Global Bond Slump Raises Fed Questions | Bloomberg Businessweek Daily 8/18/2026

>> THIS IS "BLOOMBERG BUSINESSWEEK DAILY," REPORTING FROM THE MAGAZINE THAT HELPS GLOBAL LEADERS STAY AHEAD, WITH INSIGHT ON THE PEOPLE, COMPANIES, AND TRENDS SHAPING TODAY'S COMPLEX ECONOMY. PLUS, GLOBAL BUSINESS, FINANCE, AND TECH NEWS AS IT HAPPENS. "BLOOMBERG BUSINESSWEEK DAILY" WITH CAROL MASSAR AND TIM STENOVEC, LIVE ON BLOOMBERG RADIO, TELEVISION, AND BLOOMBERG ORIGINALS. CAROL: GOOD AFTERNOON, EVERYBODY. YES INDEED, WE ARE ACROSS BLOOMBERG PLATFORMS. TUESDAY, AUGUST 18, 2026. AUGUST FLYING BY. JOE: ONE DAY AT A TIME. CAROL: THE AMAZING JOE DEAUX, BLOOMBERG ECONOMICS STATECRAFT REPORTER, COVERING A LOT OF STUFF THAT INTERSECTS IN OUR CURRENT WORLD. WE WILL TALK ABOUT THAT THE NEXT THREE HOURS IN TOTAL. WE WILL ALSO GET INTO, JOE, WHAT IS SAFE TO SAY WHAT WE ARE SEEING IN TERMS OF GLOBAL RATES, DIFFERENT ENVIRONMENT. SOME OF IT IS MORE, SOME OF IT IS INFLATION-- WAR, SOME OF IT IS INFLATION, AI SPEND. JOE: FUNDAMENTALS HAVE CHANGED ON WHY THIS IS HAPPENING. CAROL: WE WILL GET INTO THAT. IT IS A ONE-TWO PUNCH -- GLOBAL SELLOFF, SEMICONDUCTORS SELLOFF. OIL TOPPING $85 A BARREL, WITH THE U.S. AND IRAN STUCK IN A DEADLOCK OVER CONTROL OF THE STRAIT OF HORMUZ. WE WILL GET TO THE TRADE IN JUST A MOMENT. WE ARE GOING TO DO A DEEP DIVE, A LITTLE BIT OF A ROUNDTABLE ON GLOBAL RATES. WE WILL TALK ALSO ABOUT WHAT IS GOING ON IN CHINA, BECAUSE IT FEELS LIKE THEY ARE GOING THROUGH SOME ISSUES, TOO. JOE: JUST A BIT. [LAUGHTER] CAROL: IN CASE YOU DIDN'T KNOW, U.S. AND CHINA, BIGGEST ECONOMIES IN THE WORLD. WE WILL GET INTO THAT. ALSO, THE COFOUNDER AND CEO OF ROOT, INSURANCE COMPANY, AUTO INSURANCE, TRYING TO CHANGE THE WAY THINGS ARE HAPPENING. THE STOCK IS DOWN SO I'M CURIOUS WHAT HE HAS TO SAY ABOUT THE BUSINESS. LET'S GET YOU GOING ON THIS TUESDAY WITH A CHECK ON THE TRADE. HERE IS AMY MORRIS, IN FOR CHARLIE PELLETT. AMY: SELLOFF OFTEN CHIPMAKERS SENT STOCKS LOWER. WE CHECK MARKETS ALL DAY LONG ON BLOOMBERG. NASDAQ DOWN 1.25%, 342 POINTS. DOW DOWN .25%. TWO-YEAR YIELD, 4.17%. WTI AT $85 A BARREL. BRENT CRUDE TOPPING $91 A BARREL. PHILADELPHIA SEMICONDUCTOR INDEX MORE THAN 5% LOWER, LED BY MICRON, WHICH CONTINUES TO FALL, NEARLY 8% LOWER. LONGER MATURITY BONDS ARE AT THE EPICENTER OF ANXIETY OF PRETTY MUCH EVERYTHING, FROM INFLATION TO THE DEBT-LADEN AI BOOM. ONE OF YOUR IS PERSISTENT GEOPOLITICAL TURMOIL WILL MAKE ECONOMIES MORE PRONE TO SUPPLY SHOCKS AND INFLATIONARY PRESSURES. BONDHOLDERS ARE WORRIED THAT GOVERNMENTS WILL FAIL TO REIN IN SPENDING. THE 30-YEAR TREASURY YIELD IS 5.28%. WALT DISNEY'S ABC NETWORK SUED THE FCC FOR ALLEGEDLY WAGING A RETALIATORY CAMPAIGN AGAINST THE PODCASTER TO PUNISH IT FOR EDITORIAL DECISIONS DISLIKED BY THE TRUMP ADMINISTRATION. IT IS SEEKING AN ORDER BARRING THE FCC FROM TAKING FURTHER ACTION ON RENEWAL APPLICATIONS OR ALTERING THE NETWORK'S EXERCISE OF EDITORIAL DISCRETION. DISNEY SHARES 1% HIGHER. FOR ON-DEMAND NEWS 24 HOURS A DAY, SUBSCRIBE TO "BLOOMBERG NEWS NOW" WHEREVER YOU GET YOUR PODCAST. I AM AMY MORRIS LET'S GET BACK TO "BLOOMBERG BUSINESSWEEK DAILY" WITH CAROL MASSAR AND JOE DEAUX. CAROL: TIM STENOVEC OFF THIS WEEK ON VACATION. LET'S GET TO TOP OF MIND FOR TERMINAL READERS, SOVEREIGN BORROWING RATES SEARCHING AROUND THE WORLD. YOU SAY 2007, YOU KIND OF PERK UP. JOE: YOU HAVE TO PERK UP. CAROL: YOU DO. THERE ARE DOMESTIC FACTORS THAT HAVE A ROLE AROUND THE GLOBE, NO DOUBT ABOUT IT. ONE FEAR IS THAT PERSISTENT GEOPOLITICAL TURMOIL WILL MAKE ECONOMIES MORE PRONE TO SUPPLY SHOCKS AND INFLATIONARY PRESSURES. BONDHOLDERS ARE WORRIED THAT GOVERNMENTS WILL FAIL TO REIN IN SPENDING. THAT IS A GLOBAL THING PRESSURING FISCAL HEALTH. STRUCTURE AND DEMOGRAPHICS ARE RESULTING IN WANING DEMAND FROM ONCE-STEADY BUYERS. LET'S GET TO OUR ROUNDTABLE, A KILLER DUO. BLOOMBERG INTELLIGENCE CHIEF INTEREST RATE STRATEGIST IN THE PRINCETON BUREAU, AND THE BLOOMBERG NEWS CORPORATE FINANCE REPORTER ON THE SET IN NEW YORK. WELCOME, WELCOME. I SHOULD POINT OUT A STORY THAT HAS BEEN ON OUR MINDS CAME OUT YESTERDAY, WE ARE A LITTLE OBSESSED WITH IT. IT WAS YESTERDAY'S BLOOMBERG REPORTING ON HOW AI IS DRIVING OF TREASURY YIELDS. WE WILL DIG INTO THAT IN A MOMENT. IRA, FIRST WITH YOU. YOUR READ ON WHAT IS HAPPENING IN THE U.S. RATES MARKET AND GLOBAL RATES MARKET AND HOW CONNECTED THEY REALLY ARE, OR NOT? >> THEY ARE EXTREMELY CONNECTED, AND ONE OF THE BIG REASONS WHY WE DO HAVE THIS RISE IN 30-YEAR U.S. TREASURIES IS THERE IS ALTERNATIVES NOW FOR PEOPLE TO BUY OTHER BONDS. JAPANESE GOVERNMENT BONDS, WHEN YOU HEDGE IT BACK INTO CURRENCIES, WINDS UP YIELDING MORE THAN U.S. TREASURIES. NOW THE TREASURY YIELDS HAVE TO COMPETE WITH YIELDS FROM OTHER COUNTRIES. THAT CREATES THIS VERY HIGH CORRELATION BETWEEN A LOT OF THE DEVELOPED MARKET GOVERNMENT BONDS. A LOT OF THE THINGS YOU JUST SAID, CAROL, THINGS LIKE FISCAL ISSUES NOT ONLY HERE, BUT ABROAD AS WELL, JAPAN, GERMANY, THE U.K. IN PARTICULAR, YOU WIND UP IN A SITUATION WHERE PEOPLE ARE WORRIED ABOUT THE LONG-TERM HEALTH OF THESE DEVELOPED BY MARKETS, AND THAT IS FEEDING INTO THIS FRENZY OF -- NOT GOING TO SAY SELLING, BECAUSE I HAVE NOT TALKED TO ANYONE WHO IS ACTUALLY SELLING, BUT THEY ARE NOT NECESSARILY BUYING WHICH MEANS THE GOVERNMENT TO ARE SELLING HAVE TO ATTRACT PEOPLE BY ISSUING HIGHER YIELDS. JOE: YOU WANT TO BUILD ON THAT? >> THE COMPETITION IS ALSO COMING FROM THE CORPORATE SIDE. THAT IS WHAT IS HAPPENING WITH THE AI FINANCING WAVE. WE ARE SEEING A LOT OF CORPORATES ISSUING DEBT ON THE LONG END OF THE CURVE. WHICH IS PROVIDING COMPETITION TO THE LONG END OF THE TREASURY CURVE. MANAGERS HAVE MORE TO CHOOSE FROM AND THAT LEADS TO BUYING CORPORATE SPIRIT JOE: WHAT IS THE COMP AND CORPORATE BONDS LIKE WE HAVE SEEN LIKE THIS? DAVIDE: I THINK THIS IS UNPRECEDENTED, QUITE FRANKLY. IN TERMS OF ISSUANCE, $1.5 TRILLION IN THE TRADE MARKET SO FAR. ONLY 30% MORE THAN LAST YEAR. THERE WAS WIDE EXPECTATIONS -- CAROL: 30% MORE THAN LAST YEAR? GO AHEAD. [LAUGHTER] DAVIDE: MORE THAN EVEN IN 2020 WHEN THE RATES WERE VERY LOW. CAROL: I DON'T KNOW, IF THEY ARE NOT SELLING BUT THEY ARE NOT BUYING, THAT IS STILL A PROBLEM. IRA: IT IS, AND I WANT TO GO BACK TO SAY THAT IN TERMS OF THE LONG-TERM INVESTMENT GRADE CORPORATE BONDS, AND THE AI ISSUANCE AND OTHER LONG BOND ISSUANCE IS CERTAINLY COMPETING AT SOME LEVEL AND PEOPLE WANT TO HEDGE THEIR INTEREST RATE RISKS, SO THAT IS PEOPLE SELLING LONG ULTRA BOND FUTURES OR SHORTING TREASURIES AGAINST IT AS WELL. WE HAVE SEEN THIS TYPE OF ISSUANCE IN TERMS OF PERCENTAGE OF THE MARKET BEFORE. IF YOU GO BACK TO THE TELECOM BOOM OF THE LATE 1990'S AND EARLY 2000, YOU SAW A LOT OF LONG-TERM CORPORATE BONDS -- I WAS A CORPORATE BOND STRATEGIST SEVERAL DECADES AGO, I HATE TO SAY. CAROL: WE'VE ALL BEEN DOING THIS A LONG TIME, IRA. WE GET YOU. IRA: PARTICULARLY WHEN IT CHANGES QUICKLY, IN TERMS OF PEOPLE SELLING A LOT OF FIVE- AND 10-YEAR DEBT AND GO OUTSIDE THE CURVE BECAUSE THEY HAVE A FINDING NEED OR THEY DON'T WANT A MATURITY WALL IN A COUPLE OF YEARS, THAT COULD CHANGE THE TONE CERTAINLY. WHEN IT COMES TO TREASURIES, IT IS NOT ONLY AI. WE HAVE TO MAKE SURE WE UNDERSTAND THAT THERE IS A MULTITUDE OF FACTORS THAT ARE DRIVING THIS THAT ALL HAPPEN TO BE COMING TOGETHER AT THE SAME TIME, INCLUDING THINGS LIKE KEVIN WARSH NOT NECESSARILY HAVING THE CONFIDENCE OF THE MARKETS. THAT HAS TO INCREASE RISK PREMIUMS. YOU HAVE SEEN THAT THROUGH MOST OF THE TREASURY CURVE IN PARTICULAR, THE 30-YEAR PART OF THE CURVE, WHERE YOU HAVE SEEN THOSE YIELDS RISE ON THE BACK OF PEOPLE NOT KNOWING IF THE FED IS GOING TO BE ABLE TO CONTROL THE ECONOMY. CAROL: IRA, WHAT DO YOU BLAME THE MOST? IS IT MR. WARSH, THE AI ISSUANCE? IRA: THERE IS NO MOST. IT IS A LITTLE BIT OF EVERYTHING. HERE'S THE THING, THE AI STORY WOULDN'T MATTER IF YOU DIDN'T HAVE THESE OTHER THINGS GOING ON. PEOPLE WOULD BE LIKE, THESE ARE WITH 10 OR 12 BASIS POINTS, A BLIP AND A COUPLE DAYS OF REASONABLY SIZED MOVES. THE FACT THAT YOU HAVE FEARS OF THE FISCAL SITUATION IN THE U.K., FEARS ABOUT THE BOJ RAISING RATES EVEN FURTHER AND SEEING THEIR YIELDS ABOVE 4% FOR THE FIRST TIME IN DECADES AS WELL, ALL OF THOSE THINGS ARE FEEDING ON TODAY'S. YOU ADD ONTO THAT THE AI SUPPLY STORY AND IT MAKES IT MUCH WORSE. CAROL: I WANT TO BRING INTO THE CONVERSATION -- THE TEAM PUT OUT A RESEARCH NOTE AND HE COINED THE TERM BOND VIGILANTES. WE LISTEN TO WHAT HE HAS TO SAY. AND THEN IT IT SAID "WE ARE NOT PUSHING THE PANIC BUTTON HOWEVER, WE ARE CLOSELY MONITORING WHETHER THE BOND VIGILANTES MIGHT DO SO. SHOULD IT CONTINUE TO TRADE IN A NORMAL RANGE OF FOUR TO 5% WITHOUT CAUSING ADVERSE CONSEQUENCES FOR THE ECONOMY AND CORPORATE EARNINGS. NEVERTHELESS, NOW THAT THE YIELD IS APPROACHING THE TOP OF THIS RANGE, WE ARE MONITORING THE BOND VIGILANTES MORE CLOSELY." WE HAVE BEEN HERE, I FEEL LIKE, DAVIDE, BEFORE. WE TALK ABOUT THE BOND VIGILANTES AND GET CRAZY AND THEN SETTLE DOWN. ARE THERE SIGNS THAT THERE IS A PROBLEM AND, WORLD, GET READY FOR HIGHER INTEREST RATE COSTS ACROSS THE BOARD? DAVIDE: THE PUSH AND RISK PREMIUMS IS ACROSS THE BOARD. WE ARE SEEING BOND VIGILANTES IN THE CORPORATE BOND MARKET, WHERE EFFICIENCY INVESTORS ARE ASKING FOR HIGHER SPREADS AND HIGHER RETURNS ON CORPORATE BONDS. WE'RE SEEING INVESTMENT-GRADE BONDS TRADING AT JUNK LEVEL YIELDS. SO YEAH, THE PUSH HIRES ACROSS THE BOARD. CAROL: THAT'S A SIGN, RIGHT? DAVIDE: IT'S A SIGN OF INVESTOR DEMAND BECAUSE THEY EXPECT TO MUCH MORE SUPPLY. JOE: I CAN'T HELP BUT TURN BACK TO THE BACKDROP OF THE FED. IRA, YOU MENTIONED JUST THE CONFIDENCE OF THE MARKET IN THE NEW FED CHAIR. COULD YOU UNPACK THAT A LITTLE BIT? I THINK A FEW OF US HAVE LIVED THROUGH A DIFFERENT FED CHAIR CHANGES. WHY WOULD THIS BE ANY DIFFERENT THAN THE OTHERS? IRA: I THINK BECAUSE THE CHANGE IN COMMUNICATION WAS NOT INCREMENTAL AT ALL. IT WASN'T A LITTLE BIT OF A SLOWDOWN, WE WILL REDUCE THE AMOUNT OF FORWARD GUIDANCE WE CAN GIVE, WE WILL GIVE A LITTLE BIT LESS INFORMATION IN THE STATEMENT. THE FED'S POSTMEETING STATEMENT WENT FROM 400 WORDS 100 WORDS IN ONE MEETING. CAROL: BUT WHERE THEY COULD -- BUT WERE THEY GOOD WORDS? 100 WORDS? IRA: NO. CAROL: I KNOW. IRA: NO FORWARD GUIDANCE OR REASONABLE EXPECTATION. KEVIN WARSH SO FAR MISREAD WHAT THE MARKET WANTS AND NEEDS. YES, HE HAS THE COMMUNICATIONS TASK FORCE -- I PUT OUT A DEEP DIVE YESTERDAY LOOKING AT ALL OF THE TASKFORCES. THE BIG ONE IS COMMUNICATIONS. SO FAR KEVIN WARSH HAS NOT GIVEN THE MARKET ANY INDICATION OF WHAT IS COMING NEXT OR WHAT WILL COME NEXT GIVEN ANY ECONOMIC OUTCOME. UNLESS YOU DO ONE OF THOSE TWO THINGS, GIVE FORWARD GUIDANCE OR SAY, OK, HERE IS THE FIVE THINGS THAT MIGHT HAPPEN AND WE WILL DO THIS, THAT, OR THE OTHER THING DEFINING ON WHAT OUTCOME OCCURS, YESTERDAY ONE OF THOSE THINGS. THE MARKET IS CONFUSED AND WE PRICE AND HIGH RISK PREMIUMS. CAROL: A LOT OF UNCERTAINTY ABOUT THE FED CHAIR. WE NEED MORE SPECIFICITY. 20 SECONDS, DAVIDE, WE WILL GET MORE CREDIT OR BOND ISSUANCE FROM ALL OF THESE HYPERSCALERS. IT IS GOING TO KEEP COMING. DAVIDE: IT IS RELIGIOUS, YES--RELENTLESS, YES. TO TRULY DOLLARS THE NEXT TWO YEARS IN TERMS OF ESTIMATES. A LOT TO COME. CAROL: THANK YOU SO MUCH. THIS IS WHAT WE WERE HOPING TO DO. DAVIDE BARBUSCIA'S BLOOMBERG NEWS CORPORATE FINANCE REPORTER, AND IRA JERSEY, BLOOMBERG INTELLIGENCE CHIEF INTEREST RATES STRATEGIST JOINING US. THIS IS SOMETHING THAT IS A KEY MARKET STORY TODAY. LET'S SEE IF THAT IS IMPACTING HOW MARTA NORTON THINGS ABOUT TODAY'S TRADE AND MACRO OVERALL. SHE IS CHIEF INVESTMENT STRATEGIST OF THE SECOND-LARGEST RETIREMENT PLAN PROVIDER IN THE UNITED STATES, WHICH HAS TWO POINT $1 TRILLION IN ASSETS UNDER ADMINISTRATION THANKS TO MORE THAN 94,000 RETIREMENT PLANS UNDER ADMINISTRATION, INCLUDING US? AREN'T WE EMPOWER? SHE JOINS US FROM THE BLOOMBERG NEWS CHICAGO BUREAU. GOOD TO HAVE YOU BACK WITH US. LOTS TO TALK ABOUT. WE WERE JUST TALKING ABOUT THE GLOBAL RATE ENVIRONMENT. START THERE. HOW MUCH OF THAT -- I'M CURIOUS, YOU SEE A LOT OF CLUSTER PLATFORM. IS THERE AN IMPACT TO WHAT IS GOING ON IN THE GLOBAL YIELD ENVIRONMENT IN TERMS OF WHERE INVESTORS WANT TO ALLOCATE SOME OF THEIR RETIREMENT ASSETS? >> I THINK THERE IS A CERTAIN SKITTISHNESS FROM RETIREMENT SAVERS AROUND THE BOND MARKET. I THINK IT RELATES MORE THAN JUST A THIS ENVIRONMENT. WE CAN LOOK BACK AT 2022 THE FAILURES FROM THE BOND MARKET FROM THE CAPITAL PRESERVATION STANDPOINT. AND OF COURSE, AS YOU HAVE THESE LINGERING INFLATIONARY CONCERNS, IT MAKES PEOPLE WONDER WHETHER FIXED INCOME CAN PLAY THE SAME ROLE THAT IT HISTORICALLY HAS. I GUESS WHAT I WOULD ARGUE ON THAT FRONT IS THAT CERTAINLY INFLATION IS NOT A GREAT TALKING POINT FOR FIXED INCOME, AND CERTAINLY THE SUPPLY-DEMANDED DYNAMICS WE ARE TALKING ABOUT IS DIFFICULT AS WELL. IF WE WERE TO GET TO A TRUE GROWTH SCARE, I THINK THERE IS STILL VALUE TO THAT SLUG OF YOUR PORTFOLIO. IT IS A LITTLE BIT REACTIONARY TO TALK THE ENTIRE PORTION OF--TOSS THE ENTIRE PORTION OF THE PORTFOLIO OF THE WINDOW. JOE: WHEN IS THE LAST TIME YOU HAVE HAD AN INTENSE DISCUSSION OF FIXED INCOME WITH CLIENTS LIKE YOU ARE GOING THROUGH RIGHT NOW? MARTA: IT HAS BEEN AN ONGOING CONCERN. I THINK A LOT OF CLIENTS WERE PRETTY ENTHUSED ABOUT ALTERNATIVE ASSET CLASSES. GOLD, FOR EXAMPLE. BITCOIN, FOR EXAMPLE. THINKING ABOUT THE HEDGING CAPABILITIES OF THOSE ASSETS VIS-À-VIS WHAT THEY ARE GETTING OUT OF FIXED INCOME. WE WANT TO UNDERSTAND MAYBE THE WEAKNESSES OF THE OTHER ASSET CLASSES AS WELL. IT'S A SERIES OF TRADE-OFFS AS HE PUT TOGETHER THE CAPITAL PRESERVATION PORTION OF THE PORTFOLIOS. CAROL: DO THEY ASK ABOUT THE AA TRADE, SPACEX VERSUS THE FIXED INCOME SIDE? MARTA: PICK A WORRY. WHAT I FIND SO INTERESTING ABOUT THE CURRENT CLIMATE, WE TALK SO MUCH ABOUT THIS SPECULATIVE FERVOR THAT HAS TAKEN OVER MARKETS AS IT RELATES TO THE AI TRADE. THERE ARE SIGNS OF THAT BUT WE THINK ABOUT LEVERAGED ETFS AND WHAT IS HAPPENING IN EMERGING MARKETS, KOREA, TAIWAN, THOSE MARKETS. WHAT I FIND SO INTERESTING IS THERE SO MUCH HESITANCY AROUND AI. THAT IS BROADER THAN JUST MARKET CONCERN. THAT RELATES TO THE MARKETING MESSAGES WE HAVE HEARD OUT OF AI CEOS AND THE TRANSFORMATION FROM A JOB PERSPECTIVE, FROM THE DATA CENTER IN YOUR BACKYARD OR NOT. THERE ARE SO MANY CONCERNS ABOUT THIS TOPIC. JOE: YOU WRITE ABOUT EQUITY POSITIONING. IS THAT ONE OF THE THINGS YOU ARE GIVING TO THE CLIENTS THAT ARE WORRIED OR SKEPTICAL ABOUT AI? MARTA: IT'S AN IMPORTANT POINT TO THINK ABOUT AI AND THEIR EQUITY PORTFOLIO, THERE U.S. PORTFOLIO, THE PREPONDERANCE OF THEIR EQUITY EXPOSURE AND UNDERSTANDING YOUR AI FACTOR IS NOT ENTIRELY CONTAINED WITHIN THE I.T. SEGMENT OR SECTOR WITHIN YOUR PORTFOLIO. IT'S AN SMALL CAPS AND INDUSTRIALS. IT IS SPRINKLED THROUGHOUT THE U.S. MARKET. I TALK ABOUT BEING THOUGHTFUL ABOUT DIVERSIFICATION. THEY CAN MAKE SOME SENSE TO LOOK AT SOME AREAS THAT ARE NOT QUITE AS DEPENDENT OR PART OF THE AI SUPPLY CHAIN. THAT IS ONE OF THE REASONS I THINK HEALTH CARE HAS SOME APPEAL IN THIS PARTICULAR ENVIRONMENT. CAROL: WHAT IS MOST IMPORTANT WHEN WE LOOK AT MACRO? WE HAVE THE WAR, FED, AI, THE RISE IN GLOBAL BOND YIELDS. WHAT MATTERS IN YOUR VIEW WHEN IT COMES TO THOSE THINKING ABOUT THEIR RETIREMENT SAVINGS? MARTA: ALL ROADS LEAD BACK TO AI. I'M VERY CONCERNED ABOUT THE YIELD CURVE AS WELL. WE ARE IN AN ENVIRONMENT WHERE THE YIELD CURVE SEEMS TO HAVE RESET HIGHER ON THE BACK OF REAL YIELDS. THAT IS SOMETHING WE HAVE TO CONSIDER. WHEN YOU THINK ABOUT WHAT THE ENGINE OF GROWTH IS AND THE DRIVING FORCE OF THE EQUITY MARKET AND WHAT IT APPEARS TO BE THE DRIVING FORCE OF THE ECONOMY, IT IS REALLY AI. MANAGING THAT WELL, ANTICIPATING IT, NOT OVERREACTING ON AN EMOTIONAL STANDPOINT, THAT IS CRITICAL FOR INVESTORS TODAY. CAROL: IS EASY FOR US BECAUSE WE HAVE TO BE HANDS-OFF HERE. JOE: VERY HANDS-OFF. DIFFICULT. CAROL: EXACTLY. MARTA, THANK YOU SO MUCH. MARTA NORTON, CHIEF INVESTMENT STRATEGIST AT EMPIRE. SHE MENTIONED ENGINES OF GROWTH. CHINA'S SLOWDOWN COLLAPSING BEYOND THE TECHNOLOGY SECTOR. WE HAVE A GREAT CAST ON THAT, THE COO AND MANAGING DIRECTOR FOR CHINA BEIGE BOOK SHEHZAD QAZI JOINING US NEXT. AMY: IT IS 2:21 ON WALL STREET. ANTHROPIC'S REVOLVING CREDIT FACILITY IS SET TO RISE ABOVE ITS ROUGHLY $10 BILLION TARGET AS IT GETS READY FOR A HIGHLY ANTICIPATED IPO. THOSE TALKS ARE ONGOING. THE $10 BILLION PLUS REVOLVING CREDIT LINE IS A SUBSTANTIAL INCREASE OVER THE $2.5 BILLION ANTHROPIC SECURED LAST YEAR. A SLUMP IN CHIPMAKERS SENT STOCKS FALLING ON ANXIETY BUT INFLATION RISING GOVERNMENT DEBT. WE CHECKED MARKETS ALL DAY LONG HERE AT BLOOMBERG. THE S&P 500 DOWN ONE HALF A PERCENT. NASDAQ DOWN 1.2%. THE DOW WAS DOWN 1/10 OF 1%. THE 10-YEAR TREASURY YIELD AT 4.7%. CRUDE OIL OBSESSION HIGHS, NOW WTI LESS THAN $85 A BARREL. BRENT CRUDE TO JUST SHY OF $91 A BARREL. THE ABILITY OF SEMICONDUCTOR IT INDEXES MORE THAN FIVE POINT PERCENT -- 5% LOWER, LED BY MICRON. GOLDMAN SACHS WILL PLAY $410 MILLION TO BUY LC CAPITAL PARTNERS COMMERCIAL REAL ESTATE INVESTOR. THE YIELD TARGETS A BOOMING CORNER OF THE REAL ESTATE MARKET THAT ATTRACTED ASSET MANAGERS LOOKING FOR A SYNTHESIS OF REALISTIC -- REAL ESTATE AND CORPORATE CREDIT. YOU CAN OFFER LEASES TO CORPORATE CLIENTS AND SELL THE BROADER DISTRIBUTION CHANNEL AND BASE OF HIGH NET WORTH INVESTORS. FOR ON-DEMAND NEWS 24 HOURS A DAY SUBSCRIBED TO BLOOMBERG NEWS NOW WHEREVER YOU GET YOUR PODCASTS. I AM AMY MORRISON THAT THE BLOOMBERG BUSINESS FLASH. WHERE DO WE GO? BACK TO "BLOOMBERG BUSINESSWEEK DAILY" WITH CAROL MASSAR AND JOE -- CAROL: I FEEL YOU. I DON'T KNOW WHAT DAY IT IS. AMY: ONLY TUESDAY. CAROL: IT FEELS LIKE SEPTEMBER. OR OCTOBER. WE WILL GO BACK TO AMY LATER ON. WE NEED TO TALK ABOUT CHINA. THERE IS STUFF GOING ON. JOE: VERY HIGHLY ANTICIPATED SUMMIT BETWEEN CHINESE PRESIDENT XI JINPING AND U.S. PRESIDENT DONALD TRUMP. MANY PEOPLE HAVE BEEN WATCHING THIS AND MORE PEOPLE HAVE NOT. THAT'S WHY WE ARE BRINGING IN SHEHZAD QAZI, COO AND MANAGING DIRECTOR OF THE CHINA BEIGE BOOK INTERNATIONAL. HE JOINS US IN THE STUDIO. THANK YOU FOR JOINING US. SHEHZAD: GOOD TO SEE YOU. JOE: I WOULD LIKE TO START AT THE SUMMIT. YOU HAD IN A RECENT NOTE SOME VERY DETAILED BACK AND FORTH, THE PLUSES AND MINUSES OF WHAT MAY ACTUALLY NOT GET TAKEN CARE OF IN SEPTEMBER. COULD WE START THERE FOR INVESTORS WHO MAY BE ARE THINKING TOO MUCH OF THE MEETING? CAROL: THIS IS BETWEEN PRESIDENT XI AND PRESIDENT TRUMP. SHEHZAD: EXPECTATIONS SHOULD BE VERY LOW FOR WHAT'S ABOUT TO HAPPEN. WE ARE GOING TO GET A DAYLONG SUMMIT IT LOOKS LIKE AT MOST THIS TIME AROUND, AND BOTH SIDES ARE TRYING TO TALK ABOUT DELIVERABLES. THE CHINESE ARE VERY FRUSTRATED. THE U.S. SIDE DOES NOT UNDERSTAND WHY THE CHINESE ARE SO FRUSTRATED. THEY BOTH AGREE THERE IS NOT GOING TO BE A LOT DONE AT THIS MEETING. THE BIG DELIVERABLES ARE SOME FINALIZATION OF THE SO-CALLED BOARD OF TRADE NEEDS TO LOOK LIKE. DON'T EXPECT MUCH BEYOND THAT. JOE: WHAT IS THE BOARD OF TRADE? SHEHZAD: THE U.S. TRADE REPRESENTATIVE FAMOUSLY SAYS I AM THE BOARD OF TRADE. WHAT THAT MEANS IS AMBASSADOR GREER HAS AGREED WITH HIS COUNTERPARTS THAT WE ARE GOING TO PICK ROUGHLY $30 BILLION WORTH OF THINGS WE ARE HAPPY TO IMPORT FROM YOU THAT ARE NONSTRATEGIC. YOU WILL DO THE SAME AND WE ARE GOING TO MANAGE TRADE BETWEEN US. UNLIKE WHAT WE HAVE THOUGHT OF TRADE DEALS AS WE WILL OPEN UP FREE FLOW OF TRADE, THIS IS MORE ABOUT SAYING WE WILL DECIDE WHAT IS TRULY FREE AND THE REST OF THE STUFF WE WILL SLAP ON TARIFFS. CAROL: IS THAT A GOOD THING? SHEHZAD: IT'S DRIVEN BY A NATIONAL SECURITY IMPERATIVE. CAROL: FROM BOTH SIDES? SHEHZAD: CERTAINLY FROM OUR SIDE. THE CHINESE SIDE WILL DETERMINE WHETHER NATIONAL SECURITY PRIORITIES ARE. I DON'T KNOW HOW MUCH IT WILL DO IN THE LONG RUN TO TAKE CARE OF THINGS LIKE SUPPLY CHAIN ON CHINA AND SO FORTH. IT DOES NOT ADDRESS CRITICAL ISSUES LIKE -- CAROL: CLARIFY HOW MUCH WE RELY ON CHINA IN TERMS OF GLOBAL SUPPLY CHAINS. SHEHZAD: AN IMMENSE AMOUNT. THERE'S NOT REALLY THING IN OUR HOMES AND INDUSTRIAL CENTERS AND DATA CENTERS EVEN THAT IS NOT -- OR HOSPITALS THAT IS NOT COMING BY AND LARGE FROM CHINA. WHAT THEY DID WITH RARE EARTH METALS SCARED US BECAUSE IT CREATED A DISCUSSION ABOUT WHAT IF THEY DID THAT WITH PHARMACEUTICALS AND SURGICAL SUPPLIES AND MEDICAL GOODS. A TON. JOE: THAT IS WHY WE ARE HERE RIGHT NOW, RIGHT? WE HAVE THE EXPORT CONTROLS CHINA PUTS IN PLACE ON CRITICAL MINERALS AND MAGNETS. THE UNITED STATES AS WE WILL DO THE SAME THING ON CHIP TECHNOLOGY AND THE TWO SIDES WHO ARE HEAVY HITTERS IN THE WORLD ECONOMY SAY WE HAVE TO REACH A TRUCE TO CALM THE MARKETS DOWN GLOBALLY AND TO CALM THE DIPLOMATIC RELATIONSHIP DOWN. SHEHZAD: YEAH. ONE IDEA WAS THE PREDOMINANT IDEA WAS IF THE LEADERS KEEP MEETING EACH OTHER, THEN THE TRUCE CONTINUES. EVERYBODY RELEASES THE TRUCE -- WE NEEDED BECAUSE WE DON'T HAVE THE RARE EARTHS AND MAGNETS. WE DON'T HAVE A CHOICE. THE CHINESE WANT A TRUCE BECAUSE THAT IS THE BEST WAY TO KEEP KICKING THIS THING DOWN THE ROAD TO PUSH OUT TARIFFS, RUN OF THE CLOCK ON TRUMP, THEN YOU DEAL WITH YOU OVER THE NEXT PRESIDENT IS. CAROL: HOW IS CHINA FEELING ABOUT UNITED STATES? THE FOREIGN MINISTER WILL VISIT SOUTH KOREA FOR TWO DAYS FROM WEDNESDAY TO TALK ABOUT NORTH KOREA AND BILATERAL ISSUES. THIS IS COMING AFTER PRESIDENT TRUMP ORDERED THE PENTAGON TO REDUCE JOINT EXERCISES WITH THE SOUTH KOREANS, CITING COST AND HIS RELATIONSHIP WITH THE NORTH KOREAN LEADER. THERE WAS ALSO SOME CONNECTION WITH IRAN AND THE DENUCLEARIZATION. WHAT IS YOUR READ POLITICALLY ON THAT? SHEHZAD: I DON'T NECESSARILY ALIGN MYSELF WITH THE IDEA THAT WHEREVER THE U.S. TRIES TO WITHDRAW FROM A GR FEET, CHINA WILL TRY TO STEP IN. AT THE SAME TIME -- I THINK YOU CAN CERTAIN EMBOLDEN THEM EVEN IF THEY DON'T WANT TO TAKE ACTION IMMEDIATELY. CERTAINLY THEY MAY FEEL LIKE THEY COULD HAVE POTENTIALLY THE PROBABILITY OF SUCCESS GOES UP. THEY ARE DOING ALL OF THIS. ON THE OTHER HAND, VIS-A-VIS THE UNITED STATES, EVEN WHEN THEY ARE SHOWING UP HERE THEY ARE TAKING AGGRESSIVE TAX. WE ARE WATCHING WHAT IS HAPPENING IN CONGRESS. WE ARE WATCHING YOU GUYS NOT BLAMING US FOR ELECTION INTERFERENCE. DON'T TRY TO THREATEN THE TROOPS. THE TOUGH TALK IS HAPPENING BEHIND THE SCENES. JOE: ALL OF US LOOK AT THIS FROM THE PERSPECTIVE OF THE U.S. AND WHAT DOES THE U.S. HAVE AND IT. LOOK FROM THE VANTAGE POINT OF CHINA RIGHT NOW. THERE ARE ECONOMIC PRESSURES INTERNALLY. HOW DO THOSE PLAY IN THIS BROADER DISCUSSION? SHEHZAD: IN SOME WAYS THIS REALLY IS -- I THINK XI, THE GENIUS MOVE, THE ECONOMY IS PRETTY WEAK. NOT ONLY IS THE CONSUMPTION SIDE WEEK, THE HOUSEHOLD SIDE, AND THEY ARE FAILING TO EMBARK UPON THIS ECONOMIC TRANSITION THEY HAVE BEEN TALKING ABOUT FOR A DECADE AND A HALF, OR AT LEAST THE LAST FIVE TO SIX YEARS IN EARNEST. THEY ARE FAILING ON OTHERS'ACCOUNTS, YET THEY ARE ABLE TO, BECAUSE THE MACHINERY IS RUNNING, ABLE TO SHOW UP AT THE TABLE AND DEAL WITH THE U.S. NOT JUST AS COMPETITORS AND EQUALS BUT ONES THAT OFTEN TIMES LOOK LIKE THEY HAVE A CARD. CAROL: WE TALK ABOUT CHINESE DEEP POCKETS AND THE GOVERNMENT IS THERE TO BOOST A COMPANY OR A SECTOR. THOSE POCKETS ARE STILL PRETTY DEEP, RIGHT? SHEHZAD: SHEHZAD: THE POCKETS ARE STILL PRETTY DEEP. WHEREAS TRADITIONAL STIMULUS IS NOT WORKING, WE HAVE TO REMEMBER THEY HAVE NOT ATTEMPTED HOUSEHOLD-STYLE STIMULUS. THEY JUST DO NOT IDEOLOGICALLY LIKE TO DO THAT. IT IS A COMMUNIST PARTY AND THEY DON'T LIKE TO DO WELFARE, BUT THEY COULD IF THEY WANTED TO. JOE: THE POWER THE COMMUNIST PARTY HAS IN CHINA, THE GROWING POWER SPEAKS TO THAT. WHAT DOES IT DO TO WHAT IS STILL A VERY DEEPLY INDUSTRIAL-BASED JOBS ECONOMY? SHEHZAD: THAT IS A BIG CHALLENGE FOR THEM. THEY DO NOT HAVE AN ANSWER FOR THIS AS YET. THEY ARE STARING AT A VERY LARGE YOUTH UNEMPLOYMENT PROBLEM. THESE YOUNG PEOPLE WILL BECOME OLDER, SO YOU HAVE TO DO SOMETHING ABOUT THAT. PLUS, NEW ENTRANTS. CAROL: WHERE ARE THEY IN THIS TRANSFORMATION? WE TALK ABOUT IF IT IS EV'S OR HOW ADVANCED THEY ARE WHEN IT COMES TO ROBOTICS. IT SOUNDS LIKE THEY ARE SO ADVANCED THAT WE SHOULD BE WORRIED, BUT IS THAT TRUE? SHEHZAD: WE CANNOT COMPETE WITH THEM AT THE TIME WHEN IT COMES TO THINGS LIKE ROBOTICS. YOU HAVE TO REMEMBER, WE ARE TALKING ABOUT JOB LOSSES IN THIS COUNTRY THAT TRANSITION TO AUTOMATION, ESPECIALLY THE MANUFACTURING SIDE, HAS BEEN HAPPENING A LONG TIME IN CHINA, SO THEY SORT OF KNOW HOW TO DEAL WITH IT BY NOW COMPARED TO MANY OTHER ECONOMIES, BUT THEY ARE CERTAINLY VERY FAR AHEAD. JOE: IT IS INCREDIBLE. CAROL: WHAT SHOULD INVESTORS BE THINKING ABOUT? WE HAVE BEEN TALKING ABOUT CHINA FOREVER. AT THE START OF MY CAREER DECADES AGO, IT WAS ALL ABOUT HAVING ACCESS TO THE CHINESE MARKET. THAT WAS IMPORTANT TO EVERY GLOBAL INTERNATIONAL COMPANY. POST-COVID, WE THINK DIFFERENTLY. I WONDER HOW INVESTORS HAVE TO THINK ABOUT CHINA'S RELATIONSHIP WITH THE WORLD. THEY ARE FRIENDS WITH IRAN, WITH RUSSIA. WE TALK ABOUT THIS OTHER AXIS OF POWER. NORTH KOREA. WHAT IS THEIR ROLE? SHEHZAD: YOU HAVE TO LOOK AT WHAT CHINA IS BECOMING AS A STATE. THEY WANT TO BE THIS HIGH TECH SUPERPOWER AND INDUSTRIALIZED SUPERPOWER. THEY SAY WE WILL MAKE CHEAP GOODS AND ADVANCED GOODS, AND THE STORY IS INCREDIBLY INTERESTING, WHAT IS HAPPENING WITH OIL BUT OTHER PLACES AS WELL. STEEL DEMAND IS DOWN, YET CHINA IS BUYING UP ALL THE IRON ORE IT CAN. THERE ARE INTERESTING THINGS HAPPENING INSIDE THE ECONOMY, AND THE TRADITIONAL ECONOMY DOES NOT APPLY ANYMORE. JOE: TRADE HAWKS ARE STUCK ON OVERCAPACITY AND SUBSIDIES, RIGHT? WE EVEN SAW PETER NAVARRO PUT OUT A REPORT THAT HAS MADE THE ROUNDS IN THE PAST WEEK. WHAT DO YOU MAKE OF ALL THAT STILL HANGING? SHEHZAD: MY MESSAGE HAS ALWAYS BEEN YOU CAN TALK ABOUT CHINA ALL DAY LONG BUT IT WON'T MAKE ANY DIFFERENCE UNTIL YOU CAN COMPEL AMERICAN COMPANIES TO CHANGE THEIR STRATEGY. CAROL: THE FUNNY PART IS YOU HAVE THE U.S. GOVERNMENT GETTING INVOLVED IN OUR COMPANIES NOW, SO I WONDER HOW IRONIC THIS IS, BUT AS LONG AS WE KNOW THE CHINESE GOVERNMENT CAN ACTIVELY AND AGGRESSIVELY GET INVOLVED, IS IT NOT EVER GOING TO BE A MARKET THAT GLOBAL INVESTORS REALLY WANT TO EMBRACE? SHEHZAD: IF YOU ARE ALIGNING YOURSELF WITH COMPANIES THE STATE IS FAVORING, THERE IS A PRETTY GOOD CHANCE YOU CAN GET IN AND MAKE MONEY, ESPECIALLY WITH THE PLETHORA OF IPO'S OUT OF HONG KONG RIGHT NOW. YOU HAVE TO BE VERY CAREFUL BECAUSE LOOK AT WHAT HAPPENED TO BARBARA -- LOOK AT WHAT HAPPENED TO BABA AND SO FORTH. THE STATE DECIDES THE WINNERS AT THE END OF THE DAY. JOE: WHAT IS THE ONE THING YOU THINK INVESTORS SHOULD BE PAYING MOST ATTENTION TO WITH CHINA? SHEHZAD: RIGHT NOW, I WOULD SAY FIGURE OUT WHAT COULD BREAK THIS TRUCE MAY BE PASSED NOVEMBER. -- MAYBE PAST NOVEMBER. CAROL: IT HAS BEEN A WHILE SINCE WE TALKED TO YOU AND HOW THE NEWS FLOW HAS HAD US SO FOCUSED ON THE MIDDLE EAST, BUT YOU CAN NEVER FORGET WHAT IS GOING ON IN CHINA. THANK YOU SO MUCH. CHIEF OPERATING OFFICER AND MANAGING DIRECTOR FOR CHINA BEIGE BOOK INTERNATIONAL, JOINING US RIGHT HERE IN STUDIO. QUICK CHECK ON THE TRADE -- IT IS AN INTERESTING DAY AND YOU ARE MOSTLY SEEING SELLING ON THE TECH SIDE. NASDAQ IS DOWN 1.6%. ON THE SOX, ABOUT 28 OF THEM ARE DOWN NOW, A DECLINE OF 5.6%. WHEN WE COME BACK, A COMPANY LOOKING TO UP AND THE AUTOMOTIVE MARKET -- UP AND -- UPEND THE AUTOMOTIVE MARKET JOINS US. THIS IS BLOOMBERG. AMY: META PLATFORMS FACING A JURY TRIAL IN FEDERAL COURT OVER CLAIMS IT DELIBERATELY DESIGNED FACEBOOK AND INSTAGRAM TO ENCOURAGE COMPULSIVE USE AMONG YOUNG USERS. THE TRIAL CARRIES ENORMOUS RISK FOR META WITH ATTENTIONAL PENALTIES OF AS MUCH AS ONE POINT $4 TRILLION AND COULD HAVE A MATERIAL IMPACT ON THE COMPANY'S BUSINESS AND HOW IT OPERATES -- PENALTIES OF AS MUCH AS $1.4 TRILLION. THE S&P 500 DOWN .5%. NASDAQ DOWN 1.2%. THE DOW DOWN .1%. THE 10-YEAR TREASURY YIELD 4.2 PERCENT. CRUDE OIL OFF SESSION HIGHS, WTI LESS THAN $85 A BARREL. BRENT CRUDE RIGHT AT $91 A BARREL. THE PHILADELPHIA SEMICONDUCTOR INDEX NEARLY 5.5% LOWER, LED BY MICRON WHICH IS DOWN ABOUT SEVEN POINT 5%. NEW CONSTRUCTION IN THE U.S. FELL IN JULY AS SINGLE-FAMILY STARTS SLID TO THE LOWEST PACE SINCE 2022. HOUSING STARTS DECREASED 12% LAST MONTH. THE SLIDING STARTS POINTS TO A HOUSING MARKET THAT IS STRUGGLING TO GAIN MOMENTUM. PENDING SALES OF PREVIOUSLY OWNED HOMES DROPPED TO THE MOST SINCE JULY OF THE PREVIOUS YEAR. IT MATCHES THE SECOND WORST READING IN DATA BACK TO 2001. MORTGAGE RATES, WHICH HAVE CLIMBED HIGHER SINCE THE START OF THE IRAN WAR AND ELEVATED HOME PRICES STILL WAITING ON DEMAND. FOR ON-DEMAND NEWS 24 HOURS A DAY, SUBSCRIBE TO BLOOMBERG NEWS NOW OR WHEREVER YOU GET YOUR PODCAST. LET'S GO BACK TO "BLOOMBERG BUSINESSWEEK DAILY." CAROL: SHARES OF ROOT, A SMALL CAP PNC INSURANCE COMPANY, SOLD OFF AS THE COMPANY REPORTED EARNINGS-PER-SHARE ABOVE ESTIMATES AND SALES BELOW ESTIMATES. STOP DOWN 28% YEAR TO DATE. -- THE STOCK DOWN 28% YEAR TO DATE. THE COFOUNDER AND CEO OF ROOT JOINS US FROM COLUMBUS, OHIO. IT IS GOOD TO HAVE YOU HERE. I WANT TO TALK ABOUT THE BUSINESS. YOUR SHARE PRICE PRETTY NEGATIVE AND GETTING BEAT UP BY INVESTORS. WHAT ARE YOU HEARING FROM YOUR INVESTOR BASE ABOUT WHAT THEY WANT YOU TO BE DOING OR WHAT THEY WANT YOU TO KNOW ABOUT SOME OF YOUR FINANCIALS AND METRICS? ALEX: WE HAD A GREAT QUARTER AND A FIRST SIX MONTHS OF THE YEAR. WE DELIVERED RETURN ON EQUITY OVER 30% WHEN YOU ANNUALIZE IT. RELATIVE TO OUR PEERS, IT IS ALMOST UNHEARD OF. THERE WERE CERTAINLY SOME COMPETITIVE PRESSURES IN THE FIRST COUPLE OF QUARTERS IN TERMS OF GROWTH, BUT REALLY LONG-TERM, WE ARE STILL IN 37 STATES. WE HAVE OUR APPLICATIONS IN 11 STATES, SO WE WILL BE SCALING NATIONALLY. OUR PARTNERSHIPS ARE GROWING NICELY AS WELL AS OUR EMBEDDED INSURANCE PLATFORM, SO WE ARE CONTINUING TO GROW LONG-TERM. WE THINK IN THIS ENVIRONMENT IN CERTAIN QUARTERS, WE DO NOT CHASE GROWTH. WE ARE DISCIPLINED, SO YOU WILL NOT SEE US PUSH AFTER GROWTH WHEN THE COMPETITIVE ENVIRONMENT IS HOT, SO WE THINK THAT IS REALLY GOOD. WE ARE STICKING TO OUR DISCIPLINE, AND SOMETIMES, THAT IS TOUGHER THAN OTHERS, BUT THAT IS HOW WE BUILD A GREAT COMPANY. JOE: ENSURING AUTONOMOUS VEHICLES, I'M WONDERING A LITTLE BIT MORE ABOUT THAT TRANSITION. EVERYBODY KNOWS ABOUT GETTING INSURANCE FOR THEIR AUTOMOBILES, BUT WHAT DO YOU DO WHEN YOU GO FROM HUMAN TO AUTONOMOUS? HOW DOES THAT WORK? ALEX: THAT'S A GREAT QUESTION. FIRST, THE REASON WE FOUNDED THE COMPANY WAS TO UNDERSTAND RISK. WE BELIEVE THAT AND I THINK WE HAVE BEEN SHOWN NOW THAT THE NATURE OF RISK, THE NATURE OF PROTECTIVE SCIENCE IS TOTALLY GOING TO CHANGE IN AUTO INSURANCE. AUTO INSURANCE COMPANIES AND JUST A BUNCH OF DATA AND TRY TO PREDICT WHO WILL GET IN AN ACCIDENT. IF YOU LOOK OVER THE LAST 10 YEARS, THE DATA WE CAN USE AND THE DATA SCIENCE WE CAN APPLY TO THE PROBLEM HAS DRAMATICALLY CHANGED. IS CONTINUING TO CHANGE WITH AUTONOMOUS VEHICLES. WE ARE ACTUALLY -- IT IS CORRIDOR EMBEDDED STRATEGY. WE ARE WORKING TO UNDERSTAND THE DATA COMING OFF THESE VEHICLES SO WE CAN UNDERSTAND WHAT DOES THAT MEAN FOR RISK. NOT ALL THIS TECHNOLOGY IS CREATED EQUALLY. USING THE TECHNOLOGY -- IF YOU'RE ON AUTONOMOUS MODE AND GOING ON THE HIGHWAY, THAT IS DIFFERENT IF YOU'RE AN AUTONOMOUS MODE AND GOING THROUGH DOWNTOWN. YOU HAVE GOT TO ACTUALLY REALLY UNDERSTAND HOW ALL THESE THINGS IMPACT THE RISK, THE UNDERLYING RISK OF WHAT'S OCCURRING IN THE WORLD. TO DO THAT YOU HAVE TO BE THE FIRST TO GET THE DATA. WE ARE STUDYING THAT DATA. THE VAST MAJORITY ARE STILL HUMAN DRIVEN SO AS NOT A HUGE MACRO SHIFT WE HAVE SEEN YET. AS WE ARE STUDYING THE DATA WE ARE STARTING TO UNDERSTAND EXACTLY WHAT THAT MEANS FOR RISK. THESE CARS STILL CRASH AND THEY STILL NEED INSURANCE. IT IS WHEN AND HOW THEY CRASH. CAROL: WHAT IS THE EARLY LOOK AT ANALYSIS YOU ARE DOING ON THE DATA FROM AUTONOMOUS VEHICLES? YOU LOOK AT THE CARS TODAY, I TURN ON DIFFERENT THINGS. I CAN TAKE MY HANDS OFF THE WHEEL AND IT DRIVES WELL. IF I GET DISTRACTED, IT STOPS IF THE CAR STOPS IN FRONT OF ME. YOU HAVE GOT TO HAVE EARLY ANALYSIS ON THIS DATA. MAYBE IT IS SEMI-AUTONOMOUS AND AUTONOMOUS COMPLETELY. ARE THEY LESS LIKELY TO GET INTO A CRASH OR AN ACCIDENT? ALEX: ABSOLUTELY. FULLY AUTONOMOUS VEHICLES ARE LESS LIKELY TO GET INTO AN ACCIDENT. THE SEMI AUTONOMOUS IS TRICKY. PEOPLE DO TAKE THEIR HANDS OFF THE WHEELS. NOW THERE IS MORE DISTRACTIONS IN CARS AND NEVER BEFORE. YOU CAN WATCH A MOVIE IN THE CAR. THE CENTER CONSOLE. THAT IS TRICKY, BECAUSE WHAT YOU SEE IS ALTHOUGH AN AUTONOMOUS MODE OFTEN TIMES FREQUENCY IS LESS, THEY ARE NOT CRASHING AS MUCH, SEVERITY CAN BE MUCH HIGHER. SOMETIMES THESE VEHICLES WILL NOT EVEN SEE THE HAZARD COMING. YOU HAVE GOT TO BE REALLY CAREFUL WITH THIS. IT REALLY DEPENDS ON HOW IT IS BEING USED. IT IS NOT JUST IF IT IS BEING USED. IT IS WHERE IN THE SITUATION AND UNDER THE SITUATION IS USED AND THEN MAKING SURE PEOPLE KNOW FOR THE VAST MAJORITY OF THIS TECHNOLOGY YOU NEED TO BE READY TO PUT YOUR HANDS BACK ON THE WHEEL. IT DOES FAIL. IT IS NOT FULLY AUTONOMOUS YET. YOU LOOK AT THE INDUSTRY OVERALL, ALTHOUGH FREQUENCY IS DOWN, WE ARE SEEING SEVERITY UP SIGNIFICANTLY. THE AUTO INSURANCE INDUSTRY IS STILL GROWING DESPITE THIS TECHNOLOGY. JOE: YOU TALK BEHAVIORS VERSUS DEMOGRAPHICS. WHAT DOES THAT REALLY MEAN? I REMEMBER THE FIRST TIME I GOT INSURANCE AS A 16-YEAR-OLD. HOW IS IT DIFFERENT, WELL, THEN 20 YEARS AGO? ALEX: SO MUCH HAS CHANGED. BASICALLY EVERYTHING HAS FUNDAMENTALLY CHANGED IN THE LAST 20 YEARS. WHEN WE TALK ABOUT MOVING FROM DEMOGRAPHICS TO BEHAVIORS, BEFORE WHEN YOU WERE A 16-YEAR-OLD MALE, WE ASSUMED YOU WERE A TERRIBLE DRIVER. IT TURNS OUT WHEN WE LOOK AT 16-YEAR-OLD MALES, SOME OF THEM ARE VERY RISKY DRIVERS AND DANGEROUS DRIVERS. THEY NEED TO BE PRICED APPROPRIATELY. OTHERS ACTUALLY ARE GOOD AND RESPONSIBLE AND DESERVE HUGE DISCOUNTS. LIKE 80% DISCOUNT. BY MOVING AWAY FROM DEMOGRAPHICS AND THE BEHAVIORAL DATA WE ARE ABLE TO MORE ACCURATELY PRICE RISK. THAT IS GOOD FOR THE CUSTOMER, BECAUSE THE OTHER THING IT ALLOWS US TO DO IS PUT THOSE BEHAVIORAL DATA FEEDBACK BACK INTO THE DRIVER'S HANDS AND THE CUSTOMERS HANDS. YOU CANNOT CHANGE THE FACT YOU ARE A 16-YEAR-OLD MALE. YOU CAN CHANGE THAT MAYBE YOU WERE DRIVING RECKLESSLY. WE ARE GIVING PEOPLE MORE FINANCIAL CONTROL BY MOVING TO MORE BEHAVIORAL DATA. IT IS JUST A MORE FAIR SYSTEM FUNDAMENTALLY. CAROL: ABOUT A MINUTE LEFT HERE, ALEX. INDUSTRY OVERALL, POSITION OF STRONG PROFITABILITY. MAJOR PLAYERS ARE LOOKING TO GROW THEIR MARKET SHARE. I'M CURIOUS WHERE YOU SEE THE BIGGEST OPPORTUNITY IDEALLY TO GAIN SHARE. ABOUT 40 SECONDS HERE. ALEX: WE DEFINITELY HAVE SEEN COMPETITION PICK UP. COST PER CLICK IS GOING UP ALMOST 100% YEAR-OVER-YEAR. YOU ARE SEEING SHOPPING DOWN. YOU ARE SEEING A HUGE AMOUNT OF COMPETITION IN THIS SPACE. FOR US, WHERE WE SEE ATTRACTIVE GROWTH IS IN OUR EMBEDDED PLATFORM SELLING INSURANCE DIRECTLY WITH VEHICLES AND OUR INDEPENDENT AGENCY PLATFORM WHERE WE HAVE FEWER THAN 20% OF AGENTS NATIONWIDE. NATIONAL EXPANSION. WE ARE GOING TO TAKE THAT TO 100%. WE HAVE SOME GOOD SECULAR GROWTH DRIVERS IN THE BUSINESS. CAROL: LET US KNOW HOW THINGS ARE GOING. JOINING US NOW HAS BEEN ALEX TIMM OF ROOT. JOE AND I WILL TAKE A CHECK ON THE TRADING DAY AND SOME STOCKS. YOU ARE LISTENING AND WATCHING "BLOOMBERG BUSINESSWEEK DAILY." THIS IS BLOOMBERG. WITH CAROL MASSAR AND TIM STENOVEC ON BLOOMBERG RADIO AND TELEVISION. CAROL: WE ARE HEADING INTO THE 3:00 P.M. HOUR. ALMOST THERE. CAROL MASSAR. JOE IS IN FOR TIM STENOVEC THIS WEEK. THE MARKET DEFINITELY FEELS LIKE RISK OFF WHEN IT COMES TO SOME OF THE BIG TECH NAMES. IN PARTICULAR SEMI'S. THE NASDAQ IS DOWN 509 POINTS, 1.7%. OFF THE WORST LEVELS OF THE SESSION BUT DEFINITELY A DIFFERENT TONE. YESTERDAY WAS KIND OF MEH. JOE: IT FEELS LIKE EVERYTHING BUILDS DAY BY DAY. YESTERDAY MAYBE A LITTLE LESS THAN TODAY CATCHING UP. CAROL: IT IS CONTINUING. I'M CAROL MASSAR. LET'S GET TO SOME SPECIFIC STOCKS ON THE MOVE. WE HAVE BIG WINNERS AND LOSERS. YOU TO DO THAT IS NORAH MULINDA STUDIO. GOOD TO HAVE YOU HERE. INTERESTING DAY. A LOT OF SELLING ON THE TECH SIDE. LET'S START WITH KLARNA. NORAH: A REAL LAGGARD DOWN 22%. HEADING FOR HIS WORST DAY SINCE FEBRUARY. THIS IS AFTER THE COMPANY CUT ITS REVENUE OUTLOOK AND CITING SOME CURRENCY EXCHANGE PRESSURES. IT TALKED ABOUT WEAKER CONSUMER SPENDING IN GERMANY. THAT IS WEIGHING ON SOME OF THE RESULTS AND CLEARLY HOW INVESTORS ARE DIGESTING THIS PERFORMANCE. THE COMPANY HAS NOT BEEN DOING WELL THIS YEAR. THE STOCK IS DOWN 47% SO FAR FOR 2026. TOUGH DAY FOR INVESTORS OF KLARNA. CAROL: IS GERMANY REALLY IMPORTANT TO THEM? NORAH: I WAS THINKING THE SAME THING. IT'S ENOUGH TO ROCK THE BOAT CLEARLY. CAROL: LOOKING FOR REVENUE BREAKDOWNS. WE WILL DIG DEEPER INTO THAT. THE STOCK IS DOWN ON WAS 50% YEAR-TO-DATE. INTERESTING. NORAH: AND THE CFO IS ALSO ANTICIPATING TO STEP DOWN. WHEN YOU SEE SOME OF THE MANAGEMENT SHAKEUPS THAT WILL ROCK A STOCK OF IT. CAROL: YEAH. I'M LOOKING FOR THE NUMBERS. I WANT TO GO THROUGH A DEEP DIVE. YOU ARE GOING TO LOSE ME. NORAH: STAY WITH US, CAROL. CAROL: LOTS OF QUESTIONS. I LOVE HOME DEPOT. I'M JUST GOING TO PUT IT OUT THERE. IT IS FUN TO GO UP AND DOWN THE AISLES. NORAH: HOME DEPOT IS GEARED TOWARDS CONTRACTORS AND LOWE'S TOWARDS DIY CONSUMERS. I FIND MYSELF AT HOME DEPOT. I DON'T KNOW WHAT THAT SAYS ABOUT THE TWO OF US. CAROL: WHEN WE BOUGHT OUR HOUSE A BUNCH OF YEARS AGO WE WERE IN THAT HOME DEPOT. I LOVED IT. I WANT TO BUY SOME LUMBER. LET'S DO IT. NORAH: NO CELL PHONE SERVICE IN THE BACK. THAT'S WHEN YOU KNOW YOU ARE TOO DEEP IN THE STORE. SHARES ARE HIGHER BY ABOUT .1%. PERFORMANCE IS NOT TOO INTERESTING IN TERMS OF THE STOCK MOVE BUT WE SAW THE COMPANY BEATING EXPECTATIONS AS WE DEAL WITH A CHALLENGING HOUSING MARKET. 30-YEAR FIXED STILL AT A HIGH COMPARED AGAINST A YEAR AGO. YOU ARE SEEING SOME OF THOSE CONTRACTORS COMING OUT WITH THE FOCUS ON SMALLER TICKET PURCHASES. PLANTS PAINTS TOOLS. NOT THE BIG HOME KITCHEN RENOVATIONS WHEN WE SEE THINGS TURNING AROUND. CAROL: WELL, IF I NEED SOME CLEANING SUPPLIES. IT IS EVERYTHING THERE. JOE: THE RELENTLESS RISE OF THE U.S. CONSUMER. EVERY TIME, THINGS FEEL FEAR BUT NO. THEY ARE STILL SHOWING UP AND BUYING. NORAH: THEY SAY NEVER BET AGAINST THE U.S. CONSUMER. TO YOUR POINT, WE REMAIN IN THIS CHALLENGED JOB MARKET AND YOU THINK ABOUT THE ECONOMICS MORE BROADLY BUT YOU STILL SEE SOME POCKETS AS IT RELATES TO HOME DEPOT. THEY ARE STILL BEING SELECTIVE. WE ARE NOT SEEING A FULL RECOVERY BUT YOU ARE CERTAINLY SEEN THEM PICK UP THINGS HERE AND THERE. CAROL: I'M DOING MY JOB FOR THE ECONOMY. SEBASTIAN ESCOBAR SAYS I BOUGHT A .21 SENT NOT -- CENT NUT. AMY MORRIS ALSO CHIMING IN, SAYING I LOVE THE NEW HOUSE SMELL THAT IS IN THERE. NORAH: I WILL HAVE TO CHECK THAT ONE OUT NOW. CAROL: HD IS THE TICKER ON THAT ONE. NORAH: HAVE YOU USED DUOLINGO? NOW I NEED TO GO TRANSLATE OR DUOLINGO. CAROL: THAT BRINGS US TO DO A LINGO. NORAH: THE STOCK IS UP, HAVING ITS BEST IN A YEAR AFTER DAVID DAVIDSON UPGRADED THE STOCK TO BUY. THEY ARE GETTING CLOSE TO A TURNING POINT IN THE MARKETING AND MONEYMAKING STRATEGY IS BETTER THAN INVESTORS ARE REALIZING. THEY SAY THE COMPANY IS PLENTY OF ROOM TO CONTINUE GROWING. THE STOCK HAS BEEN PRETTY PRESSURED THIS YEAR IF YOU LOOK AT SHARES YEAR-TO-DATE. THEY ARE DOWN ABOUT 19%. I IMAGINE THIS IS SOME WELCOME NEWS FOR INVESTORS OF DUOLINGO THAT THEY SEE SOME UPSIDE. CAROL: TIM STENOVEC LOVES THIS ONE. HE TALKED TO THE CFO AND THE CEO AND HAS BEEN TRACKING IT. IT IS DOWN ABOUT 19%. 21% OF THE FLOAT IS SHORT SO THERE IS A NEGATIVE SENTIMENT. MUY BIEN. DO YOU SPEAK ANOTHER LANGUAGE? JOE: I TOOK FOUR YEARS OF MANDARIN CHINESE. NORAH: I DID LATIN. I THOUGHT MAYBE PREMED AND IT WOULD HELP ME. IT DID NOT REALLY WORK AT THAT WELL BUT 10 YEARS OF LATIN. A DEAD LANGUAGE. JOE: HELPED ON THE SATS. [SPEAKING MANDARIN] EASY STUFF. CAROL: THANK YOU, THANK YOU. CHECK OUT THE STOCK MEMBERS PODCAST. YOU CAN FIND IT ON APPLE, SPOTIFY, OR ANYWHERE YOU GET YOUR PODCASTS.