Markets Slip as Nvidia, Yields & the Debasement Trade Loom | The Close 8/24/2026

>> THE COUNTDOWN IS ON, EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS "THE CLOSE." ROMAINE: WAS RAY DALIO RIGHT ALL ALONG? LIVE FROM STUDIO TO AT BLOOMBERG HEADQUARTERS IN NEW YORK, I'M ROMAINE BOSTICK. EMILY: I'M EMILY GRAFFEO. WE ARE KICKING YOU OFF TO THE TRAY THAT RAY DALIO WAS TALKING ABOUT IN PLAY, THE 30 YEAR YIELD MOVING LOWER BUT STILL RELATIVELY ELEVATED, ABOVE THAT 5.2% LEVEL, AND A BIG ON THAT, ABOUT 2% RIGHT NOW, ALMOST $79,000 LEVEL. THIS EQUITY MARKET, SEMICONDUCTORS, CHIP STOCKS FALLING. NOT MUCH MOVEMENT RIGHT NOW. THE S&P 500 DOWN ABOUT .2%. ROMAINE: PHYSICALLY THE FINAL FULL TRADING WEEK OF AUGUST IS TYPICALLY SUPPOSED TO BE A SNOOZER BUT THIS WEEK PROMISES TO BE ANYTHING BUT THAT. SCOTT BESSENT MIGHT BE TRYING TOO HARD TO NUDGE YIELDS WHAT HE WANTS THEM WHILE KEVIN WARSH MAY NOT BE TRYING HARD ENOUGH. AND THEN YOU THROW IN NVIDIA AND THOSE HIGHS MEAN SUMMER VACATION ESSAYS ARE ABOUT TO GET A LOT MORE INTERESTING. NVIDIA, A SIX PERCENT DROP FROM WHERE IT WAS WHEN I LAST REPORTED EARNINGS THREE MONTHS AGO. 11% BELOW ITS LAST RECORD HIGH. THE PHILADELPHIA SEMICONDUCTOR INDEX DOWN MORE THAN 20%, AND THIS JUNE 22 RECORD IN THE RED OVER THAN NINE WEEK STRETCH AS PART OF WHAT HAS CLEARLY BEEN A PRONOUNCED ROTATION AWAY FROM THAT CORE AI TRADE INTO ALMOST EVERYTHING ELSE. SORT OF. LINKED TO THAT ROTATION BUT STILL A STAND-ALONE STORY ON ITS OWN IS THE STARE DOWN BY BUYERS OF U.S. TREASURY DEBT WITH THE TOP U.S. BOND SALESMAN OUT THERE, SCOTT BESSENT. IT'S NOT THAT THE BOND BUYERS WON'T BUY, THEY ALMOST CERTAINLY WILL. THE QUESTION IS WHAT PRICE THEY DEMANDED TO TAKE ON THE MOUNTING AND FOGGY PHYSICAL AND INFLATIONARY RISKS. >> IF WE SEE 5% ON TREASURIES ON THE 10 YEAR, I WOULD TELL YOU THAT IS A BUYING OPPORTUNITY. THE 30 YEAR, HOWEVER, HISTORICALLY HAS TREATED MUCH MORE ON THE INFLATION CONCERNS. I DON'T SEE US GOING TO 6% ON THE 30 YEAR, AND IF IT DOES, I WOULD TAKE THE OPPOSITE VIEW AND BUY A LOT OF TRUSTS, 6% 30-YEAR TREASURIES. ROMAINE: ANNE WALSH SPEAKING EARLIER, AND THIS IS A CROSS ASSET STORY. YIELDS, WHATEVER THEY DO, CERTAINLY HAS AN EFFECT ON EVERYTHING ELSE, FROM GOLD TO THE DOLLAR AS WELL. LET'S BRING IN KAMAL BHATIA, CEO OF PRINCIPAL ASSET MANAGEMENT. I WANT TO TALK ABOUT THE CROSS AS THAT STORIES HERE. THERE'S A STORY THAT RATES TO A CERTAIN DEGREE ARE GOING TO BE HIGHER, MAYBE A SMIDGE OR TWO. NO ONE SEEMS TO BE BETTING ON ANY MATERIAL DROP. A, DO YOU BELIEVE THAT? IF SO, WHAT IS THE REVERBERATION THROUGHOUT ASSET CLASSES? KAMAL: YOU ARE RIGHT. THE LONG RANGE WILL CERTAINLY BE HIGHER. TWO THINGS HAVE SHIFTED IN THIS MARKETPLACE. ONE, THE FED IS ONLY IN CONTROL OF THE SHORT TRADE. THE MARKETS HAVE TAKEN CONTROL OF THE LONG TRADES. TWO, THAT MEANS EVERY ASSET CLASS HAS TO REACT DIFFERENTLY. WE'VE SEEN THAT IN EQUITIES AND FIXED INCOME AS WELL. THE LONGER RATE IS THE ONE TO WATCH. ROMAINE: IS THERE A LEVEL YOU LOOK TOO, PARTICULARLY WITH A LONGER-TERM YIELD, WHERE YOU THINK THAT COULD BE MATERIALLY PROBLEMATIC FOR THE EQUITY TRADE? KAMAL: NOT RIGHT NOW, I THINK PARTLY BECAUSE WE HAVE INFLATION AND TERMS PREMIUM GOING UP, BUT GROWTH IS PRETTY GOOD. ROMAINE: ECONOMIC GROWTH. KAMAL: ECONOMIC GROWTH IS PRETTY GOOD, AND NOT JUST HERE. LEVEL ECONOMIC GROWTH IS PRETTY GOOD -- GLOBAL ECONOMIC GROWTH IS PRETTY GOOD. GROWTH SEES A HICCUP AND INFLATION GOES THE OTHER DIRECTION, THE LONG RATE WILL REACT. EMILY: IS THERE A LEVEL IN THE 30-YEAR YIELD THAT WOULD CAUSE THE FED TO MOVE IN? YOU SAY THE MARKET IS IN CONTROL. KAMAL: FIRST, I THINK THE 30 YEAR IS THE MODEL. THE 10 YEAR IS THE MOST IMPORTANT TO LOOK AT. THAT'S WHAT YOU ARE LOOKING TO MODEL YOUR BUSINESS PROJECTIONS, IF YOU ARE AN INVESTOR, THAT'S WHAT YOU SHOULD BE LOOKING FOR. SO, THE 30 YEAR IS NOT THE RIGHT RATE. I WOULD ARGUE THE 10 YEAR YIELD IS THE RIGHT RATE TO LOOK AT TO FIGURE OUT WHERE THE ECONOMY IS GOING IN THE LONGER TERM. EMILY: WHEN YOU THINK ABOUT WHAT THE LONG AND RATES ARE SAYING, WHAT ARE BOND INVESTORS TELLING EVERYONE ABOUT INFLATION AND ABOUT THE MACROENVIRONMENT RIGHT NOW? KAMAL: FIRST OF ALL, BOND INVESTORS SHOULD BE REALLY SATISFIED TODAY. THEY'VE BEEN CHASING SPREADS. THEY'VE BEEN TRYING TO FIGURE OUT IF SPREADS WIDE OR CONTRACT, TO EARN THEIR OUTCOME OR YIELD. AND THE RAISE SHOULD GIVE THEM SOME COMFORT. THE DOWNSIDE IS THEY HAVE VERY LITTLE TO WORK WITH NOW. THE SPREAD IS SO COMPRESSED THAT IF YOU PICK THE WRONG CREDIT, YOU WILL HAVE LOSSES ON THE CREDIT SIDE. AND THAT MAKES IT REALLY TRICKY TO BE A BOND INVESTOR RIGHT NOW. SO, THE END INVESTOR IS MUCH BETTER OFF. THE FIXED INCOME INVESTORS HAVE TO BE SMARTER IN THIS ENVIRONMENT, TO PICK THE RIGHT CREDIT GET A DIFFERENT SITUATION IN THE MARKETPLACE. ROMAINE: DOES THAT CREATE A LITTLE BIT OF STASIS? WE SAW SOMETHING SIMILAR, THESE ARE CREDIT INVESTORS RIGHT NOW. KAMAL: I WOULD EXPAND THAT TO SAY THE CREDIT MARKET IS NOT JUST PUBLIC FIXED-INCOME. THERE'S A LARGE AND GROWING PRIVATE CREDIT MARKET. FROM MY STANDPOINT, I WOULD LOOK AT CREDIT ACROSS BOTH PUBLIC AND PRIVATE, AND I KNOW FOR THE LONGEST TIME PEOPLE WOULD HAVE TO CHOOSE BETWEEN ONE OR THE OTHER. I WOULD SAY, THIS IS NOT THE TIME TO CHOOSE BETWEEN ONE OR THE OTHER. YOU THINK THEY LIQUIDITY YOU WANT, THE RISK LEVEL YOU WANT, AND THEN YOU CAN FIND VALUE EVERYWHERE. ROMAINE: WELL, CAN I PUSH BACK ON THAT? LET'S PULL IN ON EVERYTHING SURROUNDING THE AI TRADE, BECAUSE THEY SEEM TO BE COMPETING, TO A CERTAIN EXTENT, WITH BASICALLY ANY OTHER FIXED-INCOME ASSET RIGHT NOW. IS THAT SOMETHING THAT WILL RIGHT SIZE ITSELF IN DUE TIME, OR IS THIS GOING TO BE A LONGER-TERM STORY, WHERE AS LONG AS THESE ISSUERS, THEY ARE COMING TO MARKET WITH BIGGER OPTIONS. KAMAL: YOU ARE ABSOLUTELY RIGHT. WE ARE SEEING A COMPLETE RE- RATING OF HOW LARGE OUR CREDIT MARKETS CAN GET. OUR CREDIT MARKETS HAVE ALWAYS BEEN LARGE. THE PRIVATE CREDIT MARKET GOT REALLY LARGE, AND NOW YOU SEE A LOT OF CROSSOVER CREDIT HAPPENING. YOU COULD ARGUE WHERE IT IS GOING TO BE SOURCED FROM. AT SOME POINT, YOU GET TO A NATURAL CAPACITY LIMIT OF HOW MUCH CREDIT CAN BE ISSUED, BUT RIGHT NOW THEY ARE REREADING, AND THEY ARE RE-RATING BECAUSE YOU HAVE BORROWERS WHO HAVE NEVER BORROWED BEFORE. SO THEY ARE NOT LEVERAGED, THEY ARE NOT OVERSTRESSED, AND THAT IS ALLOWING THE MARKET TO EXPAND TODAY. LIKE ANY CREDIT CYCLE, YOU WILL SEE SPREADS, BUT THAT IS NOT FOR TODAY. EMILY: TALK ABOUT THOSE LIMITS, AND WHEN PRINCIPAL EXPECTS TO HIT EXPOSURE LIMITS, A SINGLE NAME, NAMES THAT HAVE NOT BEEN RAISING AND NOW FEDERALLY ARE RAISING BILLIONS. KAMAL: OUR VIEW IS, IN CERTAIN PARTS OF THE ECONOMY, YOU ARE AT THAT LIMIT. THERE'S LOTS OF TALK ABOUT AI, AND AI IS NOT JUST ABOUT A CREDIT ISSUE OR A STOCK ISSUE, IT IS AN ECONOMY ISSUE. THERE ARE PARTS OF THIS ECONOMY THAT ARE GOING TO GET RESIZED BECAUSE OF THE AI EFFECT. YOU HAVE TO LOOK AT CREDIT IN THE CONTEXT OF WHERE THE ECONOMY FOR THAT PARTICULAR SECTOR IS GETTING RESIZED. WHAT MIGHT HAVE LOOKED WELL 10 YEARS AGO DOES NOT MAKE SENSE NOW. AND WE HAVE TO CONSTANTLY THINK ABOUT THE FLYWHEEL IN FACT OF THE ECONOMY -- FLYWHEEL EFFECT OF THE ECONOMY CHANGING, HOW CREDIT MARKETS HAVE TO ADJUST TO IT, TO COME WITH THE RIGHT EXPOSURE RATING. ROMAINE: WHEN YOU HAVE PEOPLE LOOKING AT THEIR PORTFOLIOS, I'M WONDERING SORT OF WHERE THE BALANCE IS. WE ARE WELL BEYOND THE 60/40. I DON'T KNOW WHAT THE BREAKDOWN IS. DO YOU AT EXPOSURE? EVEN IF YOU HAVE MUCH, DO YOU ADD TO THAT EXPOSURE? KAMAL: OUR THINKING IS BEYOND THE 60/40 BOND MIX, TO THINK IN TERMS OF LIQUIDATING, THINK IN TERMS OF THE INCOME STRUCTURE OF THE MARKET, AND THAT OBVIOUSLY THINK IN TERMS OF THE ECONOMIC CHANGE OF THE DNA OF COUNTRIES AND SOCIETY. I WOULD SAY, IF YOU ASKED ME TO THINK WHERE THE MARKETS ARE CERTAINLY LOOKING FORWARD, I WOULD MAKE A PREDICTION HERE TO SAY, IN THE LONG TERM, BECAUSE OF WHAT IS HAPPENING, BECAUSE OF AI, PRIVATE MARKET EQUITY INVESTORS WILL CERTAINLY SEE MORE VALUE IN FRONT OF THEM. AND IN THE PRIVATE MARKET, REALLY ESTATE AND INDUSTRIAL INVESTORS WILL SEE THE BIGGEST RALLY CREATION. THAT'S HOW YOU HAVE TO THINK ABOUT ASSET ALLOCATION, WHERE VALUE CREATION WILL HAPPEN, AND THEN YOU HAVE TO BE EXTREMELY SMART TO KNOW THAT YOU DON'T BIND YOURSELF TO A CERTAIN BOND PORTFOLIO OR A CERTAIN PRIVATE CREDIT PORTFOLIO, BECAUSE THIS IS A FAST-MOVING TRANSFORMATION AHEAD OF US. ROMAINE: ALL RIGHT, KAMAL, ALWAYS GREAT TO HAVE YOU, KAMAL BHATIA, PRINCIPAL ANTS -- PRESIDENT AND CEO OF PRINCIPAL ASSET MANAGEMENT, WITH THE BIG FOCUS ON THE SO-CALLED DEBASEMENT TRADE. GOLD CONTINUES TO MOVE HIGHER, AND SO, TOO, CRYPTO. WE WILL CHECK IN WITH WILLIAM QUIGLEY IN A SECOND. EMILY: PLUS, WE WILL SIT DOWN LIVE WITH BILT CEO AND EQUINOX HOLDINGS CHAIRMAN HARVEY SPEVAK. ROMAINE: WE WILL CHECK IN WITH TORSTEN SLOK, CHIEF ECONOMIST AT APOLLO, TO GET HIS THOUGHTS. ALL THAT AND MORE COMING UP "THE CLOSE "THE CLOSE IN A THAT RIGHT HERE ON," RIGHT HERE ON -- ALL THAT AND MORE COMING UP A BED RIGHT HERE ON "THE CLOSE," RIGHT HERE ON BLOOMBERG. ♪ ROMAINE: WELCOME BACK TO "THE CLOSE." TREASURY TWIST, THE SO-CALLED DEBASEMENT TRADE, INCLUDING CRYPTO CURRENCY. BITCOIN RALLY LAST WEEK. $3 BILLION FLOWING DO A LOT OF THOSE A SPOT CRYPTO ETF'S. THERE'S A LOT OF QUESTIONS ABOUT WHAT BESSENT MIGHT DO NEXT, BUT MOST PEOPLE ARE CONFIDENT IT WILL INVOLVE SOMETHING ON THE SHORT END OF THE CURFEW THAT COULD ACT AS THE TAILWIND IN THE CRYPTO SPACE. BILL QUIGLEY JOINS US NOW, CO-FOUNDER OF TETHER. I WANT TO START OFF WITH THIS IDEA OF HOW MUCH OF SOME OF THESE MOVES THAT WE'VE SEEN OVER THE LAST COUPLE OF WEEKS IN THE CRYPTO IS DIRECTLY CORRELATED TO SOME OF THE CONCERN REGARDING WHAT IS HAPPENING AT THE TREASURY AND THEIR CURRENT FISCAL SITUATION IN WASHINGTON. BILL: WELL, WHAT I WOULD SAY IS, BITCOIN HAD BEEN, FOR MOST OF ITS HISTORY, UNCORRELATED TO GOLD, REALLY UNCORRELATED TO ANY TRADED ASSET, S&P 500 AND SO FORTH. RECENTLY, IT HAS GOTTEN AS HIGH AS .71, COMPARED TO GOLD, SO IT IS STARTING TO LOOK A LITTLE BIT MORE LIKE A GOLD TYPE HEDGE AGAINST TREASURY, U.S. GOVERNMENT INFLATION SORT OF A PLAY. I DON'T HAVE A LOT OF CONDITION IT WILL MAINTAIN THAT CLOSE ASSOCIATION, BUT THAT IS PROBABLY WHAT HAS DRIVEN IT OUT FROM A JUNE LOW OF SAY 58,000, IT IS UP ABOUT 35% SINCE THEN. A LOT OF THAT HAS COME IN THE LAST WEEK OR SO, BUT, YOU KNOW, BITCOIN PEOPLE ALL AROUND ARE CERTAINLY HAPPY ABOUT THAT. ROMAINE: I AM CURIOUS ABOUT HOW STABLECOINS FACTOR IN, PARTICULARLY GIVEN SCOTT BESSENT'S FOCUS ON ISSUING MORE SHORTER-TERM DEBT THAT A LOT OF THESE STABLECOIN ISSUERS WANT TO GET THEIR HANDS ON. THIS IS A RELATIVELY NEW BUYERS OF THE MARKET, RELATIVE TO WHAT WE WOULD HAVE HAD A FEW YEARS AGO. IS THAT GOING TO BE MATERIAL? BILL: I THINK SO. LOOK, THE WAY STABLECOIN ISSUERS MAKE MONEY IS THEY INVESTED THEIR COLLATERAL, WHICH IS USUALLY, YOU KNOW, U.S. DOLLARS, INTO VERY SHORT-TERM AND VERY LIQUID ASSETS. U.S. GOVERNMENT BONDS BEING AN OBVIOUS ONE. TETHER HAS 15 BILLION IN GOVERNMENT BONDS. SO, ANY MOVEMENT, A FEW BASIS POINTS MOVEMENT, WHEN YOU ARE TALKING ABOUT THOSE HUGE NUMBERS ARE -- HAVE A VERY SIZABLE EFFECT ON THESE COMPANIES. A PUBLIC COMPANY LIKE CIRCLE, THE VAST MAJORITY OF ITS PROFIT COMES STRICTLY FROM EARNING MONEY ON THE BOUNCE THINGS -- ON THE BALANCES OF THE STABLECOINS THAT IS INVESTING. SO, YEAH. THEY ARE VERY MUCH SENSITIVE TO WHATEVER THE TREASURY IS DOING. EMILY: SO, BILL, WHEN YOU THINK ABOUT WHERE THE DIGITAL ASSET MARKET IS HEADED, IT IS SO MUCH OF THE RECENT RALLY, KIND OF HAS BEEN AROUND THE SO-CALLED DEBASEMENT TRADE. DO YOU SEE A POINT WHERE FUNDAMENTALS COME BACK INTO PLAY? WHERE ALL OF THE INSTITUTIONAL INVESTORS THAT MAY BE EXITED EARLIER IN THE YEAR FINALLY DO COME BACK? BILL: POSSIBLY. HAVING SAID THAT, WHEN WE LOOK AT WHAT WOULD DRIVE PRICES OF BITCOIN AND CRYP <GO>'S HIGHER, YOU'VE GOT TO LOOK -- AND CRYPTOS HIGHER, YOU'VE GOT TO LOOK AT WHERE THE BIG MONEY SITS. THINGS LIKE THE BIG WEALTH MANAGEMENT COMPANY'S ON WALL STREET. HOW MUCH ARE THEY TELLING THEIR CUSTOMERS TO HOLD A CERTAIN AMOUNT OF BITCOIN? THAT HAS ACTUALLY PULLED BACK A BIT FROM WHAT IT WAS A YEAR AGO, OR EVEN MORE, WHEN ETF'S BECAME AVAILABLE FOR CRYPTO. I WOULD SAY RIGHT NOW THE MARKET IS SORT OF SITTING TIGHT. THE GIANT SOURCES OF CAPITAL, 401(K) INFLOWS, THOSE THINGS THAT ARE NOT MOVING AS MUCH AS WHAT I WOULD LIKE TO SEE, THERE'S BEEN A LOT MORE MONEY IN THE LAST YEAR THAT HAS GONE INTO GOLD ETF'S VS. BITCOIN. I SUPPOSE YOU COULD TAKE SOME COMFORT IN THAT, IF YOU ARE A BITCOIN HOLDER, AND SAY, WELL, THERE'S A LOT OF DRY POWDER THAT HAS NOT YET BEEN DEPLOYED, SO WHEN THAT DOES HAPPEN, BITCOIN TO GO UP BY A GREAT AMOUNT. BUT THE MARKET SORT OF GOT TO ITS 00 BILLION IN ETF'S AND THEN PAUSED, AND SO NOW IT IS A MATTER OF NOT ONLY PROCESSING THROUGH WHAT THE MARKET THINKS ABOUT BITCOIN AND THE OTHER CRYPTOS AND THE EFFECTS OF THE CLARITY ACT, THE BIG LEGISLATION THAT HAS BEEN PUT FORTH IN CONGRESS, THAT'S GOING TO CAUSE A LOT MORE PEOPLE AND A LOT MORE COMPANIES TO BE INVOLVED IN THE CRYPTO SPACE. EMILY: SPEAKING OF PEOPLE INVOLVED IN THE CRYPTO SPACE, BILL, I KNOW YOU HAVE BEEN INVOLVED IN CRYPTO FOR SOME TIME. THE MEETING AT JACKSON HOLE, IMPLICATIONS FOR PAYMENTS, AND POLICY. ANY THOUGHTS OR EXPECTATIONS OF WHAT WE WILL HEAR OUT OF CENTRAL BANKERS? BILL: I THINK WE WILL GET ANY REAL NEWS, BUT I WILL SAY THE U.S. HAS BECOME MUCH MORE CLEAR WITH STABLECOIN ISSUERS AND WENT ALL TOKENIZED ASSETS, WITH RESPECT TO THE CLARITY ACT. WE HAD THE GENIUS ACT LAST YEAR THAT LAID OUT WHAT THE RULES ARE FOR LAUNCHING STABLECOIN. THE CLARITY ACT PROVIDES A MASSIVE AMOUNT OF INFRASTRUCTURE POLICY WORK TOWARD OTHER THINGS, TOKENIZATION OF OTHER ASSETS GLOBALLY, SO THESE PEOPLE AT JACKSON HOLE, THEY HAVE TO BE THINKING ABOUT THIS. THE ESTIMATES ARE THAT TODAY, WE HAVE ABOUT $20 TRILLION OF TOKENIZED ASSETS, AND BY 2030, I THINK CITICORP THOUGHT IT WILL BE ABOUT $5 TRILLION, SO THEY HAVE TO GET THEIR ARMS AROUND THIS. ROMAINE: ALL RIGHT, BILL, ALWAYS APPRECIATE IT. BILL QUIGLEY, CO-FOUNDER OF TETHER, AS WE LOOK AT BITCOIN SITTING BACK WITH THAT 80,000 LEVEL. MEANWHILE, ALSO HAVING A RELATIVELY GOOD DAY AND QUITE FRANKLY A RELATIVELY GOOD FEW WEEKS, SOME OF THOSE BEATEN DOWN SOFTWARE STOCKS. WE WILL TALK ABOUT THAT WITH GABRIELA BORGES OVER AT GOLDMAN SACHS WHEN WE COME BACK AFTER THE BREAK RIGHT HERE ON BLOOMBERG. ROMAINE: TIME NOW FOR OUR TOP CALLS, THE BIG MOVES ON THE BACK OF ANALYSTS' RECOMMENDATIONS. WELLS FARGO DOWNGRADING CANADA GOOSE, CITING TARIFF PRESSURES, A RISK OF A WARMER WINTER THAT MAY COME INTO SHARES. SHARES OF THE LOWEST LEVEL SINCE MAY OF LAST YEAR. NEXT UP, THE JERSEY MIKE'S, MORGAN STANLEY JOINING A WAVE OF INITIATIONS, OVERWEIGHT ON A $20 PRICE TARGET, SAYING JERSEY MIKE'S HAS A LONG-STANDING SHARE TAKER IN THE INDUSTRY WITH A REASONABLY DURABLE BUSINESS. SHARES DOWN ABOUT 2.3%. WHIRLPOOL, WELLS FARGO STARTING THE APPLIANCE MAKER WILL EQUAL WEIGHT, CITING THE COMPANY'S DOMESTIC FOOTPRINT, GIVING IT A DISTINCTIVE ADVANTAGE VERSUS ITS PEERS, WHO ARE MORE EXPOSED TO THOSE ARE SOME OF OUR TOP CALLS. ONE OF THE GAINERS ON THE DAY IN SALESFORCE. THE STOCK RALLY MORE THAN 37% OVER THE LAST TWO MONTHS ALONE. A LOT OF QUESTIONS RIGHT NOW HEADING INTO THE EARNINGS REPORT AND JUST HOW CONFIDENT INVESTORS ARE THAT IT WILL SURVIVE. GABRIELA BORGES JOINS US NOW, U.S. EQUITY RESEARCH ANALYST OVER AT GOLDMAN SACHS. LET'S TALK ABOUT THIS EARNINGS REPORT. THE LAST ONE SURPRISE TO THE UPSIDE. MAYBE STARTING TO TAKE HOLD A LITTLE BIT. ARE WE GOING TO SEE THAT SHOW UP ON THE BOTTOM LINE ANYTIME SOON? GABRIELA: WE'VE BEEN TALKING ABOUT THE HEAVY LIFTING THAT THEY WILL HAVE TO DO TO BECOME AN AI LEADER. STEP ONE IS TABLE DEBTS, STEP TWO IS PROBABLY SIMPLY INNOVATING, EITHER ORGANICALLY OR IN ORGANICALLY. THIRD, THEY NEED TO FIGURE OUT HOW TO MONETIZE, SO SALESFORCE DOING THINGS LIKE ENTERPRISE LICENSING, ENTERPRISE IMPROVING THE AI FUNCTIONALITY. THERE'S A FAIR AMOUNT OF WORK STILL TO DO, BUT AT LEAST THE COMPANY IS RECOGNIZING, HEY, THIS IS WARTIME. WE HAVE A BUNCH MORE COMPETITION THAN WE HAD BEFORE. LET'S DO SOMETHING ABOUT IT. EMILY: DO YOU THINK FOR SALESFORCE, MAYBE THE SOFTWARE SECTOR MORE BROADLY, THE WORST OF IT IS BEHIND US? GABRIELA: WE ARE STARTING TO SEE ON THAT SIDE, NAMES LIKE SNOWFLAKE, WHERE IT IS COMING OBVIOUS THAT AI IS EQUATED WITH ALGORITHM. BUT TO RALLY OFF THE LAST TWO OR FOUR WEEKS, ONE OF THE DEBATES WE ARE HAVING IS HOW DO WE TAKE THE BALANCE AND PUT IN A DURABLE RALLY? AI IS ACTUALLY A CREATOR OF THE ALGORITHM. YOU SEE WHAT THE PACE OF ACCELERATION LOOKS LIKE. THE MORE CONVINCING THAT ACCELERATION IS, THE MORE THEY ARE ABLE TO COME BACK AND SAY AI IS ACTUALLY PAYING. ROMAINE: I'M CURIOUS, I DON'T REMEMBER IF IT WAS YOUR REPORT -- AND DEFINITELY CAME FROM GOLDMAN -- THIS IDEA THAT IT EXPANDS, SO AI EXPANDS. THAT IS YOU SMILING. OK. . TALK A LITTLE BIT MORE ABOUT EXACTLY WHERE THAT EXPANSION IS. IS THAT AT THE SECURITY LEVEL, THE DATA LEVEL, WHERE? GABRIELA: IF YOU THINK ABOUT THE FRONT OFFICE, YOU CAN APPLY THIS ANALOGY TO ANY OF THE SOFTWARE VERTICALS. WHAT DOES THAT MEAN? GETTING MORE PRODUCTIVITY OUT, WHEN ANY ONE OF THE KNOWLEDGE WORKERS CAN ACCOMPLISH. COMPANIES HAVE SHARED TIME AND TIME AGAIN, AND WE SAW THIS IN THIS PARTICULAR REVOLUTION COME ANYWHERE FROM THE 1980'S THE 2010, WHEN SOFTWARE COMPANIES DRIVE THE RALLY FOR THEIR CUSTOMERS, THEY TYPICALLY CAPTURE 10%, 25% OF THE VALUE IT CREATES. SO IT IS NOT JUST VERY EARLY USE CASES, CODING, THAT AI HAS ACTUALLY ADDED IT TO THE VALUE IN THE TECHNOLOGY SIDE. WE THINK IT IS A MATTER OF TIME BEFORE SOFTWARE COMPANIES ARE ACTUALLY ABLE TO EXERCISE PRICING POWER. EMILY: IN THE LAST MINUTE HERE, WE ALSO HAVE CROWDSTRIKE EARNINGS COMING UP. WHAT ARE YOU WATCHING? GABRIELA: THERE IS THE VIEW THAT AI IS THE NEXT WAVE OF DIGITAL TRANSFORMATION. IF THAT IS THE CASE, WE NEED MORE SECURITY. CROWDSTRIKE HAS DONE AN INCREDIBLE JOB FINDING THE RIGHT NEXGEN ACQUISITION TO BE ABLE TO SCALE AND INNOVATING ORGANICALLY. THEY ARE A VERY CLEAN TECH STOCK. THEY ORIENT THEMSELVES VERY WELL TO GROWING CUSTOMERS AND SAY WE WILL BE YOUR STRATEGIC PARTNER, AND THREE YEARS NOW, WE DON'T KNOW EXACTLY WHAT THE AI ROADMAP WILL LOOK LIKE, AND YOU CAN TRUST US AS YOUR PARTNER TO FIGURE THAT OUT. ROMAINE: GABRIELA, GREAT STUFF, GABRIELA BORGES, EQUITY RESEARCH ANALYST OVER AT GOLDMAN SACHS RESEARCH. WHEN WE COME BACK, WE WILL TALK ABOUT BILT AND ITS PARTNERSHIP WITH EQUINOX. WE WILL TALK WITH THE CEO OF BILT AND THE EXECUTIVE CHAIRMAN AT EQUINOX. THIS IS BLOOMBERG. ♪ ROMAINE: 3:30 IN NEW YORK, THIS IS THE COUNTDOWN TO THE CLOSE. LET'S TALK ABOUT A RECENT TIE UP IN THE CONSUMER REALM. MEMBERSHIP IN HOSPITALITY PLATFORM BUILT, LAUNCHING AN EXCLUSIVE PARTNERSHIP WITH EQUINOX. IT SMELLS GREAT AND THERE. THE MOVE IS CONNECTING AUDIENCES WITH BENEFITS LIKE REDEEMING BUILD CASH FOR CREDITS THAT CAN BE USED TOWARDS EQUINOX EXPERIENCES. JOINING US IS THE CEO OF BILT AND AN EXECUTIVE FROM EQUINOX. I KNOW HOW GREAT EQUINOX SMELLS ON THE INSIDE. HOW DOES BILT SMELL? >> WE COULD GIVE YOU AN EQUINOX EUCALYPTUS TOWEL. EMILY: YOU CAN SMELL THEM ON MY STREET. YOU KNOW WALKING BY THE EQUINOX. >> IT IS BETTER THAN THE ABERCROMBIE SMELL IN HIGH SCHOOL. ROMAINE: WE TALK ABOUT THE PARTNERSHIPS YOU HAVE, APARTMENT BUILDINGS, AIRLINES, HOTELS, WHY JIM'S? BILT REPRESENTS ONE AND FOUR APARTMENT BUILDINGS ACROSS THE STATES AND WHEN YOU MOVE INTO A NEW HOME YOU ARE RESETTING THE MOST IMPORTANT LIFESTYLE DECISIONS YOU HAVE. WHAT IS YOUR NEW PHARMACY? WHAT IS YOUR FAVORITE RESTAURANT AND BAR? WHERE DO YOU PARK YOUR CAR? ONE OF THE BIGGEST DECISIONS EVERYONE MAKES IS, WHAT IS YOUR NEW GYM? THE ONE THAT ALLOWS YOU TO HAVE CONCIERGES COORDINATE YOUR WORK OUT, SPOT, THERE IS NO PLACE BETTER THAN EQUINOX. ROMAINE: I KNOW WHAT YOU GET OUT OF THE PARTNERSHIP. I HAVE LOOKED AT THE EQUINOX IS GUARDING THEIR BRAND. WHAT ATTRACTED YOU TO BILT? >> WE ARE VERY SELECTIVE. WE HAVE BEEN FRIENDS FOR A LONG TIME AND I HAVE WATCHED BILT GROW THE WAY THEY HAVE, EXPLODING IN MORE RECENT TIMES. WE FELT THERE WAS A NATURAL EVOLUTION OF US COMING TOGETHER BECAUSE THE COMMUNITY HE BUILT AROUND THE COUNTRY, AND BECAUSE OF OUR COMMUNITY. THERE WAS OVERLAP BETWEEN OUR EXISTING COMMUNITIES. OUR COMMUNITY ONCE MORE FROM US, AND HIS COMMUNITY ONCE MORE PARTICULARLY FROM A NEIGHBORHOOD PERSPECTIVE. WE FOCUSED ON HELPING MEMBERS LIVE A HIGH-PERFORMANCE LIFESTYLE BY HELPING THEM THRIVE AND PERFORM AND GROW. THIS WAS A NATURAL EVOLUTION OF HOW TO SERVE THE COMMUNITY BETTER. EMILY: YOU HAVE A GOOD VIEW ON THE CONSUMER. YOU ARE SEEING WHAT BILT MEMBERS ARE USING REWARDS ON. HOW WOULD YOU SAY THE STATE OF THE CONSUMER IS, GIVEN WHERE PEOPLE ARE CHOOSING TO SPEND MEMBER REWARDS? >> HISTORICALLY PEOPLE WOULD SAVE UP REWARDS AND DO BIG LAVISH TRIPS. YOU WOULD SAVE UP FOR A YEAR AND DO THE SUMMER TRIP TO EUROPE. THIS YEAR WE HAVE NOTICED A SHIFT. PEOPLE ARE CRAVING MICRO EXPERIENCES ON A DAILY BASIS. IF YOU LOOK AT, WHETHER IT IS COMEDY SHOWS WE HOST AROUND THE COUNTRY, FITNESS CLASSES, ONE REASON WE STARTED THIS CONVERSATION, OUR PARTNER SHIP STARTED WITH SOULCYCLE WHICH IS OWNED BY EQUINOX. IT WAS UNBELIEVABLE HOW OFTEN MEMBERS REDEEMED POINTS TO BOOK A SOULCYCLE CLASS BECAUSE THE 45 MINUTE LOCAL MICRO EXPERIENCE WAS MICRO LUXURY IN YOUR EVERYDAY LIFE. TO SCALE THAT TO THE ENTIRE WELLNESS JOURNEY, FROM THE SPA, THE PERSONAL TRAINING, THE JUICE BAR, GOING IN EVERY DAY AND BEING ABLE TO CHECK IN WITH ONE CLICK, IT IS A NATURAL SYNERGY AND HOW TO THINK ABOUT YOUR LIFE. ROMAINE: WHO IS FUNDING THAT? IS IT BILT, EQUINOX? >> BILT MEMBERS EARN REWARDS EVERY DAY, BOTH ON THEIR RENT AND MORTGAGE PAYMENTS, AND ALSO IN THE NEIGHBORHOOD ECOSYSTEM. WHEN YOU THINK ABOUT LOCAL COMMERCE, THERE HAVE BEEN BUSINESSES LIKE YELP, FACEBOOK ADS, OPENTABLE, DOORDASH, BUSINESSES ARE CONSTANTLY LOOKING FOR NEW WAYS TO BRING IN CUSTOMERS. THROUGH THIS PROGRAM THEY CAN TARGET THE SPECIFIC PEOPLE WHO ARE HIGH-VALUE, LIVING DOWN THE STREET. AS THEY FUND THOSE REWARDS, THE REWARDS ARE BACKED BY CASH AND THEY CAN COME IN AND SPEND AT PLACES LIKE EQUINOX. WHEN YOU SAY I WOULD LOVE THAT MICRO LUXURY EXPERIENCE OF A MASSAGE, I COULD BOOK ONE WITH MY POINTS AFTER THIS INTERVIEW. YOU CAN NOW USE THE POINTS AND WE CAN FUND THAT BACK TO EQUINOX. >> TO ADD TO THAT, THERE IS JOINT FUNDING HERE. THROUGHOUT OUR ECOSYSTEM WE WANT MORE ENGAGEMENT. BILT ONCE MORE ENGAGEMENT SO WE ARE SUPPORTING THE RESPECTIVE COMMUNITIES TO COME TOGETHER AND ENGAGE IN A HEALTHY LIFESTYLE. EMILY: HOW DO YOU SEE IT PLAYING OUT FOR EQUINOX? IS THIS A PARTNERSHIP THAT YOU ANTICIPATE WILL BRING IN NEW EQUINOX MEMBERS? IS THIS EXISTING MEMBERS LINKING THEIR BILT ACCOUNT? >> IT'S A COMBINATION OF BOTH. WE ARE LOOKING FOR IS, THE WORD GYMS IS A FOUR LETTER WORDS. WE ARE LOOKING FOR WAYS TO SERVE THE EXISTING COMMUNITY BETTER AND THE PARTNERSHIP ALLOWS FOR THAT. WE ARE VERY SELECTIVE OF WHO WE WILL PARTNER WITH. AND WE ARE IN GROWTH MODE, OPENING LOCATIONS WITH A PIPELINE OF 50 NEW LOCATIONS AROUND THE U.S. OVER THE NEXT 4-5 YEARS. THE ABILITY TO BRING MORE PEOPLE INTO THE COMMUNITY IS IMPORTANT. ROMAINE: I WANT TO ASK ABOUT THE EQUINOX BUSINESS AND THE TYPE OF CLIENTS IT IS SERVING AND WHETHER THE TRENDS WE ARE SEEING OVERALL OUT THERE WITH A LOT MORE FOCUS ON LONGEVITY, BEING HEALTHY NOT JUST AMONG OLDER PEOPLE, HAS THAT HAD A MATERIAL IMPACT ON YOUR BUSINESS? >> ABSOLUTELY. I CALL IT HEALTH, WELLNESS AND LONGEVITY. IT USED TO BE AS THEY GOT OLDER PEOPLE WOULD THINK ABOUT, HOW DO I FOCUS ON WHAT WE REFER TO AS MY HEALTH SPAN? YOUNGER PEOPLE ARE THINKING ABOUT IT, PARTICULARLY WOMEN. . THEY THINK IN THEIR 20'S WHAT DO I NEED NOW SO I CAN BE HEALTHIER WHEN I'M OLDER? THE AVERAGE EQUINOX MEMBER CHECKS IN MORE TODAY THAN EVER BEFORE. THERE IS A HIGHER LEVEL OF ENGAGEMENT AND PARTNERSHIP WITH BILT. >> IF YOU ARE A BILT AND EQUINOX MEMBER, WE ARE RUNNING A FUND CAMPAIGN. THIS IS ABOUT COMMITMENT. IF YOU ARE INTO FITNESS AND WELLNESS AND HEALTH, WE CALL IT BILT FOR THE COMMUNITY. WHEN YOU CHECK INTO EQUINOX, YOU GET ENTERED TO HAVE YOUR RENT OR MORTGAGE PAYMENT ON THE MONTH OF EQUINOX MEMBERSHIP COVERED BECAUSE WE WANT TO CELEBRATE THE CULTURE OF COMMITMENT. >> WE WILL LET HIM FUND THAT ONE. ROMAINE: SPEAKING OF FUNDING. YOU RAISED A LOT OF MONEY ABOUT A YEAR AGO. ARE YOU GOING FOR ANOTHER FUNDING ROUND? ARE YOU THINKING IPO? >> WE ARE FOCUSED ON THE SCALE OF THE NEIGHBORHOOD ECOSYSTEM SO I THINK A LOT OF PEOPLE KNOW US FROM THE MEMBERSHIP PROGRAM, WHICH IS 7 MILLION MEMBERS PER MONTH USING THIS PLATFORM. THE OTHER PART OF OUR BUSINESS IS THE NEIGHBORHOOD OPERATING SYSTEM, WHICH ALLOWS LOCAL BUSINESSES TO MANAGE THEIR EXISTING CUSTOMER EXPERIENCES AND CONNECT TO THE NEIGHBORHOOD COMMERCE ECOSYSTEM LIKE WE ARE DOING HERE. IT IS GROWING SO MUCH FASTER THAT I WOULD HAVE THOUGHT. WE HAVE A LONG WAY TO GO TO KEEP OUR HEADS DOWN AND FOCUS ON GROWTH BEFORE I START WORRYING ABOUT IPO AND THAT TYPE OF STUFF. ROMAINE: THAT IS. A GOOD NONANSWER I APPRECIATE IT. THE CEO OF BILT AND THE EXECUTIVE CHAIRMAN AT EQUINOX. WE WILL TALK ABOUT THE BREAKDOWN IN U.S.-CANADA TRADE TALKS AND THE IMPACT ON STOCKS, INCLUDING FORD AND GM. BACK IN A MOMENT. THIS IS BLOOMBERG. ♪ ROMAINE: TIME FOR OUR STOCK OF THE HOUR. WE ARE TAKING A CLOSER LOOK AT SHARES OF FORD AND GM, THE BIG U.S. AUTO COMPANIES ALONG WITH COUNTERPARTS UNDER PRESSURE AFTER A BREAK DOWN IN U.S.-CANADA TRADE TALKS. PRESIDENT TRUMP SAYING HE WILL DOUBLE TARIFFS. THAT WOULD TAKE THE TARIFF RATE FROM 25% TO 50%. DAVID WELCH JOINS US. JUST TO PUT A FINER POINT ON THIS, BECAUSE I LOOKED AT REPORTING BY YOU AND YOUR TEAM, LAST YEAR, FORD AND GM GOT HIT PRETTY HARD. THEY TOOK A PRETTY BIG HIT FROM A 25% TARIFF. IS THERE ANY SENSE, I KNOW WE ARE STILL A LONG WAY FROM JANUARY, BUT IS THERE ANY SENSE ANYTHING WILL BE NEGOTIATED TO AVOID THAT GOING UP TO 50%? DAVID: THE TRUMP ADMINISTRATION HAS WORKED ON THIS. IF THEY ARE NOT GETTING SOMETHING THEY WANT, THEY GO WITH A REALLY BIG NUMBER AND SET A DEADLINE. THOSE DEADLINES OFTEN MOVE. YOU ARE TALKING ABOUT FOUR MONTHS. CAR COMPANIES ARE DOING DOUBLE TIME TRYING TO COME UP WITH IDEAS, SUGGESTIONS, LOBBY FOR THINGS THAT CAN HELP LOWER THE TARIFFS AND HEAD OFF THE 50%. THE JANUARY 1 DATE IS NOW MARKED ON EVERY AUTO LOBBYIST'S CALENDAR IS SOMETHING THEY NEED TO TRY TO AVOID, A 50% TARIFF COMING OUT OF CANADA. YOU HAVE HEAVY DUTY PICKUP TRUCKS AND MEDIUM DUTY PICKUP TRUCKS MADE BY FORD. THAT WOULD BE A BIG HIT FOR THEM. TOYOTA MAKES A LOT OF VEHICLES UP THERE. GM MAKES ENGINES IN ONTARIO. THESE ARE BIG TICKET ITEMS THAT WOULD HURT THEM QUITE A BIT. JUST A WEEK AGO, THEY THOUGHT THEY WOULD GET TARIFFS FROM 25% TO 15%. AND HERE WE ARE MOVING IN THE OTHER DIRECTION BECAUSE EVERYTHING BROKE DOWN. EMILY: BESIDES LOBBYING TO DELAY THE TARIFFS, WHAT ELSE REALISTICALLY CAN AUTOMAKERS DO IN THE INTERIM? DAVID: THERE IS NOT A LOT. YOU CANNOT MOVE PRODUCTION IN A BIG WAY IN SIX MONTHS OR EVEN 12 MONTHS. GENERAL MOTORS MOVED SOME PRODUCTION BACK FROM MEXICO. SH CHEVY EQUINOX AND CHEVY BLAZER BACK TO THE U.S.. THAT WILL HAPPEN 2027, 2028. IT TAKES A COUPLE OF YEARS EVEN WHEN YOU ARE MOVING AN EXISTING VEHICLE TO A PLANT THAT EXISTS. IT TAKES A LOT OF TIME. THEY CAN TRY TO FIND SOME PARTS, MAYBE FIND SOME NEW SOURCING TO AVOID IT. GM WERE SAYING THEY WOULD HAVE A TARIFF HIT OF AS MUCH AS $5 BILLION. THEY THOUGHT THEY COULD OFFSET ABOUT $2 BILLION. THEY HAVE HAD TO WORK TO DO THAT BY RELOCATING PRODUCTION AND PARTS, FINDING OTHER OFFSETS, LOBBYING FOR OFFSETS. TRUMP DID GIVE IN NOT PUTTING TARIFFS ON SOME U.S. CONTENT COMING SUMMIT OUT OF THESE PLACES. THEY LOWERED TARIFFS ON ASIAN IMPORTS. THERE HAS BEEN SOME LEEWAY BY THE TRUMP ADMINISTRATION THAT BROUGHT THE BURDEN DOWN. BUT THERE IS STILL A LOT OF MONEY THEY HAVE TO PAY THROUGH TARIFFS. ROMAINE: DAVID WELCH, OUR DETROIT BUREAU CHIEF. IT WAS A $5 BILLION HIT TO OPERATING PROFIT IN 2025 JUST OFF THE 25% TARIFF. IT WILL BE INTERESTING TO SEE IF THIS DOES TAKE EFFECT IN 2027 WHAT IT DOES FOR PROFITABILITY AND SALES. WE KEEP AN EYE ON THE BROADER MARKET IN THE U.S. WE ARE IN THE RED ACROSS THE SCREEN. WE WILL CATCH UP WITH MIMI DUFF AFTER THE BREAK RIGHT HERE ON BLOOMBERG. ROMAINE: ABOUT 10 MINUTES UNTIL THE CLOSING BELLS ON THIS ONE THE AFTERNOON. I AM ROMAINE BOSTICK. EMILY: AND I AM EMILY GRAFFEO. EQUITY MARKETS ARE LOWER. THIS IS AHEAD OF THE KEY EARNINGS REPORT WEDNESDAY. WE THOUGHT EARNINGS WERE OVER. THEY ARE NOT YET. ROMAINE: WE SAVED THE BIGGEST FOR LAST, I GUESSED, THE BIGGEST COMPANY OUT THERE, NVIDIA. IT IS INTERESTING BECAUSE IT IS HEADING INTO THIS VACUUM WHERE IT WILL BE THE ONLY THING EVERYONE IS PAYING ATTENTION TO WHEN IT COMES TO EQUITIES. IT IS SANDWICHED IN BETWEEN MACRO ISSUES WITH WHAT SCOTT BESSENT IS DOING AT THE TREASURY AND JACKSON HOLE. EMILY: WE ARE HEADING INTO THAT MEETING WITH YIELDS ELEVATED. WE DO HAVE LONG END YIELDS MOVING LOWER TODAY. BUT STILL, ABOUT FIVE POINT -- ABOVE 5.2%. THE DEBASEMENT TRADE IS BACK AND PLAY WITH BITCOIN HIGHER WHILE STOCKS ARE LOWER. THE STOCKS INDEX IS DOWN ALMOST 3%. THIS IS A WEEK WHEN WE ARE HEADED INTO NVIDIA EARNINGS. A LOT OF EYES ON THE SEMI TRADE. THE READ FROM WALL STREET IS WE DO NOT WANT TO OWN THESE CHIPS ANY LONGER. ROMAINE: THE ROTATION TRADE OUT OF SOME CHIP NAMES. THE STOCK IS DOWN 24% FROM THE ALL-TIME HIGH IN LATE JUNE. MIMI DUFF JOINS US, SENIOR CLIENT ADVISOR AND THE HEAD OF THE NEW YORK OFFICE AT GENTRUST. I WANT TO START WITH THE CHIP TRADE BECAUSE WE ARE GOING TO HEAR FROM THE BIGGEST CHIPMAKER OUT THERE ON WEDNESDAY AFTERNOON. I KNOW YOU CANNOT TALK SPECIFICALLY ABOUT NVIDIA ITSELF. BUT WHEN YOU LOOK AT THE ROTATION OUT OF CHIPS, BUT NOT NECESSARILY OUT OF THE AI TRADE WRIT LARGE, WHAT DOES THAT TELL YOU? MIMI: I THINK SOME OF THE PULLBACK COULD BE JUST RISK REDUCTION THE HEAD OF THE BIG EVENT WEDNESDAY. AS YOU SAID, WE HAVE SOME BIG MACRO EVENTS TOO. BROADER SPEAKING, THE EARNINGS BEATS HAVE BEEN TREMENDOUS. EVEN TAKING OUT THE ONE-OFF MARKUPS, YOU HAVE HAD SOLID BEATS. SOMETHING LIKE 86% VERSUS THE FIVE-YEAR AVERAGE OF 75% ON EARNINGS BEATS. THAT HAS BEEN VERY STRONG. I THINK THAT IS THE BIG PICTURE MACRO AT PLAY RIGHT HERE. ROMAINE: I AM CURIOUS. WHEN WE TALK ABOUT THIS EARNINGS SEASON, THE S&P 500 AS AN AGGREGATE, 15% EPS GROWTH, REVENUE 30%, LIKE 10 PERCENTAGE POINTS HIGHER. EVEN IF YOU GRADE IT ON THE CURB TO X OUT HIGHFLYING CHIP NAMES, IT WAS A RELATIVELY BROAD-BASED EARNINGS GROWTH OUT THERE. DOES THAT GIVE YOU HOPE FOR THE REST OF THE YEAR WITH REGARDS TO WHAT WE WILL HEAR FROM THE REST OF THE COMPANIES? MIMI: I THINK SO. I THINK YOU ARE TO FIND THE BAD NEWS THERE. IF YOU ARE LOOKING FOR BAD NEWS, YOU CAN LOOK AT THE INFLATION SITUATION. THE PAST FEW MONTH HAVE BEEN A LITTLE BETTER BEHAVED. WE HAVE PCE THIS WEEK. IF YOU WANT BAD NEWS, YOU CAN LOOK AT THE DEBT MARKETS, HIGHER YIELDS. WE HAVE HAD CORPORATE ISSUANCE ON AN ADJUSTED BASIS UP 35% YEAR-OVER-YEAR. NOT JUST MORE TREASURY ISSUANCE BUT CORPORATE ISSUANCE HAS BEEN STRONGER THIS YEAR TOO SO THERE IS MORE PAPER TO DIGEST. I THINK THE EQUITY EARNINGS STORY THUS FAR HAS BEEN A GOOD ONE. EMILY: YOU TALK ABOUT THE PAPER BEING ISSUED. A LOT OF THESE HYPERSCALERS ARE ISSUING BONDS. THEY HAVE NEVER BEEN IN THIS MARKET BEFORE. HOW ARE YOU GUYS HANDLING ALL OF THAT DEBT? MIMI: I THINK I SAW A STAT OF 80% YEAR-OVER-YEAR IN THAT SEGMENT OF DEBT ISSUANCE. WITHIN INTEREST-RATE PRODUCTS AND DEBT, WE ARE UNDERWEIGHT CREDIT RIGHT NOW BECAUSE CREDIT SPREADS ARE NEAR 27-YEAR HIGHS. WE DON'T THINK YOU ARE GETTING COMPENSATED TO OWN MUCH OF THAT DEBT. THAT IS NOT WHERE WE ARE FOCUSED RIGHT NOW. EMILY: YOU ALSO MENTIONED PCE. YOU HAVE ONE HIKE PRICED IN BY THE END OF THE YEAR IN YOUR NOTES. DO YOU THINK A SOFT PCE WOULD CHANGE THAT, OR ARE YOU STICKING TO THAT? MIMI: THAT IS NOT OUR VIEW. THAT IS THE MARKET'S VIEW THAT HAS 60% PRICED IN AN ALMOST TWO BY THE END OF NEXT YEAR. THESE THINGS ARE FLYING AROUND AS WE SEE NEW DATA COME IN. I THINK IF WE GET ANOTHER WELL BEHAVED PRINT, MAYBE THEY WILL WANT TO HOLD OFF IN SEPTEMBER. BUT THEN THAT PUTS OCTOBER IN PLAY. THESE PRINCE HAVE BEEN OVER THE 2% TARGET FOR MORE THAN FIVE YEARS. WE CANNOT PRETEND WE DON'T HAVE AN INFLATION PROBLEM RIGHT NOW. WE DO. ROMAINE: LET'S TALK ABOUT THE INFLATION PROBLEM. WE LOOK AT THE MOVEMENTS IN THE BOND MARKET THE LAST FEW DAYS, REALLY THE LAST FEW WEEKS. AND NOW A LOT OF PEOPLE LOOKING FOR ALTERNATIVES. THEY HAVE SEEN A HUGE RALLY IN GOLD AND OTHER PHYSICAL ASSETS. BITCOIN AS WELL. DO YOU RECOMMEND ALLOCATING MORE TO SOME OF THOSE AREAS GIVEN WHAT IS GOING ON? MIMI: THE DEFACEMENT THEME, IF TREASURY DOES BY SIGNIFICANT PAPER OR ISSUE MORE BILLS AND TAKE MORE OF THE AGED SECURITIES OUT, THAT IS A DOLLAR WEAKER TRADE. WE DO HAVE IN OUR CORE PORTFOLIOS ALLOCATIONS TO REAL ASSETS. THAT IS ENERGY PRODUCERS, GOLD, WE HAPPEN TO HAVE URANIUM TOO. THAT BASKET IS UP THIS YEAR MORE THAN 30%. WE DO RECOMMEND KEEPING HOLD OF THOSE TYPES OF ASSETS. ALSO ON THE EQUITY SIDE, NON-U.S. EQUITIES. WE HOLD THOSE IN AN UNHEDGED WAY. THOSE HAVE ALSO BEATEN THE S&P THIS YEAR AS WELL AS LAST YEAR. ROMAINE: SPECIFIC REGIONS YOU ARE IN FAVOR OF? MIMI: THE ONES THAT HAVE PERFORMED THE BEST IS THE PACIFIC REGION. THAT HAS DONE VERY WELL WITH JAPAN, KOREA. IT HAS GOOD DIVERSIFICATION THERE. WE ALSO HAVE EUROPE AND THE OTHER NON-U.S. SECTORS. EMILY: NOT TOO MANY GUESTS COME ON AND TALK ABOUT URANIUM, I HAVE GOT TO SAY. ROMAINE: THAT IS A BOLD CALL. WE HAVE HEARD FROM A FEW OTHER PEOPLE ON THAT. BEFORE WE LET YOU GO, I'M CURIOUS ABOUT THE JAPAN ANGLE. THERE IS BEEN A LOT OF DISCUSSION ABOUT THE COMPETITION IN TERMS OF ASSETS AND RETURNS AND WHAT INVESTORS ARE LOOKING FOR. YOU HAVE STARTED TO SEE THAT IN THE DEBT MARKETS, JAPAN VERSUS U.S. THERE ARE TWO BIG DEBT SALES COMING UP NEXT WEEK IN JAPAN THAT COULD EXACERBATE THAT. MIMI: IS CERTAINLY A THEME. THEIR CURRENCY IS AT A 40-YEAR LOW OR WHATEVER THE STAT IS. THEY HAVE MADE IT CLEAR THEY WOULD LIKE TO LIFT THERE CURRENCY. OUR TREASURY HAS BEEN HELPING FACILITATE SOME ACTIVITY IN THE MARKET THERE. I THINK JAPAN AND ASIA IN GENERAL IS A BIGGER PLAYER IN SOME OF THE MACRO THEMES WE ARE SEEING. ROMAINE: ALWAYS GREAT TO HAVE YOU ON THE PROGRAM. MIMI DUFF, HEAD OF THE NEW YORK OFFICE AT GENTRUST, COUNTING US DOWN TO THE CLOSING BELLS WITH THE S&P MARGINALLY IN THE RED ON THE DAY DESPITE THE FACT THAT THE MAJORITY OF THE STOCKS ARE IN THE GREEN. EMILY: THE CHIP TRADE REALLY FALLING OFF, AS WE SPOKE ABOUT WITH MIMI. THE NASDAQ 100 ALSO LOWER. WHAT IS HOLDING UP? IT IS BITCOIN, ROMAINE. ROMAINE: A FULL BREAKDOWN OF ALL OF TODAY'S MARKET ACTION STARTS NOW. BELL, AND PREVENTIVE CROSS-PLATFORM COVERAGE -- BLOOMBERG'S COMPETITIVE CROSS-PLATFORM COVERAGE STARTS NOW. ROMAINE: WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK WITH EMILY GRAFFEO TAKING YOU THROUGH THE CLOSING BELL. TIM STENOVEC JOINS US. NORAH MULINDA IN FOR CAROL MASSAR. WELCOME TO ALL OF OUR AUDIENCES. STOCKS ON THE BACK OF A SNOOZER. TIM: TOM AND LISA WILL BE ON THEIR WAY TO JACKSON HOLE SOON BUT BEFORE THAT, WE HAVE NVIDIA REPORTING ON WEDNESDAY. DID I HEAR EMILY TALKING ABOUT BITCOIN JUST NOW? EMILY: I MADE A LITTLE PLUG TO BITCOIN. I LISTEN. WHEN YOU ARE UP ONE OTHER ASSETS ARE DOWN. TIM: ESPECIALLY BITCOIN. THANK YOU, EMILY. NORAH: YOU TALK ABOUT HOW BUSY THIS WEEK IS WITH JACKSON HOLE AT THE END OF THE WEEK AND NVIDIA IN FOCUS, BUT ALSO PCE ON WEDNESDAY AS WE CONTINUE TO WATCH AND MONITOR INFLATION. PCE IS THE FED'S PREFERRED MEASURE SO THAT MAY TEE UP FOR WHAT KEVIN WARSH WILL SAY ON FRIDAY TO AN EXTENT. ROMAINE: YEAH. A WEIRD WEEK BECAUSE MOST PEOPLE WOULD BE AWAY. THE VOLUME IS LIGHT. 20% BELOW THE AVERAGE AT THIS TIME. OF COURSE, THAT COULD CHANGE IN A BIG WAY PARTICULARLY WEDNESDAY WITH THE PCE DATA IN THE MORNING AND NVIDIA AFTER THE VALVE AND OF COURSE EVERYONE AWAITING KEVIN WARSH AT THE END OF THE WEEK. WE GET THE CLOSING BELLS TO START THE WEEK. YOU SAW A BIT OF A BID COME BACK INTO THE MARKET AS WE GET CLOSER TO THE CLOSING BELLS, PARTICULARLY WHEN IT COMES TO THE DOW JONES INDUSTRIAL AVERAGE. THEY SPENT A GOOD PORTION OF THE SESSION IN THE RED, BUT WE SAW A BIT OF A SPIKE INTO THE CLOSE, NOW UP 140 POINTS OR 0.3%. THE S&P 500 IS LOWER BY 21 POINTS OR 0.3%. THE NASDAQ DOWN 0.8%. THE NASDAQ 100 DOWN 1%. THE RUSSELL 2000 CLOSING OUT THE DAY DOWN 0.8%. TIM: THE S&P 500 PEELING BACK THE LAYERS, YOU SAW SIGNIFICANTLY MORE STOCKS MOVE HIGHER TODAY. MORE THAN 300 TO THE UPSIDE. FEWER THAN 200 TO THE DOWNSIDE, SPEAKS TO THE ACTUAL STARTS THAT REMOVING THEIR AND THE WEIGHT OF THEM. NORAH: YEAH, DEFINITELY INFORMATION-TECHNOLOGY THE LOSER ON THE DAY'S TRADE. YOU CAN SEE THE RED IS MOSTLY I.T. BUT ALSO INDUSTRIAL AND ENERGY LOWER BUT THERE ARE MORE SECTOR LEVELS IN THE GREEN. LEADING THE WAY, CONSUMER STAPLES, FINANCIALS, AND UTILITIES. TIM: LET'S GET TO SOME STOCKS THAT MOVED HIGHER. EXPEDIA GROUP THE BEST PERFORMER IN THE S&P 500 TODAY REACHING A NEW INTRADAY HIGH, UP 5.4% AFTER WE HEARD FROM EVERCORE ISI'S MIKE WHO LIFTED THE PRICE TARGET TO A STREET HIGH OF $430 FROM $375. HE SAID EXPEDIA HAS THE MOST ATTRACTIVE VALUATION ON PRICE-TO-EARNINGS AND FREE CASH FLOW RELATIVE TO AIRBNB AND BOOKING, A COUPLE OF ITS PEERS. ONCE AGAIN, SHARES OF EXPEDIA UP 5.4 PERCENT, REACHING A NEW HIGH IN THE S&P 500 TODAY. ALSO, HAVE YOU SEEN THE NEW SPIDER-MAN MOVIE? NORAH: YEAH. TIM: WHAT ABOUT THE ODYSSEY? NORAH: NO, HAVE YET TO GO. ROMAINE: I AM WAITING FOR IT TO COME OUT ON DVD. TIM: I AM WAITING TO WATCH IT ON A PLANE, JUST HOW NOLAN WANTS SOMEBODY TO WATCH IT, ON THE BACK OF A SEAT. IT IS STILL SENDING SHARES OF IMAX AND CINEMARK HOLDINGS HIGHER TODAY, BUT IT IS MORE ABOUT SPIDER-MAN. THIS WEEKEND'S GAINS WERE SOLID. WE SAW IMAX SHARES MOVE HIGHER. CINEMARK UP CLOSE TO 5%. "SPIDER-MAN: BRAND-NEW DAY" RUN IN CLOSE TO 30 MILLION, UP 64% YEAR-OVER-YEAR. THAT WAS THE BOX OFFICE, NOT JUST THE ONE FILM. THE ODYSSEY BROUGHT IN MORE THAN 9 BILLION OVER THE WEEKEND. I WAS GOING TO SEE IT AND THEN FOUND OUT HOW LONG IT WAS AND DECIDED WE WILL GO GET DINNER INSTEAD SO WE DID NOT DO BOTH OF THOSE THINGS. FINALLY, WATCHING THE SPIDER GOLD ETF. GOLD CONTINUES ITS RUN HIGHER, UP 0.8% TODAY, CLIMBING TO THE HIGHEST IN MORE THAN THREE MONTHS. THE U.S. TREASURIES INTERVENTION IN THE BOND MARKET REVIVING CONCERNS ABOUT FISCAL POLICY AND ITS IMPACT ON THE DOLLAR. THE TRUST TODAY HIGHER BY 0.8%. GOLD HOVERING AROUND 4680 AN OUNCE. NORAH: THERE IS QUITE A FEW DECLINERS WE CAN LOOK AT THIS AFTERNOON, SO I AM LOOKING AT SHARES OF NVIDIA, C&S, MICRON, AS YOU KEEP AN EYE ON SOME OF THE MEMORY CHIP MAKERS. NVIDIA SEEING ITS WORST STREAK SINCE SEPTEMBER 2022, DOWN FOR A SEVENTH STRAIGHT DAY. SOME OF NVIDIA'S BIGGEST CUSTOMERS WERE TOLD PRICES FOR CERTAIN AI SERVERS ARE GOING UP 15%. YOU SAW THAT WEIGHING ON SANDISK AND MICRON. ALL OF THIS IN THE LEAD UP AS WE KEEP OUR EYES ON NVIDIA EARNINGS THAT ARE DUE AFTER THE CLOSING BELL ON WEDNESDAY, BUT A BIG STORY TODAY WAS ALSO TARIFFS BETWEEN THE U.S. AND CANADA. WE SAW A DOUBLE DOWNGRADE ON CANADA GOOSE. THAT IS A NAME I AM WATCHING. THE STOCK FALLING 5% ON THE DAY FOR TWO REASONS PRIMARILY. THE DOUBLE DOWNGRADE FROM UNDER -- TWO UNDERWENT FROM OVERWEIGHT -- TO UNDERWAY FROM OVERWEIGHT. THE COMPANY SHOULD BE FACING MORE MACRO RISKS LIKE THE 50% TARIFFS THE COUNTRY PUT ON CANADA, BUT SEPARATE TO THAT, WARMER WEATHER. EL NIÑO CONTINUING TO BE IN FOCUS WHEN WE LOOK AT THIS COMPANY AND OTHERS. MAYBE PEOPLE WILL NOT BE RUSHING TO GET A PARKA IF IT IS NOT AS COLD OF A WINTER AS THEY HAVE SEEN IN THE PAST. LASTLY, LOOKING AT HIMS AND HERS HEALTH, DOWN ABOUT 8% AT THE CLOSING BELL. WE WERE TALKING ABOUT THIS EARLIER WITH AVALON. VISA PUT THE COMPANY UNNOTICED FOR THE FACT IT WAS GETTING EXCESSIVE CUSTOMER COMPLAINTS, CRITICAL DISPUTES BECAUSE ALL OF THESE CUSTOMERS WERE UPSET ABOUT THE WEIGHT LOSS SUBSCRIPTION. IT STARTS OUT AT $839 INTRO MEMBERSHIP AND JUMPS TO -- IT STARTS OUT AT A $39 INTRO MEMBERSHIP AND JUMPS UP TO 49. ROMAINE: LET'S TAKE A QUICK LOOK AT YOU DOWN ACROSS HER DESK AT YIELDS -- AT YIELDS DOWN ACROSS THE CURVE. CONTINUING THIS LITTLE SEESAW BACK AND FORTH AS TRADERS TRY TO GET A HANDLE ON WHERE THEY THINK YIELDS MIGHT GO NEXT. I WANT TO BRING THIS TO YOUR ATTENTION FOR TIM STENOVEC. YOU ARE A FATHER. GOOD NEWS FOR YOU. TIM: OK. ROMAINE: STARTING TO SEE MORE FINANCIAL PACKAGES DESPITE THE FACT THAT A LOT OF PEOPLE ARE SENDING THEIR KIDS TO THESE SCHOOLS AND WOULD IN THEORY HAVE THE CASH TO PAY OUT THEMSELVES. HOUSEHOLDS THAT MAKE AS MUCH AS $500,000 A YEAR NOW BEING OFFERED SOME WAY TO SUBSIDIZE BECAUSE THE SCHOOLS ARE STRUGGLING TO HIT THEIR INTRO TARGETS. TIM: IT COULD BE BECAUSE TUITIONS HAVE GONE UP SO MUCH OF THE SCHOOLS. TALKING ABOUT BOARDING SCHOOLS. ONE IS UP $80,000 A YEAR. EVEN DAY SCHOOLS UP $50,000 A YEAR. THERE ARE PLENTY OF HIM INTO CAN AFFORD TO PAY FULL FREIGHT AT THESE PLACES AND WILL STOP AT NOTHING TO PAY AS MUCH AS THEY COULD FOR AN EXCELLENT EDUCATION, WHICH MANY PEOPLE ARGUE THESE SCHOOLS OFFER. AN EXPERIENCE TOO. EMILY: YES, THE EXPERIENCE OF BEING AT BOARDING SCHOOL AT THE AGE OF 15. ROMAINE: WHAT IS THE EXPERIENCE OF THE PARENT TO HAVE TO PAY ALL OF THIS? ASKING FOR A FRIEND. NORAH: QUESTIONS THAT NEED ANSWERS. EMILY: QUIET. THE COST OF LIVING IS GOING UP. AARON HUDSON WRITING THIS ARTICLE AND POINTING OUT THAT INVESTMENT ADVISOR SMART AS A ESTIMATES A FAMILY OF FOUR MEANS ROUGHLY $200,000 A YEAR TO LIVE COMFORTABLY IN CENTENNIAL AND NEW ORLEANS. IN NEW YORK, THAT FIGURE RISES TO $300,000. A TUITION OF $80,000, THAT WILL KNOCK OUT A LOT OF YOUR BUDGET. NORAH: WHAT IS INTERESTING IS IN THE STORY THE SCHOOLS ARE CALLING THESE PARENTS MIDDLE-CLASS, SO IT SHOWS YOU WHERE WE ARE ECONOMICALLY BUT SEPARATE FROM THAT, THE FACT THAT MANY EARN FAR MORE THAN $80,000 IN TERMS OF THE MEDIAN INCOME, BUT IT IS 150,000 I CAN QUALIFY FOR THAT. TIM: THE COST WILL CONTINUE TO GO UP. MY KIDS ARE TOO YOUNG FOR THIS. NORAH: MAYBE YOU HAVE TO START SAVING. TIM: THAT WILL DO IT FOR OUR CROSS-PLATFORM COVERAGE. YOU WRITE THE CHECKS TO THE COLLEGES YET? ROMAINE: DON'T START. I AM LOOKING AT FOR FIVE YEARS DOWN THE ROAD WITH THE DISPOSABLE INCOME WILL COME BACK MY WAY. TIM: WHAT ABOUT GRAD SCHOOL? ROMAINE: HE IS ON HIS WAY. TIM: WE WILL JOIN YOU TOMORROW SAME TIME, SAME PLACE FOR MORE OF OUR CROSS-PLATFORM COVERAGE ON BLOOMBERG. ROMAINE: OUR COVERAGE CONTINUES ON BLOOMBERG TELEVISION. WE COME BACK FROM A BREAK DOWN OF ECONOMIC CROSSCURRENTS THAT U.S. INVESTORS ARE STARING DOWN. A CONVERSATION UP AHEAD WITH TORSTEN SLOK. THIS IS BLOOMBERG. ♪ >> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS "THE CLOSE." ROMAINE: WELCOME BACK TO "THE CLOSE." A LOW-VOLUME DAY IN EQUITY MARKETS WITH MOST OF THE MAJOR INDICES FINISHING THE DAY IN THE RED COME AFFECTIONATELY SO COME BUT THE TRENDLINE HAS BEEN MUCH SOFTER THAN IT WAS A FEW WEEKS AGO. A BIG PART OF THE REASON ARE THE LINES ON THE SCREEN BEHIND ME. A BIG FOCUS RIGHT NOW ON RATES TO THAT IN A SECOND, BUT THE GOLD, THE SPOT GOLD NUMBER CONTINUING TO CREEP, RAISING A LOT OF QUESTIONS ABOUT JUST HOW MUCH FURTHER THIS CAN GO AND WHETHER THIS IS INDEED ALL TIED TO THE CONCERNS ABOUT INFLATION, THE FISCAL SITUATION, AND EVERYTHING IN BETWEEN. AS FAR AS THE WEAKNESS WE SAW IN THE CANADIAN DOLLAR TODAY, THAT CAME BECAUSE OF THE BIG BREAK WE SAT IN THE U.S.-CANADIAN TRADE TALKS, A BREAKDOWN THAT LED PRESIDENT TRUMP TO SAY HE WOULD ACTUALLY BOOST TARIFFS ON SOME CANADIAN GOODS COME PRIMARILY BY DOUBLE STARTING AT THE BEGINNING OF THE YEAR. THAT ACTUALLY TOOK A BITE OUT OF SOME OF THE U.S. AUTOMAKERS LIKE FORD AND GM. MEANWHILE, THE DEBASEMENT TRADE HAS CONTINUED TO WEIGH ON THE AI SECTOR. SOME BIG CONCERNS HEADING INTO A BIG REPORT BY NVIDIA. SOME PEOPLE TRYING TO CASH OUT TO PUT THE CASH TO OTHER USE. WE WILL GET TO THAT STORY IN A SECOND. VISA HAVING A GOOD DAY, UP 3%. SOME OF THAT A BENEFICIARY OF SOME MOVES WE HAVE SEEN BACK-AND-FORTH IN THE YIELD SPACE. THAT BRINGS US TO OUR TOP STORY FOR THE HOUR OF THE DIRECT INTERVENTION BY THE COSTS OF THE $40 TRILLION U.S. DEBT PILE. THE HISTORICAL TRACK RECORD OF SUCH INTERVENTIONS ARE SPOTTY. THE TWO MOST RECENT SUCCESSES, FIRST AND TREASURIES WERE PURCHASED IN EARLY 2000 $67 BILLION, PRIMARILY LONGER DATED BONDS. IT WAS A PROTRACTED OPERATION THAT PUSHED THE 30 YEAR YIELD DOWN BY ABOUT TWO PERCENTAGE POINTS OVER ABOUT A TWO YEAR STRETCH. SECOND, THERE WAS OPERATION TWIST IN 2011 BY A TUITION MANAGEMENT SCHEME WHERE THE FED NOT THE TREASURY BOUGHT $400 BILLION OF LONG-TERM TREASURIES WHILE SELLING AN EQUAL AMOUNT OF SHORT-TERM DEBT. BESSENT'S ACTIONS AT SO FAR SEEM TO BE STANDALONE INDEPENDENT WHICH IS INTERESTING GIVEN THAT HE BLASTED JANET YELLEN FOR WHAT HE CHARACTERIZED AS AN ATTEMPT TO REENGINEER THE WORLD'S LARGEST BOND MARKET, BUT IT IS ALSO CURIOUS TIMING FOR ALL OF THIS AS FED CHAIR KEVIN WARSH PREPARES FOR HIS OWN COMMUNICATIONS FOR HIS SPEECH FRIDAY IN JACKSON HOLE, WYOMING, THAT IS SUPPOSED TO BE ABOUT SOME OF THE MORE PROCEDURAL MATTERS OUT THERE. NO DOUBT THERE WILL BE HIGH ATTENTION AS TO WHETHER HE IS WILLING TO FORMULATE A IN BESSENT'S INTERVENTION AND WHETHER HE WILL OFFER A MORE DETAILED EXPLANATION. JOINING US IS TORSTEN SLOK FROM APOLLO. I WANT TO START FIRST WITH SCOTT BESSENT. WHAT THE TREASURY IS TRYING TO DO AND WHETHER HISTORY MIGHT BE ON THE SIDE WITH GUTS TO THE EFFECTIVENESS OF THE BOND BUYING. TORSTEN: THERE ARE REALLY THREE THINGS. YOU STARTED WITH THE INTERVENTION. THAT WAS PUSHING LONG RATES DOWN. AND THEN THE INTERVENTION TO BILLION DOLLARS TO $4 BILLION, AND NOW WE HEARD MAY BE THE TREASURY GENERAL ACCOUNT WILL ALSO BE USED. THERE IS ALMOST A CAMPAIGN FROM THE TREASURY, ATTEMPTING TO TRY TO LIMIT HOW MUCH RATES CAN BE GOING UP. ON THEIR OWN, THESE INITIATIVES HAVE HAD A MORE LIMITED EFFECT. THE FACT THIS CLOUD IS HANGING OVER THE MARKET THAT SOMETHING COULD HAPPEN, ESPECIALLY IF THE TREASURY GENERAL ACCOUNT IS BEING USED, THAT COULD HAVE A BIG IMPACT. ROMAINE: WHEN WE TALK ABOUT THE BIGGER IMPACT, I WOULD ASSUME IT COULD GET BIGGER THAN $2 BILLION. IS THERE A NUMBER YOU LOOK AT THAT WOULD HAVE A LASTING EFFECT? TORSTEN: YEAH, THAT IS WHY TODAY'S NEWS ABOUT THE TREASURY GENERAL ACCOUNT HAS MORE THAN $900 BILLION IN IT AT THE MOMENT AND COULD BE A MUCH BIGGER IMPACT ON THE MARKET BECAUSE THE THREAT OF USING HUNDREDS OF BILLIONS OF DOLLARS ON BUYING RATES COULD HAVE IMPLICATIONS. THAT BEING SAID, A CHECKING ACCOUNT ALWAYS NEEDS TO BE REFILLED. IT IS REALLY MORE THE THREAT OF THIS HAPPENING AT SOME POINT THAT IS HAVING THE BIGGEST IMPACT. ROMAINE: THAT IS WHAT I AM CURIOUS ABOUT. WOULD HE EVEN NEED TO TAP THAT? THE ECB DID SOMETHING SIMILAR AND DID NOT MAKE GOOD ON IT BECAUSE THEY DID NOT HAVE TO. THE IDEA OF SAYING THEY WOULD DO IT IF NECESSARY WAS ENOUGH TO SCARE THE MARKET INTO TOWING THE LINE. TORSTEN: IT IS VERY SIMILAR TO CURRENCY INTERVENTION FROM A CENTRAL BANK. IF YOU SAY WE MAY STEP IN AND DO SOMETHING, BUY OR SELL OUR OWN CURRENCY, THAT COULD ALSO BE A VERY IMPORTANT FACTOR. WHEN YOU THINK OF THIS AS A RISK IN HEADLINES, IT COULD CREATE A DROP IN YIELDS BECAUSE OF THE TREASURY DECIDING TO DO SOMETHING. THAT IS PROBABLY SHAKING OUT SOME PEOPLE NOW BIDDING ON RATES MOVING HIGHER. ROMAINE: IF WE DO GET TO A GENERAL ACCOUNT SITUATION WHERE THEY ARE THREATENING TO USE IT OR ACTUALLY USE IT, THIS GOES FAR BEYOND THAT MANAGEMENT. I DON'T KNOW WHAT WE CALL IT. I DON'T WANT TO USE THE QT WORD OR MAYBE JUST YIELD CURVE CONTROL. HOW DO YOU CHARACTERIZE IT IF WE DO GET TO THAT STAGE? TORSTEN: RATES ARE GOING HIGHER BECAUSE RATES HAVE BEEN HIGHER. IT IS ALSO PUTTING UPWARD PRESSURE ON RATES. THOSE FUNDAMENTAL FORCES ARE STILL IN PLACE AT THE MOMENT. THESE ARE MORE SPOTTY INTERVENTIONS TRYING AT CERTAIN POINTS TO LIMIT HOW MUCH RATES ARE GOING UP. IT IS STILL A CLOUD HANGING OVER THE RATES MARKET WITH THE THIRD ITEM COMING ALONG, THAT MEANS THESE THINGS COULD SUDDENLY JERKE RATES MUCH LOWER. THAT WILL LIKELY PUT SOME LIMIT ON HOW MUCH RATES CAN GO UP BECAUSE YOU COULD BE JERKED DOWN TO A LOWER LEVEL. ROMAINE: AT THE MOMENT, THIS IS THE TREASURY DEPARTMENT GOING ALONE AND THE FED AS FAR AS WE KNOW IS NOT INVOLVED. DO YOU THINK THAT WILL CHANGE? TORSTEN: AT THE MOMENT, THE TREASURY IS LIVING UNDER THE CONDITION OF 5% GDP. IF THAT IS NOT CHANGING, THERE IS STILL NEED TO FINANCE THE GOVERNMENT DEFICIT. GOVERNMENT DEBT LEVELS ARE STILL GOING UP. THESE ARE SMALLER THINGS HAPPENING ON THE FRINGES. ON THEIR OWN, THEY ARE NOT CHANGING THE FUNDAMENTAL FORCES DRIVING RATES HIGHER AND HIGHER INFLATION AND ALSO THE FISCAL SITUATION. ROMAINE: LET'S TALK ABOUT THOSE FUNDAMENTAL FORCES. WE HAVE TALKED ABOUT THE NEAR $40 TRILLION DEBT LOAD. THE SERVICING LOAD, JUST THE INTEREST PAYMENTS PREDICTED FOR Q4, I THINK IT WAS CLOSE TO $200 BILLION WHICH IS INSANE. THAT IS NOT SOMETHING THE TREASURY CAN SOLVE ON ITS OWN. NOT SOMETHING THE FED CAN SOLVE ON ITS OWN. IT IS SOMETHING IN THEORY CONGRESS WOULD HAVE TO ADDRESS. IT DOES NOT LOOK LIKE THEY ARE WILLING TO DO THAT. TORSTEN: THE RISK IN INTERVENTION IS IT LOWERS THE WEIGHTED AVERAGE MATURITY OF THE OUTSTANDING. THAT MEANS THE WEIGHTED AVERAGE MATURITY OF WHAT IS THE DEBT LEVEL IN TERMS OF DURATION WILL BECOME LOWER. IN OTHER WORDS, WE WOULD GET MUCH MORE DEBT ON THE FRONT END. THE SECOND RISK IS IF MORE RISK -- DEBT IS IN TBILLS, IT BECOMES MORE SENSITIVE TO WHAT THE FED IS DOING. IF KEVIN WARSH DECIDES TO RAISE RATES, THAT MEANS THE DEBT INTEREST PAYMENTS WILL GO UP BECAUSE THERE IS MORE SENSITIVITY NOW THAT MORE DEBT IS IN TBILLS. ROMAINE: IF THE WEIGHTED AVERAGE MATURITY GOES DOWN, DOES THAT MEAN, DOES THAT PUT UPWARD PRESSURE ON THE AVERAGE INTEREST RATE WE HAVE ON THAT DEBT OVER ALL? TORSTEN: IT MEANS YOU BECOME MORE DEPENDENT ON THE FRONT END BECAUSE YOU HAVE MORE DEBT ON THE FRONT END DEPENDS ON WHAT THE FED IS DOING. THE QUESTION BECOMES HOW THE LONG AND INTERPRETS WHAT IS GOING ON. IF THE LONG AND SAYS EVERYTHING IS GREAT, THE DEBT SERVICING COSTS WOULD GO LOWER. BUT IF THE LONG END SAYS WE HAVE FUN TO FORCES STILL AT PLAY IN THESE HAVE NOT CHANGED, THE LONG END COULD GO HIGHER IN THE NET EFFECT WOULD BE BOTH ARE MORE SENSITIVE TO HIGHER RATES FROM THE FED ON THE FRONT END AND THE TERM PREMIUM BECAUSE THE MARKETS CAN QUESTION THE FED'S COMMITMENT TO RATES AND DEBT LEVELS CONTINUE TO GO UP. ROMAINE: DO YOU THINK KEVIN WARSH WILL ADDRESS THIS IN HIS FRIDAY SPEECH? TORSTEN: I THINK HE WILL BE FOCUSING MORE ON THE ECONOMIC OUTLOOK AND THE FRAMEWORK THE FED IS HAVING AT THE MOMENT TO TRY TO ADDRESS SOME OF THESE CRITICISMS WE ARE SEEING IN TERMS OF THE LAST PRESS WHERE A LOT OF PEOPLE SAID WE UNDERSTAND FORWARD GUIDANCE COULD BE GOING AWAY AND WE SHOULD BE FOCUSING ON FRAMEWORK GUIDANCE. ARE YOU FOCUSING ON THE BALANCE SHEET? ARE YOU FOCUSING ON THE FED FUNDS RATE? WHAT ARE THE TOOLS YOU ARE GOING TO USE TO TIGHTEN POLICY TO TRY TO GET INFLATION TO COME DOWN? ROMAINE: DO YOU THINK HE WILL DO THAT? IT SEEMS HE DOES NOT WANT TO BE THAT COMMUNICATOR. TORSTEN: THAT IS WHY I THINK MOST OF THE DISCUSSION WILL NOT BE AROUND THE TASK FORCE. IT WILL PROBABLY FOCUS MORE ON THE ECONOMIC SITUATION AT THE MOMENT AND LESS ON THE OVERALL FRAMEWORK FOR COMMUNICATION, THE BALANCE SHEET, THE TASKFORCES. MORE LAYING OUT OUR VIEW ON THE ECONOMIC OUTLOOK AT THE MOMENT WITHOUT GIVING FORWARD GUIDANCE. ROMAINE: IT WAS INTERESTING LOOKING AT THE MINUTES AND ANECDOTAL EVIDENCE ABOUT A BIG FOCUS ON ARTIFICIAL INTELLIGENCE AND HOW IT IS AFFECTING PRODUCTIVITY OR INFLATION DEPENDING ON YOUR PERSPECTIVE. DO YOU THINK THIS WILL BECOME MORE OF A DOMINANT CONVERSATION FOR THE NEXT COUPLE OF FED MEETINGS? TORSTEN: I DO THINK THIS IS BECOMING IMPORTANT FOR THE REASONS YOU ARE MENTIONING. THE AI BUILDOUT REQUIRES HIRING MORE PEOPLE, BUYING MORE MEMORY, MORE CHIPS, MORE EQUIPMENT, LAND. IT ALSO INVOLVES CONSTRUCTION. IN THE NEAR TERM, AI IS INFLATIONARY. BUT WHEN AI IS ADOPTED AND IMPLEMENTED, WE SHOULD EXPECT TO SEE AI WILL BE DISINFLATIONARY. IT WILL PROBABLY HAVE SOME IMPORTANT IMPACT WHEN WE THINK ABOUT WHO IS IMPACTED. WE MAY SEE A REVERSAL IN THE CONSUMER WHERE THE HIGH-END WILL SEE LOWER WAGE GROWTH AND THE LOWER LEG OF THE K, BLUE-COLLAR WORKERS, WILL SEE STRONGER WAGE GROWTH AND BETTER JOB GROWTH BECAUSE AI IS MAINLY HURTING THOSE WHO HAVE MORE SKILLS AND EDUCATION. ROMAINE: WE HAVE TO LEAVE IT THERE. REALLY APPRECIATE IT. TORSTEN SLOK AT APOLLO. HEADLINES INVOLVING SITUATIONAL AWARENESS AND THIS INVOLVING SUBPOENAS BEING SENT BY THE SECURITIES AND EXCHANGE COMMISSION AS IT LOOKS INTO WHAT TRANSPIRED WITH A MERE CALAMITOUS -- NEAR CALAMITOUS SITUATION. WE WILL GET YOU MORE DETAILS ON THAT. WE WILL BE BACK IN A MOMENT RIGHT HERE ON BLOOMBERG. ♪ ROMAINE: WE WANT TO GO BACK TO THE BREAKING NEWS INVOLVING SITUATIONAL AWARENESS. THE NEW YORK TIMES IS REPORTING REGULATORS HAVE SENT SUBPOENAS TO THE MAJOR WALL STREET BANKS SEEKING INFORMATION ABOUT WHAT HAS TRANSPIRED. ACCORDING TO THAT REPORT, THE TIMES IS SAYING THE INVESTIGATION CENTERS AROUND HOW THE BANKS HANDLED THE HEDGE FUNDS TRADING AS WELL AS SOME OF THE BORROWED MONEY THAT MIGHT HAVE LED TO SOME OF THE ISSUES IT DEALT WITH. THIS IS COMING FROM A NEW YORK TIMES STORY CITING PEOPLE FAMILIAR WITH THE SITUATION SAYING SUBPOENAS HAVE BEEN SENT TO THE MAJOR WALL STREET BANKS. THE STORY ALSO SAYS THE BANKS WERE REACHED OUT TO FOR COMMENT AND HAVE YET TO RESPOND TO THAT REQUEST. ANOTHER HEADLINE CROSSING THE WIRE INVOLVING A POWER COMPANY THAT TRADED ON THE LONDON STOCK EXCHANGE FOR YEARS. IT WAS TAKEN PRIVATE IN 2021. WE ARE NOW LEARNING BASED ON A FILING IT HAS MADE THAT IT HAS FILED FOR IPO ON THE NYSE. UNDER THE TICKER AGKO. SKY NEWS REPORTED EARLIER THIS WEEK THE COMPANY WAS LOOKING TO COME TO MARKET IN THE U.S. AT A VALUATION OF ROUGHLY $20 BILLION. LET'S CHECK IN ON WHAT HAPPENED EARLIER WITH MARKETS. THE S&P ENDING THE DAY DOWN ABOUT .3%. A LOT OF PEOPLE IN A HOLDING PATTERN OVER KEY ECONOMIC DATA ON WEDNESDAY AND A BIG EARNINGS REPORT ON WEDNESDAY AS WELL. 30-YEAR YIELD SLIGHTLY LOWER ON THE DAY. BIG SOFTNESS IN THE CANADIAN LOONIE. BRICK DOWN ABOUT 3% -- BRENT CRUDE DOWN ABOUT 3%. WE WILL TALK MORE ABOUT THAT AFTER THE BREAK. ♪ >> PRESIDENT TRUMP HAS TAKEN ACTION THAT HIS PREDECESSORS HAVE LONG DEFERRED. UNDER HIS LEADERSHIP, AMERICA IS NO LONGER MANAGING THE IRANIAN THREAT. WE ARE ENDING IT. ROMAINE: THAT WAS SCOTT BESSENT, THE U.S. TREASURY SECRETARY, TODAY ON BENTLEY WHAT HE CALLED "ECONOMIC D-DAY," A CAMPAIGN TO SEVER IRAN CLEARLY FROM THE GLOBAL ECONOMY. NOT A LOT OF REACTION IN OIL PRICES. BRENT CRUDE DOWN 2.5 PERCENT. IT WAS ALREADY TRENDING IN THAT DIRECTION BEFORE THOSE COMMENTS BUT A LOT OF INVESTORS WAITING FOR MORE DETAILS ABOUT WHAT THIS D-DAY LOOKS LIKE AND WHAT THE IMPACT WILL BE ON OIL AND ENERGY MARKETS. JOINING US NOW IS AT MORRIS -- ED MORRIS TO TALK MORE ABOUT WHAT THIS MEANS. WE SHOULD POINT OUT THIS WAS NOT A LOT OF DETAIL AS TO HOW EXACTLY THIS WILL WORK, BUT I GUESS MY QUESTION FOR YOU IS FOR A COUNTRY IN IRAN THAT SEEMED RELATIVELY ECONOMICALLY ISOLATED, HOW MUCH MORE PRESSURE CAN BE PUT ON THEM, AND DOES NOT HAVE AN IMPACT ON OIL PRICES? >> IT IS A LOT OF PRESSURE ON IRAN FOR SURE. WHETHER IT HAS AN IMPACT ON OIL PRICES IS ANOTHER MATTER. WHAT IS HAPPENING ON OIL PRICES IS THE EFFECT OF BLOCKING ANY IRANIAN OIL EXPORTS, BUT IRAN HAS A DIFFICULT TIME GETTING OIL TO PASS THROUGH THE U.S. BLOCKADE, SO THE OIL MARKET IMPACTS OF THAT OBVIOUSLY WORK OVERTIME, BUT THERE IS NOTHING INCREMENTAL ABOUT IT WITH THE NEW SANCTIONS THAT ARE REALLY TRYING TO DEPRIVE IRAN FROM GETTING INVOLVED IN ANY OTHER INTERNATIONAL TRANSACTIONS BY ANYTHING THROUGH ANY MECHANISM FROM ANYONE. THE INITIAL SOUNDBITE. ROMAINE:ROMAINE: MOST OF THE SPECULATION SEEMS TO REVOLVE AROUND WHAT MIGHT INVOLVE CHINA AND IF CHINA SHUT OFF THEIR ABILITY TO ACCESS SOME OF THESE PRODUCTS. I KNOW THERE ARE THE OFFICIAL NUMBERS OF WHAT WE KNOW CHINA HAS BEEN BUYING AND SOMEONE OFFICIAL NUMBERS, BUT THEY ARE HIGHER. IF THERE WAS SOME REAL MECHANISM TO CUT THAT OFF, WHETHER DIPLOMATICALLY OR OTHERWISE, DOES THAT IMPACT THE MARKET? ED: IT HAS IMPACTED THE MARKET IN AN INDIRECT WAY. YOU CAN THINK OF THE OIL EXPORTED FROM IRAN THROUGH THE SPRING GOING INTO RESERVES OR PREVENTING RESERVES FROM BEING DEPLETED. THAT IS A DIFFERENT ISSUE FROM THE CONSUMPTION SIDE. CHINA HAS MANAGED TO REDUCE DRAMATICALLY THEIR CONSUMPTION OF BOTH GASOLINE AND DIESEL, BOTH IN NEGATIVE TERRITORIES. THEY WERE REACHING PEAK ALREADY AND NOW HAVE ACCELERATED THROUGH PUBLIC POLICY, AND THAT WILL CONTINUE. THEY HAVE A POPULATION THAT IS NOT GROWING. THEY HAVE MANAGED TO REDUCE DRIVING, AND THEY ARE KIND OF AT THE BRINK OF WHAT COULD HAPPEN TO THEM, BUT THEY HAVE TAKEN ACTIONS TO MAKE SURE THEY DON'T HAVE TO EXPORT MORE THAN THEY NEED TO CONSUME, SO THEY NEED TO REFINE LESS. AS THE PRICE REACHES HIGH LEVELS, THEY NOT WANT TO BUY IT ANYWAY, BUT THERE IS NO DOUBT THAT CHINA UNDER ITS OWN ACTIONS DEPRIVING ITSELF OF ACCOMMODATION FOR OIL FOR REFINING HAVE DONE A LOT TO KEEP THE BALANCE IN THE MARKET. THEY HAVE DONE ALMOST AS MUCH IN A WAY AS THE IAEA COUNTRIES HAVE IN PUTTING A LOT OF OIL ON THE MARKET. THAT IS SOMETHING WE WILL SEE AND SOONER. ROMAINE: I AM CURIOUS WHERE IRAN'S LEADERSHIP IF YOU CAN CALL AT THAT ACTUALLY STANDS IN ALL OF THIS. WE SAW THEY WERE BASICALLY STANDING UP OR REFUSING TO GIVE IN TO THE MILITARY BOMBARDMENT. IS THERE SOME SENSE THAT THE REPUBLICAN GUARD MIGHT BE RECEPTIVE TO TALK BECAUSE OF THE POTENTIAL ECONOMIC IMPACT OF WHATEVER BESSENT AND THE U.S. ARE ABOUT TO ROLL OUT? ED:ED: I THINK WE ARE SEEING THAT PLAY OUT RIGHT NOW. WE HAVE HAD THE PRESIDENT OF THE COUNTRY, AN ELECTED OFFICIAL, THE HEAD OF PARLIAMENT, THE SPEAKER OF THE PARLIAMENT, AND OTHER ELECTED OFFICIAL, THE FOREIGN MINISTER ANOTHER KIND OF ELECTED OFFICIAL, ALL SAYING IT IS TIME FOR IRAN TO DO SOMETHING TO DO WITH POVERTY AT HOME, TO DEAL WITH 80% INFLATION, AND TO DEAL WITH THE VERY UNHAPPY PUBLIC. NOW THE QUESTION IS, IS THE IRGC ENCOURAGING THIS OR DOING IT AGAINST THE IRGC? I WOULD SAY THIS IS AN IRGC OF TO TRY TO ALLEVIATE THE PRESSURE, TO TRY TO FIND ANOTHER PERIOD OF TIME WHEN THE STRAIT OF HORMUZ WILL BE REOPENED. LEADERSHIP WOULD NOT BE DOING WHAT THEY ARE DOING IN OPPOSITION TO THE IRGC. YOU CAN SEE THAT IN OTHER AREAS AS WELL OVER THE LAST WEEK. THE IRGC HAS BEEN MASTERMINDING STOPPING THE SUPREME LEADER AND THE THEOLOGIANS FROM GETTING INVOLVED IN NATIONAL SECURITY IN A DIRECT WAY. THEY HAVE DONE THAT IN TWO DIFFERENT WAYS. ONE IS THEY ARE KEEPING THE SUPREME LEADER OUT OF SELECTION OF PEOPLE INVOLVED IN INTELLIGENCE, SAYING CONVINCINGLY SO THAT YOU DON'T NEED A THEOLOGICAL BACKGROUND TO BE AN EXPERT IN INTELLIGENCE AND IT MAY BE SOMETHING THAT TURNS YOU ASIDE. THEY ARE REDUCING THE NATURE OF THE REGIME BUT RECOGNIZING THE PUBLIC IS VERY UNHAPPY AND VERY UNHAPPY BECAUSE OF THE ECONOMIC STRESS IT IS UNDER. ROMAINE: DO YOU FORESEE AT SOME POINT WE WILL HAVE A RETURN TO NORMALCY WITH REGARDS TO ACCESS THROUGH THE STRAIT OF HORMUZ? BASICALLY, WHAT WAS FREE REIGN PRIOR TO THE WAR STARTING SIX MONTHS AGO. BECAUSE EVEN IF IRAN COMES TO THE NEGOTIATING TABLE, THERE HAS BEEN A LOT OF DISCUSSION OF WHETHER THEY WOULD COVER THE STRAIT OF HORMUZ, CHARGING TOLLS. WHAT IS YOUR VISION FOR WHAT POTENTIALLY THE STRAIT OF HORMUZ WILL LOOK LIKE IN THE FUTURE? ED: YOU NEED TO THINK OF THREE THINGS. ONE IS WHO WILL BE RULING IN IRAN. SECOND IS, WHAT ARE THE EXPORTS GOING TO BE THROUGH THE STRAIT OF HORMUZ? HOW MUCH WILL GO THROUGH OTHER MECHANISMS, AND HOW MUCH WILL DECLINE AS A RESULT OF THE DECLINE IN OIL DEMAND AROUND THE WORLD. THESE ARE THREE THINGS THAT HAVE TO BE TAKEN INTO CONSIDERATION. CERTAINLY THE WORLD HAS CHANGED IN THAT WE HAVE IRAN AND A LOT LOOKING AT WAYS TO REGULATE THE FLOWS THROUGH THE STRAIGHT OF HORMUZ -- THROUGH THE STRAIT OF HORMUZ. SOMEBODY OUGHT TO BE LOOKING AT THE SAFETY OF VESSELS GOING THROUGH THE STRAIT OF HORMUZ, WHO IS CERTIFIED, WHO ISN'T. CERTAINLY THE ENCOURAGEMENT OF SHADOW THINGS HAS NOT ENCOURAGED THAT. IF THERE WERE TO BE AN OVERALL AGREEMENT OF ALL OF THE COUNTRIES ON BOTH SIDES OF THE STRAIT OF HORMUZ ABOUT CERTIFICATION, ABOUT CHARGING FOR THE INSPECTIONS, THAT WOULD BE A DIFFERENT MATTER FROM IRAN USING ITS MUSCLE POWER. WE ARE NOW AT A POINT AGAIN WHERE THE U.S. IS PUTTING PRESSURE ON IRAN AND PART OF THAT PRESSURE WILL BE CERTAINLY ON THE STRAIT OF HORMUZ, WHAT CAN PASS THROUGH, AND WHAT CANNOT. IT IS A QUESTION OF WHETHER THE IRGC DECIDES TO DO MORE BOMBING OF MORE VESSELS. THEY HAVE ALLOWED MORE TO GO THROUGH. PARTICULARLY, THEY HAVE ALLOWED SHUTTLE VESSELS TO GO THROUGH INCLUDING THE VESSELS RELOADING VLCC'S EAST OR SOUTH OF THE STRAIT OF HORMUZ. IF YOU LOOK AT IT, HEADING EAST PARTICULARLY TO CHINA AND INDIA. ROMAINE: GREAT STUFF. ALWAYS APPRECIATE IT. A CLOSER LOOK AT THE SITUATION IN THE OIL MARKET AND IRAN. WHEN WE COME BACK OF A CLOSER LOOK AT THE SITUATION WITH THE DOLLAR ON THE BACK OF THE TREASURY'S BUYBACK PLAN. OUR GUEST WILL JOIN US NEXT HERE ON "THE CLOSE" ON BLOOMBERG. ♪ >> THIS WAS NOT A U.S. PHENOMENON IN REGARDS TO 30 YEAR YIELD GOING HIGHER. ACTUALLY, U.S. IS THE LAST MAJOR DEVELOPED MARKET TO THE GAME OF STEEPENING YIELD CURVES. THIS IS A GLOBAL PHENOMENON AND THERE ARE REASONS BEHIND IT SO IT WILL BE VERY HARD TO FIGHT IT. ROMAINE: EARL DAVIS OVER AT BMO GLOBAL ASSET MANAGEMENT TALKING ABOUT SOME OF THE U.S. EFFORTS TO REIN IN LONG-TERM BORROWING COSTS. HE IS NOT NECESSARILY BUYING IT, AND NEITHER IS CITADEL. IT SOUNDED THE ALARM ON THE BUYBACKS, WARNING THE MOVE MONSTER FINANCIAL REPRESSION AT THE MARGIN. PREVENTING TREASURIES FROM CLEARING AT LOWER PRICES DOES NOT ILLUMINATE THAT PRESSURE, MERELY SHIFTS AND ELSEWHERE TO THE CURRENCY MARKETS. ED AL-HUSSAINY JOINED AS, PORTFOLIO MANAGER AT COLUMBIA THREADNEEDLE INVESTMENTS. I WANT TO START THEIR FIRST WITH THE CURRENCY MARKETS, SPECIFICALLY THE DOLLAR, WHICH IN THE SHORT TERM APPEARS TO BE THE LOSER IN ALL OF THIS. IS THIS JUST A QUICK REACTION FUNCTION OR THE STRUCTURAL STORY? ED: I THINK THE BROADER STORY IN THE DOLLAR HAS BEEN RELATIVE STABILITY OF VERSUS DEVELOPED MARKET PEERS. BUT WHEN YOU LOOK VERSUS EMERGING MARKET PEERS POWERING THE TRADE, THIS GIVES THE TRADE A LITTLE MORE OXYGEN AND KEEPS A LID ON U.S. RATES. AND THEREFORE TO THE EXTENT PEOPLE WERE AFRAID OF MAYBE THE FED ACCELERATING HIKES, PEOPLE WERE AFRAID OF LONG AND RATES RISING IN A DISORDERLY MANNER. THIS TAKES THAT RISK OFF THE TABLE AT LEAST TEMPORARILY. ROMAINE: YEAH, SEVEN STRAIGHT QUARTERS WE HAVE SEEN THE CAMRY OUTPERFORM. I WOULD BE REMISS NOT POINTING OUT THE HISTORY THAT THE TRADE COULD TURN ON PEOPLE QUICK. ED: IT IS DEFINITELY LONG IN THE TOOTH. IT HAS BEEN AN UNUSUAL MARKET IN THAT CENTRAL BANKS HAVE FOUGHT INFLATION MUCH MORE AGGRESSIVELY THAN THE FED HAD AND THE INFLATION-ADJUSTED REAL YIELDS IN MANY MARKETS, LOOK AT BRAZIL, MEXICO, COLOMBIA, SOUTH AFRICA, ARE IN AN ATTRACTIVE PLACE RELATIVE TO THE FED THAT HAS FOUND ITSELF BEHIND THE CURVE PARTICULARLY THIS YEAR. ROMAINE: WHEN WE TALK ABOUT THE CARRY TRADE AND THE RATE DIFFERENTIALS, SOME OF THAT AS A FUNCTION OF ECONOMIC ACTIVITY AND WE TALKED WITH A COUPLE PEOPLE ON THIS PROGRAM TODAY THAT ARE STILL PRETTY BULLISH ON U.S. ECONOMIC ACTIVITY, U.S. ECONOMIC GROWTH. UP BEING WHAT KEEPS THAT TRADE GOING? ED: QUITE STRIKING. IF YOU’D TOLD ME AT THE BEGINNING OF THE YEAR THAT EMPLOYMENT COULD END AT THE THREE HANDLE AND INFLATION ALSO AT 3 RATE BY THE END OF THE YEAR I WOULD HAVE SAID WE WOULD HAVE HAD A REALLY STRONG DOLLAR. U.S. RISK ASSETS HAVE DONE EXTRAORDINARILY WELL THIS YEAR AND YET THE DOLLAR HAS MOVED SIDEWAYS. IT’S UNDERPERFORMED SOME OF THE DOMESTIC FUNDAMENTALS AND I THINK IN LARGE PART BECAUSE THE FETE HAS BEEN SLOWER TO REPRICE RELATIVE TO OTHER BANKS. ROMAINE: WE SENT WILL TELL YOU HIMSELF HE’S AN ECONOMIC HISTORIAN. I WENT BACK AND TRIED TO FIND WHEN WE HAD INTERVENTIONS LIKE THIS THAT SUCCEEDED, WHEN WE HAD THOSE THAT FAILED. IT’S ASPORTEDY RECORD. OPERATION TWIST, WHICH WAS MORE FED THAN TREASURY WAS SUCCESSFUL. BUT-UP GO BACK AND LOOK AT OTHERS. I’M CURIOUS AS TO WHAT HISTORY SHOULD BE TELLING SCOTT BESSENT, WHAT HE’S DOING AND WHETHER HE IS WISE. I WOULD: IN HISTORY YOU NEED A REALLY LARGE STICK TO MAKE THIS INTERVENTION SUCCESSFUL AND THAT LARGE STICK IN THE FED’S CASE AND THE BALANCE SHEET. BOTH OF THE SUCCESSFUL ONE RELIED ON THE FED’S BALANCE SHEET TO LEVERAGE THE TREASURY’S INTERVENTION IN THIS MARKET. WHAT WE’RE DOING RIGHT NOW I THINK HAS REALLY POWERFUL SIGNALING BUT NOT A LOT OF FIREPOWER BEHIND IT. I THINK THE LESSON OF HISTORY IS YOU NEED TO BACK THIS UP WITH ACTIONS AND YOU NEED TO USE THE FED’S BALANCE SHEET, OTHERWISE THIS IS GOING TO BE A SHORT-LIVED INTERVENTION. ROMAINE: THAT GOES TO THE IDEA ABOUT SOME UNCONFIRMED REPORTS TO SAY ABOUT THE TREASURY USING ITS INDIVIDUAL ACCOUNT, NOWHERE NEAR THE FED’S BALANCE SHEET OF $6 TRILLION -- 7 TRILLION, WHATEVER IT IS TODAY. COULD THAT BE THE BALANCE SHEET THAT MAYBE GETS THIS HOME? ED: I THINK THE SHORT ANSWER IS NO. THE TREASURY NEEDS THAT CASH FOR DAY-TO-DAY LIQUIDITY SO THE AMOUNT OF CASH AVAILABLE FOR THE PURCHASE OF LONG-TERM BONDS I THINK IS GOING TO BE QUITE LIMITED AND IF THE FRACTURERY IS USING THE T.G.A. TO PURCHASE BONDS TO PUT ON THE FED’S BALANCE SHEET THAT STARTS TO CONFLICT DIRECTLY WITH THE FED’S BALANCE SHEETS. THAT’S A REALLY UNCOMFORTABLE POSITION TO BE IN. SO I THINK TO THE EXTENT THAT THEY’RE GOING TO BE USING A LITTLE BIT OF CASH ALL THE TJA, IT’S GOING TO BE PRETTY SMALL. THE ULTIMATE DECISION HAS TO COME DOWN TO HOW MUCH ARE WE GOING TO ISSUE IN THAT LONGER PART OF THE CURVE BY THE TIME WE GET TO 2027 AND 2028? I THINK THERE THE TREASURY HAS A LITTLE BIT MORE DISCRETION. ROMAINE: GREAT STUFF, THANK YOU. AS WE CONTINUE OUR COVERAGE ON "THE CLOSE." THIS OUT OF THE SUPREME COURT. THE SUPREME COURT SAID TO BE SIDING WITH THE PRESIDENT OF THE UNITED STATES FOR NOW ON HIS MAILIN BALLOT CURBS. THIS IS GOING TO BE A BIG FIGHT HEADING INTO A MIDTERM ELECTION IN NOVEMBER. THEY HAVE >> SAN ATTITUDE AT THE NEGOTIATION TABLE THAT CANADA IS A SUBSIDIARY OF THE UNITED STATES. THE CANADIAN INDUSTRY IS GOING TO BE DISADVANTAGED RELATIVE TO AMERICAN INDUSTRY, THAT WE’RE GOING TO SET UP TERMS SO THAT OVER TIME CANADIAN INDUSTRY IS GOING TO FACE CONSTANT HEADWINDS. THAT’S NOT SOMETHING WE’RE GOING TO ACCEPT. ROMAINE: PRIME MINISTER MARK CARNEY OF CANADA WARNING THAT HIS GOVERNMENT IS STILL WORKING ON OPTIONS FOR RETALIATING AGAINST THAT FRESH TARIFF THREAT FROM THE UNITED STATES. JOINING US IS A PRINCIPAL ECONOMIST AT THE CANADIAN CHAMBER OF COMMERCE. CANADA HAS BEEN TRYING TO WEATHER THIS NOW FOR THE LAST COUPLE OF YEARS. WHAT OTHER OPTIONS DOES CARNEY HAVE? >> GOOD TO BE WITH YOU, ROMAINE. TENSIONS ARE HIGH, EMOTIONS ARE HIGH AND YOU CAN KIND OF SEE THE STRONG DEMEANOR OF THE PRIME MINISTER. WHAT WE’RE TRYING TO DO IN CANADA IS FOCUS ON WHAT WE CAN CONTROL, THAT’S BUILDING A STRONG DOMESTIC ECONOMY. WE HAVE AN UPCOMING INVESTMENT FORUM. AS ONE OF THE BEST RISK MANAGERS, FORMER CENTRAL BANK OF TWO CENTRAL BANKS, ENGLAND AND CANADA, PRIME MINISTER CARNEY IS IN RISK MITIGATION MODE AND WALKED AWAY FROM THE TABLE AS A RESULT OF UNFORTUNATELY A DEAL THAT WE COULD NOT AGREE UPON. ROMAINE: I’M CURIOUS ABOUT THE ECONOMIC IMPACT. DOES THIS PUT THE POTENTIAL FOR A RECESSION FOR CANADA BACK ON THE TABLE ASSUMING THAT THERE ISN’T A RESOLUTION BY THE END OF THE YEAR? >> WE’RE IN A TIT FOR TAT SITUATION RIGHT NOW. TARIFFS AREN’T GREAT. CONSUMERS PAY HIGHER PRICES. I WOULD NOTE THAT PRICES IN THE UNITED STATES ARE GROWING AT ABOUT 3%. CENTRAL BANKS LOOKING AT POTENTIALLY HIKING INTEREST RATES AS A RESULT. SO TARIFFS DO HAVE AN IMPACT. CANADA IS PLANNING TO PUT ON RETALIATORY TARIFFS, AND THAT’S GOING TO IMPACT THE CONSUMER AT A TIME WHEN GAS PRICES ARE ALREADY ELEVATED. IT’S NOT A GREAT TIME. THIS IS RAISING THE COST OF DOING BUSINESS BOTH IN THE UNITED STATES AND UNFORTUNATELY IN CANADA. SO THE HOME IS THAT WE GET TO A RESOLUTION AS QUICKLY AS POSSIBLE AND MOVE PAST THIS. I WILL NOTE THAT WE ARE LOSING A LITTLE BIT OF THE PLOT HERE, RIGHT? THIS IS ALL ABOUT NORTH AMERICAN COMPETITIVENESS. THIS WAS A DEAL BEFORE THE TRI-LAT RAM DEAL. ROMAINE: ABSOLUTELY. CARNEY DID KIND OF ADDRESS THE RETALIATION, THAT DOING DOLLAR FOR GLAIR ISN’T PRACTICAL GIVEN THE DISPARITY IN THE TWO ECONOMIES BUT IT SHOWS WHAT OTTAWA COULD TARGET TO GAIN LEVERAGE. >> UNFORTUNATELY IN THESE SITUATIONS, THESE TRIP LIFTS ARE CALCULATED TO HAVE THE MAXIMUM AMOUNT OF PAIN. OF COURSE, THERE ARE SYMBOLIC ELEMENTS TO THE UNITED STATES PUTTING TARIFFS IN THE LATEST ROUNDS ON HOCKEY STICKS. SO IT’S NOT LIKE WE CAN COUNTER DOLLAR FOR DOLLAR IN TERMS OF RETALIATION BUT I THINK THERE IS SOME SILVER LINING HERE IN TERMS OF LEVERAGE FOR CANADA. IN TERMS OF THE UNITED STATES DOES NEED OUR ENERGY, OUR NATIONAL RESOURCES. CRITICAL MINERALS ARE GOING TO BE EXTREMELY IMPORTANT, ESPECIALLY IN THE AGE OF A.I. YOU WANT A PARTNER IN CANADA AND THIS IS WHY THE HARSH TONE FROM THE TRUMP ADMINISTRATION IS RUBBING THE CANADIAN ADMINISTRATION AND CANADIANS THE WRONG WAY. ROMAINE: YOU TALK ABOUT NORTH AMERICA. THE LATEST REVIEW I THINK IS UP AHEAD. I ASSUME THAT NOT MUCH IS GOING TO HAPPEN THERE UNLESS CANADA AND THE U.S. RESOLVE THIS PARTICULAR TARIFF SITUATION. >> UNFORTUNATELY WE DON’T -- AS SIGNALED BY THE CANADIAN ADMINISTRATION, AMERICAN ADMINISTRATION, IT’S NOT SURE WHEN WE’RE GOING TO RETURN TO THE TABLE AND GET TO CONSTRUCTIVE TALKS. IT’S IN THE INTERESTS OF BOTH COUNTRIES TO GET BACK TO THE TABLE AS QUICKLY AS POSSIBLE. I’M NOT SURE HOW THE U.S. MID TERMS ARE GOING TO PLAY INTO THAT AS FAR AS TIMING. NEW THREATS FROM THE PRESIDENT THIS MORNING ON A NEW GENERATION OF GOODS. HOPEFULLY THINGS WILL COOL A LITTLE BIT AND WE CAN RETURN AND GET TO CONSTRUCTIVE TALKS BETWEEN OUR TWO COUNTRIES. ROMAINE: THANK YOU. ALL EYES ON THE POLITICAL SITUATION GOING ON BETWEEN THE TWO NATIONS. MEANWHILE, ALL EYES STILL BACK ON THE MARKET AS WE SET YOU UP ON WHAT TO WATCH OVER THE NEXT 24 HOURS. EARNINGS OUT OF DICK’S SPORTING GOODS. EARNINGS OUT OF ZOOM AFTER MARKET. A READ ON NEW HOME SALES AS WELL AS THAT RICHMOND FED INDEX. WE’LL HEAR FROM THE RICHMOND FED PRESIDENT AND SOUTH CAROLINA HOLDING A SPECIAL PRIMARY RUNOFF FOR THE U.S. SENATE SEAT TO REPLACE THE LATE SENATOR LINDSEY GRAHAM. I’M SURE THEY’LL HAVE A LOT MORE ON THAT SITUATION IN SOUTH CAROLINA. I’LL BE BACK WITH YOU TOMORROW HERE ON "THE CLOSE" WITH ALL OF YOUR MARKET-MOVEBLING COVERAGE RIGHT HERE ON BLOOMBERG.