Business

1. Trump’s Asia asks
2. Fed shortlist set
3. Gates’ tone shift
4. US layoffs near GFC levels
5. Saudi summit kicks off

Wall Street is starting to look a bit like a stage drama where nobody is playing the part that casting assigned.

To build a giant Louisiana data center, Meta raised $29 billion in equity from Blue Owl (a firm known for private credit) and private credit from PIMCO (a firm known for public bonds). Google has piles of cash and a red-hot stock, but is instead bringing its pristine credit rating to the deal table, backstopping crypto miners. The $7 billion that KKR and Apollo are putting into Keurig Dr. Pepper is “equity” in the sense that it will help KDP reduce its debt load. But it isn’t coming from their traditional PE funds.

You think companies are built with equity and debt? That’s cute, today’s masters of the universe will chuckle while patting your head.

What used to be called simply “investing” or “lending” has been replaced by “capital solutions” — hybrid equity, kickers, and cash flows tailored to match the returns promised to investors on the other side. Growing pots of money now resemble liquid sand, moldable into whatever shape will fit the money hole in front of it. This shift has been obscured by narratives, overcooked in my view, about a battle between private credit and banks: “There’s one system,” Goldman Sachs President John Waldron told me a few weeks ago, and it’s changing quickly.

Goldman reorganized itself along these lines earlier this year, and firms from Chicago buyout shops to Middle Eastern sovereign wealth funds have launched “capital solutions” arms. Lawyers are jumping in downstream.

Prioritizing what companies actually need over whatever widgets Wall Street happens to sell is good customer service. Personal wealth management got a lot better when firms started asking “how much do you need to retire?” instead of “would you like to buy this structured note?”

And the rise of insurance money in investing has created patient capital that in many cases fits those money holes better than blunter instruments. Much of KKR and Apollo’s Keurig investment will end up in their insurance arms, backed by long-term contracts with the coffee-pod maker, people familiar with the matter said.

But flexible capital will almost certainly overflex, and not everyone with “go-anywhere” money should go anywhere. I suspect that before this cycle is over, we’ll see a few instances that leave everyone asking, “why did they own that?”

Trump’s Japan trip offers little clarity on trade

President Donald Trump gave a warm welcome to Japan’s new prime minister but got few specifics on a trade deal. “Anything you want, any favors you need, anything I can do to help Japan, we will be there,” Trump said in a meeting with Sanae Takaichi that lacked any of the president’s signature hardball. But documents released by the White House show little beyond an agreement to cooperate on rare-earth metals and a list of companies interested in participating in a vaguely outlined $550 billion Japanese investment program into the US. There were no specifics around the thornier trade issues of autos and rice.

The focus remains on China, whose President Xi Jinping is set to meet Trump Thursday in South Korea. A significant de-escalation signaled, fuzzily, by outlines of a deal over the weekend in Malaysia boosted markets, but some China hawks are warning of a missed opportunity to reset a geopolitical relationship that will define the 21st century. “Trump seems to be working his way back even from a confrontation that he began and Biden escalated, toward something a little more like business as usual,” Semafor’s Ben Smith writes in his column this week.

Bessent’s five Fed finalists

The list of candidates for the toughest job in the financial world is set. US Treasury Secretary Scott Bessent said he has whittled an 11-person list of candidates to replace Fed Chair Jerome Powell next year down to five relatively inside-the-box candidates that he’ll recommend to the president.

The nominee will face a high-wire act of placating the president (who wants steep interest rate cuts) while keeping the trust of investors worried about high inflation and political influence on the central bank. Everyone on the shortlist has to some degree backed Trump’s calls for steeper cuts to interest rates: current Fed governors Christopher Waller and Michelle Bowman, top Trump economic adviser Kevin Hassett, former Fed official Kevin Warsh, and BlackRock markets whisperer Rick Rieder.

Powell’s Fed is expected to cut interest rates by a modest quarter-point this week, but expect a push for a more robust cut from Trump’s newest appointee, Stephen Miran. The meeting will also give Waller and Bowman another chance to audition.

Bill Gates targets climate failures

Bill Gates thinks efforts to combat climate change have focused on the wrong outcomes. In a lengthy essay today, Gates argues that a narrow focus on curbing emissions has done little to improve the lives of the world’s poorest people — for example, fertilizer bans that led to food shortages and pressure campaigns against fossil-fuel financing that left communities without power. He told reporters that the essay will anger both those who “think climate [change] is not important” and those who think it’s “apocalyptic.”

His manifesto is likely to anger climate absolutists. But it taps into a political current of prioritizing private-sector investments over government rhetoric, with echoes of Marc Andreessen’s now-famous “Time to Build” essay that sparked a shift in how Silicon Valley thinks about the public good.

Widespread layoffs muddy Fed picture

Amazon is the latest big company to announce layoffs, deepening concerns ahead of the Fed’s meeting this week that the labor market is weakening. Amazon’s 14,000 cuts could ultimately hit 30,000, about 10% of its corporate staff. (Warehouse and seasonal hiring are unaffected for now.)

Nearly 1 million American workers have lost their jobs so far this year, the most since 2009, excluding the spike in spring 2020. Tech companies — the industry with the easiest access to capital right now — are leading the cuts, with Intel, Microsoft, Meta, and others contributing to more than 107,000 jobs eliminated this year, according to Challenger, Gray & Christmas. But cuts at Target, Exxon, and PwC show the pain goes beyond Silicon Valley.

The cuts add complexity to an already fuzzy labor market. Some economists think Chicago Fed President Austan Goolsbee’s four horsemen — vacancy rate (job openings per unemployed person), job-finding rate (how quickly unemployed people are getting those jobs), the layoff rate, and the unemployment rate — show a labor market headed towards balance, accounting for slower immigration. Others, including a potential Fed chair, disagree.

Wall St. touts itself in Saudi Arabia

Wall Street heavyweights opened Saudi Arabia’s premier investment conference — key to the kingdom’s efforts to attract foreign capital — by touting America, Semafor’s Mohammed Sergie reports from the Riyadh Ritz-Carlton.

The dollar’s slip this year reflects investors’ past overexposure to US assets, but that trend is reversing, BlackRock CEO Larry Fink said at the event. Money is flowing back because there’s still a “deep belief in the opportunity in the US,” which is spending “more than almost anywhere else” on technology.

That might not be good news for Saudi Arabia, which needs foreign investment and technology to diversify its economy. The kingdom has used FII, now in its ninth year, to show some (metaphorical) financial leg, and the event has served as the launchpad for some $250 billion in deals since it was launched. It’s off to a slow start this year: A $3 billion partnership between Blackstone and Saudi Arabia’s new artificial intelligence company, Humain, was the biggest unveiled this morning.

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➚ BUY: Self owns. OpenAI’s surprise announcement that it completed its restructuring into a for-profit unlocks a $22 billion investment from SoftBank that was contingent on the move.

➘ SELL: Cell phones. CEOs are sick of everyone being on their phones during meetings. “It’s a huge problem,” said Airbnb’s Brian Chesky, an admitted offender.

Companies & Deals

• Respectfully declined: Kirkland & Ellis wants its lawyers to be nicer when they’re negotiating terms for private fund investments. The firm has long faced criticism for setting the market on fine-print rights between big investments and asset managers. (“Fire K&E” topped an investors’ wish list at a recent industry conference.)
• Cowboy boot: Paramount is losing its biggest star at a tricky time.
• Bingo card: Whatnot is worth $11.5 billion, in a neat encapsulation of today’s startup craze.
• Self-catalyzed: Nelson Peltz — who’s done this before — is teaming up with tech investor General Catalyst to make a $7 billion take-private bid for UK fund giant Janus Henderson.
• Jitters turn to jolts: Keurig Dr. Pepper is turning to two private equity firms to ease shareholder concerns that its coffee megamerger will leave it on shaky ground. Apollo and KKR will invest $7 billion across the two companies, resulting from Keurig’s merger with JDE Peet’s, which will combine and split along hot-and-cold beverage lines.

Watchdogs

• MAHA mayhem: Texas sued Tylenol maker Kenvue for advertising the drug as safe for pregnant women, citing research (widely discredited by experts) showing a link between autism and prenatal Tylenol use. Kenvue shares, which rose after a meandering Trump press conference that made similar accusations last month, fell 3% Tuesday.
• Unchained: Senate Democrats want more information on Trump’s decision to pardon Binance’s Changpeng Zhao after the firm threw its weight behind a Trump-affiliated stablecoin.

Markets

• Retail therapy: PayPal shares rose more than 12% Tuesday after the company announced it would integrate its digital wallet into ChatGPT, allowing users to make purchases directly on the chatbot.
• You get a chip: Qualcomm saw big gains on Monday after it announced it would manufacture AI chips to compete with Nvidia and AMD.
• Ballots and bonds: Argentina’s bonds and currency soared Monday after President Javier Milei’s party won a key midterm election, bolstering the conservative reforms that have made him a Trump ally. Bessent congratulated Milei but gave no update on efforts to organize a $20 billion private-sector loan package for Argentina.