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a scenario and they've never stressed a circulation scenario and there's so many other risks out there that they really need to be focused on. And so it's not only it's a huge distraction for the supervisors for the bank management it creates a false sense of security you know they always are they always pass now and oh everything must be fine. I think Jamie Diamond had a telling comment that it actually inhibits bank boards from challenging risk managers at banks because Well, the Fed says we're great. Did you see our stress test results? Well, maybe they aren't. So they need to go. We need to be replaced with a dynamic process, less public, not tied to capital, which makes it inherently contentious. And so I think my guess is Warsh will be dealing with that. They will be making some significant changes. All right, Sheila, always a pleasure. I really appreciate it. Have a wonderful weekend. Former FDIC chair Sheila Bear. And of course, if you haven't read her memoir, back from 2012, the bull by the war. And definitely go check it out. We're going to set you up for what to watch over the next week. Stick with us. This is Bloomberg.

get on this. This is the problem we need to get a fix. And I think that's what happened after 23. Well, I mean, I mean, our regulars kind of forgetting though, the lessons of await, you keep mentioning the idea of lower capital requirements that banks have been pushing for. I mean, obviously their argument is, look, I mean, we're pumping money, we're lending more money into the system. If you allow us to do this, I mean, is there a balance to that argument? Yeah, well, why do we want more lending? There's not a shortage of credit. And, And you know, they hit, you get them all this additional balance sheet capacity. First of all, they're probably just do buybacks, right? They're probably just here to distribute those not really long. So assuming they do, they've got to go off and buy, find, find borrowers. And they're going to be riskier borrowers because pretty much anybody who deserves a loan now is getting one. So I don't, I don't, that's inflationary. Again, I think deficits are inflationary. There is so much going on, frankly, that's beyond the control of the Fed. That's creating inflationary pressures, which is why I'm not optimistic, he's going to see a downward trajectory on inflation. But no, there's plenty of credit out there. Everybody, they're making plenty of loans. They don't need more capital capacity to do so. But with regards to the Fed's focus, or maybe lack thereof on some of the regular story stuff, I do have to ask you. I mean, everyone, I should say everyone, but a lot of people, they hate the dot plot. But I think the only thing they hate more than the dot plot are these stress tests. And I am curious about whether these, I don't know. They force us to cover it. And I don't think I've ever learned anything. No, I haven't. But you know more about this. And I mean, I don't mean to be glib, but I mean, do these stress tests, the Fed stress tests, tell.

I may be wrong, but no, I think the banks, I would not worry about banks in a rising interest rate environment. I would worry about banks in a state inflation environment where the Fed is having to raise rates at the same time we're seeing an economy slow and loan losses go up, unemployment go up, that would create a real problem, but hopefully he can avoid that. And again, but it's another reason why, probably no time like the president of the data continues to show rising inflation or even a trajectory that's not as quickly as it should be, like a due speed or whatever, it's time to hike. But with some of the mid-sized banks, have we resolved or at least addressed, to a certain extent, some of the duration risk that was out there that took down Silicon Bank, Valley Bank a couple of years ago? Because that's still a concern. And I should point out, for all the profits that these banks reported, they're still sitting on hundreds of billion dollars of unrealized losses that are gonna have to be reconciled at some point. Yeah, well that's true. And they are gonna be strengthening the capital treatment of those unrealized losses in a way that I think long-term will be helpful. No, I think because banks do not have to mark the market. They have flexibilities that other companies would not have on this. So I think they will weather it. There is a lot more, I think the 23 per fuffle with the regional banks, I think really woke up bank managers, woke up examiners too.

Basically, he painted a picture of a relatively healthy economy. And to kind of build off something that Chris Elena Gorgie was saying is like, you know, you're supposed to fix your roof when the sun is shining, not when it's raining. So if you have a healthy economy and you know inflation is running hot, as it has been for 65 straight months, why not do something now? Yeah. Well, I think that's right. I mean, I think that's eventually, again, unless the numbers show us something differently. my glasses, that's where they're going to end up. And they should. And there is, financial conditions are certainly not restrictive and many sectors are pretty darn loose. And I'm always scratching my head about why they're cutting bank capital requirements to get trains more new lending, supposedly, into the economy, which would also be inflationary. And that's been a long-term frustration in mind that the Fed doesn't really look at the supervisory side, the regulatory side of what they do. But yeah, he has room to tighten without hurting the economy. And you're right. That's when you want to do it, when you've got the flexibility and bandwidth to do it. Well, let me ask you about the banks and their ability to withstand any sort of interest rate hike cycle here. I mean, we're coming off one of the most profitable quarters that we've seen for banks and while at least the larger banks, I should point out. I mean, do you see the banking system as strong and particularly strong enough to withstand if it does get there, a meaningful fight against inflation with regards to rates? Yeah, no, I think there, well, again...

there was a first Fed chair meeting Fedwarsha meeting that's right back in June and I remember you gave my a plus for handling that press conference did you get a chance to listen to the speech and if so how did you grade it today I did well I gave it I gave I'll give it an A a couple things I was disappointed I you know I know it's touchy and I'm not surprised he didn't but I was hoping you bring up the national debt as an inflationary you know a factor and for you're trying to figure out what's what's going on with inflation. But overall, you know, he did what he needed to do. There's a lot of substance talked about the economy, shared his personal perspectives, again explained the last meeting decision to hold. So yeah, and it was, it was, you know, tweaked debate on the hawkish side, but he was suitably general, will take action and say what they're gonna do or that they would take action. He wants convincing evidence that, meaningful evidence, I think he said that inflation is coming down. But you know, the big question is what the trends are. And I think that's refreshing. I mean, I think the Fed obviously, you know, hindsight's always 2020, but they were a little too eager to see cooling inflation and started cutting too early and we had a problem. So I think wanting to see clear evidence of trends and acting based on that is good. And my guess is the trends are not going to be good. He's going to be raising rates if not September, October. Well, I know he didn't want to tip his hand and obviously say that. No fed chair does, but it does.

The dollar could be undermined as the reserve currency. Do you see any signs of that or do you think that that's been shaken? That's been sort of put to rest. What is the alternative? When you look at what is happening, and that was actually the subject of this symposium, where is financial innovation taking us? Stable coins. Who is backing stable coins? The United States, 98% of stable coins come from here. from here, they originate from here. How is that being done with Treasuries backing stable coins? So there is no clear march towards an alternative. And let me say something that I wish people would pay more attention to. What is the strength of the dollar? It is the strength of the US economy. and the US economy with deep and liquid capital markets, a lot of investment in venture capital, in innovation, attractiveness, other people money come here. They don't go somewhere else. All of this underpins the strength of the dollar. This being said, we would still be advocating for responsible fiscal policy here in the United States and elsewhere. Managing director, Kristalina Georgieva, thank you so much for spending all this time with us. Really appreciate it. That was Crystalina Curegava, the managing director of the IMF and Romana.

So productivity is amazing, 2.5% growth year after year. So the real economy is doing well. It is inflation that is the headache. So something that you've noted and other people have too is that everyone's been surprised at how resilient the global economy has been in the face of higher oil prices in particular. That's one big aspect that's been a surprise, not to mention the underlying economy as well. Do you expect that to keep going? Do you think that that resilience is well founded or do you think that it's fragile and bifurcated in a way that gives you pause? The right way to answer is, so far the world economy has been resilient. This resilience cannot be taken for granted. Why it has been so resilient? Because of these two forces, AI boosting it up and not as strong impact of energy prices as we feared. was talk about energy, you know, oil price is $100, $150 that did not happen. The question is why? It didn't happen because reserves have been deployed, because other sources of energy including the United States stepped up, because shift to alternative energy is quite profound, and also because we are more sensitive to price than we thought we would be. So demand went down. Now out of these reasons supplies, reserves, this is not forever.

And it is something that central banks ought to pay attention to and take action if necessary. And it was very reassuring to hear Chair Worsh saying that if necessary we act. But we are not seeing the underlying trends to be one that creates fears that inflation is getting completely out of whack. It is not happening. Why is it important to act decisively early? Because if inflation expectations were to de-anchor, then what would happen in markets is, of course, nervousness turning into panic. We don't want that to happen. Do you think that there is a credibility issue for central banks and developed markets right now, given the concerns with the fiscal overhang and given some of the fears that they've been reluctant to address inflation. Just trying to explain it away, trying to figure out what exactly they're dealing with. They need to be laser focused on trust in their ability to contain inflation. And in that sense, the message to central bank says, if you need to act, do not hesitate. hesitation creates concerns. But let's be fair.

they have first and foremost the responsibility for price stability. Another aspect of this conference has been stablecoin although if you get people in the hallways no one wants to talk about stablecoin they're like we're here to talk about something else and it is not the question of exactly how we're going to have digital assets. That said you made a really interesting point about the role that technology plays in financial stability and how it could actually expedite or hasten crises stemming from monetary policy accidents or other fiscal policy accidents. You talk a little about that. Well, what we know is that financial innovation is good, but it increases risks. It accelerates impact. And if this impact is possible, positive, great. If it is negative, it can lead to spillover impacts within an economy and even across its borders. My message on this point is don't live with the illusion that technology is going to make your life simpler. It won't. You need strong policy frameworks, even more so in a world of fast impact from technology. More, not less. I'm smiling because I don't think anyone feels like artificial intelligence has really made their lives that much more easy. They're much easier. Everyone's just trying to scramble to keep up with everything. Do you think right now that the potential issue...

desire for the government to spend more. Why? Because the government has done it over the last couple of crises, did it after COVID, did it after the energy shock from the war in Ukraine, foot shock, price shock at that time. So people are saying, hey, you did it, continue. Not affordable. My message to everybody is delay no longer. Why? Because debt levels are now above where they were after the Second World War. And Ken Rogoff is right to say, do you really want a crisis to get you to do what is necessary? Police act on your own. It sounds like a kid has gotten candy after everything that they've done, and suddenly someone's saying take the candy away. You might get a tantrum, but it is what it is. You wrote, you said in your speech also, that IMF popularly stands for Internet. It's mostly fiscal. So an interesting point at a monetary policy conference. How has the fiscal debt overhang complicated monetary policy and made it a lot more difficult for policymakers to really address inflation and just head on? Well, first, more demand, more spending, pushes price levels up, not down. Second, when we have a high level of debt, It is much harder for central banks to act decisively by raising interest.

built your buffers, especially in good times. Right now the economy is doing well. Well, let's cut the deficit, bring down the debt. And to recognize that your best friend are sound policies and strong institutions. Do you ever get frustrated? Do you feel like you're beating at your head against the wall when you say, come on, get your house in order to people who are saying, no thanks, maybe the next guy can come around to do it? It seems like no one's listening. Some are listening. look at emerging markets. They have done fabulously well. Their monetary policy frameworks are strong. Their fiscal frameworks are much better. Sometimes we look at them, they do better than advanced economies. So some people that have had the painful experience of crisis are listening. it is human nature. When do we fix our roofs? When the sun is shining or when there is rain? So we will continue to shout, police, the sun is shining, it's a good time, bring the roofers. Bring the roofers. Ken Rogoff, earlier, a Harvard professor was talking with my colleague, Tom Keen, and he said ultimately it's going to take a debt crisis to really cause develop markets to get their fiscal house in order. Do you agree? Not necessarily. We have seen historically that actions have been taken in good economic times.

anchors? Is this something else that we can address? What has happened over the last years is shock upon shock upon shock. And that pressed governments to borrow and spend more than they should. And of course that has some inflationary impact. And also we know that when we were hit by COVID at that time the public spending was perhaps a bit more generous. But how do you know how much is enough when the world economy comes to a screeching stop? I would blame central banks only if they don't draw lessons from experience. And what we're seeing here in Jackson Hole and what we heard from chair Warshiz, they are drawing lessons from experience. And the lesson, at least on its face, seems to be, perhaps they need to be a bit more restrictive in their policies. Do you think that more broadly around the world that needs to be the approach, even though shocks are still gonna keep coming, it seems like the shock after shock after shock isn't really changing? We have to accept this reality that the world is changing very rapidly and that part of this change is a positive or a negative shock. Right now, we are dealing with two shocks that work in opposite directions.

We've been talking all day about that keynote speech by Kevin Moore, shout at the Kansas City Fed's economic symposium in Jackson Hole, Wyoming. We do want to go back out there where the co-host of Bloomberg Surveillance, Lisa Abramoitz, is still on the ground there, and she's got a special interview, a sit-down with the managing director of the IMF, Kristalina Georgieva. Lisa, take it away. Thank you. Thank you so much, Romaine. I am here with the IMF managing director, Kristalina Georgieva. a moment to speech from Fed chair Kevin Warsh. This is your first Jackson Hole Summit. I would love to just first say thank you for joining us. What was your takeaway from Kevin Warsh's speech? What did you think of it? He did a great job. He articulated his views on the evolution of monetary policy in a rapidly changing world very clearly and his commitment to price stability that 2% is a target for the Fed to achieve was very clear. I think I think the audience was positively impressed by the clarity and also the message he communicated to the central banking community, we have to be humble. The world is changing so rapidly, we have to carefully watch what is going on and make our best call for the benefits of...

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financial innovations that come in. There's some concerns that now we're going back to maybe a little bit more opacity in the markets. How do you see it? Yeah. I mean there's always been concerns in any time you get markets where the Federal Reserve has been involved. And you mentioned the extraordinary efforts after the global financial crisis. Right. And the feds have the fed had been buying mortgage backed securities. And so the prices in the mortgage market were artificial for a long time. And now the Fed's getting out of that and we're starting to see what those exact markets are. In terms of prediction markets, I actually believe there's academic evidence on this that they're actually providing more transparency and providing more information to folks, not only to retail investors who are investing in it as a retail trader as a hobby, but what we're actually seeing is that institutional investors are becoming more and more interested in prediction markets first as a way just in terms of price discovery. So for example, If you want to look at, well, what's the probability of the Fed increasing rates by 25 basis points at the September meeting, you know, the odds on the prediction markets went from about one in three before today's speech to about 50-50 afterwards. And it matches pretty much what we're seeing in the futures market. And so the prediction markets provide an opportunity for all kinds of new event contracts that either match what we already have or can actually get some new market that people would be able to hedge in these markets.

do that. Oh yes, I mean he made it very clear. He was you know he people were looking to you know he said he wasn't going to give any forward guidance and he dressed that right at the beginning and folks were trying to figure out you know the biggest question people asked going into this meeting that I heard was they said well at least give us your reaction function in the sense that they people wanted some insights into what data are you using and then how are you reacting to that data in terms of your monetary policy. Well Well, he pretty much answered the first part of the question. And he gave some specific examples of some of the data that he's looking at. In fact, he spent the first part of his speech saying that he's actually looking at some new data involving the effects of artificial intelligence. For the second part, how he's going to be reacting to that, he didn't give an explicit answer. What he did instead was he laid out some core principles that he's thinking about. Now, one of those core principles, he specifically stated that the 2% inflation target firm and fixed and he specifically mentioned the PCE index. There were some some questions as to what what index he was going to be looking at and whether the 2% was actually something that he was going to be targeting or whether he was going to be satisfied with something slightly above 2%. You know we've been stuck in that 3 to 4% range for a while. Yeah, he came down very heavily and said look I'm looking at 2% and basically laid down the line to say you know you you measure me by my ability to get down to 2% and and I'm gonna be holding myself accountable to that.

now. Yeah, Romain, thanks for having me. Yeah, this is it's consistent with what Kevin Morse has said in his nomination hearing and in some of the press conferences that he's had after the FOMC meetings that he really wants to focus on conventional monetary policy. He wants to move away from the lines that are blurring into fiscal policy. And he's even gone up into the point where he said earlier that, you know, owning a bunch of long term bonds on the Fed balance sheet is sort of blurring the lines of fiscal policy. So he's actually looking to shed those from the balance sheet rather than following the Treasury Secretary into intervening in these markets. And he made that very clear today. He reiterated the fact that unfettered, unfiltered market prices are important for the Fed to fulfill its mandate. And he even came up with an analogy that Ben Bernanke talked about years ago where you have if the Fed is looking to market prices, but the markets looking to Fed guidance, you can end up with what he called a hall of mirrors problem. And so what he wants is unfiltered market prices in the bond markets, and he doesn't want to try to manipulate that and then have markets try to then figure out what the Fed's going after that. Well, he's going to have to then reconcile that with his colleague at some point. And you kind of getting at what was obviously a very talked about column by Stan Druckenmiller kind of admonishing his former protege and he kind of made the exact same point. I can't remember the exact language, but it was basically like that.

This is what it's all been for the daily commutes the endless market monitoring tracing patterns tracking flows Auto-coding coffee crushing working orders This is the trade you've been waiting for and with next generation speed automation and integration This is the new fixed income BMS that will make sure you win it Bloomberg trade EMS expect more All right, it's Kevin Warsh and other folks go behind closed doors to discuss the monetary policy framework There are debates back in Washington on the lines in American investing and whether they should be withdrawn. The SEC considering changes to accredited investor rules, regulators looking to put more private assets into retail funds, market exchanges, experimenting with tokenization and academics weighing how the latest wave of innovation interacts with it all. Mike Pivobar has been steeped in these debates for decades from his research years ago on bond pricing transparency to his regulatory role as an SEC commissioner. Now he's the head of Georgetown's Pacerio Center for Financial Markets and Policy. Mike, great to have you. I do want to start off with Kevin Warsh because in that speech at Jackson Hole he talked about the idea that moving interest rates is the predominant tool for the Fed to fulfill its mandate. And he seemed to kind of, I guess, I don't say knock, but certainly throw a little bit of shade at this idea of using unconventional mechanisms when times aren't necessary.

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kind of, you know, for all of us folks out here in the market. He gave the market what they wanted now. He goes behind closed doors. There's a lot of discussion about the mechanics of the Fed, these task forces, all this other stuff. What's going to be most important for you coming out of these meetings, independent of, you know, just that dual mandate speech today? Well, I think it's that promise that the Fed as a committee will do its right for the economy. and should it be the case that inflation does pick up again and it discontinues its deceleration, that they will hike. But again, I think there's plenty of room for them to just remain on hold, especially since we are seeing consumers spending slow as well as pivoting towards those things that people need. And really most of the growth in the economy this year has been due to investment in technology, especially AI and there's no guarantee that's going to persist at the relative strength that we've seen so far. So there's still an argument for just holding and waiting and seeing. All right Dana, really appreciate you joining us. Data Penerson out there in a very brainy Jackson Hole, Wyoming. She is the chief economist leader of the economy strategy and finance center over at the conference board. When we come back we're going to focus a little bit more on financial regulation. There's a lot going on in Washington. We're gonna catch up with the former...

continuing claims have been low. And certainly we don't see any material inflation in wages, which is also part of the labor market. So I think we're still in this low fire, low higher stasis within terms of the labor market. With regards to the inflation side and the amount of spending that we continue to see in this economy, I don't know what the official government data is telling us, but every company, a retail focused, consumer focused company that has reported earnings, has talked about this idea of a more choiceful consumer. Some going so far to say that these folks are coming in to basically buy what they need and not much else. Are you seeing similar patterns and does that force the issue for the Fed? Indeed, that's been the sentiment, So that's been the measure that we've heard among consumers even earlier than now, like late December of last year and into the beginning of this year, where they were definitely leaning towards necessities and away from discretionary items. We're actually seeing that in the data, in the BEA consumers, real consumer spending, where people are spending more on things that they need like food, gasoline, electricity, moving away from highly discretionary goods and services, even things like cars.

that repeatedly and he was very strong on that today. And so I think the Fed is going to continue to keep rates a little bit restrictive, especially since we have these structural drivers of inflation that are leading against the easing that we're seeing from shelter costs. So, but it gets to this idea as to sort of when you would actually see action. There are a lot of people that are looking at the next meeting less than three weeks away and saying the Fed should just hike rates. Did you get any sense though that Warsh is actually prepared to act rather than just talk? I think definitely he is prepared to act if needed. He did note that we still have some inflation readings coming out and there's also the uncertainty certainly given geopolitical risks out there. And I think that the decision is not made yet or at least he's certainly not going to telegraph it. And I just think that the Fed can probably remain on hold for now, unless we see inflation misbehaving. What's your view at the conference board when it comes to the health of the labor market and how that overlays with what we know about inflation and investors, or I should say rather, CEOs' expectations for inflation going forward? Yes, I'd say the labor market is still pretty healthy.

growth rate back down to the Fed's 2% target isn't just an idea to pass off to markets. It's a commitment by the FOMC to follow through on its dual mandate. Now there is one signal nobody can miss. The responsibility for 65 months of sustained elevated inflation sits squarely with the central bank and that's where it belongs. So here is my standard. We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That's our job, that's our mandate, and that's our charge to keep. Of course, inflation is just one side of the mandate. Maximum employment, that's the other, and now markets are looking for clues for that balance. Raising rates to fight inflation, sometimes it will slow its economic activity, which often means a slowdown in job growth. not full on contraction and hiring. Now Warsh didn't say job losses would be harmless or even specify how much unemployment he would tolerate and that is the asymmetric policy problem here. But the silver lining of course is that that employment objective is much closer to being satisfied than the price stability mandate. And maybe that labor market strength is what gives the Fed enough headroom to prioritize around inflation and a 2% target that has remained elusive now for more than five years in counting. Dana Peterston joins us right now, chief economist and leader of the economy strategy.

bringing you up to the minute news whenever and wherever it happens. I'm Haslinda Armin in Mumbai. This is Lombard. The countdown is on. Everything you need to get the edge at the end of the market day. This is the close. Welcome back to the close. Remain boss secure with a look at how equity is finished out the day. Modest losses all around for most of the major industries here in the US though. Most of the major industries in the US still finishing the week in the green and all the major indices right now on track to post a monthly gain for the month of August. But the real activity was in the bond market with the short end of the curve seeing most of the action. Big selling there that pushed yields higher by about 12 basis points. Less activity on the longer end with the 30 year yield. That yield was only up about two basis points. That's largely a function of what we learned out of Kevin Warsh and his commitment to actually fight inflation. It's a pivot. more I guess the articulation if you will it really did put a bid under some of the financial stocks like Bank of America it put a bid under a lot of discretionary stocks as well remember they would actually benefit should inflation start to come down. However of course that fight against inflation could slow the economy and that raises questions about some of those longer duration names like Nvidia as well as some.

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but yeah, it's bringing it all in house. Yeah, have you ever been up to one of those places in Washington Heights where you can get the live chicken and they do the deed for you right there? Not on purpose. Okay, yeah. Yeah, not on purpose. What do you got for us? The Pro Bowl. I know you're a big sports ball fan, Tim Senevic, but the Pro Bowl has been an institution since 1951 in the NFL and earlier this week they said they're getting rid of it. Nobody watches it, honestly. Okay. And the players don't care. The players don't wanna play with it. get hurt so they don't really it's basically like you know the equivalent of like a backyard touch football game but they finally decided end of an era I don't know if inflation had anything to do with that yeah they losing money Emily are you a sports fan you know I'm trying yeah they do have a cell that's what that means I follow the cheerleaders and so the Pro Bowl was always a fun time to see all of the different cheerleaders all coming together and her college football Emily you follow your college football I do follow my college sports. I do need to graduate. I need to grow up. Okay. All right. Well, you got the weekend to do it. Guys, have a great weekend. You too. Maybe we'll see Romaine here on Monday. Maybe we'll see Emily. I'm going to join Carol out in the seven seven. All right. Wherever she is. Go ahead. That is going to do it for our cross platform coverage of the closing bell. Have a good and safe weekend everybody. We will see you same time, same place on Monday. Our coverage continues here on Bloomberg Television. We go back out to Jackson Hole for reaction to Kevin Warsh's speech.

year the rise yesterday it added about four hundred and forty two billion dollars in market value. So we've been talking about different experts on our show. They're saying why the dip. That's a question we post. Then they said you know what it's not systemic maybe it could be interest rate related but not an issue right now. And lastly Alta shares there are taking ahead as well. They're down about four percent higher discounts premium promotions. They really weighed on on their margins. So that was the issue for Alta. All right. US resident eats per year. How much? I don't know. 100 pounds. Yes, 103 pounds. Wow, look at that. He did his homework, I guess. There's no off position on the genius. But here's the important part. It's an increase from five years ago, a six pound increase from five years ago. Red meat consumption is declining. This is according to the Department of Agriculture. We're talking about this because Lisa getting this story on my radar today. It's in the Financial Times. about the cult of the $5 rotisserie chicken that is defying inflation.

what you do when it comes to sports betting on on Cal-Chi, but it's not considered sports betting at least By legal entities the CFTC predicting right that's different excuse me. That's predicting It's predicting at least that's what the CFTC says So this is something that is not going away anytime soon and Cal-Chi faces this challenge on a you know State-by-state basis, but this is the latest setback for the company Flutter shares higher today by 7.1%. These sports books have been pretty beat up though as people have moved away from traditional sports books and gone instead to rivals like Polymarket and Cal-Chi. All right, I wanna get to the decline or since we get on the upside. We wanna start with PayPal. They're shared down about 12%. And here's the reason why. Sources are saying there's a group from Advent Stripe. They're not going along with their $50 billion pursuit of the company. So that was a big blow. That was not good news for the company. It would have actually ranked as one of the biggest ever leveraged buyouts if it had gone through. But PayPal, early mover in digital payments, right? But the thing is a struggling modernization and its payment technologies have been a real problem for the company, rivals. You have Apple, you have Alphabet. They've kind of seized the market share. And then you have the company. They ousted their CEO earlier this year. They have a new CEO in the spot. And he's saying it's specific financial goals for the company. He wants to change out reports earnings, also how they assign each line of business.

mixed bag today though what's leading the way consumer discretionary communication services energy staples and what is the laggard it's IT some days you're up some days you are down it's all after that fed meeting all right let's get to some of the stocks that moved higher today gainers how about that look at this we got gap higher today by close to 13% shares jumped after the company named Michael Francis to head up its old Navy brand. Prophet 2 came out outpaced estimates that offset a sales decline at the old Navy and lower sales guidance. Francis will take over as CEO of old Navy on November 2nd and the current CEO will transition to an advisory role. It does follow a sales decline last quarter at old Navy and the company trimmed the upper range of its outlook for 2026 net sales. Still investors cheering the overall results from GAP higher today by 13%. Also shares of a firm, the Buy Now Pay Later FinTech company, they were higher today by as much as 17% earlier in the session. A steady move lower, still finishing the day in the green, up 4 tenths of 1%. The company did hit an intraday high going back to September of 2025, so the highest intraday since then, close to a year. This after the company forecast revenue for the first quarter that beat the average analyst estimate. We did speak with Max Levchin, the company's CEO, And he said that American consumers, at least the consumers that he views, he calls them the affirm consumers, he says they are healthy right now.

into the equity market. When you look at the Russell 2000, those small caps, those interest rate sensitive stocks are selling off the most today by a pretty big divergence than the S&P 500. Yeah, the one thing I wanted to point out, which we haven't actually spoken about so far, but the Bloomberg Dollar Spot Index, that's up by about three-tenths of a percent right now, so we're watching the dollar closely too after all this news we've had today. Yeah, and particularly we have so much talk about that debasement trade coming out of Treasury Secretary Besin and the moves that he started telegraphing about two weeks ago that bid into gold that dropped in the dollar, being reversed for today. Of course, a lot of questions right now, as a lot of people sort of, I guess, maybe depart for the next week or so until after the Labor Day holiday and sort of what that means. Remember, if you have your calendar out, you want to mark down September 16th. That is the next Fed decision day. October 28th is the next one after that. day is November 3rd here in the U.S. and then the final Fed meeting on December 9th of this year. We have read across the screen here in the U.S. for U.S. equity markets, so the losses are relatively fractional. The Dow Jones industrial average only down 10 points. We'll just basically call it unchanged. The S&P down 20 or a quarter of a percent. The NASDAQ down 139 points or a half a percent. The NASDAQ 100 down 7 tenths of a percent. the Russell 2000 taking the biggest print of today's sell off down about 1.4%. Romain you're not leaving us next week are you? Yeah.

seen situations where the stock sort of peter out and you see it today with Nvidia where it's you know it's it's under a bit of profit-taking to me what what happened yesterday was you for the kind of rallies we saw particularly in the software companies in Nvidia you had have institutional money flowing in and that institutional money is just sort of washing in washing out and it's like we can't be momentum traders to that degree all the time yeah all right Steve got to leave it there Steve Sashnik chief strategist over at Interactive Brokers and video shares down 5% after yesterday's 9% gain. All of the major indices in the red on the day but still higher on the week and for the month of August. A full breakdown of all of today's price action starts right now. The closing bell. Bloomberg's comprehensive cross-platform coverage of the U.S. market close starts right now. And right now we are two minutes away from the end of the trading day. We'll mainbots stick alongside Emily Graffaio taking you through to that closing bell with a global simulcast. We're joined now by Tim Stenevec, Lisa Mateo in today for Carol Masser. Welcome to our audiences across all of our Bloomberg platforms, television, radio, our partnership with YouTube and a market that has clearly made it clear what it thought of that big speech by Kevin Warsh earlier today. I mean, I don't want to steal your thunder, Romain. Yeah. But the bond market reaction. Yeah. Especially at the front end, two-year yields, up 12 basis points right now. Yeah. A straight-up hire.

I mean, I think Emily, that's why we're only down 20 points on the spools as opposed to as opposed to down more significantly with 12 basis points on the short end. Right. You know, we, the, my initial reaction was like gentlemen start, you know, you may feel free to resume your regularly scheduled rally because, you know, what was the first thing that stocks did? So you're ready when Warsh left the podium, rates were already seven or eight basis points higher at the short end stocks rally because it's a Friday. It's a Friday, it's a quiet day, don't shorted all tape, all that kind of stuff. So off we went, without actually any regard to it. Then finally the weight of money kind of made people step back and think. But stock traders, as long as they could justify them with decent earnings, and obviously yesterday, Nvidia went a long way to that. And there was a huge rotation. I can't remember a day where you had a fairly significant decent sized rally and yet one sector only up in the S&P 500. That was it. 10 down, 1 up, and 200 S&P 500 stocks lower, more than more than advances. So it was it was a weird day and I think we're sort of seeing the hangover of that but it shows you that you know a few if the right companies do the right things the stock market can just sort of carry on. Carry on. Okay so that's what's gonna carry us then until we finally get maybe a little bit more clarity from the Fed just carry on keep buying Nvidia because some of these chips are selling off. I think I you know

that two at the 2% target we've been above that 2% fed target Beth Hammack was on with Lisa Bromitz earlier today I know she's always been a hawk but she was very clear it's time to act what are we waiting for that you know that's a question more for wash than for anyone else that's why I kind of well let me I'm sorry let me go ahead yeah I mean we got a set we went up from like a 35 to a 60 percent probability for for September it's to me October is off you know it's like the 90% percent probability for October that to me is off the table I can't see them doing anything barring like something truly catastrophic literally the week before the midterms. What's the power though potentially message-wise of just a 25 basis point hike and I ask that because that's not gonna derail the economy it's not gonna derail the market but it wouldn't send a signal that yeah that's sort of backing up your action right your words. In a non political world you are a hundred percent right 25 basis points isn't going to do anything. I believe it was Beth Hammack this morning who said, you know, that financial conditions are as easy as they come. It was one of the people on air this morning. And I don't disagree with her. You know, you look at the Bloomberg liquidity indices, they're all screaming. I think the long end is being hit by liquidity problems because I think everybody's recognizing that not only are the world's central banks needing liquidity, but so are the cash flow generating companies that have been providing liquidity for so long. That's part of it. But I think that's the problem. I think it's smarter.

to make the next step now, that is what is required. Security, clarity, confidence, and trust. And that is why I think this is a really important issue right now. And our thanks to Ted Moynihan, CEO at Oliver Wyman. Now let's take a look at how markets are right now. As we march closer to the closing bell to close out the day and to close out the week on this Jackson Hole Day, we do have equities selling off most of the movement coming out of the small caps. those interest rates, sensitive parts of the market. You can see the Russell 2000 and flat. That is the term here to describe what the yield curve is doing. It's flattening as those shorter dated treasuries really move up higher and rates here, the two year yield up about 12 basis points as traders kind of parse through. We're gonna be seeing rate hikes potentially in September, Romain and that's lifting the dollar as well. Let's bring Steve Sashinick into the conversation. She's strategist over at Interactive Brokers. So I mean, I'll put you on the spot there. You answered that question. I mean, that Fed meeting is what? Less than three weeks away. Are we going to get a rate hike then? I don't think so. Yeah. I've been in the December camp for a while, and it's not necessarily for economic reasons. It's for political reasons. It's, you know, thinking about how Warsh got the job and who he had to appoint him to the job, we know that the president is strongly in favor of cutting interest rates. I think Warsh realizes that's a non-starter, as does pretty much everybody in the markets, but I think he does.

the sentinels, if you will, to protect us. Look, I think it's a great question, Romain. I think AI has been built by technologists and technology companies, but trust relies on all of us to build trust in the systems that we operate and the industries that we're building and the economies that we're in. So I think this is something that really relies on the action of all of us. I do think the letter calls out that AI companies need to act as well. need to create frameworks that are shared with industry, particularly shared with the more vulnerable parts of our industries, critical infrastructure hospitals and so on, and that there is a responsibility on AI companies, technology companies, cyber companies, as well as industry, as well as government. So I welcome that being called out. Are we moving too fast? I mean, is there with regards to you being part of this letter, is there some sense here that folks are actually calling for some sort of slowdown of the deployment and development of some of these AI models? You know, I always say to people that where we are right now, you know, in the AI kind of transformation that we're going through is kind of in the messy middle. You know, we had a few years there where people were just getting into grips with the technology and what it was able to do and rolling out pilots and experimenting. And now where, you know, what we see in our work is we're in a phase where, you You know, people are really trying to scale innovation and scale transformation and, you know, enable their whole organization.

call to action. One of the signatories on that letter was Oliver Wyman. We had a chance to catch up with the CEO, the relatively new CEO of Oliver Wyman and Marsh Consulting, Ted Moynihan to talk about this. Take a listen. We thought this was really timely. We think it needs to be called out that the speed of development of AI means that the risks, in particular the cyber risks, but other risks are amplifying very, very quickly. And the letter does a really good job of calling that out and also making the point that, you know, this is a collective action problem. Is that something though that you had been seen in your role at Oliver Wyman and at Marsh? I mean, you've been advising CEOs now and other companies for, you know, decades. Were you already seeing evidence of this concern out there amongst some of those folks in the C-suite? Yeah, absolutely. What we see is, you know, companies in multiple industries, but also governments, technology companies, AI companies, all feeling that this is a rapidly growing problem which, and I'm from Ireland, we have a saying there that it takes a village to solve a hard problem. This is just that kind of problem that no individual company can solve it alone. And it requires the whole system to work together and really to raise the focus on this. I am curious too about this idea. This letter comes at a time when obviously everyone's focused on the hugging face breach which involved OpenAI's tools sort of going off the reservation. If you will.

And these incumbent solutions, these legacy solutions are just not able to keep up with attacks. So we're seeing a lot of folks now starting to migrate away from these incumbent solutions and into modern endpoint protection solutions. So give me a sense though, I mean, as this built out and I have to ask you, I mean, we all know, I mean, the bigger players out there, the Googles, Microsoft, Palo Alto Networks are all assembling broad security platforms as well. But why does a customer come to Sentinel-1 as opposed to going to those other names. I think it's first and foremost efficacy and it's the autonomous nature of the platform. There aren't many platforms out there that are actually completely holistic and can work out of the box with no, you know, length integration or consultancy work. If you think about somebody like Palo Alto Network it's a great company, but they have about seven or eight different platforms that you need to put together to even get to the point you're starting to get the right visibility into your environment. I think that complexity alone actually leaves more gaps for attackers to go after. So for our customers, we secure some of the most discerning organizations in the world today. Some of the biggest companies, half of the Fortune 10, clearly they look at the efficacy of our product, of our cybersecurity platform, it's something that can be deployed and immediately detect and protect in real time without that human intervention. Tamera really appreciate it. Gotta leave it there. Tamera Wine Garden.

remediate any damage that has been made. We're one of the only vendors in the world today that can actually supply that in any given environment, in public cloud, in regulated environments, in air-gapped environments, federally, but also for schools. So it's an amazing piece of software that runs completely autonomously, scales the defenders in doing their job from protecting this onslaught of attacks. So all in all, we are big believers that the next stage in cybersecurity is going to be waged with autonomous security, not with necessarily just more people, more consultants, more hands-on keyboard, but with software that can actually scale what they do and allow them to be more productive. Your second quarter results, annual recurring revenue, 1.22 billion. That was beating estimates. DPS beat for the second quarter revenue beat what's going to keep the momentum going what's really going to drive growth going forward Yeah, I mean in many ways our emerging solutions sets have accelerated in this past quarter and even in the quarter before We're at this very very interesting juncture that sits there and really provides the fabric for all of your cyber security operations And on top of that, when we think about where models and agents actually run, they run on machines, on workloads, on endpoints. That's exactly what's ...

And right now there's also not a bulletproof solution. Maybe there never will be a bulletproof solution. So the idea that we can just use this technology inherently safely, I think is a bit misguided. I think we're leaning on frontier labs to make sure that they put enough safeguards into their models. And typically, they do. And they do the best they can to achieve that. But you also have open source models. And in the case of open source models, you can really strip out any type of safeguard and use them for whatever you want. So we're entering this very interesting period of time where the defense and how you defend from some of these attacks is not entirely clear. That's where vendors like Central One come in with new capabilities that are designed to always monitor what these models are doing, essentially trying to continuously vet the behavior of the model without making any assumptions that it's gonna do something good or bad. But the models on how you secure this are just not set yet. So it's all being built as customers are starting to adopt AI more profoundly in their environments. How then do you differentiate yourself from all the other competition out there in the cybersecurity space when you're trying to basically get more customers and convince them that they should go with Sentinel-1? I think our approach has been there for about a decade now.

really know who's protecting us right now. Yeah that's a great question and I think it's twofold. One is the safety of these models themselves. I mean we just talked about putting these things in classrooms. Do we really know exactly how the model works? Do we have all the patterns of behavior identified? Do we know how it affects our neurological evolution? I I think we don't really have the answers to all of those. And then on top of that, we're seeing malicious usage of these models. Obviously, these models don't really think for themselves. They're waiting for these prompts, for these instructions from humans. And humans can use them for whatever purpose they choose. And we're seeing obviously cyber crime groups. We're seeing nation-state adversaries. They're misusing these models to scale their attacks and go after our critical infrastructure. The underbelly of our entire digital realm is now infused with decades old infrastructure and software. That's just not up to par with the model usage and the capabilities of some of these models. Well, based on what you're actually saying, Tomer, I mean, give me a sense. Are the chief information officers out there, are they actually getting sort of these incremental budgets for AI security? I mean, we know the money's there if you want to build a data center, You want to build out the infrastructure, but is there money being allotted for this to

like the reservation around let's make sure that the child is mature enough and has the core foundational principles in place and the core values in place before you start equipping them with an excessive use of technology is a very sound argument. You just want to make sure that you don't wait for so long that they stop this they don't have an instinct for it and that instinct develops too late. And so it's a fine balance to be made. Like you don't need to start someone at three years old because they might not have the maturity to go out and even absorb the things that they might get to may I. And then over time you might not want to wait until you're 21 to do it either because that might be too late. So there's a fine balance of when you start getting exposed to technology and that maturity level that you would expect from the kids needs to to be there before you can expose them in the right way. All right, G2, great conversation. We gotta get you back, I have a longer one here because it gets into some deep issues. G2 Patel, there he is, the president and chief product officer over at Cisco. And of course, one of those concerns does revolve around the world of a security. And of course that's actually raised some opportunities for a lot of these cybersecurity companies. Our next guest, he runs Sentinel One. And they recently joined the earnings parade joining us right now as a co-founder, chairman, and CEO of Sentinel-1, Tomar Weingarten. Tomar, before we get to some of the numbers out of your most recent report.

there's a technology disruption like the one that we are experiencing right now, which is a seismic shift, you will find that there's going to be some jobs that are lost. Virtually every job is going to get refactored and net new categories of jobs will be created. And so what we need to do is make sure that that the percentage of people that might lose their jobs, you want to upskill society as fast as possible so that the suffering is minimized. And we want to make sure that that we have the right level of skills that are in demand right now that get effectively trained within multiple different venues and we want to make sure that we can help do that. So that's what Cisco has been thinking about. I think one of the things in the tech industry that historically I've never been a big fan of is we take the kind of downside effects of technology as kind of like a matter of like, yeah, that's just the cost of disruption. There'll be some people that lose their jobs and that is real suffering that happens So you want to make sure that you can collectively as a tech community as a society at large Yeah, be involved in upskilling the entire workforce so that they can have the relevant skills for the time and the era They're reliving it But as you're making this push into there and this kind of piggybacks awful what Emily was asking about the right age too I mean we've already seen some schools were trenched from this particularly in in Chicago with Chicago public schools kind of kicking Gemini out at least for now. There are a lot of course questions by parents about

things that children need to learn early on. I'm wondering if you think though, maybe there's a minimum age for when AI shows up in the classroom or this is something that even preschoolers, kindergartners should start adapting or is there like a certain period of development where you actually wanna be completely AI free? That's a really good question. You know, I have to think about that because I have a 15 year old daughter and she got into technology pretty early in her life but we wanted to make sure that we actually didn't have her only doing that. So there were certain kind of tactile skills that we wanted to make sure that she learned as well. So I think your question is a really good one which is you might not wanna have AI available at three years of age or four years of age. You might wanna make sure that there's certain foundational skills that get taught first. Yeah. And then you get to when AI starts to come into the picture. My thinking is like, you know, once you get to seven, eight, nine, you want to make sure that you have that instinct and texture for how it has to work and then just use that as a massive accelerator. But you need to make sure that your first principle foundational skills are in place. So give me a second. I haven't thought about this enough. So like, I might I reserve the right to change my mind as I think about what age you would actually get into it. So it's a really good question, Emily.

from leadership. When you, the higher up you go within leadership, the quality of questions you ask your teams is far more important than the fact that you have all the answers. You're never going to have all the answers, but the quality of questions determine what your success rate is going to be over time. So what does this look like in practice? Is this really about teaching students how to prompt language models? It's about making sure that Emily, the students know how to take. Every individual is going to be a manager of agents. We're going to have agents at our disposal and we need to make sure that we can figure out a way to best utilize those agents to do work on our behalf. And so that's the fundamental shift that has to be made. And so if we can teach students from a very early age to be AI native and know that you're going to have all of these resources at your disposal, but the way in which you go out and deploy those resources is what's going to be the difference maker. That's a very different skill to learn than the way that we've been teaching for a while. Now, that would tell you that there's no harm in having agents assist a human in going out and getting to a certain level of insight, which is not something that we've talked before. open book exams up until now only happen in select courses. And so now you're going from these open book exams to AI available.

knowledge do we have? And knowledge is going to get to be a commodity. And actually, what's not going to be something that differentiates people is how much knowledge you have in your head, but more the quality of questions you can ask, or you can get any any information back and any insight back. And so it's a fundamental structural shift in the mental model that you have to approach education with, which is truly understanding the quality of questions that can be asked so so that you can get exactly what you want back to have original insights that can then be generated to go out and do things that you couldn't do before. But I'm curious about that statement though, G2. I mean, that almost seems to be making an argument for more of a human element in our classrooms. I mean, it's basically, you just basically describe the humanities. Yeah, I actually don't think AI and the human element are mutually opposed to each other. In fact, I think you need both. But that actually tells you even more that you need to have AI in the classroom so that people can actually start to think in very different ways than the way that they've been conditioned to think over the course of the past several hundred years. Can I just, sorry, but on that point, though, and I understand what you're saying, though, but if the idea is that the knowledge itself becomes commoditized, though, but isn't the knowledge itself, to a certain extent, the foundation of that human critical thinking interpretation itself? You can't really have one without the other, or can you? It's just that the ability to acquire knowledge, you don't have to keep it all in your head. You don't have to retain it all in your head. What you'll be able to do is get a far...

We have a tool for this. It's called democracy. Bringing you the most important news and financial information whenever and wherever it happens. I'm Michael McKee on the Mexican border. And this is Bloomberg. I think the most important thing in education is the productive struggle. And if you all flow that productive struggle to an AI, it's not a great learning experience. And so what I'm seeing is that educators, first and foremost, the educators need to be educated in how to use AI. And then the appropriateness per assignment. You know, this assignment you can have AI do some ideation with you. This one you can use it to correct your work. In this case, you shouldn't use AI at all. We have to teach both the teachers as well as the students when there's productive struggle and when there's not. That was McGraw Hill CEO Phillip Moyer on our show earlier this week discussing AI's influence on education. And our next guest is promoting now AI ready campuses, AI in the classroom and pledging to train more than a million more people in the U.S. in AI digital skills over the next four years. Joining us right now is the president of Cisco and the chief product officer G2 Patel. G2, great to have you here on the program. First, let's start off with exactly what AI actually means, meaning AI in the classroom I should say actually means. So when we talk about that, what is the

We believe in taking a moment, assessing the conditions. Because not every signal is a signal to act. Our trading analytics surface the context and leave the decision with you. Capital.com, the trading platform that's built for better decisions. The end of jobs, or the end of human struggle. We see the endless funds fueling the AI hype. While others follow the noise, we follow the money. Values or like moral system. Instead it's based on building an AI that will be completely honest and humble about what it knows and doesn't know. Once you have something like this you can ask questions about particular preferences that you or I or a particular company or government has about what is acceptable, what is not acceptable. because if you build an AI that embodies a particular set of moral values, well maybe different people have different views of what is good and bad and different countries and so on. The preferences of different companies could also be different. So that's one reason why it would be better if it is something we can do at runtime to ask is this action going to violate these instructions and also Honesty is super important. Like I wouldn't...

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Then the inevitable conclusion is go on and take a lot of risk. What's the no need to, no need to have risk control. So as an active manager who overlays, trying to control the amount of risk we take, that's coming back into the vote. I don't think it's necessary if they lay out a path which they did before of lower rates. I do want to ask about the other kind of big event that circled this week. And that, of course, was Nvidia and really just the broader conversation around the AI trade. If you believe what we saw from Nvidia, that's still intact. The spending's still there. And he expects, Jensen Wong expects that spending to at least be strong, at least through 2028. Do you look at the valuations on some of these stocks, the hyperscalers, the picks and shovel companies, even the software makers, and say to yourself, this is still a buy through 2028? The market, these stocks traded, they traded very reasonable valuation. So the market is saying we don't believe in the duration of this trade the way that these companies are articulating to us. So that is the decision that as an investor you have to make. Is the duration going, why are the memory stocks are single digits? The market is telling you this could be peak earnings. I don't think so. I think it's going to last longer. But that is the key decision.

in the market today. Now the market's ladder down a little bit. But if you look under the hood, what you see is that real speculous stocks are not doing well. Well, why is that? Well, speculous stocks work. If you know the Fed's going to cut rates, they did very well after last year's Jackson Hole event when drone policy were cutting rates. They don't do well in a raising environment. They are selling off. Money is moving into the more stable, larger mega-cap tech stocks that are less vulnerable if in fact rates move higher. Financials? Great for financials. You're saying rates will stay high. So I think there is leadership change. And then I guess the other thing that I would say is, you know, if you're hoping for P expansion, that's not that's not going to happen. I think the way you also say economy is very strong. And you know, I think earnings can drive this stock market to higher level by year end. But don't expect any P expansion. Okay, so speculative stocks not working small caps, not working. This is just then reiterating the play that's been really driving the market for so long as you said, right? Large cat mega cap tech stocks. That's just where you want to concentrate the portfolio going forward. Well, I mean, yeah, but not.

Surprisingly, we learned a lot today out of the Fed share, Kevin Warsh. One interesting comment that he made was a so-called Hall of Mirrors problem, as he referred to it, where the markets sort of rely materially on the Fed's guidance and the Fed relies on market prices. He's basically saying we're all more likely to be blinded to new developments. It's an interesting turn here, and quite frankly, it allows the market to maybe get a better sense of exactly not just how Kevin Warsh thinks, but exactly how how this Fed will be guided. Andrew Sleiman, his senior portfolio manager at Morgan Stanley Investment Management. I'm sure you were listening to this speech, we all were. And it gets to this idea Andrew, do you walk away from this, certainly vis-a-vis what we had on July 29th at the last Fed meeting, do you walk away from today, here on this August 28th, feeling more confident about at least having an idea of where the Fed might go next? Yeah, I mean, I don't think I think he reiterated and went to more detail of what he laid out earlier, which is the Fed's not going to be as communicative Hall of Mirrors simply says it's they're not going to lead the market. And I think he's been very consistent. I think it's I think it's very healthy. I'm happy with the what he said. But I don't I'm not shocked anything he said I think it's very consistent with what we heard before just more detail. And now that you have that detail, I mean, how do you sort of

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Nvidia just sort of nailing that point home, but it's not just Nvidia. A lot of people saying you can see the productivity, even if the benchmark numbers don't highlight it. You're seeing it in margin expansion in the rest of the forgotten 493 that have not been forgotten this year within the S&P 500, clearly in the Russell 2000. So even though today you're seeing the sort of knee jerk, what's rate sensitive, let's sell. You haven't seen that over the past couple of months when actually the Russell 2000 has gained more, has outperformed even in the face of already people baking in the prospect of higher interest rates. So ultimately people take misinstride saying that this is an economy that can handle it. The real question is, is this a government that can handle that? And that's what I'm curious to hear from IMF managing director, Crystalina Georgieva. At what point does the fiscal overhang become the real problem and something that governments have to deal with? Not necessarily a central banking problem where you have inflation running too hot for too long and them looking to step in. All right, Lisa, we're gonna check back in with you in just about an hour's time. Of course, the US Rates Story, an international story. Kristalina Gorgieva there, the managing director of the IMF will be joining Lisa out there in Jackson Hole. Meanwhile, back here in New York, when we come back, we're gonna assess some of the risks that investors are now having to confront. We're gonna catch up with Andrew Slemon, senior portfolio manager and Morgan Stanley Investment Management. That's coming up next year on The Close, right here on Bloomberg.

Kevin Warsh has essentially not locked himself in for a September raid hike, but clearly put that back on the table in a way that it wasn't prior to 10 a.m. Eastern today. Ultimately people are saying 65 months of above target inflation at a time where he is looking at core PCE clearly from what his speech delivered, talking about how actually the components underneath PCE were broad based, not just having to do with oil or or tariffs or AI gives the sense that there is a lack of patience and that he is ready to deliver along with a lot of the committee. Look, Beth Hammack has been hawkish for a while. The Cleveland Fed president has come out and said that people in her district are asking her to do something about inflation, that they are feeling it bite into their budgets and that it's really becoming an increasing problem. I heard that from others as well on the sidelines here. It seems like people are saying it is not enough to have an excuse of where the inflation is coming from the absolute price level has gotten incredibly concerning that has been my takeaway is that ultimately the Kevin Warsh that came out a lot more hawkish than some people were expecting he did deliver something it was not a no-nothing no saying nothing kind of speech he delivered a sense that he was concerned and he was prepared to take action and that frankly is the tone heading into the weekend and it's clearly what you're seeing bleed out through markets yeah Lisa what was the reaction of the investors that you spoke to in Jackson Hole because we're seeing the market reaction right now. It's a yield curve that's flattening. It's equities that are selling off. But what were people saying about worship speech?

A new digital order isn't defined by technology alone. As sovereign AI reshapes digital independence, as agentic AI transforms decisions, as quantum unlocks new possibilities, every breakthrough demands a cyber-first mindset. That's why the future meets at Gisec Global, the Middle East and Africa's largest cyber security event. We shape policy and power innovation. We protect the digital order. Weekend routine. Guys, buckle up! Bringing you up to the minute news whenever and wherever it happens. I'm Lisa Abramowitz in Rio de Janeiro and this is Bloomberg. Welcome back to the close live from our studios in New York City but all the action right now is happening out in Jackson Hole, Wyoming. That's where Bloomberg surveillance co-host Lisa Abramowitz has been staked out all day long. She obviously had a sideline view to that keynote speech by Kevin Warsh earlier today but you've also had a lot of interviews Lisa and you had one that actually occurred prior to Kevin Warsh's statement. And that was with Beth Hammack, and she was pretty direct in about this idea that it's kind of time for the central bank to now start raising rates by.

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sort of look at an inflation fight as being a function of that, complementary to that, or working against that? Well, I think the good news is the banking industry as a whole is very well capitalized, companies and banks like BMO, we're in a very good position to be able to support our clients. And so right now we have the capability and the capacity to deliver the capital, whether it's for smaller businesses all the way up to our largest corporate clients. So banks in general and certainly a bank like BMO has more than enough capital to provide and to help fund future growth. As we sort of, I guess, head into whatever the wild blue yonder has, I mean, we're talking about economy, at least on paper, that seems to be holding up. Inflation, high, but not necessarily out of control, and now Fed Chair, who seems to be clear that he's willing to commit to that. Emily just mentioned the AI boom, a big driver of our economy. As you look for new opportunities heading into next year, does that become a repeat of the playbook for 2026 or are you now looking to something different? Yeah, for us we are focused on working with our clients across a range of opportunities. Certainly we deliver on loans and banking, but also critically important is our ability to help them with their liquidity and cash management. Very excited that our treasury business grew 15% year over year on top of a 23% growth a year before that. Capital Markets, our middle market M&A business has some of the largest pipelines that we've ever seen so I think the key and how we act

AI or just really looking at process and expense and all of our clients are really thinking through that in a way that, in a disciplined way. But for us, we're seeing growth across a lot of different sectors. We saw growth in our commercial real estate area, our asset-based area, our dealer finance, in engineering and construction, and in our core M&I and even into our emerging middle market. So, we're really seeing good consistent growth where clients are saying, we understand the uncertainty, we understand some of these different potential scenarios, but we are thinking through how do we grow and how do we make sure we're successful regardless of the outcome. How much of that growth is coming from AI whether it's you know in in credit markets in equity markets versus BMO maybe looking to diversify and offer clients something outside of the AI trade. Yeah look obviously broadly for the economy there is a lot of growth tied to AI but for us are kind of focused on in the Midwest and has been a core. So we work with clients across a lot of industries that aren't necessarily as directly tied to AI. Certainly as we've grown in California with the acquisition that we made of Bank of the West, we start seeing some of those more technology related sectors. But broadly, we see growth from beyond just the AI play. I do just want to kind of go back though, too. I don't want to keep harping on every single word that Warsh said, but there was also a lot of talk in his speech about this idea.