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• 00:00ROMAINE: A SEVEN-DAY RUN FOR THE S & P POWERED BY WHAT ELSE BUT AI. I’M ROMAINE BOSTICK. KATIE: I’M KATIE GREIFELD. WE ARE KICKING OFF TO THE CLOSING BELL IN THE U.S. MORE GREEN ON THE SCREEN, LIKE ROMAINE SAID. SEVEN STRAIGHT DAVE GAINS FOR THE S & P 500, UP .4%, DRIVEN IN A BIG WAY BY AI, BY OPENAI, NOT A PUBLICLY LISTED COMPANY, BUT MAKING A SPLASH IN THE STOCK MARKET. NASDAQ 100 HIGHER BY 1% NOW. THIS IS A RISK-ON DAVID 10-YEAR TREASURY DEAL HIGHER BY FOUR BASIS POINTS. VOLATILITY OUT OF THE EQUITY MARKET RIGHT NOW, ROMAINE. DOWN A LITTLE BIT ON THE VIX, ALTHOUGH WE ARE TRADING WITH THE 16 HANDLE. ROMAINE: TAKE A LOOK AT THE TOP OF THE SCREEN, IT IS ABOUT OPENAI. IT WAS ABOUT A WEEK AGO WHEN OPENAI SENT ETSAY AFTER UNVEILING AN INCIDENT BUY OPTION IN CHATGPT. RALLYING THE MOST SINCE 2016 ON OPENAI, DEPLOYING SIX GIGAWATTS WORTH OF GRAPHICS PROCESSING UNITS. CISCO AND MATTEL RALLYING ON COMMENTS ADDED OPENAI DEVELOPER RIBBON THAT SUCH MARKET MOVING SWAY RARE, BUT IT HIGHLIGHTS RISING INFLUENCE THAT IS GOOD FOR OPENAI. FOR EVERYONE ELSE, MAYBE NOT SO MUCH. > > IT IS QUITE AN INTERESTING THING TO WAKE UP TO THIS MORNING. WE HAVE A COMPANY GIVING AWAY 10% OF ITS STOCK TO A STARTUP THAT DOESN’T HAVE POSITIVE FREE CASH FLOW TO BUY TENS OF BILLIONS OF DOLLARS OF THEIR PRODUCTS SOMEWHERE DOWN THE LINE. THAT STOCK IS UP 30%. ROMAINE: WE WILL GET BACK TO THAT STORY IN A SECOND. BONDS GLOBALLY ARE IN SELLOFF MODE. STEEPENING THE CURVE INITIALLY SPARKED BY THE SICK-DA— SIX-DAY U.S. GOVERNMENT SHUTDOWN. THEN YOU HAVE FRANCE’S FORMATION AND COLLAPSE OF A NEW GOVERNMENT, THE LIKELY ELECTION OF A PRO-STIMULUS PRIME MINISTER IN JAPAN. WHERE ARE THE SAFE HAVENS TODAY? WHERE ELSE, GOLD. FLIRTING WITH 4000. BITCOIN ALSO IN THE MIX, CUPPING 125,000 OVER THE WEEKEND— TOPPING 125,000 OVER THE WEEKEND CONCERNS OVER PHYSICAL CONDITIONS KEEPING PEOPLE AWAY FROM SAFE HAVENS. KATIE: I WANT TO LOOK AT CORRELATIONS, SPECIFICALLY GOLD AND THE S & P 500. GOLD IS IN YELLOW, AND THEN YOU HAVE THE S & P 500 IN WHITE. THESE TWO LINES HAVE BEEN MOVING IN TANDEM, NOT TYPICALLY THE RELATIONSHIP YOU WOULD EXPECT TO SEE. YOU EXPECT WHEN THE WHITE LINE GOALS DOWN, GOLD GOES UP. THE CORRELATION BETWEEN THESE ASSET CLASSES IS JUST ABOUT .9, SO VERY CORRELATED BETWEEN WHAT IS SUPPOSED TO BE A SAFE HAVEN ASSET AND RISK-ON ASSET. YOU LOOK OVER THE PAST COUPLE YEARS, THIS RELATIONSHIP PEAKS IN OCTOBER, THE MOTHER WE ARE CURRENTLY IN. IN WHICH DIRECTION IT PEAKS, WHICH ASSET CLASS BREAKS OUT OF THIS DYNAMIC, I CAN’T TELL YOU. KEEP AN EYE ON THIS CHART. ROMAINE: EVERYONE RIGHT NOW KEEPING AN EYE ON THE CHART IN THE MARKETS. THE SHUTDOWN IN WASHINGTON, FOR A BETTER WEEK ON WHAT IS GOING ON AROUND THE WORLD, LET’S BRING IN THE CHAIRMAN AND CEO OVER AT MONROE CAPITAL. HE JOINS US IN NEW YORK IN THE, TOO. > > GOOD TO BE HERE. ROMAINE: 20 BILLION UNDER MANAGEMENT RIGHT NOW. THE BIG FOCUS ON MIDDLE-MARKET COMPANIES, ADDED TIME WHEN WE ARE NOT GETTING A VISUAL ECONOMIC DATA. WE ARE LIKING THE PEOPLE LIKE YOU TO TELL US HOW THE ECONOMY IS GOING. > > IT’S INTERESTING. WE HAVE ABOUT 520 COMPANIES IN OUR PORTFOLIO. I CALL IT MIDDLE AMERICA, MAINSTREAM AMERICA. AVERAGE EBITDA, $30 MILLION. FASCINATING WHAT IS GOING ON HERE. EVER SINCE WE WERE LIBERATED IN MARCH UP UNTIL NOW, WE HAVE SEEN A LOT OF DICHOTOMY IN THE HAVES AND HAVE-NOTS. CONSUMER GOODS, HOSPITALITY COMPANIES DOWN, SOFTWARE BUSINESSES, HEALTH CARE BUSINESSES CAN BUSINESS-TO-BUSINESS SERVICES UP IT ANYTHING THAT REQUIRES A CONTAINER TO COME INTO THE COUNTRY, THOSE ARE THINGS YOU WANT TO STAY AWAY FROM RIGHT NOW. THINGS THAT DON’T REQUIRE CONTAINERS, THAT ARE BUSINESS-TO-BUSINESS SERVICES CAN THAT IS WHERE YOU WANT TO BE. ROMAINE: FOR THE THINGS THAT REQUIRE CONTAINERS, WHAT IS THE LONGER-TERM OUTLOOK FOR THOSE NAMES? IS IT THAT THEY RIDE OUT WHATEVER TARIFF AND TRADE ISSUES AND ADJUST LONGER-TERM? > > WE HAVE GOT TO FIGURE OUT WHERE THE BOTTOM HIS. RIGHT NOW THERE HAS BEEN A LOT OF VOLATILITY. M & A CAN’T HAPPEN IF THERE IS NOT CERTAINTY. FINANCING CAN’T HAPPEN IF THERE IS NOT CERTAINTY. WE NEED TO PROJECT CERTAINTY INTO THE MARKETPLACE. AFTER THAT PERIOD, WE CAN UNDERWRITE. WE CAN UNDERWRITE HIGH INTEREST RATES, LOW INTEREST RATES, COVID, RECESSION ISSUES. IT IS HARD TO UNDERWRITE WHEN YOU DON’T KNOW WHAT YOUR COSTS ARE. KATIE: INTERESTING TO HEAR YOU SAY YOU CAN UNDERWRITE IN A HIGH INTEREST RATE AND LOW INTEREST RATE SCENARIO, WHAT YOU NEED IS CERTAINTY. LET’S TALK ABOUT THAT RATE PICTURE. THE MARKET SEEMS CERTAIN WE WILL GET ONE, MAYBE TWO MORE RATE CUTS THIS YEAR. WE GOT THE FIRST ONE JUST ABOUT A MONTH OR SO AGO. HOW IS THAT FACTORED INTO MIDDLE AMERICA? TED: THERE IS TWO THINGS THAT ARE HAPPENING. WE ARE TRYING TO HEAT UP THE ECONOMY. THE ADMINISTRATION IS CLEARLY TRYING TO HEAT UP THE ECONOMY WITH RATE CUTS. WE DO RATE CUTS WHEN YOU HAVE A SITUATION WHERE YOU HAVE GOT BIG UNEMPLOYMENT, REVENUE ISSUES, MACROECONOMIC HEADWINDS. THE CHALLENGE IS WE ARE DOING RATE CUTS AND TALKING ABOUT TWO MORE THIS YEAR AND POSSIBLY FOR MORE NEXT YEAR INTO A MARKET THAT IS ALREADY HOT. THE STOCK MARKET IS FLYING. THERE IS LOTS OF MONEY ON THE SIDELINES WITH PRIVATE EQUITY AND PRIVATE CREDIT. THE BIGGEST CHALLENGE WE HAVE TO BE MINDFUL OF HIS INFLATION. THAT IS OUR ENEMY. WE ARE STARTING TO SEE UNEMPLOYMENT NUMBERS THAT INDICATE RATE CUTS MAY BE A GOOD OPTION. THE OTHER SIDE OF THAT IS INFLATION. LOOK AT ED PRICES COME LOOK AT CEREAL PRICES, LOOK AT AIR TRAVEL PRICES. IT IS HIGHER THAN IT SHOULD BE. KATIE: ABSOLUTELY AT THE CONSUMER LEVEL, COST-OF-LIVING IS STILL A SERIOUS PROBLEM. THE FEDERAL RESERVE TRYING TO THREAD THE NEEDLE WITHOUT THE BENEFIT OF GOVERNMENT DATA. WHEN YOU LOOK AT THE DIFFERENT SECTORS ACROSS YOUR PORTFOLIO COMPANIES, WHERE DO YOU HAVE CONVICTION RIGHT NOW WHEN YOU CONSIDER THESE DIFFERENT CROSSCURRENTS? TED: LISTEN, YOU GUYS TALKED ABOUT IT JUST NOW, AI. AI IS ON A RUN AND THERE IS NO LOOKING BACK. I’M CONCERNED LIKE ANYTHING, THERE IS GOING TO BE WINNERS AND LOSERS WITH AI. I AM OF FUNDAMENTAL INVESTOR. I SHAKE MY HEADS. WHAT I LIKE, THOUGH, IS THE INFRASTRUCTURE AROUND AI. THAT IS WHAT WE ARE FOCUSED ON, POWER, ENERGY SYSTEMS, ENGINEERING, THINGS THAT AI NEEDS IN ORDER TO CREATE INFRASTRUCTURE. I LIKE THAT. HEALTH CARE, OUTSOURCED HEALTH CARE SERVICES, AND WITH ALL THE FEDERAL CUTS HAPPENING RIGHT NOW AND THE STATE CHALLENGES, A LOT OF HEALTH CARE IS GOING TO BE OUTSOURCED. THOSE OUTSOURCED COMPANIES ARE GOING TO BE PLACES TO WATCH. I’M CONCERNED ABOUT HOSPITALITY. WE ARE STARTING TO SEE CREDIT-CARD DEFAULTS. CREDIT CARDS GO UP, THAT IS A SURE SIGN YOU WILL SEE STRESS IN THE CONSUMER MARKET. I’M CONCERNED ABOUT FOURTH-QUARTER STRESS OF THE CONSUMER. ROMAINE: I’M CURIOUS ABOUT YOUR BACKGROUND — MONROE HAS BEEN AROUND FOR YEARS BUT YOU HAD A CAREER BEFORE THAT. YOU HAVE BEEN THROUGH DIFFERENT BUSINESS AND ECONOMIC CYCLES. HOW DOES THIS COMPARE, WHAT WE ARE GOING TO KNOW TO WHAT YOU HAVE SEEN IN THE PAST, IF AT ALL? TED: IT’S INTERESTING, LIKE I SAID EARLIER, WE HAVE A UNIQUE SITUATION RIGHT NOW, STOCK MARKET TRADING AT 27 TIMES PE. AVERAGE OVER THE YEARS, 17, 18 TIMES. BY ANY STRETCH OF THE IMAGINATION, WE ARE AT HIGH LEVELS OF VALUATION. M & A ON THE SIDELINES. LOOK AT 2019, 2021. WE ARE AT HALF LEVELS OF M & A. LAST YEAR WE WERE ROCKING. COME FOURTH-QUARTER, FIRST QUARTER — AFTER SECOND QUARTER OF THIS YEAR, SLOW DOWN AND JUST STOP. 80% OF OUR M & A WAS THROUGHOUT PORTFOLIO — THROUGH OUR PORTFOLIOS. NOT NEW M & A. I’M HOPEFUL THAT WHEN WE GET IT FOURTH-QUARTER, THERE IS PENT-UP DEMAND THAT WE WILL SEE M & A. WE SAW A BIG ONE ANNOUNCED THIS MORNING AND I THINK WE WILL SEE MORE. THE BUSINESS COMMUNITY NEEDS CERTAINTY. IF WE GET CERTAINTY, THE MARKET IS POISED FOR M & A. THERE IS PRIVATE EQUITY THAT HAS BEEN SITTING 10, 12 YEARS, THAT NEEDS TO GET UNWOUND. WE HAVE NOT EVER SEEN AT SECONDARY MARKET LIKE WE ARE SEEING TODAY BECAUSE LPS WANT THEIR MONEY BACK. UNIVERSITIES, HARVARD, YALE, STANFORD, THEY NEED MONEY BACK SO THEY CAN FUND BUDGET. KATIE: IT IS INTERESTING TO HEAR SAID THAT YOU HAVE M & A NOT BACK TO LEVELS YOU WOULD EXPECT IT TO BE WHEN YOU PUT IT IN CONJUNCTION WITH WHAT WE SEE IN THE IPO MARKET. YOU HAVE SEEN IPO’S, BACK. TO SEE THIS BREAK APART THAT ONE HAS COME BACK AND THE OTHER HASN’T, HOW OFTEN DO YOU SEE THAT DYNAMIC? TED: LOOK WHERE THE IPO IS COMING FROM, TECHNOLOGY. WE ARE SEEING SOFTWARE, TECHNOLOGY. THAT IS WHERE WE ARE SEEING M & A TODAY. IT IS NOT THE CORE U.S. DISTRIBUTION, MANUFACTURING, SERVICE INDUSTRIES. WE WERE A SERVICE ECONOMY. FOR SERVICES, WE NEED JOBS, WE NEED CERTAINTY. WHEN YOU START TO SEE JOB GROWTH IN THOSE SERVICE ECONOMY AREAS, WHAT I’M CONCERNED ABOUT IS KIDS AND GRANDKIDS OF MY CONTEMPORARIES. AI HAS NOT BEEN WRITTEN YET, THE FINAL CHAPTER. IT’S GREAT, YOU ARE SEEING VALUATIONS, ALL THESE WONDERFUL THINGS HAPPENING IN TERMS OF DATA CENTERS BEING BUILT AND VALUATIONS EVERY DAY, UNICORNS. AI IS GOING TO TAKE JOBS. PEOPLE AREN’T TALKING ABOUT IT, BUT I SEE IT TODAY. CONSULTING FIRMS, ACCOUNTING FIRMS, LAW FIRMS, THOSE ARE ENTRY-LEVEL JOBS THAT TRAINED MUCH OF CORPORATE AMERICA. THE CHALLENGE FOR US IS TO MAKE SURE THAT WE ARE CREATING THOSE TYPES OF JOBS THAT ARE ABLE TO TRAIN YOUNG PEOPLE SO THEY CAN GO ON AND ACHIEVE GREAT THINGS LIKE A LOT OF MY CONTEMPORARIES HAVE. ROMAINE: ABSOLUTELY HOPEFULLY WE GET THERE. I HAVE ONE FINAL QUESTION, ARE YOU MORE BULLISH ON AI OR THE CHICAGO CUBS? TED: LISTEN, I AM A CUBS GUY, I’M ROOTING FOR THEM. THESE DAMN MILWAUKEE BREWERS REALLY TOOK IT TO US. AND OUR YANKEES FANS FEEL. ROMAINE: I AM NOT A YANKEES FAN. I’M DANCING. [LAUGHTER] TED, GOOD TO HAVE YOU. TED KOENIG’S CHAIRMAN AND CEO OF MONROE CAPITAL. AS WE CAN YOU DOWN TO THE CLOSE, WE ARE FOCUSING ON M & A AND ONE OF THE BIGGEST DEALS FOR FINANCIAL STOCKS THIS YEAR. THAT IS COMING UP AFTER THE BREAK. THIS IS «THE CLOSE» ON BLOOMBERG. ♪ > > CERTAINLY THE INDICATIONS THAT THEIR ACCELERATED APPROVALS ARE AN IMPORTANT CONSIDERATION HERE. THAT SAID, APPROVED TO BID ON THE FAILED BANKS IN 2023, I’M CONFIDENT WE COULD HAVE GOTTEN THE DEAL APPROVED IN THE PRIOR ADMINISTRATION AS WELL. IT IS NICE TO KNOW THAT THE PROCESS HERE WILL BE FACT-BASED BUT EXPEDIENT IF RECENT OUTCOMES ARE ANY GUIDE. KATIE: THAT WAS TIM SPENCE DISCUSSING THE TIMELINE OF THE BANK’S AGREEMENT TO BUY COMERICA FOR $10.9 BILLION IN STOCK. THE ACQUISITION WILL BE THE LARGEST U.S. BANK DEAL THIS YEAR. LET’S BRING IN HERMAN CHAN WITH BLOOMBERG INTELLIGENCE TO BREAK IT DOWN. THIS COMBINATION CREATES THE NINTH LARGEST BANK IN THE COUNTRY. TELL US WHAT FIFTH THIRD GETS OUT OF BUYING COMERICA. > > SURE. COMERICA REPRESENTS A GEOGRAPHIC EXPANSION FOR FIFTH THIRD THAT IS MOSTLY IN THE MIDWEST HISTORICALLY AND IS MOVED INCREASINGLY INTO THE SOUTHEAST. IT WILL BRING TEXAS AND CALIFORNIA TO ITS BRANCH PRESENCE, AND THAT IS WHERE THEY WANT TO GROW, PARTICULARLY IN TEXAS. FIFTH THIRD MENTIONED OPENING UP 150 NEW BRANCHES ON TOP OF THE BRANCHES COMERICA OPERATES. ROMAINE: I REMEMBER A COUPLE YEARS AGO WITH THE SILICON VALLEY BANK FOLLOW, THERE WAS CONCERN ABOUT CONSOLIDATION IN THE SPACE. WHAT IS CHANGED? IS IT THE NEW ADMINISTRATION EMBOLDENING THESE COMMITTEES TO PURSUE THESE DEALS? HERMAN: THAT IS ONE OF THE PRIMARY REASONS. THE SECOND REASON IS WE HAVE HIGHER STOCK PRICES ACROSS THE BOARD FOR BANKS SO THERE WAS MORE CURRENCY TO DO DEALS. YOU SEE THAT WITH STRONGER PLAYERS LIKE PNC, HUNTINGTON, FIFTH THIRD USE THEIR CURRENCY TO BUY SMALLER BANKS AND GROVE MARKETS LIKE THE SOUTHEAST AND TEXAS. KATIE: WHEN YOU THINK ABOUT THE COMERICA SIDE OF THIS TRANSACTION, FIFTH THIRD, THEY GET THE GEOGRAPHIC EXPANSION. COMERICA, I SEE THAT YOU WROTE THAT THIS WASN’T ENTIRELY UNEXPECTED WHEN YOU THINK ABOUT THE ISSUES THEY WERE WORKING THROUGH ON THEIR SIDE OF THINGS. HERMAN: THAT’S RIGHT. COMERICA SHOT ITSELF IN THE FOOT A LITTLE BIT AS INTEREST RATES ROSE. THEY HEDGE THEIR REVENUES. HE REALLY HASN’T SUPPRESSED TOPLINE GROWTH THE PAST COUPLE YEARS — IT REALLY HAS SURPASSED TOPLINE GROWTH THE PAST COUPLE YEARS. THE DEAL IS CAPITULATION ON THAT BECAUSE OF THE LOWER PROFITABILITY AND RESULTING HIGHER EFFICIENCY RATIO AND HIGHER EXPENSES. THIS HELPS RESET EXPECTATIONS FOR THE COMERICA EXISTING P & L AND IT WILL HELP FIFTH THIRD GOING FORWARD. ROMAINE: I’M CURIOUS — I UNDERSTAND WHY YOU WOULD HAVE TWO BANKS OF THIS SIZE. IS THERE POTENTIAL WITH M & A WITH BIGGER BANKS GOING FOR SMALLER BANKS, OR IS THERE NO REAL ADVANTAGE? HERMAN: THE BIGGER BANKS ARE SORTA PRECLUDED FROM TRADITIONAL M & A DEALS JUST DUE TO THEIR SIZE. THEY HAVE TRILLION DOLLAR BALANCE SHEETS, THEY ARE UBIQUITOUS IN LARGER MARKETS. BANKS LIKE BANK OF AMERICA AND J.P. MORGAN ARE FOCUSED ON GROWING ORGANICALLY AND OPENING UP NEW BRANCHES INTO NEW MARKETS THEY ARE NOT IN CURRENTLY. THAT IS ONE OF THE REASONS WHY THESE LARGER BANKS ARE FOCUSED ON M & A, BECAUSE THEY SEE BANKS LIKE J.P. MORGAN GOING INTO THEIR HOMETOWN LIKE IN PITTSBURGH FOR PNC, FOR EXAMPLE. PNC IS GROWING OUTSIDE THE TRADITIONAL GEOGRAPHIC FOOTPRINT JUST TO CREATE A MORE STABLE BASE AND GROW OPERATIONS. KATIE: WHO ELSE SHOULD BE ON OUR WATCH LIST FOR POTENTIAL COMBINATIONS? IS THIS THE START OF AN ACTUAL TREND? KNOWING LIKE ROMAINE SAID, WE HAVE BEEN WAITING FOR THIS FOR A WHILE. HERMAN: I CAN SAY THAT THE TREND HAS STARTED NOW AFTER COMERICA’S DEAL WITH FIFTH THIRD, PNC BUYING FIRST BANK IN ARIZONA AND COLORADO, AND HUNTINGTON WITH THE VERITEX DEAL. THE QUESTIONS WILL BE ON THE OTHER LARGER REGIONALS LIKE MMT, KEYCORP, CITIZENS, REGIONS IN ALABAMA, THAT THE QUESTIONS WILL COME FROM TRYING TO DECIPHER IF THEY ARE NOW MORE ACQUISITIVE AFTER SOME OF THESE PEERS ARE BEING REALLY ACTIVE AND AGGRESSIVE IN EXPANDING. ROMAINE: ALL RIGHT, HERMANN, GREAT STUFF. A CLOSER LOOK AT ONE OF THE BIGGEST DEALS OF THE YEAR, CERTAINLY THE BIGGEST IN THE FINANCIAL SECTOR. COMERICA SHARES UP 13% RIGHT NOW. REGIONAL BANK STOCKS AS A WHOLE HAVING A PRETTY DECENT DAY AS WELL THERE IS A LOT OF CONCERNS ABOUT THE U.S. GOVERNMENT, SHUT DOWN FOR A SIXTH DAY. A BIG QUESTION RIGHT NOW BUT WHAT IS GOING ON BEHIND CLOSED DOORS AND WHAT HAPPENS WHEN THOSE DOORS FINALLY OPEN. JARED BERNSTEIN, FORMER CHAIR OF THE COUNCIL OF ECONOMIC ADVISERS, GOING TO BE JOINING US AFTER THE BREAK. THIS IS «THE CLOSE» ON BLOOMBERG. ♪ ROMAINE: THE U.S. GOVERNMENT SHUT DOWN CONTINUING INTO ITS SECOND WEEK, AND IN HIS LATEST PIECE FOR BLOOMBERG OPINION, JONATHAN LEVIN WRITES, «THE LACK OF DATA FROM THE SHUTOUT LEAVES BUSINESSES, INVESTORS, AND OTHERS GROPING IN THE DARK FOR SIGNALS ABOUT THE ECONOMY.» JONATHAN JOINS US TO TALK ABOUT ALL THE GROPING GOING ON. WE HAD REPRESENTATIVE EMMER’S ON LAST WEEK SAYING WE DON’T NEED U.S. GOVERNMENT DATA, JUST LOOK AT THE PRIVATE DATA. DOES THE PRIVATE DATA REALLY STACK UP? JONATHAN: I DON’T BELIEVE THAT AT ALL. LET’S TAKE THE ADP RELEASE LAST WEEK. THE THING ABOUT ADP IS THIS, LIKE SO MANY OF THESE OTHER DATA SETS, AT THE END OF THE DAY IS TUNED TO BLS DATA. THERE WAS A MAJOR KNOW THAT SAID THIS LATEST PRINT WAS AFFECTED BECAUSE THEY WERE REBENCHMARKING TO BLS DATA. WE CAN GET A COUPLE WEEKS, WE CAN GO MONTHS WITHOUT THIS GOVERNMENT DATA. ALTERNATIVE PRIVATE SECTOR DATA IS NOT READY TO STAND ON ITS OWN TWO FEET. AND I COULD GO ON AND ON, ROMAINE. THERE ARE A LOT OF THINGS THAT THE PRIVATE SECTOR IS NEVER GOING TO MEASURE FOR US. MAYBE JUST BECAUSE THERE IS NO PROFIT MOTIVE. SURE, THESE BIG MACRO STATS, THERE ARE A BUNCH OF PROVIDERS AT THIS POINT. TAKE VULNERABLE GROUPS IN VARIOUS PARTS OF OUR COUNTRY, TAKE RURAL POPULATIONS. THERE IS NOT A PROPER WORD FOR PEOPLE TO GO OUT AND DO A GOOD JOB OF MEASURING THESE THINGS, BUT THEY ARE AND IMPORTANT FOR POLICY MAKERS. KATIE: IT IS PART OF THE CONVERSATION WE HAVE BEEN NAPPING OF HOW COMPLETE A PICTURE YOU CAN HAVE OF THE ECONOMY WITH THESE ALTERNATIVE SOURCES OF DATA. BRING THIS TO POLICYMAKERS. THIS IS A DIFFICULT ENVIRONMENT FOR THE FED TO OPERATE IN. OCTOBER 6 RIGHT NOW. NOT TOO MUCH MOVEMENT YET. HOW DOES THE FED WHEN THEY NEXT MEET, EVEN IF THEY HAVE DELAYED DATA ON THEIR SIDE, WHAT MIGHT THAT CONVERSATION SOUND LIKE? JONATHAN: OBVIOUSLY IT GETS A LITTLE BIT TRICKIER HERE. IT IS NOT THE END OF THE WORLD. AS ANY USER WILL TELL YOU, THEY ARE NEVER 100% ANCHORING TO ONE DATA POINT. IT IS NOT ABOUT BLS VS. ADP. IT IS IN THE WORLD WE LIVE IN TODAY, YOU WANT TO HAVE THE FULL CONSTELLATION OF DATA. YOU WERE NEVER GOING TO WEIGHT ONE THING 100%, NEVER GOING TO WEIGHT ANOTHER THING 100%, BUT YOU WANT THE FULL CONSTELLATION OF DATA AND YOU WEIGH IN WITH THE INHERENT UNCERTAINTY IN ALL OF THESE THINGS COME AND AT THE END OF THE DAY YOU MAKE A DECISION. AND THAT BECOMES SO MUCH HARDER IN AN ENVIRONMENT LIKE THIS. ROMAINE: I’M CURIOUS, JONATHAN, I DON’T KNOW IF YOU HAVE A RESPONSE FOR THIS, BUT THERE IS CONCERN THAT IF WE DO END THE SHUTDOWN AND REOPEN, THERE HAS BEEN A CERTAIN DISMANTLING, OR AT LEAST ATTEMPTED DISMANTLING, OF SOME OF THE TRADITIONAL PROCEDURES OF OUR DATA COLLECTION AND DATA DISSEMINATION PRACTICES BY THE GOVERNMENT. I’M CURIOUS AS TO HOW MUCH FAITH YOU PUT IN THE IDEA THAT WHEN WE DO REOPEN, WE ARE GOING TO RETURN TO THE OLD WAYS, OR AT LEAST THE MORE RELIABLE WAYS THAT WE HAVE COME TO DEPEND ON. JONATHAN: YOU KNOW, IT IS SUCH A SHAME TO SEE THIS ATTACK GOING ON FROM THE WHITE HOUSE TO THE BUREAU OF LABOR STATISTICS, BECAUSE SOME OF THE BEST WAYS TO MODERNIZE OUR STATISTICS INFRASTRUCTURE ARE COMING FROM WITHIN THE BUREAU OF LABOR STATISTICS. THE PROBLEM THERE IS NOT THE PERSONNEL. THE PROBLEM IS MONEY MONEY MONEY. WE HAVE SEEN FUNDING AND STAFFING LEVELS DROP ACROSS ADMINISTRATIONS. IT IS A BIPARTISAN PROBLEM. AND IF WE WANT TO HAVE — IF WE WANT TO CONTINUE HAVING THE BEST STATISTICS INFRASTRUCTURE IN THE WORLD, THAT IT IS VERY SIMPLE, WE NEED TO INVEST. KATIE: JONATHAN, GREAT TO GET SOME TIME WITH YOU AND HEAR YOUR PERSPECTIVE. THAT IS JONATHAN LEVIN OF BLOOMBERG OPINION. WE WANT TO BRING IN SOMEONE WHO KNOWS WHAT IT IS LIKE BEHIND CLOSED DOORS DISCUSSING ECONOMIC POLICY AT THE WHITE HOUSE. HIS NUMBERS JARED BERNSTEIN AND HE IS THE FORMER CHAIR OF THE COUNCIL OF ECONOMIC ADVISERS, CURRENTLY A SENIOR FELLOW AT THE CENTER FOR AMERICAN PROGRESS. FANTASTIC TO HAVE YOU WITH US. WE ARE IN A DAY SIX OF THE SHUTDOWN AND WEEK TWO OFFICIALLY. GIVEN THAT YOU HAVE THIS EXPERIENCE UNDER YOUR BELT AND WHAT IS YOUR BEST GUEST AS TO WHAT THE CONVERSATIONS BEHIND CLOSED DOORS MIGHT SOUND LIKE AT THIS POINT? JARED: FIRST OF ALL, THANK YOU FOR HAVING ME ON AND RAISING THIS IMPORTANT TOPIC. I THOUGHT THE PREVIOUS CONVERSATION WAS HELPFUL AS WELL. THERE ARE TWO MAIN CONVERSATIONS THAT YOU WOULD EXPECT BEHIND CLOSED DOORS RIGHT NOW, AT LEAST TWO. ONE IS ASSESSING IT WAS WINNING. PUBLIC OPINION IS A HUGE FACTOR IN DETERMINING HOW LONG THIS GOES ON AND WHEN IT ENDS. RIGHT NOW THE POLLING SHOWS THE DEMOCRATS ARE DOING BETTER THAN REPUBLICANS IN THIS REGARD, BOTH BECAUSE PEOPLE ARE SOMEWHAT MOVED BY THE DEMOCRATS’ MESSAGE REGARDING HEALTH COVERAGE. IT IS ALSO THE CASE THAT 70% OF PEOPLE WHO ARE ON THE AFFORDABLE CARE ACT EXCHANGES LIVE IN RED STATES. IT IS NOT QUITE THE CLEAN RED-BLUE BREAK REPUBLICANS WOULD LIKE. AND THEN THERE’S THE DISCUSSION OF PURE FUNCTIONALITY. ARE WE GETTING WHAT WE NEED, HOW DAMAGING IS THAT THE DATA REPORTS AREN’T COMING OUT, WHO IS AN EXEMPT PERSON, WHAT IS GOING ON WITH THINGS THAT ARE HUGE FOR CONSUMERS — AIR TRAFFIC CONTROL, TSA WORKERS. THEY ARE WORKING WITHOUT PAY. THAT HAS BEEN A REAL SOURCE OF PRESSURE IN PRIOR SHUTDOWNS. THOSE ARE SOME OF THE THINGS GOING ON, I WOULD IMAGINE, BEHIND CLOSED DOORS. KATIE: THAT IS WHAT I’M CURIOUS ABOUT THEM WHERE THE RUBBER MEETS THE ROAD WHEN IT COMES TO DETERMINING PUBLIC OPINION. THAT IS GOING TO DETERMINE WHO BLINKS FIRST WHEN IT COMES TO THIS STANDOFF. MAY BE THE JOBS REPORT, WE CARE ABOUT THAT, BUT WHEN IT COMES TO THE AMERICAN PUBLIC, WHAT ARE THE THINGS WE NEED TO KEEP AN EYE ON AS THE DAYS AND WEEKS PROGRESS? JARED: IT’S A GREAT POINT. FOLKS COMING TO YOUR MICROPHONES, INCLUDING MYSELF, WILL BE MOAN ALL DAY MISSING THE JOBS REPORT. IT IS NOT SOMETHING THAT REGULAR PEOPLE ARE REALLY KEYED INTO. I THINK IT HAS A LOT MORE TO DO WITH THE THINGS THAT AFFECT PEOPLE’S EVERYDAY LIVES. TRAVEL IS HUGE. I’VE SEEN SHUTDOWNS END THE AFTERNOON OF THE MORNING THAT THE AIR TRAFFIC CONTROLLER SAID THAT’S IT. WE ARE JUST NOT GOING TO KEEP COMING TO WORK WITHOUT PAY. THAT CAN TAKE FOUR WEEKS, FIVE WEEKS. BUT THAT IS WHAT HAPPENED IN ONE OF THE MORE RECENT SHUTDOWNS. SAME WITH TSA WORKERS. PEOPLE ARE VERY SENSITIVE TO THOSE KINDS OF LINES. THEN YOU HAVE SERVICES THAT PEOPLE WANT TO ACCESS. WHETHER IT IS GETTING YOUR PASSPORT IN A TIMELY WAY, CALLING THE SOCIAL SECURITY ADMINISTRATION — WE SHOULD BE CLEAR, SOCIAL SECURITY CHECKS GO OUT AND THEY WILL CONTINUE TO GO OUT. THE WORKERS THAT SEND THOSE OUT OUR SO-CALLED EXEMPT OR CENTRAL WORKERS. IF YOU’RE TRYING TO CALL SOMEBODY AND GET THEM ON THE PHONE, IT IS HARD ANYWAY, PARTICULARLY NOW. YOU MIGHT THINK OF THEM AS HARASSMENT CAN GETTING THROUGH YOUR DAILY LIVES, FACTORS THAT CAN LEAD TO A LEVEL OF FRUSTRATION THAT EVENTUALLY FORCES CONGRESS TO MOVE. ROMAINE: I’M CURIOUS ABOUT THE POLITICKING AROUND THIS PARTICULARLY ON THE DEMOCRATS’ SIDE. I KNOW THEY MADE THIS AN ISSUE ABOUT THE AFFORDABLE CARE ACT AND REINSTATING PROVISIONS THEY THINK SHOULD NEVER HAVE BEEN STRIPPED OUT TO BEGIN WITH OUT OF THE PREVIOUS BILLS. BUT I’M ALSO CURIOUS AS TO WHETHER THERE IS SOMETHING UNDERNEATH THE SURFACE THAT GOES A LITTLE BIT DEEPER ABOUT TRYING TO CURB THE POWER OF THE PRESIDENCY COME OF TRUMP SPECIFICALLY. JARED: OH, THAT IS UNQUESTIONABLE, AND I DON’T KNOW IF IT IS THAT FAR UNDER THE SURFACE. YOU HAVE HEARD DEMOCRATS EXPLICITLY ARGUE THAT ONE OF THE MOTIVATIONS FOR THE SHUTDOWN IS THAT THEY CAN’T EVEN TRUST REPUBLICANS IF THERE IS A HANDSHAKE, IF THERE IS AGREEMENT, BECAUSE OF ALL OF THESE RESCISSIONS AND IMPOUNDMENTS, THE IDEA THAT YOU WOULD LEGISLATIVE BUDGET DEAL BUT THEN THE OTHER SIDE WILL REFUSE TO SPEND THE ALLOCATED FUNDS. ONE WAY IN WHICH DEMOCRATS ARE OPERATING IS THAT THIS MAY NOT PROVE TO BE THE ULTIMATELY SUCCESSFUL LEGISLATIVE STRATEGY. THEY MAY NOT END UP GETTING EXACTLY WHAT THEY WANT — THAT IS TYPICALLY THE CASE IN SHUTDOWNS. BUT IT IS ALSO A VERY IMPORTANT MESSAGING STRATEGY FOR THEM. THEY HAVE THE MICROPHONE, THEY HAVE A LITTLE BIT OF LEVERAGE BECAUSE OF THE FILIBUSTER, AND THEY ARE GOING TO LET PEOPLE KNOW THE WAYS IN WHICH, A, THEY ARE BEING LEFT OUT OF POLITICS, B, THE WAYS IN WHICH REPUBLICANS ARE HURTING THEM RIGHT WHERE IT HURTS IN THEIR AFFORDABILITY PACKETS AND WALLETS AND POCKETBOOKS. C, JUST VERY FOCUSED ON THE HEALTH-CARE DIMENSION OF ALL THAT. ROMAINE: DOES THAT — DO YOU THINK THAT IS GOING TO RESONATE, THOUGH, WITH THE AMERICAN PEOPLE? WE HAVE SEEN THE SPIN BY THE REPUBLICANS, AND THEY HAVE BEEN RELENTLESS, AND MORE IMPORTANTLY UNITED, IN THAT MESSAGING SO FAR. I’M CURIOUS AS TO HOW RANK-AND-FILE VOTERS VIEW WHAT IS GOING ON IN WASHINGTON. JARED: THAT IS WHY WE HAVE POLLSTERS WHO ARE LITERALLY TAKING DAILY POLES OF THIS STUFF. THAT QUESTION IS VERY MUCH A TEMPERATURE QUESTION. YOU HAVE TO TAKE THE TEMPERATURE EVERY DAY AND SEE WHERE THE PUBLIC IS. THUS FAR, I’VE BEEN SURPRISED ABOUT HOW DISCIPLINED THE DEMOCRATS THEY ARE NOT EXACTLY KNOWN FOR BEING DISCIPLINED GROUP THESE DAYS, BUT THEY ARE STAYING VERY MUCH ON MESSAGE. I’VE SEEN NUMBERS NORTH OF 70% IN TERMS OF PEOPLE WHO ARE MOVEDD B THE DEMOCRATIC MESSAGE THAT REPUBLICANS ARE HURTING THEM WHEN IT COMES TO HEALTH CARE AFFORDABILITY. THIS CERTAINLY CAME UP DURING THE BUDGET DEBATE ACT. THE FACT THAT 77% OF FOLKS ON THE ACA EXCHANGES ARE IN RED STATES THAT HASN’T BEEN LOST ON FOLKS IN THE DEBATE, AND THE FACT THAT REPUBLICANS CONTROL ALL THREE BRANCHES OF GOVERNMENT, FOUR IF YOU WANT TO INCLUDE THESE CONSERVATIVES ON THE SUPREME COURT, AND THAT’S WHAT DEMOCRATS ARE PREVAILING. I HAVE A SENSE THAT IS ELASTIC AND HE COULD CHANGE QUICKLY. THAT IS THE TEMPERATURE-TAKING EXERCISE THESE DAYS. ROMAINE: ALL RIGHT, JARED, REALLY APPRECIATE YOU JOINING US. , JARED BERNSTEIN FORMER CHAIR OF THE COUNCIL OF ECONOMIC ADVISERS, SENIOR FELLOW FOR THE CENTER FOR AMERICAN POLITICS. DAY SIX OF THE SHUTDOWN AND A LOT OF QUESTIONS ABOUT WHAT COULD AND IT, AND MORE IMPORTANTLY, WHY WE GOT HERE IN THE FIRST PLACE. JOINING US NOW, AND LECTURER OF MANAGEMENT PRACTICE AT THE YALE SCHOOL OF MANAGEMENT AND A BLOOMBERG OPINION COLUMNIST. I KIND OF WANT TO START WITH WHAT ENDS THESE SHUTDOWNS. I WENT BACK TO HISTORY AND IT IS ALL OVER THE MAP. YOU HAVE SOME WHERE YOU AT BIPARTISAN AGREEMENT AND YOU HAD SOMEWHERE JUDGES» GOT INVOLVED. THE LAST LONG ONE THAT TRUMP SHEPHERDED BACK IN 2018 AND 2019, THAT HAPPENED TO COINCIDE WITH THE CONGRESSIONAL ELECTION WERE DEMOCRATS WON POWER IN THE HOUSE AND HE FORCED HIS HAND. > > USUALLY SOMEONE FOLDS. THE EASIEST ANSWER IS SOMEONE FOLDS. SOMETIMES THE PRESSURE BECOMES SO HOT THAT THEY FIND SOME SORT OF COMPROMISE. USUALLY THE PARTY THAT. ALREADY IN CONGRESS BECAUSE IT IS REALLY HARD TO COMPETE AGAINST THE PRESIDENCY IN THE MODERN MEDIA ENVIRONMENT. THE PRESIDENT TOWERS OVER EVERYONE ELSE. I’M NOT SURE HOW THAT — IF THAT IS HOW THIS ONE IS WHEN WORK OUT, THOUGH. ROMAINE: WE WERE TALKING IN THE NEWSROOM ABOUT THE ORIGINS. WE GO BACK TO 1976, BUT MOST OF THE SHUTDOWN STARTED IN THE 1980’’S UNDER REAGAN. THE U.S. ATTORNEY GENERAL ESTABLISHED THIS IDEA THAT THE GOVERNMENT BASICALLY COULD SHUT DOWN IN THESE TYPES OF SITUATIONS. WITHOUT THAT LEGAL PRECEDENT, DO YOU THINK THAT WOULD HAVE BEEN MORE OPTIONS TO KEEP THE GOVERNMENT FUNCTIONING CAN EVEN IF THERE WAS SOME SORT OF PARTIAL SHUTDOWNS? GAUTAM: YEAH, AND WHAT WE SAW WAS ATTEMPT BY VERY PARTIES TO CREATE PAPER SHUTDOWNS, WHERE THE GOVERNMENT KEPT OPERATING AND THE BUDGETS WERE APPROVED, THINGS LIKE THAT. THIS SHUTDOWN IS DIFFERENT THAN PREVIOUS ONES, AND IT IS BECAUSE OF THE SUPREME COURT. THE SUPREME COURT CREATED THIS SHUTDOWN, BECAUSE THEY CREATED BY THE WAY THEY ARE USING THE EMERGENCY DOCKET, THEY ESSENTIALLY GAVE TRUMP THE POWER TO DO THESE RESCISSIONS, WHICH NO ONE THOUGHT THE PRESIDENT HAD BEFORE, AND FROM THE DEMOCRATS’ PERSPECTIVE IT MADE IT IMPOSSIBLE TO STRIKE A DEAL BECAUSE THERE’S NOT AN INTERLOCUTOR YOU CAN TRUST TO STRIKE A DEAL BECAUSE THE TRUMP PEOPLE ARE NOT LEGALLY OBLIGATED TO KEEP TO IT. IT IS HARD TO STRIKE A DEAL WITH SOMEONE WHO CAN TURN AROUND AND VIOLATE IT 30 SECONDS LATER. KATIE: RIGHT, THAT IS WHAT I WAS GOING TO ASK. THIS SHUTDOWN IS DIFFERENT IN THAT THE SUPREME COURT CREATED IT. HOW WOULD THIS AFFECT HOW IT IS POSSIBLY GOING TO END, ESPECIALLY WHEN YOU’RE SPEAKING TO AS TO MISTRUST AS TO WHETHER THE DEALS WILL BE HONORED? GAUTAM: THE POLITICAL DYNAMIC IS A LITTLE DIFFERENT. AS JARED BERNSTEIN SAID EARLIER, IT IS CLEAR FROM THE POLLING DATA THAT THE PLURALITY OF AMERICANS ARE SAYING THAT THIS IS TRUMP AND THE REPUBLICANS’ FAULT. BUT THE DYNAMICS ARE VERY STRANGE. ON THE REPUBLICAN SIDE, ALL THE THREATS THEY ARE MAKING TO PUT PRESSURE ON THE DEMOCRATS, THEY DO PUT PRESSURE ON THE DEMOCRATS. BUT THERE ARE ALSO THINGS THAT ARE DEEPLY UNPOPULAR, LIKE GOING OFF AND KILLING GREEN CONSTRUCTION, OR WE ARE GOING TO LAY OFF HUNDREDS OF THOUSANDS OF GOVERNMENT EMPLOYEES. THERE IS TO FIRST ORDER ALMOST NO PUBLIC SUPPORT FOR THINGS LIKE THAT. THERE IS THIS BIZARRE THING OF — I WANT TO ADD TO THAT, WHAT THE DEMOCRATS ARE ARGUING FOR HIS WE NEED AN EXTENSION OF THE OBAMACARE SUBSIDIES. THESE SUBSIDIES ARE MASSIVELY POPULAR. IF THEY GO AWAY AND PREMIUMS SHOOT UP, IT WILL BE POLITICALLY DEVASTATING FOR REPUBLICANS, PARTICULARLY IN RED STATES. THIS IS A REALLY STRANGE DYNAMIC. DEMOCRATS ARE DEMANDING THE RIGHT TO SAVE REPUBLICANS FROM THEIR OWN POLITICAL MISTAKE. REPUBLICANS ARE SAYING NO. KATIE: SO SQUARE THAT CIRCLE, PUT IT INTO CONTEXT WITH NOTES YOU PASSED TO OUR PRODUCERS THE DEMOCRATS ARM IS PLAYING HAND. — ARE MISS PLAYING THEIR HAND. ARE YOU SPEAKING TO THAT DYNAMIC, OR ARE THEY NOT PLAYING THE CARDS THEY HAVE IN A WAY THAT MIGHT BE ADVANTAGEOUS TO THEM? GAUTAM: I REALIZED AFTER I SEND IT TO YOU THAT THERE WAS A BETTER WAY TO PHRASE IT. DEMOCRATS ARE PLAYING THE WRONG GAME. THE GAME THEY ARE PLAYING IS ONE ABOUT POLICY. THEY THINK, WELL, IF WE GET THESE SUBSIDIES EXTENDED, THAT WILL BE GOOD FOR PEOPLE, AND THAT IS OUR JOB. THEY ALSO BELIEVE, I’M SURE, THAT IF IT WILL BE GOOD FOR PEOPLE, WE WILL BE GETTING POLITICAL REWARDS FOR IT. THAT IS HOW AMERICAN POLITICS USED TO WORK, OR HOW WE USED TO THINK IT WORKED. BUT THE TRUMP JUST PASSED A GIGANTIC BILL THAT JUST THE ONE BIG BEAUTIFUL BILL — THAT WAS MASSIVELY UNPOPULAR AND REALLY HURT THEIR OWN VOTERS THEIR BELIEF WAS THEY WOULD NOT BE PUNISHED FOR THIS BY THEIR OWN VOTERS, AND JUDGING BY THE POPULARITY OF TRUMP WITHIN REPUBLICAN CIRCLES, THAT BELIEF IS TRUE. DEMOCRATS ARE ACTING LIKE POLICY — LIKE POLITICAL OUTCOMES ARE DRIVEN BY POLICY. I JUST DON’T THINK THAT IS TRUE ANYMORE. THERE IS A REAL GENERATIONAL SHIFT HERE. IF THEY WIN AND GET THESE SUBSIDIES EXTENDED AND THE PREMIUMS DON’T GO UP, I DON’T THINK THERE WILL BE 20 PEOPLE IN THE UNITED STATES WHO VOTE FOR DEMOCRATS BECAUSE OF IT. ROMAINE: ON THAT POINT ABOUT THE DEMOCRATS DISH I AM PARAPHRASING —- I AM PARAPHRASING, BUT WE SAW THIS LONG BURN WITH THE REPUBLICANS, WHERE ESTABLISHMENT REPUBLICANS WERE RESISTANT TO FAR RIGHT NEWCOMERS, MANY YOUNGER, WHO JUST LOOKED AT POLICYMAKING AND POLITICKING AS MUCH DIFFERENT THINGS. I FEEL LIKE YOU ARE SEEING THE SAME TENSIONS ON THE DEMOCRATIC PARTY SITE, ALTHOUGH NOT NECESSARILY WITH THE SAME RESULTS. I’M CURIOUS IF YOU SEE THE PARTY SHIFTING ONE WAY OR ANOTHER. GAUTAM: I THINK IT IS INEVITABLE THAT IT WILL. VALUING POLICY OVER POLITICS IS GOOD FOR THE COUNTRY BUT BAD FOR THE PARTY. WHAT WE SEE IN EVERY COMPETITIVE MARKET IS OVER TIME, IF YOU DO THINGS THAT ARE GOOD FOR YOURSELF, YOU WILL PUSH OUT THE PEOPLE WHO ARE INTERESTED IN SYSTEMICALLY LARGER, ABSENT EXTERNAL FORCES. IF ONE OF THE TWO PARTIES WINS BY SOME GARGANTUAN MARGIN — 1932 STYLE, OR 1980 — WHERE THEY ARE LIKE, WE ARE GOING TO BE IN POWER THE NEXT THREE ELECTION CYCLES, THEN THE INCENTIVES SHIFT AND PEOPLE WILL BE SAYING WE NEED TO GOVERN, BECAUSE WHETHER OR NOT WE GOVERN SUCCESSFULLY WILL DETERMINE WHAT WILL HAPPEN. AS LONG AS POWER IS DECIDED BY FIVE SEATS IN MISSOURI AND NEBRASKA, THIS IS GOING TO KEEP HAPPENING. ROMAINE: YEAH, AND 1932-STYLE LANDSLIDE I FEEL LIKE IN THIS POLITICAL CLIMATE IS NOT GOING TO HAPPEN. I HAD AN INTERESTING CONVERSATION WITH SOMEONE THIS WEEK, A SMART PERSON, AND ASK ABOUT THE SHUTDOWN, AND HE LITERALLY SAID «THE GOVERNMENT SHUTDOWN?» THAT IS WHAT WE ARE DEALING WITH AS WELL. GAUTAM MUKUNDA, LECTURER OF MANAGEMENT PRACTICE AT THE YELLOW SCHOOL OF MANAGEMENT AND AN OPINION COLUMN — YALE SCHOOL OF MANAGEMENT AND AN OPINION COLUMNIST AT BLOOMBERG. KATIE: ANDY ON THE HEELS OF A NEW DEAL WITH OPENAI. WE DISCUSSED WITH THE COO OF OPENAI NEXT. THIS IS «THE CLOSE» ON BLOOMBERG. ♪ ROMAINE: WE STARTED TODAY WITH THE BIG POP IN SHARES OF AMD AFTER IT INKED A LANDMARK DEAL WITH OPENAI TO BUILD OUT INFRASTRUCTURE, GIVING THE CHIPMAKER A CHANCE TO CHALLENGE NVIDIA IN THE COMPUTING INDUSTRY. THIS COMES THE SAME DAY AS OPENAI’S ANNUAL DEVELOPERS DAY, WHERE WE HAVE SEEN A LOT OF SPOTS LIKE CISCO AND MATTEL ALSO MOVING SIGNIFICANTLY BASED ON SOME OF THE COMMENTS OUT OF THE CONFERENCE. JOINING US IS ED LUDLOW AT THAT CONFERENCE, JOINED BY THE COO OF OPENAI, BRAD LIGHTCAP. ED? ED: AND THE ABILITY TO USE THIRD-PARTY APPS WITHIN CHATGPT AND THE PROFOUND IMPACT ON THE MARKET WAS THOSE NAME CHECK SAW THEIR STOCKS MOVE IN A SIGNIFICANT WAY. DELIGHTED TO SPEAK ONCE AGAIN WITH BRAD LIGHTCAP. IT IS SIMPLE AS THAT, REALLY, THE ABILITY TO BE WITHIN CHATGPT AND ACCESS SPOTIFY ORPHIC MARK, AS TWO EXAMPLES. WHEN YOU WERE DISCUSSING THE IDEA OF THAT AN API ACCESS WITH THOSE PARTNERS, WAS IT A TOUGH NEGOTIATION TO GET THEM ON BOARD WITH THE IDEA? BRAD: NO, I MEAN, WE HAVE SEEN ENTHUSIASM FOR THIS FROM THE BEGINNING. REMEMBER WAY BACK WHEN, PLUG-INS IN THE EARLY DAYS OF CHATGPT. THIS IS ONE OF THE FIRST ATTEMPT TO BUILD AN ECOSYSTEM AROUND CHATGPT SO CHATGPT CAN INTERACT WITH APPLICATIONS THAT ARE IMPORTANT TO YOU IN YOUR PERSONAL LIFE AND AT WORK. NOW WE HAVE A MUCH RICHER SERVICE THROUGH MCP AND OTHER PROTOCOLS TO BRING APPLICATIONS INTO CHATGPT AND TO ALLOW YOU TO ENGAGE WITH CHATGPT IN THE KIND OF WORK AROUND WORK. IT IS THE CONTEXTUAL ASPECT OF TIME DOING — I’M DOING X, I NEED Y, I AM ON A ROAD TRIP AND I NEED A PLAYLIST THAT WOULD WORK WELL. USING CHATGPT TO SOLVE A HIGH-LEVEL TASKS AND INTEGRATING TASKS — ED: WE ARE IN A PLACE WHERE CHATGPT IS MORE OF AN OPERATING SYSTEM. WHETHER THAT WAS YOUR AMBITION OR NOT IS THAT, WHERE YOU WANT TO TAKE IT, TO BE AN OS AND A DEVELOPER-DRIVEN PLATFORM? IT IS ALMOST LIKE AN APP FOR ON PAPER BASED ON WHAT YOU ANNOUNCED THIS AFTERNOON. BRAD: WE ALWAYS THOUGHT OF CHATGPT IS A SUPER SYSTEM. WE NEVER SET OUT TO BUILD A CHATBOT. WE WANTED SOMETHING THAT IS REALLY TRUE TO YOU AND WHAT YOUR PREFERENCES AND GOALS ARE THAT CAN HELP YOU ACHIEVE MORE. PART OF THAT IS CHATGPT HAVING AN APPRECIATION AND UNDERSTANDING OF THE APPLICATIONS IN YOUR LIFE THAT ARE IMPORTANT. IN ENABLING THAT KIND OF CONNECTIVITY AND INTEROPERABILITY MAKES CHATGPT RICHER AND ALLOWS PASS-THROUGH FOR PEOPLE TO ENGAGE WITH APPS THEY LOVE, AS WELL AS NEW APPS. ED: THE PASTOR BUSINESS IS INTERESTING. WHERE THEIR CONCERNS WITH TECHNOLOGY COMPANIES THAT THEY WOULD TAKE TRAFFIC AWAY FROM THEIR OWN DOMAINS? BRAD: MOST PEOPLE ARE FOCUSED ON BUILDING INTO NEW INTERFACES. THIS IS JUST LIKE MOBILE IN A SENSE, WHERE YOU HAVE A NEW INTERFACE, PEOPLE ARE GOING TO WANT TO USE MOBILE FORM FACTORS ON THE GO APPS LIKE SPOTIFY IN SOME WAYS EXIST BECAUSE THEY REALLY KNOW MOBILE. WE THINK THERE IS AN OPPORTUNITY FOR BUILDERS TO CREATE NEW APPLICATIONS THAT ARE NATIVE TO CHATGPT AND FOR SERVICES YOU LOVE TO BE ABLE TO BENEFIT, TOO. ED: IS THERE A REVENUE SHARING AGREEMENT WITH THIRD PARTIES WHOSE APPS ARE ACCESSIBLE TO CHATGPT? BRAD: WE WILL FIGURE OUT THE ECONOMICS OF THIS OVER TIME. WE ARE BRAND-NEW HERE. PLUG-INS WAS THE FIRST VERSION OF THIS. WE TAKE THIS EXPERIMENTAL MINDSET TO MAKING SURE WE GET IT RIGHT. WE DO WANT TO BUILD SOMETHING THAT IS USEFUL FOR DEVELOPERS. OF COURSE THERE WILL HAVE TO BE SOME EXCHANGE OF ECONOMICD SNF VALUE — ECONOMICS AND VALUE. ED: YOU HAVE HIT 809 ACTIVE WEEKLY USERS. — 800 MILLION ACTIVE WEEKLY USERS. IT IS A SIGNIFICANT MILESTONE. ALL THE TIME I’M ASKED BY ALL KINDS OF PEOPLE, DO WE HAVE ANY SENSE OF WITHIN THAT IN HUNDRED MILLION HOW MANY ARE BASELEVEL FREE USERS AND HOW MANY ARE PREMIUM LEVEL PAID SUBSCRIBERS? BRAD: WE HAVE A VERY HEALTHY FUNNEL OF PEOPLE THAT CHOOSE TO PAY FOR CHATGPT. IT HAS SURPASSED WHAT MY EXPECTATIONS FRANKLY WERE. PEOPLE HAVE THIS PERCEPTIONS THAT CONSUMERS TEND NOT TO PAY FOR SOFTWARE. SIMILAR TO WHAT I WAS SAYING BEFORE ON HOW YOU CODEVELOP THE PRODUCT ALONGSIDE THE BUSINESS MODEL, CHATGPT IS A GREAT EXAMPLE OF THAT, WHERE THE SUBSCRIPTION MODEL IS A TESTAMENT TO HOW VALUABLE IT IS FOR MORE USERS THAN I THINK WE EXPECTED TO BE WILLING TO PAY FOR IT. WE DON’T DISCLOSE THE EXACT NUMBER, BUT IT IS A HEALTHY AMOUNT AND MORE EVERY DAY. ED: OPENAI IN THE BEGINNING WHEN AFTER THE CONSUMER FOR USERS AGGRESSIVELY. YOUR FOCUS ON THE ENTERPRISE BUSINESS. WHAT IS THE STRATEGY FOR THAT, AND HOW DO YOU PRIORITIZE YOUR ENTERPRISE BUSINESS? BRAD: GLAD YOU ASKED ABOUT THAT. TODAY’S ANNOUNCEMENT TARGET WHAT ARE AN IMPORTANT SET OF USE CASES FOR THE ENTERPRISE CAN THINGS WE HAVE BEEN HEARING ENTERPRISES ASK US ABOUT FOR SOME TIME. SPECIFICALLY ONE IS WE HAVE THE ABILITY FOR ENTERPRISES TO BUILD AGENTS IN A MUCH MORE VISUAL AND INTUITIVE WAY. YOU HEARD US SAY THE YEAR 2025 IS THE YEAR OF AGENTS AND I THINK THAT IS TRUE. KODAK IS A GOOD EXAMPLE OF THAT. OUR CODING AGENT AVAILABLE THROUGH AN API. ED: LITETIME HAS GOTTEN A LOT SHORTER. BRAD: YOU SAW TODAY WE LIFE DEMOED A FEW THINGS WE BUILT IN REAL-TIME. WE EXPECT THAT TO CONTINUE TO BE A TREND. THINGS LIKE AGENT BUILDER ALLOW ENTERPRISES TO BUILD POWERFUL AGENTIC EXPERIENCES ON THE GO ITERATIVELY AND CONNECT IT TO THE TOOLS AND SOURCES OF INFORMATION THAT MATTER FOR THE BUSINESS. ED: THE DATA POINT THAT JUMPED OUT AT ME IS YOUR API IS HANDLING 6 BILLION TOKENS PER MINUTE, AND THAT HELPS EXPLAIN WHY THE AMD DEAL, FOCUS ON INFERENCE. YOU ARE FOCUSED ON ALL OF THESE DOMAINS OF THE COMPANY. I HAVE GOT TO ASK YOU, HOW ARE YOU GOING TO FINANCE YET ANOTHER INFRASTRUCTURE PROJECT? IS THERE GOING TO BE SOME DEBT FOR THE AMD CAPACITY, AND HOW DO YOU MOVE QUICKLY TO GET IT ONLINE? BRAD: THE HIGH-LEVEL THING IS WE ARE TREMENDOUSLY COMPUTE-CONSTRAINT. THE REASON FOR THAT IS THE QUESTION YOU ASKED, DEMAND. EVEN TODAY I AND A STANDARD, DEMAND AND REVENUE GROWTH HAS BEEN TORRID IN ITS FACE. REALLY WE HAVE TO INVEST AHEAD OF THAT. THAT IS GOING TO BE THE LIMITER FOR US TO CAPTURE DEMAND WHETHER IT IS CONSUMER OR ENTERPRISE, AND PARALYZING MORE PRODUCT EXPERIENCES AND ENABLE USERS TO BE ABLE TO USE THOSE PRODUCTS MORE ACTIVELY IN THEIR DAILY LIFE, WORK, AND AT HOME. EVEN THINGS LIKE THE APP WE JUST LAUNCHED, WE WISH WE COULD INVITE MORE PEOPLE ONTO IT NOW, BUT WE NEED MORE COMPUTE. THE AMD DEAL, WE ARE EXCITED ABOUT DIRECTIONALLY BEING A WAY FOR US TO DO THAT. ED:ED: I HAVE GONE ASK ABOUT THE REPORT THAT OPENAI CLOSED SECONDARY ABILITY FOR A PLACE TO SELL SHARES AT THE $500 BILLION EVALUATION. WHAT IS THE METRIC WE ARE SUPPOSED TO JUDGE HER SUCCESS BY , THE 500 BILLION DOLLARS VALUATION, 6 BILLION TOKENS PER MINUTE? FOR YOU, BRAD, WHAT IS IT? BRAD: FOR ME IT IS A METRIC THAT WE TALKED ABOUT AS TOKENS. YOU MENTION 6 BILLION TOKENS PER MINUTE ON AIR API. THAT IS THE PUREST — FOR ME THE KIND OF ESSENCE OF UTILITY IS THAT CONSUMPTION METRIC. WE HAVE TRACKED THAT METRIC TO SEE HOW PEOPLE’S CONSUMPTION OF AI IS GROWING OVER TIME. YOU SEE THIS HAPPEN IN AMAZING WAYS. THINGS LIKE KODAK’S WE HAVE SEEN PRO 10X SINCE AUGUST — GROW 10X SINCE AUGUST. YOU ARE SEEING THE SAME PATTERN EMERGE ACROSS MULTIPLE INTERVIEWS AND MULTIPLE AREAS OF WORK, AND THAT IS A METRIC I LOOK AT. IF PEOPLE ARE USING THIS FOR MORE THINGS, THAT IS THE ULTIMATE GOAL. ED: BRAD LIGHTCAP IS OPENAI’S COO. THERE IS A FIREHOSE OF HEADLINES AND INDIA HAS MOVED MARKETS ALL DAY LONG. KATIE: OUR THANKS TO ED LUDLOW AND BRAD LIGHTCAP AT THE ANNUAL DEVELOPERS DAY. DURING THAT CONVERSATION, NEWS MAKING. ROMAINE: APPLE SHARES DOWN ALMOST 20%. THIS WAS THE DARLING OF SHARES THAT JUST GOT ADDED TO THE S & P 500 LAST MONTH. WE ARE LEARNING BASED ON BLOOMBERG REPORTING THAT THE SECURITIES AND EXCHANGE COMMISSION IS PROBING THE COMPANY’S DATA COLLECTION PRACTICES THAT RELATE TO ALLEGATIONS THAT THE COMPANY VIOLATED PLATFORM PARTNER SERVICE AGREEMENTS TO PUSH MORE TARGETED ADVERTISING TO CUSTOMERS. THIS IS ACCORDING TO PEOPLE FAMILIAR WITH THE MATTER AT BLOOMBERG REPORTERS HAVE SPOKEN TO. WE SHOULD POINT OUT THAT REPORTERS HAVE REACHED OUT TO APPLOVIN. KATIE: THIS HAS BEEN A DARLING IN THE STOCK MARKET. YOU CAN SEE THE REACTION NOW. ACCORDING TO REPORTING, THIS IS IN RESPONSE TO A WHISTLEBLOWER COMPLAINT AS WELL AS MULTIPLE SHORT SELLER REPORTS THAT HAVE BEEN PUBLISHED. A LOT OF SCRUTINY COMING IN ON THIS COMPANY. ROMAINE: WE WILL TRY TO GET MORE DETAILS ON THIS. WHEN WE TALK ABOUT THIS BURGEONING AI AND BROADER AI TRADE OUT THERE, WHICH APPLOVIN TO A CERTAIN EXTENT GOT CAUGHT UP IN, THERE ARE QUESTIONS ABOUT THE DURABILITY CANNOT SOME MUCH BECAUSE THE ALLEGATIONS, — NOT SO MUCH BECAUSE OF THE ALLEGATIONS HERE, BUT WHETHER THEY ARE ON FIRM FOOTING. KATIE: HOPE TO GET MORE DETAILS ON IT, BUT THE REACTION IN THE SHARES, BIG WIPEOUT UNDERWAY. ROMAINE: OVERALL, THOUGH, THE MARKET IS HOLDING UP, THE BROADER MARKET, WITH THE S & P HIGH ON THE DAY, AS IS THE NASDAQ AND THE OTHER INDICES. SEEMA SHAH JOINS US TO COUNT IS DOWN TO THE CLOSING BELL. I WANT TO START WITH THE AI TRADE WRIT LARGE. WE HAVE SEEN IT GET GOOSED A LOT THE PAST FEW DAYS AND WEEKS WITH THESE ANNOUNCEMENTS BY OPENAI AND THE OTHER BIG PLAYERS IN THE SPACE ABOUT THE CONTINUING SPEND THAT WE ARE SEEING OUT OF MAJOR COMPANIES, THE IDEA THAT AT LEAST FOR THE U.S. ECONOMY, IT IS CORPORATE CAPEX SPEND OUTPACING CONSUMER SPENDING, THE FIRST TIME WE HAVE SEEN THAT IN DECADES. , HI, ROMAINE — > > HI, ROMAINE, THANKS FOR HAVING ME FOR SOME SEEN THESE NUMBERS COMING UP ON THESE REPORTS. IT IS DIFFICULT TO SEPARATE THE AI THEME, WHICH HAS BEEN DRIVING MARKETS THE LAST FEW YEARS, BUT IT SEEMS LIKE IT IS HAVING THAT IN THE MACRO SCENARIO AS WELL. CLEARLY THERE IS BENEFITS. WE CAN SEE THE CAPEX DRIVE HAS BEEN DRIVING THE ECONOMY HAS OTHER SEGMENTS HAVE BEEN WEAKENING. ALWAYS HAVE TO THINK ABOUT SOME OF THE RISKS THAT OVER TIME IF YOU WERE TO GET A SETBACK IN THESE NUMBERS, WHAT DOES IT PLAY THROUGH TO THE BROADER ECONOMIC PICTURE. ROMAINE: ARE YOU CONCERNED AT ALL ABOUT WHAT SOME PEOPLE HAVE DEEMED THE CIRCULAR NATURE OF SOME OF THESE DEALS, THE IDEA THAT OPENAI ANNOUNCES AN AGREEMENT FOR AMD, FOR AMD TO BASICALLY USE OPENAI SERVICE, OPENAI TO BUY AMD GPU’S, THE IDEA THAT IT IS DISCLOSED ECOSYSTEM REVEALS? IS THAT CAUSE FOR CONCERN? SEEMA: I DON’T KNOW IF IT IS CAUSE FOR CONCERN AT THE MOMENT, BUT IT DEFINITELY NEEDS SOME SCRUTINY. WHAT WE HAVE SEEN OVER TIME IS ECONOMISTS AND STRATEGISTS ARE STARTING TO TAKE A CLOSE EYE FOR — STARTING TO TAKE A CLOSE EYE TRYING TO DISSECT WHAT THE GENERAL MACRO REPERCUSSIONS IN THE RISKS ARE IS GOING TO BE REALLY KEY. THE ONE THING WE ARE SAYING IS IF THERE WERE TO BE A REAL SETBACK IN SOME OF THESE CAPEX NUMBERS AND THE FEEDTHROUGH TO SO MANY OTHER COMPANIES, CIRCULARITY OF THAT, IT COULD HAVE SIGNIFICANT RAMIFICATIONS FOR THE U.S. ECONOMY AND GLOBAL ECONOMY. I HAVE TO SAY, THOUGH, EVEN IF YOU WERE TO GET A DISAPPOINTING NUMBER, OVERALL WE DO THINK THAT THE AI NARRATIVE IS LIKELY TO CONTINUE, JUST TO BE A BIT OF A SETBACK, WITH BROAD REPERCUSSIONS, BUT SOMETHING WE THINK WOULD BE FAIRLY SHORT-LIVED. KATIE: JUST THINKING MORE BROADLY ABOUT THESE DEALS, ROMAINE BRINGS UP THE CIRCULAR NATURE THAT SOME HAVE POINTED OUT ABOUT ALL OF THESE BIG COMPANIES SPENDING MONEY ON EACH OTHER. I THINK BACK TO THE ORACLE-OPENAI DEAL THE WEEK BEFORE THAT. IT WAS POINTED OUT IN FABRICATED KNOWLEDGE THAT THERE IS NO WAY FOR ORACLE TO PAY FOR THIS WITH CASH FLOW, THAT YOU ARE SEEING THESE COMPANIES HAVE TO RAISE EQUITY OR — ORDER TO FUND THEIR AMBITIONS WHEN IT COMES TO THE AI INFRASTRUCTURE SPACE. I WONDER HOW THAT CHANGES THE NATURE OF INVESTING IN THE TECH SECTOR. A LOT OF THESE BIG MEGA CAP NAMES ARE KNOWN FOR HAVING RELATIVELY CLEAN AND STRONG BALANCE SHEETS, BUT NOW WHEN IT COMES TO TRYING TO COMPETE AND HAVING TO KEEP UP IN THIS RACE TO JUST SPEND MONEY, IT SEEMS LIKE SORT OF THE NATURE OF THOSE COMPANIES COULD CHANGE WHEN IT COMES TO THEIR RELATIONSHIP WITH DEBT. SEEMA: KATIE, I THINK THAT IS ABSOLUTELY RIGHT. WHEN WE TALK ABOUT TECH UP TO THIS POINT, THERE IS CONCERNS BEING RAISED ABOUT VALUATIONS, I THINK WHAT PEOPLE COME BACK TO HIS THESE ARE CASH-RICH BUSINESSES WITH STRONG BALANCE SHEETS, AND THE GROWTH IS BEING DRIVEN BY FUNDAMENTAL STRENGTH DRIVERS BEHIND THEM. ONCE YOU GET INTO THIS NEW WAY FOR SO MUCH HAS TO BE FUNDED BY DEBT OR EQUITY, THEN IT STARTS TO CHANGE AND YOU MAY SEE SOME INVESTORS BEING A LITTLE BIT MORE SKEPTICAL ABOUT SUSTAINABILITY OF THIS, HOW FROTHY IS THIS. I THINK QUESTION MARKS BEING RAISED AROUND VALUATIONS IS LIKELY GOING FORWARD, AND IT DOES BECOME MORE AND MORE IMPORTANT THAT THESE COMPANIES NEED TO CONTINUE DELIVERING ON SOME OF THE STUFF THEY PROMISED. OF COURSE, EACH QUARTER IT GETS MORE AND MORE DIFFICULT FOR THEM TO DELIVER. KATIE: I WOULD LOVE TO GET YOUR THOUGHTS ON A DYNAMIC THAT IS VERY CLEAR IN TODAY’S STOCK MARKET. YOU HAVE OPENAI REALLY DRIVING NEWS WHEN IT COMES TO A LOT OF PUBLIC COMPANIES. OPENAI IS A PRIVATE COMPANY, BUT YOU THINK ABOUT WHAT WE ARE SEEING IN AMD AND A WHOLE WAVE OF OTHER COMPANIES. AS AN INVESTOR, HOW DO YOU MAKE SENSE OF THAT, THAT BASICALLY YOU HAD TO THIS COMPANY THAT YOU DON’T HAVE QUARTERLY UPDATES ON REALLY BEING THE CHIEF CATALYST FOR A LOT OF NAMES IN THESE INDEXES? SEEMA: YOU KNOW, THERE IS SO MUCH ON THE CONCENTRATION SIDE OF THE MARKET. AS YOU SAID, THESE ARE PRIVATE COMPANIES, SO YOU ARE NOT GETTING THE SAME NUMBERS OR INFORMATION, AND THAT IS STILL DRIVING THE STRENGTH OF THE MARKET. IT IS DRIVING THE STRENGTH OF OTHER COMPANIES, WHICH ARE NOT DIRECTLY RELATED. THIS IS SOMETHING WE NEED TO KEEP AN EYE ON. I THINK THAT HAS BEEN THE STORY, THE CONCENTRATION OF THESE COMPANIES REQUIRES CLOSER SCRUTINY, AND THEN WHEN YOU START TO THINK ABOUT THE MACRO IMPACT, IT IS INCREASINGLY CLEAR TO INVESTORS THE CLOSER THE LOOK, THE MORE IMPORTANT IT IS. ROMAINE: SEEMA, ALWAYS GREAT, CHIEF GLOBAL STRATEGIST AT ASSET MANAGEMENT, COUNTING US DOWN TO THE CLOSING BELL, WITH THE S & P SITTING AT RECORD HIGHS, NASDAQ AT RECORD HIGHS. SO, TOO, IS THE RUSSELL. DOW SITTING THIS ONE OUT. A FULL BREAKDOWN OF THE MARKET ACTION STARTS WITH OUR GLOBAL SIMULCAST NOW. > > «THE CLOSING BELL, BLOOMBERG’S COMPREHENSIVE COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ROMAINE: AND RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK ALONGSIDE KATIE GREIFELD TAKING YOU THROUGH TO THAT CLOSING BELL WITH A GLOBAL SIMULCAST JOINED BY TIM STENOVEC AND CAROL MASSAR. CAROL, NOTHING IS MORE CRUCIAL RIGHT NOW THAN THE NEWS THAT JUST CROSSED THE WIRE. THAT CHARLIE IS BACK IN THE STUDIO. CAROL: I THOUGHT YOU WERE GOING TO GO TO THE STOCK BUT I AM LOOKING AT THE SEMICONDUCTOR SPACE. TIM: YEAH, WE KNOW CHARLIE. KATIE: SHE’S IN THE SKIT WITH TAYLOR SWIFT, COME ON. CAROL: EVERYBODY IS AT ONE POINT. TIM: HIGHLY RECOMMEND CHECKING THAT ONE OUT. CAROL: THANKS FOR THE MAN EXPLAINING. I APPRECIATE IT. SEMICONDUCTOR STOCK AT 3%. THANK YOU A AND D. THAT ONE IS UP 21% ALONE. TAKE IT AWAY, GUYS. ROMAINE: ALL SERIOUSNESS, WE TALK ABOUT A MARKET AT RECORD HIGHS BUT MORE IMPORTANTLY, WHY? OPEN AI MAKES ANOTHER BIG ANNOUNCEMENT. THIS INVOLVING A.M.D. THEY HOLD A DEVELOPERS CONFERENCE. YOU SEE ALL THE BIG NUMBERS THERE. THE LAST FEW WEEKS IT SEEMS TO BE THE ONLY TRADE IN DOWN. A BIG PART OF THE REASON WHY YOU SEE THE DOW JONES AVERAGE IN THE GREEN. THE DOW DOWN 64 POINTS ABOUT .1%. THE NASDAQ UP ABOUT . .8% ON THE HIGH. CAROL: LET’S GET TO THE S & P 500. IT’S UP SEVEN DAYS IN A ROW. UP ABOUT 2% IN THOSE SEVEN DAYS, KATIE, IF I LOOK AT THE TRADE, YOU HAD ABOUT HATCH HIGHER, HALF LOWER SO IT’S NOT LIKE EVERYBODY WAS ENJOYING THE MOVE UP TO ANOTHER RECORD CLOSE ON THE S & P 500. KATIE: SEVEN SECTORS IN THE GREEN, JUST FOUR IN THE RED. WHAT WAS LEADING THE CHARGE? WHO OTHER THAN INFORMATION TECHNOLOGY. UP ABOUT .6% AS A WHOLE. ROMAINE: WHY SIT CALLED INFORMATION TECHNOLOGY? KATIE: I DON’T KNOW, THAT’S JUST WHAT THE TERMINAL TELLS ME. TIM: JUST CALL IT I.T. ROMAINE: THAT FEELS OUTDATED, LIKE COMMUNICATION SERVICES. KATIE: I COULDN’T TELL YOU BUT HEALTH CARE HAVING A BAD DAY. RIGHT NOW INTERESTING TO THE DOWNSIDE. ROMAINE: HEALTH CARE, THAT’S A NAME THAT’S TIMELESS. CAROL: LET’S GO TO SOME OF THE INDIVIDUAL GAPERS. SEMICONDUCTOR OUTPERFORMANCE. THANK YOU TAX A.M.D., YOU GUYS HAVE SPENT A LOT OF TIME TALK ABOUT IT. SHARES UP AS MUCH AS 37% AT THEIR HIGHS TODAY FINISHING WITH A GAIN OF JUST SHY OF 4%. HOLY MOLY, BATMAN. A.I. RALLY AND THE CHIP GRAB IS ON IN A BIG WAY. WE’VE SPENT A LOT OF TIME TRYING TO FIGURE OUT THE SPEND, THE COMPANIES THAT WORKING TOGETHER. DOES IT ALL PLAY OUT AND THE REVENUES ULTIMATELY BE THERE? I GUESS TIME WILL TELL. THAT DEAL FOR OPEN AI FOR AI INFRASTRUCTURE COULD GENERATE TENSE OF BILLIONS OF FAMILIARS. ROMAINE: AS A KID I’D GET HOME FROM SCHOOL AND WATCH THE ORIGINAL BATMAN WITH BURT WARD AND ADAM SMITH. CAROL: I DON’T KNOW IF YOU GUYS CHECKED OUT CRITICAL METALS TODAY. -UP 109%. FINISHING WITH A GAIN OF 45% AFTER REUTERS REPORTED THAT TRUMP ADMINISTRATION OFFICIALS HAVE DISCUSSED TAKING A STAKE IN THE METAL MINING COMPANY. IT WOULD GIVE THE U.S. A STAKE IN THE RAREST MINE INVESTMENT IN GREENLAND. AGAIN, A THEME WE’VE SEEN ABOUT THE U.S. GOVERNMENT TAKING POTENTIALLY OWNERSHIP STAKES IN VARIOUS COMPANIES THAT THEY DEEM IMPORTANT TO U.S. SECURITY. AND COMERICA, A BIG BANK DEAL. AGREEING TO BUY IT FOR ABOUT 10.9 BILLION IN STOCK, IT WOULD BE THE LARGEST BANK DEAL THIS YEAR. COMERICA UP ABOUT 14% IN TODAY’S SESSION. TIM: NOTABLE DECLINERS IN THE S & P 500. AMONG THE WORST ON A PERCENTAGE BASIS WAS VERIZON. TICKER VZ, ACTUALLY SHARES CLOSING WORST OR WORST MONDAY DROP GOING BACK TO APRIL OF THIS YEAR. HANS VESBURG OUT AFTER SEVEN YEARS AS C.E.O. FORMER PATEOS CHAIRMAN COMING I IN. VESBURG WILL STICK IN THE ROLE FOR A WHILE. VERIZON HAS BEEN LOSING SUBSCRIBERS AND MARKET SHARE. IT SHED 51,000 MOBILE MONTHLY CUSTOMERS IN THE PAST QUARTER. VIRGIN MOBILE, MORE THAN 20 YEARS, HE WAS THE FOUNDER OF THAT COMPANY AND HE WAS THERE FOR 10 YEARS AND THEN HE WAS AT NEXTEL SPRINT SO HE HAS COMMUNICATIONS EXPERIENCE IN THE COMMUNICATIONS SPACE. ROMAINE: THAT’S CALLED STREET CRED. TIM DENY THIRD BANK FINISHING DOWN 1.4%. CAROL TALKED ABOUT THE INCREASE IN COMERICA TODAY. IT IS THE LARGEST U.S. BANK DEAL THIS YEAR. WE’LL SPEAK WITH HERMAN SHAN ABOUT THIS IN JUST A FEW MINUTE. ROS: WE ALREADY SPOKE WITH HIM. KATIE: WE DID, IT WAS REALLY GOOD. CAROL: THANKS FOR WARMING HIM UP. APPRECIATE IT. TIM: WE DID A WHOLE HOUR ON THE NVIDIA AND A.I. TRAILED TODAY. ROMAINE: WE ALMOST DID TOO. TIM: SHARES FALLING 14%. THEY CRATERED AT 3:30 WALL STREET TIME. AFTER BLOOMBERG NEWS REPORTED THERE’S BEEN A PROBE OF IT ACTIONS. THEY DECLINED TO COMMENT ON THE GLOBE. SAYING IT REGULARLY ENGAGES WITH REGULATORS. THE S.E.C. DIDN’T COMMENT DUE TO A SHUTDOWN. ROMAINE: LOOKING AT TREASURY YIELDS IN THE U.S. THIS WAS A GLOBAL PHENOMENON AND WE HAD A LOT OF SHUTDOWNS, A GOVERNMENT IN FRANCE THAT LASTED LESS THAN THE LIFE SPAN OF A MAY FLY AND POTENTIALLY A NEW PRIME MINISTER IN JAPAN THAT IS EXPECTED TO ALSO PUT SOME DOWNWARD PRESSURE ON BOND PRICES. A LITTLE BIT OF A SELL OFF WITH SOVEREIGN DEBT. CAROL: GOOD TO KNOW THERE’S SOMETHING WE CAN COUNT ON. THAT’S TAYLOR SWIFT. SHE CAN SELL STUFF. WE HAD, WHAT, HER ALBUM «THE LIFE OF A SHOWGIRL.» IT SOLD 2.7 COPIES IN THE UNITED STATES ON ITS FIRST DAY SO IT’S KIND OF AMAZING, IT BROKE A RECORD BUT IT’S NOT JUST THAT. PEOPLE ACTUALLY WENT TO THEATER TO SEE TAYLOR. ROS: THAT’S RIDICULOUS, WHO WOULD DO THAT? KATIE: A FEW OF OUR PRODUCERS, AT LEAST. TIM: 41.MILLION IN TICKET SALES IN THE U.S. AND CANADA, ANOTHER $16 MILLION INTERNATIONALLY. AN AMC EXCLUSIVELY. THOMAS BUCKLEY IS CLOSE FRIENDS WITH TAYLOR SWIFT’S PARENTS. I DID NOT REALIZE THAT. ROMAINE: I WAS TOO BUSY TO GO TO THAT. NOW THERE’S A LOT OF CONCERN RIGHT NOW THAT SOME OF THE RETALIATORY ACTIONS BY PEOPLE OVERSEAS WHO ARE UPSET WITH OUR TRADE POLICIES HERE AREN’T BUYING U.S. PRODUCTS, BASICALLY U.S. WHISKEY. KATIE: EXPORTERS OF U.S. LIQUORS, INCLUDING BOWER BEEN FELL 9% FROM A YEAR AERIAL WITH SHIPMENTS TO CANADA PLUNGING 85% TO LESS THAN 10 MILLION IN THE PERIOD. ROMAINE: SO WHAT ARE THEY DRINKING UP THERE? KATIE: MAYBE THEIR OWN HOME BREW. IT WOULD SPEAK TO THAT RETALIATORY FEELING. WHEN WE WERE DISCUSSING THE FIRST ROUND OF CANADA TARIFF TALKS, THAT WAS DEFINITELY A MAJOR THEME THERE. CAROL: KIND OF MAKES SENSE, RIGHT? AMID THIS TARIFF WASH AND AND THE SUPERB BACK BY THE U.S., THEY’RE GOING FIGHT BACK NOT BUYING OUR STUFF. ROMAINE: SOME OF US WILL FIGHT BACK. [LAUGHTER] CAROL: GUYS, THAT’S A WRAP. OUR CROSS PLATFORM RADIO AND TV ORIGINALS. TIM AND I CONTINUING ON YOUTUBE AND RADIO. SEE YOU AGAIN SAME TIME, SAME PLACE TOMORROW. ROMAINE: WE CONTINUE HERE WITH A CLOSER LOOK AT SOVEREIGN DEBT AND A NEW REPORT OUT ON WHAT’S GOING ON IN EMERGING MARKETS. WE’LL TALK WITH THE FINANCIAL DIRECTOR OF THE FINANCIAL MARKETS. THAT’S COMING UP HERE ON «THE CLOSE.» 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.» KATIE: WELCOME BACK TO «THE CLOSE.» I’M KATIE GREIFELD. ROMAINE: AND I’M ROMAINE BOSTICK. A RECORD HIGH FOR THE NASDAQ, THAT RECORD HIGH FOR THE RUSSELL 2,000 AND THE S & P 500. 6740 AND CHANGE POWERED BY THAT NEWS EARLIER TODAY FROM OPEN AI. A RECORD DAY FOR GOLD. A FLIGHT TWO SAFE HAVEN STATUS. A RECORD WEEK FOR BITCOIN AS WELL. ONCE AGAIN MAYBE IN A SEARCH FOR SAFE HANKS. NOT NECESSARILY SO IN THE OTHER SECTORS. DOLLAR YEN WEAKENING BY ABOUT 2% ON THE DAY. KATIE: WHAT WE’RE SEEING IN THE STOCK MARKET RIGHT NOW. A.M.D., THE THE STAR OF THE DEAL. AFTER THAT DEAL WITH OPEN AI, SENDING A BUNCH OF SHARES HIGHER INCLUDING THE LIKES OF NVIDIA. THEIR SHARES ARE DOWN ABOUT 1%. AND THEN LATE-BREAKING NEWS, BROOM BERK REPORTING IT’S BEING PROBED BY ITS DATA COLLECTION PROCEDURES. 14% LOWER ON THE DAY. BUT OUR TOP STORY IS GLOBAL POLITICS AND SOVEREIGN MARKETS. YEARS ON 10-YEAR-OLD BOBBED JUMPING AFTER FRANCE’S PRIME MINISTER SURPRISE RESIGNATION. AND ARGENTINA TALKS WITH THE COUNTRY’S FINANCE MINISTER CURRENTLY IN WASHINGTON TO NEGOTIATE THE TERMS OF A U.S. AID PACKAGE. CERTAINLY A LOT TO KEEP AN EYE ON. ROMAINE: ABSOLUTELY. AND WE TALK WITH THE FINANCIAL DIRECTOR OF THE MONITOR INTERNATIONAL MARKETS AT THE MONITOR FUND. I WANT TO START OFF ON ISSUANCE WE’RE SEEING THIS YEAR QUILT COMES TO EMERGING MARKETS. A LOT LESS OF THAT WAS DOLLAR ISSUANCE. > > DOLLAR ISSUANCE AND OTHER CURRENCY, IT’S NOT A RECORD YEAR BUT IT’S A SOLID YEAR TO DATE. ROMAINE: WHY MORE LOCAL CURRENCY ISSUANCE? > > THE LOCAL EMERGING MARKETS HAVE REALLY WORKED ON DEVELOPING THE LOCAL MARKETS. THAT CAN MEAN A SHOCK FROM ABROAD OR DOMESTICALLY AND A LOT OF PROGRESS HAS BEEN MADE THERE. KATIE: AND WHAT DOES DEMAND LOOK LIKE ON THE INVESTOR SIDE OF THINGS? HOW HAS IT BEEN RECEIVED BY THE INVESTMENT COMMUNITY? > > WHAT MAJOR EMERGING MARKETS HAVE DONE IS REALLY DEVELOP A BUY SITE IN THEIR OWN COUNTRY. A MIX OF GLOBAL AND LOCAL INVESTORS AND HAVING THOSE LOCAL IT’S ARREST LININGSIDE THE GLOBAL INVESTORS IS REALLY STABILIZING THE COUNTRY. KATIE: AND WIDE ARE WE SEEING THAT LOCAL INVESTOR BASE BUILDING UP HERE? > > THIS IS POLICY WORK OF THE COUNTRY. THE COMPANIES ARE DEVELOPING INSURANCE COMPANIES AND PENSION FUNDS SO YOU HAVE A RICH TRADING ENVIRONMENT. THERE ARE PRIMARY DEALERS. REPO MARKETS. ALL OF THESE THINGS WE’RE USED TO IN ADVANCED ECONOMIES LIKE THE U.S. IS HAPPENING MORE ASK MORE IN EMERGING MARKETS AND IT’S REALLY BENEFITING THEM. ROS: WHAT DOES THAT LOOK LIKE PARTICULARLY IN SOME OF THE FRACTURES IN GLOBAL TRADE? > > ABSOLUTELY. WE’VE SEEN A RALLY THIS EFFORT M. STOCKS. THEY’RE UP ABOUT 24%, 25% YEAR TO DATE. THAT’S MERELY TWICE AS MUCH AS THE — ECONOMY. ROMAINE: ONE ISSUE WE’VE DEALT WITH A LOT OVER THE YEARS WHEN IT COMES TO PEOPLE INVESTING IN EMERGING MARKETS IS THIS THE IDEA THAT WHEN YOU START TO SEE A COUNTRY GET ITS FISCAL HOUSE IN ORDER, SOMETIMES THERE’S SOME SORT OF POLITICAL EUROPE HE’LL. WE’RE KIND OPEN SEEING THIS RIGHT NOW IN ARGENTINA. SEEMS LIKE SIX MONTHS AGO WE WERE PRAISING SOME OF THE MEASURESSER IN TAKING AND NOW WE’RE TALKING ABOUT POTENTIAL BAILOUTS BY THE UNITED STATES. > > I DON’T WANT TO COMMENT ON A PARTICULAR COUNTRY IN THIS INTERVIEW BUT BASICALLY COUNTRIES HAVE BEEN ABLE TO MAKE THE RIGHT CHOICES AND THAT IS HELPING THEM IN TERMS OF STABILITY AND GROWTH TRAJECTORY BUT, OF COURSE, WE’VE ALSO SEEN COUNTRIES MAKING OTHER CHOICES. IT’S ABOUT HAVING ROBUST POLICY FRAMEWORKS IN PLACE. KATIE: IT’S HARD NO NOT TALK ABOUT WHAT’S GOING ON IN FRANCE. YOU THINK ABOUT POLITICAL TURMOIL OVERALL, HOW IT’S AFFECTING CERTAIN COUNTRIES, CERTAIN CREDITS HERE AND YOU LOOK AT THE DEVELOPED MARKETS IN CONTRAST TO THE EMERGING MARKETS AND SOME OF THE SUCCESS STORIES YOU HAVE HERE AND I WONDER WHAT THE BALANCE LOOKS LIKE FROM WHERE YOU’RE SITTING? > > WHEN WE LOOK AT THE GLOBAL DEBT PICTURE, DEBT HAS BEEN RISING EVERYWHERE, TRUE IN ADVANCED ECONOMIES AND EMERGING MARKETS. WE ARE IN A WORLD TODAY COMPARED TO FIVE OR 10 OR 15 YEARS AGO WERE SOVEREIGN DEBT LEVELS ARE THAT MUCH HIGHER AND THAT MAKES PEOPLE MORE FRAGILE TO ANY POLITICAL NEWS, ON THE GOOD SIDE OR BAD SIDE. KATIE: WE TALK ABOUT RISING DEALT LEVELS AND I ALWAYS COME BACK TO THE INVESTOR BAILS. YOU’RE HAVING A LOCAL INVESTMENT COMMUNITY GET BUILT UP. HAS THAT BEEN AT THE SUSPENSE OF GLOBAL INVESTORS COMING INTO EMERGING MARKETS OR WHAT’S GOING ON WITH THAT COMMUNITY? > > I WOULDN’T PUT IT AS AN EITHER-OR. RATHER, BETTER MARKET LIQUIDITY IS BENEFITING EVERYBODY SO HAVING A BETTER DOMESTIC BASE IS INCREASING LIQUIDITY DOMESTICALLY WHICH IS ALSO BENEFITING GLOBAL INVESTORS. ROMAINE: I HAVE TO ASK YOU ABOUT THE GENERAL ROLE RIGHT NOW OF THE I.M.F. IN FACILITATING SOME OF THOSE POLICY CHANGES AND PROVIDING SUPPORT OF FOR THOSE POLICY CHANGES. IS IT STILL EFFECTIVE? > > ABSOLUTELY. WE’RE WORKING WITH OUR 191 MEMBER COUNTRIES TO STRENGTHEN POLICY FRAMEWORKS. IN SOME COUNTRIES THAT HINGES ON TECHNICAL FRAMEWORKS AND IN OTHER COUNTRIES IT’S THROUGH SURVEILLANCE AND IN SOME COUNTRIES IT’S THROUGH PROGRAMS. WE’RE THERE TO HELP THE MEMBERSHIP. ROMAINE: I REALLY APPRECIATE YOU BEING WITH US HERE TODAY. TOBIAS ADRIAN, FINANCIAL COUNSELOR AND DIRECTOR OF THE MONITOR AND CAPITAL MARKETS DEPARTMENT AT THE I.M.F. WHEN WE COME BACK, WE’LL TURN BACK TO THE EQUITY MARKETS AND CONSTELLATION BRANDS UP ABOUT 3% HERE IN THE AMP-HOURS TRADE AND THERE’S BEEN A LOT OF TALK ABOUT HOW PEOPLE AREN’T DRINKING. THEY’VE BEEN HURTING BUT THE HIGH END OF THE RANGE COMING IN ABOVE ESTIMATES. KATIE: SHARES POPPING AFTER HOURS IN WHAT’S BEEN A PRETTY TERRIBLE YEAR. WE’LL DISCUSS WITH KATHERINE BLACK COMING UP NEXT. THIS IS «THE CLOSE» ON BLOOMBERG. ROMAINE: WELCOME BACK. WE’RE LOOKING AT SHARES OF CONSTELLATION BRANDS, UP ABOUT 3% IN THE AFTERHOURS TRADE. EARNINGS OUT FOR THE MOST RECENT QUARTER. COMP SALES COMING IN AT ABOUT 2.58 BILLION. SLIGHTLY ABOVE ESTIMATES. THEY ARE GOING SLIGHTLY ABOVE WHAT THE STREET WAS LOOKING FOR BUT THE COMPANY STILL EXPECTING CONTRACTION WHEN IT COMES TO SALES OF BEER. A LOT OF PEOPLE ARE LOOKING AT THE GENERATIONAL SHIFTS IN HOW WE CONSUME CERTAIN TYPES OF ALCOHOLIC BENCHES. GREAT TO HAVE YOU HERE. I HEAR ALL THESE AN EX DOTAL NUMBERS ABOUT GENZ ISN’T DRINKING BUT WE’RE NOT CONSUM ING ALCOHOL IN THE SAME QUANTITYITIES WE USED TO. WE’RE GRAVITATING TO NON-ALCOHOLIC. ARE YOU SEEING THAT IN THE DATA? > > WE ARE. EVEN A FEW YEARS AGO WHEN YOU SAW HOT DRINKS LIKE TEQUILA OR BOURBON ON THE RISE ORIGIN, THOSE ARE STARTING TO MODERATE A BIT. LIKE YOU SAY, IT IS YOUNGER CONSUMERS. OLDER CONSUMERS STILL ARE DRINKING AND DRIVING GROWTH. ROMAINE: THERE WAS A REPORT EARLIER TODAY ABOUT HOW CRAFT BREWERIES ARE STARTING TO SHUT DOWN. THEY’RE REALLY FEELING THE PAIN. WHEN PEOPLE ARE GOING OUT, WHAT ARE THEY CONSUMING? ARE THEY SPENDING MORE ON FOOD RATHER THAN DRINK, DRINKING NONOLCOHOLIC STUFF? > > IT’S A MIX OF THINGS. WE’RE SEEING THE C.F.I. IN GOING OUT GOING UP. THEY ARE BEING CHOOSIER FOR ONE AND THERE’S A BROADER TREND YOU’LL SEE ON MENUS EVERYONE, MOCKTAILS AND IT’S BETWEEN A HEALTHIER CHOICE AND ALSO SAVVIER. KATIE: I WILL SAY, IT’S AMAZING THOSE MOCK TAILS COST ALMOST AS MUCH AS SAME THING. BUT I DO WANT TO TALK MORE ABOUT THE CONSUMER. SINCE WE’RE IN DAY SIX OF THE GOVERNMENT SHUTDOWN AND IT FEELS LIKE WE’RE ALL TRYING TO PARSE OUT WHAT THE IMPACT ON THE ECONOMY, ON THE CONSUMER IS. WHERE DOES IT ACTUALLY START TO MAKE A DIFFERENCE? > > INTERESTING QUESTION BECAUSE WHAT WE SEE IS THAT IT DOESN’T IMPACT EVERYBODY DIRECTLY IN THEIR PAYCHECK. ONLY ABOUT 35% OF CONSUMERS SAY I THINK THIS COULD IMPACT ME DIRECTLY OR INDIRECTLY BUT WHAT IT DOES IMPACT ACROSS THE BOARD IS CONSUMER CONFIDENCE. WE CAN LOOK BACK AT PAST GOVERNMENT SHUTDOWNS AND SEE THAT HAPPEN AND WE’RE SEEING THAT HAPPEN AT A TIME WHEN CONSUMERS WERE ALREADY LEANING INTO BEING SAVVY SHOPPERS AND WE’RE GOING INTO A HOLIDAY SEASON SO IT’S AN INTERESTING TIME. KATIE: SET US UP FOR THAT UPCOMING HOLIDAY SEASON. IT’S OCTOBER 6 AND WE’LL BE TALKING ABOUT BLACK FRIDAY AND THEN, OF COURSE, THE PROPER HOLIDAYS AFTER THAT AND IF YOU HAVE CONSUME I WERE CONFIDENCE WEAKENS, HOW DOES THAT ALL FIT TOGETHER? > > MID SEPTEMBER WE DID SOME RESEARCH AND CON ASSUMERS EVEN — CONSUMERS EVENT THEN WERE PLANNING TO SHOP MORE ONLINE AND USING COUPONS. BIG SALES DEALS. WHAT WE KNOW FROM PAST GOVERNMENT SHUTDOWNS THAT HAPPENED IN EARLY OCTOBER. IN 2013 THERE WAS ONE THAT STARTED OCTOBER 1 AND RAN FOR A COUPLE OF WEEKS. IT SHIFTED SPENDING IN THAT CASE BACK SO OCTOBER WAS QUITE SOFT, PICKED UP A BIT MORE IN NOVEMBER AND DECEMBER BUT BEFORE THAT GOVERNMENT SHUTDOWN, ANALYSTS EXPECTED RETAIL SALES FOR THE HOLIDAY PERIOD TO BE 3% TO 4% AND THEY ENDED UP BEING ONLY ABOUT 2% SO IT DEFINITELY HAS AN IMPACT, EVEN IF IT LASTS ONLY FOR A COUPLE OF WEEKS AND IT’S BECAUSE OF THAT CONFIDENCE ISSUE. ROMAINE: EVEN BEFORE THE SHUTDOWN THERE WAS A LOT OF CONCERN ABOUT THE HEALTH OF THE CONSUMER, PARTICULARLY IN THE MIDDLE AND LOWER INCOME LEVELS. > > THAT’S RIGHT AND I THINK RETAILERS ARE PREPARING IN A FEW WAYS. ONE IS THEY’RE MANAGING THEIR INVENTORIES VERY CLOSELY ALTHOUGH MANY BOUGHT AHEAD EARLY AND STOCKED UP BECAUSE OF TARIFFS AND THEY WERE ALSO PLANNING ON BIG EARLY SALES. THIS IS AN ONGOING TREND WHERE CONSUMERS ARE SHOPPING EARLY AND I THINK RETAILERS ARE UP WITH THAT. TOMORROW, AMAZON PRIME DAY. WALMART DEAL DAYS COMING UP, ETC. COP ASSUMERS WERE PLANNING TO USE THAT TO START THEIR SHOPPING AND SOME WERE PLANNING TO DO THE MAJORITY OF THEIR SHOPPING DURING THOSE EVENTS. THAT MIGHT MODERATE A BIT. ROMAINE: IT’S ONLY EARLY OCTOBER AND APPARENTLY I’M ALREADY BEHIND ON MY HOLIDAY SHOPPING? [LAUGHTER] KATIE: THAT IS KATHERINE BLACK, PARTNER OVER AT CARNEY AND COMING UP ON «THE CLOSE,» CONVERSATION WITH CITADEL FOUNDER AND C.E.O. KENNEL GRIFFIN. FROM THE CITADEL FUTURE OF GLOBAL MARKETS CONFERENCE NO NEW YORK. DON’T GO ANYWHERE. THIS IS «THE CLOSE» ON BLOOMBERG. KATIE: LET’S GET ANOTHER CHECK ON THESE MARKETS ON THIS MONDAY. THE S & P 500 AND THE NASDAQ CLOSED TODAY’S SESSION AT RECORD WITH A SIGNIFICANT BOOST COMING FROM CHIPMAKERS AND THE AI TRADE. JOINING US IS BLOOMBERG’S JONATHAN LIVE IN THAT WAS THE STORY. AMD, OPENAI AND THE DEAL. WE HAVE SEEN A RAFT OF THESE SORT OF AGREEMENTS. I KEEP THINKING ABOUT A SNAKE EATING ITS SELF WHEN WE THINK OF ALL OF THESE COMPANIES SPENDING MONEY ON EACH OTHER IN A CIRCLE. AND I DON’T KNOW HOW IT ENDS. > > EXACTLY. AT THE END OF THE DAY, A LOT OF THE FOLKS INVESTING IN THIS TECHNOLOGY ARE GOING TO HAVE TO START MAKING MONEY OTHERWISE THEY ARE GOING TO HAVE TO TURN AROUND AND STOP SPENDING MONEY ELSEWHERE. AS YOU SAY, IT IS A LITTLE BIT OF A CIRCLE AND IT IS A LITTLE SCARY TO ACKNOWLEDGE THAT WHEN IT ENDS FOR ONE PARTY, WHEN IT ENDS FOR YOUR SNAKE, IT IS GOING TO END FOR A LOT OF PARTIES AND MAY BE AN ENTIRE STOCK MARKET. I THINK THAT IS A REASONABLE WAY TO THINK ABOUT THE RISKS GOING FORWARD HERE. ROMAINE: I JUST HAD TO GOOGLE AURORA BOREALIS. IT GETS TO THE IDEA, WE TALK ABOUT A MARKET — LET’S GO BACK. THREE YEARS ALMOST TO THE MONTH, WE HAD THIS SORT OF PUBLIC DEBUT OF CHATGPT. AND TO A BIG PART OF THE RALLY WE HAVE HAD OVER THE LAST FEW YEARS HAS BEEN ALMOST DIRECTLY TIED TO THAT AI TRADE. IF WE DO FIND OUT IT IS AURORA BORIS IN NATURE AND MORE THAN JUST A COUPLE OF COMPANIES, IS THAT CAUSE FOR ALARM OR CAN WE WORK OUR WAY THROUGH IT AND SEE THE TRADE BROUGHT NOW? > > THERE ARE SEVERAL WAYS THIS CAN PLAY OUT AS I LIKE TO SAY EVEN IF YOU ARE UTTERLY CONVINCED WE ARE IN A BUBBLE, NO ONE CAN HONESTLY TELL YOU WHERE AND WHEN IT ENDS. I JOKE IT WILL PROBABLY END IN MIAMI. BUT OTHER THAN THAT, THERE IS NO TELLING EXACTLY. IT IS BROADENING. THE MARKET PERFORMANCE IS BROADENING OUT A LITTLE BIT HERE. IF YOU LOOK UNDER THE HOOD AT WAS — AT WHAT IS EXPECTED TO HAPPEN IN EARNINGS IN Q3, THE BIG QUESTION IS NOT JUST A SNEAKY AI TRADE ALSO WHEN YOU SEE THE EXPANSION OF INDUSTRIALS MULTIPLES. WHEN YOU SEE THESE EARNINGS PROJECTIONS IN THAT SPACE, IS THAT A KNOCK ON EFFECT FROM THE SAME DOG ON TRADE? SO HOW OVER CORRELATED ARE THESE PORTFOLIOS AT THIS DAY AND AGE. THAT IS THE CONCERN. ROMAINE: WE WILL FIND OUT HOW IT ALL ENDS AND YOU WILL BE THE FIRST WE WILL CALL. JONATHAN LIVE-IN, OPINION COLUMNIST, WITH US FROM BLOOMBERG. A CONFERENCE BEING SPONSORED BY CITADEL AND FRANCINE LACQUA IS SITTING DOWN WITH THE CEO OF CITADEL, KEN GRIFFIN. KEN: SECONDLY, THE TRUMP ADMINISTRATION IS VERY MUCH ALIGNED WITH SEEING THE SUCCESS OF THE AMERICAN WORKER. REMEMBER THE POLICIES BEING EFFECTUATED — THEY REALLY ARE ABOUT THE AVERAGE AMERICAN FAMILY FEELING THAT LIFE IS BETTER AND WORKING BETTER FOR THEM. THIS BACKDROP IS FEELING — IS FUELING THE ENTHUSIASM WE SEE IN U.S. MARKETS. AND WE HAVE PHYSICAL AND MONETARY STIMULUS THAT YOU WOULD EXPECT TO SEE IN THE MIDDLE OF A RECESSION. WE ARE SEEING RIGHT HERE AND RIGHT NOW IN A PERIOD OF FULL EMPLOYMENT SEVERAL YEARS INTO THE BUSINESS CYCLE SO WE ARE ON A BIT OF A SUGAR HIGH IN THE U.S. ECONOMY RIGHT NOW. > > MARKETS MOVING AWAY FROM THE TARIFF SITUATION. KEN: PRETTY MUCH IN THE REAR OF YOUR — REARVIEW MIRROR. WITH ISSUES RELATING TO TARIFFS SUCH AS HIGH INFLATION THAT HAS YET TO BE RESOLVED, THERE IS A SENSE OF ALMOST INEVITABILITY AT THE INFLATION GENIE WILL GO BACK INTO THE BOTTLE. BUT I THINK THAT IS A PREMATURE CONCLUSION. IF YOU LOOK AT THE IMMIGRATION POLICIES, THE FISCAL POLICIES, THE MONETARY POLICIES, IT IS A VERY PRO-INFLATIONARY ENVIRONMENT. I THINK THE MARKETS ARE JUST WAY TOO CALM ABOUT THE PROSPECTS OF A SUBSTANTIAL MOVE HIGHER IN INFLATION. > > IS THE FED RIGHT TO FOCUS ON THE LABOR MARKET RATHER THAN INFLATION? KEN: I THINK THAT IS A REALLY INTERESTING DEBATE. AND I REMEMBER WHEN JANET YELLEN BECAME THE CHAIR OF THE FED. SHE HAD A VERY SIMPLE FRAMEWORK THAT SHE THOUGHT ABOUT. SHE THOUGHT ABOUT THE FACT THAT THE U.S. HAD GONE THROUGH ONE SIGNIFICANT RECESSION AND THE RISK OF ANOTHER AND THE ENSUING JOB LOSS AND HUMAN CAPITAL ATROPHY THAT WOULD GO WITH A SECOND, ADJACENT OR NEARBY RECESSION WOULD BE INCREDIBLY DAMAGING FOR MILLIONS OF AMERICANS. YOU LOSE YOUR JOB TWICE IN JUST A FEW YEARS, YOU REALLY DO BECOME SEPARATED FROM THE BROADER EMPLOYMENT MARKETS. AND THAT WAS THE LENS THROUGH WHICH SHE MADE A NUMBER OF DECISIONS THAT BOTH AT THE TIME AND IN RETROSPECT WERE REASONABLY DOVISH IN TERMS OF MANAGING POLICY. RIGHT HERE, RIGHT NOW, I THINK THAT ARGUMENT IS HARD TO REACH. THE FED IS TRYING TO MAKE A DECISION BETWEEN BUYING SOME DOWNSIDE PROTECTION ON THE LABOR MARKET AND MANAGING INFLATION AND I THINK THEY ARE MAKING A DECISION THAT PUTS THEM AT RISK IF WE DO SEE INFLATION RE-ACCELERATE EARLY INTO 2026. > > IS THAT WHAT YOU ARE EXPECTING AND WHY HAS IT NOT PLAYED OUT THE WAY MANY PEOPLE THOUGHT? KEN: WE ARE STILL OFF THE TARGET. LET’S JUST CUT TO THE CHASE. INFLATION IS SUBSTANTIALLY ABOVE TARGET AND SUBSTANTIALLY ABOVE TARGET IN ALL FOUR CAMPS FOR NEXT YEAR. IT IS PART OF THE REASON THE DOLLAR HAS DEPRECIATED 10% AND THE FIRST HALF OF THE YEAR. THE SINGLE BIGGEST DECLINE IN THE U.S. DOLLAR IN SIX MONTHS IN 50 YEARS. GOLD IS THAT RECORD HIGHS. — GOLD IS AT RECORD HIGHS AND THE APPRECIATION AND OTHER DOLLAR SUBSTITUTES, TO USE THE WORD LOOSELY IN ITEMS LIKE CRYPTO, FOR EXAMPLE, IS UNBELIEVABLE. DOLLARIZED OR DE-RISK THEIR PORTFOLIO. > > ARE YOU REALLY SAYING THAT? KEN: JUST CHECKED THE PRICE OF GOLD. IT IS THE LIFE OF ITS OWN AS YOU SEE SOVEREIGNS AROUND THE WORLD, CENTRAL BANKS AROUND THE WORLD COME AS YOU SEE INDIVIDUAL INVESTORS AROUND THE WORLD GO — YOU KNOW WHAT? I NOW VIEW GOLD AS A SAFE HARBOR ASSET AND THE WAY THAT THE DOLLAR USED TO BE VIEWED. THAT IS WHAT IS REALLY CONCERNING TO ME. THERE HAS BEEN PLENTY OF PUBLISHED RESEARCH IN RECENT WEEKS AND MONTHS ABOUT FOREIGN INVESTORS BUYING U.S. EQUITIES AND HEDGING THEIR RETURNS BACK TO THEIR LOCAL CURRENCY. GOD AGAIN IS A BIFURCATION OF I’M GOING TO BET ON AMERICAN BUSINESS BUT I WANT TO IMMUNIZE SOME OF MY SOVEREIGN EXPOSURE TO THE UNITED STATES. > > THE PREVIOUS PANEL WAS TALKING ABOUT THE SHUTDOWN. GIVEN WHERE WE ARE, CAN THE FED DO ITS JOB AT THE END OF THE MONTH IN THESE CIRCUMSTANCES WHERE WE MAY NOT HAVE ENOUGH DATA? KEN: I DON’T THINK THE DATA OVER A FEW WEEKS SHOULD BE THAT DETERMINATIVE TO THE FED. THAT OVER AGGRANDIZE IS THE IMPACT OF THE REPORTS OF THE DATA. I JUST THINK THAT IS A BIT OF A MISPLACED WERE YOUR CONCERN. > > DO YOU WORRY ABOUT THE SHUTDOWN, FULL STOP? > > IT IS SYMBOLIC OF A DIFFERENT PROBLEM, THE DYSFUNCTION BETWEEN THE DEMOCRATIC AND REPUBLICAN PARTIES ON RESOLVING ISSUES WITH RESPECT TO THE BUDGET OF THE UNITED STATES OF AMERICA. AND TO BE CLEAR BOTH PARTIES ARE GUILTY OF PROFLIGATE SPENDING. AS I SAID AT THE START, THE U.S. FISCAL SITUATION IS THAT OF A NATION THAT IS TRYING TO WORK ITS WAY OUT OF A RECESSION ACCEPT THE REALITY IS WE ARE MULTIPLE YEARS INTO A VERY HIGH PERIOD OF GROWTH. THIS IS WHERE WE SHOULD BE RUNNING A DEFICIT — IN THE CLINTON YEARS WE RAN A SURPLUS AT THIS POINT OF THE CYCLE AND WE ARE NOW RUNNING A DEFICIT OF CLOSE TO 6% OR 7% DEPENDING ON WHERE A NUMBER OF THINGS LAND. THAT IS JUST COMPLETELY IRRESPONSIBLE. AND SO WHAT IS AMAZING IS WE ARE HAVING A SHUT DOWN OVER A RELATIVELY SMALL AMOUNT OF MONEY AND NEITHER PARTY IS STEPPING UP TO THE PLATE TO DEAL WITH OR GRAPPLE WITH THE REALITY THAT THE UNITED STATES NEEDS TO ENDURE A FAIR AMOUNT OF FISCAL REFORM TO BE ON A PATH OF LONG-TERM SUSTAINABILITY. > > WHY IS IT NOT BEING TALKED ABOUT? KEN: IT IS POLITICALLY UNPOPULAR AND POLITICS HAVE GONE TO A SHORTER AND SHORTER HORIZON. IN THE CLINTON DAYS THEY SIGNED A BUDGET WITH A SURPLUS. AND THAT WAS IN OUR LIFETIME. IT HAS BEEN A LONG TIME SINCE WE HAVE SEEN THAT LEVEL OF DISCIPLINE IN WASHINGTON AROUND MANAGING THE AFFAIRS OF THE U.S. ECONOMY. > > YOU WORRY A LOT ABOUT THAT. KEN: YOU MUST ALSO. WE ALL HAVE TO WORRY ABOUT THE LEVEL OF DEBT WE HAVE IN THE UNITED STATES. > > THE MARKET IS PRETTY COOL ABOUT IT. KEN: THE MARKET WILL LOOK PAST IT FOR A FEW YEARS BUT IF YOU GO OUT WITH ANYONE TO TALK ABOUT WHAT THEY WORRY ABOUT WITH RESPECT TO THE U.S. ECONOMY, THE FISCAL SITUATION IS ALMOST ALWAYS TOP OF LIST. SO I THINK THERE IS ONE THING TO KEEP IN MIND WHICH IS ASSET PRICES REFLECT A LEVEL OF EXUBERANCE WE SEE TODAY BUT I HAVE TO TELL YOU THAT IF YOU ARE WITH IN — WITH ANYONE IN THIS BUSINESS, TOP OF LIST CONCERNS IS THE LEVEL OF SPEND IN WASHINGTON IS ALWAYS TOP THREE IF NOT NUMBER ONE. > > WHAT IS THE WAY OUT? KEN: FIRST AND FOREMOST GROWTH IS AN IMPORTANT PART OF THE WAY OUT. AND THIS IS WHERE THE TRUMP ADMINISTRATION’S FOCUS ON DEREGULATION IS SO IMPORTANT. IT IS SO IMPORTANT IN TERMS OF CREATING AN ENVIRONMENT IN WHICH GROWTH CAN EXIST LIKE REALLY IMPORTANT. UNLEASH THE ANIMAL SPIRITS AND AMERICA. AND THE ONE THING ABOUT THIS COUNTRY, DIFFERENT FROM MOST, IS THE ENTREPRENEURIAL CLASS IN THIS COUNTRY IS INCREDIBLY AMBITIOUS. IT IS REALLY ABLE TO MAKE PROFOUND CHANGES HAPPEN. IF YOU LOOK ACROSS THE INVESTMENT PORTFOLIOS, A SUBSTANTIAL PORTION OF ALL THE MONEY WE INVEST IS IN BUSINESSES STARTED IN THE LAST 50 YEARS. IT IS REMARKABLE THE WEALTH CREATE IN THIS COUNTRY BY NEWLY FORMED BUSINESSES. IT IS STUNNING. IT IS THE ENVY OF THE WORLD. AND THE TRUMP ADMINISTRATION IS CERTAINLY TAKING STEPS TO ENCOURAGE THAT CONTINUED AMERICAN SUCCESS STORY. BUT, WE ALSO NEED TO GIVE REAL CONSIDERATION TO TAX POLICY AND TO SPENDING POLICIES. AND I THINK — HOW ARE THEY REBRANDING THE BIG BEAUTIFUL BILL AT THIS POINT? > > HOW WOULD YOU REBRAND IT? KEN: I DON’T THINK THERE IS A NICE WAY TO PUT LIPSTICK ON THAT PIG. [LAUGHTER] I MEAN, IT IS A PROCYCLICAL TAX CUT LATE IN THE ECONOMIC CYCLE. EVERYONE IN THIS ROOM, NO ONE WANTS MORE TAXES BUT IF YOU ARE NOT ON A SUSTAINABLE SET OF TAX POLICIES IN THE BEST OF TIMES, WHAT POLICIES WILL YOU UNLEASH AT THE WORST OF TIMES? THE U.S. HAS A WEALTH TAX WHEN THE INEVITABLE BILL COMES THROUGH. 60%, 80% AS THE INEVITABLE BILLS COME DUE? WHAT IS THE LONG-TERM CONSEQUENCE OF THESE POLICIES RIGHT HERE, RIGHT NOW? I THINK PEOPLE ARE CONCERNED WHERE THOSE MIGHT BE IN 10 OR 15 YEARS. INHERITANCE TAXES HAVE TO CHANGE IN LIGHT OF THE TREMENDOUS AMOUNT OF WEALTH HELD BY THE BABY BOOMERS AND THE TREMENDOUS AMOUNT OF DEBT THAT THEIR GENERATION WAS A PART OF. THESE ARE REALLY INTERESTING POLICY DEBATES THAT WILL EMERGE 7-15 YEARS DOWN THE ROAD WHICH COULD HAVE ADVERSE CONSEQUENCES PARTICULARLY FOR AMERICAN REALISM. TODAY I MIGHT BUILD A GREAT BUSINESS BUT I MIGHT NOT BE ABLE TO KEEP A SUBSTANTIAL AMOUNT OF WEALTH THAT I CREATE. MAYBE THROW IN A WEALTH TAX FOR GOOD MEASURE AND YOU MAY REALLY IMPACT THAT ZEITGEIST THAT IS SO POWERFUL IN TERMS OF OUR ECONOMIC PROSPERITY. > > WHERE DO YOU SEE THE ANIMAL SPIRITS IN THE U.S. BECAUSE A LOT OF CHIEF EXECUTIVE SAY THEY LIKE SOME OF THE POLICIES BUT THERE ARE A LOT OF PEACE — POLICIES LIKE VISAS OR OTHERS AND THEY ARE UNCERTAIN WHERE THE NEXT MIGHT COME FROM AND THEY ARE RELUCTANT TO SPEND RIGHT NOW. KEN: THE TRUMP ADMINISTRATION HAS GIVEN US A LOT THAT WE LOVE AND A LOT THAT WE HATE. THEY ARE AN EQUAL OPPORTUNITY GIVER. ON THE PRO SIDE IS CLEARLY THE PUSH FOR DEREGULATION. IS CLEARLY A MESSAGE TO AMERICAN WHETHER IT IS SMALL BUSINESS OWNERS OR ENTREPRENEURS THAT THIS COUNTRY WANTS TO SEE OUR COMMERCIAL CLASS SUCCEED. DOT IS A FOREIGN LANGUAGE TO THE BIDEN ADMINISTRATION. THEY HAD NO CONDUCTIVITY WITH THE AMERICAN BUSINESSES. THE TRUMP ADMINISTRATION IS VERY CONNECTED IN A DIFFERENT AND PROFOUND WAY. BUT HAVING SAID THAT, THE TARIFF POLICY HAS HAD UNEVEN IMPACTS ACROSS THE COMMERCIAL SCENE. I FEEL FOR THE SMALL AND MEDIUM-SIZE BUSINESSES THAT ARE SINGLE SOURCE IN TERMS OF THEIR GOODS FROM ASIA WHO ARE NOW SEEKING TARIFFS AT LEVELS THAT ARE UNIMAGINABLE IN THE CONTEXT OF A BUSINESS MODEL. THEY WILL BE IN A WORLD OF HURT IN THE MONTHS AHEAD AND THEY WON’T HAVE THE FLEXIBILITY THAT A LARGE CONGLOMERATE WILL HAVE IN BEING ABLE TO RECONSTRUCT SUPPLY CHAINS. BUT IS AN AREA THAT IS QUITE PAINFUL TO WATCH. THE IMPACT ON FARMERS. THE CHINESE HAVE VOTED CLEARLY TO BUY THEIR FOOD PRODUCTS FROM OTHER COUNTRIES. AND IT IS REALLY HITTING THE AMERICAN FARMING COMMUNITY QUITE HARD. THAT IS PAINFUL TO WATCH PLAY OUT. THE IMMIGRATION POLICIES — I MUST SAY I SCRATCH MY HEAD OVER. WE AS A NATION ARE FACING A BIRTH RATE THAT IS BELOW THE REQUIRED — THAT REQUIRED TO MAINTAIN OUR POPULATION SO UNLESS THE UNITED STATES WANTS TO SHRINK IN SIZE IN THE NEXT 50 YEARS WE ARE GOING TO HAVE TO PERMIT IMMIGRATION. AND I WOULD THINK OUR POLICIES WOULD BE AROUND TRYING TO ENCOURAGE THE BEST AND BRIGHTEST FROM AROUND THE WORLD TO COME TO THE UNITED STATES AND BUILD CAREERS AND FAMILIES IN OUR COUNTRY. I HAVE LONG SAID THAT EVERY SINGLE STUDENT IN THE UNITED STATES WITH A STEM DEGREE SHOULD GET A GREEN CARD STAPLED TO THAT DIPLOMA AND A PATH TO CITIZENSHIP. ROUGHLY 50% OF THE SILICON VALLEY STARTUPS ARE STARTED UP BY IMMIGRANTS. IT IS JUST REMARKABLE HOW THIS COUNTRY HAS WON IN THE GLOBAL WAR FOR TALENT AND WE SHOULD CONTINUE TO PURSUE THAT AGGRESSIVELY. AND THEN ON THE MILLIONS OF PEOPLE THAT HAVE COME ACROSS THE BORDERS IN THE LAST SEVERAL YEARS, I APPLAUD THE PRESIDENT FOR CONTROLLING OUR BORDERS. IT WAS REALLY IMPORTANT TO STOP THE FLOW OF ILLEGAL IMMIGRATION AND UNFORTUNATELY, AS YOU AND I BOTH KNOW, A NUMBER OF COUNTRIES IN SOUTH AND CENTRAL AMERICA DID NOT SEND US THEIR BEST OR BRIGHTEST. PAUL WISHON ON WELCOMED THEM WARMLY. I AM — I APPLAUD THE PRESIDENT FOR SHUTTING THE BORDERS BUT THOSE THAT HAVE COME TO THIS COUNTRY AND HAVE PLACED ROOTS HERE WHO ARE WORKING AND CONTRIBUTING TO OUR ECONOMY, WE SHOULD FIND A PATH FOR THEM TO STAY HERE AND CONTINUE TO CONTRIBUTE. THEY ARE IMPORTANT IN AGRICULTURE, CONSTRUCTION AND IN THE LEISURE INDUSTRIES. THEY DO A LOT OF JOBS THAT WOULD BE NEAR IMPOSSIBLE FOR US TO FILL WITH AMERICAN BORN LABORERS. IT WILL BE REALLY TOUGH. AND WHAT GETS LOST IN SOME OF THE DEBATE IS THEY ARE NOT TAKING JOBS FROM AMERICANS BY AND LARGE. THEY ARE ACTUALLY PLAYING CRITICAL ROLES THAT HELP AMERICAN BUSINESSES THRIVE AND SUCCEED AND ALLOW US TO EMPLOY MORE PEOPLE AT HIGHER WAGES ACROSS THE BROADER ECONOMY. WHEN IT COMES TO IMMIGRATION WRIT LARGE I THINK WE HAVE COME OFF THE RAILS AND WE NEED TO RETHINK OUR POLICIES. FIRST AND FOREMOST THE PRESIDENT WAS RIGHT TO CLOSE THE BORDERS. BUT IF YOU ARE HOME DEPOT IN THE MORNING LOOKING FOR A JOB, THAT IS NOT WHERE YOU SHOULD BE TRYING TO FIND A PERSON TO THE PORCH. > > DO YOU WORRY ABOUT YOUR HIRING IN THE FUTURE BECAUSE OF THE VISA POLICIES? KEN: FORTUNATELY WE ARE IN A SECTOR OF THE ECONOMY WHERE WE ARE A $100,000 COST TO HIRE ONE PERSON IS NOT A BREAK IT OR MAKE IT. I WORRY FAR MORE ABOUT THE REAL WILL IN INDIA THAT WANT TO COME TO AMERICA OR THE GIFTED STUDENT IN MATHEMATICS AND PHYSICS THAT CHOSES TO STAY IN CHINA. I WAS IN CHINA SHORTLY AFTER DO WAS ANNOUNCED. LET ME TELL YOU WHAT THE CHINESE WERE PROFOUNDLY PROUD OF — NOT ONE AUTHOR ON DEEPSEEK WAS EDUCATED IN AMERICA. IT WAS A POINT OF NATIONAL PRIDE IN EVERY MEETING I WENT TO — THE PROFOUND PRIDE THAT NOT ONE PERSON WHO AUTHORED DEEPSEEK WAS EDUCATED IN AMERICA. > > THAT HAS A LOT OF CONSEQUENCES. KEN: IT HAS DIRE CONSEQUENCES. > > LONGER TERM. WHAT DO YOU EXPECT FROM THE TRUMP-XI MEETING BEFORE THE END OF THE YEAR? KEN: I WOULD LOVE TO SEE DÉTENTE AND TO SEE THE RELATIONSHIP REACH A POINT OF STABILITY. RIGHT NOW IT IS TWO GREAT SUPERPOWERS TRYING TO FIND A NEW EQUILIBRIUM. AND SO LONG AS WE ARE BOTH COMPETING FROM A POSITION OF SELF INTEREST IN A WORLD OF 7 BILLION PEOPLE IN A RAPIDLY CHANGING ENVIRONMENT, YOU ARE GOING TO HAVE POINTS OF FRICTION. IT WOULD BE WONDERFUL TO SEE THAT PRESIDENT XI AND PRESIDENT TRUMP ARE ABLE TO FIND A MORE CONSTRUCTIVE SET OF RULES OF ENGAGEMENT TO HELP EACH COUNTRY PROSPER AND MEET THE NEEDS OF THEIR CITIZENS AND HELP — AND HAVE LESS TENSION. > > DO YOU WORRY ABOUT THE WORLD FRAGMENTING? KEN: THE WORLD HAS FRAGMENTED. > > TO A POINT OF NO RETURN? KEN: THE QUESTION IS, WHAT IS THE LONG-TERM ABILITY FOR THE UNITED STATES TO PLAY A PIVOTAL AND INFLUENTIAL ROLE IN THE DEVELOPMENT OF AFRICA, SOUTH AMERICA AND MOST OF ASIA? AND I GO TO AFRICA SEVERAL TIMES A YEAR. CHINESE GENERALLY SPEAKING ON THAT CONTINENT PROVIDE THE POWER PLANTS. THEY BUILD THE AIRPORTS. THEY PROVIDE THE CELLULAR NETWORKS. WHEN YOU TURN ON YOUR PHONE AND TURN ON THE LIGHTS AND GO ANYWHERE BY PLAYING AND IT IS ALL PROVIDED FOR BY THE CHINESE, YOU TELL ME WHO’S ORBIT THAT COUNTRY IS IN. AND THE UNITED STATES USED TO CONTROL — GENERAL ELECTRIC WAS AN INCREDIBLE SOURCE OF INDUSTRIAL MIGHT AS WELL AS POLICY MIGHT BECAUSE IT USED TO BE COMPANIES LIKE GENERAL ELECTRIC THAT REALLY PROJECTED AMERICAN POWER AROUND THE WORLD. AND I WOULD REALLY LIKE TO SEE THE UNITED STATES BE IN A POSITION TO REASSERT THAT FORM OF INTERCONNECTEDNESS, NOT JUST THROUGH FOREIGN POLICY, BUT THROUGH INDUSTRIAL CONNECTIVITY. AND UNFORTUNATELY, AND YOU KNOW THE HISTORY OF TARIFFS, IS THAT COMPANIES TEND TO RIP — TEND TO RETREAT BACK TO THEIR DOMESTIC MARKET. WHERE THEY CAN PROVIDE AN INFERIOR PRODUCT AT A HIGHER PRICE POINT TO A DISILLUSIONED CONSUMER AND THEY OFTEN BECOME UNCOMPETITIVE ON THE WORLD STAGE. SO IRONICALLY THE ADMINISTRATION’S PUSH TOWARDS HIGHER TARIFFS COME IF WE JUST LOOK AT THE HISTORY OF THIS AROUND THE WORLD, IT IS USUALLY A STORY OF RETRENCHMENT WHERE RETRACEMENT FROM YOUR GLOBAL POSITION TO A MORE LOCAL POSSESSION. THAT IS THE WRONG DIRECTION TO TRAVEL FOR THE UNITED STATES OF AMERICA. > > DO YOU TELL THIS TO THE TRUMP ADMINISTRATION? KEN: I HAVE A TEAM OF PEOPLE IN CONSTANT DIALOGUE WITH MEMBERS OF THE ADMINISTRATION, THE HOUSE AND SENATE AND WE HAVE BEEN VOCAL ON THIS OVER THE LAST FEW MONTHS. FROM MY PERSPECTIVE, THE RIGHT ECONOMIC POLICIES, THE RIGHT POLICIES ON IMMIGRATION, THE RIGHT POLICIES ON EDUCATION, THE RIGHT POLICIES ON CULTURE, THEY HAVE A PROFOUNDLY POSITIVE IMPACT ON THE UNITED STATES FOR DECADES TO COME. AND WITH ONE PARTY IN CONTROL WHICH IS RELATIVELY RARE IN AMERICAN HISTORY, YOU DO HAVE A TWO-YEAR WINDOW TO EFFECTUATE THOSE CHANGES AND TO HELP THE PRESIDENT REALIZE HIS DREAM OF MAKING AMERICA GREAT AGAIN. I DO BELIEVE HIS ACTIONS AND CHOICES COME FROM A GOOD PLACE BUT I DO WISH HE HAD BETTER ADVISORS THAT WERE BETTER GROUNDED IN ECONOMIC THEORY IN PARTICULAR TO LEAD THE COUNTRY TO A MORE PROSPEROUS FUTURE. > > THERE HAS BEEN A LOT OF TALK ABOUT FED INDEPENDENCE. HOW SHOULD WE VIEW THAT? IS IT NOISE OR IS THERE A REAL DANGER? KEN: IT IS A VERY — LET ME GIVE YOU — WHY DOES THE INDEPENDENCE MATTER? FROM TIME TO TIME THE FED HAS TO MAKE CHOICES THAT ARE REALLY POLITICALLY UNPOPULAR. BUT IS WHY YOU WANT FED INDEPENDENCE. YOU WANT THE FED TO BE INDEPENDENT SO WHEN YOU HAVE TO RAISE RATES TO BREAK THE BACK OF INFLATION, IT IS GOING TO HAPPEN. IF THE FED IS VIEWED AS POLITICALLY CAPTIVE, WHICH POLITICIAN DO YOU THINK ON EITHER SIDE OF THE AISLE IS GOING TO ARGUE TO RAISE RATES AND TO SLOW THE ECONOMY DOWN AND CAUSE MILLIONS OF PEOPLE TO LOSE THEIR JOBS? CAN YOU NAME A POLITICIAN THAT WOULD DO THAT? > > POLITICAL SUICIDE. KEN: RIGHT. AND IF YOU ARE UNWILLING TO BREAK THE BACK OF INFLATION YOU RUN THE RISK OF RUNAWAY INFLATION. AND IN PARTICULAR IN A PROFOUND WAY YOU HURT THOSE AMERICANS WHO ARE MOST VULNERABLE PARTICULARLY THE RETIREES AND NEAR RETIREES WHO NO LONGER HAVE THE FLEXIBILITY IN EITHER THEIR CAREER OR INVESTMENT PORTFOLIOS TO WITHSTAND THE DAMAGE THAT INFLATION YIELDS. SO I THINK THIS IS A HUGE STRATEGIC MISTAKE BY THE ADMINISTRATION BECAUSE IF INFLATION DOESN’T REAR ITS UGLY HEAD, THEY WANT SOMEONE TO BE ANGRY WITH LIKE THE REST OF THE AMERICAN PEOPLE. AND WHOEVER’S POLICY SUCCESSOR WILL BEAR THE BRUNT AS PAUL VOLCKER DID YEARS AGO IN MAKING THAT REALLY TOUGH CALL TO RAISE RATES IN A WAY THAT IS PAINFUL TO THE AMERICAN FAMILIES IN THE SHORT RUN BUT NECESSARY TO PROTECT THE INTERESTS OF OUR COUNTRY HOLISTICALLY. > > THE MARKET HAS LARGELY LOOKED THROUGH IT. KEN: YOU CANNOT UNDERESTIMATE — WE ARE DEEP IN A BULL MARKET. AND THERE IS A LOT OF FOAMO. AND I JUST THINK TO STOCK EVERYTHING UP TO THE MARKET LOOKS PAST — THE MARKET LOOKS PAST — THE CRASH OF 1987, AND I’M NOT SAYING IT WILL HAPPEN TOMORROW — THE BIG NEWS STORY ON THE DAY OF THE CRASH IN 1987 WAS ANSWERING THE DIAGNOSIS OF BREAST CANCER AND THERE WAS AN ATTACK BY SOME INCONSEQUENTIAL IRANIAN ORDER IRAQI BOAT ON AN AMERICAN VESSEL. AND THE MARKET LOST ALMOST A QUARTER OF ITS VALUE THAT DAY. IN A DAY. THE MARKET LOST ALMOST A QUARTER OF ITS VALUE. I SORT OF THINK, TO SORT OF SAY THAT THE MARKET LOOKS PAST ALL OF THIS MISSES THE FACT THAT WHEN THE MARKET CHOOSES TO CHANGE ITS MIND, THE CORRECTION CAN BE EXTRAORDINARILY QUICK AND EXTRAORDINARILY PAINFUL. > > DOES IT NEED A CATALYST TO CHANGE DIRECTION? KEN: IN 1980 SEVEN, WE DID NOT HAVE A CATALYST. IN 2008 YOU HAD THE CONTINUED EROSION OF THE CAPITAL BASE OF THE BANKING SYSTEM DUE TO THE HOUSING MARKET TURMOIL BUT EVEN THE MASSIVE FINANCIAL LOSSES IN 2008 IN THE SCHEME OF LIFE HAD VERY LITTLE FOREWARNING. I THINK IT IS VERY IMPORTANT THAT WHEN YOU WERE IN THE MONEY MANAGEMENT BUSINESS TO PUT YOUR RISK MANAGER HAT ON AND KEEP IN MIND THAT NO MATTER HOW EXUBERANT THE MARKET MAY BE AT ANY MOMENT IN TIME, WHEN YOU ARE LATE IN THE CYCLE, THE CYCLE CAN SHIFT IN THE BLINK OF AN EYE. > > BUT FOR THE MOMENT IT IS AI VALUATIONS THAT ARE PROPPING EVERYTHING UP. KEN: AI IS HAVING A MOMENT IN THE SUN TODAY. AND THE AI COMMUNITY IS GOING TO HAVE TO DEMONSTRATE ITS ABILITY TO DELIVER LITERALLY TRILLIONS OF DOLLARS OF VALUE. I, AS AN AMERICAN, HOPE THAT IT COMES TO PASS BUT THERE ARE REASONS WE SHOULD ALL BE JUST A BIT CONCERNED ABOUT THE SPEED WITH WHICH THIS CHANGE WILL HAPPEN. HERE IS A SIMPLE FRAMEWORK. WHEN THEY INVENTED THE PERSONAL COMPUTER, OK, DID WE THINK THE WORLD WAS GOING TO CHANGE IN A PROFOUND WAY? OF COURSE WE DID. BUT IT HAS TAKEN 50 YEARS TO PLAY OUT. AND WE ARE STILL VERY MUCH IN THE MIDDLE OF THE JOURNEY. AI TODAY, LARGE LANGUAGE MODELS IN PARTICULAR HAS BEEN IN EXISTENCE FOR A FEW YEARS. I THINK THERE IS A REAL CHANCE THAT WHEN WE THINK ABOUT THE — ROMAINE: AND YOU ARE WATCHING KEN GRIFFIN SPEAKING TO FRANCINE LACQUA OUT. YOU CAN CONTINUE WATCHING THAT CONVERSATION BY TYPING LIVE GO ON YOUR TERMINAL. A WIDE-RANGING DISCUSSION WITH KEN GRIFFIN TALKING ABOUT GOLD BEING A SAFE HAVEN ASSET. AND HIS COMMENTS ABOUT THE PHYSICAL — THE FISCAL PATHS NOT BEING ON THE RIGHT TRAJECTORY SAYING IF WE ARE NOT PUTTING OURSELVES ON A BETTER FISCAL PATHS IN GOOD TIMES, WHAT WILL IT BE LIKE IN BAD TIMES? KATIE: AND SAYING THAT GOLD HAS TAKEN ON THE ROLE AT THE EXPENSE OF THE U.S. DOLLAR, SOMETHING HE IS CONCERNED ABOUT. A WIDE-RANGING INTERVIEW. ROMAINE: AND KEEPING AN EYE ON TRILOGY METALS WITH THE GOVERNMENT TAKING A STAKE. «BALANCE OF POWER» IS NEXT. STICK AROUND FOR «BALANCE OF

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