Saudi-Led Forces Advance Against Houthis; Dalio Warns of Debt Crisis

0:02 Bloomberg Audio Studios.

0:04 Podcasts.

0:05 Radio.

0:06 News.

0:10 Good morning, I'm Nathan Hager.

0:11 And I'm Karen Moscow. Here are the stories we're following today.

0:15 Karen, we begin in the Middle East in the fight for control of the key Bab el-Mandeb Strait. Yemen's internationally recognized government says it has regained control of the Red Sea city of Mocha from the Houthis. The Saudi-led coalition backing Yemen also says it destroyed a ballistic missile launcher in Yemen's capital, Sana'a, and destroyed military targets in a key port north of Bab el-Mandeb. that the Houthis have held for more than a decade. We get the very latest from Bloomberg's head of Middle East coverage, Stuart Livingston Wallace.

0:43 You need to put in some caveats immediately. One is we're relying entirely here on the claims being made by the Yemeni government or the internationally recognized government. Secondly, as we know from Russia, Ukraine, you know, front lines are always... somewhat muddled and confused. And then the third thing is, can they hold it? Because so far, their track record in holding territory has been somewhat patchy.

1:04 And Bloomberg's Stuart Livingston-Mollis reports even if the coalition holds its territory, Bloomberg Economics estimates it is not likely to achieve its goal of eliminating the Houthis.

1:13 Now let's get to the latest from the campaign trail, Nathan. Four weeks until midterm election day, President Trump is making a bid to bring down fuel costs that have been rising due to the Iran war. He signed an executive order to allow more widespread use of a tax-exempt variety of diesel fuel known as red-dyed diesel.

1:32 This order will also drive down the cost of all goods.

1:35 Including grocery prices, very substantially.

1:37 And it's an honor to do it. And we're not going to need it long. I hope we're not going.

1:42 To need it long because your prices are plummeting and they're going to really be plummeting.

1:46 Just a little while.

1:47 And President Trump signed the order in Grand Island, Nebraska, where Republican Senator Pete Ricketts is in a competitive race with independent Dan Osborne. The president won Nebraska by about 20 percentage points just two years ago.

2:00 And as we get closer to the midterms, Karen, a new poll shows health care costs ranked near the top of voters' economic concerns.

2:08 Bloomberg's Courtney Donahoe has the latest.

2:10 With a month to go before the midterms, the poll finds 6 in 10 voters say they were very or somewhat worried about affording health care, outranking concerns over food, utilities, and housing. The findings by KFF, which is a nonpartisan health policy research group, also show 42% say they trusted Democrats to do a better job of handling health care costs, while 22% chose Republicans. Two-thirds of respondents supported a national health plan or Medicare for All. Recent changes have fueled anxiety around health care. Affordable Care Act marketplace enrollment dropped by about 4 million people this year after Congress declined to extend enhanced subsidies. Americans with ACA plans are paying 20 percent more than 2025, and premiums are expected to

2:57 jump double digits next year.

2:59 Courtney Donahoe, Bloomberg Radio.

3:01 All right, Courtney, thank you. One other political note here. President Trump now says he'll pay for video ads with his personal funds and through his political action committee. The president made the pledge on Truth Social after ethical concerns were raised about an ad paid for by the U.S. government that featured positive images of him and a voiceover saying a golden age for the U.S.

3:21 Has begun.

3:22 The White House had previously defended the ad as a public service announcement and noted that President Trump is not on the ballot. But Democrats and the watchdog group Public Citizens say the video could violate laws against using federal funds for publicity or propaganda purposes.

3:37 The Supreme Court, Karen, is considering whether to allow state and local lawsuits blaming oil companies for climate change, and several justices suggested they're open to letting at least a narrow class of claims go forward.

3:48 Bloomberg's Amy Morris reports from Washington.

3:51 Justice Brett Kavanaugh questioned one attorney on who gets to regulate environmental issues.

3:56 We have four precedents.

3:57 Make crystal clear that interstate air and water pollution are matters for federal law unless Congress specifically preserves state law.

4:08 Justice Elena Kagan seemed skeptical of the attorney's legal theories.

4:12 One theory is about air and water regulation and who gets to do that. And another theory sets out broad principles of who can do what extraterritorially with respect to any subject.

4:25 Chief Justice John Roberts voiced concern about the consequences of permitting a deluge of new suits against the energy industry. In Washington, Amy Morris, Bloomberg Radio.

4:34 All right, Amy, thank you. In New York, the city is considering new proposals to regulate artificial intelligence as safety debates continue over the tech's fast-paced development. And Bloomberg's Monica Ricks reports from Manhattan.

4:47 The New York City Council kicked off a landmark oversight hearing with testimony from whistleblowers like former anthropic researcher Jacob Coxon, who says AI could destroy us all.

4:57 On the current path, I think it is more likely than not that humanity loses control to these AIs and it could end in human extinction.

5:05 AI firms, including reps from Anthropic, OpenAI and Google, are also expected to testify as the council considers about a dozen measures to regulate the tech. At the federal level, the Trump administration has largely taken a hands-off approach. In New York, Monica Ricks, Bloomberg Radio.

5:21 All right, Monica, thanks.

5:22 Bloomberg News has learned OpenAI's in talks with multiple investment funds from the United Arab Emirates to help anchor a $ 30 billion round of financing for the chat GPT maker. Top AI firms, including OpenAI and Anthropic, have previously turned to deep-pocketed Middle East investors to meet their intense capital needs.

5:39 Let's turn to the markets here, Nathan, where futures are higher once again. After yesterday's gains to begin the week, the Nasdaq closed at an all-time high. The S & P 500 also near record levels. Stuart Kaiser is the head of U.S. equity trading strategy at Citi.

5:54 If you look at the year to date even, it's been a very challenging macroeconomic environment for equities overall. oil is up significantly, yields are significantly higher. What's allowed you to power through that is earnings. So in our view, once earnings season starts, the market's going to kind of push the rest of that macro stuff off to the side and focus on what gets reported.

6:12 I mean, the forward earnings.

6:14 Estimate for the S & P 500 is 30% higher today than it was at the beginning of the year.

6:19 And city steward Kaiser, the S & P 500 is up nearly 14% this year, while the NASDAQ has surged 18%.

6:25 As for the Treasury market, Karen, billionaire Ray Dalio sounding a warning there. The Bridgewater Associates founder tells Bloomberg he thinks a U.S.

6:33 Debt crisis is approaching.

6:35 I think within the next three years, what we have is that issue of that squeezing it out. And so when you take a look at literally what that means and then what the impact of that is going to be on asset prices.

6:52 Ray Dalio spoke exclusively with Bloomberg's Haslund Amin. You can catch the full conversation on the Bloomberg.com and the Bloomberg Business app.

6:59 Nathan, Dalio's comments came after Treasury Secretary Scott Besson sought to reassure Treasury investors, saying that economic growth and spending restraints will help the government to start bending the curve. Besant in fireside chat at a Pennsylvania chamber event said that the U.S. can achieve 3% growth and that can help bring down America's debt burden. Economists surveyed by Bloomberg are more cautious, forecasting little more than 2% growth in 2027 and 2028. Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's John Tucker. John, good morning.

7:37 Good morning, Karen. Twenty student organizations hosted a protest at Cornell University calling for sexual assault prevention as the university deals with the fallout from a gang rape allegation against seven fraternity members for an alleged 2024 incident. Faculty members addressed the protesters.

7:55 We are Cornell.

7:56 We say enough is enough and we demand justice.

7:59 For Jane Doe.

8:04 New York Governor Kathy Hochul last week appointed a special prosecutor to investigate the case. One student was killed in a school bus crash in central Florida. The Polk County Sheriff Grady Judd says the car crossed the center line, crashed into a bus, which he says then flipped onto its roof on the way to Winter Haven High School.

8:22 The bus also crashed head-on into an oncoming Jeep, which caught fire. Judd says one person at that Jeep also died.

8:29 It was a terrible, tragic morning.

8:32 We had a beautiful 10th grade girl lose her life.

8:37 She was in the bus.

8:39 The bus was carrying 37 high school students. Jim Baker, a television evangelist who lost his popular ministry in a 1986 scandal, has died. Baker was also in prison for five years for having violated federal financial laws. On ABC News' Nightline, he was interviewed by Ted Koppel about the scandal.

8:59 I feel we've made a mistake, and we're very sorry about it. And I feel that.

9:08 If I had it to do over again, you know, we would just say no and we would not do it.

9:15 Jim Baker was 86 years old. Global News, 24 hours a day and whenever you want it with Bloomberg News Now. I'm John Tucker and this is Bloomberg, Karen.

9:25 Thanks, John.

9:26 Time now for our Bloomberg Sports Update. And for that, we bring in John Staschauer.

9:30 Thanks, Karen. In the American League playoffs, the Yankees helped the Rays out. They committed four errors and Tampa Bay won 5-2. They lead the series 2-0, heading to New York. The White Sox won 4-3 at Cleveland. Chicago is 4-0 in the postseason with all four wins on the road. They're now heading back home to try to win the series.

9:49 They haven't won a postseason series at home since 1906. Monday Night Football in New Orleans. Atlanta got a big day from Bijan Robinson. 145 yards, two touchdowns. The Falcons won 42. your Bloomberg Sports Update.

10:03 Stay with us.

10:04 More from Bloomberg Daybreak coming up after this.

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10:14 And around the world on Bloomberg.com and the Bloomberg Business App.

10:19 This is Bloomberg Daybreak. Good morning. I'm Nathan Hager.

10:22 Four weeks now until the November midterm election. President Donald Trump headed to deep red Nebraska to announce a bid to bring down fuel costs that have been surging due to the Iran war.

10:32 To officially waive the off-road requirement and allow anyone to purchase tax-free red-dyed diesel for any reason.

10:42 President Trump announced the executive order for a tax-exempt variety of diesel fuel at a rally in Grand Island, Nebraska. Joining us for more this morning is Bloomberg News managing editor Jill Desis. Jill, good to speak with you this morning. What's the potential impact of waiving this limit? Does it get to the broader issue in the heartland ahead of this midterm.

11:04 Good morning.

11:05 Yes, good morning, Nathan. So just to get into a little bit more of the nitty gritty of what you just heard Donald Trump talk about there, this plan would effectively allow more widespread use of red or dyed diesel. So that's generally available for, you just heard the president himself say it, off-road purposes. So it's farm and construction equipment.

11:24 It wouldn't directly lower the operational cost for harvesters, tractors, excavators, all this kinds of off-road equipment that already runs on taxes onto red diesel, but it could cut the expenses to run things such as pickup trucks and other on-road vehicles. So when we're talking about the idea of the president delivering this kind of an announcement in deep red Nebraska, largely rural conservative areas, it kind of calls to question this idea of, you know, we're just a month out from the midterms. You know, are Republicans here really kind of feeling on the defensive a little bit, trying to shore up some support for the party ahead of those midterms?

12:02 But that kind of gets you to a little bit of the part of where this is going.

12:05 Yeah.

12:05 And we're just seeing a new poll out this morning from the health firm KFF that health care costs are right up there with gasoline prices, gas and diesel, presumably. As top voter concerns just four weeks into the midterms, what is the challenge going forward for Republicans to address those economic concerns that we've seen in poll after poll are really top of mind for voters.

12:29 Yes, this is a really interesting poll coming from KFF, six in 10 voters saying they were either very or somewhat worried about affording health care. I think, you know, when you take into consideration recent changes within the health care marketplace in the United States, the Affordable Care Act marketplace enrollment dropping by about four million people this year after Congress declined to extend enhanced subsidies. kind of enters the equation there. I mean, look, historically, Republicans have polled better than Democrats on economic issues. But when you're looking at some of these results that this polling firm has found, including polling independents, it seems that voters currently actually trust

13:05 Democrats more on health care and living cost issues. So Again, really kind of tells you what's at play here with some of these voters. I mean, again, just kind of zooming out here, looking at the fact that the Iran war still is not completely resolved. A lot of concerns about pressure on fuel prices, the fact that that remains top of mind for voters. But then you're also bringing in some of these concerns about health care. Again, does raise some pretty serious concerns for Republicans at this stage.

13:28 Yeah, in the past, of course, you've heard the president talk about the affordability issue as a hoax. Getting closer to the election, are we seeing the president sort of pivot away from that in terms of trying to shore up support for a lot of Republican candidates who seem to be pretty vulnerable this close to the election?

13:44 Got about 30 seconds left here.

13:46 Yeah, I mean, look, I think you're still seeing, you know, the president hammered on a lot of key points, you know, about, you know, the economy inflation. But obviously, the Republicans are vulnerable, given that that's the party in power at this moment. And the fact, again, that, you know, the war has not wrapped up quite in the way, you know, that the president has said that he might have maybe an understatement there. But again, a month out, we'll have to see whether or not the president tries to, you know, sort of dig out of, you know, the strategy of appealing more to that conservative base. But it does seem at this point that the Republicans are kind of hoping that, you know, really doubling down on those core conservative Republican

14:19 voters who want to vote for president, driving up some of that turnout rate might help them out in the end.

14:25 This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond.

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