Good Morning! Union Pacific is acquiring Norfolk Southern in an $85 billion deal to create America’s first transcontinental freight railroad. M&A volume is up nearly 20% this year to $2.2 trillion, and JPMorgan is set to take over Apple Card from Goldman.

Anthropic is raising capital at a $170 billion valuation. Apple just lost its fourth AI researcher to Meta, likely in a nine-figure comp package. And private equity-backed firms accounted for 80% of recent defaults.

Plus: Companies that raise guidance outperform the index by 3 points, while misses lag by 4. Automation is coming for junior roles in PE, and an OpenAI launched a Study Mode in ChatGPT.

Correction to yesterday’s story: Blackstone executive Wesley LePatner was among four people killed in Monday’s tragic Midtown NYC shooting. Our thoughts are with her family and everyone affected by this devastating event.

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SQUEEZ OF THE DAY

Baby Bonuses Just Dropped

China’s birth rate has been dramatically plummeting since peaking in the late 1980s. Last year, the country logged only 9.54 million births, a 50% decrease from 2016.

And now, the country that used to fine people for having too many kids under the One-Child Policy (up until 2015) will pay you to have one.

China announced a new $502-per-child annual subsidy to incentivize childbirth. It’s modest, but over 20 million families could qualify. And it’s the latest in a growing list of panic policies. China has already pushed to extend maternity leave, provide mortgage discounts and tax breaks, and has even suggested penalizing adults who remain childless.

China had been one of the most career-first societies over the past couple of decades. Known for its "996 culture" (working 9am - 9pm, 6 days a week), women in particular were encouraged to delay having children, but now China is asking its society to reconsider. 

The UN projects China’s population will shrink from 1.4 billion to 1.3 billion by 2050, and under 800 million by 2100. And a shrinking workforce could mean no growth, rising liabilities, and long-term existential risk. 

China has been a key driver of global growth for decades. But a collapsing birth rate means a smaller workforce, weaker consumer demand, and slower GDP, all of which could ripple into global markets. From Apple and Tesla to luxury stocks and commodities, China’s population curve might be the most underpriced risk in the market. 

Takeaway: China is entering a new era of demographic desperation, and it could be a warning sign if you’re long China. The same country that once punished large families and glorified 996 work culture is now handing out baby subsidies and pushing women out of boardrooms and into nurseries. Only time will tell if baby bonuses can put a band-aid on the problem.

HEADLINES

Top Reads

• Blackstone exec among those killed in Manhattan shooting (Axios)

• NYC shooting has experts reviewing building safety protocols (BB)

• Union Pacific will buy Norfolk Southern in an $85 billion deal (Fox)

• Dealmakers hit summer highs with $100B industrials haul (BB)

• JPMorgan nears deal for Apple Card from Goldman Sachs (CNBC)

• Anthropic in talks to raise fresh capital at $170B valuation (CNBC)

• Apple reportedly lost another AI researcher to Meta (YF)

• Private equity drives 80% defaulted debt jump (BB)

• Good guidance is the new earnings beat for investors (Axios)

• Automation is coming for private equity’s junior roles (FT)

• AI is already wrecking fragile job market for college graduates (WSJ)

• Capital Group, KKR seek SEC nod for retail private equity fund (BB)

• Ex-Millennium trader launches energy-focused hedge fund (BB)

• Fed unlikely to cut but this week’s meeting is packed with intrigue (CNBC)

• HSBC asks managing directors to work in-office 4x/week (BB)

• Chipotle AI hiring tool helping firm find employees 75% faster (CNBC)

• Barclays posted strong Q2 earnings thanks to IB revenue (CNBC)

• Are consultants useless? (FT)

• OpenAI launches Study Mode in ChatGPT (TC)

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CAPITAL PULSE

Markets Rundown

Market Update

• Stocks pulled back, ending a multi-day rally. The S&P 500 and Nasdaq slipped modestly, while small caps underperformed

• European equities gained on trade deal momentum, but Asia and emerging markets were weaker

• The U.S. dollar continued its climb, though still down year-to-date

• 10-year Treasury yields fell after strong demand in a government bond auction

• Oil prices surged nearly 4% after the U.S. gave Russia a 10-day deadline to reach a truce in Ukraine

Economic Data Highlights

• Consumer confidence improved, but households still report hiring concerns

• Job openings declined, with hiring soft but layoffs still at low levels

• Trade deficit narrowed due to a drop in imports, likely boosting tomorrow’s GDP reading

• The Atlanta Fed lifted its Q2 GDP estimate, but underlying growth remains soft amid ongoing trade and policy uncertainty

Reported Earnings

• PayPal beat expectations on both earnings and revenue, with strong payment volume and improving margins

• Spotify missed revenue targets but posted strong user growth across both premium and ad-supported tiers

• UPS delivered solid revenue growth, though profit margins were under pressure as shipping volumes remained mixed

Earnings Today

• Microsoft – Focus on cloud and AI performance as Azure growth and AI-related demand drive results

• Meta Platforms – Key watch on ad revenue strength and ongoing investment in AI infrastructure

• Robinhood – Investors looking for momentum in crypto trading and signs of improving user engagement

Movers & Shakers

• (+) CyberArk Software ($CYBR) +13% after the cybersecurity company is in talks to be acquired by Palo Alto Networks.

• (–) UPS ($UPS) -11% because the delivery company announced disappointing earnings.

• (–) Spotify ($SPOT) -12% after the streaming company announced weak forecast.

Private Dealmaking

• Union Pacific will buy Norfolk Southern in a $85 billion deal

• Baker Hughes acquired Chart Industries for $13.6 billion

• CRH sold Eco Material Technologies for $2.1 billion

• iA Financial acquired RF Capital for $435 million

• Vanta raised $150 million at $4.2 billion valuation

• HeroDevs, a provider of open-source software security tools, raised $125 million

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

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DAILY VISUAL

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DAILY ACUMEN

Patience Pays

In investing, the best gains often come from doing... nothing.

Holding. Waiting. Enduring the noise.

Same goes for careers, relationships, even personal growth.

The problem? Our brains are wired for action. We equate motion with progress. But in a compounding world, most of your returns are backloaded.

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Play long enough, and the odds shift.
Play with conviction, and the world starts to tilt.

ENLIGHTENMENT

Short Squeez Picks

• Why ADHD brains thrive on last-minute pressure

• People with higher cognitive ability have weaker moral foundations

• The right and wrong way for bosses to apologize

• 6 steps to reset a demotivated team

• Does breathing actually matter for your workout?

MEME-A-PALOOZA

Memes of the Day

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