Inflation Data and Market Bullishness

Summary

Bloomberg Surveillance Podcast – Episode Summary

Episode: Inflation Data and Market Bullishness
Date: June 11, 2026
Hosts: Tom Keene, Jonathan Ferro, Lisa Abramowicz, Annmarie Hordern
Notable Guests: Jay Hatfield (Infrastructure Capital Advisors), Ian Steely (J.P. Morgan), Bailey Lipschultz (Bloomberg News), Julia Wilson (KPMG)

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Episode Overview

This episode of Bloomberg Surveillance focuses on the evolving economic and financial landscape in the wake of persistent inflation, ongoing geopolitical strife, market bullishness, and the upcoming landmark SpaceX IPO. The hosts and guests dive deep into inflation data, equity market valuations, fixed income flows, consumer resilience, and the impact of AI, providing sharp analysis through the lens of recent market trends.

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Key Discussion Points & Segments

1. Inflation, War & Market Valuations with Jay Hatfield (01:44–07:41)

• Gulf of Hormuz & Geopolitical Risks:
  Jay Hatfield offers a contrarian view on the ongoing tension around the Gulf, arguing that further escalation (rather than resolution) is more likely—and that such aggressive moves may, somewhat counterintuitively, support bullish sentiment in markets.

• S&P 500 Projections
  Hatfield maintains a non-consensus bullish target of 9,000 on the S&P 500, resting his argument on surging earnings expectations and a so-called "earnings bubble":

  • “We’re in an earnings bubble… earnings are going up every day. They’re up 12% since we started our 8,000 target.” (Jay Hatfield, 02:38–03:08)
  • He calculates the S&P target using a 23x multiple on forecast 2027 earnings, but notes this hinges on lower interest rates and an end to the war.

• Defining the Earnings Bubble:

  • Hatfield clarifies that the “bubble” is driven by earnings rising so rapidly that analysts can’t keep up—not by unjustified or reckless profit projections.

• GDP vs Earnings Growth:

  • “You don’t need super strong GDP to get earnings growth… Most analysts are too negative about earnings.” (Jay Hatfield, 03:52–04:12)

• Inflation Data and the Role of Fed

  • Hatfield points out that key inflation leading indicators—money supply and oil prices—signal ongoing inflation pressures.
  • Criticizes current inflation metrics: “PCE is a horrible, horrible measure… Shelter is just ridiculous. It should not exist. It's six months delayed on purpose.” (Jay Hatfield, 04:49–05:52)
  • Stresses faith in Fed Chair’s adaptability and suggests three rate cuts could follow a resolution of war tensions.

• IPO Market and Tesla Comparisons

  • Hatfield draws parallels between “Musk acolytes” and Tesla’s previous run-ups, cautioning that high valuations may still attract momentum:
    • “If you look at Tesla, it’s about 300% overvalued in our models. And this [IPO] is only about 50% overvalued. So it could double or triple.” (Jay Hatfield, 06:58–07:19)

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2. Fixed Income, Credit Markets & Global Outlook with Ian Steely (10:20–18:52)

• Bond Market Behavior

  • Ian Steely expresses surprise at fixed income’s resilience despite immense rate volatility and oil price shocks:
    • “Actually I think the market’s very well behaved… the impact hasn’t been as dramatic as maybe was feared.” (Ian Steely, 10:44–11:31)

• Credit Risk Appetite

  • Corporate fundamentals are holding up well globally; Steely isn’t worried about spread blowouts unless a recession emerges.
  • “Corporate America and actually corporates around the world are in a pretty good spot… I don’t see a real risk of a big widening there unless you’re talking recession.” (Ian Steely, 11:38–12:13)

• Fed Rate Cut Prospects

  • The panel agrees that while rate cut pressure endures, US data do not yet support easing.

• Demand for Bonds & Cash Flows

  • Enormous demand persists for fixed income, fueled by cash-rich investors seeking yield over money market funds.

• Europe & Asia vs. US Market Calls

  • In Europe, while there were front-end shocks, Steely calls for caution about aggressive rate hike bets, noting economic fundamentals lag the US.
  • Asia and EM: Steely singles out Latam (Brazil, Mexico) for higher, more compelling real yields.

• UK Gilt Market Amid Politics

  • UK government bonds (“gilts”) are attractive but subject to political risk as fiscal rules and debt trajectories dominate investor focus.

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3. SpaceX IPO & Big Tech Listings with Bailey Lipschultz (21:58–28:16)

• IPO Landscape and Profit Profiles

  • Bailey Lipschultz contextualizes the SpaceX IPO alongside other equity events:
    • “Anthropic’s obviously much younger than SpaceX… But this is the moment we’ve been waiting for.” (Bailey Lipschultz, 22:30–22:49)
  • On profitability: SpaceX has been profitable pre-XAI merger, while Anthropic is profitable on a run-rate basis; OpenAI remains a longer-term play.

• SpaceX IPO Mechanics & Expectations

  • The IPO is structured in a private-placing style—“We’re raising money, we’re raising $75 billion. Are you in, are you out?” (Bailey Lipschultz, 23:45–24:09)
  • Strategic/Institutional Interest: Potential exists for tech companies or partners to take stake, similar to Nvidia’s involvement in past deals.
  • “If you got allocated in Australia or Japan, unless you pull an all-nighter, this doesn’t really impact you until Monday.” (Bailey Lipschultz, 26:49–27:25)

• IPO Aftermath & Index Inclusion

  • Unique lock-up structure steps in post-earnings, gradually increasing the float and smoothing index inclusions (especially into the NASDAQ 100).

• Elon Musk, Skeptics & Valuations

  • On reactions from notable short-sellers: “He [Musk] would probably point at Tesla and say look what I’ve done with Tesla.” (Bailey Lipschultz, 27:43)
  • “Tesla is a company that has been valued at north of $1.5 trillion on the expectation that robo taxis and robots are something we all live with in the next five years. It’s not a car company.” (Bailey Lipschultz, 27:47–28:11)

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4. Consumer Resilience, Beauty, & Retail Strategy with Julia Wilson (31:14–38:06)

• Beauty Market Explosion

  • Ubiquity of self-care spending: “You can never underestimate the American consumer when it comes to spending—and skin care.” (Julia Wilson, 31:40–31:49)
  • Beauty and wellness products expand across demographics, including men.

• Summer Travel & Consumer Strength

  • Despite higher fuel and airfare prices, “the consumer is still out there spending… about to host a really big party.” (Julia Wilson, 32:38–32:58)
  • Supported by job growth in hospitality and related sectors.

• K-shaped Spending & ‘Wellnification’

  • High-end consumers continue to splurge on “wellness” and “luxury beauty” as a form of self-expression; middle/low-income consumers trade down selectively.

• Strategic Corporate Priorities

  • Companies remain focused on:

    1. Portfolio simplification
    2. Organization design (esp. around AI adoption)
    3. Persistent cost control amid higher input prices

  • AI’s evolving impact is a central talking point at board and C-suite levels, with most companies still learning but beginning to see substantial productivity gains.

• Industry M&A and Brand Strategy

  • Boards are pushing for scale and operational efficiency, particularly in apparel and luxury—expect more M&A and brand roll-ups.

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Memorable Quotes

• “We’re in an earnings bubble… earnings are going up every day. They’re up 12% since we started our 8,000 target.”
  — Jay Hatfield (02:38–03:08)

• “You don’t need super strong GDP to get earnings growth… Most analysts are too negative about earnings.”
  — Jay Hatfield (03:52–04:12)

• “PCE is a horrible, horrible measure [of inflation]. Shelter is just ridiculous. It should not exist. It's six months delayed on purpose.”
  — Jay Hatfield (04:49–05:52)

• “Corporate America and actually corporates around the world are in a pretty good spot… I don’t see a real risk of a big widening there unless you’re talking recession.”
  — Ian Steely (11:38–12:13)

• “Anthropic’s obviously much younger than SpaceX… But this is the moment we’ve been waiting for.”
  — Bailey Lipschultz (22:30–22:49)

• “Tesla is a company that has been valued at north of $1.5 trillion on the expectation that robo taxis and robots are something we all live with in the next five years. It’s not a car company.”
  — Bailey Lipschultz (27:47–28:11)

• “You can never underestimate the American consumer when it comes to spending—and skin care.”
  — Julia Wilson (31:40–31:49)

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Segment Timestamps

• Geopolitics, Earnings, and Inflation: 01:44–07:41
• Fixed Income & Global Markets: 10:20–18:52
• SpaceX, IPOs & Tech Market Dynamics: 21:58–28:16
• Consumer, Retail and AI Trends: 31:14–38:06

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Summary

This episode delivers a multidimensional analysis of market optimism against a backdrop of persistent inflation, global political drama, shifts in bond and credit markets, exuberance for mega-IPOs, and unyielding consumer strength. The optimistic bullishness of guests like Jay Hatfield contrasts with a tone of critical realism—a blend that captures both Wall Street’s momentum and Main Street’s pragmatism. The growing role of AI and shifting consumer trends round out a comprehensive snapshot of the current financial landscape.

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For full interviews, actionable market calls, and more, tune in to the Bloomberg Surveillance Podcast weekday mornings.

Transcript

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[Tom Keene]

Jay Hatfield joins us to get us to PPI here in a moment. I mean you're making a moment to moment in your note. You have an optimistic tone on the opening of the Gulf of Hormuz. You're beholden to whatever the headlines are like everyone else.

[Jay Hatfield]

Well, we've had a non consensus view that the Iranians would not come to the table. Just using common sense. I didn't study Iranian studies and at Wharton, but they've been warring with the US for 47 years. So why all of a sudden after we killed their top leaders, are they going to capitulate? So we actually view this more aggressive move as bullish. We think this trade is going to have to be reopened by force and it's going to require boots on the ground.

[CBOE Announcer]

Wow.

[Jonathan Ferro]

Okay, maybe we're moving there today. You've also got a 9,000 target on the S&P 500. That's non consensus. How do you get there?

[Jay Hatfield]

Well, this is not an Internet style. You know. AOL Time Warner is worth $2,000. All we did is just mark our original Forecast to market. So we're in an earnings bubble. And in fact, you have to be on aspects, go, index, go every day because the 27 earnings are going up every day. So they're up 12% since we started our 8,000. So we're using 23 times 27 to get to 23. You need lower rates, you see, need the war to end.

[Tom Keene]

And the interpolation that pokes the Dow, which I just did, is now 61,000, which is not in anybody's framework. When you say earnings bubble, define what that bubble is. Is it not legitimate that the earnings will be there in 18 months?

[Jay Hatfield]

No, it's just rising so fast you can't keep track of.

[Tom Keene]

It's a bubble that it's just moving. But it could be moving constructively with free cash flow development.

[Jay Hatfield]

Absolutely. And we're 100% earnings driven, so that's why we're bullish on the market.

[Tom Keene]

I got to time this to get to the ppi, but this is critical, J, with your wonderful foundational economics. The heart and soul of this is, for whatever reason, a buoyant nominal GDP which starts with okay revenues at least, right?

[Jay Hatfield]

Absolutely. Although it's important to note that you don't need super strong GDP to get earnings growth. Earnings growth comes from retained earnings and strong return on invested capital. So most analysts are too negative about earnings. They say, oh well, GDP is only 1%, so it doesn't really require a really robust economy.

[Tom Keene]

I can't spell it, but Paul Sweeney press it here, to say the least. We were talking about like, is this the inflation top 4.2%. Select people including Mike Reed, RBC, saying no. And there's PPI final demand year over year. 6.0, the next month survey, 6.4 and it came in at an enjoyable 6.5%. You know, I'm sorry, that's inflation. It may be only for one month, but there it is.

[Jonathan Ferro]

How do you view inflation here? Is it, you know, to use a word that people don't like anymore, transitory. Is there something more fundamental out there, do you think?

[Jay Hatfield]

Well, there's two critical leading indicators. Inflation, the money supply, which is negative. So we have a very, very tight Fed and oil prices, which are horrendously higher. So not surprisingly, it's bleeding through already. The ppi, it has not bled through to PC Core yet, only in airline fares, which is the most obvious. But usually it bleeds through to everything. But surprisingly, PC Core was really tame because you are seeing some pandemic inflation come out, like insurance. So we're still bullish. We're going to get three cuts that as soon as the war ends, PC should go close to target. And if also we have a competent Fed chair now and he does adjust, he doesn't use our numbers. I guess he's not aware of him. But he does trim mean into other adjustments because if you really look into the hood, PCE is a horrible, horrible measure. They don't use market rates. They impute a lot of rates. Shelter is just ridiculous. It should not exist. It's six months delayed on purpose. Terrible measure of. Of inflation.

[Tom Keene]

Jay's laughing at me. You can't see this, folks. On radio and YouTube. You can see that Alanis Morris said irony in his voice there. I mean, come on. Clevel. The University of Michigan in Kansas City revolutionized how we measure inflation. And there's a select group out there stuck in a time long ago and far away. That's all there is to it.

[Jay Hatfield]

Absolutely. It's a complete horrible thing that caused our Fed to completely miss the inflation of 21.

[Tom Keene]

I mean, Paul, I can't tell you the revolution that was called Cleveland cpi. And there's gone to many other improvements. A guy named Matt Shapiro at Michigan that Claudia Sahm studied. Yeah, among others.

[Jonathan Ferro]

What do you make of a $75 billion IPO?

[Tom Keene]

Thank you.

[Jay Hatfield]

Well, we'll see. I think there's.

[Tom Keene]

Did you get your allocation?

[Jay Hatfield]

We didn't indicate because we don't pay a lot of commissions. So we get a lot when the deal does poorly and get none when it does well.

[Tom Keene]

So you got to play commission, folks. That's the single smartest.

[Jay Hatfield]

So I think there's three people in the world. You know, they all work in equity capital markets at Goldman Sachs, but our guess is there's more than 75 billion of Musk acolytes. And if you look at Tesla, it's about 300% overvalued in our models. And this is only about 50% overvalued. So it could double or triple and have that musk premium out there.

[Tom Keene]

Unfortunately, j have to go to break. We got to get you back in here just to talk about what you two know far better than me, which is the body language of a transaction in. Paul, it's about future business, isn't it?

[Jonathan Ferro]

Yeah. Oh, yeah. And it's paying. You know, Jay doesn't pay commissions. He's not getting the love here. He's a buy and hold.

[Tom Keene]

The loveless. Jay Hatfield makes us smarter of inflation. Stay with us. More from Bloomberg surveillance coming up after this.

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[Jonathan Ferro]

IBM Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend, small cap stocks with improving operating margins, or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on Public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by

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[Tom Keene]

Ian Steely thrilled that he could join us here. International had fixed income. Thank you so much for joining us this morning. The news flow is just nuts. I was actually almost shaking yesterday coming out of the the studio. How do you do a mid year review given this madness?

[Ian Steely]

With difficulty. Look there's huge amounts going on and actually I think the market's very well behaved. So if you look at everything that it's been thrown at it, whether it's the oil price moves, whether it's now the expectation of central banks possibly hiking rates obviously ECB is going to start that process today. Market's very well behaved and even though we've seen yields move significantly higher on kind of core fixed income you're talking 35 basis points or so on a 10 year Treasury I look at a US AG today it's flat and that benefit of having that yield that carry steep yield curves or upward sloping yield curves, maybe not that steep. It's all beneficial. So actually the actual overall impact of the market hasn't been as dramatic as maybe was feared come 1st of March when this all kicked off.

[Jonathan Ferro]

How much credit risk are you taking out there in the marketplace? Well you can sit there in a U.S. treasury and get paid a very nice coupon these days you can do

[Ian Steely]

but you can get an even nicer coupon in credit. I think what we've learned over Q1 is that corporates are in pretty good health. Corporate fundamentals look great. Everything that when I talk to all of our credit analysts I hear is that corporate America and actually corporates around the world are in a pretty good spot. So yes I fully understand that spreads are tight and everyone's looking at that but I don't see a real risk of a big widening there unless you're talking recession. And again that feels a long way off even with with oil doing what what oil has been doing.

[Jonathan Ferro]

The Federal Reserve we're going to hear from them next week. I mean presumably this our US Federal Reserve chair has some pressure to cut rates but the data is just not there, is it?

[Ian Steely]

No, definitely not. So I think you know, you saw the move start at the last meeting they're going to be have more of a neutral bias. I think the labor market is obviously in a better position. I was go back and look at where we were in February. The three month run rate for non farm jobs was actually marginally negative. We're now 188,000 and again if you look at the sort of the mosaic of labor data not everything's pointing flashing green. If you look at the unemployment rate obviously that's stable. If you look at wage growth that's not re accelerating some of the small business surveys tensions to higher aren't looking great but there's there's no question that we've seen a bit of a, looks like we've seen a bit of a pickup. So for me, you know, from a credibility standpoint, I think we've got to

[Tom Keene]

be neutral in steel with this international head of fixed income at J.P. morgan. This morning you go into endless meetings. Is there an appetite for bonds with all this issuance, a tech thing and you know, space X and all that. But is there just, is there just still in a wall of international money looking for a warm spot and Bill's notes and bonds?

[Ian Steely]

I think there is. You just need to look at the huge amounts of supply that we've had in the US corporate market this year. It's all been very well. I mean Kelsey Barrow has aged, Kelsey Barry never ages. No, but you just look at it and we see it from our client base. Everyone wants to, to own the fixed income market with yields where they are. Everyone's sitting on too much cash at the moment and we're seeing that flow come in. And I think the market as a whole, when I look at the demand for, for the issuance within the corporate space, the concessions are small, the demand, the over subscriptions are elevated. There's phenomenal demand for bonds out there.

[Tom Keene]

All this to me is just a huge deal is, you know, Scarlet fu is talking 8 trillion in money market funds.

[Jonathan Ferro]

Yep, yep.

[Tom Keene]

And the question to me is like, okay, do they go to a cash equivalent? And the answer is no. They're looking at the Sweeney 2. Yields are out there.

[Jonathan Ferro]

Yeah. 2% yield, 4.12% Europe. What's the fixed income call in Europe these days?

[Ian Steely]

So we've had a big shift in market expectations in Europe. The US is actually catching up a little bit now but obviously the sort of the highlight of where the problem was was Europe. Uk massive repricing in the front ends very early on in the conflict. I think there's some value to be had there. I think the ECB obviously they're going to hike rates today. I'm not sure they're going to be able to hike rates three times over the next year or so. And I think I talked to the bank of England, they're not that keen on hiking hiking rates. They see this more, you know. Yes, it's a near term inflation shock but it's a tax and in economies that aren't particularly strong at the moment, they haven't got all the good stuff you've got over here when you AI tech the what's really driving, driving the economy. So for me, yes the market's repriced, but I think there's a bit of an opportunity there.

[Tom Keene]

Harry Maguire, are you kidding me? Did he just lose out on the England team because of his age? Is it just that simple?

[Ian Steely]

I think he should be there.

[Tom Keene]

He should.

[Ian Steely]

He's done enough.

[Tom Keene]

His mother's absolutely disgusted.

[Jonathan Ferro]

Is that right?

[Tom Keene]

He's like. Paul's like religion over there. Right?

[Jonathan Ferro]

I know, I know.

[Tom Keene]

I mean, a lot of people were left off the team. I mean, there's a real shock in England, isn't there?

[Ian Steely]

There has been. I think ultimately you've got a manager that wants the team as a whole to do well rather than individual players. So let's see if that works out.

[Jonathan Ferro]

So what is the expectation in England for your team this year?

[Ian Steely]

I think it's difficult to look away from France, in all honesty, but it's got to hurt. You guys, look, we've got a very good team on that day. I think they can probably be anyone. So pretty excited about it.

[Jonathan Ferro]

I don't even know what the feeling is for the US team. Like, are we.

[Tom Keene]

We're getting there.

[Jonathan Ferro]

What are the expectations?

[Tom Keene]

We're doing three teams a day. Okay. By Christmas, okay. We'll be talking. It's turned into an. Are you really just. Are you over here just to see the World Cup? Is that, you know. Did you ring a deal here with Mary Erdos or something? Here to.

[Ian Steely]

I'm flying home this evening. Unfortunately, our first games not till next week, so that's not the case.

[Tom Keene]

Get one more in here.

[Jonathan Ferro]

So what are we doing here outside of the us, Outside of Europe? Talk to us about Asia. What's the call there, from your perspective? Because, I mean, we hear a lot of concern about energy for that part of the world, given what's going on.

[Ian Steely]

Yeah. And I think if you think maybe Europe's in the spotlight, Asia is probably even more so in the spotlight from an energy standpoint. And actually what you had there was very low yields to start with. Now the central banks have tried to sort of maybe avoid, you know, having to move and they're now playing a bit of catch up. If you look at what's happened in sort of Indonesia, although there's. There's other kind of political ramifications that are going on there. So I do think that's a more challenging environment for us though. When I look across other parts of emerging markets, if I look at sort of Latam and the Brazils and the Mexico as well, that's where we. That's where we see the opportunity to get much more attractive nominal yields, much more attractive real yields than you can get over in Asia within the politics

[Tom Keene]

of the United Kingdom. I haven't talked to Francine Lacroix in a week. So and not up to speed on this but we have a headline here across the Bloomberg out of Queen Victoria street in London that Secretary Healey has resigned from the Starmer government. The Defense Secretary here, I don't want you to do the International Relations Act. It's not appropriate with compliance. But what is the state of guilt? Does JP Morgan look at the trauma of UK politics and say UK full faith and credit paper is an opportunity here?

[Ian Steely]

I think there is an opportunity within in the gilt market ultimately there is definitely political questions coming up. We're obviously got the by election and ultimately that's probably going to lead to, you know, a possible shift in, in leadership and the market's very focused on what that would mean for the gilt market. Ultimately we're an economy at the moment that has a lot of debt and how will the fiscal rules be adhered to? Adhered to. But I think what we've heard is that there's not much wiggle room. You know, the UK government is going to have to sort of, you know, fall in line with what the market is, is after. You know, gilts do look attractive relative to other core fixed income markets around the world. But there's going to be some volatility as we go through these political headlines.

[Tom Keene]

Your first three games are Croatia, Ghana and Panama.

[Jonathan Ferro]

That's not easy.

[Tom Keene]

Who made the schedule of the King?

[Ian Steely]

Croatia could be a tough game. An interesting opener.

[Tom Keene]

Yeah, I agree.

[Jonathan Ferro]

I'm watching. I think it's going to be good here. I think

[Tom Keene]

no idea the level of dumbness here. Yeah, I mean, Chris, I'm a, I'm a Tots fan. That shows you how dumb dumb I am. Ian Steely, thank you so much, J.P. morgan. Stay with us. More from Bloomberg Surveillance coming up after this.

[Jonathan Ferro]

Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend small cap stocks with improving operating margins or the s and P500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on Public. You just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market and paid for by

[Public.com Announcer]

Public Holdings Brokerage Services by Public Investing member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete [e-mail] Disclosures Game Night Rush

[Jonathan Ferro]

or Any night of the week really Genius keeps every order moving from online ordering to your kitchen to the front counter. Big league reliability for any business. That's genius.

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You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Tom Keene]

This is my conversation of the day. No question about a Bailey Lipschelz. This senior reporter of Bloomberg News barely describes his competency on the IPO dynamics going on right now. In your wonderful story this morning, there's a single sentence and on the back of it you link open a I and anthropic in the Wall Street Journal bombshell on pricing of tokens and you bring that over to rocket ships and Elon Musk. How in God's name do you do that?

[Bailey Lipschultz]

Working hard and a lot of coffee, I guess. But I mean, Tom, this is something we've been waiting for. Everyone's been waiting for any of these companies to go public. Anthropics obviously much younger than SpaceX which is more than two decades old. But this is the moment we've been waiting for and we're going to see how this actually shakes out today, tomorrow and through the next few weeks.

[Tom Keene]

The common theme is nobody's making Magna Decide. LSE's keyword Profit. Where on the X axis is profit

[Bailey Lipschultz]

for the companies, for all of them? Well, so SpaceX before it merged with Xai, Elon Musk, kind of X Twitter Grok component the company was quite profitable. They dominate launch. They essentially have a space monopoly now. Analysts aren't expecting free cash flow positivity for a number of years. Anthropic on their latest run rate, Bloomberg reported that they actually are profitable on a monthly basis. What does that mean for an annual basis? TBD and I think OpenAI, depending who you talk to, is a much more long term thesis for that company to really turn profitable.

[Jonathan Ferro]

SpaceX, we have a fixed price for the IPO was 135. What's, what's the thought here? Are we going to price at that number? Below it, above it?

[Bailey Lipschultz]

Our here, our expectation is this price is sticking to it, the size is sticking to it. Elon Musk and The team at SpaceX came out and treated it kind of like a private fundraising round and said we're raising Money, we're raising 75 billion. Are you in, are you out? 1.77 trillion. Show us what you want. And that's the expectation. So it's going to be an interesting dynamic how they allocate the shares later today and then what we see with trading tomorrow.

[Jonathan Ferro]

Do we think we're going to have any surprising investors? Whether it's a technology company, a list private equity firm, or is it just going to be a run of the mill institutional IPO with some retail components?

[Bailey Lipschultz]

I think there's a lot of interest if there is a strategic component. Just given the announcements we've seen between the company and Anthropic, what's the strategic component?

[Jonathan Ferro]

Companies, a Google for example, might step in and buy something here at the ipo. Yeah, yeah, yeah, we saw that.

[Bailey Lipschultz]

We saw that with Core Weave. Core Weaves IPO really only happened because Nvidia showed up in huge size and was able to get that deal done because they're such a close partner. So that's just another dynamic to track.

[Jonathan Ferro]

Now you've got a report out here Today, some reporting. SpaceX tells investors it has lined up blue chip credit ratings. Are they going to come to the bond market after this ipo?

[Bailey Lipschultz]

That is the expectation. One of the things We've been hearing is that there's a view from SpaceX that this is the only equity financing they will do. Everything from now on will be day. So the expectation in these meetings is we've got IG rating from the three firms. We're going to tap the debt markets. We can do that. No one else can. From a, from an AI perspective, when you look at some of the sell side expectations, hundreds of billions of dollars have to come from somewhere. So seemingly the debt market.

[Tom Keene]

What does the selling start like? Toby Nangle and the FTSE and Isabel Lee for Bloomberg talked a lot about all the index dynamics and all that like restricted stock and other things maybe I understand in July, August, September. Are there people out there ready to sell who are insiders?

[Bailey Lipschultz]

So they have an interesting lockup structure. After their second quarter earnings, which realistically could come anytime in July, they'll have a chunk of shares available for sale from early investors. If the stock meets certain thresholds, that number gets even higher as the time rolls on over that 60, 80, 90 day period. They're going to continue to kind of increase that float incrementally to try to make it so. Some of these Dynamics with the NASDAQ 100 inclusion are less rocky just because we know money will BE flowing in 15 trading days from tomorrow from the NASDAQ 100 trying to match the buying and selling.

[Jonathan Ferro]

Does Elon have a lockup? I can't imagine him ever.

[Bailey Lipschultz]

He's locked up for over a year. But if you buy into the notion that SpaceX and Tesla are going to merge, he is super voting rights. So there would be no incentive for Elon Musk.

[Tom Keene]

If that's the vision to sell, totally unfair. And then there's no one listening. So it's okay. Bailey, what's going to happen when it trades tomorrow? What's your single guess understanding? You could well be wrong. But what's the Bailey Lipschelz guess on what the stock does?

[Bailey Lipschultz]

It goes up. Wall street needs this deal to work because of the companies that they want to and need to take public later this year. Wall street needs this deal to work because the company needs to raise a heck of a lot of money to build out space infrastructure to build out AI infrastructure. This is a deal that people need to make money on. People need to have trade. Well, day one, the interesting dynamic is this is a deal that was pitched globally. It's going to open call at 1 or 2 o' clock on a Friday. If you got allocated in Australia or Japan, you're not unless you Pull on an all nighter. This doesn't really impact you until Monday, so who knows what the weekend.

[Tom Keene]

I have Jim Chanos tomorrow and Bloomberg Money. I think of George Noble working with Peter lynch at Fidelity. They are to be polite, scathing. How would Mr. Musk respond to experienced intelligent people going, you got to be kidding me.

[Bailey Lipschultz]

They would. He would probably point at Tesla and say look what I've done with Tesla.

[Tom Keene]

Looked at the chart yesterday. The vector on Tesla's up.

[Bailey Lipschultz]

This is a company. Tesla is a company that has been valued at north of 1 1/2 trillion dollars on the expectation that robo taxis and robots are something we all live with in the next five years. It's not a car company. They're not selling cars.

[Tom Keene]

Bloomberg published yesterday that 59 robo taxis are in three cities.

[Jonathan Ferro]

That's it.

[Bailey Lipschultz]

Fundamentals don't align with this company and it hasn't with Tesla.

[Tom Keene]

We'll lend it right there.

[Jonathan Ferro]

We'll get more.

[Tom Keene]

Smartest thing I've heard in the entire thing. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Bloomberg Host]

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Tom Keene]

Julia Wilson joins us now. Principal consumer retail strategy and why in God's name is the four of the biggest thing going Part of your consumer act is beauty. We were talking to Alexis help here and I said at the dining room table, says Clarins. Still a big deal. And nobody knew what Clarence was. Your world of beauty, the money of lotion, it's nuts, right?

[Julia Wilson]

It's definitely nuts. It speaks to the summer of experience. And you can never underestimate the American consumer when it comes to to spending and skin care.

[Tom Keene]

Apparently 56 bottles tipper toed on the sink in the bathroom. How did we get there?

[Julia Wilson]

Well, you know, it's interesting. Who's buying it and who's actually building up that volume. It's not just the teen, you know, teenage, younger alpha generation females are buying it, but you're seeing it expand across all segments and demographics.

[Jonathan Ferro]

So you mean guys are buying it?

[Julia Wilson]

Guys are buying. If you look at their, their medicine cabinet, it's not the same soap for your hair anymore. Fragrances.

[Tom Keene]

I am so out of.

[Julia Wilson]

Oh, I have sons too, and I know, I know.

[Jonathan Ferro]

Yeah, we had like my when my sons were living at home, the ax was all over the place.

[Julia Wilson]

Remember ax?

[Jonathan Ferro]

Oh, they moved beyond axe. I know, I know.

[Jay Hatfield]

All right.

[Jonathan Ferro]

What are they, what are people doing this summer? Are people traveling this summer? I mean, I got gas at $4.30. I don't know. I got airline fares going higher. Are people traveling this summer?

[Julia Wilson]

You know, the, the US Consumer is very similar to the Knicks and they're very resilient. So, so there's definitely that disconnect that you see with some of the signals. There's a little bit softness in the belly, so to speak, of the US economy, but the consumer is still out there spending. The way that I think about it is we're about to host a really big party.

[Jonathan Ferro]

That's right.

[Julia Wilson]

And so far what you see, one of the things that I took away from the jobs report yesterday, earlier this week was that 70,000 of those jobs are actually related to the act of hotel tourism, et cetera. And so people have jobs, there's. They are spending on things that go along with hosting a party, which is putting on makeup, getting clothes. You think about the summer spending spree that we had in apparel was also pretty strong.

[Jonathan Ferro]

So I mean overall, the consumer, how do you see the K shaped economy from your work in terms of how people spend money? How do you guys at kpmg, how do you guys think about it?

[Julia Wilson]

Yeah. So the luxury consumer, if you think about what is luxury but some place to hold your dream, so to speak. I was with someone yesterday and they used that expression. So, you know, thinking about who do I want to be in the luxury beauty in particular is a form of self expression. They're still spending really big on that and they're spending in areas that you would see it more in the wellness. So wellnification of all the different categories. Wellnification, it's hard to, it doesn't come across your relationship.

[Tom Keene]

You gotta go to William and Mary

[Julia Wilson]

to be able to come up with these names. No, that actually came from when I was at the Beauty Independent. That was one of the terms that they came up with. But, but the US consumer, the luxury in particular is doing well and they're being really, they're still being choiceful about, you know, where do I want to spend, whether it's on neurotoxins or some of these really big ticket items that are almost experience based. But then on the case shape, there are people where, you know, you mentioned the gas prices. So the average consumer on average was spending about $200 on gas and they're spending about 230. So it is a much bigger portion of their budget, so to speak, and they are making those choices. You know, private label is always an area that if you have faith and conviction in that product and you believe in it, you're willing to trade down more easily. But it happens across the demographic segment. So as you think about, I might go for a more luxury lip gloss, but then I feel perfectly comfortable with the mass hair care. So you're making those choices in and out of consumer Segments.

[Tom Keene]

Julia Wilson with this principal consumer retail strategy. All the beauty stuff out there. Kpmg. So with kpmg, you go out and talk to companies. What makes them lean forward? What part of your act is where they really lean in and listen.

[Julia Wilson]

For us, we're seeing companies really focus. They're continuing to focus on the three things that they've been focused on over the past two years, which is really portfolio simplification. So as fewer things, fewer things and really focusing on what they do well. I see Org design really related to AI.

[Tom Keene]

Translate that.

[Julia Wilson]

If you think about AI is supposed to give companies this whole next level view of productivity. The way that you actually get that out is by redesigning your workforce. It doesn't always mean fewer bodies, it could mean reshaping, upskilling, et cetera. So thinking about what is the org that's really going to take me into the future so I don't fall behind is the second area. And then the last area that we're really seeing is still that core cost because of gas prices in particular and some of the other areas that are either direct inputs or indirect inputs into their supply chain. We're still seeing people cut those costs.

[Jonathan Ferro]

AI. So for your clients, I think we're all, and I think I speak for a lot of us, we're all just learning day by day what AI is, what it can do, how we should interact with it. Where do you think your companies are that you talk to at the board level, the C suite level? Where are they in kind of that whole AI thing?

[Julia Wilson]

I would say it's still a bell shaped curve. So there's some that are leading the pack. There's still a whole bunch that are figuring things out and trying to understand where it could be most impactful. And there's some that are laggards. Kpmg we had some of our leaders talking about the partnership that we did with Anthropic and you just see every next generation that we have is so much smarter. When I started using it, I thought you are a very hardworking but not the brightest analyst. And you know, my team, when I think about what I was using even six months ago, when you start to see what you're doing now, the capability is amazing. And you, you really think about that. The shape, the size and scope and shape of your organization, totally different.

[Jonathan Ferro]

Yeah.

[Tom Keene]

One final question here. I saw that Mike Ashley is going to buy the rest of Hugo Boss. Are we going to see a big industry roll up? I mean, is the bottom line is after Covid, the luxury trauma, blah blah blah that we're just going to see one ginormous roll up.

[Julia Wilson]

Well, I think boards are pushing companies to think bigger, so we're seeing that across the board, but in particular in apparel. When you think about brands and what can I do to give those brands the operational leverage to be affordable in the market, sometimes bigger is better. So you're going to see where the brand needs to lean in and have their own direct supply chain where they need to tell their story slightly differently. They're going to keep that separate. But when you're going to think about what is it that I could, you know, band together, you know, paperboard, some of that secondary and tertiary packaging, those types of areas, you're going to see companies come together to get that.

[Tom Keene]

Julia thank you. Julia Wilson, kpmg. Just love having her get a huge turnout here to some of the things that we're pouring money into each and every day.

[Bloomberg Host]

This is the Bloom Bloomberg Surveillance Podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 7 to 10am Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business App. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.

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