Open Interest 10/12/2026

IS COLUMBUS DAY, VOLUMES ARE LIGHT, BOND MARKETS ARE CLOSED. 30 MINUTES UNTIL THE START OF THE TRADE. I AM DANI BURGER. "BLOOMBERG: OPEN INTEREST." STARTS RIGHT NOW. OIL EDGES HIGHER AT THE MARKET FACES EARNINGS SEASON AND A PACKED WEEK OF DATA. ON THE TECH FRONT, THE BROADCOM CEO COMPARES AI INVESTORS TO CASINO GAMBLERS. SOME OF THE STOCKS WE ARE WATCHING, MEMORY STOCKS HAVING A ROUGH GO OF IT. SANDISK, SK HYNIX, ALL OF THEM TRADING LOWER. THERE WAS A REPORT THAT A CHINESE RIVAL PROGRESSED ON THE NEW CHIP ARCHITECTURE. THAT IS A PROBLEM FOR ALL OF THEM AND VOLUMES ARE LIGHT. HIGHER OIL PRICES AND QUESTIONS AROUND TECH VALUATIONS ARE ALSO PUSHING INVESTORS MORE DEFENSIVELY. LET'S GET MORE INTO THAT. OIL PRICES ARE SWINGING AS SAUDI ARABIA FACES NEW ATTACKS. PRESIDENT TRUMP SAYS RUSSIA AND UKRAINE HAVE AGREED TO AN ENERGY CEASE-FIRE. UKRAINIAN PRESIDENT VOLODYMYR ZELENSKYY SAYS RUSSIA HAS ALREADY BROKEN THE CEASE-FIRE. >> THE ENERGY CEASE-FIRE CAN BECOME A MAJOR STEP TOWARDS ENDING THE WAR IF THE AMERICANS TRULY STEP IN AND MAKE SURE RUSSIANS RESPECT THE ENERGY CEASE-FIRE. DANI: LET'S BRING IN THE OIL REPORTER CHARLES. WE HAVE THE TWO CONFLICTS ADDING TO THE OIL GAINS. LET'S HEAD TO RUSSIA WHERE WE HAD THE PRESIDENT ANNOUNCING RUSSIA WOULD BE ABLE TO PUT MORE DIESEL ONTO THE MARKET THERE IS SKEPTICISM WHETHER AN ENERGY CEASE-FIRE WILL BE TAKING PLACE. WHAT IS THE DYNAMIC YOU ARE LOOKING AT? CHARLES: THERE IS DEFINITELY SKEPTICISM AROUND BOTH OF THOSE POINTS, BOTH A CEASE-FIRE AS WELL AS WHETHER THOSE POSSIBLE RUSSIAN DIESEL BARRELS BEEN LAUNCHED ONTO THE MARKET COULD HAVE BEEN IMPACT AT ALL. WE DID SEE PRICES TAKING A BIT OF A BREATHER BUT NOW THEY ARE BACKED UP AFTER PRESIDENT ZELENSKYY HAS MADE CLEAR FOLLOWING RUSSIAN STRIKES ON ENERGY ASSETS IN UKRAINE OVER THE WEEKEND THERE DOES NOT SEEM TO BE MUCH OF A CEASE-FIRE THE U.S. PRESIDENT HAD CLAIMED. THE U.S. PRESIDENT WOULD LOVE TO SEE A WAY OUT OF THAT. IT SEEMS LIKE THE LEVERS ARE PRETTY LIMITED. DANI: ON THE OTHER CONFLICT, THE CONCERNS ABOUT ESCALATION, OIL MARKETS ARE UP 2%. BRENT DOING SOMETHING SIMILAR. THESE ARE NOTABLE GAINS BUT NOT HUGE GAINS. WHEN YOU MIGHT EXPECT IF THERE WERE FEARS OF WIDER ESCALATION. WHAT YOU MAKE OF THAT? CHARLES: WE HAVE BEEN HERE BEFORE AND IT IS BEEN A SIMILAR STORY WHERE WE HAVE BEEN PRICING IN THIS PREMIUM. IF WE TALKED A FEW WEEKS AGO IN MID-SEPTEMBER, THERE WAS A LOT OF OPTIMISM AND HAS BEEN A LOT OF OPTIMISM AROUND MORE AND MORE FLOWS. THERE IS ALWAYS BEEN A QUESTION OF IF WE HAVE SEEN THE FLOWS HITTING PREWAR LEVELS, WHY HAVEN'T WE GOT BELOW $100 A BARREL FOR BRENT. THE ANSWER IS WE SEE THE RISK PREMIUM. IN THE SECOND FRONT WE HAVE SEEN THAT THE WHO THESE -- THE HOUTHIS HAD THEIR DEADLIEST ATTACK IN SAUDI ARABIA WE HAVE SEEN ONGOING ATTACK SINCE. THIS IS A DANGEROUS ENVIRONMENT AND THAT IS WHY TRADERS ARE CONTINUING TO PRICE TOWARDS THE RISK AND HAVE BEEN. IT IS A FRAGILE MOMENT. DANI: THANK YOU VERY MUCH FOR JOINING US. PRICE OF OIL HIGHER 2%. EARNINGS SEASON UNOFFICIALLY KICKS OFF TOMORROW. THE BIG BANKS WILL BE LEADING THE WAY. BANK OF AMERICA AND MORGAN STANLEY ON WEDNESDAY. BLOOMBERG'S WALL STREET CORRESPONDENT JOINS US. ALWAYS AN INCREDIBLY BUSY WEEK. WILL THIS BE A QUARTER OF ANOTHER RECORD BUT JUST BARELY RECORD FOR THESE TRADING CALLS? >> I LOOK AT IT AS MORE OF A MIXED BAG. WHAT WE SAW ON THE FIRST HALF OF THE YEAR IS GOOD NEWS FOR ONE BACK TRANSLATED TO GOOD NEWS FOR EVERYONE BUT WE HAVE HAD SOME STRUCTURAL CHANGES INTO THE SECOND HALF THROUGH THE THIRD QUARTER. LOOK AT THE CAPITAL MARKETS, LOOK AT CONCERNS AROUND THE CONSUMER ECONOMY. EVERY BANK WILL HAVE ITS OWN STORY TO TELL. YOU DO NOT NECESSARILY EXPECT ALL OF THEM TO MOVE IN CONCERT. DANI: WHICH OF THE ONES THAT HAVE HAD THE STRUCTURAL DIFFERENCES? CHARLES: LET'S TALK ABOUT GOAT -- >> LET'S TALK ABOUT GOLDMAN SACHS AND MORGAN STANLEY. THERE STOCKS WERE ON A TEAR. THEY WERE THE FINANCIAL MARKET BENEFICIARY OF THE BROAD AI TRADE, OF THE BIG BOOM IN CAPITAL MARKETS ACTIVITY. AS YOU'VE SEEN SLOW DOWN, WE HAD THE BIG SPACEX IPO IN THE FIRST HALF. WE WERE SUPPOSED TO HAVE THE DOUBLE-HEADER OF OPENAI AND ANTHROPIC IN THE SECOND HALF. NOW WE ARE ONLY EXPECTING ANTHROPIC. LAST WEEK WE SAW A NVIDIA BACKED COMPANY HAVING TO PULL ITS IPO. THERE BEEN SOME JITTERS AND CAPITAL MARKETS BUT NOT JUST THE PUBLIC EQUITY MARKETS. YOU'VE ALSO SEEN DIGESTION ISSUES WITH THE PARAMOUNT WARNER BROS. DEBT THAT CAME TO MARKET. THERE IS SOME CONCERN THE CAPITAL MARKETS BOOM MIGHT NOT CONTINUE AT THAT SAME PACE AND THE PRIME BENEFICIARIES OF THAT MIGHT HAVE TO BE ON THE BACK FOOT AND WILL HAVE SOME EXPLAINING TO DO. THEY MIGHT COME OUT AND SAY THE PIPELINE LOOKS PHENOMENAL AND AS FAR AS THEY ARE CONCERNED THINGS ARE GOING TOP-TIER ON EVERY FRONT AND BECAUSE OF THE REACTION OF THE STOCK PRICE AND EARNINGS SEASON YOU COULD SEE A BIG LIFT AND THAT IS THE THING YOU WILL BE FOLLOWING WITH THAT. IF YOU LOOK AT WHAT IS HAPPENING WITH THE CONSUMER ECONOMY, WHEN YOU THINK OF BANK OF AMERICA, THEY HAD THEIR OLD -- THEIR OWN IDIOSYNCRATIC ISSUE. YOU WILL SEE THE UNREALIZED LOSSES WILL GO UP IT WILL BECOME A POINT OF CONVERSATION. MORE THAN ANYTHING ELSE IT WILL REMIND EVERYONE OF THE LOST OPPORTUNITY COST, WITH WELLS FARGO AND JP MORGAN, YOU WANT TO SEE WHERE THEY ARE TALKING ABOUT. WILL THEY HAVE TO LIFT DEPOSIT COSTS QUESTION MARK IS THERE ENOUGH LOAN GROWTH IN THE RIGHT KIND OF LOAN YIELD? IS IT THE GOOD LOAN GROWTH AND THE RIGHT LOAN YIELD? ARE WE TALKING ABOUT LOAN GROWTH BECAUSE OF CONSUMERS SEEKING LOANS WHICH IS NOT HIGH-QUALITY? YOU WILL HAVE TO PAY VERY CLOSE ATTENTION TO WHAT EVERY BANK IS SAYING THIS QUARTER. THAT IS WHAT WE PROBABLY SEE EVERY QUARTER BUT THIS QUARTER MORE SO THAN EVER BEFORE. DANI: AS YOU SAID, THEY ARE DOWN 13% SINCE AUGUST. THANK YOU SO MUCH. WE'LL HAVE YOU ON A LOT OF THIS WEEK. THAT IS OUR CHIEF WALL STREET CORRESPONDENT. BROADCOM CEO IS LIKENING THE AI TRADE TO A CASINO AND QUESTION THE ECONOMICS OF MONEY-LOSING AI LABS. HE SAYS A LOT OF INVESTORS HAVE NO CLUE WHAT THEY ARE INVESTING IN AND SAID VERY EXTREME EXPECTATIONS, ALWAYS TO FIND OUT THERE IN A CASINO. MANDEEP SINGH JOINS US. THIS FOLLOWS WONDERFULLY. NOT ONLY THOSE COMMENTS BUT IT FEELS LIKE THERE IS PUSHBACK IN MARKETS, WHETHER IT BE THE NVIDIA LINKED AI PLAYER IN AUSTRALIA DECIDING NOT IPO. SPREAD STARTING TO WIDEN. THE BROADCOM CEO SAYING FINANCING MARKETS WOULD BE A BOTTLENECK. OUR FINANCING MARKET STARTING TO BE A BOTTLENECK FOR AI? MANDEEP: THE COST IS STARTING TO GO UP. IT WILL HAVE A BEARING ON THE FINANCING OF THESE DATA CENTERS. TOKEN PRICING COMING DOWN, COST OF FINANCING GOING UP, ALL OF THESE ARE NEGATIVES. YOU LOOK AT THE BIG PICTURE IN TERMS OF TOKEN GROWTH, MORE AGENTIC USE CASES IT FEELS LIKE THERE IS A LOT OF RUNWAY WHEN IT COMES TO DEPLOYING AI AND THERE IS MORE COMPETITION. YOU WILL PICK WHAT SORT OF PROJECTS WILL GET FINANCED GOING FORWARD. NOT EVERYTHING THAT IS LINKED TO A WILL FIND FINANCING. OVER ALL THE TRENDS ARE INTACT WHEN IT COMES TO AI DEPLOYMENT. DANI: M&A CAN STILL HAPPEN BECAUSE AMAZON IS IN TALKS TO BUY AN START UP. EVAN BILLION DOLLARS IS THE VALUE. WHAT WE KNOW ABOUT THIS AI START UP? MANDEEP: EVERYONE, ESPECIALLY ON THE APPLICATION SIDE, WE KNOW AMAZON BLOCKED OFF MUSE. WHEN IT COMES TO AGENTIC AI, ALL OF THESE PLAYERS HAVE A LOT OF FEAR WHEN IT COMES TO WHAT AGENTS CAN DO. EVERYONE SWEARS BY THE FUNCTIONALITY. WHEN IT COMES TO E-COMMERCE IT IS EASY TO SEE HOW MUSE CAN CHANGE THE COURSE OF E-COMMERCE. AMAZON NEEDS TO STEP UP. BLOCKING AN APP IS NOT THE SOLUTION AND THAT IS WHAT THEY ARE AFTER HERE. DANI: LET'S GET A CHECK ON OUR MARKETS. CLOSE TO ANOTHER SET OF RECORD HIGHS. IT IS A MARKET WITHOUT A LOT OF JUICE. WE NEED TO GAIN .4% FOR THE S&P TO GET TO A RECORD. 1.3% FOR THE NASDAQ. BOTH OF THOSE LAST TUESDAY. BRENT CRUDE DOWN 1.9% -- UP TO PERCENT RATHER THIS MORNING WITH CONCERNS IN RUSSIA AND THE MIDDLE EAST. FINALLY, BECAUSE BONDS MARKETS ARE CLOSED THE EURO IS STILL TRADING AT A 2025 LOW. LET'S LOOK AT OTHER MOVERS. >> FIRST UP, IT IS A DOUBLE DOWNGRADE FOR ADOBE. WELLS FARGO SLASHED THE STOCK TWO NOTCHES. IT SEEMS MEANINGFUL CRACKS IN THE GROWTH PROFILE, LOWERING THE PRICE TARGETED $225 A SHARE. THE STOCK IS ALREADY PLUNGED 30% THIS YEAR. IT IS DOWN NEARLY 4% TODAY. WE WILL MOVE OVER TO PHARMA. BRISTOL-MYERS IS TRADING HIGHER. A LATE STAGE TRIAL USING A LOWER DOSE OF ITS LUNG DISEASE DRUG MET ITS GOALS AND THAT COULD SUPPORT A MORE CONVENIENT DOSING OPTION FOR PATIENTS WHILE PRESERVING THE DRUG'S EFFECTIVENESS. SHARES RALLYING ABOUT 3% TODAY. WE WILL END ON A MEGADEAL. IONQ BUYING A CYBERSECURITY PLATFORM. IT HELPS COMPANIES PROTECT THEIR NETWORK FROM AI DRIVEN CYBER THREATS. THAT WILL GIVE THE COMPUTER GIANT IQ A MUCH BIGGER FOOTHOLD IN CYBERSECURITY. SHARES DOWN 1.8% OF FAR TODAY. THOSE ARE YOUR MORNING MOVERS. DANI: WE WILL CATCH UP WITH YOU LATER IN THE HOUR. COMING UP, MORE ON THAT IONQ DEAL. WE WILL SPEAK WITH THE CEO. DANI: A LOOK AT WHAT IS MAKING HEADLINES AROUND THE WORLD. HSBC IS MOVING CLOSER TO A WALL STREET STYLE PAY MODEL. THE BANK WILL PHASE OUT FIXED PAY ALLOWANCES FOR SENIOR STAFF AND SHIFT TO MORE COMPENSATION INTO PERFORMANCE-BASED BONUSES. IT CEO CONTINUING A BROADER RESTRUCTURING PUSH. MORE ON THAT STORY LATER THIS HOUR. ROBERT HALL AND MICHAEL WOODFORD HAVE WON THE 2026 NOBEL PRIZE IN ECONOMICS. THEIR RESEARCH HELPED SHAPE THE ECONOMIC MODEL CENTRAL BANKS USED TO RESPOND TO RECESSIONS AND OTHER MAJOR SHOCKS. THE ECONOMISTS WILL SPLIT A $1.2 MILLION PRIZE. IONQ BUYING A CYBERSECURITY COMPANY AS COMPANIES RAISE TO PROTECT THEIR NETWORKS FROM AI POWERED ATTACKS AND FUTURE QUANTUM COMPUTERS THAT COULD BREAK TODAY'S ENCRYPTION. FOR MORE ON THE DEAL WE ARE JOINED BY THE IONQ CHAIRMAN AND CEO. THIS IS A CYBERSECURITY COMPANY THAT HELPS LARGE COMPANIES AND GOVERNMENTS CONTROL WHO AND WHAT ACCESSES THEIR COMPUTER NETWORK. BY THIS DEAL AND WHY NOW? NICOLO: IONQ'S LARGEST SECURITY COMPANY IN THE WESTERN WORLD. WE HAVE BEEN INVESTING IN THE LAST COUPLE YEARS AND POST QUANTUM SOFTWARE. ELISITY IS A FANTASTIC COMPLEMENT AND STRATEGIC ADDITION TO OUR DEFENSE IN DEPTH STRATEGY. IT BRINGS US A FANTASTIC LEADER IN JAMES WARREN BRENNER, IT BRINGS IS A FABULOUS CULTURAL FIT WITH OUR TEAM. CULTURE EATS STRATEGY FOR BREAKFAST. BEST OF ALL IT BRINGS US 100 NEW CUSTOMERS AND A CHANNEL FOR WRITING AND CARRYING OUR PRODUCTS INTO THE ENTERPRISE, AS WELL AS A NUMBER OF GOVERNMENT PARTNERS. ON A COMBINED BASIS WE ARE UNEQUIVOCALLY THE LEADING SECURITY COMPANY IN THE WESTERN WORLD. THESE TECHNOLOGIES ARE IMPORTANT , NOT ONLY FOR THE QUANTUM ERA, BUT YOU NEED THINGS LIKE ELISITY'S ZERO TRUST STRATEGY AND OUR QUANTUM DISTRIBUTION TODAY TO KEEP YOU SAFE FROM THE THREATS OF LLM'S. DANI: YOU BOUGHT A CHIPMAKER, SKY WATER, ONLY TWO MONTHS AGO. WHAT IS YOUR PLAN TO INTEGRATE TWO MAJOR ACQUISITIONS WITHOUT EXECUTION RISK? NICOLO: WE HAVE BEEN AN EXPANSIVE COMPANY SINCE OUR IPO. WE STARTED IN QUANTUM COMPUTING AS OUR CORE BUSINESS. IT WAS A ROADMAP FOR A COMPUTERS WHICH WE ANNOUNCED LAST MONTH. IT ENABLES US TO BE VERTICALLY INTEGRATED AND REDUCE CYCLE TIMES FROM EIGHT MONTHS TO EIGHT WEEKS AND IN ADDITION TO THAT WE ARE ALSO EXPANDING OUR ABILITY TO SUPPLY THE U.S. AND OUR ALLIES AND ACCELERATE THEM. I HAVE CONDUCTED ENCLOSED ABOUT 57 ACQUISITIONS AS A PUBLIC COMPANY LEADER IN MY CAREER. I FEEL LIKE THE PATTERN RECOGNITION IS GETTING BETTER FOR ME AS THEY AGE AND GET MORE EXPERIENCED. AT THE SAME TIME I FEEL LIKE ANY MISTAKES THAT HAVE BEEN MADE DECADES AGO IN MY CAREER -- INTEGRATION IS A CORE COMPETENCE OF IONQ AND WE ARE GROWING MULTIPLE FACETS OF OUR BUSINESS AT THE SAME TIME. THAT IS WHAT ELISITY IS ABOUT. WE ALSO HAVE QUANTUM NETWORKING AND QUANTUM SENSING AND THESE ARE ALL COMPLEMENT REPORT OF AT -- OF OUR QUANTUM PLATFORM WHERE CUSTOMERS ARE BUYING MORE THAN ONE SOLUTION AND IT IS FUELING ACCELERATION IN OUR GROWTH. DANI: THE LOGICAL QUESTION IS WHAT IS NEXT? ARE THERE ANY OTHER GAPS YOU MIGHT WANT TO ADD ON TO VIA ACQUISITION? NICOLO: WE ARE ALWAYS LOOKING AT HOW WE CAN MAKE 1+1 EQUAL THREE. WE HAVE DEMONSTRATED THAT IN OUR COMPUTING BUSINESS WHERE WE ACQUIRED OXFORD ONYX. WE HAVE THE MOST MANUFACTURABLE QUANTUM COMPUTING BUSINESS IN THE WORLD BUT ALSO THE LARGEST. DOING THINGS IN THE REAL WORLD IS VERY MUCH THE FOCUS OF WHAT OUR QUANTUM STRATEGY AND QUANTUM BUSINESS IS ABOUT. WE HAVE A HUGE R&D ORGANIZATION. WE SPENT ABOUT $500 BILLION A YEAR ON R&D. WE BELIEVE QUANTUM IS SPENDING MONEY TO MAKE SURE THE FUTURE HAPPEN SOONER AND WE ARE ALSO INVESTING ACROSS THE QUANTUM PLATFORM TO MAKE SURE WE ARE BRINGING PRODUCTS TO MARKET IN A ROBUST WAY. YOU SAW OUR PARTNERSHIP WITH NVIDIA LAST MONTH IN THE QUANTUM COMPUTING SECTOR AS A VALIDATION OF OUR INVESTMENT, NOT ONLY IN QUANTUM NETWORKING BUT ALSO IN SKY WATER. ELISITY WILL GIVE US THE ABILITY TO NOT ONLY MOVE FASTER AND BRING YOUR PRODUCTS TO MARKET BUT ALSO BROUGHT IN THE CUSTOMER BASE AND GIVE US A FANTASTIC TEAM THAT CAN INTEGRATE OUR PRODUCT OFFERINGS AND OFFER THAT DEFENSE IN DEPTH STRATEGY TO THOSE GOVERNMENT AND ENTERPRISE TO BOTH SIDES OF THE ATLANTIC. NO DOUBT WE SEE HUGE OPPORTUNITIES AS WE SUPPLY QUANTUM TECHNOLOGIES FROM SUBMARINES TO SATELLITES. WE SEE OPPORTUNITIES IN SENSING. WE SEE OPPORTUNITIES AND BRING OUR QUANTUM TECHNOLOGIES TO MORE CUSTOMERS ON A GLOBAL BASIS. DANI: IF I CAN JUMP IN. SOMETHING THAT MIGHT BE APT TO THROW IN IS THE INTEL CEO OVERNIGHT ESSENTIALLY IN ASIA WAS SPEAKING AT A CONFERENCE HE BELIEVES QUANTUM COMPUTING WILL BE MAINSTREAM IN THE NEXT THREE TO FIVE YEARS? IS THAT THE TIMELINE YOU ARE ASSUMING AND WHAT NEEDS TO GO RIGHT TO THAT WERE SPEEDED UP? NICOLO: IONQ WAS THE FIRST QUANTUM COMPANY IN THE WORLD TO SEVEN FIGURES OF REVENUE, EIGHT FIGURES, NINE FIGURES. GUIDANCE WE JUST UPLIFTED TO 460 MILLION DOLLARS OF REVENUE THIS YEAR. WE HAVE BEEN ROUGHLY DOUBLING REVENUE EVERY YEAR SINCE THE IPO. WHAT IS YOUR DEFINITION OF MAINSTREAM? I THINK WE ARE ALREADY A SUBSTANTIAL SIZED ORGANIZATION. WE GROW EFFECTIVELY AND WE CONTINUE TO SHOW THE PLANNING HORIZON FOR QUANTUM TECHNOLOGIES IS HERE. DANI: WHAT ABOUT PROFITABILITY? YOU HAVE THE REVENUE, WHEN DOES PROFITABILITY COME? NICOLO: WE ARE FOCUSED ON GROWTH. WE HAVE NOT GIVEN GUIDANCE ON WHEN WE EXPECT THAT TO HAPPEN. I HAVE SEEN GREAT TECH COMPANIES FOCUS ON BUILDING THE ECOSYSTEM, BUILDING THE REVENUE, AND MAKING SURE CUSTOMERS ARE ALL ENJOYING PART OF THE ECOSYSTEM. THAT IS THE BOWL AT THE MOMENT. AND THE LONGER TERM ALL BUSINESSES WILL BECOME PROFITABLE BUT WE THINK WE WILL BE ABLE TO SCALE SUBSTANTIALLY MORE BECAUSE WE HAVE A VERY SUPPORTIVE SHAREHOLDER BASE AND OUR INVESTORS ARE SEEING WE ARE DELIVERING THE RESULTS. YEAR ON YEAR WE BEAT GUIDANCE, WE BEAT FINANCIAL EXPECTATIONS AND WE BEAT EXPECTATIONS ALSO WHEN WE'VE BEEN DOING THAT FOR FIVE YEARS. DANI: I HAVE 30 SECONDS AND I HATE TO DUMP THIS ON YOU WITH BARELY ANY TIME, BUT PART OF THE ACQUISITION IS FOR THE COMING THREAT OF Q DAY, THE POINT WHEN QUANTUM COMPUTERS BECOME POWERFUL ENOUGH TO BREAK ENCRYPTION STANDARDS. WHEN IS Q DAY? NICOLO: I WAS THE FIRST IN THE WORLD TO SAY Q DAY WAS COMING SOONER AND I SAID IT WOULD HAPPEN BY THE END OF THIS ADMINISTRATION IN THE LAB AND A YEAR AFTER THAT IN SCALE. WE ARE URGING OUR CUSTOMERS TO LISTEN TO THE WHITE HOUSE EXECUTIVE ORDER OF JUNE 22 AND START WORKING WITH US NOW. THIS IS A REAL AND PRESENT THREAT AND GETTING READY FOR Q DAY HELPS PROTECT AGAINST THOSE LLM LAB LEAKS THAT WILL ONLY GET WORSE AS LLMS START TO FIGURE OUT THE NEED TO WORK WITH QUANTUM COMPUTERS TO CRACK ENCRYPTION IN THE SHORT-TERM AND LONG-TERM. DANI: THANK YOU SO MUCH FOR YOUR TIME. GREAT TO HAVE YOU ON THE HEELS OF THE ACQUISITION. COMING UP, THE AI SPENDING BOOM. DOES IT FACE REALITY CHECKS? KATRINA DUDLEY TELLS US WHAT EARNERS NEED TO HEAR THIS EARNINGS SEASON. YOU ARE WATCHING "OPEN INTEREST." ♪ DANI: FIVE MINUTES UNTIL THE OPENING BELL AS THE S&P AND NASDAQ GO NOWHERE. TIP STOCKS AND SEMIS SELLOFF GETTING DRAGGED DOWN BY RISK OFF SENTIMENT. BRENT CRUDE IS HIGHER 2% AND THE EURO STILL AT A 2025 LOW. LET'S LOOK AT OTHER MOVERS. CHIPOTLE, SHARES FALLING AFTER STARBUCKS SAID IT IS NOT PURSUING A TAKEOVER OF THE BRITO CHAIN. WHEN THAT REPORTING CAME OUT ANALYSTS WERE BROADLY SKEPTICAL. THE INFORMATION REPORTS THE CRYPTO MINER TURNED AI SERVICE PROVIDER HAS ENTERED A MULTIYEAR CLOUD DEAL WITH ANTHROPIC AND SALESFORCE SHARES ARE HIGHER. BANK OF AMERICA RAISED ITS RECOMMENDATION TO BUY FROM UNDERPERFORM ANALYSTS ENLIST SOURCING POSITIVE TAILWIND FROM ADOPTION OF ITS SOFTWARE. LESS THAN 10 MINUTES UNTIL THE OPENING BELL. WE WILL BEGIN THE TRADING DAY WITH KATRINA DUDLEY. THAT IS UP NEXT. YOU ARE WATCHING "OPEN INTEREST." ♪ DANI: LET'S GET TRADING WEEK STARTED. MOMENTS TO GO. THIS IS "BLOOMBERG OPEN INTEREST ." WE JUST NEED TO GAIN 0.4% FOR THE S&P TO HIT A NEW HIGH. WE MAY STRUGGLE TO GET THERE, VOLUMES ARE LOW WITH THE COLUMBUS DAY HOLIDAY. BOND MARKETS ARE CLOSED. IT IS UNFAIR THAT EQUITY TRADERS STILL HAVE TO SHOW UP. THE NASDAQ IS UNDERPERFORMING BECAUSE OF CHIPMAKERS. AT THE NEW YORK STOCK EXCHANGE, THEY ARE CELEBRATING COLUMBUS DAY AND ITALIAN HERITAGE. THE SOCIAL SECURITY ADMINISTRATOR THERE, I GUESS HE IS ITALIAN, SOME OTHER WELL-KNOWN ITALIAN FIGURES. KELLY CONWAY? SURE, WHY NOT. AXE COMPUTER MARKING THEIR OFFICIAL TRANSMISSION TO AN AI INFRASTRUCTURE COMPANY. THEY WERE A BIOTECH COMPANY DOING RESEARCH WITH AI. HOP ON THE BANDWAGON. THESE SHARES ARE DOWN OVER THE PAST FIVE YEARS, SO CLEARLY THEY NEEDED TO MAKE A CHANGE. UP 63% YEAR TO DATE. CHIP STOCKS ARE DOWN ACROSS THE BOARD THIS MORNING. A CHINESE RIVAL COULD BOOST DENSITY. TECH VALUATIONS ARE ALSO PUSHING TRADERS TO A MORE DEFENSIVE STANCE. IT'S A MORE MUTED MARKET THIS MORNING. LET'S BRING IN FRANKLIN TEMPLETON INVESTMENT STRATEGIST KATRINA DUDLEY. WONDERFUL TO SEE YOU THIS MORNING. YOU HAVE BEEN WRITING ABOUT HOW MUCH NEEDS TO BE SPENT ON AI, WHAT WE MIGHT GET THIS EARNINGS SEASON AND WHETHER THERE WILL BE AN ROI. WE HEARD FROM THE BROADCOM CEO SEEING A LOT OF THIS IS HAPPENING WITHOUT ROI. IS THIS EARNINGS SEASON DIFFERENT THIS TIME? DOES ANYTHING CHANGE NOW? KATRINA: THERE ARE TWO ROI'S WE HAD TO BE FOCUSED ON. THE FIRST IS THAT HYPERSCALER, ALMOST $800 BILLION OF CAPEX. THAT CAPITAL IS BEING DEPLOYED, WE ARE LOOKING AT IT ALMOST AKIN TO A REAL ESTATE INVESTOR, LOOKING AT THE CREDIBILITY OF THE PERSON BACKING THAT SPENDING. WE THINK THERE IS GOOD CREDIBILITY THERE, FUNDED FROM FREE CASH FLOW. THOSE ARE NOW TURNING NEGATIVE, SO THERE IS A NEED FOR DEBT FUNDING. BUT I THINK THE PRIVATE CREDIT MARKETS AND THE BOND MARKETS HAVE BEEN VERY VIGILANT IN TERMS OF, BEFORE WE MAKE THIS LOAN, YOU HAVE TO DEMONSTRATE THE VALUE PROPOSITION. WE ARE LOOKING AT OUR FRIENDS ON THE FIXED INCOME SIDE TO BE REALLY DILIGENT IN MEASURING THAT ROI. LET'S MOVE TO THE OTHER SIDE OF ROI WHICH HAS NOT BEEN TALKED ABOUT, AND I THINK IT WILL BE THE NARRATIVE FOR THE NEXT SIX MONTHS, THE COMPANIES SPENDING ON AI, WHAT ROIS ARE THEY DELIVERING. YOU ARE SEEING A LITTLE BIT OF A MIXED MESSAGE IF YOU LOOK AT SOFTWARE, BANKING, INFRASTRUCTURE. YOU START TO SEE POSITIVE NARRATIVES. IF YOU LOOK AT OTHER PARTS OF THE MARKET, THEY ARE SAYING, WE HAVE NOT SEEN THE RETURNS. DANI: AREN'T THOSE IN CONFLICT? YOU CAN SEE THIS TO THE AVERAGE COST THAT COMPANIES ARE SPENDING ON COMPUTE. IT HAS GONE WAY DOWN FROM ITS PEAK, ALMOST HAVE. -- HALF. COMPANIES REALIZE I CANNOT SPEND AS MUCH AND MAY YOU'RE NOT PAYING HER FOR CLAUDE, YOU ARE USING OPEN-SOURCE. IT IS THE CHEAPER INFERENCE STARTUPS COMING IN. AREN'T THOSE IN CONFLICT, HYPERSCALERS DOING WELL, AND THE REST OF THE UNIVERSE TRYING TO GET SHEET COMPUTE? KATRINA: THERE IS A PARADOX, WHEN YOU DROP THE PRICE OF SOMETHING COME TO DEMAND INCREASES SO MUCH MORE, THE TOTAL PIE GETS BIGGER. THE TOTAL REVENUE PIE AS THE PRICING COMES DOWN COULD BE BIGGER, BUT YOU ARE RIGHT, THE ROI AT THE HYPERSCALER LEVEL EVEN WITH THOSE HIGHER REVENUES WILL GO DOWN BECAUSE THEY HAVE A HIGHER LEVEL OF CAPEX. AS THE COST OF COMPUTE COMES DOWN, AS PEOPLE LOOK AT ALTERNATIVE MODELS, MORE USE CASES WILL COME INTO THE FRAY. YOU HAVE SEEN SO MANY NARRATIVES ABOUT IT. THIS ESCAPING, AI GETTING OUT OF THE PROJECT SANDBOX. FROM THAT PERSPECTIVE, WE ARE IN A REGULATED INDUSTRY. WE HAVE BEEN REALLY RIGID IN MAKING SURE WE HAVE AFFORDABILITY, TRACEABILITY, TRACTABILITY WHENEVER WE HAVE DEPLOYED AI. I THINK THAT WILL MOVE INTO THE REST OF THE MARKET. DANI: THIS IS THE PICTURE I HAVE HEARD FOR AGENTIC SOFTWARE COMPANIES. THEY SAY, YOU NEED SOMETHING MORE CONTAINED, YOU DON'T WANT TO BE GETTING DATA TO LARGE LINE WHICH MODELS, SO MAYBE YOU WOULD TAKE ON AN AGENTIC SOFTWARE COMPANY THAT HAS A CONTAINED ECOSYSTEM. YOU ARE USING THE SITE YOUR COMPANY, YOU ARE VERY AWARE OF THE SAFETY PARAMETERS. DO YOU THINK THAT COULD BE SOMETHING THAT HELPS SOFTWARE THIS TIME AROUND? KATRINA: AT OUR LEVEL, WE OWN THE CONNECTED INTELLIGENCE LAYER. THAT IS WHERE WE BAKE IN THIS TRACEABILITY. FOR EXAMPLE, IF YOU HAVE ENERGETIC SOFTWARE SENDING EMAILS, WE NEED TO KNOW, IS IT AN AGENT OR PERSON SENDING EMAILS? WE ONLY WANT PEOPLE SENDING EMAILS OUT TO OUR CLIENTS, PRESSING THE BUTTON AND THEN HAVING THE DISTRIBUTION. WE HAVE BEEN VERY FOCUSED ON THAT WITHIN THE FRANKLIN TEMPLETON INFRASTRUCTURE. WE ARE A LARGE COMPANY, WE HAVE THE BALANCE SHEET AND THE ABILITY TO MAKE THESE INVESTMENTS, THIS SPENDING. FOR OTHER PARTS, SMALLER COMPANIES, YOU MAY SEE AN ARGUMENT FOR SOMEONE HAVING IT DO IT FOR ME, BUYING INTO THOSE RISK CONTROL MECHANISMS. DANI: IF I COULD SHIFT TOPICS FOR A MOMENT. WE ARE ENTERING THE OFFICIAL START OF EARNINGS SEASON AS BIG BANKS KICK OFF. ONE OF THE TRENDS, WE HEARD FROM DELTA ALREADY, AND THEY DOWNGRADED THEIR ASSUMPTIONS BECAUSE OF FUEL PRICES. THE NOTION IS THEY CAN KEEP ON PASSING ALONG THAT COST. DO YOU THINK WE WILL SEE THAT MORE, THE PRICE OF DIESEL IN ENERGY BECOMING MORE OF AN ISSUE? KATRINA: IF YOU LOOK AT CREDIT CARD SPENDING, BECAUSE THE BANKS ARE REPORTING FIRST-COME IT WAS UP 1%, 2%. AT THE BEGINNING OF THE YEAR, THERE WAS A DULL DRUM IN SPENDING BUT IT LOOKS LIKE THE CONSUMER IS PICKING UP. WE ARE WATCHING CONSUMER DELINQUENCIES, SO THAT IS THE OTHER THING TO WORRY ABOUT. IF YOU START TO SEE PRESSURE ON THE CONSUMER, I THINK WE NEED TO WORRY ABOUT THE ABILITY OF COMPANIES TO PASS IT ON. ANOTHER NUMBER WE ARE WATCHING AND COMPARING, AND SOMETIMES YOU HAVE TO DO THE COMPARE AND CONTRAST, IS WHAT THE UNIVERSITY OF MICHIGAN EXPECTATIONS FOR INFLATION ARE. 4.6%. HOW DOES THAT COMPARE WITH A LOWER NUMBER COMING OUT OF THE FED, WHICH IS A MORE DEMOGRAPHICALLY DIVERSE NUMBER THAN THE UNIVERSITY OF MICHIGAN, WHICH TENDS TO SKEW TO LOWER INCOME. LOWER INCOME SPENDERS ARE CONCERNED ABOUT PRICES, THE COST OF DIESEL. WE WILL CONTINUE TO FOCUS ON THE LOWER INCOME AND MAKING SURE AND THEY CONTINUE TO BE ROBUST. THAT IS SOMETHING WE NEED TO BE PAYING ATTENTION TO DURING YOUR NEXT SEASON -- EARNINGS SEASON. DANI: YOU POINTED THIS OUT, THE MOOD IS VERY BEARISH. EVEN AS WE TREAT NEAR ALL-TIME HIGHS, THERE IS ROOM TO RUN. KATRINA: IF I LOOK AT WHAT IS DRIVING THE MARKET, IT IS TECH AND ENERGY COMPANIES, TOP-PERFORMING YEAR TO DATE. INTERESTINGLY, THEY ARE DRIVING THAT POSITIVE NARRATIVE, BUT THEY ARE ALSO CREATING SOME OF THAT NEGATIVE NARRATIVE. ENERGY PRICES ARE UP SIGNIFICANTLY, DIESEL PRICES DRIVING EARNINGS OF ENERGY COMPANIES BUT ALSO CONCERNS ON THE MARKET. TECHNOLOGY COMPANIES ARE THE OTHER AREA OF CONCERN. YES, IT IS THIS DICHOTOMY IN THE MARKET, AND THAT IS WHAT IS SHOWING UP IN THAT AI INDEX BEING YOU HAVE A LARGE PERCENTAGE OF THE MARKET THAT IS BEARISH. YOU ALSO HAVE A PORTION OF THE MARKET THAT IS BULLISH. AT THE MOMENT, WE CONTINUED TO CLIMB WHAT WE CALL THE WALL OF WORRY. EVERYONE IS TALKING ABOUT THESE NEGATIVES, PEOPLE TALK ABOUT OVERSUPPLY COME OVER SPEND A BUT FROM OUR PERSPECTIVE, I THINK THE ROI NARRATIVE IS THE SECOND LEG OF THE STORY THAT WILL DRIVE US THROUGH INTO 2027. DANI: TECH, ENERGY HAS DONE WELL. BENEATH THAT, ARE YOU SEEING POCKETS OF BEARISHNESS THAT YOU THINK PRESENT A GOOD OPPORTUNITY? KATRINA: I AM NOT AS MUCH IN THE BOOK TO BE AVOID CAMP, BUT I LOOK AT HEALTH CARE. YOU MENTIONED SOMEONE WAS RINGING THE BELL, A FORMER BIOTECH COMPANY TURNING INTO AN AI INFRASTRUCTURE PLAYER. HEALTH CARE IS ONE OF THOSE AREAS WHERE IT WILL BE A VERY SLOW BUILD, BUT WE ARE GOING TO SEE A EYEING GREATER R&D, PRODUCTIVITY, MORE DRUGS COMING OUT OF THE PIPELINE. IT'S ONE OF THOSE AREAS THAT WE THINK IS AN UNDERAPPRECIATED BENEFICIARY OF AI BECAUSE IT IS SUCH A LONG TAIL. DANI: UNLESS THEY ALL DECIDE TO BECOME AN AI INFRASTRUCTURE COMPANY. WHY NOT HOP ON THE BANDWAGON. KATRINA: THAT IS CONCERNING BECAUSE THAT IS WHAT HAPPENED IN PRIOR BUBBLES. WE DON'T THINK THIS IS A BUBBLE, BUT WHEN E WANT TO MAKE SURE THAT WE DON'T HAVE TOO MANY COMPANIES MAKING THAT LEAP. DANI: THAT IS FRANKLIN TEMPLETON'S KATRINA DUDLEY. LET'S GET A CHECK ON THE EQUITY MARKETS. BROADLY SPLIT BETWEEN GAINERS AND LOSERS. WE ARE UP 0.1 PERCENT. WE NEED TO GO UP 0.4% IN ORDER TO SEE ALL-TIME HIGHS IN THIS MARKET. YOU HAVE MEDICAL MICROSOFT, APPLE, BIG TECH HAVING A GOOD DAY, AS IS ENERGY AS THE PRICE MOVES HIGHER. CONCERNS IN THE MIDDLE EAST, UKRAINE, RUSSIA. TO THE DOWNSIDE, CHIPMAKERS HAVING A ROUGH GO OF IT. MICRON, AMD, IT'S A WHO'S WHO OF ALL THE CHIPMAKERS. CONCERN SEEMS TO BE EMANATING FROM ADVANCEMENT IN CHINESE COMPANIES, SOME OF THE TECHNOLOGY THEY HAVE BEEN PUTTING OUT. ALSO JUST HIGHER OIL PRICES. IT IS LIKE VOLUME THIS MORNING, CONSIDERING BOND MARKETS ARE CLOSED. A PRETTY EVEN SPLIT, BUT THANKS TO ENERGY AND SOME OF THOSE BIG CAP MAG 7 NAMES, THE OVERALL INDEX IS HIGHER. FINANCIALS ALSO HIGHER AHEAD OF THE KICK OFF OF THE EARNINGS SEASON. STELLANTIS SAYS THAT A COMBINATION OF EUROPEAN AND AMERICAN BUSINESSES ARE NOT IN THE WORKS. WE WILL HAVE THAT, NEXT. TIME THOUGH FOR SOME TOP CALLS. HERE WITH THAT IS HEMA PARMAR. HEMA: WE HAVE A TECH ROUNDUP TODAY, STARTING WITH SALESFORCE, GETTING AN UPGRADE, RAISING THE COMPANY TO A BUY FROM UNDERPERFORM. IT THINKS AI WILL SERVE AS A BOOST. MAY COMPANIES ARE UNLIKELY TO REPLACE SALESFORCE PLATFORMS, AND AI COULD INCREASE THEIR DEPENDENCE ON THE COMPANY. NEXT, DOUBLE DOWNGRADE FOR ADOBE. WELLS FARGO SLASHING THE STOCK TO UNDERWAY FROM OVERWEIGHT, WARNING THEIR GROWTH IS STARTING TO WEEKEND. FULL YOUR TARGETS WILL BE TOUGH TO HIT ESPECIALLY AS SOME PRICE INCREASES ARE BEING DELAYED. SHARES ARE DOWN NEARLY 2% SO FAR. FINALLY, RAYMOND JAMES UPGRADES T-MOBILE TO OUTPERFORM. IT THINKS FEARS OVER SPACEX COMPETITION ARE YEARS AWAY FROM BECOMING A REAL THREAT AND THAT T-MOBILE HAS ITS OWN MAJOR ADVANTAGES. SHARES ARE UP NEARLY 2%. THOSE ARE YOUR TOP CALLS. DANI: THANK YOU. THE PARIS AUTO SHOW IS UNDERWAY AS CARMAKERS DEAL WITH MORE GEOPOLITICAL DIVISION. THE CEO OF STELLANTIS ADDRESSED RUMORS AT THE COMPANY WAS LOOKING TO SPLIT ITS EUROPEAN AND AMERICAN BUSINESSES. HE TOLD BLOOMBERG THOSE PLANS DID NOT WORK THE WAY THEY HAD HOPED. >> IT IS NOT PLAUSIBLE. OUR STRATEGY IS BASED ON HAVING ALL OF THE PLAYERS PLAYING A UNIQUE ROLE, BUT ALL OF THEM IN JOY TRANSVERSAL TECHNOLOGY. GLOBALLY WE DEVELOP TECHNOLOGIES FOR ALL THE BRANDS. THOSE ARE POWER BANKS, PLATFORMS, COMPUTING POTENTIAL. THIS IS ONE INVESTMENT FOR ALL AND THEN EACH BRAND WILL BUILD THEIR OWN PATH. DANI: JOINING US NOW IS DETROIT BUREAU CHIEF DAVID WELCH. WHO HAS BEEN PUSHING FOR THE BRANDS TO SPLIT UP, AND WHY IS IT ON THE TABLE TO BEGIN WITH, AND WHY BACKTRACK AND SAY, WE CANNOT DO IT, IT'S NOT POSSIBLE? DAVID: IT'S MORE MARKET SPECULATION THAN ANALYSTS PUSHING THIS BECAUSE THE COMPANY HAS A DIFFICULT TIME MANAGING THIS HUGE FAMILY OF BRANDS ACROSS MANY GLOBAL MARKETS. WHAT HE IS ESSENTIALLY SAYING IS THEY SHARE ENGINES, VEHICLE PLATFORMS, PARTS, OTHER TECHNOLOGIES LIKE HYBRID SYSTEMS. YOU JUST CANNOT PULL A COUPLE OF EGGS OUT OF THE OMELETTE TO DO IT. THERE ARE WAYS AROUND IT. COMPANIES DEVELOP SEPARATE ROLES ALL THE TIME. IF THEY WANTED TO SPLIT IT, THEY COULD FIND WAYS TO DO IT. HE IS BASICALLY SAYING, THEY ARE NOT TALKING ABOUT THAT RIGHT NOW. THEY WILL TRY TO MAKE A GO A BIT WITH THIS HUGE STELLANTIS FAMILY OF BRANDS. DANI: HOW DOES THE SPLIT LOOK? JEEP AND RAM SEEM TO BE RECOVERING, EUROPEAN BRANDS ARE LACKING? DAVID: THAT IS THE DIFFICULT PART. SUPPOSE YOU WERE TO TRY TO SPLIT THIS, THERE WOULD BE SOME COMPANIES, CHINESE COMPANIES, SOME OF THE OTHER ASIAN AUTOMAKERS ALREADY IN THE U.S. THAT WOULD LOVE TO HAVE CHEAPER RAM. THAT IS WHAT HE IS SAYING WITHOUT OPENLY SAYING IT. THE U.S. BUSINESS, IF YOU ARE SELLING PICKUP TRUCKS AND LARGE SUVS, IT IS QUITE LUCRATIVE. IN EUROPE, YOU ARE SMELLING SMALLER VEHICLES, LOWER MARGINS. THE KOREANS, JAPANESE, ALL THE EUROPEAN BRANDS ARE PLAYING IN THAT. THE CHINESE CARS ARE KEEPING PRICES IN CHECK FOR EVERYBODY, WHICH MAKES IT DIFFICULT TO MAKE MONEY THERE. EVERYONE WANTS THOSE AMERICAN BRANDS, BUT WHO WANTS TO KEEP THIS OTHER BUSINESS IN A HIGHLY CONTESTED EUROPEAN MARKET? THAT IS THE DIFFICULT PIECE OF THIS, IF YOU ARE TRY TO SPLIT THE COMPANY. DANI: PART OF THE CONVERSATION IN EUROPEAN SALES IS THE COMPETITION FROM CHINA. IT APPEARS THE EU AND CHINA HAVE AGREED TO A MEASURE ON EV'S, THAT CHINA WOULD PROVIDE MILLIONS OF SALES OF VEHICLES. DAVID: THE CHINESE HAVE AN ABILITY TO SELL PLUG-IN HYBRIDS, ELECTRIC VEHICLES, AND THEY DON'T HAVE THE RESTRICTIONS IN EUROPE LIKE THEY DO IN OTHER MARKETS, SPECIFICALLY THE UNITED STATES. VERY DIFFICULT FOR THEM TO GET OVER HERE BECAUSE OF TARIFFS, CONNECTED VEHICLE BANS, BUT THEY CAN DO THAT IN EUROPE. THAT IS WHY WE HAVE SEEN MASS LAYOFFS FROM VOLKSWAGEN, BMW. THEY HAVE ALL FELT THE PRESSURE FROM THIS. ANY THREAT FROM THE CHINESE TO SELL DIFFERENT VEHICLES, DIFFERENT TYPES OF VEHICLES IN THE EUROPEAN MARKET HAS GOT TO STRESS THE CEOS OF THE EUROPEAN AUTO COMPANIES. DANI: THANKS FOR JOINING US. THAT IS DAVID WELCH. HSBC MAKES CHANGES TO ITS PAY STRUCTURE FOR ITS SENIOR STAFF. WE WILL HAVE THE DETAILS RIGHT AFTER THIS BREAK. DANI: LET'S GET A CHECK ON HER EQUITY MARKET. WE ARE STILL MISSING OUT ON ALL-TIME HIGHS. VERY CLOSE BUT UNCHANGED S&P, AND A NASDAQ UNDERPERFORMING. CHIP STOCKS UNDER PRESSURE FROM COMPETITION COMING FROM CHINA. WE MOVE FURTHER AWAY FROM ALL-TIME HIGHS. AS FOR THE BROADER MARKETS, BOND MARKETS ARE CLOSED THIS MORNING, SO WE DON'T HAVE THE CASH TRADE FOR YOU. THE EURO CONTINUED TO SINK, TRADING AT 8.25 LOW. BRENT CRUDE UP 2.2 PERCENT FOLLOWING CONCERNS ABOUT THE STRAIT OF HORMUZ, POTENTIAL ATTACKS. IRGC ISSUING STATEMENTS ABOUT A TANKER. CHIPOTLE DOWN NEARLY 4%. STARBUCKS WILL NOT BE BUYING IT. THEY JUST ISSUED A STATEMENT ON THAT. IONQ DOWN 6.5 PERCENT WITH A NEW ACQUISITION. WE WOULD TALK TO THE CEO EARLIER IN THE SHOW. HSBC UP 1.3%, MOVING TO A PAY STRUCTURE THAT MORE CLOSELY RESEMBLES WALL STREET. LET'S GET MORE ON THIS WITH OUR FINANCE REPORTER IN LONDON, HARRY WILSON. WHAT IS HSBC CONSIDERING? HARRY: THEY ARE LOOKING AT PHASING OUT THE FIXED PAY ALLOWANCES INTRODUCED MORE THAN A DECADE AGO. THIS WAS A POLICY INTRODUCED POST-FINANCIAL CRISIS, MEANT TO BETTER ALIGN EXECUTIVE PAY WITH THEIR BANKS' INTERESTS. IT WAS ALWAYS CONTROVERSIAL IN THE U.K. IT WAS AN EU-INTRODUCED RULE, AND WITH THE U.K. NOW OUTSIDE OF THE EUROPEAN UNION, THE U.K. HAD ABOLISHED THESE RULES AROUND BONUS CAPS, WHICH ALLOWS THE BANKS TO MAKE THESE CHANGES LIKE WE ARE SEEING TODAY. DANI: HSBC SEEMS TO BE MAKING A LOT OF CHANGES, REPORTS ABOUT CUTTING ROLES IN ITS U.K. WEALTH BUSINESS. WHAT IS THIS TRANSFORMATION THAT HSBC IS ATTEMPTING TO UNDERGO? HARRY: THEY BROUGHT IN A NEW CHIEF EXECUTIVE TWO YEARS AGO, AND HE'S BEEN DOING A SLEW OF CHANGES ACROSS THE BANK OVER THE PAST FEW YEARS. MERGERS, CLOSURES OF BUSINESSES, DOWNSIZING OF BUSINESSES. IT ALL COMES DOWN TO SUPPLICATION. THE BANK IS TRYING TO SIMPLIFY ITS STRUCTURE ACROSS THE WORLD. YOU HAVE THE STRUCTURAL CHANGES BUT ALSO AROUND PAY. THE FIXED PAY ALLOWANCE HAS ALWAYS BEEN A COMPLICATED WORKAROUND FOR A SET OF RULES ARE NO LONGER IN PLACE. THIS FITS WITH A PICTURE OF A BANK CUTTING COSTS BUT ALSO TRY TO SIMPLIFY ITS STRUCTURES AROUND THE WORLD. PART OF THAT IS HOW YOU PAY PEOPLE. DANI: WE WILL GET REPORTS FROM THE BIG NAMES THIS WEEK. TO WHAT DEGREE ARE THE AMERICAN BANKS STILL SO DOMINANT IN THINGS LIKE TRADING, TO WHAT DEGREE ARE THE EUROPEANS TRYING TO WRESTLE ANY SORT OF MARKET SHARE BACK? HARRY: THE FIXED PAY ALLOWANCE, THE BONUS CAP, THIS WAS ALWAYS PRESENTED AS SOMETHING THAT WAS HOBBLING EUROPEAN BANKS AGAINST AMERICAN BANKS. THE FACT THAT YOU HAVE THESE PAY STRUCTURES IN PLACE MEANT THAT HE COULD NOT PAY YOUR STAFF AS MUCH AND BONUSES AS YOU HAD IN THE PAST. WITH THESE TYPES OF RULES BEING REMOVED, IT SHOULD BE A COMPETITIVE ADVANTAGE TO BRITISH BANKS TO PAY THEIR STAFF MORE. I IMAGINE FOR THEM, IT WILL ENABLE THEM TO COMPETE BETTER WITH WALL STREET BANKS. WHETHER THIS WILL DRASTICALLY CHANGE THE LANDSCAPE OVERNIGHT, I DOUBT IT. THIS IS JUST THE START OF ONE OF SEVERAL CHANGES THE BANKS ARE LOOKING TO MAKE, TO MAKE THEMSELVES MORE COMPETITIVE. DANI: WE APPRECIATE YOUR REPORTING THIS MORNING. THAT IS HARRY WILSON. HERE IS WHERE THINGS STAND. WE ARE VERY CLOSE TO ALL-TIME HIGHS, BUT NEGATIVE SENTIMENT ESPECIALLY IN THE NASDAQ THIS MORNING, AS SEMIS TAKEN OF THE LEG LOWER, DOWN 0.4%. BEARS HAVE BEEN CLIMBING IN THE RECENT AI SURVEYS, EVEN THOUGH WE ARE AT ALL-TIME HIGHS. WE EXPECT STRONG EARNINGS BUT BELOW THE PEAK OF LAST QUARTER. WILL THEY SHOW UP? COMING UP IN THE NEXT HOUR, MARIJA VEITMANE EXPLAINS WHY WALL STREET IS PULLING BACK ON EXPOSURE TO THE BANKING SECTOR. TINA FORDHAM ON HIGHER ENERGY PRICES AND INFLATION. THEN DAVID GEORGE SETS US UP FOR A HUGE WEEK OF BANK EARNINGS. YOU ARE WATCHING OPEN INTEREST. DANI: 30 MINUTES INTO YOUR TRADING DAY. WELCOME BACK TO "BLOOMBERG OPEN INTEREST." I'M DANI BERGER. EQUITY MARKETS GO A WHOLE LOT OF NOWHERE ON A LOW-VOLUME COLUMBUS DAY HOLIDAY. LOYAL EDGES HIGHER SUPPLY PRICE MELT FROM RUSSIA TO THE MIDDLE EAST. THOSE GEOPOLITICAL RISKS AND LOOM AS INVESTORS FACE IN EARNINGS SEASON AND A PACKED WEEK OF DATA. MORE AI WARNING STANCE. ANTHROPIC FLAX NEW CLUB MISBEHAVIOR INCLUDING ON GOVERNMENT SYSTEMS. INVESTOR LOOKING AHEAD TO A BUSY WEEK OF DATA AND FED SPEAK, CPI, PPI, REMARKS FROM KEVIN WARSH ARE ALL ON THE AGENDA. JOINING US NOW IS IN THE CURRENT -- ENDA CURRAN. WHAT ARE WE EXPECTING? ENDA: ON A HEADLINE BASIS, ACCELERATED INFLATION DOWN 0.6% ON THE MONTH, 3.6% OF THE YEAR. THE STORY THERE IS ALL ABOUT ENERGY, GAS, THE OIL STORY, THE IRAN WAR. CORE INFLATION IS EXPECTED TO BE DIFFERENT. THAT THINKING IS YOU MAY SEE SOME MODERATION BECAUSE THE PREVIOUS MONTH WAS DRIVEN BY ONE OFFS. THAT A WIRELESS CELL PHONE CHARGE. THE BIGGER STORY WILL BE ANY SIGNS OF HOW BROAD-BASED INFLATION IS, IS IT SPILLING OVER TO OTHER SECTORS OF THE ECONOMY? WE KNOW SERVICES HAVE BEEN STICKY, SO KEEP AN EYE ON INSURANCE COSTS. AIRFARES ARE UP 22% ON THE YEAR. KEEP AN EYE ON THE AUTO SECTOR. USUAL SUSPECTS LIKE SHELTER COSTS. IT WILL BE A COMPLEX NUMBER. HEADLINE STICKER SHOCK BECAUSE OF THE IRAN WAR, ENERGY. EVERYONE WILL BE LOOKING AT JUST HOW BROAD-BASED THOSE PRICE PRESSURES ARE. DANI: WE ALSO GET A FEW CLUES THIS WEEK IN THE WAY OF FED SPEAK BEFORE THEY BEGIN THEIR OFFICIAL BLACKOUT PERIOD STARTING ON THE 17TH. IT WILL BE CAPPED ON THE 15TH WITH KEVIN WARSH SPEAKING WITH THE IMF. WHAT HAVE WE SEEN SO FAR IN THE RUN-UP TO THIS DECISION, WHETHER THIS IS A UNITED FED, OR WHETHER THERE ARE CORE DIFFERENCES IN HOW THEY ARE APPROACHING INFLATION IN THE NEED TO CURVE B IT? ENDA: BROADLY SPEAKING, OFFICIALS ARE WORRIED ABOUT INFLATION, THEY WANT TO RAISE INTEREST RATES AT SOME POINT, BUT THEY PROBABLY THINK THEY HAVE TIME TO STAY ON HOLD. I BASE THAT ON SOME KEYNOTE SPEECHES FROM VICE CHAIR JEFFERSON, A COUPLE WEEKS AGO, JOHN WILLIAMS MADE A SIMILAR POINT, FED GOVERNOR CHRIS WALLER CAME OUT WITH SIMILAR REMARKS, MORNING ABOUT INFLATION BUT MORNING THEY DON'T NEED TO GO BACK TO BACK. THERE HAS BEEN THIS CHORUS OF OFFICIALS SAYING THEY DON'T NEED TO RUSH. THERE ARE OTHERS WHO CONTINUE TO WARN ABOUT INFLATION, MORE NEEDS TO BE DONE. BETH HAMMACK IS ONE EXAMPLE. THE EXPECTATION AMONG MARKETERS THAT THEY WILL STAY ON HOLD THIS MONTH. BESTS AROUND 20% OF THE TABLE HEIGHT. WE HAVE CHAIRMAN WARSH SPEAKING THIS MONTH AT THE IMF MEETINGS. THAT WILL BE INTERESTING BECAUSE AFTER THE INFLATION READINGS, HE SAYS HE DOES NOT LIKE TO GIVE SIGNALS, BUT IF WE GET A HOT NUMBER, HE MAY HAVE TO. THAT MAY INFLUENCE THE DECISION COMING UP IN A FEW WEEKS. DANI: THANK YOU SO MUCH. JOINING US NOW IS MARIJA VEITMANE AT STATE STREET GLOBAL MARKETS. MANY PEOPLE WOULD AGREE WITH YOU THAT HIGHER RATES ARE NOT BREAKING EQUITY MARKETS, BUT IT DOES MAKE IT MORE CONCENTRATED. UNDER THE SURFACE, EVERYTHING OTHER THAN ENERGY AND TECH HAS BEEN STRUGGLING. IS THAT A REASON TO BE CONCERNED, ARE JUST A CONSISTENT CHARACTERISTIC OF THIS MARKET? MARIJA: I AM VERY MUCH IN THE LATTER CAMP. THIS YEAR, THE EQUITY RALLY WAS UNPRECEDENTED, GIVEN YOU HAD THE STOCK MARKET AND INTEREST RATES HOVERING AROUND MULTIYEAR HIGHS. UNDER THE SURFACE, AS YOU SAY, IT IS VERY MUCH TECH, ENERGY. TO US, EARNINGS WERE STRONG. REALLY LOOKING UNDERNEATH INTO THE EARNINGS STORY, IT IS SUPER CONCENTRATED, HAS BEEN, AND LIKELY WILL CONTINUE TO BE. DANI: DOES THAT MEAN AS WE LIST ALL OF THE RISK EVENTS, THE EARNINGS WILL BE THE THING THAT MATTERS FOR THIS MARKET, MAYBE NOT THE MACRO DATA? MARIJA: ABSOLUTELY. WITH THE EQUITY MARKETS, THAT HAS BEEN THE STORY OF THE YEAR. WE HAVE SEEN VERY CONSISTENTLY STRONG RISK APPETITE, INVESTORS BUYING RISK BASED ON STRONG EARNINGS. I WOULD ADD THAT EARNINGS SEASON HAS BEEN A CATALYST FOR EXTRA RISK-TAKING. THAT IS WHAT WE ARE LOOKING AT. DANI: CONSENSUS FOR THIS EARNINGS SEASON, COMING DOWN FROM A RECORD 32% IN THE LAST QUARTER, STILL A STRONG 24%. DEUTSCHE BANK SAYS IT IS PRESSING INTO MUCH OF A SLOW DOWN, AND THAT LEAVES ANOTHER QUARTER OF ABOVE AVERAGE BEATS. I WONDER HOW YOU SEE THAT, THAT SLOW DOWN BEING PRICED INTO EARNINGS, AND WHETHER THAT IS WARRANTED. MARIJA: FOR US, IT'S A STORY OF THE HAVES AND HAVE-NOTS. THANK YOU FOR THE CONSENSUS, IT IS LOWER THAN THE PREVIOUS QUARTER, BUT EQUALLY, THE VAST MAJORITY, YOU HAVE ENERGY AND TECH, EXTRAORDINARY STRONG EARNINGS EXPECTATIONS. THE REST OF THE MARKET IS MEDIOCRE. I WOULDN'T CONCENTRATE ON AGGREGATE NUMBERS, AVERAGES. NOBODY IS GOING TO GET 24%. IT IS MORE LIKE TECH AND ENERGY, HUGE EARNINGS GROWTH, EVERYTHING ELSE, A LOT OF WEAKNESS. WE SEE MORE EVIDENCE OF THIS TWO-SPEED ECONOMY. DANI: I KNOW YOU HAVE SOME FEELINGS ABOUT BANKS. YOU HAVE FOR SOME TIME. WHAT DO YOU EXPECT FROM FINANCIALS, ALREADY FALLING 13% FROM AUGUST? MARIJA: IT IS INTERESTING. FINANCIALS, WE EXPECTED EARNINGS GROWTH, BUT THE LAST PLACE WAS HEALTH CARE IN TERMS OF EARNINGS EXPECTATIONS. I THINK HEALTH CARE JUST FELL BELOW FINANCIALS, SO NOT THE LOWEST EXPECTATIONS, BUT IN TERMS OF FINANCIALS, IT'S BEEN VERY INTERESTING. GROWING SHARE OF U.S. BANKS AND EUROPEAN BANKS. BANKS ARE RELY MORE ON THIS VOLATILE COMPONENT OF NONINTEREST EARNINGS. IT IS STILL THERE, JUST NOT AS DOMINANT. WHAT WE THINK ABOUT BANKS, THAT THESE VALUATION LEVELS, IT IS NOT A HIGH PERCENT, BUT ONE OF THE HIGHEST RELATIVE TO HISTORY, FAIRLY EXTENDED INVESTOR HOLDINGS PARTICULARLY IN EUROPE. THAT IS A RISK IN THE COMPOSITION OF THE EARNINGS. THAT IS WHAT WE ARE WATCHING, PARTICULARLY IN EUROPE. NET INTEREST MARGINS ARE FOLLOWING, THIS RELIANCE ON STRONG MARKETS IS MAYBE NOT SOMETHING INVESTORS WANT TO PAY FOR. DANI: IT ALMOST REFLECTS THIS CONCENTRATION RISK OF MARKETS THEMSELVES BEING OVER RELIANT ON AI. IS THAT ANOTHER ADDED ELEMENT OF, NOT ONLY ARE THEY CONCENTRATED, EARNINGS DERIVED FROM CAPITAL MARKETS, BUT THOSE CAPITAL MARKETS THEMSELVES ARE VERY CAUGHT UP IN AI, TOO? DOES THAT MAKE THE PROBLEM EXPONENTIALLY MORE CONCERNING? MARIJA: ABSOLUTELY. WE ARE SEEING THE SITUATION, IF THERE IS A COMPANY OR SECTOR THAT IS LINKED TO AI IN SOME WAY OR SHAPE, PRICES ARE BID UP, INSTITUTIONAL INVESTORS ARE EAGER TO PUSH MONEY THAT WAY. THE SECOND THAT YOU LOOK AT SECTORS NOT LINKED TO AI, CONSUMER, INDUSTRIALS, SMALL CAPS, THEN YOU SEE WEAK PERFORMANCE. IT IS ALMOST LIKE AN ON-OFF SWITCH. THAT IS POTENTIALLY OUR FEAR WITH HIGHER INTEREST RATES. IT WILL NOT DERAIL THE TECH TRADE. THESE COMPANIES HAVE 80% MARGINS, THEY CAN TAKE AN EXTRA 1% OF INTEREST, BUT EVERYONE ELSE IS STRUGGLING UNDER THE HIGHER INTEREST RATES, LOSING PRICING POWER. THAT IS REALLY IMPORTANT FOR US, THE ON-OFF SWITCH FOR ACTIVE ALLOCATION. DANI: WHAT WOULD IT TAKE YOU TO GET CONFIDENT IN A BROADENING OUT TRADE TO INVEST IN CONSUMER ORIENTED STOCKS, SMALL CAPS? MARIJA: WE HAVE BEEN SAYING EARNINGS. I WANT TO SEE A BROADENING OF EARNINGS. THAT IS THE FIRST THING WE SEE IN EARNINGS EXPECTATIONS FOR Q3, HUGE NUMBERS IN TECH, EVERYONE ELSE IS SINGLE DIGITS, SMALL TEENS. ONCE WE SEE THAT GAP BEGINNING TO CLOSE, THEN WE WILL LOOK TO BROADEN THE TRADE. I'M AFRAID TO SAY THAT WE ARE NOT THERE YET. DANI: ALWAYS A PLEASURE TO HAVE YOU ON, MARIJA VEITMANE OF STATE STREET. LET'S GET A CHECK ON THE MARKETS 30 MINUTES INTO YOUR TRADING DAY. S&P HAS TURNED NEGATIVE, IT WAS HIGHER. HIGHER OIL PRICES SEEMS TO BE THE DRIVER THIS MORNING. UP TO PERCENT ON BRENT CRUDE AS THE NASDAQ ALSO UNDERPERFORMS. CHIP STOCKS, MEMORY STOCKS HAVING A ROUGH GO OF IT. LET'S HAVE A LOOK AT SOME OF THE OTHER MOVERS ON OUR RADAR THIS MORNING. HEMA: WE HAVE A DOUBLE UPGRADE FOR SALESFORCE FROM BANK OF AMERICA, RAISING THE STOCK TO A BUY FROM UNDERPERFORM. THE ANALYST SAYS AI ADOPTION WILL SERVE AS A BOOST FOR THE COMPANY. SHARES ARE UP 3%. NEXT, STELLANTIS, AFTER THE EU UNVEILED AN AGREEMENT TO LIMIT CHINA'S CAR EXPORTS TO EUROPE. THE CEO SAYING A SPLIT OF THE COMPANY'S BRANDS IS NOT POSSIBLE. SHARES ARE UP SLIGHTLY SO FAR TODAY. FINALLY, STARBUCKS SAYS IT IS NOT BUYING CHIPOTLE. THE STATEMENT COMING AFTER A REPORT LAST WEEK THAT THE COFFEEMAKER WAS WORKING ON A PROPOSAL. YOU ARE SEEING SHARES OF CHIPOTLE DOWN 4%, STARBUCKS UP 1%. IT'S A STRANGE COMBO, WOULD YOU BUY A COPY WITH YOUR BURRITO? DANI: YES, FULL STOP. DOES THAT NOT SOUND DELICIOUS? WE NEED TO GO TO THE WEST COAST AND HAVE SOME MORE BREAKFAST BURRITOS BECAUSE THEY ARE SOME COMING UP, TINA FORDHAM ON GROWING TENSIONS IN THE U.K. IN SAUDI ARABIA, ADDING UNCERTAINTY FOR ENERGY MARKETS. WE GET INTO IT AFTER THE BREAK. DANI: LET'S GET SOME HIGH INTEREST STORIES, LOOK AT WHAT IS MAKING HEADLINES AROUND THE WORLD. HACKERS TARGETED HUNDREDS OF SUPERMARKETS IN FRANCE, FORCING REFRIGERATION SYSTEMS INTO DEEP FOR AND SPOILING FOOD. SOME SYSTEMS REPORTEDLY HEATED TO 120 DEGREES FAHRENHEIT, FORCING STORE TO THROW OUT PRODUCE. RESEARCHERS HAVE FLAG VULNERABILITIES AND R IN REFRIGERATION CONTROLLERS. SAUDI ARABIA SAYS IT INTERCEPTED NEW ATTACKS FOLLOWING STRIKES ON THE RIYADH AIRPORT. OVER 140 PEOPLE WERE KILLED. REGIONAL TENSIONS ESCALATE. UKRAINE PRESIDENT ZELENSKYY SAYS UKRAINE WILL KEEP STRIKING RUSSIA IF MOSCOW REFUSES AND ENERGY CEASE-FIRE. HE ACCUSED RUSSIA OF CONTINUE ATTACKS ON UKRAINE AND ENERGY CITES PRESIDENT TRUMP ANNOUNCING A TRUCE. HE ALSO SAYS UKRAINE NEEDS A FULL CEASE-FIRE BEFORE IT CAN HOLD ELECTIONS. LET'S DISCUSS THESE GEOPOLITICAL DEVELOPMENTS. JOINING US IS TINA FORDHAM, FOUNDER OF FORDHAM GLOBAL FORESIGHT. YOU HAVE BEEN WRITING ABOUT THIS, VARIOUS DEVELOPMENTS IN UKRAINE AND RUSSIA. WE HAVE THE PRESIDENT TRYING TO CALM AND ENERGY CEASE-FIRE. THE PRESIDENT'S DEAL WITH RUSSIA OVER DIESEL. TAKEN TOGETHER, YOU SAY THESE MARKET TURNING POINT IN THE U.S. RUSSIA RELATIONSHIP. WHAT DO YOU SEE, WHERE IT GO FROM HERE? TINA: THE SEQUENCE OF DEVELOPMENT IS THAT WE SAW OVER THE WEEKEND HAD AN AIR OF FAMILIARITY IN PART BECAUSE PRESIDENT TRUMP HAS TAKEN TWO ANNOUNCING MEASURES TO HELP TOP-DOWN ENERGY PRICES OVER THE WEEKEND, OFTEN COMBINED WITH THREATS. IN THIS CASE, WHAT HE ANNOUNCED ON FRIDAY WAS A DIESEL DEAL WITH RUSSIA OF COURSE, THE UNITED STATES IS NOT ABLE TO TRADE WITH RUSSIA BECAUSE OF SANCTIONS THAT WERE PASSED BY CONGRESS AFTER THE FULL-SCALE INVASION IN 2022, FURTHER REINFORCED BY THE SANCTIONS PACKAGE THAT THE LATE SENATOR LINDSEY GRAHAM SPONSORED. THAT ANNOUNCEMENT IS A BIG DEAL IN GEOPOLITICAL TERMS, BUT MAY BE A SMALL DEAL IN DIESEL PRICE TERMS, RELIEF FOR AMERICAN FARMERS AND TRUCKERS, AS WAS INTENDED. BUT IT WAS WHAT HAPPENED AFTER THAT THAT ALSO GOT MY ATTENTION. IN THE CONTEXT OF WHAT I SEE AS WIDER EFFORTS FROM THE WHITE HOUSE TO POSSIBLY NORMALIZE RELATIONS WITH RUSSIA IN A PIECEMEAL FASHION, STARTING WITH THIS DIESEL SALE, ADDED TO THAT, BUT THE KUSHNER-WYCOFF DUO HAVE SUGGESTED IN TERMS OF EASING SANCTIONS ON RUSSIAN POTASH, SUPPLIES, OTHER KINDS OF SWEETENERS. OF COURSE, THE INVITATION FOR RUSSIA TO JOIN THE G20 IN DECEMBER. DANI: WHERE DOES THIS LEAVE EUROPE? REPORTS THAT THEY ARE NOT PLEASED WITH THESE DEALS. ZELENSKYY BASICALLY SAYS, IS RUSSIA GOING TO STOP ATTACKING OUR ENERGY INFRASTRUCTURE, TOO? THE PRESIDENT, ON TRUTH SOCIAL, SAYING THE EUROPEAN UNION HAS ALSO BEEN PAYING RUSSIA FOR ENERGY. WHAT DOES THAT DO TO THE TWO REGIONS, HAVING TRUMP TO MAKE MOVES, TO PEACE DEAL AND EMBRACE RUSSIA AGAIN? TINA: I WANT TO BRING US BACK TO THE RESPONSE FROM CONGRESS. CONGRESS WAS NOT CONSULTED WITH THIS ANNOUNCEMENT. THOSE SANCTIONS STAY IN PLACE. THE TREASURY HAS SWIFTLY WROTE AN EXEMPTION, BUT WE HAVE SEEN A RESPONSE FROM THE SENATE FOREIGN RELATIONS COMMITTEE, BIPARTISAN GROUP OF SENATORS, THAT HAVE EMPHASIZED U.S. TAXPAYER MONEY SHOULD NOT BE GOING TO FUND THE KILLING OF CIVILIANS IN UKRAINE. ON TOP OF THE CONGRESSIONAL OBJECTIONS, WE CAN ALSO SEE PRESIDENT TRUMP HAS SUGGESTED, PRESIDENT ZELENSKYY, THAT IT WAS TIME FOR HIM TO GO, TO WHICH ZELENSKYY SAID IF THERE WAS AN ENERGY CEASE-FIRE, AS TRUMP ANNOUNCED ON SUNDAY BUT NOT ACKNOWLEDGED BY RUSSIA, THERE COULD BE ELECTIONS. WE ARE TRAPPED IN THIS GROUNDHOG DAY, REPEATING OF THE SAME OLD TROPES. YET, RUSSIA BOMBED AN ENERGY PLAN IN THE CITY OF KHARKIV IN EASTERN UKRAINE JUST A COUPLE OF HOURS AFTER PRESIDENT TRUMP POSTED UNTRUTH SOCIAL THAT THERE WAS AN ENERGY CEASE-FIRE. TALKING DOWN THE WAR DOES NOT SEEM TO BE AN EFFECTIVE METHOD FOR DIPLOMACY. THAT IS WHAT I SEE RIGHT NOW. DANI: FOR THOSE TRACKING THESE TWO SIMULTANEOUS CONFLICTS IN GEOPOLITICAL AND ENERGY TERMS, ALSO HAVE TO CONTEND WITH THE ATTACK ON THE SAUDI ARABIAN AIRPORT, CONCERNS OF ESCALATION. I AM LOOKING AT THE SCREENS SKY BRENT CRUDE IS UP ONLY 2%. IF THIS MARKET WAS TRULY CONCERNED ABOUT ESCALATION, 2% SEEMS QUITE CONTAINED. DO YOU THINK THAT IS AN APPROPRIATE RESPONSE, THAT THIS IS NOT SOMETHING THAT WOULD VASTLY CHANGE THE PICTURE WHEN IT COMES TO ESCALATION, GLOBAL ENERGY MARKETS? TINA: I SUPPOSE I'M NOT SURPRISED. MARKETS HAVE BECOME MUCH MORE FOCUSED AND SELECTIVE THAN THEY WERE 15 YEARS AGO, THINKING ABOUT PRICES. THOSE HOUTHI MISSILES ATTACKED THE AIRPORT IN SAUDI ARABIA, TWO AIRPORTS, NOT ENERGY INFRASTRUCTURE. MARKETS ARE ALSO LOOKING AT THE FACT THAT MUCH OF THE TRAFFIC THROUGH THE STRAIT OF HORMUZ HAS BEEN RESTORED, PERHAPS 80%, 90% OF VOLUMES. IT IS ALWAYS HARD FOR MARKETS TO PRICE GEOPOLITICS. TAKEN TOGETHER, WE SHOULD BE POSITIONING FOR AN EXPECTATION THAT OIL STAYS HIGHER FOR LONGER, THAT THIS IMPACTS THE RATES CYCLE, AND THAT ANY POSSIBLE RELIEF, WHETHER IT IS DUE TO A PERIOD OF LULL IN THE MIDDLE EAST OR RUSSIA-UKRAINE, DOES NOT COME FAST ENOUGH TO HELP REPUBLICANS AT THE MIDTERMS, WHICH WAS UNDOUBTABLY BEHIND TRUMP'S MOVE TO BUY THOSE SUPPLIES FROM RUSSIA WHEN HE TALKED ABOUT OUR GREAT RANCHERS, FARMERS, TRUCKERS. DANI: AT THE SAME TIME, THE U.S. HAVE BEEN BUILDING UP TROOPS IN THE AREA. THIS IS A PRESIDENT WHO SAID HE WOULD NOT STRIKE BEFORE THE MIDTERMS, BUT SAUDI IS A KEY ALLY IN THE MIDDLE EAST COME IN THE CONFLICT WE HAVE SEEN. WHAT IS YOUR ASSUMPTION AS TO WHETHER OR NOT THE U.S. DOES INCREASE ITS INVOLVEMENT FOLLOWING THESE ATTACKS? TINA: IN ADDITION TO THE FINANCIAL MARKET AND OIL PRICE IMPACT, I'VE HAD CONVERSATIONS IN RECENT WEEKS WITH A NUMBER OF BANKERS AND BUSINESS LEADERS FROM THE GULF. THIS DEADLY ATTACK AT THE MAIN AIRPORT IN RIYADH COMES AT A CRUCIAL TIME WHEN THE COUNTRY IS HOSTING THE WORLD PETROLEUM CONGRESS, SEVERAL ENERGY LEADERS, HAVE ANNOUNCED THEY WILL NOT BE ATTENDING. THIS WAS THE LAST THING THAT BUSINESS IN THE GULF NEEDED. IT REPRESENTS THE BIGGEST ATTACK SINCE THE START OF THE WAR MORE THAN SIX MONTHS AGO NOW. THE WHOLE VISION OF THE MIDDLE EAST BEING -- THE GULF BEING A SWITZERLAND OF THE MIDDLE EAST -- IS TAKING A HIT FROM THESE DEVELOPMENTS. IT'S JUST A REMINDER THAT NOTHING HAPPENS IN A VACUUM. EVEN THOUGH THE W HOUTHIS OVER THE YEARS HAD BEEN A RAGTAG MILITIA, THEY HAVE LEARNED TO MAKE DRONES APPARENTLY FROM READING ABOUT IT ON CLAUDE. THEY CAN DO A GREAT DEAL OF DAMAGE. IT IS COLLATERAL DAMAGE, IT DOESN'T CHANGE THE OVERALL PREMISE OF DOING BUSINESS, BUT IT IS DIFFICULT TO BEAT THEM, JUST LIKE IT'S BEEN DIFFICULT FOR THE U.S. TO BEAT IRAN. DANI: THANK YOU SO MUCH FOR JOINING US. THAT IS FORDHAM GLOBAL INSIGHT CO-FOUNDER TINA FORDHAM. BIG BANKS FACE AND EARNINGS TEST. WE WILL DISCUSS WITH ANALYST DAVID GEORGE OF BAIRD. THIS IS OPEN INTEREST. ♪ DANI: NOT MUCH TO GUIDE MARKETS. BOND MARKETS ARE CLOSED FOR THE COLUMBUS DAY HOLIDAY. EARNINGS SEASON RAMPS UP. NOTABLE DRIFT LOWER FOR THE NASDAQ. I ALSO WANT TO CHECK ON CHIPOTLE AND STARBUCKS SHARES, AFTER STARBUCKS SAID WE ARE NOT BUYING CHIPOTLE. WHAT WAS THAT ALL ABOUT LAST WEEK? THE REACTION WAS NOT GREAT. ANALYST WIDELY PANNED IDEA OF STARBUCKS BUYING CHIPOTLE. COMING UP, WE WILL LOOK AHEAD TO BIG BANK EARNINGS. ANALYST DAVID GEORGE JOINS US NEXT. DANI: BAIRD ANALYST DAVID GEORGE IS OPTIMISTIC HEADING INTO BANK EARNINGS. HE EXPECTS GENERALLY GOOD RESULTS, HELPED IN PART BY SOLID LOAN GROWTH. HE ALSO SAYS BANK STOCK LOOK MORE REASONABLE AFTER THE RECENT SELLOFF. DAVID JOINS US NOW. BANKS ARE DOWN ALMOST 12% SINCE THAT AUGUST PEAK. IS THIS A MARKET THAT IS UNDERESTIMATING TO WHAT DEGREE THEY WILL BE SHOWING UP THIS WEEK EARNINGS? DAVID: GOOD MORNING. I THINK WE HAVE SEEN OVER THE LAST MONTH WITH THIS BACKUP IN BOND YIELDS A RISK THROUGHOUT ANYTHING CYCLICAL. IT IS NOT JUST BANKS, IT IS HOMEBUILDERS, INDUSTRIALS, ANY SECTOR THAT IS NOT AI CENTRIC OR TANGENTIALLY PART OF THE SEMICONDUCTOR COMPLEX. FORTUNATELY, WE THINK THE NEXT COUPLE OF WEEKS, AS YOU LOOK AT BANK EARNINGS, THEY WILL BE PRETTY GOOD OVERALL. WE ARE LOOKING AT 20% YEAR-OVER-YEAR EARNINGS GROWTH, WHICH IS PRETTY GOOD FOR THE BANKING SECTOR. LOAN GROWTH REMAINS RELATIVELY GOOD, SHOULD BE OVER 7% THIS QUARTER WITH STRENGTH BOTH IN THE CONSUMER AND CREDIT, CAPITAL MARKED SHOULD BE SLOWER, BUT THAT'S EXPECTED. THE SET UP FOR STOCKS IS ACTUALLY PRETTY GOOD GOING INTO EARNINGS SEASON TOMORROW. DANI: WE WERE JUST BEING WITH MARIJA VEITMANE OF STATE STREET ABOUT THIS, BANKING BUSINESSES ARE GETTING TO CONCENTRATED ON CAPITAL MARKETS, AND THOSE CAPITAL MARKETS THEMSELVES ARE TOO CONCENTRATED AROUND AI, DUE TO THE VOLATILITY OR FINANCING TO BUILD OUT. IS THAT A CONCERN TO YOU, THE CONCENTRATION OF IT? DAVID: IT IS NOT SO MUCH CONCENTRATION -- AND WE HAVE BEEN DOING THIS FOR 25 YEARS OR SO. WE HAVE BEEN IN AN ENVIRONMENT WHERE FEES AND CREDIT HAVE ALL BEEN TAILWINDS. THAT IS SOMETHING THAT WE DON'T SEE VERY OFTEN. AS WE THINK ABOUT CAPITAL MARKETS, REVENUES BROADLY, IT IS FAIR TO SAY, LIKE YOUR LAST GUEST MENTIONED, MANY OF THE BROKERS AND MONEY CENTER BANKS MAY BE OVER EARNING AS IT RELATES TO CAPITAL MARKETS REVENUES. TO THE EXTENT THAT YOU GET A SLOW DOWN IN AI CAPEX, OFFERINGS RELATED TO AI, CLEARLY, SOME OF THE WALL STREET BANKS WOULD SEE A DECELERATION OR EVEN DECLINE IN CAPITAL MARKET CENTERED REVENUE. FOR THAT REASON, IN ADDITION TO THEIR VALUATIONS, WE HAVE BEEN MORE CONSTRUCTIVE ON THE REGIONAL BANKS, GIVEN MUCH LOWER MULTIPLES, LESS SUSCEPTIBLE TO THAT HANGOVER THAT WILL ULTIMATELY COME WHEN CAPITAL MARKETS REVENUES AND NORMALIZE. DANI: WHAT DOES THAT MEAN ABOUT YOUR ASSUMPTIONS AROUND BANKS? BUT WE SEE CREDIT LOSSES BE RELATIVELY CONTAINED? DAVID: IN GENERAL. CLEARLY, THE CONSUMER, THERE ARE LOTS OF HEADWINDS OUT THERE, YOU MENTIONED THIS BACKUP IN RATES, THE OIL PRICE DELTA SINCE THE BEGINNING OF THE YEAR IS SIGNIFICANT. FORTUNATELY, UNEMPLOYMENT IS VERY LOW, 4.2%. THAT IS THE MAIN FUNDAMENTAL DRIVER AS IT RELATES TO WHAT, HOW THE CONSUMER WILL BEHAVE. LOAN GROWTH OUT OF THE CONSUMER AREA HAS BEEN AROUND 4%, IN LINE WITH GDP BROADLY. WE ARE FEELING PRETTY GOOD TODAY AS IT RELATES TO CREDIT FOR BOTH THE CONSUMER AND THE COMMERCIAL AREA ACTUALLY. DANI: WHAT IS YOUR ASSUMPTION WITH HOW BANKS ARE USING THEIR CAPITAL? WE HAVE SEEN A FEW DEALS COMING FROM GOLDMAN SACHS AROUND ASSET MANAGEMENT. JAMIE DIMON HAS TALKED ABOUT MAYBE WE DO A DEAL IF WE SEE SOMETHING ATTRACTIVE. DO YOU FORESEE THE BANKS PUTTING THEIR CAPITAL MORE TO WORK IN THAT WAY AS WE GO ON THIS YEAR? DAVID: THE ELECTION IS PROBABLY AN IMPORTANT DATA POINT. WE ARE IN A UNIQUE REGULATORY TIME TODAY, GIVEN THE CHANGE, MORE MERGER-FRIENDLY REGULATORY BACKDROP. WE ARE OF THE VIEW THAT OVER THE NEXT TWO YEARS, YOU'LL SEE AN ACCELERATION OF DEALS. THIS BACKUP IN THE 10-YEAR MAY SLOW THINGS SOMEWHAT BUT THERE ARE STILL TOO MANY BANKS OVER 3500, AND WE THINK THERE WILL BE CONTINUED CONSOLIDATION OVER THE YEARS. WE EXPECT THAT TO PICK UP POST THIS NOVEMBER ELECTION. DANI: AMONG THE BIG BANKS, WHO ARE YOU EXPECTING TO OUTPERFORM? WHICH BANKS DO YOU THINK HAVE THE MOST ABILITY TO SURPRISE TO THE UPSIDE? DAVID: I THINK IT'S MORE IMPORTANT TO THINK ABOUT, AS IT RELATES TO THE STOCKS, THE SET UP GOING IN IS RELATIVELY NEGATIVE FROM A SENTIMENT PERSPECTIVE. WE THINK THAT BODES WELL FOR THE STOCKS. WE THINK JPM TOMORROW WILL HAVE A VERY GOOD QUARTER, THEY HAVE AN ASSET-SENSITIVE BALANCE SHEET, VERY MUCH LEVERED TO SHORT-TERM RATES. THIS BACKUP IN RATES SHOULD HELP THEM FROM AN INTEREST INCOME PERSPECTIVE. WE EXPECT THEM TO TALK ABOUT 2027 NET INTEREST INCOME TOMORROW. WE THINK THAT WILL BE CONSTRUCTED. WE THINK THE BANKS BROADLY WILL TRADE RELATIVELY WELL, NOT ONLY THE REGIONALS, BUT THE MONEY CENTER IS, AS WELL. THE CAPITAL MARKET SLOW IS LARGELY EXPECTED, IN THE STOCKS, AND WE ARE VERY BULLISH ON THESE NAMES GOING INTO THE QUARTER. DANI: THANK YOU SO MUCH FOR JOINING. DAVID GEORGE OF BAIRD HEAD OF THE BIG BANK EARNINGS. JP MORGAN KICKS THINGS OFF. IT WILL BE A VERY BUSY WEEK AS WE TRY TO GUIDE THE MARKETS TOWARD ALL-TIME HIGHS. CPI ALSO TO CONTEND WITH, BUT PERHAPS IT IS EARNINGS THAT WILL WIN OUT. WE DON'T HAVE A LOT OF DRIVERS IN THE WAY OF CATALYSTS TODAY. THE S&P AND NASDAQ ARE LOWER. CHIPMAKERS ARE HAVING A ROUGH GO OF IT THIS MORNING, SO WE ARE UNABLE TO GET TO NEW ALL-TIME HIGHS THAT WE HIT ON TUESDAY. BRENT CRUDE ALSO NOT HELPING THINGS OUT, UP 2.25 PERCENT. BONDS ARE CLOSE FOR THE COLUMBUS DAY HOLIDAY. LET'S TAKE A LOOK AT SOME OTHER MOVERS THIS MORNING WITH HEMA PARMAR. HEMA: WE WILL START IN PHARMA. IT'S A WIN FOR BRISTOL-MYERS, USING A LOWER DOSE OF ITS LUNG DISEASE DRUG, MEETING ITS GOAL. SHARES ARE STILL DOWN 3% THIS MORNING. ADOBE, DOUBLE DOWNGRADE FOR THE COMPANY. SHARES ARE FALLING THIS MORNING. WELLS FARGO CUT ADOBE TO UNDERWEIGHT FROM OVERWEIGHT. THE ANALYST SEES MEANINGFUL CRACKS IN THEIR GROWTH STORY. MEMORY CHIPMAKERS ARE UNDER PRESSURE AFTER A CHINESE RIVAL SAID IT HAS MADE PROGRESS IN DEVELOPING A NEW CHIP THAT CAN STORE MORE DATA. YOU ARE SEEING SHARES OF SANDISK, WESTERN DIGITAL, MICRON ALL DOWN THIS MORNING. SANDISK DOWN MORE THAN 7%. THOSE ARE YOUR MORNING MOVERS. DANI: THANK YOU SO MUCH. LET'S STAY WITH AI AND TECH. ANTHROPIC SAYS IT'S CLAUDE MODEL CARRIED OUT UNINTENDED ACTIONS INCLUDING SUBMITTING A FALSE TIP IN A POLICE HOMICIDE CASE. LET'S GET TO ED LUDLOW. THESE HAVE A VERY REAL WORLD FEEL TO IT IN TERMS OF WHAT CLAUDE DID. WHAT DO WE KNOW ABOUT THE DETAILS? ED: IN THESE CASE STUDIES, THE MODELS TOOK REAL-WORLD ACTIONS AND THERE ARE CONTINUED BEHAVIORS BY MODELS THAT ARE NOT THE INTENTION. THAT IS CONCERNING. THE NET RESULT, THE CONSEQUENCE IS THERE WAS NOT ANY MATERIAL IMPACT IN THE REAL WORLD. THIS RANGES FROM A PERIOD OF TIME FROM MAY THROUGH THE END OF AUGUST IN THE SUMMER. ANTHROPIC STARTED TO GO BACK THROUGH THE TRANSCRIPTS. THIS IS ALL IN THE CONTEXT OF THEM TESTING DIFFERENT GENERATIONS OF MODELS. IN SOME CASES, LIKE THE HOMICIDE CASE THAT YOU FLAGGED, THESE MODELS WERE GIVEN LIVE INTERNET ACCESS DELIBERATELY, TO TEST AND EVALUATE THEM IN CERTAIN WAYS. NOW ANTHROPIC IS DISCLOSING THE NET RESULTS OF THAT. DANI: IS IT AN ISSUE WITH ANTHROPIC NOT PUT IMPROPER GUARD RAILS VERSUS IT GOING ROGUE? ED: THIS IS WHY THE HOMICIDE CASE STUDY IS INTERESTING. WE KNOW WHEN IT HAPPENED, JULY 18, LATE AT NIGHT. THE MODEL HAD ACCESS TO THE INTERNET, AND THE TEST AND EVALUATION THAT ANTHROPIC WAS TRYING TO CONDUCT WAS, WHAT CAN THIS MODEL DO WITH RANDOM WEBSITES? IT FOUND A WEBSITE THAT WAS ABOUT UNSOLVED HOMICIDES IN THE CITY OF PHILADELPHIA, AND THE MODEL, IN TRYING TO ACE THE TEST -- HOW DO YOU INTERACT WITH A WEBSITE -- TRY TO FILL OUT THE MISSING PERSON'S TIP FORM. I HAVE INFORMATION ABOUT THIS CASE. WHEN I SAY REAL-WORLD CONSEQUENCES, THERE WERE NOT ANY, AUTOMATED SYSTEMS FLAGGED IT ON THE POLICE SIDE OF BEING SPAM ESSENTIALLY, SO THE TIP NEVER WENT THROUGH. BUT THAT IS THE PROBLEM. ANTHROPIC TOLD THIS MODEL, GO AND INTERACT WITH THE WEBSITE, AND IT DID. IT IS JUST GIVING A FICTITIOUS TIP ON AN UNSOLVED HOMICIDE IS PROBABLY NOT SPECIFIED ENOUGH, WHAT ANTHROPIC HOPE THAT IT WOULD NOT DO. DANI: ANTHROPIC ALSO BRIEFED THE WHITE HOUSE ON THESE CASES. THE WHITE HOUSE IS LIGHT, THEY CAN SELF REGULATE. HOW IS THAT DYNAMIC INVOLVING? ED: WHAT IS NEWS IN THIS, THIS IS AN EARLY CASE STUDY OF THE PRESIDENT IN THE WHITE HOUSE'S SUPER INTELLIGENCE TASK FORCE. A LOT OF PEOPLE IN INDUSTRY ARE STILL ASKING, WHAT WAS THE NET RESULT OF ALL OF THOSE CEOS GOING TO LUNCH WITH THE PRESIDENT, COMING OUT IN THE ROSE GARDEN, SAYING THIS IS WHAT WE AGREED TO DO. THEY BASICALLY AGREED TO SHARE INFORMATION. ANTHROPIC PUBLISHED THIS REPORT OCTOBER 9, BUT THEY ALSO BREED THE SUPER INTELLIGENCE TASK FORCE -- BRIEFED THE SUPER INTELLIGENT TASK FORCE, WORKING AS A GROUP. THAT IS SIGNIFICANT. IT IS A DISCLOSURE RATHER THAN SOME ACTION AS A RESULT OF IT. DANI: REALLY LOOKING FORWARD TO BLOOMBERG TECH, STARTING IN ABOUT 20 MINUTES TIME. COMING UP ON THE SHOW, TWO U.S.-BASED ACADEMICS SHARE THE NOBEL PRIZE IN ACADEMICS. MORE ON THEIR WORK, NEXT. THIS IS OPEN INTEREST. ♪ TO DO MY U.S.-BASED ACADEMICS, ROBERT HALL AND MICHAEL WOODFORD, OUR SHARE OF THE 2026 NOBEL PRIZE IN ACADEMICS -- ECONOMICS, RATHER. THEIR RESEARCH HELPED SHAPE THE MODEL OF THE CENTRAL BANKS AND OTHER GOVERNMENTS USED TO TACKLE INFLATION AND OTHER ECONOMIC SHOCKS. LET'S DISCUSS WITH MICHAEL BALL. IT FEELS PRETTY OF THE MOMENT TO GET THE NOBEL ECONOMICS PRIZE BASED ON THE TYPE OF RESEARCH. MICHAEL: THEY ARE KIND OF THE GODFATHERS OF NEW KEYNESIAN. AFTER THE 1970'S, WE REALIZED THE CONSUMER WAS RUNNING POLICY AND EXPECTATIONS. WE HAVE CONSUMERS CHANGING BEHAVIOR EVEN BEFORE THE FED OR FISCAL POLICY CHANGES, SO TIMELY IN THAT SENSE. WELL-DESERVED FOR THESE GUYS. DANI: IT IS OLD RESEARCH THAT HAS ESSENTIALLY A VERY APT MEETING TODAY. AS WE LOOK AT CPI, WE EXPECT HEADLINES TO BE HIGHER ON ENERGY PRICES. BUT THAT CANNOT BE TAKEN IN ISOLATION BECAUSE OF EXPECTATION FOR HIGHER PRICES. MICHAEL: INFLATION ANCHORING IS A KEY POLICY FOR THE FED. EVERYONE EXPECTS GAS AND DIESEL PRICES TO CONTINUE TO STAY HIGHER BECAUSE OF WHAT WE ARE SEEING IN THE MIDDLE EAST AND ELSEWHERE. FED POLICY HAS TO CHANGE. THIS IS ALL ABOUT FRONT RUNNING EXPECTATIONS IN A LOT OF WAYS. THESE GUYS FOUND IT AND PROVED IT. DECADES LATER, IT IS STILL ON THE FOREFRONT RIGHT NOW IN THIS CURRENT ENVIRONMENT. DANI: TALKING ABOUT HOW MUCH YOU CAN EXTRAPOLATE, SURVEYS LIKE THE UNIVERSITY OF MICHIGAN ARE MAY BE LESS USEFUL BECAUSE INFLATION EXPECTATIONS ARE ABOUT 4% IN THOSE SURVEYS, CONSUMER SENTIMENT IS ALWAYS PRETTY BAD EVEN THE PEOPLE ARE SPENDING. I WONDER IF I CAN ONLY GO SO FAR IN TERMS OF EXPECTATIONS IMPACTING ACTUAL BEHAVIOR? MICHAEL: THIS IS WHAT IS INTERESTING ABOUT THIS CURRENT ENVIRONMENT OF SO MANY DATA POINTS, WHETHER IT BE THINGS LIKE MUSE, TRYING TO ANTICIPATE WHAT YOU'LL BE FOCUSED ON AND SPENDING ON. THIS HAS BECOME MORE INTERESTING WITH AI AND THE RICHER DATA SETS. WE WILL SEE IF POLICYMAKERS RUN WITH IT, WHAT ACADEMIA DOES. IN THEORY, THERE SHOULD BE MORE APPLICABLE NOW THAN EVER BECAUSE WE HAVE MORE INFORMATION ABOUT BUSINESSES AND HOW CONSUMERS ARE MAKING THE DECISIONS. DANI: I KNOW YOU'LL HAVE YOUR EYE CLOSELY ATTUNED TO THE PRICE OF OIL. IT IS UP 2% THIS MORNING EVEN THOUGH THERE IS CONCERN FOR ESCALATION OF THE LATEST HAPPENING IN SAUDI ARABIA. DOES TWO PERCENT HIGHER MAKE SENSE TO YOU? THAT FEELS WELL CONTAINED, ALL THINGS CONSIDERING. MICHAEL: ABOUT THREE DOLLARS OFF OF THE LOW OVERNIGHT. TODAY'S STORY IS AS MUCH ABOUT RUSSIA AS WELL AS THE HOUTHIS. WHAT WE HAVE SEEN FOR A COUPLE OF WEEKS NOW IS ACTIVITY IN THE BLACK SEA PICKING UP. IT'S A TARGET MARKET IN THEORY, BUT THE BARRELS ARE GETTING OUT, SO WE GO BACK AND FORTH ON THIS NARRATIVE. EQUITIES ARE ON THEIR OWN GETTING READY FOR EARNINGS. DANI: IS THAT MORE IMPACTFUL IN YOUR MIND THAN CPI? MICHAEL: I THINK SO. THE FED HAS ALREADY SET ON A PATH WHERE THEY WILL REMOVE THESE CUTS. WE ARE NOT UNHINGED YET. IT WILL TAKE MULTIPLE MONTHS OF CPI PICKING UP, CORE PCE PICKED UP, FOR US TO GET WORRIED ABOUT THAT. RIGHT NOW IT'S ABOUT SUPPLY FROM AI, DEFICIT ISSUES ACROSS THE GLOBE, EARNINGS, WHETHER THE CONSUMER CAN BE STRONG. DANI: YOU WERE ON LAST WEEK WHEN WE GOT A LOT OF FED SPEAK. WE ARE GOING TO HEAR FROM KEVIN WARSH. DO YOU THINK HE IS STILL THE ANCHOR FOR THIS FOMC, OR COULD HE HAVE DRIFTED SOMEWHERE FROM OTHER POLICY SPEAKERS THAT WE HAVE HEARD? MICHAEL: I DON'T KNOW. KEVIN WARSH GOES THROUGH A LOT OF EFFORT TO NOT BE UNDERSTOOD. THAT IS A DANGER THAT WE MAY REGRET LATER. HE IS VERY CREDIBLE, HE HAS AN IDEA, HE IS DOING IT THE COMMITTEE IN MIND, BUT HE'S BEEN VERY TIGHTLIPPED, AND I WOULDN'T EXPECT IT TO CHANGE TOO MUCH. DANI: GOING BACK TO THE NOBEL PRIZE, RESEARCH WITH HOW INFLATION DICTATES DIFFERENT BEHAVIOR CHANGES BASED ON EXPECTATIONS. HOW MUCH DOES THAT CHANGE WHEN THERE IS A IF YOU DO NOT GIVE ME EXPECTATIONS ANYMORE? TRYING TO REMOVE FORWARD GUIDANCE. MICHAEL: A LOT OF THE WORK THAT CAME OUT OF HALL SPECIFICALLY WAS HOW IMPORTANT FORWARD GUIDANCE WAS IN CRAFTING CONSUMERS, AND THE BLUNTER INSTRUMENTS OF POLICY WOULD BE SHORTER. YOU CAN GET PEOPLE TO MOVE QUICKER BEFORE YOU EVEN RAISE OR CUT RATES. HERE WE ARE IN A WORLD THAT WANTS TO CLAP BACK DOWN FROM IT FROM THE LEADER OF THE FED. IT IS A RISKY GAMBIT, BUT WE WILL SEE. DANI: THANK YOU FOR JOINING. MISSED YOU THIS WEEK. LIKE A BALL OF OUR BLOOMBERG TEAM. GOLD IS EDGING LOWER. OUR MIDDLE SPOTLIGHT IS COMING UP NEXT. THIS IS OPEN INTEREST. ♪ DANI: TIME FOR OUR METAL SPOTLIGHT. GOLD IS EDGING DOWN FROM THEIR HIGHEST LEVEL IN A WEEK AS TRADERS MONITOR OIL PRICE SWINGS AND A WEAK ECONOMIC DATA FOR CLUES ON THE FED'S NEXT MOVE. JOINING US NOW IS MACRO STRATEGIST FRANK MACAM. WHAT ARE YOU LOOKING AT FOR MOVERS FOR THE PRECIOUS METAL? >> THIS TOY FOR GOLD IS PRETTY SIMPLE. GOLD FIELDS REALLY STUCK, NEEDS A RESET. IT IS STUCK BETWEEN STRUCTURAL TAILWINDS WITH CENTRAL BANKS BUYING, ASSET MANAGERS CONTINUE TO DIVERSIFY AWAY FROM THE DOLLAR INTO GOLD, BUT WHAT IS HAPPENING NOW IS MACRO HEADWINDS ARE AHEAD OF US. YOU HAVE A FED CONTINUED TO STAY HAWKISH. REAL YIELDS MOVING UP, AND THAT HAS A NEGATIVE CORRELATION WITH THE PRICE OF GOLD. ETF'S HAVE BEEN REALLY FROTHY SINCE LAST YEAR, PILING INTO THIS TRADE. NOW THAT THINGS ARE SLOWING DOWN, IN NEED OF A RESET, GOLD IS AT THE LOWEST LEVEL OF THE YEAR TODAY. THERE IS A RISK THAT GOLD COULD FIND A WOBBLE WINDOW HERE UNTIL THE MACRO PICTURE STABILIZES. DANI: IN ORDER FOR GOLD TO RALLY, IS IT JUST DEPENDENT ON THE FED? FRANK: IT IS DEPENDENT ON THE FED, BUT ALSO DEPENDENT ON THE BACKEND OF THE IS IT JUST DEPENDENT ON THE CURVE, AND APPEAL CONTINUED TO MOVE HIGHER. WE COULD SEE BREAKEVENS GOING HIGHER. MAYBE THAT GIVES GOLD A BIT OF A REPRIEVE. THAT IS NOT WHAT WE ARE SEEING RIGHT NOW. THE VOLATILITY IN GOLD IS SHOWING SIGNS OF COMPRESSING, WHICH IS SHOWING THE INS ZOOMERS THAT WE SAW IN GOLD THIS YEAR AND LAST YEAR IS FADING. THE RALLY THAT WE WILL SEE, ONCE THINGS STABILIZE, WILL BE A LOT MORE STRUCTURAL THAN HIGH CONVEXITY, LIKE WE'VE SEEN IN THE YEAR. DANI: WHAT ABOUT THE SPREAD IN SILVER? FRANK: THE GOLD TO SILVER RATIO HAVE BEEN TRADING AT ITS NARROWEST RANGE IN 18 MONTHS. WHAT THAT IS SAYING TO US, GOLD AND SILVER ARE NOW BEING CAUGHT UP IN THIS MACRO VOLATILITY VORTEX, SO IT'S NOT TREATING -- IT IS NOT TREATING ON IDIOSYNCRATIC FUNDAMENTALS. THAT WILL CONTINUE TO FAVOR GOLD. ONCE THINGS STABILIZE ON THE MACRO FRONT, GOLD HAS A LOT MORE SAFE HAVEN PROPERTIES THAN SILVER DOES. THAT RATIO WILL CONTINUE TO TRADE HIGHER WOULD GOLD OUTPERFORMING SILVER. DANI: YOU'VE ALSO BEEN WATCHING COPPER. SOMETHING AROUND A TWO-WEEK HIGH. WHAT ARE THE DRIVERS ALLOWING COPPER TO CONTINUE TO RALLY? FRANK: COPPER IS AN INTERESTING STORY HERE. WE HAVE TALKED ABOUT COPPER BEING SUPER BULLISH WITH THE MARKET BEING TYPED, SUPPLY DYNAMICS BEING TYPED. WE HAVE SEEN RECENTLY COME THE DEMAND FROM CHINA IS STARTING TO WANE, BUT COPPER IS NOT REFLECTED BECAUSE IT IS TIED TO THIS EXUBERANCE IN THE AI BUILDUP. IF YOU ARE ALLOCATING TO COPPER HERE, AT THIS STAGE OF THE CYCLE, IT IS LIKE AN EQUITY PROXY. MORE SPECIFICALLY, IT'S A PROXY TO THE AI TRADE. EVERYONE HAS BEEN LOOKING INTO WHAT COULD POTENTIALLY A BIT OF A VOLATILITY TRANSFER FROM WHAT WE HAVE SEEN THE RATES IN OIL TO EQUITIES, SO THAT COULD ALSO HURT COPPER. THAT IS TRACKING THE MARKET VOLATILITY. DANI: GREAT TO HAVE YOU ON, FRANK MONKAM. IT'S A BUSY WEEK, EVEN THOUGH IT'S A QUIET DAY TODAY. WE WILL HEAR FROM BETH HAMMACK TOMORROW. BIG BANK EARNINGS KICKOFF. JP MORGAN, GOLDMAN SACH, WELLS FARGO REPORTING. THE BIG ECONOMIC DATA POINT, CPI FOR SEPTEMBER, THE LAST CPI BEFORE WE HEAR FROM THE FED. ANTHROPIC SET TO MEET PROSPECTIVE INVESTORS. THURSDAY, PPI, RETAIL SALES. AND KEVIN WARSH IS SET TO SPEAK IN BANGKOK. WE WERE JUST SPEAKING TO MICHAEL BALL ABOUT THIS. HIS GOAL HAS BEEN TO TELL THE MARKET NOTHING. I'M OFF TO BEVERLY HILLS FOR INTERVIEWS TOMORROW INCLUDING THE SAMBANOVA CEO. THAT IS ALL FOR OPEN INTEREST. ♪