Costly US Bond Sales,‘SaaSpocalypse’, Rare Earth Investments |Bloomberg Businessweek Daily 8/13/2026

>> THIS IS BLOOMBERG BUSINESSWEEK DAILY, REPORTING FROM THE MAGAZINE THAT HELPS GLOBAL LEADERS TO THEY HAD WITH INSET ON THE PEOPLE, COMPANIES AND TRENDS SHAPING TODAY'S COMPLEX ECONOMY. PLUS GLOBAL BUSINESS, FINANCE AND TECH NEWS AS IT HAPPENS. WITH CAROL MASSAR AND TIM STENOVEC, LIVE ON BLOOMBERG RADIO, TELEVISION AND BLOOMBERG ORIGINALS. CAROL: GOOD AFTERNOON EVERYBODY ACROSS BLOOMBERG PLATFORMS. WELCOME TO BLOOMBERG BUSINESSWEEK DAILY. IT IS THURSDAY AUGUST 13. NOT QUITE A FRIDAY THE 13TH. TIM: FEELS LIKE FRIDAY THE 13TH, I WILL BE HONEST. [LAUGHTER] HERE WE GO. WE GOT THIS. CAROL: IT HAS BEEN ONE OF THOSE DAYS FOR US. WELCOME. WE ARE DELIGHTED TO HAVE YOU WITH US. TIM: I DON'T KNOW IF YOU ARE LONG IN THIS MARKET, YOU ARE PRETTY HAPPY LOOKING AT POTENTIALLY A RECORD CLOSE FOR THE S&P 500. CHARLIE PELLETT WILL HAVE DETAILS. THE VAST MAJORITY OF STOCKS ARE A THREE TO ONE RATIO. THE S&P UP .5%. MONTH TODAY SO FAR UP 4%. CAROL: NOT TOO CHEVY IF YOU ARE A BULL. YOU HAVE INVESTORS SAYING MODERATING INFLATION PERHAPS, SO MAY BE THE FED DOES NOT HAVE TO DO ANYTHING, AND REFRAIN FROM RAISING INTEREST RATES NEXT MONTH. TIM: DOES A LOT OF ECONOMIC DATA WE GET BETWEEN NOW AND THEN. CAROL: I AM JUST TELLING YOU WHAT PEOPLE ARE THINKING. MAY BE THE FED IS SAYING NOT NOW WHEN IT COMES TO RAISING RATES NEXT MONTH. A LOT CAN HAPPEN BETWEEN NOW AND THEN. AHEAD THIS HOUR, WE WE'LL GET INTO THE LATEST TREASURY AUCTION, 30 YEAR. TIM: THAT AUCTION DRAWING ITS HIGHEST YIELD SINCE 2001. WHAT IT ALL MEANS FOR US THAN FOR YOU. CAROL: ALSO ON THE TRADE, UP UP AND AWAY AND WHY THE BACKDROP IS SUPPORTIVE OF THE NEAR AND LONG-TERM UPSIDE. WE HAVE UBS'S ALIGNMENT PARTNERS WITH US IN THE HOUSE. TIM: IS SHE IN THE HOUSE WITH US? I AM GIVING HER A HARD TIME. SHE DOES NOT REALLY COME TO NEW YORK CITY IN THE SUMMER. IT'S PRETTY GREAT. CAROL: TOTALLY GET IT. TIM: WE CANNOT GET ENOUGH FOR THE RACE FOR CRITICAL MINERALS. YOU DID A DEEP DIVE EARLIER ON THIS. EARLIER THIS WEEK WE DID SPEAK TO GARY EVANS AT U.S. ANTIMONY AHEAD OF THEIR EARNINGS CONVERSATION. BUT WE ARE LOOKING FORWARD TO HAVING LIBBY'S STOP BY EARLIER. CAROL: ESPECIALLY SINCE PRESIDENT TRUMP TALKING ABOUT U.S. INVESTMENTS LAST WEEK. A BIG TO-DO. AND WE HAVE A BLOOMBERG MARKETS MAGAZINE FEATURE ON HOW AI LOOMS OVER SOFTWARE COMPANIES AND THE INVESTORS WHO PILED INTO THEM. A DEEP DIVE. IT IS THE MONEY ISSUE FOR BLOOMBERG MARKETS MAGAZINE. TIM: SPEAKING OF LATER ON, I WANT TO GIVE A SHOUT TO OUR 4:00 P.M. HOUR. THE RECIPIENT OF THE NOBLE PRIZE IN ECONOMIC SCIENCES WILL BE JOINING US, HE HAS A NEW BOOK OUT. CAROL: WE ARE OBSESSED. OUR WHOLE TEAM HAS BEEN TALKING ABOUT THIS FOR A WHILE. TIM: WE WANT YOU TO BE PART OF THE CONVERSATION. SUBMIT SOME QUESTIONS. JUST GO TO BLOOMBERG.COM/ASKRADIO. IT'S EXCLUSIVE TO BLOOMBERG.COM SUBSCRIBERS AND SUBSCRIBERS OF THE BLOOMBERG TERMINAL. KEEP THEM COMING. CAROL: YOU CAN ASK THOSE QUESTIONS ABOUT ANY OF OUR GUEST SEGMENTS. FIRST UP, WHEN IT COMES TO THE MARKETS LET'S SEE WHAT IS GOING ON IN YOUR TOP BUSINESS STORIES. CHARLIE: THE SALE OF 30 YEAR DEBT, GOVERNMENT SOLD 30 YEAR BONDS AT A 5.216% RATE. THAT IS THE HIGHEST SINCE 2001. IT DOES REFLECT A RELENTLESS SELLOFF IN THE MARKET. S&P PUSHING HIGHER. EARLIER TODAY WE WERE TRADING ABOVE 7800 ON THE S&P, UP 0.5%. NEEDLESS TO SAY IT IS A RECORD. THE NUMBER77.57. ANY CLOSE ABOVE THAT WILL BE A NEW HIGH ON THE S&P.77.91 WHERE WE STAND RIGHT NOW. THE DOW LOWERED, LITTLE CHANGED, DOWN NINE POINTS, A DROP OF UNDER .1%. MASTEC UP .7%. THE NASDAQ 100 INDEX UP 1.2%. CISCO END CE -- CISCO DOWN 9%. THE TWO YEAR, 4.14%. THE 10 YEAR, 4.64%. THE 30 YEAR, 5.21%. GOLD AT 43.58. WEST TEXAS INTERMEDIATE CRUDE $81.48 A BARREL. BRENT CRUDE $87.17, A DROP OF 2%. AMONG THE OIL SUPER MAJORS TODAY, EXXON MOBIL DOWN .6%. CHEVRON SHARES UP .5%. CONOCOPHILLIPS LOWER BY 2.1%. FOR ON-DEMAND NEWS 24 HOURS A DAY, SUBSCRIBE TO BLOOMBERG NEWS NOW WHEREVER YOU GET YOUR PODCASTS. THAT'S A BLOOMBERG BUSINESS FLASH. CAROL: THE U.S. GOVERNMENT SELLING $25 BILLION WORTH OF 30 YEAR BONDS TODAY. WE FOUND OUT HOW THE AUCTION WENT. DRAW, HE SAID LIKE YOU'RE FROM NEW JERSEY. I AM PROUD OF IT. TIM: HE SPENT A COUPLE YEARS OUTSIDE OF NEW JERSEY IN YOUR LIFE. CAROL: IN NEW YORK. [LAUGHTER] THAT CAN BE SO COMPLEMENTARY TO A NEW JERSEY ACCENT. THE AUCTION DREW ITS HIGHEST YIELD SINCE 2001, 5.216% VERSUS A 2.12% WHEN ISSUED YIELD AT THE NEW YORK BIDDING DEADLINE. THAT WAS A SIGN THAT THE MEN FELL SLIGHTLY SHORT OF EXPECTATIONS -- THAT DEMAND FELL SLIGHTLY SHORT OF EXPECTATIONS. TIM: LET'S START WITH THE AUCTION AND WHAT INVESTORS ENDED UP PAYING FOR IT. YOUR TAKE AWAY FROM THIS? >> THE AUCTION WAS A SMALL, TINY BIT HIGHER YIELD THAN WHAT WAS EXPECTED AT 1:00 WHEN THE AUCTION CLOSED. THE BIDDING METRICS WERE COMPLETELY AVERAGE OF THE LAST YEAR'S WORTH OF REFUNDING OPTIONS. NOT A BIG SURPRISE. I THINK DEALERS AND OTHER INVESTORS WERE SET UP FOR THIS. THAT IS WHY YOU SAW A BIT OF YIELD CURVE STEEPENING BETWEEN THE 10 AND 30 YEAR YESTERDAY WHERE 30 YEAR YIELDS WERE A BIT HIGHER THAN 10 YEAR YIELDS DAY ON DAY. IT WAS NOT A BIG SURPRISE. PEOPLE ARE NOT BALKING AT BUYING DEBT EVEN THOUGH WE CONTINUE TO HAVE DEFICITS ON 6% OF GDP. CAROL: SOMETIMES IF SOMEONE SAYS YOUR AVERAGE, IT IS NOT A COMPLIMENT, BUT IN THIS CASE BEING AVERAGE IS A GOOD THING. CHARLIE: THE TREND FOR THE TREASURY AUCTIONS RECENTLY HAS BEEN PRETTY GOOD. WE HAD BASICALLY ONE MONTH WHERE WE HAD PRETTY BAD AUCTIONS AND THAT WAS IN MARCH AT THE BEGINNING OF THE WAR. SINCE THEN, THE PRIMARY MARKET HAS BEEN REASONABLY DECENT. PART OF IT IS NOW THAT WE ARE ABOVE 5% IN 30 YEAR YIELDS, THE HIGHEST YIELDS IN THE LAST 25 YEARS, I THINK YOU ARE ATTRACTING SOME LIABILITY DRIVEN INVESTORS. THESE ARE PENSION FUNDS AND INSURANCE COMPANIES THAT LIKE A 5% BOOK YIELD. THEY BUY TREASURIES, IT IS VERY LIQUID. INSTEAD OF BUYING 30 YEAR CORPORATE BONDS, WHICH MAY BE THEY CANNOT BUY ENOUGH SIZE OR WITH SPREADS AS TIGHT AS THEY AREN'T THEY DON'T FIND THEM OVERLY ATTRACTIVE, SO THEY ARE COMING INTO BUYING TREASURIES. WE GOT HERE, SO THAT MEANS THERE WERE SOME WHO DID NOT WANT TO BUY BEFORE WE GOT HERE. NOW I SUSPECT WE FOUND AN EQUILIBRIUM AND NOW THE QUESTION IS WHAT CAUSES YIELDS TO GO BACK DOWN TO 475? I'M NOT SURE IT IS THERE. PART OF THAT IS BECAUSE YIELDS ON THE LONG END OF THE WORLD ARE STARTING TO GO UP DRAMATICALLY. TIM: A MUCH HIGHER COULD IT GO FOR THE 30 YEAR -- HOW MUCH HIGHER COULD IT GO FOR THE 30 YEAR IN THE U.S.? IRA: I THINK WE WILL HAVE HER TO 475 OVER THE NEXT SIX MONTHS. COULD WE GO TO 5.6%? I DON'T THINK WE WILL, IN PART BECAUSE I THINK THAT REALLY YIELDS, TALKING ABOUT THE YIELD ON 30 YEAR TIPS, BEING AT 3%, IT DOES NOT SEEM TO WANT TO BREAK ABOVE THAT. UNLESS WE GET A SIGNIFICANT INCREASE IN LONG-TERM INFLATION EXPECTATIONS, WHICH I DON'T EXPECT AND I DON'T SEE WHY THAT WOULD OCCUR AT THIS POINT IN TIME, I THINK WE ARE PROBABLY PRETTY CLOSE TO THE HIGH. CAN WE GET TO 525 OR 530? MAYBE. I SUSPECT WE ARE RETESTING THE CYCLE HIGHS FOR THIS ECONOMIC CYCLE CAROL: A BIT OF A BUMMER FOR THE U.S. GOVERNMENT WHO HAS TO PAY THE DEBT. HIGHER RATES. CHARLIE: IT'S HIGHER RATES, BUT $25 MILLION OF 30 YEAR. THAT IS NOT GREAT. BUT AT THE SAME TIME IT IS WHAT WILL HURT THEM A LOT MORE ARE WHAT IS GOING ON WITH TBILLS AND TO YEAR YIELDS -- TWO YEAR YIELDS. THERE'S A LOT MORE OF THAT OUT THERE. THAT 50 BASIS POINT SELLOFF WILL INCREASE THE COST OF THE GOVERNMENT MORE THAN WHAT THEY ARE DOING ON THE LONG END. THAT ALMOST IS ALSO RAN. CAROL: THIS IS WHY WE TALK TO YOU. THANK YOU. HE IS THE PART INTELLIGENCE CHIEF U.S. INTEREST RATES STRATEGIST. THAT IS THE U.S. RATE PICTURE. LET'S GET TO THE U.S. MARKETS AND INVESTMENT LANDSCAPE. TIM: LET'S GET TO MANAGING DIRECTOR FOR WEALTH MANAGEMENT AND PRIVATE WEALTH ADVISOR AT ALIGNMENT PARTNERS AT UBS, WHICH HAS OVER $1 BILLION IN ASSETS UNDER MANAGEMENT AS OF MIDYEAR. SHE'S OUT ON LONG ISLAND THIS AFTERNOON. CAROL: WE WANT TO SEE THE COST. -- COAST. I WANT TO SEE THE BEACH. TIM: YOU CAN JUST WALK RIGHT OVER TO THE RIVER CAROL AND TAKE A LOOK. HOW MUCH DO YOU WATCH THE U.S. BOND MARKET? >> WE ALWAYS WATCH THE BOND MARKET. THE RELATIONSHIP BETWEEN THE INTEREST RATE, BOND MARKET AND EQUITIES IS A HISTORICAL AND VERY STRONG RELATIONSHIP. HOWEVER, BECAUSE OF THE NEXT QUESTION YOU WILL ASK ME, WHEN YOU ARE IN A MARKET WHERE YOU HAVE: INFLATION TO POTENTIALLY DISINFLATION, WHERE YOU HAVE A LABOR MARKET THAT IS ALSO STOKING PROBABLY A DECREASE IN THE LIKELIHOOD INTEREST RATES GO UP, AND WHEN YOU HAVE AN EARNINGS PICTURE THAT IS EXTRAORDINARY NOT ONLY IN THE U.S. BUT GLOBALLY, LET'S JUST S AY THAT ESPECIALLY IN MID AUGUST LESS FERVENT THAN I WATCH THINGS RIGHT NOW. CAROL: WE HAD A GREAT STORY ON THE BLOOMBERG WE HAVE BEEN TALKING A LOT ABOUT THIS WEEK. EARNINGS GROWTH HAS BEEN TOO STRONG WITH PROFIT GROWTH RUNNING AT MORE THAN 30% THE SECOND QUARTER. THIS PACE IS UNLIKELY TO LAST AND THE CONSENSUS EXPECTS GROWTH TO FALL IN THE FIRST QUARTER OF 2027 AND MODERATE INTO THE MIDTEENS FOR THE FULL YEAR. THE THING I WANT TO GET TO HISTORICALLY, WHEN EARNINGS PER SHARE GROWTH IS ABOVE TREND BUT DECELERATING, THE S&P'S MEDIAN 12 MONTH RETURN IS 6.7% COMPARED TO 14% WHEN EPS GROWTH IS ABOVE TREND AND ACCELERATING. MIND YOU, EVERY IS A BIT DIFFERENT. ALI: AND DEPENDING ON WHICH DATA AND HISTORICAL ALLEGORY YOU PICK, YOU GET DIFFERENT NUMBERS. I LIKE TO LOOK AT IT DIFFERENTLY, WHICH IS WE HAVE AN ABSOLUTELY SECULAR BULL MARKET, WHICH THE AVERAGE BULL MARKET SINCE WORLD WAR II HAS LASTED SEVEN YEARS. I THINK THIS ONE CAN FOUR YEARS IN LAST A LOT LONGER GIVEN WHAT WE HAVE IN AI, RESHORING, TARIFFS, ETC. BUT WHAT I BELIEVE AND WHAT WE BELIEVE AT UBS IS, YES, ARE WE GOING TO CONTINUE TO HAVE THE KIND OF EPS AND PROFIT GROWTH WE HAVE HAD? NO. CAN WE STILL SEE ONLY 5% TO 30% THIS YEAR -- 25% TO 30% THIS YEAR? YES. I WOULD LIKEN IT TO WHAT WE HAVE SEEN WITH THE TOP 10 TECH TITANS, WHERE LAST YEAR WE CAME DOWN SIGNIFICANTLY. CAN IT STAY AT 150%? NO, IT IS DOWN. BUT DOES THAT MEAN THAT EARNINGS ARE NOT GOING UP MORE THAN AVERAGE, AND DOES THAT MEAN THERE IS ROOM STILL ALSO TO GROW INTO THIS EARNINGS AND GROW INTO ADDITIONAL MULTIPLES BECAUSE OF PRODUCTIVITY GAINS? I DO BELIEVE SO. BUT I UNDERSTAND THAT THE MORE HIGHS INCREMENTALLY WE REACH, THE MORE BULLS WE SEE. TIM: THE QUESTION THAT I GUESS I HAVE IS WHAT FLIPS THAT? WHAT MAKES YOU THINK MAYBE WE DON'T GET A GREAT PRINT FROM NVIDIA AND THAT SINCE SOME SIGNAL. WHAT ARE YOU WATCHING? ALI: FOR ME, THE RISKS WE HAVE TO THE DOWNSIDE TO THE GLOBAL ECONOMY, BOTH TO SOCIAL INFRASTRUCTURE AND POLITICS ARE NOT REALLY THE MACRO RIGHT NOW. AND THEY ARE NOT EVEN REALLY THE MICRO. IT IS MORE THE ESOTERIC OR THE SIX SIGMA KIND OF STUFF. IT IS GEOPOLITICS, IT'S ANOTHER PANDEMIC. I THINK THAT WHEN YOU TALK ABOUT WHAT THE REAL RISKS ARE AND WHAT IS GIVING VOLATILITY INTO THIS MARKET, ALTHOUGH WE HAVE SEEN LITTLE OUTSIDE OF THIS TOP 10 STOCKS, I THINK WE ARE TALKING ABOUT SOME OF THE AI STORIES WE HEARD A LOT ABOUT, LOOKING AT THE CIRCULARITY OF THE INFRASTRUCTURE OF THE BUILD THE RELATIONSHIPS OF THE ECOSYSTEM. WE ARE TALKING ABOUT WHAT IT LOOKS LIKE WHEN YOU TAKE THEM LOADED DEFENSIVE LARGEST CAP COMPANIES OF THIS COUNTRY AND ECONOMY AND THEY START SPENDING ALL OF THEIR CASH SO THAT THAT LEVEL OF SUPPORT IS THERE. I GET ASKED A LOT, IS THIS ANOTHER BUBBLE? I DON'T BELIEVE SO. ALTHOUGH THERE WILL BE WINNERS AND LOSERS. NOT EVERYONE WHO HAS AN AI BEHIND THEIR NAME WITH SUCCEED. AS WE HAVE SEEN THIS EARNINGS SEASON, THE MEDIAN COMPANY HAS PRINTED 15%. NOT THE 10 COMPANIES PRINTING 150% AND EVERYONE ELSE DETRACTING FROM IT. WE ARE STARTING TO SEE THE OLD SCHOOL, OLD WORLD OIL AND GAS MANUFACTURING ACCRETION TO THE BOTTOM LINE AND THAT IS MULTIYEAR AND A SECULAR CHANGE BOTH TO EARNINGS THE ECONOMY. >> IT LOOKS LIKE YOU ARE BUYING A LOT. U.S., EUROPEAN, ASIAN STOCKS. YOU ARE PLAYING AROUND THE WORLD HERE. ALI: THERE ARE A COUPLE THINGS GOING ON RIGHT NOW SO ONE IS THE AI, YOU KNOW, INFRASTRUCTURE TREND. THAT IS CHINA AND U.S. LARGELY. EUROPE IS HAVING A DIFFERENT KIND OF RENAISSANCE, WHETHER IT IS GOOD, BAD, OR INDIFFERENT, WHICH IS AS A RESULT OF GEOPOLITICS, TARIFFS, WHAT WE HAVE SEEN IN TERMS OF THE LIMITATION OF OIL FLOW THROUGH, THEY ARE HAVING TO SPEND A LOT MORE OF THEIR PUBLIC AND PRIVATE MONEY TO PHYSICALLY AND FROM A CYBER AND ENERGY PERSPECTIVE PROTECT AND BUILD THEIR ECONOMIES SO THEY ARE HAVING AN EXTRAORDINARY EARNINGS SEASON AND IT IS NOT SOMETHING THAT IS LIKELY TO BE ONE OR TWO SEASONS. THESE ARE TALKING ABOUT LONG-TERM SYSTEMIC CHANGES TO THE WORLD. WE ARE VERY BULLISH OR I AM VERY BULLISH BUT IT'S A LARGE PART OF THE PORTFOLIO WOULD BE DEVELOPED EQUITIES. EMERGING MARKETS, HAVE A BENT IN THAT. SHORT-TERM, SHORT DURATION FIXED INCOME AND WE ALSO BELIEVE THAT FOR A LOT OF THE REASONS WE HAVE SEEN, LAST WEEK WAS THE BEST-PERFORMING WEEK IN GOLD, THERE IS WANTING TO BE A RENAISSANCE IN THAT TRADE FOR ALL THE RIGHT REASONS. TIM: PEOPLE ARE TALKING ABOUT GOLD RIGHT NOW. OK. SO WHAT IS GOING ON? 30 SECONDS. ALI: LAST YEAR, EVERYBODY TALKED ABOUT GOLD, IT DID EXTRAORDINARY, THAT WAS A STORY. THIS YEAR, WE GOT INTO THE POLITICAL ISSUES IN MARCH AND GOLD DID NOT DO WELL AND PEOPLE WERE VERY CONFUSED AND TOOK MONEY OFF THE TABLE BOTH BECAUSE OF THE WINNINGS, BECAUSE OF THE LACK OF CORRELATION, ETC.. NOW, WHAT WE ARE STARTING TO SEE IS THE FUNDAMENTAL -- THE U.S. DOLLAR IS GOING TO START TO STRENGTHEN AGAIN BECAUSE OF GEOPOLITICS AND THE DEMAND FOR ASSETS AND LESSENING OF THE DEMAND FOR TREASURIES FROM OTHER FOREIGN SOVEREIGNS. WE ARE STARTING TO SEE THAT BUYING. AND WE ARE JUST STARTING TO SEE IT COME BACK IN A WAY THAT IS A VERY LONG TERM DIVERSIFIER AND VALUE-ADDED PART OF A PORTFOLIO. CAROL: GREAT STUFF. NEXT TIME, IT IS AT YOUR HOME, AT YOUR PLACE. ALLIE MCCARTNEY, GOOD STUFF. BE WELL, BE WELL. SHE IS MANAGING DIRECTOR OF WEALTH MANAGEMENT AT UPS. WE ARE TALKING WHEN WE COME BACK. CHARLIE: IT IS 2:21 ON WALL STREET. WE CHECKED MARKETS ALL DAY LONG. WE HAVE THE DOW LITTLE CHANGED JUST A COUPLE OF MINUTES AGO, TRADING HIGHER. DOWN TWO POINTS ON THE INDUSTRIALS, LOWER BY LESS THAN 1/10 OF 1%. S&P 500 INDEX HIGHER BY 43, LOOKING AT A RECORD. INDEED WE WERE TRADING ABOVE 7800 EARLIER TODAY ON THE S&P. ANY ADVANCE ABOVE 77-57 WILL BE A RECORD ON THE S&P SO RIGHT NOW , TRADING AT A NEW HIGH. WE HAVE THE NASDAQ COMPOSITE INDEX UP .7%. THE NASDAQ ONE HUNDRED INDEX DOING A LITTLE BIT BETTER, UP 1.2% AND ALL OF THIS UP BY 1.8%. THE PHILADELPHIA STOCK EXCHANGE SEMICONDUCTOR INDEX, 4.14%. 4.64%. THE 30 YEAR, 5.2 1%. GOLD MEANWHILE, DOWN 1.1% THERE. WEST TEXAS INTERMEDIATE CRUDE TRADING LOWER BY 2%. WTI RIGHT NOW AND JUST -- BARREL OF BRENT, DOWN BY A 1.8%. WE HEARD FROM CISCO SYSTEMS LAST NIGHT AFTER THE CLOSE OF TRADING. THE STOCK LUNCHEON TODAY DOWN 9.3%. SELLING OFF. EARNINGS DOWN BY 13.1%. AFTER THE CLOSE OF TRADING TODAY, WE WILL HEAR FROM APPLIED MATERIALS. THAT STOCK UP BY 1.6%. DELTA LAUNCHING NEW SERVICE THAT WILL SPEAK VOLUMES ABOUT AUSTIN, TEXAS'S EMERGENCE AS A TECH HUB AND GLOBAL DESTINATION. DELTA WILL BE LAUNCHING NONSTOP SERVICE BEGINNING MARCH 27. IT WILL BE USING AN AIRBUS A330 ON THE ROOT. SERVICE BEGINS NEXT MARCH. S&P UP 43 RIGHT NOW, UP BY ABOUT .6%. THAT IS A BLOOMBERG BUSINESS FLASH. CAROL: IT IS THE MONEY ISSUE FROM THE MAGAZINE TEAM. ONE STORY WE WANTED TO BRING TO ALL OF YOU SEEMS FITTING WITH SOME OF THE BIGGER NARRATIVES GOING ON ABOUT HOW ARTIFICIAL INTELLIGENCE LOOMS OVER SOFTWARE COMPANIES AND THE INVESTORS WHO PILED INTO THAT. TIM: MORE SPECIFICALLY THE BUYOUT FUNDS WHO WERE DRAWN TO LOW COSTS ARE FACING AN ENTIRE BUSINESS MODEL THAT IS AT RISK. HERE TO EXPLAIN IS THE BLOOMBERG NEWS SENIOR REPORTER WHO COVERS PRIVATE CREDIT AND LEVERAGED FINANCE. CONGRATULATIONS ON THIS STORY. WE TALK A LOT ABOUT IT BUT THIS IS REALLY A DEEP DIVE INTO LEVERAGED BUYOUT SOMEWHAT INITIALLY WAS SO ATTRACTIVE TO SOME OF THESE PRIVATE EQUITY FIRMS ABOUT SOFTWARE. THAT IS WHERE I WANT TO START BECAUSE YOU KNOW, THERE WAS THIS JOKE LIKE THAT IS SOFTWARE MARGINS FOR THE MARGINS ON THESE COMPANIES FOR SO LONG WERE SO HIGH AND THAT WAS PART OF THE ATTRACTION. >> THE BETTER THE MARGINS, THE MORE DEBT, -- THE MORE DEBT YOU CAN LOAD IT UP WITH. THE PRIVATE EQUITY BUSINESS MODEL IS TO USE DATA TO NEVER A COMPANY WHEN THEY BUY IT. IT IS NOT BORROWED BY THE PRIVATE EQUITY FIRM BUT BY THE TARGET COMPANY BEING ACQUIRED. TIM: PLEASE REPEAT THAT LAST PART. TIM: -- CAROL: ISN'T THAT A CLASSIC MOVE? >> THIS IS HOW PRIVATE EQUITY MAKES SO MUCH MONEY BUT THE KEY THING IS THE PRIVATE EQUITY FIRM IS NOT ON THE HOOK FOR THAT LEVERAGE. THE TARGET COMPANY IS AND THAT IS WHAT IS AT STAKE RIGHT NOW. CAROL: LET'S TALK ABOUT THIS. ONE OF THE THINGS YOU KEEP THINKING IS THAT IS IT ONE SHOE TO DROP? IS IT A LOT OF SHOES TO DROP? SO FAR, IT SEEMS TO BE MANAGEABLE. SO TELL US ABOUT KIND OF WHAT WE ARE, WHAT WE HAVE SEEN, BUT WHY MAY BE THE SITUATION OR ENVIRONMENT IS CHANGING FOR SOME OF THESE NAMES? >> THAT IS AN IMPORTANT DISTINCTION TO MAKE. THIS IS ALL ABOUT THE FEARS THAT IT COULD BE COMING. AT THE HEART OF IT, AND TECHNOLOGY HAS THE POTENTIAL TO DISRUPT EXISTING SOFTWARE BUSINESSES THAT WERE CONSIDERED PRETTY MUCH FINE AND THE FEAR IS THAT YOU WILL HAVE CERTAIN TYPES OF SOFTWARE COMPANIES ESPECIALLY AFFECTED. IF YOU WERE PROVIDING SOFTWARE THAT IS THE INFRASTRUCTURE LAYER OF A COMPANY, PROBABLY OK. IF YOU ARE DOING DATA VISUALIZATION AND THAT IS YOUR MAIN PRODUCT, YOU CAN PLUG THAT INTO CHATGPT AND THOSE COULD BE ESPECIALLY AT RISK. THAT IS A FAIR POINT AND THAT IS ONE OF THE DEFENSES PEOPLE HAVE WHICH IS THAT, YOU KNOW, IF YOU ARE A BIG CORPORATION, YOU HAVE ALL OF YOUR EMPLOYEES USING CERTAIN PRODUCTS, YOU ARE NOT GOING TO HAVE THEM GO UP ON THEIR OWN AND USE AI BUT CLAUDE CODE HAS DEVELOPED VERY RAPIDLY AND THAT IS MAY BE TAKING THE PLACE OF SOME PRODUCTS THAT WOULD HELP SOFTWARE DEVELOPERS. TIM: IS THE CONCERN THAT WITH THESE TYPES OF SERVICES, YOU WOULD HAVE INTERNALLY PEOPLE WHO -- PEOPLE CREATE SOME SORT OF PROGRAM THAT WOULD REPLACE PAYING FOR SEATS -- ON A PER SEAT BASIS FOR CERTAIN COMPANIES? PAULA: THE FEAR IS THAT IT COULD CHIP AWAY AT REVENUE AND REVENUE GROWTH AND THAT IS WHERE THE DEBT COMES IN. TIM: I AM STILL SKEPTICAL OF THE WHOLE THING. CAROL: THAT COMPANIES ARE GOING TO ENTRUST DOING DATA ANALYSIS? TIM: PART OF IT HAS TO DO WITH THE PIPELINE OF INNOVATION. THEY ARE CONSTANTLY ITERATING ON PRODUCTS AND MAKING THEIR PRODUCTS BETTER AND BETTER FOR THEIR CUSTOMERS. THAT IS THE WAY THAT IT HAS WORKED. YOU CAN'T JUST GET ONE PERSON WITHIN A COMPANY TO CREATE -- TO REPLICATE SOMETHING THAT THEY HAVE BEEN PAYING FOR FOR YEARS. THE UPDATES AND MAKE IT BETTER AND BETTER? I DON'T KNOW. I'M NOT TRYING TO BE A DEFENDER. PAULA: THIS IS THE BIG QUESTION AND THIS EXACT DISCUSSION IS WHAT INVESTORS ARE TRYING TO FIGURE OUT. IS THIS A REAL RISK? IS THIS NOT? THEN YOU GET TO THIS POINT WHERE I AM AN INVESTOR. HOW DO I PICK WINNERS AND LOSERS? HOW DO I ANTICIPATE WINNERS AND LOSERS? THAT IS WHERE A LOT OF THE QUESTIONS ARE RIGHT NOW. CAROL: THE DEBT HAS BEEN ISSUED. RIGHT? SO WHO IS AT RISK? LET'S CARRY IT OUT. IT IS SO HARD TO SAY. LET'S SAY THIS DOES HAPPEN. WHAT DOES THAT LOOK LIKE? WHO GETS HURT? WHAT INVESTORS GET HURT? WHAT COMPANIES GET HURT? WHO IS IN LINE FOR THE DEBT THAT DOES NOT GET PAID BACK OR PENNIES ON THE DOLLAR IF THAT? PAULA: FIRST, LET'S TALK ABOUT HOW LEVERAGED BUYOUT WORKS. WHEN A FIRM DECIDE TO DO THIS KIND OF TRANSACTION, THEY TYPICALLY HAVE TWO TYPES OF DEBT MARKETS. CAROL: FOR EVERYBODY ON RADIO, PAUL IS GOING TO WALK YOU THROUGH IT. -- PAULA IS GOING TO WALK YOU THROUGH IT. PAULA: IT CAN ESSENTIALLY FINANCE SOME OF THAT WITH ITS OWN EQUITY COMMITMENT WHICH IS JUST CASH AND THEN IT CAN FINANCE PART OF THAT WITH DEBT. IT CAN HAVE ONE OF TWO MARKETS. -- OR THE PRIVATE CREDIT MARKET WHICH GREW VERY RAPIDLY STARTING IN ROUGHLY 2022 CREEK -- COMPETE WITH THE LEVERAGED LOAN MARKETS. THAT PRIVATE CREDIT COMPLAINT IS VERY INTERESTING. WE SHOULD NEVER DISCOUNT THEM. THOSE ARE VERY BIG PART OF THIS FINANCING PROCESS BUT PRIVATE CREDIT GREW A LOT AND THEY WERE WILLING TO DO MORE AGGRESSIVE DEALS THAN SYNDICATED COUNTERPARTS. HAVING DEBT ON YOUR BALANCE SHEET REALLY CREATES TWO PROBLEMS FOR A COMPANY. THE FIRST IS THAT YOU HAVE TO PAY THE INTEREST EXPENSE AND THE SECOND IS YOU HAVE TO REFINANCE IT AND BOTH OF THOSE WILL HAVE ISSUES IF REVENUE STARTS TO COME DOWN AT SOME OF THESE COMPANIES. CAROL: WE JUST HAD A CHART UP BUT IT SHOWS WHAT THE TITLE ON THAT GRAPHIC WAS, HOW A PE FUND CAN BUY A COMPANY FOR -- AND THEN THEY HAVE THE LENDERS. PUTTING UP THE REST. PAULA: WE ARE SEEING QUESTIONS OVER HOW THIS WILL UNFOLD. WHEN THEY LEVER UP A COMPANY IN THIS WAY, THEY ARE DOING IT BECAUSE THEY BELIEVE THEY CAN RAPIDLY INCREASE REVENUE SO THE COMPANY CAN BASICALLY GROW OVER TIME TO ADAPT TO ITS LARGE DEBT LOAD. THAT MEANS REVENUE HAS TO GROW. IF IT SLOWS OR REVERSES AT CAROL: WHO IS AT THE TOP OF THE DEBT STACK? LAURA: THE PRIVATE EQUITY FIRM IS AT THE BOTTOM OF REPAYMENT BECAUSE THE WAY DEBT WORKS IS BASICALLY THE DEBT INVESTORS GET PAID BACK FIRST AND IF THERE IS A RESTRUCTURING OR BANKRUPTCY OF ANTIQUITY -- BANKRUPTCY COMMIT TYPICALLY THE EQUITY GETS WIPED OUT. ITS PROBLEMS PREDATE THE CURRENT AI CONCERNS. IT HAD ITS OWN SET OF ISSUES. IN THAT SITUATION, HIS CO-INVESTORS LOST $500 BILLION. ONE OF THE LARGEST WHITE DOTS IN PRIVATE EQUITY IN YEARS. TIM: WE SPOKE TO ORLANDO BRAVO IN THE PAST. WE SPOKE TO HIM YEARS AGO IN A COMPLETELY DIFFERENT ENVIRONMENT THAN IT IS TODAY. CAROL: IT WAS JUST CHASING PRIVATE CREDIT AND WANTING TO PUT IT ANYWHERE. TIM: THIS IS A FIRM FOR YEARS THAT HAS BEEN ALL ABOUT SOFTWARE. TALK ABOUT THE EXAMPLE BUT BRAVO'S ROLE IN THIS. PAULA: IT SEEMED LIKE A SMART INVESTMENT AT THE TIME. THEY USED A $1.8 BILLION CREDIT LOAN TO FINANCE IT, AND SPECIFICALLY A RECURRING REVENUE LOAN. WHAT IS COMMON IN EARLIER STAGE COMPANIES IS THEY ARE NOT GENERATING A LOT OF EARNINGS, SO AN ALTERNATIVE IS A LOAN OFF RECURRING REVENUE. IN ALL DEBT TIMES THAT WOULD BE CONSIDERED PRETTY EXTREME, BUT FOR THE NEWER SOFTWARE COMPANIES THAT WAS CONSIDERED MORE COMMON. IT ALSO HAD A SPECIAL FEATURE CALLED PICK OR PAYMENT IN KIND OR YOU COULD DEFER SOME OF THE INTEREST BY ADDING IT TO THE PRINCIPAL PAYMENT OF THE DEBT LATER. BASICALLY THIS COMPANY TRIED TO INCREASE EARNINGS, IT COULDN'T, BUT BECAUSE IT WAS PICKING THE DEBT, THE DEBT SIZE KEPT INCREASING AND ENDED IN AN UNFORTUNATE RESTRUCTURING. CAROL: SO THE TARGET FOR SUCCESS HAD TO BE EVEN HIGHER BECAUSE THE DEBT LOAD KEPT HIRING BECAUSE THEY KEPT ADDING ON INTEREST. PAULA: THAT IS WHAT IS HARD ABOUT DEBT, IS IT AMPLIFIES RISK. CAROL: WE TALK A LOT ABOUT THE SOFTWARE SPACE. WHAT DO INVESTORS LOOK FOR? IS IT A CASE OF A BUNCH OF DEALS STARTING TO HAVE PROBLEMS? IS IT A CASE OF A BIG DEAL, OR WE JUST DON'T KNOW? HOW DO WE KNOW IF THIS IS GOING TO BECOME A BIGGER PROBLEM? IS IT A HIGHER RATE ENVIRONMENT THAT MAKES IT TRICKIER? WHAT MAYBE TIPS EVERYTHING OVER, OR AI IS DOING EVERYTHING THESE COMPANIES DO? PAULA: CAN A COMPANY PAY ITS INTEREST EXPENSE? A LOT OF THESE LEVERAGED BUYOUT'S ARE DONE IN THE 2020 TO 2022 ERA. AS THE FED INCREASED INTEREST RATES, THEIR BORROWING COSTS ALSO INCREASED, WHICH SQUEEZED THE LIQUIDITY A BIT. CAROL: I THINK THEY THOUGHT THEY WOULD BE EXITING IN THREE TO FIVE YEARS. PAULA: THAT IS THE OTHER COMPONENT. AS INTEREST RATES INCREASE, VALUATIONS FELL. A PRIVATE EQUITY FIRM DOES NOT WANT TO SELL IT FOR LESS THAN IT BOUGHT IT FOR. A LOT OF COMPANIES ARE BASICALLY STUCK AND CANNOT BE SOLD OR IPO'D. THE REAL TEST IS THE REFINANCING BECAUSE A LOT OF THE DEBT IS ROUGHLY SEVEN YEARS OF MATURITY. A LOT OF THAT IS COMING DUE BETWEEN NOW AND 2029. AND SO EACH OF THOSE IS GOING TO BE A TEST CASE BASICALLY. TIM: YOU SAID EARLIER IT IS UNCLEAR IF THE SAAS APOCALYPSE ACTUALLY HAPPENED. SOME WOULD HAVE SAID, WAIT A SECOND, IT LOOKS LIKE PUBLIC MARKET INVESTORS MADE A DECISION AS OF NOW. WHEN WE CAN DEFINITIVELY SAY THERE IS OR IS NOT A SAAS POCALYPSE? PAULA: AT LEAST IN THE DEBT MARKET IT WILL BE ON A CASE-BY-CASE BASIS. CAROL: IF WE CAN BRING UP OUR LAST CHART, YOU HAVE SEEN BASICALLY INVESTORS OR LENDERS GROWING WARY. WE HAVE A CHART THAT SHOWS THAT BIO FUNDS BINGED ON SOFTWARE DEALS, BUT IF YOU LOOK AT 2026 YOU CAN SEE THAT HAS COME DOWN DRAMATICALLY. PAULA: AND LENDER CONFIDENCE IS KEY BECAUSE IF YOU LOSE ACCESS TO DEBT CAPITAL MARKETS, AT THE LEAST YOUR BORROWING COSTS WILL GO UP MORE AND IN A WORST-CASE SCENARIO WILL NOT BE ABLE TO REFINANCE AT ALL. EITHER CAN CAUSE A RESTRUCTURING. CAROL: THIS IS A GREAT EXPLAINER OF WHY WE ARE WATCHING, SOME OF THE METRICS TO KEEP AN EYE ON. TIM: A MASTER CLASS IN UNDERSTANDING THE STRUCTURE OF THESE THINGS. CAROL: THANK YOU. BLOOMBERG NEWS A SENIOR REPORTER WHO COVERS PRIVATE CREDIT, ALSO LEVERAGED FINANCE. THIS IS IN BLOOMBERG MARKETS MAGAZINE. IT IS THE MONEY ISSUE. THEY ARE VERY DEEP DIVES. TIM: WE ARE TALKING CRITICAL MINERALS AND RARE EARTHS, NEXT. CHARLIE: IT IS 2:40 ON WALL STREET. WE CHECK MARKETS ALL DAY LONG ON BLOOMBERG. WE HAVE SHARES OF WORKDAY SURGING. TRADING RESUMED UP 14.1%. SILVERLAKE SAID TO BE IN TALKS TO BUY WORKDAY, THAT ACCORDING TO A REPORT FROM REUTERS. WE HAVE WORKDAY SHARES AFTER A BRIEF TRADING HALT UP BY 14.1%. WE WILL HAVE MORE DETAILS AS THEY BECOME AVAILABLE. BEARS REPEATING WORKDAY UP BY 14.1 PERCENT. THE DOW, S&P AND NASDAQ ALL ADVANCING. THE DOW JONES INDUSTRIAL AVERAGE BACK IN THE GREEN AT 53,804. UP 0.1%. HAS BEEN SWINGING BETWEEN GAINS AND LOSSES. LOWER ON THE DOW FOR MUCH OF THE DAY. S&P 500 INDEX BELOW 7800. DID GET A COUPLE PRINTS THIS MORNING ABOVE THAT NUMBER. RIGHT NOW THE S&P UP 48, A GAIN OF 0.6%. NASDAQ HIGHER BY .8%. THE RUSSELL 2000 INDEX OF SMALL-CAP SHARES UP .2%. NASDAQ 100 UP BY 1.3%. ALSO COULD NOT NEGLECT TO TELL YOU THAT THE S&P TRADING AT A RECORD. CLOSED TODAY ABOVE 77 -- ANY CLOSED ABOVE 77.57 WILL BE A RECORD. VIX BELOW 15. THE TWO YEAR YIELD 4.13%. 10 YEAR, AND 30 YEAR RIGHT NOW AT 5.2%. GOLD $43.58. WEST TEXAS INTERMEDIATE CRUDE $80.91 A BARREL. SPACEX CHAIRS CONTINUING TO HOLD ABOVE LAST MONTH'S IPO PRICE. RIGHT NOW WE HAVE SPACEX SHARES LOWERING TODAY, DOWN ROUGHLY 2.9%. 141.96. LAST MONTH WENT PUBLIC AT 135. WORKDAY SHARES SURGING 14.1% AFTER A ROTORS REPORT -- A REUTERS REPORT THAT SILVERLAKE IS IN TALKS TO BUY WORKDAY. CAROL: WE WILL COME BACK TO CHARLIE PELLETT. BACK IN LATE JUNE WE REPORTED HOW THE U.S. ARMY STRUCK DEALS WITH SEVERAL COMPANIES TO BUILD CRITICAL MINERALS PROCESSING PLANTS TO DO IT ON MILITARY BASES AROUND THE COUNTRY. IT WAS A FIRST OF ITS KIND INITIATIVE BY THE TRUMP ADMINISTRATION TO BOOST DOMESTIC PRODUCTION OF THESE KEY MATERIALS. ALLOYS, MINING, ENERGY X, ALL REACH AGREEMENTS WITH THE PENTAGON TO BUILD OUT FACILITIES. TIM: JUST LAST WEEK PRESIDENT TRUMP, WE TALKED ABOUT THIS ALL WEEK, HE TOUTED THAT $3 BILLION IN U.S. INVESTMENTS IN CRITICAL MINERALS MINING. THAT WAS AIMED AT WEANING THE U.S. OFF SUPPLY CHAINS THAT HAD BEEN DOMINATED BY CHINA. THIS WEEK WE HAVE BEEN DIGGING IN DEEP WITH CRITICAL AND RARE MINERALS. THOSE THAT ARE QUITE LITERALLY DIGGING DEEP TO GET THEM. CAROL: ONE SUCH INDIVIDUAL IS PRESIDENT AND CEO OF RE-ALLOYS. IT'S GREAT TO HAVE YOU HERE. YOUR STOCK IS UP ALMOST 60% YEAR TO DATE. 19% OF THE FLOAT IS SHORT. YOU DO COME OUT WITH EARNINGS, SO I KNOW THERE ARE CERTAIN THINGS -- YES, TOMORROW. YOU ARE ALWAYS CONSIDERED TO GIVE US SOME TIME. TELL US ABOUT HOW THINGS ARE GOING. IT FEELS LIKE THERE'S TIME WHERE THE WHITE HOUSE IS SPENDING TIME ON THIS AND THAT IT BACKS OFF. >> I WILL GIVE YOU ON THE ARMY S IDE WHICH YOU TALKED ABOUT, WE ARE WORKING CLOSELY WITH THEM TO GET TO THE FINISH LINE. THERE ARE A LOT OF THINGS THAT GO INTO IT BESIDES PUTTING UP A BUILDING. THERE ARE SIGNIFICANT DEMANDS. WE ARE MAKING SURE ALL THOSE ARE IN PLACE SO WE CAN ACCELERATE OUR PROCESS OF BEING ON THE ARMY BASE WITH OUR PROCESS OF WHETHER IT IS A SEPARATION OR METALIZATION. THEY ARE ACTIVELY INVOLVED. IN GENERAL, YOU MENTIONED HIS ROUNDTABLE MEETING OR WASHINGTON MEETING. IT IS THE MONEY THAT THEY ARE GETTING OUT AND THERE SEEMS TO BE NO SLOWING DOWN FOR THE GOVERNMENT'S INTEREST IN MAKING SURE THAT THIS HAPPENS AND SINCE YOU MENTIONED YOU HAVE BEEN DIGGING IN, YOU PROBABLY KNOW WHY AND THERE IS STILL A MASSIVE GAP BETWEEN US DOING ANYTHING AND CHINA CONTROLLING THE PROCESS. TIM: HOW DO YOU MEASURE IT? CAROL: HAS ANYTHING CHANGED? TIM: WE ARE IMPATIENT. WE KEEP ASKING ABOUT THIS. LIPI: CLEARLY, BUT IT DOES TAKE TIME AND IT GOES BACK TO THE NO WAIVERS EXECUTIVE ORDER THAT TRUMP PUT OUT THE OTHER DAY. IF YOU READ IT CLOSELY, THERE ALWAYS HAS TO BE AN EXCEPTION TO THE RULE AND THINGS LIKE THAT BUT WHAT IT TELLS YOU IS THAT THERE IS A VERY SIGNIFICANT NEED AND WE ARE NOT PLAYING GAMES AND YOU NEED TO BE ON TOP OF THIS BUT SOMETHING THAT TOOK FOUR DECADES TO BUILD UP IN CHINA WILL NOT TAKE FOUR WEEKS TO BUILD UP IN AMERICA SO REALISTICALLY SPEAKING, WE HAD THE PROCESS, THE SEPARATION WHICH IS THE BIGGEST AND WHAT WE ARE FOCUSED ON. THE SEPARATION OF ROCKS TO ERRORS. A SIGNIFICANT COMPONENT SO HE OPENED THE MAGNET FACTORY TOMORROW. YOU NEED TO GO THROUGH THERE AND THAT BOILS DOWN TO SEPARATION. WE ARE MOSTLY FOCUSED ON DEFENSE MEANS. HEAVY RARE EARTH IN THE MIX SO IN A REALISTIC WORLD, I WOULD SAY WE ARE STILL A FEW YEARS AWAY. LOOKING AT THE JANUARY 1 COME OFF AND MAKING SURE WE ARE GOING NEXT YEAR TO DELIVER. JUST METALS. WE ARE REALLY TRYING HARD TO COME TO THAT DEADLINE WITH ACTUAL MATERIAL TO THE TABLE. I THINK WE ARE THERE. OTHERS IN THE SPACE, MYSELF INCLUDED AND ALL THE OTHER COMPANIES, WE ARE WORKING REALLY HARD BECAUSE IT DOES TAKE TIME TO BUILD UP AN ENTIRE INDUSTRY. PUT UP A SWITCH. TIM: YOU KEEP SAYING IT TAKES TIME BUT IT ALSO TAKES RESOURCES AND THAT IS WHERE THIS ADMINISTRATION HAS BEEN IN SOMETHING WE TALKED A LOT ABOUT AND I AM JUST CURIOUS WHAT ELSE YOU NEED OR WHAT ELSE YOU THINK THE INDUSTRY NEEDS FROM THE U.S. GOVERNMENT. LIPI: RIGHT NOW, THINGS ARE MOVING ALONG. WE WILL PUT THAT OUT TOMORROW. WE WILL TALK ABOUT THAT NEXT TIME BUT WE ARE FUNDED FOR OUR PROCESSING ROLLOUT AND METALLIZATION ROLLOUT. WE ARE FUNDED FOR A PHASE ONE AND WE WILL GET TO THE FINISH LINE WITH MAKING METALS BY 2027 AND THEN SCALING IT UP. IT'S NOT A MATTER OF MAKING IT. IT IS ABOUT MAKING MORE. GETTING TO THE FINISH LINE AND MAKING MORE. THE OTHER COMPANIES THAT ARE GETTING FUNDED ARE WORKING -- WE ARE THE MOUTH -- MOST FOCUSED ON HEAVY RARE EARTH AND ON TARGET FOR NEXT YEAR TO START HAVING PRODUCTION AND OBVIOUSLY TO KEEP SCALING UP YEAR AFTER YEAR BUT IT'S STILL GOING TO TAKE US TO 2028 AND 2029 TO WHERE WE CAN SUPPLY MORE THAN LITTLE BITS AND PIECES. CAROL: YOU FINISH PLEASE. LIPI: ALL THE COMPANIES, LOOK AT THE THREE OR FOUR COMPANIES YOU VERY FAMILIAR WITH. IT TAKES A FEW YEARS IF EVERYTHING GOES RIGHT. OUR INTEREST WAS TO TAKE WHAT HIS EXISTING MOUTH. NEARING COMPLETION ON THEIR PHASE ONE PLAN AND METALLIZATION PLAN UNDER CONSTRUCTION AND OUR INTEREST -- AS SOON AS POSSIBLE AND BY NEXT YEAR, PROMISES ABOUT FIVE YEARS FROM NOW BUT ACTUALLY DELIVERABLES NOW WITH COMMITMENTS TO SCALE. CAROL: YOU SAID YOU HAD NOT TAKEN GOVERNMENT MONEY YET. YOU ARE HOLDING OFF. WHAT IS THE DEAL? LIPI: AT THE MOMENT, WE DO NOT NEED IT. WE ARE IN TALKS FOR FURTHER THINGS IF THE ARMY EXPANSION GETS THE LEASE ON THE PROPERTY OR IN OTHER WORDS WHEN WE GO BIGGER AND FASTER ON SCALE. WE RAISE $100 MILLION FROM SIGNIFICANT INSTITUTIONS. AND 50 MILLION BEFORE THAT. WE WERE LEVERAGING OFF WITH THE OTHER COMPANIES THAT WE BOUGHT OUT OR PARTNERED WITH HAVE SPENT HUNDREDS OF MILLIONS OF DOLLARS DOING SO WE DO NOT FALL INTO THE BOAT -- TO REBUILD EVERYTHING FOR YOU IN 10 YEARS. WE ARE BUILDING IT AS WE PUT OUR MONEY -- WE ARE SHOWING RESULTS AND THEN WE CAN GO BACK WITH THE STRONGER HAND AND SAY IF WE WANT TO ADD THIS OR THAT BUT SO FAR WE HAVE BEEN DOING FINE WITH THE INDUSTRY FUNDING AND WE ARE IN TALKS WITH MANY DIFFERENT VARIOUS FACTIONS. WE WANT TO GET OBVIOUSLY SOMETHING TO DO WITH THAT. IT TAKES TIME AND THESE ARE COMMITMENTS. IT TAKES TIME. WE WILL GET THERE AS WE SCALE UP. WE ARE NOT IN A RUSH. CAROL: REALLY APPRECIATE IT. I SHOULD POINT OUT SHARES OF ALLOYS ARE UP 4% IN TODAY'S SESSION AND THEY DO REPORT EARNINGS TOMORROW. HE IS PRESIDENT AND CEO, JOINING US THERE. TIM: IT IS BLOOMBERG BUSINESSWEEK DAILY. >> THIS IS BLOOMBERG BUSINESSWEEK DAILY WITH CAROL MASSAR AND TIM STENOVEC ON BLOOMBERG RADIO AND TELEVISION. CAROL: GETTING READY FOR THE LAST HOUR OF TRADING. IN OUR BLOOMBERG OFFICES HERE AT OUR HEADQUARTERS IN NEW YORK CITY ON A DAY WHERE WE ARE SEEING YIELDS HAVE MOVED OFF WITH A BIG 30 YEAR AUCTION. WE HAVE HAD A BUNCH THIS WEEK. S&P 500 UP 52 POINTS, GIVE OR TAKE A LITTLE BIT, UP .7%. YOU HAVE MORE NAMES IN THE INDEX. I THINK MORE THAN 300 ARE GAINING GROUND IN THE THURSDAY TRADE. NASDAQ 100. A PERFORMER OF THE MAJOR INDICES. 1.3%. 395 POINTS. TIM: YESTERDAY, WE GOT CPI. TOMORROW, WE ARE GOING TO GET RETAIL SALES IN SENTIMENT. SOME ADDITIONAL CONTEXT. THEY PACKED THE BAGS FOR JACKSON HOLE. CAROL: I AM CAROL MASSAR ALONG WITH TIM STENOVEC. LET'S GET STOCKS ON THE MOVE. WITH US TO DO THAT IS EQUITIES REPORTER, HE IS MATTHEW GRIFFIN AND JOINS US HERE IN STUDIO. WE HAVE GOT TO START WITH WORKDAY. WDA Y IS THE TICKER. 10 MINUTES. >> A GORGEOUS REPORT THAT PRIVATE EQUITY FIRM SILVER LAKE IS IN TALKS TO BUY THE SOFTWARE PROVIDER. REUTERS SAYS THOSE DISCUSSIONS HAVE BEEN GOING ON FOR SEVEN MONTHS ABOUT A TAKEOVER OF THE SOFTWARE COMPANY. THEY ARE CITING UNIDENTIFIED PEOPLE FAMILIAR WITH THE TALKS ALTHOUGH THERE IS NO GUARANTEE A DEAL WILL OCCUR. THE STOCK UP 20%. THE STOCK WAS DOWN 18% THIS YEAR BEFORE THE REPORT. TIM: YOU GO BACK TO THE HIGH THAT IT REACHED IN FEBRUARY OF 2024. IT'S AT 2012 WITH TODAY'S MOVE HIGHER. AND THE WAY THAT SOME OF THEM ON THE PRIVATE SIDE, SOME OF THE WAY THE LBO'S HAVE TURNED OUT AS A RESULT OF CONCERNS OVER AI. IT'S A GREAT READ AND EVERYBODY SHOULD CHECK IT OUT. THINKING OF WHAT IS HAPPENING IN THE PUBLIC MARKETS WITH SOME OF THESE STOCKS. CAROL: AS POINTED OUT, EVERY COMPANY IS THE SAME. WHO MIGHT BE VULNERABLE IN AN AI WORLD? TIME WILL TELL ON THAT ONE. LET'S STAY WITH THE TECH WORLD. WE GOT THE EARNINGS LATE YESTERDAY. >> THAT STOCK IS EXTENDING THE CLIENT THROUGHOUT THE SESSION HERE AND WHAT IS DISAPPOINTING INVESTORS IS AN OUTLOOK FOR CISCO'S AI SALES. ACTUALLY THE FIRST TIME THEY HAVE GIVEN GUIDANCE FOR THAT METRIC SO THE NETWORKING EQUIPMENT COMPANY THEY EXPECT $7.5 BILLION IN THE CURRENT YEAR IN DATA CENTER RELATED SALES AND THAT NUMBER ACTUALLY, IF YOU JUST DO THE MATH, IT IMPLIES YEAR-OVER-YEAR GROWTH, PRETTY STRONG GROWTH, AND IT IS A STEP DOWN COMPARED TO $9.3 BILLION IN BOOKINGS. FOR AI RELATED EQUIPMENT. MAYBE SOME QUESTIONS AMONG INVESTORS ABOUT REVENUE CONVERSION. THAT SHOWS UP ON THE TOP LINE. CAROL: SO MUCH STUFF NOW. TIM: MAY BE PUTTING ON A PAIR OF BIRKENSTOCKS. MAYBE TODAY, THE STOCK IS MOVING HIGHER. MATTHEW: THAT STOCK IS RALLYING. WE ALSO GOT AN OUTLOOK AT PLAY THERE. CONSTANT CURRENCY REVENUE GROWTH OF 15%. IT IS A SIGN THAT THEY ARE MANAGING THROUGH SOME HEADWINDS. THEY ARE PAYING IMPORTANT LEVIES IN THE U.S.. THAT BEING SAID, THEIR STRATEGY HAS BEEN TO LEAN INTO GERMAN MANUFACTURING. HOW TO BE PICKY ABOUT WHERE THEY MANUFACTURE AND WHERE THEY SELL SO THIS IS A SIGN THAT DESPITE THE HEADWINDS, THAT IS PAYING OFF RIGHT NOW. TIM: I SHOULD GET A PAIR OF BIRKENSTOCKS. CAROL SAYS NOTHING. SHE STAYS SILENT. CAROL: I HAVE ACTUALLY HAD A PAIR. I JUST ASSUMED YOU HAD THEM. TIM: TO BE FAIR, IN THE 1990'S, I HAD THEM BUT I DON'T KNOW WHERE THAT PAIR WENT. THAT IS LONG GONE. CAROL: I WOULD LOVE TO SEE THEM. SO BIRKENSTOCKS IT'S TICKER ISN'T B.I. ARKK -- BIRK. SO LET'S GO TO BECOME A REAL QUICKLY, IS IT STEP UP? MATTHEW: THEY ARE DOWN 12% NOW AND ALSO AN OUTLOOK AT PLAY. INVESTORS ARE THINKING ABOUT THE FUTURE TODAY. THAT IS FOR GROSS MERCHANDISE SALES OF 10.1 BILLION TO 10.3 BILLION DOLLARS THIS YEAR AND IT'S ACTUALLY A RAISE AND IT LOOKS OK NEXT TO GUIDANCE BUT THEY REPORTED REALLY STRONG UPSIDE ON THAT METRIC IN THE MOST RECENT QUARTER BECAUSE OF THE WORLD CUP. SO WHAT ANALYSTS ARE SAYING IS THAT IMPLIES THE BEST DAYS OF GROWTH FOR AN HOUR BEHIND THE COMPANY. WE ALSO HAD BANK OF AMERICA CUTTING THEM TO THE CELL EQUIVALENT RATING EVEN DESPITE THE HIGHER OUTLOOK. TIM: I JUST BOUGHT SOME TICKETS ON STUB HUB. A FEW WEEKS AGO. CAROL: NICE STUFF. TIM: THE WHOLE PROCESS IS LIKE HOW -- IS NOT SOLD OUT BUT I CANNOT GET THESE TICKETS DIRECTLY. I DON'T GET IT. SO CHALLENGING REGARDLESS OF THE PLATFORM. CAROL: ALL THESE FEES. WHY IS THAT? MAKES IT ANY BETTER? OK, NICE. IT'S THANK YOU SO MUCH. MATTHEW GRIFFIN, CHECK OUT OUR STOCK MOVERS PODCAST. FIVE MINUTE EPISODES. BIG WINNERS AND LOSERS IN THE STOCK MARKET. YOU CAN FIND IT ON APPLE, SPOTIFY, OR ANYWHERE YOU GET YOUR PODCASTS. WE ARE GOING TO DIG EVEN DEEPER