Bloomberg Surveillance 07/26/2023

>> INFLATION REMAINS WELL ABOVE OUR GOAL OF 2%. >> WE ARE LIKELY TO NEED MORE RATE HIKES TO REALLY BRING INFLATION BACK. >> IT COULD TAKE SOME TIME, TO ASSESS AND COLLECT INFORMATION AND BE ABLE TO ACT. >> I DO BELIEVE INFLATION IS DECLINING GRADUALLY AND AN A WAY THAT -- AND IN A WAY THAT MAY BE SUSTAINABLE. ANNOUNCER: THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN: GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO, ALONGSIDE TOM KEENE AND THE WONDERFUL BRAMO BACK IN THE HOT SEAT. THE S&P 500 SLIGHTLY NEGATIVE THIS MORNING. AFTER THAT IS HIGHER, MICROSOFT IS LOWER. META COMING UP AFTER THE CLOSING BELL. CHAIRMAN POWELL. TOM: I WILL GO ON TO TALK ABOUT GOOGLE, MICROSOFT AND LVMH. THERE IS A WORRY THAT THE BACKDROP FOR THE FEDERAL RESERVE SYSTEM OF THE UNITED STATES OF AMERICA IS A GROWTHINESS OF AMERICA THAT HAS BEEN THE GREAT MISCALL OF 2023. YOU CAN SUM IT UP IF YOU WANT TO GIVE ME EIGHT ISSUES. JONATHAN: YOU WILL GET A STATEMENT AND USE CONFERENCE. BRAMO, WELCOME BACK. THE FIRST PARAGRAPH OF THE STATEMENT AND WHAT THEY SAY ABOUT INFLATION AND THE IMPROVEMENT WE HAVE SEEN THE LAST COUPLE MONTHS. LISA A: AND WHETHER THERE WILL BE A DISSENT AMONG RAPHAEL BOSTIC AMONG OTHERS, AND HOW MUCH YOU WILL GET FROM THE OTHERS ALONE BOW -- OTHERS ABOUT GROWTH THE MISS -- GROWTHINESS. JONATHAN: IN THE MIDDLE OF TWO, THERE WAS A FEELING OF MORE TO COME. ONE MONTH, TWO MONTHS LATER, THERE IS A FEELING OF ONE AND DAD. LISA A: THIS IS A GREAT POINT. THERE IS A 44% CHANCE PRICE INTO THE MARKETS OF A SEPTEMBER RATE HIKE FOLLOWING WHAT WE ARE EXPECTING TODAY. WE HAVE BEEN HERE BEFORE WHERE THIS MOVIE PLAYED OUT WHERE PEOPLE SAID NO MORE BUT THEN YOU SEE HOUSING AND OTHER AREAS RE-ACCELERATE. AT WHAT POINT DOES THIS LEAVE THE FED TO MAKE A DIFFERENT DECISION? JONATHAN: ALPHABET IS UP 1.7%. HYPERSONIC IS DOWN RIGHT NOW. AFTER THE CLOSE, WE WILL HEAR FROM META. S&P 500 ARE SLIGHTLY NEGATIVE EQUITIES DOWN BY 0.1%. TOM: I AM GLAD YOU MENTIONED YIELDS. THE 10 YEAR REAL YIELD IS ONE POINT 05%. I DON'T KNOW WHAT THEY ARE LOOKING AT HERE. WHAT DREW MATTIS SAID IS HE MODELS OUT FOR A LONG-TERM OF VIBRANT 3% REAL GDP. THAT IS AN OUTLIER CALL. HOW DOES THIS CHANGE FED POLICY? LISA A: WE HAVE GDP TOMORROW WHICH MIGHT CHANGE THE FENCE READ ON THIS. HOW DO YOU DOVETAIL THE FACT YOU ARE SEEING RE-ACCELERATION AT A TIME WHEN OTHERWISE WE ARE LOOKING AT OTHER AREAS FALLING OFF, LIKE CORPORATE SPENDING? JONATHAN: THINK ABOUT THE SPLIT BETWEEN NOT JUST THE U.S. BUT EUROPE, AND CHINA. TOM KEENE AND I HAD THIS CONVERSATION YESTERDAY. CHINA'S THROWING STIMULUS AT THE ISSUE. THE U.S. HAS A DIFFERENT PROBLEM IN THE EYES OF THE DEAD. LISA A: THAT IS WHAT PEOPLE ARE LOOKING AT. THE FEDERAL RESERVE MEETING IS HAPPENING AT 2:00 P.M. BEFORE THAT, OUR SPECIAL AT 1:30. BILL DUDLEY WILL BE HERE WITH BOB MICHELE AND DIANE SWONK. BEFORE THAT, NEW HOME SALES. WE ARE EXPECTING SOME REEF CELEBRATION WHICH WE HAVE SEEN IN PRICING. HOW THIS THE FED DEAL WITH THIS, WHICH WAS SUPPOSED TO BE THE MOST INTEREST RATE AFFECTED AREA. TO DATE, WE HAVE SEEN 97 S&P COMPANIES, AROUND 20% OF MARKET CAP, REPORTS A HUGE CHUNK COMING THIS WEEK AND NEXT WEEK. I AM WATCHING A DAY VERSIONS BETWEEN CORPORATE SPENDING AND SENIOR SPENDING. WE HAVE SEEN COMPANIES PULLING BACK AS CONSUMERS STEP UP THEIR SPENDING. JONATHAN: JOINING US NOW IS MAX CAN, A CHIEF STRATEGIST AT HSBC. LET'S TALK ABOUT THIS. WHY THROUGH THE REST OF THE SUMMER? WHAT HAPPENS AFTER THAT? MAX: WHAT WE HAVE RIGHT NOW IS A PRETTY SUPPORTIVE QT REPORTING SEASON YOU GUYS JUST MENTIONED. WE LOOK AT THE LATEST TECH EARNINGS. UNTIL THEN, WE HAVE SOME PRETTY NEGATIVE DOWNWARD REVISIONS AND EARNINGS EXPECTATIONS. WHEN WE LOOK AT AVERAGE EARNINGS SURPRISE FACTORS, THEY ARE A BIT ABOVE HISTORICAL AVERAGES FOR THE U.S. THAT IS GOOD. THERE IS A BIT OF UPSIDE SURPRISE POTENTIAL ON THE MAIN BACKSWING UPSIDE IN U.S. WHEN WE LOOK AT CAP RETENTION AND REGIONAL SURVEYS AND INVENTORIES. THEY HAVE ALL BEEN PICKING UP IN THE U.S. SPECIFICALLY. THESE TWO THINGS COME UP WEEKS AND MONTHS AND ARE PRETTY GOOD. TOM: DESCRIBED THE WALL OF MONEY OUT THERE. AND OF THE THINGS OF LATE JULY IS THE BELIEF THE MONEY IS THERE ON A FIRST ORDER CONDITION, INSTITUTIONAL MONEY, OR WHATEVER THAT WILL GO INTO QUALITY BONDS AND STOCKS. AS HSBC IDENTIFIED HOW MUCH -- HAS HSBC IDENTIFIED HOW MUCH MONEY IS OUT THERE? MAX: WHEN WE LOOK AT HOW UNDERINVESTED OR EXPOSE THEY ARE TO SEVERAL ASSET CLASSES, WHAT WE CAN SEE IS SINCE LATE LAST YEAR, AROUND OCTOBER, THEY HAVE BEEN DISTANTLY UNDERWEIGHT. THEY ARE CONSISTENTLY PARKING CASH ON THE SIDELINES OR HIDING OUT IN LOWER RISK ASSET CLASSES IN ANTICIPATION OF A U.S. RECESSION SO MANY WERE EXPECTING. IT IS NOT JUST -- IT'S JUST NOT HAPPENING. THERE IS, PARTICULARLY AMONG DISCRETIONARY INVESTORS AND REAL MONEY INVESTORS, AN AWFUL LOT OF UNDERWEIGHT POSITIONS IN THE RISK ASSETS THAT HAVE TO BE CORRECTED OVER THE NEXT COUPLE WEEKS AND MONTHS. THIS SHOULD KEEP THE EQUITY MARKET AND RISK ASSETS QUITE UPBEAT THE NEXT COUPLE MONTHS. LISA A: YOU WERE BEARISH LAST YEAR AND WENT BULL THIS YEAR, TALKING ABOUT HOW YOU ARE EXPECTING US TO GET AHEAD OF THE RECOVERY ON THE OTHERS. EXTENDED THE CALL THROUGH THE SUMMER. AT THE END OF THE SUMMER, THINGS MIGHT CHANGE. WHAT WOULD THIS BE? MAX: YOU GUYS HAVE BEEN TALKING ABOUT THIS. WHAT IS THIS FINE LINE BETWEEN ACTIVITIES BUT ON THE OTHER HAND, THIS MAY BE -- BETWEEN ACTIVITIES BEING BETTER, BUT ON THE OTHER HAND, THIS MAY MEAN THE MARKET GOES DOWN. THE POSITIVE SURPRISE ON EARNINGS AND TOP-DOWN DATA IS WHEN IT STARTS TO AREA BY PLACING. PERHAPS TOWARD Q4. MAYBE EVEN EARLIER THAN THAT AND WE MAY NEED TO EXTEND TO THE NEW YEAR. ONE OF THE CONCERNS WE HAVE IS U.S. HEADLINING LEASH AND IS GOING TO REACCELERATE SLIGHTLY INTO THE YEAR AND DAY -- YEAR END WHICH MIGHT GO TO HOPE OF PARTICULARLY IMMACULATE DISINFLATION. THEN WE MAY GO TO SIMILARLY AS WE HAD IN FEBRUARY AND TWO KEY POLICY RATES IN RESTRICTED TERRITORY LONGER. LISA A: A LOT OF PEOPLE I HAVE SPEAKING TO THINK THE FED HAS TAKEN A MORE DOVISH TONE. YOU HAVE HEARD RAPHAEL BOSTIC BUT OTHERS AS WELL SAY THAT PERHAPS THINGS AREN'T THIS IS GETTING IN -- THINGS ARE DISINFLATING IN A CONTROLLED WAY. IS THIS HAPPENING? MAX: THIS IS PERHAPS THE DANGER THAT WE ARE THINKING EVERYTHING IS FINE, WE DO NOT NEED A RECESSION AND INFLATION WILL SLOW DOWN BY ITSELF. WE ARE FINE AND THE S&P WILL GO TO 10,000. THAT IS THE CONCERN I HAVE THAT WE ARE GETTING TO CALL IN THE SECOND HALF AND ARE STARTING TO AGREE TO MUCH WITH EACH OTHER, SAYING WE HAVE 1 THIS INFLATION AND IT IS OVER AND DIS-INFLATION WITHOUT ANY CONCERNS COMING UP. WHEN I LOOK TO OUR PROJECTIONS OVER THE NEXT FEW MONTHS, WE ARE MUCH MORE COMPARED TO THE MARKETS AND CONSENSUS. THIS IS THE KEY CONCERN. FOR US, IT IS NOT THE CONCERN AROUND AN EARNINGS RECESSION OR MARGIN. IT IS THE CONCERN THAT WE ARE PERHAPS GETTING TOO COMFORTABLE AROUND THE INFLATION TRAJECTORY, TOO SOON. TOM:. I LOOK AT THE CALL OF THE STOCK MARKET, I BELIEVE THE FOURTH-LARGEST DOW JONES INDUSTRIAL TRACK. YOU KNOW THE THEMES. YOU WRITE ABOUT THEM EACH AND EVERY DAY. WHAT DOES THIS MEAN FOR STOCKS THAT HAVE ADVANCED 30% TO 50%? WHAT DO YOU DO WITH LORI SOX OF SIX ONCE AGO? MAX: TO BE HONEST, YOU STILL BUY THEM. YOU ARE STILL UNDERWAY -- WE ARE STILL OVERWEIGHT THIS COMES DOWN IN THREE MONTHS TO SIX MONTHS. UNTIL THEN, WE CAN STILL PLAY THIS DISINFLATIONARY WAVE IN THE U.S. IN PARTICULAR AND BETTER ACTIVITY DATA AND BETTER EARNINGS AND MARGINS. THIS IS STILL A NICE, GOLDILOCKS PICTURE WHERE WHAT YOU WANT TO DO DURING THIS FIRE IS GO -- THIS ENVIRONMENT IS GO BROADER ALONG THE GROWTHY PART OF THE MARKETS. LIKE EMERGING MARKET DEBT. TOM: THE GROWTHY PART OF THE MARKET. [LAUGHTER] JONATHAN: CHIEF AT HSBC. AS LISA POINTED OUT, THE RIGHT TO BE BULLISH HAS BEEN AN DECENT 18 MONTHS FOR MAX KETTNER AND TEAM. TOM: YES, I THINK YOU WERE LOOKING REALLY HARD SIX MONTHS AGO OR SO. THIS IS THE CONUNDRUM MAX ADDRESSED. THAT THEY WILL DO THE PARIS OLYMPICS BUT THE BLOOM IS OFF THE ROSE. WORRY ABOUT THIS, WORRY ABOUT THAT. DAVID KELSEY OVERNIGHT -- DANA TELSEY SLICES THROUGH OVERNIGHT. THIS IS THE CONUNDRUM YOU HAVE. GROWTHINESS AND WHAT DO WE DO WITH GOOGLE? JON: IF YOU LOOK AT THESE STATEMENTS FROM THE CEOS, AI HOPES AND DREAMS. YESTERDAY, JUST OPENING UP INDIVIDUAL STATEMENTS, THE FIRST LINE OF EACH QUOTE FROM EACH CEO LIKE SATYA NADELLA SAID THEY ARE ASKING HOW MUCH THEY CAN APPLY THE FIRST GENERATION OF EACH -- OF AI. LISA A: WHEN YOU LOOK AT EARNINGS, WHERE IS THE AI PROFITABILITY? WHERE ARE REVENUES? IT COMES DOWN TO ADD SPENDING, CLOUDS ENDING, THE NUTS AND BOLTS -- CLOUD SPENDING, THE NEXT AND BULLS. JONATHAN: YOU ARE TRANSITIONING FROM CFO TO PRESIDENT AND CIO? WHAT IS THAT? LISA A: IT IS A NEW POSITION. I WAS LOOKING UP THINGS AND THERE WAS NONE IN WHAT I COULD FIND. TOM: SHE CAME FROM NEW YORK AND SERVED FIVE YEARS OF PAIN AS CFO AND WHAT THEY WANT HER IS RIDE HEARD ON THE MANY DREAM INVESTMENTS AND BOLT POPONS -- BOLT-ONS AND FOUNDERS. SHE HAS TO PICK UP THE DEGREE AND FIGURE OUT WHAT TO DO IT. LISA A: THAT CLEARS IT UP. JONATHAN: WALL STREET HAS BEEN A BIG FAN FOR A LONG TIME. I'M CURIOUS ABOUT THE TRANSITION FROM CFO TO A NEW ROLE. EQUITIES ARE SOFTER. >> THE BIGGEST THREAT REMAINS INFLATION. WE HAVE HAD GOOD NEWS ON HOW TO FIGHT IT, AND REVISE A BIT. THERE WAS QUITE A BIT OF RESILIENCE IN THE GLOBAL ECONOMY IN THE FIRST QUARTER BUT THE MOMENTUM IS SLOWING DOWN WHICH IS WHY AT THE END OF THE DAY, THE REVISION IS NOT STRONGER THAN WHAT IT IS. JONATHAN: THE INTERNATIONAL MONETARY FUND WITH A MILD LIST TO THEIR FORECAST FOR GLOBAL GROWTH BUT AS THE IMF CHIEF POINTED OUT, THERE IS MODEST GROWTH INTO 2024. GOOD MORNING. CHAIRMAN POWELL MAKING A FED DECISION LATER THIS AFTERNOON. MOST PEOPLE ANTICIPATING ANOTHER HIKE. IT IS ABOUT >> NEXT. THAT'S WHAT IS NEXT. EQUITY FUTURES RIGHT NOW ON THE S&P ARE NEGATIVE BY 0.1%. MICROSOFT IS LEISURE WAITING ON THIS. MAKES UP 10% OF THE NASDAQ 100. NASDAQ WHAT HIT MORE BECAUSE IF THEY MOVE. MICROSOFT IS DOWN 3.5% THIS MORNING. NASDAQ IS DOWN BY 2.5%. THE EURO HAS BEEN GOING SOMEWHERE AND ALL OVER THE PLACE OVER THE LAST COUPLE WEEKS. WE HAVE HAD SIX DAYS OF EURO WE THIS AND A SINGLE SESSION OF EURO STRENGTH -- OF EURO WEAKNESS AND A SINGLE SESSION OF EURO STRENGTH. TOM: THERE ARE SOME INTERESTING DYNAMICS IN FX INTO THE WEEKEND. INTO THE EARNINGS SEASON, I HAVE YET TO SEE A SUMMER. YOU MENTION EARLIER 40%, 20%, 80% OF EARNINGS HAPPENING WITHIN 10 DAYS. WE WILL BE A LOT WISER ABOUT THE GROWTH AND VALUE IN SIX TO EIGHT DAYS. JONATHAN: IT IS AROUND 40% OF THE U.S. MARKET CAP THIS WEEK. WHAT IS THE ENTRY PRICE FOR GOODS OF LVMH? THEY SAID THEY ARE WEAKER. WHAT IS THE ENTRY PRICE OF A LEVY GOOD FOR LVMH? TOM: THE ENTRY PRICE IS -- FOR EXAMPLE A TENT TIFFANY'S WHERE THEY JUST SPENT A GAZILLION DOLLARS FOR A DISPLAY OF AUDREY HAVE -- H EPBURN'S DRESS FROM "BREAKFAST AT TIFFANY'S." THERE IS A ONE FLOOR, 412 OR 418, I CANNOT REMEMBER, WHICH IS ALSO OVER. IT IS LIKE ENTRY PRICE. THIS IS A BIG DEAL. WE HAVE TO ASK THE QUESTION, OR U.S. SALES DOWN BECAUSE OF A LACK OF CHINESE TOWARDS -- CHINESE TOURISTS? WE TALKED ABOUT THIS YESTERDAY GOING INTO LVMH. THIS SEEMS TO BE A SOFT SPOT FOR SOME PLAYERS. LISA A: CHINA WAS THE SOFT SPOT. WE HAVE BEEN BLAMING CHINA FOR THE POTENTIAL SLOW DEBT IN LUXURY SALES BUT IT IS NOT. IT IS IN THE U.S.. I HAVE BEEN LOOKING AT BAGS. HERE IS A T-1, 260. THIS IS NOT MY PURVIEW. [LAUGHTER] TOM: TERRY HAYNES KNOWS THEY BULLDOZED -- THIS IS WEST FORD'S THEATER WHERE DAVID RUBENSTEIN PUT SO MUCH INTO PART OF OUR NATIONAL CHARACTER THERE. THEY BULLDOZED SIX BLOCKS OF WASHINGTON, D.C.. TERRY HAYNES KNOWS WHO CAN MAKE A CIRCLE FROM TIFFANY TO GUCCI. THAT IS THE WHOLE LUXURY BRANDING THERE. JONATHAN: A WHOLE D.C. SOBBING LAB. TOM: YES. WE ARE GOING TO LIGHTEN THE LOAD . HAYNES. I LOOK OUT OF MY OFFICE AT WHAT THEY DID TO WASHINGTON. IT IS NOT THE WASHINGTON IN FROM MY CHILD. AUGUST BECKONS. JONATHAN HAS BROUGHT THIS UP A COUPLE TIMES. WE ARE GOING TO HAVE A REPUBLICAN DEBATE. IT IS A LOGICAL THEY CAN HAVE A PROPER DEBATE WITHOUT THE FORMER PRESIDENT OF THE UNITED STATES. TERRY: THEY MAY HAVE A MORE PRODUCTIVE DEBATE IN SOME WAYS. IT PROVIDES THE OPPORTUNITY TO CHALLENGE THEMSELVES AND IF DONALD TRUMP IS NOT THERE, THEY HAVE THE OPPORTUNITY TO PUNCH WITHOUT BEING PUNCHED BACK. WE WILL SEE HOW THIS GOES. THAT IS ABOUT A MONTH AWAY NOW. IT TELLS YOU A LOT ABOUT HOW LITTLE YOU COME OUT OF WASHINGTON. IN SUCCEEDING WEEKS, WE ARE TALKING ABOUT SOMETHING THAT HAPPENED -- IS HAPPENING IN FOUR OR FIVE WEEKS. TOM: WHAT ARE YOU FOCUSED ON THIS WEEKEND? MOST OF US ARE UNFOCUSED. HELP US GET FOCUSED. WHAT MATTERS RIGHT NOW? TERRY: THE PHRASE ON THE LIST OF EVERYONE -- THE LIPS OF EVERYONE IN WASHINGTON IS "JET GUMES." BEYOND THAT, YOU HAVE A FEW DIFFERENT INQUIRIES. THERE WILL BE SOME HEAT ON HOMELAND SECURITY SECRETARY MAYORKAS. WE HAVE THE BUBBLED OF TALK ABOUT POTENTIAL IMPEACHMENT AND QUERIES IN THE FALL OR WINTER. FINALLY, IT WILL NOT BE LOST ON YOU THAT THERE WILL BE A UFO HEARING IN THE HOUSE. THE TWO JOKES SOME WILL GO RIGHT AT THAT FOR NUMBER WAS SO I WILL LEAVE THAT FOR NUMBER THREE. JONATHAN: THIS IS A BIG DEAL. TOM: I THINK SCULLY WILL BE THERE. JONATHAN: THE FREQUENCY OF THE SIGHTINGS IS MUCH HIGHER THAN PEOPLE PREVIOUSLY APPRECIATED HEAD. WE ARE GOING TO FIND OUT MORE DETAIL TODAY. LISA A: YOU CANNOT JUST SAY THAT IN THIS CASE. [LAUGHTER] JONATHAN: HOW MUCH ARE THEY HIDING IN WHAT IS HAPPENING IN THIS COUNTRY AND OUR AIRSPACE DAPO IT IS REALLY IMPORTANT. THE AWFUL TALK ABOUT THIS TOMORROW. YOU WILL SEE. LISA A: MEANWHILE, WE ARE TALKING ABOUT THE REAL WORLD. I WOULD LOVE TO GET YOUR THOUGHTS ON TEAMSTERS AND WHAT THIS COULD MEAN IN TERMS OF WAGE INFLATION THAT WE GET FRIDAY. HOW DO YOU THINK PRESIDENT BIDEN WILL WEIGH IN ON THIS IN A TIME WHEN NATION IS A CONCERN BUT HE IS CONSIDERED THE MOST PRONE UNION PRESIDENT OUT THERE? TERRY: IT IS INTERESTING. THE TEAMSTERS ESSENTIALLY STIFF ARMED HIM AND TOLD HIM TO STAY AWAY FROM THIS BECAUSE THEY THOUGHT THEY HAD A BETTER SHOT AT A GOOD DEAL. THIS IS HAPPENING. WE WILL STILL HAVE STRIKE ACTIVITY GOING ON. IT WILL BE BEYOND THE SUMMER AND FALL AND STILL BEYOND THE WHITE HOUSE'S ABILITY TO TRY TO SUCCESSFULLY RESOLVE ANY OR ALL OF THESE. I THINK NET-NET WILL BE A BIT OF A DRAG ON THE ECONOMY AND EAT INTO INFLATION FEARS WHICH IS A DATA POINT THAT GOING FORWARD IS LIKELY TO INFORM THE FED'S FUTURE TRACK AS WELL. JONATHAN: EVERYTHING THE PRESIDENT SAYS RIGHT NOW IS UNDER AND MICROSCOPE. BECAUSE OF HIS AGE GOING INTO ELECTION NEXT YEAR, THERE WAS A QUOTE YESTERDAY. WHAT DID HE SAY ABOUT ANTICANCER? WHAT DID THE PRESIDENT SAY? TERRY: FUNDAMENTALLY, THIS WAS A FOLLOW TO THE CANCER BEEN SHOT HAS BEEN PUSHING EVER SINCE THE DAYS WHEN HE WAS VICE PRESIDENT. THIS EFFORT WILL CONTINUE. THERE WILL BE FUNDING FROM CONGRESS THAT WILL SEND YOU ON THIS. BEYOND THIS, I DON'T THINK THERE WAS ANYTHING PARTICULARLY MEANINGFUL. JONATHAN: MUCH CONFUSION OVER THIS YESTERDAY AS TO WHETHER THE PRESIDENT SAID HE HAD ENDED IT OR WE CAN END IT. TOM: I'M GLAD YOU BROUGHT IT UP. TO ME, THE CONFUSION IS NOT A SINGLE ITEM. IT IS HAPPENING EVERY AUTO DAYS. WHERE ARE WE IN A YEAR? WAS RISHI SUNAK, HE IS LIKE 38 YEARS OLD? JONATHAN: 38 YEARS YOUNGER THAN HIM MAY BE. IT SEEMS LIKE A SILLY STATEMENT, BUT AT THE END OF THE DAY, THE WAY THE MEDIA REACTED THE LAST 24 HOURS IS AN EXAMPLE OF WHAT IT WILL BE LIKE FOR THE NEXT 12 MONTHS. JONATHAN: TOM SAID HE -- THAT YOU HAD BEEN IN NORWAY FOR THE LAST WEEK. TELL US ALL ABOUT THE FJORDS. LISA: WE DID NOT SEE A POLAR BEAR. THAT IS THE REVIEW. I WAS IN ALASKA. JONATHAN: -.2%. THERE IS A REASON WHY WE ARE A LITTLE BIT SOFTER THIS MORNING. WE WILL GET THOSE EARNINGS IN JUST A MOMENT. THE TREASURY IS SHAPING UP AS FOLLOWS. YIELDS ARE A LITTLE BIT LOWER ON THE SESSION. INTERESTING THAT WE HAVE HAD THIS INFLATIONARY AND DEFLATIONARY DEVELOPMENT. THE FED BANK --BACKING AWAY FROM THE IDEA. HIGHER AND NOT LOWER THIS TIME AROUND. LISA: HOW LONG CAN THEY HOLD UP RATES? IF THEY ARE NOT CUTTING RATES, WHAT DOES THAT DO TO THE REST OF THE CURVE? JONATHAN: THE EURO, SIX CONSECUTIVE DAYS OF EURO WEAKNESS. REPLACE THAT WITH A TOUCH OF EURO STRENGTH. WE HAVE BEEN TALKING ABOUT IT FOR A WEEK. THE DATA OUT OF EUROPE IS NOT GETTING IT DONE. TOM: THAT IS IDIOSYNCRATIC. THE EURO IS ABOUT EUROPEAN GDP WEAKNESS. THE BLENDED INDEX REALLY HAS NOT MOVED. THIS IS A EURO SPECIFIC STORY. JONATHAN: UNDER SURVEILLANCE THIS MORNING, EXPECTING THE FEDERAL RESERVE TO RAISE RATES BY ANOTHER 25 BASIS POINTS. THEIR HIGHEST LEVEL IN 22 YEARS. YOU GET THIS STATEMENT AT 2:00 P.M. AND THEN YOU GET THE NEWS CONFERENCE AT 2:30. LISA, I THINK YOU HAVE TOUCHED ON THE MOST IMPORTANT PART OF TODAY FOR CHAIRMAN POWELL. HOW DO YOU REFLECT THE CONSENSUS, WHEN MAYBE THERE IS NOT ONE? LISA: WE DO NOT KNOW, JUST LIKE YOU DO NOT KNOW. THERE ARE THOSE WHO THINK THAT WE ARE IN A STEADY INFLATION, BUT WE KNOW THAT WE ARE GOING TO OBSERVE THIS AND THIS. WHAT ELSE CAN YOU SAYING? JONATHAN: A LITTLE LATER, WE WILL GET EARNINGS FROM META-. GAINING IN THE PREMARKET AFTER BEATING EXPECTATIONS ON ADVERTISING. MICROSOFT THIS MORNING IS HEADED IN THE OPPOSITE DIRECTION. A DECELERATION AND CLOUD GROWTH. TOM: I GET THAT. SOMEBODY IS GOING TO BE RIGHT AND SOMEBODY WILL BE WRONG ABOUT THE VET. OF CLOUD GROWTH, BUT I DO NOT HEAR ANYBODY SAYING YOU ARE GOING TO SEE A STRATEGIC CHANGE IN CLOUD. WHAT DOES IT MEAN FOR AMAZON? LET'S REMIND OURSELVES THAT CLOUT GUY CAME TO TAKE OVER. THAT IS SORT OF THE TRIANGULATION OF CLOUD IN AMERICA RIGHT NOW. JONATHAN: YOU SAID ZEITGEIST? THIS IS NOT A ZEITGEIST. JOHN LEWIS FACING CHARGES OF INSIDER TRADING IN THE U.S. FEDERAL PROSECUTORS CLAIM HE PASSED ON INSIDER KNOWLEDGE TO FRIENDS, ASSISTANCE, AND EVEN ROMANTIC PARTNERS. IT IS AN IMPORTANT QUOTE SAYING THIS, THE GOVERNMENT HAS MADE AN EGREGIOUS ERROR AND CHARGING THIS MAN OF --HE CAME TO THE U.S. VOLUNTARILY TO ANSWER ILL-CONCEIVED CHARGES, AND WE WILL DEFEND HIM VIGOROUSLY IN COURT. TOM: I THOUGHT THE COVERAGE WAS VERY BALANCED AND THAT THEY TALKED ABOUT THE ALLEGATIONS. I NEED TO SAY THANK YOU FOR THE TO BE SEATS. I AM BIASED. I THINK THEY ARE GOING TO PROVIDE SOME EVIDENCE. THERE ARE SOME SERIOUS ALLEGATIONS THERE. WE WILL SHARE ONE MORSEL. THERE ARE MANY. >> THAT IS THE ALLEGATION, THE ONE OFF. >> ABOUT 15 PERCENT OF THE EXAM IS ETHICS AND WHAT YOU FLUNK IN ETHICS IS INSIDER TRADING. IT IS NOT A LOT OF CLARITY, BUT THOSE ALLEGATIONS ARE PROVIDING CLARITY. I THINK THAT WE NEED TO DO SOME REPORTING ON THIS. I HAVE TO BE HONEST, WE HAVE OUR LEGENDARY ART DAYS AND WE NEED TO RESEARCH THIS. WE NEED TO DO SOME RESEARCH HERE. JONATHAN: I CANNOT BELIEVE HOW TRANSPARENT TOM WAS ABOUT THIS CONTROVERSY. TOM: WHO LET HER IN? THE MAJOR ISSUE IS INSIDER TRADING IS NOT AS CLEAR-CUT AS THE PUBLIC THINKS. IT CAN GET REALLY BACK-AND-FORTH. I WAS STUNNED BY THE ALLEGATIONS. FRANCES DONALD IS WITH US RIGHT NOW. WE ARE THRILLED THAT YOU ARE HERE. WHAT ARE YOU WRITING ABOUT THIS WEEKEND? WHAT IS THE DYNAMIC THERE? IS IT INVESTMENT OR THE MYSTERY OF THIS BUOYANT CONSUMER? >> WE ARE TRYING TO STICK TO PROCESS. STILL, I'LL ASH ALL OF OUR LEADING INDICATORS SUGGEST THAT THE BEST BASE CASE SCENARIO IS A RECESSION. THE GAME IS NOT TO SAY WHETHER THERE IS RECESSION -- RECESSION OR A SOFT LANDING. WHAT WE ARE TALKING ABOUT IS IN THE NEXT ONE TO TWO MONTHS, WE SEE DATA THAT WILL GIVE THE APPEARANCE OF SOFT LANDING. LOOKING FURTHER OUT, WE STILL HAVE TO MAINTAIN THIS CALL. DOES NOT FEEL GOOD, BUT WHEN YOU STICK TO THE INDICATORS, THAT IS THE BEST CASE. I CAN SAY THAT SOMETIMES YOU NEED TO PARTICIPATE IN MOMENTUM DRIVEN RALLIES. THIS HAPPENS. MACRO IS NOT ALWAYS THE DRIVER. AN OVERLAY --IT MATTERS MUCH MORE AT INFLECTION POINTS. I DO NOT BELIEVE THAT WE ARE AT AN INFLECTION POINT. THE INFLECTION POINT WILL PROBABLY COME BACK INTO THE STORY THREE MONTHS FROM NOW. NOW IS THE TIME TO SHINE, IF THOSE ARE YOUR STRENGTHS. TOM: GOING TO SAY GOLDMAN SACHS, BUT I AM MAKING IT UP. EVERYBODY IS PUSHING IT OUT. CAN YOU RAISE IT TO 2026? >> SURE. IF YOU ASK ANY ECONOMIST, THEY WOULD HAVE SOME SORT OF RECESSION BECAUSE THEY DO NOT BELIEVE THAT CYCLES ARE NECESSARILY DEAD. WHY HASN'T THE RECESSION THAT EVERYONE HAS FORECAST MATERIALIZED? YOU HAVE TO LOOK AT WHAT A STANDARD ECONOMIC MODEL WOULD TELL YOU. WHAT MAY NOT BE TRUE OR WHAT IS DIFFERENT ABOUT THIS ENVIRONMENT. THIS TIME IS FUNDAMENTALLY DIFFERENT. YOU CANNOT THROW THE BABY OUT WITH THE BATHWATER. THERE ARE ELEMENTS THAT WILL BE DIFFERENT. IT WILL LOOK SLIGHTLY DIFFERENT. YOU DO HAVE TO QUESTION WHY IS IT NOT HERE YET? THERE ARE CYCLE EXTENDERS AT PLAY. WE ARE NOT TALKING --THERE ARE THINGS THAT ARE DIFFERENT ABOUT THE STORY, BUT NEGATING ALL OF THE POWER OF THE INDICATORS IS NOT PRUDENT TO THIS ENVIRONMENT. JONATHAN: DO YOU ALSO ENVISION THAT WE HAVE A PROBLEM SIMULTANEOUSLY? >> THIS IS WHAT CONCERNS ME MORE. THERE ARE A HECK OF A LOT OF ENVIRONMENTS IN BETWEEN THOSE THINGS. IF I AM AN ASSET MANAGER, A CLASSIC RECESSION REBOUND --WE HAVE A PLAYBOOK FOR THAT. WHAT CONCERNS ME MORE IS WHAT EUROPE IS EXPERIENCING NOW. STICKY INFLATION WITH NO GROWTH. I AM WORRIED ABOUT THIS CONCEPT OF THE GREEN LANDING BEING THE MOST BULLISH OUTCOME. I'M NOT SURE A SOFT LANDING IS AS BULLISH AS EVERYBODY MAKES IT OUT TO BE. IF WE DO NOT GET THOSE, WE HAD A WE RATING. I'M NOT SURE WE HAVE REALLY THOUGHT THROUGH WHAT DOES SOFT LANDING MEAN FOR EQUITY MARKETS? LISA: HOW MUCH DO YOU THINK IT IS A TRAP TO LEARN PEOPLE, IN TERMS OF VULNERABILITIES AND THAT TYPE OF MAYBE SOFT LANDING BUT NO GROWTH CIRCUMSTANCE? >> IT DEPENDS ON YOUR TIMELINE. IT CAN BE AN OPPORTUNITY TO LEVERAGE SOME CYCLICAL BOUNDS. BUT IF YOU ARE A LONGER TERM INVESTOR, YOU SHOULD BE LOOKING AT THESE AS AN OPPORTUNITY TO REDUCE YOUR RISK. IT WILL CALL INTO PLAY WHY THERE IS MORE FOCUS ON PRIVATE ASSET. IN THIS ENVIRONMENT DESCRIBED AS SLOWER GROWTH, WE WILL BE LOOKING FOR ASSET CLASSES THAT REDUCE VOLATILITY. TOM: IS THE MEETING THIS AFTERNOON? IS THE PRESS CONFERENCE THIS AFTERNOON ASUS FAST? >> I WOULD EXPECT THAT CHAIR POWELL ALSO EXPECTS IT TO BE A SNOOZE FEST. I DO NOT THINK THERE IS ANYTHING HE COULD SAY TODAY THAT WOULD CONVINCE THE MARKET TO TAKE OUT RATE CUTS FROM NEXT YEAR. JUST ABOUT EVERYBODY RECOGNIZES THAT THE FED DOES NOT HAVE THE LUXURY OF PIVOTING. WE HAVE PRICES SURGING AND INFLATION EXPECTATIONS ARE UP QUITE A BIT. HE CANNOT GO DOVISH. THIS IS A MARKET THAT WILL START PUTTING A LITTLE LESS WEIGHT ON WHAT THE FED SAYS AND MORE ON WHAT 2024 WILL LOOK LIKE. PROBABLY A LOT OF STRATEGISTS ARE COMING UP WITH A BASE CASE FOR ALL THE OTHER SCENARIOS BEHIND THE SCENES. THE FED CAN START TALKING A LITTLE BIT MORE ABOUT SCENARIOS, BUT IT COMES BACK TO THE ISSUE THAT THE FED HAS TO CONTROL THE ISSUES. THE BANKS WILL HAVE TO HAVE A MOMENT WHERE THEY ADMIT, WE DO NOT ALWAYS KNOW WHAT IS GOING ON. THAT WILL BE THE STORY FOR HOW MARKETS TRADE. JONATHAN: THIS WAS AWESOME. COME TO THE STUDIO MORE OFTEN. TRYING TO RETAIN THE OPTIONALITY OF GOING AGAIN. TOM: I PREDICT THAT WE ARE GOING TO SEE HIM SAY DATA DEPENDENT. THAT IS WHAT THEY ARE. IT IS A POST PANDEMIC. JONATHAN: I IMAGINE THE FIRST FEW MINUTES MIGHT BE SILLY. TOM: I DO NOT KNOW IF THAT WILL COVER IT. JONATHAN: FUTURES A LITTLE BIT SOFTER. >> IT IS REALLY HARD TO ARGUE AGAINST BIG TECH FOR THE TIME BEING THAT IT IS ALSO HARD TO ARGUE THIS IS SUSTAINABLE REACTION AND HOW THE BIG TECH CAN GROW. JONATHAN: HOW BIG CAN THE BIG TECH GROW? BIGGER. A TOUCH OF UNDERPERFORMANCE. SHOWING A SLOWDOWN. REMAINING BULLISH. WE MAINTAIN OUR RATES. THEY RAISED THE PRICE TARGET TO 400, REFLECTING CONFIDENCE IN AI OPPORTUNITY. TOM: I WAS STANDING IN THE KITCHEN, LOOKING AROUND THE CORNER, WATCHING THE MARKET AND THERE WAS A THING ON THE SCREEN CALLED DOG PILE. DOG PILE WAS BOUGHT BY GOOGLE AS A KEY PART OF THEIR SEARCH ALGORITHM. THE OTHER NAMES, I CANNOT REMEMBER NOW. I DID NOT SEE THE INTERNET COMING. I HAD THE HONOR OF TELLING -- WHAT DAN WROTE YESTERDAY ON THIS IS CRITICAL. IT IS NOW, AGAIN, 1995. TRANSFORMATIONAL. JONATHAN: OUT OF THE CORNER OF MY EYE, I SAW IT. I ALWAYS REFLECT ON THIS VIDEO. YOU REMEMBER THE CLIP FROM THE LATE 90'S AND THE SMUG JOURNALIST ASKING ABOUT AMAZON BEING BIGGER THAN SEARS. YOU LOOK BACK ON IT AND IT SOUNDS RIDICULOUS. IN MOMENTS LIKE THESE, TRYING TO BE MAYBE A LITTLE BIT MORE MODEST ABOUT WHAT WE DO NOT KNOW AND HAVE SOME HUMILITY ABOUT THIS AI MOMENT. HE THINK WE NEED A BIGGER DOSE OF HUMILITY ABOUT HOW BIG THIS CAN BE? >> I THINK IT WILL BE BIGGER THAN ANTICIPATED. IT JUST FURTHER CONCERNS -- CONFIRMS WHAT WE SAW FROM NVIDIA. THEY ARE EXPLODING ACROSS THE BOARD. BIGGEST TRANSFORMATION THAT WE HAVE SEEN IN TECH IN 30 YEARS. IT IS JUST DRIVING A NEW TECH BULL MARKET. LISA: WHAT ARE THE MOST LUCRATIVE AREAS? WILL IT BE GENERATIVE AI, WHERE YOU CAN PUT YOUR AVATAR IN, TRY ON CLOTHING AND ORDER THINGS, OR IS IT SOMETHING ELSE? HOW DO YOU DETERMINE WHO THE WINNERS WILL BE? >> I THINK IT HAS BEEN PROVEN AGAIN AND AGAIN AT THE TOP OF THE MOUNTAIN. IT IS REALLY SOFTWARE AND CHIPS. WHEN I LOOK AT SALESFORCE.COM --IT IS JUST THE TIP OF THE ICEBERG. OTHERS ACROSS THE CHEAP ECOSYSTEM. IT IS ALL ABOUT USE CASES, WHICH IS WHY RIGHT NOW, INVESTORS ARE JUST LOOKING. IT IS REALLY LOOKING AT TWO, THREE, 24 YEARS. IT COULD BE 8% TO 10% OF BUDGETS NEXT YEAR. LISA: THEY DID NOT NECESSARILY DELIVER. THEY ARE NOT DELIVERING AS FAST, SOME SORT OF INVESTMENT ON THE CLOUD SPACE. WHAT WOULD YOU SAY TO INVESTORS ABOUT HOW THEY SHOULD LOOK AT THIS VALUATION AND PUT A PRICE TARGET ON THAT? QUEST THAT WAS ONE OF MY CONVERSATIONS LAST NIGHT. THE TACTICIAN AND HALL OF FAMER, GETTING THE POPCORN OUT AND READY FOR AN ACCELERATING GROWTH STORY. THEY ARE NOT GOING TO GIVE THEIR PLAYBOOK AWAY. THEY CONTINUE TO JUST BE NUMBERS OVER THE COURSE. I BELIEVE MICROSOFT, A YEAR FROM NOW WILL JOIN APPLE AND WHAT I SEE IN A YEAR. TOM: OK. I GUESS THAT IS THE NEW INDUSTRY ORGANIZATION AROUND US. BLUE LIGHTS WILL SHOW UP. HOW DID THESE GIANT COMPANIES BUT THE PROFITABILITY HANDLED THE 21ST CENTURY LEWD RIGHTS -- HANDLE THE 21ST CENTURY? >> TECHNOLOGY IS GOING ONE HUNDRED IN THE LEFT LANE. THE STRONGER ARE GOING TO GET STRONGER. IT WAS A HUGE FLANKS OF THE MUSCLES. THIS IS, IF YOU ARE A BEAR, COMING OUT OF HIBERNATION MODE -- TOM: WHY ARE YOU LOOKING AT ME? >> I THINK WHAT YOU SAW FROM TECH EARNINGS IS MORE AND MORE BULLISH. I THINK NEXT WEEK WILL BE THE GOLDEN MOMENT. TOM: I WANT TO KNOW WHAT AMAZON AND APPLE --I THINK AMAZON IS IN THE CLOUD. APPLE IS NOT. HOW DOES APPLE EMBRACE AI? >> WE BELIEVE IT WILL BE IN AI DRIVEN APP STORE IN. I ULTIMATELY BELIEVE IN THE NEXT ONE TO TWO YEARS, IT WILL BE A FURTHER PENETRATION STORY. TOM: HOW MANY CAN THEY PICK UP AT OF AI, FIVE YEARS OUT? >> YOU ARE TALKING ABOUT THREE TO 400 IMPROVEMENT BECAUSE THEY OWN THEIR ECOSYSTEM, PLUS AI IS SOFTER. I BELIEVE WE WILL BE SITTING HERE IN EARLY TWO THOUSAND 20 FIVE, GETTING READY FOR THE SUPER BOWL. JONATHAN: I ACKNOWLEDGED IN THE LATE 1990'S THAT THERE WERE THINGS THAT WE DID NOT APPRECIATE. WE ALSO GOT SOLD A LOT OF BS. I WISH I COULD CURSE ON THE SHOW. WHAT IS IN AI GENERATED APP STORE? >> WHETHER IT IS HEALTH, FITNESS, ANY KIND OF APPS, THEY WILL BE AI GENERATED AND BUILT WITHIN THE APP STORE. ANY ACT OR USER WILL BE ABLE TO DOWNLOAD THOSE APPS FOR DEVELOPERS. THE NEXT VERSION OF THAT IS GOING TO BE IN AI DRIVEN APP STORE THAT WILL COME OUT AND I THINK THEY ARE STARTING THE CONCEPT OF IT. JONATHAN: YOU HAVE BEEN BULLISH ON THIS UPGRADE CYCLE THAT KIND OF NEVER WAS. IT IS KIND OF A JUSTIFICATION. MANY PEOPLE ARE GOING TO BUY THE IPHONE 14 AND 15. WHAT IS GOING ON THERE? >> THE BEARS THOUGHT 200 MILLION, BUT THEY SOLD 200 25 MILLION. THEY CONTINUE TO UNDERESTIMATE. THAT IS WHY I VIEW THIS AS A MINI CYCLE PLAYING OUT. NEXT THURSDAY, COOK ON THE CALL WILL JUST BE FURTHER FUEL IN THE ENGINE FOR THIS UPGRADE CYCLE. TOM: I TOOK A PHOTO OF DAN'S SHOE AND THE SATURATION IS SO SUPERIOR TO ANYTHING BEFORE IT. JONATHAN: ISN'T THE SAMSUNG CAMERA BETTER? >> YEAH, BUT THAT'S NOT THE POINT. THE REPORT OVERNIGHT WAS NOT GOOD. >> I THINK IT CONTINUES TO BE MORE AND MORE SHARE GAINS FOR APPLE. IT IS A CONTINUED STRUGGLE THAT THEY HAVE, AGAIN AND AGAIN. TOM: I'M GOING TO PUT THIS OUT ON TWITTER. JONATHAN: JUST A SNAPSHOT OF YOUR SNEAKERS. FROM NEW YORK CITY THIS MORNING, GOOD MORNING. NEGATIVE. YOU HEAR FROM APPLE AND AMAZON LATER. BEFORE WE GET THERE, IT IS >> INFLATION REMAINS WELL ABOVE OUR GOAL OF 2%. >> WE WILL NEED A COUPLE MORE RATE HIKES TO BRING INFLATION BACK. >> IT WILL TAKE SOME TIME TO COLLECT MORE INFORMATION AND THEN BE ABLE TO ACT. >> I BELIEVE THAT IT IS DECLINING GRADUALLY IN A WAY THAT MAY BE SUSTAINABLE. >> WE STILL HAVE A BIT OF WORK TO DO. JONATHAN: A FED DECISION RIGHT AROUND THE CORNER. GOOD. FOR OUR AUDIENCE WORLDWIDE, THIS IS BLOOMBERG SURVEILLANCE. LISA IS BACK. EQUITY MARKETS. CHAIRMAN POWELL, 2 P.M. EASTERN TIME. A LITTLE BIT LATER AFTER THAT, EARNINGS FROM META-FOLLOWING EARNINGS FROM MICROSOFT. TOM: THIS IS A BIG DEAL. 8% TO 9%, THAT IS THE HARDEST EARNINGS SEASON. EVERYBODY THOUGHT THOSE NUMBERS WOULD COME DOWN. I AM SEEING A LOT OF RESEARCHERS SAYING, MAYBE NOT. LISA: WE ARE SEEING THEM RAISING. 70 EIGHT CENTS, BEATING THE PROJECTION. WHAT I FIND INTERESTING IS THAT EVEN IN THE LOWER END ITEMS, YOU ARE SEEING CONSUMER IS ABLE TO KEEP SPENDING ABOVE EXPECTATIONS, AND THAT IS THE STORY THAT WE NEED TO PAY ATTENTION TO. JONATHAN: IT HAS BEEN A YEAR OF AIRLINES AND CRUISE LINES. LISA: IT GOES TO WHAT WE HEARD FROM FRANCES DONALD. INFLATION, TRENDS. AND WHAT WE ARE SEEING IS SOMETHING THAT WILL BE MORE STICKY. JONATHAN: HE SAYS HE EXPECTS INFLATION TO BE ACCELERATE. EXPECTING INFLATION TO BE ACCELERATE. LET'S GET ANOTHER NAME. SHE WAS TALKING ABOUT A RECESSION BUT A RECESSION WITH STICKY INFLATION. IF YOU ARE SCRATCHING YOUR HEAD, LOOK TO GERMANY. IT IS STILL A PROBLEM. TOM: LET'S BE CLEAR. WE SAID THIS WHEN LISA WAS AWAY. ECB MEETING IS MORE IMPORTANT THAN WHAT WE ARE DOING TODAY. HE IS --HE HAS TO BE AWARE OF THE CHALLENGES OF GERMANY AND FRANCE. LISA: HOW DOES HE EXPRESS HAWKISHNESS? HE HAS NO OTHER OPTION. HOW DOES HE GIVE AN ARGUMENT FOR IT WHEN YOU SEE MORE SPLINTERING DIDN'T HAVE AN MONTHS? JONATHAN: YOU WOULD THINK ONE AND DONE, BUT THEY REMAIN -- THEY RETAIN THEIR OPTIONALITY. I KEEP WORKING. I DO RESEARCH. I DO RESEARCH IN THE AFTERNOONS. TOM: YOU ARE WORKING LIKE THE ROMANS, YEARS AGO. THEY WORKED 80 HOURS A WEEK. I CLOCK OUT AT 10:01. YOU KEEP WORKING, BUT I DO NOT. JONATHAN: WE ARE NEGATIVE BY 0.2%. WE HAVE VIRTUALLY UNCHANGED. THE EURO SHOWING SOME STRENGTH TODAY. EURO-DOLLAR. LISA: WE WILL GET THAT RATE DECISION. YOU WILL NOT BE CLOCKING OUT AT 10:00 A.M. WE HAVE BOB MICHELE AND DIANE. BEFORE THAT MEETING, WE GET JUNE NEW HOME SALES. AVH CELEBRATION IN A SPACE THAT WAS SUPPOSED TO BE INTEREST RATE SENSITIVE. WE SAW THEM CLIMBING A LITTLE BIT HIGHER. WE SAW FROM GOOGLE AND ALPHABET THAT CONSUMER DISCRETIONARY SPENDING, THE RETAILERS SPENDING AND ADVERTISING HAS BEEN STRONG. CORPORATIONS ARE NOT SPENDING AS MUCH WHICH IS VERY INTERESTING. JONATHAN: WONDERFUL TO CATCH UP WITH YOU ON A FED DECISION DAY. WHAT ARE YOU LOOKING FORWARD TO IN THE NEWS CONFERENCE LATER THIS AFTERNOON? >> WE HAVE HAD A FAIRLY LONG-HELD CALL, WHERE WE ARE GOING TO HIT TODAY. IT IS FULLY PRICED AND AND WILL PROVIDE NO SHOCK TO THE MARKET. YOU JUST HAVE TO LOOK AT THE STRENGTH OF THE ECONOMIC DATA TO KNOW THAT THEY HAVE TO ALMOST PUT ASIDE THE MOST RECENT AND CONTINUE ON THE THREAT OF A RESURGENCE ON THE TIGHTNESS OF THE MARKET AS WELL. THEY SHOULD NOT RISK A FURTHER EASING OF FINANCIAL CONDITIONS. WE HAVE TO REMEMBER THAT JAY POWELL HAS A TENDENCY TO LET HIS TRUE SELF OUT. LISA: IT IS THE MISTAKE THAT EVERYONE IS LOOKING FOR. ONE AFTER THE OTHER OF SOME OF THE CAUTIOUS INVESTORS HAVE BEEN PUTTING UP MEDICAL BUZZ. STANLEY SAYING THAT HE GOT IT WRONG IN TERMS OF THE RALLY. HAVE YOU THROWN IN THE TOWEL AND SAID, I NEED TO LEAN INTO THIS RALLY? >> WE ARE A LITTLE BIT IN BETWEEN. WE HAVE BEEN EXPECTING THE ECONOMY TO SLOW. IT IS A SLIGHTLY WEIRD SITUATION WHERE YOU HAVE THE INFLATION NUMBERS BUT THE GROWTH NUMBERS HAVE NOT MATCHED UP IN THAT WAY. WE ARE EXPECTING A FURTHER PULLBACK, BUT BECAUSE RECESSION CALL IS ONE THAT IS VERY SHORT, ONE .5 PERCENT GDP GROWTH. WE ARE EXPECTING TO SEE A LITTLE BIT OF A PULLBACK AND THEN WE WILL BE LOOKING TO GET VERY RISK ON. BUT WE ARE NOT AT THAT POINT RIGHT NOW. LISA: SO YOU COULD END UP WITH SOME KIND OF SLOWDOWN BUT STILL STICKY INFLATION? >> I DO NOT THINK I AM QUITE THERE. I DO THINK YOU WILL SEE SLOWDOWN. WE DO NOT BUY INTO THE ARGUMENT THAT THE FED NEEDS TO SEE INFLATION AT 2.5%. WE THINK THEY WILL BE FINE. WE CONTINUE TO SEE DECELERATION AS THE ECONOMY SLOWS. IT DOES NOT MEAN THAT THEY WILL MOVE INTO LOOSE TERRITORY. POLICY WILL STILL BE VERY RESTRICTIVE. IF WE ARE WRONG ABOUT THE ECONOMIC GROWTH SCENARIO, YOU SEE THIS CONTINUE IN THE ECONOMY. IT WILL BE ACCOMPANIED BY A RESURGENCE IN INFLATION. TOM: I'M SO GLAD YOU'RE HERE. I HAVE SOMETHING I HAVE NEVER SEEN IN 30 YEARS OF DEALING WITH THE BLOOMBERG TERMINAL. COCA-COLA WITH A HEADWIND OR THAN THE DRAMA OF LAST YEAR. ETHICS IS GETTING MORE STABLE OFF OF THE DOLLAR. BUT AT THE REVENUE LINE, UNIT CASE VOLUME OF 0%. THE HEADLINE AFTER SAYS ORGANIC REVENUE GROWTH IS BEING MODELED AT PLUS EIGHT, PLUS 9%. I HAVE NEVER SEEN THAT SPREAD BETWEEN ZERO PERCENT AND AN EIGHT PERCENT VIEW OF THE FUTURE. CAN COMPANIES RAISE INTO THIS INFLATION CYCLE? DO THEY KEEP RAISING PRICES, OR DOES THAT IN SOME POINT? >> PEOPLE SEE THIS BIFURCATION WITH COMPANIES. THE COMPANIES THAT HAVE THE BRAND AND PRICING POWER WILL CONTINUE TO CREEP IN ON THESE PRICES. IT IS LIKELY TO BE ONE OF THE OUT PERFORMERS. IF YOU ARE A SMALLER COMPANY, AS INFLATION IS COMING DOWN, YOU'LL FIND IT MORE AND MORE DIFFICULT. TAKING THAT BIG MACRO VIEW, WE NEED TO START THINKING ABOUT THE QUALITY. WHATEVER YOUR VIEW IS, IF YOU BELIEVE INFLATION IS COMING DOWN , THAT HAS TO BE PART OF YOUR STRATEGY. TOM: DID THEY SEE VALUE IN INTERNATIONAL INVESTMENT RIGHT NOW? THE GREAT ZOMBIE ROLLUP. THAT IS IMPLIED AMERICAN. CAN THERE BE A GREAT ZOMBIE ROLLUP TO QUALITY AND SKILL WORLDWIDE? >> THERE ARE OPPORTUNITIES. THE ENVIRONMENT IS QUITE DIFFICULT TO READ. THERE ARE A LOT OF DIFFERENT VIEWS AT THE MOMENT. YOU HAVE TO START FOCUSING ON LONGER-TERM THEMES. WE LOOK AT EQUITIES AND THINK ABOUT REASSURING. THERE WILL BE AREAS WITHIN ASIA THAT ARE LOOKING PRETTY GOOD. IN LATIN AMERICA, A KEY FOCUS OF MEXICO. WE HAVE SOME CENTRAL BANKS THAT ARE CUTTING INTEREST RATES. I THINK IT IS STILL COMPELLING FROM A LONG-TERM PERSPECTIVE, BUT NOT FOR US. DO NOT THINK ABOUT THE NEAR TERM BECAUSE IT IS QUITE CONFUSING. THINK ABOUT THE NEXT YEAR OR COUPLE OF YEARS OUT. JONATHAN: DO YOU WANT LUXURY OR ATTACK? >> DE-RISKING WORK OK A LOT OF THE, BUT YOU ARE NOT SEEING THIS SPILL OVER TO OTHER ECONOMIES. YOU ARE SEEING A CHINESE RECOVERY, WHICH IS VERY LACKLUSTER, BUT ANY BENEFITS THAT EXIST ARE NOT SPILLING INTO THE MARKETS. I WOULD PLAY THE TECH TRADE. >> THANK YOU. THESE FEARS OVER THE EUROPEAN MARKET ARE CREEPING BACK IN. SOME HAPPY TALK A LITTLE EARLIER THIS WEEK. ENCOURAGING MAYBE A LIFELINE IN CHINESE EQUITY MARKET THAT HAVE STRUGGLED, BUT IS THAT SUFFICIENT? DO WE NEED TO SEE SOME REAL STIMULUS COMING OUT OF THAT COUNTRY? LISA: I WAS READING ABOUT WHY CHINA CANNOT STABILIZE. THEY CANNOT INFLATE A BUBBLE IF THEY DO NOT SOLVE SOME OF THE PROBLEMS WITH THE LOCAL GOVERNMENT. THEY NEED TO RESPOND TO SUPPLY AND DEMAND DYNAMICS. JONATHAN: THEY START TO EMERGE IN CHINA, THAT MAYBE YOU CANNOT DO MUCH ABOUT. IF YOU ARE JUST TUNING IN, WELCOME. WE HAD NEGATIVE ON THE S&P BY 0.2%. COMING UP, LOOKING FORWARD TO THIS CONVERSATION. ALISHA LEVINE. ALWAYS ONE OF THE BEST. THAT CONVERSATION IS JUST AROUND THE CORNER. TOM: I THINK THEY ARE GOING TO GET SOME OPTIMISM FROM HER. IT IS NOT JUST DETAIL RISK, BUT THE OPTIMISM THAT IS OUT THERE. I WONDER HOW PEOPLE RECALIBRATE TO A BULL MARKET. >> LOOKING FORWARD TO CATCHING UP. BEFORE THAT, WE NEED TO GO TO D.C. AND CATCH UP WITH ANNE-MARIE. THE GOOD NEWS FOR THIS ADMINISTRATION, THE STRIKE FROM UPS THAT PROBABLY WILL NOT HAPPEN NOW BECAUSE WE HAVE A DEAL ON THE TABLE --GOOD NEWS FOR THE BIDEN ADMINISTRATION. LISA: MASSIVELY GOOD NEWS. THERE WAS CONCERN IF HE WOULD STEP IN AND HALT A STRIKE THAT MANY DEPEND ON FOR THEIR BASIC GOODS. THAT WAS A CONCERN HANGING OVER IT AND NOW THE CONCERN IS SHIFTING, WAGE INFLATION. THIS IS NOT JUST THE TEAMSTERS. TOM: WHAT AN INTERESTING STORY OUT OF BOSTON. MY FIRST QUESTION TO HIM IS AMAZON THE NEXT UPS FOR THE TEAMSTERS? JONATHAN: INTERESTING. COMING UP, YOUR EQUITY MARKET. FROM NEW YORK CITY, GOOD MORNING. >> WE ARE GOING TO HAVE A SHUTDOWN. THERE IS A GROUP THAT THINKS THAT A GOVERNMENT SHUTDOWN WOULD BE A GOOD THING POLITICALLY AND IN TERMS OF GOVERNANCE. WE CANNOT RUN OUR COUNTRY WITHOUT A BUDGET. THIS CANNOT BE THE SOLUTION. WE HAVE TO FIX OUR BUDGET PROCESS. JONATHAN: THE CRISIS THAT NEVER WAS. FROM NEW YORK CITY, WELCOME TO THE PROGRAM. THE CONSENSUS, WE HAVE A RATE HIKE. 2:00 P.M. FOR THE DECISION. COMING INTO IT ON THE S&P 500, JUST A LITTLE BIT SOFTER. NO DRAMA THIS MORNING. TOM: HOW THEY FINESSE THIS. THIS IS A ZEITGEIST. WE MENTIONED IT ON THE SHOW WITH FIXED INCOME STRATEGIST LOANS. THESE ARE PACKAGES OF WHAT I WILL CALL FIXED INCOME. NOT DERIVATIVES BUT STRUCTURED SECURITIES, OFTEN LEVERAGED. JONATHAN: WE ARE HEARING MORE AND MORE ABOUT THAT. TOM: WHERE ARE YOU ON THIS, POLICE SAY? LISA: THEY ARE USUALLY SENSITIVE WITH THE INCREASE IN RATES. YESTERDAY, I'M SURE YOU TALKED ABOUT WHAT WE SAW AT OF EUROPE A MASSIVE DECLINE IN LOAN DEMAND. THAT IS WHAT WE WILL HEAR ABOUT TOMORROW. TOM: SLEEPY DAYS OF JULY INTO AUGUST. FAR MORE SERIOUSLY, THERE WAS SECURITY AROUND HER. YOU HAVE TO BE KIDDING ME. EVERYBODY GROWN-UP, LIKE COMMANDER. COMMANDER IS BITING SECRET SERVICE AGENTS. IT IS FRANKLY NOT FUNNY. IT IS COMMANDER GOING OUT TO THE HAPPY FARM? IF THEY CANNOT SOLVE THIS ISSUE, HOW CAN WE BELIEVE THAT THE PRESIDENT CAN SOLVE THE NATION'S SERIOUS ISSUES? >> THIS DOG, SEVERAL EMAILS ARE SHOWING THAT IT HAS WRITTEN A NUMBER OF SECRET SERVICE AGENTS. THEY HAD ANOTHER DOG, MAJOR, WHO FOLLOWED A SIMILAR TRACK. HE WAS SENT TO FAMILY FRIENDS IN DELAWARE, AND COMMANDER WILL PROBABLY MEET THE SAME FATE. TOM: HAVE YOU EVER MET COMMANDER? HAVE YOU EVER BEEN IN THE WHITE HOUSE AND MET HIM? >> I HAVE SEEN HIM RUNNING AROUND UNLEASHED, BUT I NEVER WANTED TO GO OVER TO HIM. I LOVE DOGS, BUT I NEVER HAD THIS URGENCY TO WANT TO GO BACK. TOM: THIS IS THE INSIGHT THAT YOU GET. LISA: ARE YOU TROLLING ANNE-MARIE? IT WAS INTERESTING WHAT IT SAYS ABOUT THE NEW CYCLE, THAT THIS WAS THE TOP STORY BY MANY POLITICAL OUTLETS THAT THERE WERE ATTACKS BY THIS DOG. I AM CURIOUS ABOUT YOUR THOUGHTS ON THIS RESOLUTION. I'M CURIOUS FROM YOUR VANTAGE POINT HOW THIS IS BEING RECEIVED IN A WHITE HOUSE THAT DODGED A BULLET BUT IS ALSO FACING AN INFLATION PROBLEM. >> THEY DID NOT WANT THE ADMINISTRATION TO GET INVOLVED. THEY WERE ABLE TO GET A DEAL THAT THEY SEEM TO BE HAPPY WITH. THEY HAVE TO GO BACK AND MAKE SURE THEY CAN GET THROUGH. THERE WAS A HICK UP WITH THE RAILROADS. BUT IT DOES SEEM LIKE THIS IS A DEAL THAT THEY ARE HAPPY WITH. HIS THOUGHT PROCESS WAS THERE WOULD BE A DAY OR TWO STRENGTH FROM UPS FIGURES. -- WORKERS. IT COULD HAVE BEEN ANOTHER ISSUE FOR THE SUPPLY CHAIN ON THE. THEY REALLY TRY TO WORK TO UNWIND IT. ANYTIME YOU ARE SEEING A UNION PRESIDENT COME OUT AND SAY THAT THEY ARE FIGHTING FOR HIGHER WAGES IN AMERICA, THIS PRESIDENT IS GOING TO WANT TO EMBRACE THAT AND GO DOWN AS THE MOST PROLABOR PRESIDENT. LISA: THIS IS PROBABLY WHAT HE IS WANTING TO BE THE HEADLINE, INSTEAD OF HIS DOG. THE RACE IS REALLY HEATING UP WITH CONTENDERS HAD OF NEXT MONTH'S DEBATE. >> THE PRESIDENT --HE HAS APPROVAL RATING IS IN THE 40'S. THE ISSUE IS THAT HIS ECONOMIC APPROVAL RATINGS ARE IN THE 30'S. I CANNOT GET OVER THIS POLL THAT SAYS THREE IN 10 AMERICANS THINK THE U.S. IS DOING BETTER COMING OUT OF THE PANDEMIC ECONOMICALLY THAN THE REST OF THE WORLD. LOOK AT U.S. DATA VERSUS THE REST OF THE WORLD. WE ARE DOING MUCH BETTER. YES, IT DOES FEEL LIKE AMERICA IS OUT FRONT, BUT THAT IS NOT HOW AMERICANS FEEL. THEY ARE STILL FEELING WHAT WE HAD IN TERMS OF INFLATION. AMERICANS ARE STILL FEELING THAT. IT IS WHY THE ADMINISTRATION IS TRYING TO OWN THIS TERM AND EXPLAIN ALL THE LEGISLATIVE WINS THAT THEY HAVE HAD AND POTENTIALLY SHIFTING THEM ON THE ECONOMY. IF THERE IS A SOFT LANDING, IT COULD BE HELPFUL TO THIS PRESIDENT. JONATHAN: BUT THE NYMEX MEANS DIFFERENT THINGS TO DIFFERENT PEOPLE. TOM: YOU THROW IT OUT AND SEE IF IT STICKS ON THE WALL. IT IS ABOUT THE NEXT JOBS REPORT, THE NEXT INFLATION REPORT. JONATHAN: THAT IS POODLE. THERE IS AN EASILY STARTLED CREATURE. TOM: YOU HAVE TO FIX IT. THE ISSUE IS NOT THE BITE, IT IS THE BITES, PLURAL. JONATHAN: THAT IS A PROBLEM. LISA: THE FACT THAT EVERYTHING GETS HIGHLIGHTED IN THIS NEW WAY IS A SERIOUS PROBLEM. HE WONDERED WHAT THE DEMOCRATIC PARTY IS THINKING ABOUT THAT. JONATHAN: WHO IS GOING TO SHOW UP SO THAT? TOM: I HAVE NEVER BEEN A VERY FOCUSED MONEY RAISER. LISA: DID YOU SEE RON DESANTIS CUTTING PART OF HIS STAFF? JONATHAN: I BELIEVE THAT DEBATE. TOM: TWO LAKESIDE. DOROTHY -- JONATHAN: IT IS A DOG FREE ZONE FOR THE NEXT 30 MINUTES. WE DO NOT KNOW WHAT TO CABLE TALK ABOUT. -- TK WE'LL TALK ABOUT. WE ARE DOWN BY 20%. TOM: WHAT IS A SPRINT RACE? WHAT IS IT? I DO NOT EXPLAIN. JONATHAN: NO PITSTOPS. I STILL REALLY DO NOT KNOW. I'M NOT A BIG FAN OF IT. I THINK IT TAKES SOMETHING AWAY. I'M WITH YOU. WE ARE ON THE THING PAGE ABOUT THAT. I'M NOT SURE WHERE THAT CONVERSATION CAME FROM, BUT I -- LET'S GET TO THE BOND MARKET. 10-YEAR, 30 YEAR. YIELDS UNCHANGED. WE DID THIS IN THE LAST HOUR. I COMPARE THE MARKET TO WHERE IT WAS AT THE CLOSE. THE TWO-YEAR WAS AND WE ARE HIGHER NOW. WE ARE A LITTLE BIT HIGHER NOW. THAT IS WHAT THE THAT WE ARE EMBRACING THIS DISINFLATIONARY SOFT LANDING. LISA: IT IS NOT LONG ENOUGH TO TORPEDO THE RALLY. PEOPLE ARE TRYING TO JUSTIFY SOMETHING ABOUT INFLATION THAT IS BASICALLY -- JONATHAN: PMI'S THIS WEEK ARE TERRIBLE. THE EURO HAS HAD A STRING OF WEAKNESS. THE EURO AGAINST THE DOLLAR, 110 . INVESTORS ARE EXPECTING TO RAISE INTEREST RATES AGAIN. PUTTING RATES AT THEIR HIGHEST LEVEL IN 22 YEARS. A TWO PART STORY. THE FIRST PARAGRAPH OF THE STATEMENT IS WHERE WE WILL GO INITIALLY. INFLATION REMAINS ELEVATED. EMBRACE THE IMPROVEMENT AND PROGRESS THAT WE HAVE MADE. LISA: EVERYONE IS JUST GOING TO ASSUME THAT THEY ARE GOING TO BE MORE HAWKISH THAN THEY ACTUALLY ARE. I KNOW THAT WE WILL BE PARSING THROUGH THIS TODAY. THAT IS THE PROMO. JONATHAN: TOM MIGHT STAY AWAKE. TOM: IT WILL BE TOUCH AND GO. JONATHAN: AFTER THAT, WE WILL HAVE WHAT HAPPENS WITH META-. POSITIVE BY 6%. BEATING EXPECTATIONS IN ADVERTISING. MICROSOFT HEADING IN THE OPPOSITE DIRECTION. OFFSETTING THE ARTIFICIAL INTELLIGENCE STORY. I BELIEVE WE HAVE BILLING JUST MOMENTS AGO. TOM: I WAS NOT AWARE, BUT IT WAS SINGLE-DIGIT OVER THE YEARS. 9.1% RETURN PER YEAR FOR THE LAST 10 YEARS. OFF THE BOTTOM OF OCTOBER, 82%. LISA: YOU ARE TALKING ABOUT MICROSOFT AND GOOGLE. IT IS FUELING SOME OF THE AD DRIVEN NAMES WHEN IT COMES TO CONSUMER SPENDING. BOEING WILL TAKE ADVANTAGE OF THAT. WE SAW HILTON BEATING EXPECTATIONS. EVERYONE IS TRAVELING AND MOVING AROUND. THIS WILL CONTINUE THROUGH EARNINGS. FOR HELON REMAINS THE QUESTION. JONATHAN: NEVER MIND THE DOGS, THIS IS THE STORY RIGHT NOW. UPS REACHING AN AGREEMENT WITH THE TEAMSTERS UNION. THIS HAS AVOIDED A STRIKE THAT COULD HAVE STARTED AS EARLY AS NEXT WEEK. WE PUT A LOT OF PRESSURE ON THEM IN THE MEDIA AND THE INDUSTRY. THEY BLINKED. MAYBE THIS CAPTURES THE MOMENT, BUT THIS COULD HAVE BEEN A REAL STRIKE. TOM: I'M NOT GOING TO GO INTO IT RIGHT NOW, BUT THIS IS A KID WHO WENT UP AGAINST ALL STEREOTYPES, EVERY VIEWER AND LISTENER HAS ABOUT THE TEAMSTERS. IT INVOLVED IMMENSE COURAGE AND THE PAYOFF WAS TODAY. THE FIRST THING OUT OF HIS MOUTH IS, AMAZON IS. HIS BASIC TAKE IS YEARS AND YEARS OF UPS, HE WOULD SUGGEST THAT THE SQUARE IT UP AND THEY FIXED IT OVERNIGHT. THEY CAME TO AN AGREEMENT THAT BENEFITED THE EMPLOYER AND ALSO THE TEAMSTERS, AND HE IS MOVING ON TO THAT MODEL. I WOULD SUGGEST IF YOU DRIVE DOWN THIRD AVENUE, AMAZON IS PART OF THAT DISCUSSION. IT WILL BE INTERESTING TO SEE. KATHY JONES IS WITH US. I THINK THAT IS UNDERPLAYED. THE REAL YIELD STASIS, ALL MY RADAR IS UP IN THE MARKET BECAUSE IT IS BORING. >> A SHOE THAT WE WILL GET SOME SORT OF EXCITEMENT. AS HE SAID, IT IS WIDELY ANTICIPATED. WHAT IS FORWARD GUIDANCE GOING TO BE? THEY WILL SOUND HAWKISH, BUT THEY MIGHT INDICATE A PAUSE. HOW DOES THAT GET PARSED OUT? WHAT DOES IT COMMUNICATE? REALLY GET A VOTE OR A HANDFUL OF RATE HIKES? IT COULD COMMUNICATE A LOT IN THE MARKET. JONATHAN: I JUST WONDER WHAT IT MIGHT MEAN YIELD CURVE THAT IS ALREADY INVERTED. >> THERE IS A LOT OF DISINFLATION IN THE PIPELINE THAT IS FLOWING THROUGH, AND WE ARE NOT SEEING A HUGE AMOUNT OF PRESSURE. OF COURSE, YOU HAVE OIL THAT WILL BE THERE, BUT IT DOES NOT LOOK LIKE WE ARE SEEING A WEEK CELEBRATION. IT IS SUBSTANDARD. IT IS REALLY HARD TO PUSH THE INFLATION NARRATIVE FROM THERE. LISA: WOULD IT BE BAD IF JAY POWELL CAME OUT AND SAID, WE DO NOT KNOW WHERE THIS IS GOING, WE DO NOT HAVE A CLUE. ALL OF US ARE NOT SURE, BUT HERE IS WHAT WE ARE WATCHING, CALL IT A DAY. >> I WISH HE WOULD, BUT I THINK THE FED HAS FORECAST THAT THEY HAVE TO HAVE SOME SORT OF CONFIDENCE, GOING FORWARD, BUT NOBODY REALLY KNOWS WHAT WILL HAPPEN IN THE NEXT THREE QUARTERS. AS TOM MENTIONED, WE HAVE TIGHTENING CREDIT AT THE BANKS. LOOK AT THE SENIOR LOAN OFFICERS PRETTY SOON. I WOULD IMAGINE THE FED HAS DONE SOME WORK. NOT WAITING FOR THE QUARTERLY REPORT TO COME OUT. MIGHT HAVE A FEEL, SO THAT WILL GO INTO THE EQUATION. TIGHTENING IS STILL HAPPENING, EVEN IF THEY PAUSE. I THINK THAT MIGHT BE PART OF THE MESSAGE THAT COMES BACK -- COMES OUT. LISA: WE'RE SEEING THEM GO UP HIGHER THAN THEY HAVE. CANDY, WITH CONVICTION SAY THAT THEY ARE NOT GOING TO HIKE AND PUSH AGAINST A RECESSION? COULD THEY SAY HOW HIGH THE BAR IS WITH MTE'S? >> THEY OUTLINED FOR THINGS THAT THEY WERE WATCHING AND ONE WAS THIS DISINFLATION FROM THIS WHOLESALE MARKETS. YOU COULD SAY IT HAS HAPPENED. HE HAS TALKED ABOUT ASSAD TRAINED GDP GROWTH WHERE I WOULD ARGUE THAT WE HAD HAD THAT OVER THE LAST YEAR OR SO. HE TALKED ABOUT A SLOWDOWN IN HOUSING PRICES, BUT IT HAS NOT FLOWED THROUGH IN THE DATA. AND THEN THERE IS THE WAGE DATA. WE HAVE TO WAIT FOR THAT. I THINK THEY COULD OUTLINE THE DATA. THEY HAVE OUTLINED IT OVER THE LAST YEAR OR TWO. GARY WAITING TO HEAR EVERYTHING. LABOR DAY IS PROBABLY THE FINAL ONE. TOM: I STILL HAVE NOT RECOVERED FROM 18 MONTHS AGO. I THOUGHT BONDS WERE ALWAYS POST GO UP. WHAT IS THE RECOMMENDATION TO PARTICIPATE? FLEX WE LIKE EXTENDING DURATION WITH A BARBELL OR A LADDER. IT IS FINE BECAUSE -- TOM: GIVE US A MATURITY GAP. >> NO AUSTRIAN PIECES. TOM: SHOULD WE GO 10 YEARS OR 20 YEARS? MS. JONES IS SAYING ONE TO SEVEN. THAT IS MASSIVE. IT IS JUST --YOU KNOW. JONATHAN: IT WAS ONE OF THEM SHOWS MOMENT AND EVERYBODY KNEW. EVERYBODY KNEW IT WAS. THEY KNEW THAT NEGATIVE YIELDS WERE DEEPLY UNSUSTAINABLE. LISA: PEOPLE SAY MAYBE IT IS A BUBBLE THAT CAN JUST EXIST IN PERPETUITY. IT IS REALLY CAPITAL APPRECIATION. OR PRICE APPRECIATION, NOT THE ACTUAL COUPON, WHICH IS NOTHING. JONATHAN: YIELDS ARE NEGATIVE, BUT THEY WILL BE MORE NEGATIVE. THAT WAS THE STORY THE LAST 10 YEARS. TOM: IT IS. THE LAST 16 YEARS. JONATHAN: IF YOU ARE JUST JOINING THE PROGRAM, WELCOME. WE ARE COUNTING YOU DOWN TO A FED DECISION THIS AFTERNOON. WE ARE NEGATIVE BY --WE ARE NEGATIVE. TOM, WE HAVE NOT TALKED ABOUT A BANKING MERGER, AND THE OTHER MONTH OVER THE LAST THREE MONTHS. I THINK IT SPEAKS TO THE MOMENT THAT WE ARE NOT TALKING ABOUT THE BANK OF CALIFORNIA. TOM: A MARKETING GUY -- LISA: IT IS PROBABLY BANK CORP.. TOM: IT HAS SOME EQUITY KICKERS. I DO NOT REALLY KNOW THE DETAILS. WHAT I KNOW IS, PRECRISIS, IF THEY COME OUT, AND USING THAT AS A NUMBER. CRITICALLY, IT IS THE MOST GLOOMY WHEN THE CAMERA WAS SHAKING. THEY ARE POPPING FROM FOR 10. LISA: IT HIGHLIGHTS HOW THEY ARE HAVING A LOT OF SHOVEL CLIMBING OUT OF THE. THAT IS THE ISSUE, SO IT WILL TAKE PRIVATE MONEY TO COME IN AND CREATE IT. >> IT IS HARD TO ARGUE AGAINST BIG TANK FOR THE TIME BEING, BUT IT IS ALSO DIFFICULT TO RATIONALIZE THE SUSTAINABLE REACTION OF THE BIG MARKET. JONATHAN: BIG TECH GROWING A LOT BIGGER OVER THE YEARS SO FAR. LOOKING AT MICROSOFT, MICROSOFT IS NEGATIVE THREE .6%. AI HOPES AND DREAMS NOT ENOUGH TO BAILOUT DECELERATING GROWTH THAT WE WILL TALK ABOUT IN JUST A MOMENT. ALPHABET IS POSITIVE BY 6%. AND SALES LOOK DIFFERENT OVER THERE, RISING OFF OF THE BACK OF THAT INITIALLY. SNAP IS DOING ANYTHING BUT. TOM: IF YOU CANNOT SOCKET WRENCHES OFF OF THAT, INVENTORIES ARE TERRIBLE THERE. JONATHAN: IT IS SNAPCHAT. DIFFERENT COMPANY. I WAS HARDLY PIVOTING FROM MICROSOFT TO SNAPCHAT. YOU SHOULD CHECK IT OUT, SNAPCHAT. I DO NOT EVEN HAVE IT ON MY PHONE. TOM: LISA, DO YOU SNAP? LISA: NO. SNAP APP. THE USE IT TO THE MEET UP WITH FRIENDS, BUT IT IS ALSO --THEY ACTUALLY TRACK EACH OTHER AND IT BECOMES A SOCIAL ISSUE. TOM: I HAVE NEVER ASKED THIS QUESTION. THEY DO NOT PAY ATTENTION TO ME. CAN I ASK A QUESTION? I'M SORRY. WE ARE TALKING TECH AND BOEING HAS BEEN LOADED WITH TECHNOLOGY. LISA: THERE IS ACTUALLY A REAL QUESTION THAT IS SOMEHOW NOT GOING TO BOEING EARNINGS, BUT HOW ARE ALL COMPANIES GOING TO BE PITCHING AI AS TECH COMPANIES. OTHERS HAVE A LOT OF DATA. >> AND LOVE OUR AUDIENCE. THE ANSWER IS STRAIGHTFORWARD. AT LEAST FOR THE BANK OF CALIFORNIA, THE CODE SAYS IN ORDER TO CONDUCT BUSINESS, A FIRM MUST HAVE RECEIVED A COMMISSION AUTHORING -- AUTHORIZING BUSINESSES AND HELPING COMPANIES EARN. TOM: THAT IS BRILLIANT. THANK YOU. I LEARNED SOMETHING. WE HAVE GET IT IN. THERE IS ALL OF THIS AI DS THAT REMINDS YOU OF NANOTECHNOLOGY. WILL BOEING BE EFFECTED BY AI? >> IF THEY START GIVING NUMBERS, THEY TOLD US HOW MUCH REVENUE THEY ARE GENERATING FROM AIS SERVICES, NOT A WHOLE LOT, BUT IT GREW, QUARTER OVER ORDER, AND I THINK THE STOCK IS DOWN BECAUSE EXPECTATIONS WERE EVEN HIGHER. NVIDIA TOLD US THAT THEY ARE RAISING THEIR FORECAST BECAUSE OF THE AI DEMAND. TOM: IF DAN IVES SAYS THERE WILL BE A POP IN THE MARGIN, I THINK YOU GET THAT. IS GOING OR OTHER COMPANIES USING TECHNOLOGY TO SEE AN EXPANSION IN THREE TO FIVE YEARS OUT FOR AI AKO >> PROBABLY NOT. YOU NEED HUGE UPFRONT INVESTMENT IN TERMS OF BUILDING DATA CENTERS AND REALLY AGGRAVATING A LOT OF DATA. YOU'RE TALKING ABOUT THE WHOLE INTERNET AND EVERYBODY IS GETTING PROTECTIVE OF THEIR DATA. THERE WILL BE A HANDFUL OF CLAIMS, BUT THE INTERNET COMPANIES ARE WELL POSITIONED. THEY HAVE THE MOST DATA. WHEN YOU TALK ABOUT COMPANIES THAT HAVE DIGITIZED EVERYTHING, THEY ARE LOOKING TO DIGITIZE, BUT THEY ARE STILL VERY NEW. JONATHAN: WHAT IS THAT? FLEX IT IS TWO FOLD. THEY WANT TO RETAIN HER, BUT IN TERMS OF GOOGLE LOOKING TO TAKE STAKES LIKE THEY DID, THEY CANNOT BUY A COMPANY RIGHT NOW WITH THE CURRENT SET UP. WHAT MICROSOFT DID IS THEY TOOK A 10 MILLION DOLLARS STAKE EARLY ON. THEY ALREADY DID THAT WITH ANTHROPIC. IT'S JONATHAN: SO THEY ARE ULTIMATELY GOING TO BE BIG COMPANIES. >> THE TRANSFORMATIVE MODEL CAME UP FROM GOOGLE. IT WAS A 2017 PAPER WRITTEN BY GOOGLE EMPLOYEES. NOW WE ARE TALKING ABOUT HOW OPENAI HAS BECOME THE BUZZ. THAT IS WHY HE STARTUPS WILL BE NIMBLE. I THINK IT WILL HAPPEN IN THE STARTUPS. LISA: IT IS COMING FROM ADVERTISING MORE THAN ANYTHING ELSE. CORPORATE INVESTMENT IS NOT DELIVERING. ARE WE GOING TO SEE THAT ADVERTISING FITTING THEM AS WELL? >> ALSO THE COST EFFICIENCY SIDE . YOU ARE GOING TO SEE THE SAME COST-CUTTING EFFORTS. IT WILL FEED INTO THE FREE CASH FLOW. ALPHABET TALKED ABOUT HOW THEY ARE REDUCING FOR THE SECOND HALF. THESE COMPANIES HAVE THE INCREMENTAL LEVERAGE. ADD SPENDING IS COMING BACK, BUT IT IS NOT COMING BACK TO THAT POINT. LISA: WHEN WILL THEY BE ALLOWED TO MAKE FURTHER JOB CUTS? >> BECAUSE OF THE CHANGING NATURE OF AI AND WHAT CLOUD IS DOING, CERTAIN JOBS WILL BE OBSOLETE. WHAT THEY ARE DOING IS ESSENTIALLY REPLACING PEOPLE MAKING SMALL CHANGES THAT COULD REPETITIVE. COPILOTS COULD BE HUGE IN TERMS OF HOW MANY EMPLOYEES YOU NEED. THAT IS FAIR. I THINK THE COPILOT ASPECT IS HUGE. BOTH INTERNALLY AND WHAT THEY COULD SELL TO THEIR CUSTOMERS. JONATHAN: I ASSISTING TO A PODCAST THE OTHER DAY. WHEN IT CAME TO THE LIKES OF FACEBOOK, THEY BOUGHT IT. WHEN HE IS LOOKING AT AI, THEY ARE GOING TO INVEST IN THINGS. WITH THOSE DEALS WERE MADE, I HUNDRED THINKING, THAT IS A LOT OF MONEY FOR INSTAGRAM OR WHATSAPP. 10 YEARS LATER, LOOK AT US NOW. THEY ARE ANNOYED WITH THEMSELVES. I JUST WONDER IF THE INVESTMENTS OF SOME OF THESE TECH FIRMS WILL COME UNDER THE MICROSCOPE, KNOWING THAT THESE BIG TECH PLAIN USE COULD GET A LOT LARGER. >> THEY WILL PROBABLY COME UNDER THE MICROSCOPE, BUT THEY HAVE THE SCALE. THIS IS VERY INTENSIVE. ALL GENERATIVE AI IS COMPUTER INTENSIVE. TOM: WE WERE TALKING TO CAROL MASSAR ABOUT THE IROBOT VACUUM IN HER LIVING ROOM. WHY DID THEY BUY THAT? WHY DID THEY DO THAT? LIKE'S THEY ARE NOT TRYING TO MAKE MONEY OFF OF THE HARDWARE. IT IS THE TECHNOLOGY. JONATHAN: THAT IS WHAT IT IS ABOUT. TOM: WE GOT ON THE PHONE WITH SWEENEY AND CAROL WAS ENCYCLOPEDIC ABOUT VACUUMING YOUR HOUSE WITH ROBOTS. YOU HAVE ONE OF THOSE? >> INFLATION REMAINS WELL ABOVE OUR LONGER RUN GOAL OF 2%. >> WE WILL NEED A COUPLE MORE RATE HIKES TO BRING INFLATION BACK. >> IT COULD TAKE TIME TO COLLECT MORE INFORMATION AND THEN BE ABLE TO ACT. >> I BELIEVE UNDERLYING INFLATION IS DECLINING IN A WAY THAT COULD BE SUSTAINABLE. >> WE ARE CLOSE BUT WE STILL HAVE WORK TO DO. ANNOUNCER: THIS IS "BLOOMBERG SURVEILLANCE." ♪ TOM: RIGHT. GOOD MORNING. THIS IS "BLOOMBERG SURVEILLANCE." FED DAY. LISA HAS RETURNED FROM NORWAY LOOKING AT WALES. NICE OF YOU TO SHOW UP. JONATHAN IS ALWAYS HERE. THAT WAS THE BEST OPENING OF THE 8:00 A.M. OUR I HAVE SEEN IN YEARS. THEY WERE WRONG SIX MONTHS AGO, THEY WERE WRONG 12 MONTHS AGO, THEY WERE WRONG 18 MONTHS AGO. AND ETHAN HARRIS WOULD SAY THEY HAVE BEEN WRONG SINCE MCCHESNEY MARTIN. WHAT A BUNCH OF HOT AIR. JONATHAN: YOU ARE TALKING ABOUT A VICTORY LAP A WEEK AGO. TOM: THEY COULD HAVE IT IN REAL-TIME BASED ON DATA, BUT THE CRYSTAL BALL GAZING, THE DOTS. I HAD DINNER ONCE WITH RICHARD BERNER AND YOU HAD SMOKE SIGNALS, GREENSPAN WITH A SANDWICH AT LUNCH, THAT IS MORE SOPHISTICATED THAN WE HEARD IN THE SHOW OPENING. JONATHAN: MAXIMUM TRANSPARENCY COMING OUT OF THE FINANCIAL CRISIS AND ONCE THE TOOTHPASTE IS OUT OF THE TUBE, YOU CANNOT GET IT BACK IN. AT THAT IS WHAT WE LIVE WITH NOW. TOM: DOES THE BANK OF ENGLAND HAVE MAXIMUM TRANSPARENCY AS A YOUNG INSTITUTION? JONATHAN: I DO NOT GET THE SAME SENSE THAT THEY ARE RUNNING AROUND DOING SPEECHES. I THINK THAT THE ECB IS UP THERE. I THINK WE HEAR FROM PRESIDENT LAGARDE MORE THAN GERMAN POWELL. TOM: IN FRANKFURT YEARS AGO IT WAS LIKE, WHO THE HELL IS THAT? THE ECB HAS MASSIVE CHALLENGES OF BUNDESBANK VERSUS OTHERS GOING YOU HAVE GOT TO BE GETTING ME. JONATHAN: BUT GERMANY IS IN A RECESSION. THE DECISION FOR THEM ISN'T STRAIGHTFORWARD EITHER. IT HAS BEEN INTERESTING. IT IS NOT LISTENING TO THE DOVES , IT IS THE HAWKS THAT WILL NOT COMMIT TO TIGHTENING. THERE IS A MEETING ON THURSDAY BUT THE PMI IS DREADFUL, BUSINESS CONFIDENCE IS NOT GREAT AND INFLATION IS STILL A PROBLEM. IS THAT A CASE STUDY FOR STATESIDE, I DO NOT KNOW. BUT IT IS FASCINATING. TOM: LISA SAW SOME ORCAS OFF OF SWEDEN. VERY COOL. YOU HAVE HAD YOUR MIND CLEAR. WHAT IS THE TOXIC BREW WE WILL SEE THIS AFTERNOON? LISA: I LOVE YOUR SET UP, THEY HAVE BEEN WRONG FOREVER! IT IS RIDICULOUS. TOM: THEY ARE FARTHER THAN THEY USED TO BE. LISA: FAIR ENOUGH, BUT THEY WERE NOT KEEPING THEIR THUMB ON THE MARKET FOR MORE THAN A DECADE, IT WAS THE FED'S BUBBLE, THEIR 100 YEAR BOND AS WELL AS OTHER CENTRAL BANKS. HOW TODAY COMMUNICATE THE NEW NORMAL? THAT IS THE FOCUS, HOW LONG WILL THEY KEEP RATES AT THEIR HIGHEST LEVEL GOING BACK TO 2001? EVEN IF WE DO NOT GET A RECESSION, HOW DO THEY SAY WE CAN CUT RATES IF WE SEE A SIGNIFICANT SLOWDOWN IN INFLATION? TOM: THIS IS YOUR WHEELHOUSE, THE DATA DEPENDENCY. SO REPRICING BONDS TO PERFECTION AS SPREADS COME IN. HAVE YOU SEEN WAVERING IN THAT? LISA: SPREADS ARE THE TIGHTEST. THEY ARE OVER BENCHMARK RATES, AT LEAST GOING BACK TO APRIL OF LAST YEAR. HOW MUCH IS THIS A LEGITIMATE REFLECTION OF A LACK OF DEFAULTS IN THE SAME WAY WE HAVE SEEN TRADITIONALLY IN DOWNTURNS AND HOW MUCH IS IT A MISPRICING? TOM: OFF OF THE RADAR I AM LOOKING AT BRENT CRUDE, $83. JONATHAN: EQUITIES THIS MORNING ON THE S&P 500 SHAPING UP AS FOLLOWS. MICROSOFT IS DISAPPOINTING, A DECELERATION AND CLOUD REVENUE. -3.65%. THE STORY FOR ALPHABET IS POSITIVE, SIX PERCENTAGE POINTS. AD SALES ARE DECENT. META IS ONE TO WATCH AFTER THE FED DECISION THIS AFTERNOON. 10 YEAR IS BASICALLY UNCHANGED. TOM: ALICIA LIVING AS HEAD OF INVESTMENT STRATEGY AT BANK OF NEW YORK MELLON AND SHE BRINGS MATHEMATICAL ABILITIES TO THIS SHOW. WHAT IS THE INTERESTING THING -- THE BLACK SWAN OUT THERE. THE DOW HAS BEEN OF 47 DAYS IN A ROW. TELL ME ABOUT THE TAIL DISTRIBUTION IF EVERYBODY IS LOVING THE DOW JONES? ALICIA: IT IS ENORMOUS HERE, BUT A LITTLE BIT SHALLOW. MEANING THE LEFT TAIL HAS SLOWLY SHRUNK, BUT STILL BAD. THE RIGHT HAS MOVED OUT FURTHER AND A LITTLE BIT FATTER. THAT IS WHAT YOU SEE IN THE MARKET. IT IS HARD TO SAY WE WILL NOT END IN A PLACE WHERE THE FED KEEPS BREAKING SOMETHING. ON THE OTHER HAND, THE EVIDENCE SO FAR, JUST LOOK AT HOUSING, HOUSING -- IF THAT IS THE LEADING INDICATOR OF WHERE THE ECONOMY IS GOING, WE HAVE BOTTOMED. SO HOW CAN WE BOTTOM WITH THE FED AT 5.25 HERE? TOM: ON A PARTIAL DIFFERENTIAL BASIS, HOW DO YOU ALLOCATE? ALICIA: WE THINK ULTIMATELY THERE IS A RECESSION OUT THERE, BUT THERE IS ALWAYS A RECESSION OUT THERE. WE ARE IN A BUSINESS CYCLE. WE THINK THAT GOING AT IT A LITTLE MORE UNDER RATION, ALTHOUGH THERE IS RISK OVER 4% OF THE ECONOMY STAYS STRONG AND THE FED MAY HAVE TO RELOOK AT ITS DOTS. AND WE NEVER WENT UNDERWEIGHT, WE ALWAYS STAYED FULLY INVESTED. A FEW MONTHS AGO YOU SAID HOW DO Y NOT GO 5%? BUT WE ARE ALWAYS INVESTED AND INVESTORS HAVE TAKEN ADVANTAGE OF THE UPSWING. AND WITH BETTER-THAN-EXPECTED DATA, ALL OF WALL STREET WAS EXPECTING THE APOCALYPSE, THIS IS WHAT YOU GET, THE BUILD UP. NOW IT IS MOVING INTO OTHER SECTORS. JONATHAN: NOW THEY ARE WONDERING IF THEY WILL MISS THE AMOUNT UP ENCYCLICALS AS WELL. TALK ABOUT THE EQUITY MARKET. ALICIA: SINCE THE BEGINNING OF JUNE, WHEN WE HAD THAT BLOWOUT LABOR REPORT THAT CAME IN BETTER THAN EXPECTED KUMUTHA THE SWITCH IN THE MARKET. THERE WAS A RECESSION TRADE THERE IN THE STOCK MARKET. IT WAS BUY LARGE-CAP TECH BECAUSE THEY CAN FUND THEMSELVES, THEY HAVE A NEW SHINY TOY, CASH FLOW AND ARE THEY DO NOT HAVE TO BORROW MONEY. AND THEY DO NOT TRADE ON DIVIDEND YIELD. SO IT IS ALL FINE. THE REST OF THE MARKET REALLY WAS TERRIBLE, PARTICULARLY THE DEEP CYCLICALS LIKE THE BANKS, ENERGY AND SMALL-CAP. IN JUNE WE SAW THE SWITCH. AND YOU SAW IT BROADENING OUT. NO YOU HAVEW A GREATER PERCENTAGE OF THE S&P TRADING ABOVE THEIR 58 DAY MOVING AVERAGE. YOU HAVE HEALED THE MARKET IN MANY WAYS. I LOOK AT THE INDUSTRIAL REPORTING FROM YESTERDAY, HOW DO YOU HAVE INDUSTRIALS BEATING ESTIMATES IN A RECESSION? LISA: BUT IT RAISES THE QUESTION THAT MAX WAS TALKING ABOUT, AS WAS FRANCES DONALD, THERE IS A QUESTION ABOUT WHETHER PEOPLE ARE BUYING INTO DISINFLATION PREMATURELY AND WHETHER THE UNDERBELLY OF THIS IMMACULATE DISINFLATION IS STICKY INFLATION AND STAGFLATION DOWN THE LINE. HOW MUCH OF THAT IS A CONCERN? ALICIA: IT IS A CONCERN. THE WORLD WE ARE IN IS A HIGHER INFLATIONARY WORLD. THE THOUGHT THE FED CAN GET TO 2% AND STICK THAT WITHOUT A DOWNTURN SEEMS DIFFICULT BECAUSE IF YOU LOOK AT WHAT IS GOING ON IN THE LABOR MARKET, THAT IS THE STICKING POINT. WE THINK INFLATION REMAINS SLIGHTLY HIGHER THROUGH THE NEXT CYCLE. DOES THE FED EXCEPT THE VICTORY AT 3%? THAT IS THE QUESTION. THAT IS THE DIFFERENCE BETWEEN GOOD PROBABILITY OF A SOFT LANDING VERSES WE ARE GOING INTO SOMETHING REALLY BREAKING. AND DOES THE FED IT LOSE CREDIBILITY IF IT ACCEPTS 3%. LISA: IN THAT KIND OF WORLD ARE STOCKS --? ALICIA: WE ARE MORE ALLOCATED TO STOCKS THAN BONDS RIGHT NOW BUT WE HAVE INCREASED OUR ALLOCATION TO ALTERNATIVES, PARTICULARLY AS WE SEE THE BANKS MOVE FROM CERTAIN TYPES OF LENDING. SO WE TRY TO COME ACROSS ALL ASSET CLASSES TO TAKE A VANTAGE OF THE WORLD WE ARE IN. WE THINK IT ENDS WITH A HIGHER RATE THAN BEFORE. THE THOUGHT THAT WE GO BACK TO ZERO IS A PIPE DREAM. THE EXCESSES ARE CLEAR, SO ABSENT A MAJOR CRISIS WE ARE NOT GOING BACK TO ZERO. 3% TO 3.5% SEEMS LIKE THE RIGHT NUMBER. THAT'S A DIFFERENT WAY TO ALLOCATE. TOM: WHAT IS THE LEVINE RATIONALIZATION OF OWNING HOLDING AND ACQUIRING THE SUCCESSFUL TECH STOCKS RIGHT NOW? YOU RATIONALIZE A MOVE OUT, THE TERMINAL RATE WHERE YOU SAY I AM BUYING OUT THREE OR FIVE YEARS? WHAT IS THE PROCESS TO KEEP THOSE STOCKS IN THE PORTFOLIO? ALICIA: WHAT WE DO NOT TRADE -- THE RATIONALE IS ALWAYS THE LONG-TERM. TOM: LONG-TERM IS SIX MONTHS? ALICIA: TRUE. END OF YEAR. ABOUT THREE HAVE BEEN FIVE YEARS IS HOW TO BUY THESE. YOU BUY THEM BECAUSE THERE IS AN ACCELERATION OF GROWTH IN A NEW BUSINESS MODEL THAT WILL BE MONETIZED GOING FORWARD. YIELDS WILL BE LOWER, ON ALL LIKELIHOOD, TWO YEARS FROM NOW. THEN YOU GET THE MULTIPLE TAKEN CARE OF AND YOU DO NOT WORRY ABOUT CAP ALL MULTIPLES. AT THAT IS HOW YOU BUY THEM. BUT THERE IS A MASSIVE GROWTH OPPORTUNITY AHEAD OF THEM. THE A.I. CREATORS AND BENEFICIARIES SEEM TO BE CENSORED IN LARGE-CAP TECH, AND THAT IS WHERE YOU HAVE TO GO TO TAKE ADVANTAGE OF IT. JONATHAN: THIS IS SO HARD. WHAT ABOUT BUYING SOMETHING UP ALREADY 100% THIS YEAR? I LOOK ALICIA: -- ALICIA: I LOOK AT 1995. THAT WAS ONE OF THE GREATEST EXPLOSIONS OF WEALTH. AND IT WAS A GREAT TIME TO BE PICKING STOCKS. BUT THAT IS WHAT YOU HAVE TO LOOK AT. THIS IS NOT GOING TO BE A SHORT-TERM STORY. OF COURSE THERE WILL BE DRAWDOWNS. WE HAVE NOT SEEN A DRAWDOWN OF MORE THAN 8% THIS YEAR. IN THE MIDST OF THE FED BREAKING REGIONAL BANKS. THE AVERAGE IS 15%. SO, WOULD WE LIKE TO SEE THAT? OF COURSE, SO WE CAN BUY MORE. [LAUGHTER] BUT -- SO, IT HAS BEEN AN UNUSUAL YEAR. AND I THINK THE THOUGHT OF POSITIONING AND EVERYBODY ON ONE SIDE OF THE TRADE IS A GREAT REMINDER OF WHEN EVERYBODY AGREES WE HAVE TO BE CAREFUL. JONATHAN: ALICIA LEVINE, THANK YOU. HEADING WEALTH MANAGEMENT OVER THERE AT NEW YORK MELLON. TOM: WHAT IS THE RATIONALIZATION OF BONDS -- OF THE BEARS, RATHER, AND TO BE FURTHER RATIONALIZATION OF BULLS HERE? WE LAUGH ABOUT IT WITH LISA, BUT IT IS A TOXIC BREW OF EMOTION OVER WHAT WAS MISSED LAST YEAR. JONATHAN: I CANNOT GET OUT TWO YEARS OR SIX MONTHS OR 24 HOURS. WELCOME TO THE PROGRAM. IF YOU ARE JUST TUNING IN, WE ARE NEGATIVE BY 0.2%. COMING UP IN 28 MINUTES, THE BRILLIANT ETHAN HARRIS OF BANK OF AMERICA. THE ECB ON THURSDAY AND BANK OF JAPAN WILL CLOSE OUT THE WEEK. TOM: IT IS IMPORTANT. DR. HARRIS IS ICONIC AMONG MODERN ECONOMICS. I THINK YOU WILL ENJOY RETIREMENT, PROBABLY WRITING A NEW BOOK. MAYBE LISA AND ETHAN HARRIS CAN GO CANOEING. JONATHAN: SHE WENT CANOEING LAST SUMMER. [LAUGHTER] THAT'S NOT HAPPENING. I WOUND. TOM: I ASKED IF THEY WERE FLOATING. THEY DO NOT HAVE FLOATIES. I DO NOT SWIM. CAN YOU SEE ME SWIMMING? [LAUGHTER] COME ON. LISA: YOU DO NOT SWIM. JONATHAN: CAN YOU NOT? TOM: NO. CAN YOU SEE ME IN A SPEEDO IN ITALY? IT IS NOT GOING TO WORK. JONATHAN: I HAVE WORN A SPEEDO. I DID NOTICE MORE AND MORE PEOPLE AT THE BEACH -- LISA: IN EUROPE. JONATHAN: NO, THESE PEOPLE ARE FROM AUSTRALIA. LISA: OK. I DO NOT SEE THE SPEED OOS. JONATHAN: I'M NOT SURE THE ITALIANS ARE DOING IT BUT -- [LAUGHTER] TOM: THE AUSTRALIANS ARE FROM EUROPE. I LEARNED SOMETHING TODAY. JONATHAN: THEY WERE. I AM TELLING YOU. >> THERE IS NOT GOING TO BE A RECESSION THIS YEAR. THINK WE ARE IN FOR A BIG PRODUCTIVITY RISE. IF I WAS TRYING TO PUT POTENTIAL GROWTH 10 YEARS FROM KNOCK MY WOULD PUT IT CLOSER TO 3%. TOM: A LOT OF NEWS GOING ON. THAT WAS MY INTERVIEW OF THE WEEK, NO QUESTION ABOUT IT, WHER E HE IS LOOKING AT A 3% GDP MODEL. SOME SHOCKING OPTIMISM FROM A MEASURED AND CONSERVATIVE STRATEGIST. AND WE WILL GET TO THIS IN A MOMENT. BUT ETHAN HARRIS WILL BE JOINING US FROM BANK OF AMERICA. TODAY, AFTER THE FED DECIDES, BRAMO OF NORWAY HAS YET TO SEE "BARBIE." I HAVE SEEN IT TWICE. MATTEL IS LIGHTING IT UP. IF ANYBODY STAYS UP LATE ENOUGH TO GET A PAYCHECK. LISA: DOW JONES REPORTING THAT THE MOTEL EXECUTIVE THAT REVIVED BARBIE TO BE THE NEW GAP CEO. SHARES ARE POPPING IN PREMARKET TRADING, OF ALMOST 6%, AS THEY MAKE THE ACQUISITION. WHAT IS THE BARBIE TREND GOING TO SAY ABOUT THE GAP STYLE? TOM: THAT WAS THE THOUGHT I HAD. HOW DOES HE BARBIE-IZE GAP. THAT'S GAP, RIGHT? LISA: DO YOU GO BACK TO BASICS. RICHARD DIXON THE MATTEL PRESIDENT AND COO IS GOING TO HEAD OVER TO THE GAP TO BE THE NEXT CHIEF EXECUTIVE OFFICER. THIS COMES AFTER A YEAR-LONG SEARCH FOR A NEW LEADER. I THOUGHT THIS WAS INTERESTING GIVEN WHAT WE HAVE BEEN TALKING ABOUT. WHAT WAS THAT CALLED, THE MOVIE PSYCHO -- CYCLE? TOM: IT IS INTERESTING BECAUSE WE ARE NOT OVER "BARBIE." DOES BARBIE HAVE LEGS? THAT IS SERIOUSLY THE EMOTION THIS MORNING. [LAUGHTER] AFTER ANNA NORMA'S WEEKEND. -- AN ENORMOUS WE CAN. GREAT, -- WEEKEND. GREAT. I THINK THEY KEEP DOING IT. YEARS AGO, PRE-VCR, YOU WENT TO MARY POPPINS 10 TIMES OR SOUND OF MUSIC EIGHT TIMES. IT WHY ARE PEOPLE NOT GOING TO "BARBIE" FIVE TIMES? IT IS GOOD. I LIKE BEACH KEN. LISA: THAT IS THE VIBE YOU ARE GOING FOR? TOM: YEAH. FED DAY. LET'S GET BACK ON THE TRACKS HERE. FUTURES AT -8. YIELD MARKET, THIS IS THE PERFECT TIME TO TALK TO IRA JERSEY ABOUT THE FED MEETING AND -- CUT TO THE CHASE. THERE'S BEEN A MORE OPTIMISTIC GDP FRAMEWORK MODELED OUT. IF YIELDS COME OUT IN SOME FORM OF AMERICAN ENTHUSIASM, THERE SEEMS TO BE A CONSENSUS VIEW THAT WE ARE ALL GOING TO DIE. DO WE SURVIVE A HIGHER REAL YIELD? DO WE SURVIVE NOMINALLY HIGHER YIELDS? IRA: YOU ASKED ABOUT TWO DIFFERENT THINGS, TWO DISTINCT ITEMS GOING FORWARD. NUMBER ONE IS I THINK THAT COME AGAIN WE SURVIVE HIGHER REAL YIELDS? THE ANSWER IS THE ECONOMY PROBABLY CAN'T. I THINK WITH FIVE-YEAR REAL YIELDS A LITTLE BIT BELOW 2% RIGHT NOW THAT IS SUGGESTING THERE IS A RISK PREMIUM BUILT INTO THE MARKET. ONCE YOU HAVE A RECESSION, WHENEVER THAT TENDS TO BECOME I THINK LATER NEXT YEAR -- BE, I THINK LATER NEXT YEAR, THE REAL GDP FORECAST FOR 2024 IS OPTIMISTIC. IF IT COMES INTO FRUITION WE NEED REAL YIELDS TO BE CLOSE TO WHERE THEY ARE, IF NOT HIGHER. IT DEPENDS. DO YOU THINK THAT THERE ARE FRAGILITY'S IN THE ECONOMY THAT WILL FORCE US INTO A RECESSION, THEREFORE THE FED SWITCHES. AND IF WE ARE WRONG AND WE SAY MY FRIEND DREW WAS RIGHT, WE WIND UP WITH A SITUATION WHERE YIELDS STAY WHERE THEY ARE AND WE HAVE AN INVERTED YIELD CURVE AND WE NEVER SEE A RECESSION. TOM: HE JUST CALLED DREW MY FRIEND BECAUSE HE IS TICKETS TO THE WORLD CUP COMING UP IN A YEAR AND A HALF AND IRA IS TRYING TO SEE THE WORLD CUP. LISA: THAT IS EXACTLY WHAT WE ARE TALKING ABOUT. FULL ALLEGIANCE THERE. YOU ARE TALKING ABOUT HOW YOU COULD, IF THERE IS A LACK OF DISINFLATION OR A HEAD FAKE, REAL YIELDS COULD GO HIGHER THAN WHERE WE ARE NOW. DOES THE CHANCE OF THAT SEE MORE LIKELY TO YOU BASED ON HOUSING, THE RESILIENCE IN AN ECONOMY THAT SHOULD BE BATTERED BY RAISING TO THE HIGHEST LEVELS GOING BACK TO 2001? IRA: IT IS A REAL CHALLENGE TO FORECAST OF MARKET AND WE ARE WE ARE GOING. THAT'S BEEN TRUE SINCE THE PANDEMIC. WE HAVE SEEN DIFFERENT SHIFTS TO VARIOUS PARTS OF THE ECONOMY, EVERYTHING FROM THE SUPPLY CHAIN ISSUES TO NOW THE TIGHT LABOR MARKETS. I FULLY ADMIT I DID NOT EXPECT INFLATION TO BE AS STICKY AS IT HAS BEEN. THIS IS GOING BACK A COUPLE YEARS AGO, PRIMARILY BECAUSE WE DO NOT EXPECT THE LABOR MARKET TO BE SO TIGHT. NOW THE QUESTION IS, IS LABOR GOING TO HAVE PRICING POWER GOING FORWARD? PEOPLE ARE NOT GOING TO SWITCH THEIR JOBS EVERY YEAR, WHICH HAS BASICALLY BEEN HAPPENING IN A LOT OF INDUSTRIES. IF THAT IS NOT THE CASE, INFLATION WILL NATURALLY COME DOWN. LISA: YOU WERE TALKING ABOUT HOW YOU GOT IT WRONG IN TERMS OF THE STICKINESS OF INFLATION, BUT A LOT OF PEOPLE DID, INCLUDING THE FEDERAL RESERVE. IT RAISES THE QUESTION ON WHETHER MODELS ARE BROKEN. AND WE ARE LOOKING AT YIELD CURVE PROPHECY AND IF IT IS NO LONGER THE TOOL IT USED TO BE FOR FORECASTING. DO YOU BUY THAT ARGUMENT? IRA: THIS IS ALL IT IS, THE MARKET'S EXPECTATION OVER THE SHORT-TERM INTEREST RATES GO TO BE IN THE LONG-TERM. AT SOME POINT THE FEDERAL RESERVE IS GOING TO RAISE RATES, BUT IT IS BY HOW MUCH AND HOW FAST AND WHEN WILL THEY START. SO THE IDEA THAT THE FED IS GOING TO HIKE ONE MORE TIME, AND THAT CUTS IN SIX MONTHS, MAY BE THAT IS WHERE THE MARKET GOT THINGS WRONG. BUT IS THE 10 YEAR MISPRICED? NO, BECAUSE THE FEDERAL RESERVE COULD CUT MORE LATER. IT COULD STAY AT 5.5% FOR 18 MONTHS BECAUSE WE HAVE STICKY INFLATION, BECAUSE ALL OF THE MODELS ARE BROKEN AND WE DO NOT KNOW WHAT IS GOING ON. THEN SUDDENLY SOMETHING BREAKS, MORE BANKS MAYBE, COMPANIES START TO FAIL. ONCE THAT HAPPENS THE FEDERAL RESERVE CUTS AGGRESSIVELY MAY BE DOWN TO 2%. IF YOU DO ALL THE MATH AND SAY WHAT IS FAIR VALUE FOR THE 10 YEAR IN THAT SCENARIO, WE ARE PERFECTLY PRICED FOR THAT. THERE ARE MULTIPLE SCENARIOS. THE MARKET IS SAYING THAT RATES WILL BE LOWER IN ABOUT THREE OR FOUR YEARS FROM NOW. TOM: THERE'S A DIFFERENCE BETWEEN THE TWO YEAR YIELD AND 10 YEAR YIELD. I THINK THAT 8% OF THE AUDIENCE GETS IT. BUT YOU ARE THE PRO. WHICH OF 45 SPREADS OUT THERE MATTERS TO IRA, THREE MONTHS, 30 YEARS, THE TWO-FIVE BELLY OF THE CURVE -- WHICH SPREAD MATTERS TO YOU? IRA: WHAT I LOOK AT IS THE TWO-FIVE, BECAUSE THAT IS WHERE MARKETS TEND TO BE THE MOST LIQUID AND WHERE YOU GET THE BEST INDICATION OF WHAT THE MARKET IS REALLY THINKING FOR FUTURE ECONOMIC ACTIVITY AND INFLATION DYNAMICS. BUT ALSO FOR ME, FOR THE REAL ECONOMY, ONE SPREAD I LOOK AT A LOT, AND THIS WILL BREAK IN THE CYCLE AND IT NEVER HAS BEFORE SINCE WORLD WAR II, IS THE FED FUNDS FIVE-YEAR SPREAD. THAT TENDS TO SHOW WHERE BANK NET INTEREST MARGINS ARE AND CREATES THE WILLINGNESS FOR BANKS TO LEND SHORT, RIGHT? TAKE IN DEPOSITS. THEN LEND FOR FIVE YEARS, REAL ESTATE LOANS. IF THEY ARE NOT MAKING MONEY FROM MAKING THOSE LOANS, THAT WILL -- TOM: WHAT IS THE DURATION OF THE FED FUNDS? IRA: IT IS BASICALLY ZERO. TOM: THAT IS LIKE TOMORROW. IRA: CORRECT. TOM: FROM TOMORROW OUT TO FIVE YEARS OUT. EVERY TIME HE IS ON I LEARN SOMETHING. LISA SHOULD KNOW THIS STUFF. LISA: IT IS ALL IMPORTANT AND BOND DYNAMICS ARE GOING TO RULE SO MUCH IN THE NEXT CYCLE. TOM: IRA JERSEY WITH US FROM BLOOMBERG INTELLIGENCE. MUCH TO TALK ABOUT ON A FED DAY. WE ARE WITH YOU THIS AFTERNOON. TOM: BLOOMBERG SURVEILLANCE. THE FED ASIDE THIS AFTERNOON. 1:30 P.M., IT IS LIKE BASEBALL OR FOOTBALL. WE START A HALF HOUR EARLY. I LIKE THE WAY THAT THEY HAVE BEEN SEEING THE BALL. LISA: HE SEEMS TO HAVE REAL CONFIDENCE. TOM: STANDING TALL. THE NEW YORK FED PRESIDENT. IT IS GOOD TO HAVE DR. DUDLEY WITH US, AND ALL THAT, BECAUSE DR. DUDLEY REALLY MAKES A CASE FOR VIGILANCE ABOUT INFLATION. LISA: THAT IS WHAT WE HAVE BEEN HEARING TODAY FROM PEOPLE WHO ARE IN THE MARKET. THE CONCERN IS NOT A RECESSION, IT IS STAGFLATION. THE CONCERN IS NO LANDING, ALTHOUGH SLOW GROWTH AND INFLATION REMAINS HIGH. TOM: I GET IT, IT IS A QUIET MEETING. MICHAEL WILL BE IN THE PRESS CONFERENCE. BUT THE QUIET MEETINGS COULD BE THE MORE SILENT SURPRISES THAT COME ALONG. FUTURES ARE NEGATIVE EIGHT. THIS IS JOY. I WILL CUT TO THE CHASE OF WHAT ETHAN HARRIS REALLY DID. THERE IS A SMALL SHOP THAT WENT UNDER, IT WAS CALLED A LEHMAN BROTHERS. AND HE IS ONE OF THE FEW THAT PROVIDED IMMENSE STABILITY TO LEHMAN BROTHERS. AFTER THAT, HE MIGRATED TO BANK OF AMERICA WHERE HE HAS BEEN A FORCE FOR DECADES. HE IS RETIRING. I WILL CUT TO THE CHASE. IS MOYNIHAN AWARE OF THIS? BECAUSE BRIAN SAYS I THINK GDP WILL DO THIS AND HE IS LOOKING AT ETHAN HARRIS, DID HE ALLOW THIS? ETHAN: ONE OF THE GREAT THINGS ABOUT OUR CEO IS HE REALLY CARES ABOUT HIS RESEARCH DEPARTMENT. HE READS HIS STUFF. ONE OF THE GREAT THINGS IS THE FIRM REALLY CARES ABOUT RESEARCH. TOM: THAT IS GREAT. BRIAN, YOU CANNOT COME OUT IN FRONT OF THE CAMERAS. STAY OVER THERE. YOU WROTE A MAGNIFICENT BUT YEARS AGO. IT WAS A PIERCING BOOK WITH YOUR EXPERIENCE AT THE FED ABOUT THE DYNAMICS AT THE FED. WHICH IS JEROME POWELL'S FED -- WHAT DOES JEROME POWELL'S FED LOOK LIKE AS YOU GO WRITE YOUR NEXT BOOK? ETHAN: I WILL WRITE ANOTHER BOOK, WHICH I HAVE BEEN TALKING ABOUT FOR 15 YEARS. BUT I THINK WE ARE TURNING BACK THE CLOCK. THE NEW FRAMEWORK WITH THE FED DID NOT WORK AND WE WILL SEE A TURNING BACK OF THE CLOCK. IT IS MORE LIKE JANET YELLEN FED FOR BEN BERNANKE FED. I DO NOT THINK IT MAKES SENSE FOR THEM TO DO WHAT THEY DID, WAIT FOR INFLATION TO BE REALLY UNDERWAY THAN START HIKING INTEREST RATES. I DO NOT EXPECT RADICAL CHANGE BUT GOING BACK TO THE OLD MODEL. LISA: IS IT THE OLD MODEL MEANING 10 YEARS AGO OR THE OLD MODEL 40 YEARS AGO? THAT IS DIFFERENT. THAT IS THE DEBATE WE HAVE BEEN HEARING ABOUT. HOW WILL WE LOOK BACK AT THIS MOMENT IN HISTORY? WAS IT A SEACHANGE THAT USHERED IN A NEW ERA OF HIGH INFLATION OR A PANDEMIC INDUCED BLIP THAT WILL GO BACK TO WHAT WE WERE SEEING FIVE YEARS AGO? ETHAN: THE FED HAS DEMONSTRATED THEY LEARNED A LESSON. THEY STARTED VERY LATE. YOU WILL HEAR THAT FROM BILL DUDLEY TODAY. AND THEY STARTED TOO LATE. AND THAN THEY DID INCREDIBLY AGGRESSIVE CATCHING UP. AND THAT WAS A SIGNAL TO ME THAT THEY UNDERSTOOD THEY MADE A MISTAKE. YOU DO NOT WANT TO BE GOING 75 BASIS POINTS. IT'S DANGEROUS, NORMALLY. BUT IF YOU ARE WAY BEHIND THE CURVE, YOU CATCH UP. I DO NOT AGREE WITH PEOPLE WHO SAY THEY WILL COMPROMISE ON THEIR INFLATION TARGET. AT THE PRESS CONFERENCE HE REPEATS OVER AND OVER, EVERY CHANCE, HE SAYS WE ARE SERIOUS ABOUT HITTING THE 2% INFLATION TARGET. HE IS PUTTING HIS CREDIBILITY ON THE LINE. HE DOES NOT WANT TO BE ARTHUR BURNS. LISA: BUT WHAT HAVE WE LEARNED ABOUT THE AGGRESSIVE TIGHTENING? THEY DID THAT. NOTHING BROKE. YOU COULD ARGUE, OK, WE SAW SOME BANK RUMBLES BUT WE ARE LOOKING AT HOUSING RE-ACCELERATING. AND MUCH OF THE ECONOMY IS DOING BETTER THAN EXPECTED, SO WHAT DO YOU MAKE OF THAT? ETHAN: I THINK THEY WERE UP AGAINST SOME BIG TAILWINDS IN THE ECONOMY. THE EXCESSIVE SAVINGS LEFT OVER FROM THE CRISIS. A PENT UP DEMAND FOR WORKERS WITH JOB OPENINGS. SO THE FED DID ACHIEVE SOME WEAKENING. BUT THE CONSUMER JUST REFUSED TO ROLL OVER. JOBS WERE GREAT. SAVINGS WERE HIGH. SO, I THINK THAT IT IS DELAYED, THE WEAKNESS. AND WE ARE STILL THINKING ABOUT A RECESSION EARLY NEXT YEAR. BUT LIKE OTHER FORECASTERS, WE HAVE BEEN FORCED TO CONCEDE THAT IT WILL TAKE A WHILE. I DO NOT THINK IT IS THE END OF THE WORLD. THERE'S A HARD AND SOFT LANDING DEBATE, BUT IF YOU ARE FORECASTING AND THE UNEMPLOYMENT RATE GOING FROM 3.5% TO 4%, THAT IS GREAT. THAT IS NORMAL UNEMPLOYMENT. IT IS THE PEOPLE I DISAGREE WITH, THE PERFECT LANDING CROWD THAT SAYS YOU DO NOT HAVE TO HAVE PAIN AT ALL. INFLATION WILL GO AWAY ON ITS OWN, NO ADJUSTMENT IN THE ECONOMY. THAT I DISAGREE WITH. IT WILL BE A SOFT LANDING, WHETHER IT IS A BUMPY OR A LITTLE MORE BUMPY. BUT IT WILL NOT BE A HARD LANDING. TOM: WITH ALL THE NOISE OUT THERE, IS THERE TOO MUCH COMMUNICATION? WE OPENED THE SHOW WITH A VIGNETTE THAT ONE OF THE INTERNS PUT TOGETHER OF THE FED SPEAKERS SPEAKING. TOO MUCH COMMUNICATION? ETHAN: THAT IS THE STRUCTURE OF THE FED. TOM: NOT THE OLD FED. ETHAN: GREENSPAN SUPPRESSED THE OPENNESS OF THE COMMITTEE, BUT THAT HAS CHANGED UNDER THE NEW FED CHAIRS, SO THERE IS A LOT OF INFORMATION COMING OUT. I THINK THAT THE BUSINESS REPORTERS GET HYPED UP ABOUT THIS WHOLE THING. THEY KEEP TALKING ABOUT HAWKS AND DOVES. WELL, LOOK AT THE FED -- THERE'S BEEN VIRTUALLY NO DISSENTS THROU GH WAY BEHIND THE CURVE, THE FASTEST TIGHTENING IN HISTORY, AND DATA-DEPENDENT. SO THE IDEA THAT WE NEEDED TO GET ALL PUMPED UP ABOUT WHAT SOME DOVE SAID IS WAY OVERDONE. TOM: YOU HAVE BEEN LITIGIOUS IN BUILDING CAREERS. WHAT YOU DID FOR MICHELLE MYERS. AND MOYNAHAN HAS YET TO RECOVER FROM MICHELLE MYERS LEAVING. BUT THE BOTTOM LINE IS YOU HAVE BUILT CAREERS. YOU CAME OUT OF THE PLUTONIUM CALCULUS, OUT OF THE UNIVERSITY OF MASSACHUSETTS WITH THE IDEA THAT MATH MATTERS. IS THERE TOO MUCH MATH IN THE GAME? ETHAN: NOT IN THE AREA I AM IN. IF YOU ARE A STREET ECONOMISTS TRYING TO FIGURE OUT POLICY AND THE ECONOMY, WE ALL UNDERSTAND THAT IT IS A LOT OF STORYTELLING, HISTORIC ANALOGIES, AND YOU DO NOT WANT TO GET TOO CRAZY ABOUT THE MODELING. IN ACADEMIA, THERE HAS BEEN A DRIFT INTO MATH, WHERE YOU IMPRESS PEOPLE BY THE COMPLEXITY OF THE NUMBERS, BUT IT DOES NOT REALLY WORK IN THE REAL WORLD. THERE HAS BECOME A SPLIT BETWEEN PEOPLE WHO ARE PRACTICAL ECONOMISTS AND THE ONES THAT DO THE MATHINESS. LISA: WE ARE SPEAKING WITH ETHAN HARRIS AFTER MORE THAN A DECADE AT BANK OF AMERICA, WHO IS RETIRING AS OF THIS FRIDAY. I BELIEVE THIS IS YOUR LAST INTERVIEW. AND WE APPRECIATE YOU SHARING IT WITH US. I WANT TO PROVE IT, BECAUSE WE -- PIVOT, BECAUSE WE ARE TALKING ABOUT LOOKING BACK AT THE TRAJECTORY OF A CAREER AND UNDERSTANDING WHERE WE ARE. DO YOU THINK PEOPLE COMING INTO THE INDUSTRY IN THE FUTURE WILL BE WORKING IN AN OFFICE TO THE SAME DEGREE? WILL THAT BE ONE OF THE BIGGER SEE CHANGES THAT PERSISTS OVER THE NEXT DECADES? ETHAN: I THINK THAT HYBRID IS THE NEW NORMAL. I THINK THERE IS A BATTLE BETWEEN CORPORATE LEADERSHIP AND THE STAFF ABOUT WHAT THEY WANT TO DO. TOM: HARRIS IS GETTING HIMSELF INTO TROUBLE. HE'S GOT TWO DAYS. WHAT IS HE SAYING? ETHAN: SO MAYBE TODAY IS MY LAST DAY. [LAUGHTER] NO, I AM TALKING ABOUT IN GENERAL. IT'S DEFINITELY NOT GOOD FOR DEVELOPING NEW PEOPLE TO HAVE EVERYBODY SITTING IN THEIR PAJAMAS AT HOME. TOM: CAN WE QUOTE YOU ON THAT? [LAUGHTER] ETHAN: EXACTLY. SO, YOU DO NOT WANT TO BE ENTIRELY AT HOME. ON THE OTHER HAND, IN MY CASE, W I HAVE A CRAZY COMMUTE, SO FOR ME I AM MORE PRODUCTIVE IF I AM WORKING HYBRID. THAT IS WHAT IT IS ABOUT, WHAT IS THE MOST PRODUCTIVE MODEL. AND I THINK IN MANY INDUSTRIES HYBRID WILL END UP BEING THE THING. LISA: A SENSITIVE QUESTION AS WE TALK ABOUT THE EARNINGS OF TECH COMPANIES AND ARTIFICIAL INTELLIGENCE, WILL CHATGPT BE YOUR NEW RESEARCH ASSENT -- NEW RESEARCH ASSISTANT? ETHAN: A FRIEND OF MINE SON PUT MY NAME IN THERE AND STARTED ASKING QUESTIONS. SO, WHAT I FOUND WITH CHAT IS THAT AT FIRST IT GAVE VERY GOOD ANSWERS. IT FOUND MY BIO. WROTE IT UP AND BETTER LANGUAGES THAN I DID. BUT THEN AS MY SON KEPT ASKING TOUGHER QUESTIONS, AND STARTED RETURNING NONSENSE. IT STARTED TELLING ME THAT I HAD WON SOME GREAT PRIZE IN JAPAN -- LISA: YEAH? ETHAN: LIKE A PEACE PRIZE IN JAPAN. IF YOU PUSH IT, IT GAVE YOU JUMP. -- JUNK. TOM: CAN YOU GIVE OUR AUDIENCE A VIGNETTE OF WHAT IT WAS LIKE, NOT THE FINAL DAYS OF LEHMAN BROTHERS, BUT A WEEK AFTER OR A MONTH AFTER. GIVE US A WINDOW INTO HOW YOU AND OTHERS HAD TO PICK UP THE PIECES? . ETHAN: EVERYONE WAS IN SHELLSHOCKED. I WAS LUCKY -- SHELLSHOCK. I WAS LOOK AT BECAUSE MY TEAM HAD A LIFEBOAT TO JUMP INTO. BUT YOU WERE IN AN ENVIRONMENT WHERE YOU HAD BOTH THESE FORCED MARRIAGES GOING ON IN WALL STREET, WHICH ARE NEVER FUN. AT THE SAME TIME YOU HAD THIS INCREDIBLY DEMANDING AND INTERESTING AND CHALLENGING WORL TO TRY TO FORECASTD, WHERE THE ECONOMY IS JUST COLLAPSING. AND IT WAS AN AMAZING TIME AND YOU JUST HAD TO KIND OF TRY TO LEAN ON EACH OTHER BETTER. TOM: THANK YOU SO MUCH. A HUGE COMMITMENT TO THE SHOW, IT HAS BEEN GREAT. LISA: WE REALLY APPRECIATE IT. ETHAN: I HOPE IT IS NOT MY LAST TIME ON. [LAUGHTER] TOM: GIVE THIS TO BRIAN MOYNIHAN. HE'S TEARING IT UP. ETHAN: YOU GUYS ARE REALLY TRYING TO GET ME INTO TROUBLE. [LAUGHTER] TOM: WE WILL STILL TALK TO YOU. IT IS AMAZING, WHEN PEOPLE TALK ABOUT THIS -- THE CEOS ARE UNDER THE GUN AND SOME ARE INFORMED AND SOME ARE NOT, BUT BRIAN MOYNIHAN IS ALWAYS INFORMED. THE S&P 500 IS DOWN 2/10 OF 1%. LISA: COMING UP, WE WILL SPEAK WITH SEAN O'BRIEN, PRESIDENT OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS. THIS COMES WHEN PEOPLE DO NOT UNDERSTAND THE DYNAMIC IN THE LABOR MARKET, THEY HAVE AN UPPER HAND. NOT LIKE THEY HAVE HAD IN DECADES. UPS, TO SOME DEGREE, AND ALSO FOR JOE BIDEN. TOM: HE HAS WORKED WITH MARTY WALSH. AND IT IS DRAGGING A TRULY AMERICAN INSTITUTION, THE TEAMSTERS, WITH ALL THE DEBATES -- BUT MR. O BRIIEN, HE WILL TELL US ABOUT THE SYMBOLISM OF THE UPS DEAL, AND BEYOND IT. BUT IT IS A HUGE MOMENT FOR ORGANIZED LABOR. LISA: SOME 340,000 MEMBERS. THIS IS NOT INSIGNIFICANT. I AM CURIOUS ABOUT THE DETAILS BECAUSE, YES, YOU HAVE THE TEAMSTERS IS SAYING THAT UPS BLINKED. WITH THIS KIND OF MESSAGING YOU WONDER ABOUT THE CONCESSIONS ON BOTH SIDES. SOMETHING LIKE $30 BILLION EXTRA GIVEN TO THE MEMBERS. WHAT IS THE NEW PARADIGM FOR LABOR NEGOTIATIONS? TOM: THE QUESTION IS DOES LABOR FINALLY GET A SHARE. ETHAN HARRIS CAN REMEMBER WHEN LABOR HAD SOME FORM OF POWER AND THEY GAVE IT UP FOR WHATEVER IN 2007 AND 2008. LISA: AND CORPORATE PROFITS A SHARE AS THE POOL INCREASED. WILL WE SEE MORE OF THIS ARE A VERY SMALL ADJUSTMENT? TOM: COMING UP, ARE IMPORTANT INTERVIEW WITH THE HEAD OF THE TEAMSTERS, THE LOCAL 25 IN BOSTON, TO CHANGING THE LABOR ECONOMY OF AMERICA. >> AND FURTHER CONTACT -- A FAIR CONTRACT IS SOMETHING THAT THE WORKERS CHOOSE AT THE END OF THE DAY. THAT PROCESS IS IMPORTANT FOR THE PARTIES TO BE ABLE TO NEGOTIATE AND TO RESOLVE ISSUES THAT WE WANT A STABLE WORK, A PATH TO THE MIDDLE CLASS AND A SECURITY IN RETIREMENT. WE WANT HEALTH BENEFITS AND LEAVE, ALL THINGS THAT THE PRESIDENT HAS PRIORITIZED, AND THAT IS WHAT IT MEANS TO HAVE A GOOD JOB. TOM: THE ACTING SECRETARY THERE ON THE JOBS REPORT, TALKING ABOUT LABOR IN AMERICA. WE'LL GET TO THAT IN A MOMENT. SEAN O'BRIEN IS THE GENERAL PRESIDENT OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS. WE HAVE A FED MEETING THIS AFTERNOON. WE ARE WATCHING THE MARKETS AS WELL. DO YOU WANT TO DO THE MOVERS NOW? LISA: I THINK THAT THIS IS TOO IMPORTANT. TOM: WE WILL DO IT LATER. WE COULD GO FOR AN HOUR ON THIS. THIS IS THE CONVERSATION OF THE DAY. IF YOU ARE IN BOSTON, AND YOU GREW UP WITH THREE GENERATIONS OF TEAMSTERS, AND YOU TAKE ON ALL OF WHAT WE KNOW, DECADES OF THE TEAMSTERS, AND YOU REVOLUTIONIZE UNIONS IN AMERICA, YOU COME TO A MOMENT LIKE WE SAW YESTERDAY WITH UPS. SEAN O'BRIEN HAS PROVIDED THE LEADERSHIP ON THIS. HE IS THE GENERAL PRESIDENT OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS. CONGRATULATIONS ON THIS PRE-VOTE AGREEMENT THAT YOU HAVE WITH UPS. IN YOUR COMMENTS, AND OTHERS, YOU SAY AMAZON IS NEXT. WHERE DO YOU MOVE FROM A SUCCESSFUL AGREEMENT TO THE NEXT TRANSPORTATION COMPANY? IS IT AMAZON? SEAN: -- TOM: WE HAVE GOT SOME AUDIO PROBLEMS THERE. WE'LL COME BACK WITH HIM IN A MOMENT. THIS IS SO IMPORTANT. AND MY SOPHISTICATED OBSERVATION, WHEN I AM DRIVING, I SEE THE TRUCKS ON 3RD AVENUE DELIVERING ALL OF THOSE BOXES TO OUR BUILDING. LISA: WHEN YOU TALK ABOUT AMAZON, I WILL GIVE YOU DETAILS OF THE AGREEMENT. THERE WAS A WAGE INCREASE. $2.75 MORE AN HOUR, $7.50 OVER THE CONTRACT THAT GOES UNTIL 2028. IF YOU THINK ABOUT WHERE WE ARE IN TERMS OF THE WAGE INCREASES, WHAT IS THE NEW MINIMUM WAGE -- NOT DICTATED BY THE GOVERNMENT BUT BY THE WORKERS? TOM: OUT OF THE RAILWAY STRIKE THEY WERE THINGS IN HERE THAT I THOUGHT WERE COMMON SENSE, LIKE A DISCUSSION OF WHAT TO DO WITH MARTIN LUTHER KING DAY IN JANUARY, WHERE THEY TEAMSTERS GET THE REST, LIKE EVERYBODY ELSE, TO THINGS YOU CAN REALLY SEE IN THE NEGOTIATIONS OF THE DEFINITION OF PART-TIME AND FULL TIME. THE SEVEN SHADES OF GRAY BETWEEN THEM. LISA: IT COMES IN A TIME WHERE PEOPLE ARE WONDERING HOW MUCH LONGER THE LABOR POWER CAN REALLY CONTINUE. JUST SOME MORE DETAILS, THIS REALLY HIGHLIGHTS HOW DIFFERENTLY WE CAN LOOK AT THESE ROLES. UPS DELIVERY DRIVERS, JUST TO GIVE YOU A SENSE OF HOW MUCH THEY ARE PAID PER HOUR, $49. THAT IS THE TOP RATE. THAT IS THE HIGHEST PAID DELIVERY TRUCK DRIVERS AMONG ALL THE ONES IN THE UNITED STATES. DOES IT SET A NEW LOW MARK FOR THE OTHER COMPANIES, TO YOUR POINT ABOUT WHAT DOES THIS SAY ABOUT AMAZON? TOM: WE HAVE HAD TECHNICAL DIFFICULTIES WITH SEAN O'BRIEN. PERHAPS BLOOMBERG WILL SPEAK TO SEAN O'BRIEN LATER IN THE DAY. BUT WHAT I WOULD MENTION HERE IS THE IDEA OF THE GENERATIONAL CHANGE. THERE'S STEREOTYPES OF ALL THESE ORGANIZATIONS IN THE GOVERNMENT, AND OUTSIDE, AND IS SOMEBODY LIKE SEAN O'BRIEN HAS BLOWN THAT UP. JFORGET ABOUT WIKIPEDIA, READ THE LITERATURE ON WHAT THIS KID OUT OF BOSTON DID, AND THERE IS A MY IDENTITY -- MODERNITY TO THE DISCUSSION NOW. WE WILL TRY TO PICK IT UP WITH SEAN O'BRIEN NOW. CONGRATULATIONS, SEAN.IF I LOOK AT UPS AND MOVE FORWARD, IS AMAZON THE NEXT COMPANY TO SPEAK TO? SEAN: IT WILL DEFINITELY BE A TARGET. WE'LL TAKE THIS HISTORIC AGREEMENT AND USE IT AS A TEMPLATE TO SHOW WORKERS WHAT THEY CAN RECEIVE WHEN THEY JOIN THE TEAMSTERS UNION. TOM: THE SIGNIFICANCE OF THIS AGREEMENT SPEAKS TO A NEW TEAMSTERS. DOES ALL OF AMERICA, INCLUDING CAPITALIST AMERICA, MISUNDERSTAND THE MODERN LABOR DYNAMIC? SEAN: I AM NOT SURE IF THEY MISUNDERSTAND IT, BUT ONE THING WE WERE ABLE TO ACHIEVE WITH THE AGREEMENT IS WE SHOWED THE ENTIRE COUNTRY WHAT YOU CAN DO WHEN YOU HAVE THE SUPPORT OF YOUR RANK AND FILE MEMBERS. I THINK WE PUT MORE ENERGY INTO THE LABOR MOVEMENT, BUT ALSO WE GOT THE LARGEST DEAL DONE WITHOUT HAVING A STRIKE. SO, I THINK THAT WE ADDED CREDIBILITY TO THE PROCESS AND ALSO WE SET THE TONE FOR WHAT ORGANIZED LABOR CAN ACHIEVE AGAINST CORPORATE AMERICA AND THESE HIGH PROFITS. OUR MEMBERS NEED TO BE REWARDED. LISA: YOU SAID UPS BLINKED IN A STATEMENT TO THE MEMBERS, DO YOU GET THE SENSE CORPORATIONS ARE MORE WILLING TO BLINK NOW BECAUSE OF THE LABOR SHORTAGES, THAT NEGOTIATING POWER IS STRONGER THAN IT HAS BEEN IN A LONG TIME? SEAN: WE HAVE TREMENDOUS LEVERAGE RIGHT NOW BECAUSE WE CAN LEVERAGE OUR ABILITY. WE PROVIDED TREMENDOUS SUPPORT DURING THE PANDEMIC, PROVIDING GOODS AND SERVICES. AND NOW IS THE TIME TO CAPITALIZE. WE FOUGHT LONG. WE KEPT SEEING CEO PAY INCREASING AND STOCK OPTIONS INCREASING. AND OUR MEMBERS AND THE LABOR MOVEMENT, THOSE WAGES WERE NOT INCREASING, SO RIGHT NOW WE HAVE THE ABILITY TO SHOWCASE AND BE THE MODEL AND ENCOURAGE OTHER UNIONS TO STAND UP AND FIGHT. LISA: HOW DO YOU DECIDE WHAT THE THRESHOLD IS BETWEEN WORKERS' RIGHTS AND PAY INCREASES VERSUS THE HEALTH OF A COMPANY, GIVEN PRICES ARE INCREASING AND THIS IS AN INFLATIONARY ENVIRONMENT? SEAN: WE HAD A GREAT SITUATION WITH UPS, BECAUSE OF OUR MEMBERS AD ND THEIR HARD WORK. A HEALTHY COMPANY SHOULD SHARE THE PROFITS AND WEALTH. WE TAKE EVERY NEGOTIATION WE DO -- WE DO A DEEP DIVE ON IT, WE ARE MORE SOPHISTICATED THAN YEARS AGO. WE STUDY OF THE FINANCES. AND WE MAKE CERTAIN THAT WE UNDERSTAND WHAT WE CAN GET OUT OF THESE COMPANIES. BUT FOR FAR TOO LONG, YOU KNOW, EVERYBODY USES THE ECONOMY TO SAY WE ARE PROBABLY GOING INTO A RECESSION. BUT WE COME OUT OF BAD SITUATIONS AT SOME POINT SO WE STAY FOCUSED ON WHAT THE MEMBERS NEED. WE ARE NOT CONCERNED WITH WALL STREET. WE WANT TO PROVIDE MIDDLE-CLASS OPPORTUNITIES FOR THESE FAMILIES. TOM: IN THE TIME WE HAVE LEFT, YOUR SONS ARE INVOLVED AND YOUR FATHER WAS LOCAL 25, AS WELL. YOU HAVE LIVED THIS FOR YOUR ENTIRE LIFETIME. HOW DO WE CHANGE THE ITEMIZATION OF LABOR IN AMERICA, THE D UNIONIZATION OF AMERICA? DO YOU PERCEIVE A SEA CHANGE WITH THIS AGREEMENT? SEAN: I THINK IT WILL BE A TEMPLATE TO SHOW THE ENTIRE WORKFORCE, UNION AND NONUNION, WHAT YOU GET WHEN YOU JOIN A UNION. YOU WILL GET HEALTH AND WELFARE, A PENSION, AND MORE IMPORTANTLY DIGNITY AND RESPECT. YOU WILL BE PROTECTED AGAINST TECHNOLOGY. WE CAP PROVIDE A FULL-TIME JOB OPPORTUNITIES. THAT IS THE LEVERAGE YOU HAVE WHEN YOU GET THE BEST CONTRACT IN THE INDUSTRY. TOM: WE ARE RUNNING OUT OF TIME BUT I WANT YOU TO SPEAK TO THE BLOOMBERG SURVEILLANCE OFFICE. THERE'S MANY FANCY PEOPLE THERE, PROBABLY LESS PROUNION THAN MANY, BUT WHAT DO THEY TEAMSTERS BRING THE CAPITALISTS TO PROVIDE FOR BETTER PRODUCTIVITY? SEAN: WE BRING THE BEST WORKFORCE IN AMERICA. WE APPROVED IT DURING THE PANDEMIC, NOT JUST WITH UPS, BUT WE PROVIDED GOODS AND SERVICES. WE R E ESSENTIAL. WE WILL CONTINUE THAT. WE HAVE THE BEST WORKFORCE IN AMERICA. TOM: CONGRATULATIONS. I'M ASKING YOU TO DO SOMETHING ABOUT THE RED SOX AFTER UPS. SEAN O'BRIEN THERE. I WILL NEVER FORGET THIS STUDY THAT WAS DONE, I WILL GIVE CREDIT TO MOUNT SINAI ON IT, WHERE THEY PARTITIONED IT LABOR IN THE HOSPITALS DURING COVID AND GOT MORE DONE WITH THE UNION LABOR THAN NONUNION LABOR BECAUSE OF THE ORGANIZATION STRUCTURE. THAT IS HUMBLING. LISA: IT IS A NEW ERA. THAT IS MY QUESTION, HOW MUCH OF A DYNAMIC IN THE SHIFTING OF LABOR'S FORCE, HOW MUCH WILL IT STICK? TOM: THAT IS A HUGE MYSTERY OUT THERE.

Channel: Bloomberg Television

Views: 30,723

Keywords: Jon Ferro, Lisa Abramowicz, Tom Keene

Id: P8OdndIDLis

Length: 146min 11sec (8771 seconds)

Published: Wed Jul 26 2023