continue to rise. Right. Um, one of the more recent ones that didn't go well at all was, you know, Jack in the box, uh, buying Del Taco, uh, Jack in the box. And Del Taco had much more synergies, you know, i.e. beef than, than Chipotle. Uh, and Starbucks is, uh, you know, is Starbucks going to start? You know, they did started selling a jalapeno wrap, right. Are they going to expand are. Is Chipotle they going to start selling more coffee. You know probably not on both of those right. So you know could it be become a multi-platform operator. It could but it's difficult to execute. You know like I said earlier, it's like it distracts management. And we have some of these chains, you know, you brought up yum. Something was always on fire. If you have four brands not it's very rare where you have all four brands doing well at the same time right now. For them, at times KFC U S was not doing well. Um, Pizza Hut has been a disaster, right? So it's a it's tough model to execute. Mike, thank you so much for joining us, Michael Helen of Bloomberg Intelligence. And that does it for open interest this morning. Coming up tomorrow Amanda Gaddy of PNC Yocum. Clement of Panmure, Lieber Lieber him as he gets more bearish. And the University of Michigan's Joanna Shoe.