Stocks Halt Rally After Signs of Consumer Slowdown | The Close 8/14/2026

>> THE COUNTDOWN IS ON. EVERYTHING YOU NEEDED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS "THE CLOSE." ROMAINE: CONSUMERS TAKE A BREATHER AND SO TOO DOES THE EQUITY RALLY. LIVE AT BLOOMBERG HEADQUARTERS IN NEW YORK, I'M ROMAINE BOSTICK. ISABELLE: WE GOT A DATA DUMP TODAY. IT SHOWED THAT THE ENGINE OF THE U.S. ECONOMY IS COOLING FROM CONSUMER SALES TO RETAIL SALES. THE S&P DOWN 5.2%. NASDAQ EDGING LOWER BY .3%. THE TWO YEAR YIELD EXTENDING ITS DECLINES FOR THE THIRD STRAIGHT WEEK AS FED RATE CUTS CRUMBLE. WE SELL BRENT CRUDE OIL HIGHER BY NEARLY 2% AS GEOPOLITICAL TENSIONS CONTINUE TO RISE. ROMAINE: A MODEST DAY OF LOSSES FOR THE S&P 500, CAPPING WHAT WILL BE A MODEST WEEK OF GAINS. THE WEAKNESS TIED TO THAT ONE-TWO PUNCH OF THE WORST U.S. RETAIL SALES REPORT IN A YEAR. TO DO YOUR READING THE SHORT AND LONG-TERM -- DETERIORATING PERCEPTIONS ABOUT THE SHORT AND LONG-TERM. CONCERNS ABOUT THE AI TRIED. THE PHILADELPHIA SEMICONDUCTOR INDEX WHICH CAME INTO 2026 WITH 10 STRAIGHT WEEKS OF GAINS HAS NOT POSTED BACK TO BACK WEEKLY GAINS SINCE JUNE, NOR BACK TO BACK WEEKLY LOSSES. NOW SEVEN WEEK SEE-SAW BETWEEN GAINS AND LOSSES, A TESTAMENT TO THE DIVISION AND ATTITUDES ABOUT HOW MUCH THE AI TRADE HAS LEFT. NVIDIA ON THE CALENDAR IN THE WEEK AND A HALF. THE EARNINGS SEASON ON THE SURFACE IS PHENOMENAL, BUT THESE MASSIVE EARNINGS BEATS AND THE GUIDANCE WE SAW FROM TECH AND NON-TECH COMPANIES ARE BARELY MOVING THE STOCK PRICE NEEDLE. SINCE EARNINGS BEGAN THE S&P'S 3% GAIN IS BARELY ONE THIRD OF THE SURGE WE SAW DURING THE Q1 SEASON. THAT IS DRIVING ONE OF THE SHARPEST DECLINES IN THE S&P'S FORWARD PRICE TO EARNINGS MULTIPLE ON RECORD. >> EVERYONE WANTS TO TALK ABOUT THIS PEAK EARNINGS. AND IF YOU THINK ABOUT WHETHER THE MARKET IS POSITIONED FOR THAT, WHAT I WOULD SAY IS EQUITY POSITIONING IS ALIGNED WITH THE 14%, 15% GROWTH RIGHT NOW, WHICH IS NOT BAD GROWTH. BUT WE ARE GETTING LIKELY 25%. POSITIONING, THERE IS STILL UPSIDE FOR THE MARKET. ROMAINE: WE TALK ABOUT THAT 35% GROWTH. ARE PEOPLE STILL OPTIMISTIC FOR THE NEXT COUPLE QUARTERS AHEAD? ISBAELLE: I THINK PEOPLE ARE BECAUSE THE REVISIONS HAVE BEEN STELLAR. I KNOW WE HAVE NVIDIA NEXT WEEK, BUT WE ARE ALMOST DONE WITH THE EARNINGS CYCLE. ONE INTERESTING SIGNAL IS EARNINGS REVISIONS. THEY ARE GETTING MOMENTUM. THE GREEN LIGHT AND LITTLE TICK UP, IT IS GAINING. THE HIGHEST UPWARD NUMBER OF REVISIONS FOR THE QUARTER SO FAR. 59 COMPANIES RAISING THEIR OUTLOOK EARLIER THIS MONTH. DESPITE SOFTER ECONOMIC DATA, CORPORATE EARNINGS EXPECTATIONS ARE MOVING HIGHER. ROMAINE: OUR NEXT GUEST SAYS OTHER THAN THE RECESSION ERA IS HERE, THAT WHAT WE SEE IN THE MOMENTUM IN EARNINGS IS A CYCLE UNLIKE ANY OTHER. THE DIRECTOR OF GLOBAL MACRO FOR FIDELITY. WE TALK ABOUT THE EARNINGS GROWTH CLIP, REVENUE GROWTH TOO HAS BEEN ALSO PHENOMENAL. WE KNOW BY DEFAULT THESE RATES CANNOT CONTINUE. IS THIS GOING TO BE A MODERATION OF SOME OF THOSE GROWTH RATES, OR ONE OF THOSE AREAS WHERE WE FALL OFF A CLIFF ONE QUARTER? >> IT IS THE BIG QUESTION. WE ARE IN AN EARNINGS BONANZA IF YOU WILL. THE GROWTH RATE IN YEAR-OVER-YEAR EARNINGS FOR THE SECOND QUARTER STARTED THE QUARTER AT ABOUT 25% OR SO. IT IS NOW AT 32%. THE MOMENTUM IS INCREDIBLY STRONG. THE DOLLAR ESTIMATE, OR DOLLAR EARNINGS NUMBER FOR THE S&P IN THE LOW 300S IS UP $100 YEAR-OVER-YEAR AND THE GROWTH RATE IS 35%. BOTH THE LEVEL AND TO GROWTH RATES ARE STILL ACCELERATING, SO THE MOMENTUM IS THERE. THE ESTIMATES FOR THE COMING QUARTERS ARE EQUALLY STILL REVISING. WHAT WE HAVE ALWAYS FOUND IS THERE IS A LOT OF ALPHA IN FINDING STOCKS WHERE THERE IS POSITIVE EARNINGS MOMENTUM AND REVISION. AT SOME POINT THE GROWTH RATE IS UNDOUBTEDLY GOING TO SLOW, AS IT ALWAYS DOES. IT'S A STOCHASTIC INDICATOR. AT THAT POINT, AS WARREN BUFFETT SAID, WHEN THE TIDE GOES OUT YOU WILL SEE WHO WAS SWIMMING NAKED. ON THE EQUAL WEIGHTED INDEX IT IS 18. 75% OF THE S&P 500 IS AN UP TREEND ABOVE THEIR 200 DAY MOVING AVERAGE. THERE IS A RISK FROM RISING INTEREST RATES. THE 10 YEAR AT 470. WE CAN TALK ABOUT RISKS IN AI AND HOW THAT IS BEING FINANCED, BUT FOR NOW THIS IS A STRONG EARNINGS DRIVEN MOMENTUM MARKET. ROMAINE: LET'S TALK ABOUT THE RISK IN AI. ONE INTERESTING THING WITH THE RECORD SET, THAT SEEMS TO SUGGEST NOT JUST BREADTH, BUT MET SOME FOLKS TURNED AWAY FROM THE AI TRADE OR SOME OF THE BIG NAMES THAT GOT US HERE OVER THE LAST THREE YEARS. JURRIEN: I AM VERY CONVERTED BY -- COMFORTED BY THE FACT THAT TWICE THIS YEAR, EARLIER DURING THE IRAN CONFLICT AND MORE RECENTLY WHEN THE S&P PEAKED JUNE 2 AND WENT SIDEWAYS WHILE THE MAG 7 AND AI SPACE WENT DOWN, THE MARKET SURVIVED IT PRETTY WELL. THE MARKET BROADENED. BREADTH IS BROADENED. GLOBAL MARKETS ARE PARTICIPATING. THERE ARE A LOT OF FISH IN THE SEA RIGHT NOW. AND WE ARE FISHING FROM A BIG POND, WHICH IS AN IMPROVEMENT FROM WHERE WE WERE OVER THE LAST 10 YEARS WHERE IF YOU ARE NOT IN THOSE MEGA CAPS, YOU WERE JUST NOT PARTICIPATING. AND NOW YOU CAN PARTICIPATE. THE FACT THAT THESE ROTATIONS -- THEY DON'T HAPPEN IN AN UP MARKET BUT AT LEAST THEY DON'T HAPPEN IN A STRONGLY DOWN MARKET, I THINK IS A HEALTHY SIGN. ISBAELLE: THE S&P IS 20 TIMES FORWARD EARNINGS. IS IT CHEAP ENOUGH TO KEEP BUYING? OR IS IT PRICE TO PERFECTION TERRITORY? JURRIEN: IT DEPENDS ON HOW YOU LOOK AT IT. VALUATION IS ONE OF THOSE FUNNY THINGS WHERE BEAUTY IS IN THE EYE OF THE BEHOLDER. YOU CAN HAVE BEARS AND BULLS ARGUING OVER THE SAME NUMBERS AND COME UP WITH DIFFERENT CONCLUSIONS. THE FORWARD MULTIPLES ARE VERY REASONABLE. EVEN THE TRAILING 12 MONTH NUMBERS ARE INTO LOW TO MID 20'S. THE CAPE MEMBERS, THE CYCLICALLY ADJUSTED PE LIKE THE FIVE-YEAR IS NEAR ALL-TIME HIGHS AT 34. A BEAR WOULD PROBABLY POINT TO THAT. THE WAY EARNINGS HAVE GROWN OVER THE LAST FIVE YEARS FROM THE COVID DAYS UNTIL NOW THIS AI BOOM, A CAPE RATIO WILL MAKE THE MARKET LOOK MORE EXPENSIVE THAN IT IS JUST BECAUSE IT IS A -- JUST BECAUSE IT IS WEIGHTED DOWN. WHEN THE EARNINGS MOMENTUM STARTS TO FALL OFF, AND I DON'T THINK IT WILL BE A CLIFF, BUT COULD BE A SLOWDOWN, THEN AT THAT POINT WE HAVE TO LOOK AT HOW EXPENSIVE IS THE MARKET, AND HOW CROWDED IS THE TRADE? WE'VE SEEN ETF FLOWS INTO SINGLE NAME LEVERED ETFS BETWEEN THE U.S. AND KOREA. ABOUT $70 BILLION HAS BEEN CHASING THAT SPACE. THERE ARE POCKETS OF CROWDED TRADE, BUT OVERALL, FROM WHAT WE ARE SEEING THE DEMAND FOR CHIPS IS STILL WELL AHEAD OF THE SUPPLY. WE CAN TALK ABOUT THE FINANCING. HALF A TRILLION COMING IN INVESTMENT-GRADE BOND ISSUANCE THIS YEAR, ANOTHER HALF A TRILLION NEXT YEAR. THOSE ARE I THINK THE BIG QUESTIONS, BUT THE ACTUAL FUNDAMENTALS ARE WHITE-HOT. ISBAELLE: WE DO LOVE LOOKING AT LEVERAGED ETF'S. I THINK THEY SNUCK IN $3.7 BILLION, WHICH IS IMPRESSIVE. I THINK THE WILDCARD IS BOND YIELDS. AT WHAT POINT DOES A TERM PREMIUM BECOME A SERIOUS THREAT TO EQUITIES IN YOUR VIEW? JURRIEN: TO ME THAT HAS BEEN ONE OF THE TWO MAIN TAIL RISKS. ONE IS CONCENTRATION RISK IN THE S&P OF THE TOP 10 NAMES BEING 40% AND IT IS ALL AI ALL THE TIME. I AM HEARTENED BY THE FACT THAT THE MARKET HAS BEEN ABLE TO ROTATE WITHOUT A LOT OF DAMAGE. THE OTHER SIDE IS THE BOND MARKET. THE 10 YEAR YIELD AT 4.7. THAT IS A PE OF AROUND 22, 21. THAT IS WHERE THE S&P'S PE IS AS WELL. WHEN A SAFE ASSET IS YIELDING COMPETITIVELY AGAINST THE RISKY ASSET, AND THE SAFE ASSET GOES UP IN YIELD OR DOWN IN VALUATION, THE STOCK MARKET NEEDS TO ADJUST BY ALSO LOWERING ITS PE. THEN PRICE IS JUST A RESIDUAL OF EARNINGS AND VALUATION. IF THE PE GOES DOWN FROM 20 TO 60 BECAUSE BOND YIELDS ARE GOING TO FIVE AND ABOVE, THEN IT DEPENDS. IF EARNINGS ARE FLAT, THE MARKET WILL GO DOWN 15%, BUT IF EARNINGS ARE GROWING 30% THAT WILL BE AN OFFSET. THAT IS HOW THE WAVES GO BACK AND FORTH. I DO SEE MORE UPSIDE RISK TO TREASURY YIELDS THAN DOWNSIDE RISKS. THE ECONOMY IS RUNNING PRETTY HOT, EVEN THOUGH WE HAD A WEAK RETAIL SALES NUMBER AND THE PAYROLL WAS SOFT, ALTHOUGH THAT IS MOSTLY A STATISTICAL THING. OVERALL THERE IS MORE UPSIDE IN THE STOCK MARKET NEED TO PAY ATTENTION TO THAT. ROMAINE: I AM CURIOUS AS TO HOW YOU MAP IN ENERGY PRICES GIVEN NOT SO MUCH VOLATILITY IN PRICES, BUT THE VOLATILITY IN THE POLICY AND APPROACH TO THE WAR IN IRAN AND WHETHER WE GET THE STRAIT OF HORMUZ OPEN ANYTIME SOON. JURRIEN: THIS HAS BEEN A PUZZLING QUESTION FOR MANY OF US, BECAUSE THIS HAS BEEN THE DOG THAT HASN'T BITTEN YET. WE KEEP LOOKING AT THESE INVENTORY NUMBERS, THE STRAIT OF HORMUZ AND HOW SHIPS CAN OR CAN'T GO THROUGH. AND YET OIL PRICES DO REMAIN FAIRLY ORDERLY, AND THEY HAVE NOT REALLY SCARED THE MARKET. I THINK THAT COULD CHANGE AT ANY MOMENT. CHINA MAY VERY WELL BECOME THE KEY PLAYER BECAUSE IT HAS THE ABILITY TO EXPORT OIL, WHICH NOT MANY OTHERS DO. IT HAS BEEN PUZZLING THAT IT HAS NOT HAD A MORE NEGATIVE EFFECT. I'LL BE CANDID ON THAT FRONT. ROMAINE: DIRECTOR OF GLOBAL MACRO FOR FIDELITY KICKING US OFF TO "THE CLOSE" ON THIS FRIDAY AFTERNOON. A CLOSER LOOK AT THE ECONOMY AND AT THE FIGHT AGAINST INFLATION, OR MAY BE A DECISION TO HELP OUT THE CONSUMER. WE WILL CATCH UP WITH THE FORMER BOSTON FED PRESIDENT TO TALK ABOUT THE POTENTIAL PATHS AHEAD FOR THE FED. ISBAELLE: FROM ECONOMIC DRIVERS TO DRIVER'S SEAT. THE ASTON MARTIN CEO JOINS US TO UNVEIL HIS COMPANY'S LATEST MODEL AND DISCUSS THE ROAD AHEAD FOR LUXURY AUTOMAKERS. ROMAINE: WE CONTINUE COVERAGE OF THE BUSINESS OF SPORTS. WE WILL TALK ABOUT STREAMING. IF YOU TRIED TO STREAM THE NFL, MLB, NBA, YOU ARE PAYING A LOT. IT IS RAISING SOME ANTITRUST CONCERNS. WE CATCH UP WITH A MANAGING PARTNER AT THE ANTITRUST LAW FORM SHINDER CANTOR LERNER, COMING UP ON "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: LET'S CHECK IN ON THE MARKETS AS WE HEAD TOWARDS THE END OF THE WEEK. THE STOCKS ARE DOWN ON THE DAY . ISABELLE, LOOKS LIKE THE S&P GOING TO END UP ON A WEEKLY BASIS HERE. IT'S INTERESTING, WE TALK ABOUT THIS MIX, WE TALK A LOT ABOUT THE YIELD PICTURE AND BRENT CRUDE AND CURRENCIES AND ALL THE CURRENTS BETTING THAT AROUND. ISABELLE: THERE IS A LOT OF CROSSCURRENTS. THE LONGEST STRETCH SINCE MAY, GOOD NEWS AND EQUITY LAND, BUT YOU ARE RIGHT, THE CROSSCURRENTS, STILL KIND OF MURKY WITH THE DATA DUMP TODAY -- I AM SAYING IT AGAIN. ROMAINE: WE HAD THE TWO INFLATION REPORTS THIS WEEK, WHICH WERE BENIGN. RETAIL SALES REPORT THIS MORNING THAT SOME PEOPLE ARE DISMISSING AS A LITTLE BIT OF AN ANOMALY, THOUGH IT WAS BAD, DOWN .6%. THE IDEAS MAYBE IT CORRECTS ITSELF. PC REPORT LATER, AND THAT WE ARE ALMOST THROUGH EARNINGS. THIS IS KIND OF THE PICTURE FOR THE FED WHEN THEY GO INTO THE MID-SEPTEMBER MEETING. ISABELLE: I DON'T KNOW IF WHAT THEY SEE IS A NICE PICTURE. ONE INVESTORS SAYING WE SHOULD BE CAREFUL WHAT WE WISH FOR BECAUSE IF WE ARE GETTING ECONOMIC WITNESS AS AN--ECONOMIC WEAKNESS AS AN EXCHANGE, THAT MIGHT NOT BE GOOD. ROMAINE: THE OTHER BIG STORY IS DTEK TRADE-- THE TECH TRADE. SUPPLIES, SANDISK AT THE TOP OF THE LEADERBOARD. A LOT OF THE GAINS CAME YESTERDAY. SUPER MICRO, SEAGATE, THOSE ARE YOUR THREE BIG MOVERS THIS WEEK ON THE S&P 500. AND RETAIL, TOO, THAT IS A MIXED PICTURE. WAYFAIR UP, BUT YOU HAVE NAMES LIKE TAPESTRY THAT ARE DOWN HARD ON A WEEKLY BASIS. ISABELLE: HIGHER BY 11%. ROMAINE: WE WILL TALK ABOUT THAT LATER, AND YOU HAVE TO EXPLAIN THAT TO ME BECAUSE I DON'T UNDERSTAND -- IT IS FUN TO GO TO. I DON'T KNOW WHAT THE BUSINESS MODEL IS FOR THAT. THESE ARE A LOT OF THE DRONE MAKERS. UNUSUAL MACHINES IS NOT ON THE BOARD, BUT THAT IS UP IN DOUBLE DIGIT PERCENTAGES. THAT SEEMS TO BE TIED TO THIS MOVE BY THE TRUMP ADMINISTRATION TO PUT TARIFFS ON CHINESE DRONES AND DRONE COMPONENTS. ISABELLE: I WANT TO GO BACK TO THE WAYFAIR, BECAUSE THE K-SHAPED ECONOMY, DEPENDS ON WHO YOU ASK. SOME PEOPLE FEEL IT IS NEVER GOING, SOME FEEL IT IS WHAT--NARROWING, SOME FEEL IT IS WIDENING. I FEEL IT IS WIDENING BECAUSE EVERY TIME I GO TO THE GROCERY IT GETS HARDER AND HARDER. ROMAINE: EVERYBODY GOES OUT AND SHOPS, YOU CAN SEE THE PRICE PRESSURES. WHETHER YOU CAN AFFORD IT OR NOT IS ANOTHER QUESTION. WE WILL TALK ABOUT IT AT THE 4:00 P.M. OUR, THE EARNINGS YOU GET FROM YOUR WALMARTS, TARGETS, HOME DEPOTS, ESTEE LAUDERS. THEY WILL GIVE US A SENSE OF WHAT THE K-SHAPED ECONOMY LOOKS LIKE AND WHERE EXACTLY THOSE COMPANIES MIGHT BENEFIT OR BE HURT. ISABELLE: YESTERDAY WE TALKED ABOUT TAPESTRY, AND STILL SEEING A LOT OF GAINS. PEOPLE ARE STILL SHOPPING, JUST MORE SELECTIVE. COMING UP, WE ARE LOOKING AT S HARES IN THE GREEN, UP 14% AFTER REPORT OF THE TAKEOVER BID FROM SILVERLAKE. WE WILL BREAK THAT DOWN AND ALL THE MOVES. THIS IS "THE CLOSE" ON BLOOMBERG. ROMAINE: YOUR KEEPING AN EYE ON SHARES OF WORKDAY. THEY ARE DOWN ON THE DATE, BUT AFTER YESTERDAY'S 18% GAIN, THEY ARE HEADED FOR THE BEST WEEKLY GAIN IN ABOUT A YEAR. YESTERDAY WAS THE BEST DAY FOR THE STOCK SINCE 2016, AND IT BOILS DOWN TO SOME REPORTING OUT THERE. IT STARTED WITH REUTERS SAYING THAT SILVER LAKE IS IN TALKS TO BUY THE SOFTWARE COMPANY. SOFTWARE COMPANY? YEAH. OUR NEXT GUEST SAYS ANNEXING MAKES SENSE, IF YOU WILL, MAKES THE MOST SENSE IN THE APPLICATIONS SPACE TO ACQUIE, AND WORKDAY SHOWS COULD FALL IN THE 240 TO 250 RANGE. SCOTT BERG JOINS US TO TALK MORE ABOUT THIS. WHEN WE SAW THIS REPORT THE OTHER DAY, THE FIRST QUESTION WAS I THOUGHT EVERYONE FELL IN LOVE WITH SOFTWARE, BUT YOUR THESIS MAKES A GOOD POINT, YOU CAN'T LOOK AT ALL SOFTWARE COMPANIES THE SAME, AND WORKDAY DOES SOMETHING SPECIFIC THAT YOU SEEM TO THINK WILL BE MORE RESILIENT IN THIS AI ERA. EXPLAIN. >> I THINK WHEN YOU LOOK AT SOFTWARE BROADLY SPEAKING, APPLICATION SOFTWARE SPACES, THERE IS CLEARLY SOME APPLICATIONS THAT COMPANIES COULD EITHER CUSTOM-CODE THEMSELVES WITH THE VIBE CODING METHODS ARE OTHER WAYS TO BRING IN THOSE TECHNOLOGIES AND SAVE COSTS. BUT THE REGULATORY RISKS AND THE COMPLAINT RISKS AND THE INTERNAL COMPLEXITIES AROUND WORKFLOWS MAKE SOFTWARE AND FINANCIALS VERY UNLIKELY TO BE THROWN INTO THAT BUCKET ANYTIME SOON. THERE IS A LOT OF BUSINESS RISK WITH THAT. UNDER THAT THERE IS A VERY GOOD LARGE BUSINESS THAT SHOULD HAVE DURABLE GROWTH IN THE CATEGORIES BECAUSE CUSTOMERS DON'T WANT TO TAKE THE RISK. IF THAT IS THE CASE, AS CORE EVALUATIONS HAVE BEEN IN THE SECTOR THE LAST SIX MONTHS, WORKDAY MAKES AS MUCH SENSE AS ANY COMPANY TO TAKE A SWING AT. ROMAINE: YOU SAID AFTER ACQUISITION PRICE WOULD BE .240 TO 2.50, WHICH WE HAVE NOT SEEN SINCE LAST FALL. THE ALL-TIME HIGH WAS 307 BACK IN 2024. THAT IS A BIG GAP BETWEEN WHERE WE ARE TODAY AND WHAT YOU THINK THE VALUE MIGHT BE. SCOTT: CERTAINLY WE HAVE NEVER SEEN AN ACQUISITION OF AN ENTERPRISE SOFTWARE COMPANY OF THIS SIZE AND SCALE BEFORE. THIS WOULD BE THE LARGEST ONE I AM AWARE OF. IF YOU LOOK BACK AND OTHER TRANSACTIONS THE LAST 18 MONTHS, THERE IS TWO OTHER PAYROLL SOFTWARE PROVIDERS THAT WERE BOTH ACQUIRED AT PREMIUMS THAT WERE ABOUT 22, 23% HIGHER THAN WORKDAY'S PRICE WAS YESTERDAY AT THE CLOSE. IF WE USE THAT AS A COMPARABLE BACKDROP, TAKING ON JUST ABOUT FIVE TIMES REVENUE THAT WOULD PUT THE WORKDAY SHARE PRICE IN THE 250 RANGE, AS I MENTIONED IN MY NOTE TODAY. THAT IS PROBABLY THE CLOSEST BAROMETER FOR US TO LOOK AT IN RECENT YEARS. ISABELLE: HOW MUCH OF WORKDAY'S GROWTH IS AT RISK FROM AI COMPETITORS LIKE OPENAI AND ANTHROPIC? OR DO YOU THINK THAT THOSE FEARS ARE OVERBLOWN? SCOTT: I TAKE A MORE CONTRARIAN VIEW OVER THE LAST YEAR OR TWO. I THINK THE FEARS AROUND PAYROLL AND FINANCIALS ARE OVERBLOWN. THE SPACE AROUND PAYROLL, IT IS AMAZING HOW QUICKLY EMPLOYEES LEAVE IF YOU DON'T PAY THEM ACCURATELY. IF YOU TRY TO VIBE-CODE PAYROLL, THAT HAS TO BE ACCURATE. AGAINST THE COMPLEXITY AROUND PAYROLL AND TAX LAWS, SIGNIFICANTLY DIFFERENT FROM STATE TO STATE. SAME THING WITH FINANCIALS. IF YOU'RE -- YOUR BOOKS ARE NOT ACCURATE OR RIGHT, PEOPLE GO TO JAIL FOR THOSE DISCREPANCIES. THESE ARE NOT ON THE FRINGE EDGES OF WHAT COMPANY CAN USE AND FEEL COMFORTABLE WITH AT THE END OF THE DAY. THEY NEED SOMETHING THAT IS MORE HARD AND READY TO GO AND DOESN'T HAVE ERRORS. ISABELLE: WHAT ABOUT THE CEO? HE'S BACK. DO YOU THINK HE IS THE RIGHT PERSON TO LEAD WORKDAY INTO BEING AN AI COMPANY, OR DO YOU THINK THEY NEED A BIGGER STRATEGIC RESET? SCOTT: I THINK PERSONALLY FROM A PRODUCT PERSON, GIVEN WHAT THE INDUSTRY IS GOING THROUGH ON THE PRODUCT SIDE, I DO THINK HE IS THE RIGHT FIT. HE HAS BEEN AT THE COMPANY FOR HIS ENTIRE FIRST STINT, 16, 17 YEARS. HIS RETURN IS WELL WARRANTED. IF IT IS NOT HIM ON A GO-FORWARD BASIS, SOMEONE MUCH LIKE HIM SHOULD BE AT THE REINS AT THE COMPANY. HE'S A PERFECT FIT FOR WHAT THEY ARE TRYING TO GO THROUGH TODAY. ROMAINE: I'M CURIOUS IF THIS DEAL DOES COME INTO FRUITION, WHAT THE FINANCING LOOKS LIKE, PARTICULARLY COMING OUT OF THE PRIVATE EQUITY SPACE AT A TIME IT STILL IS SKITTISHNESS AROUND US DESPITE YOUR BIT MORE OPTIMISM THERE. DO YOU THINK THEY WOULD BE ABLE TO FINANCE THIS AT A COST OF CAPITAL THAT WERE NOT HAMSTRING WORKDAY TOO MUCH GOING FORWARD? SCOTT: I DO THINK THAT IS THE BIGGEST RISK OF THE TRANSACTION GETTING DONE TODAY. IF YOU LOOK AT SOFTWARE TAKE OUTS THE LAST 15-PLUS YEARS, PRIVATE CREDIT HAS BEEN HEAVILY INVOLVED IN LOTS OF THESE. THEY HAVE BEEN LEVERAGED BUYOUTS FOR THE MOST PART. THEY LOOK AT WHAT THE PRIVATE CREDIT BACKDROP TODAY LOOKS LIKE, THERE IS A LOT OF CONCERN ABOUT THESE COMPANIES AND THEIR NOT NECESSARILY OVERLY HEAVY EXPOSURE TO SOFTWARE, BUT CERTAINLY EXPOSURE TO SOFTWARE, AND THE RISKS OF THESE BUSINESSES ARE. WILL THEY GET TO BE REFINANCED? YOU HAVE THE SAME QUESTION WITH WORKDAY IS CANDY PRIVATE EQUITY SPONSOR, WHETHER IT IS SILVER LAKEO OR A CONSORTIUM, CAN THEY RAISE $24 BILLION WORTH OF DEBT TO GET THIS LEVERAGED? I'M NOT SAYING THEY CAN'T, BUT THE BIGGEST CONCERN THE MARKET WILL HAVE TO ACTUALLY GETTING THE TRANSACTION DONE. ROMAINE: GREAT STUFF. GOT TO GET YOU BACK. SCOTT BERG. DOWN 30% FROM THE LAST ALL-TIME HIGH YEARS AGO, GETTING A NICE PUMP ON A WEEK, 10%. WE WILL RECAP THIS WEEK'S ECONOMIC DATA AND WHAT WE LEARN FROM THE RETAIL SALES REPORT. DOESN'T MOVE THE NEEDLE FOR THE FED? THAT CONVERSATION IS UP NEXT. ♪ >> I THINK WHAT WE ARE ALSO SEEING IS THE CONSUMERS ARE BEING MORE CAREFUL WITH WHAT THEY ARE BUYING THEMSELVES. AND THE HOLIDAYS HE WOULD SHOP FOR YOUR FAMILY AND NOT FOR YOURSELF AS MUCH. ON THIS SURVEY CONSUMERS SAY THEY WILL GET THE BASIC NECESSITIES FOR THEIR FAMILIES, AND THEY MAY NOT BY THEMSELVES THE STOP THEY USED TO BUY, THAT ASPIRATIONAL SHOPPING WE ARE USED TO SEEING IN THE PAST. ROMAINE: OUR GUEST JOINS US YESTERDAY ON THE CLOSE. WE TALKED ABOUT THE STATE OF THE CONSUMER, WHETHER THEY ARE JUMPING. A RETAIL SALES REPORT SUGGESTS FOR CERTAIN ITEMS, THEY ARE NOT. ISBAELLE: FIVE OF 13 CATEGORIES IN THE REPORT. WHAT SHOCKED ME IS AMAZON SEEING THE BIGGEST DROP. IF SOMEONE IS NOT SHOPPING AT AMAZON, THAT MEANS THE ECONOMY IS BAD. I BUY THE SILLIEST THINGS ON AMAZON. LIKE TOOTHBRUSH. ROMAINE: I HAVE A GUY IN BALTIMORE, CUSTOM-MADE. IT GETS TO THE IDEA OF WHETHER WE TAKE THIS AS A ONE-OFF, WHETHER IT PAINTS A MORE ACCURATE PICTURE OF THE U.S. ECONOMY, AND WHETHER THE FED SHOULD ACTUALLY EVEN PAY ATTENTION TO IT. INFLATION WAS ALSO AN ISSUE. LET'S BRING IN THE FORMER PRESIDENT OF THE BOSTON FEDERAL RESERVE. I WANT TO START WITH THE CONSUMER. I WAS LOOKING AT THE RETAIL SALES NUMBER, THAT CONTRACTION OVERALL. ONLINE SALES DRAGGED TOO. WE ARE STILL SPENDING SOMEWHERE. THERE WERE A LOT OF OTHER CATEGORIES THAT SEEM TO SUGGEST THE CONSUMER IS STILL SPENDING. WHAT DOES A DEBATE LOOK LIKE AMONGST FED MEMBERS WHEN YOU HAVE DATA, AND EVEN THE TRENDLINE THAT SEEMS TO CONFLICT WITH EACH OTHER? >> THE FED DOES NOT FOCUS ON JUST ONE NUMBER. IT DOES TEND TO FOCUS ON A TREND. BUT I THINK A WEAKER RETAIL SALES NUMBER IS CONSISTENT WITH WHAT WE HAVE SEEN IN CONSUMPTION FOR THE FIRST HALF OF THE YEAR. IF YOU LOOK AT CONSUMPTION OVER THE FIRST TWO QUARTERS IT ONLY GREW AT 1.5%. THAT IS WEAKER THAN THE OVERALL ECONOMY, A LOT WEAKER THAN WHAT HAS BEEN HAPPENING IN INVESTMENT. WE HAVE AN ECONOMY WHERE AI AND TECH INVESTMENT ARE DRIVING INVESTMENT SPENDING, BUT THE CONSUMER HAS BEEN BUFFETED BY HIGHER OIL PRICES, MAY BE SOME CONCERNS ABOUT WHAT IS GOING ON IN THE MIDDLE EAST. AS A RESULT THEY HAVE BEEN MORE RELUCTANT TO BUY, PARTICULARLY FOR THOSE LOW INCOME INDIVIDUALS WHO ARE LIKELY TO BE MORE STRAPPED BY THE OIL PRICES GOING UP. THE PICTURE THIS RETAIL SALES PROVIDES IS PRETTY CONSISTENT WITH CONSUMPTION THAT IS NOT REALLY DRIVING THE ECONOMY. RIGHT NOW WHAT IS DRIVING THE ECONOMY IS INVESTMENT SPENDING. ROMAINE: DOES THAT WORRY YOU, OR IS THIS THE NATURAL CYCLES THAT THE ECONOMY GOES THROUGH FROM TIME TO TIME? ERIC: IF THE CONSUMER -- CONSUMPTION IS AN IMPORTANT COMPONENT OF GDP. SPENDING IS TWO THIRDS OF ALL GDP. ANYTIME CONSUMPTION SLOWS DOWN, ECONOMISTS TEND TO PAY ATTENTION. BUT I THINK WHAT WE HAVE IS A SOMEWHAT DIFFERENT BALANCE THAN WE NORMALLY SEE, PARTICULARLY IN AN ENVIRONMENT WHERE THE STOCK MARKET HAS BEEN GOING UP SO STRONGLY. THE ECONOMY IS GROWING PROBABLY AT THE APPROPRIATE RATE OVERALL, MAY BE A BIT WEAKER THAN WE WOULD LIKE. A LOT OF THAT IS BECAUSE THE CONSUMER HAS CONTINUED TO BE SOMEWHAT LETHARGIC. ISBAELLE: INFLATION AROUND 3.4%, WELL ABOVE THE FED'S 2% TARGET. HOW DO YOU MAKE THE CASE OF WHY THE FED SHOULD CUT RATES WITH INFLATION THIS STICKY? ERIC: I THINK THE DEBATE IS GOING TO BE ABOUT WHETHER THE FED SHOULD RAISE RATES OR LEAVE THEM THE SAME. AS YOU POINT OUT, THE CPI NUMBER THAT CAME OUT AT THE BEGINNING OF THIS WEEK AT 3.4% IS WELL ABOVE THE FED'S TARGET. I THINK THOSE THAT ARE WILLING TO WAIT ARE ARGUING THAT WHEN YOU TAKE OUT FOOD AND ENERGY, SHELTER HAS NOT BEEN GOING UP NEARLY AS RAPIDLY, AND IT IS NOT WIDESPREAD INCREASES. THEY THINK AS OIL PRICES COME DOWN WE WILL SEE THE OVERALL INFLATION RATE COME DOWN. I THINK THE OTHER SIDE OF THE ARGUMENT IS THE FED HAS BEEN HOPING THAT INFLATION WOULD COME DOWN MORE NATURALLY BY WAITING FOR FIVE YEARS, AND IT HAS NOT HAPPENED. I THINK THERE'S A SUBSET OF THE COMMITTEE THAT IS CONCERNED THAT WE KEEP EXPECTING INFLATION TO COME DOWN, BUT WHEN WE GET THROUGH A COUPLE QUARTERS WE FIND ONCE AGAIN THE FED HAS MISSED ITS TARGET BY A SIGNIFICANT AMOUNT. FOR THOSE THAT ARE CONCERNED THAT INFLATION HAS BEEN QUITE HIGH, THEY WILL PROBABLY STILL HAVE THAT CONCERN. FOR THOSE THAT WANT TO WAIT, I THINK THEY WILL ARGUE IT IS BEING DRIVEN PRIMARILY BY OIL PRICES, AND WHEN OIL PRICES COME DOWN THERE WILL BE LESS CONCERNED ABOUT INFLATION. ISBAELLE: YOU MADE THE POINT THAT THE FED USUALLY LOOKS AT THE DATA IN TOTALITY. ON ONE HAND YOU HAVE HIGHER INFLATION AND ON THE OTHER A WEAKENING CONSUMER. IF YOU WERE TO PICK BETWEEN THE TWO, WHICH IS SCARING THE FED MORE? ERIC: I THINK RIGHT NOW THEY ARE PRETTY FOCUSED ON INFLATION. IF YOU LOOKED AT THE PRESS CONFERENCE THE CHAIR PROVIDED AFTER THE FOMC, HE EMPHASIZED THE COMMITTEE WAS QUITE FOCUSED ON GETTING THE INFLATION RATE BACK TO 2%. THEY WILL NEVER BE HAPPY WHEN WE GET WEAK REAL ECONOMIC DATA IN, BUT NOW THEY WILL BE PRIMARILY FOCUSED ON THE EXPECTATIONS FOR HOW LONG IT TAKES INFLATION TO COME DOWN TO THE 2% INFLATION TARGET. ROMAINE: I WANT TO GET YOUR THOUGHTS ON THIS IDEA OF HOW THE MARKET REACTS TO THIS, PARTICULARLY WITH SOME OF THE MOVES WE'VE SEEN IN THE BOND MARKET ON THE LONG END OF THE CURVE WITH THE 30 YEAR YIELD GOING UP. A REFLECTION OF LONGER-TERM CONCERNS ABOUT INFLATION, FISCAL DEFICITS AND THE LIKE. NOT TO BE GLIB, BUT DOES THAT DO SOME OF THE WORK FOR THE FED IF THE BOND MARKET CONTINUES TO REPRICE THE PRICE DOWN, YIELDS UP ON THE LONGER END? ERIC: IT DOES SLOW DOWN THE ECONOMY IF WE HAVE HIGHER RATES. THAT IS WHETHER IT IS INITIATED BY THE FED OR OTHER CONDITIONS. IF THE REASON THE LONG RATE IS UP IS BECAUSE THEY ARE NOT CONFIDENT THE FED WILL BRING INFLATION DOWN, THAT'S A PROBLEM FOR THE FED. THAT IS NOT THE WAY THEY WANT THE MARKET TO TIGHTEN, BECAUSE THEY HAVE LESS CONFIDENCE IN THE FED DOING WHAT THEY SAY THEY ARE SUPPOSED TO DO. I THINK THE DEFICIT OBVIOUSLY IS AN ISSUE. AS WE HAVE SEEN IN JAPAN, THERE HAS BEEN CONCERN ABOUT INTEREST RATE DIFFERENTIALS BETWEEN THE JAPANESE AND UNITED STATES, AND THEY ARE WORRIED THEY WILL BE SELLING TREASURY SECURITIES IN ORDER TO DEFEND THEIR CURRENCY. I THINK THERE ARE A VARIETY OF FACTORS GOING ON FOR WHY THE LONG END IS UP. IT'S A LITTLE BIT GLIB TO JUST SAY THE MARKET IS DOING THE FED'S WORK FOR IT. I THINK YOU HAVE TO INTERPRET WHY IT IS MOVING. I THINK THE REASONS WHY IT HAS PROBABLY MOVED UP, IT STARTED MOVING UP AT THE PRESS CONFERENCE. THAT WAS AN INDICATION THEY ARE NOT AS CONFIDENT THAT THE ACTIONS OF THE FED WOULD BE COMMENSURATE WITH HOW THEY DESCRIBE WHAT THEY ARE PLANNING TO DO WITH INFLATION. ROMAINE: COMMUNICATION FROM CHAIR WARSH IS LIKELY TO BE LESS THAN WHAT WE GOT OUT OF HIS PREDECESSORS. DOES THAT COMPLICATE THINGS FOR THE MARKET AND BACK ON KEVIN WARSH? ERIC: THERE ARE OTHER FED PRESIDENTS AND GOVERNORS WHO ARE SPEAKING. I THINK THERE WERE PEOPLE SPEAKING ON BOTH SIDES OF THE LAST DECISION. I THINK THE CHALLENGE IS THERE IS ONLY ONE PERSON THAT CAN SPEAK FOR THE ENTIRE COMMITTEE, AND THAT IS CHAIR WARSH. IF HE DOES NOT SPEAK FOR THE WHOLE COMMITTEE, THEN YOU HAVE A BUNCH OF PEOPLE SPEAKING FROM THEIR OWN VIEWPOINT. YOU DON'T HAVE TO PROVIDE FORWARD GUIDANCE, BUT I THINK IT IS IMPORTANT TO PROVIDE A LITTLE CONTEXT FOR WHY DECISIONS ARE BEING MADE. AND SINCE, ESPECIALLY COMING OUT OF AN FOMC MEETING, I THINK IT IS IMPORTANT FOR THE CHAIR TO SAY THE REASON THE COMMITTEE MADE THE DECISION THEY DID IS THE FOLLOWING. AND THAT DOES NOT HAVE TO BE FORWARD-LOOKING OR SAY ANYTHING ABOUT WHAT THEY WILL DO IN THE FUTURE, BUT I DO THINK IT IS IMPORTANT TO JUSTIFY WHAT THE MAJORITY OF THE COMMITTEE DECIDED AT EACH MEETING. ROMAINE: ERIC, FORMER BOSTON FED PRESIDENT. WE SHOULD POINT OUT WE DID HEAR FROM A COUPLE FED PRESIDENTS THIS WEEK. A BLOOMBERG INTERVIEW YESTERDAY, ONE SAYING HE'S ENCOURAGED BY THE RECENT COOLING IN INFLATION, BUT ANY DROP IN RETAIL SALES WOULD MAKE HIM NERVOUS. WE TURN BACK TO THE BROADER MARKETS. MARGINAL LOSSES ON THE DAY, BUT AN INTERESTING STAND OUT ON A SINGLE STOCK BASIS. IT'S REDDIT. SHARES SURGING BECAUSE THE S&P DECIDED IT SHOULD BE INCLUDED IN THE S&P 500. WE SHOULD HAVE THAT CONVERSATION AS PART OF OUR STOCK OF THE HOUR, NEXT. THIS IS BLOOMBERG. ♪ ISABELLE: TODAY'S STOCK OF THE HOUR IS REDDIT. IT IS SAID TO JOIN THE S&P 500 PRIOR TO THE START OF TRADING ON AUGUST 18. THE SOCIAL NETWORKING NAME -- IT IS BEING ACQUIRED BY EQUITY RESIDENTIAL. THIS IS A BIG DEAL. EVERY TIME THE S&P ANNOUNCES SOMETHING, 5:16 P.M. -- YESTERDAY I WAS MAKING MY ESCAPE IN ESCALATOR AND I CHECKED MY INBOX AND I HAD TO RETURN TO MY SEAT. ROMAINE: IT RAISES A LOT OF QUESTIONS. YOU COVER THE STOCK. I DON'T WANT TO BE GLIB ABOUT IT. THIS STOCK HAD A HUGE RUN UP AND IS POSTED HEALTHY REVENUE GROWTH, 60-PLUS PRESENT THE LAST FEW QUARTERS OR SO. THE EBITDA IS THERE. BUT IS THIS A STOCK THAT SHOULD BE IN THE S&P 500? ISABELLE: IT'S A GOOD QUESTION. IF YOU THINK ABOUT IT, THERE ARE SOMETHING LIKE 500 COMPANIES THERE. MAYBE NOT THE BEST COMPANY, BUT SINCE THE IPO IT HAS HAD GREAT EARNINGS, AND IS LEANING INTO AI. AND REDDIT IS REDDIT! IT IS A CULTURAL PHENOMENON. DO YOU USE REDDIT? ROMAINE: I HAVE A SECRET HANDLE. I GO THERE AND TROLL EVERYBODY ON WALL STREET. ISABELLE: 90% OF THE REVENUE IS AN ADVERTISING. ROMAINE: THAT IS WHAT I'M CURIOUS ABOUT, BECAUSE WHEN I THINK OF THIS, IT IS JUST A PURE ADVERTISING PLAY, OR IS THIS A BROADER BUSINESS MODEL UPON TRYING TO POST ADS? ISABELLE: NO, THEY ARE TRYING TO MAKE MONEY WITH AI. ROMAINE: HAVEN'T THEY ACCUSED THESE LOM'S-- LLM'S OF STEALING OR SCRAPING THE STUFF WITHOUT PERMISSION? SOMETHING LIKE A HUGE PERCENTAGE OF THE RESPONSES YOU GET FROM THESE LLM'S ARE SCRIPT FROM REDDIT? ISABELLE: I THINK OF HER THAT. I DO LOVE REDDIT. I'M LOOKING FOR A NEW ELECTRIC KETTLE. THE OPTIONS ARE VARIED, $40 OR $200. ROMAINE: I DON'T BELIEVE IN ELECTRIC. I BELIEVE IN THE POT ON THE STOVE. ISABELLE: LIKE MY GRANDMOTHER. ROMAINE: THANK YOU, ISABELLE. ON THAT NOTE, SHARES OF REDDIT HAVING A GOOD DAY. ONE OF THE FEW STANDOUTS ON AN OTHERWISE QUIET DAY. IT IS A QUIET DAY. VOLUME AT THIS TIME IN THE S&P 500 DOWN MORE THAN 25%. A LOT OF PEOPLE DIDN'T SHOW UP TO WORK. ISABELLE: IT WAS GHOST TOWN. ROMAINE: I THINK WE ARE THE ONLY TWO PEOPLE IN THE BUILDING. KIM WILL BE JOINING US PROBABLY BY ZOOM, BUT WE THANK HER FOR HER SERVICE, AFTER THE BREAK ON BLOOMBERG. ♪ ROMAINE: JUST ABOUT 10 MINUTES AWAY UNTIL THE CLOSING BELLS. I'M ROMAINE BOSTICK. ISABELLE: I AM ISABELLE LEE. I LIKE OUR NEXT GUEST, SHE SAID IT IS A WEIRD FRIDAY HERE, AND IT IS INDEED A WEIRD FRIDAY. IT IS KIND OF GHOST TOWN, BUT ALSO MARKETS ARE WEIRD. WE SAW A HUGE DATA DUMP -- I SHOULD SOME SAYING THAT. THE DATA IS CONFLICTING. ROMAINE: IT IS CONFLICTING AND IT CREATES MAYBE A CONUNDRUM FOR THE FED, BUT ULTIMATELY WHAT IT MEANS IS THEY DON'T DO ANYTHING. MONDAY HAVE DIGESTED ALL OF THESE EARNINGS, SO FAR SO GOOD. I GUESS THE BIG QUESTION IS WHAT IS THE NEXT BIG BUMP FOR THIS RALLY, GIVEN HOW HIGH SOME OF THE VALUATIONS ARE. AS WE GET CLOSER TO THE CLOSING BELLS, WITH THE S&P AND NASDAQ 100 DOWN .2%, YOU HEADLINES CROSSING THE WAY ON INDIVIDUAL NAMES, WHEN INVOLVING PAYPAL. THIS WAS REPORTED BY REUTERS AND "THE WALL STREET JOURNAL" REPORTING THAT ADVENT COULD BE COMING TOGETHER TO MAKE A BID FOR PAYPAL. PAYPAL HAD SEEN THE PREVIOUS OFFER THAT HAD BEEN REPORTED BY REUTERS, $60.50 A SHARE, AS INSUFFICIENT. THOSE SHARES ARE AROUND $62 A SHARE. KEEP PARAMOUNT SKYDANCE, OUT MAKING COMMENTS--KEEP AN EYE ON PARAMOUNT SKYDANCE, OUT MAKING COMMENTS ON THE REGULATORY ISSUES SURROUNDING CLOSING THE DEAL WITH THE 12 STATE ATTORNEY GENERALS CONTESTING THIS TO "ENGAGE IN GOOD FAITH." ISABELLE: WE ARE SEEING RETAILERS NEXT WEEK AND IT WILL SAY A LOT ABOUT THE MOOD OF THE ECONOMY. I HAVE STOPPED SPENDING A LITTLE BIT, ROMAINE. ROMAINE: LET'S GET TO KIM FORREST. KIM, I DO WANT TO START WITH THE TECH TRADE FOR A SECOND. TO A CERTAIN EXTENT AND GOT A LITTLE BIT OF A SECOND LIFE HERE. WE SAW THOSE SANDISK INVESTOR DAY IN NEW YORK WHERE THEY GAVE A LONG-TERM FORECAST THROUGH 2023 THAT SEEM TO SUGGEST THAT, OK, IN THEIR VIEW, THEY THINK THE SUPPLY CHAIN CONSTRAINTS AND OTHER THINGS THAT HAVE BENEFITED THEM ARE GOING TO CONTINUE TO BENEFIT THEM. WE HEARD FROM CISCO AND A FEW OTHER COMPANIES THAT MAYBE THINGS ARE NOT ALL THAT ROSIE. WHAT DO YOU MAKE OF WHAT WE HAVE LEARNED OUT OF EARNINGS SEASON FROM BTECH NAMES? --THESE TECH NAMES? >> I THINK GOING IN EVERY THING WAS PRICE TO PERFECTION. SOFTWARE WAS A THING OF THE PAST BECAUSE WE COULD JUST SPEAK TO OUR COMPUTER AND SAY "WRITE ME A NEW HR SYSTEM" OR WHATEVER PEOPLE THOUGHT. SOME OF THOSE IDEAS HAVE COME CRASHING DOWN, AND WITH IT PRICES. BUT I THINK TODAY'S NEWS WAS REALLY INTERESTING. IF YOU HAD FOLLOWED MEMORY -- BY DESIGN THINKING ABOUT THE NONVOLATILE DATA-CONTAINING MEMORY, IT HAS BEEN ALWAYS ON A ROLLER COASTER BECAUSE IT IS VERY EXPENSIVE JUST LIKE ANY SEMICONDUCTOR TO MAKE A NEW FABRICATION PLANT OR TO EXPAND CAPACITY. WHAT THEY DO IS PUT A WHOLE BUNCH OF MONEY, EXPAND CAPACITY DRAMATICALLY. THERE ARE ONLY A HANDFUL OF PROVIDERS. SO YOU WENT ON THIS ROLLER COASTER RIDE OVERSUPPLY, OVER DEMAND, OVERSUPPLY. NOW WE HAVE SEEN PERSISTENT UNDERSUPPLIED. IT LOOKS LIKE SANDISK IS USING CONTRACTS TO WORK THEIR WAY AROUND THIS. WHILE I DON'T THINK IT IS A COMPLETE FIX, IT IS ON THE ROAD TO BEING FIXED WITH THESE CONTRACTS. I THINK THAT IS A REALLY GREAT THING COMING OUT OF THIS. WE ARE NOT GOING TO BE WHIPSAWED AS INVESTORS ANYMORE. ROMAINE: I WANT TO SEPARATE THIS IDEA OF AI BEING THIS BIG STRUCTURAL THING FOR OUR SOCIETY, WHETHER WE WANT IT TO BE OR NOT, WITH THE IDEA OF HOW IT IS BEING FUNDED. THERE WAS TALK ABOUT JENSEN HUANG'S EFFORT TO CREATE THIS $500 BILLION FINANCING TOOL. I'M SURE YOU'VE HEARD THE JOKES, THAT NVIDIA IS THE CENTRAL BANK FOR THE AI TRADE. WHO KNOWS? MAYBE THIS ALL WORKS OUT. BUT WE HAVE TO ASK THESE SKEPTICAL QUESTIONS, AND I'M CURIOUS IF YOU ARE CONCERNED AT ALL ABOUT HOW MUCH THIS FLYWHEEL ALL LINKS BACK EFFECTIVELY TO ONE COMPANY. KIM: YEAH, IT IS CONCERNING, ALTHOUGH I HAVE TO SAY, I FELT REALLY GOOD EARLIER THIS YEAR THAT WE HAVE HAD SOME OTHER WINNERS OTHER THAN NVIDIA. NVIDIA WAS, TO PARAPHRASE SOMEBODY ELSE -- AND I THINK THAT IS REALLY CONCERNING. AND THEN THEY ARE ABLE -- BECAUSE THEY ARE STILL VERY INFLUENTIAL, BUT NOT THE ONLY ANSWER IN TOWN. AND CERTAINLY AS AI PLAYS OUT, AND THIS IS MY SPECIAL SAUCE, I HAVE A DIFFERENT VISION, I DON'T THINK LLM'S TAKE OVER THE WORLD. I THINK LLM'S WILL BE MAY THE DELIVERY MECHANISM, BUT THERE IS GOING TO BE OTHER MODELS IN THE BACK THAT HAVE NOTHING TO DO WITH LARGE LANGUAGE MODELS. YOU ASK A LARGE LANGUAGE MODEL TO GET YOU AN ANSWER, AND OTHER MODELS TAKE OVER. IT USES OTHER MODELS. I KNOW THIS IS KIND OF CRAZY, BUT THAT IS GOING TO USE DIFFERENT KINDS OF COMPUTE. ARE WE BUILDING TOO MUCH? HMM, MAYBE. BUT MAYBE IT IS GOING TO BE TURNED INTO WHAT I THINK ARE THOSE SMALLER TARGETED MODELS THAT ARE GOING TO ANSWER SPECIFIC QUESTIONS. AND I DON'T THINK THAT MOST INVESTORS HAVE THE SAME IDEA OR MODEL OF THE MODELS THAT I DO. ISABELLE: KIM, I WANT TO ZOOM OUT A LITTLE BIT BECAUSE WE ARE SEEING STRONG AI DEMAND ALONGSIDE SOFTWARE CONSUMER. DO YOU THINK THAT AI CAN KEEP ON CARRYING THE MARKET? WE DO GET A LOT OF RETAIL REPORTS NEXT WEEK. KIM: I THINK RETAIL IS GOING TO COME INTO THE SPOTLIGHT AND FOR GOOD REASON. I DON'T KNOW THAT MANY ACTUAL CONSUMERS ARE SPENDING FOR AI, SO THAT KIND OF GETS SHOVED TO THE SIDE. AND IT'S STILL A CONSUMER-ORIENTED ECONOMY, NOT AN AI ECONOMY. I THINK THIS IS GOING TO TAKE SOME OF THE SPOTLIGHT. BUT THAT BEING SAID, THE REASON WHY IT IS DOMINATING JUST ABOUT EVERY FORM OF MEDIA, AND BY THAT I MEAN AI, IS BECAUSE THAT IS WHERE THE BIG MONEY IS BEING SPENT, AND INVESTORS WANT TO MAKE MONEY OFF OF THAT MONEY. WE'RE STUCK WITH AI FOR A WHILE, BUT THANK GOODNESS WE ARE GOING TO GET SOME OTHER COMMENTARY ON HOW THE ECONOMY IS DOING. ROMAINE: DOES IT MATTER, THE? WE WERE TALKING TO ERIC ROSENGREN, AND I WAS GOING TO ASK ABOUT THIS IDEA THAT THE CONSUMER SEEMS TO BE WEAK AND THAT SEEMS TO BE 70% OF GDP. HE SEEMED SANGUINE ABOUT IT -- LOOK, AS LONG AS THERE IS BUSINESS SPENDING THERE, YOU KNOW, SOMETIMES THAT IS HOW CYCLES WORK. KIM: YEAH, AND I THINK THAT'S RIGHT, ESPECIALLY FOR THE STOCK MARKET. THE STOCK MARKET DOESN'T NECESSARILY CARE ABOUT GDP ALL THAT MUCH, IT REALLY DOESN'T. IT IS ALWAYS LOOKING FOR THE NEXT BIG IDEA AND GROWTH. WHENEVER ANYBODY SAYS WHAT DO YOU DO EVERY DAY, I LOOK FOR GROWTH. I DON'T CARE IF YOU ARE A VALUE INVESTOR, YOU ARE LOOKING FOR VALUE COMPANIES THAT ARE GOING TO GROW. WALL STREET REWARDS GROWTH. WE HAVE A BIG GROWTH STORY IN THE BUILDOUT OF AI AND THAT IS WHY IT HAS CAPTURED EVERYBODY'S ATTENTION AND ALL THE MONEY, BECAUSE IT IS SPENDING ALL THE MONEY, RIGHT? ROMAINE: ABSOLUTELY. KIM:" GROWTH.--GROWTH GROWTH GROWTH. ROMAINE: ALWAYS LOVE THE CONVERSATION. SPEAKING OF THAT GROWTH STORY, WE GOT IT OUT OF THE EARNINGS SEASON. NOT OVER YET, BUT WE ARE TRACKING AT 30% GROWTH IN AGGREGATE. A FULL BREAKDOWN WITHOUT GLOBAL SIMULCAST STARTS RIGHT NOW-- WITHOUT GLOBAL SIMULCAST STARTS RIGHT NOW. >> "THE CLOSING BELL," BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE, STARTS RIGHT NOW. ROMAINE: AND RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE VENETO OF THE TRADING DAY-- END OF THE TRADING DAY. ROMAINE BOSTICK ALONGSIDE ISABELLE LEE. WE ARE JOINED BY CAROL MASSAR AND TIM STENOVEC. WELCOME TO OUR AUDIENCES ACROSS ALL OF OUR GLOBAL PLATFORMS, TELEVISION, RADIO, OUR PARTNERSHIP WITH YOUTUBE. HERE ON A SOMEWHAT TEPID END TO THE WEEK, DESPITE WHAT HAS OBVIOUSLY BEEN AN INCREDIBLY VOLATILE WEEK WHEN IT COMES TO THE EQUITY MARKETS. CAROL: I FEEL LIKE WE ARE GOING OUT WITH A WHIMPER, BUT YOU ARE ABSOLUTELY RIGHT. SOME OF BIG MOVES IN THE OVERALL INDICES AS WELL AS INDIVIDUAL NAMES. IT FEELS LIKE WE ARE GOING INTO THE WEEKEND A LITTLE, A LITTLE WEAK. TIM: THAT'S FAIR. I KIND OF WANT TO SEE WHAT HAPPENS WITH RETAIL EARNINGS. TJX. WE GOT A REPORT ON RETAIL SALES THAT WAS UNDERWHELMING. WE WILL HEAR FROM WHAT THESE COMPANIES ARE SEEING AND GET A BETTER IDEA. ISABELLE: IT'S TAR-ZHAY, TIM. NO ONE SAYS "TARGET" ANYMORE. 85% OF THE S&P 500 COMPANIES THAT HAVE BEEN REPORTED HAVE BEATEN EXPECTATIONS AND I BELIEVE THE STRONGEST IN SEVERAL YEARS. ROMAINE: BUT THAT KIND OF CREATES THE FEAR. EVERY SORT OF PEAK AND GROWTH, WHAT PEOPLE REGARDING FOR. WE STILL GET NVIDIA WEEK AFTER THAT AND THEN WE CLOSE THINGS OUT UNTIL THE NEXT EARNINGS SEASON. KIND OF INTERESTING ON A DAY LIKE TODAY, WE CLOSE OUT THE WEEK WITH THE NUMBER ONE GAINER IN THE S&P 500 BASICALLY A COMPANY THAT DOES VEHICLE OPTIONS AND THE BIGGEST DECLINER IN THE S&P 500 IS BROADCOM, THE CHIPMAKER. PUT IT ALTOGETHER TOGETHER AND IT IS RIGHT ACROSS THE SCREEN FOR ALMOST ALL OF THE MAJOR INDICES. COMING OUT OF THAT RECORD HIGH. IT IS STILL UP ON THE REPLY ABOUT 3/10 OF A PERCENT. IT'S A SIMILAR STORY FOR THE NASDAQ COMPOSITE AND THE NASDAQ 100. DOWN ON THE DAY BUT UP ON THE WEEK. THE RUSSELL 2000 IS YOUR BRIGHT SPOT. IT IS ADDING ABOUT 60 POINTS HERE ON THIS FRIDAY AFTERNOON. HALF A PERCENTAGE POINT. CAROL: IT IS COST. IT KNOWS YOU LIKE THAT INDEX. THE S&P 500, I WILL GO THERE. 250 NAMES HIGHER. 244 TO THE DOWNSIDE. MAYBE THE BIGGEST ENERGY IS GAINER. TECH IS UP BY LIKE .03%. ISABELLE: DID YOU KNOW THAT TIM STENOVEC HOSTED BLOOMBERG TECH TODAY? TIM: AND I LIVE TO TELL THE TALE. THANK YOU FOR TUNING IN. YOUR REAL TIME FEEDBACK WAS REALLY NICE. HE SAID I WAS DOING A GREAT JOB. IT WAS SO NICE. ROMAINE: UNTIL THAT LITTLE GLITCH. ISABELLE: I'M SURE YOU ARE GREAT. CAROL: I NEVER GET EMAILS FROM YOU. TIM: IF YOU DON'T HAVE ANYTHING NICE TO SAY, THEN DON'T SAY IT AT ALL. CAROL: WHEN YOU GOING ON VACATION? LET'S GET TO SOME OF THE INDIVIDUAL GAINERS. I WILL GO TO READ IT. FINISHING UP. IT IS BEING ACQUIRED BY EQUITY RESIDENTIAL. THE STOCK DOWN MORE THAN 20%. ONCE THOSE INDEX FUNDS START BUYING, THAT COULD BE A BIT OF A BOOST FOR THAT NAME. LET'S GO ON OVER TO THE TOP PERFORMING STOCK IN THE S&P 500 THIS YEAR. WE OFTEN TALK ABOUT IT. SANDISK. THE STOCK UP AT ITS HIGHEST ABOUT 9% TODAY FINISHING WITH A 7.4% GAIN. IT IS A TOP GAINER. J.P. MORGAN INITIATING COVERAGE. I THOUGHT THIS WAS KIND OF INTERESTING. THEY ARE CATCHING THIS INFLECTION AND DEMAND. DRIVEN BY RAPID GROWTH. DEFINITELY OUTPERFORMER. FOR STOCKS CLOSING AT 16.41 AND CHANGE. SO WE ARE LOOKING AT MAYBE A 47% INCREASE FROM THE LAST CLOSE EXCLUDING TODAY'S TRADE. LET'S GO OVER TO UNUSUAL MACHINES. THANK YOU FOR THAT ONE. IT IS A DRONE PARTS COMPANY. IT JUMPED IN THE POST-MARKET. THE TRUMP ADMINISTRATION SAYS THEY ARE APPLYING A 100% TARIFF ON AND -- UNMADE AIRCRAFT SYSTEMS. THE STOCK IS UP TO 60%. IT GOT SOME LOVE ON WALL STREET ON THE FRIDAY TRADE. TIM: WHAT DIDN'T GET LOVE FROM WALL STREET IS MY JOB. ONE OF THE WORST PERFORMERS. PLANS FOR DATA CENTER HAVE BEEN DELAYED. THEY TOLD REUTERS THAT THE DATA CENTER PROJECT IN NEW MEXICO REMAINS ON SCHEDULE. A CHECK OF HOW APPLIED MATERIALS IS STONE IN TODAY'S SESSION. THIS AFTER THE SEMICONDUCTOR EQUIPMENT MAKER TOPPING FORECASTS. IT FOLLOWS THAT FRENETIC RALLY THIS YEAR. ANALYSTS WERE POSITIVE AND IN GENERAL. OVER THE NEXT COUPLE OF YEARS. WE DON'T REALLY HAVE AN ANSWER TO THAT YET. QX SHARES FELL BY TWO POINTO. YOU HAVE SPOKEN TO IN THE PAST. HE SAID I SECOND-QUARTER RESULTS REFLECT MARKET CONDITIONS AND THE PROGRESS WE'RE MAKING ACROSS THE COMPANY. ROMAINE: LET'S TAKE A QUICK LOOK AT YIELDS. WE SAW SOME MOVEMENT TODAY TO THE UPSIDE. THE LONGER END OF THE CURVE IS SHAPING UP TO BE THE REAL STORY. CAROL: GOOD STAFF. THAT IS A WRAP. WE CALL IT THE CLOSING BELL. WE WILL BE BACK HERE DAILY. SAME TIME, SAME PLACE ON MONDAY. ROMAINE: WE HAVE BEEN TALKING ABOUT THE BIG RETAIL REPORTS OUT NEXT WEEK. ESPECIALLY ON THE BACK OF THE CONSUMER SENTIMENT NUMBER THAT WE GOT THIS WEEK. WE WILL CATCH UP WITH THE MANAGING PARTNER TO SEE WHERE SHE THINKS THIS IS GOING. HIS COMING UP NEXT ON BLOOMBERG. ♪ >> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. ROMAINE: WELCOME BACK. MANAGING TO NOTCH A GAIN FOR THE WEEK. 3/10 OF A PERCENT. THE MOMENTUM CONTINUES. YOU SEE SOME BROADENING WHEN IT COMES TO THIS MARKET. THE RUSSELL 2000 IS UP OVER THE LAST FIVE DAYS. A MIXED PICTURE FOR GOLD AND YIELDS. THE STORY OF THIS YEAR IN THE EQUITY MARKETS REMAINS SANDISK, THE BEST PERFORMING STOCK OF THE YEAR HANDED THE DATE AND THE WEEK. UP MORE THAN 30% THIS WEEK. THIS KIND OF GROWTH STORY WILL NOT END ANYTIME SOON. IT SEEMS TO SUGGEST THAT MOMENTUM WILL KEEP GOING. CANNOT SAY THE SAME FOR BROADCOM. REALLY TOOK IT ON THE CHIN TODAY. DISAPPOINTING INVESTORS. DOWN ABOUT 9%. MORE OF A DISCOUNT RETAILER. UP ABOUT 8%. HAVING A GOOD WEEK ON THE BACK OF SOME BULLISH COMMENTARY FROM ANALYSTS. THAT BRINGS US TO OUR TOP STORY. IF THE CONSUMER IS LOSING MOMENTUM. THIS SHOWS AN INCREASE DOWNSIDE RISK. IT DOES STOP SHORT OF ANY DOWNTURN. PEOPLE ARE STILL SHOPPING. THAT IS UNDENIABLE. IT IS IN THE NUMBERS. NEXT WEEK'S BATCH OF EARNINGS COULD BE AN EYE-OPENER. THEY WILL TAKE US TO MORE DISCRETIONARY NAMES LIKE TARGET. HOUSING SENSITIVE NAMES. THE TAGLINE FOR THE CONSUMER IS TRADING DOWN, NOT SHUTTING DOWN. >> CONSUMERS ARE FEELING ENERGY PRICING. PUTTING MORE PRESSURE ON THAT. THEY ARE DOING A GREAT JOB. THEY ARE FEELING THAT PAIN. THEY WILL GET THE CONSUMER BACK DURING THE HOLIDAYS. ROMAINE: THAT WAS EARLIER THIS WEEK. JOINING US NOW IS A PARTNER AT CARNEY. GREAT TO SEE YOU HERE. YOU SAW THE RETAIL SALES REPORT. I KNOW THERE ARE A LOT OF ASTERISKS TO IT. BUT YOU TRACK THESE TRENDS. WHAT IS THAT TREND BASED ON WHAT YOU ARE ATTRACTING? >> I THINK WE ARE SEEING A LOT OF THE SAME THAT WE HAVE BEEN SEEN FOR A LONG TIME. IT IS A CUMULATIVE EFFECT. I DON'T THINK IT IS A HUGE SHOCK. I DON'T THINK WE ARE FALLING OFF A CLIFF. CONSUMERS ARE STILL TRENDING DOWN. WE SEE LOWER INCOME CONSUMERS SPENDING LESS AND TRADING OUT OF SOME THINGS THAT ARE NOT DISCRETIONARY. WE ARE SEEING THAT A PRONOUNCED RATES THE NECESSARY. ROMAINE: WE ARE BASICALLY THROUGH THE BACK-TO-SCHOOL SHOPPING SEASON. SOME KIDS ARE ALREADY BACK IN SCHOOL. WAS THERE ANY EVIDENCE THAT THERE WAS A CHANGE RELATIVE TO THE PREVIOUS YEAR UP OR DOWN? >> WE JUST DID OUR BACK-TO-SCHOOL SPENDING SURVEY. PEOPLE STILL HAVE SOME MORE SHOPPING TO DO. WE ARE FINDING THAT CONSUMERS ARE TRADING DOWN. TWO DIFFERENT RETAILERS. THEY HAVE BEEN DOING IT FOR A WHILE. ROMAINE: EVERY TIME WE HAVE TALKED TO A RETAIL CEO COMING OUT OF THEIR EARNINGS, THEY ARE TALKING ABOUT THE IDEA OF VALUE. THAT SEEMS TO BE A CONSISTENT NARRATIVE. IS THIS A HEALTHY CONSUMER ECONOMY RIGHT NOW? >> I DON'T KNOW IF IT'S THE MOST HEALTHY WE HAVE SEEN. CONSUMERS ARE STILL SPENDING. OVER 90% TELL ME THEY ARE CHALLENGING -- CHANGING THEIR BEHAVIOR. THERE WAS SOME COMBINATION OF BEHAVIOR. THAT IS A CONTINUATION OF THINGS WE HAVE SEEN IN PAST YEARS. THE HEALTHIEST SEGMENT THAT WE ARE SEEING IS HIGHER IN, AND ALSO YOUNGER CONSUMERS. THEY ARE REALLY PROPPING UP THE SPENDING. THEY ARE DOING AND IN LARGE PART WITH BY NOW, PAY LATER, AND OTHER MECHANICS. ROMAINE: ARE THEY BUYING PHYSICAL GOODS? I WAS LOOKING AT THE ONLINE SHOPPING. IT WAS DOWN. RESTAURANTS AND BARS WERE UP. AS A TELL US ANYTHING? >> BACK-TO-SCHOOL DAY OF SHOPPING FOR KIDS. THAT IS WHAT WE HAVE SEEN. WE WATCH THAT METRIC SO QUICKLY FOR HOLIDAYS. THEY HAVE BEEN MONTHS WHEN IT WAS DEPRESSED. ROMAINE: I THINK OF A COMPANY LIKE WALMART. TARGET IS A DIFFERENT STORY. WILL WE SEE THAT K-SHAPED ECONOMY ACTUALLY SHOW UP IN THE COMPANIES THEMSELVES? >> PERHAPS. WHAT YOU ARE SEEING IS GOOD EARNINGS. THAT IS ONE OF THE TECHNIQUES THAT IS BEING USED. THEY ARE BENEFITING FROM HAVING THE BEST VALUE. PEOPLE ARE SHOPPING ON DISCRETIONARY. ROMAINE: WHAT ABOUT THE LUXURY SPACE. WE HEARD FROM SOME EUROPEAN LECTURING MAKERS. IT WAS A MIXED BAG. WE SAW GROWTH RATES COMING DOWN A LITTLE BIT. DO YOU ANTICIPATE ANY SORT OF PICKUPS IN THOSE COMPANIES THAT ARE MORE PURELY ON THE LUXURY SIDE? >> I THINK A LOT OF THAT SEGMENT LIKE TAPESTRY AND OTHERS ARE BENEFITING FROM CONSUMERS. THAT HAS MIGRATED DOWN A LITTLE BIT. ONE OF THE KEY THINGS I AM WATCHING IS THAT BY NOW, PAY LATER. HOW ARE THEY DOING WITH CREDIT? IT IS REPORTED ON CREDIT REPORTS. THAT COULD REALLY CHANGE THINGS FOR THAT SEGMENT. IT COULD IMPACT A LOT OF THESE PLAYERS. ROMAINE: SO GREAT TO HAVE YOU HERE. IN THE MOMENT WE ARE GETTING THESE FILINGS. BERKSHIRES IS OUT. ONE OF THE NOTABLE CHANGES IS IT ACTUALLY ADDS DR HOLDINGS. THIS HAS SOME SIGNIFICANCE GIVING BERKSHIRES RECENT SURFACE. -- PURCHASE. WE WILL BE BACK IN A MOMENT. ROMAINE: IT WAS ONE OF THE MORE SCINTILLATING STORIES. IN 2021 IT AGREED TO GO PUBLIC. IT WOULD'VE BEEN A $6 BILLION DEAL. THAT LISTING WAS PUT ON HOLD AMID QUESTIONS OF THE COMPANY'S GROWTH. IN A ROUND OF LAYOFFS FOR 900 WORKERS THAT THE CEO CONDUCTED ON A MASS ZOOM CALL. BY 2023 THEY SEEM TO HAVE COST CORRECTED. IT HAD PLUNGED MORE THAN 90%. THE STOCK IN THE COMPANY HAVE NEVER QUITE RECOVERED. THE CEO WAS REPLACED. BUT HE IS NOT GOING AWAY QUIETLY. HE SAID HE COULD RETAKE CONTROL OF THE COMPANY. IN A STATEMENT LAST -- YESTERDAY HE SAID THE CURRENT VALUATION FAILS TO REFLECT THE OPERATIONAL IMPROVEMENTS ALREADY UNDERWAY. HE SAID IMMEDIATE ACTION IS NECESSARY TO RESTORE SHAREHOLDER CONFIDENCE. THEY SAID THE BOARD IS COMMITTED TO ACTING IN THE BEST INTEREST OF ALL SHAREHOLDERS AND WILL NOT BE BULLIED INTO ACTIONS THEY DON'T BELIEVE SERVE THOSE INTERESTS. THEY SAY THE CONCERNS ARE BEYOND MATTERS OF CORPORATE GOVERNANCE. GREAT TO HAVE YOU HERE. A LOT GOING ON HERE. YOU LEFT ON AUGUST 3. THERE WAS A STATEMENT OUT THAT SAID THE DECISION WAS MUTUAL. NOW YOU WANT BACK IN. WAS IT NOT MUTUAL. THE DECISION WAS ABRUPT. I WAS GIVEN A SET OF CHOICES. I THOUGHT LET'S DO WHAT'S BEST FOR THE COMPANY. SINCE THAT TIME THE STOCK PRICE OF THE BUSINESS HAS GONE DOWN BY 45%. I THOUGHT MAYBE SOMEONE NEW MIGHT BE ABLE TO HELP. ROMAINE: AUGUST 3 WAS 10 DAYS AGO. WHAT? >>>> HAS CHANGED I THINK WE HAVE SEEN A NUMBER OF THE STOCK MARKET VOTING ON THIS. WE HAVE A NUMBER OF DEALS WE ARE EXECUTING. FUNDAMENTALLY THE JOB OF MAKING HOMEOWNERSHIP BETTER FOR ALL AMERICANS IS NOT DONE. WE HAVE MADE A LOT OF PROGRESS. WE WERE AT THE FIVE YARD LINE. OF GETTING TO PROFITABILITY. ALL OF THOSE THINGS ARE BETTER DONE AND EXECUTED WITH SOMEONE WHO IS NOT THE CURRENT CHOICE. ROMAINE: DO YOU HAVE ANY SPECIFIC EXAMPLES OF THINGS HE DID THEY GIVE YOU CONCERN? >> THE BOARD FIRING. HAVING A NEW CEO COME IN AND THEN DEPARTING FOR THE SOUTH OF FRANCE ON VACATION. THAT IS NOT AN INDICATION OF CONFIDENCE. ROMAINE: I HAVE TO ASK YOU, IN THE STATEMENT THAT WAS RELEASED TODAY, I'M GOING TO READ IT TO YOU. I'M SURE YOU SAW IT. IT SAID BASED ON COUNCIL ANALYSIS, THIS IS EVIDENCE OF MISCONDUCT. WHAT ARE THEY REFERRING TO? >> I THINK THAT IS TOTAL ABOVE CASE. THEY DID NOT REFER TO ANYTHING SPECIFIC. FUNDAMENTALLY THOSE ALLEGATIONS ARE NOT TRUE. THEY ARE MEANT TO DEFLECT FROM THE FACT THAT HE DOES NOT HAVE THE SUPPORT OF THE EMPLOYEES. ROMAINE: DO YOU HAVE THE SUPPORT OF SHAREHOLDERS? HOW MANY VOTES HAVE YOU BEEN ABLE TO CORRAL? >> 52% OF THE VOTE. THE SHAREHOLDERS HAVE SPOKEN. ROMAINE: ARE THESE DECLARATIONS BINDING OR REVOCABLE? >> THEY ARE BINDING. THEY HAVE BEEN DELIVERED BY COUNSEL TO THE COMPANY. ROMAINE: GIVE ME A SENSE OF WHAT COMES NEXT. >> IF THERE IS NOT A CONSENSUAL RESOLUTION, BECAUSE OF THE COMPANY BYLAWS, THEY WILL NEED TO ACCEPT IT. MAYBE IN 35 DAYS. ROMAINE: ACCORDING TO YOU, YOU HAVE THE SHAREHOLDER SUPPORT. DO YOU HAVE THE MONEY? >> WE DO NOT NEED ANY MONEY. THE COMPANY IS WELL-CAPITALIZED. THE COMPANY HAS BEEN GROWING DESPITE THE IRAN WAR. WE GREW 15%. WHILE PEOPLE WERE DROPPING BOMBS. ROMAINE: YOU SAID HE WOULD INVEST $5 MILLION PERSONALLY. YOU SAID THERE WAS ANOTHER $30 MILLION. THE COMPANY WILL BUY THAT BACK. IF YOU WERE ABLE TO GET BACK CONTROL. COMPANY SHARES ARE UNDERVALUED. COMPARED TO WHERE THEY WERE TWO WEEKS AGO. IT WAS SOMETHING LIKE 27 DOLLARS PER SHARE. TODAY IT IS MERELY HALF THAT. ROMAINE: BUT WHY BUY BACK STOCK. THIS IS A COMPANY THAT IS STILL EARNING CASH. >> IT IS ON ITS WAY TO PROFITABILITY. THE COMPANY IS IN THE PROCESS OF SETTLING ITS BANK IN THE UNITED KINGDOM. IF WE ARE ABLE TO GENERATE PROCEEDS FROM OPERATIONS TURNING PROFITABLE OVER THE COMING MONTHS AND EXECUTE THE SALE OF THE BANK WHICH WILL RELEASE OVER $70 MILLION IN CASH TO THE COMPANY, THEN BUYING BACK TO COMPANY STOCK IS SOMETHING WE CAN DO THAT IS GOOD FOR OUR STOCK PRICE. TODAY WE ARE THE LEADING AI PLATFORM IN THE INDUSTRY. THE STOCK TRADES AT 1.5 TIMES REVENUE. I AM TELLING YOU WE ARE VERY CLOSE. ROMAINE: BUT NOTHING BINDING IN REGARDS TO THAT SALE? >> NOTHING BINDING SO FAR. ROMAINE: I'M CURIOUS ABOUT THE BOARD. DO YOU HAVE A SENSE OF WHO YOU WANT AS DIRECTORS? HAVE YOU LINED THOSE PEOPLE UP? >> WE HAVE LINED UP TO WE WOULD LIKE ON THE BOARD. ROMAINE: WILL THEY GIVE YOU THE POWER EVEN IF YOU WERE TO GET THE SUPPORT ON THIS? YOU ARE CONFIDENT? HAVE YOU BEEN A DIRECT CONVERSATION WITH THE COMPANY? >> YES. WE WERE AT A BOARD MEETING EARLIER. WE NEED TO SEE THE PROGRESS. WE APPRECIATE YOU COMING ON. TRY TO TAKE BACK THE HELM OF THE COMPANY. WHEN WE COME BACK, WE WILL SWITCH TO CARS. BIG, POWERFUL CARS. ♪ ROMAINE: LET'S GO OUT TO CARMEL, CALIFORNIA. ASTON MARTIN IS REVVING UP ITS NEWEST VEHICLE. TELLING IT AS THE MOST POWERFUL IN ITS HISTORY. IT IS LIMITING PRODUCTION TO ONLY 150 CARS WORLDWIDE. GREAT TO HAVE YOU HERE. TALK TO ME ABOUT IT REAL QUICK. WHEN WE TALK ABOUT THE MOST POWERFUL. WHAT ARE WE TALKING ABOUT HERE? >> THANK YOU FOR HAVING US ON THE SHOW. I WAS TRYING TO THINK OF WHAT THAT WAS LIKE AN IMPERIAL MEASUREMENTS. ALSO FROM ANY OTHER CAR COMPANY. ISABELLE: GIVE ME A SENSE HERE. WHY DID YOU FEEL THE NEED TO GO FROM THAT? DID YOU NEED TO DO THAT? >> IT IS THAT SEGMENT OF MARKET PRICE. THE ENGINE IS ABSOLUTELY AT THE HEART OF IT. IT IS WAY LIGHTER. AND GEARBOX. A DIFFERENT REAR AXLE. THE ENTIRE DRIVING EXPERIENCE IS COMPLETELY DIFFERENT FROM ANY CAR WE HAVE EVER OFFERED. IT IS AT THE TOP OF OUR RANGE. ROMAINE: LET'S TALK ABOUT THIS COLLECTORS AND CONNOISSEURS. IT IS A COLLECTORS ITEM. DEFINITELY YOU HAVE TO BE NOT ONLY A CONNOISSEUR. WHAT IS THE GOAL? OF RELEASING THIS? FOR YOUR BUSINESS MODEL? AS A RELATIVELY NEW CEO? >> IT IS ABSOLUTELY ESSENTIAL FOR OUR FUTURE SUCCESS. WE GO FROM AN SUV TO A MID ENGINE CAR. WE ARE ONE OF THE FEW BRANDS OF THE WORLD THAT CAN AND HAVE SUCCESSFULLY IN THE PAST OFFERED CARS AT THIS RANGE. THE CONTRIBUTION YOU GET IS A REAL BOOST. WE HAVE A THOUSAND CUSTOMERS WORLDWIDE WHO HAS SPENT MORE THAN MILLION DOLLARS WITH US EVERY YEAR. WE LIKE TO CREATE SOMETHING EXTRAORDINARY. AT THE LEADING EDGE OF DESIGN, TECHNOLOGY, AND THIS IS ONE SUCH EXAMPLE. ROMAINE: YOU HAVE REGULATION, ELECTRIFICATION, ALL THE PUSHBACK. I KNOW THIS IS SOMEWHAT OF A NICHE PRODUCT. I'M CURIOUS IF THIS IS A TESTAMENT TO THE OF THE 12 MAY BE OUTLIVING ALL THOSE FORECASTS WHEN IT SEEMED LIKE WE WERE GOING THERE A COUPLE OF YEARS AGO. >> YOU ARE RIGHT. THERE HAS BEEN A CHANGE IN MANY COUNTRIES AROUND THE WORLD. IT HAS BEEN FAIRLY DRAMATIC. WE ARE NOW IN A SITUATION WHERE ALL OF OUR FUTURE INDICATORS SAY WE CAN CONTINUE TO SELL THESE VERSIONS OF THESE CARS THROUGH 2035. WE WILL MAKE THEM COMPLIANT. WE HAVE A CLEAR ROAD NOW FOR THE NEXT NINE YEARS. THE REASON WE DO IT WITH THIS CAR IS THIS IS THE BIGGEST COLLECTION IN THE WORLD. THEY LOVE THIS KIND OF PAGEANTRY. WE MAY BE CLOSE TO THE END OF THIS ERA. WE WANT TO MAKE THE MOST OF IT. ROMAINE: YOU'RE COMING UP ON YOUR TWO YEAR ANNIVERSARY. I AM CURIOUS ABOUT THE SENSE OF THE PATH BACK TO PROFITABILITY. HOW MUCH OF IT RUNS THROUGH CARS ? >> I THINK FIRST OF ALL BE BETTER WITH OUR CORE PRODUCTS. WE HAVE MADE MAJOR STRIDES. SO WE CAN BE PROFITABLE. AT A MUCH LOWER VOLUME THAN WE ALREADY ARE. IT IS TO GET A SOLID FEEL ON THIS. THESE CARS REALLY GIVE US A TURBOCHARGED. IN THE SECOND HALF OF THIS YEAR AND CERTAINLY IN THE NEXT YEAR, WE SHOULD BE A POSITION WAY WE CAN DEMONSTRATE WE HAVE TURNED THE CORNER. WE CAN GENERATE POSITIVES. WITH A CRITICAL MIX TO THE TOP AND. AT LEAST FOR THE NEXT FEW YEARS. AS WE TRANSITION. ROMAINE: WE HAVE SEEN THE VOLUME GO UP. AS YOU WORK YOUR WAY UP TO CASH POSITIVE. I WONDER HOW YOU DO THAT VALUATION. CERTAINLY COMPARED TO WHERE ASTON MARTIN HAS BEEN TRADING. LET'S BE BLUNT, IT IS LIKE A DISTRESSED CARMAKER. >> THERE IS NO QUESTION. PERFORMANCE OF THE SHARES HAS BEEN PRETTY DRAMATIC. AS SOON AS WE DEMONSTRATE WE CAN DELIVER CONSISTENTLY FROM A FINANCIAL POINT OF VIEW, THE FUNDAMENTALS ARE THERE. WE HAVE RESTRUCTURED. WE CAN GENERATE CREDIBLE CONTRIBUTIONS. WE HAVE A CLEAR BUSINESS PLAN. IN A ROADMAP TO GET TO PROFITABILITY. IT IS NOT DRIVEN BY SUPERHIGH VOLUMES. GETTING MUCH MORE VALUE-BASED STRATEGY. ROMAINE: TALK TO ME ABOUT THE PEOPLE YOU NEED TO DO THAT. YOU DIDN'T JUST CUT SEVERAL HUNDRED JOBS. AND THEN YOU ARE LAUNCHING THESE AMBITIOUS PRODUCTS. THAT REQUIRES A LOT OF HUMAN BEINGS. THERE IS A LOT OF DESIGN THAT GOES INTO THAT. WHILE CUTTING BACK SUCH A HUGE AMOUNT OF YOUR WORKFORCE. >> IT IS THE SAME CONUNDRUM THAT MOST BUSINESSES FACE. I WILL GIVE YOU A EXAMPLE. WE HAVE USED THESE. WHEN I FIRST JOINED A COUPLE OF YEARS AGO, ABOUT 25% OF THE CARS THAT WE BILL CAME OFF THE PRODUCTION LINE AND THEN HAD TO BE REWORKED. WE HAVE THIS FIGURED OUT. THAT MEANS INSTEAD OF SPENDING EXTRA HOURS, THE CARS GO STRAIGHT THROUGH. THERE IS VIRTUALLY NO DEAL. IMPROVING QUALITY IS A KEY TO RELEASING THIS. THIS IS NOT SOMETHING WE WANT TO DO. WE HAD TO BECOME MORE EFFICIENT. QUITE THE OPPOSITE. ROMAINE: DO YOU THINK YOU NEED TO RAISE MORE CAPITAL? GO BACK TO CAPITAL MARKETS? >> THE LAST FINANCING WE DID A FEW WEEKS AGO GIVES US MORE FLEXIBILITY. THEY CAN DELIVER BOTH. WHAT WE HAVE IN DERIVATIVES. ALSO GET US READY FOR THE NEXT GENERATION OF CAR. FOR THE NEXT LEVEL OF EMISSIONS STANDARDS. THE NEWEST LEVEL OF CONNECTIVITY AND WE ARE NOW WELL SET UP TO DELIVER THE STRATEGIC PART FOR THE SHAREHOLDERS. ROMAINE: CEO OF ASTON MARTIN UNVEILING THE MOST POWERFUL CAR. WE ARE KEEPING AN EYE ON THIS. WE ARE GETTING AN INTERESTING HEADLINE RIGHT NOW. HARVARD DISCLOSING A STAKE IN SPACEX. ABOUT $2.2 BILLION. NOT REALLY HAVING MUCH IMPACT ON SPACEX SHARES. WE ARE KEEPING AN EYE ON SOME OF THESE DISCLOSURES THAT ARE CROSSING THE WIRE FAST AND FURIOUS. ♪ ♪ ROMAINE: WE ARE JUST ABOUT THREE WEEKS AWAY FROM THE START OF THE NATIONAL FOOTBALL LEAGUE SEASON HERE IN THE U.S. AND IF YOU WANT TO WATCH IT, YOU HAVE TO PAY UP TO SEE ALL YOUR FAVORITE TEAMS PLAY ON SUNDAYS. THE EXPLOSION OF STREAMING SERVICES OUT THERE IS FORCING FANS TO PAY FOR MULTIPLE SUBSCRIPTIONS. THEY ARE NOW INVESTIGATING WHETHER THE NFL VIOLATED ANTITRUST LAWS. JOINING US RIGHT NOW TO TALK A LITTLE BIT MORE ABOUT WHAT IS GOING ON HIS SENATE ANTITRUST LAWYER. SHE SPECIALIZES IN LITIGATION. WE SAW A GREAT BLOOMBERG'S STORY ON THIS. THERE SEEMS TO BE SOME CONCERNS ABOUT EXACTLY WHAT TYPE OF DEALS THE NFL AND OTHERS STRUCK WITH THE STREAMING SERVICES. THEY HAVE THAT PARTNERSHIP WITH YOUTUBE. WHAT ARE WE TALKING ABOUT HERE? >> THE BACKGROUND FOR SUNDAY TICKET REALLY BEGINS WITH THE 2015 LAWSUIT. AGAINST THE NFL. FOR BUNDLING EVERY GAME INTO ONE PACKAGE. THE ISSUE WAS THAT IT STEMS FROM A 1961 ANTITRUST EXEMPTION FOR PULLING YOUR RIGHTS FROM BROADCASTS. WHAT HAPPENED IN A PERFECT MARKET IS THE NFL TEAMS WOULD EACH COMPETE WITH ONE ANOTHER TO MARKET THEIR BROADCAST RIGHTS. INSTEAD, THERE WAS THIS EXEMPTION IN 1961 THAT SAID TEAMS CAN PULL THEIR RIGHTS TO GATHER FOR SPONSORED, FREE OVER THE AIR BROADCASTS. IN 2015, THERE WAS THE VERY FIRST CHALLENGE TO THAT VERY OLD LAW THAT PREDATES CURRENT STREAMING THAT SAID YOU CANNOT COLLECTIVELY DO THIS. YOU HAVE TO COMPETE. IF I AM A SPORTS FAN AND I LIVE IN NEW YORK HYPOTHETICALLY AND I HAVE THREE SONS WHO ARE DIEHARD PHILADELPHIA EAGLES FANS, EYES SHOULD BE ABLE TO GET EAGLES GAMES. BUT INSTEAD I HAVE TO BUY A PACKAGE OF EVERY SINGLE GAME, MUCH OF WHICH I HAVE NO INTEREST IN WATCHING. THAT IS THE GENESIS OF WHERE WE ARE TODAY. THE PLAINTIFFS IN THAT CASE TODAY ACTUALLY WON A JURY VERDICT WHICH WAS OVERTURNED BY THE JUDGE AND IS NOW UP TO APPEAL TO THE NINTH CIRCUIT. THE LEAGUE'S ARE SPREADING OUT THEIR CONTENT ACROSS A MULTITUDE OF DISTRIBUTORS. STREAMING AND CABLE AND BROADCAST. IT IS TRULY EXPENSIVE TO WATCH YOUR FAVORITE TEAMS. AND WHERE YOU CAN CATCH THOSE GAMES. ROMAINE: IT IS ABSOLUTELY CONFUSING. I'M CURIOUS ABOUT LEGALLY, YOU TALK ABOUT ALL OF THESE DISPARATE STREAMING SERVICES AND EVERYTHING KIND OF SPREAD OUT, WHEN I THINK ANTITRUST VIOLATIONS I THINK THE EXACT OPPOSITE. THAT THESE GET CONCENTRATED INTO ONE LITTLE POCKET. WHAT WOULD ACTUALLY BE THE RELIEF. TO NOT DISPERSE IT AGAINST ALL THESE PLATFORMS? I DON'T UNDERSTAND. >> IT IS ACTUALLY THE OPPOSITE OF NOT CHARGING. IT IS THAT THERE WOULD BE A FREE MARKET WHERE EACH TEAM COULD INDIVIDUALLY NEGOTIATE WHERE ITS GAMES WILL BE TELECAST. SO YOU KNOW IF I WANT TO WATCH THE EAGLES, I NEED ONE SUBSCRIPTION. WHOEVER THEY DECIDE TO DISTRIBUTE WITH. LET'S SAY IT'S AMAZON. IF I WANT TO WATCH EAGLES GAMES, I JUST GET AN AMAZON SUBSCRIPTION. INSTEAD THEY ARE PULLING IN WITH ALL OF THE TEAMS WHICH MEANS YOU HAVE TO GET FOUR OR FIVE DIFFERENT SUBSCRIPTIONS OR CABLE SERVICES. ROMAINE: THIS IS NOT JUST COME UP WITH REGARDS TO STREAMING STUFF BUT IT HAS COME UP BEFORE WITH ANTITRUST ISSUES. THEY HAVE TO MAKE THE CASE OF THE NFL IS A JOINT VENTURE AND YOU HAVE TO HAVE THE 32 TEAMS COORDINATE TO PRODUCE WHAT THE NFL IS TRYING TO PRODUCE. IS THAT NOT A VALID ARGUMENT? >> NOT ACCORDING TO THE SUPREME COURT. THERE WAS A DECISION ABOUT 15 YEARS AGO THAT SAID THAT THESE ARE INDIVIDUAL ECONOMIC ENTITIES. THIS IS, I SHOULD BE REALLY CLEAR. THE SPORTS BROADCASTING ACT ADDRESSED IMMUNITY. ARE THE IMMUNE FROM ANTITRUST LAWS? ONE COULD ABSOLUTELY ARGUE THAT IN THIS ENVIRONMENT WITH STREAMING AND CABLE, THIS ACT HAS NEVER BEEN TO APPLY IMMUNITY IN THIS CONTEXT. AS INDIVIDUAL ENTITIES THEY SHOULD BE COMPETING WITH ONE ANOTHER. ROMAINE: HOUSE REPUBLICAN INVESTIGATORS THAT THE NFL REJECTED AN ESPN PROPOSAL FOR A $70 SUNDAY TICKET AS OPPOSED TO THIS TEAM BY TEAM PRODUCT WHICH IS WHAT GETS THOSE OVERALL COSTS FOR CONSUMERS A LOT HIGHER. IF THAT IS ACCURATE, DOES THAT PROVIDE EVIDENCE THAT THE LEAGUE IS IN SOME WAY TRYING TO PROTECT THE PRICE OF ITS BUNDLE RATHER THAN ALLOWING FOR A FREER MARKET? >> THE HALLMARK OF MARKET POWER IS THE ABILITY TO CHARGE WHAT ANTITRUST LAWYERS CALL MONOPOLY RENTS. BUT WE WILL JUST CALL THEM OVERCHARGES. THE REALITY IS IF YOU LOOK AT THAT CONCENTRATION OF POWER, THERE WILL ULTIMATELY BE LESS MONEY FLOWING TO THE LEAGUE OVERALL. BECAUSE EACH TEAM WOULD BE NEGOTIATING ON ITS OWN MERIT. RIGHT NOW THEY ARE BENEFITING FROM THAT CONCENTRATED MARKET POWER BY ULTIMATELY BEING ABLE TO EXTRACT MORE MONEY FROM THE SYSTEM. IN A PERFECT COMPETITIVE WORLD THE TEAMS WOULD COMPETE WITH ONE ANOTHER. COMPETITION LOWERS PRICES. THAT WOULD BE TO THE BENEFIT OF CONSUMERS AND FANS ACROSS THE COUNTRY. ROMAINE: I KNOW WE ARE PICKING ON THE NFL BECAUSE THAT WAS THE MAIN CASE HERE BUT WHEN YOU LOOK AT THE OTHER SPORTS LEAGUES IN THE U.S., IS THIS KIND OF THE SAME STORY MORE OR LESS? >> THE EXEMPTION APPLIES TO ALL FOUR MAJOR SPORTS LEAGUES. THEY ARE ALL BENEFITING FROM IT. THE NFL MAKES THE MOST MONEY ACROSS THE BOARD. $14 BILLION. SO THEY TEND TO GET MOST OF THE ATTENTION. BUT THE OTHER LEAKS NOT THAT ORGANIZED. ROMAINE: THIS IS ALL FASCINATING. I DON'T KNOW HOW THIS WORKS OUT THAT AS A FAN I WOULD TELL YOU IT WOULD BE NICE TO HAVE MORE CLARITY. I WOULD LIKE TO ASK YOU, YOU ARE AN EAGLES FAN? >> I MARRIED INTO AN EAGLES FAMILY. ROMAINE: I WAS LOOKING AT YOUR BACKGROUND. I WAS GOING TO SAY. HOPEFULLY YOU WILL GET YOUR GAMES AND YOU WILL NOT HAVE TO PAY TOO MUCH FOR THEM. ALL OF THIS IS FASCINATING STUFF. THANK YOU FOR EXPLAINING IT TO US. WHEN WE COME BACK, WE WILL SET YOU UP FOR WANT TO WATCH OVER THE NEXT WEEK. WE HAVE BEEN TALKING A LOT ABOUT IT. THERE ARE A LOT OF EARNINGS. WE WILL BREAK IT DOWN FOR YOU AFTER THE BREAK. THIS IS BLOOMBERG. ♪ ROMAINE: THAT SET YOU UP FOR WHAT TO WATCH NEXT WEEK. SOME HOUSING INDEX NUMBERS. JUST A PROGRAMMING NOTE. WE WILL BE AT MARTHA'S VINEYARD NEXT WEEK. ON TUESDAYS WHEN RETAIL EARNINGS STARTED TO COME IN. WE WILL GETS HOME SALES NUMBERS. IT WILL BE AN INTERESTING OVERLAY. TO SEE WHAT THE GOVERNMENT NUMBERS LOOK LIKE. LOWE'S AND TARGET WILL REPORT. AS WELL AS ESTEE LAUDER. A NICE CROSS-SECTION OF THE RETAIL LANDSCAPE. WE WILL HEAR FROM ANALOG DEVICES THAT DAY AND WE WILL GET THE FED MINUTES FROM THAT LAST MEETING. IT REALLY IS LOAD -- LASER FOCUSED ON THAT. THURSDAY WE GET EARNINGS FROM WALMART, ALIBABA, AND OTHERS. THEN WE WILL ROUND OUT THE WEEK WAS SOMEWHERE ECONOMIC DATA. A CLOSER LOOK AT SOME PMI'S. AND THE SERVICES PMI'S ARE OUT THAT DAY. YOUR SET UP FOR NEXT WEEK WILL LARGELY BE A BIG READ ON THE HEALTH OF THE U.S. ECONOMY. WE WILL HAVE FULL COVERAGE OF THAT. LIKE NO OTHER. NEXT WEEK. WE HOPE YOU JOIN US THEN. STICK AROUND. JOE MATHIEU IS UP NEXT RIGHT HERE ON BLOOMBERG. ♪