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25:00So I still think United and Delta are the way to play it. We're long United because they seem extremely confident put out an 8K before your biggest competitor just to steal some of their thunder. It's like kind of amazing that they did that. Did they front run results essentially? It was implied. so it's hard to back into what their cash is. But, I mean, that's a big, big swing that they put up, positive free cash flow. But cash at Delta was also good, and they're both deleveraging. They're both trying to say, listen, we shouldn't be 10 times stocks, 10 times earnings. We could give out dividends.

25:33Delta talked about its dividend yield being sub 2 % yield, which is better than the market. Are the challenges at Newark behind United? Yeah, June for Newark was the best-performing airport. So it still seems like air traffic controllers need to get in. But now that the runway issue has been fixed, Newark is coming back. And Newark, for context, is about 10 % of United's capacity. Wow. So it's a lot. Hey, listen, no, it's just interesting. Well, you know, I was going to just follow on that. Like I keep thinking about my husband used to fly a small plane and he's constantly looking at how crowded the skies are.

26:07Like, are we getting to a point where it is too crowded in terms of the traffic that is up there and that we'll have to kind of adjust or no? I think we need more air traffic controllers. You know, retirement age is 55 and takes two to three years. The attrition rate is quite high. And so we do need more support. So one of the things that's interesting with the big, beautiful bill is there's 12 billion, 12.5 billion of additional funding for the FAA. So that could be seen as positive, push modernization forward. We think the FAA budget is about 22 billion. So it would be doubling the budget. We don't know if that's all in one year.

26:41It's hard to quite see that. But yeah, we definitely need a push towards modernization and using AI to help us fly better. Speaking of flying, let's talk a little bit about Embraer and what's going on with shares today or ADRs today are lower. This after the president said yesterday more tariffs or new tariffs rather on Brazil. What is the economic impact in your view on Embraer of these tariffs? You have no doubt on this. I don't know if I believe these tariffs in the first place. Really? Yeah, let's assume they actually happen. It would be most impactful to Embraer, but most positive for a company called Textron, I cover that small Cessnas.

27:17And here's why. And it's actually negative for American Airlines, too. So twofold issue. So Embraer is a manufacturer of commercial aircraft. They make smaller aircraft than Boeing and Airbus. And the biggest backlog associated with that is basically American. American has 92 Embraer jets that Embraer has in its backlog out of the 250. So with a 50 % tariff, it would increase Americans' CapEx by about 15%. So obviously they might reconsider that order. So negative from that perspective, I was actually in Sao Paulo seeing Embraer's facility really neat last month. But obviously they ship it back to the U.S., so it would be a tariff product.

27:57And it doesn't seem excluded. The second impact is Embraer's executive jets. jets and Embraer, uh, 60 % of their jets go to us customers. Although they may factor some of it in Florida, there could be a tariff there. So we thought some book away goes to a company like Textron. Wait, can't, can't they get around some of these tariffs the way that airlines have tried to get around air buses tariffs by essentially flying the plane. And I don't look, forgive me. I don't know the accounting, but I've read stories about how they're able to like, you know, buy the plane from another country and then the tariffs don't aren't as high.

28:30Yeah, I think we're yet to see it. You know, we don't know how they'll do it. But one of the workarounds is potentially flying an aircraft to, say, you know, a non-tariff country. And then you register it there and then you fly it back to the U.S. We'll see. I mean, on the private jet industry, it's a lot easier to do that. But if you have if you're a high net worth individual that could buy a latitude for 20 million and a prater for 20 million and now your prater is more expensive. Do you do you really need to think about that? So that's why Textron shares are up today off the Embraer call. No, you're right, because it was in our write-through, too.

29:05Off of your note, because of the selling that we're seeing in Embraer. Just got 30 seconds, unfortunately. We could go through more airlines. What is it that you think in the airline space is really interesting that we're not talking about? And forgive me, because I only do have about 30, 35 seconds. Ooh, airline space. I think premium. Like, the premium offerings are getting really good, whether it's Delta One or United Polaris. Delta is sort of sneak previewing an even higher-end business class that they might launch. They just opened their fourth Delta One Lounge in Seattle. So lots of new upgrades to come, and that's making it a better travel experience, but only for the premium customer, the main cabin still suffering.

29:40It's like the cash-shaped economy in flying, right? Like the haves and the kind of have-nots, I'm just going to say. Sheila, thank you so much. Sheila Kiyualu, she is, of course, Managing Director in Equity Research over at Jefferies, joining us here. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa. Play Bloomberg 1130. Lots of news in the Elon Musk universe. The billionaire, world richest person.

30:19Wait, nothing's ever going on in the Elon universe. I think I could say that every day. I know. He makes it like that. I feel like there's something every day. Sometimes I go in and look for tweets that he wrote to cite them, and then it's like you have to scroll 30 tweets to find the one that he wrote like an hour ago. And then Elon was with me on my train when I got stuck, and the train wasn't moving. No, not literally. Not literally. Courtesy of X. Well, you were watching that because the AI startup, XAI, is rolling out Grok 4 just months after releasing its previous iteration, underscoring the frenetic pace of AI development.

30:50You were all over that earlier this morning, Carol. The news coming the same day, though, yesterday that Lindy Acarino announced she was leaving the social media company X. Kurt Wagner is the guy to answer all of these questions about these things. He's Bloomberg News senior technology reporter. He covers all things social media. He's also the author of Battle for the Bird, Jack Dorsey, Elon Musk, and the$44 billion fight for Twitter's soul. We'll talk about the company formerly known as Twitter in a second. But first, I want to talk about Grok and really what Grok 4 is and how you compare it to what else is out there on the market, Kurt.

31:23Yeah, I mean, part of this is that we're going to have to wait and see, right? We've heard Elon talk about Grok 4 and how great it's going to be and how, you know, it's equivalent of every PhD student ever in the world combined and smarter than that, right? But until you really get your hands on these things, it's hard to say. What I will say is the timing is interesting. You saw this week that the version of Grok that we have right now, Grok 3, was spewing this anti-Semitic stuff. And I think what that tells me is that no matter how good these chatbots get in terms of the technology, it still really depends on how they're trained and who is sort of filling the information into these bots, right?

32:07Because Grok 4 could be the most advanced thing of all time. If it's spewing anti-Semitic comments to users on X, it really doesn't matter, right? And so to me, we need to sort of wait and see. I realize that's a bit of an unfulfilling answer to this question, but it's just too early. And all we have right now is sort of Elon's praise for the bot to go off of. Grok also coming to a Tesla soon near you. This is what Elon Musk said, too. So what is that? Like, is that just giving more data to Grok? I don't know. What's that connection? I guess I get it on some level because it's the Elon universe.

32:42But what is that? I was going to say, like, the Elon universe is like this ever-morphine melding thing. We've talked about, the three of us have talked about this before. But, like, this idea that one corner of his universe just kind of gets pulled into the other, this is pretty common. So I'm not surprised. But this is how I'm thinking of it. And, again, you know, new information, like, this can all evolve. But hands-free, right? Like the idea that you maybe you're already using self-driving, but let's pretend you're doing it the old fashioned way. You're driving yourself around and you want to safely, you know, figure out the best route to where you're headed.

33:19You need to ask about a headline you thought about earlier. You want to make a call like you want a voice assistant that is ultimately high quality that's going to be able to do all those things safely. Right. So maybe in a perfect world, you know, Grok serves as your co-passenger, your co-pilot here on a trip so that you're not like pulling out your phone or tinkering with the screen in the Tesla. Now, I think a lot of this is sort of idealistic because we need to see how this is implemented. And also, again, like how good is Grok? Is it is it reliable enough to do those types of things? But I think in the perfect world, imagine it as the hands free co-pilot there for you in your in your car.

33:55Well, if you bring up the point about some of the challenges that Grok 3 has had that has been well documented in terms of coming up with anti-Semitic posts and the like on X and sort of what we've seen shared out there, Kurt. How do we know if Grok 4 or how does XAI solve this if it hasn't really solved this for Grok 3? Yeah, and I think that's sort of the challenge. And I think the issue too is like the anti-Semitic comments that came out of Grok 3. Those happened just over the last couple days. Grok 3 has been out for months before that, right? But there was a tweak, you know, Elon was talking about like a tweak to the chatbot, and all of a sudden, it's now, you know, sharing these really horrible posts.

34:38And so these things can evolve very quickly depending on, again, what type of information is put into it, what type of guardrails are in place for how these bots should or should not respond. So I'm certainly not in a position where I'm like, oh, they fixed it. Grok 4 is going to go off without a hitch. I think the timing of the incidents they had with Grok 3 right before this rollout actually make me much more skeptical about Grok 4. But, again, we sort of need to wait and see. They clearly at the very least acknowledged that that was a problem, right? Sometimes they've had issues and they just kind of refused to even acknowledge the issue.

35:13In this case, they acknowledged, hey, this was inappropriate. These types of answers should not have been coming. I know the bar is incredibly low, guys, but I take that as a good sign. I am wondering, Kurt, that Elon's time in the government and Doge, how much – like, can we make any assumption that there was information and data that he had access to that is kind of going into Grok? Will we ever even know? It's a great question. It's one we've been all asking about actually for months. There was this idea you may remember, you know, when he asked employees of the government to basically say, hey, here are the five things I did this week.

35:53Right. Like basically justify your job. Send us an email with what you did. There was speculation around that time that, you know, the only way to really sift through thousands and thousands of emails of a list of five accomplishments was to rely on AI. Now, as far as I know, there was no reporting that sort of confirmed, hey, Grok was being used or that certainly sensitive government information was being put into Grok or that Grok was being trained on that type of stuff. But again, there was a lot of speculation, given what Elon does, given his focus on this AI, that maybe it was used behind the scenes to sort of help with some of these tasks, maybe help with where cuts should be coming from or not coming from.

36:38I don't recall, again, that ever being confirmed with reporting. But I think you're asking the question that a lot of us have been asking for months now was, was there a relationship there beyond, you know, just the way anyone could use it publicly, right? Yeah, exactly. I want to talk about X, Carol. Let's go there. Kurt, your morning newsletter that I read earlier today about your view on Lindy Acherino leaving the company formerly known as Twitter X, I think you were like many people who thought she wouldn't actually last two years at the company, given the history of high profile people at some of these companies and sort of just the what was happening at X in the early days.

37:23what do we know about her exit, why she's leaving, and sort of what this means for the social media platform moving forward? So we don't know a ton beyond. I can tell you that this has been in the works since well before this most recent Grok thing. As far as I know, I don't want to say that that wasn't a factor necessarily, but it wasn't like she was all in five days ago and suddenly she's all out. I think that this was something that had been in the works coming before this. Now, whether the Grok incidents expedited a timeline or not, I can't say for certain, but I think this is something she was planning to do before.

38:00Now, what this signals to me and what I tried to get across in that newsletter is that this might not just be a change of leadership at the company. It could be a change of identity at the company, right? Because when Lindy Acherino was hired, she is a well-known or was a well-known media executive, advertising executive. And so this was a signal that, hey, advertising is sort of the bread and butter. This is how we'll continue to make money. That's where the person in charge of this company has her time, energy, and focus. If Yaccarino is replaced by someone with an AI background or an engineer, a product person who's not focused on advertising in the same way, I think we could be witnessing sort of a transition of X as an ads platform to X as something completely different.

38:47It may be that fighting with advertisers for 0.5 % of the global advertising market is no longer worth their time and attention. And instead, this platform becomes a data provider for Grok or other AI products in the future. And so that was sort of what I was getting at in this newsletter is like this might not just be the end of her time there. This might also be the end of us thinking of this as like an ads business. And maybe we need to start thinking about what X can become in a different way. Like a media company being used for some other end. Some of it might be for folks who want to have a mouthpiece or so on and so forth.

39:25I don't know. It's just kind of interesting. That makes me concerned about the data that X is getting or that XAI would get. That's not great data? Yeah. What they say, Kurt, garbage in, garbage out. I mean, my feed, I'm sure it's my fault. But there's a lot of stuff on there that's not necessarily the correct answer to things. Well, Grok's already been trained on X data. And that might explain in some ways why we saw what we saw with this anti-Semitic post over the last couple of days, right? It has to be trained to think that way or say those types of things. And if you are taking the fire hose of posts from X and putting them into Grok, that might be the outcome that you get in some instances.

40:05And so it's not new. This idea that Grok is suddenly going to be trained on X, this is already happening. I think for me, it's more like, is that kind of the sole purpose of why X exists moving forward? Is it sort of like Elon Musk's personal sort of megaphone playground plus the training fuel for AI stuff that makes the real money down the line? that feels to me like where we might be headed. Now they could surprise us. They could replace Linda Iaccarino with some other major advertising executive. And all of a sudden I'll come back and talk with you about it and say, Hey, you know, my, my, my take was certainly wrong, but I think her stepping aside sort of paves the way for them to, to leave advertising behind a little bit and move in a different direction.

40:48Just quickly, 25 seconds though, are advertisers really going to come back in a big way as long as Elon is somehow political in whatever form that is? Just quickly. I mean, this has been the Achilles heel for this company since he took over, is that you have a brand advertising business, but you have an owner who constantly does and posts things that are not necessarily brand friendly or brand safe. And so that's been the rub. And until he sort of changes the way he behaves on X. I just don't see that really being settled anytime soon. All right. Tesla shares that we should point out up about 4 % in today's trade.

41:25Hey, Kurt Wagner. So appreciate it. Bloomberg News, senior technology reporter covering social media. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful.

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43:51Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube.

44:00How about you let me drive? Oh, no, no, no, no. This is not a toy. Honey, please, out of the drive. Drive on. Excuse me, I want to drive. You drive, say it's crazy. It's the question that drives us. You drive me crazy. This is the drive to the close. The funky music will drive us till the dawn. On Bloomberg Radio. All right, TikTok, everybody. Just coming up on about 18 minutes to go until we wrap up the trade on this Thursday. Carol Master, Tim Stanovic live in our Bloomberg Interactive Broker Studio. You heard both Bill and Charlie. breaking down the trade and we are hovering near our highs of the session.

44:38We'll see if ultimately we can get another record close here on the S &P 500, but quite a run and quite a bounce back from that near, was it bear market correction? I know I always do that. You are going on vacation soon. I don't even drink a lot of beer. Bear beer. Yeah. We're at 25 % roughly since April 2nd. I know. So quite a bounce back, right? So let's see what Veronica Willis has to say about all of She's Global Investment Strategist at Wells Fargo Investment Institute. They've got about$44 billion in assets under management. And she is joining us from New York. Hey, Veronica, good to have you here with us.

45:16It's been an interesting market year. And it's, yeah, we're about halfway through. Talk to us about what's kind of top of mind for you as we get ready for another earnings season. We continue to digest trade tariff news that seems to continue to come out of the White House. What's top of mind about the investment environment for you? Yeah, I think top of mind right now is to expect a little bit more volatility for the rest of the year. The market's seen a really impressive rally from those lows earlier this year. Maybe it's gotten a little bit ahead of itself. There are still some uncertainties related to trade.

45:53We've got, you know, earning season coming up, which could start to see some of those impacts around that uncertainty around prices and uncertainty around tariffs. So it could be, you know, a little bit more volatility to come for the rest of the year. A little bit more or maybe a lot more if these tariffs stay in effect come August 1st. It's really dependent on, you know, what we see ultimately for the in-state for the tariffs. And that's where all of the uncertainty is. So we don't really know what those are going to look like. You know, the worst case scenario is going to cause a lot of volatility for the markets.

46:26If they're not as aggressive as what they've currently been announced, if we're able to get some negotiations between the U.S. and some of the trading partners, then we could see a little bit less volatility. So I am curious. You guys have a bunch of strategists, a bunch of analysts. I can only imagine some of the conversations you're having back and forth. And I do wonder if you feel like you have more questions about the outlook or more answers. Do you feel like there is more things that you can kind of cross off your list? There are definitely a lot of questions and then a lot of scenarios as the answers for those questions.

47:02So that's a lot of what we're talking about are, you know, the different tariff scenarios and how that might impact the economy. With the signing of the One Big Beautiful Bill Act, that takes one uncertainty off of the table. So we know what the fiscal policy is. We don't know quite what the full impact is going to be to the economy. So that's still a question as well. So it's a really interesting time with a lot of questions. Yeah, I feel like more questions than answers for a lot of investors out there. We've spoken to some people this week who have said, hey, that August 1st deadline for tariffs, we see that as serious in the sense that we don't think the president is going to extend that deadline again like he did from July 9th.

47:43Remember, yesterday was supposed to be the day that the extension expired, but it was extended this week to August 1st. What's your view on that? I think there's always the possibility that it will continue to be extended, whether the president says that it will be or not. So that's exactly what we saw with the July 9th deadline. So that's always one of the possibilities. then there's always that possibility that we start to see some agreements and some negotiations happening and get some more clarity before that August 1st deadline. So there's really just a lot up in the air. All right. So there's a lot coming out, investors.

48:20And yet, we talked about this with our Gina Martin-Adams of our Bloomberg Intelligence team. She follows and covers and directs U.S. Equity Universe coverage for us here at Bloomberg Intelligence. Torsten Slok over at Apollo also has a note and noting the concentration, extreme concentration, the S &P 500 returning to extreme levels with the top 10 companies accounting for 40 % of the index's market capitalization and a record high share of earnings. And Gina talked to about some of the MAG7 names that the outperformances, big tech names, Nvidia hitting 4 trillion in market cap yesterday. Investors are really moving into those names and maybe it's not as much of a broadening out.

49:03Is that a dangerous sign for you? What's your read on that and what it says about the investment environment? And once again, see that concentration. That is a concern. And, you know, we've seen it play out throughout the past couple of years where, you know, the MAG-7 was pretty much the only thing driving performance for the S &P 500 as a whole. And if we return to that type of environment, you know, any kind of shocks in any of those big names, that's going to be what drives the market down, and it can happen really quickly. And so we'd like to see that performance broaden out a little bit to believe that we're in a more sustainable rally.

49:46So that's part of why we're thinking there's still going to be some volatility throughout the year. We're not necessarily buying into the belief that we're just straight up from here. We need to see that performance broaden out of it. What about when it comes to geographical performance? There was a big narrative at the beginning of the year and even toward the middle of this most recent quarter, really focused on the outperformance of equities outside of the United States, specifically European equities. What are your views geographically for the second half of the year? So we do think that, you know, that global diversification, having that exposure to the international equities is important as part of a diversified portfolio.

50:27So that's played out really well this year. We think it will still play out well throughout the rest of this year. But we do think eventually when U.S. economic growth starts to recover later in this year, early 2026, that we'll start to see that U.S. outperformance resume. So one thing I want to ask you before we wrap up here on this Thursday, earnings, bank earnings kickoff next week. JP Morgan coming out along with the other big banks. I'm looking at the KBW Bank Index. It is up almost, well, it's up about 38 % year to date. I was going to say almost 40%, not year to date, forgive me, from that April 4th low.

51:06So we have seen a tremendous rally. Overall, the index is up 13 % year to date, and that easily is about double what we've seen in terms of the return for the S &P 500. So some mega outperformance. What do we need to see in terms of earnings to justify the moves that we've seen already? Or do you think there is room to continue moving higher? And again, just got about 30, 40 seconds. Yeah, I do think there is still some room to move higher. The market's expecting some deregulation that should benefit the banks. And so I think that's driven a lot of that performance in financials overall. I think with earnings next week, we'll need to see some kind of follow through.

51:48So we need to see some good earnings reports from these banks to buy into that rally. So it'll be really important to watch. All right. We're going to leave it on that note. Hey, Veronica, thank you so much. Appreciate you. Veronica Willis, Global Investment Strategist at Wells Fargo Investment Institute. They've got roughly$44 billion in assets as of February of this year. So good to get her view.

52:33Terminal.

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