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00:00♪ > > I DON'T SEE MUCH OF A CHANGE TO LEADERSHIP. > > IS A DIFFERENT STRUCTURE IN TERMS OF THE MARKET AND SOUTH, AND SOUTH, IN TERMS OF PARTICIPANTS. > > EVERY MARKET IS PRICING IN THIS AI STRUCTURE. > > PEOPLE WANT TO PUT OUT SOME SERIOUS MONEY TO BE PART OF THAT STORY. ANNOUNCER: THIS IS "BLOOMBERG SURVEILLANCE" WITH JONATHAN FERRO, LISA ABRAMOWICZ AND ANNMARIE HORDERN. JONATHAN: LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING. FROM OUR AUDIENCE WORLDWIDE, "BLOOMBERG SURVEILLANCE" STARTS RIGHT NOW. COMING INTO MONDAY, FISCAL RISK UNLEASH. JAPAN'S NEXT PRIME MINISTER AS ANOTHER FRENCH LEADER IS RESIGNING JUST ONE MONTH ONTO THE JOB. GOLD UP 50% YEAR TO DATE. > > THIS IS A CLEAR SIGNAL THAT DEVELOPED MARKETS ARE LOSING CLOUT. GOOD STEWARDS OF CAPITAL AS WE SEEN OVER THE PAST 5, 6 DECADES, THE DOLLAR STANDARD OF THE EURO BEING A COUNTERWEIGHT TO THE DOLLAR. IF YOU ARE NOT GOING TO GO TO EUROPE, HELLO, FRANCE. IF YOU ARE NOT GOING TO GO TO THE YEN, JAPAN. JONATHAN: FRANCE AND JAPAN ARE THE EPICENTER OF SOME OF THESE BOND MOVES SO FAR THIS MORNING. JAPAN POTENTIALLY HITTING THE ACCELERATOR. FRANCE STRUGGLING TO HIT THE BRAKES. WE TALKED ABOUT THIS A MILLION TIMES WHEN IT COMES TO THE FRENCH. THE FRENCH GOVERNMENT ISN'T GOING TO FIX THINGS UNTIL DOING NOTHING BECOMES MORE PAINFUL THAN DOING SOMETHING. LISA: BECAUSE THERE IS THIS BELIEF IN THE BOND MARKET EVEN AS YIELDS CLIMBED THAT THERE WILL BE SOME SORT OF DISCIPLINE VOICED UPON THE GOVERNMENT. IT BECOMES A CHICKEN AND EGG KIND OF RACE. DOES THE BOND MARKET HAVE TO REALLY FREAK OUT BEFORE THE GOVERNMENT DOES AND AS LONG AS THEY HAVE FAITH THAT THE GOVERNMENT WILL RESPOND TO THEM, WILL THEY ULTIMATELY HAVE THAT FREAK OUT? THIS IS REALLY CIRCULAR THINKING THAT IN THE MEANTIME IT LOOKS LIKE JAPAN IS HAVING A BIT MORE OF THAT MORE ACCELERATION HIGHER YIELDS. JONATHAN: THE U.S. A BASTION OF STABILITY FOR GLOBAL MARKETS SO FAR THIS MORNING. COMING UP THIS HOUR, JAPAN SELECTS A PRO STIMULUS LEADER. AND ANOTHER FRENCH PRIME MINISTER RESIGNS. AND THE GOVERNMENT SHUTDOWN IN THE U.S. HOLDS BACK ECONOMIC DATA. JAPAN'S RULING PARTY LINING UP THE COUNTRY'S NEXT PRIME MINISTER IN A SURPRISE PICK, SENDING RISK ASSETS SOARING. ISABEL, WALK US THROUGH THE NEW LEADER IS AN LET'S GO THROUGH THE POLICY PLATFORM. WHAT CAN WE EXPECT POLICY TO LOOK LIKE? > > RIGHT. WE SHOULD TAKE A LITTLE MINUTE JUST TO ACKNOWLEDGE THAT THIS IS A REALLY HISTORIC MOMENT FOR JAPAN. I'VE BEEN JAPANESE POLITICS FOR DECADES AND WE NEVER THOUGHT WE WOULD SEE THE DAY WHEN A WOMAN TOOK THE TOP JOB BUT IT SEEMS ALMOST CERTAIN THAT IS WHAT IS GOING TO HAPPEN. SHE'S KNOWN AS A VERY TOUGH PERSON WHO'S WORKED HER WAY UP TO THIS POSITION NOT FROM ONE OF JAPAN'S POLITICAL DYNASTIES, BUT FROM WHERE PRIME MINISTERS OFTEN COME FROM, AND ORDINARY MIDDLE-CLASS FAMILY. THAT IS THE KIND OF PERSON SHE IS. BUT HER POLICIES ARE BASICALLY BIASED TOWARD MORE SPENDING AND A MORE DOVISH CENTRAL BANK POLICY. THEY THINK THERE'S GOING TO BE MORE SPENDING IN TERMS OF WHETHER IT IS MAYBE HANDOUTS OR TAX CUTS. SHE IS PRETTY HAWKISH ON DEFENSE AS WELL. THE BANK OF JAPAN WILL RAISE RATES AT THE END OF THIS MONTH. THOSE BETS ARE FADING AWAY A BIT. THERE WILL BE SOME PRESSURE FROM HER, OVER THE BANK OF JAPAN IS OFFICIALLY INDEPENDENT. THERE'LL BE SOME PRESSURE FROM HER TO MOVE DOWN THOSE HIKES AS PROMISED. SHE'S ALSO SEEING AS BASICALLY NATIONALIST SO SHE'S BEEN PRETTY HAWKISH ON WHAT SHE SAID ON CHINA IN THE PAST AND IN RECENT WEEKS SHE'S HINTED THAT SHE MIGHT WANT TO TRY TO RENEGOTIATE THE TRADE DEAL JAPAN HAS WITH THE U.S. WHICH IS QUITE BOLD. SHE HAS WALKED BACK ON THAT A BIT BUT THOSE DIPLOMATIC SKILLS, IF THEY EXIST, WILL BE PUT TO THE TEST AT THE END OF THIS MONTH. THESE TWO TOUGH LEADERS WILL BE MEETING. JONATHAN: MARK THAT ON THE CALENDAR. APPRECIATE THE UPDATE. JORDAN, WELCOME TO THE PROGRAM. THIS COULD BE A BIG MOMENT. DARE I SAY, IS THIS A TRUST LIKE MOMENT FOR THE BOND MARKET? > > IT IS NOT TRUST, BUT IT COULD BE. THIS IS A NEW VERSION OF THE MARKET IS THINKING. I THINK WE NEED TO HAVE SOME LEVEL OF CAUTION IS WHAT POLITICIANS SAY AND WHAT THEY DO. IT IS PRETTY DIFFICULT BECAUSE THAT FACTION IS MUCH WEAKER AFTER A LOT OF ELECTION DEFEAT. ROUGHLY HALF THE SIZE THEY WERE A YEAR AGO. THAT MESSAGE WE'VE BEEN GIVING CLIENTS JUST NOW AND OVER THE WEEKEND IS THAT THAT WOULD LEAD TO LOSE SOME MONETARY POLICY FOR SURE. THAT WOULD LEAD TO A WEAKER YEN. IN ORDER TO WIN THE LDP ELECTION, SHE DID OTHER FACTIONS . ARGUING TO RESPECT THE PARTY MEMBER VOTE IS THE KEY REASON WHY SHE WON THIS WEEKEND. IT ALSO MEANS SHE WILL PROBABLY HAVE TO APPOINT A FINANCE MINISTER, MIGHT SEE THE YEN SELLOFF RELAX A BIT BUT WE KNOW WHO THE FINANCE MINISTER IS AND IS SORT OF CONTINUATION CANDIDATE FROM THE PREVIOUS ADMINISTRATION. LISA: HOW HIGH IS YOUR CONVICTION LEVEL THAT WHAT SHE DOES IS SOMEWHAT DIFFERENT FROM WHAT SHE SAYS? ARE YOU RECOMMENDING THAT THEY BY THE YEN WITH THE DOLLAR, SURPASSING THAT LEVEL VS. THE JAPANESE CURRENCY? > > I WOULD SAY WITH HIGH CONVICTION THAT WITH A CURRENT SET UP IN THE PARLIAMENT, THE LDP DON'T HAVE A MANDATE, THEY DON'T HAVE A MAJORITY. THEY RELY ON THE COALITION PARTY THAT DOESN'T EVEN GET THEM OVER THE LINE. I'VE GOT A PRETTY HIGH CONVICTION SHE CAN SUDDENLY DO VERY LARGE POLICIES BECAUSE SHE MIGHT WAS MEMBERS OF HER OWN PARTY OR MAKE THOSE TALKS QUITE DIFFICULT. A CONSUMPTION TAX CUT WHICH IS ALL THE TALK LAST TIME AROUND IN THE ELECTIONS LAST YEAR, WATERED DOWN SIGNIFICANTLY. I DON'T THINK WE ARE GOING TO HAVE A BIG FISCAL AGENDA UNTIL WE SEE HER POLLING. WHEN WE SEE THE POLLING, IF THE LDP SHOOTS UP TO SOMETHING LIKE 40 OR 50, IF YOU SEE HER OWN PERSONAL RATINGS IMPROVE, THEN WE CAN'T RULE OUT ELECTIONS. IF THAT HAPPENS, IF WE GET IN ELECTION THIS TIME OR EARLY NEXT YEAR, I CAN'T RULE THAT OUT. LISA: IT FEELS SOMEWHAT DIFFERENT FOR WHAT POTENTIALLY COULD BECOME A LIZ TRUSS MOMENT BECAUSE THIS IS JAPAN, THIS IS FRANCE, THIS IS THE U.S. WITH A GOVERNMENT SHUTDOWN WERE A LOT OF GOVERNMENTS ARE SHOWING REAL RELUCTANCE TO CLAMP DOWN ON DEFICITS THAT HAVE BEEN CLIMBING. THEY WANT TO LEAN ON THE DEFICIT LEVER WHICH IS THE REASON WHY YOU SEE BOND YIELDS CREEPING HIGHER. AT WHAT POINT DOES IT TAKE ON A LIFE OF ITS OWN? > > THE YOU HAVE -- THE U.S. AND GERMANY OF ITS OWN PHYSICAL ISSUANCE. JAPAN IS VERY ACUTELY AWARE OF THIS PROBLEM. THE MINISTRY OF FRANCE HAS BEEN DEALING WITH THAT. WHAT HAS CHANGED IS THE DEMAND HAS COLLAPSED AND ACTUALLY DO MAJORITY OF THE TRADING VOLUMES FROM THE 10 YEAR ONWARDS IS FROM FOREIGNERS. THIS MEANS THAT YOU GET THESE SORT OF BIG MOVES LIKE YOU'VE SEEN TODAY, FOREIGNERS AND ALTER LONG AND CONTINUED BE. ALL IN ALL, SOMETHING WILL BREAK. I THINK THAT IS WHY THE LDP FISCAL PRUDENCE PLAYS A LARGE ROLE. JONATHAN: IN ADDITION TO THAT, THE ROLE OF THE CENTRAL BANK. LET'S DISCUSS IT. TRADITIONALLY IF THIS IS THE UNITED STATES WOULD BE TALKING ABOUT A PRO-FISCAL STIMULUS PARTY OR LEADER. THE PRICING OF RATE HIKES IN THE FUTURE ACTUALLY CAME IN. I WONDER IF THIS REALLY A UNIQUE INDEPENDENT CENTRAL BANK? > > ALL THESE INDEPENDENT CENTRAL BANKS, THEY ANSWER TO CONGRESS. WHEN IT COMES TO THE BOJ, THERE IS A PRETTY STRONG LEVEL OF POLITICAL COOPERATION. WE'VE SEEN THIS BEFORE WHERE MOST PEOPLE HAVE BOTH FISCAL EASING AND MONETARY. IT ACTUALLY LEAN HEAVILY ON THE MONETARY POLICY SIDE OF THAT STORY. THERE IS THE POTENTIAL TO PLAY A LARGE ROLE. IF YOU THINK BACK TO LAST YEAR, THERE'S HISTORY BEHIND THIS JOB. THEY DELAY THAT RATE HIKE FROM OCTOBER THROUGH JANUARY. WE ONLY HAD ONE TWEET FROM HER AND ONE VICTORY SPEECH SO FAR. IT'S VERY DIFFERENT WHEN INFLATION IS NEAR ZERO. THE AIM OF THIS GOVERNMENT IS TO TRY TO BRING INFLATION DOWN. YOU DON'T REALLY ACHIEVE THAT BY STOPPING THE BANK OF JAPAN FROM RAISING RATES. OCTOBER IS CLEARLY MUCH LESS LIKELY NOW . IF YOU WERE TO ASK ME, THE BANK OF JAPAN HAS LINED UP LOAD THE SPEECHES. WE WILL HEAR FROM THE GOVERNOR LATER THIS MONTH THAT THE DATA IS STRONG IN JAPAN. IT ALL ADDS UP TO A RATE HIKE APART FROM THE POLITICS AND UNCERTAINTY. JONATHAN: THANKS FOR JUMPING ON ON THE BREAKING NEWS EVERY WEEKEND. THANK YOU, SIR. BIG MOVE IN DOLLAR YEN, UP BY 2%. THERE IS A FEELING THAT THEY WILL BE MORE CONSTRAINED THAN THE LATE SHINZO ABE. LISA: MAYBE THAT'S THE REASON YOU ARE NOT SEEING AN EVEN HIGHER SELLOFF. GOLDMAN SACHS ANALYSTS CAME OUT AND SAID THIS IS GOING TO BE A GLOBAL MOVE AND FOR EVERY 10 BASIS POINT HIGHER IN JAPANESE YIELD YOU ARE GOING TO SEE TWO OR THREE BASIS POINT HIGHER IN THE LIKES OF THE U.S. AND IN EUROPE ABOUT WHETHER THIS IS GOING TO BE A RUMOR OR ESSENTIALLY WHAT IS GOING TO HAPPEN. > > THAT'S GET YOU AN UPDATE ON STORIES WORLDWIDE. YAHAIRA: JAPAN'S RULING CONSERVATIVE PARTY HAS ELECTED ITS NEW LEADER. THE PRO-STIMULUS LAWMAKER IS A FORMER GOVERNMENT MINISTER, ADDED HEAVY METAL DRUMMER AND LONGTIME FAN OF MARGARET THATCHER. JAPANESE LONG BOND YIELDS CLIMBED FOLLOWING HER ELECTION WHICH FEELS EXPECTATIONS OF CONTINUED POLICY EASING. MEANWHILE IN EUROPE, FRENCH PRIME MINISTER SEBASTIAN CORE DO HAS RESIGNED AFTER LESS THAN A MONTH ON THE JOB. AND JUST ONE DAY AFTER A CONTROVERSIAL CABINET RESHUFFLE. EMMANUEL MACRON NOW HAS TO DECIDE WHETHER TO NAME A NEW PRIME MINISTER, CALLED A PARLIAMENTARY ELECTION OR RESIGNED HIMSELF. AND HERE IN THE U.S. THE GOVERNMENT SHUTDOWN IS ENTERING ITS SIXTH DAY. STOPGAP SPENDING THAT IS ALREADY FAILED FOUR TIMES. CHUCK SCHUMER SAYS MIKE JOHNSON HAS THE TOOLS TO NEGOTIATE WITH DEMOCRATS. JONATHAN: UP NEXT, THERE GOES ANOTHER ONE. > > [SPEAKING FRENCH] JONATHAN: ANOTHER FRENCH PRIME MINISTER RESIGNS. ANDREW SHEETS OF MORGAN STANLEY JOINS US NEXT. JONATHAN: WELCOME BACK TO THE PROGRAM, LOOKING AT FOR EARNINGS FROM DELTA AIRLINES ON THURSDAY. TAKING UP EARNINGS SEASON, THAT IS GOING TO BE ONE TO WATCH. THE FED MINUTES ON WEDNESDAY. WHERE IS THE FED, HOW DIVIDED IS THAT COMMITTEE RIGHT NOW? 30 YEAR BONDS COME A DAY LATER. LISA: IT'S REALLY IMPORTANT TO NOTE THAT WHAT YOU JUST SAID IS ESSENTIALLY CORRECT, THAT EARNINGS ARE GOING TO BE SO IMPORTANT BECAUSE OF THE INCREDIBLE DEARTH OF OTHER DATA WHICH IS THE REASON WHY 10 YEAR, 39 BILLION GIVEN THE FACT THAT PEOPLE ARE IN THIS RUMORED STRANGE ZONE OF THE IDEA OF LOSING SENSITIVE CREDIBILITY. JONATHAN: IT'S A LOT TO THINK ABOUT. JUST UP AND UP. THAT IS EXACTLY WHAT THIS EQUITY MARKET HAS DONE, SIX DAYS. EQUITIES UP AGAIN ABOUT A THIRD OF 1%. LET'S TALK ABOUT FRANCE AND WAS HAPPENING IN EUROPE. UNDER SURVEILLANCE THIS MORNING, THERE GOES ANOTHER ONE. > > [SPEAKING FRENCH] JONATHAN: SO HERE'S THE LATEST THIS MORNING. THE FRENCH PRIME MINISTER RESIGNING, A SURPRISE MOVE THAT DEEPENS THE FRENCH POLITICAL CRISIS. AFTER PRESIDENT MACRON NAMED NEW CABINET. JOINING US NOW TO EXPLAIN ALL OF THIS, CAROLINE, WELCOME BACK TO THE PROGRAM. WHAT IS NEW ABOUT THIS ONE? > > THE NEW THINGS THAT HE OF THE SHORTEST-LIVE PRIME MINISTER IN THE FRENCH REPUBLIC THAT WAS CREATED IN 1958. 3.5 WEEKS ONLY. CLEARLY THERE WAS SOME MISUNDERSTANDING AFTER THE NOMINATION OF THIS CABINET LAST NIGHT BY OPPOSITION PARTIES BECAUSE IT WAS BROADLY UNCHANGED COMPARED TO ITS PREDECESSOR AND YOU HAD THE RETURN OF THE DEFENSE MINISTER WHICH DIDN'T GO VERY WELL WITH THE REPUBLICANS WHO WERE THREATENING TO LEAVE ENTIRELY. THE SOCIALISTS ALSO DIDN'T REALLY AGREE EVEN THOUGH HE TRIED TO CHANGE THE METHOD BY SAYING HE WOULD NOT FORCE ANY BILL FOR PARLIAMENT, HE WOULD LET THE PARLIAMENT DECIDE ON THE BUDGET, HE WOULD LET THE PARLIAMENT DEBATE THE DETAILS ON THE BUDGET. HE DIDN'T WANT TO HAVE THE RETIREMENT REFORM COME BACK TO THE NATIONAL ASSEMBLY. THIS PERFORM WAS ADOPTED BACK IN 2023 AFTER MONTHS OF PROTEST. NOW, ALL EYES TURNED TO PRESIDENT EMMANUEL MACRON TO SEE IS HE GOING TO SPEAK TODAY, IS HE GOING TO ANNOUNCE WHAT HAPPENS NEXT? HE HAD THREE OPTIONS AND HAS DONE IT MANY TIMES OVER THE PAST YEAR. PERHAPS HE COULD CALL NEW SNAP LEGISLATIVE ELECTIONS AGAIN AFTER 2024 AND HE COULD ALSO RESIGN WHICH SOME PARTIES FROM BOTH THE FAR RIGHT AND THE FAR LEFT ARE CALLING FOR. JONATHAN:JONATHAN: YOU SEE THE SPILLOVER OVER THE FX MARKET. BIG WINNER OF THE YEAR, EUROPEAN BACK, FRENCH BANKS THIS MORNING. LISA: I CAN IMAGINE GOING FORWARD IF THERE IF THIS IDEA OF POLITICAL DYSFUNCTION AND YIELDS RISING IN THE WRONG MANNER, I JUST WONDER THE FACT THAT THE DOLLAR IS STRENGTHENING TODAY, NOT BECAUSE IT'S A FANTASTIC BASTION OF FUNCTIONALITY, BUT RATHER EVERYTHING ELSE IS MORE DYSFUNCTIONAL. JONATHAN: DOWN 5%, AND I THINK YOU TODAY , RELATIVE TO THE YEAR SO FAR, LIKE THIS. LISA: THERE IS A BIGGER, OUTSIZE MOVE REGARDLESS OF WHAT HAPPENS JUST BECAUSE PEOPLE HAVE GOTTEN SO ON ONE SIDE OF THE TRADE. THIS IS THAT IN EUROPEAN STIMULUS, IN SOME SORT OF STABILITY AMID ALL OF THIS. JONATHAN: LET'S TALK ABOUT ALL OF THIS. JAPAN, FRANCE, THE U.K. AS WELL. IT'S EITHER AN INABILITY OR UNWILLINGNESS TO DO SOMETHING ABOUT THE FISCAL TRAJECTORY. AS SOMEBODY WHO HAS TO LOOK ACROSS FIXED INCOME, WHAT DOES THAT MEAN TO YOU? > > LOOK, I THINK YOU HAVE A GLOBAL PHENOMENON OF PRETTY CHALLENGING FISCAL SITUATIONS. THE U.S. IS RUNNING A DEFICIT OF 6.5% GDP. JAPAN APPEARS TO BE LOOKING IN MORE PHYSICAL EASING. THE FRENCH BUDGET IS IN A CHALLENGING STATE AND THE U.K. IS CLEARLY IN FOCUS. SO I THINK THIS IS AN ISSUE THAT IS A GLOBAL PHENOMENON, ONE WHERE THERE IS A LOT OF LONGER-TERM MOMENTUM TOWARD WEAKER PHYSICAL POSITIONS. WE DO THINK THAT THE U.K. MIGHT BE IN A SOMEWHAT BETTER PLACE THAN APPRECIATED. IT'S DEFICITS MOVING AT A DIFFERENT DIRECTION THAN THESE OTHER COUNTRIES WHICH IS THE REASON WHY WE DO THINK YOU COULD SEE SOMEWHAT WEAKER GROWTH IN THE NEAR TERM, MORE BANK OF ENGLAND CUTS BUT ULTIMATELY BETTER YIELD PERFORMANCE. BUT I ALSO THINK THIS IS A SITUATION WHERE IN SOME LEVELS, THIS IS WORK TO CREDIT ADVANTAGE. IF YOU THINK ABOUT THE BETTER RELATIVE STATE OF CORPORATE BALANCE SHEETS, THE FACT THAT IN THE U.S. IT IS TAX CUTS FOR CORPORATIONS THAT IS ON ONE LEVEL WIDENING THE FEDERAL PUBLIC BUDGET DEFICIT THAT KIND OF SOME OF THE SAME FACTORS THAT ARE DRIVING THE PUBLIC DEFICITS WIDER ARE MAKING THE PRIVATE SECTOR BALANCE SHEETS BETTER AND THAT CAN WORK TO CREDIT ADVANTAGE. LISA: AT THIS POINT WE TALKED PREVIOUSLY ABOUT THE POSSIBILITY OF CORPORATE SPREADS TRADING INSIDE OF WHERE GOVERNMENT RATES ARE. DO YOU SEE THAT AS AN INCREASING LIKELIHOOD? WE'VE ALREADY SEEN THAT WITH A COUPLE OF ISSUANCES FROM MICROSOFT. I'M JUST WONDERING IF YOU SEE THAT AT THE PATH OF TRAVEL. > > I THINK THE BEST WAY THAT I WOULD PROBABLY THINK ABOUT THAT IS WE CAN STILL LOOK AT VERY NARROW CORPORATE SPREADS RELATIVE TO WHAT ONE WOULD OTHERWISE EXPECT THAT THE MACRO ECONOMIC ENVIRONMENT TO DICTATE. AS YOU MENTION, I THINK THIS VERY HIGH QUALITY SPREADS THAT THE TRADE VERY TIGHT. THIS IS THE 90TH ANNIVERSARY OF MORGAN STANLEY. WE WERE LOOKING BACK AT THE FIRST BIND YIELD THAT MORGAN STANLEY BROUGHT 90 YEARS AGO. IN 1935, THAT PAPER IS TRADING AT 70 OVER. THERE'S A LOT OF HISTORICAL PRECEDENT FOR HIGH-QUALITY QUALITY BONDS TRADING TYPE GENERALLY AND I THINK IN AN ENVIRONMENT WHERE THE MARKET IS LOOKING FOR SAFETY, A LACK OF DRAMA, A LACK OF HEADLINE RISK, THAT COULD BE VERY VALUABLE AND LEAD SOME OF THESE TO TRADE QUITE EXPENSIVE. LISA: I ASK THIS AT A TIME WHERE TALKING ABOUT THE GOVERNMENT DEBT MARKETS, DISPLAYING A BIT OF CONCERN ABOUT DYSFUNCTION IN A VARIETY OF PLACES, HOW MUCH DOES IT MATTER FOR THE CORPORATIONS WHAT DOMAIN THEY RESIDE IN? > > I DO THINK AN INTERESTING PART OF THIS IS THAT THE REASON WHY CORPORATE SHOULD NOT TRADE THROUGH GOVERNMENT HAS ALWAYS BEEN BASED ON A PRETTY REASONABLE IDEA THAT THE GOVERNMENTS ULTIMATELY HOLD THE POWER OF TAXATION. IN A SCENARIO WHERE THE BUDGET DEFICIT WAS SO TROUBLING THAT THEY WOULD TURN TO THE CORPORATE SECTOR AND TAX BACK THAT MONEY AND CREATE MORE OF A CREDIT CHALLENGE. I THINK YOU'VE SEEN IT CERTAINLY IN THE U.S., THE OPPOSITE. YOU SEEM CORPORATE TAXES BEING LOWERED ON A GOING FORWARD BASIS. IN EUROPE, THE TRAJECTORY IS CERTAINLY NOT TOWARD CORPORATE TAX RAISES IN THE MAIN. I THINK THAT IS IMPORTANT BECAUSE THAT IS ONE STRONG COUNTERWEIGHT TO THIS IDEA. I THINK FOR THE MOMENT THE TRAJECTORY IS VERY MUCH TOWARDS CORPORATE STILL BEING IN A RELATIVELY BETTER POSITION AND GOVERNMENT STILL IN A NUMBER OF THESE DIFFERENT JURISDICTIONS NOT BEING READY, NOT BEING WILLING, NOT WANTING TO RAISE AND CHANGE THAT CORPORATE TAX BURDEN IN A WAY TO BALANCE BACK. JONATHAN: THE TRANSMISSION PROTECTION INSTRUMENT, WHAT KIND OF LEVELS WE HAVE TO SEE FRENCH YIELDS BREAKOUT TO? > > I THINK WE ARE STILL A LITTLE WAYS FROM THAT. I DO THINK AS WE KIND OF DIGEST THE PRICE ACTION THAT WE'VE SEEN SO FAR THIS MORNING, THIS IS SOMETHING THAT WE DO THINK WAS RELATIVELY EXPECTED. MAYBE NOT NECESSARILY TODAY, BUT ON A RELATIVELY NEAR-TERM BASIS. THE ECB IS ALSO GOING TO CARE ABOUT THE BROADER FUNCTIONING OF MARKETS, THE BROADER LEVEL OF INITIAL STABILITY AND WHETHER WE SEE ANY LEVELS OF UNDUE TIGHTENING. OVERALL THE MARKETS MAY BE DOWN THAT MANY OF THESE INSTITUTIONS HAVE PERFORMED QUITE WELL OVERALL. GOING BACK TO BREAKING SOME OF THAT SOVEREIGN VS. CORPORATE DYNAMIC, I THINK WE'VE GENERALLY SEEN THE CORRELATION OF EQUITIES AND CREDITS WITHIN THESE COUNTRIES BE LOWER THAN WE SAW IN PREVIOUS VOLATILITY AND I THINK THAT BEING SAID, WE DO THINK THE ECB WILL EASE POLICY MORE THAN THE MARKET IS EXPECTING OVER THE NEXT SIX MONTHS. WE THINK INFLATION WILL COME DOWN MORE THAN THE MARKET IS EXPECTING BUT WE ARE NOT EXPECTING ANY KIND OF IMMEDIATE STEPPING IN HERE. JONATHAN: GREAT TO SEE YOU. I TAKE AWAY, AND THERE ARE MANY, SPREADS ARE SUPERTIGHT PERHAPS MORE ABOUT THE SAW BRITISH EVEN JUST THE CORPORATE. LISA: ANNMARIE: CORPORATIONS LIVE RELATIVELY BETTER AND THAT RAISES THE QUESTION WHAT DOES THE SOVEREIGNTY START TO SAY CORPORATIONS, YOU ARE DOING PRETTY WELL. CAN YOU GIVE US SOME? JONATHAN: ANYTHING BUT. FROM NEW YORK CITY THIS MORNING, GOOD MORNING TO ALL. IN BLOOMBERG TV -- YOU ARE WATCHING BLOOMBERG TV. ♪ JONATHAN: SIX DAYS, NO LOSSES ON THE S & P 500. UP AROUND ONE THIRD OF 1% ON THE S & P. IN THE BOND MARKET CHECK OUT THIS TWOS, ATTENDS, 30'S. YIELDS UP BY FOUR BASIS POINTS. TENDS AT ABOUT 4.15. EURO-DOLLAR NEGATIVE OFF THE BACK OF MORE FRENCH PARLIAMENT TURMOIL. EURO-DOLLAR DOWN BY .7%. CHECK OUT THE MOVE, DOLLAR-YEN 2% MOVE. THE NEW LEADER FOR THE RBP. LET'S SEE ABOUT THIS, ULTIMATELY A CONVERSATION TO KICK OFF THE TRADING DAY. TAKE THE YEAR SO FAR, U.S. GOVERNMENT BOND YIELDS DOWN 40 BASIS POINTS, FRIEND SHIELDS UP 40 BASIS POINTS. JAPANESE 10 YEAR BOND MOVES UP 60 BASIS POINTS. ALL THIS CONVERSATION ABOUT THE U.S. AND FISCAL RISK. U.S. GOVERNMENT BONDS HAVE REALLY OUTPERFORMED FRANCE AND JAPAN. LISA: I DON'T YOU CAN TAKE THAT AND SAY THE U.S. HAS A FANTASTIC FISCAL HOUSE IN ORDER. THIS IS A QUESTION OF EVERYWHERE ELSE SEEING THE SAME FISCAL ISSUES WITH THE UNITED STATES IS SEEING AND THEN SOME. THE EXPECTATIONS WERE BETTER. IT RAISES THE QUESTION DOES THIS TAKE A LIFE OF ITS OWN. IS IT A DIFFERENT STORY THAN JUST THE BUDGET DEFICIT INTO CONCERNS PEOPLE HAD FOR DECADES BEFORE. > > YIELDS HIGHER ACROSS THE CURVE. SUPPLY LATER THIS WEEK. THE BOND MARKET THE GLOBAL BOND MARKET STORY THREE HOURS AWAY FROM THE CASH OPEN. HERE'S DANI BURGER. > > GOOD MORNING, IT DOES SEEM LIKE THE CONCERNS ABOUT THE GOVERNMENT AROUND THE WORLD WITH THE SHUTDOWN ONGOING THE SO-CALLED BASEMENT TRADE. THAT'LL REPORTERS ARE RUNNING WITH. BITCOIN OVER THE WEEKEND HITTING ALL-TIME HIGHS. SO THE CRYPTO-LINKED STOCKS ARE TAKING OFF CIRCLE OF NEARLY 5%. COINBASE UP 2.3%. AN ANALYST TELLING A REPORTERS APPARENTLY POKEMON CARDS ARE ALSO TRADING AN ALL-TIME HIGH. MAKE OF THAT WHAT YOU WILL. ELSEWHERE SOME SELL SIDE ACTION FOR YOU. ONE OF THE BIGGEST GAINERS IN THE S & P 500 AND THE PREMARKET TRADE, JOSEPH MOURAD MORGAN STANLEY UPGRADING FROM HOLD TO OVERWEIGHT SAYING THIS HAS A LOT MORE RUN TO GO AND THAT VALUATION IS A CONCERN BUT MACRON HAS VERY STRONG PRICING POWER IT IS GOING TO BE ABLE TO RETAIN. THAT IS THE LATEST WITH MICRON. REUTERS REPORT THAT THE TRUMP ADMINISTRATION HAS BEEN IN TALKS WITH CRITICAL MINERALS ABOUT TAKING A STAKE. IT WOULD BE ONE OF THOSE LOAN CONVERSIONS TO EQUITY THAT THE U.S. HAS BEEN DOING WITH OTHER COMPANIES. IT'S A RARE EARTHS COMPANY BASED IN GREENLAND. THOSE SHARES UP 68% OFF OF THAT. JONATHAN: THE NEWS KEEPS COMING THIS HEADLINE CROSSING THE BLOOMBERG TERMINAL FOR THIRD TO MICRO AMERICA FOR 8288 A SHARE. ALL STOCK DEAL VALUED AT $10.9 BILLION. WE'VE BEEN TOLD A MILLION TIMES WE WILL START TO SEE THIS AND SEE MORE OF IT. NOW IT IS STARTING TO HAPPEN. LISA: THIS AS CAPITAL MARKETS ARE WIDE OPEN FOR THE BANKS WE DO SEE A FAMILIAR REGULATORY ENVIRONMENT IN WASHINGTON DC. WE HAVE A COUPLE OF DIFFERENT PROJECTIONS FROM JULIAN EMANUEL OF EVERCORE ISI FROM THE NEXT YEAR IN TERMS OF THE S & P 500. HE SAID THERE WAS A 30% CHANCE OF A BUBBLE LIKE A CONDITION THAT COULD PUSH THE S & P TO 9000 AND HE SAID CAPITAL MARKET ACCELERATION IS KEY TO THE CONTINUATION OF THE BULL MARKET. THESE DEALS JUST KEEP MOUNTING. JONATHAN: THE REGULATORS LET READY TO LET IT HAPPEN. BANK OF AMERICA 80 TO 88. MORE ON THAT STORY. ELSEWHERE FRENCH PRIME MINISTER SEBASTIAN RESIGNING JUST ONE DAY AFTER CONTROVERSIAL CABINET RESHUFFLE. RISING ON THE RENEWED POLITICAL TURMOIL WERE JAPANESE MARKET SURGING AFTER THE LAWMAKER SECURED TO BECOME JAPAN'S NEXT LEADER. SPECULATION OVER HIS DEMAND BOOST POLICY SENDING THE NIKKEI HIGHER. AND FINALLY FEDERAL -- SUING TO STOP MASS FIRINGS OF GOVERNMENT WORKERS FROM THE GOVERNMENT SHUTDOWN. NATIONAL ECONOMIC COUNCIL DIRECTOR KEVIN HASSETT WARNING CUTS WILL START IF NEGOTIATIONS GO NOWHERE. > > ULTIMATELY COMES DOWN TO WHETHER THE DEMOCRATS SHOW SIGNS OF PROGRESS IN THOSE TALKS. ON THE SEA AND SAVE THE UNION YESTERDAY. REAL QUESTION HERE ABOUT WHAT THIS MEANS FOR MARKETS. RIGHT NOW THEY ARE SHRUGGING IT OFF EVEN THOUGH THERE'S MORE THAN 70% CHANCE PRICED IN THE BETTING MARKETS THE YOU WILL GET A SHUTDOWN THAT EXTENDS LONGER THAN OCTOBER 15. IF YOU SEE THOSE LAYOFFS WATCH FOR THE ECONOMIC IMPACTS TO GET PRICED INTO THE MARKET MORE. THAT'S WHAT I THINK WILL BE DIFFERENT ABOUT THIS SHUTDOWN. JONATHAN: THE DIFFERENCE BETWEEN FURLOUGHS AND FIRINGS. TYPICALLY WE WOULD LOOK THROUGH THIS BECAUSE IT IS JUST ECONOMIC ACTIVITY DELAYED NOT DERAILED. THIS WOULD BE VERY DIFFERENT IF WE STARTED TALKING ABOUT FIRINGS. LISA: ULTIMATELY THE BILLIONS OF DOLLARS PEOPLE SAY GETS REMOVED FROM GDP IN A GIVEN QUARTER WOULD NOT JUST COME BACK IN THE FORM OF PAYCHECKS. PEOPLE ARE LOOKING AT THIS AND SAYING THAT COULD MAKE THIS SHUTDOWN VERY DIFFERENT FROM OTHERS. > > LET'S TURN TO COMMODITIES. FISCAL CONCERNS IN THE U.S. JAPAN AND EUROPE FUELING A SO-CALLED TO BASEMENT TRADE. FRESH ALL-TIME HIGHS. GOLD REMAINS OUR HIGHEST CONVICTION LONG COMMODITY RECOMMENDATION. GOOD TO SEE YOU. GO THROUGH THE PRICE TARGETS NOW AND TAKE FROM THAT WHAT YOU LOOKING FORWARD TO AT THE MOMENT. DAAN: GOLD RISING 10% BY THE END OF NEXT YEAR. SIGNIFICANT UPSIDE BOTH BECAUSE THE RECENT DRIVERS OF THE RALLY ARE DRIVEN BY STICKY INFLOWS FROM THE BANKS AND HOLDINGS. IT'S NOT DRIVEN BY POSITIONING AND SECOND, IN SEPTEMBER WE SAW ETF INFLUENCE WERE SIX TIMES -- INFLOWS WERE SIX TIMES LARGER SUGGESTING THIS INTO THE RELATIVELY SMALL MARKET AND THE GOLD MARKET IS ABOUT 70 TIMES SMALLER THAN THE U.S. TREASURY MARKET. BUT THIS IS CAUSING SIGNIFICANT ADDITIONAL UPSIDES FOR ABOVE CONSENSUS TARGETS. JONATHAN: LET'S GO FOR THE FIRST OF ALL AND THEN TO THE SECOND OR THIRD POINT LATER. THE CENTRAL BANK DIVERSIFICATION'S BUILDING NOW FOR A NUMBER OF YEARS. WHY DO YOU THINK THAT STORY IS NOT JUST A ONE-OFF DIVERSIFICATION. THE YOU BELIEVE IT'S AN ONGOING TREND THAT COULD PERSIST. DAAN: WE THINK CENTRAL BANKS ARE MEAN UNDERWEIGHT GOLD WE THINK THE FREEZING OF RUSSIA'S CENTRAL BANKS RESERVES IN 2022 WAS A WAKE-UP CALL. RESERVE MANAGERS REALIZING IT'S A SAFE ASSET IF YOU HOLD IT IN YOUR DOMESTIC PORTS IS GOLD. WE ESTIMATE THE CHINESE CENTRAL BANK HAS ABOUT A PERCENT OF ITS RESERVES IN GOLD. THE GLOBAL AVERAGE IS 20%. THAT'S ALSO WHERE RUSSIA WENT BY 2022. IF YOU LOOK AT CENTRAL-BANK SURVEYS OF GOLD THEY ARE AT RECORD HIGHS. REMAINING UNDERWEIGHT GOLD ESTIMATE WE PROBABLY HAVE THREE YEARS A VERY RAPID PURCHASES THAT HAVE BEEN FIVE TIMES FASTER SINCE 2022 AND -- AVERAGE. THAT IS A STRUCTURAL DRIVER. CYCLICALLY ADDITIONAL FED CUTS THE INITIAL BOOST BECAUSE ETF WILL RISE OUR RATES COME DOWN. LISA: LOOKING IN A MUST FOR THOUSAND ON GOLD. BY THE END OF NEXT YEAR, WITH THE LIKELIHOOD THAT IS SUBSTANTIALLY HIGHER THAN THAT. DO YOU HAVE A TARGET. DAAN: IT IS QUITE POSSIBLE. THIS SIGNIFICANTLY TO THE UPSIDE. I THINK ONE WAY TO THINK ABOUT IT IS IN CONTRAST TO MOST OTHER COMMODITIES HIGH GOLD PRICES DON'T CURE HIGH PRICES. IF THIS WOULD HAPPEN IN THE OIL AND NATURAL GAS MARKET WE WOULD SEE HIGHER SUPPLY, THE GOLD MARKET IS DIFFERENT. IT'S ONLY 1% OF THE TOTAL GOLD THAT HAS EVER BEEN MINED. SO THE SUPPLY SIDE DOESN'T RESPOND TO HIGHER PRICES. AND DEMAND FROM WHAT WE CALL THE TWO HIGH CONVICTION BUYERS IN THE FRAMEWORK, A CENTRAL BANKS AND ETF'S THEY DON'T BUY OR SELL BECAUSE THEY HAVE CONVICTIONS ABOUT THE RISK TO THE ECONOMY. THEY WANT TO DIVERSIFY AND SO IN CONTRAST TO OTHER PHYSICAL COMMODITIES THAT ARE CONSUMED I THINK THERE IS SIGNIFICANT UPSIDES TO THE GOLD PRICE WERE HIGH PRICES. > > CAN WE GET A SENSE OF HOW MUCH A GOLD STORY IS CENTRAL BANK BUYING THE DIVERSIFICATION AWAY FROM THE U.S. OR OTHER AREAS THAT COULD POTENTIALLY SEIZE ASSETS. AND HOW MUCH IS ACTUALLY A VOTE ABOUT INFLATION, A VOTE ABOUT THE IDEA OF FISCAL IRRESPONSIBILITY IN DEVELOPED MARKETS AROUND THE WORLD. DAAN: I THINK YOU WANT TO BREAK DOWN THE RALLY IN 22 INTO TWO POINTS. THE RALLY AND 22, 23 AND 24 WAS DRIVEN BY DIVERSIFICATION INTO GOLD. RATES WERE HIGH AND RISING BUT THIS YEAR THEY WERE UP 50%. YOU HAVE TWO SOURCES OF DIVERSIFICATION PUSHING IN THE SAME DIRECTION. BECAUSE RATES ARE COMING DOWN. AS OF THE PRIVATE SECTOR ALSO STEPS INTO THE GOLD MARKET. BOTH STICKY BUYERS IN THE FRAMEWORK ARE PUSHING IN THAT DIRECTION. IN SEPTEMBER WE THINK ETF'S IN THE PRIVATE SECTOR WITH THE BIGGEST DRIVER. JONATHAN: YOU MENTION LIMITED DEPTH IN THE MARKET. THAT'S REALLY IMPORTANT FACTOR. DOES HER QUESTIONS ABOUT POTENTIAL SPILLOVER TO MARKETS BUT THE DEPTH JUST ISN'T THERE FOR EVERYONE TO GET THE DIVERSIFICATION THEY ARE LOOKING FOR. DAAN: I THINK YOU'RE SEEING AN ACROSS-THE-BOARD RALLY IN PRECIOUS METALS. WE ARE OUTPERFORMING GOLD THIS YEAR DESPITE THE FACT CENTRAL BANKS ARE BUYING GOLD AND SILVER. SOME OF THOSE DIVERSIFICATION MOTORS PUSHING FLOWS INTO THE MARKET ARE ALSO HAPPENING ON THE PRECIOUS MARKET. SO THE GOLD MARKET IS ABOUT 70 TIMES SMALLER THAN THE TREASURY MARKET. ANY SMALL DIVERSIFICATION'S INTO THIS RELATIVELY SMALL MARKET WILL CAUSE VERY SPECTACULAR PRICE UPSIDE. WE THINK THAT FROM A PORTFOLIO INVESTOR PERSPECTIVE THEY ARE VERY DIFFERENT. BOTH PRECIOUS METALS AND BITCOIN PRICES CAN RISE VERY QUICKLY BUT IF YOU FIRST LOOK AT THE CORRELATION AND WERE THE RESULT HOLD GOLD IS THAT IT'S A SAFE HAVEN. THE CORRELATION TENDS TO BE SIGNIFICANT. IT'S MORE VOLATILE MORE COORDINATED ASSET THAN GOLD. JONATHAN: DO YOU THINK THAT RELATIONSHIP HAS CHANGED. TAKING A STEP BACK IT'S PRETTY CLEAR STOCKS UP GOLD UP. WHAT'S THE RELATIONSHIP BETWEEN GOLD AND RISK. DAAN: CAN THERE BE CHANGE OVER TIME. IF YOU LOOK AT SOME OF THE MACRO CONSIDERATIONS THAT HAVE LED THIS DECISION TO THE GOLD MARKET IT'S MORE TEA TO REFLECT BOND PERFORMANCE. YOU MENTIONED THE JAPANESE WITH FRENCH BOND UNDERPERFORMANCE THIS YEAR SOME OF THOSE QUESTIONS ABOUT MACRO FISCAL POLICY I THINK OF PUTTING UPWARD PRESSURE ON BONDS AND ARE ALSO HELPING THE GOLD PRICE. > > IF YOU HAD SAID 12 MONTHS AGO FOR IT WOULD'VE LAUGHED. GOOD TO SEE YOU. THANKS FOR COMING BY. ON A MAJOR RALLY FOR GOLD THIS YEAR. WE ARE UP 50% YEAR-TO-DATE. SKIN UPDATE ON STORIES WORLDWIDE WITH YOUR BLOOMBERG BRIEF. YAHAIRA: PRESIDENT TRUMP IS ORDERING ISRAEL AND HAMAS TO REACH A SETTLEMENT TO END THE TWO-YEAR WAR IN GAZA. MEDIATED TALKS BEGIN TODAY IN EGYPT WITH U.S. ENVOY STEVE WITKOFF ATTENDING. THE FIRST TEST OF PROGRESS WILL BE WHETHER HAMAS RELEASES ITS REMAINING HOSTAGES IN EXCHANGE FOR ISRAEL FREEING PALESTINIAN PRISONERS. CALIFORNIA GOVERNOR GAVIN NEWSOM SAYS HE WILL SUE THE TRUMP ADMINISTRATION OVER ITS ORDER TO SEND HIS STATE'S NATIONAL GUARD TROOPS TO PORTLAND. NEWSOM ARGUES THE DEPLOYMENT DEFIES A FEDERAL COURT RULING THAT FOUND NO LEGAL BASIS FOR USING STATE TROOPS. IF THE LATEST FLASHPOINT IN THE PRESIDENT'S PUSH TO FEDERALIZE LAW ENFORCEMENT IN DEMOCRATIC LEAD STATES. SHARES ARE SOARING UP 13% AFTER THE BANK ANNOUNCED A DEFINITIVE MERGER WITH FIFTH THIRD BANCORP. THEY WILL ACQUIRE THEM IN ALL STOCK TRANSACTION VALUED AT $10.9 BILLION. IT'S EXPECTED TO CLOSE AT THE END OF FIRST QUARTER OF 2026. > > THANK YOU VERY MUCH. MORE AND ABOUT 30 MINUTES TIME. UP NEXT, DISTORTED DATA. > > THE SHUTDOWN IS COMPOUNDING THE EXISTING PROBLEM WHICH IS OUR DATA IS BEING SUBSTANTIALLY DISTORTED BY TARIFF DEVELOPMENTS, FRONTLOADING INVENTORIES. JONATHAN: THE CONVERSATION UP NEXT WITH PAUL DONOVAN. YOU ARE WATCHING BLOOMBERG TV. ♪ JONATHAN: STOCKS ARE HIGH YEAR. UP BY 0.4% ON THE S & P. ON THE NASDAQ UP BY 0.6. SAYING THIS ON FRIDAY WE CONTINUE TO RECOMMEND EVIDENCE OF POSSIBLE MELT-UP INTO YEAR END GROWTH. JULIAN EMANUEL INCREASED PROBABILITY OF A BUBBLE. LISA: TALKING ABOUT A 30 PERCENT CHANCE OF THE S & P 500 RISING AND 9000 BY THE END OF NEXT YEAR. THE BIGGEST BALL, I DON'T THINK SO. WE ARE LOOKING AT A POTENTIAL UPSIDE SCENARIO THAT SIGNIFICANTLY HIGHER WHICH RAISES THE QUESTION YOU ASKED EARLIER WHAT IS THE REACTION BETWEEN GOLD AND RISK. IS IT THE MONEY PRINTER, IS IT -- IT'S GOING AND MAKING ITS NOISES AND A LOT OF PEOPLE ARE TAKING NOTE. > > UNDER SURVEILLANCE THIS MORNING DISTORTED DATA. > > THIS SHUTDOWN IS COMPOUNDING AN EXISTING PROBLEM WHICH IS DATA IS BEING SUBSTANTIALLY DISTORTED BY TARIFF DEVELOPMENTS FRONTLOADING INVENTORIES THERE IS ALREADY A GIANT QUESTION ABOUT WHAT DATA SHOULD YOU BE USING. IN OUR MONTH-TO-MONTH DATA NOT TELLING US THE TRUE STORY. OR THE AMERICAN CONSUMER. JONATHAN: ANOTHER WEEK OF ECONOMIC DATA AS THIS ENTERS ITS SIXTH DAY. PAUL DONOVAN OF UBS GLOBAL MANAGEMENT WRITING THE PROP -- THE FOLLOWING. SENTIMENT SURVEYS ARE EVEN WORSE AND THAT'S WITH THE MARKET WILL BE LEFT TO WORK WITH. YOU ARE ONE OF OUR FAVORITES. GREAT TO FINALLY CATCH UP WITH YOU. I WANTED TO GET YOUR OPINION ON THIS. I FOUND A LOT OF PEOPLE SAY WE ARE FLYING BLIND WITHOUT THE DATA. IT WILL BE BLIND ALREADY. PAUL: WE WERE PERHAPS FLYING IN QUITE A THICK FOG. SO FOR ABOUT 15 YEARS ECONOMISTS HAVE BEEN COMPLAINING AROUND THE DETERIORATING QUALITY OF ECONOMIC DATA. NOBODY FILLS IN SURVEYS ANYMORE. STRUCTURAL CHANGE MEANS WE ARE MISSING PARTS OF THE ECONOMY WHERE THE REPORTS. AND THE POLITICAL BIAS IS GETTING EXTREME AND PEOPLE ARE ANSWERING ACCORDING TO THEIR POLITICAL VIEWS NOT ACCORDING TO WHAT'S HAPPENING IN THEIR LIVES. SO WE'VE HAD THIS PROBLEM FOR SOME TIME BUT THE OFFICIAL DATA DID THE BEST OF A BAD JOB. IT DID THE BEST THAT IT COULD IN ORDER TO FILTER OUT SOME OF THIS NOISE AND GIVE US AN IDEA OF WHERE THE ECONOMY WAS PERFORMING IN REAL TIME. > > CHANGE GOING FORWARD WE DON'T EVEN HAVE THAT. BUT WE END UP IN THE REALM OF SPECULATION AND RUMOR AT A TIME WHERE PEOPLE TAKE THAT PUT IT TOGETHER AND SAY STOCKS HAVE TO KEEP GOING UP. PAUL: THIS IS WHERE THINGS START TO GET TRICKY. PERHAPS A LITTLE BIT LESS FOR THE EQUITY MARKET THAN FOR THE BOND MARKET BECAUSE OF COURSE CORPORATE DATA AS LONG AS COMPANIES ARE HONEST IS GOING TO BE STILL RELIABLE SO THE EARNINGS REPORTS THAT COME OUT, THE CORPORATE ANNOUNCEMENTS THAT ARE LEGALLY OBLIGED TO PUT OUT. THAT SHOULD ALL BE OK. THE BIGGER MACRO PICTURE IS GETTING CONFUSED. SOME OF ITS RELIANCE ON WHAT WE'RE SEEING ELSEWHERE IN THE WORLD. HOW DO WE JUDGE U.S. TRADE DATA. LET'S SEE WHAT COUNTRIES ARE SAYING WHEN THEY'RE TALKING ABOUT EXPORTS TO THE STATES. > > YOU MADE A REALLY GOOD POINT IN YOUR RECENT NOTES BUT RIGHT NOW THE MARKET IS TRYING TO SHUT DOWN IN WASHINGTON DC AS NEGLIGIBLE, SOMETHING THAT WILL MAYBE CAUSE THE LOSS OF ECONOMIC BE ROOT COOPED POTENTIALLY. IN A COUPLE WEEKS OR MONTHS TIME. WHY DO YOU THINK THIS TIME COULD BE DIFFERENT. PAUL: AS A BASELINE I DON'T THINK IT IS GOING TO BE DIFFERENT. WE GET THIS WITH EVERY SHUTDOWN YOU GET A PERIOD WHERE THERE IS ECONOMIC ACTIVITY AND YOU GET A PERIOD WHERE YOU REBOUND. THE BACKPAY IS PAID BACK. THE ONLY REAL DIFFERENCE THIS TIME IS U.S. PRESIDENT TRUMP HAS TALKED ABOUT POSSIBLY FIRING SOME MORE GOVERNMENT EMPLOYEES. THAT IS DIFFERENT BECAUSE THEN YOU'RE NOT GETTING THE REBOUND FROM THOSE EMPLOYEES, YOU ARE ALSO POTENTIALLY CREATING A FEAR OF UNEMPLOYMENT AMONGST PEOPLE. THAT WOULD BE A MORE TROUBLING SITUATION BECAUSE YOU WOULD GET THE SLOWDOWN NOT THE REAP -- BUT THE REBOUND WE WOULD NORMALLY SEE WOULD BE A LOT MORE MUTED. I WOULD REGARD THAT IS THE RISK CASE. THE BASE CASE IS THIS IS GOING TO BE LIKE EVERY OTHER SHUTDOWN, THAT KIND OF THING. BUT THERE IS THAT RISK IF SOME EMPLOYEES ARE GOING TO LOSE THEIR JOBS PERMANENTLY AS A RESULT OF THE SHUTDOWN. JONATHAN: WE DO HOPE YOU ARE RIGHT AND WE BOUNCE BACK AND GET BACK TO BUSINESS. IN ORDER TO TALK ABOUT WAS INFLATION. MARKET-BASED EXPECTATIONS OF INFLATION HOW THE FED MEASURES THINGS AND HOW CONSUMERS EXPERIENCE IT. TALKING ABOUT FREQUENCY. COULD YOU EXPLAIN THAT AS A CONCEPT IN ECONOMICS AND WHY IT'S IMPORTANT TO THE DIFFERENCE BETWEEN HOW CONSUMERS FEEL AND WHAT THE FED IS TRACKING. > > THIS IS AN IMPORTANT POINT, EVERYONE IS GUILTY OF FREQUENCY BIAS. THAT IS TO SAY YOU REMEMBER THE PRICE OF THE SNICKERS BAR YOU BUY EVERY DAY. YOU DO NOT REMEMBER THE PRICE FOR A TELEVISION YOU BUY EVERY THREE OR FOUR OR FIVE YEARS. SO AS A RESULT WHEN PRICES CHANGE IN THE HIGH-FREQUENCY PURCHASES IT'S SORT OF STICKS IN YOUR MIND. EVERY TIME I GO TO THE VENDING MACHINE AT WORK I THINK THAT PRICE IS GONE AND I REMEMBER WHAT USED TO COST 70 PENCE AND NOW IT'S COSTING ME 90 PENCE. BACK THEN -- THAT THEN COLORS THE VIEW OF INFLATION. THE FACT THAT TELEVISION IS 20% CHEAPER THAN THE LAST ONE YOU BOUGHT SEVEN YEARS AGO YOU DO NOT REMEMBER THAT. THE PROBLEM THAT WE HAVE IS THAT WHEN YOU SEE BASICALLY RISING FOOD AND RISING FUEL PRICES, THOSE ARE PRICES THAT CONSUMERS WILL REMEMBER AND THAT WILL CREATE A SENSE OF DISSATISFACTION WHEN YOU HAVE FOOD AND FUEL INFLATION. IF YOU HAVE AN OVERALL DENIED INFLATION ENVIRONMENT AND THERE SOMETHING WEIRD GOING ON WITH FOOD SUPPLY, THAT CAN CREATE A PECULIAR SITUATION WITH THE CENTRAL BANK SAYS INFLATION IS NOT A PROBLEM AT ALL AND THE CONSUMER SANG THE COST OF LIVING GOES UP. THAT'S REALLY THE ISSUE. > > IS THAT THE SITUATION NOW, DOES THAT SHAPE CONSUMER VALUE HERE. PAUL: WHAT WE HAVE AT THE MOMENT IS QUITE INTERESTING. IT'S A REVERSE OF WHAT HAPPENED ON THE LAST ADMINISTRATION. THE LAST ADMINISTRATION INFLATION IS COMING DOWN NOBODY REALLY BELIEVED IT BECAUSE FOOD PRICE INFLATION WAS VERY HIGH. IT WAS AN EPISODE OF PROFIT LED INFLATION. BUT WHAT HAS BEEN HAPPENING THIS YEAR UNTIL RECENTLY IS A FUEL PRICES ARE BEING SUBDUED. FOOD PRICES UNTIL RECENTLY HAVE NOT BEEN PARTICULARLY A PROBLEM WITH DURABLE GOODS PRICES HAVE GONE FROM FALLING TO RISING. AND SO YOU HAVE THE REVERSE PROBLEM THERE. THE INFLATION PEOPLE ARE NOT NECESSARILY SO AWARE OF. WHAT WE'VE BEEN SEEING MORE RECENTLY IN THE STATES IS FOOD PRICE INFLATION HAS BEEN TAKING UP. THINGS LIKE THE PRICE OF BEEF FOR EXAMPLE HAS GONE UP DRAMATICALLY, COFFEE PRICES ARE SOARING AND THAT IS GOING TO BE MORE VISIBLE. I THINK THE NOISE FOR CONSUMERS ABOUT INFLATION THE POLITICAL ANXIETY ABOUT INFLATION. IT IS LIKELY TO BE RAMPING UP. AS WE SEE THESE HIGHER FOOD PRICES STARTING TO EMERGE. > > HOPEFULLY WE CAN DO THIS AGAIN. PAUL DONOVAN ON THE ECONOMIC SITUATION. DISTORTED DATA AND THE CONSUMER EXPERIENCE OF THIS ECONOMY AT THE MOMENT. WE HAVE A STOCK MOVING FORWARD. AND WITH A 20% MOVE IN THE PREMARKET INKING A DEAL WITH OPENAI TO RUN OUT AI INFRASTRUCTURE. COULD GENERATE TENS OF BILLIONS OF DOLLARS IN NEW REVENUE. > > THIS AFTER NVIDIA'S CONNECTION WITH OPENAI AND THEIR HUGE INVESTMENT WHERE THEY ARE ESSENTIALLY SELLING CHIPS AT A DISCOUNT TO OPENAI TO ENGAGE WITH CERTAIN DIFFERENT TYPES OF PROGRAMMING AND MACHINE LEARNING TECHNOLOGIES. IT KEEPS THEM IN THE MIX. THIS IS PART OF THE BLOG FOR AMD , ON A LEVEL PLAYING FIELD ON THE LIKES OF NVIDIA IS A REASON YOU'RE SEEING INTEL SHARES LOSING A LITTLE BIT. WHEN ARE THEY GOING TO INK A BILLION-DOLLAR DEAL WITH OPENAI. JONATHAN: TO THAT ONE NAME THAT'S NOT EVEN IN THE EQUITY MARKETS. LISA: A PRIVATE MARKET COMPANY WITH SUCH INCREDIBLE CLOUD AND SUCH INCREDIBLE DOLLARS ATTACHED TO IT. > > 22% MOVE ON AND SO FAR THIS MOMENT -- THIS MORNING. DAVID STEINBERG AND AMANDA LYMAN , THE SECOND HOUR BLOOMBERG SURVEILLANCE UP NEXT. ♪ > > THE BIGGER CONCERN IS THE QUALITY OF THAT INFLATION DATA. > > EVEN IF THE SHUTDOWN LAST FOR A WHILE. > > THE ECONOMY IS COMING LESS SENSITIVE TO THE NEXT MOVE AND MORE SENSITIVE TO WHAT'S HAPPENING IN WASHINGTON. > > REPUBLICANS GETTING A DISPROPORTIONATE AMOUNT OF THE BLAME. > > THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA ABRAMOWICZ AND ANNMARIE HORDERN. JONATHAN: LIVE FROM NEW YORK CITY, GOOD MORNING FOR AUDIENCE WORLDWIDE. THE SECOND HOUR OF BLOOMBERG SURVEILLANCE STARTS. ALL-TIME HIGHS SIX DAYS NO LOSSES. UP AGAIN BY 0.3. UP TO 0.7 ON THE NASDAQ. A 20% MOVE IN THE PREMARKET ON AMD. INKING A DEAL WITH OPENAI FOR AI INFRASTRUCTURE. > > IT'S WORTH TENS OF MILLIONS OF DOLLARS AFTER OPENAI HAS INKED DEALS WITH ORACLE, WITH NVIDIA WITH MICROSOFT, OPENAI WHICH PIONEERED CHATGPT IN 2022 THAT REALLY LAUNCHED THIS MOVE INTO AI. A REAL QUESTION RAISED THIS HOUR I THINK IT'S THE QUESTION HOW MUCH IS THE TECH STORY INCREASINGLY LEVERED TO OPENAI GIVEN HOW QUICKLY IT'S RISEN AND HOW MUCH MONEY HAS BEEN INVESTED. > > SUCH AN INTERESTING MOMENT IN REAL TIME TRYING TO WORK OUT THIS PROGRAM IN FIVE YEARS TIME. WHETHER IT IS REALLY THE FOURTH INDUSTRIAL REVOLUTION. OUR NEXT GUEST IS SPECULATING WHETHER IT IS. LISA: ESPECIALLY AT A TIME WHERE IT COMES WITH OTHER CAPITAL MARKET ACTIVITY. WE WERE TALKING ABOUT FIFTH THIRD BANK, THIS IDEA OF A MERGERS AND ACQUISITIONS PICKING UP THIS EXUBERANCE AROUND THE GLOBE THE SENSE OF THE MONEY PRINTER GROWING EVEN AMID A LOT OF QUESTIONS WE WILL HAVE GOVERNMENT FUNCTIONING AS WELL IS WHAT THE LONGER-TERM TRAJECTORY REALLY IS. JONATHAN: RICK RIEDER OF BLACK ROCK SAID RECENTLY THE MOST INTERESTING TIME IN HIS WHOLE CAREER IN FINANCIAL MARKETS NOT JUST TECH IT'S CROSS ASSETS GLOBAL. THE MOVING EURO-DOLLAR, IN DOLLAR-YEN. THE MOVE IN THE JAPANESE GOVERNMENT BOND MARKET. NEW LEADERSHIP IN JAPAN. A LACK OF LEADERSHIP IN FRANCE. JONATHAN: ALL OF IT LEADING TO A QUESTION AROUND BOND YIELDS LONG TERM AND HOW MUCH THEY COULD RISE GIVEN THE FACT A LOT OF COUNTRIES DON'T HAVE THE ABILITY OR WILLINGNESS TO PAY BACK A LOT OF THE DEFICITS. IT RAISES A QUESTION AS WE LOOK AT GOLD EARLIER ABOUT JUST HOW MUCH THAT PUSHES FOR A POTENTIAL RALLY. ARE WE MOVING TO A NEW ERA ABOUT PHILOSOPHICAL QUESTIONS FOR THE INDUSTRIAL WORLD ACTUALLY GIVES THE RETURNS THE MONETARY WORLD GAVE FOR THE PAST FOUR DECADES. IS THAT WHAT PEOPLE ARE LOOKING AT GIVEN THE FACT THERE IS A LACK OF CONVICTION THE DEVELOPED MARKETS CAN REALLY PROVIDE THE SAME TYPE OF HAVEN FOR THIS CAPITAL. JONATHAN: 3940 IS SO FAR THIS MORNING. COMING UP STOCKS ON THE SIX-DAY WINNING STREAK. THE SHUTDOWN DEADLOCK STRETCHES INTO A SECOND WEEK OUT OF BLACK ROCK. FISCAL RISK IS UNLEASHED IN JAPAN AND FRANCE. WE BEGIN WITH STOCKS AT ALL-TIME HIGHS. WRITING U.S. TECH WAITING CLIMB TO DOC --.COM ERA HIGHS. THE EARLY INNINGS OF A FOURTH INDUSTRIAL REVOLUTION OR NEAR PEAK EXUBERANCE. WELCOME TO THE PROGRAM. YOUR WORDS, YOU POSE THE QUESTION HELP ME ANSWER IT. PEAK EXUBERANCE OF THE FOURTH INDUSTRIAL REVOLUTION. > > I THINK WE ARE CERTAINLY IF YOU LOOK AT THE CAPEX SPEND ANALYSTS ARE HESITANT TO EVEN LOOK AT MORE THAN 12 TO 24 MONTHS AND I THINK THE REALITY IS THE AI BOOM IS REAL AND IT'S NOT GOING TO BE A QUESTION AROUND HUNDREDS OF BILLIONS OF DOLLARS OF CAP EXPERT RATHER TRILLIONS AND IT'S NOT A QUESTION OF HOW IT'S CAN IMPACT HYPERSCALERS. THE LARGE LANGUAGE MODELS LIKE OPENAI. IN OUR OPINION HERE AT CLEAR HARBOR IT'S REALLY GOING TO IMPACT AND BENEFIT MULTIPLE SECTORS OF THE U.S. AND THE GLOBAL ECONOMY. NOT JUST TECHNOLOGY BUT UTILITIES. NOT JUST INDUSTRIALS BUT HEALTH CARE. THEN THERE IS A RACE TO BRING ELECTRONS, MORE ELECTRICITY GENERATION IN THE COUNTRY AND ALL THE COMPANIES IN SECTORS THAT ARE INVOLVED WITH THAT. AND WE HEAR A LOT ABOUT NUCLEAR FOR EXAMPLE TRYING TO SORT OF PLAY AN IMPORTANT ROLE IN BRINGING THOSE ELECTRONS ONLINE. WE THINK COMMERCIAL SOLAR STILL HAS A ROLE TO PLAY HERE BECAUSE THAT'S THE FASTEST WAY TO DO THAT. LOTS OF OPPORTUNITY FOR PRODUCTIVITY GAINS AND IT WOULDN'T BE SURPRISED TO THE UPSIDE OF GROWTH IN THE NEXT SEVERAL YEARS. > > THE FINANCE THE CAPITAL PROVIDERS THE ENERGY PROVIDERS THE TECH PLAYERS IT'S ALL BECOMING ONE SECTOR BUT WE'VE BEEN CONDITIONED BY THE LATE 90'S I THINK A LOT OF PEOPLE STILL CONDITIONED BY THAT THAT A MISALLOCATION OF CAPITAL COMES BEFORE YOU IDENTIFY THOSE. HOW DO YOU NAVIGATE THE RISKS OUT THERE IN THE YEARS TO COME. AARON: CERTAINLY THERE NEEDS TO BE ATTENTION TO CAPITAL AND EARNINGS AND FREE CASH FLOW BUT THERE REALLY IS TO THAT EXTENT IF YOU LOOK AT THE 1990'S AT THE PEAK YOU LOOK AT THE TRAILING PE MULTIPLE OF THE NASDAQ IT WAS TRADING AT PROBABLY 185 TIMES MULTIPLE. THE NASDAQ TODAY IS TRADING IN THE 30'S. TRADING IN THE MID TO HIGH 20'S MULTIPLE. YOU LOOK AT THE EARNINGS THAT WERE GENERATED FROM THE NASDAQ AT THE PEAK REPRESENTING ABOUT 4% OF ALL U.S. LIST IT COMPANIES THE TOTAL EARNINGS OF THE NASDAQ NOW WE LOOK AT THE MARKET CAP WAS 40%. OF THE ENTIRE LIST OF MARKET CAP. TODAY THE MARKET CAP IS ABOUT ONE THIRD OF ALL U.S. LIST OF COMPANIES AND YET THE EARNINGS THAT THEY ARE GENERATING RELATIVE TO THE U.S. COMPANIES IS ABOUT 40%. I THINK THAT ULTIMATELY COMES DOWN TO THE PE MULTIPLE. THERE IS CONCENTRATION IN THOSE NAMES IN TECHNOLOGY TODAY REPRESENTING THAT AND WE HAVE TO BE VERY MINDFUL OF IT. THE NVIDIA'S AND MICROSOFT, THE ALPHABETS. AND SO THAT'S CERTAINLY SOMETHING WE NEED TO BE MINDFUL. THE VALUATION PICTURE IS VERY DIFFERENT TODAY. LISA: I WANT TO PICK UP ON THE CONCENTRATION RISK ABOUT THIS DEAL WITH OPENAI AND AMD AND IF WE ARE LOOKING AT A DIFFERENT TYPE OF SYSTEMIC RISK THIS TIME AROUND. WHAT IS THE INTERCONNECTEDNESS OF ALL THESE COMPANIES, SHOULD THERE BE A PROBLEM WITH ONE OF THEM. AARON: THE TECHNOLOGIES ARE NOT -- I THINK THE QUESTION TO A GREAT EXTENT MAY BE OR LEASE WE ARE THINKING ABOUT THIS IS TO WHAT EXTENT DOES THE EFFICIENCY OF LARGE LANGUAGE MODELS EVOLVE SO QUICKLY AND DRAMATICALLY BUT WE CAN COMPREHEND THAT THE DEMAND FOR THE HYPERSCALERS FOR THE CHIPS, FOR THE NVIDIA PRODUCTS, FOR BROADCOM'S CHIP THAT THAT DEMAND SOMEHOW SURPRISES TO THE DOWNSIDE NOT BECAUSE THERE ISN'T GROWTH AND MASSIVE OPPORTUNITY THEY JUST OUTLINED BUT BECAUSE OF THE EFFICIENCY THAT'S BROUGHT TO BEAR. I THINK THAT IS A HUGE QUESTION RIGHT NOW. > > IT SEEMS CLEAR THAT TECH STORY IS ONE THEY CAN GET BEHIND. IS IT SOMETHING THAT MAKES YOU ABLE TO IGNORE WHAT IS GOING ON GLOBALLY WITH THE FUNCTION WE ARE SEEING AROUND THE WORLD. HOW CONNECTED ARE THE STORIES AND WHEN WERE TALKING ABOUT A SEA CHANGE IN TECHNOLOGY AND MAKE OUR LIVES FANTASTIC TALKING ABOUT THE FACT THE GOVERNMENT IS COLLAPSING. HOW DO YOU PUT THESE TWO TOGETHER? AARON: I THINK WE HAVE TO KEEP OUR EYES ON THE ECONOMIC REALITY OF THE GLOBAL ECONOMY. GEOPOLITICS HAS BEEN WITH US FOR A LONG TIME. THE UNCERTAINTY FACTOR WE HAVE HAD SHUTDOWNS BEFORE. CHANGES IN THE PRIME MINISTER AND JAPAN IN THE PAST. WE HAVE HAD ASSASSINATIONS NOW WITH WHAT'S GOING ON -- AS WELL AS WHAT'S GOING ON IN FRANCE WITH A LACK OF A GOVERNMENT. IF YOU LOOK AT WHAT'S HAPPENING IN EUROPE, FOR THE FIRST TIME IN MY LIFETIME THEIR DEFICIT SPENDING TO REARM THEIR COUNTRY TO BUILD INFRASTRUCTURE. THAT HAS HUGE POSITIVE TAILWINDS FOR EUROPE. I KNOW I SOUND LIKE A BROKEN RECORD BUT I THINK THERE'S A GREATER AWARENESS OF THAT. IF YOU LOOK AT MR. AND MISSES WATANABE, RISING INTEREST RATE ENVIRONMENT INCREMENTALLY STRONGER JAPANESE YEN YEAR TODAY ALTHOUGH THERE'S ARGUMENT IF THAT WILL CONTINUE. WITH THE NEW LEADERSHIP AT HAND. THOSE ASSETS THAT CAPITAL THAT WAS ONCE DOMESTICATED IN THE 80'S AND 1970'S INTO THE 90'S WAS SENT OVERSEAS AS BEING BROUGHT HOME AND NO INTERNATIONAL INVESTORS SEE THE OPPORTUNITY NOT JUST BECAUSE OF WHAT JAPANESE INVESTORS ARE DOING. IF YOU LOOK AT THE REGULATORY ENVIRONMENT IN A PLACE LIKE JAPAN. A RETURN ON EQUITY IS ONCE AGAIN THE FOCAL POINT OF CORPORATE JAPAN. WHERE BUYBACKS AND DIVIDENDS, THEIR OPPORTUNITY SETS ALL OVER THE DEVELOPED WORLD BUT THERE ARE ALSO IN THE EMERGING MARKETS WHERE YOU CAN SEE CHINA, WHAT IS CHINA DOING? THEY REALIZE THEY CANNOT FLOOD THE U.S. MARKETS, THEY ARE TRYING TO FLOOD THE EUROPEAN MARKETS. THAT MAY BECOME A PROBLEM AS EUROPEAN POLICYMAKERS RAISE TARIFFS AS WELL. SO THEY ARE FLOODING THE EM MARKETS TO A GREATER EXTENT. THAT COULD BOOST CURRENCIES IN EM IN PLACES LIKE SOUTH AFRICA, TURKEY, BRAZIL AND OTHER PLACES AND ALSO BOOST THE BOND MARKET PRICES THEY ARE, LOWER YIELDS AND IT COULD OFFER HIGHER ASSET PRICES. THERE IS A LOT AT PLAY HERE. JONATHAN: ONE PIECE OF WHAT YOU JUST SAID IT WAS A JAPANESE PIECE OF IT. IF THE MONEY IS TRULY WON'T GO HOME THAT CREATES OPPORTUNITIES IN JAPAN AND INTRODUCES VULNERABILITIES IN OTHER PLACES. WHO IS VULNERABLE? AARON: IT IS INTERESTING. IT IS NOT REALLY EM. IT COULD BE ON THE MARGIN PLACES LIKE NEW ZEALAND, PLACES LIKE AUSTRALIA WHERE THERE IS MORE OF A SIGNIFICANT ENFORCEMENT, THE UNITED STATES. U.S. TREASURY PURCHASES AND JAPAN WERE EXTRAORDINARILY HIGH. COULD BE IN EUROPE AS WELL SO CERTAINLY WE WILL NEED TO FIND WAYS TO FUND OUR DEFICITS. 120% DEBT TO GDP RUNNING 7% TIGHT DEFICIT SPENDING. IN GERMANY WE ARE 65% DEBT TO GDP IN THEIR DEFICIT SPENDING SO THEY HAVE MORE WIGGLE ROOM RELATIVE TO THE U.S.. JONATHAN: THANK YOU SIR, APPRECIATE IT. LOTS OF A CONCENTRATION RISK. A LOT OF THESE ARE VERY CONCENTRATED AROUND THE SAME THING. LISA: ESPECIALLY GIVEN THE FACT THEY ARE BETTING AI CAN GET OVER. IS A GOING TO GO OUT THAT MUCH, CAN OVERWHELM ANY KIND OF QUESTIONS AROUND DYSFUNCTION IN GOVERNANCE. IF YOU'RE REALLY PESSIMISTIC ABOUT WHAT YOU ARE SEEING IN THE GOVERNMENT, IF YOU ARE PESSIMISTIC WHEN YOU READ THE NEWS HEADLINES JUST LOOK AT THE S & P 500 AND LOOK GOOD. DID YOU LOOK AT OPENAI. THAT WARM FUZZY FEELING COMES ROARING BACK. JONATHAN: EVERYTHING HAS BECOME SO CONCENTRATED. THIS IS ALSO A GEOPOLITICAL NEGOTIATIONS BETWEEN CHINA AND THE UNITED STATES AS WELL. DO YOU HAVE TO THINK ABOUT THAT IS A POTENTIAL FACTOR TO ALL THIS STUFF. I MENTIONED THE SECTOR STORY. BANKS AND ENERGY. I KNOW THIS IS A STRETCH BUT THEY ARE BECOMING ALMOST THE SAME TRAIT OF THE MOMENT. > > TAKE A LOOK AT THE JP MORGAN WHEN THEY TALK ABOUT BEING A TECH COMPANY AND HOW MUCH THEY ARE INVESTING IN THE TECHNOLOGY THAT COULD POTENTIALLY MAKE THEM MORE EFFICIENT AND KEEP THE SAME FOOTPRINT OF PERSONNEL BUT EXPAND THIS. THE SAME THING IN BANK OF AMERICA AND OTHER BIG BANKS. HOW MUCH ARE PEOPLE POURING BILLIONS OF DOLLARS INTO NUCLEAR POWER PLANTS. YOU PUT ALL OF THIS TOGETHER AND YOU CAN GET ON THE TRAIN OF OPTIMISM, YOU CAN RIDE THE TRAIN OF OPTIMISM OR FIGHT AGAINST IT IN A BAR OF GOLD WITH A BAD LOOK ON YOUR FACE. JONATHAN: NASDAQ 100 FUTURES UP BY 0.6%. THE GAINS CONTINUE. WHAT A START OF YAHAIRA: THE WEEK. YAHAIRA:YAHAIRA: SEEING A MONSTER MOVE IN SHARES UP MORE THAN 27%. FOLLOWING NEWS IT SIGNED A DEAL WITH OPENAI. OPENAI WILL DEPLOY SIX GIGAWATTS OF AMD CHIPS OVER YEARS. IT'S EXPECTED TO DELIVER TENS OF MILLIONS OF DOLLARS IN REVENUE WHILE ACCELERATING OPI INFRASTRUCTURE -- OPENAI'S INFRASTRUCTURE. SHARES ALSO SOARING NEARLY 12% IN THE PREMARKET. FIFTH THIRD WILL ACQUIRE THEM IN AN ALL STOCK TRANSACTION VALUED AT $10.9 MILLION. IT IS THE LATEST SIGN REGIONAL BANKS ARE LOOKING TO TAKE ADVANTAGE OF THE NEW DEREGULATORY ENVIRONMENT UNDER PRESIDENT TRUMP. IT'S EXPECTED TO CLOSE AT THE END OF THE FIRST QUARTER OF 2026. BOEING IS HOPING TO INCREASE ITS MANUFACTURING OUTPUT AS SOON A THIS MONTH. SOURCES SAYING 737 MAX OUTPUT COULD REACH 42 JETS MONTHLY. THEY ARE ALSO LAYING THE GROUNDWORK TO INCREASE MANUFACTURING IN APRIL IN LATE 2026 WHICH COULD BOOST PRODUCTION TO ABOUT 53 JETS A MONTH. THAT'S YOUR BLOOMBERG BRIEF. > > UP NEXT ON THE PROGRAM, NEITHER SIDE IS BLINKING. > > I THINK IF THE PRESIDENT DECIDES THAT THE NEGOTIATIONS ARE ABSOLUTELY GOING NOWHERE, THEN THERE WILL START TO BE SOME LAYOFFS. I THINK EVERYBODY IS STILL HOPEFUL. > > THAT CONVERSATION UP NEXT WITH HENRIETTA. GOOD MORNING. ♪ JONATHAN: WE MIGHT BE LIGHT ON ECONOMIC DATA THIS WEEK. LOOK OUT FOR A COUPLE OF THINGS. LOOK OUT FOR DELTA. NOT A READ ON THE COMPLETE ECONOMY. THE HIGH-END CONSUMER AND HOW THEY ARE FLYING. DELTA AIRLINES ON THURSDAY. LOOK OUT FOR FED MINUTES. COMMUNICATION SO FAR A MASSIVE DIVIDE ON THE FOMC. WHAT DOES IT MEAN FOR POLICY AND THE NEXT MOVE. HERE IS YOUR DAY AHEAD. STOCKS ARE UP ON THE S & P 500 ONCE AGAIN BY 0.3 PERCENT. SIX DAYS NO LOSSES. IT MIGHT BE THE SAME STORY. NASDAQ 100 BY 0.6. ON THE RUSSELL BY 0.5. THE MARKET NOT PREOCCUPIED BY THE LATEST IN WASHINGTON. NEITHER SIDE IS BLINKING. > > I THINK THAT IF THE PRESIDENT DECIDES THAT THE NEGOTIATIONS ARE GOING NOWHERE, THEN THERE WILL START TO BE LAYOFFS. BUT I THINK EVERYBODY IS STILL HOPEFUL WE GET A FRESH START AT THE BEGINNING OF THE WEEK BUT WE CAN GET THE DEMOCRATS TO SEE IT IS COMMON SENSE TO AVOID LAYOFFS LIKE THAT. WE THINK THE DEMOCRATS THERE IS A CHANCE THEY WILL BE REASONABLE. JONATHAN: THE WHITE HOUSE THREATENING MASS LAYOFFS IS A GOVERNMENT SHUTDOWN HEADS INTO ITS SIXTH DAY. JOINING US IS LAURA DAVISON. I HAD A FEELING WE WOULD BE TALKING ABOUT THE SAME THING ALL OVER AGAIN. SHUTDOWN CONTINUES. DO YOU SEE ANY SIGN OF A BREAKTHROUGH? LAURA: RIGHT NOW THERE WAS BASICALLY NOTHING OVER THE WEEKEND. THERE ARE A COUPLE OF THINGS THAT COULD POTENTIALLY START TO MOVE FEELINGS ONE WAY OR ANOTHER. ONE ARE THOSE LAYOFFS, IF THE WHITE HOUSE MAKES GOOD ON THAT THREAT. SO FAR THEY HAVE HELD OFF ON DOING THAT. YOU COULD POTENTIALLY SEE SOME DEMOCRATS WANTING TO END THE SHUTDOWN SOONER RATHER THAN LATER. THE OTHER PIECE CAME FROM POLITICO IS THERE ARE SOME WHITE HOUSE AIDES THAT ARE VERY CONCERNED ABOUT THEIR POSITION ON THE ACA SUBSIDIES. THIS IS DEMOCRATS BIG ASK, RENEWING THESE OBAMA CARE TAX CREDITS THAT EXPIRE AT THE END OF THE YEAR AS PEOPLE RECEIVE LARGE SPIKES IN PREMIUM RATES. SOME REPUBLICANS WHO ARE SAYING THIS POSITION IS UNTENABLE AND THEY NEED TO SUPPORT THIS WHICH IS WHAT DEMOCRATS WANT TO DO. THERE'S A COUPLE OF DIFFERENT PIECES HERE. RIGHT NOW BOTH SIDES THINK THEY HAVE THE UPPER HAND. POLLING IS QUITE SPLIT SO IT COULD TAKE SEVERAL WEEKS FOR WE SEE WHERE THE PUBLIC SENTIMENT IS ON WHICH SIDE THEY BLAME THE AMERICAN MEAN WE ARE STILL IN A SHUT DOWN SEVERAL DAYS FROM NOW. JONATHAN: SPEAKER JOHNSON SAYING THIS IS ABOUT MINORITY LEADER CHUCK SCHUMER TRYING TO SECURE HIS POLITICAL FUTURE. WHAT'S THE REACTION IN WASHINGTON TO THAT? LAURA: IT'S SOMETHING DEMOCRATS HAVE REALLY REJECTED AND PUSHED BACK ON. ONE OF THE THINGS THE REPUBLICANS ARE BROUGHT UP IS HE IS WORRIED ABOUT A PRIMARY RACE FROM THE LEFT. SOMEONE LIKE ALEXANDRIA BECAUSE YOU CORTEZ BUT REALLY THE ENTIRE DEMOCRATIC PARTY IS BEHIND SCHUMER IN SAYING THE LESSON WE LEARNED IN 2024 IS WE DON'T FIGHT HARD ENOUGH, THIS IS OUR OPPORTUNITY TO FIGHT AND GET A KEY POLICY WHEN WE WANT. JONATHAN: THANKS FOR JOINING US. TO BUILD ON THAT CONVERSATION HENRIETTA JOINS US. THE POLITICS WOULD SUGGEST THIS DOESN'T LAST VERY LONG. HENRIETTA: I THINK WE ARE PROBABLY GOING TO ALREADY BE ABLE TO SEE THAT THIS WEEK IS A LOST CAUSE. THEY ARE NOT EVEN BACK IN D.C. YET. I DON'T SEE MOVEMENT HAPPENING THIS WEEK WE ARE PROBABLY GOING TO BE GOING TO THE 15TH AT THIS JUNCTURE. LISA: DO YOU THINK ULTIMATELY THIS IS GOING TO LOOK WORSE ON ONE PARTY OR THE OTHER WOULD YOU THINK ULTIMATELY PEOPLE DO NOT CARE, THEY WON'T CARE UNLESS THERE IS SOME SORT OF MASS LAYOFF MOVES. HENRIETTA: I THINK IT'S INTERESTING. WITH THE PRESIDENT HE HAS HIS 38 PERCENT OR SO OF THE AMERICAN ELECTORATE THAT JUST WILL NOT EVER BREAK FREE OF THE PRESIDENT. SO HE WILL BE ABLE TO SHORE UP THAT BASKET AND THAT KEEPS IT ON HIS SAME TRAJECTORY OF SHUT THE GOVERNMENT DOWN AND USING EXECUTIVE AUTHORITY TO GO INTO PORTLAND, GO INTO ILLINOIS AND DO A LOT OF THINGS THAT ARE VERY AGGRESSIVE. THEN YOU HAVE THE DEMOCRATIC SIDE WHO THEIR OWN CONFERENCE IS SO MAD AT THEM THAT THERE IS ALMOST NO PAIN BECAUSE THEY ARE ALREADY SO MAD IN THE FIRST PLACE. SO YOU MIGHT AS WELL JUST TRY TO CHANGE SOMETHING UP. SO THERE ARE CONFLICTING RATIONALES FOR BOTH STAYING THE COURSE. DEMOCRATS TRYING SOMETHING NEW AND DIFFERENT. LISA: WE ARE TALKING ABOUT A GOVERNMENT SHUTDOWN AT A TIME WHEN THERE IS A LOT OF POTENTIAL NOISE AND ACTION ON THE FOREIGN POLICY POINT OF VIEW. I'M THINKING ABOUT ISRAEL AND HAMAS BUT ALSO WHAT'S GOING ON WITH RUSSIA AND UKRAINE. THE SUPREME COURT IS ALSO POTENTIALLY GOING TO BE RULING ON TARIFFS THIS WEEK THE SUPREME COURT COMES BACK AFTER ITS RECESS AND IS PROBABLY GOING TO VOTE ON A NUMBER OF THESE MATTERS. HOW DOES THAT ADD TO THE COMPLICATION OF GOVERNMENT BEING SHUT DOWN? HENRIETTA: IT'S THESE THREE ITEMS THAT ARE ELIGIBLE FOR EXECUTIVE ACTION THAT'S WITH THE PRESIDENT'S DONE. THE RATIONALE FOR HAVING SUCH A STRONG AND ROBUST CALL ON THE PRESIDENT TAKING THESE TARIFF ACTIONS HE PROMISED ON THE CAMPAIGN TRAIL SERIOUSLY. HE CAN DO ALL OF THIS WITHOUT CONGRESS OF FOR NOW. WHEN I LOOK AT THESE DATA SETS ABOUT WHETHER IT'S RUSSIA OR ISRAEL, OR THE TARIFFS SPECIFICALLY I LOOK AT WHAT ARE THE AMERICAN PUBLIC'S TOP THREE ISSUES AND THEY ARE THE ECONOMY, INFLATION AND HEALTH CARE. EVERY ONE OF THOSE ITEMS THE PRESIDENT IS UNDERWATER. AMERICANS FAMOUSLY DON'T FOLLOW FOREIGN POLICY. IT'S INTERESTING TO NICHE GROUPS WHO FEEL UNIQUELY IMPACTED OR OTHERWISE FOLLOWING THE RUSSIA UKRAINE SITUATION, BUT MOST AMERICANS LITERALLY DO NOT FOLLOW FOREIGN POLICY. SO THERE ARE THREE MAJOR ITEMS. THE ECONOMY, INFLATION IN HEALTH CARE ARE WHERE WE SHOULD CONCENTRATE AND THE PRESIDENT IS MATERIALLY UNDERWATER ON ALL THREE. LISA: DO YOU THINK REPUBLICANS COULD JOIN THAT GIVEN THE FACT THIS IS AN AREA WHERE THERE MIGHT BE SOME OPENNESS TO GAIN A DEGREE OF FAVOR WITH THE POPULATION. HENRIETTA: I THINK SO ON HEALTH CARE. THOSE SUBSIDIES CANNOT EXPIRE THEY DISPROPORTIONATELY GO TO RED STATES. YOU HAVE MEMBERS OF THE U.S. SENATE WHO ARE RUNNING FOR STATEWIDE OFFICE IN A STATE LIKE ALABAMA THAT TAKES A TREMENDOUS AMOUNT OF THOSE SUBSIDIES. I THINK GIVEN THE OPPORTUNITY TO PUT THIS DEMOCRATIC POSITION OF EXTENDING THE ACA SUBSIDIES ON THE FLOOR IT WOULD PASS. MY COLLEAGUE WHO IS OUR HEALTH CARE EXPERT SAYS 75% THEY WILL PASS BY THE END OF THE YEAR. JONATHAN: ARE WE BEGINNING TO FRAME THE MIDTERM DEBATE. HIS IS ULTIMATELY WHAT IT'S GOING TO SOUND LIKE? > > THERE IS STILL SOME INFIGHTING ABOUT WHETHER OR NOT THEY WANT TO JUST PRIORITIZE HEALTH CARE WHICH HAS HISTORICALLY BEEN ABLE TO GET THEM SOME GAINS BUT I WOULD SAY THERE IS A FIGHT BREWING AT THE WAYS AND MEANS, AND OTHER KEY DECISION-MAKING FACTORS TO SAY WHERE WILL WE GO, WHAT IS THE DEMOCRATIC POSITION ON TARIFFS. IT IS A 60 HYPE -- A 6040 ISSUE BUT THE PRESIDENT IS ON THE WRONG SIDE OF. AMERICANS KNOW TARIFFS ARE TAXES AND THEY DO NOT LIKE THEM. I'VE SAID THIS BEFORE, RAISING THE COST OF BEER IT'S A PRETTY EASY CAMPAIGN MESSAGE. DEMOCRATS ARE UNIFIED AROUND WHAT THEY WANT TO DO. JONATHAN: DO THE POLITICS LEAD TO REBATES, TO USE THAT MONEY FROM TARIFFS AND GIVE IT BACK TO THE CONSUMERS AHEAD OF THE MIDTERMS? > > THAT IS REALLY EXPENSIVE. THE REBATES THE PRESIDENT AUTHORIZED IN HIS FIRST TERM COST $289 BILLION, THAT IS MORE THAN THE REVENUE COMING IN FROM TARIFFS SO FAR SO THE BOND MARKET WOULD REACT VERY NEGATIVELY TO THAT. I DON'T THINK YOU HAVE THE VOTES BUT IF WE GET A RECONCILIATION BILL YOU CAN BET THAT WILL BE THERE. TRY TO GET THE FARMERS BAILED OUT BUT MAYBE NOT A REBATE CHECK. JONATHAN: IF YOU ARE A BOND BULL YOU'RE LOOKING AT TARIFFS AND AWAY YOU DIDN'T BACK IN APRIL. ALL THOSE THINGS OVER THE NEXT 12 MONTHS. GETTING CLOSER AND CLOSER TO THE MIDTERMS THE CONVERSATION CAN BECOME ILLOGICAL WHEN IT COMES TO THESE THINGS BECAUSE OF POLITICS. LISA: NOT ONLY ARE REBATES EXPENSIVE WHEN IT COMES TO THE EXPENDITURE SIDE OF THE BALANCE SHEET BUT IT WILL CAUSE A BOOST TO INFLATION. EVEN WITHOUT THAT, TORSTEN SLOK PUT THIS OUT THAT IT IS BEGINNING TO LOOK LIKE 20 EVEN WITHOUT THE REBATE CHECKS TALKING ABOUT ANNUALIZED MONTH OVER MONTH GROWTH SHOWING 60% OF THE ITEMS ARE GROWING FASTER THAN 3% SO THAT INFLATIONARY PRESSURE IS ALREADY THERE EVEN WITHOUT THAT TURBOCHARGING FROM REBATES ON THE TARIFFS. JONATHAN: NEXT TIME IT MAY WELL HAVE A THREE HANDLE. LISA: DO PEOPLE CARE, I'M TALKING ABOUT THE FED. GIVEN THE FACT THAT THEY ARE PROBABLY GOING TO CUT RATES AT LEAST TWO MORE TIMES. JONATHAN: UP NEXT ON THE PROGRAM , FINDING ALTERNATIVE FIGURES IN THE DATA VACUUM PLUS YOUR MORNING MOVERS. AND --AMD SURGING HIGHER IN THE PREMARKET. ♪ JONATHAN: THE RALLY RESUMES, CONTINUES. HIGHER BY A THIRD ON THE S & P . YOUR MORNING MOVERS WITH DANI BURGER. YAHAIRA: -- DANI: YOU CAN SEE AMD UP 24.3%. THE COMPETITION, INTEL SHARES MOONGLOW OR ON THE BACK OF THAT NEWS. NVIDIA ALSO TRADING DOWN BY 1.3 PERCENT. AMD SAYS THIS WILL GIVE THEM TENS OF BILLIONS OF DOLLARS. YOU CAN SEE WHY THAT IS HAVING SUCH A BIG IMPACT ON STOCKS. BOEING PLANS TO INCREASE THE OUTPUT OF ITS JETS, 42 A MONTH STARTING THIS MONTH, BY NEXT YEAR, 53 JETS A MONTH. THAT IS A BIG HIKE AND UNDERSCORES THE FACT THAT THEY ARE GETTING MORE CONTROL OVER THEIR PROCESSES PAYMENT THAT IS A .7% RISE FOR THEM. BREAKING NEWS THIS MORNING, FIFTH THIRD BANCORP BUYING COMERICA, $10.9 BILLION DEAL. IT WOULD GIVE THEM $288 BILLION IN ASSETS. MAKING IT EASIER TO COMPETE WITH THE BANKING GIANTS, GIVING THEM MORE EXPOSURE IN THE SOUTHWEST, PLACES LIKE CALIFORNIA AND TEXAS. FOR THIRD C-SHARES OFF BY ABOUT 4%. JONATHAN: THANK YOU FOR THE UPDATE. MORE ON THAT DEAL WITH THE SENIOR ANALYST FOR U.S. REGIONAL BANKS AT BLOOMBERG INTELLIGENCE BABY AND WE HAVE BEEN HAVING A CONVERSATION WITH YOU, THESE GUYS ARE GETTING TOGETHER. HERE IT IS. HOW WIDELY EXPECTED WAS THIS? HERMAN: THIS REINFORCES THE FACT THAT LARGER MIDWEST REGIONAL BANKS ARE EXPANDING INTO OTHER MARKETS. WE SAW THIS WOULD BE IN CA, HUNTINGTON IN OHIO, EXPANDING INTO TEXAS. THIS IS A CONTINUATION OF THAT. FIFTH THIRD GOING INTO CALIFORNIA AND TEXAS. COMERICA HAS BEEN RUMORED TO BE ON THE MARKET TO SELL ITSELF OVER THE PAST SEVERAL QUARTERS, CONCERN THAT SOME OF ITS POSITION WITH HIS INTEREST RATES HAS NOT BEEN THE BEST POSITION. THERE HAS BEEN A LOT OF SCUTTLEBUTT IN TERMS OF ACTIVIST INVESTORS PUSHING FIFTH THIRD FOR SALE. JONATHAN: BASED ON WHAT WE HAVE HEARD THERE IS MORE TO COME. WHAT HAVE YOU HEARD GIVEN THE TRACK RECORD SO FAR? HERMAN: WHAT IS NEXT FOR A BANK LIKE KEYCORP, ALSO IN THE MIDWEST? YOU HAVE SEEN ITS RIVALS EXPANDING, SO THE QUESTION ON THE NEXT EARNINGS CALL IS HOW WELCOME ARE THEY FOR ANOTHER TRANSACTION GOING FORWARD? JONATHAN: THANKS FOR JUMPING ON. BUSY MORNING FOR YOU, I KNOW. FIFTH THIRD BUYING COMERICA AT A DEAL VALUED AT $10.9 BILLION. THE FIRST THING THAT YOU TALKED ABOUT, CAPITAL MARKETS ACTIVITY, M & A, BANKS ARE VERY BUSY THIS YEAR. THAT ACTIVITY THEY'VE BEEN TALKING ABOUT HAS BEEN BUILDING UP BIG TIME. LISA: IF THE JEFFRIES IS ANY CLUE ABOUT EARNINGS NEXT WEEK, YOU CAN IMAGINE, THEY HAD RECORD REVENUE FROM THEIR DEALS UNIT BECAUSE OF THIS KIND OF ACTIVITY, SPECIFICALLY WITH THE BANKS. PNC, PINNACLE. HOW MUCH MORE TO COME? WHAT IS THE MAIN MOTIVATING DRIVER? IS IT BECAUSE THE MARKETS ARE OPEN, THE REGULATORY ENVIRONMENT IS GOOD, OR ULTIMATELY THEY HAVE TO, BECAUSE THEY NEED TO BE THE LEADER IN THE MIDDLE MARKET, OTHER AREAS THAT DON'T GET THE SAME WHITE GLOVE SERVICE? JONATHAN: MNA IN SEPTEMBER WAS THROUGH THE ROOF AS WELL. HOW MANY TIMES HAVE WE HEARD THE PIPELINE IS FULL? OK, KEEP ON TALKING. NOW WE ARE REALLY SEEING IT. LISA: CARLISLE NEARING A $7 BILLION DEAL FOR BASF. CAPITAL MARKETS ROARING. FINANCIAL CONDITIONS, LET'S EASE THEM MORE. THIS RAISES THE QUESTION OF THE FED, IF THE MARKETS HAVE FRONTLOADED ALL OF THOSE RATE CUTS. JONATHAN: THE DOOR IS OPEN AND REGULATORS POTENTIALLY GREASING THAT DOOR A LITTLE BIT. ON THE RADAR THIS MORNING, FRENCH STOCKS ARE DOWN AFTER THE PRIME MINISTER'S RESIGNATION, DEEPENING THE COUNTRY'S POLITICAL CRISIS. IN JAPAN, STOCKS SURGING. YEN FALLING AGAINST THE DOLLAR. AMD INKING A DEAL WITH OPENAI IN A DEAL THAT COULD GENERATE TENS OF BILLIONS OF DOLLARS IN REVENUE. FINALLY, THE SHUTDOWN ROLLING INTO A SECOND WEEK. UNIONS REPRESENTING THOUSANDS OF FEDERAL WORKERS ASKING A JUDGE TO BLOCK POTENTIAL FIRINGS FROM THE TRUMP ADMINISTRATION. THE ADMINISTRATION ALSO DELAYING ECONOMIC REPORTS AND DATA COLLECTION. THIS IS FORCING WALL STREET TO TURN TO ALTERNATIVE PLACES. THE ECONOMY IS HOLDING UP BETTER THAN EXPECTED DESPITE MIXED SIGNALS IN SEPTEMBER. THE U.S. ECONOMY SHOWED RESILIENCE. DAVID STEINBERG, CEO OF ZETA JOINS US NOW. LET'S TALK ABOUT YOUR INDICATOR. WHAT ARE YOU TRACKING, ONE? TWO, WHAT IS IT TELLING YOU? DAVID: THANK YOU FOR HAVING ME. WE ARE LOOKING IN REAL TIME AT 240 MILLION AMERICANS, WHAT ARE THEY RESEARCHING, WHAT ARE THEY BUYING, WHERE ARE THEY GOING? WE FEED THAT INTO THIS INDEX TO BUILD A SCORE TO SEE WHAT WE BELIEVE THE HEALTH OF THE U.S. ECONOMY IS. AND THEN GO TO THE DIFFERENT CATEGORIES, EVERYTHING FROM RETAIL TO AUTOMOTIVE. WE BELIEVE THE ZETA ECONOMIC INDEX IS THE BEST OF YOU INTO THE CONSUMER DRIVEN U.S. ECONOMY. LISA: WE HAVE SEEN A LOT OF RUMORS, SPECULATION THAT THE LABOR MARKET IS FALLING OFF QUITE CONSIDERABLY. THAT WAS BUILT ON WITH THE NONFARM PAYROLLS THAT WE GOT IN AUGUST. DOES YOUR DATA INDICATE A DIFFERENT PICTURE? DAVID: THERE ARE SOME CATEGORIES WHERE WE WILL SEE JOBS LIVING THAT WE HAVE ALSO SEEN HIRING. WE HAVE SEEN THE CONSUMER AS IT RELATES TO SPENDING BE VERY RESILIENT. OUR ECONOMIC STABILITY INDEX WAS FLAT MONTH OVER MONTH INTO SEPTEMBER, WHICH IS A VERY GOOD SIGN THAT CONSUMERS ARE FEELING COMFORTABLE TO SPEND. LISA: HOW MUCH ARE YOU PARSING OUT THE CONSUMER AS IT RELATES TO THE UPPER INCOME VERSUS THE MIDDLE INCOME VERSUS THE LOWER INCOME? THE WEALTHIER INDIVIDUALS, ESPECIALLY WITH THE STOCK MARKET ON A NEW TEAR EVERY DAY, YES, THEY ARE SPENDING, THEY ARE GOING TO THE FRONT OF THE CABIN, BUT TO WHAT EXTENT IS THIS A GLOBAL RISING UP OF ALL THE POTENTIAL TIERS OF INCOME EARNERS? DAVID: REALLY GOOD QUESTION. WE SEE THE MULTI-DRIVING THE VAST MAJORITY OF SPENDING. IF YOU LOOK AT THE TOP 10% OF THE U.S. FROM A WEALTH PERSPECTIVE, THEY CONTINUE TO DRIVE A DISPROPORTIONATE P AMOUNT OF SPEND. BUT WE ARE NOT SEEING A MASSIVE SLOW DOWN AT THE BOTTOM. THE BIG DIFFERENCE OVER THE LAST FEW MONTHS IS WE ARE SEEING A LOT MORE SPENDING GOING TO ESSENTIAL ITEMS, AND LESS SPENDING TWO LUXURY ITEMS. THAT IS EVEN AFFECTING THE WEALTHY. AS YOU BEEN SAYING ON THE PROGRAM, THERE IS A LOT OF UNCERTAINTY OUT THERE. WHAT IS THE FED GOING TO DO? JOBS DATA IS BEING REVISED DOWN. BUDGETS, TARIFFS. PEOPLE CONTINUE TO BE NERVOUS ABOUT BIG RISKS FOR BIG TICKET ITEMS, AND THAT IS CAUSING CONSTERNATION WITH EVEN THE WEALTHY, BUT EVEN THE WEALTHY CONTINUE SPEND AT A HIGH PACE. LISA: GIVEN THE FACT THAT YOU SAY PEOPLE ARE SPENDING ON ESSENTIALS, IT LEADS TO THE QUESTION ABOUT INFLATION. PEOPLE ARE SAYING THAT WILL NOT BE THE MAIN DRIVER. ARE YOU SAYING ACTUALLY THERE IS ENOUGH SPENDING POWER AND RESILIENCE, ESPECIALLY IF THERE IS MORE CERTAIN, FOR INFLATION TO BECOME MUCH MORE OF A CONSIDERATION? DOES YOUR DATA TRACK THAT? DAVID: IT'S A GOOD QUESTION. WE COULD ADD IT AS AN EVALUATION POINT AS WE LOOK AT OUR DATA. WE JUST OF THE LARGEST ACQUISITION IN OUR HISTORY, BUYING MARIGOLD, SPECIFICALLY TO GET DATA POINTS, SO WE COULD ANSWER QUESTIONS LIKE THIS IN ADDITION TO THE OPERATIONS OF THE BUSINESS. TO ME, FROM OUR DATA, IT APPEARS THAT MOST CONSUMERS AT THIS POINT CONTINUE TO LOOK THROUGH INFLATION AND CONTINUE TO SPEND. THE ECONOMIC INDEX WOULD PUT GDP GROWTH AT A 2% TO 3% GROWTH RATE. THAT DOES NOT TOTALLY TAKEN TO AFFECT HOW LONG A GOVERNMENT SHUTDOWN COULD BE, WHAT TYPE OF UNCERTAINTY WOULD COME WITH THAT. JONATHAN: AS I'M SURE YOU KNOW, THE ECONOMY IS CHANGING, A HANDFUL OF TECH CEO'S VALUES ARE RISING. HOW WOULD YOUR INDEX CORRELATE WITH BROADER GDP AND WHETHER THAT MAY CHANGE WITH CONTRIBUTIONS COMING FROM ELSEWHERE NOW? DAVID: NO QUESTION WE ARE SEEING INFRASTRUCTURE SPENDING AS PART OF GDP GRO UP. WE HAVE A CONNECTION TO THE ECONOMIC INDEX AS WELL LOOKING AT ALL OF THESE PURCHASES. WHERE IS THE ECONOMY? ALWAYS ABOUT 60, 70 PERCENT CONSUMER SPENDING, CORPORATE SPENDING, AND THE BALANCE IS GOVERNMENT.. WE ARE SEEING CORPORATE GO UP EXPONENTIALLY, AND A LOT OF THAT IS AN INFRASTRUCTURE. THAT WILL BE PART OF GDP GROWTH. TO YOUR QUESTION, IT MAY BE PART OF A SURPRISE TO THE UPSIDE. JONATHAN: I IMAGINE YOU HAVE BEEN BUSIER OVER THE LAST WEEK. DAVID: WE ARE DOING OUR BIGGEST DEAL, TRYING TO GET THIS REPORT DONE, THEN WE HAVE OUR ANNUAL CONFERENCE. 2000 PEOPLE COMING TO NEW YORK THIS WEEK FOR ZETA LIVE. IT HAS BEEN A CRAZY PERIOD FOR US. JONATHAN: GREAT TO CATCH UP WITH YOU. DAVID STEINBERG OF ZETA GLOBAL. I IMAGINE DAVID HAS BEEN BUSY. LISA: ULTIMATELY, PEOPLE WILL LOOK ANYWHERE THEY CAN FOR THE SIGNALS, NOISE, SOMETHING TO GIVE A SENSE OF WHAT TO TRADE ON. TORSTEN SLOK PUT OUT A BOOK OF THE ALTERNATIVE SOURCES, OPENTABLE, BLOOMBERG DATA, REDBOOK DATA, FED WEEKLY DATA, BROADWAY SHOWS. THESE ARE THE TYPES OF DATA POINTS THAT PEOPLE ARE USING BECAUSE THERE IS NOTHING ELSE. JONATHAN: I SAW THAT OVER THE WEEKEND. AMAZING THAT HE PUT THAT OUT. LISA: IT IS REALLY VALUABLE, ESPECIALLY LOOKING AT THIS, WEEKLY BROADWAY SHOW ATTENDANCE HAS FLUCTUATED AND IT IS ON THE RISE. I HAVE BEEN ENJOYING IT. JONATHAN: I HAVE NOT. JUST NOT MY THING. LISA: HAVE YOU BEEN RECENTLY? JONATHAN: I WATCHED "HAMILTON" YEARS AGO. VERY GOOD BUT STILL NOT MY THING. LISA: IN GENERAL, I DON'T LIKE THE NOSTALGIA SHOWS, BUT THE NEW, QUIRKY, INTERESTING ONCE. JONATHAN: I DON'T LIKE THE SINGING. I DON'T LIKE TO SING ALONGS. LISA: PEOPLE WOULD AGREE WITH YOU. JONATHAN: IF I'M WATCHING A MOVIE AND THEY BREAK OUT INTO SONG. WHY DID YOU HAVE TO DO THAT? I LIKE THE MUSIC, I JUST DON'T NEED THE MOVIE THEATER SINGING IT. FUTURES UP ON THE S & P. LET'S GET TO YOUR STORIES ELSEWHERE WITH YAHAIRA. YAHAIRA: JAPAN'S REALLY CONSERVATIVE PARTY HAS ELECTED A NEW LEADER, A FORMER GOVERNMENT MINISTER, TV HOST, AND HEAVY METAL DRUMMER. JAPANESE BOND YIELDS ROSE AFTER HER ELECTION WHICH FIELD EXPECTATIONS OF CONTINUED POLICY EASING. ASTON MARTIN SHARES ARE FALLING IN LONDON, DOWN 7.2%, AFTER CUTTING ITS OUTLOOK FOR THE SECOND TIME THIS YEAR. TARIFFS AND FALLING DEMAND ARE WEIGHING ON THE BRITISH CARMAKER. ASTON MARTIN SAYING IT LAUNCHED A BROAD SPENDING REVIEW, A MOVE THAT COULD SHAPE UPCOMING MODELS. . IN SPORTS, THE MLB DIVISIONAL ROUND SAW THE BLUE JAYS JUMP TO A DOMINANT LEAD OVER THE YANKEES WITH TWO HIGH-SCORING VICTORIES. MEANWHILE, THE MARINERS AND THE TIGERS ARE TIED AT 1-1. SEATTLE GOT ITS FIRST PLAYOFF WIN IN 24 YEARS. THE BREWERS AND THE DODGERS BOTH HOLD 1-0 ADVANTAGE IS INTO TONIGHT. JONATHAN: LOOK AT WHO IS IN HERE. LISA: SHE IS MOURNING THEM. JONATHAN: AN EMPTY SEAT WHERE ANNMARIE ONCE WAS. LISA: HER YANKEES MUG ALSO DISAPPEARED. JONATHAN: I THINK SHE IS BACK TOMORROW. I CANNOT CONFIRM IF THIS IS RELATED. UP NEXT, A GLOBAL PHENOMENON. > > THIS IS AN ISSUE THAT IS A GLOBAL PHENOMENON, ONE WHERE THERE IS A LAW OF LONGER-TERM MOMENTUM TOWARD WEAKER PHYSICAL POSITIONS. IN SOME LEVELS, THIS IS NUMBER TWO CREDIT'S ADVANTAGE. JONATHAN: THAT CONVERSATION IS NEXT WITH AMANDA LYNAM OF BLACK ROCK. THIS IS BLOOMBERG. ♪ JONATHAN: NEW LEADERSHIP IN JAPAN. LOOK AT THIS MOVE ON THE BACK OF THAT. ALMOST 5% HIGHER ON THE NIKKEI 225. HOW PRO STIMULUS IS SANAE TAKAICHI, HOW CAN STRANGLE SHOULD BE BY THIS MARKET AND OTHER THINGS, TOO? LISA: HOW MUCH CONTROL DOES SHE HAVE OVER THE BANK OF JAPAN? THEY WERE GOING TO RAISE RATES AT THE NEXT MEETING, BUT NOW PEOPLE ARE PRESSING IT OUT BECAUSE OF HER LEADERSHIP. WHAT IS THE CONNECTION WHEN PEOPLE TALK ABOUT INDEPENDENT CENTRAL BANKS? JONATHAN: AS JORDAN POINTED OUT, BACK THEN, THE INFLATION RATE WAS IN A DIFFERENT PLACE. LET'S JUST PUT IT THAT WAY. LISA: THESE STORIES IN A VACUUM WOULD NOT BE THAT SIGNIFICANT BECAUSE THE INFLATION RATE IS NOT RUNAWAY BY ANY MEANS, BUT WHEN YOU TAKE IT HOLISTICALLY, THIS QUESTION OF EVERY DEVELOPED MARKET GOVERNMENT IS SPENDING WITHOUT ANY SENSE OF RESTRAINT, HOW DOES THAT CHANGE THE GLOBAL YIELD MARKET? JONATHAN: LET'S TALK ABOUT THE GLOBAL YIELD MARKET. UNDER SURVEILLANCE THIS MORNING, A GLOBAL PHENOMENON. > > THIS IS AN ISSUE THAT IS A GLOBAL PHENOMENON, ONE WHERE THERE IS A LOT OF LONGER-TERM MOMENTUM TOWARD WEAKER PHYSICAL POSITIONS. THE U.S. IS RUNNING A DEFICIT OF 6.5% OF GDP, JAPAN IS LOOKING AT MORE FISCAL EASING, THE FRENCH BUT IT IN A CHALLENGING STATE, AND THE U.K. IS CLEARLY IN FOCUS. IN SOME LEVELS, THIS COULD WORK TO CREDIT'S ADVANTAGE. JONATHAN: A PRO STIMULUS LEADER ELECTED IN JAPAN AND THE FRENCH PRIME MINISTER RESIGNS AFTER JUST A MONTH ON THE JOB. AMANDA LYNAM JOINS US NOW. ANDREW SHEETS OF MORGAN STANLEY WAS TALKING ABOUT CREDIT SPREADS , SAYING THAT POTENTIALLY TELLS YOU MORE ABOUT WHAT IS HAPPENING WITH THE SOVEREIGN THAN IT DOES CORPORATE CREDIT. WOULD YOU AGREE? AMANDA: I WOULD PUSH BACK ON THE VIEW THAT THE FISCAL SITUATION GLOBALLY IS SHINING A SPOTLIGHT ON CREDIT BEING A BETTER RISK. IT IS ABSOLUTELY TRUE THAT CREDIT ISN'T A GOOD PLACE. I DON'T DISAGREE WITH HIS CONCLUSION, HOWEVER, THAT IT COULD BE GOOD FOR CREDIT BECAUSE OF THE YIELD BACKDROP. HIGHER YIELD, SO LONG AS THEY DON'T BECOME DISORDERLY, UNLEASHED A WAVE OF TECHNICAL BASE DEMAND INCORPORATE, AND THERE IS A LIMITED POT FOR INVESTOR TO DEPLOY CAPITAL. STRUCTURALLY HIGHER RATES ACROSS THE GLOBE ACTUALLY DOES SUPPORT YIELD BASE DEMAND FOR CORPORATE CREDIT. IT JUST REINFORCES ONE OF THE POINTS WE'VE BEEN MAKING. IF YOU ARE ALLOCATING TO CORPORATE CREDIT, YOU SHOULD BE DOING THAT FOR YOU AND CARRY. NOT BECAUSE YOU EXPECT A TOTAL RETURN BOOST FROM LOWER RATES. JONATHAN: THERE HAVE BEEN SOME CREDIT EVENTS. THE RISK IS ALL AROUND SOVEREIGNS. CAN WE JUST SIT HERE AND SAY THAT THEY ARE BOTH IDIOSYNCRATIC OR IS THERE SOMETHING BIGGER HAPPENING HERE? AMANDA: QUIETLY, THE DEFAULT RATE HAS BEEN ON THE AGGREGATE. ABSOLUTELY THERE HAVE BEEN SOME IDIOSYNCRATIC SITUATIONS. COMMON THEMES AND POCKETS OF STRESS. SO UBPRIME CONSUMER AMONG THEM. WE SEE BORROWING COSTS BECOMING SOMEWHAT MORE ACCOMMODATIVE, NOT EASY, BUT ACCOMMODATIVE. GROWTH HAS BEEN SOLID AND THERE IS SCOPE TO BE ACCELERATED IN 2026. WITH THOSE FACTORS, IT IS HARD TO SEE A PEAK IN NEW DEFAULTS. ABSOLUTELY THERE ARE DISPERSION THEMES UNDER THE SURFACE. THE QUESTION FOR INVESTORS, IS THAT ENOUGH TO WARRANT A RISK OFF POSTURE? WE DON'T THINK IT IS. IF YOU LOOK AT LEVERAGED FINANCE, IT HAS BEEN QUITE RESILIENT DESPITE THOSE DEFAULT ACTIVITIES. LISA: MAYBE NOT RISK OFF, BUT DOES IT PREVENT ONE FROM BEING FULLY RISK ON? IF YOU ARE A ALL IN YIELDS BUYER, THEY HAVE COME OUT SUBSTANTIALLY, BUT WHY NOT CLIP THAT COUPON? AMANDA: YOUR POINT IS WHAT WE BEEN SAYING SINCE APRIL. WE ARE COMFORTABLE SELECTIVELY MOVING DOWN IN CREDIT QUALITY, NOT CHOOSING THE LEFT TAILS OF THESE MARKETS, WHETHER THAT IS IN LIQUID CREDIT OR PRIVATE CREDIT. THERE ARE STILL SOME CAPITAL STRUCTURE THAT HAVE NOT RUN INTO THEIR DEBT CAPITAL STRUCTURES WITH GROWTH ABOVE TREND OVER THE PAST FEW YEARS. WITH GROWTH NOW BELOW TREND, IT IS HARD TO SEE WHY THAT SITUATION WOULD BECOME EASIER FOR THEM. BACK TO THE POINT OF DISPERSION AND VOLATILITY UNDER THE SURFACE, HASN'T BEEN ENOUGH TO DO REAL OVERALL PERFORMANCE. WE EXPECT THAT TO REMAIN IN PLACE. LISA: IS IT BETTER TO GO ALL IN ON THE YIELD IN THE PUBLIC OR PRIVATE MARKETS? AMANDA: IT DEPENDS ON THE ILLIQUIDITY PROFILE OF THE INVESTOR. CAN THEY TAKE ON THAT RISK OR NOT? ONE OF THE THINGS THAT YOU BEEN SEEING SINCE THE EPIDEMIC IS INCREASED FLUIDITY BETWEEN THESE MARKETS. WE ARE SEEING THE SAME BORROWER REFINANCING BETWEEN THE TWO MARKETS, SO THEY ARE NOT AS SILENT AS THEY USED TO BE. JUST AS THERE IS MORE FLUIDITY ACROSS HIGH-YIELD. WE MEASURE THAT IN A FEW WAYS, NOT LEAST OF WHICH IS JUMBO LOANS IN PRIVATE CREDIT. THEY ARE LENDING TO COMPANIES THAT COULD ACCESS THE PUBLIC MARKET IF THEY WANTED TO. IT JUST DEPENDS ON WHETHER THE INVESTOR BASE IS COMFORTABLE HOLDING THAT ILLIQUIDITY. LISA: OUR JAPANESE INVESTOR STILL BIG IN THE MARKET? AMANDA: FOREIGN INVESTORS OWN 25% OF THE CORPORATE CREDIT MARKET. ONE OF THE AREAS THAT HAVE BEEN NOTABLE, FOREIGN DEMAND IS ON TRACK TO RIVAL 2023 AND 2024 IN TERMS OF DEMAND FOR U.S. CORPORATE CREDIT. THE CONCERNS ABOUT THE LAWS OF U.S. EXCEPTIONALISM HAVE NOT BEEN BORNE OUT IN THE DATA. I THINK THAT IS AN IMPORTANT STAT WHEN WE THINK ABOUT THE STRUCTURAL DRIVERS OF DEMAND OF U.S. CORPORATE CREDIT. JONATHAN: SOMETHING THAT I MENTIONED EARLIER. WE HAVE BEEN HAVING THIS CONVERSATION ALL YEAR, AS JAPANESE YIELDS CONTINUE TO LIFT, IS THE MONEY GOING TO GO HOME? DO YOU THINK IT WILL? AMANDA: I THINK IT'S A DELICATE BALANCE. THERE ARE NOT A LOT OF ALTERNATIVES FOR HIGH QUALITY PRODUCT. CERTAINLY THE U.S. MARKET IS THE LARGEST, FOLLOWED BY EUROPE, AND ASIA. YOU ALSO HAVE A WEAKER YEN. IN TERMS OF BALANCING THE TRADE-OFF BETWEEN YIELD AND WHAT IS GOING ON IN THE CURRENCY, INVESTORS WILL STRUCTURALLY ERR ON THE SIDE OF ALLOCATING TO THE U.S.. IN GENERAL, THAT TREND REMAINS IN PLACE. JONATHAN: EXCEPTIONALISM, WE ARE BACK TO THAT AGAIN BY THE END OF THE YEAR? LISA: IS IT EXCEPTIONALISM OR THERE IS NO OTHER PLACE TO GO-ISM? WHY NOT GO INTO THEM? JONATHAN: CANNOT REPLACE THE DEPTH OF IT. EVEN THE GOLD PART OF IT. TRYING TO DIVERSIFY AWAY FROM DOLLAR DOMINATED MARKETS AND GOLD HAS NOWHERE NEAR THE DEPTH OF THAT MARKET. LISA: WHICH IS WHY ETF'S AND RETAIL INVESTORS WERE BEHIND SOME OF THE RALLIES. I ASKED WHETHER BITCOIN WAS A PRECIOUS METAL. HE WAS NOT GOING TO ENTERTAIN THAT. I WONDER HOW MUCH OF THAT IS AT PLAY BECAUSE YOU CAN MAKE THAT MARKET AS BIG AS YOU WANT IT TO BE. JONATHAN: SEVEN WEEKS OF GAINS ON GOLD. LISA: YOU DON'T EVEN WANT TO SAY THE WORD BITCOIN. JONATHAN: HE DIDN'T WANT TO SAY IT. LISA: DON'T YOU AGREE IT IS SOMETHING WORTH PAYING ATTENTION TO? JONATHAN: HE WAS MAKING THE POINT THAT ONE WAS MORE CORRELATED WITH RISK THAN THE OTHER. BUT SO FAR THIS YEAR, EVERYTHING IS UP INTO THE RIGHT. LISA: PEOPLE HAVE MONEY AT IT HAS TO GO SOMEWHERE, WHICH IS WHAT CORRELATES RISK AND GOLD AND BITCOIN. JONATHAN: I THOUGHT THAT WAS A CONVERSATION THAT YOU DIDN'T WANT A PART OF. AMANDA LYNAM, THANK YOU. NEXT, AND DREW MATTIS, JAY GOLDBERG, LINDSEY PIEGZA, JAMES TIERNEY OF ALLIANCEBERNSTEIN. > > I DON'T SEE MUCH OF A CHANGE TO THE LEADERSHIP FABRIC OF THE MARKET. > > IT'S A DIFFERENT STRUCTURE IN TERMS OF THE MARKET ITSELF IN TERMS OF PARTICIPANTS. > > EVERY MARKET IS PRICING IN THIS AI STRUCTURAL THEME. > > PEOPLE WILLING TO PUT UP SERIOUS MONEY TO BE A PART OF THAT STORY. > > THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA ABRAMOWICZ, AND ANNMARIE HORDERN. JONATHAN: THE THIRD HOUR OF BLOOMBERG SURVEILLANCE STARTS NOW. THE GAINS KEEP ON BUILDING. UP A THIRD OF 1% ON THE S & P. NASDAQ UP BY 0.8. AMD IN THE PREMARKET HIGHER BY 27%. THE STORY DROPPED ABOUT ONE HOUR AGO, INKING A DEAL WITH OPENAI TO ROLL OUT INFRASTRUCTURE. LISA: A WHOLE HOST OF DEALS THAT OPENAI HAS INKED WITH OTHER TECH COMPANIES, AND VIDEO FOR THEIR CHIPS, ORACLE, MICROSOFT. IT RAISES A QUESTION OF HOW LEVERAGED THIS ENTIRE STORY IS TO OPENAI, ALSO SPEAKS TO THIS INCREDIBLE FERVOR IN CAPITAL MARKETS. THEY ARE WIDE OPEN FOR ANYTHING RELATED TO AI. MERGER MONDAY IS BACK. JONATHAN: DEAL ACTIVITY. FIFTH THIRD TO BY COMERICA IN AN ALL STOCK DEAL VALUED AT $10.9 BILLION. COMERICA UP BY 13%. I KEEP GOING BACK TO THAT PHRASE, MACRO PARALYSIS. THAT IS WHAT IT FELT LIKE AT THE TIME. SIX MONTHS LATER, CORPORATE AMERICA HAS MOVED ON BIG TIME. LISA: ARE WE SEEING A RE-ACCELERATION INTO THE FOURTH QUARTER? SOMETHING THAT WE HAVE HEARD FROM AIRLINE CEOS AND BANKING EXECUTIVES WHEN IT COMES TO CAPITAL MARKETS ACTIVITIES. DO EXECUTIVES HAVE ENOUGH CONVICTION FOR FINANCING, POTENTIALLY FOR FED RATE CUTS, IN THE BACKDROP THAT WE WILL NOT SEE SOME MASSIVE INCREASE IN TARIFF RATES, THAT THEY CAN PUT THESE DEALS TOGETHER, ESPECIALLY IN THE BANKING CENTER WHERE REGULATORS ARE SAYING GO FOR IT? JONATHAN: WE DON'T KNOW BECAUSE WE DON'T HAVE ECONOMIC DATA. HALF JOKING, BUT WE HAVE TO RELY ON THE CORPORATIONS. I KNOW THAT WILL BE THE HIGH INCOME SIDE OF THINGS AT THE DELTA STORY, BUT WE WILL DEPEND ON THEM A LOT IF THIS GOVERNMENT SHUTDOWN CONTINUES. LISA: HOW LEVERAGED IS THIS MARKET TO THE IDEA OF BETTER THAN OR WORSE THAN EARNING REPORTS COMING OUT OF THESE COMPANIES AS WELL AS THE COMMENTARY? CEOS THIS YEAR HAVE TURNED INTO DIPLOMATS, CENTRAL BANKERS, POLITICIANS, AND HERE THEY ARE THE ECONOMISTS, COMING OUT AND TELLING YOU ALL THE INFORMATION THAT WE ARE NOT GETTING FROM THE GOVERNMENT, SOME OF THE OFFICIAL SOURCES. IT HAS BEEN A NOTABLE SHIFT WHEN WE SEE THE CENTRAL BANK OF JENSEN HUANG, DELTA. JONATHAN: QUITE A CHANGE. COMING UP, DREW MATUS OF METLIFE INVESTMENT MANAGEMENT, JAY GOLDBERG ON WHAT HE CALLED BUBBLE-LIKE BEHAVIOR IN THE CHIPS SPACE, AND LINDSEY PIEGZA. STOCKS SHAKING OUT THE POLITICAL DIVISION IN WASHINGTON. DREW MATUS WRITING, GIVEN THE LEVEL OF AGILITY IN THE LABOR MARKET AND ALREADY LOW LEVEL OF CONSUMER SENTIMENT, THIS TIMING MAY MAKE IT WORSE, BUT IT DOES NOT CURRENTLY SEEM A CAUSE FOR MATERIAL CONCERN. BASED ON THE MARKET MOVE, CERTAINLY NOT. ALL TIME HIGHS AND ADDING TO IT. ARE WE ON THE PRECIPICE OF A MELT-UP OR MELTDOWN? DREW: I AM MORE WORRIED ABOUT THE LATTER. EVERYONE IS EXCITED ABOUT A I, EVERYONE TALKING ABOUT WHAT IT WILL DO FOR PRODUCTIVITY. AT THE SAME TIME, THEY SAY THE REASON THAT JOBS ARE NOT BEING CREATED IS AI. THERE IS THIS WEIRD DISCONNECT BETWEEN PRICING AND ALL THE POTENTIAL BENEFITS FROM AI OVER THE LONG-TERM AND IGNORING THE TRANSITION COSTS THAT ALWAYS GO ALONG WITH SOME KIND OF TRANSITION LIKE THAT. IF YOU GO BACK TO THE ADVENT OF THE COMPUTER AGE, COMPUTERS MAKING THEIR WAY INTO COMPANIES, THERE WAS A LOT OF DISRUPTION, CREATED A LOT OF ISSUES WERE A LOT OF COMPANIES. WE ARE JUST IGNORING THAT TO GET FROM POINT A TO POINT B. THERE IS A PRETTY ROUGH ROAD THAT YOU HAVE TO TRAVEL. JONATHAN: SOUNDS LIKE THIS WAS A CONVERSATION WE HAD IN THE PREVIOUS HOUR, WHETHER YOU NEED A MASSIVE ALLOCATION OF RESOURCES BEFORE YOU CAN IDENTIFY THE ULTIMATE WINNERS OF THE CYCLE. DO YOU SEE HISTORY REPEATING? DREW: I'M NOT SURE IF IT REPEATS BUT IT WILL CERTAINLY RUN. IF YOU THINK ABOUT HOW YOU CAN DO THINGS WITH AI VERSUS HOW YOU HAVE TO DO THINGS WITH COMPUTERS BEFORE COMPUTERS, WITH COMPUTERS, YOU TOOK INDIVIDUAL JOB FUNCTIONS AND YOU STREAMLINED THEM. AI ENABLES YOU TO GO ACROSS MULTIPLE JOB FUNCTIONS, MULTIPLE SILOS. SILOED COMPANIES WILL FIND IT HARD TO COMPETE WITH COMPANIES THAT HAVE A TECHNOLOGY THAT ALLOWS THEM TO HAVE A BROADER SPAN OF CONTROL OF THINGS AND BE MUCH MORE EFFICIENT. LISA: WE LOOKING AT A MARKET THAT IS NOT THINKING RATIONALLY? NOT TO GIVE ANTHROPOMORPHIC QUALITIES TO THIS MARKET, BUT THE FACT THAT THERE IS PLENTY OF MONEY, GOVERNMENTS ARE MORE INCLINED TO STIMULATE THAT HAVE FISCAL PRUDENCE? DREW: THERE ARE A LOT OF QUIRKS GOING ON THERE, AS WELL. THE FED IS STILL SHRINKING ITS BALANCE SHEET. WE SHOULD ASK OURSELVES WHY THEY ARE DOING THAT. IT IS A LITTLE BIT LIKE THE WIZARD OF OZ, PAY ATTENTION TO THE RATE CUTS, NOT TO THE FACT THAT WE ARE SHRINKING OUR BALANCE SHEET EVEN AS WE ARE USING INTEREST-RATE'S. THEY HAVE IDENTIFIED SOMETHING THEY WANT TO DO WITH THE BALANCE SHEETS, AND THEY ARE GETTING THERE. FRANKLY, I THINK THEY ARE WILLING TO TRADE RATE CUTS TO REDUCE THE SIZE OF THE BALANCE SHEETS. IT WOULD BEHOOVE US TO THINK ABOUT WHY THAT IS NECESSARY. MAYBE THE ANSWER IS THERE IS TOO MUCH LIQUIDITY SLOSHING AROUND AND THEY NEED THAT AMOUNT RELATIVE TO THE SIZE OF THE ECONOMY BACK INTO SOME SORT OF BALANCE. LISA: IF THE FED IS WILLING TO CUT RATES, THERE IS PLENTY OF LIQUIDITY SLOSHING AROUND, YIELDS CLIMB HIGHER, YOU ARE SEEING A PULLBACK IN EQUITIES. WHERE DOES THE MONEY GO IF THERE IS SOME SORT OF SELLOFF? DREW: USUALLY WHEN THERE IS SOME KIND OF SELLOFF OR EVENT LIKE THAT, IT IS A RISK OFF EVENT. YOU MOVE INTO CASH AND OTHER THINGS LIKE THAT. ALSO WHEN YOU HAVE A LOT OF THINGS GOING ON, WE HAVE TARIFFS, LABOR STORIES, THESE EARNINGS NUMBERS, AND THEY DON'T MATCH UP, WHAT HAPPENS IS, THE VOLUME OF INFORMATION COMING IN IS TOO GREAT FOR PEOPLE TO INTERNALIZE AND MAKE DECISIONS ON. SO THEY SWITCHED TO A FIGHT OR FLIGHT INSTINCT, RISK ON OR RISK OFF. IN AN ENVIRONMENT LIKE THIS, YOU ARE MUCH MORE PRONE TO LARGE MARKET EVENTS AS PEOPLE DECIDE, I DON'T UNDERSTAND WHAT IS HAPPENING, I'M GOING TO TAKE MY MONEY OFF THE TABLE TODAY AND FIGURE OUT WHETHER I WANT TO PUT IT ON THE TABLE TOMORROW. JONATHAN: LET'S TAKE GOLD, MASSIVE RALLY THIS YEAR, ALONGSIDE THE ROUND WE HAVE SEEN IN STOCKS. IF WE HAD THAT PULLBACK, HOW TO WIN GOLD CORRELATE WITH THOSE GREATER RISKS? DREW: I'M NOT AN EXPERT IN THAT, BUT THE MOVE THAT YOU ARE SEEING HAS TO DO WITH FED CREDIBILITY, WHETHER PEOPLE BELIEVE THAT THAT IS UP TO THE TASK. THAT IS HAPPENING DESPITE THE FACT THAT THERE IS NO INFLATION PRESSURE OR LONG-TERM INFLATION EXPECTATION BECOMING UNHINGED. BUT IT IS A RELATIVE TRAIT VERSUS EQUITIES. GOLD HAS BEEN OUTPERFORMING EQUITIES. WHEN THAT KIND OF THING HAPPENS, IT'S USUALLY A SIGN WHEN PEOPLE DON'T HAVE A LOT OF FAITH THAT FED POLICY IS IN THE RIGHT SPOT, OR GOING TO CONTINUE TO BE IN THE RIGHT SPOT FOR AN INDEFINITE PERIOD OF TIME. JONATHAN: YOU CAN DISAGREE, BUT IT SOUNDS LIKE YOU DON'T HAVE MUCH PURSUIT IN THE FED IN THEIR INFLATION PURSUIT. DREW: I THINK THEY KIND OF GOT OFF COURSE. IT IS NOT IMPORTANT WHETHER INFLATION IS AT 3% OR 2%. WHAT IS REALLY IMPORTANT IS THE VOLATILITY OF INFLATION. THAT CREATES PLANNING PROBLEM FOR CORPORATIONS. IF YOU TELL ACO THEY ARE HAVING 3% INFLATION FOR THE NEXT 10 YEARS, THAT IS BETTER THAN HAVING BETWEEN ZERO AND 2% INFLATION WITH 200 BASIS POINTS OF VOLATILITY AND THAT. THE MORE CONCRETE INFORMATION YOU CAN PROVIDE THE DECISION-MAKERS, THE EASIER IT IS FOR THEM TO MAKE DECISIONS, WHICH MEANS THE ECONOMY DOES MORE BECAUSE THEY ARE MORE WILLING TO INVEST, HIRE, WILLING TO TAKE THOSE CHANCES THAT THEY NEED TO. LISA: IS IT THAT I HEDGE AGAINST A REACCELERATION IN INFLATION, OR BETTER TO HEDGE AGAINST SOME SORT OF DOWNTURN IN GROWTH RIGHT NOW? DREW: I WOULD SAY DOWNTURN IN GROWTH BECAUSE I DON'T THINK THERE'S A LOT MORE THEY CAN DO TO PUSH INFLATION LOWER. IF YOU TRY TO DO THAT, YOU END UP WITH STICKY INFLATION AND MUCH LOWER GROWTH. IF YOU ARE GOING TO HAVE INFLATION, YOU MAY AS WELL HAVE THE GROWTH TO GO ALONG WITH IT. LISA: THE LOGICAL QUESTION IS DO BOB PROVIDE THAT HEDGE TO GROWTH IF INFLATION IS STILL A CONCERN? DREW: I THINK THAT IS WHERE YOU ARE SEEING THE 10-YEAR STICK WHERE IT IS, AND THAT IS OUR EXPECTATION FOR NEXT YEAR AS WELL. 10-YEAR BETWEEN FOUR AND FOUR POINT FIVE. THAT ALSO TELLS YOU THAT WHATEVER THE FED'S RATE CUTS WILL DO, THEY WILL PROBABLY NOT BE AS EFFECTIVE AS THEY HAVE BEEN IN THE PAST, WHICH MIGHT MEAN THAT YOU MAY GET A FEW MORE OF THEM. THE MARKETS HAVE COME AROUND TO THE IDEA THAT WE MAY SEE 100 BASIS POINTS MORE EASING. THAT IS IN THE RIGHT NEIGHBORHOOD IN OUR MINDS, BUT YOU WILL NOT SEE MUCH MOVEMENT IN THE LONG END, SO YOU WILL NOT SEE MUCH CURVE STEEPENING. JONATHAN: HOW QUICKLY DO THOSE 100 POINTS COME ABOUT? DREW: I DON'T THINK THEY ARE IN A RUSH BUT IT WILL BE SUSTAINED. YOU WANT TO KEEP SIGNALING THAT YOU ARE DOING SOMETHING BUT YOU UNDERSTAND WHAT YOU ARE DOING -- THE MATERIAL IMPACT WILL BE FROM THE ANNOUNCEMENT OF DOING IT, NOT FROM THE ACTUAL ACT ITSELF. JONATHAN: DREW MATUS OF METLIFE INVESTMENT MANAGEMENT. A LOT OF THAT IS PRICED. LISA: WHICH IS WHY PEOPLE ARE SAYING HOW MUCH IS THE MARKET BRINGING FORWARD RATE CUTS THAT HAVE YET TO HAPPEN, LEAVING A REAL DISAPPOINTMENT RISK IF THOSE DO NOT COME THROUGH? JONATHAN: WHICH MEANS THEY MAY HAVE TO GO MORE, WHICH IS WHAT HE WAS BRINGING UP. LISA: ESPECIALLY GIVEN THE FACT THAT OTHER BIG WALL STREET BANKS, THE NEUTRAL RATE COULD BE NEAR WHERE HE IS TALKING ABOUT. DID YOU SEE STEPHEN MIRAN OVER THE WEEK AND SAID, IF HE SAW A RED SPEAK UP, THAT WOULD BE A CONCERN FOR HIM AND HE WOULD RECONSIDER HOW QUICKLY TO CUT RATES. SEEMS LIKE THERE IS AN ECONOMIC CHECK EVEN ON THE MOST OF HIS POSITIONS --MOST DOVISH POSITIONS. JONATHAN: EQUITY FUTURES UP BY 0.4% ON THE S & P 500. WITH AN UPDATE ON STORES WORLDWIDE, HERE IS THE HIGH REP. YAHAIRA: THE GOVERNMENT SHUTDOWN IN ITS SIXTH DAY. THE SENATE IS SET TO VOTE ON A STOPGAP SPENDING BILL THAT HAS ALREADY FAILED FOUR TIMES. CHUCK SCHUMER SAYS MIKE JOHNSON HAS REFUSED TO NEGOTIATE WITH DEMOCRATS ON EXTENDING HEALTH CARE SUBSIDIES. AMD SHARES ARE SURGING 33% IN THE PREMARKET FOLLOWING NEWS IT SIGNED A DEAL WITH OPENAI. OPENAI WILL DEPLOY SIX GIGAWATTS OF AMD GPU'S OVER MULTIPLE YEARS. THE DEAL WILL GENERATE TENS OF BILLION DOLLARS IN REVENUE FOR AMD WHILE ACCELERATING OPENAI'S INFRASTRUCTURE BUILDOUT. IN SPORTS, THE NFL HAS NO UNDEFEATED TEAMS REMAINING. THE PHILADELPHIA EAGLES FELL TO THE DENVER BRONCOS AND NEW ENGLAND PATRIOTS STUNNED THE BUFFALO BILLS. ELSEWHERE, THE BALTIMORE RAVENS FELL TO 1-4. THE NEW YORK JETS LOST TO THE COWBOYS. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: THANK YOU. NEXT, THE MORNING CALLS, CATCHING UP WITH JAY GOLDBERG ON WHAT HE CALLED BUBBLELIKE BEHAVIOR IN THE CHIPS SECTOR. THAT CONVERSATION IS JUST AROUND THE CORNER. ♪ > > I THINK THE REALITY IS THAT AI BOOM IS REAL, IT IS NOT GOING TO BE A QUESTION AROUND HUNDREDS OF BILLIONS OF DOLLARS OF CAPEX BUT RATHER TRILLIONS. HOW IT WILL REALLY IMPACT AND BENEFIT MULTIPLE SECTORS OF THE U.S. AND THE GLOBAL ECONOMY. LOTS OF OPPORTUNITY FOR PRODUCTIVITY GAINS, MAY BE SURPRISED IN UPSIDE FOR THE GROWTH. JONATHAN: THAT WAS EARLIER THIS MORNING FOLLOWING ANOTHER BIG DEAL IN THE SECTOR. POSITIVE BY 0.4% ON THE S & P. NASDAQ UP BY 0.9. THE GAINS CONTINUE LARGELY THANKS TO AMD. NOW HIGHER BY 33%. FOLLOWING THIS DEAL WITH OPENAI. LISA: AMD HAS A SEAT AT THE TABLE WITH THE LIKES OF ORACLE, MICROSOFT. THERE CHIPS WILL ALSO BE USED WITH OPENAI. HOW MUCH IS OPENAI AT THE CENTER OF ALL THINGS HAVING TO DO WITH ALGORITHMIC LEARNING, HOW INTERTWINED ARE ALL OF THESE COMPANIES AT A TIME OF INCREDIBLY ELEVATED VALUATIONS? JONATHAN: LET'S GET SOME MORNING CALLS. WELLS FARGO RAISING HIS PRICE TARGET ON MICROSOFT COME EXPECTING TO BENEFIT FROM HIGHER CLOUD DEMAND. MORGAN STANLEY UPGRADING MICRON TO OVERWEIGHT. FINALLY, GOLDMAN RAISING ITS PRICE TARGET ON NVIDIA, POINTING TO GROWTH FROM ITS STRATEGIC INVESTMENTS AND PARTNERSHIPS. JAY GOLDBERG CALLING THE RECENT MOVES IN AI BUBBLELIKE BEHAVIOR. JAY GOLDBERG JOINS US NOW. YOU HAVE A RARE CELEBRATING ON NVIDIA. BUBBLELIKE BEHAVIOR. DOES THE ANNOUNCEMENT FROM THE AMD AND OPENAI SPEAK TO SOME OF THAT FOR YOU? JAY: ABSOLUTELY. IT'S AN INTERESTING THING TO WAKE UP WHEN YOU HAVE A COMPANY GIVING AWAY 10% OF ITS STOCK TO A STARTUP THAT DOESN'T HAVE POSITIVE FREE CASH FLOW, TWO BY TENS OF BILLIONS OF DOLLARS ON THEIR PRODUCT SOMEWHERE DOWN THE LINE, AND THAT COMPANY STOCK IS UP 30%. ON THE FACE OF IT, IT LOOKS LIKE A GOOD DEAL FOR AMD OVER THE LONG TERM , BUT THE MARKET REACTION SEEMS TO BE LOOKING AT ONLY THE POSITIVES, APPLYING A 0% DISCOUNT RATE TO FUTURE EVENTS, NOT LOOKING THROUGH THE WHOLE DEAL. LISA: IN THE PAST, WE HAVE SEEN EARNINGS OUTPERFORM AGAIN AND AGAIN FROM THESE COMPANIES. PEOPLE WILL SAY, IF YOU LOOK AT THE PRICE TO THE ACTUAL INCOME LEVEL, YOU SEE MULTIPLES COME DOWN, NOT GO UP. EVEN WITH PRICES GOING UP SIGNIFICANTLY. WHAT ABOUT THAT STORY DOESN'T WORK FOR YOU IN THE SAME WAY THAT IT DID THREE YEARS AGO? JAY: I AM NOT A BEAR ON AI IN GENERAL. IT HAS THE POTENTIAL TO BE VERY IMPORTANT. BUT NO TECHNOLOGY IS ADOPTED IN A STRAIGHT LINE. WE SAW THAT WITH THE INTERNET, WE SAW THAT WITH MOBILE. THESE THINGS GO UP AND DOWN. JUST ASSUMING, DRAWING STRAIGHT LINES AND EXTRAPOLATING WHERE WE ARE TODAY INTO SOME SORT OF NEVER ENDING FUTURE, THAT IS NOT HOW THINGS WORK. WE NEED JUST A LITTLE DEGREE OF CAUTION AROUND SOME OF THIS STUFF. A LOT OF THESE THINGS ARE GETTING VERY EXTENDED JUST BASED ON WHAT THE ACTUAL DEPLOYMENTS ARE LOOKING LIKE, RETURNS THAT THE HYPERSCALERS ARE GETTING ON THEIR INVESTMENTS. LISA: WHAT DO YOU THINK IS MOST SPECULATIVE? I KNOW YOU'RE A RATING ON NVIDIA, BUT ARE THEY THE BIGGEST OFFENDER RIGHT NOW IN YOUR MIND? JAY: WE HAVE THIS MASSIVE AI'S TAKING PLACE RIGHT NOW, BUT IF YOU BOIL IT ALL DOWN, IT IS REALLY SIX COMPANIES DRIVING ALL OF THAT. MICROSOFT, AMAZON, GOOGLE, META, OPENAI. I UNDERSTAND THEIR IMPERATIVES, WHY THEY ARE DOING THIS, BUT I THINK IT IS WORTH REFLECTING, IT IS JUST SIX COMPANIES. NONE OF THEM ACTUALLY HAVE A VERY CLEAR RETURN ON THEIR INVESTMENT. THEY ARE SPENDING IT BECAUSE EVERYONE ELSE IS SPENDING. OPENAI IS AN INCREDIBLY CAPABLE COMPANY WITH GREAT MODELS, BUT AT THE SAME TIME, THEY ARE FREE CASH FLOW NEGATIVE. THAT CALLS INTO QUESTION THE WHOLE SUSTAINABILITY OF THIS. JONATHAN: IT IS BRINGING IN MULTIPLE SECTORS, THE ENERGY, CAPITAL PROVIDERS, TECH. I KNOW BASED ON YOUR WRITING, YOU THINK THAT THIS COULD CAUSE PROBLEMS DOWN THE ROAD. THE CONCENTRATION EXACERBATES THE DOWNSIDE RISK. JAY: THAT IS ABSOLUTELY THE CASE. WHEN I HEAR MY COLLEAGUES TALK ABOUT ENERGY AND PIPELINES AND MATERIALS, AND THEY ALL TALK ABOUT THE AI ELEMENT TO THEIR STOCK GROWTH. THAT JUST MAKES ME PAUSE. I HAVE BEEN COVERING SEMICONDUCTORS FOR 20 YEARS NOW. I HAVE A GOOD RELATIONSHIP WITH MY PEERS BUT THERE'S NEVER BEEN A LOT OF OVERLAP. HERE WE HAVE EVERYONE TALKING ABOUT THE SAME THEMES. JONATHAN: THE ENERGY PIECE OF IT IS INTERESTING. THERE HAS BEEN A BROADER CONVERSATION, PEOPLE ACKNOWLEDGE THE POTENTIAL FOR CONSTRAINTS. WILL THAT BE THE FIRST CONSTRAINT, THE THING THAT SHAKES THIS UP QUICKLY? JAY: ABSOLUTELY. I AM CAUTIOUS ON NVIDIA. MY READING IS MORE UNDERPERFORMED THAN SELL. BUT THE ISSUE IS, ALL THE GOOD NEWS IS PRICED INTO NVIDIA, NONE OF THE POTENTIAL DOWNSIDE IS PRICED IN. A LOT OF THINGS THAT COULD GO WRONG BEYOND THEIR CONTROL. TOP OF THAT LIST IS ELECTRICITY. WE DON'T KNOW TO THE EXTENT TO WHICH OPENAI CAN DELIVER ON ALL OF THESE ELECTRICITY NUMBERS THEY PUT OUT THERE. IN THE LAST WEEK, THEY HAVE TALKED ABOUT ADDING 16 GIGAWATTS OF COMPUTE CAPACITY. I DON'T THINK ANYONE KNOWS WHERE THAT PARABLE COME FROM. THEY HAVE SOME ROUGH IDEAS BUT NOT ALL OF THEM ARE A LOCK. THAT IS A REAL PROBLEM. THAT WILL PAUSE THINGS SOMEWHERE DOWN THE ROAD. LISA: HOW FAR AWAY FROM SOME SORT OF ENERGY RELATED CONSTRAINT THE PROMISES OF HOW MUCH EXPANSION CAN MEET REALITY? JAY: THAT IS A LITTLE BIT BEYOND MY SCOPE, I'M JUST A HUMBLE SEMICONDUCTOR ANALYST, BUT I THINK WE WILL SEE CONCERNS ABOUT THAT IN THE NEXT YEAR. LISA: AT WHAT POINT DO YOU SEE THIS AS A QUESTION OF THE U.S. VERSUS CHINA GIVEN DEEPSEEK? DO YOU THINK THAT ISSUE WILL COME TO THE FORE, THERE COULD BE SOME NEW INNOVATION THAT RENDERS SOME OF THE BIG TECH COMPANIES MORE OBSOLETE IN SHORT ORDER? JAY: IT IS THIS WEIRD DICHOTOMY WE HAVE. THE U.S. HAS CHIPS BUT NOT A LOT OF ELECTRICITY. CHINA HAS ALL THE ELECTRICITY THEY NEED BUT NOT ENOUGH CHIPS. BOTH SIDES FACE THEIR OWN CONSTRAINTS, BUT I THINK THERE WILL BE SOME PRETTY SIGNIFICANT -- I DON'T WANT TO SAY BREAKTHROUGHS -- BUT ADVANCES IN CHINA AS COMPANIES LIKE HUAWEI FIND WAYS TO BUILD THEIR OWN DOMESTIC SUPPLY CHAIN THAT GETS THEM OUT FROM UNDER THESE U.S. RESTRICTIONS. THEY WILL PROBABLY NOT BE AS GOOD AS THE BEST THAT NVIDIA AND AMD HAVE TO OFFER THEM BUT THEY MAY BE GOOD ENOUGH TO PUSH AHEAD. AN IMMENSE AMOUNT OF TALENT IN CHINA. I DON'T WANT TO OVERSTATE IT, I THINK THE U.S. STILL HAS A PRETTY BIG LEAD IN TERMS OF FUNDAMENTAL MODELS, BUT THERE IS AN INCREDIBLE AMOUNT OF TALENT IN CHINA AND THEY ARE NOT AS CONSTRAINED AS THE U.S. GOVERNMENT MAY THINK. JONATHAN: WHEN YOU SAY THAT CHINA HAS THE ELECTRICITY, NOT THE CHIPS, THAT THE U.S. HAS THE CHIPS AND NOT THE ENERGY CONSTRAINTS, WHICH PROBLEM IS EASIER TO FIX? JAY: I THINK IT WILL BE CHINA GETTING AROUND U.S. SANCTIONS, PROBABLY BY BUILDING THEIR OWN SUPPLY CHAIN. JONATHAN: JAY GOLDBERG, COME BACK SOON. WE HAVE A LOT TO TALK ABOUT. THE BEARISH VIEW RELATIVE TO THE EXUBERANCE ELSEWHERE THIS MORNING AT LEAST. LISA: A LOT OF CONSTRAINTS THAT WE HAVE NOT EXPERIENCED, WHETHER IT IS ENERGY OR THAT COMPETITION FROM OVERSEAS. THAT LAST POINT IS INTERESTING, CHINA'S CONSTRAINTS ARE LESS ONEROUS THAN THE U.S.'S. JONATHAN: YOU THINK IT WOULD BE EASIER TO BUILD OUT THE ENERGY INFRASTRUCTURE. I AM NO EXPERT ON THE MATTER, BUT IF YOU WOULD ASK THE LAYPERSON, THEY WOULD THINK IT IS EASY TO DO SOMETHING WITH ENERGY. BUT THAT IS THE DOWNSIDE CASE FOR NVIDIA, BASED ON WHAT JAY SAID. LISA: HOW LONG DOES IT TAKE TO BUILD A NUCLEAR PLANT? WE HAVE TALKED ABOUT THAT. HOW LONG DOES IT TAKE TO GET THE PERMIT INC. FOR THESE ENERGY PLANTS? MNIMBY. WHO WANTS AN ENERGY PLANT IN THEIR BACKYARD? JONATHAN: LISTEN CAREFULLY TO WHAT HE SAID, UNDERPERFORMED BUT NOT A CELL. THE NASDAQ UP BY .9%. LISA: HE IS STILL A BELIEVER. HE IS NOT SAYING THIS IS A HUGE BUBBLE. HE IS SAYING MAYBE WE ARE GETTING INTO THIS WHOLE CIRCULAR FINANCING THING, LEAVING ME A LITTLE QUEASY. JONATHAN: EVEN IF ULTIMATELY DOWN THE ROAD YOU MIGHT BE RIGHT. NASDAQ 100 UP BY 1%. LINDSEY PIEGZA FROM STIFEL NICOLAUS WITH THE GOVERNMENT SHUTDOWN AFFECTING MORE ECONOMIC DATA. ♪ JONATHAN: LIVE FROM NEW YORK CITY, WELCOME BACK TO THE PROGRAM. 60 MINUTES AWAY FROM THE OPENING BELL. UP BY ZERO POINT 4% ON THE S & P 500. 0.9 ON THE NASDAQ 100. 2-YEAR BOND YIELDS DOWN LAST WEEK. 3.50. UP THIS MORNING BY A COUPLE BASIS POINTS. 3.59. 10-YEAR IN FOCUS ON WEDNESDAY. LISA: TALKING ABOUT GLOBAL SELLOFF'S IN DEVELOPED MARKET BONDS BECAUSE OF THE FISCAL BACKDROP. I JUST WONDER HOW MUCH OF THIS IS A RESULT OF BOND FUND MANAGERS SAYING TO PEOPLE, THIS IS THE TIME TO GET INTO LONGER-TERM BONDS, THIS IS THE INCOME TRADE. WE SAW THOSE BECAUSE THE LAST COUPLE OF WEEKS. THEN HOLD ON, YIELDS CAN GO UP WHEN YOU HAVE A GLOBAL HOOK UP. HOW MUCH STAYING POWER THAT HAS. JONATHAN: IT IS INTERESTING, BUT COMPARED TO THE MOVES THAT WE ARE SEEING IN THE STOCK MARKET ELSEWHERE, AMD, THE CEO SPEAKING IN A CONFERENCE CALL, SAYING THE OPENAI DEAL IS NOT EXCLUSIVE AND THAT THEY CANNOT SUPPLY EVERYONE. THAT IS A NORMAL IN STOCK TO WATCH. WITH MORE, HERE IS YAHAIRA JACQUEZ. YAHAIRA: AMD SHARES RISING 35% IN THE PREMARKET, AFTER IT SIGNED A MULTIYEAR DEAL WITH OPENAI TO SUPPLY SIX GIGAWATTS OF AI CHIPS, A MOVE THAT CAN BRING AMD TENS OF BILLIONS OF DOLLARS IN NEW REVENUE. THE LATEST SIGN THAT THE AI BUILDOUT SHOWS NO SIGNS OF A SLOWDOWN. INTEL RISING 2%. MOVING ON TO ANOTHER TECH PLAYER, TESLA, SHARES UP 2% IN THE PREMARKET, AFTER THE COMPANY TEASED WHAT LOOKS LIKE A NEW PRODUCT REVEALED. SPARKING THOSE ABOUT WHAT COULD BE NEXT FOR TESLA. WE END ON AN M & A DEAL, FIFTH THIRD BANCORP. FIFTH THIRD WILL BE BUYING COMERICA IN A $10.9 BILLION DEAL. IT IS THE LATEST REGIONAL BANK MERGER AS THESE COMPANIES TRY TO TAKE ADVANTAGE OF THE TRUMP ADMINISTRATION'S DEREGULATORY PUSH. JONATHAN: SOME OF THE MOVES TO LOOK FOR AT THE OPENING BELL. LET'S TURN TO THE GOVERNMENT SHUTDOWN. THE CONTINUED STAND UP IN WASHINGTON PLAGUING THE RELEASE OF ECONOMIC DATA. MICHAEL MCKEE HAS BEEN STRUGGLING TO KEEP UP. WHAT DO WE LOOK AT IF WE DON'T HAVE THE TRADITIONAL INDICATORS? > > YOU CAN WATCH SURVEILLANCE. WE HAVE TO BUY INTO THE IDEA THAT THIS WILL GO ON FOR A WHILE. THE GOOD NEWS IS WE DON'T HAVE A LOT OF SIGNIFICANT DATA DUE OUT THIS WEEK. WE WILL MISS TRADE FIXTURES, JOBLESS FIGURES ON THURSDAY, INVENTORIES ON THURSDAY. NOT BEING INDICATORS THAT WILL CHANGE ANYONE'S MIND ABOUT THE FED. WE GET NEW YORK FED EXPECTATIONS TODAY, SENTIMENT ON FRIDAY. WEDNESDAY IS THE BIG DAY. FIRST MINUTES FOR STEPHEN MIRAN. WHAT DID THEY SAY ABOUT CONTINUING THE RATE CUTTING CYCLE? WE WILL ALSO GET LOTS OF FED SPEAK TO THAT POINT. THE QUESTION IS HOW MUCH OF IT WILL MATTER BECAUSE THEY DON'T HAVE SOMETHING NEW TO TALK ABOUT? A TREMENDOUS NUMBER OF SPEAKERS LED OFF TODAY BY JEFFREY SCHMID, THE KANSAS CITY FED PRESIDENT, THE MOST HAWKISH PERHAPS ON THE BOARD. A LOT OF PEOPLE SPEAKING BUT WHAT WILL THEY SAY WHEN THERE IS NO NEW DATA TO TALK ABOUT? NEXT WEEK WILL BE A REALLY GOOD WEEK. JUST PUTTING THIS OUT THERE TO MAKE YOU FEEL BETTER ABOUT THE THINGS THAT WE WILL MISS IF THEY DON'T GET DONE. JAY POWELL IS SPEAKING ON THE 14TH, SPEAKING ABOUT THE ECONOMIC OUTLOOK. THAT WILL BE THE HIGHLIGHT OF THE WEEK. THEN MAKE IT CPI, PPI, RETAIL SALES, IMPORT PRICES, HOUSING STARTS, OR WE DON'T GET THEM IF THE GOVERNMENT REMAINS SHUT FOR A THIRD WEEK. SOMETHING TO LOOK FORWARD TO AND MAYBE KEEP YOUR FINGERS CROSSED. JONATHAN: LET'S GO TO CPI. IS THERE A KEY COLLECTION PERIOD, EVEN IF WE OPENED UP THE DAY BEFORE, THEY WOULDN'T BE ABLE TO PRODUCE THE DATA? MICHAEL: IT DEPENDS ON HOW MUCH TIME THEY HAVE. THEY HAVE BEEN STRUGGLING WITH A LACK OF PEOPLE TO DO ALL THE WORK. 2013, THEY DID PRODUCE A CPI WHEN THE GOVERNMENT FINALLY REOPENED, BASED ON ABOUT 45% OF THE USUAL DATA. THEY CAN DO IT, IT'S JUST A QUESTION OF HOW MUCH CREDENCE YOU WILL GIVE THE NUMBERS, HOW MUCH IT WILL MATTER BY THE TIME THEY GET IT OUT. JONATHAN: THANK YOU. STRUGGLING TO KEEP UP WITH THIS ONE BUT ULTIMATELY HOPING THAT WE GET A READ ON U.S. INFLATION NEXT WEEK. LINDSEY PIEGZA JOINS US NOW FOR MORE. WE DIDN'T GET PAYROLLS, WE MAY NOT GET CPI. WE WILL GET A FED MEETING. I'M TOLD THEY ARE ESSENTIAL. IF THEY MEET AND THEY DON'T HAVE CPI AND PAYROLLS, DO THEY MAKE THE DECISION TO CUT INTEREST RATES? LINDSEY: EVEN WITHOUT AN UPDATED LOOK AT THE DATA, THE CONVERSATION WILL BE FIERCE. WE HAVE THIS GROWING NUMBER OF OFFICIALS CONCERNED ABOUT A LINGERING LEVEL OF INFLATION. THOSE THAT ARE FOCUSED MORE ON THE WEAKNESS OF EMPLOYMENT. EVEN WITHOUT A NEW DATA POINT, THIS CONVERSATION WILL INTENSIFY AND COMPLICATE THE ABILITY OF THE FED TO JUSTIFY ANY FURTHER MOVEMENT. THE LACK OF DATA WILL REINFORCE THE NEED FOR A MORE PATIENT, CAUTIOUS APPROACH TO POLICY FROM HERE. LISA: WHAT DATA ARE YOU WATCHING RIGHT NOW GIVEN THE GOLD STANDARD DATA, WHICH IS FLAWED, YES, BUT THE BEST THAT WE HAVE GOT? WHAT ARE YOU FOCUSING ON INSTEAD? LINDSEY: WE STILL HAVE A LOT OF INFORMATION ON THE PRICE SIDE. WE ARE STILL WAITING TO SEE IF WE GET AN UPDATED CPI OR PPI REPORT BUT WE HAVE A LOT OF INFORMATION TO SUGGEST THAT INFLATION IS NOT NECESSARILY HEADING BACK TO THE 2% PRICE LEVEL. SOME OF THE PREFERRED MEASURES OF INFLATION, CORE PCE STILL NEAR 3%, WITH RECENT REPORTS ADJUSTING UPWARD MOMENTUM IN THE PIPELINE. IT'S VERY IMPORTANT THE FED STAYS FOCUSED ON THAT MANDATE FOR PRICE STABILITY EVEN WITH EARLY SIGNS OF A COOLING IN TOPLINE HIRING. THE FED SHOULD NOT COMPLETELY ABANDON THAT PRICE STABILITY COMPONENT WHICH HAS FAILED TO REINSTATE FOR YEARS NOW POST-PANDEMIC. LISA: AT THE SAME TIME, WE SAW JOB OPENINGS PER UNEMPLOYED PEOPLE, THAT RATIO FELL TO THE LOWEST LEVEL SINCE 2021, NONFARM PAYROLLS THAT WERE CONCERNING TO SOME PEOPLE, PRETTY SIGNIFICANT DOWNWARD REVISIONS TO THE OVERALL PAYROLLS NUMBERS FOR THE YEAR ENDING IN MARCH. WHAT CREATES DO YOU GET TO THE IDEA THAT THERE IS A SIGNIFICANT SHIFT IN THE LABOR MARKET THAT WARNS ATTENTION BY THE FED? LINDSEY: WE ALSO SEE JOBLESS CLAIMS, WHILE VOLATILE, IN A TIGHT RANGE. UNEMPLOYMENT IS STUBBORNLY NEAR 4%. AT THE LEAST COME THE LABOR MARKET DATA IS NOT ALL POINTING IN THE SAME DIRECTION, WHICH IS NOT TO SAY THAT WE IGNORE THE DATA POINTS ON THE WEAKER SIDE, BUT TO SAY IT IS NOT AN ALARM BELL QUITE YET. IT IS SOMETHING TO BE AWARE OF. THAT SAID, THIS IS A VERY AGED RECOVERY. GIVEN THE INTRODUCTION OF INTERNATIONAL FLOWS, THE NEED FOR TOPLINE HIRING TO SLOW. AS WE HEARD FROM CHAIR POWELL, HE NOTED FULL EMPLOYMENT WAS AROUND 125, 150,000 IN TERMS OF PAYROLLS. HE HAS SIGNIFICANTLY LOWERED THAT. NOT NECESSARILY AN EXPANDING LABOR MARKET BUT CERTAINLY ENOUGH TO KEEP STABILITY IN PLACE IN TODAY'S LABOR MARKET. JONATHAN: CAN WE PAD THAT VIEW WITH WHAT IS HAPPENING IN STOCK MARKETS, FINANCIAL CONDITIONS? DO YOU THINK THE FED IS RISKING MISPLACING ITS ANCHOR AROUND THE LABOR MARKET, ULTIMATELY FUELING FINANCIAL A EXCESESS. LINDSEY: TRADERS ARE TRADING UP ON GOOD DATA. THE ECONOMY IS RELATIVELY SOLID. TRADING UP ON BAD DATA AS WELL. THIS IS THE EXPECTATION THAT THE FED WILL JUMP IN AND PROVIDE MONETARY POLICY SUPPORT WITH ADDITIONAL POLICY EASING, EVEN AT THE EXPENSE OF MAINTAINING STILL ELEVATED INFLATION. I DO THINK THE MARKET HAS BECOME COMPLACENT, THAT THE FED WILL CONTINUE TO SUPPORT THE ECONOMY REGARDLESS OF THE BALANCE IN TERMS OF THE RISKS ON BOTH SIDES OF THE MANDATE TILTING TO ONE SIDE OR THE OTHER. JONATHAN: I APPRECIATE YOUR TIME. LINDSEY PIEGZA FROM STEEPLE ON THE ECONOMY. AMD IS A TWO AND A $70 BILLION COMPANY AND WE ARE SEEING A 30% MOVE ON THE BACK OF AN OPENAI DEAL. OPENAI IS NOT MAKING MONEY AND WE ARE LEVERAGING A LOT OF BETS ON THE IDEA THEY CAN KEEP ON SPENDING AND KEEP ON SPENDING. LISA: THIS IS THE KIND OF MOVE THAT WE SAW IN ORACLE. THESE ARE HUGE COMPANIES, HUNDREDS OF BILLIONS OF DOLLARS OF MARKET CAPITALIZATION MOVING SIGNIFICANTLY OFF THE PROMISES THAT HAVE NOT BORNE OUT, DON'T HAVE A LOT OF TANGIBILITY TO THEM, WHICH HIGHLIGHTS HOW ENTHUSIASTIC PEOPLE ARE. IT RAISES THE QUESTION OF BUBBLES OR INCREDIBLE EXUBERANCE, WHATEVER YOU WANT TO CALL IT. I KEEP ON THINKING ABOUT THAT 9000 FIGURE FROM JULIAN EMANUEL, HE SEES A CHANCE THAT WE COULD SEE THE S & P RISE TO 9000 BY THE END OF NEXT YEAR AS A RESULT OF SOME OF THESE DYNAMICS. JONATHAN: AMD IS UP 35%. ED LUDLOW WILL JOIN US TO BREAK DOWN THAT AGREEMENT. LET'S GET AN UPDATE ON STORIES WORLDWIDE. YAHAIRA: THE FRENCH PRIME MINISTER HAS RESIGNED THREE WEEKS OF THEM BEING NAMED TO THE POST, ONE DAY AFTER A CONTROVERSIAL CABINET RESHUFFLE. MACRON NOW HAS TO DECIDE WHETHER TO NAME A NEW PRIME MINISTER, CALL PARLIAMENTARY ELECTION OR RESIGN HIMSELF. THE RISING UNCERTAINTIES SENDING FRENCH BOND YIELDS HIGHER. MEANWHILE, PRESIDENT TRUMP IS URGING ISRAEL AND HAMAS TO REACH A SETTLEMENT TO END THE WAR IN GAZA. MEDIATED TALKS BEGIN TODAY IN EGYPT WITH STEVE WITKOFF AND TENDING. THE FIRST TEST OUR PROGRESS WILL BE WHETHER HAMAS RELEASES THE REMAINING HOSTAGES IN EXCHANGE FOR ISRAEL FREEING PALESTINIAN PRISONERS. A CHANGE AT THE TOP OF VERIZON. DAN SCHULMAN HAS BEEN NAMED AS THE NEW CEO. HANS VESTBERG WILL SERVE AS A SPECIAL ADVISOR THROUGH OCTOBER 4. SCHULMAN WAS THE FORMER CEO OF PAYPAL. JONATHAN: THANK YOU. NEXT ON THE PROGRAM, SETTING YOU UP FOR THE DAY AHEAD, CATCHING UP WITH JAMES TIERNEY OF ALLIANCEBERNSTEIN. ED LUDLOW ON THIS MOVE HERE, AMD UP IN THE PREMARKET BY 35%. THAT IS NEXT. THIS IS BLOOMBERG. ♪ > > A I HAVE THE POTENTIAL TO BE VERY IMPORTANT BUT NO TECHNOLOGY IS ADOPTED IN A STRAIGHT LINE. THERE WILL ALWAYS BE FITS AND STARTS. EXTRAPOLATING FROM WHERE WE ARE TODAY INTO SOME SORT OF NEVER ENDING FUTURE, THAT IS NOT HOW THINGS WILL WORK. ALL THE GOOD NEWS IS PRICE INTO NVIDIA AND NONE OF THE POTENTIAL DOWNSIDE IS. LOTS OF THINGS THAT CAN GO WRONG THAT IS BEYOND THEIR CONTROL. JONATHAN: A LOT OF THINGS GOING RIGHT THIS MORNING FOR A LOT OF STOCKS. EQUITIES ON THE S & P FIRMER. NASDAQ UP BY .8%. ONE STOP GETTING OUR ATTENTION, SHARES OF AMD ABSOLUTELY SOARING ON THE BACK OF A DEAL WITH OPENAI. THAT STOCK IS UP MORE THAN 36%. ED LUDLOW HAS MORE. IF I TOLD YOU THIS DEAL AHEAD OF TIME, WOULD YOU HAVE PUT A NUMBER ON THE BACK OF IT? ED: I WOULD HAVE SAID YES ON THE AMD MOVE, REACTION TO THE STORY, BUT I WOULD STILL BE SURPRISED AT THE STORY. THE STRUCTURE OF THE DEAL IS REALLY IMPORTANT HERE. SIX GIGAWATTS, THE CAPACITY OF PEAK TIME AND DEMAND FOR A LARGE CITY WHEN TALKING ABOUT ELECTRICITY, SO IT'S A SERIOUS DEAL, AND AMD IS TALKING ABOUT TENS OF BILLIONS OF DOLLARS. THE THING YOU HAVE TO UNDERSTAND, OPENAI STILL HAVE TO UNDERSTAND, OPENAI STILL HAD TO SPEND MONEY HERE. AMD HAS ISSUED A WARRANT FOR OPENAI BUT THEY ARE IN TRANCHES AGAINST DELIVERABLES. UNLESS OPENAI SPENDS MONEY, IT IS HARD TO UNDERSTAND HOW THIS COMES TO FRUITION INTO REAL LIFE. JUST LIKE NVIDIA BEING THE GOLDEN TICKET FOR AI IF YOU ARE A SOFTWARE COMPANY, OPENAI IS THE GOLDEN TICKET IF YOU ARE A HARDWARE COMPANY. JONATHAN: HOW MUCH ARE WE LEVERAGING ON THE SUCCESS OF ONE COMPANY TO KEEP ON SPENDING, KEEP ON SPENDING WHEN THEY ARE NOT MAKING ANY MONEY? ED: THAT IS WHY I SAY THE STRUCTURE OF THE DEAL IS IMPORTANT. THERE IS A DIFFERENCE BETWEEN WHAT OPENAI AND AMD HAVE AGREED TO DO VERSUS WHAT WE HAVE BEEN CALLING CIRCULAR FINANCING. IN PARALLEL, THE NVIDIA-OPENAI DEAL SAW DELIVERABLES BUT GAVE OPENAI PROBABLY SOMETHING IN LIEU OF CASH, LET'S CALL IT SHIPS. BUT THEY GOT OPENAI EQUITY IN RETURN. IN THIS CASE, OPENAI IS GETTING AMD EQUITY. THE MAIN THING IS THE SIMPLE QUESTION, YOU ARE ALL COMMITTING TO THIS. WHAT IF, 10 YEARS DOWN THE LINE, YOU DON'T NEED THAT CAPACITY AND YOU HAVE DONE YOUR MATH WRONG? JONATHAN: LOOKING FORWARD TO THE PROGRAM LATER THIS MORNING. BLOOMBERG TECHNOLOGY AT 11:00 A.M. ED LUDLOW AND CAROLINE HYDE. AMD UP BY 35%. LISA: BUYING RELEVANCE BECAUSE AMD WAS NOT IN THE GAME. NVIDIA WAS THE BIG CHIPMAKER AND AMD WAS GETTING LOST IN THE DUST. SUDDENLY, IF THEY CAN COME UP WITH MICROPROCESSORS FOR THE LIKES OF OPENAI, DOES THAT UNLEASH A WHOLE SLEW OF VALUE NOT YET PRICED IN? JONATHAN: JAMES TIERNEY RIGHTS, SHOULD THE FUNDING SPIGOT TURNOFF IN 26 OR 27, THE ENTIRE ECOSYSTEM WILL SLOW DOWN IN THE MARKET IS NOT CURRENTLY PRICING THAT IN. JIM, GOOD MORNING. THAT WAS THE WAY THAT YOU FRAME THINGS COMING INTO THE STUDIO. WHAT DO YOU THINK OF THE DEAL, HOW DOES IT DIFFER TWO THINGS ANNOUNCED IN THE PAST MONTH? JIM: IT MAKES SENSE FOR AMD. BROADCOM AND NVIDIA WERE THE TOP TWO PLAYERS. THIS BUYS THEM RELEVANCE. THE OPENAI SEAL OF APPROVAL REALLY MATTERS. LISA: DOES IT CONCERN YOU THAT AI IS THE NEW BITCOIN OR BLOCKCHAIN, THAT ALL YOU HAVE TO DO IS ANNOUNCE A DEAL THAT MAY OR NOT COME TO FRUITION IN ORDER TO SEE YOUR STOCK SERVED BY THIS MUCH? JAMES: I THINK THE MARKET IS SO BINARY RIGHT NOW, PEOPLE ARE LOOKING FOR AN AI STORY. THIS IS A REALLY BIG STORY. THE QUESTION IS WHAT PRODUCTIVITY WILL ALL THIS DRIVE? IF THE PRODUCTIVITY IS THERE TO DO MORE OR MORE WITH LESS, WE WILL SEE MORE OF THIS. LISA: THERE IS ALSO THIS QUESTION OF CREATING THE CAPACITY IN THE ENERGY SPACE WHICH CAN ALLOW THAT PRODUCTIVITY, ALLOW THE PROMISES TO COME THROUGH THE PIPELINE. WE WERE TALKING WITH A SEAPORT ANALYST NOTING THAT MAY BE THE CONSTRAINT THAT PUTS A STOP TO THIS. HOW FAR ARE WE AWAY FROM THAT, IS THAT VERY MUCH ON YOUR RADAR? JAMES: MANY THINGS HAVE TO GO RIGHT HERE. WE NEED TO HAVE THE ENERGY, DATA CENTERS, THE CHIPS. SO MANY PEOPLE ARE FOCUSED ON THIS, THAT IS NOT MY BIGGEST CONCERN HERE. JONATHAN: WHAT IS YOUR BIGGEST CONCERN? JAMES: THAT THE PRODUCTIVITY DOESN'T PLAY OUT. JONATHAN: WE ARE WAITING FOR THESE REVELATIONS TO COME. WHEN DO WE START TO LOSE PATIENCE, OR ARE WE SEEING IT ALREADY? JAMES: WE ARE SEEING LITTLE BITS OF IT RIGHT NOW. WE NEED TO SEE MORE GIVEN THE AMOUNT OF SPENDING THAT WILL BE DONE OVER THE NEXT COUPLE OF YEARS. JONATHAN: SPENDING IS KEY. THERE IS A LOT OF SPENDING. ANY REASON TO BELIEVE THAT SPIGOT WILL BE TURNED OFF ON THE SPENDING, OR IS THAT LINKS TO THE FACT THAT THESE COMPANIES NEED TO SHOW THAT THEY ARE GENERATING RETURNS ON THE INVESTMENT? JAMES: WE WILL HEAR A LOT MORE IN THE NEXT FEW WEEKS WITH EARNINGS, SEE WHAT CAPEX BUDGETS LOOK LIKE, BUT I THINK THEY ARE GOING UP. I DON'T THINK THE SPIGOT TURNS UP IN 26 OR 27. LISA: HOW MUCH DO YOU THINK THE HIGH VALUATIONS ARE SIMPLY BECAUSE PEOPLE CANNOT PRICE IN THE MACRO ENVIRONMENT RIGHT NOW AND ARE LOSING FAITH IN GOVERNMENT RELATED ASSETS? IN A SERIOUS WAY, PEOPLE SAY I CANNOT PRICE A MACRO ENVIRONMENT THAT IS A BLACK BOX, BUT I CAN PRICE IN SOME OF THE POTENTIAL GAINS IN PRODUCTIVITY, GAINS MORE BROADLY, QUALITY OF LIFE FROM ARTIFICIAL INTELLIGENCE? JAMES: THE AMOUNT OF MONEY THAT HAS BEEN MADE IN THE SPACE THE LAST COUPLE OF YEARS IS MASSIVE, SO PEOPLE WANT TO SAY WHAT IS THE NEXT OPPORTUNITY. THERE IS A LITTLE BIT OF CHASE HERE. LISA: ARE YOU LETTING UP ON THE POSITIONING OR GETTING DOWN BECAUSE A BUBBLE IS GOING TO BUBBLE? JAMES: WE HAVE A VARIETY OF EXPOSURES, THINGS THAT ARE OBVIOUS LIKE NVIDIA, OR THINGS THAT ARE LESS OBVIOUS. WE ARE PLAYING ACROSS A DIFFERENT NUMBER OF OPPORTUNITIES. JONATHAN: WHERE IS THAT EXPOSURE THAT YOU WANT TO GET TO, THINGS THAT ARE STILL UNDERPRICED? JAMES: SOME OF THE THINGS THAT WE HAVE TALKED ABOUT. COPPER CONNECTORS BEING IN THE NVIDIA BOXES. THAT IS AN OPPORTUNITY. EATON IN THE DATA CENTERS, PROVIDING THAT ELECTRICAL EQUIPMENT. JONATHAN: IS IT ALL BECOMING ONE TRADE? ARE YOU SENSING THAT FROM THE CONVERSATIONS YOU HAVE? JAMES: IT IS VERY CORRELATED. YOU SEE A WHOLE BASKET OF STOCKS THAT MOVE TOGETHER, ABSOLUTELY. JONATHAN: DOES THAT MAKE YOUR JOB HARDER? HOW DIFFERENT IS IT FROM THE 1990'S BASED ON THAT? JAMES: THERE ARE A LOT OF SIMILARITIES. JONATHAN: JAMES TIERNEY, THANK YOU FOR DROPPING BY. SIMILARITIES TO THE 1990'S, NOT QUITE THERE YET. THESE ARE COMPANIES THAT ARE MAKING A LOT OF MONEY RIGHT NOW. THE CAPEX PLANS, HE THINKS THE SPENDING WILL CONTINUE THROUGH 2027, UNLESS YOU SEE SOME KIND OF BIG UPSET. LISA: WHICH IS THE KEY QUESTION, WHAT COULD BE THE UPSET? COULD IT BE THE ENERGY, PRODUCTIVITY, WHERE IT ISN'T HAPPENING, OR SOME SORT OF DOWNTURN, TURNING OFF OF THE FEDERAL SPIGOT WHEN IT COMES TO SPENDING? PEOPLE ARE NOT SEEING IT. PEOPLE ARE SAYING THIS IS A SEA CHANGE AKIN TO THE RAILROAD, THE INTERNET, AND THAT IS WHY PEOPLE ARE PILING IN. I ALSO THINK THERE IS NO ALTERNATIVE RIGHT NOW. THAT IS WHY A LOT OF PEOPLE ARE SAYING I CAN ANALYZE THIS, SO LET'S GO. JONATHAN: JULIAN EMANUEL MENTIONING THE POTENTIAL OF 9000 ON THE S & P. UBS, EVIDENCE OF A POSSIBLE MELT-UP INTO YEAR-END. THINK ABOUT HOW MANY PEOPLE SINCE APRIL HAVE BEEN ON THE SIDELINES AND MISSED A LOT OF THIS OVER THE LAST SIX MONTHS, WAITING FOR THE CONSEQUENCES OF LIBERATION DAY TO FINALLY BITE, AND THIS MARKET KEEPS GETTING AWAY FROM THEM. MOVES LIKE THIS, 35 PERCENT ON AMD ON THE BACK OF A DEAL LIKE THAT. LISA: THE FOMO TRADE COMING BACK TO THE FOUR. WHO NEEDS GAMESTOP WHEN YOU HAVE THE LIKES OF AMD RISING 36%? YOU CAN GO TO THE MORE TRADITIONAL NAMES. WHEN YOU TAKE A STEP BACK, THERE IS A REAL QUESTION ABOUT WHAT THE GUT CHECK WILL ULTIMATELY BE. WILL THERE BE A COMPANY THAT COMES OUT AND SAID WE INVESTED XYZ IN AI AND HAVE SEEN NO GAIN? ARE WE ARE PULLING BACK ON OUR INVESTMENT BECAUSE WE ARE NOT SEEING THE PRODUCTIVITY GAIN? WE ARE NOT HEARING ANYTHING LIKE THAT. WHAT YOU HEAR IS INCONCLUSIVE BUT CORPORATE EXECUTIVES ARE EXCITED ABOUT THE PRODUCTIVITY THEY COULD POTENTIALLY ENGENDER. IT IS A BIG UNKNOWN IN A LOT OF WAYS BUT PEOPLE ARE PILING IN BECAUSE IT IS GIVING THE RETURNS. JONATHAN: I AM NOT THAT EXCITED ABOUT EARNINGS. I FIND BANK EARNINGS TEDIOUS, BUT GIVEN THE AMOUNT OF ACTIVITY WE HAVE SEEN, THE AMOUNT OF DEBT THAT CAME TO THE MARKET IN SEPTEMBER, DEAL FLOW THAT HAS PICKED UP, REGIONAL BANKS DEAL THAT WE HAD THIS MORNING BETWEEN COMERICA AND FIFTH THIRD, INTERESTING TO SEE WHAT THEY SEE AT THE MOMENT AND WHAT THEY EXPECT. LISA: THE JUSTIFICATIONS FOR THESE TIEUPS. IS IT BECAUSE THE CAPITAL MARKETS ARE WIDE OPEN? YOU NEED SIZE IN THIS KIND OF ENVIRONMENT? OR IS THERE SOMETHING ELSE THAT THEY SEE GOING ON THAT IS TRULY AN INDUSTRIAL RENAISSANCE? JONATHAN: 35% MOVE IN AMD IN THE PREMARKET GOING INTO THE OPENING DELL. NEW LEADERSHIP IN JAPAN, MAJOR. MOVEMENT ON DOLLAR-YEN. THEN WE HAVE A DEAL TO TIE UP THE REGIONAL BANK SECTOR AS WELL. THAT IS JUST AN APPETIZER OF THINGS TO COME. NO ECONOMIC DATA AND NO ONE SEEMS TO CARE. LIBBY CANTRILL OF PIMCO, STEPHANIE ROTH OF WOLFE RESEARCH. GOOD MORNING TO YOU ALL. THANK YOU FOR CHOOSING BLOOMBERG TV. THIS WAS "BLOOMBERG SURVEILLANCE." ♪

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Bloomberg Surveillance 10/6/2025

Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern speak daily with leaders and decision makers from Wall Street to Washington and beyond. No other program better positions investors and executives for the trading day. (Source: Bloomberg)

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