Stocks Fall as Bond Yields Rise | The Close 8/20/2026

ANNOUNCER: THIS IS "THE CLOSE." ROMAINE: WHAT’S A MERE $40 TRILLION AMONG FRIENDS? LIVE FROM STUDIO 2 HERE AT BLOOMBERG HEADQUARTERS IN NEW YORK, I’M ROMAINE BOSTICK. >> AND I’M SALLY BAKE WELL AND WE’RE KICKING YOU OFF TO THE CLOSING BELL HERE IN THE U.S. SO, FIRST OF ALL, LET’S GET A CHECK ON THE MARKETS AS THEY NAVIGATE THIS HIGH STAKES DIVERGENCE BETWEEN BIG BOX RETAILER EARNINGS, WEAKER THAN EXPECTED JOBS DATA, AND OF COURSE THE TREASURY’S BOND BUYING MANEUVERS. SO LET’S SEE, FIRST OF ALL, WE HAVE THE S.N.P. WHICH IS DOWN NEARLY ALMOST A PERCENT AFTER WAL-MART REPORTED DISAPPOINTING SALES AND DROPPED BY ALMOST 10% ITSELF AT ONE POINT. AND THEN WE HAVE THE NASDAQ ALSO DOWN, ALMOST A PERCENT. LET’S LOOK AT BRENT CRUDE. THAT’S ACTUALLY UP A TOUCH NOW TO ABOUT $93. WHICH IS INTERESTING BECAUSE PRESIDENT TRUMP HAS ACTUALLY THREATENED NOW TO ECONOMICALLY ISOLATE IRAN AND ITS TRADING PARTNERS AND THEN OF COURSE THERE’S THE 30-YEAR YIELD WHICH IS ALSO UP, DESPITE THE FACT THAT TREASURY SECRETARY SCOTT BESSENT HAS FLAGGED A HIGHER POTENTIALLY BOND BUYING PLAN. ROMAINE: ABSOLUTELY. THAT IS DOMINATING THE HEADLINES ONCE AGAIN. HERE IN THE BOND MARKET. AND OF COURSE THE TOP U.S. BOND SALESMAN, AND REALLY -- IT’S REALLY GOING TO BE MUCH MORE A FOCUS ON SOME OF THOSE WOULD-BE BUYERS OUT THERE. THEY’RE STILL IN A BIT OF A SNIT, WE SHOULD POINT OUT. NOT TAN TANTRUM TERRITORY BUT THE DISCOMFORT THAT’S BEEN BUILDING SINCE THE PIVOT BACK IN MIDJUNE, IT CAN’T BE IGNORED ANY LONGER. 30-YEAR TREASURY YIELDS, THEY’VE GONE FROM 4.84% TO 5.3%. THIS WEEK THE HIGHEST SINCE 2007. JAPAN’S NEAR RECORD $4.-- 4.1% 30-YEAR YIELD, THAT’S A PERCENTAGE POINT HIGHER THAN A YEAR AGO. FRANCE HIT 4.9% THIS WEEK. THE HIGHEST SINCE 2008. AND U.K. YIELDS AT 5.8%, THEY’RE NEAR THEIR HIGHEST SINCE 1998. THE BIGGER PROBLEM THIS BECOMES FOR BONDS, THE BIGGER THE PROBLEM IT MIGHT BECOME FOR EQUITIES. EQUITIES THAT HAVE RELIED ON A MAVS A.I. BUILDOUT FUNDED BY A RELATIVELY LOW COST TO CAPITAL, FORMER NEW YORK FED PRESIDENT DUDLEY SAYING HE CEASE A BUBBLE IN EQUITIES AND THE TILT TOWARD HIGHER YIELDS AND THE DIMINISHING IMPACT OF A.I. SPENDING ON THE ECONOMY MEANS THAT BUBBLE, AS HE SEES IT, IT MAY BE SET TO POP IN 2027. SO IT RAISES THE QUESTION AS TO WHERE EXACTLY DOES THIS LEAVE US IN THE BOND MARKET RIGHT NOW. ON ONE HAND, IF YOU’RE CHASING YIELD, TIMES ARE GOOD. SORT OF. SOME OF THE HIGHEST ABSOLUTE GOVERNMENT BOND YIELDS SINCE THE FINANCIAL CRISIS. BUT THAT INCREASE HAS ALSO COMPRESSED THE PREMIUM THAT CORPORATE BONDS PAY OVER TREASURIES TO NOW THE TIGHTEST SINCE 1997 AND THAT HAS GREG PETERS EQUIPPING THAT DESPITE BEING A CREDIT INVESTOR, HE’S NOT REALLY IN LOVE WITH CREDIT RIGHT NOW. >> IT’S KIND OF A PARADOX WHERE ON ONE END I THINK CREDIT IS TOO TIGHT AND DON’T WANT TO OWN IT. IN KIND OF A BETA WAY. BUT FROM AN ALPHA GENERATION STANDPOINT, WITH DISBERGS IN THE A.I. BUILDOUT, IT’S TREMENDOUS OPPORTUNITY. ROMAINE: AND THAT GLOBAL RISE IN YIELDS RAISING A LOT OF QUESTIONS ABOUT THE CREDIT LANDSCAPE AT LARGE. YOU SEE THAT THERE ON YOUR SCREEN. JUST ONE OF THE METRICS WE’VE BEEN KEEPING AN EYE ON HERE AT BLOOMBERG AS WE KEK YOU OFF -- KICK YOU OFF TO THE CLOSE HERE ON THIS THURSDAY AFTERNOON. C.I.O. OF ROCKEFELLER GLOBAL FAMILY OFFICE IS HERE. JIMMY, GREAT TO SEE YOU AGAIN. >> LIKEWISE. ROMAINE: LET’S TALK ABOUT THIS GRIND HIGHER THAT WE’VE SEEN IN YIELDS AND T.S.A. GLOBAL STORY. IT’S NOT JUST THE U.S. WHAT’S BEEN DRIVING THAT AND MORE IMPORTANTLY, HOW MUCH FURTHER DO YOU THINK IT MIGHT GO? >> YEAH, I THINK IT’S A NUMBER OF FACTORS, STARTING WITH ONE HIGHER THAN EXPECTED DEFICIT IN JULY. NOW WE’RE PROJECTING ABOUT $2 TRILLION OF DEFICIT THIS YEAR. YOU HAVE THE CROWDING OUT EFFECT INTERESTINGLY FROM THE PRIVATE SECTOR WITH HYPERSCALERS ISSUING A LOT OF DEBT. AND CERTAINLY THE JAPANESE SITUATION. I THINK THAT JOINED INTERVENTION ACTUALLY REMINDED INVESTORS THAT THERE’S A REAL CHALLENGE THERE. JAPAN IS CAUGHT BETWEEN A ROCK AND A HARD PLACE. IN THAT THEY NEED TO STRENGTHEN THE CURRENCY BUT TO DO SO THEY NEED TO RAISE RATES WHICH WOULD DAMAGE THEIR ECONOMIC GROWTH. AND WE’RE AFRAID THAT BY THEIR STRENGTHENING THE CURRENCY, IT DRIVES TREASURY YIELDS HIGHER. AND ON TOP OF THAT, I ALSO THINK THERE’S THAT, WHAT I CALL THE FORWARD GUIDANCE TANTRUM, WHERE CHAIR WARSH HAS PIVOTED AWAY FROM FORWARD GUIDANCE, IT’S BEEN MET WITH SOME RESISTANCE COMING FROM THE MARKET AND INVESTORS MAY BE EXPRESSING THAT FRUSTRATION AND THE UNCERTAINTY THROUGH A HIGHER VOLATILITY, HIGHER YIELDS. ROMAINE: WHO IS IN CHARGE RIGHT NOW, THOUGH? I LOOK AT SORT OF SOME OF THE MOVES AND SOME OF THIS YOU CAN MAYBE BLAME ON THE FED PIVOT AND SOME OF THE MISCOMMUNICATION IF YOU WILL OUT OF WARSH. AND BESSENT’S TRYING TO DO HIS BEST HERE. WHEN YOU COME TO YOU THE AND YOU DOUBLE YOUR BOND BUYING, AND I KNOW IT’S JUST $4 BILLION, BUT THE NEWS EARLIER TODAY SAID IT COULD BE EVEN HIGHER, IS HE JUST KIND OF, YOU KNOW, PUNCHING AGAINST IT’S WIND HERE? -- AGAINST THE WIND HERE? >> YEAH, I THINK BY APPEARING TO TRY TOO HARD IT’S ACTUALLY TRIGGERING GREATER ANXIETY. BEST TO JUST LEAVE IT TO THE MARKET AND WE DO HAVE THE JACKSON HOLE SYMPOSIUM NEXT WEEK. WE’LL SEE WHAT CHAIR WARSH SAYS. I’M A LITTLE BIT AFRAID THAT HE MIGHT DISAPPOINT THE MARKET IN THAT HE MAY STICK TO THE BIGGER PICTURE, THE BROAD PHILOSOPHY, FRAMEWORK, THE TASK FORCE, WHEREAS THE MARKET IS MICROFOCUSED ON WHAT’S THE GUIDANCE FOR SEPTEMBER, WHICH IS TRYING TO PIVOT AWAY FROM. I DO THINK WHAT HE’S TRYING TO DO IS THE RIGHT THING IN THE LONG RUN. >> SO WITH THE NATIONAL DEBT NOW CROSSING $40 TRILLION, ALONGSIDE HEAVY CORPORATE DEBT ISSUANCE, AND SOFTER LABOR MARKET REPORTS, SHOWING WEAKER THAN EXPECTED JOBS GROWTH, WHAT IS THE ACTUAL CORRECTIVE ACTION THAT WE CAN SEE HERE? CAN THE MARKET RELY ON A FISCAL SHIFT OR A SLOWDOWN IN A.I. SPENDING? OR ARE WE DEPENDENT ENTIRELY ON SOFTER MACRO DATA? >> YEAH, MY GUESS IS THAT THE CIRCUIT BREAKER WILL HAVE TO COME FROM POTENTIALLY WEAKER ECONOMIC DATA, OR SOFTER THAN EXPECTED INFLATION DATA. BUT THAT’S ALSO AT THE MERCY OF THE SITUATION IN THE MIDDLE EAST. SO IN THE MEANTIME, WE JUST HAVE TO COME DOWN WITH AN ENVIRONMENT OF HIGHER VOLATILITY AND ALSO SEASONABLY YOU’RE ENTERING LATE AUGUST, EARLY SEPTEMBER, HISTORICALLY IT TENDS TO BE A MORE VOLATILE PERIOD. >> AND SO HOW DO WE RECONCILE THE KIND OF PROFOUND POLICY TENSION AND IRONY HERE? WE HAVE A FED CHAIR TRYING TO UNTETHER MONETARY POLICY FROM MARKET EXPECTATIONS, AND TO FORCE INVESTORS TO KIND OF STAND INDEPENDENTLY, WHILE THE TREASURY DEPARTMENT IS ACTIVELY LEADING IN AND TRYING TO SOOTHE THE LONG END OF THE CURVE WITH THESE BUYBACKS. YOU KNOW, WHO IS DRIVING THE ACTUAL MARKET REALITY RIGHT NOW? >> YEAH, A LOT OF PEOPLE HAVE BEEN SAYING THAT WE’RE MOVING INTO THIS ERA OF FISCAL DOMINANCE, SO YOU’RE ALSO SEEING THE TREASURY KIND OF TAKING THE LEAD. ULTIMATELY IT’S GOING TO TAKE KIND OF THE COORDINATED EFFORT AND OF COURSE CHAIR WARSH AND SECRETARY BESSENT DO TALK AND IT’S IN THE BEST INTERESTS OF EVERYONE TO PUT A CAP ON YIELD. SO WE WILL BE LOOKING FOR THAT CIRCUIT BREAKER, BUT IN THE MEANTIME, WE’RE GOING THROUGH THIS PERIOD OF, YOU KNOW, TRANSITION. ROMAINE: I DO WANT TO ASK YOU ABOUT THE INFLATION STORY AND I GO THROUGH YOUR MONTHLY LETTERS THAT YOU PUT OUT THERE. I’M GOING TO ASK YOU IN A SECOND TO EXPLAIN THE WHOLE FRENCH REVOLUTION THING WHICH IS A LITTLE OVER MY HEAD, THE MOST RECENT ONE. BUT ABOUT INFLATION SPECIFICALLY AND THE ROUTE ARE ROOT CAUSES OF WHAT WE’RE -- ROOT CAUSES OF WHAT WE’RE SIGHING RIGHT NOW -- SEEING RIGHT NOW WITH THAT PERSISTENCE, HOW MUCH IS THE A.I. STORY, IS THAT TO A CERTAIN EXTENT ALSO THE INFLATION STORY? >> YES. BECAUSE A.I. SPECIFICALLY IS DRIVING UP INFLATION IN SOME SEGMENTS. OF THE ECONOMY. IT YOU LOOK AT HARDWARE PRICES, HISTORICALLY THAT’S DEFLATIONARY. RIGHT NOW WE’RE SEEING REAL INFLATION WITH THE RISE IN RENT PRICES LEADING TO SPIKE HIKES BY ALL THE EQUIPMENT MAKERS AND ON TOP OF THAT IS ACCELERATING ECONOMIC GROWTH. YOU KNOW, SMALL CAP STOCKS, MID CAP STOCKS, THEY’RE REPORTING SOLID EARNINGS. AND THIS HAS BEEN FELT ON MAIN STREET AS WELL. SO THAT’S DRIVING POTENTIALLY HIGHER DEMAND AND THAT’S, AGAIN, PUSHING UP PRICES IN THE NEAR TERM. >> WE HAVE INDEED GONE -- WE’VE HAD THIS SHIFT BETWEEN -- FROM HOW THIS A.I. BUILDOUT IS FUNDED, WITH COMPANIES MOVING AWAY FROM JUST THEIR CASH FLOW TO AGGRESSIVELY TAPPING DEBT MARKETS. NOW, HOW REAL IS THE RISK THAT A.I. INFRASTRUCTURE DEBT CROWDS OUT OTHER CORPORATE BORROWERINGING? IF RETURN ON INVESTMENT TIMELINES DON’T REALLY ADD UP? >> YEAH, I THINK THAT’S AN ONGOING CONCERN. AND IN FACT, WE WILL BE -- I THINK THE MARKET WILL BE FOCUSED ON THE CAPEX GUIDANCE FROM 2027 IN THE JANUARY REPORTING SEASON, DEPENDING ON THEIR GUIDANCE, MARKET WILL TRY TO THEN ESTIMATE HOW MUCH DEBT NEEDS TO BE ISSUED. AND THAT COULD BECOME A POTENTIAL FUNDING ISSUE AND WE’LL SEE THAT SHOWING UP IN CORPORATE BALANCE SPREADS. YOU’RE ALREADY SEEING HYPERSCALER DEBT BALANCE SPREADS RISING RELATIVE TO THE REST OF THE MARKET SO EVENTUALLY THE REST OF THE MARKET WILL PUSH BACK. ROMAINE: REAL QUICKLY, I JUST WANT TO GET YOUR THOUGHTS ABOUT HOW ATTRACTIVE RIGHT NOW YOU THINK THE JAPAN SITUATION IS FOR INVESTORS. ARE WE GOING TO SEE AT LEAST ON A RELATIVE BASIS MAYBE A FEW MORE PEOPLE START TO GRAVITATE THERE, MAYBE AT THE EXPENSE OF U.S. DEBT AND EVEN RISK ASSET STHS >> FROM AN EQUITY STANDPOINT, JAPANESE BANKS LOOK PRETTY INTERESTING BECAUSE THEIR RATE HIKE SHOULD LEAD TO HIGHER NET INTEREST MARGINS. AND FOR MANY COMPANIES, THEY’RE NOW HAVING PRICING POWER FOR THE FIRST TIME IN MANY YEARS. SO OVERALL IT’S A PRETTY POSITIVE TAIL WIND. ROMAINE: ALL RIGHT. JIMMY, GREAT TO HAVE YOU. AS ALWAYS, JIMMY CHANG. C.I.O. OF ROCKEFELLER GLOBAL FAMILY OFFICE KICKING US OFF TO THE CLOSE. HERE ON A WEEK WHERE WE’RE CHECKING IN WITH THE CONSUMER. IN A BIG WAY. PARTICULARLY THE HIGH END CONSUMER. WE’RE GOING TO CATCH UP WITH PAULINE BROWN, THE FORMER CHAIRMAN OF LVMH NORTH AMERICA BUSINESS TO GET HER READ ON THE CONSUMER TRENDS OUT THERE AND ANOTHER END OF THE CONSUMER SPECTRUM, SNACK FOODS. J & J, THE MAKER OF DIP AND DOTS AND ICY, WE’RE GOING TO TALK TO THE C.E.O. AND IT’S UNDERGOING A TRANSFORMATION AND TRYING TO WIN OVER INVESTORS. AND THE CASE FOR A U.S. EQUITY MARKET BUBBLE. WE’RE GOING TO CATCH UP WITH FORMER NEW YORK FED PRESIDENT BILL DUDLEY ABOUT HIS LATEST WARNING. ALL THAT AND MORE COMING UP IN A BIT RIGHT HERE ON "THE CLOSE," RIGHT HERE ON BLOOMBERG. ♪ ROMAINE: A BIG WEEK FOR ROBOTICS COMPANIES. DEBUTING. CHINA'S UNIT TREE ROBOTICS GOING PUBLIC AND SHANGHAI. OUR NEXT GUEST COMPANY IS GETTING READY FOR ITS OWN DEBUT AND SAYS IT IS SAID TO BE THE ONLY PUBLIC U.S.. PLAY ON HUMANOID ROBOTICS WITH PROVEN COMMERCIAL USES. PEGGY IS JOINING US. GREAT TO HAVE YOU. LET'S START OFF WITH SOME OF THE NAMES THAT DIDN'T JUST COME TO MARKET. WE SAW THE VALUATION ON UNIT TREE CLOSING OUT ITS FIRST DAY NEAR 50 BILLION DOLLARS. RAISING $39 BILLION IN THE PRIVATE MARKETS. ARE YOU UNDERPRICED AND ARE YOU READY TO COME TO MARKET? >> THANK YOU FOR HAVING ME. I WOULD SAY WE ARE VALUE PRICED. WE ARE AT A 2.5 BILLION DOLLAR PRE-MONEY VALUATION. WE WILL BE GOING PUBLIC. THE VERY FIRST HUMANOID IN THE U.S. IN THE FALL TIMEFRAME. I THINK WHAT WE ARE SEEING IS PENT-UP DEMAND TO INVEST IN THIS SPACE. THERE IS A LOT OF EXCITEMENT IN ROBOTICS AND WHAT WE CALL PHYSICAL AI, THE MIXTURE OF AI AND ROBOTICS AND INVESTORS ARE LOOKING FOR PLACES TO GO FOR THAT OPPORTUNITY. ROMAINE: INVESTOR DEMAND IS THERE BUT WHAT ABOUT THE BUYER DEMAND? WHAT IS THE MARKET RIGHT NOW? I FEEL LIKE WE'VE BEEN TALKING ABOUT ROBOTICS FOR DECADES. ARE WE NOW AT A STAGE WHERE IT IS A COMMERCIALLY VIABLE BUSINESS WITH REAL, TANGIBLE LONG-TERM REVENUE GROWTH? >> IT IS. WE HAVE OVER $300 MILLION OF BOOKED ORDERS. ONE OF THE REASONS WE CHOSE TO GO THIS PATH IS IN ORDER TO ENSURE THAT WE COULD DEPLOY ON THAT VERY QUICKLY SO WE ARE ACCELERATING OUR PATH TO MARKET. WE HAVE ANOTHER 30 OR SO CUSTOMERS SEEKING THESE TYPES OF DEVICES. THEY DO THE DIRTY, DANGEROUS AND DULL TASKS THAT ARE PART OF PEOPLE'S JOBS IN THESE FACILITIES. THEY CAN STEP IN AND TAKE THE SORT OF WORK OFF THEIR HANDS. SIMPLE MOVING THINGS FROM ONE DEVICE TO ANOTHER. OFF AND ON PALLETS. AND DOING IT OVER AND OVER AGAIN FREEING UP THE HUMANS TO DO HIGHER VALUE WORK. SALLY: AGILITY HAS OPENED A 60,000 SQUARE-FOOT FACILITY IN FREMONT TO ADVANCE THE DIGIT FIVE. WHAT ARE THE KEY MILESTONES FOR MEETING RIGOROUS THIRD-PARTY SAFETY COMPLIANCE FOR THIS KIND OF ROBOT INTERACTION YOU'VE MANAGED TO ACHIEVE. >> WE OPENED UP THE FACILITY TO ACCELERATE THE TRAINING OF SKILLS OF HER DIGIT. THE BIG OBSTACLE WITH HUMANOIDS IS ALL OF THEM MUST WORK INSIDE A SAFETY CELL UNTIL THEY ARE CERTIFIED TO COME OUTSIDE OF THAT CELL. WHAT THAT MEANS IS THEY HAVE TO SAFELY DETECT HUMANS IN CLOSE PROXIMITY AND ENSURE NO HARM IS DONE. AT THE END OF THIS YEAR, WE WILL BE DEMONSTRATING THE VERY FIRST SAFETY CERTIFIED HUMANOID THAT CAN COME OUTSIDE OF THOSE WORK CELLS THEY ARE IN RIGHT NOW AND MOVE THROUGHOUT THESE FACILITIES AND DO DIFFERENT JOBS. IT IS LIKELY, WE THINK, PROBABLY THE NUMBER ONE OBSTACLE INTO VAST DEPLOYMENT OF HUMANOIDS. THERE WILL BE A HIGHER BAR TO GET INTO THE HOME OVER TIME. SALLY: SWITCHING BACK TO YOUR PLANS TO MERGE, FOXCONN LEFT -- LEAD THE PIPE. BEYOND THE CASH, WHAT KIND OF ROLE WILL IT HAVE IN HELPING YOU SCALE? >> WE ARE EXPLORING STRATEGIC ENGAGEMENT WITH FOXCONN. THEY ARE CLEARLY A LEADER IN LOOKING TO BUILD IN NORTH AMERICA. WE HAVE A FACTORY ALREADY IN SALEM, OREGON, WHERE WE BUILD ALL OF OUR ROBOTS. IT IS CAPABLE OF BUILDING 10,000 ROBOTS A YEAR IN THAT FACTORY BUT AT SOME POINT WE WILL NEED TO SEEK LARGER FACILITIES AND ADDITIONAL FACILITIES. THE ENGAGEMENT WITH FOXCONN EARLY IS REALLY GOING TO BE A BIG HELP TO US OVER TIME. ROMAINE: I'M CURIOUS ABOUT WHAT THE RELATIONSHIP IS FROM A REGULATORY STANDPOINT BETWEEN THE U.S. AND CHINA. THERE ARE THE NEW TERRORISTS THAT THE PRESIDENT ANNOUNCED SPECIFICALLY ON ROBOTICS THAT EFFECTUAL -- THAT EFFECTIVELY WILL SHUT OUT SOME OF THE CHINESE COMPETITORS AND SOME CHINESE PARTS AS WELL. YOU HAVE PUBLICLY SAID YOU ARE SUPPORTING THESE MOVES BY THE PRESIDENT. WHY? >> WE ARE SUPPORTING THE ADMINISTRATION'S MOVES BECAUSE THAT IS A SUBSIDIZED INJURY -- INDUSTRY IN CHINA. THEY PRICED LOWER THAN COST. WE SAW A SIMILAR PLAYBOOK WITH THE DRONE INDUSTRY. WE HAD A DRUM INDUSTRY HERE AND OVER SEVERAL YEARS IT MOVED TOWARDS CHINA. WE WOULD LIKE TO ENSURE THAT DOES NOT HAPPEN WITH THE ROBOTICS INDUSTRY. WE THINK THESE ARE GREAT MOVES BY THE ADMINISTRATION TO ENSURE THERE IS A LEVEL PLAYING FIELD FOR U.S. COMPANIES IN THE ROBOTICS SPACE. ROMAINE: THAT IS A FINISHED PRODUCT AND I UNDERSTAND THE COMPARISON BUT DO YOU HAVE THE ACCESS TO ALL OF THE MATERIALS THAT YOU WOULD NEED WITHOUT CHINA? >> RIGHT NOW, MOST OF OUR COMPONENTS ARE SOURCED RIGHT HERE IN THE U.S. ALL ROBOTS WILL NEED THE RARE EARTH MAGNETS THAT HAVE BEEN MUCH TALKED ABOUT RECENTLY AS PART OF THE MOTORS THAT RUN THE ACTUATORS THAT BECAUSE ALL OF THE MOVEMENTS WITH THE HUMANOID ROBOTS. THAT IS ONE AREA WE ARE TRACKING CLOSELY TO ENSURE WE CONTINUE TO HAVE ACCESS TO COMPONENTS THAT NEED RARE EARTH METALS. ROMAINE: ANY IDEA WHEN THE DEAL WILL CLOSE OUT? >> WE ARE HOPING THE FALL TIMEFRAME AND SO FAR WE ARE ON TRACK TO HIT THAT TIME. ROMAINE: WE HOPE TO HAVE YOU BACK THEN. PEGGY JOHNSON FROM AGILITY ROBOTICS. WHEN WE COME BACK WE WILL LOOK AT SHARES OF WALMART. THEY ARE HAVING AN AWFUL DAY. THIS IS "THE CLOSE" ON BLOOMBERG. ROMAINE: TIME NOW FOR OUR TOP. FIRST UP IS CODY. RBC DOWNGRADING IT TO SECTOR PERFORM. CITING AN UNCLEAR AND HIGHLY COMPLICATED PATH TO RETURN TO REVENUE AND PROFIT GROWTH. SHARERS DOWN ABOUT 8% ON THE DAY ADDING TO WHAT IS NOW A 64% YEAR TO DATE SLUMP. AT SEA, BANK OF AMERICA BOOSTING THE STOCK TO BUY. THE ANALYST SAYS THE E-COMMERCE PEDDLERS -- GROWTH PILLARS ARE LOOKING STARTED. SHARES ON A THREE DAY RUN. AND FINALLY, TJX, A DOWNGRADE TO NEUTRAL FROM CITI WITH SADIE CITING A FASHION MISSTEP. TJX DOWN AGAIN BY ALMOST 4% AGAIN TODAY FOR ITS BIGGEST TWO DAYS SLIDE SINCE 2022. THAT BRINGS US TO WALMART HAVING IT SINK US ONE DAY LOSS SINCE 2022 AFTER THE COMPANY REPORTED SLOWEST U.S. SALES GROWTH IN SIX YEARS. JOINING US RIGHT NOW TO TALK MORE ABOUT THIS IS MICHAEL LASSER OVER AT UBS WHO COVERS THE HARDLINES. LOOK, CLOSE TO 3% GROWTH BUT WHAT ARE WE TALKING ABOUT HERE WHEN WE TALK ABOUT THE SLOWEST GROWTH RATE IN SIX YEARS? IS THAT ENOUGH OF A CONCERN FOR YOU? MICHAEL: I THINK WHAT IS HAPPENING WITH WALMART IS A COUPLE OF THINGS. FIRST, IT IS FUELING A PRESSURE POINT FROM SOME LEGISLATIVE CHANGES THAT ARE LIMITING THE PHARMACY BUSINESS. IT CREATED ABOUT A 125 BASIS POINT HEADWIND. NOT INTENSIFIED. THAT CREATED A BIT OF A SLOW DOWN FROM ONE Q TWO TO QUEUE. AND CONSUMERS GOT MORE CHALLENGING. WALMART IS NOT IMMUNE TO THAT GIVEN THE SIZE. HAS THIS CHANGED ANY OF THE CONVICTION WE HAVE OR OUTLOOK FOR WALMART? NO. WALMART IS EVOLVING ITS BUSINESS MODEL AND IS BECOMING MORE EFFICIENT, MORE PRODUCTIVE AND PROFITABLE. WE SAW IT THIS QUARTER EVEN WITH ALL OF THE MOVING PIECES. IT STILL GENERATED PROFITABILITY BETTER THAN WHAT FOLKS WERE EXPECTING AND IT RAISES GUIDANCE FOR THE YEAR BY 3.5 CENTS AND THERE IS PROBABLY MORE UPWARD REVISIONS TO GO. SALLY: HOW MUCH OF THIS IS THE LIKES OF AMAZON AND TARGET EATING WALMART'S LUNCH? MICHAEL: I DON'T THINK THIS IS A COMPETITIVE ISSUE WHATSOEVER. I THINK THIS IS A COUPLE OF DIFFERENT FACTORS INCLUDING THE LOWER INCOME CONSUMER BEING UNDER PRESSURE AS WELL AS LESS INFLATION. LET ME PUT A FRAME OF REFERENCE AROUND THAT. IN THE FIRST QUARTER, GENERAL MERCHANDISE -- THINGS LIKE SPORTING GOODS, APPAREL, HOME RELATED PRODUCTS -- THERE WAS 4% INFLATION IN THOSE CATEGORIES. IN THE SECOND QUARTER, IT WAS 1.7. IF THEY SOLD THE SAME NUMBER OF GOLD GOT GOODS THEY SAW 230 BASIS POINTS OF LOWER GROWTH SIMPLY BY THE PRICE PASSAGE. ROMAINE: OUTSIDE OF THE RETAIL SPACE WITH REGARDS TO THE MEMBERSHIP OF ADVERTISING A MARKETPLACE BUSINESS. ON FRIDAY I TALK TO SOMEONE AND THEY SAID TO LOOK THERE AND THE CFO TALKED ABOUT THIS WITH THE IDEA OF OPERATING BEING UP 10% IF YOU TAKE OUT THE TARIFFS. THAT IS ON A 2.5 PERCENT COMP. I SEE THEY ARE BANGING THE DRUM HERE BUT THAT IS NOT THE RETAIL BUSINESS. ARE YOU COMFORTABLE WITH THEM LEANING ON THE AD SPACE, MARKETPLACE BUSINESS AND ON THE MEMBERSHIP? MICHAEL: I ABSOLUTELY AM COMFORTABLE WITH THEM LEANING OR GENERATING BETTER PROFITS FROM THOSE SOURCES. LET'S PUT A LITTLE PERSPECTIVE ON IT -- 24% GROWTH IN E-COMMERCE IN THE CORNER. MORE THAN 40% GROWTH IN ADVERTISING. THAT IS PUTTING BANNER ADS, SELLING SEARCH WORDS ON WALMART.COM OR THE APP. THEY HAVE PURCHASED VISIO. THEY'VE BEEN PUTTING ADS WHEN YOU LIGHT UP YOUR TELEVISION. THEY ARE IN THE EARLY STAGES OF HARVESTING WHAT SHOULD BE A VERY ATTRACTIVE PROFIT RUNWAY FOR A LONG PERIOD OF TIME. ROMAINE: MICHAEL LASSER, ONE OF THE BEST IN THE BUSINESS. EQUITY RESEARCH ANALYST COVERING HARDLINES AND FOOD RETAIL OVER AT UBS WITH WALMART SHARES SEVERELY UNDER PRESSURE ON THIS DAY. THAT WAS A LOOK AT THE MIDDLE INCOME CONSUMER, LOWER INCOME CONSUMER. WHEN WE COME BACK WE WILL LOOK AT THE HIGH END CONSUMER. THE FORMER HEAD OF LVMH NORTH AMERICAN BUSINESS WILL JOIN US IN JUST A SECOND. PAULINE BROWN ON THE HEELS OF SOME INTERESTING EARNINGS. THAT CONVERSATION IS COMING UP NEXT AFTER THE BREAK RIGHT HERE ON BLOOMBERG. ♪ ROMAINE: FOUR STRAIGHT QUARTERS OF ORGANIC GROWTH WITH REGARDS TO NET SALES. MORE THAN 6% OF THE MOST RECENT QUARTER. YOUR GUIDANCE FOR THE NEXT FISCAL YEAR AND THE FULL FISCAL YEAR IS 3% TO 5%. YOU HAVE CONFIDENCE THAT YOU’RE GOING TO MEET THAT? >> YEAH, ABSOLUTELY. I THINK LIKE YOU SAID, WHEN WE ARE -- NEW STRATEGY CALLED BEAUTY REIMAGINE 18 MONTHS AGO, WE MADE SATURDAY OF PROMISE. AND TODAY I’M HAPPY TO REPORT THAT PROMISE MADE, PROMISE KEPT. ROMAINE: THE C.E.O. OVER AT ESTEE LAUDER. HE WAS ON THE CLOSE EXCLUSIVELY YESTERDAY TALKING ABOUT THE BEAUTY COMPANY’S BIG EARNINGS. THIS HAS KIND OF BEEN THE INTERESTING THING NOW WITH ALL OF THESE FASHION AND BEAUTY COMPANIES, THEY’RE ALL SORT OF TRYING TO FIND SORT OF THEIR LITTLE POCKET OF THE WORLD RIGHT NOW, WHERE THEY FIT IN, AND HOW THEY STACK UP AGAINST COMPETITORS. YOU GO DOWN THE LONG LIST OF NAMES HERE, WHETHER IT’S AN HE ESTEE LAUDER OR RALPH LAUREN. THEY’RE ALL SORT OF SEEING DIFFERENT CONSUMERS, DIFFERENT STORIES RIGHT NOW. SALLY: THAT’S RIGHT. THE FIGHT VERY MUCH SEEMS TO BE ON FOR THAT MIDDLE INCOME CONSUMER. I MEAN, IS THAT YOU, ROMAINE? IS THAT ME? I DON’T KNOW. BUT IT DOES SEEM THAT SOME OF THE AMERICAN BRAND HAVE THE EDGE AT CAPTURING THAT CONSUMER THESE DAYS. ROMAINE: AS THE SAND SHIFT, THERE ARE A LOT OF QUESTIONS AS TO EXACTLY MAYBE WHO COMES OUT ON TOP OR MAYBE -- I DON’T KNOW, MAYBE EVERYONE DOES. PAULINE BROWN KNOWS A LOT ABOUT THIS SPACE. SHE’S THE FORMER CHAIRMAN OF LVMH NORTH AMERICA. SHE ADVISE AS LOT OF COMPANIES ON THIS. SHE WORKED AT ESTEE LAUDER AT ONE POINT, AVON, QUITE A FEW OTHER PLACES. IT’S GREAT TO HAVE YOU HERE. I DO WANT TO PICK YOUR THOUGHTS, NOT SO MUCH ON THE EARNINGS THEMSELVES, BUT SOME OF THE DISPARITY THAT WE’VE SEEN IN A LOT OF THE REPORTS OUT OF THE VARIOUS BIG-NAME KIND OF LUXURY, IF WILL YOU, COMPANIES THAT HAVE REPORTED. I MEAN, YOU WROTE A BOOK A FEW YEARSA AND YOU TALKED A LOT ABOUT THIS IDEA OF LUXURY BEING ABOUT DESIRE AND TASTE AND AESTHETICS. YET BLOOMBERG’S BEEN WRITING A LOT ABOUT HOW IT’S BECOME A LOT MORE TACTICAL FOR CONSUMERS. YOU GOT THE JEN Z’S -- GEN-Z GOING TO SECONDHAND SITES TRYING TO GAME OUT WHAT THESE THINGS ARE WORTH. YOU HAVE PEOPLE IN CHINA WHO ARE CHECKING THEIR PORTFOLIOS BEFORE THEY BUY THAT LATEST HERMES SCARF OR WHATEVER IT IS THEY’RE BUYING OVER THERE. WHAT IS THE TREND LINE NOW THAT’S HAPPENING IN THE LUXURY SPACE? >> I THINK THE RULE OF THUMB HISTORICALLY WAS THAT WHEN THE MARKETS ARE GOOD, WHEN HOUSE SOMETHING GOOD, WHEN UNEMPLOYMENT IS GOOD, THAT PEOPLE SPEND. WHAT I’M SEEING IN MARKET AND IN EVERY REGION IS THAT THEY SPEND A LOT MORE SELECTIVELY. OBVIOUSLY WHEN THE MARKET CONDITIONS ARE NOT GOOD, THEY DO NOT SPEND ON DISCRETIONARY THE WAY THAT THEY WOULD IN FROTHIER TIMES BUT RIGHT NOW BECAUSE WE’RE SEEING AT LEAST HERE IN THE U.S. RELATIVELY HEALTHY OR STABLE CONDITIONS ACROSS MOST OF THOSE METRICS, WHAT WE’RE SEEING IS A VERY DISCRIMINATING CUSTOMER. THEY’RE DISCRIMINATING ON PRICE, MORE IMPORTANTLY THEY’RE DISCRIMINATING ON VALUE. AND THEY’RE DISCRIMINATING ON WHETHER THEY BUY STUFF VERSUS WHETHER THEY INVEST THAT IN VACATIONS AND ENTERTAINMENT, IN DINING. THERE’S A LOT OF COMPETING OPTIONS FOR THOSE DOLLARS. ROMAINE: I AM CURIOUS ABOUT THAT. BEAN RECENTLY HAD A REPORT SAYING THAT THE GROWTH ENGINE OF LUXURY IS LESS ON THE GOODS AND MORE ON THE EXPERIENCES, OBVIOUSLY YOU HAVE A LOT OF EXPERIENCE AT BAIN AND THEN MACKENZIE HAD AN INTERESTING REPORT OUT SAYING THIS IDEA OF SORT OF THAT SINGLE MONOLITHIC LUXURY CONSUMER THAT MAYBE WE TENDED TO THINK OF IS KIND OF A THING OF THE PAST. >> YEAH. I THINK SO. I ALSO THINK THAT THESE CONDITIONS ARE VERY SUBCATEGORY-SPECIFIC. SO EVEN WHEN YOU LOOK AT THE ESTEE LAUDER RESULTS, FRAGRANCE WAS A CLEAR CUT WINNER, WAS UP DOUBLE DIGITS, 10%. HAIR CARE, WHICH IS ANOTHER ONE OF THE FOUR SEGMENTS THAT THEY PLAY IN, WAS ACTUALLY NEGATIVE. IT WAS A DRAG ON THE REST OF THE COMPANY. FORTUNATELY FOR THEM IT’S NOT AS BIG A PORTION OF THEIR BUSINESS. 10 YEARS AGO WE WOULD HAVE SEEN THE INVERSION OF THAT -- INVERSE OF THAT. FRAGRANCE USED TO BE A DRAG ON ESTEE LAUDER’S INCOME. SO NOW IF YOU ARE PLAYING IN THE RIGHT SEGMENT, IN THE RIGHT MARKETS AND GEOGRAPHIES, WE DEFINITELY HAVE AN EDGE. BUT NO MATTER HOW WELL STRATEGICALLY YOU’RE POSITIONING, IF YOUR BRAND IS NOT STRONG, AND BY THAT BRAND I MEAN IF THE DESIRABILITY BY THE CONSUMER FOR THAT BRAND IS NOT STRONG, YOU WILL NOT GET THE CONSUMER TO COME AND OPEN UP THEIR WALLET. ROMAINE: I’M CURIOUS, WITH REGARDS TO THE STRUCTURE OF THESE COMPANIES, AND WE’LL JUST TAKE ESTEE LAUDER, I MEAN, THEY ARE KIND OF QUINTESSENTIALLY HIGH END LOW. THEY HAVE A LOT OF SORT OF LOWER PRICED PRODUCTS THAT ARE STILL IN THIS ZEITGEIST AND OBVIOUSLY THE HIGH END STUFF. HOW DOES THAT STACK UP AGAINST SAY MAYBE AN LVMH WHICH IS ALMOST PURELY MORE TOWARDS THE HIGHER END OF THE PRICE SPECTRUM? >> YEAH. WHAT YOU’RE SEEING WITH LVMH RIGHT NOW IS THAT THE STRONGEST BRAND ARE THE ONES THAT ARE MOST INACCESSIBLY PRICED. SO THEIR JEWELRY SEGMENT DID VERY WELL. LAURA PIANA DID VERY WELL AND THE MORE DEMOCRATIC BRANDS LIKE A VITTON OR IS HE FORA -- SEPHORA HAVE NOT DONE AS WELL IN THIS MARKET. THAT’S ONE INTERESTING INDICATOR. IN THE CASE OF ESTEE LAUDER, YOU’RE RIGHT. WHILE RELATIVE TO SAY LAUREL, THEY ARE VERY SKEWED TOWARD UPPER END OF THE MARKET, THE FACT IS IF YOU LOOKED AT THEIR CUSTOMER PROFILES, THIS IS NOT A HIGHLY AFFLUENT WOMAN WHO IS BUYING THEIR PRODUCTS. IT REALLY IS A WOMAN WHO WANTS BETTER COSMETICS. SO SHE’S MORE INCLINED TO BUY COSMETICS WHEN SHE GOES TO ESTEE LAUDER, BUT SHE MIGHT BUY THE REST OF HER HOUSEHOLD GOODS FROM TARGET. THERE’S A LOT OF CROSSOVER. SO I WOULDN’T CALL THIS THE SAME KIND OF AFFLUENT CONSUMER THAT WE WOULD SEE WITH AN LVMH AND CERTAINLY NOT WITH OTHERS. SALLY: AND SO WITH AMERICAN BRAND LIKE RALPH LAUREN AND COACH, THEY ARE DOING WELL BY CAPTURING THIS MIDDLE INCOME CONSUMER. DO YOU THINK THAT’S GOING TO LEAD TO EUROPEAN -- THE EUROPEAN RIVALS NEEDING TO RETHINK THEIR PRICING MODELS A LITTLE BIT? >> I THINK THEY SHOULD HAVE RETHOUGHT THAT BEFORE THEY ACTUALLY ELEVATED IT. IT’S VERY HARD FOR A LUXURY BRAND TO PRICE ADJUST DOWNWARD. WHAT THEY ARE DOING, AND I THINK THEY’RE DOING THIS ACROSS THE BOARD, IS THEY’RE BEING MUCH MORE SENSITIVE AND CONSERVATIVE IN THE PRICING OF NEWER PRODUCTS. BUT THAT SAID, NEWER PRODUCTS ARE A SMALL PORTION OF THE TOTAL PRODUCTS SOLD. A NEVER FULL BAG FROM L.V. IS NOT A NEW PRODUCT AND IT’S A BIG PORTION OF THEIR BUSINESS SO THEY’RE NOT GOING TO START REDUCING OR DISCOUNTING THOSE GOODS. BUT I DO THINK THAT THEY’RE AWARE THAT THAT HAS BEEN A REAL CONSTRAINING FACTOR. ON TOP OF OTHER ISSUES LIKE THE TARIFFS, WHICH HAVE HIT REALLY ALL OF THESE COMPANIES IN THE LAST FEW YEARS, ON TOP OF THE FACT THAT THERE’S A PROLIFERATION OF PRODUCTS AND BRAND RIGHT NOW IN THE MARKET MORE THAN EVER, MORE STORE OPENINGS THAN EVER, SO THE CONSUMERS HAVE BEEN FATIGUED, I THINK THE REASON THAT RALPH LAUREN IS FARING SO WELL IS NOT SIMPLY BECAUSE THEY’RE APPEALING TO THE MIDDLE OF THE MARKET, IT’S BECAUSE THEY HAVE BEEN MUCH MORE DISCIPLINED IN HOW THEY’VE TOLD THEIR STORIES AND HOW THEY’VE MERCHANDISED AND HOW THEY’VE PRICED THEIR GOODS SO THERE’S A PERCEPTION BY THE CONSUMER THAT THEY ARE A GOOD VALUE RELATIVE TO SOME OF THEIR DIRECT COMPETITORS. ROMAINE: THAT SEEMS TO BE PLAYING OUT IN THE STOCK MARKET. WE WERE TALKING INTERNALLY EARLIER TODAY ABOUT THE IDEA THAT RIGHT NOW LVMH’S STOCK ACTUALLY TRADES AT A SLIGHT DISCOUNT TO RALPH LAUREN’S STOCK. THE FIRST TIME THAT’S HAPPENED IN QUITE A FEW YEARS. AND BLOOMBERG HAD A GREAT STORY ABOUT IT. LOOK, YOU CAN GO IN THERE, YOU CAN GET, YOU KNOW, 2 SOCKS, BUY YOURSELF A $60 BASEBALL HAT IF YOU WANT AND FEEL LIKE YOU GOT SOME SORT OF PIECE OF LUXURY WITHOUT NECESSARILY SPENDING THOUSANDS OF DOLLARS. IS THAT THE MODEL? >> I THINK THAT HAS BEEN THE MODEL FOR RALPH LAUREN AND RALPH LAUREN, YOU KNOW, IF YOU ACTUALLY LOOK AT THE BREADTH OF THEIR PRODUCT LINE, AND NOT JUST IN TERMS OF THE NUMBER OF PRODUCTS THAT THEY SELL, BUT THE PRICE POINTS AND THE DIFFERENT SUBLABELS THAT THEY HAVE FROM THE PURPLE LABEL AT THE HIGHEST END, TO SOME OF THE PARTNERSHIPS THEY’VE HAD OVER THE YEARS WITH MACY’S AND COLE’S, THEY’RE SPEAK -- KOHL’S, THEY’RE SPEAKING TO A VERY BROAD SWATH OF THE POPULATION. WHEREAS LVMH HAS EVEN MORE ACUTELY IN THE LAST FEW YEARS FOCUSED ON A VERY CONCENTRATED SEGMENT OF THE POPULATION. AND THAT’S A VULNERABILITY, PARTICULARLY IN A TIGHT MARKET. BECAUSE NOT ONLY -- I MEAN, THE VERY WEALTHIEST PEOPLE ARE DOING JUST FINE AS LONG AS THEIR PORTFOLIOS ARE WELL STRUCTURED. BUT EVERY LUXURY PLAYER IS PURSUING THEM AND FOCUSING AND IT’S GETTING MORE AND MORE PENSIONIVE TO SERVICE THAT CUSTOMER. SO -- MORE EXPENSIVE TO SERVICE THAT CUSTOMER. SO LVMH IN THIS MOMENT IN TIME HAS I’D SAY MORE CHALLENGES AND MORE COMPLEXITY THAN MORE OF A PURE PLAY LIKE RALPH LAUREN. ROMAINE: IN FAIRNESS TO YOU, THEY’VE MADE A FEW GOOD MOVES ON THE DESIGNER FRONT THAT SEEMS TO HAVE, YOU KNOW, CREATED A LOT MORE ATTENTION AND BUZZ THAN IN THE PAST. IF YOU HAD TO SAY WHAT THEY SHOULD DO MOVING FORWARD, DO YOU SAY, CONTINUE PUSHING IN THAT DIRECTION, BUYING THESE STAR DESIGNERS, FINDING THESE YOUNGER FOLKS WHO CAN KIND OF CREATE DESIGNS THAT WILL GENERATE THAT BUZZ? IS THAT STORY LINE? >> IT’S A REQUISITE FOR FASHION BUT KEEP IN MIND THAT FASHION IS JUST A PIECE OF THE BUSINESS AND IT’S ARGUABLY THE MOST DIFFICULT PIECE OF THE BUSINESS. SO WHEN YOU THINK OF AN LVMH, YOU STILL HAVE A HUGE PORTION OF THE BUSINESS THAT, FOR EXAMPLE, IS IN WINE AND SPIRITS. THE DYNAMICS OF MARKETING AND MERCHANDISING WINE AND SPIRITS, INCREDIBLY DIFFERENT. BUT THEY ARE TWO. THEY’VE HAD TO, IN ORDER TO KEEP THE BUZZ, IN ORDER TO KEEP SOME SORT OF CUSTOMER EXCITEMENT, EDITORIAL EXCITEMENT, THEY’VE HAD TO ENGAGE IN A LOT OF COLLABORATIONS WITH ARTISTS AND DESIGNERS ACROSS THE DIFFERENT WINES AND SPIRITS BRAND AND ACROSS THE BOARD IT’S GETTING MORE AND MORE CROWDED TO PLAY IN ANY ONE OF THESE SEGMENTS AND IT’S GETTING MORE AND MORE EXPENSIVE TO BREAK THROUGH THE CLUTTER BUT WHEN IT U.P.S. CAN TO FASHION, TO ANSWER YOUR QUESTION, YES, IT STARTS WITH GREAT TALENT. AND THEN IT’S ABOUT STORY TELLING AROUND THAT TALENT. AND IF YOU CAST THE TALENT WELL, AND IF YOU HAVE THE MARKETING MACHINE READY TO GO, WHICH IS WHAT’S HAPPENING RIGHT NOW BY THE WAY AT CHANEL, WHICH HAS HAD A BRILLIANT UPTURN, THAT IS REALLY THE FORMULA FOR THAT SEGMENT OF THE BUSINESS. YES. ROMAINE: ABSOLUTELY. ALL RIGHT. PAULINE, GOT TO LEAVE IT THERE. ALWAYS GREAT TO CATCH UP. PAULINE BROWN, FORMER CHAIRMAN AT LVMH NORTH AMERICA. WHEN WE COME BACK, WE’RE GOING TO SWITCH FROM THE HIGH FASHION WORLD TO SOMETHING A LITTLE MORE PEDESTRIAN. DIER. THOSE SHARES HAVING A GREAT DAY. IT’S THE BIGGEST GAINER IN THE S&P 500. IT’S THE STOCK OF THE HOUR AND IT’S UP NEXT RIGHT HERE ON "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: DEERE SHARES OF ABOUT 7% AFTER THE TRACKER -- TRACTOR MAKER. NORAH MULINDA JOINS US WITH MORE OVERALL SALES. I WAS LOOKING AT THE AG SEGMENT. WHAT IS THE ENTHUSIASM AMONG INVESTORS? >> THE FACT THAT DEERE IS SEEING -- MIGHT NOT BE GETTING ANY WORSE. THEY ARE NOT NECESSARILY CALLING FOR A V-SHAPED RECOVERY. WE WILL SEE A MASSIVE PICKUP. THEY ARE SEEING STABILIZATION AND THAT IS WHAT YOU ARE SEEING A LOT OF INVESTORS ON WALL STREET HEDGING ON IN THIS MOMENT. SALLY: THE COMPANIES SAID THEY SAW AN IMPROVEMENT IN USED INVENTORY. WHY DOES THAT MARKET MATTER? >> YOU DON'T WANT IT TO BE TOO CHEAP ESPECIALLY GIVEN THE FACT THAT A FARMER THAT MAY BE STRAPPED FOR CASH MIGHT BE MORE INTERESTED IN GOING TOWARD USED MACHINERY SO THE FACT THAT WE ARE SEEING THE SPREAD NARROW, THAT IS A POSITIVE FOR DEERE MORE BROADLY. ROMAINE: WHEN IT COMES TO THE AGRICULTURE EQUIPMENT, IT LIVES AND DIES BY THE PRICE OF THE CROPS. THIS IS ALSO A CALL I ASSUME ON PRICES? >> IF YOU THINK ABOUT THE FACT THAT WE HAVE BEEN GETTING HEAT WAVES, THAT HAS MADE IT MORE DIFFICULT WHEN YOU THINK ABOUT FARMING. AS YOU CAN IMAGINE, LIMITED INVENTORY MEANS HIGHER DEMAND SO THEY ARE ABLE TO PRICE THE CROPS AT A HIGHER PRICE. THAT IS SUPPORTIVE OF THE AGRICULTURAL INDUSTRY MORE BROADLY BUT IT ALSO MEANS THAT FARMERS MAY BE GETTING MORE INCOME THAN THEY HAVE HAD IN RECENT YEARS AND THEY ARE ABLE TO SPEND MORE ON SOME OF THAT EQUIPMENT WHEN THEY MIGHT WANT A NEW BIG GREEN TRACTOR. ROMAINE: HAVE YOU EVER DRIVEN ONE OF THOSE BIG, GREEN TRACTORS? >> ONCE. I'M FROM VIRGINIA. YOU ARE FROM CHICAGO. ROMAINE: WE JUST STEAL THEM. NORAH MULINDA. DEERE IS THE BIGGEST GAINER ON THE S&P 500 AS WE COUNSEL -- AS WE COUNT YOU DOWN TO THE CLOSING BELLS. NANCY TANENGLER WILL JOIN US AFTER THE BREAK. ROMAINE: WELCOME BACK TO "THE CLOSE." MARCHING DOWN TO THE CLOSING BELLS. ABOUT 10 MINUTES TO GO AND WE'VE BEEN ON THE BACK FOOT ALL DAY WHEN IT COMES TO U.S. EQUITIES. SALLY: THE RALLY IN EQUITIES AND BONDS IS VISITING -- IS FIZZLING. THE NASDAQ IS DOWN ABOUT .7%. BRENT CRUDE IS HOLDING AROUND 93 POINT FIVE DESPITE THE THREATS FROM PRESIDENT TRUMP TO ECONOMICALLY ISOLATE IRAN. AND WE HAVE THE 30 YEAR YIELDS UP A LITTLE BIT AGAIN. AS THE MARKET DIGESTS THE BOND BUYING MANEUVERS. ROMAINE: YOU LOOK AT THE EQUITIES RIGHT NOW AND THE BIGGEST TRACKS COMING FROM WALMART, APPLE AND AMAZON AND NVIDIA IS ALSO DOWN JUST FRACTIONALLY ON THE DAY BUT OBVIOUSLY A HUGE WAITING ON THE INDEX PROVIDING A BIT OF A DRAG TO THE UPSIDE. MICRON, DEERE AND EXXON. NANCY TENGLER JOINS US NOW AND IS THE CEO AND CIO OF LEFFLER CANDLER INVESTMENTS. STARTING WITH THE BOND MARKET, I'M SURE YOU BEEN PAYING ATTENTION TO THE BUYBACKS, THE INCREASED BUYBACKS AS SCOTT BESSENT HAS ANNOUNCED AND AS HE WENT ON ANOTHER NETWORK TODAY DEFENDED IT AND SAID THEY COULD BE HIGHER. WHEN YOU LOOK AT THE MARCH HIGHER THAT YOU SEEING IN LONG-TERM YIELDS, WHAT DOES THAT TELL YOU ABOUT WHAT THE MARKET IS SEEING AND MORE IMPORTANTLY WHAT IT TELLS YOU ABOUT WHAT THE MARKET WANTS? NANCY: I THINK IT IS THE LATTER. I THINK WHAT WE ARE SEEING IS A MARKET THAT IS RETURNING TO BOND VIGILANTES STATUS. THEY DON'T LIKE WHAT THEY'VE HEARD FROM KEVIN WARSH. AND WHETHER I AGREE WITH THAT OR NOT IS NOT THE POINT BUT THE MARKET IS ALWAYS RIGHT. THE MARKET DOESN'T LIKE THAT AND THEY DON'T LIKE THE NEW REGIME OF -- WE ARE GOING TO DO THIS AND THEN DIVE. IT IS VERY INDICATIVE OF THIS ADMINISTRATION WHERE WE SORTA FLOAT SOME HEADLINES AND SEE WHAT HAPPENS. THAT SAID, I HAVE TREMENDOUS RESPECT FOR SCOTT BESSENT AND I THINK HE UNDERSTANDS MARKETS WHICH IS A GREAT TRAIT FOR A TREASURY SECRETARY -- SECRETARY OF THE TREASURY. BUT I THINK THE TRIAL BALLOONS ARE CREATING A LITTLE BIT OF CHAOS. AND THEY WILL SETTLE AS IT ALWAYS DOES. ROMAINE: LET ME ASK YOU MORE POINTED, SHOULD EQUITY INVESTORS BE WORRIED ABOUT WHAT WE ARE SEEING IN THE BOND MARKET WITH REGARD TO ARRESTING OR REVERSING THE RALLY THAT WE'VE SEEN OVER THE LAST FEW YEARS? NANCY: I DON'T THINK SO BECAUSE IN THE SHORT-TERM, POTENTIALLY GUESTS. OVER THE MEDIUM-TERM, STOCKS DO RESPOND TO EARNINGS GROWTH IN THE UNDERLYING FUNDAMENTALS. WE HAD THE MOST INCREASES IN GUIDANCE, I THINK IT WAS PROPER SCENT OF COMPANIES, INCREASED GUIDANCE THIS LAST QUARTER, THE HIGHEST LEVEL SINCE WE CAME OUT OF THE PANDEMIC AND BEFORE THAT, THE HIGHEST LEVEL EVER. THAT TELLS ME THAT COMPANIES ARE SEEKING AHEAD. THEY HAVE VISIBILITY AND THEY ARE RAISING GUIDANCE. ONE IN 10, 1 AND 11. THAT IS POWERFUL IN ADDITION TO THE FACT THAT MARGINS CONTINUE TO EXPAND. WE PRODUCE A THEMED PIECE AFTER EACH EARNINGS CALL AND THE ONE THAT STOOD OUT TO ME WAS CHEVRON SAYING, WE ARE GOING TO SPEND 25 PERCENT LAST IN CAPEX PER OIL BEAR ON THAT IS A COMPELLING NUMBER. ACROSS SECTORS THERE WAS A HOST OF THEM. IT IS AUTOMATION, AI, ROBOTICS. THE THINGS WE'VE BEEN TALKING ABOUT THAT ARE DRIVING THE UNDERLYING FUNDAMENTAL STORY WHICH I THINK IS STILL VERY COMPELLING. SALLY: WITH FIXED INCOME OFFERING THE HIGHEST YIELDS IN A LONG TIME, HOW IS THAT CHANGING ASSET ALLOCATION AS YOU SEE IT IN TERMS OF PORTFOLIO MANAGEMENT? NANCY: I THINK YOU WILL SEE AT THE MARGIN POTENTIALLY GREATER ALLOCATIONS TO BONDS FROM THE USUAL SUSPECTS, THE SHADOW BANKING CREW SO THINK INSURANCE COMPANIES AND PUBLIC PENSION PLANS BUT THEY ALREADY HAVE AN INSATIABLE APPETITE FOR CREDIT. AND THAT IS WHAT IS DRIVING OR HAS HISTORICALLY DRIVEN SHARE BUYBACKS AND IS NOW DRIVING CAPEX. I DON'T EXPECTED TO HAVE A HUGE IMPACT BECAUSE THERE IS STILL SIX OR $7 TRILLION IN CASH ON THE SIDELINE SO I THINK ON WEAKNESS YOU WILL SEE THE RETAIL INVESTOR COME BACK IN AND THE COMPANIES COME BACK INTO BY THEIR SHARES. AGAIN, IT IS NOT GOLDILOCKS BUT WE ARE IN A BULL MARKET. WE ARE EARLY IN A BULL MARKET IF YOU LOOK BASED ON HISTORY. WHAT WE KNOW FROM THE 90'S AS YOU COULD HAVE HIGHER INTEREST RATES COEXIST WITH ROBUST STOCK PRICE TOTAL RETURN AND I THINK THAT'S WHAT WILL SEE IN THE COMING YEAR WAS. SALLY: EARNINGS SEASON IS WINDING DOWN AND THE ATTENTION IS RETURNING TO THE MACRO DATA FOLLOWING THE WEAKER THAN EXPECTED JOBS REPORTS. WHEN YOU SEE THE KIND OF NOTABLE DISCONNECT IN MARKET PRICING? >> I DO THINK THAT JOBS NUMBERS, WE PUT A LOT OF EMPHASIS ON THESE NUMBERS BUT IN FACT THEY ARE ALWAYS REVISED AND THEY'VE BEEN PRETTY WRONG FOR A LONG TIME. SO WHAT WE KNOW IS THAT PEOPLE ARE STILL WORKING AND THEY ARE STILL SPENDING, FOR THE MOST PART. UNEMPLOYMENT RATE DECLINED DUE TO A DECLINE IN THE PARTICIPATION RATE BUT THIS IS A BENIGN ENVIRONMENT FOR JOBS. WHAT I THINK WE HAVE TO CONTINUE TO FOCUS ON IS INFLATION. THE NUMBERS ARE FRAUGHT BECAUSE SOME OF THEM ARE INTERPOLATED IN THE GOVERNMENT DATA SO WE FOCUS ON A NUMBER THAT IS SPIKING TRUTH, INFLATION AND WE LOOKED AT THE NON-STICKY CPI FROM THE ATLANTA FED AND OTHER METRICS. THAT IS WHAT WE WILL CONTINUE TO WATCH BECAUSE WE ARE HEARING FROM THE COMPANIES THAT FUEL PRICES ARE GOING TO IMPACT, NOT ALL COMPANIES BUT SOME OF THE RETAILERS IN PARTICULAR, WILL IMPACT THE MARGINS IN THE SECOND HALF OF THE YEAR. THAT IS WHAT WE ARE WATCHING. AND WE WILL CONTINUE TO STAY ON FUEL WATCH. ROMAINE: I AM CURIOUS THOUGH ABOUT YOUR OVERALL TAKE ON THIS EARNINGS SEASON. BY ANY SORT OF REASONABLE METRIC, THIS WAS A PHENOMENAL QUARTER PRETTY MUCH ALL AROUND, AT LEAST IN AGGREGATE BUT THERE ARE CONCERNS ABOUT WHETHER WE'VE REACHED A PEAK GROWTH RATE ON THE REVENUE SIDE OR PROFITABILITY SIDE. ARE YOU HOPEFUL THAT EVEN IF THERE IS A GLIDE DOWN, A REVERSION TO THE MEAN, THAT IT WILL BE MORE ORDERLY AND INVESTORS WILL BE ABLE TO DIGEST IT? NANCY: IN THE SHORT TERM, YOU NAILED THE RIGHT QUESTION -- YOU WILL SEE VOLATILITY AS EARNINGS DECELERATE AND THEY ULTIMATELY WELL. I GO BACK TO LOOK AT A NAME LIKE MICROSOFT. WHEN WE STARTED TO PAY ATTENTION TO THE PRINTS ON AS YOUR, IT WENT FROM THE HIGH 90'S AND TERMS OF PERCENT GROWTH DOWN TO WHERE IT CURRENTLY IS AROUND 30. AND THAT TAKES A TRANSITION. THE HEDGE FUND GUYS, A LOT OF THEM EXIT WHEN EARNINGS DECILE RIGHT SO YOU NEED THE VALUE INVESTORS TO STEP IN OR A NEW CONSTITUENT. I THINK THERE WILL BE DISRUPTION AROUND POTENTIALLY DO SELL RATING EARNINGS. I JUST DON'T THINK WE ARE THERE YET. I THINK WE HAVE A FEW MORE QUARTERS, IT MAY BE A COUPLE MORE YEARS OF CONTINUED, AT LEAST AT CURRENT LEVELS, MAYBE NOT ACCELERATION OF EARNINGS GROWTH BUT AT CURRENT LEVELS. ROMAINE: NANCY TENGLER COUNTING IS DOWN TO THE CLOSING BELLS WHICH ARE JUST ABOUT TWO MINUTES AWAY. AS WE SPEAK, STOCKS TAKING A LEG DOWN HITTING SESSION LOWS AS WE MOVE CLOSER TO THE CLOSING BELLS. A FULL BREAKDOWN OF ALL OF TODAY'S ACTION STARTS NOW. >> THE CLOSING ROMAINE: AND RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK HERE WITH SALLY BAKE WELL. TAKING YOU THROUGH TO THE CLOSING BELL. CAROL MASSER JOINS FROM US THE RADIO BOTH. EMILY IN FOR TIM STENOVEC. WELCOME TO OUR AUDIENCES ACROSS ALL OF OUR BLOOMBERG PLATFORMS, OUR PARTNERSHIP WITH YOUTUBE, HERE ON A THURSDAY AFTERNOON, WHERE BOND YIELDS ARE UP AND STOCKS ARE DOWN. IN FACT, STOCKS AS WE SPEAK HITTING THE SESSION LOWS. CAROL: YEAH, EXACTLY. I WAS JUST LOOKING AT ANOTHER LEG TO THE DOWN SIDE. I KEEP THINKING ABOUT SOME OF THESE RETAIL EARNINGS THAT WAVE GOT, WAL-MART, CERTAINLY A BIT OF A SALES SLOWDOWN. SO YOU WONDER WHAT THAT SAYS ABOUT THE CONSUMER. WE TALKED TO OUR BLOOMBERG INTELLIGENCE TEAM WHO SAID THAT UNDERLYING THE INFORMATION, ACTUALLY SOME OF IT DIDN’T LOOK SO BAD. EMILY: YEAH, I MEAN, WHEN YOU THINK ABOUT HIGHER RATES, THAT IS SOMETHING THAT CAN CRIMP CONSUMERS. TALK ABOUT MORTGAGE RATES ALSO EARLIER IN OUR SHOW, AND IT’S SOMETHING THAT PEOPLE WATCH AND YOU CAN SEE THOSE ECONOMICALLY SENSITIVE PARTS OF THE STOCK MARKET GETTING HIT THE MOST TODAY. LIKE YOU SAID, THE DOW AND THE RUSSELL 2,000 AS WELL. SALLY: AND IF YOU TAKE A LOOK AT THE IMAP FUNCTION ON THE TERMINAL, THERE’S A WHOLE LOT OF RED FOR THE S&P 500. IT’S BEEN A DAY WHERE THE MARKET HAS NAVIGATED A HUGE NUMBER OF FORCE, INCLUDING LONG-TERM BOND YIELDS, AND A NUMBER OF FISCAL -- ROMAINE: WE TALK ABOUT THE CONSUMER AS WELL. OBVIOUSLY THOSE RESULTS OUT OF WAL-MART, WE WERE TALKING WITH MICHAEL AT U.B. IS. HE WAS MORE OPTIMISTIC. WE ARE GOING TO GET A READ ON THE CONSUMERS WITH ROSS SALES AFTER THE BELL TONIGHT. MAYBE IT PROVIDES MORE CLARITY, MAYBE IT DOESN’T. OVERALL, INVESTORS JUST PULLING BACK JUST A LITTLE BIT. WE SHOULD POINT OUT, AS IS TYPICAL THIS TIME OF YEAR IN MID AUGUST, VOLUME IS RELATIVELY LIGHT. BUT THAT JUMP WE SAW IN BOND YIELDS UP ABOUT FIVE BASIS POINTS ON THAT 30-YEAR YIELD, TAKING A LITTLE BIT OF A BITE OUT OF THE EQUITY MARKET. THE DOW JONES INDUSTRIAL AVERAGE LOSING ABOUT 686 POINTS OR 1.3%. THE S&P 500 DOWN ABOUT 66 POINTS, OR .9% ON THE DAY. THE NASDAQ COMPOSITE DOWN A FULL PERCENTAGE POINT ON THE DAY, WHILE THE NASDAQ 100 DOWN ABOUT .7%. THE RUSSELL 2,000, THAT’S GOING TO CLOSE IN THE RED, DOWN ABOUT 40 POINTS, OR 1.3%. CAROL: BACK TO THE LARGE CAPS I GO. S&P 500, DEFINITELY MORE OF A RISK-OFF TRADE. NO SURPRISE PERHAPS THERE. YOU DID SEE SAL 342 NAMES IN THE S&P 500 LOWER ON THIS THURSDAY. 157 TO THE UPSIDE. FOUR UNCHANGED. YOU HAVE THE I MAP WHICH IS SUCH A GREAT VISUAL. SALLY: IT IS. IT’S LOOKING PRETTY RED WITH ENERGY BEING THE ONLY SECTOR WHERE WE’RE SEEING A LITTLE BIT OF GREEN LIFTING IT. AND FINANCIALS DOWN ABOUT .88% AND CONSUMER STAPLES DOWN BY ABOUT 1.8% AS WE HAD THE VERY TOUGH WAL-MART EARNINGS WHERE THEY POSTED DISAPPOINTING SALES. CAROL: FOR THOSE -- ROMAINE: SORRY TO INTERRUPT. SPEAKING OF WAL-MART, WE ARE GETTING THOSE EARNINGS OUT OF ROSS STORES. OBVIOUSLY A MUCH SMALLER PLAYER, BUT STILL ONE THAT IS A SIGNIFICANT READ ON THE CONSUMER. THE SECOND QUARTER NUMBERS SHOW THE E.P.S. COMING IN AT ABOUT $2.66 PER SHARE, WELL ABOVE STREET ESTIMATES OF -- THAT’S VERSUS A YEAR AGO WHEN IT HAD .56 A SHARE. SO AN INCREASE IN E.P.S. ON A YEAR OVER YEAR BASIS. NET SALES IN THE MOST RECENT QUARTER, THAT DID COME IN SLIGHTLY ABOVE ESTIMATES, 6.26 BILLION DOLLARS. THE STREET ON AVERAGE WAS LOOKING FOR ABOUT $6.16 BILLION. WE’LL ROUND THAT UP TO ABOUT $6.2 BILLION. SO 13% GROWTH ON SALES, JUST SLIGHTLY ABOVE ESTIMATES. CAROL: VERY INTERESTING. THIS HAS BEEN AN OUTPERFORMER THIS YEAR. SHARES OF ROSS STORES ARE UP 27% YEAR TO DATE. WE’RE SEEING ANOTHER POP TO THE UPSIDE. WE JUST TALKED WITH OUR MARKET GUEST, SKYLER. THIS IS A NAME HE LIKES. HE THINKS IT’S A RETAIL THAT ARE PLAYS TO A CERTAIN SECTOR AND HAS BEEN DOING FAIRLY WELL AND WAS LOOKING FORWARD TO EARNINGS HERE. ROMAINE: IT’S UP. EMILY: THE BEEN ON FIRE AND IT LOOKS LIKE THAT OPTIMISM IS GOING TO CONTINUE. THE COMPANY SAYING THEY’RE RAISING THEIR OUTLOOK FOR BOTH THE THIRD AND THE FOURTH QUARTERS AND THAT AT LEAST IN THE PREVIOUS QUARTER, THE GROWTH WAS SUPPORTED BY AN INCREASE IN NEW CUSTOMERS. AND HIGHER ENGAGEMENT FROM EXISTING CUSTOMERS. SALLY: IN THE PRIOR QUARTER, WELL WITH THE 18 TO 24-YEAR-OLD CROWD, ROSS DID WELL. THE GEN-Z WHO WERE UNDER PRESSURE FROM INFLATION GOING DOWN INTO THE OFF-PRICE RETAILER. ROMAINE: TELL ME ABOUT IT, SALLY. CAROL: IS THAT BECAUSE YOU’RE SHOPPING THERE OR SHOPPING FOR SOMEONE THERE? ROMAINE: I’M NOT TOUCHING THAT. [LAUGHTER] CAROL: LET’S GO TO SOME OF THE GAINERS. YOU KNOW, RISK-OFF REMAINED ON THE EQUITY SIDES OF THINGS. WE SAW RATES GOING UP. YOU KNOW WHAT WAS INTERESTING, OUTPERFORMANCE. CHECK OUT BITCOIN, AS HIGH AS $72,949 AT ITS HIGH. I KNOW. SHOULD CHECK ON YOUR BITCOIN, SEE WHAT IT’S WORTH NOW, BUDDY. ROMAINE: I FORGOT MY PASSWORD. CAROL: YOU AND MATT MILLER. ROMAINE: THOSE PASSWORDS ARE LONG. CAROL: WRITE THEM DOWN OR DO SOMETHING. LET’S GET TO SOME CRIP TOE PLAYERS IN THE SPACE RIDING HIGH AS A RESULT. THE PRESIDENT’S MEETING WITH CRIP TOE C.E.O.’S AND LOBBYISTS, THIS HAS GIVEN THIS SECTOR SOME MOMENTUM OVER THE LAST TWO DAYS. LET’S GO THROUGH IT. STRATEGY UP 7.8%. TOPPING THES IN A DA DAK 100. IN THE PAST TWO DAYS ALONE, WE’VE SEEN IT UP ABOUT 20%, STILL DOWN ABOUT 76% FROM ITS ALL-TIME HIGH. BACK IN LATE 2024. BUT NONETHELESS, SOME OUTPERFORMANCE AGAIN WITH STRATEGY, COIN-BASED GLOBAL UP 7.6%. AND THEN YOU ALSO HAD CIRCLE INTERNET GROUP, THAT ONE, 6.5% GAIN. AND THEN MOVING ON OVER TO GALAXY DIGITAL, THAT ONE UP ABOUT 7.2% AGAIN. SO THAT SECTOR REALLY HAS HAD A VERY STRONG BULLISH TWO-DAY RUN HERE. AND THEN JUST FOR SOMETHING DIFFERENT, SOMETHING SIMPLER, DEERE. TOP NAME IN THE S&P 500, YOU CAN SEE THAT ONE UP ALMOST 7% IN TODAY’S SESSION. MANUFACTURER OF TRACTORS RAISING THE LOWER END OF ITS ANNUAL PROFIT OUTLOOK, CITING IMPROVEMENT IN EARLY ORDER PROGRAM TRENDS, INVENTORIES, FOR USED EQUIPMENT, AND ADOPTION OF ITS ADVANCED TECHNOLOGIES. IT ALSO POSTED THIRD QUARTER EARNINGS THABEET HELPED BY A TARIFF REFUND. EMILY: WE’RE GOING TO STAY ON THE RETAILERS BECAUSE I’M STARTING WITH WAL-MART. THAT STOCK CLOSING DOWN 9% TODAY. IT’S, AGAIN, A MIXED BAG FOR ALL OF THESE CONSUMER-FACING COMPANIES. AS LEAST FOR THIS QUARTER FOR WAL-MART, THE SHAREHOLDERS JUST WEREN’T HAPPY WITH THE RESULTS. THEY DID REPORT THE SLOWEST U.S. SALES GROWTH IN SIX YEARS, SALES AT U.S. STORES OPEN AT LEAST A YEAR, EXCLUDING FUEL, ROSE 2.6% IN THE SECOND QUARTER. THAT WAS SHY OF EVEN THE LOWEST ANALYSTS ESTIMATES COMPILED BY BLOOMBERG AND THE BIG BOX RETAILER SAID IT WAS HINDERED BY PRICING PRESSURE IN ITS PHARMACY BUSINESS. SO, AGAIN, THAT STOCK FALLING ABOUT 9%. MODERNA FALLING. NOW, IT DID HAVE A RECORD DAY YESTERDAY. BUT EVERYTHING THAT GOES UP, I GUESS HAS TO COME DOWN. THAT STOCK FINISHING THE DAY DOWN 24%. IT WAS THE BIGGEST FULL-DAY DROP ON RECORD, BUT OF COURSE THIS IS COMING AFTER YESTERDAY’S 177% CLIMB, STEMMING FROM A CLINICAL TRIAL, WHEN SHARES OF THE DRUG MAKE HEIR BASICALLY MORE THAN DOUBLED AFTER THE COMPANY SAID THAT ITS CANCER VACCINE CUT THE RECURRENCE OF MELANOMA IN A LARGE LATE-STAGE TRIAL. BUT THAT STOCK, MAYBE SOME INVESTORS TAKING SOME PROFITS HERE. FINALLY, SPACEX. IT’S NOW ABOUT FLAT FROM ITS I.P.O. IT DID DROP ABOUT 4% TODAY. TODAY’S SECOND TRANCHE OF THE STOCK WAS RELEASED. FROM A POST-INITIAL PUBLIC OFFERING LOCKUP PERIOD. SO COUPLE PEOPLE THAT WERE IN ARE NOW TRYING TO GET OUT. CAROL: ALL RIGHT, GUYS. THAT IS A WRAP. UP A LITTLE BIT OF EARNINGS AND A LOOK AT THE MARKET TRADE. THAT IS OUR CROSS PLATFORM COVERAGE. SALLY AND ROMAINE FINISHING UP ON "THE CLOSE" ON TV. WE WILL SEE YOU AGAIN, SAME TIME, SAME PLACE TOMORROW. ROMAINE: AND WE MOVE FROM THE CASH MARKET TO THE POST MARKET AND TAKE A LOOK AT SHARES OF ROSS STORES. THEY ARE HIGHER IN THE AFTER HOURS TRADE. WE’RE GOING TO BREAK DOWN THOSE EARNINGS WHEN WE COME BACK AFTER THE BREAK RIGHT HERE ON "THE CLOSE." RIGHT HERE ON BLOOMBERG. ♪ ROMAINE: WELCOME BACK TO "THE CLOSE." LET’S LOOK AT SHARES OF ROSS STORES. IN THE AFTER-HOURS TRADE, UP ABOUT 4%. THE COMPANY JUST NOW REPORTING ITS EARNINGS AND THE RETAILER, WELL, IT’S IMPRESSING ON A LOT OF LEVELS HERE. COMSALES IN THE MOST RECENT QUARTER UP ABOUT 10%. SAYING COMP SALES SHOULD GROW AT 6% TO 7%. THE AVERAGE OF STREET ESTIMATES WAS FOR 3%. DANA TELSEY JOINS US, THE C.E.O. AND CHIEF RESEARCH OFFICER AT TELSEY ADVISORY GROUP. THERE WAS THE QUARTER THAT JUST WAS WHICH WAS GOOD BUT FOR A COMPANY TO IT BASICALLY SAY, WE’RE GOING TO LAP THAT BY DOUBLE WHAT THE STREET WAS LOOKING FOR FOR THE CURRENT QUARTER, WHAT’S GOING ON? >> ROSS STORES C.E.O. JIM RON I COULD HAS PUT IN PLACE A VERY EFFECTIVE STRATEGY. BY INCREASING INVENTORY, ENHANCING THEIR ASSORTMENT, REMODELING STORES, THEY’VE BEEN ABLE TO CAPTURE NEW CUSTOMERS AND LOOK WHAT THE COMP WAS DRIVEN BY. IT WAS DRIVEN BY TRAFFIC. SO AFTER A 17% COMP IN Q1, A 10% COMP IN Q2, THEY’RE MOVING IN THE RIGHT DIRECTION. ROMAINE: WHEN YOU SAY TRAFFIC, ARE WE TALKING NEW CUSTOMERS, OR JUST THE EXISTING CUSTOMER GOING IN MORE? >> I THINK WITH COMPS LIKE THIS, I THINK YOU’RE GETTING A BIT OF BOTH. YOU DON’T DELIVER DOUBLE-DIGIT COMPS TWO QUARTERS IN A ROW, WITH ONLY EXISTING. IT’S GOT TO BE A MIX OF BOTH. AND YOU’RE ALSO SEEING THE GOODNESS IN MARGINS TOO COME THROUGH AND BY RAISING THE GUIDANCE, THE THIRD QUARTER SEEMS TO BE OFF TO A STRONG START. ROMAINE: GIVE ME SOME SENSE HERE, WITH REGARDS TO SOME OF THE CHANGES THAT HAVE BEEN MADE THERE. BECAUSE FOR A WHILE ROSS WAS KIND OF STRUGGLING AND IT WAS KIND OF ONE OF THOSE RETAILERS, YOU DIDN’T REALLY KNOW WHERE THEY QUITE FIT IN. I MEAN, I KNOW THEY’RE KIND OF DISCOUNT BUT WHY GO THERE AS OPPOSED TO A KOHL’S OR T.J. MAX? WHAT IS THE IDENTITY OF ROSS STORES NOW? WHAT IS CUSTOMER THEY’RE GOING FOR? >> I THINK THEY’VE UPDATED THEIR IDENTITY. WHEN JIM CAME IN, HE IS A GROWTH C.E.O. HE INVESTED IN MARKETING. HE INVESTED IN REMODELING THE STORE. HE’S GETTING YOUNGER CUSTOMERS. HE’S GETTING EVEN SOME CUSTOMERS WHO ARE THEIR EXISTING CUSTOMERS, WHO ARE COMING BACK MORE FREQUENTLY. HE’S BASICALLY UPDATED THE ASSORTMENT, PARTICULARLY IN APPAREL, WHERE HE HAS MADE STRONG HEADWINDS INTO GETTING MORE BRAND NAMES. IT’S NOT JUST BETTER MERCHANDISE, ON THE BETTER BRAND, IT’S ACROSS THE PLATFORM. AND THE OTHER THING THAT IS GOING TO COME GOING FORWARD, WITH THE UPTICK IN THE NUMBER OF NEW STORE OPENINGS, NORTHEAST, I THINK HE’S GOING TO ACCELERATE HIS RATE OF STORE OPENINGS IN THE NORTHEAST. AND HE HAS MORE NEW CUSTOMERS TO CAPTURE. ROMAINE: TALK A LITTLE BIT ABOUT THAT. THE NUMBER OF STORES WENT UP SLIGHTLY. AND I JUST POINT OUT, OBVIOUSLY I’M IN MY LITTLE BUBBLE HERE IN MANHATTAN SO YOU DON’T REALLY SEE TOO MANY ROSS STORES AROUND, BUT WHERE IS -- I MEAN, WHERE ARE THEY SORT OF GEOGRAPHICALLY LOOKING AT? IN TERMS OF, IS IT SUBURBAN AREAS, URBAN AREAS, WHERE? >> SO OVERALL THEY HAVE OVER 40% OF THEIR STORES IN CALIFORNIA. THEY’RE NOW COMING TO THE NORTHEAST. YOU’RE GOING TO SEE THEM GO TO SOME OF THE SUBURBAN AREAS MORE SO THAN THE URBAN AREAS. AND SO FAR WE’VE HEARD ABOUT SOME OF THE STORES THEY’VE OPENED IN THE NORTHEAST, IN THE SUBURBS, THEY’VE PERFORMED A LITTLE BIT BETTER THAN EXPECTED. SO I DON’T THINK IT’S A SURPRISE THAT THEY’RE TAKING UP THEIR RATE OF NEW STORE OPENINGS. ROMAINE: BEFORE WE LET YOU GO, I HAVE TO GET YOUR THOUGHTS ABOUT T.J.X. BECAUSE THERE WAS A LOT OF TALK ABOUT WHY THE QUARTER WAS RELATIVELY WEAK AND THE IDEA THAT THERE MIGHT HAVE BEEN SOME MISSTEPS WITH REGARDS TO THEIR MERCHANDISE SELECTION. DO YOU HAVE ANY INSIGHTS AS TO WHAT HAPPENED? >> COUPLE THINGS. THE COMP STORE SALES OF THAT DIVISION WERE BELOW EXPECTATIONS AT 1%. SELF-INFLICTED EXECUTION ISSUES IS HOW THEY’RE TERMING IT. ONE OF THE INTERESTING TAKEAWAYSAWAYS IS THE FACT THAT WHEN THEY LOOKED AT THEIR SALES PERFORMANCE IN STORES NEAR COMPETITORS, AND THOSE NOT NEAR COMPETITORS, THEY PERFORMED THE SAME. SO TO ME WHAT THAT SAYS IS IT WAS AN EXECUTION ISSUE. THIS HAPPENED YEARS AGO AT T.J., THEY COURSE CORRECTED IT, AND THEY’RE EXPECTING COMPS TO RETURN, AT LEAST TO THE 2% TO 3% LEVEL IN THE FOURTH QUARTER. I THINK THEY HAVE TOP ATTENTION TO THIS, BOTH FROM THE C.E.O. ON DOWN AT T.J. AND THERE’S A VERY STRONG COMPANY WITH GREAT VENDOR RELATIONSHIPS. I DON’T THINK YOU COUNT T.J. OUT. I THINK THEY CONTINUE TO WORK, IF YOU LOOK AT THE COMPS YOU SAW, 6% TO 7%, BOTH AT HOME GOODS, AND IN THEIR INTERNATIONAL BUSINESSES OF INTERNATIONAL AND CANADA. ROMAINE: ALL RIGHT, DANA, I’LL LET YOU GO HERE. DANA TELSEY, C.E.O. AND CHIEF RESEARCH OFFICER AT TELSEY ADVISORY GROUP. THOSE EARNINGS OUT OF ROSS ARE OUT AND THE CONFERENCE CALL SET TO START IN A MATTER OF MOMENTS. BEFORE WE CONTINUE HERE ON THE RETAIL SPACE, I DO JUST WANT TO BRING A QUICK HEADLINE IN THE WORLD OF A.I. AND THAT INVOLVES BROADCOM. THE CHIP MAKER. NOW WE’RE LEARNING BASED ON BLOOMBERG REPORTING THAT THE COMPANY PLANS -- IS IN TALKS WITH A GROUP OF LENDERS TO RAISE MORE THAN $60 BILLION IN DEBT FOR AN A.I. CHIP FINANCING DEAL THAT WILL ACTUALLY BENEFIT ANTHROPIC AND OTHER COMPANIES. THIS ACCORDING TO PEOPLE FAMILIAR WITH THE SITUATION THAT SPOKE ON CONDITION OF ANONYMITY. WE’LL TRY TO GET YOU MORE DETAILS ON THAT. NOT MUCH MOVEMENT THERE IN THE STOCK. THERE IS A LOT OF MOVEMENT, THOUGH, ON ROSS STORES. NOW UP ABOUT 5% HERE ON THE DAY. AND MAYBE AN INTERESTING COUNTERWEIGHT TO WHAT WE SAW EARLY ERR IN THE DAY OUT OF WAL-MART WHICH OF COURSE WAS TO THE DOWN SIDE. MARY ROSS GILBERT IS SENIOR ANALYST AT BLOOMBERG INTELLIGENCE COVERING RETAILERS. MARY, LET’S START WITH ROSS HERE. YOU HEARD DANA HERE. THIS SEEMS TO BE MORE ABOUT EXECUTION, MANAGEMENT EXECUTION, RATHER THAN JUST SORT OF, YOU KNOW, SECULAR TRENDS HERE. GIVE ME A SENSE HERE OF NOT ONLY WHY THEY BEAT BUT WHY YOU THINK THEY WERE SO AGGRESSIVE IN GUIDING? >> ROMAINE, THE REASON WHY YOU’RE SEEING ROSS SO STRONG IS THAT THE COMPANY HAS REALLY SHIFTED TO AN WHAT THIS MEANS IS WHEN IT COMES TO MOVING TO THE NEXT SEASON, THEY ARE DOING IT IN A MUCH QUICKER FASHION, RATHER THAN WAITING OUT A LULL IN THE PERIOD, THEY ARE GOING AFTER THE BUSINESS AND THEN CHASING IT. THEY ARE BRINGING IN MORE UPSCALE BRAND SPIRIT YOU CAN FIND MARK JACOBS AS MUCH AS KATE SPADE IN THEIR STORES. THEY HAVE ALL THE BRANDS. ANOTHER THING TO DO A COUPLE YEARS AGO THAT HAS GIVEN A COMPETITIVE ADVANTAGE -- MAYBE THERE ARE SOME SHARE GAINS FROM SOME OF THEIR PEERS -- THEY DECIDED TO EXECUTE A PRICING STRATEGY THAT HURT THEIR MARGINS INITIALLY BUT NOW THAT WE HAVE CYCLED ALL THE PRICE ADJUSTMENTS THEY MADE, NOW WE ARE SEEING MARGIN GAINS. THEY ARE IN A COMPETITIVE POSITION. THEY ARE TAKING AN OFFENSE A BANK STRATEGY RATHER THAN A DEFENSIVE, CONSERVATIVE STRATEGY AND THAT IS WHY YOU SEE COMP GAINS STRONGER THAN PEERS. AS DANA POINTED OUT, THERE WAS SOME MIXED EXECUTION. I AGREE WITH DANA. THEY WILL COURSE CORRECT THAT VERY QUICKLY. ROMAINE: THEY SAID THE GROWTH THEY HAD AND THE GROWTH THEY ARE FORECASTING IS A MIX BETWEEN HIGHER ENGAGEMENT AMONG EXISTING CUSTOMERS AND ALSO AN INFLUX OF NEWER CUSTOMERS. WHERE ARE THE NEWER CUSTOMERS COMING FROM? THE IDEA THAT HE WOULD HAVE GONE TO A WALMART OR A KOHL'S OR A MACY'S, WHERE ARE THEY BEING POACHED FROM? MARY: THAT IS A VERY GOOD QUESTION. IT IS COMING FROM ALL OF THE ABOVE. ROSS HAS BEEN A NICHE RETAILER AND THEY TENDED TO BE VERY ATTRACTIVE TO, LET'S SAY, THE UPPER MIDDLE INCOME AND THE MIDDLE INCOME. THEY ARE ALSO ATTRACTING SOME PREMIUM CUSTOMERS, WHO MIGHT BE TRADING DOWN FROM TJX BECAUSE THEY ARE CARRYING SOME BRANDS THEY TYPICALLY FIND THAT MARMOTS, FOR EXAMPLE. THERE IS A COMBINATION OF THAT. THERE IS A LOT OF INFLUENCERS WHO ARE HAVING AN IMPACT ON DRYING AND MORE CONSUMERS. YOU ARE SEEING A BIG PICKUP. THEY ARE TAKING A STRONG STANCE ON THE MARKETING SIDE. IF YOU LOOK AT THEIR LATEST CAMPAIGN FOR THE FALL AND IT, THAT IS FEATURING BRENDA SOME, AND THEY ARE DOING A GREAT JOB. THE MERCHANDISE WILL SHOW YOU SOME EDITS. IT GIVES THE CUSTOMER IDEAS ON HOW TO PUT TOGETHER OUTFITS. THAT INCREASES BASKET, TOO. ROMAINE: MARY ROSS GILBERT, SENIOR ANALYST AT BLOOMBERG INTELLIGENCE. THAT CONFERENCE CALL FOR ROSS STORES IS UNDERWAY. WE WILL CONTINUE OUR FOCUS ON THE CONSUMER AND A FUN CONVERSATION WITH DAN FACHNER OF J&J SNACK FOODS. YOU HAVE HEARD OF SUPER PRETZEL. THAT CONVERSATION COMING UP NEXT RIGHT HERE ON "THE CLOSE," ON BLOOMBERG. >> REPORTS OF THE MOVIE BUSINESS' DEATH ARE GREATLY EXAGGERATED. WE WENT THROUGH COVID AND A TERRIBLE STRIKE THAT WAS EXTREMELY DESTRUCTIVE. IT REALLY COMPROMISED THE AMOUNT AND VARIETY OF PRODUCT THAT WAS IN THE THEATERS. NOW IT IS BACK. THERE IS GREAT PRODUCT. THE THING THAT IS REALLY ENCOURAGING ABOUT IT IS YOUNG PEOPLE ARE GOING BACK TO THE MOVIES. ROMAINE: TOM ROTHMAN, THE CEO OF SONY. I WANTED TO PLAY THE CLIP BECAUSE I LOVE TOM. THAT CLIP ALSO INTERSECTS WITH OUR NEXT GUEST. AS THE BOX OFFICE HAS ITS MOMENT ONCE AGAIN, QUESTIONS REMAIN WHETHER THE REBOUND IS GOING ACROSS THE BROADER ECONOMY. J&J SNACK FOODS LIVES AT THAT INTERSECTION OF IT THEATERS, THEME PARKS AND BOMB PARTS. ICEE, DIPPIN' DOTS AND SUPERPRETZEL. DAN FACHNER JOINS US RIGHT NOW. DAN: NICE TO BE HERE. ROMAINE: YOU MUST HAVE THE MOST FUN JOB. HARD NOT TO BE GOOD. I WANT TO START WITH THE THEATER EXPERIENCE. I INTERACT WITH A LOT OF YOUR PRODUCTS WHEN I GO TO THE THEATER OR THE BALLPARK AND SEE DIPPIN' DOTS OR SOMETHING LIKE THAT. WHAT IS THE GENERAL STRATEGY FOR GROWTH. ARE YOU MORE FOCUSED ON THOSE AREAS? ARE YOU MORE FOCUSED ON THE TAKE FROM GROCERY TYPE BUSINESS? DAN: 60% OF OUR BUSINESS IS IN FOOD SERVICE. IN A SPOT WHERE WE CONTINUE TO GROW. WE HAVE TREMENDOUS BRANDS. YOU GO TO THE THEATER AND YOU GET AN ICEE. THE THEATER HAS COME CHARGING BACK. MANY THOUGHT IT WAS LEFT FOR DEAD AND IT HAS COME CHARGING BACK. THEY HAD A RECORD-BREAKING WEEKEND WITH SPIDER-MAN. ROMAINE: TOM SEEMS TO THINK THIS WILL CONTINUE. THIS IS A START OF SOMETHING BIG. MORE PEOPLE WANT TO HAVE THESE EXPERIENCES -- NOT JUST MOVIES BUT WANTING TO BE OUT WITH EXPERIENCES. I ASSUME LONG-TERM THAT WOULD HAVE TO HAVE A POTENTIAL UPSWING ON YOUR BUSINESS. DAN: IT HAS A GREAT IMPACT FOR THE BUSINESS. JUST LIKE WE TALKED ABOUT EARLIER, WHEN YOU GO TO A THEATER YOU THINK ABOUT GETTING A POPCORN AND AN ICEE. WHEN YOU GO TO AN AMUSEMENT PARK, THE BEST PART IS THE DIPPIN' DOTS. IF YOU GO TO A BALLGAME, YOU ARE THINKING ABOUT A BIG SOFT PRETZEL WITH MUSTARD. ROMAINE: IF I SENT OF MY COUCH WITH AN ICEE AND DIPPIN' DOTS, I WOULD BE JUDGED BY MY WIFE. SALLY: NOBODY SEES YOU IN THE THEATER. ROMAINE: THERE ARE A LOT OF QUESTIONS AS TO WHEN THAT GIVES TO A POSITIVE NUMBER AND WHAT ACTUALLY GET YOU THERE. DAN: WE THINK WE ARE THERE COMING INTO 2027. THE LAST YEAR WE HAVE BEEN WORKING ON A TRANSFORMATION INITIATIVE. WE HAD SOME SKEW RATIONALIZATION TO BUILD OURSELVES FOR THE FUTURE. THAT ENDS AT THE END OF OUR FOURTH QUARTER. AS WE GET INTO THE FIRST QUARTER OF 2027, WE THINK WE HAVE THE OPPORTUNITIES TO GET BACK TO GROWTH. ROMAINE: WHEN YOU TALK ABOUT THE GROWTH, WILL THIS BE PURELY ORGANIC? WILL THIS BE ABOUT EXPANSION? FINDING NEW PARTNERS AND THINGS LIKE THAT? DAN: IT WILL BE A COMBINATION. WE HAVE SOME GREAT NEW CUSTOMERS. WE HAVE BEEN PUSHING OUR CORE -- WE THINK OF ICEE, SUPERPRETZEL, DIPPIN' DOTS -- WE HAVE GREAT NEW CUSTOMERS COMING ON BOARD. WE WILL SEE THAT EFFECT AS WE GET INTO 2027. ROMAINE: I REMEMBER ON THE CALL YOU TALKED ABOUT A MAJOR PRETZEL DEAL THAT YOU HAVE WITH -- I ASSUME IT IS A FAST FOOD CHAIN. YOU WILL BE ON THE MENU? DAN: WE ARE HAVING OUR PRETZEL IN A BUN FORM. I CANNOT TELL YOU WHO IT IS WITH BUT IT IS EXCITING TO BE HAVE YOUR BRAND. ROMAINE: DO YOU PLAN TO TRY TO DO MORE OF THAT? DAN: TEAMS ARE DOING REALLY GOOD WITH A GREAT PIPELINE OF NEW BUSINESS. ROMAINE: I KNOW YOU CANNOT NAME THEM, BUT WHEN YOU TALK ABOUT THOSE PARTNERSHIPS, IS THE IDEA THAT YOU, J&J SNACK FOODS AND THESE BRANDS ARE ADDING VALUE TO THOSE CHAINS, OR IS IT VICE VERSA? DAN: I THINK IT IS A LITTLE BOTH WHEN YOU GET TO USE YOUR BRAND NAME. I THINK A PRETZEL BRINGS VALUE TO A LOT OF CHAINS, AS DOES DIPPIN' DOTS OR ICEE. ROMAINE: WHEN WE TALK ABOUT THE FOOD SERVICE AND THE DROP WE SAW, SOME OF THAT WAS BECAUSE OF THE PLANNED SKEW CUTS. DAN: IT WINDS DOWN IN Q4. IT WAS ABOUT 3.5% OF SALES IN Q3 AND 2.5% IN Q4. ROMAINE: I HAVE TO ASK ABOUT THE GLP-1 CRAZE. A LOT OF PEOPLE ARE ON THE MEDICINES OR EATING LESS SUGARY AND SALTY FOODS. HAS THAT AFFECTED YOUR BUSINESS? HAVE YOU MADE ANY CHANGES TO YOUR LETTER TO ADDRESS THAT? DAN: ABSOLUTELY. AS A CEO YOU HAVE TO PAY ATTENTION TO THE TRENDS. GLP-1 HAS SOME IMPACT. WE ARE NOT SEEING A LOT BECAUSE OUR PRODUCTS ARE EXPERIMENTAL. WE ARE WORKING ABOUT MORE INNOVATION LIKE A PROTEIN ENRICHED PRETZEL. 10 GRAMS OF PROTEIN IN IT. OR LUIGI'S MINI POP, SMALLER SIZE WITH HYDRATION AND ANTIOXIDANTS. THE TEAM IS DOING A LOT OF GREAT THINGS TO LEAN IN AND MAKE IT GLP-1 FRIENDLY. ROMAINE: WHAT IS YOUR HOUSE LIKE ON HALLOWEEN? YOU MUST BE POPULAR. YOU LOAD UP THE FREEZERS AND PUT THEM ON THE PORCH? DAN: EVERYBODY LOVES US. ROMAINE: YOU STARTED IN ICEE WHEN YOU WERE A YOUNG ADULT. YOU HAVE GROWN WITH THEIR COMPANY FROM A SERVICE TECHNICIAN WITH ICEE MACHINES TO CEO OF THIS BROADER SNACK FOOD. DAN: I STARTED AS A SERVICE TECHNICIAN AND WORKED MY WAY THROUGH THE COMPANY. BECAME CEO OF ICEE AT 37 YEARS OLD. SIX YEARS AGO I BECAME THE CEO OF J&J SNACK FOODS. YOU UNDERSTAND THE DIFFERENT JOBS ALONG THE WAY AND YOU VALUE PEOPLE. GOOD TEAMS ARE WHAT MAKES COMPANIES A SUCCESSFUL. ROMAINE: IF YOU GO INTO THE THEATER AND YOU SEE AN ICEE MACHINE, WHAT FLAVOR ARE YOU GETTING? DAN: STRAWBERRY LEMONADE. IF IT IS NOT IN THERE, I WILL GO BLUE RASPBERRY. ROMAINE: I LIKE BLUE RASPBERRY MIXED WITH THE COKE. DAN, GREAT TO HAVE YOU HERE. DAN FACHNER, THE CEO OF J&J SNACK FOODS. THE OWNER OF ICEE, DIPPIN' DOTS AND SUPERPRETZEL. WE WILL TURN BACK TO THE MARKETS AND TALK ABOUT AN INTERESTING COLUMN BY THE NEW YORK FED PRESIDENT, BILL DUDLEY. HE SEES A BUBBLE IN EQUITY MARKETS AND THINKS IT WILL POP IN 2027. THAT IS COMING UP NEXT ON "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: FORMER NEW YORK FED PRESIDENT BILL DUDLEY, ALSO A BLOOMBERG OPINION COLUMNIST, IS OUT WITH A NEW COLUMN. HE’S WARNING THAT THE U.S. EQUITY MARKET IS IN BUBBLE TERRITORY. DUDLEY WRITES IN THIS COLUMN, THE TILT TOWARD EVEN HIGHER YIELDS AND THE DIMINISHING IMPACT OF A.I. SPENDING ON THE ECONOMY COULD MEAN THAT THE BUBBLE AS HE SEES IT MAY BE SET TO POP IN 2027. PLEASED TO SAY THAT BILL DUDLEY JOINS US RIGHT NOW TALK TO A LITTLE BIT MORE ABOUT THAT. BILL, I WANT TO START OFF FIRST WITH THIS IDEA OF THE BUBBLE ITSELF. AND SORT OF WHAT THE METRICS YOU’RE USING TO I GUESS MAKE THAT JUDGMENT CALL, THAT THIS IS INDEED A BUBBLE, OR BUBBLE TERRITORY. >> THE FIRST THING YOU SEE IS THE EQUITY MARKET VALUATIONS ARE REALLY STRETCHED. IF YOU LOOK AT THE SHILLER RATIO, IT’S AT 41, ALL-TIME HIGH WAS 44 IN DECEMBER, 1999. THE AVERAGE OVER THE LAST, YOU KNOW, 25, 30 YEARS HAS BEEN ABOUT 17. YOU LOOK AT THE REAL EQUITY RISK PREMIUM, THE RETURN FOR HOLDING EQUITIES, 1.1%. EXCESS EXPECTED RETURN, LESS THAN HALF THE AVERAGE THE WE’VE SEEN SINCE 2010. LOOK AT THE BUFFET INDICATOR WHICH IS JUST THE U.S. MARKET CAP TO G.D.P. RATIO, IT’S AROUND 240%. BUFFET SAID THAT THE STOCK MARKET WAS AT A RISK WHEN IT WAS ABOVE 100. YOU LOOK AT VALUATIONS AND THEN YOU THINK ABOUT WHAT’S ACTUALLY HAPPENING IN THE CYCLE. HUGE INVESTMENT BOOM GOING ON IN ARTIFICIAL INTELLIGENCE, AND, YOU KNOW, THIS YEAR WE’RE GETTING TREMENDOUS IMPETUS TO THE COUNTY FROM THAT BUT THE IMPETUS IN 2027 IS ALMOST CERTAINLY GOING TO LESSEN BECAUSE IT’S NOT THE LEVEL OF INVESTMENT, IT’S THE CHANGE IN INVESTMENT THAT MATTERS. AND THE CHANGE IN INVESTMENT ALSO MATTERS FOR EARNINGS GROWTH OF THE SUPPLIERS TO THE A.I. HYPERSCALERS. SO I THINK THAT THAT’S ANOTHER THING THAT’S GOING TO START TO WIN THE MARKET IS, YOU’RE GOING TO START TO SEE A SLOWDOWN IN THE BOOM ITSELF. AND WHEN THE BOOM SLOWS, THAT MEANS PROFIT GROWTH EXPECTATIONS ARE GOING TO COME DOWN. AND THERE’S DOWNWARD PRESSURE ON PROFIT MARGINS. SO JUST LIKE YOU HAD A REALLY GREAT STORY ON THE WAY UP, EXPANDING PROFIT MARGINS, HIGHER VOLUME, ON THE WAY DOWN, YOU’LL HAVE SLOWER VOLUME GROWTH, AND MORE CONSTRAINING PROFIT MARGINS. THE LAST PROBLEM YOU HAVE FOR THE A.I. IS JUST THE FACT THAT, ARE THE A.I. HYPERSCALERS GOING TO BE ABLE TO GENERATE THE $2 TRILLION OF REVENUE THEY NEED TO JUSTIFY THEIR INVESTMENT? ROMAINE: ABSOLUTELY. AND WE’RE GOING TO GET THERE IN A SECOND BUT I DO WANT TO GO BACK TO THE FINANCING THING BECAUSE -- AND WE KNOW OBVIOUSLY THESE LEVELS CAN’T SUSTAIN THEMSELVES, BUT THEN YOU TALK TO, YOU KNOW, THE C.E.O.’S OF THESE COMPANIES OR THE ANALYSTS WHO COVER THEM AND THEY ALL SEEM TO THINK AT LEAST FOR THE NEXT TWO OR THREE YEARS, THAT WE’RE GOING TO CONTINUE TO KIND OF SEE THIS TYPE OF SPENDING AND THERE WAS A STORY THAT JUST CROSSED THE WIRE BEFORE YOU CAME ON, ON BROADCOM HELPING TO ARRANGE A FINANCING DEAL FOR $60 BILLION, $70 BILLION. IT SEEMS -- I KNOW IT’S NOT NEVER-ENDING, BUT WHEN I HEAR, OK, 2027, THAT’S AROUND THE CORNER. YOU DON’T THINK THAT SOME OF THESE TENS OF BILLIONS, HUNDREDS OF BILLIONS OF DOLLARS THAT HAVE ALREADY BEEN ANNOUNCED, AND THE IDEA THAT THEY KEEP RAISING THEIR CAPEX NUMBERS, YOU DON’T THINK THAT THAT IS GOING TO CONTINUE MUCH LONGER? >> I THINK CAPEX IN 2027 WILL BE HIGHER THAN 2026 BUT THE INCREASE IN CAPEX IN 2027 WILL BE SMALLER THAN THE KRIEN THE INCREASE IN 2026. IF YOU LOOK AT THE FINANCING, IT’S MUCH LESS BY THE HYPERSCALERS DOING IT OUT OF THEIR OWN CASH FLOWS AND BALANCE SHEETS SO IT’S GETTING PRETTY WHITE HOUSE AS THE SUPPLIERS ARE LENDING TO HIGHER SCALERS AND PRIVATE EQUITIES -- PRIVATE CREDIT IS DOING THEIR OWN PIECE. SO YOU’RE ALSO GETTING GREATER OWE PASSITY IN TERMS OF HOW THIS IS ACTUALLY BEING FUNDED. THE WAY IT COMES TO AN END I THINK IS PRETTY SIMPLE. PROFIT MARGINS, YOU KNOW, -- THE WHOLE THING STARTS TO SLOW, PROFIT MARGINS START TO BE COMPRESSED AND THEN THE EXPECTATIONS OF FUTURE PROFITS GET DIMINISHED. AND, YOU KNOW, THE STOCK MARKET’S DISTRIBUTE DISCOUNTED PRESENT VALUE OF FUTURE EARNINGS, YOU START PUSHING DOWN EARNINGS EXPECTATIONS, THAT FLOES BACK TO THE STOCK PRICE AT PRESENT. ANOTHER ISSUE THAT DOESN’T GET A LOT OF ATTENTION IS THE SUPPLY OF EQUITIES IS GOING TO INCREASE. WE’VE HAD SOME REALLY BIG I.P.O.’S THIS YEAR. AND THE LOCKUP’S ON THOSE I.P.O.’SING ARE GOING TO END, SO YOU HAVE A FLOW OF EQUITIES THAT HAS TO BE ABSORBED BY THE MARKETPLACE. ROMAINE: SPEAKING OF WHICH, WE REPORTED EARLIER TODAY THAT ANTHROPIC, WHICH IS LOOKING TO COME TO MARKET, IS NOW LOOKING LIKE IT ACTUALLY MIGHT ACTUALLY BE AS BIG, MAYBE NOT BIGGER, THAN SPACEX. I DO WANT TO GET YOUR THOUGHTS SPECIFICALLY, THOUGH, ON THIS IDEA OF THE REVENUE AND PROFITABILITY CATCH-UP TO ALL OF THIS CAPEX SPEND. I MEAN, YOU CAN PUT THE NUMBERS ON A PIECE OF PAPER, YOU CAN SEE HOW AM BENEFICIARIES THIS SPEND SOMETHING AND THE IDEA THAT YOU DO NOT HAVE A REVENUE STREAM, AT LEAST RIGHT NOW, THAT’S COMMENSURATE WITH THAT SPEND. IS THIS JUST KIND OF A REDUCKS OF WHAT WE SAW WITH THE DOT-COM BUILDOUT OR THE TELECOMBUILDOUT OR EVEN THE RAILROAD BUILDOUT? >> YEAH, I THINK IT IS BECAUSE I THINK EVERYBODY WANTS TO BE FIRST BECAUSE IT’S A WINNER TAKE ALL KIND OF GAME. SO EVERYONE’S PUTTING ALL THEIR CHIPS ONTO THE TABLE AND WHAT’S PROBABLY GOING TO HAPPEN IS WE END UP WITH OVERCAPACITY, YOU LOSE THE ABILITY TO HAVE A LOT OF CONTROL OVER PRICING. AND SO YOUR ABILITY TO CHARGE WHAT YOU WANT TO CHARGE TO JUSTIFY YOUR INVESTMENT STARTS TO BECOME IMPAIRED. THE RAILROAD AND INTERNET AND TELECOM BOOM, ALL OF THOSE THINGS DID GREAT THINGS FOR THE ECONOMY. TWO THINGS CAN BE TRUE AT THE SAME TIME BUT THE TECHNOLOGICAL INNOVATION CAN BE REALLY TRANSFORMATIVE, BUT AT THE SAME TIME YOU CAN HAVE AN INVESTMENT BOOM AND BUST. IF YOU LOOK AT HISTORY, IT TELLS YOU THAT THAT’S USUALLY THE CASE. SO THE QUESTION HERE IS REALLY JUST -- NOT WHETHER IT’S GOING TO BE IN TERMS OF A BOOM TO BUST. IT’S REALLY A QUESTION OF TIMING AND MAGNITUDE. ROMAINE: HYPE SCALERS, THEY HAVE MADE THE ARGUMENT PUBLICLY THAT IF THERE IS EXCESS CAPACITY FROM THIS DATA CENTER BUILDOUT, THE IDEA IS THAT MAYBE EXCESS CAPACITY FOR THE A.I. SPECIFIC STUFF, THAT THE IDEA IS THAT THERE’S STILL ENOUGH SORT OF COMPUTING AND CLOUD COMPUTING BUSINESS NON-A.I. STUFF THAT ALL OF THIS EQUIPMENT AND THESE FACILITIES CAN HANDLE. IS THAT JUST KIND OF A LITTLE BIT OF A RED HERRING IN YOUR VIEW? >> WELL, I JUST THINK THE MAGNITUDE OF THE INVESTMENT IS SO GREAT RELATIVE TO WHAT WE’VE SEEN HISTORICALLY THAT IT’S HARD FOR ME TO IMAGINE THAT CLOUD-COMPUTING BY ITSELF COULD TAKE UP ALL THIS CAPACITY. WE’RE TALKING ABOUT AN EXTRAORDINARILY LARGE INCREASE IN -- ORDERS OF MAGNITUDE INCREASING IN COMPUTE CAPACITY. NOW, IT’S FINE, THAT CANNOT BE VERY USEFUL BUT AT THE END OF THE DAY IS IT ALL GOING TO BE NEEDED AND ARE PEOPLE GOING TO BE ABLE TO PRICE FOR THAT? ROMAINE: WITH REGARDS TO THE ECONOMIC IMPACT, DO YOU NOT BUY INTO THIS IDEA OF THE PRODUCTIVITY IMPROVEMENTS AND ENHANCEMENTS THAT A.I. WILL BRING OR MAY BRING OR MAYBE HAS ALREADY BROUGHT FOR SOME COMPANIES? >> I THINK THERE’S GOING TO BE SIGNIFICANT PRODUCTIVITY ENHANCEMENTS BUT IT’S NOT CLEAR THAT THE PRODUCTIVITY ENHANCEMENTS NECESSARILY ALL GO TO THE A.I. PROVIDERS. YOU KNOW, HISTORICALLY, YOU LOOK AT A LOT OF INNOVATIONS, A LOT OF THE EXCESS RETURNS GET COMPETED AWAY AND WHY SHOULD THEY BE -- WHY SHOULD THEY BE COMPETED AWAY IN THIS CASE? WE HAVE SEVEN OR EIGHT DIFFERENT FIRMS THAT ARE GOING ALL-IN INTO THIS SPACE. WE’RE PROBABLY GOING TO TURN OUT WITH TWO OR THREE THAT ARE GOING TO BE VIABLE IN THE LONG RUN. GETTING THERE IS GOING TO BE PAINFUL. ROMAINE: WHAT ABOUT THE COST OF CAPITAL? THAT’S GONE UP. WE’VE SEEN SOME ISSUERS THAT BORROWED AT ONE RATE, MAYBE A FEW MONTHS AGO, COMING BACK TO MARKET AND PAYING, YOU KNOW, SEVERAL -- TENS OF BASIS POINTS MORE THAN WHAT THEY HAD AND OF COURSE YOU HAVE THIS HUGE MOVE THAT WE’VE SEEN IN LONG-TERM TREASURY YIELDS JUST OVER THE PAST COUPLE OF MONTHS. WITH A 30-YEAR YIELD AT 5.3%. DOES THAT FACTOR IN TO THIS MAYBE A.I. BOOM SLOWING DOWN? >> WELL, IT WEIGHS ON VALUE WAYS, RIGHT? -- VALUATION, RADIO SNIT IF YOU HAVE -- RIGHT? THE RISING YIELDS, EVEN THOUGH IT’S GETTING A LOT OF ATTENTION BECAUSE IT’S VERY DIFFERENT THAN WHAT WE’VE BEEN IN FOR THE LAST 20 YEARS OR SO, THE RISING YIELDS ISN’T REALLY THAT LARGE AT THIS POINT. NOW, THE THING THAT OBVIOUSLY CAUSES THIS ALL TO COME TOGETHER MUCH MORE QUICKLY IS PEOPLE START TO GIVE UP ON THE U.S. IN TERMS OF FISCAL SUSTAINABILITY. U.S. HAS A VERY LARGE BUDGET DEFICIT. I THINK THAT’S WEIGHING ON THE BOND MARKET. IN FACT, -- IF THAT WERE TO COME TOGETHER MORE QUICKLY, YOU COULD SEE A HIGHER SPIKE IN YIELDS AND THEN THAT OBVIOUSLY COULD BE THE PRECIPITATING EVENT. IT’S HARD TO KNOW EXACTLY WHAT’S GOING TO BE THE DRIVER OF THE END, BUT THERE’S SO MANY RISK FACTORS OUT THERE PRESENTLY, IT’S HARD TO BELIEVE THAT WE’RE JUST GOING TO SKATE THROUGH THIS UNSCATHED. ROMAINE: WITH REGARDS TO THOSE RISK FACTORS, PARTICULARLY WHEN IT COMES TO OBVIOUSLY THE $40 TRILLION ON DEBT AND THEN OBVIOUSLY THE DEFICIT WIDENING, 6% OF G.D.P. NOW, SOME OF THE MEASURES THAT SCOTT BESSENT HAS MADE WITH THESE BUYBACK ANNOUNCEMENTS TO TRY TO I GUESS KEEP A CAP, IF YOU WILL, ON RATES, IS THAT GOING TO BE ENOUGH, I MEAN, EVEN IN THE SHORT-TERM, TO ADDRESS THIS ISSUE ABSENT ANY SORT OF MOVE BY CONGRESS OR ANYONE ELSE -- ANY OTHER POLICYMAKERRERS IN WASHINGTON TO GET THE DEFICIT AND DEBT SITUATION UNDER CONTROL? >> WELL, WHAT DEBT IS DOING IS GOING TO HELP IT VERY MUCH AT THE MARGIN BUT, YOU KNOW, REDUCING THE AMOUNT OF LONG-TERM TREASURY DEBT OUTSTANDING, YOU KNOW, IT’S WORTH, YOU KNOW, BASIS POINTS, NOT PERCENTAGE POINTS IN TERMS OF THE LEVEL OF INTEREST RATES. SO IT’S REALLY TACTICAL RATHER THAN STRATEGIC. AT T THE END OF THE DAY, YOU HAVE TO ATTACK THE BUDGET PROBLEM, THE FISCAL PROBLEM, AND THAT REQUIRES A LOT OF HEAVY LIFTING AND WE HAVE POLITICAL PARALYSIS IN THE UNITED STATES WHERE THE DEMOCRATS WANT TO DO IT ONE WAY, THE REPUBLICANS WANT TO DO IT A TOTALLY DIFFERENT WAY AND AS A RESULT NOTHING GETS DONE. LOOK AT SOCIAL SECURITY. IT’S NOT THAT MANY YEARS NOW UNTIL WHERE SOCIAL SECURITY IS GOING TO BE FULLY INSOLVENT AND THE FACT THAT WE’RE NOT FULLY, STRONGLY DEBATING THAT AND TAKING IT UP IN CONGRESS IS REALLY QUITE UNNERVING, FRANKLY. ROMAINE: OBVIOUSLY THIS IS A PROBLEM FOR THE TREASURY DEPARTMENT RIGHT NOW. DOES THIS BECOME A PROBLEM FOR THE FED BILL, PARTICULARLY AGAINST THE BACK DROP OF A NEW CHAIR, JACKSON HOLE ABOUT A WEEK FROM TODAY, I BELIEVE. WHERE, YOU KNOW, INVESTORS ARE GOING TO WANT TO HEAR SOMETHING, I’M NOT SURE WE’RE GOING TO GET IT, BUT THEY’RE CERTAINLY GOING TO WANT TO HEAR FROM WARSH AND THE OTHERS AS TO EXACTLY WHAT THE GAME PLAN IS. >> THE FED HAS TO TAKE THE WORLD AS IT IS. IF THE U.S. IS ON AN UNSUSTAINABLE FISCAL PATH, THAT JUST MAKES THE JOB ON THE FED MORE DIFFICULT IF YOU START TO HAVE FISCAL CONSOLIDATION, THAT WOULD SLOW DOWN ECONOMIC GROWTH AND THE FED COULD RESPOND BY LOWERING INTEREST RATES BUT THE FED IS STUCK WITH THE WORLD AS IT IS, NOT THE WORLD THAT IT WANTS TO BE. ROMAINE: ALL RIGHT, BILL ALWAYS APPRECIATE IT. GREAT COLUMN TODAY. BILL DUDLEY, BLOOMBERG OPINION COLUMNIST, AND MORE IMPORTANTLY FORMER PRESIDENT OF THE NEW YORK FED. LET’S LOOK AT SOME OF THE AFTER-HOURS MOVES HERE AND OF COURSE THE BIGGEST MOVER, AT LEAST ONE OF THE MORE NOTABLE ONES, IS ROSS STORES. THAT CONFERENCE CALL KICKED OFF JUST A LITTLE LESS THAN 30 MINUTES AGO AND THOSE SHARES NOW HITTING I GUESS POST-SESSION HIGHS HERE, UP ABOUT 7%. WE’LL KEEP AN EYE ON THAT. A BEAT AND RAISE QUARTER, A BIG RAISE, WE SHOULD POINT OUT, BROADCOM SHARES UP FRACTALLY HERE. BLOOMBERG REPORTING NOW, BROADCOM INVOLVED TO TRY TO ARRANGE FINANCING FOR ANOTHER CHIP DEAL, $60 BILLION TODAY 70 BILLION. WE’RE GOING TO TALK MORE ABOUT WHAT’S BEEN GOING ON IN THE A.I. SPACE WHEN WE COME BACK AFTER THE BREAK. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ >> NEVER IN THE HISTORY OF BUSINESS HAS SOMETHING GROWN SO QUICKLY. I THINK THERE ARE TWO REALITIES. THERE ARE THESE MOMENTS WHERE YOU PLUG IN AI AND THERE ARE EXTRAORDINARY RETURNS BUT THE FEAR A LOT OF BUSINESSES HAVE IS ARE THEIR EMPLOYEES TOKEN MAXXING. MAYBE THEIR EMPLOYEES SPEND 5 WHEN THEY COULD HAVE SPENT $.15. ROMAINE: HE WAS ON THE PROGRAM YESTERDAY HIGHLIGHTING THE RAPID RISE IN AI SPENDING. OUR NEXT GUEST HAS AN INSIDE LOOK AT SOME OF TECH'S BIGGEST PLAYERS ADVISING SAMSUNG, GOOGLE, OPENAI AND MICROSOFT. HER NAME IS ALLIE MILLER AND SHE IS THE CEO OF OPEN MACHINE. ALLIE: THANK YOU FOR HAVING ME. ROMAINE: LET'S BUILD OFF OF WHAT ERIC WAS SAYING. WHO ARE THE COMPANIES GETTING AI RIGHT? FINDING THE BALANCE BETWEEN WHAT THEY ARE SPENDING ON THE POTENTIAL RETURN? ALLIE: EVERY SINGLE ENTERPRISE IS FOCUSED ON SPENDING THE RIGHT AMOUNT. WHAT I HAVE NOTICED IN FRONTIER COMPANIES AS THEY ARE SPLITTING THE COMPANY INTO TWO DIFFERENT GROUPS. ONE GROUP IS RAISING THE FLOOR, THE OVERALL CAPABILITIES, MAKING SURE EVERYONE IS GETTING THE HELP THAT THEY NEED. THOSE WILL PROBABLY STICK WITHIN SUBSCRIPTION LIMITS. . THEY HAVE A SECRET FRONTIER UNIT -- MAYBE NOT SECRET -- BUT THEY ARE BULLDOZING AT THE FRONTIER. THAT GROUP, MAYBE 100 PEOPLE, ARE GETTING HIGHER BUDGETS, MORE EXPERIMENTATION, TEAMS OF 2-8 PEOPLE WHO ARE MAYBE SPENDING THOUSANDS OF DOLLARS PER DAY. IN GROUP 1, YOU MIGHT BE SPENDING $30 A MONTH. ROMAINE: LET'S TALK ABOUT THE SMALLER GROUP. WHAT IS THE GOAL COMPANIES ARE GOING FOR? SOME BIG BREAKTHROUGH? ALLIE: EVERYONE WILL FIGHT OVER THIS. I THINK IT IS SPEED OF ITERATION. I WORK WITH COMPANIES WITH 20,000-. PLUS PEOPLE IT IS HARD TO STEER A SHIP AND ITERATE AT THAT LEVEL. THE WORLD IS BECOMING MORE COMPLEX. A TEAM OF 100 IS WORKING ON BRAND-NEW PRODUCTS, BRAND-NEW BUSINESS LINES. THEY ARE PROBABLY SPINNING UP AN ML PERSON PLUS UP SUBJECT MATTER EXPERT, SAYING CAN WE REINVENT THE WORKFLOW? ALLIE: HOW MANY COMPANIES HAVE THE LUXURY OF DOING THAT? ROMAINE: ALPHABET CAN THROW SPAGHETTI AT THE WALL AND THEY WILL STILL BE OK. SMALLER COMPANIES, IT HAS TO BE A DIFFERENT STORY. AT SOME POINT THE BOARD OR PRIMARY INVESTORS WILL COME KNOCKING. SHOW ME A RETURN. ALLIE: THEY ARE EVALUATING R.O.I. ON DIFFERENT TIME HORIZONS. 75% OF COMPANIES ARE SHOWING POSITIVE ROI ON AI SPEND. ROMAINE: 75%? WOW. ALLIE: THAT IS TODAY, MID-2026. WHAT I SEE MOVING FORWARD IS THE AI SPEND THAT IS HAPPENING IS MUCH HIGHER. IT IS CREATING AI FACTORIES INSIDE COMPANIES. 2023-2024, WE ASKED AI TO WRITE IT EMAIL AND FELT GOOD. THE AI SUPER COMPANIES ARE WORKING ON, THEY ARE WORKING WITH HUNDREDS OF THOUSANDS OF AI AGENTS THAT ARE RUNNING PROACTIVELY 24/7. IT IS A MUCH HIGHER SPEND AT FULL FORCE. YOU HAVE THESE COMPANIES EVALUATING SMALLER MODELS, OPEN-SOURCE MODELS, BUT THE WAY THEY ARE EXPERIMENTING IS CHANGING EVERY MONTH. ROMAINE: GIVE ME A SENSE OF WHAT YOU ARE SEEING -- YOU DO NOT HAVE TO NAME ANY SPECIFIC COMPANIES -- BUT WHAT ARE THESE COMPANIES DOING WRONG? WHAT IS THE THING YOU LOOK AT AND SAY, COME ON, GUYS? ALLIE: [LAUGHTER] FIRST IS WHEN THE EXECUTIVE HAS NO IDEA WHAT THEY ARE TALKING ABOUT. THAT IS ONE OF THE SCARIEST THINGS. WHEN THEY ARE TALKING A BIG AI GAME IN THAT YOU GET THEM ONE-ON-ONE AND YOU GRILL THEM ON AI AGENTS AND IT IS FALLING FLAT. THANKFULLY ALL MY CLIENTS ARE SPUN UP. A LOT OF IT IS EXECUTIVE EGO. A LOT OF EXECUTIVES ARE WORRIED ABOUT THEIR OWN JOBS. THERE WAS A STUDY THAT CAME OUT LAST YEAR THAT 74 PERCENT OF CEOS ARE WORRIED THEY WILL GET FIRED IF THEY HAVE THE WRONG AI STRATEGY. IN THE U.S. THAT NUMBER SHOOTS UP TO 79%. A LOT OF EXECUTIVES ARE SAYING LET'S THROW PILOTS ADDED, LET'S SAY EXPERIMENT A LOT AND MAYBE SOMETHING WILL WORK. THEY ARE APPLYING LINEAR 2019 THINKING TO A WORLD THAT LOOKS NOTHING LIKE THAT. ROMAINE: ARE THE PEOPLE DOING THAT -- DOES THIS END UP BEING CONSUMER FACING, SO THE CONSUMER ENDS UP INTERACTING WITH A CHATBOT OR SOMETHING AND THEY SEE THE FLAWS, OR IS THIS MORE INTERNALLY? ALLIE: WHEN YOU HAVE AN EXECUTIVE THAT CANNOT DEMONSTRATE SOLID TOP-DOWN LEADERSHIP YOU WILL HAVE FAILURE. ANOTHER THING FAILING THESE COMPANIES IF THEY DO NOT REALIZE THERE IS BOTTOM-UP ACTIVITY. LEADERS ARE NOT LISTENING TO THESE AMAZING AI SUPER USERS. SECRETLY, A LOT OF PEOPLE INDIVIDUALLY HAVE FIGURED OUT THE AMAZING WAY OF WORKING WITH AI, BUILDING THEIR OWN WORKFORCES, THEY ARE NOT SHARING THAT INFORMATION. ROMAINE: I'M NOT DEFENDING THE CEOS BUT A YEAR AGO YOU WOULD ASK ABOUT A OUR AND THEY WOULD SCOFF AT YOU. THEN THEY GET ASKED BY INVESTORS AND ANALYSTS AND HAVE TO COME UP WITH SOMETHING. HOW MUCH OF THIS IS THE FOLKS TRYING TO BOLT ON AI TO WHATEVER THEIR BUSINESS INFRASTRUCTURE IS? COMPANIES THAT HAVE THE LUXURY OR THE FORESIGHT TO BUILD IT HOLISTICALLY IN SOME WAY OR ANOTHER? I KNOW THAT IS HARD FOR THEM A SHARE RELATIVE TO A FRONTIER COMPANY. ALLIE: I'M SEEING COMPANIES THAT HAVE BEEN AROUND FOR 50-PLUS YEARS THAT HAVE THOSE EXPERIMENTATION ZONES. WHAT IS SO IMPORTANT IS THE AI OF TODAY IS A REINVENTION OF HOW WORK GETS DONE. SO MANY COMPANIES ARE DOING THE INCREMENTAL CHANGE, AND FEELING REALLY GOOD ABOUT IT. THEY ARE GETTING THE 30% PRODUCTIVITY GAINS OR 40% COST SAVINGS BY THE ARE MISSING THE 10X BUSINESS GROWTH. I THINK WHAT IS VERY IMPORTANT IN THAT SPLIT IS YOU CANNOT REALLY TELL, EXTERNALLY, WHO'WHOS. YOU ARE LOOKING FOR SECRET SIGNALS WHETHER THEY ARE BOLD ENOUGH TO TALK ABOUT CANNIBALIZING THEIR OWN BUSINESS LINES, A WAY OF DOING SOMETHING. IF I HAVE NOT HEARD A CEO SAY WE STOPPED DOING X, I DO NOT BELIEVE IN THEIR FUTURE. ROMAINE: WE NAMED SOME OF THE COMPANY TO ADVISE. THEY ARE ALL TECH COMPANIES. WHAT ABOUT THE NON-TECH COMPANIES SPECIFICALLY? YOU HAVE THESE BUSINESSES THAT ARE JUST OLD ECONOMY, FOR LACK OF A BETTER PHRASE. THE CEO FROM A TRUCKING COMPANY TALKED ABOUT HOW HE INTEGRATED AI PRETTY HEAVILY OVER THE LAST TWO YEARS, INCREASED THE EFFICIENCY OF HIS BUSINESS. WE HAVE SEEN THESE OLD ECONOMY COMPANIES FIND A WAY TO EMBRACE THIS NEW TECHNOLOGY. ARE YOU FINDING MORE COMPANIES AND CEOS IN THAT SPACE THAT HAVE KINDA FIGURED OUT OR ARE ON THEIR WAY TO FIGURING IT OUT? ALLIE: I HAVE BEEN OF THESE BOARDROOMS HEARING FROM CHATGPT, EVERYONE LOSING THEIR MINDS, TO WHAT HAS HAPPENING RIGHT NOW. I HAVE WORKED WITH AIRLINES. I HAVE FOR THESE CONVERSATIONS. . WHAT IS REALLY INTERESTING IS ABOUT ONE YEAR AGO YOU COULD KIND OF GET AWAY WITHOUT HAVING A COMPLETE AI ANSWER. NOW THERE IS NO EXCUSE. EVERY SINGLE COMPANY IS STEPPING UP TO THE PLATE. THE SPLIT IS IN WHAT YOU SAID BEFORE. WHETHER THEY ARE TALKING ABOUT INCREMENTAL CHANGE, USING AI FOR PRICING, CREATING MORE CUSTOMIZED MARKETING AND FEELING REALLY GOOD ABOUT THAT, OR IF THEY ARE COMPLETELY REINVENTING THE WAY THEY DO BUSINESS. IKEA IS ONE OF THE BEST EXAMPLES. THEY DECIDED TO ROLL OUT AND AI CHATBOT. THAT TOOK AWAY A CERTAIN PERCENT OF CUSTOMER SUPPORT. THEY DID NOT NEED 8500 CUSTOMER SUPPORT MEMBERS. THEY REALLOCATED THEM TO A BRAND-NEW BUSINESS LINE OF INTERIOR DESIGN. THAT MADE OVER BILLION IN ITS FIRST YEAR. THEY COULD ONLY DO THAT IF THEY DID INCREMENTAL CHANGE IN CUSTOMER SUPPORT. ROMAINE: THAT IS A FEAR WITH EMPLOYEES. CEOS AND START USING THIS, MI JUST TRAINING THE BOTS TO DO MY JOB? ALLIE: THAT IS WHY THEY ARE GATEKEEPING. THERE IS TENSION ON BOTH SIDES. ROMAINE: GREAT TO HAVE YOU. ALLIE MILLER, CEO OF OPEN MACHINE, ADVISING A LOT OF COMPANIES, SOME OF TECH'S BIGGEST PLAYERS. WE WILL BE BACK IN A MINUTE. THIS IS BLOOMBERG. ROMAINE: WE HAD A PRETTY BUSY DAY ON WALL STREET TODAY WITH STOCKS ON THE BACK FOOT LARGELY BECAUSE OF THE BUMP UP ON YIELDS. ROSS SHARES HIGHER IN THE POST MARKET-RATE. WE GET ANOTHER READ ON THE RETAIL SPACE TOMORROW MORNING WITH BJ'S WHOLESALE. THAT COMES OUT BEFORE THE BELL TOMORROW. WE WILL GET THE FLASH PMI'S OUT OF EUROPE. WE WILL GET A FRESH SNAPSHOT OF THE DIVERGING PATHS IN ECONOMIC ACTIVITY IN THE REGION. 9:45 A.M. EASTERN, S&P GLOBAL RELEASES PMI'S. SOMETHING THAT COULD POTENTIALLY MOVE THE MARKET. WITH THE S&P CLOSING OUT THE DAY IN THE RED AND YIELDS CLOSING OUT IN THE GREEN, THAT IS WHAT THE MARKETS WILL HAVE THEIR EYES ON. WE WILL HAVE FULL COVERAGE ON "THE CLOSE" TOMORROW RIGHT HERE ON BLOOMBERG. ♪