WEBVTT - Bloomberg Surveillance TV: June 12th, 2026 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordernt. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.960 Terminal and the Bloomberg Business App. Stuart Kaiser City writing, 0:00:37.960 --> 0:00:40.919 there hasn't been much market breath lately on both sealovs 0:00:41.000 --> 0:00:43.960 and rallies. The market has been mixed as people rotate 0:00:44.240 --> 0:00:47.080 instead of broad changes in risk. Stuart joins us now 0:00:47.080 --> 0:00:49.440 for more Stupid Morning. I know you can't talk much 0:00:49.440 --> 0:00:51.960 about this IPO specifically, but the amount of IPOs that 0:00:52.000 --> 0:00:53.400 are coming to the market at the moment, do you 0:00:53.400 --> 0:00:55.320 see them as a red flag for the ball market 0:00:55.480 --> 0:00:57.160 or a green flag to deploy more capital. 0:00:57.480 --> 0:00:59.240 I mean, UTIM worth to see how they perform, and 0:00:59.240 --> 0:01:01.640 I think it's not just pos right. You have secondary 0:01:01.640 --> 0:01:04.400 offerings from Meta from Google, from Amazon, you have tremendous 0:01:04.400 --> 0:01:06.680 amount of convertible bond issue, its HIGHG bond issue, and 0:01:06.760 --> 0:01:10.040 so this is a sort of broad based demand for capital, 0:01:10.080 --> 0:01:11.640 and I think a lot of investors are looking at 0:01:11.640 --> 0:01:14.680 this is one of the largest construction and industrial production 0:01:14.760 --> 0:01:17.119 cycles the world has ever seen, right, and that needs 0:01:17.120 --> 0:01:19.440 to be financed. And what we're seeing I think the 0:01:19.560 --> 0:01:21.320 last couple of weeks is a little bit of a 0:01:21.360 --> 0:01:24.800 friction in the market as people digest just the enormous 0:01:24.800 --> 0:01:26.000 amount of capital that's going to need to. 0:01:25.959 --> 0:01:27.640 Be raised to get those push backs too that we've 0:01:27.680 --> 0:01:31.160 talked about Meta Auricle maybe spending too much thinking about 0:01:31.240 --> 0:01:34.360 raising more capital stock markets pushback. A ural company is 0:01:34.360 --> 0:01:36.280 going to be treated the same, maybe just isolating the 0:01:36.280 --> 0:01:36.880 weak points. 0:01:37.640 --> 0:01:39.720 I mean, I don't think all all companies will be 0:01:39.720 --> 0:01:42.280 treated the same. You know, the winners are going to 0:01:42.360 --> 0:01:44.360 the winners, and the big free cash flow companies like 0:01:44.360 --> 0:01:46.000 we see from the Max seven the last couple of years, 0:01:46.000 --> 0:01:47.520 are going to be able to raise that capital. And 0:01:47.760 --> 0:01:49.840 companies that are maybe the Tier two or the tier 0:01:49.840 --> 0:01:51.800 below that are going to see credit spreads rise and 0:01:51.800 --> 0:01:54.000 going to see some more pressure. I think what's gotten 0:01:54.000 --> 0:01:58.200 people's attention recently is last year was all about definancing, right, 0:01:58.280 --> 0:02:00.640 this year it's been about equity finance. So that's got 0:02:00.680 --> 0:02:03.000 in equity investors attention. I wait, this applies to us 0:02:03.000 --> 0:02:05.640 as well, Like this doesn't seem very fair, and much 0:02:05.680 --> 0:02:08.000 like Lisa, I was forced to watch Star Trek against 0:02:08.000 --> 0:02:10.040 my will, so you know, I have some scar tissue 0:02:10.040 --> 0:02:12.760 that I'm working through as well related to this. We 0:02:12.800 --> 0:02:13.640 talked about that later. 0:02:13.720 --> 0:02:15.400 You know, this is actually something I think a lot 0:02:15.440 --> 0:02:17.560 of people on Wall Street probably are working through this morning. 0:02:17.919 --> 0:02:19.400 There is a sense though, and you talked about this. 0:02:19.480 --> 0:02:21.840 John was talking about the rotating pool of capital and 0:02:21.840 --> 0:02:24.040 how it's going from different names and different pockets, and 0:02:24.040 --> 0:02:26.280 the breath has been really bad. How much of people 0:02:26.360 --> 0:02:29.320 selling some of the previous winners to get in on 0:02:29.639 --> 0:02:30.880 the new, hot and shiny thing. 0:02:31.360 --> 0:02:34.120 You know, it's a tough situation right now because the 0:02:34.160 --> 0:02:36.760 winners is still where people want to be. And this 0:02:36.840 --> 0:02:40.120 year has been really defined by estimate revisions. Earning's going 0:02:40.200 --> 0:02:42.720 higher and that's driving stock returns, and frankly, that's been 0:02:42.760 --> 0:02:45.200 in a relatively narrow part of the market. So as 0:02:45.280 --> 0:02:48.040 much as people might want to rotate, when you say okay, 0:02:48.040 --> 0:02:49.640 when you rotate, you have to sell this guy and 0:02:49.639 --> 0:02:51.840 buy that guy. The guy they have to buy is 0:02:51.880 --> 0:02:54.280 not something they want to own, right, So in some sense, 0:02:54.320 --> 0:02:57.240 it's like you're being forced to rotate against your will 0:02:57.280 --> 0:03:00.520 a little bit. And it's been a little bit tricky. Look, 0:03:00.560 --> 0:03:01.840 some of the stuff is up so much. If we 0:03:01.880 --> 0:03:03.919 look at NASDAK earnings are up ten percent since the 0:03:04.040 --> 0:03:07.200 end of March. Semiconductor's earnings have been revised up seventeen 0:03:07.240 --> 0:03:09.680 percent since the end of March, So you kind of 0:03:09.680 --> 0:03:12.840 fade that at your own risk. Is that done? And 0:03:12.880 --> 0:03:14.520 I think a lot of investors do not think those 0:03:14.560 --> 0:03:17.560 revisions are done. They still want access to those positive 0:03:17.560 --> 0:03:20.239 earnings revisions. So I think people are planning a little 0:03:20.240 --> 0:03:23.120 bit of hopscotch amongst the AI winners. Oh this looks 0:03:23.120 --> 0:03:25.320 a little overdone. Let me move here, but it's not, 0:03:25.600 --> 0:03:28.639 you know, I want to move down the quality spectrum 0:03:28.639 --> 0:03:31.320 would be really too far away from that AI trade. 0:03:31.400 --> 0:03:34.000 Something you mentioned that the dept marks have gotten used 0:03:34.040 --> 0:03:35.920 to being tapped again and again to build out the 0:03:35.920 --> 0:03:38.119 industrial Revolution, and they certainly have been over the past 0:03:38.160 --> 0:03:41.400 two years. Now it's equity markets turn at the same 0:03:41.400 --> 0:03:43.160 time as it's being driven by the fact that equities 0:03:43.160 --> 0:03:46.119 look like a better risk reward proposition at a time 0:03:46.120 --> 0:03:49.520 of earnings growth like the kind we've seen, given that 0:03:49.640 --> 0:03:52.760 inflation is going to be higher that yes, bond yields 0:03:52.760 --> 0:03:55.200 are higher than they have been historically, but in some 0:03:55.240 --> 0:03:57.600 ways aren't necessarily even going to keep pace with inflation 0:03:57.600 --> 0:03:57.960 over the. 0:03:57.880 --> 0:04:00.320 Next couple of years. And you also have this situation 0:04:00.360 --> 0:04:01.880 where the credit marks are going to start to look 0:04:01.920 --> 0:04:05.040 a lot more like the equity markets, right because large 0:04:05.040 --> 0:04:07.360 cap tech and the mag seven are issuing debt, all 0:04:07.400 --> 0:04:09.520 that desk going to go into the credit indsease. So 0:04:09.560 --> 0:04:11.960 this sort of sector concentration you have with in equity 0:04:12.160 --> 0:04:14.240 actually is going to exist within credit. So you're not 0:04:14.280 --> 0:04:16.920 you're sort of you're not getting all the upside reward, 0:04:17.040 --> 0:04:18.920 but you're actually getting a lot of the risk and 0:04:18.960 --> 0:04:21.760 the concentration. So you know what we'll see ultimately how 0:04:21.800 --> 0:04:23.360 that health that plays out. I mean, I'm an equity guy. 0:04:23.360 --> 0:04:25.240 I'm going to tell you what equities, not the. 0:04:25.240 --> 0:04:29.000 Bond usually bond allocated money going into the equity space 0:04:29.040 --> 0:04:31.000 because of exactly this dynamic. 0:04:31.040 --> 0:04:33.200 You know, I mean, money's been coming into the equity space, 0:04:33.240 --> 0:04:35.600 you know, kind of from all directions. The beauty of 0:04:35.600 --> 0:04:37.520 the bomb market though, is your you know, you're constantly 0:04:37.560 --> 0:04:39.599 recycling coupon payments and stuff like that. I mean, the 0:04:39.560 --> 0:04:41.599 bond market's healthy. Look where credit spreads are, you know, 0:04:41.760 --> 0:04:44.719 there's not like an issue on the credit side. But 0:04:44.800 --> 0:04:46.960 to your point, you're you're making a decision there of 0:04:47.000 --> 0:04:48.520 you know, do you want your fixed payout or do 0:04:48.560 --> 0:04:51.400 you want access to that sort of upside earnings revision 0:04:51.440 --> 0:04:54.680 and the revisions are just like goofy powerful this year, 0:04:54.920 --> 0:04:56.680 so it's kind of hard to step away from that, 0:04:56.720 --> 0:04:57.599 I think for most people. 0:04:57.720 --> 0:05:01.119 So you're described the changing characteristics of they US credit market. 0:05:01.240 --> 0:05:03.800 Can we talk about the changing characteristics of the index 0:05:04.120 --> 0:05:06.159 the Nasdaq? What that's going to look like is we 0:05:06.200 --> 0:05:10.359 introduce some loss making companies with massive market caps and 0:05:10.360 --> 0:05:12.000 we do so really quickly. 0:05:12.040 --> 0:05:14.040 How's the character of the NASTAK going to change? Well? 0:05:14.080 --> 0:05:16.000 I think what's interesting is the size of some of 0:05:16.040 --> 0:05:18.960 these i pos is just so big historically because they 0:05:18.960 --> 0:05:21.120 didn't they IPILD late. I guess would be a way 0:05:21.120 --> 0:05:22.919 to way to look at that. And the other interesting 0:05:22.960 --> 0:05:24.520 thing with the indices is a lot of these things 0:05:24.560 --> 0:05:26.560 are going to be a Nasdaq pretty quick and not 0:05:26.640 --> 0:05:28.200 in the S and P for a while, so you 0:05:28.279 --> 0:05:30.000 kind of get a little bit of a divergence, you know, 0:05:30.040 --> 0:05:32.200 between between how the two things look. You know, for 0:05:32.279 --> 0:05:34.520 Nastak specifically, we have to see how it all plays out, 0:05:34.560 --> 0:05:37.440 but it's not unusual to have sort of higher volatility, 0:05:37.520 --> 0:05:38.680 you know, stocks with a lot of argy. 0:05:39.040 --> 0:05:41.920 Question, does just that just amplify the existing difference that 0:05:41.960 --> 0:05:43.640 already exists between the two indexes? 0:05:44.320 --> 0:05:46.800 You know, look, the concentration in SMP has gotten pretty 0:05:46.839 --> 0:05:48.160 high as well. But yes, it will. I mean, you 0:05:48.200 --> 0:05:50.039 could be in a situation later this year where there 0:05:50.080 --> 0:05:52.920 are two or three you know, new IPOs that people 0:05:52.920 --> 0:05:55.040 will really want access to that are in one index 0:05:55.120 --> 0:05:57.440 or the not and not the other, and you will 0:05:57.440 --> 0:05:59.000 get a divergence there, And yeah, it will, I mean 0:05:59.360 --> 0:06:01.000 just by definition, and I think it'll kind of widen 0:06:01.000 --> 0:06:01.920 out the gap between the two. 0:06:01.960 --> 0:06:04.440 Do you buy the argument that with increased supply, the 0:06:04.560 --> 0:06:08.440 dynamics of the equity market are changing enough to dilute 0:06:08.440 --> 0:06:10.600 some of the demand that just the technical is alone 0:06:10.720 --> 0:06:13.040 should take away some of the heat that's been underpinning 0:06:13.040 --> 0:06:13.880 the equity markets. 0:06:13.920 --> 0:06:16.080 I mean, just like too much supply not enough demand. 0:06:16.320 --> 0:06:18.200 You know, that's what we've seen. I think the last 0:06:18.240 --> 0:06:20.720 couple of weeks, right is people are you know, looking 0:06:20.760 --> 0:06:23.240 at it a little more critically in terms of how 0:06:23.320 --> 0:06:25.640 much equity supply am I going to need to absorb 0:06:25.800 --> 0:06:27.920 over the next six to nine months? And what does 0:06:27.920 --> 0:06:29.920 that mean for performance? From my perspective is you know, 0:06:29.960 --> 0:06:32.080 I'm a good news is good news guy, and if 0:06:32.160 --> 0:06:35.000 those earnings numbers are getting revised up in the way 0:06:35.040 --> 0:06:38.320 they are, there's only so long you can keep yourself 0:06:38.360 --> 0:06:41.680 away from that, right. I mean, you revised up Nasdaq 0:06:41.720 --> 0:06:44.120 earnings one percent in the last week. I mean that's 0:06:44.160 --> 0:06:47.680 just like a stunning, you know, rate of change. So yeah, 0:06:47.880 --> 0:06:49.919 I guess perhaps you know where there's a little bit 0:06:50.000 --> 0:06:53.320 indigestion going on right now, and it's almost perspective indigestion 0:06:53.440 --> 0:06:55.640 because people are looking at the next six to nine 0:06:55.640 --> 0:06:57.880 months and what is the total amount that gets issued? 0:06:58.600 --> 0:07:01.119 If your jamming earnings that's high they are, there's always 0:07:01.120 --> 0:07:01.920 something you get ignored. 0:07:02.240 --> 0:07:03.960 Let's get another waes down. The technical is if i'd 0:07:03.960 --> 0:07:06.840 buy banks like up here sky high, really reducing the 0:07:06.880 --> 0:07:08.640 amount of flow, the amount of stock that's available for 0:07:08.680 --> 0:07:11.000 people to buy, the shrinkage that everybody's been talking about. 0:07:11.280 --> 0:07:13.360 As the spread starts to close, and I know it's 0:07:13.360 --> 0:07:15.680 still wide because it starts to close. Does that dynamic matter, 0:07:15.760 --> 0:07:17.000 That's really what Lisa's asking. 0:07:17.240 --> 0:07:19.400 Yeah, I mean it can matter. I mean, there was 0:07:19.440 --> 0:07:21.600 some discussion that some of this capex vending was going 0:07:21.640 --> 0:07:23.840 to eat into into buybacks and stuff like that, and 0:07:23.880 --> 0:07:25.880 now you're actually getting equity issuance. So to your point, 0:07:25.920 --> 0:07:27.560 you're kind of going the other way. What's interesting too, 0:07:27.680 --> 0:07:29.760 is a lot of these companies started issue with dividends 0:07:29.840 --> 0:07:32.800 less than eighteen months ago and are now kind of 0:07:32.800 --> 0:07:34.920 committed to that. So yeah, look, there is there is 0:07:34.960 --> 0:07:37.200 a little bit of a supplied demand dynamic, you know, 0:07:37.280 --> 0:07:39.000 going on. But to your point, this has been a 0:07:39.080 --> 0:07:43.320 multi decade issue of you know, shrinking number of publicly 0:07:43.360 --> 0:07:46.080 traded companies, et cetera. So it's not something you're going 0:07:46.160 --> 0:07:49.960 to fix or reverse in six months, right, it would 0:07:50.000 --> 0:07:51.080 take longer than that, I think. 0:07:51.600 --> 0:07:55.120 Stay with us. More Bloomberg surveillance coming up after this. 0:08:04.160 --> 0:08:07.160 The former deputy National Security Advisor Victoria Coats writes the 0:08:07.200 --> 0:08:10.000 following President Trump has demonstrated that he can bomb what 0:08:10.040 --> 0:08:12.239 he wants when he wants in Iran and there's little 0:08:12.320 --> 0:08:14.240 or nothing the regime can do about it. 0:08:14.480 --> 0:08:15.400 Victoria joins us. 0:08:15.360 --> 0:08:17.880 Now for more, Victoria, welcome back to the program. The 0:08:18.000 --> 0:08:22.880 US has demonstrated repeatedly that it has military superiority over Iran, 0:08:23.000 --> 0:08:25.160 both in the skies and intelligence and so on and 0:08:25.200 --> 0:08:28.440 so forth. How do they ensure the US that they 0:08:28.480 --> 0:08:33.240 translate that superiority into a superior deal that benefits the US. 0:08:34.200 --> 0:08:36.400 Well, good morning, John. Yeah, I think we've actually seen 0:08:36.400 --> 0:08:38.520 that play out in real time over the last couple 0:08:38.600 --> 0:08:40.560 of days. And I admit I am a little nervous 0:08:40.600 --> 0:08:44.280 that Tyler's going to pop back up with another changing headline. 0:08:44.320 --> 0:08:47.120 In this current news cycle, a lot of things are shifting. 0:08:47.360 --> 0:08:49.120 So take all this with a grain of salt, But 0:08:49.160 --> 0:08:53.480 it looks like what happened to my eye is that 0:08:53.559 --> 0:08:56.360 everybody thought the president was done with kinetic action. He 0:08:56.480 --> 0:08:59.400 wasn't going to go back in the Iranians, whereas he says, 0:08:59.480 --> 0:09:02.640 tap tap tapping the Americans along, and he decided, you 0:09:02.640 --> 0:09:04.600 know what, we can go back in. We can go 0:09:04.640 --> 0:09:06.600 and bomb a bunch of these sites. And I've heard 0:09:06.640 --> 0:09:10.079 them described as blinding targets. So you're getting rid of 0:09:10.120 --> 0:09:13.120 their radars, their ability to see things, their ability to 0:09:13.200 --> 0:09:17.040 launch missiles. Did it for two nights and then threatened 0:09:17.040 --> 0:09:19.800 carg Island, and I think the Iranians thought, wow, maybe 0:09:19.840 --> 0:09:22.440 this isn't what we've been dealing with for the last 0:09:22.520 --> 0:09:25.160 forty five years, and that we need to make a 0:09:25.200 --> 0:09:27.320 deal or else we're going to sustain damage that we 0:09:27.400 --> 0:09:31.800 can't recover from. So I do think that military superiority 0:09:31.920 --> 0:09:34.400 is a fact. We are the ones who are stopping 0:09:34.440 --> 0:09:37.480 ships in the street right now. They are threatening ships, 0:09:37.600 --> 0:09:39.839 but we're shooting down their drones. We're the ones who 0:09:39.880 --> 0:09:43.160 are actually disabling the tankers. So that's the reality the 0:09:43.160 --> 0:09:46.560 Iranians face. Hopefully it means they're going to start making 0:09:46.600 --> 0:09:48.560 some better decisions Victoria. 0:09:48.920 --> 0:09:51.160 With all due respect, I'm looking at what the market 0:09:51.160 --> 0:09:54.000 reaction was yesterday, and that was not the interpretation of 0:09:54.080 --> 0:09:56.680 the market. When the initial headlines came out and the 0:09:56.720 --> 0:09:59.720 t social posts from President Trump, the reaction of markets 0:09:59.800 --> 0:10:03.040 was don't believe you. You've talked about a potential escalation before, 0:10:03.400 --> 0:10:06.160 why should this be any different. And essentially, if you 0:10:06.200 --> 0:10:08.200 take a look at what Marius is reporting, the semi 0:10:08.400 --> 0:10:12.040 official news agency out of Iran, it's a sixteen point deal, 0:10:12.160 --> 0:10:14.760 a fourteen point deal that includes some that are still 0:10:14.880 --> 0:10:16.880 very controversial and similar to what they were a couple 0:10:16.920 --> 0:10:19.880 of months ago. What gives you confidence that anything was accomplished? 0:10:20.960 --> 0:10:23.280 Well, I mean, I don't actually get my news from 0:10:23.960 --> 0:10:26.800 They haven't proven terribly reliable in the past. What they 0:10:26.840 --> 0:10:29.240 tend to be is a messaging device actually to the 0:10:29.240 --> 0:10:32.600 Iranian people from the regime. They're trying to signal to 0:10:32.640 --> 0:10:35.520 the Iranians what they want to have in this deal. 0:10:35.840 --> 0:10:38.520 And so this is maya a lot of wishful thinking 0:10:38.840 --> 0:10:41.000 out of the Iranian regime. I'm going to wait and 0:10:41.040 --> 0:10:45.360 see what's actually in the deal before I just make 0:10:45.440 --> 0:10:49.400 up my mind about it. But obviously, Lisa, we're dealing 0:10:49.480 --> 0:10:53.360 with the Iranians. They have been obstreperous before. That is 0:10:53.400 --> 0:10:56.719 theirs that's their brand, if you will. They're going to 0:10:56.840 --> 0:11:00.800 try to continue the sort of stale we're in as 0:11:00.840 --> 0:11:02.840 long as we can. But I think the fact that 0:11:02.880 --> 0:11:06.160 the president has both been willing to do hugely more 0:11:06.240 --> 0:11:09.480 than any other American president to degrade that regime, to 0:11:09.559 --> 0:11:13.200 degrade their nuclear program, to demand his red lines, and 0:11:13.240 --> 0:11:15.440 then was willing this week, you know when in the 0:11:15.480 --> 0:11:19.240 situation where there is significant political pressure on him to 0:11:19.600 --> 0:11:22.280 you know, wrap this up, get to a deal, any deal, 0:11:22.440 --> 0:11:25.280 But he hasn't been doing that. He's been sticking to 0:11:25.320 --> 0:11:27.640 his red lines. So you know, as I said, I'm 0:11:27.640 --> 0:11:29.520 going to wait and see what's actually in the deal 0:11:29.640 --> 0:11:33.040 rather than believe Mahre. And you know, as for market reaction, 0:11:33.200 --> 0:11:36.160 I mean, the stock market went up a thousand points yesterday. 0:11:36.240 --> 0:11:38.600 That's that's not a bad thing. Well, Victoria, what. 0:11:38.559 --> 0:11:41.320 Gives you confidence at this time something has changed in 0:11:41.360 --> 0:11:43.120 the negotiating position from Ran. 0:11:44.120 --> 0:11:46.120 Well, it doesn't look. It looks to me like they 0:11:46.160 --> 0:11:49.960 are shifting. That they are realizing that the situation for 0:11:50.080 --> 0:11:53.280 them is one of diminishing returns, and so you know, 0:11:53.360 --> 0:11:57.520 they can demand to have control over the straight going forward. 0:11:57.600 --> 0:11:59.520 But the fact of the matter is that the rest 0:11:59.600 --> 0:12:02.920 of the re that they've so completely alienated is busily 0:12:02.960 --> 0:12:07.480 building infrastructure to make that completely irrelevant. So you have 0:12:07.600 --> 0:12:12.280 the Saudi petrolne pipeline that we've discussed, We've got UAE 0:12:12.440 --> 0:12:17.400 building the Fujira pipeline around the street, and talk of 0:12:17.440 --> 0:12:20.400 a natural gas pipeline that Katar would have access to 0:12:20.480 --> 0:12:25.880 across the Arabian Peninsula. So the Iranians are in a 0:12:25.920 --> 0:12:29.120 position where they have fewer and fewer cards even if 0:12:29.160 --> 0:12:32.960 they are if they are obstinate at the negotiating table, 0:12:33.000 --> 0:12:35.920 and eventually they're just not going to have that much 0:12:35.960 --> 0:12:37.079 regional leverage. 0:12:37.760 --> 0:12:41.280 Stay with us more Bloomberg surveillance coming up after this. 0:12:50.600 --> 0:12:53.120 Some on Wall Street expecting SpaceX that tap the debt 0:12:53.160 --> 0:12:56.640 market shortly after a record breaking IPO, sources telling us 0:12:56.640 --> 0:12:59.040 here at Bloomberg the company has lined up investment great 0:12:59.160 --> 0:13:02.480 ratings from three major bond graders. Zach Griff, it's a 0:13:02.480 --> 0:13:05.000 credit size, writing, I don't think there's any precedent to 0:13:05.120 --> 0:13:07.640 draw for a company like SpaceX to understand what they're 0:13:07.720 --> 0:13:11.080 rating should be. Zach joined just now for more, Zach, welcome. 0:13:11.120 --> 0:13:13.840 You heard the words of our previous guest. It's clearly 0:13:13.880 --> 0:13:17.200 an ig rated company. Do you see it differently? 0:13:19.000 --> 0:13:21.920 No, we don't. And in terms of what drives that 0:13:22.080 --> 0:13:25.600 ig rating, John, you have the new or relatively recent 0:13:25.679 --> 0:13:30.680 Google and anthropic deals, those aren't captured in the LTM metrics. 0:13:30.720 --> 0:13:33.200 And when you think about the loan to value consideration 0:13:33.320 --> 0:13:35.800 that I think you were just highlighting from Bruce Richards 0:13:35.800 --> 0:13:39.880 there it's one to two percent of the overall enterprise value, 0:13:39.920 --> 0:13:43.120 and so there's obviously a ton of equity valuation ahead 0:13:43.160 --> 0:13:45.679 of that credit. And so while that's not something that 0:13:45.840 --> 0:13:48.120 the ratings agencies tend to look at, we do think 0:13:48.160 --> 0:13:51.040 it plays a factor here, and so we are expecting 0:13:51.080 --> 0:13:54.280 an IG rating on SpaceX when they come to the market, 0:13:54.320 --> 0:13:57.200 and we think that'll be relatively quickly after the IPO. 0:13:57.320 --> 0:13:59.920 Today, it's incredibly difficult to value a company like this. 0:14:00.040 --> 0:14:02.480 We've heard a lot of different opinions so far this morning, 0:14:02.559 --> 0:14:05.280 and to evaluate whether it's investment rate or high yield. 0:14:05.679 --> 0:14:09.120 But does the bulk of equity being raised give you, 0:14:09.160 --> 0:14:12.600 as a bond analyst comfort that the equity markets are 0:14:12.640 --> 0:14:14.880 sharing in some of this and are actually sharing the 0:14:14.880 --> 0:14:17.320 first lost piece and give you confidence that they can 0:14:17.400 --> 0:14:19.120 raise more debt at a better value. 0:14:20.560 --> 0:14:22.840 Yeah, a lot of comfort, Lisa, when you think about 0:14:22.840 --> 0:14:24.840 what we were just going through, and if you think 0:14:24.880 --> 0:14:29.040 about the metrics from the last twelve months, ibadah perspective 0:14:29.200 --> 0:14:32.480 looking at around five times leverage and so that's more 0:14:32.640 --> 0:14:35.960 historically consistent with a high yield rating. Again, that doesn't 0:14:36.000 --> 0:14:38.320 capture some of the recent deals, and of course having 0:14:38.360 --> 0:14:41.400 all of that equity ahead of the credit makes us 0:14:41.600 --> 0:14:44.480 very comfortable with that IG rating, And when you think 0:14:44.480 --> 0:14:47.040 about how much debt they're likely to come to market 0:14:47.080 --> 0:14:49.720 with in the near term, call it around twenty billion, 0:14:50.120 --> 0:14:52.560 that kind of pales in comparison in terms of what 0:14:52.760 --> 0:14:55.720 the market has been digesting with ease so far this year, 0:14:55.840 --> 0:14:58.800 with the big five hyperscalers coming with almost one hundred 0:14:58.800 --> 0:15:02.040 and seventy five billion split across US dollar and various 0:15:02.040 --> 0:15:04.120 other currencies. So we do think there is going to 0:15:04.160 --> 0:15:07.240 be demand for that debt out there without much of 0:15:07.280 --> 0:15:09.640 an issue, even after this huge equity raise. 0:15:09.960 --> 0:15:10.800 That says Zech, how. 0:15:10.800 --> 0:15:14.360 Much is it concern you the just absolute consolidation of 0:15:14.480 --> 0:15:16.840 all risk in one bet right now, whether it's on 0:15:16.880 --> 0:15:18.720 the dead side or on the equity side. 0:15:20.280 --> 0:15:24.400 Yeah, I think concentration risk is a fair concern to have, 0:15:24.440 --> 0:15:27.840 and I think the circular financing consideration that you were 0:15:27.920 --> 0:15:30.720 just discussing with the prior guest is something we're concerned 0:15:30.720 --> 0:15:33.320 about when we think about where the rubber meets the 0:15:33.400 --> 0:15:36.200 road from that perspective and where there might really be risk. 0:15:36.680 --> 0:15:39.440 In terms of some of these big players coming to 0:15:39.480 --> 0:15:41.960 market with the IPOs open AI seems to be the 0:15:41.960 --> 0:15:44.560 one that really needs the funding. And so if for 0:15:44.600 --> 0:15:49.320 some reason markets become less risk taking over the next 0:15:49.360 --> 0:15:52.080 couple of months when Anthropic and open AI need to 0:15:52.080 --> 0:15:55.080 come to market, that's a timeframe that we think there 0:15:55.120 --> 0:15:58.040 could be a little bit more consternation. For now, we're 0:15:58.080 --> 0:16:00.800 certainly comfortable with the environment in and when we talk 0:16:00.880 --> 0:16:04.160 to our clients from a fixed income perspective, they're very 0:16:04.160 --> 0:16:07.560 happy with all in nield levels despite tight credit spreads 0:16:07.560 --> 0:16:08.800 really across the credit market. 0:16:09.120 --> 0:16:12.160 Just finish up on SpaceX. So I understand they've got 0:16:12.160 --> 0:16:14.480 this massive ability right now to tap into the equity 0:16:14.480 --> 0:16:16.880 market and raise equity capital quite easily, and we've seen that. 0:16:17.160 --> 0:16:19.640 But how much should that should be a factor in 0:16:19.800 --> 0:16:22.800 your credit rating when the company is losing money and 0:16:22.840 --> 0:16:25.200 they're going to spend that money really quickly too. You 0:16:25.240 --> 0:16:27.360 mentioned some of the hyperscalus and debt issue in sound Swell. 0:16:27.400 --> 0:16:30.880 Let's take Calphabet. Alphabet made profit more than one hundred 0:16:30.880 --> 0:16:34.120 billion dollars last year. Zach, this company loses money, why 0:16:34.120 --> 0:16:35.760 should that company have an IG rating? 0:16:37.480 --> 0:16:41.200 Well, again, it comes down to companies rating or the 0:16:41.280 --> 0:16:44.120 ratings companies raiding through the cycle. When you think about 0:16:44.120 --> 0:16:47.840 some of the deals recently inc That certainly improves the position, 0:16:48.040 --> 0:16:51.720 and the net cash position after the IPO certainly looks 0:16:52.080 --> 0:16:54.760 very attractive. Now we're expecting cash burn to be around 0:16:54.800 --> 0:16:57.760 twenty to thirty billion per year as they lean in 0:16:57.800 --> 0:17:00.760 to their AI infrastructure business. So there's a lot of 0:17:00.960 --> 0:17:04.439 metrics to consider, John, but we do think with the 0:17:04.560 --> 0:17:07.920 recent deals and projecting forward through the cycle and considering 0:17:07.960 --> 0:17:11.520 some of the upside scenario that an IG rating will 0:17:11.520 --> 0:17:14.160 be justified. And that's kind of what we're hearing out 0:17:14.160 --> 0:17:15.960 there as well. 0:17:16.000 --> 0:17:19.560 This is the Bloomberg Surveillance Podcast, bringing you the best 0:17:19.600 --> 0:17:23.160 in markets, economics, angiopolitics. 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