OpenAI’s $70B AI Boom, Goldman Leads Wall Street Trading Surge

It's Friday. Can we hold on to gains 30 minutes until the start of trading? I'm Danny Berger. I'm mike ball. Bloomberg. Open interest starts now. Coming up on today's show open I $70 billion revenue target breathes new life into the eye trade. Soaring jet fuel prices from the war in the Middle East continue to squeeze U.S. airlines. And a trading windfall for Wall Street's biggest banks with Goldman leading the pack. Okay. The stocks we're looking at this morning we just got Delta early earnings. We're going to break this down with Sid in just a moment. But look at the price action. Down two and a third of 1%. Earnings come in light. Delta cuts its full year profit outlook. It was the sharp jump in fuel costs that eat into profits. And it forced the company to reset expectations for the rest of the year. We were wondering when will fuel prices finally really be passed on to a consumer that starts to push back in oil. It's a different story falling this morning and then starts to edge up. President Trump yesterday said the U.S. won't attack Iran. Before the midterms. There were some concern before he does. But Mike, it feels like that relief has been short lived this morning. Yeah, just a few minutes ago, we got another indication that the kinetic warfare is still ongoing in the strait oil back up. And this is after an overnight where we saw French bonds getting a little bit of a bid. Rates for falling equities were doing well. We're getting a relief rally sort of from these confusing OpenAI headlines yesterday that now have been sort of rectified. So here we go. Oil back in the driver's seat. And that's probably what we expect for the rest of the session. Again, it speaks to the fragility of the moment that you can have one headline, this coming from Iran's state news agency that the IRGC is targeting shippers and a tanker in the Strait of Hormuz. We're going to talk to Ed about this in a moment. But I think it's so fascinating that the entire market is being moved on. OpenAI headlines a company which is not yet public, a company that we're concerned about what its revenue is. We get some clarification this morning. Maybe it's not as bad as we thought, but that in entirety, moving the S&P 500 in the Nasdaq. And earlier in the year, we were talking about how many these guys coming public, which had too much light and all this and that. You then have a better scrutiny on sort of the earnings and the projection of earnings and just how long it will take. And you have to adjust the multiples of the whole entire I trade. And we're kind of seeing that play out. So there's probably greater volatility in the eye trade as these headlines come out. And we get this launching of these IPO's eventually. Yeah. And so we'll actually be able to see at least the quarterly updates from these companies. So let's get into that open I is expecting to reach or exceed $70 billion in annual revenue by the end of the year. Yesterday, tech shares led losses after reports that its revenue would be lower than some previous estimates around $50 billion. Let's bring in Bloomberg Tech host Ed Ludlow. At first of all, what was the discrepancy? What changed over the past 12 hours? Well, the discrepancy is also in understanding what annualized revenue actually is, right? It's not that. Uh, by the end of 2026, this year, OpenAI will have booked 77 $0 billion of revenue. It's that in very simple terms, by the end of this year, OpenAI expects to be making money at a pace that would produce $70 billion over the next 12 months. That specific discrepancy in the figure 70 billion, uh, by year end versus exiting September with, uh, annualized revenue and a run rate basis of $50 billion. It's like accounting. Um, you know, what investors have been trying to do in recent months is make it apples to apples with anthropic. And the difference is quite simple. It is gross revenues where you do or don't count some revenues through cloud partners versus net revenues. Um, but the more interesting thing I think, guys, right, is like, why did markets kind of freak out yesterday about a private company? Uh, and it's IRR. I found that like, amazing. Yeah. I think everyone is really hanging on to the I train is the driver. But switching gears a little here to Apple. Also seeing them under a little pressure de component sort of shipments were down. Is this Apple specific with the phone cycle? I know I'm due for a new phone. Or is this really a greater kind of warning for just electronic prices going up and then the pushback from the consumer? Okay, so the origin of this is a NIKKEI report that Apple told some component suppliers they were cutting their order for those components by about 15%. Nick citing anonymous sources. Uh, but Nick also kind of went a step further to say that this generation of iPhone 18 Pro, in terms of contemporaneous demand, is down in the region of 15 to 20% relative to the prior generation in the same period. Um, and, you know, Apple hasn't commented on any of this, but the backdrop is really simple. Higher handset prices specifically attributable to higher memory costs. You know, let's make it really simple story. iPhones cost more. Why do iPhones cost more? Because the memory components in them cost more. And that seems to be putting off the consumer. Based on Nick's report, which Apple didn't engage with. Thank you so much. Looking forward to Bloomberg Tech in about two hours time. That's Bloomberg's Ed Ludlow. Elsewhere in corporate news, shares of Delta falling 2.5% in the premarket. It cut its full year earnings outlook. CEO Ed Bastian saying, quote, I wouldn't call that a surprise to anyone. It's all because of higher fuel prices. If this continues to go higher for longer, which I think it will as a premium airline in the industry, we have the best ability to price for that. Joining us now is Bloomberg's global aviation correspondent. Said Philip, maybe someone was surprised considering that shares fell. Maybe it's not surprising said that there are higher fuel prices, but maybe it's the lack of delta ability to really push all of that along to the to their customers. Absolutely. So for the airline industry, it's been this chicken and egg situation as to how far you can push ticket prices before consumers push back. And so Delta has that pricing power, especially with their strong loyalty program, especially with their strong premium cabins. The problem for the airline is even those customers have a limit on how much they're willing to pay. And so the airlines are having to do this delicate balance between how much of that fuel cost increase they can pass on and how much of that they have to retain, and that sort of Hood's profitability and impacts their focus for the year because of the ability to actually charge people more. And I mean, Delta keeps talking about how ticket prices are still lower than inflation. The prices increase on Delta on ticket prices have being less than inflation. At the same time, consumers who are feeling the pinch may be sort of holding off on flying. So do we have that transparency. Or we can see where the premium price versus the sort of main cabin price difference equate to the loss of business. So we can actually see the the impact of this sort of shift in consumer sentiment. So about 6,069% of Delta's revenues in the third quarter came from premium and loyalty customers versus like or just basically 40% of it coming from the, um, the main cabin. So it is a bigger share of that sort of pie. So for Delta, the set of premium customer is going to be more and more important as these oil prices drag on. What does it mean for the other US carriers? To what degree is Delta a bellwether. So Delta is obviously the most profitable US carrier. And so all the other carriers, uh, either sort of united US along with Delta, has sort of focus on that premium end of the market. But you have others that are sort of much harder hit. And so which is why we had the bankruptcy in sort of Spirit Airlines earlier this year, because there is that sort of K shaped economy, which continues where consumers are at the bottom end of the care holding off on flying. And whereas consumers on the top end, uh, continuing to pay for business class seats. So okay, so maybe United will just buy all the other airlines and they won't have any problems, said Philip. From our aviation team. Thank you so much. Now to earnings to come. Wall Street's biggest banks are expected to reveal a quarterly stock trading haul of nearly $19 billion when they report next week, Bloomberg said. Needs a takeover. Joins us with a preview. So can you just put this in context because we did get a few warnings. Bank of America specifically that they're trading hall would be higher, but maybe more on the flat side from from prior quarters. Exactly. And most of the warnings we have seen have been about fixed income. The big warning that came from Bank of America has been about fixed income. And the banks sharply sold off right after this. Even Goldman Sachs, which is expected to be the leader in stocks trading. Uh, they were also warning about fixed income coming softer than equities. We have a really interesting comment from Mike Mayo, who is saying for the first half of the year it was very easy. Everyone was winning. Every category was strong. Second quarter was blockbuster. But now this quarter, as things are slowing down, we're going to see some banks perform really well hit records. But we're going to see some laggards. So this is where people will shine. And their uh their risk controls will really show. Lisa, do we get transparency on the revenue between the different parts of that or how do we want to think about it? Um, I think we've heard a lot about mortgages being a issue with, uh, for example, for Bank of America. We know their mix of deals was different, and they were kind of behind on the eye boom in credit. So perhaps that's one reason it's been going down. We already had Jefferies report. They also, uh, had a miss on their fixed income trading. So that's definitely been the the soft spot we've seen. Uh, obviously debt underwriting is doing well. A lot of that refinancing has been happening. Uh, but nevertheless equity trading expected to be very strong. 5 billion, uh, 5.1 billion for Goldman Sachs. And Morgan Stanley is expected to be right behind it. That said, last quarter they really did those estimates. So who knows. Maybe it happens again. You need to thank you so much for joining us. Bloomberg still needs that set cover. It does set us up for this really interesting type of environment for earnings, Mike, because everything right now, as we've been discussing with Ed and this morning has been pinned on I. So can you get a broadening trade. Well bank show up. Clearly the airlines not showing up this morning but also the M&A environment changing, the IPO environment changing. We get headwinds now on some of the businesses that were driving growth and financials. And we know finance was already in correction territory almost down 10% for that sector. I mean this could be a bad earnings season that we're going to find out next week. And it's just setting up a little bit weak or now the bar maybe so low that we have some surprises. When Martin on the show yesterday saying that higher rates were the things impeding IPOs are certainly noted on the capital markets environment. Let's get a check on your markets this morning about 20 minutes until the start of your trading day. We bounce back. The Nasdaq up 7/10 of 1%. The S&P up a third of a percent after two consecutive days of declines. Yields though are moving higher by two and a half basis points. Brent crude back down its narrative ping pong with concerns about attacks in the Strait of Hormuz. But the president saying that he does not plan to attack Iran before the midterms. Let's take a look at some of the other movers on our radar this morning. With that is Nora. Melinda. Good morning. Nora. Hey, Danny. First up, human is surging this morning. That's after one of its key Medicare Advantage plans got a better government quality rating. And that puts more than 2 million members back in plans that qualify for bonus payments, potentially giving Humana a meaningful revenue boost in 2028. Shares are higher by 16% in the premarket trade. Next up a stock to the downside American Express falling. That's after federal regulators fined the company $350 million, saying that it failed to catch and report money laundering moving through its system. That's not good for shares of American Express, down by about 1.6%. And finally keeping an eye on wireless tower stocks moving higher. That's after SpaceX agreed to buy a nationwide portfolio of low band spectrum. and that's because SpaceX could build more equipment into existing tower sites. Traditional carriers also, and focus on concern that space could become a bigger competitor. Those are your morning movers. Danny. Nora, thank you very much. Coming up on the show, more details on that space deal that could shake up the wireless carrier market. This is Bloomberg. Let's get you some high interest stories and look at what's making headlines around the world. Hurricane ISIS is strengthening in the Gulf of Mexico, threatening the northern coast, Gulf coast late tonight or early tomorrow. Energy companies are shutting down offshore operations, cutting off a big chunk of Gulf oil and natural gas production. The storm could also bring heavy rain, flooding, power outages and a storm surge of up to seven feet. KKR is banning non-compete agreements for employees earning under $100,000. At its U.S. portfolio companies, the PE giant says the move is aimed at boosting worker mobility, wages and retention, and plans to expand the policy to hire paid employees over time. Elon Musk wants to take on America's biggest wireless carriers. The company is buying key spectrum for Starlink mobile, but the real test is building the network, as it will need to launch thousands more satellites and spend billions on infrastructure here on Earth. Let's dig into that. Joining us now is sauna Passion. Kirk. It's great to have you on. Can you just explain what exactly SpaceX bought with this latest spectrum deal, and to what degree that does threaten the current carriers? Yeah, totally. So on Thursday, SpaceX announced that they had bought a swath of spectrum that will essentially enable them to become closer to becoming a mobile carrier. So what this spectrum does is it enables the Starlink satellites to beam cell service to phones even when they're inside, which it wasn't clear that their network could do that before. If you pair that with a terrestrial infrastructure, which SpaceX says it aims to do, that's essentially bringing them onto the path to becoming a major mobile carrier that could compete with Verizon, AT&T, T-Mobile. But, you know, there's still major hurdles. Um, they have no terrestrial infrastructure of their own. So they would have to build that out. And that could take years or massive investments as well. Um, and they will also have to launch more Starlink satellites to improve that coverage. So, Sara, how much more spectrum do they have to buy? How much is out there? And can we see some of the others? Other carriers come in and try and front run that to block? Yeah. So other carriers could definitely make a defensive play for more spectrum. It is clear that SpaceX will likely have to acquire more spectrum to really compete with the major telecom operators, which, you know, have the rights to vast more amounts of spectrum. Um, so it's, you know, we still see them remaining aggressive about acquiring, you know, these government airwaves. And I'm sure that they will continue to be if they're really serious about pursuing the strategy, which it so far seems like they are. This is already a company and a CEO which is committed or said the need to spend trillions of dollars in Sona. We learned this week that they're looking at a debt offering this one around their eye infrastructure. But the debt that already exists out there, all of it is basically trading under par, does just have the ability to keep tapping these debt markets. If this is another source of spending that they're going to need to do. Yeah. So it's still unclear. And they haven't been, you know, forthcoming with how much of a terrestrial network they want to be. They want to build. So I think it's unclear to us how much investment that would take. Um, you know, if you're building a terrestrial network on par with the Verizon or T-Mobile or something like that, that's going to take billions of dollars. Um, but SpaceX has, you know, this pretty, pretty fortuitous satellite capability that the other providers don't have. So maybe they will have to build less terrestrial, um, infrastructure. So it's still unclear how much this will take. But, you know, we can assume that there will be some significant investments, um, that they may have to go back to the credit markets for. Hey, Sana, thank you so much for joining us. That's on a passion curve with the latest on space. And and this is something you and I have talked about, just the huge amount of spending, the trillions that Musk has said that he needs to spend. And I guess he needs to get there in order for his IPO to live up to the insane Tam that they put on it and the valuations. There's a lot at stake on his ability to continue to raise debt and build out these types of infrastructure without execution. And it's kind of making me laugh because, you know, how do you become a trillionaire? You borrow 10 trillion. So, you know, look, SpaceX and his vision again is in the multitudes of trillions. And again, he came out today, I think, earlier and said again, my vision here is going to be bigger than the US economy. He's just throwing out pie in the sky numbers and I'm not sure exactly. You know, as we get down the road further and it continues to be more crowded with governments and with other sort of things that we need, how this is all going to work out. But we're not there yet. I think it is important to your point that we have started. We're not there yet, but there has been some pushback. The space that hasn't been trading well, it's under par in space, sold off the other day when we learned of this big Apollo deal. So it does feel like there are at least small glimmers, at least of hedging. Yeah, wrinkles in the cards for sure. You saw that pick up. And it's the same sort of with Oracle at a different scale for sure. But people are starting to get ahead of it. And big question. And again how long to the road to profitability. And as we were talking right there, how competitive are the other carriers going to be. And is this the only game in town as far as what we're doing in the space? Yeah. What other carriers will need to spend more and more debt? And here we go. Well, I mean, even other countries and other places, there's going to be redundancies. Yeah, it's a great point. Um, Mike, hold that thought because we have more to talk about both when it comes to debt markets, I and much more. We're going to start the trading day with Amanda Haggerty of PNC Asset Management. That's up next. Bank of America says investors are pouring money into cash funds at the fastest pace since the pandemic. More than $166 billion flowed into money market funds in the past week. Bank of America says that the money is unlikely to come back into stocks until the fed starts cutting rates in a meaningful way, especially with cash and bonds still offering attractive yields. Let's bring in PNC Chief Investment Officer Amanda Haggerty. Amanda, this one's interesting because one, clearly people aren't tempted by duration, even with yields at multi-decade highs or stocks, even though those are trading at record highs. What do you make for this current grab for cash? Doesn't make sense. Should people be hiding out in cash like instruments? Well, it's great to be with you. Good morning. No, I have jacked. We should not be running for the hills and backing up the track and cash. We're going to six. Cash creates optionality. It is not an investment strategy. It's not a winning one. Yes I mean yields are up a little bit okay fine whatever. But I'm not worried about this backdrop. I mean this has been an unloved market environment. There's no question about it. But I think there's a decent number of investment opportunities that are emerging here. And even with a little bit of the volatility we're seeing and in bonds, I think that creates some opportunities not to go long, of course, but longer than than cash, certainly. And on the stock side of the equation, I think we're going to see some interesting opportunities emerge, maybe post Q3 earnings season. So I mean, it sounds like you're a little bit optimistic here on the economic backdrop, maybe not just the AI CapEx story driving stocks, but, you know, a broadening out. Does this kind of justify a fed that may go more than just 2 or 3 more hikes. And effectively we can have maybe a more sustained cycle because the growth backdrop allows it. You're hitting all my triggers here this morning. Um, you know, I think I've been pretty vocal, uh, recently that I also object, uh, to the fed, uh, raising rates and fairly aggressively from here. I'm not convinced that the tools in their toolkit really will help solve the inflationary challenges that we have in front of us. And so I think there is a reason to recalibrate policy. Don't get me wrong. I think there is a little bit of movement that can happen here. But I do worry about how fast and how furious the fed may feel like they need to raise rates from here, so a couple of rate hikes doesn't necessarily keep me up at night, even if I dissent or object on that topic. Um, but but growth has been very strong. And I think in the very short run we can certainly endure it. I just think the end state, what ultimately happens with inflation may not move the needle as much with fed policy. Then I think what most market participants are expecting. All right. Well, we'll talk some slack out this morning saying a view. I think many share that essentially, uh, you have seen some inflation, you have seen some rate sensitivity be hit especially you can see that in the equity markets. But it's not hitting the I players. And Amanda, I wonder even if we only get a few more hikes, is that enough to say this market is going to have really narrow breadth, that the only thing that's going to hold up as I and it's going to continue to damage everything else underneath the surface. I'm not sure that I would go so far as to say that it's going to damage everything. I do worry about small and mid-cap, in particular small business owners, the lower end consumer. I think that's where some of the pain is certainly going to be focused. It's not so much on in large mega cap multinationals. So that's the I think that's how I'm sort of thinking about it. I don't think it's enough to break the cycle either, per se. If we get just a couple of rate hikes here. But again, I think this inflationary environment persists until we get a resolution with the conflict in the Middle East. It's not the only thing, but at the moment, when you look at the difference between headline and core CPI, the lion's share of it is energy and commodity complex related. I just think the Fed's tools are blunt instruments. Amanda, you're going to stay with us. The opening vote just around the corner. Amanda Haggerty as your markets rebound from two days of losses. All right. It's just two bells until you can get to your weekend. This is open interest. I am Dani Burger and this is a market that is rebounding this morning. The driver appears to be the confusion the reports over at OpenAI just how much annualised revenue they're making. There's new concerns that it was less than expected. The story this morning is actually everything's okay. And it's a private company, but it's impacting everything. The S&P up about a third of 1%, the Nasdaq up 6/10 of 1%. Some pressure in oil this morning means that Russell 2000 and the Dow is not playing along. Um down at the New York Stock Exchange we have New York's bravest the New York Fire Department ringing the opening bell. Very cool. Love to see it. Thank you for all of your work. Uh, it looks like something of a delayed, perhaps, uh, anniversary, uh, acknowledgement of 911. Then we have. Why is that ringing the opening bell? I think it's pronounced y San. I'm going to be honest, I'm not quite sure, but they do space stuff, and they're IPO ING holding what I, I guess is like a satellite or one of their products, I don't know, space stuff enough. Guys, I'm going to be honest here. Um, but they look very happy. And there's a very cute baby there. So good for them. Um, here at the open, I'm looking at Delta. Shares are down more than 2%. Earnings came in a bit like the airline also cut its full year profit outlook. There was a sharp drop in fuel costs, and that's eating into profits and forcing the company to reset expectations for the rest of the year. Let's bring in back Yancy, chief investment officer, Amanda Haggerty. And, Amanda, I wonder if there's a warning for consumer stocks within this earnings season from Delta because they had held up really well, even with fuel costs higher, it seems like they're not necessarily able to pass all of that along to the consumer. Do you think that this might be an enduring theme as we get into the thick of earnings? Well, I think it'll be really interesting to see if it does turn into that. I don't know that I necessarily have been forecasting that, but everybody is focused on is the consumer going to hit a wall at some point? That is not our base case, right. That's the worst possible case scenario. And we think the consumer, even though the low end is under a decent amount of pressure, the consumer continues to hang in there. But you have to think against the prices for everything going up that a consumer is going to be more discerning. Going forward, we didn't see it so much in back to school sales. I think that's a good, you know, harbinger for the holiday shopping season. But certainly airline tickets are really pushing the envelope here, so I wouldn't be surprised. Many of you seen valuations sort of compress while earnings have held up. The multiples are lower now. They're not cheap. They're not expensive. What do you think we need to kind of see. Is it really just the macro needs to cool down, whether it's oil and rates or what can get the sort of expansion. And then we can maybe hit some new levels here on the SBX. And let's be clear, we're pretty high as it is. Yeah, I mean we're we're doing pretty well, all things considered. Right. The macro backdrop today is way more complex than it was at the beginning of the year. And despite that, we continue to, you know, flirt with new all time highs. So it's not all bad news, I think to get the market rally sort of re-engaged here, Q3 earnings season is going to be important. I think it will be a good outcome. By the way, we've seen positive revisions, maybe a little bit slower than the last couple of quarters, but positive revisions. So I think we have a higher bar here that we will exceed. But of course we have an all important midterm election cycle. And so notoriously so. I think that creates a little bit of volatility. In and out of election cycles. So getting past that I think will be kind of like a mr. blue Sky environment for the market. It doesn't mean that we've solved everything, but it's getting sort of a key guidepost out of the way. So I think it's going to be choppy for a little bit more through here. But I think Q3 earnings season will be the shot in the arm that the market needs to get going post-election. Well, I mean, I got to talk about the chop of the past 12 hours. I mentioned it at the market open, the OpenAI headlines. It seems quite remarkable concerns. The revenue is in what we expected. Everything in tech sells off. And by the way, all the other stuff rallied this morning. You're getting the inverse of that is reporting confirms that actually their revenue run rate still looks pretty strong. I wonder what you make of OpenAI as this market catalyst, a company that has yet to list and is not publicly traded. I'm playing a lot of Radiohead Paranoid Android, right. That's the investor sentiment vibes right now. It's there's just such a skittish ness around all things I and the path forward. And for whatever reason, every time there's a headline that comes out that's maybe not quite as, you know, hardcore bullish as what, you know, the consensus would expect. We're selling things off. And it just it's it's a knee jerk reaction. It's overdone. As far as I'm concerned. This stuff is just going to happen. It's going to continue to happen. This is an innovation cycle that has long legs to it. And so I'm not at all surprised to see a little bit of choppiness here. But I think to the extent that we get a bigger reset again, not necessarily my base case, but I be leaning in, uh, using it as a buying opportunity. I think there's a lot of time left in the cycle. So I mean, in the notes you shared with us, you said you had a little bit of a preference of value right now, maybe over growth. And I think this feeds into what we just spoke to about how there's a little more wobbles now in the AI CapEx story. Nothing to necessarily derail it, but certainly we are pricing sort of a maximalism optimism in some ways. Now, let's be clear. There's a lot that can happen. Um, maybe expand here on what you see for earnings breadth going into Q3. And is that really why you're leaning more into value here? Well, breadth has narrowed a lot. Right at the beginning of the year. It was pretty narrow. Then we started to see that all important expansion and breadth. Now we're back to, you know, narrowing breadth environment. I think it comes down to the more complex macro backdrop. That all being said, um, some of the drivers, right, some inflation, uh, persistence there, whether we like it or not, uh, rising rate environment, some of the macro uncertainty does tend to favor value ever so slightly. Don't don't get me wrong, I'm not selling my growth here. But I think if you know, you're going to look for a pocket of opportunity and missed a little bit of chop value looks looks pretty good. It had a little bit of a run. Uh, and then it has given some of it back. So um, so I think the macro backdrop is sort of setting the stage for value to maybe reinsert itself a little bit. We'll have to see how Q3 earnings season plays out. So it's really more of a slight valuation advantage for value overgrowth right now. Amanda so wonderful to spend the Friday morning with you. Thank you so much for joining us. Enjoy your weekend. That's Amanda Haggerty. Let's get a check on your equity market this morning. We rebound. Uh, and it's pretty decent. 300 stocks, more than 300 stocks are up. We have been going to all time highs on not good breath. Can we get back to all time highs. It's going to take a little bit. We've been selling for the past two consecutive days. It is the AI sector though that is rebounding in force. We were just speaking about this with Amanda. How much is OpenAI making that conversation back and forth? Uh, punching us around some interesting individual company stories. Lou. Momentum. It makes, uh, AI data center components. They say for Nvidia to be specific, they say that they are booked out for their components through 2020, uh, nine. So that shows you the where the demand is. Humana. Uh, you can see that right below it. Also rallying this morning. Um, getting some good ratings when it comes to their Medicare and Medicaid, what insurance will pay out. So that's good for them to the downside. Uh, we talked about this at the top of the show with, uh, add some concern around Apple and pricing their AT&T, Verizon, T-Mobile, the entirety of the telecom sector lower down as SpaceX buys more, uh, spectrum, allowing them getting closer to allow them to compete. You also have a lot of staples, a lot of consumer companies in the doldrums. Pepsi, after their earnings yesterday, is getting price cut by price cut from the various, uh, sell side analysts racing Delta down there too after their earnings. So staples communications energy all of those down communications is because of what's happening in the telecoms. Everything else doing pretty well this morning being led by real estate and consumer discretionary. Coming up, it's been a record breaking year in the ETF world. And still a quarter left to go. More next. This is open interest. Time now for a top calls here with. That is normal. Linda. Hey, Nora. Hey, Danny. First up to a starting IBM at hold and saying it likes the company's position when it comes to enterprise computing and its ability to help businesses put AI to work. But the question here is timing. And how long before all this I spend actually turns into more demand for IBM? Next up. Scotiabank. Scotiabank is upgrading Webull to sector outperform from sector reform, saying much of the risk around its China ties is already priced into the stock. And despite those concerns, revenue and profits are still growing. And finally, we've been talking about it all morning. Humana getting even more love on Wall Street today. Baird lifting the stock to outperform from neutral after one of its key Medicare Advantage plans got a better government quality rating, helping to send the stock surging. Baird announces Humana earning more than $35 a share by 2028. Those are your top calls, Danny. Nora, thank you very much. We'll catch up with you in the next hour. ETF flows have already hit a record in 2026, with nearly a full quarter left to go. U.S. ETFs took in just 1.5 trillion just over that in the first three quarters. And at that current pace, it could approach $2.1 trillion by year end. Let's discuss with Bloomberg Intelligence senior analyst James Safer. James, what needs to go right for us to hit that mark? Um, so to hit 2 trillion, it just needs to be a little bit worse than last year. Uh, and based on the fact that we beat last year already three, three quarters, I mean, it's kind of pretty much, uh, a lock to go through 2 trillion. Obviously, the the risk is, you know, a massive sell off in risk assets. But going back 11 years, if you look at what happens in flows, it's usually a minimum of 30% of the annual flows coming into that fourth quarter. So obviously punching above just the calendar. But in many instances it gets up to 40% or 44% even in some years. So, um, December is the biggest month of the year, pretty much every single year. Without question. Q4 is almost always the biggest quarter of the year without question. So, uh, as long as things go on the track, they are working across 2 trillion and we could reach for 2.1 trillion apps and a, you know, a major pullback in equities. Hey James great to see you. Happy Friday. Just one in about three sort of fixed income flows. This is mostly in credit. Is it short duration. Where are we looking at here. Uh honestly it's across the board. It's it's probably uh it's short duration is one of the biggest getters this early this year. So S-curve is one of the top five ETFs getting flows which is just T-bills. But honestly the this record was driven almost exclusively by not exclusively driven heavily by equity ETFs. Fixed income ETFs are also at a record this year through the first three quarters. Right. But what we've seen in September and so far in October, fixed income is punching way above their way. Usually it's equity pulling in almost all of the money. Um, right now, fixed income is actually pulling in more money over the last, you know, six weeks or so, which is a little bit abnormal. I think it means that one people are, you know, tax loss harvesting their mutual fund assets potentially, but also people they like. The high rates right there for a while was there is no alternative, Tina. And now there's stuff yielding over 5% that's borderline risk free. James, you and the team have also been writing about these funds that hold OpenAI and OpenAI as fundraising rounds, and what that means for the funds. Could you first explain just the structure of these? Do these hold actually like private placement in OpenAI? Are they derivatives? What are people buying when they buy funds that have OpenAI exposure? So the short answer is all of the above. You need to really when you're going to buy something and you're looking at it because it has private exposure to something like OpenAI or anthropic, or as recently as space X, you need to understand exactly how they're getting their exposure. Some of them are doing through SPV special purpose vehicles. Some of them are doing through derivatives. Like you mentioned, total return swaps on perpetual futures. There's all these different ways that people are doing it, but the ones that we pay close attention to are ones that are actually getting into the private placements or actually getting exposure to the shares. Um, and there's a lot of different funds out there. There's these ETFs, these mutual funds, they can hold up to 15% of their assets in what are called illiquid securities. And there's a bunch of funds out there by our account that have exposure to OpenAI. And there it's kind of a growing area of the ETF and mutual fund landscape to get exposure to these things. Hey, James, we're going to have to leave it there. Thank you so much, James Seyfert. And tune into ETF IQ on Mondays at 12 p.m. New York time. And James has teamed up with Eric Balchunas to write a book, Both Sides of the Coin A Guide to Bitcoin and Crypto Investing for Everyday Investors. Both of them are brilliant and you can pre-order that now. It comes out on November 10th. Coming up, y'all can comment explains why he sees the S&P 500 falling to 5000 by the end of 2027. That's up next. This is open interest. People are worried, and that's not a sign of a bubble. Like, usually when you're in the bubble, there's a lot of exuberance and people have FOMO feel for missing out. And currently I don't know what to write. So there is no bubble at the moment. I would say no. Goldman strategist Christian Mueller question with Bloomberg's Guy Johnson this morning. Wall Street is still betting heavily on AI, but Palmer Liberal is warning that the trade could end very badly. Research analyst Jack Clement says, quote, my core conviction is that the AI bubble will either burst in 27 or in 2028. His S&P 500 target for 2027, implying a roughly 36% downside. From here, Joe joins us now. Joe, this got a lot of attention. And you just heard there Goldman pushing back on the idea this is even a bubble. Maybe we should start there. What defines this current environment as a bubble and what pops it. So I think the entire AI boom is investing in the in the wrong future of AI. Uh, at the moment, we're investing into frontier large language models running on in data centers. When it becomes, to me, more and more clear that the real future of AI is small language and open weight models running on local desktop, uh, computers. And that, to me, indicates that we're already having over invested in data centers. As more and more of these applications move to smaller, cheaper models, uh, running locally. So just like a zero sum game, then where many other places like China has more open source, takes capital away from the US markets, or do you see this sort of as just more of a general deflation of the overall final kind of what this is worth story. Uh, it is the latter, mostly. Uh, I think we've over invested and the realization will come that these earnings that, uh, some people, uh, who shall remain nameless at this point in time, uh, expect to fill the prices and to kind of earnings to grow into the prices. They won't materialize. Uh, I think these earnings forecasts that we have for some of these tech names for the next two years are way too optimistic. And, uh, we're going to see at some point a decline in the CapEx growth, not necessarily a decline in CapEx, but just a normalization of the CapEx. And that leads to, uh, a lot of, uh, sales and, uh, revenue downgrades and then to earnings downgrades along the entire supply chain. Joel, you know, one of the one of the pushbacks I hear to this argument is that for the hyperscalers, that demand is exceeding supply, that there is demand for all of this stuff right now. There was a, um, a company, for example, that makes some of the components for Nvidia saying that they are booked out through 2029. The demand is there. And I wonder what you make of that argument that this can't necessarily be a bubble because people are placing orders, they see the insight into the need for all of this capacity. Yeah. I mean, nice orders. You order intake, you have to assume if something happened to it. Um, the thing is that, uh, there are independent estimates that about half of Nvidia chips at the moment, half of Nvidia GPUs are not installed in working data centers because those data centers aren't even online and not coming online in the next 1 or 2 years. Also, when it comes to the underlying demand, if you strip out OpenAI and tropics demand, there's hardly any demand there for AI compute that justifies the trillion dollar investments that we're that the hyperscalers alone are expected to do next year. So we already at yield levels. And of course they're accessing multitudes of capital channels. So let's be careful that are going to basically see what you see coming. Or is it need to go higher? The yields need to go higher simply. No, I mean this is this is another factor that really, really worries me. And say if you had asked me two months ago, I would have said, that's a bubble that can easily last another two years. Um, since then, Oracle's cost of debt through, uh, spread, widening and higher, uh, Treasury yields have doubled. Uh, the cost of debt for off raising debt for Microsoft. Amazon Alphabet has increased by 1.5 percentage points. So, uh, if you don't have the free cash flow anymore, which a lot of these hyperscalers, for example, don't have, uh, anymore because they've invested so much in data center, uh, built out. Um, then you rely either on equity raises, which obviously your existing shareholders don't really like, or on debt capital raise, but your debt cost of debt has just significantly increased, which increases the incentive for these companies to cut back on their growth plans. And as I said, all I need for this bubble to burst is for those growth plans to be revised downwards and for growth to slow down. Because that already will change, uh, the earnings outlook for a lot of basically the entire supply chain. I think the problem a lot of people would have for those that agree with you is that you can spot the bubble, but it's perhaps harder to say, when do you get out while the music is on, you keep dancing. So what do you look for? Maybe it's some of the debt markets otherwise that you were explaining. What do you look for to kind of say? All right, the end is approaching. Yeah. I mean, I started my career and that that ages me here, but I started my career in 1998 at a value investment shop. Uh, so, uh, I have been burned heavily by, uh, missing out on the last stages of a tech bubble. Um, but I would say at the moment It is not the time to be a hero and go underweight tech stocks and that entire AI boom. Yet, uh, you have to wait for a clear signal. Um, the simplest way to do it is to look at actual price momentum. Uh, I say it the simplest way to deal with it is once the S&P 500 drops below the 200 day moving average, you start to reduce your tech positions and you get out of there. Uh, an alternative thing that I'm very much looking for is, uh, the guidance for 2027 by the hyperscalers. What kind of CapEx do they guide for in 2027, and how does that compare to analyst consensus forecasts? Yeah, Joe, let me piggyback on that. And I'm sympathetic to this view. I am worried about the concentration in market leadership now. And I do think maybe we are getting overoptimistic. But what would be let me and devil's advocate here. What would be your checklist that I've got this wrong. No this is real. And these earnings growth are actually sustainable. I think we would need to see. And that's really why I'm looking forward to and tropics IPO, to be perfectly honest, because once on Tropic is Life, we get quarterly GAAP uh, earnings reports from anthropic, and that will give us a much clearer picture of what is the revenue growth, what is the profit net income growth. Uh, for and Tropic, how fast are they closing the gap for the cash burn. Uh, and once you're listed, you you can still obviously come up with EBITDA and all. You just kind of like nice, uh, fancy metrics of earnings before all the bad stuff, as Charlie Munger called it. Uh, but a professional investor can look at the actual earnings, and it gives us a much clearer picture of whether this is really a bubble. And we're very, very far away from and tropic OpenAI potentially breaking even and becoming profitable or whether this is a real thing. Joe, we have less than a minute here, but just quickly, what would be the economic consequences of this, of this future, you see? While 90% of U.S. GDP growth is from U.S. and tech investments alone, and we estimate that about more than 50% of GDP growth in the US at the moment is from IE investment. So if that investment boom stops, the U.S. economy very quickly, comes close to recession or goes into recession, and I think Europe would follow and Asia would follow as well. Joe, thank you so much for joining us. That's Pamirs, Joe Clement. Um, Mike, thank you very much for joining 90%. That's a that's a high amount for high tech. I mean, there's a wealth effect driving the consumer, but, you know, it's not like the entirety of the economy. So we'll have to see that seems a little bit bearish. But again it is driving the market. So it is a big part of that. And we have to see whether or not it can power through this earnings quarter again and get revalidate. Yeah I think a lot of people sympathetic to that argument. Thank you so much for spending the past week with me. It's been a pleasure to have you. Up next, it's hour two of open interest. 30 minutes into your trading day. Stocks slightly higher, up about a quarter of a percent. You're watching Bloomberg open interest. I'm Dani Burger. It's been the push and pull of open eye. Are we pessimistic about their revenue? They did seemingly admit in September that it would be lower. But then we got the reporting this morning that it's still 70 billion that uplifts the entirety of the S&P, thanks to the eye trade. In just a moment we're going to get economic data crossing the terminal. We are looking for the preliminary October number for the University of Michigan consumer sentiment survey. And that is in and it is weaker than expected. The survey estimate was for just over 47. It comes in at 46. Current conditions are so much weaker than expected that was expected to be over 50. It's under it at 44.7. Quite a low reading Expectations. That's higher than expected. So again current conditions lower, expectations higher. That comes in at 47. That's also higher than the prior month at uh 47. The survey was for 45. Let's get to these inflation figures slightly lower than we thought too. Uh, for one year expected inflation coming in at 4.7%, 5 to 10 year inflation 3.5%. That's being in line with what the estimate said. So again, just underscoring 46 on the University of Michigan consumer sentiment survey. That is a very weak number. We've only really gotten one weaker reading than that over the past decade at 45, uh, in, in the springtime of this year. So again, a really weak reading to come in for the Michigan Consumer Sentiment Survey, seemingly led by current conditions. The outlook there. Let's get more on this. Joining us now is Joanne Chu, University of Michigan's director of the Surveys of Consumer. Joanne, can I just get your initial thoughts on the survey you have out this morning. We should read today's reading as essentially very little change from last month. Um, the primary change that we do see is a pretty sharp decline in buying conditions for durables. Um, and that's not surprisingly, being driven by higher interest rates. Uh, we see buying conditions for all major purchases, not just durables, but cars and homes as well. Uh, coming down near historic lows on the basis not just of high prices, which consumers have been unhappy about for quite some time, but now higher borrowing costs. Um, at the same time, they're still expecting high prices to remain. You saw that inflation expectations ticked up. Uh, so consumers are still expecting pain on their pocketbooks to come. It's interesting because the this report also comes just on the heels of earnings from Delta, where they said fuel prices are going up and they needed to cut their outlook, maybe unable to pass along those high prices. Joining us a consumer that's been dealing with price fatigue is anything different this time around. Is the sentiment finally translating into consumers who are pushing back spending in different ways. Consumers have been telling us pretty loud and clear for, uh, for, for the past few years that, you know, high prices really are quite, um, quite a weight on their personal finances. Uh, back in 2022, they had the strength of high of high strong incomes and strong labor markets. Uh, right now there's support coming from stock markets, but only for wealthy consumers. Uh, for middle income, middle wealth, lower wealth, consumers who don't own substantial stock. That stock market doesn't help them at all. You know, the soaring eye trade doesn't help them at all. Uh, so many of them, you know, have been trying to make do. They've been trying to trade down and how they spend without necessarily reducing their total spend. Um, but they are looking at further adjustments to their spending going forward. Where are you seeing those adjustments? I see some specific categories that that you put out here. Things like food, groceries, household durables. Some of this does feel like necessities food and groceries. But just how widespread is some of that movement. The thing is, a lot of the the items that I've seen, uh, the most notable, uh, increases in prices have been necessities have been, uh, non-discretionary goods. And so especially with gas prices, if you drive to commute to work and you don't have any other options, there's not much you can do to adjust that. And so what that means is that consumers are needing to adjust, make adjustments elsewhere or wherever they can. Uh, so it's going to be different for different consumers. Um, but I think we're largely seeing it on non-discretionary things. As always, one of the interesting parts of this report, Joanne, is sort of the partisan gap, especially as we head into the midterms. What are you finding there? So we did see a little bit, actually, of an improvement among Democrats and Republicans. Um, and we saw a pretty sharp decline among independents. So overall, uh, those balance each other out to for a little change from September. Um, overall, consumers are all in agreement across the political spectrum, are in agreement that the outlook for the economy has declined since the beginning of the year, and that continues to be the case. What do you make of the independents dropping? Is that because you have this new driver of higher inflation in the form of the war in the Middle East? I mean, that is a factor that's driven down a sentiment for all three political groups Democrats, independents and Republicans. So I think we really need to wait until the end of the month when we get more data to better understand why independents, uh, see a different October than Republicans and Democrats. But really, I think when we look at the Arc over the last few months, over the period since the start of the Iran conflict, um, all consumers, regardless of political beliefs, uh, believe that the outlook has soured. You know, I like to go back to where we started this conversation, or one of the comments you made about higher rates being an issue for consumers. And here you have only 14% saying it's okay to use credit for major purchases. Uh, that matches 2022 in 1981 levels despite very different rate environments. What did you make of that? And consumers are just pretty skeptical right now, um, about how much financial risk, uh, they are able to stomach. And I don't mean in terms of investment, I mean in terms of, you know, spending out of their savings, spending out of their, um, out of borrowing. Uh, we are in a very different environment, even though interest rates are lower than they were in back in the 80s. Um, you know, we've been in an environment where people are saddled with more kinds of debt. And they were back then, you know, student loans weren't really a thing at that time. Mortgages are much larger now than they were, um, 40, 50 years ago. Uh, so we are in a different environment, but people consumers are pretty wary. Um, they really want to take financial risk only when they really need to. Joanne, as always, thank you so much for joining us. That's Joanne Schuh of the University of Michigan. Let's get a check on your markets. After a University of Michigan sentiment survey, as Joanne pointed out, is Similar to last month in showing some of the depressed levels, so stocks hold on to their gains. They're up a quarter of 1%. It's OpenAI moving things because you're not feeling the pressure of higher rates this morning. And rates are higher. We're still below that 2002 high sitting at five 2632 a push and pull from Brent crude. It seems that the pull down this morning is thanks to comments, a post from the president that he would not attack Iran before the midterm elections. Let's take a look at some of the other movers this morning with that is nowhere near. Hey, Nora. Hey, Danny. First up, Delta Airlines falling. And that's after the company cut its outlook for the year, saying higher fuel costs are really weighing on the business, especially when you consider the Iran war. Uh, Delta expects to absorb about $6 billion in additional fuel cost this year. That's compared to 2025. You'll see shares of Delta Airlines down by about 1.8% and moving from travel over to tech space, announcing a spectrum deal that will enable it to use its Starlink satellites to become a major mobile carrier in the United States. Of course, that's weighing on wireless giants like Verizon, T-Mobile and AT&T all falling on the news. And finally, keeping with tech, Apple shares under pressure this morning. This comes after a report that the company cut component orders for the iPhone 18 Pro and the iPhone 18 Pro Max. That comes after softer than expected demand. Shares of Apple lowered by about 2.5%. Those are your morning movers. Danny. Nora, thank you very much. Let's break down some of those tech moves. Joining us now is Bloomberg tech editor Sarah Frier. Sarah, maybe it's worth just starting out on Apple where Norah left off. Is this just the continued impact of higher prices and what that means passing it on to the consumer? Or is something else going on here? Well, you know, first of all, we haven't we haven't confirmed this report. But I think that you're right. Like, this is this is an area where, you know, Apple in creating these new devices, leads people to want to replace their phones and, um, get a new device and and already that calculus has become harder because phones aren't getting as much better as they had in past generations, they're still getting a little bit better. And then, um, you know, you add the higher price on top of it, and it might be harder for consumers to get to stores again, it feels like it's going to be an enduring theme. Consumers how much they're willing to pay this earnings season. So way from Apple because that is bringing down the complex of of suppliers to at some of those chip providers elsewhere, the eye complex and thus the overall market seems to be trading on the day to day headlines of open eye and their revenue share. What has been the discrepancy in just how much money we we think OpenAI will be making and having a large impact again on overall markets? And this is a this is a big discussion we're having. So OpenAI, uh, we reported, based on our sources, that they've told investors they're expecting to reach or exceed 70 billion in annualized revenue by the end of the year. Now, Bloomberg previously reported that anthropic was, um, reaching 65 billion in annualized revenue at the end of July. Now, what's very important is those numbers cannot be compared. They calculated differently. Okay. So there has been some confusion in recent weeks because, um, investors have attempted to calculate OpenAI's revenue to be, uh, apples to apples comparison with anthropic um but annual. But the the the way that anthropic has its revenue is by taking the the gross of the contracts that they that they're getting through their cloud providers whereas OpenAI takes just their share just the net of those contracts. So it may be the case that OpenAI, um, may have a comparable size of business to anthropic. Uh, we just we just do not have enough information to say that at this point, so does the market behavior sort of underline just how much is reliant on these lambs and their businesses succeeding? I don't think we've ever had a situation like this where two of the most important companies for the entire ecosystem, for the entire market, remain private, right. And this is this is going to be, um, you know, really interesting couple of months because we're going to see anthropic IPO. We're going to get a little bit more visibility into their business. And along the way, investors are going to have to try to compare anthropic numbers to open eyes, to judge the trajectory of those businesses. And this this metric, this annualized revenue metric has has really become, um, more of a more of a common yardstick in the eye economy, the startups using it to describe the trajectory of their businesses. However, everyone seems to do it differently. You know, if it's net or gross revenue, if it's based on a month, if it's based on a quarter, if it's based on future 12 months of contracts. I mean, there are a lot of different ways to do it all. Correct. Um, there is no standard. And so I think once we see, um, more public reporting, uh, that is really going to help the market understand how to digest the growth of these businesses. Sarah, great to get you on. Thank you for joining us and for all your work this week. That's Bloomberg's Sarah Frier. Coming up on the show, Ellen Hazen of Putnam Putnam joins to discuss why she is cautiously bullish on equities. That's coming up next. This is open interest. Let's get some high interest stories. So look at what's making headlines around the world. Democrats are on track to win as many as 19 House seats next month. That's according to the Cook Political Report, enough for a strong majority. Cook says that Republicans have struggled to overcome President Trump's low approval rating as voters remain concerned about inflation, tariffs and the Iran conflict. We're to have more on the policies at play in the midterms later this hour, and New York City Mayor Zoran Mamdani is calling for an end to ice operations in the city after an agent shot and wounded a man during enforcement action. We will not. We know. And I have said this directly, whether to the president or to the public. Ice undermines public safety. It makes us less safe. New York City will not stand by while Ice agents treat New Yorkers, and we will not back down from the demand that so many, including myself, have put forward. Time and again, this is an agency that must be abolished. Why forget couple therapy? Some high earners are doing some tax math instead. A quirk in the salt cap means two single filers can potentially deduct far more than a married couple. That's leading some partners to delay marriage, opting for domestic partnerships or even considering they were only divorced strictly for the tax savings. And they say romance is dead. Let's get a check on your markets this morning because we are up, uh, about a quarter of 1%, uh, for both the Nasdaq and the S&P 500 rebounding thanks to Open Eye and their reported revenue. Uh, then you are seeing ten year yield still marching higher four basis points despite oil coming in. Five 2674 is where we stand. Ellen Hazen, chief market strategist and portfolio manager at FL Putnam, says she is cautiously bullish on equities, writing, quote, the underlying fundamentals are strong and economic growth is broadening beyond just technology. She joins us now. Ellen, that feels just straight up bullish. Why the caution maybe around that thesis. I think if we look at the second derivative, Danae of capital spending among the hyperscalers into next year, There's no question that it's going to slow. And we've seen that initially a year ago, two years ago it was funded out of free cash flow. Now they're having to take on debt. They're having to do JVs or other off balance sheet financing. And so that is causing it to slow. You look at the issuance which is driving some of those higher yields that we're talking about across the whole market. And all of that is going to act as a governor or a brake on the ability to grow so quickly. And so you had a lot of companies that were I related, particularly the tech hardware names for the last couple of years. They just went up every day. And I don't think that can continue. If you're beginning to see slowing growth, to say nothing of the permitting and the labor and the materials supply chain limits on growth. We were talking to an analyst from Panmure that has, um, a very bearish take on this equity market. He sees it going by 5000 to 20 by 2027 because he thinks this is a bubble. He said. Basically a really interesting idea that essentially in order for the AI narrative to hold up, you have to have open AI and anthropic as public companies, so we can get a confirmation every quarter that they are getting a return on these investments that investors are coming in. And I wonder how you see it, because we have had a market that's been moving day by day, just based on like nuggets of reporting that we've gotten from OpenAI and anthropic. Those companies are among the most important in the market right now, even though, as you point out, they're not public. And we saw what happened yesterday where OpenAI revenue was late. No, it's actually back where we thought it was. So we'll have to see what happens there. I think the benefits from I are going to be very long standing, long tailed. They're going to take a while to come out. That will take years. There will be fits and starts. There will be quarters and periods where it looks like the ROI isn't there, and there will be other periods where we see operating margins expand, not just for the eye names, but for the users and the beneficiaries of AI is something like over 75% of companies are using it in some fashion. So the adoption is there and the returns will be there, but it won't be in a straight line. And that's where it gets into valuation. If the market's really expensive, then that is implicitly assuming it will be in a straight line. And we all know that that's not going to happen. I'd love to get your thoughts on everything else, because it's a market that's reached new highs because of AI, and some other things have been ignored. Target one of your stock picks. So why why put your fortunes behind target. What's attractive there. So target's a great company. And they lost their way for a handful of years. But in the last two quarters, they've seen positive traffic for the first time in a couple of years. They've seen positive, uh, comps, which beat last quarter. They've seen gross margin improvement 8100 basis points the last couple of quarters. So it's a very high quality company. High returns on invested capital. Good growth, very solid. But it really had a tough couple of years. And we're on the other side of that. So I think that's a really good thing to tuck away. And I think this falls into the theme of diversifying away from just the eye trade, which has done so well, but it's not going to be the only thing that does well. So we want to look at companies outside that I trade as well. I mean target has come roaring back. It's up 57% so far year to date. And this earnings season as we hear from target all the other consumer companies. What are you looking at to confirm that this is a consumer that is continuing to spend. Because we've got delta earnings this morning and they're talking about higher fuel prices that it's sustained longer than they thought it would. Maybe not being able to pass on all those costs. Where are you sort of looking in some of these consumer names to see if this is a consumer that's holding up. So we look at a wide variety of indicators. One of the things we look at is credit card delinquencies and auto delinquencies. And those are pretty stable. They really haven't deteriorated yet. And if the consumer was really under pressure, we would see that deteriorating. Another thing we're looking at is the labor market. So on the unemployment front, still very low at 4.2%. But if you look at real average hourly earnings and accumulative basis over the last five years, they're flat on average. So it's just barely keeping up with inflation. So that's a little bit of a concern. And then of course you saw the consumer confidence numbers that came out just a few minutes ago. And those have been trending steadily down with some gags for the last several years. So I think the consumer feels very precarious. Now if you if you decompose that into the high end and the low end consumer, the high end consumer is doing fine. Interestingly, they're actually seeing lower inflation than the low end consumer is for the basket that they spend money on. So the pressures continue to pile up on the low end of the cake. And so I think you need to be really careful about looking at companies that are in the low end of the K, that that's the market they're serving. But for the middle of the road and for the higher end consumer, they're still doing okay. That's really interesting that that difference in inflation. When I was speaking to someone about, um, a hedge fund manager, just about I and their whole thing was like, if you're if you're into EI, you need to have health care on the other side of it. Like it is the ultimate balance for this equity market. I know McKesson is is also one of your picks. Just talk me through that. So drug distribution is a duopoly basically with or McKesson Cardinal Health and a couple other players. So call it an oligopoly. Very low margin business but very stable market share doesn't change hands that often. And the drivers there are really volumes and drug pricing. So volumes with you have a big demographic tailwind that is just structurally there. As we see the baby boomers age and the population ages. So you continue to see that, but you're also seeing positive drug pricing. And that also helps their bottom line. So you're getting some operating margin expansion, reasonable evaluation I'm not saying it's super cheap. You're talking mid high teens. Uh um multiple for mid-teens earnings growth. But it's something that's going to be stable. You can tuck it away, put it away in your portfolio and act as ballast for the eye trade. And so great to have you on come again sooner. This time we we left too big of a break from the last time. Alan Hazen of FL Putnam still ahead. Fort Lauderdale, Florida is getting a luxury makeover. We're going to talk to Mickey Naphtali, chairman and CEO of the Naphtali Group, on why the big money may be moving out of Miami. This is open interest. You're watching open interest an hour into your trading day, and stocks rebound from two days of losses, up about a third of 1% for both the S&P and Nasdaq. Russell is up there too, even though we do have the pressure, excuse me, of higher yields this morning higher by four basis points. As to the driver of them. Not entirely clear at this moment because Brent crude is still down about one tenth of 1%. It is a corporate environment where there's more spending, more concern around that space. That is the reason that you're looking at Verizon and all the telecoms down this morning, getting more spectrum, challenging them closer to being able to rival them. Delta some earnings that show that finally higher fuel prices are starting to bite. Humana. Getting a good rating from the Medicare Medicaid agency. So that's good news for them. Up 12%. Meanwhile, Apple down some reporting from the Nikkei suggesting that they need to cut some of their component orders. Bloomberg has yet to confirm that coming up. Move over Miami, new York developers are betting big on Fort Lauderdale. That's coming up next. From snowbirds to skyscrapers, Fort Lauderdale, Florida is having its own moment in the sun. New York developers are pouring money into luxury condos as buyers look beyond Miami for more space, lower prices and a different kind of pace. Mickey Naphtali is one of them. He is the chairman and CEO of the Naphtali Group, a New York based developer investing heavily in both cities, making. Great to see you. Thank you for having me. So what is driving Fort Lauderdale. I was telling you in the break, like my kind of thinking, when I think of Fort Lauderdale, I think of, you know, my grandparents who once lived there. They would go visit them. A retirement community whose going into Fort Lauderdale is this? The people in Miami getting pushed out is this New Yorker's coming down. What's behind the boom? So that's that's a great question because this is the story about of South Florida. And we're going many years ago. That's how it it all started. But everything has changed. And and to me to a point of basically no return because, you know, between Miami, Fort Lauderdale, Palm Beach, West Palm Beach, they offer so much and the population is changing, getting much younger. You know, there a lot of noise about the companies that are moving and people are moving, but they are not moving only from New York. We see buyers from California, we see buyers from Texas, we see buyers from Chicago. We see, yes, we see buyers from the Tri-State area. We have a very good reputation in New York. So we you know, by definition, we do see buyers that know us. And they want they are very interested in what we do in South Florida. But but they are not the only one. And it's a it's a it's a really interesting and fascinating point of time because I think Fort Lauderdale is a little bit behind Miami and Palm Beach. But it's the location is is absolutely amazing. The airport is great. The transportation is great. The bright line connecting between Fort Lauderdale, Miami and Palm Beach, it's the capital of the world. You know, the beaches are amazing. Boats, yachts, everything is great. So that's where we see. And that's why we're building the Viceroy Residences in Fort Lauderdale. And notably, if you're coming from California and New York, the tax regime is much better today. Well, what is the mix of what you're seeing of people moving for lifestyle reasons versus like political tax environment? So we see both of course some of them are moving because of taxes and political. Absolutely. There's no question about that. But it's a lot about lifestyle. Again, you know, the change between those places many years ago where, you know, for retirees and that that move, you know, there's so they offer so much in the lifestyle is just fantastic. So we see both and the demand the demand is is growing. And we see the, you know, people migrating, you know, from other states to, to South Florida. And you're you're busy man Mickey, because you have your New York home. You have Miami, this growing area in Fort Lauderdale. How are you seeing capital split between the various regions, be it South Florida or like doubling down at home? So look, we are very happy with, with, uh, our investments in, uh, in New York. New York is a different story. Everyone are trying to, you know, to ask me. Okay, so if you developing in Fort Lauderdale, what do you stop developing in New York? No, no, no, there is no, it's not about competition between, you know, human is human beings. We have different things that we like different. Some people like to be in to being in Fort Lauderdale. Some people like to be in, uh, in New York. They're also different, you know, age group and whatnot. It's just different preferences. And the New York market is strong. You know, even with all the political, you know, environment. And in the South, Florida a market is very, very strong. Fort Lauderdale is getting there. And we're very excited to the political environment. Just how big of a difference has it made with Mayor Mamdani coming in? Because there was obviously so much noise at the beginning. There was the whole Ken Griffin saga to on the ground. making. What are the things look like? So look, I mean, there are two things, right? The mortgage rates, which, you know, that's any not only in New York. Right. So that's really at the mall, the mortgage rates. And that's not a political issue. That's really. Can I afford or not to buy something. And those are usually the entry point. A you know, the first time buyers regarding the the terror talks, you know, it really depends. Some very wealthy people care about it. And some people say, look, I want to live in New York. Life is too short. That's where I want to be. And and that's the end of the story. So there is not a lot of inventory in New York. So because of that, there is not a huge impact at this point of time. And listen, there are a lot of legal challenges out there. We'll see what how everything will pencil out the you know, the it might change. So we don't know at this point what is the biggest bottleneck right now from, uh, rates to construction costs. Diesel now heading higher with the war in Iran. Iran. What is the biggest problem? I would say rates. That's the biggest issue, especially for buyers because look people, the population is growing and is long. Where we are focusing is developing in in major cities. There is a huge trend in the last 20, 30 years of people moving from the suburbs to urban kind of cities, right? The problem is that if they can afford to sell their home, they have a mortgage with two, three, 4% and now commit to something to a new mortgage at 7%. What is very nice about new development and devices are in Fort Lauderdale. This is a project that is going to be complete in two and a half to three years. So you don't really need to focus on the mortgage rates today. Now okay. What the mortgage rates will be in two and a half years. Three years? I don't know. I don't know if any. I don't think anyone knows. Maybe before we end, can I ask you then about the other maybe looming threat, whether it is a threat or not, in the 2 to 3 years? I mean, we had an analyst coming on today to talk about this idea that all the universe is a bubble. I wonder how much wealth and how much people moving, buying new places in Fort Lauderdale, Miami, New York, what, what have you. It's because of the wealth effect. It's because of entrepreneurs, because of people who work for AI companies. How much of it is based on that and how fragile does that mean if some part of it becomes unwound? I, you know, wealth is not only created that through the eye. Boom. I think we see tremendous amount of wealth, tremendous amount of wealth going after. And it's pushing the entire market because it's not only the 20, 30, 40, $50 million apartments and more. By the way, we were selling over $100 million. But not only that. So they're buying. So those that are selling them. So it's pushing the entire market, right? So those that are getting more for their home or apartment then buying something else and, and it goes down the chain. There is a tremendous wealth out there. And, you know, look at how many billionaires today compared to 5 or 10 years ago, I think one trillionaire. The right. Well, amazing story, I think. Mickey, thank you so much for joining us. Great to have you on, Mickey. Naphtali of the Naphtali group. Let's get a check on your markets as we enter over an hour into your trading day. Still hanging around the same level, up about a third, even with yields pushing higher by four and a half basis points. Brent crude now turning positive up about a third of 1% at $104 a barrel. Let's get a look at some of the movers this morning with that is normal. Linda. Hey, Nora. Hey, Danny. First up, Humana shares are jumping this morning. Hasn't for getting better Medicare quality ratings, which could mean a lot more revenue down the road for this company. These so-called star ratings can unlock bonus payments worth billions of dollars when plans earn four stars or more. You're seeing the stock hitting its highest level since 2024, and shares are up by about 12%. Next up, American Express it's facing a $350 million fine for failing to catch and report money laundering in its system. It's one of the steepest penalties imposed by federal regulators during President Trump's second term. Shares of American Express down by about 8/10 of a percent. And finally, earnings season just around the corner here. Big banks getting ready to report results next week. And they're expected to deliver another strong quarter. And Goldman Sachs could lead the pack with stock trading revenue expected to top $5 billion. Shares though Goldman Sachs just below flat right now. Those are your morning movers. Danny Nomura thank you very much. Now let's get back to news that broke at the top of the hour. President Trump has established a committee to investigate mortgage fraud allegations against Fed Governor Lisa Cook and intensifying efforts to oust her from her role. Joining us now is Bloomberg Washington correspondent Tyler Kendall. Tyler, what's the latest? So, Danny, at this point, this no doubt is bolstering the Trump administration's efforts to oust Fed Governor Lisa Cook. We got this memorandum released by the white House that says this committee is going to be set up to investigate whether or not cook made claims about, quote, false statements in connection with one or more mortgage instruments. The president says the committee will include the NSC director, Kevin Hassett. The administration has accused cook of mortgage fraud by listing homes in both Michigan and Georgia as her primary residences, alleging she did so to secure more favorable mortgage loan terms. But we should say that Lisa Cook has denied any wrongdoing. She has not been charged with any wrongdoing, and her lawyers have suggested that if there were discrepancies on her mortgage applications, they very likely could have been due to a clerical error. Now, we may get more information on how the administration is going about this push because according to the white House, there will be an in-person meeting at the white House on November 5th, where they will look into whether or not there is sufficient cause to remove cook. And that is, of course, a very important term because there is such a high legal bar to remove a fed official from office at section ten of the Federal Reserve Act, which mandates that you need to justify that there is sufficient cause typically meant to mean malfeasance or neglect of duties related to the job. Danielle adds. Spokesperson spokespeople for the Fed and Cook's lawyer did not immediately respond to requests for this comment. The broader context here the Supreme Court did stifle the Trump administration's bid to oust cook back in June, bolstering the central bank's protection. Then we'll have to see what happens now. Tyler, thank you very much for that update. That is Bloomberg's Tyler Kendall in Washington. Coming up, the New York Liberty Hour, returning home to Brooklyn with their season on the line. We're going to speak to Sam Sussman, Brooklyn Sports and Entertainment CEO next. You're watching open interest. The WNBA semifinals are shifting to Brooklyn, the New York Liberty, to host the Atlanta Dream tonight at the Barclays Center in Game three of their best of five series. The Liberty faced elimination after the dream took A20 lead with a controversial 198 turnover overtime win Wednesday night. Joining us now is Sam Zuckerman, the CEO of Brooklyn Sports and Entertainment, the parent company of the nets, Liberty and the Barclays Center, and more. Sam, thank you very much for joining us. Just give me your assessment of tonight. How do you assess the state of the series, whether the liberty can turn it around, and what ultimately a win or loss would mean for the business? Um, I'm very excited about tonight. Tonight's game. I have full confidence in our team. And yeah, look at overall women's sports has been on, you know, an incredible, incredible rise. And I think deliberate is taking or has taken a real leadership position and that, um, I think it all stems from a vision and long term view and investment. When the size bought the team seven years ago, they actually played it at the gymnasium in Westchester, um, in front of less than 2000 people. And, you know, over time, we've invested in the team. We're building a training facility in Greenpoint, and we won the championship in 2024. We look forward to doing that again. And you now see that we're playing mostly in front of a sellout crowd with, uh, business metrics doubling every year, attendance, merchandise, viewership, sponsorships. And, um, we look forward to doing that again. What is the model for really increasing things from here? Because, for example, the Golden State Valkyries, they were the first WNBA team to hit $100 million in annual revenue. And one of the things that that team talked about was really leading in. To the Bay area culture. And I wonder if you're trying to do something with Brooklyn, how important it is to lean in kind of to this Brooklyn DNA for the team? Yeah. One thing I would mention is, um, youth basketball. So one of the ways that we've leaned into the community is through youth basketball. It is an incredibly organic way for us to tap into the community by offering access to the game, to the young generation. And both the New York Liberty and the Brooklyn Nets are relatively young to the borough, and there is no better way, um, than that to tap into the community and to make an impact. And I'm proud to say that over the last four years, uh, we've been we've been serving the community. We have, um, we have a deal with the Department of Education where we go into public schools and we deliver, uh, free clinics. And through that and through, uh, presence in our, in our, uh, practice locations. We. We engage more than 50,000 youth a year, and we think that drives an incredible impact. It is honestly so, so wonderful. Just, you know, from my own viewpoint as a sports fan to like see this movement, that women's sport and specifically the WNBA is going through. But with that spotlight, it also has brought, um, bad faith arguments, uh, podcasters saying ridiculous things, unfortunate things happening at games. How do you, as a CEO, think about protecting the integrity of the sport and your players? Yeah. Look, overall, we're focused on what's ahead of us and we're focused on the game. We're focused on winning. We're focused on getting better every day. Um, and we're focusing on delivering championships on both sides. Um, speaking of championships, the city was elated to see the Knicks do what they did. I wonder for you if that was bittersweet. Does it suck attention out of the, like, New York basketball world to have the Knicks being so dominant. Look, it's like playing golf. You got it. You got to focus on your own game. And I think we have an incredibly, um, high energy team with young talent like Michael and Yegor. Uh, we have, uh, we have a couple of, um, veterans. Uh, and and we are. I think if last night's game is any indication, I think you could see a glimpse of, um, high energy and a team that plays hard. Um, very inspired by our head coach, Joe Brodie. And they have this year more, um, more strength and more length. Uh, and I think you're going to see it, uh, play out. And we are we are building towards a championship team. Also, if you look off the court, this year is our opportunity to celebrate our 60th anniversary. Um, and their theme of, um, legacy through reinvention. That on one hand, we're very, um, young to Brooklyn, and we're investing in a community on the other. We're a storied franchise that has been around the Tri-State area for 60 years, and we look through theme nights to celebrate all these six areas and reconnect to the fans that we have along the Tri-State area. Of course, congrats for being two zero in the preseason thus far for the nets. Um, this idea of of why live sports and entertainment is so important. Of course, you oversee Barclays, the concert venue itself, and you and your team note that concerts at an all time high. Something Clerici said in an interview with David Rubin. Rubinstein. This idea of it being kind of like the anti I thing. I wonder if you're actually seeing that in behavior of consumers who want to come in that whose budgets are really tight. If there's been a noticeable trend of any sort of like backlash to the very online world we live in, and whether that's led in a perceivable way to more people wanting to see things like live sports and concerts. Yes. And it has, uh, I think we live in a world where consumer preferences are reshaping, people are interested in immersive stuff. They're interested in experiential. They spend their money more on what they do, what memories they build, how they experience. And there is nothing like live music. There is nothing like live sports unfolding right in front of your eyes. Um, and in our consumers are telling us how they like to see it. And I think we've made a significant investment listening to our customers. Uh, we're now in the midst of a five year, $150 million renovation where every summer we launch a few new areas and a few new clubs. Um, and we are we are doing that. We've launched clubs like JetBlue at the Ki and, uh, the Toki ro and the Gallagher Terrace, where people can spend time with their friends, um, and have the experience and, um, this this season, we're also going to launch a couple of new locations, a couple in new clubs, contactless entry, everything to facilitate the experience. And I think that everybody that comes to Barclays can see that we're a great host, and that it is a place with tremendous energy. Would nothing like it. Sam, thank you so much for joining. Good luck for tonight. We're all rooting. We're all rooting for you in the team. Thank you so much. Sam Zuckerman of Brooklyn Sports and Entertainment. Coming up on the show. From tariffs to energy. And I, Nathan Dean of Bloomberg Intelligence breaks down what's at stake in the midterms. This is open interest. President Trump says that the U.S. will not strike Iran before the midterm elections. Trump has suggested Iran was waiting to see how his Republican Party would do during the midterms. Joining us now is Nathan Dean, senior government analyst at Bloomberg Intelligence and the author of the Washington Update newsletter. Nathan, how crucial are developments in the Iran to the upcoming election? So the crucial, from the standpoint that most Americans are actually opposed to the conflict with Iran and subsequently the price and affordability, and that's where the Republicans are sort of in a little bit of a trouble at the moment, because there's not many levers that they can pull between now and the election to drive affordable prices. Now, you know, the other thing that we just keep in mind is that markets are really generally taking into account that the Democrats are going to take the House of Representatives, which isn't really going to have much of an impact on President Trump's Iran strategy at all, because post a post election, you know, the power of the presidency is a lot more powerful when it comes to things like geopolitical and national security. So President Trump's I ran strategy is really just going to be up to him. The Democrats aren't really going to have much of a role to play in that. Let's just go through some of these these other midterm issues. And you talk about the presidential power. Nathan, one of the interesting things you point out is around AI that the power of who decides whether there's regulation or how that takes form is really up to the president. What is the thinking there? Yeah. So until January 20th, 2029 at 12:01 p.m., when the next president takes the oath of office, I at a federal level is essentially what is President Trump want to do? And he's taking the approach right now that, you know, we shouldn't really put much curbs on artificial intelligence. AI is a way to combat China. But B, when President Trump says all you really need in paraphrasing here is a strong president. When you see the Azar, you know, Jay Clayton going out to meet with the companies, that's what you're going to see over the next two years. But I would say here is that the states are going to try and fill the void, but nothing we're seeing coming out of policy for the next two years is really going to disrupt the AI CapEx boom. We think that's just going to continue, at least from the standpoint. Nothing in Washington is going to restrict it. Isn't that a problem for the midterms, though, Nathan? Because there seems to be a differing message from the president and Republicans that are running that are trying to push back against data center development. And the president saying, we need superintelligence. We have to keep building. Yeah, you're absolutely right. There's a lot of NIMBYism. Not in my backyard when it comes to data centers. And here's where the thing is with data centers. When President Trump says let data rain again from a federal level, you're not going to see a lot of restrictions. But we've got about 30, 32 states next year. They're going to have their legislatures come into session in the first half of 2027. And so we think a lot of the political rhetoric you're seeing on the policy trail right now is going to transform over to state regulations. Now, this isn't really going to disrupt data center builds writ large. But what it will do is begin to actually impact specific projects. So you can't build in New York. So you're going to go to new Jersey instead. Nathan, thank you so much for joining us. Nathan Dean of Bloomberg Intelligence. Look out for his Friday newsletter coming up on Monday show Katrina Dudley, a Franklin Templeton, Mary Wightman of State Street, and David Georgia Baird ahead of a big week for bank earnings. Have a great weekend. In the meantime. This is Bloomberg.