May CPI and Major IPOs

Summary

Bloomberg Surveillance: May CPI and Major IPOs

Date: June 10, 2026
Hosts: Tom Keene, Paul Sweeney
Key Guests: Laurie Calvasina (RBC Capital Markets), Jeff Given (Manulife), Ira Jersey (Bloomberg Intelligence), Edward Ludlow (Technology), Odetta Cushy (First American)

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Episode Overview

This episode dives deep into crucial economic drivers for markets: the latest US Consumer Price Index (CPI) release, persistent inflation concerns, Fed policy implications, the landscape for major IPOs (especially SpaceX's anticipated debut), and trends in real estate and housing. The hosts also tap into expert insights on tech innovation, market sector rotation, and the underlying psychology defining both retail and institutional investors. The discussion maintains the show’s signature banter and camaraderie.

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1. Assessing the Market: Earnings, Sectors & Tech Rotation

[01:42–06:14]

Key Insights & Points:

• Tech Sector Nervousness:
  • Laurie Calvasina notes increased nervousness around the top 10 tech "hyperscalers," with clients wondering if we’ve hit the peak of the capex cycle and tech valuations.
  • “That nervousness tends to rise and people start to pull things from all over the place when we get to peak valuations. That's exactly what we saw last fall and that's what we're starting to see again, though I would say it's not to the same degree.” (Laurie Calvasina, [02:22])
• Semiconductor Sell-Off:
  • Clients express interest in diversifying but admit “the picking seemed pretty slim”.
  • Some remain long-term positive on semis and AI, but the urge to explore alternatives is growing.
• Small/Mid-Caps Outperforming:
  • Russell's year-to-date outperformance is “very choppy” and “jagged…with big swings up and down.”
  • Despite strong jobs growth and manufacturing surveys, small caps remain sensitive to interest rate expectations.
  • “Interest rates...been a surefire way to trip up the small cap trade. So we've been a little bit less enthusiastic here for a little more time.” (Laurie Calvasina, [03:37])

Notable Quote:

• On PowerPoint presentations:
  • Tom Keene: “Which is why I hate Laurie Calvasina because she sends over a 103-page PowerPoint.”
  • Laurie Calvasina: “That's the mini. We cut it down recently. It was getting up to around like 130 or 140.” ([01:54–02:01])

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2. Market Quality: Profitability & Small Cap "Reputation"

[04:59–05:48]

Points:

• Laurie Calvasina discusses the debate around profit vs. non-profit companies in small caps, especially as low-earning and even loss-making stocks outperform after recessionary lows.
• “A lot of biotech stocks...those are technically low quality because of the earnings component, but not really. I do think small caps…are getting a bad rap on the quality issue.” ([04:59])

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3. Macro Market Check: CPI, Yields, and Bond Strategy

[06:47–11:28]

Inflation and Bond Market Views:

• Jeff Given (Manulife):

  • CPI is running higher mainly due to temporary shocks (like energy), but persistent elevation will require Fed action.
  • The 10-year Treasury is unlikely to drop significantly; could even rise if the Fed needs to get more aggressive against inflation.
  • Yield curve flatter or inverted if Fed has to move decisively.

  Notable Quote:

  • "At what point in time does it become not one-off? ...if we stay up here another three, four, five months, then we're going to have to really consider what the Fed has to do to slow this economy down." (Jeff Given, [07:08])

• Credit Risk:

  • Many portfolios are shifting to higher quality—no need to “reach for yield” with Treasury and investment-grade rates up.
  • Total return vs. “clipping coupons” still debated; institutional buyers like insurance firms appreciate current fixed income yields.

  Notable Quote:

  • “When’s the last time we’ve been able to earn 4.5% on a 10-year Treasury...?” (Jeff Given, [09:46])

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4. Deeper Dive: Inflation Targeting & Fed Credibility

[12:15–16:40]

Ira Jersey (Bloomberg Intelligence):

• Term Premiums & Rate Moves:

  • Term premiums for long bonds stable; two-year yields most reactive to policy expectations.
  • The 4.2% year-on-year CPI print is "priced by the market to be the high print of this cycle." If inflation moderates, yields could stabilize.

• The 2% Inflation Target Debate:

  • Questions whether the hard 2% Fed target makes sense in the current context.
  • “The Fed lost a little bit of flexibility...by having a hard 2% target...maybe it would make more sense to think about 2.3%, 2.5% and stable.” (Ira Jersey, [14:59])

• Complexity in Financial Markets:

  • Today’s environment not as “frothy” as 2006, but some echoes in market complexity.
  • "When money demand is outstripping money supply, then obviously the market will create new kinds of money…and then you get the financial crisis." (Ira Jersey, [16:40])

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5. World Cup 2026: Ticketing Woes & Economic Implications

[17:58–19:28]

Discussion:

• FIFA’s ticket strategy for the upcoming US-based World Cup draws user complaints and concerns about high costs—a stark difference from Russia or Qatar.
• “These were eye popping kind of prices...there is a big sticker shock. I’m a little bit concerned you won’t get...sellout crowds or you’ll have mainly domestic attendees instead of a vibrant international stadium environment.” (Ira Jersey, [18:20])

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6. Major IPO Spotlight: SpaceX and the Data Center Race

[21:59–29:44]

Edward Ludlow (Tech Reporter):

• SpaceX IPO Context:

  • SpaceX is promoting a vision of orbital data centers—in effect, satellites as servers, with mainstream economics comparable to land-based data centers.
  • Institutional investors are “massively oversubscribed” for the IPO; anticipation is electric.
  • IPO likely priced at $1.77 trillion (with some expectation it could trend higher by Friday).
  • Musk’s direct involvement limited to major meetings and, of course, social media.

• Tesla / SpaceX Synergies & Retail Shareholders:

  • Market assumes eventual deeper integration between Tesla (robotaxi compute needs) and SpaceX (orbital compute).
  • Open question on how retail investors, and especially Tesla’s loyal base, will gain access to the SpaceX IPO.

  Notable Quotes:

  • “This is a massively oversubscribed IPO and people want to participate in it.” (Edward Ludlow, [28:01])
  • "Institutional book closes 4pm today, but all these different platforms offering the retail trade...carries on till Thursday night." ([29:00])
  • “If Tesla gets there...with fleets of thousands and thousands of robotaxis...Tesla becomes the first big customer of that [SpaceX orbital compute].” ([27:02])

Lively Banter:

• How robotaxis will handle chaotic airport pickups, comparisons between Boston universities, and the public’s attitude toward soccer in the US.

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7. Real Estate & Shelter Inflation

[32:34–36:56]

Odetta Cushy (First American):

• What to Watch in CPI:
  • Key focus: Is inflation broadening beyond energy into goods and especially services?
  • “Are we seeing it broaden outside of just the energy sector into goods and services? And that would really be the concern from the Fed's perspective.” ([33:04])
• Housing Sector Outlook:
  • Mortgage rates at ~6.5% are better than last year, but still weigh on momentum.
  • Shelter costs—40% of core CPI—are key to the inflation outlook; recent rent deceleration should begin to cool measured shelter inflation.
  • “Building more homes, making it less burdensome to build, is the solution to affordability.” ([36:29])

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8. Memorable Moments & Quotes

• On Sleep Sacrifice in Finance:

  • Laurie Calvasina: “Literally that's about five hours a night.” ([05:57])
  • Tom Keene: “And then the weekend and we take eight naps.” ([05:58])

• On robotaxi logistics:

  • Edward Ludlow: “At SFO...you have to go out the terminal, up the escalator, onto the air train, change, stop, go on another stop, walk 500ft and then you can get picked up by a Waymo.” ([27:25])

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9. Important Timestamps

• Nervousness in Tech/Capex Cycles – [02:22]
• Small/Mid Caps Performance – [03:33]
• CPI & Bond Yields – [07:08]
• Fed’s Inflation Targeting Debate – [14:59]
• SpaceX IPO Deep Dive – [22:08] through [29:44]
• Real Estate/Shelter Inflation – [32:34] through [36:56]

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Conclusion

This episode weaves through the critical themes of inflation, Federal Reserve policies, fixed income strategy, equity sector rotation, and the excitement—and concern—surrounding a generational IPO. Tying it together are insights on the real economy (housing, jobs), humorous exchanges, and straightforward commentary on the impacts of market structure and innovation. A must-listen for anyone tracking global finance in 2026.

Transcript

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[Tom Keene]

The reason credit Suisse was so good, Mark Flaherty and Oil, et cetera, et cetera, was their research was gorgeous. Which is why I hate Lori Calvisina because she sends over 103 page PowerPoint

[Paul Sweeney]

and you got to read it because

[Tom Keene]

I got time to read every single screen. What are you, Mary Meeker in disguise?

[Laurie Calvasina]

That's the mini Pulse.

[Tom Keene]

That's the mini.

[Laurie Calvasina]

We cut it down recently. It was getting up to around like 130. 140.

[Tom Keene]

And it's just sick. Laura, you're too young to remember this, but I remember lifo, FIFO and all the accounting that went into more traditional companies. Does big tech hyperscalers, do they have countable lifo, FIFO balance sheets that, that

[Laurie Calvasina]

I'm not qualified to comment on, Tom. I'm not really sure, but the, the reality is that we are seeing the nervousness around that top 10 cohort for one reason or another, right? Is it. Are we at a peak in the capex cycle? How much are these technologies being used? Are we overspending? That nervousness tends to rise and people start to Pull things from all over the place when we get to peak valuations. And that's exactly what we saw last fall and that's what we're starting to see again though I would say it's not to the same degree. I'll give you a couple of examples. Talking to clients earlier this week about the semi sell off that we saw on Friday. The general vibe I was getting was, yeah, this stuff feels like it's been a little bit ahead of itself. But we still like these stories longer term. And if I go back to a month ago when I was in Europe, I was talking to a lot of clients in London and Zurich. I would say London in particular, where they're like, we've been in the semis, we've been on the AI theme. Is there anything else we should be looking at? We want to explore other opportunities. You could sense that impulse to diversify, but at the same time when we would go through and look at all the other sectors, the picking seemed pretty slim. And I picked up on that same vibe this week as well.

[Paul Sweeney]

Smaller mid caps. The Russell outperforming year to date. What do you make of that?

[Laurie Calvasina]

So if you look at Russell, it's been outperforming since last fall, but it's been very, very choppy. It's been sort of jagged, you know, with big swings up and down. And one thing that seems to trip small caps up, you know, the fundamentals are fantastic right now in terms of jobs growth re accelerating. Ism is above 50 for several months in a row. The animal spirits feel like they're coming back to the economy. But at the same time interest rates and when you bake in hikes from the Fed or dial down your dovish Ness since 2022 that's been a surefire way to trip up the small cap trade. So we've been a little bit less enthusiastic here of a little more time.

[Tom Keene]

And Laurie Kelvin, Ira Jersey coming up, Jeff Given as well. The tape does better. Negative 70 was a negative 50. Now negative 37. And S&P futures. The Vix 20 handle 20.97 does better from 20 to 21 into a better 20.97. Even oil comes in off the the back and forth tweets if you will and news flow from Iran to 1600 Pennsylvania Avenue. In the yield space, 30 year bond 502 becomes a 501. I'm running it out to four decimal points because that's the way we, we roll as well. 10 year yield, 4.5 to percent discuss companies that make profit versus the nonprofit companies.

[Laurie Calvasina]

This is a complicated issue. I mean, it's one that comes up quite a bit in small cap. We're seeing, you know, kind of low earnings quality stocks outperform similar to what we saw last year off the April 8th low. That's something that tends to happen off recession type lows. But we're also starting to see that show up in the S&P 500 as well. You know, what I would say is, especially when you get into small cap, there's a question of are loss makers really low quality? A lot of biotech stocks, for example, early stage technology companies, I have seen, frankly in the small cap space, people are getting a little bit more comfortable with biotech, which is not something I would have heard five and 10 years ago. And those are technically low quality because of the earnings component, but not really. I do think small caps, I'm starting to increasingly think they're getting a bad rapid on the quality issue.

[Tom Keene]

Laurie, thank you so much for coming in. The new slow is crazy. I don't know how you do it. I don't know anybody in equity.

[Laurie Calvasina]

I don't, I don't sleep.

[Tom Keene]

Yeah, we don't sleep.

[Laurie Calvasina]

Literally that's about five hours a night

[Tom Keene]

and it's one hour here, three hours there kind of thing. And then the weekend and we take eight naps.

[Laurie Calvasina]

I had an hour and 49 minute nap on Sunday afternoon.

[Tom Keene]

Yes.

[Laurie Calvasina]

Heaven.

[Edward Ludlow]

That was heaven.

[Venture Global Representative]

Yeah.

[Ira Jersey]

That's what we live.

[Tom Keene]

That's what happens when you gag the children.

[Laurie Calvasina]

Yeah. You throw them in the pool with their grandparents.

[Tom Keene]

Thank you, grandparents. Lori Calvacina, thank you so much. Of course, Always and forever with rbc. We're going to get to Ira Jersey here in a moment. We got to have an extended time with him not only on what he sees off the CPI report, but also his work on the World Cup Again, as I noticed on StubHub tickets issued tickets released today for so many games at this World cup is like a huge deal. When was the last time we talked about the Knicks, Alexis? Oh, it's been way too long.

[Paul Sweeney]

Our ticket price has gone up since then.

[Tom Keene]

Yeah. Jeff Given joins how to develop market Fixed Income at Manulife. Investor, thank you for coming today. And just a crazy day. How do you synthesize a higher CPI in this angst about what about CORE at Manulife? How do you fold that into the Bond story?

[Jeff Given]

Yeah, I mean, one thing to look at is, you know, how temporary is this going to be? And you know, one of the dangers that we're in Right now is we're having all these one off shocks and we try to, you push it away and say it's one off, it's one off, one off. At what point in time does it become not one off? You know, we're not trying to play too, too much into the recent run up in CPI as it is more energy related and if we start to get oil flowing through the straight again, maybe that comes off a little bit. However, if we stay up here another three, four, five months, then we're going to have to, you know, really consider what the Fed has to do to slow this economy down.

[Paul Sweeney]

We've got, it seems like the bond market's doing the Fed's work here. We've got rates moving higher here. I'm looking at the 10 year 452 year. Where do you think we end the year on the 10 year, for example?

[Jeff Given]

I do think we ended 10 year around the 450ish level. It's really hard for me to see the 10 year coming down a whole lot. It's hard to see getting back into pricing in Fed cuts like we were at the end of February. There is a risk it goes a bit higher. However, if we get to the point that we have to price in the Fed saying we're going to need to crush inflation, I think that ends up being curve flattener and maybe an inverted curve because I don't think they're going to have to go gradually just to make themselves feel better.

[Paul Sweeney]

So again we got this inflation print today in line with expectations, but it's higher. And how much of that is just energy? I'm looking at the core, that's higher too, but I don't know.

[Jeff Given]

Yeah, I mean I think it's not just energy story. Right. We're starting to see a bit stronger inflation back even in January and February when you look at some of the subcomponents and so there's other things going on now. What we don't know is, you know, energy prices usually have a 6 to 12 month lag on the economy. And does that put the consumer at risk? When we hit October of this year,

[Tom Keene]

what is a 5% 30 year bond signal? I mean, and again after this inflation report, looking at real yield, some of the hourly real yield statistics were negative. I mean what is, how does your day to day grind change over the 5% 30 year?

[Jeff Given]

Yeah, I mean I, you know, I worry a little bit more about the 10 year. If the 10 year got up to 5%, I'd be very concerned as far as where we're going, a big move. Take a look at what's mortgage rates. Are you seeing housing prices across the across the US slowing and you know, in some areas pockets turning negative. And if you added another 50 basis points to mortgage rates, I mean, I think that's a problem for the overall economy. In addition to having higher energy prices at the same time.

[Paul Sweeney]

How much credit risk are you taking these days?

[Jeff Given]

We're moving our credit risk a bit higher quality. You don't have to reach for yield anymore. I think that's one of the things that you can't be missed. When's the last time we've been able to earn 4.5% on 10 year treasury and if you throw in another 100 basis points or so for credit, 5.5%, that's pretty good. You're seeing fixed annuity buyers come in the market because they like that print insurance companies as a total return investor. Maybe 5%, 30 years, you know, a bit scary at times. But an insurance company, they loving that environment.

[Paul Sweeney]

Interesting. So that's kind of the place to be. I think people want to talk to these bond guys now. Cocktail parties, they'll come up.

[Tom Keene]

Well, yeah. They had no rate for years. Is it a total return made in your life or you just clip the coupon?

[Jeff Given]

We're more, we're told more total return approach. You know, we're benchmark against the ag, but it's a bit AG aware and looking for a fair amount of excess.

[Tom Keene]

Did you have Zvibodi at Boston University?

[Jeff Given]

I was not fortunate enough to take one of his classes, but I had obviously had to read his book.

[Tom Keene]

I mean, Paul, you have no. This has got to be a Duke equivalent.

[Jeff Given]

Yeah.

[Tom Keene]

If you go academics from BU to bc.

[Paul Sweeney]

I know.

[Tom Keene]

I mean you have to switch from Cornwall's which is the bar for bu, and you got to go up to Marianne.

[Paul Sweeney]

Okay.

[Tom Keene]

All right. I mean that's a hell of a shift in Boston.

[Jeff Given]

It's one mile apart.

[Tom Keene]

I mean Boston College and Boston University, they're just two separate worlds, aren't they?

[Jeff Given]

They are. I mean this Tees Pub versus Marianne's after a hockey game all the day, all day long.

[Tom Keene]

Yeah. I don't think people understand like Duke in unc.

[Paul Sweeney]

I know.

[Tom Keene]

How far apart are they?

[Jeff Given]

Like there's literally about a mile. Yeah, it's, you know, a little mile and they integrate. Like when you. The student sections, the lines are blurred.

[Paul Sweeney]

Yeah, absolutely.

[Tom Keene]

We'll have to see. Thank you for coming in. We got massive breaking news today that We've got a, at Rundu. Can you. I hope you can come back again when it's not nuts. Jeffrey Given had a developed market, fixed income and fixed income portfolio manager Manulife of Boston. So here's what we're going to do. Hugely anticipated. Get a lot of emails on this. Is Ira coming on today? Yeah, we're going to do the World cup but we've got to do the inflation report first and all of this wonderful fixed income work as well. Ira, go fabozzi on me here and tell me what matters within the four characteristics of the curve. Right now discuss the premium, that fancy stuff you guys work in every day.

[Ira Jersey]

Yeah, so if you're talking about term premium, you know, basically the risk premium that you need to hold in order to, or the extra yield you need in order to hold a bond for the long term, you know that's actually been very stable for, for five years out to 30 years over last couple of months. It's, it's the two year really that's been moving around quite a lot and initially that was because inflation expectations jumped much higher and now it's really because the policy rate is now expected maybe to be increased. So basically the Fed hiking interest rates. So, so that's where you get 2 year yields up above 4% and, and the yield curve flattening a little bit. I think that's probably about done. We put out a note just this morning noting that we thought the two year yield was fully priced for realistic outcomes for, for the policy and for the Fed. And, and a big reason for that was this number today because this, this number, this 4.2% year on year CPI print is priced by the market to be the high print of this cycle. So, so I think that's very important because if inflation starts to come down then two year yields could stabilize.

[Tom Keene]

You agree with that? I don't mean to be rude here but this is like saying Senegal is going to be France. Do you believe 4.2% the peak.

[Ira Jersey]

It probably, it probably is. Now obviously there's a lot of risk in that. But, but, but based on where the, where the oil futures curve is pricing, based on the fact that you, you get a level adjustment. Right. So we have to be careful because I think a lot of times people say oh, there's still a lot of inflation because you know, bread prices are you know, $5 a, you know, a bag or whatever. But, but the, the issue is, is that that a jump in, in prices to a new level doesn't mean that you're going to get a bigger change in the future. Right. It just means that the level is high of, of individual prices, but it doesn't mean that, that you're going to have persistent inflation and persistently increasing prices, even if prices never go down.

[Public Representative]

Right.

[Ira Jersey]

I think that's a kind of one of the observational fallacies that a lot of people, you know, wind up having because they'll say, oh, you know, gas prices are still $4 a gallon. Yeah. But they're still at 4. They're not going to 5. Right. I think one of the issues that people don't, don't see it's change versus level. So, yeah, I think that 4.2% probably is the high. Now, of course, if we continue to run at 3%, which is something that the market's also priced for over the next year or so. You know, obviously it's going to be difficult for the Federal Reserve to, to decrease interest rates if you're still well above their targeted inflation level.

[Paul Sweeney]

We haven't been somebody quoting. We haven't been in 2% inflation in, like, for ever. Where did this 2% number go? Can we kick this to the curb?

[Ira Jersey]

Well, I actually think that it was a little bit of a mistake to have any kind of hard 2% number. Right. So, Paul, you know, we think back in the 1990s, we were running a bit above that. Right. You know, PC Deflator was running around 2.3, 2.5%. Things seemed fine.

[Public Representative]

Right.

[Ira Jersey]

Because wages were growing faster than that and we had a decent, decent economic activity. You know, I think the Fed lost a little bit of flexibility in how they approach their inflation target by having a hard 2% target. And quite frankly, that is something Kevin Morse would like to revisit. So as he comes in next week to his first meeting as the FOMC chair, he'll need to try to figure out with his colleagues, hey, should we actually have this hard 2% number or should we think about it more as in, is it 2.3%, 2.5% and stable? Right. That's really probably more important in my view, to the health of the economy is give certainty to how quickly prices are going to grow and the economy will figure it out around that, which it always has done across America.

[Tom Keene]

Ira Jersey with us driving all of Bloomberg Intelligence fixed income coverage definitive at Credit Suisse years ago. Ira, help us here off your remit with the complexity of the fixed income transactions of the technology bro. Paul and I learned that if we see the word mezzanine circle it in the prospectus. This is back folks, when there was pencil and paper. We've gone way beyond mezzanine. Do you see a complexity and a frenzy like 2006?

[Ira Jersey]

It's not quite as bad, but there are people who are, you know, I think, I think when you go back to that period of time, Remember we spent five years with the fed funds rate at 1%, interest rates were relatively low and, and you had a lot of financial engineering and a lot of new products that were trying to be used for yield enhancement purposes. I actually think, and I wrote about this actually when I was at Credit Suisse a long time ago, was one of the reasons why the markets created all of these CDOs and all of these triple A tranches of different fixed income products was really because the Federal Reserve didn't increase the money supply quickly enough. And I know a lot of academic economists, economists don't agree with me with this, but the fact is that money demand was growing very quickly during that period of time. And when money demand is outstripping money supply, then obviously the market will create new kinds of money. And then of course, once that doesn't become money, you wind up getting the financial crisis. I think in today's environment we have plenty of money out there. There's some funding market needs that need to be addressed and have been addressed by the Fed. But otherwise, no, we don't see the same kind of gearing that we had back then.

[Tom Keene]

Nobody cares, okay, Ira? What they care about is two thirds of America doesn't care about the World Cup. I guess a lot of them do care about the World Cup. The world's coming to America for the World cup. And I saw on StubHub today all sorts of games with new ticket issuance. How bad is FIFA screwed up the tickets nationwide?

[Ira Jersey]

Yeah, I think they made some, you know, pretty big mistakes. I mean they were trying to maximize, I think their, their profits by, you know, leaking out, leaking out tickets. But then, you know, that became a problem for the resellers and the like. There's a lot of people that I've talked to in Europe, a lot of my friends from when I was in graduate school and the like, who were like, you know, tickets are crazy expensive. How are we going to go? Like when, you know, when we went to Russia, when we went to Qatar, like, yeah, there were some tickets that were expensive, but we were able to get into a match for, you know, €100 or whatever. And, and so these were eye popping kind of prices for a lot of people, especially when you have to consider you have to travel over an ocean and then you have all of the relatively high priced accommodations in the United States. Compared to other places where the World cup has been held over the last 20 years or so, there is a big sticker shock. So I'm a little bit concerned that you won't get the kind of environment where you have a sellout crowd or you'll have a lot of maybe domestic people going to games instead of people from these countries to create a great stadium environment. So I'm really interested to see how that's going to work.

[Tom Keene]

We'll have to see our jersey. Thank you so much Driving all the fixed income at Bloomberg Intelligence. He is Surveillance World Cup Correspondent. 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]

Chinese in our studio, usually in San Francisco. Edward Ludlow driving all of our technology coverage. Open Question how do you study space

[Edward Ludlow]

X this morning I study it as a pitch on the economics of a satellite of great scale that is a data center. So in a satellite you have the body and right now the body in any given satellite is a probe of some kind. It creates data and sends it back down to Earth. What SpaceX is pitching is a story where there are thousands and thousands of satellites and in the body of that satellite with massive solar arrays and radius is a server.

[Tom Keene]

You're in Charlottesville, Virginia. You're lecturing CFA Institute on this. What's your X axis to the hopes and dreams of Mr. Musk? Is it three years? Is it 30 years?

[Edward Ludlow]

This is why it's worth us discussing this on air right now, Wednesday morning for an IPO that will price tomorrow and trade Friday because actually something has been happening since Sunday night. Bankers around the country have been pitching this idea in real time. And based on our reporting, the institutional investors, long only asset managers, are placing orders for $10 billion of shares, big blocks, because they believe in the economics of what Elon Musk is pitching on the data center side. In other words, I'm saying the roadshows worked based on our reporting Sunday night they had a certain number of orders. By Wednesday morning they had many more. And thus we arrived to a place where they're oversubscribed. By the way, the math on a space based data centers is the same as a day central on Earth. It's a dollar per token how many dollars it takes to generate a token or a dollar per kilowatt the dollar to generate a kilowatt worth of compute, which is measured in the electrical draw. It's exactly the same. I know Paul. I see it in your face.

[Paul Sweeney]

Hasn't been done. When do they expect to deploy some of this technology?

[Edward Ludlow]

So this is why I say this is a live situation. The roadshow has meaning in the prospectus. They very clearly outlined that they expected to put an orbital data center in place 2028 into 2029. The bankers and SpaceX's representatives have been telling very important investors ahead of the IPO that they actually might pull that forward a little bit and do a demo, a test, a pilot in 2027. But given that three days ago we saw the design of the thing for the first time and how many times have you rolled your eyes at me or cautioned me on Elon Musk stating a date. Yeah, and then see where we actually land. So. So all of that gets taken into account, but is also in the boilerplate risk factors of the document. You know, so that's how I view pages.

[Paul Sweeney]

Has Elon been on the road pitching this person? Do we know?

[Edward Ludlow]

You know, I don't have any reporting or evidence that he has done much beyond the conversation he had with Jamie Dimon. Brett Johnson is Space X's CFO. He's much less known. He's basically SpaceX's only ever CFO. And he is going to preside over the finance org that does the biggest IPO in history. Much more engaged directly with the bankers, the important shareholders. You will notice that Elon Musk, I don't know, I see the Elizabeth Warren headlines on the sec. I don't really have any reporting on that, but I would say Elon Musk has continued to post on X quite often in this period.

[Tom Keene]

To two questions to start with this. Lower this folks. The high ground on technology. Do you just assume SpaceX and Tesla made at some point?

[Edward Ludlow]

Yes. I mean, well, I don't assume the market assumes that in the end SpaceX and Tesla still, this is what drives it.

[Tom Keene]

I think of George Noble, definitive, Fidelity Overseas and many, many other critics of all this. They think the world is just, you know, yeah, it's going to hell in the desk. Cara Carlson, Bloomberg News. Yes, Tesla has 59 robotaxis in three Texas cities and yet people talking to you say this is the second coming of whatever. Yeah, I mean that's the discontinuous nature of the A.D. ludlow world.

[Edward Ludlow]

Yeah.

[Tom Keene]

So discuss that.

[Edward Ludlow]

So the, the thesis is that that if Tesla gets there on the end where they have fleets of thousands and thousands of robo taxis, in other words, a Tesla vehicle that has no human driver, it drives itself. There is an element in that of onboard compute. The cars have computers on them which helps them perceive the world around them. But this is still AI where you are asking an underlying algorithm AI model to do something that still requires some kind of mathematics going on in a data center. So the link is if Space X is going to do thousands of satellites in orbits that are data centers and they are focused on what we call inference running the AI model, Tesla becomes the first big customer of that.

[Paul Sweeney]

Gotcha.

[Edward Ludlow]

It is Elon having a negotiation with

[Tom Keene]

Elon how is a robotaxi going to pick somebody up at Terminal 1 at JFK?

[Edward Ludlow]

Good question. How they've done it at other airports is to have designated pickup areas.

[Tom Keene]

They're simples jfk.

[Edward Ludlow]

Yeah, I know Kansas City, I know

[Tom Keene]

they're not gorgeous new airport. Frankly, Manila has a gorgeous new airport.

[Edward Ludlow]

Can I give you a case study? SFO, right? So waymo off services SFO. Dear listener, if you're not watching on YouTube I'm waving my fingers in the air in operates SFO. You have to go out the terminal, up the escalator, onto the air train, change, stop, go on another stop, walk 500ft and then you can get picked up by a Waymo sfo. So like that's the reality of it.

[Tom Keene]

What's going to happen Thursday? What should I mean, I don't want to pin you down if you're wrong. We understand that I'm wrong all the time. Well look, what's your best guess? What's going to happen Thursday into Friday?

[Edward Ludlow]

Kyle Porter and I reported that SpaceX had valued this and priced this IPO early at 1.77 trillion. And Musk replied on X saying false. In the end, when all the documents came out, it was $1.77 trillion and $135 per share price. So we got that right. However, because this is atypical and unusual, they priced ahead of the roadshow. People don't know what will happen. There is every legal, mechanical and psychological chance that the price goes way up, that they price it higher, that we're talking about a company in excess of 2 trillion. How it trades at the Friday whenever that gets going, I have no idea. It's academic, isn't it? It doesn't matter. But right now the state of play is so clear. This is a massively oversubscribed IPO and people want to participate in it.

[Paul Sweeney]

How about retail? I think they allocated initially maybe 30%. So how's that that playing out?

[Edward Ludlow]

There's an outstanding question, which is indirectly, Musk has promised Tesla's very loyal, quite broad retail shareholder base that they would get some kind of access to this ipo. And that's not been codified. There's no mechanism for that. So I'd be interested in that. Musk has talked about rewarding loyalty in that sense. It'd be interesting to see how those tester shareholders react if they weren't able to participate. Remember, the institutional book closes 4pm today, but all these different platforms offering the retail trade that I think that carries on till Thursday night.

[Paul Sweeney]

Didn't know that.

[Edward Ludlow]

Yeah.

[Paul Sweeney]

Institutional book closes today.

[Edward Ludlow]

Yeah. Yeah.

[CBOE Representative]

All right.

[Paul Sweeney]

I'll get my order in.

[Edward Ludlow]

You're looking at me with great skepticism, but that's healthy. Like, how healthy is that? That's good.

[Paul Sweeney]

Yep. All right, I'm on it. I'll take my index allocation. That's how we roll.

[Tom Keene]

My head hurts. Thank you. Thank you. Thank you so much. 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 app or watch us live on YouTube.

[Tom Keene]

Odetta Cushy joins us now, Deputy Chief Economist, first American out of Northeastern, out of St. John Fisher College. Paul, like, you know, the Open, the other, the PGA at the Oak Hill up in Rochester the other year, St. John Fisher. I mean, the kids just roll out of bed, is that right? And they do, they do 18 holes at oak Hill.

[Paul Sweeney]

Very good.

[Tom Keene]

That's the way they roll. It's St. John Fisher College. Odetta, what do you expect to see in the CPA report? What is the distinction for you?

[Odetta Cushing]

But what I'm really looking for is whether we're seeing inflation broadening across categories. The consensus is that we'll have a print above 4%. Consider that just a year ago the the the inflation was with a two handle. And so the question really is, are we seeing it broaden outside of just the energy sector into goods and services? And that would really be the concern from the Fed's perspective.

[Tom Keene]

I mean, off GEORGE burry Paul Core CPI 2.9%, up from 2.8%. Can you imagine a three handle on Core?

[Paul Sweeney]

Boy, that's not what the market's looking for. Data. If we do, in fact, see higher core inflation, what do you think it's coming from? Because a lot of folks definitely feel it when they go to the gas station to fill up their tank of gas. They fill it at the at the shopping center when they go to buy groceries. Where is inflation most problematic for you?

[Odetta Cushing]

Well, you know, as a, as a real estate economist, we see that the higher gas prices is impacting construction costs. We're seeing it flow through to diesel prices, obviously, which is which is very important for construction and higher and certainly burdensome to breaking ground on more homes. So that's certainly one area that we're monitoring.

[Paul Sweeney]

Where are you seeing it in your business here in real estate? I mean, we have mortgage rates, boy, you know, back up to six and a half percent here. And we just got a housing number yesterday, you know, still that 4 handle 4 million used homes. It seems tough for the real estate business.

[Odetta Cushing]

It's been a challenging year, though I will say a better year than last year. Mortgage rates, while they're they've hit about six and a half percent, mortgage rates are still lower than a year ago. Inventory is still a bit higher than it was a year ago. So that's helping move transactions in the right direction, albeit very slowly. But we did start the year with a rate of 6, 6%. And now we've moved up to 6 and a half. So certainly that slowed the momentum.

[Tom Keene]

So what's the inflation series you lean on? I mean is it trim this, trim that, Cleveland the 18 other flavors we've got what is a data cushy believe in?

[Odetta Cushing]

You know, I'm classic, I look at, look at the core inflation and then what I tend to do is break it out into its, its main components and I track core good goods inflation, core services inflation and then they tend to break out shelter on its own. Shelter inflation makes up 40% of core and so we like to see what's happening with shelter. And the good news there is that you know, that tends to, to trail what's happening with rents on new leases. And we know that we continue to see deceleration in new leases. That should drag overall shelter inflation lower later this year. I think that's a, that's a tailwind to getting inflation down.

[Tom Keene]

That's really important. Is that zeitgeist in the, the market right now? This idea of OER and you know, the eight other ways of, of calculating real estate disinflation, is that in the zeitgeist right now or is that a surprise to come?

[Odetta Cushing]

I think, I think it's pretty well understood that shelter inflation should continue to drag overall inflation lower. I think all eyes right now are certainly on the energy sector and, and whether we start to see those higher oil prices flow into other, other portions of our, of our inflation basket.

[Paul Sweeney]

Affordability in housing here, is there a solution out there? Is it just build more houses?

[Odetta Cushing]

I do think that the supply side should, should be getting the attention here because what happens if you juice up the demand side of the equation in a supply constrained market is you just start to see house prices go up. And so I think building more homes, making it less burdensome, less costly to build new homes is, is the solution.

[Tom Keene]

Thank you so much. The news slow folks this morning is just killing me. Odetta Cushing, thank you so much for joining us.

[Bloomberg Host]

This is the 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 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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