>> THE FED HIKING INTEREST
RATES INTO A KNOWN SLOW DOWN FROM THE MARKETS.
THIS IS SOMETHING THEY DON'T NORMALLY DO. >> WE HAVE HEARD FROM A LOT OF
COMPANIES THAT THEY ARE THINKING THE FOLLOWING
ENVIRONMENT IS GOING TO BE MORE CHALLENGING. >> HIGHER INFLATION RAISES THE
PROSPECT OF A PRETTY SIGNIFICANT SLOWDOWN. >> WE ARE SEEING SIGNS I GLOBAL
ECONOMIC GROWTH IS DECELERATING AT A PRE-RAPID CLIP. ANNOUNCER:
THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO
AND LISA ABRAMOWICZ. JOHN:
FROM OUR AUDIENCE WORLDWIDE, GOOD MORNING, GOOD MORNING.
THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO.
FUTURES UP HALF OF 1%. THE WEEK AHEAD. TOM:
WE ARE GETTING READY FOR A SHOW, A TERRIFIC LINEUP TO GIVE
YOU PERSPECTIVE. WE'VE GOT TO GET THERE FIRST.
IT IS THE RECESSION DEBATE OVER THE WEEKEND, A REALLY RICH
WEEKEND OF RESEARCH. HE HAS BEEN SO GOOD ON STAYING
IN THE MARKETS BECAUSE RECESSION IS NOT INEVITABLE. >> SEPTEMBER 21 IS THE MEETING.
IT IS THE FINAL 75 BASIS POINT HIKE. TOM:
LONG AGO AND FAR AWAY IS AN ELECTION COMING.
WE'VE GOT TO GET LISA REACQUAINTED WITH THE TERMINAL.
NOVEMBER 2, AFTER SEPTEMBER 21, MORE IMPORTANT. JOHN:
IT HAS BEEN A WHILE, HASN'T IT? HIKING UNKNOWN EVEREST. WE
WANTED TO KEEP IT REAL INTERESTING. LISA:
IS GOOD TO BE BACK AND IT SOUNDS LIKE AS ALWAYS, IT WAS
-- TOM: DID YOU GET A HEADACHE COMING
BACK? LISA: I THOUGHT YOU WERE GOING TO ASK
IF I GOT A HEADACHE COMING BACK ON THE SHOW.
WONDER HOW MUCH THAT HAS TO DO WITH THE DOLLAR WEAKNESS THAT
HAS BEEN THE ONGOING THEME IN THE WAKE OF THE ECB AND HOW
MUCH THAT AFFECTS A LOT OF THE RISK ASSETS WHEN I WAS AROUND. JONATHAN:
FUTURES UP HALF OF 1% ON THE S&P. IT ALSO LOOKS LIKE THIS, UP
FIVE BASIS POINTS. WE NEED TO TALK ABOUT THE DATA.
PRETTY TERRIBLE ON BOTH SIDES OF THE ATLANTIC. THIS MORNING, GERMAN BUSINESS
CONFIDENCE, THE EURO SHOWING JUST A LITTLE BIT OF STRENGTH
THIS MORNING. >> TO ME, THAT WITH THE BIG
STORY, PROBABLY HIKING OR WHEREVER I WAS.
TO ME, THAT IS TRACKING IT SEEMS LIKE THAT IS THE BIG
SHIFT. THE STRENGTH SUDDENLY AFTER SO
MUCH WEAKNESS. TODAY NOT A HUGE DAY, BUT A
MONUMENTALLY FOR THE UNITED STATES. THIS WEEK, ALL THE U.S.
GOT SAFE TECH EARNINGS THROUGHOUT THE WEEK.
TUESDAY, WE'VE GOT MICROSOFT AND ALPHABET. WEDNESDAY, WE GET MENTOR,
FACEBOOK, AS WELL AS THE SOFTWARE AND THE HARDWARE.
LATER ON IN THE WEEK WE GET APPLE AND AMAZON ON THURSDAY.
ON WEDNESDAY, THE RATE DECISION, THE KEY ISSUE PEOPLE
ARE TALKING ABOUT. AS YOU POINTED OUT, IT IS NOT
THE 75 BASIS POINT RATE HIKE, IT WHAT HAPPENED IN SEPTEMBER
AND THE DUAL MANDATE OF BOTH GETTING THAT INFLATION IN
DEALING WITH THE UNEMPLOYMENT RATES THAT HAVE TO RISE IF THEY
WANT TO GET THAT INFLATION RATE DONE.
THAT SEEMS TO BE THE TENSION THAT A LOT OF PEOPLE ARE
LOOKING FOR. A SLEW OF ECONOMIC DATA
INCLUDING ON THURSDAY. THIS IS WHAT I'M REALLY
INTERESTED IN. THE SECOND GDP FIGURE DOESN'T
COME IN NEGATIVE. ARE WE ALREADY IN A TECHNICAL
RECESSION? WE DID HAVE A NEGATIVE GDP
PLACED IN THE FIRST QUARTER. HOW MUCH DOES THAT SHAKE THE
VIEW, ESPECIALLY AS IT COMES A DAY AFTER THE FEDERAL RESERVE?
YOU WILL REMEMBER HOW IN THE LAST COUPLE OF MEETINGS, IT HAS
BEEN A KEY INDICATOR FOR THIS FEDERAL RESERVE.
ARE WE STARTING TO SEE THE COST OF EMPLOYMENT GO DOWN, OR IS IT
CONTINUING? JONATHAN: WE MIGHT GET THAT WALL STREET
JOURNAL MEETING AGAIN TODAY'S AHEAD OF THE MEETING.
NOTHING AT ALL TO SEE THEIR. LISA, THANK YOU.
TOM, LOOKING AHEAD TO GDP ON FRIDAY.
ALL LOOKING FOR THAT SECOND QUARTER OF NEGATIVE GROWTH. TOM:
A SECOND QUARTER OF NEGATIVE GROWTH I THINK IS A PRETTY HIGH
DISPERSION. AGAIN, IT GETS RECALIBRATED
ALONG THE WAY. I TAKE THE POINT THAT THE
ECONOMIC JUST IMMENSE -- ARE GOING TO FOLD RIGHT INTO WHAT
THE STOCK MARKET CALLS WILL BE. JONATHAN: WE HAVE A NEW GUESSTIMATE, 4200
DOWN FROM 47. LORI, GREAT TO CATCH UP WITH
YOU. LET'S START RIGHT THERE. >> TARGETS ARE ALWAYS
CHALLENGING IN YEARS LIKE THIS. THE MARKET GROWTH BETWEEN NOW
AND YOUR END. WE THINK TRENDS HIT BOTTOM IN
MID JUNE. REALLY, WE WANTED TO SEND A
SIGNAL THAT WE THOUGHT THERE WAS SOME -- BETWEEN NOW AND
YEAR-END, THAT WE DO THINK WE NEED TO BE LEANING INTO
RECESSION REBOUND, WHICH WE THINK ARE OVER-BOUGHT AN
OVER-SOLD. I WILL TELL YOU, MY ORIGINAL
4700 TARGET IS PROBABLY STILL THE RIGHT BET BUT WHEN WE LOOK
AT THE STOCKS VS. BONDS, THAT REALLY DOES
TEMPORARY ENTHUSIASM. TOM: AGGRESSIVELY TAKING RISKS IN
CREDIT. WE HAVE A 67% COUPON, GET YOUR
FOOT IN THE WATER, LET'S GO. YOU ARE SAYING THE SAME THING
ON RECESSION. WHAT IS A RECESSION REBOUND
SECTOR OR PART OF A SECTOR LOOKING LIKE? LORI: SOME OF THE AREAS THAT
TYPICALLY DO WELL I THINGS LIKE FINANCIALS AND TECHNOLOGY
STOCKS, AREAS THAT TYPICALLY UNDER-PERFORMING THE DRAWDOWN
AND OVER-PERFORM ON THE REBOUND. WE THINK THE FINANCIALS ARE KEY
AT THIS POINT IN TIME. EVEN IF WE DO HAVE A MILD
TECHNICAL RECESSION, BANKS WILL EXECUTE VERY WELL THROUGH IT.
TOM: THEN HOW WILL YOU USE THE GDP
STATISTICS? I GET IT IS A FIRST LOOK, BUT
IF THE BANKS ARE DOING WELL, THAT MEANS WE UNDERESTIMATE THE
RESILIENCY OF THE CONSUMER. DO YOU BUY THAT LINE? LORI:
I THINK THAT THE BANKS ARE TELLING YOU IF YOU LOOK THROUGH
SOME OF THE REPORTS WE'VE SEEN SO FAR IS THAT CONSUMER IS AT A
VERY GOOD STARTING POINT FOR WHATEVER THIS ECONOMIC FORM
ENDS UP BEING CALLED. I THINK THAT IS ONE OF THE
LESSON THAT EQUITY INVESTORS HAVE LEARNED OVER THE LAST FOUR
OR FIVE YEARS, THAT EVERY TIME WE ENTER ONE OF THESE RATES IN
THE EQUITY MARKET, WHETHER IT IS THE TRADE WAR, THE PANDEMIC
ITSELF, THAT THE CONSUMER IS PRETTY RESILIENT. JONATHAN:
AND I PLAYING THE INFLATION STORY STILL, OR PIVOTING TO
SLOWER GROWTH? WHICH ONE IS IT? LORI: A LITTLE BIT OF BOTH.
WE GET ASKED A LOT ABOUT STAGFLATION AND WHAT WE HAVE
TOLD PEOPLE IS THAT WE DO ADJUSTED LESION RATES TO
MODERATE IF THEY STAY HIGH RELATIVE TO THIS RATE.
I AM A LITTLE BIT CONCERNED THAT WE MIGHT NOT BE OUT OF THE
ENERGY IN SHORT-TERM, BUT LONGER TERM, I THINK YOU WANT
TO PLAY THERE. I THINK TECHNOLOGY IS A GREAT
WAY TO PLAY THAT SLOWING GROWTH, AND WE DO SEE THE
MARKET STARTING TO SHIFT AWAY FROM THESE OVERVALUED -- BACK
TOWARD MORE REASONABLY-VALUED AREAS.
ONE OF THE THINGS WE LEARNED THE LAST FEW YEARS IS THAT
THESE BIG SOFTWARE COMPANIES IN PARTICULAR ARE THE TOOLS THAT
COMPANIES USE TO FIGHT JUST ABOUT WHATEVER BATTLE GETS
THROWN THEIR WAY. THEY ARE GOING TO GET PERHAPS A
BETTER PATH FROM THE FED, BUT THINGS AREN'T GOING TO BE ALL
ROSES AND SUNSHINE. HOW DO SMALL CAPS FIT INTO THIS
CONSIDERING THAT YOU ARE NOW GOING OVERWEIGHT SMALL CAPS
HEADING INTO IT MOST PEOPLE SAY IS A U.S. RECESSION? LORI:
I THINK YOU HAVE TO REALLY EVALUATE WHAT YOU THINK ARE THE
DIFFERENT PARTS OF THE MARKET AT THIS POINT IN TIME.
WE KNOW THAT THEY ALWAYS HAVE A VERY HARD PIVOT, THEY TEND TO
REALLY UNDERWRITE AND PERFORM HEART HEADING IN AND ON THE WAY
DOWN INITIALLY, BUT THEY TEND TO REALLY EXPERIENCE THAT PIVOT
IN THE LATE PARTS OF RECESSION ON THE WAY OUT.
WHAT WE SEE IN PARTICULAR WHEN WE LOOK AT SMALL-CAP
PERFORMANCE AGAINST ECONOMIC INDICATORS LIKE JOBLESS CLAIMS
AND ISM MANUFACTURING IS THAT SMALL CAPS ARE ALREADY TRADING
AS THOUGH WE HAD A SPIKE IN AS THE MANUFACTURING HAS PLUNGED.
I DON'T REALLY NEED TO HAVE THAT "
ARE WE HAVING A RECESSION" DEBATE, THEY ARE ALREADY
PRICING IT. LISA: DO YOU THINK THAT THIS MEANS
THAT SMALL CAPS ARE AHEAD OF THE MARKET, OR IS THIS
INDICATING WE ARE ALREADY ANY RECESSION THAT IS GOING TO GET
CONFIRMED ON THURSDAY? LORI: I THINK IT IS GOING TO BE
INTERESTING IF YOU DO GET A NEGATIVE GDP FOR THE QUARTER
WHETHER OR NOT PEOPLE VIEW THAT AS A RECESSION.
BUT I DO THINK THAT SMALL CAPS ARE VERY ECONOMICALLY SENSITIVE
BECAUSE THEY DO HAVE PRIMARILY MOST OF THEIR REVENUE COMING
OUT OF THE U.S. IF THERE IS A TECHNICAL
RECESSION IN PLACE, SMALL CAPS WOULD REALLY MAKE SENSE FOR THE
CARNAGE WE'VE SEEN IN THAT SPACE SINCE MARCH OF LAST YEAR. JONATHAN:
GREAT TO CATCH UP WITH YOU, AND THANK YOU FOR ISSUING THE
DOWNGRADE BEFORE THE APPEARANCES, UNLIKE SOME GUESTS
WHO DO IT AFTER THE INTERVIEW. TOM, I NEVER UNDERSTAND. LISA:
WHAT ARE YOU TALKING ABOUT? TOM: THEY DON'T WANT TO GET TO THE
MEDIA, THEY WANT TO GO TO A PROCESS WHERE IT IS APPROVED,
MOVE UP THE FOOD CHAIN, AND THEN IT GETS THE CLIENTS FIRST.
JONATHAN: LAST WEEK THE E.U. CAME OUT WITH THIS PROPOSAL TO
CUT GASEOUS FOR THE REST OF THIS YEAR, AND WE TALKED ABOUT
POTENTIAL DISSUADING OF THE SOUTH AND THE NORTH. LISA: WE HAVE THIS IDEA THAT THE
EUROPEAN GDP COULD GET CUT PRETTY DRAMATICALLY IF RUSSIA
CUTS PRICES, ESPECIALLY PHYSICAL WINTER.
ALREADY YOU ARE SEEING A COUNTRY PUSHED BACK SAYING
"COME ON, GUYS, REALLY? DO WE REALLY HAVE TO DO THIS?"
IT RAISES QUESTIONS ABOUT LONGER-TERM, HOW THEY CAN
REALLY BUILD SUPPLIES. JONATHAN: THE DATA IS ALREADY TERRIBLE,
LET'S PUT IT THAT WAY. TOM, THE TENSIONS ARE PRETTY
CLEAR BETWEEN A HAWKISH CENTRAL BANK IN SOME WEAK ECONOMICS IN
AMERICA, TWO. TOM: I READ A LOT ABOUT THE WAR OVER
THE WEEKEND, A MASSIVE CASE OF THE WAR BEING REMOVED FROM
LONDON, REMOVED FROM NEW YORK. JONATHAN: LISA, WELCOME BACK.
LISA: THANK YOU. TOM: JON, I THINK THE GLOOM CLICKED
IN AROUND 6:01. THERE IT WAS. JONATHAN: WHEN THE SHOW STARTED.
LISA: AT LEAST SMILING. TOM: IT WAS SMILING GLOOM.
JONATHAN: THE FORECAST ON THE S&P FROM
NEW YORK. THIS IS BLOOMBERG. ♪ >> KEEPING YOU UP-TO-DATE
WITH NEWS FROM AROUND THE WORLD, THIS IS FIRST WORD NEWS.
THE EUROPEAN CENTRAL BANK MAY NOT BE -- IN RATES AFTER LAST
WEEK'S HEIGHT. THE GOVERNING COUNCIL MEMBER
HAS TOLD BLOOMBERG AT THE RATE INCREASE IN SEPTEMBER ALSO NEEDS TO BE SIGNIFICANT,
ALREADY MORE THAN FOUR TIMES THE TARGET.
TREASURY SECRETARY JANET YELLEN SAYS SHE DOESN'T SEE ANY SIGN
THAT THE U.S. ECONOMY IS IN A BROAD RECESSION.
SHE HAS TOLD NBC THAT THE U.S. IS LIKELY TO SEE SOME SLOWING
OF JOB CREATIONS BUT SAYS THAT ISN'T A RECESSION. HERE IN THE U.K., THE NEXT PRIME MINISTER -- ECONOMIC
GROWTH. THE FOREIGN SECRETARY IS LEADING THE CALL WHERE SHE HAS
PLEDGED TO CRACK DOWN CHINA'S INFLUENCE IN THE U.K.
BECAUSE OF THE BIGGEST LONG-TERM THREAT TO BRITAIN.
THE DIRECTOR GENERAL OF THE ORGANIZATION HAS DECLARED THE
MONKEYPOX INFECTION A PUBLIC HEALTH EMERGENCY OF
INTERNATIONAL CONCERN. THE VIRUS HAS SPREAD TO ABOUT
16,000 PEOPLE IN MORE THAN 17 COUNTRIES IN JUST A FEW MONTHS.
THEY ARE CONCERNED ABOUT THE COVID OUTBREAK'S AND THE LACK
OF URGENCY AND COORDINATED TESTING AND TREATMENT.
GLOBAL NEWS 24 HOURS A DAY ON AIR AND ON BLOOMBERG QUICKTAKE.
POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN
MORE THAN 120 COUNTRIES. THIS IS BLOOMBERG. ♪ >> I WOULD SAY THAT WE ARE
SEEING A SLOWDOWN. A RECESSION IN THE ECONOMY,
I THINK THERE IS A PLAY TO KEEP THE LABOR MARKET STRONG
AND INFLATION DOWN. JONATHAN: THAT WAS JANET YELLEN ON NBC
OVER THE WEEKEND, FROM NEW YORK CITY THIS MORNING.
GOOD MORNING, IT IS A PRICE ACTION ON THE S&P. THE YIELDS HIGHER, BY FIVE
BASIS POINTS. CRUDE UP 1%. THE EURO SHOWING A LITTLE BIT
OF STRENGTH AS WE GET A COUPLE OF POLICYMAKERS TALKING UP THE
EURO-DOLLAR. OF 2/10 OF 1%. IF WE GET THAT NEGATIVE GLOOM
ON FRIDAY THE SECOND QUARTER, THE SECOND CONSECUTIVE QUARTER
IN AMERICA, EXPECT A TON OF PUSHBACK THAT SOUNDED A LOT
LIKE SECRETARY YELLEN OVER THE WEEKEND.
CAN YOU CALL IT A RECESSION WHEN WE JUST TURN THAT 72,000
PAYROLL? TOM: A REASON TO STAY WITH US ON TV
AND RADIO, KATE -- JP MORGAN REALLY PARSES IT OUT. IF YOU HAVE DOMESTIC FINAL
SALES, THEY SEEM TO BE A LITTLE SOFT, BUT THEY ARE LOOKING FOR
A SURPRISING EXPORT GROWTH. THEY PARSE OUT TO 0.7% POSITIVE
STATISTIC. IT WAS AN ODD WEEKEND.
FOR THOSE OF YOU WORLDWIDE, MAYBE YOU ARE COOL AND
COLLECTED, WE ARE NOT. WITHIN THAT WAS A JEWEL OF AN
ESSAY BY STEPHEN EISENBERG. MOST IMPORTANTLY, STEPHEN
EISENBERG IS 81. IT WAS THE MOST EMOTIONAL ESSAY
BY SOMEONE OF THAT VINTAGE OF TRUMP, OF FIVE IN, AND HE JUST
SAID GIVING UP, ANNOUNCED ONE TERM NOW AND THEN YOU CAN ACT
WITH A NEW INDEPENDENCE. IS THAT IN THE ZEITGEIST? LISA:
HE SEEMS ALONE AT THE MOMENT BECAUSE MANY DEMOCRATS DO NOT
WANT THE PRESIDENT TO BE THE LEADERSHIP OF 2024. ABOUT 64% OF DEMOCRATS SAY THEY
WANT A NEW CANDIDATE FOR 2024. TELLING THE PRESIDENT TO QUIT,
THIS ACTUALLY GIVES MORE FREEDOM TO COME OUT, BUT ALSO
INSTEAD OF WHISPERS, PEOPLE ABLE TO ACTUALLY COME OUT AND
PREPARE A BENCH. >> YOU ARE LOVING IT.
THE GUY MOWING THE LAWN BEHIND YOU IS VERY AWARE OF THE
POLLING AS WELL. MR. EISENBERG TALKS ABOUT THE
PRESIDENT. IF THE PRESIDENT CAME OUT AND
SAID RIGHT NOW, WHAT IS THE URGENT QUESTION YOU MUST DEAL
WITH? LISA: THE FACT THAT HE HAS COME OUT
WITH A LOT OF CONVICTION, JUST DEALING WITH THE ISSUES AT HAND.
THE ISSUE WHICH MANY ADVISE I'M SURE WOULD BE TELLING THE
PRESIDENT IS YOU AND THAT AUTOMATICALLY BECOME A
LAME-DUCK PRESIDENT. IF YOU ARE NOT RUNNING IN 2024,
YOU BECOME A LAME-DUCK PRESIDENT.
POTENTIALLY WHAT COULD HAPPEN IS THAT IT COULD HELP OTHER
DEMOCRATS AND MIDTERM ELECTIONS, THE CASE THAN
POTENTIALLY, THEY ARE NOT VOTING ON WHETHER OR NOT THEY
LIKE WHAT IS HAPPENING RIGHT NOW WITH THE ECONOMY ON
REFERENDUM, AND ACTUAL INDIVIDUALS SITTING IN THE
WHITE HOUSE, THEY GIGGLE POTENTIALLY ON THOSE PEOPLE
RUNNING FOR LEGISLATURE, WHETHER OR NOT IT IS FOR
CONGRESS, PERCENT, OR FOR ACTUAL POLICY. >> HOW VULNERABLE IS PRESIDENT
BIDEN AFTER PINNING A LOT OF HIS CAMPAIGN ON GAS PRICES? DOWN TO $4.36 PER GALLON, HOW
MUCH DO WE LOOK AT SOMETHING THAT IS INCREDIBLY VOLATILE AND
COULD SHIFT AHEAD OF THE MIDTERMS? >> THIS IS OBVIOUSLY A HUGE
GOAL OF THE ADMINISTRATION. THEY WANT PRICES DOWN,
ESPECIALLY DURING THESE CRUCIAL SUMMER MONTHS WHEN A LOT OF PEOPLE ARE TAKING FOR THE ROADS
A HUGE MILESTONE, YOU CAN SEE THE PRESIDENT TWEETING CONSTANT
WEIGHT AFTER GOING LOWER ON GASOLINE.
WHETHER OR NOT IT HAS CHANGED THE PSYCHE OF THE VOTERS BEFORE
NOVEMBER REMAINS TO BE SEEN, BUT IT IS SOMETHING THAT
OBVIOUSLY THEY WANTED TO QUELL, BECAUSE THEY JUST DO NOT WANT
PEOPLE COMPLAINING ABOUT GASOLINE PRICES.
BUT ALSO, GASOLINE PRICES RELATIVE TO EVERYTHING ELSE.
THIS IS A BROADER INFLATION STORY THAT THEY ARE TRYING TO
COMBAT. JONATHAN:
SURELY IT WORKS THE OTHER WAY. LISA:
I GET YOUR POINT, AND THIS IS GOING TO BE SOMETHING THAT IS
INCREASINGLY PERILOUS BEHIND SOME OF THE CLAIM THAT THIS
WHITE HOUSE HAS HAD. I KNOW YOU WILL BE ONE
JONATHAN: JONATHAN: OF THESE PEOPLE.
THAT IS ALL THE PRICES. LISA:
DID YOU KNOW THAT FRIDAY, WE GET CHEVRON AND EXXON EARNINGS?
WE GET A CHANCE. JONATHAN:
I THINK THE POINT ABOUT THE GDP ON THURSDAY, DCI IS ON FRIDAY.
IF WE GET THAT NEGATIVE PRINT, IF WE GET A HINT FROM SECRETARY
YELLEN ABOUT HOW THEY MIGHT HANDLE THAT. LISA:
HER INTERVIEW OVER THE WEEKEND WAS CERTAINLY LOOKING AHEAD AND
FORESHADOWING WHAT THEY ARE EXPECTING ON THURSDAY.
THIS IS LIKELY GOING TO BE A TECHNICAL RECESSION, BUT THEY
ARE TRYING TO GET AHEAD OF THAT AND YES, MAYBE TECHNICALLY THE
U.S. IS IN RECESSION, BUT THAT DOES
NOT MEAN THAT THERE IS THIS MASSIVE AMOUNT OF SLOWING
GROWTH, ESPECIALLY WHEN YOU COMPARATIVELY LOOK AT OTHER
COUNTRIES, NAMELY IN EUROPE. JONATHAN:
THANK YOU, WE WILL CATCH UP WITH YOU IN ABOUT AN HOUR.
THE PMI SERVICES NUMBER LAST WEEK WAS DREADFUL.
I MEAN, IT WAS TERRIBLE. IF YOU TAKE OUT THE PANDEMIC
MONTHS OF THE WEEKEND, IT WAS THE WEAKEST IN RECORD GOING
BACK TO TWO THOUSAND NINE, THAT IS HOW BAD IT WAS. TOM:
I WILL TAKE THAT. 12 OR 13 YEARS.
BUT TO LOOK AT THE EQUATION OF GDP, THERE IS A PART OF AMERICA
THAT EVEN IF YOU HAVE A TECHNICAL RECESSION OR WHATEVER
YOU WANT TO CALL IT, THEY ARE GOING TO BE FINE.
THERE IS A HUGE PART OF AMERICA TO PRESIDENT HAS TO ADDRESS,
AND I WOULD SUGGEST FLAT ON THEIR BACK NOW.
FOR THE KIND OF TALK ABOUT IS ONE SINGLE ITEM OF INFLATION,
AND THAT IS A WIN, AND PARTICULARLY THAT THEIR HOME
SALES SHOULD BE LOWERED TO NEW RENTALS. >> A LOT OF PEOPLE HAVE BEEN
LOOKING AT THAT, HOW MUCH ARE THEY LOOKING AT A TECHNICAL
RECESSION TO KEEP UNEMPLOYMENT LOW, HOW MUCH ARE WE LOOKING AT
SOMETHING MORE PROJECTED? JONATHAN:
FEATURES OF HALF OF 1% ON THE S&P.
THE NASDAQ, HALF OF 1% ALSO. GOOD MORNING.
THIS IS BLOOMBERG SURVEILLANCE. JONATHAN: I'VE ALWAYS SAID THE
CONVERSATIONS IN THE COMMERCIAL BREAKS WITH THE GUESTS SO MUCH
BETTER THAN WHEN THEY COME LIVE ON AIR. TOM: I WANT TO DO THAT.
JONATHAN: WHY IS THAT? TOM: I WANT TO DO IT LIKE SPORTS
WHERE WE SHOW THE MESSAGING. THANK YOU TO OUR GREAT
ADVERTISERS DOWNLOAD. THEY WATCH ME STIRRING TANG AND
THE REST OF IT. JONATHAN: FUTURES THIS MORNING UP 0.1
PERCENT ON THE S&P 500. BEST WEEK OF GAINS GOING BACK A
MONTH. WE CAUGHT UP WITH LORI CALVASINA OF RBC, WHO GOES FROM 4700 DOWN TO 4200 GET -- DOWN
TO 4200 GET I WANT TO TALK ABOUT THE TENSION BETWEEN
HAWKISH CENTRAL BANKS AND WEAKER ECONOMIC DATA AND TOOK
ABOUT A TWO-YEAR IN AMERICA. THURSDAY THAT TWO-YEAR CAME IN
25 BASIS POINTS, AND THAT PMI ON FRIDAY WAS PRETTY BAD.
WE BOUNCE BACK JUST TO BASIS POINTS TO 2.9 9% ON THE
TWO-YEAR IN AMERICA -- BASIS POINTS TO 2.9% ON THE TWO-YEAR
IN AMERICA. THE OUTPUT NUMBERS KEEP COMING
IN. EURO DOING OK WITH HAWKISH CENTRAL BANK SPEAK MAY
SUPPORTING THINGS FOR NOW, BUT THE DATA COME OF THE PMI'S LAST
WEEK, THIS MORNING THE EVO INDEX , WHICH IS BASICALLY
GERMAN BUSINESS CONFIDENCE, SINKING. TOM:
OUR AMERICAN AUDIENCE REALLY DOESN'T CARE, BUT GERMAN YIELDS
WITH A VENGEANCE HAVE COME IN. I LOOK AT THE SWISS 20 YEAR,
WHICH CAME IN WITH STRONG SWISS FRANC, SO IT IS A MOVABLE FEAST
IN EUROPE, AND I WOULD SUGGEST MORE MOVABLE RIGHT NOW, MORE
DYNAMIC THAN WHAT WE SEE IN AMERICA. JONATHAN:
FOR THE MULTINATIONALS WE'VE GOT TO CARE, EARNINGS AND FX.
TOM: FX IS TANGIBLE. NO QUESTION ABOUT THAT.
LET US GET A HANDLE ON WHERE WE ARE GOING TO THE FED MEETING,
AND THEN INVOLVES ACTUALLY DOING ECONOMICS. AT COLUMBIA UNIVERSITY HE TOOK
MICROECONOMICS, KIND OF SORT OF. BRUCE CHASM AND JOINS US FROM JAKE -- RISK CHASM AND -- BRUCE
KAZMAN JOINS US FROM JP MORGAN. WHAT SORT OF RECESSION IS THIS?
BRUCE: AS YOU KNOW THERE'S A GOOD
CHANCE SECOND QUARTER GDP WILL PRINT NEGATIVE FOR A SECOND
QUARTER IN A ROW IN Q2. AS YOU KIND OF BREAK DOWN THE
DATA WITH JOB GROWTH SO STRONG, WITH WHAT WE CONTINUE TO EXPECT
A BE A POSITIVE CONSUMER SPENDING NUMBER IN THIS WEEK'S
REPORT, IT DOESN'T FEEL LIKE A NORMAL BREAK INTO WHAT WE WOULD
CALL A RECESSION. WE SHOULD RECOGNIZE THAT ABOUT
THE FIRST HALF, BUT AT THE SAME TIME, WE SHOULD RECOGNIZE THE
MOMENTUM LOSS THAT WE HAD MIDYEAR.
WE ARE GOING TO PROBABLY PRINT A NEGATIVE CONSUMPTION NUMBER
IN A ROW. THE FLASH PMI'S WERE UGLY.
WE ARE NOT SEEING THAT IN THE U.S. WE ARE SEEING IT ELSEWHERE.
WHAT LOOKS LIKE A TECHNICAL EVENT AS WE MOVE THROUGH THE
FIRST HALF OF THE YEAR COULD EASILY TURN INTO A REAL
RECESSION EVENT HAS WE GO THROUGH THE NEXT COUPLE OF
MONTHS. TOM: IN YOUR SPREADSHEET YOU'VE GOT
A ONE-OFF ON EXPORTS THIS QUARTER.
IS IT EXPORT GROWTH TO THE RESCUE? BRUCE:
THERE IS SOME SUPPORT THERE, PARTICULARLY AS WE SEE CHINA
AND ASIA LIFTING AFTER WHAT WAS A BIG SECOND-QUARTER SET OF
LOCK DOWNS. BUT WITH THE DOLLAR RISING AND
WITH EUROPE VERY MUCH IN THE CROSSHAIRS OF A RECESSION RIGHT
NOW, I WOULD NOT BE COUNTING ON EXPORTS SAVING US HERE.
I THINK THE SAVING GRACE HAS TO BE THE BUSINESS SECTOR BENDING,
NOT BREAKING, IN THE FACE OF THE DRAGS WE ARE SEEING.
ALSO, INFLATION COMING OFF IN THE SUMMER WITH GASOLINE PRICES
STARTING TO MOVE LOWER. JONATHAN:
I'M LOOKING AT CERTAIN DATA POINTS.
CLAIMS ARE HIGHER THE LAST FEW WEEKS.
THE PMI LAST WEEK WAS REALLY BAD. WE ARE STARTING TO SEE THIS
SHOW UP IN HOUSING. I AM TRYING TO WORK OUT WHICH
PART OF THIS IS DESIRABLE AND WHICH PART OF IT IS UNDESIRABLE.
BRUCE: I DON'T THINK THE MOVEMENT
TOWARDS SOFTER GROWTH IS UNDESIRABLE ON THE PART OF THE
FED. THAT IS WHAT THEY WANT. THEY WANT TO SLOW THE ECONOMY.
THEY WANT TO TAKE OUT THE DEMAND COMPONENT OF INFLATION
AND THEY ARE HOPING THAT THAT, WITH THE MODERATION OF SOME OF
THE DRAGS, GETS YOU BACK TO SOMETHING MORE ACCEPTABLE.
HOWEVER, AND I THINK THIS IS REALLY WHAT IS BEHIND YOUR
QUESTION, THE MOMENTUM LOST COME OF THE IDEA THAT LAYOFFS
ARE STARTING TO RISE, THAT IS STARTING TO PUSH TOGETHER A
DYNAMIC WHICH TRADITIONALLY HAS BEEN RECESSION.
RECESSIONS IN THE U.S. CONTEXT IS A MOVE UP IN
UNEMPLOYMENT RATES OF 2% OR MORE.
THAT IS THE RISK, THAT WE ARE LETTING SOMETHING TAKE HOLD
WHICH IS GOING TO GIVE US A MUCH SHARPER MOVE THAN ANYTHING
LIKE WHAT YOU MIGHT CHARACTERIZE THE FIRST HALF OF
THE YEAR AS LOOKING LIKE. LISA: EMBEDDED IN JON'S QUESTION IS
THE FIGHT, MORGAN STANLEY DISAGREEING WITH YOUR OWN JP
MORGAN ON WHEN THE FED IS GOING TO REVERSE COURSE AND THEN
START CUTTING RATES AFTER RAISING RATES.
AT WHAT POINT IS THE SOFTENING WE ARE SEEING IN DATA NOW
REFLECTIVE OF A FED THAT WILL BE ABLE TO BACKTRACK AS SOON AS
NEXT YEAR? BRUCE: I ACTUALLY THINK IT IS FAR
SOONER THAN THE YEAR. WE ARE LOOKING FOR 75 BASIS
POINTS THIS WEEK. WE ARE LOOKING FOR MORE
OPEN-ENDED GUIDANCE. I DON'T THE BEAR GOING TO
COMMIT TO THE SIZE OF MOVE AT A SEPTEMBER MEETING.
I THINK WE PROBABLY STILL DO GET A 50 AT THE SEPTEMBER
MEETING, BUT BEYOND THAT, IF WE ARE SEEING THE ECONOMY REALLY
SOFTEN , JOB GROWTH SLOWED TOWARDS ZERO, I DON'T THINK THE
FED IS GOING TO CONTINUE TO BE TIGHTENING HERE.
WE'VE GOT THEM PAUSING AT ABOUT 3.50%.
WE DON'T HAVE THEM EASING AT THIS POINT BECAUSE WE DON'T
HAVE A REAL RECESSION CALL AND OUR FORECAST. BUT I THINK IT IS
ABOUT THE ECONOMY. IF THE ECONOMY STARTS TO SLOW,
GIVEN THAT THE FED GETS RATES TO A MODESTLY NEUTRAL STANCE,
THE EQUATION CHANGES AT THE FED. IT IS NOT THERE TODAY WITH THE
1.75% LEVEL OF RATES AND AN ECONOMY STILL GENERATING OVER
400,000 JOBS A MONTH, BUT IT WILL BE THERE IN THREE OR FOUR
MONTHS IF WE ARE RIGHT. LISA: WHAT IS ENOUGH TO CAUSE THE FED
TO TAKE A STEP BACK? IS IT AN UNEMPLOYMENT RATE AT
4.5 PERCENT, INFLATION COMING DOWN TO 5% FROM 9.1%?
HOW FAR DO WE HAVE TO SEE PROGRESS WHEN IT COMES TO THE
DETERIORATION IN MOMENTUM BEFORE PERHAPS TAKING A BREAK?
BRUCE: I THINK THE SHORT ANSWER TO
THAT IS A FISH NEEDS TO HAVE POLICY STANCE, A TRAJECTORY ON
INFLATION, AND DYNAMICS ON GROWTH GIVE THEM COMFORT THAT IN THE YEAR -- IN A YEAR,
INFLATION IS GOING TO BE BELOW 3%. THE JOB GROWTH WE ARE SEEING
RIGHT NOW IS NOT THERE. IF PAYROLL GROWTH IS DOWN TO
100000 AND THE RUN RATE ON INFLATION WITH ENERGY PRICES
OFF IS MOVING MORE INTO THE 0.3% PER MONTHLY BASE, WE THINK
YOU COULD EASILY BE IN THAT ZONE. TOM:
YOUR UPDATE ON EMERGING MARKETS, PLEASE.
THE CURRENCIES GIVE WAY. I AM TOLD CONVERSATION AFTER
CONVERSATION THIS TIME IS DIFFERENT. MY RADAR IS UP. BRUCE:
I THINK IT CREATES MORE RISK HERE, ESPECIALLY SINCE WE WILL
NOT SEE THE RELIEF ON CENTRAL BANK ALICE E.
I THINK WHERE THIS TIME IS DIFFERENT IS IN THE LAUNDRY --
IN THE LARGER EM ECONOMIES. THERE ARE CERTAINLY LOW INCOME
PROBLEMS, BUT IN THE LARGER EM ECONOMIES, YOU JUST DON'T HAVE
THE DEBT OVERHANGS. YOU DON'T HAVE THE CURRENT
ACCOUNT IMBALANCES. YOU HAVE POLICY MAKERS THAT
HAVE BEEN WILLING TO CONTINUE TO USE FISCAL POLICY.
SO GROWTH IS SLOWING. EM IS CERTAINLY A THREAT IF THE
U.S. AND EUROPE WENT TO RECESSION.
WE DON'T THINK THERE IS A SYSTEMIC MAGNIFYING EFFECT
THROUGH CREDIT, WHICH IS OFTEN THE CASE WHEN YOU SEE SOME OF
THESE DYNAMICS TAKE IN EM. JONATHAN:
WHERE IS THE LEVERAGE RIGHT NOW? WHENEVER WE TALK ABOUT THIS
RECESSION STORY, YOU ACKNOWLEDGE THE RISKS IN
AMERICA, YET WE KEEP HEARING THE SAME THING THAT CONSUMER
BALANCE SHEETS ARE STRONG. WHERE DO YOU THINK THE LEVERAGE
IS GOING TO SHOW UP? BRUCE: THAT IS THE INTERESTING
QUESTION. ARE WE GOING TO SEE THE DYNAMIC
ON GROWTH WHICH STILL HAS A HEALTHY PRIVATE SECTOR SORT OF
CUSHION HERE? IS THAT GOING TO GET MAGNIFIED
BY CREDIT? IT CERTAINLY ISN'T HAPPENING
YET, BUT THERE ARE SIGNS OF STRESS BUILDING.
I THINK THERE'S ALWAYS THE UNDERLYING POINT WHEN YOU ARE
RAISING INTEREST RATES AND SLOWING GROWTH, YOU CAN BE
SURPRISED AT WHERE SOMETHING SHOWS UP THAT DOES NOT SEEM TO
BE A BIG STORY. I WOULD WORRY ABOUT EUROPEAN
BANKS IN AN ENVIRONMENT IN WHICH WE ARE SEEING MORE SHARP
SLOWDOWNS IN GROWTH AND WE ARE JUST GETTING THE ECB GOING.
I WORRY THAT SOME OF THE SMALLER EM ECONOMIES SHOW MORE
TENDENCY TO SPILL OVER IN WAYS WE ARE NOT EXPECTING FROM A
GEOPOLITICAL POINT OF VIEW AND FROM A CREDIT MARKET POINT OF
VIEW. I WILL TELL YOU FOR SURE, I AM
ALWAYS SURPRISED WHERE THESE THINGS SHOW UP, AND I THINK WE
SHOULD NOT LOSE SIGHT OF THE CONTEXT THAT THIS IS AN
ENVIRONMENT WHERE THIS IS A LIKELY OUTCOME. JONATHAN:
AWESOME TO GET YOUR VIEWS ON A RANGE OF THINGS.
THAT WAS JUST AS GOOD AS THE COMMERCIAL BREAK.
JUST AS GOOD OF THE CONVERSATION IN THE COMMERCIAL
BREAK. THE FED MEETING THIS WEEK IS
NOT ABOUT THE FED MEETING THIS WEEK. IT IS ABOUT THE NEXT ONE.
SEPTEMBER 21. BEFORE WE GET TO SEPTEMBER 21,
YOU'VE GOT AN AUGUST 10 CPI PRINT, A SEPTEMBER 13 CPI
PRINT, AND I THINK TO BRUCE'S POINT, MAYBE THE LABOR MARKET
IS GOING TO TAKE ON INCREASED IMPORTANCE OVER THE NEXT THREE
TO PERFORMANCE. WILL THIS FED BE CONFRONTED BY
SLOWER DROPS GROWTH, MAYBE EVEN NEGATIVE JOBS GROWTH BY THE END
OF THIS YEAR AS THEY TRY TO TACKLE INFLATION? TOM:
YOU OUTLINED WHAT WE ARE ALL DOING NOW.
WE HAVE JOINED JEROME POWELL IN BEING MASSIVELY DATA DEPENDENT.
WE JUST HAVE TO WAIT TO SEE WITH THE DATA IS.
WE CAN GUESS ON IT. JP MORGAN SAW THE HEADLINES
FRIDAY THAT RECESSIONS ARE ALWAYS DISINFLATIONARY.
OK, SO WE'VE GOT TO SLOW DOWN. BUT OUR WE DISS INFLATING DOWN
TO 7%, 5%, 3%? JONATHAN:
LISA, SOME PEOPLE MIGHT BE SCREAMING AT THE TV RIGHT NOW
SAYING NO, CHAIRMAN POWELL JOINED US TO BE DATA-DEPENDENT
BECAUSE HE IGNORED THE DATA FOR THE WHOLE OF LAST YEAR. LISA:
I IMAGINE THEY MIGHT BE SCREAMING FOR A WHOLE RANGE OF
REASONS. THAT IS BEEN A CONSTANT THEME.
IF YOU ARE DATA DEPENDENT, WHAT DATA ARE YOU LOOKING AT?
THAT IS WHY I AM CURIOUS ABOUT THE EMPLOYMENT COST INDEX.
HOW MUCH DOES THAT FEATURE INTO THE BELIEF THAT IS HARDENED
INTO THE MARKETS OF A FED PAUSE AS SOON AS NEXT YEAR, EVEN
THOUGH A LOT OF PEOPLE THINK THERE'S ONLY A 40% CHANCE OF
RECESSION? JONATHAN: BECAUSE HE TOLD US THAT WAS WAS
POSSIBLE FOR THE FED PIVOT AT THE END OF LAST YEAR. LISA:
AND THE UNIVERSITY OF MICHIGAN SURVEY WAS RESPONSE FOR THE
INCREASE WE SAW JUST A FEW MONTH AGO. SO WHICH DATA?
JONATHAN: JUST CHERRY PICKING. PICK WHICHEVER ONE YOU WANT.
I GET THE DATA-DEPENDENT THING, BUT AS I SAID A MILLION TIMES
LAST WEEK, IF YOU DON'T UNDERSTAND THE REACTION
FUNCTION , THEN WHAT IS TO SEE HERE? WHICH DATA POINT MATTERS?
TOM: DON'T THINK THERE IS A REACTION
FUNCTION COMING OUT, AND WITH A HUGE FISCAL IMPULSE WE'VE HAD,
THIS IS ALL ORIGINAL. JONATHAN: FUTURES UP 0.4% ON THE S&P.
FROM NEW YORK, THIS IS BLOOMBERG. >> KEEPING YOU UP-TO-DATE WITH
THE NEWS FROM AROUND THE WORLD, WITH THE FIRST WORD NEWS, I'M
LEIGH-ANN GERRANS. HE FED WILL PROBABLY HAVE TO
INFLICT MUCH MORE PAIN ON THE ECONOMY TO GET HIS LEASH AND
UNDER CONTROL AFTER RAISING RATES IN JUNE BY THE MOST SINCE
1994. POLICYMAKERS ARE EXPECTED THIS
WEEK TO APPROVE ANOTHER 75 BASIS POINT HIKE, AND THEY ARE
LIKELY TO SIGNAL THEIR INTENTION TO KEEP MOVING HIGHER
IN THE MONTHS AHEAD. THE U.S. SAYS A RUSSIAN CRUISE MISSILE
STRIKE ON THE PORT OF ODESSA HAS PASSED OUT OF MOSCOW'S
COMMITMENT TO EXPORTS. THE DEAL FOR SAFE SHIPMENT
CORRIDORS WAS SIGNED AFTER MONTHS OF TALKS.
RUSSIA SAYS THE MISSILE ATTACK TARGETING UKRAINIAN MILITARY
INFRASTRUCTURE. NOW HONG KONG REPORTEDLY PLANS
TO REDUCE HOTEL OR FOR ARRIVALS. ACCORDING TO LOCAL MEDIA, A
HEALTH CODE SYSTEM WILL BE INTRODUCED.
ONE PROPOSAL CALLS FOR FIVE DAYS OF HOTEL OR IN.
AFTER THAT, ARRIVING TRAVELERS WOULD BE ISSUED WITH A
SO-CALLED YELLOW HEALTH CODE FOR TWO DAYS THAT WOULD
PROHIBIT THEM FROM ENTERING HIGH-RISK AREAS.
THE SWISS BANK JULIUS BAER HAS REPORTED NET INCOME FELL 26% IN
THE FIRST HALF OF THE YEAR, WHILE MARKET SWINGS ERODED
ASSETS THAT THE FIRM OVERSEAS FOR THE RICH.
THE CEO FLIPPER CAN BUNKER HAS TOLD BLOOMBERG TV HE THINKS THE
WORST IS NOW OVER. APPLE HAS ANNOUNCED A RARE
SALES PROMOTION IN CHINA, OFFERING FOUR DAYS OF DISCOUNTS
ON ITS TOP-TIER IPHONES AND RELATED ACCESSORIES.
APPLE IS USUALLY HESITANT TO ALTER PRICES, BUT IT WILL CUT
$89 HALF THE PRICE OF THE IPHONE 13 SERIES.
THAT SUGGESTS THAT THERE IS SURPLUS INVENTORY. PRES. BIDEN:
I AM WORKING TO MAKE SURE THAT WHEN THE PRICE OF OIL COMES
DOWN, THE PRICE AT THE PUMP COMES DOWN AS WELL.
IT COMES DOWN IN REAL TIME. THE GOOD NEWS IS THAT IS
HAPPENING. IT IS NOT HAPPEN FAST ENOUGH. JONATHAN:
GASOLINE PRICES COMING DOWN EVERY SINGLE DAY SINCE JUNE.
THAT IS THE PRESIDENT OF THE UNITED STATES.
WE WISH HIM WELL AS HE RECOVERS FROM COVID.
HOOSIERS POSITIVE 0.5% THIS MOANING.
HERE'S THE PRICE FOR YOU ON THE NASDAQ, UP 0.5%.
YIELDS UP BY FIVE BASIS POINTS. THE DATA OUT OF EUROPE NOT
GREAT AGAIN, BUT THE CENTRAL BANK SPEAK REMAINS HAWKISH. EURO-DOLLAR, 1.0222. TOM:
WHAT DO YOU THINK? I'VE GOT AN EQUITY MARKET LIFT.
IT IS A BULL MARKET. JONATHAN: 28% OF THE S&P REPORTS THIS
WEEK. THIS WEEK FOR EARNINGS, HUGE.
TOM: ABSOLUTELY AGREE WITH THAT. WE WILL HAVE ALL OF THAT,
INCLUDING THE BI TECH COMPANIES. ESTE BIG TECH COMPANIES.
-- THE BIG TECH COMPANIES. I WOULD TO JUST WE COME DOWN TO
PARTLY JULY. 90 IN WASHINGTON, MAYBE 100
DOWN SOUTH WHERE IT IS SUPPOSED TO BE 100 DEGREES.
HOW DID WE DO IN THIS HEATWAVE? HOW DID WASHINGTON DO, OUR
GRADES DO, OUR CLIMATE POLICY DO, GIVEN A REAL HEATWAVE? >> THE HOT SUMMER HERE IN D.C.
IS WHEN LAWMAKERS TRY TO GET AWAY. THE WHOLE POINT OF AUGUST
RECESS IS TO GET OUT OF HERE WHEN IT IS HOTTEST, BUT THEY
DID NOT SUCCEED IN GETTING OUT IN TIME, SO THEY HAVE TO TALK
ABOUT CLIMATE. THE CLIMATE POLICY DID NOT
STAND UP TO THE HEAT. IT IS SAFE TO SAY THAT IT DID
NOT GO WHERE MANCHIN WAS EXPECTED TO GO, SO NOW WE ARE
BACK IN THE MANCHINOLOFY GAME. LISA:
PERHAPS WHERE CLIMATE POLICY DID NOT GO, THE PRICE FACTOR
DID IN TERMS OF WHAT PEOPLE WERE DOING WHEN IT COMES TO
DRIVING IN THE PRICE RESPONSE TO THE PUMP.
WHY HAVE WE SEEN GASOLINE PRICES GO DOWN?
IS IT PURELY BECAUSE OF THE SPR RELEASE, OR BECAUSE PEOPLE ARE
DRIVING LESS, CONSUMING LESS IN THE FACE OF HIGHER PRICES? >> THE SPR IS A REAL EFFECT.
YOU CAN'T RELEASE 100 SOME MILLION BARRELS AND NOT HAVE A
PRICE EFFECT. ON THE GASOLINE RESPONSE YOU
ALSO HAVE REFINED PRODUCT INVENTORIES.
WHERE WERE WE A MONTH AGO? MID JUNE, WE WERE 7% BELOW
DEMAND I GIVE AGO. WE ARE NOW 5% ABOVE A YEAR AGO.
WHAT CHANGED? THE ANSWER IS DEMAND.
ALSO, REFINERIES RUNNING FLAT OUT.
YOU SEE BOTH A PRICE RESPONSE AND 98% CAPACITY UTILIZATION.
LISA: HOW MUCH DO YOU SEE THIS AS
BEING A CONTINUAL DECLINE IN GAS PRICES VERSUS A POP IN
TERMS OF THE KNEE-JERK RESPONSE TO FIVE DOLLARS A GALLON
GASOLINE IN THE UNITED STATES? >> THE REFINING CHALLENGE HAS
NOT ENTIRELY GONE AWAY. IF DEMAND LIGHTENS THEN YOU GET
SOME BALANCES IN THOSE INVENTORIES, BUT WATCH OUT FOR
STORMS. WATCH OUT FOR UNEXPECTED DOWNTIME.
IN TERMS OF THE CRUDE STORY, A LOT OF IT HAS TO DO WITH THE
QUESTION OF WHETHER OR NOT A PRICE CAP TRULY COMES INTO
PLACE, AND IF NOT, WHETHER THE EUROPEAN SANCTIONS THAT COULD
DRIVE PRICES UP LATER IN THE YEAR COME TO PASS. JONATHAN:
DO YOU HAVE A BASE CASE FOR LATER THIS YEAR IN EUROPE? >> LAST WEEK THE SENTIENCE
PACKAGE PUSHED BACK A TRANSACTION BAN ON THIRD
COUNTRY TRANSACTIONS FOR CRUDE. THAT COULD BE A PREVIEW OF
WHERE EUROPE ACTUALLY GOES. RIGHT NOW THE DEPUTY SECRETARY
OF TREASURY IS IN EUROPE TO PITCH THE PRICE CAP.
IT DOES NOT LOOK AS THOUGH THE PRICE CAP NECESSARILY IS
GETTING A LOT OF UPTAKE IN THE WORLD, BUT THE OTHER OPTION IS
TO SAY LET'S PUSH BACK AND WAIT. TOM:
IF I LOOK AT CLIMATE CHANGE AND THE HEATWAVE, WHAT IS GOING TO
COME IS MORE LARGE HEAT, LARGE COLD, THE GREATER DYNAMICS THAT
WE HAVE. IS OUR GRID READY FOR IT? KEVIN:
OUR GRID IS PROBABLY NOT THE BIGGEST CONCERN IN THE WORLD
RIGHT NOW. PUTTING IS TRYING TO WIN -- PUT
IN -- PUTIN IS TRYING TO WIN ON THE GRID IN EUROPE.
IT HAS BEEN VERY CLOSE. CRYPTOCURRENCY SHUTTING DOWN IN
TEXAS TO MAKE THE MARGIN FOR THINGS TO WORK.
GAS PRICES REBOUNDING ON THE HEAT.
WE CAN SEE WHERE THE PRESSURE IS COMING, AND IS SHOWING UP IN
THE CPI SHARE THE GOES TO UTILITIES AND TO ELECTRICITY
AND GAS ESPECIALLY. YOU ARE CERTAIN TO SEEK A
SIGNIFICANT AMOUNT OF AMERICA'S POCKETBOOK GOING TO THE WALL
INTO THE BURNER. JONATHAN: KEVIN BOOK OF CLEARVIEW ENERGY
PARTNERS. AT THE HEART OF THAT CONVERSATION, A DEMAND RESPONSE
THIS DRIVING SEASON. REMEMBER THE REPORT FROM J.P.
MORGAN THAT WE WERE LOOKING FOR POTENTIALLY SIX DOLLARS
GASOLINE? WE GOT THE RESPONSE MAY BE A
LITTLE EARLIER THAN THEY ANTICIPATED. LISA:
IF YOU START TO SEE FOUR DOLLARS A GALLON, WHAT IS THE
PRICE POINT AT WHICH PEOPLE START TO PROTEST VERSUS FEEL
MORE CONFIDENT TO GO OUT AGAIN? HOW MUCH FURTHER DOWN CAN
PRICES GO IF WE DON'T GET THAT REFINERY RESPONSE? JONATHAN:
THE POLITICS OF ENERGY IN EUROPE LATER THIS YEAR IS GOING
TO BE CRITICAL, BOTH EUROPE'S RELATIONSHIP WITH THE REST OF
THE WORLD AND THE RELATIONSHIPS WITHIN EUROPE.
I THINK THE LATTER IS WHERE MY ATTENTION IS RIGHT NOW, WHETHER
THEY CAN FORM SOME SORT OF CONSENSUS ABOUT WHAT THEY NEED
TO DO THROUGH THE REST OF THIS YEAR. TOM:
I KNOW THEY ARE WAY AHEAD OF US IN TERMS OF CONSERVATION, BUT I
JUST THINK IT IS A DIFFERENT STORY HERE, IT FOR AND STORY
THERE. I WOULD SUGGEST THE SHOCK HERE
IS GOING TO BE COMPLETE HE WRAPPED AROUND A CHANGING OF
SEASONS AND THE FEAR OF THAT COLD.
THAT IS GOING TO HAPPEN SOONER THAN LATER.
IT IS NOT GOING TO BE OCTOBER. THIS IS GOING TO BE LITERALLY
IN WEEKS. JONATHAN: I STILL DON'T UNDERSTAND HOW
YOU CAN HAVE SOME KIND OF CAP ONRUSHING CRUDE.
WIRED DAY -- WHY ARE THEY TALKING TO THE EUROPEANS? LISA:
HOW ABOUT TALK TO RUSSIA? RUSSIA CAME OUT OVER THE
WEEKEND AND SAID YOU REALLY THINK WE ARE JUST GOING TO SAY
SURE, WE WILL TAKE GAS AT 50% LOWER PRICES? NOT A CHANCE.
WE WILL NOT DO BUSINESS WITH YOU IF YOU TRY TO IMPOSE PRICE
CAPS. SO WHERE WILL THEY GET THE LEVERAGE TO DO IT?
IT IS CHINA, IT IS INDIA, AND THAT IS A PRETTY TENUOUS BET.
JONATHAN: IT IS A STORY I CAN'T GET MY
HEAD AROUND, BUT I AM OPEN TO EXPLANATIONS.
FUTURES UP 0.5% ON THE S&P. ON THE NASDAQ 100, WE ARE
POSITIVE BY 0.5%. WHEN WAS THE LAST TIME YOU
HEARD A STORY ABOUT CUTS TO THE PRICE OF THE IPHONE?
MAYBE THE CHEAPER VERSION, SURE, BUT THE PREMIUM IPHONE,
CUTS OF UP TO $89 AND CHINA? TOM: I SAW THAT.
IT IS IN CHINA WHICH IS A DIFFERENT MARKET FOR THEM AND
SUCH. WHAT I WOULD SAY, AND THIS IS
LIKE DAN IVES TERRITORY AND OTHERS, IT IS A COMPLETE
MYSTERY TO ME HOW THAT CONFERENCE CALL IS GOING TO GO.
IT COULD SWING EITHER WAY. THE UNCERTAINTY AROUND BIG TECH
RIGHT NOW IS GINORMOUS. JONATHAN:
YOU DON'T USUALLY SEE THOSE SALES ON TOP-TIER IPHONES.
IT IS INTERESTING. LISA: THE BIG QUESTION I WANT TO HEAR
ANSWERED, HOW MUCH IS THIS A CHINA SPECIFIC ISSUE HAVING TO
DO WITH THE LOCKDOWNS AND HOW MUCH IS THIS A BROADER SLOWDOWN
IN DEMAND FOR THE PREMIUM PRODUCT OF APPLE? JONATHAN:
FOUR DAYS OF DISCOUNTS ON TOP-TIER IPHONES AND APPLE.
A TON OF RESEARCH GOING INTO THE NUMBERS.
FOREIGN-EXCHANGE, AND THE STRENGTH OF THE CONSUMER, THAT
IS GOING TO BE INTERESTING. THROW IN CHINA, AND THAT IS AN
IMPORTANT EARNINGS RELEASE LATER THIS WEEK.
FUTURES POSITIVE ON THE S&P. FROM NEW YORK, THIS IS
"BLOOMBERG SURVEILLANCE." >> THE FED HAS TO DO HIS JOB TO
GET INFLATION DOWN. >> THE FED'S HIKING INTEREST
RATES INTO A KNOWN SLOWDOWN IN THE MARKET.
THIS IS SOMETHING THAT THEY DON'T NORMALLY DO. >> WE HAVE HEARD FROM A LOT OF
COMPANIES THAT THEY ARE THINKING THE FOLLOWING
ENVIRONMENT IS GOING TO BE MORE CHALLENGING. >> HIGHER INFLATION AND POLICY
TIGHTENING RAISES THE PROSPECT OF A PRETTY SIGNIFICANT
SLOWDOWN. >> WE ARE SEEING SIGNS THAT
GLOBAL, GROWTH IS DECELERATING AT A PRETTY RAPID CLIP HERE. >> THIS IS "BLOOMBERG
SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO,
AND LISA ABRAMOWICZ. JONATHAN:
LIVE FROM NEW YORK CITY, FOR OUR AUDIENCE WORLDWIDE, GOOD
MORNING. THIS IS "BLOOMBERG SURVEILLANCE" ON TV AND RADIO.
ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ, I'M JONATHAN FERRO.
FUTURES UP 0.5%. SAID IT A FEW TIMES ALREADY
THIS MORNING. WHAT A WEEK COMING UP. TOM:
IT IS A NICE TIME TO RECALIBRATE.
THAT HAS BEEN MY THEME HERE. THE FED MEETING CLEARLY THE KEY
THING. WE REMIND LISA THAT SHE'S DOING
THE SHOW. WE'VE GOT A GREAT SET OF GUESTS
COMING UP. THE S&P 500 WITH A RECENT LIFT
IS A CORRECTION. IT IS DOWN 10%. IT IS NOT THAT BAD OUT THERE.
TOM: WE ARE BEINGS OF -- JONATHAN:
WE ARE BEING SUPPORTED BY LOWER YIELDS BECAUSE THE DATA IS
WEAK, SO WHAT ARE YOU GOING TO TRADE, THE WEEK DATA, THE LOWER
YIELDS? TOM: I THINK EARNINGS HAVE SURPRISED
ON THE UPSIDE. THERE'S A LOT OF PEOPLE KEEPING
SCORE OF THIS. I THINK JULIAN EMANUEL IS DOING
A GREAT JOB ON IT, AND EARNINGS HAVE BEEN OK. JONATHAN:
IS SNAPCHAT YOUR BELLWETHER? TOM: IT MY BELLWETHER.
CAN WE ALL GET OVER IT? JONATHAN: SNAP, TWITTER.
LOOKING AHEAD TO ALPHABET, FACEBOOK OR GET THEY ARE THE
HEAVYWEIGHTS FOR AMERICA AND WORLDWIDE. LISA:
20% OF THE INDEX IS GOING TO REPORT THIS WEEK, COMPRISED OF
THOSE FIVE NAMES WHICH ARE GOING TO BE COMING OUT ON
TUESDAY. HOW MUCH DO WE GET A SENSE OF
THE SLOWDOWN IN CONSUMER DEMAND THAT IS GOING TO AFFECT SOME OF
THE CASH COWS OF THE MARKET, BUT HAVE NOT BEEN PRICED IN?
PEOPLE HAVE BEEN REALLY RESILIENT AND HAVE SHRUGGED OFF
DISAPPOINTMENTS AND EARNINGS MUCH MORE THAN IN PREVIOUS
YEARS. HOW MUCH IS THIS BASICALLY
WHERE VALUATIONS ARE VERSUS REAL OPTIMISM BAKED INTO
SOMETHING REAL? JONATHAN: THAT PMI LAST WEEK WAS TERRIBLE.
I'M LOOKING AHEAD TO SEE IF WE GET CONFIRMATION OF THAT
BECAUSE THAT WAS PRETTY BRUTAL. DOES ANYTHING CHANGE FOR THE
FED THIS WEEK? TEEING UP A MOVE IN SEPTEMBER?
LISA: THEY WILL DEFINITELY GO 75.
THAT SEEMS TO BE THE CONSENSUS. THEY ARE BY SIMPLY TAKING A 100
BASIS POINT RATE HIKE OFF THE TABLE.
AFTER THAT, HOW MUCH GUIDANCE CAN THEY ACTUALLY GIVE?
WHAT DATA ARE THEY LOOKING AT? HOW MUCH ARE THEY GOING TO
FORECAST ANYTHING? JONATHAN: GUIDANCE IS DEAD.
TAKEAWAY OF LAST WEEK, FOR THE ECB, TOO. TOM:
I THOUGHT THAT WAS THE KEY THING FOR THE ECB.
WE HAVE NOT TALKED ABOUT TPI. JONATHAN:
WHAT DID MARCUS ASHWORTH CALL IT, TO PREDICT ITALY? TPI? TOM:
THE FIRST THING I LOOKED AT THIS ONE WAS ITALIAN SPREADS,
WHICH I GUESS ARE OK IS HOW I WOULD PUT IT THIS MORNING.
JONATHAN: FUTURES ARE OK, UP 0.4% THIS
MORNING ON THE NASDAQ 100. YIELDS ARE HIGHER BY FIVE BASIS
POINTS. 2.80% ON THE 10 YEAR. CRUDE HIGHER THAN 1%. EURO-DOLLAR, 1.0223.
WELCOME BACK, BRAMO. LISA: IT IS GOOD TO BE BACK.
TODAY IS GOING TO BE A HUGE GAME CHANGER FOR A SLEW OF
REASONS, THE FIRST BEING THESE BIG TECH EARNINGS WE ARE
TALKING ABOUT. ALPHABET, MICROSOFT, META,
AMAZON, WHY IS PINTEREST THERE? I AM NOT SURE. [LAUGHTER]
SORRY, I AM JUST GOING TO BE HONEST. I KNOW TOM REALLY LIKES
PINTEREST. TOM: DOW COMPONENT. JONATHAN:
IS THAT ANOTHER BELLWETHER FOR YOU? TOM: IT IS, EXACTLY. LISA: WEDNESDAY WE'VE GOT THE RATE
DECISION AND PRESS CONFERENCE. HOW MUCH DO THEY TALK ABOUT NOT
ONLY INFLATION AND OUT OF THEY ARE LOOKING ON AT THAT FRIEND
VERSUS WHAT THEY ARE SEEING IN THE ON EMPLOYMENT PICTURE?
HOW MUCH CAN UNEMPLOYMENT RISE BEFORE THEY RESPOND TO THAT IN
ADDITION TO JUST COMBATING INFLATION?
THIS IS A KEY ASPECT WHEN PEOPLE TALK ABOUT WHEN THE FED
MIGHT DIAL BACK RATE HIKES OR EVEN REVERSE SOME, WHICH A LOT
OF PEOPLE ARE BAKING AND FOR 2023. THIS WEEK WE GET A SLEW OF
ECONOMIC DATA. INTERESTING ON THURSDAY, THE
SECOND QUARTER GDP PRINT FOR UNITED STATES, IF IT COMES IN
NEGATIVE, WOULD MEAN A TECHNICAL RECESSION.
WE ALSO GET THAT KEY EMPLOYMENT COST INDEX ON FRIDAY, AS WELL
AS UNIVERSITY OF MICHIGAN SENTIMENT DATA.
IF WE LOOK AT WHAT THE FED IS DATA DEPENDENT ON, WE HAVE SEEN
BOTH OF THOSE INDICATORS WITH RESPECT TO THE RIGHT DECISIONS,
SO MAYBE WE WILL GET SOME GUIDANCE FOR THE FOLLOWING
MEETING IN SEPTEMBER. JONATHAN: I WILL JUST BE FOCUSED ON
PINTEREST NUMBERS THIS WEEK. [LAUGHTER] LISA: ME TOO.
JONATHAN: SARAH HUNT JOINS US NOW.
YOUR LINE, THIS MARKET WHAT THE WEATHER IN'S PLACES.
DON'T LIKE IT. WAIT A FEW MINUTES, IT WILL
CHANGE. DO WE HAVE TO GET USED TO THAT?
SARAH: I THINK WE DO. YOU HAVE SO MANY DIFFERENT
CROSSCURRENTS GOING ON IN SO MANY DIFFERENT FORCES ACTING ON
THE MARKET THAT YOU HAVE THESE LITTLE MOMENTS WHERE IT IS ALL
ABOUT INFLATION, AND THEN IT IS ALL ABOUT RECESSION COMING OUT
IS ABOUT THE FED, NOW IT IS ABOUT THE ECB.
I THINK YOU ARE JUST IN A PERIOD OF VOLATILITY BECAUSE
YOU HAVE A LOT OF DIFFERENT THINGS GOING ON RIGHT NOW AND
PEOPLE ARE FOCUSING ON THEM IN DIFFERENT MOMENTS. TOM:
YOU HAVE A GREAT SINGLE LINE IN YOUR ESSAY ON SNAP, AND THE
LEVEL OF SNARK IS OFF THE CHARTS.
IS SNAP REALLY A BELLWETHER? EXPLAIN THE MASSIVE DIVIDE YOU
SEE NOW BETWEEN SUBSTANTIAL AND PERSISTENT FREE CASH FLOW
COMPANIES AND THE REST OF THIS NOISE OUT THERE. SARAH:
THAT IS REALLY THE KEY. WE HAVE BEEN TALKING ABOUT THAT
SINCE THE BEGINNING OF THE YEAR. REALLY, WHAT YOU NEED TO FOCUS
ON HIS COMPANIES THAT HAVE A BUSINESS MODEL THAT HAS BEEN
SUSTAINABLE THROUGH A CYCLE BECAUSE RIGHT NOW WE HAVE A
CYCLE OF THINGS THAT ARE SLOWING.
YOU CAN ARGUE ABOUT WHETHER OR NOT IS A RECESSION OR SLOW DOWN.
IT IS DEFINITELY A LOSS OF MOMENTUM AND WE DEFINITELY SEE
SOME PROBLEMS IN ALL OF THAT. YOU ARE GOING TO CUT
ADVERTISING, BUT ARE YOU GOING TO CUT IT FROM GOOGLE FIRST OR
OTHER PLATFORMS FIRST? THAT IS SORT OF WHERE I WAS
GOING WITH THAT. IT IS NOT ABOUT TRYING TO BE
MEAN TO SNAP OR GET IT IS ABOUT SAYING IF YOU'RE GOING TO PULL
BACK ON ADVERTISING, THAT IS GOING TO HAPPEN.
BUT IS IT GOING TO HAPPEN ACROSS THE BIGGER PLATFORMS AS
MUCH AS ACROSS THE SMALLER PLATFORMS?
I'M NOT SURE THAT IS THE CASE. LISA: HOW MUCH ARE SOME OF THESE
BELLWETHERS THAT ARE THE BIG TECH COMPANIES GOING TO
POTENTIALLY SHIFT THE VIEW IN MARKETS TO BE SORT OF A PIVOT
POINT FROM THE OPTIMISM WE SAW LAST WEEK GOING INTO THE
RECESSION THAT SO MANY PEOPLE EXPECT? SARAH:
EVEN THOUGH GOOGLE HAD GOOD NUMBERS LAST TIME, THE STOCK
WAS HIGHER AND THEN CAME DOWN. I THINK YOU ARE FIGHTING TO
DIFFERENT FORCES, ONE OF WHICH IS INDIVIDUAL FUNDAMENTALS FOR
EACH OF THESE COMPANIES, AND THE OTHER ONE IS TECHNOLOGY AS
A WHOLE VERSUS INTEREST RATES. I THINK RIGHT NOW TECHNOLOGY AS
A WHOLE IS SUFFERING UNDER BOTH THE INTEREST RATE CYCLE AND THE
PROFITABILITY CYCLE, BUT THERE'S NOT A LOT OF
DIFFERENTIATION ON THE INVESTOR SIDE YET.
I THINK THAT COMES AS WE GET FURTHER ALONG. LISA:
GOLDMAN SACHS HAS TALKED ABOUT THE STRONG DOLLAR AND HOW THAT
IS GOING TO REDUCE EARNINGS-PER-SHARE BY 1% TO 2%
IN A WAY THAT PERHAPS HAS NOT BEEN BIG IN TWO VALUATIONS.
HOW DO YOU HAVE VALUE WAIT THE DOLLAR STRENGTH UP UNTIL A
COUPLE OF DAYS AGO AND HOW THAT IS GOING TO FACTOR? SARAH:
I THINK THE FASTER, THE HIRED THE DOLLAR HAS MOVED AND THE WEAKER OTHER CURRENCIES, DO
PEOPLE WORRY AS MUCH IS ABOUT THE CURRENCY TRANSLATION ISSUE,
OR DO THEY LOOK AT THE UNITED STATES AND SEE AN EQUITY MARKET
THAT IS IN BETTER ECONOMIC SHAPE THAN SOME OF THE OTHER
EQUITY MARKETS GLOBALLY? ULTIMATELY THAT WILL TRUMP THE
FACTOR OF WHETHER OR NOT THE DOLLAR STRONG IS A PROBLEM, BUT
IT IS GOING TO BE IN WAYS THAT PEOPLE HAVE NOT NECESSARILY
CALCULATED YET. JONATHAN: AWESOME TO HEAR FROM YOU.
SARAH HUNT OF ALPINE SAXON WOODS.
NONE OF US AROUND THESE TABLES THINKS THAT SNAPCHAT OR TWITTER
ARE BELLWETHERS, BUT ULTIMATELY IT HAS CERTAINLY SHARPENED THE
FOCUSED, REINFORCED THE FOCUS ON ALPHABET AND META LATER THIS
WEEK. TOM: I JUST FLAT OUT DON'T AGREE.
GRANTED, FACEBOOK HAS ITS OWN CHALLENGES. I GET THAT.
BUT I THINK THE MEDIA CONFLATION OF ALL DIFFERENT
TYPES OF TECH IS WAY OFF. JONATHAN:
LET ME BE MORE SPECIFIC SINCE YOU DISAGREE.
THE AD REVENUE PIECES OF THOSE TWO COMPANIES, THAT IS GOING TO
BE A BIG FOCUS FOR A LOT OF PEOPLE TOM: I AGREE.
AND AMAZON HAS THEIR NEW BURGEONING AD BUSINESS.
JOE FELDMAN RIGHT ABOUT THAT FIVE DAYS AGO OR SO.
THERE'S THE BIG AGILE PLAYERS. I GET, THAT THEY ARE THE FUTURE
OF ADVERTISING REVENUE, IF YOU WILL. IT IS WORTH WATCHING.
LOOK AT APPLE. PRE-PANDEMIC, APPLE WAS FAIRLY
GETTING BY WITH $59 BILLION OF FREE CASH FLOW.
JUST EARLY GETTING BY. WE ARE MODELING ON THE
BLOOMBERG SCREEN $109 BILLION FOR THIS FISCAL YEAR ENDING
THIS AUTUMN. THEY ARE DOING TERRIBLE.
JONATHAN: CASH MACHINE. WE KNOW HOW WELL THEY ARE DOING.
TOM: BUT WE HAVE QUITE TO SNAP. JONATHAN:
I DON'T THINK ANYONE IS DOING THAT. TOM:
I THINK A LOT OF PEOPLE IN THE PARLOR GAME CONFLATE ALL THAT
STUFF, AND I JUST DON'T BUY IT. JONATHAN:
SNAPCHAT AND APPLE, TWO COMPANIES I DON'T THINK EITHER
OF US WHATEVER COMPLETE. LISA: I WILL LET YOU GUYS WORK THIS
OUT IN THE BREAK, BUT I DO THINK THERE'S AN ISSUE HERE
WHEN YOU TO START TO SEE THE CASH COWS.
I'M GLAD YOU PUT THAT CASH FLOW INTO PERSPECTIVE.
WHAT HAPPENS WHEN ONE OF THOSE CASH FLOW COMPANIES STARTS TO
DISCOUNT ITEMS NOT ONLY IN CHINA, BUT IN THE UNITED STATES AFTER SEEING LINES OUT THE DOOR
? WHAT HAPPENS WITH MICROSOFT REPORTING EARNINGS THIS WEEK,
PERHAPS TO TALK ABOUT WHY THEY HAVE BEEN REDUCING THE JOBS
PLAN? HOW MUCH DOES THIS SERVE AS A
MASSIVE BELLWETHER REGARDLESS OF THE CASH FLOW THAT WE KNOW
THEY HAVE? TOM: I DON'T THINK IT IS MASSIVE.
I THINK IT IS AT THE MARGIN. IF YOU BRING UP THE PRICE OF A
PRODUCT, UNIT SALES GO UP. THAT IS PART OF THE ELASTICITY
OF PRICE DOWN. WE BE THE CELLO YACHT OF YOU IT
-- MAYBE THEY SELL A LOT OF UNITS IN CHINA. JONATHAN:
THE GOAL IS TO TAKE SOME DEMAND AWAY, TO TAKE SOME HEAT OUT OF
THE LABOR MARKET. I WOULD SAY SEEING THOSE BIG
TECH COMPANIES PULL BACK ON JOB OPENINGS NOT IN THEIR
WORKFORCE, PERHAPS THAT MIGHT BE SEEN AS A DESIRABLE OUTCOME.
TOM: OVER THE WEEKEND, EVERY SINGLE
CONVERSATION DEVOLVES BACK TO RENT.
WITH THE FED IS REALLY FOCUSING ON IS TAKING THE OOMPH OUT OF
THE HOUSING MARKET. JONATHAN: STICK HERE FOR A LONGER.
THAT IS SHAPING THE DEBATE ABOUT HOW FAR THIS FEDERAL
RESERVE IS GOING TO HAVE TO GO AND WHY ENTER HOLLEN HORSE IS
STILL 4% YEAR-END ON FEDERAL FUNDS. LISA:
EVERY CONVERSATION HAS TO DO WITH RENT BECAUSE TOM TRIED TO
SELL ME AN APARTMENT TO RENT OVER THE WEEKEND.
HE ACTUALLY GAVE ME A TOUR AND TRIED TO GET ME TO JOIN IN.
JONATHAN: AND SPEND MORE MONEY ON RENT.
A LOT MORE MONEY ON RENT. FUTURES UP 0.5% ON THE S&P.
FROM NEW YORK, THIS IS BLOOMBERG. LEIGH-ANN:
KEEPING YOU UP TO DATE WITH NEWS FROM AROUND THE WORLD,
WITH THE FIRST WORD, I'M LEIGH-ANN GERRANS.
TREASURY SECRETARY JANET YELLEN SAID SHE DOES NOT SEE ANY SIGN
THAT THE U.S. ECONOMY IS IN A BROAD RECESSION.
SHE HAS TOLD NBC THAT THE U.S. IS LIKELY TO SEE SOME SLOWING
OF JOB CREATION BUT SAID THAT IS NOT RECESSION.
SHE ALSO EXPRESSED CONFIDENCE IN THE FEDERAL RESERVE'S FIGHT
AGAINST INFLATION. THE EUROPEAN CENTRAL BANK MAY
NOT BE DONE WITH BIG INCREASES IN INTEREST RATES AFTER LAST
WEEK'S HALF-POINT HIKE. THE GOVERNING COUNCIL NUMBER
HAS SET THE RATE INCREASE IN SEPTEMBER ALSO NEEDS TO BE
QUITE SIGNIFICANT. THE ECB IS TRYING TO REDUCE
INFLATION THAT IS ALREADY MORE THAN FOUR TIMES IT'S 2% TARGET.
HERE IN THE U.K., LIZ TRUSS SAYS IF SHE IS THE NEXT PRIME
MINISTER, SHE WOULD INVEST INVESTMENT -- SHE WOULD FUND
INVESTMENT ZONES. HER RIVAL IN THE RACE IS RISHI
SUNAK, WHO HAS PLEDGED TO CRACK DOWN CHINA'S INFLUENCE IN THE
U.K. HE CALLS THE BIGGEST LONG-TERM
THREAT TO BRITAIN. 11 MUSK IS DENYING HE HAD AN
AFFAIR WITH SERGEY BRIN'S WIFE. THE ALLEGED AFFAIR TOOK PLACE
IN DECEMBER. THE NEWSPAPER SAYS THAT THE
COFOUNDER OF GOOGLE SOLD HIS INVESTMENTS IN MUSK'S COMPANY.
MUSK SAYS THE STORY IS UNTRUE AND THAT HE IS STILL FRIENDS
WITH BRIN. GLOBAL NEWS 24 HOURS A DAY, ON
AIR AND ON BLOOMBERG QUICK, POWERED BY MORE THAN 2700
JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES.
I'M LEIGH-ANN GERRANS. THIS IS BLOOMBERG. ♪ >> I ACTUALLY THINK THAT JUST THE RIGHT THING TO DO IS TO
RAISE TAXES RIGHT NOW TO TAKE SOME OF THE DEMAND OUT OF THE
ECONOMY. JONATHAN: LARRY SUMMERS, ALWAYS POPULAR.
THE HARVARD UNIVERSITY PRESIDENT EMERITUS.
I DON'T THINK THAT IS GOING TO BE POPULAR AT ALL. ON THE NASDAQ 100, UP 0.5%.
YIELDS HIGHER BY FIVE BASIS POINTS. 2.8032% ON THE 10 YEAR. DATA OUT OF EUROPE NOT GREAT.
GERMAN BUSINESS CONFIDENCE SOFT, ROLLING OVER. WE ARE POSITIVE THERE IS A --
POSITIVE THERE 0.3%. MAYBE THE BIG HIKES AREN'T DONE
WITH THE FIRST ONE. WE COULD GET ANOTHER ONE IN
SEPTEMBER. TOM: THE PARLOR GAME FRONT AND
CENTER TODAY. I JUST LOOK AT THE PRICING AND
SEE WEST TEXAS INTERMEDIATE, CERTAINLY A WELCOME SIGN.
OPPER, BARELY LOOK AT THAT TODAY, BUT COPPER IN STASIS.
E.M. STORED OF -- E.M. SORT OF STASIS ON A HEAT WAVE
MAY BE ENDING ACROSS THE COAST THIS MORNING.
ANNMARIE HORDERN IS IN IT, 1600 PENNSYLVANIA AVENUE, AND JOINS
US COOL, CALM AND COLLECTED THIS MORNING.
YOU TRY TO FIGURE OUT THE PLAN FOR SEPTEMBER. WHAT IS THE PLAN?
WHAT IS THE URGENCY TO CHANGE THE BODIES IN THE CABINET AND
THE WHITE HOUSE? ANNMARIE: FIRST, THERE IS A LACK OF
URGENCY AT THE MOMENT FOR ANYTHING AT THE WHITE HOUSE
BECAUSE THE PRESIDENT IS STILL IN ISOLATION, QUARANTINING
BECAUSE HE HAS COVID-19. VIRTUALLY HE IS JOINING
MEANINGS AND EVERYTHING, WORKING AROUND THE CLOCK.
FOR SEPTEMBER AND OCTOBER, IT IS REALLY GOING TO BE ABOUT
MAKING SURE THAT HE IS MAKING THIS CRUCIAL DOMESTIC STOP
BECAUSE THEY ARE CONCERNED ABOUT THE MIDTERM ELECTION.
EVERYTHING FROM NOW ON IS GOING TO BE ABOUT THE MIDTERM
ELECTION. YOU HAVE THE HOUSE ON THE
SENATE RUSHING TO GET A NUMBER OF THOSE DONE BEFORE THE GOING
TALK IS RECESS BECAUSE -- GO INTO AUGUST RECESS BECAUSE THEY
KNOW WHEN THEY COME BACK, EVERYONE IS FOCUSED ON GETTING
REELECTED. TOM: THE FORMER PRESIDENT MAY RUN.
I GET THAT. BRING IT OVER TO THE PRESIDENT
OF THE UNITED STATES. WHAT DO DEMOCRATS WANT FROM
THEIR LEADER? ANNMARIE:
A MAJORITY OF DEMOCRATS, POLLED IN "THE NEW YORK TIMES,"
DO NOT WANT HIM TO RUN. THEY THINK THAT THERE NEEDS TO
BE A NEW SHIFT IN LEADERSHIP, AND IT IS NOT EXACTLY PERSONAL,
BUT HE WOULD BE IN HIS 80'S AT HE WAS GOING TO BE RUNNING
AGAIN FOR 2024. THEY THINK THEY'RE JUST NEEDS
TO BE A NEW LEADERSHIP FOR THE DEMOCRATIC PARTY.
THE ISSUE YOU HAVE, IF THE PRESIDENT SAYS HE IS NOT
SEEKING REELECTION, THE SET MAKE HIS PRESIDENCY A LAME-DUCK?
OTHERS LIKE WE SAW ON THE WASHINGTON POST THINK IT COULD GIVE HIS WORDS MORE CONVICTION
AND YOU HEAR THEM WHISPERING IN PARTS OF WASHINGTON HOW TO
PREPARE A FUTURE BET. TOM: WHY IS -- LISA:
WHY IS NANCY PELOSI GOING TO TAIWAN? ANNMARIE:
WE DON'T KNOW YET FOR SURE SHE IS GOING TO TAIWAN.
SHE'S TAKING A TRIP TO ASIA, BUT THE PRESIDENT SAID THE
MILITARY ADVISED THAT IS NOT A GOOD IDEA.
THE FIERY RHETORIC CONTINUES OUT OF BEIJING.
THIS MORNING WE HEARD FROM THE FOREIGN MINISTRY SPOKESMAN
SAYING THEY ARE GETTING STRONGLY PREPARED FOR THIS
VISIT. SHE CLEARLY WANTS TO MAKE A
STANCE ABOUT STANDING WITH TAIWAN.
IT WOULD BE QUITE A POLITICAL STATEMENT.
WE'VE NOT HAD A SPEAKER OF THE HOUSE GO TO TAIWAN SINCE 1997
WHEN IT WAS NEWT GINGRICH, AND AT THIS MOMENT THERE'S A LOT OF
ISSUES, COMBATIVE ISSUES BETWEEN BEIJING AND WASHINGTON. WE SHOULD ALSO NOTE THIS IS
USEFUL FOR XI JINPING AT THE MOMENT.
HE IS STRUGGLING DOMESTICALLY WITH THE COVID ZERO POLICY,
WHAT IS GOING ON WITH THE MORTGAGE RATES.
A NUMBER OF ISSUES. YOUTH UNEMPLOYMENT, AND NOW HE
IS ABLE TO DEFLECT A LOT RIGHT NOW ON THIS RELATIONSHIP. LISA: IT IS ALSO A SOUP WHEN IT COMES
TO THE U.S. RELIGION SHOULD WITH CHINA, BUT
HAVING TO DO WITH HOW THEY ARE GOING TO DO WITH TARIFFS, HOW
THEY ARE GOING TO DO WITH THE TRADE RELATIONSHIP AT A TIME OF
INCREASING FRAYING, AS WELL AS A POSSIBLE PARTNERSHIP BETWEEN
CHINA AND RUSSIA THAT HAS REALLY RUFFLED SOME FEATHERS.
ACROSS THE WORLD, WHERE ARE WE IN TERMS OF THE TARIFFS AND
LIFTING THOSE TO EASE INFLATION DOMESTICALLY? ANNMARIE:
WE STILL DON'T KNOW. THE END ADMINSTRATION CONTINUES
TO SAY THEY ARE WEIGHING IT, BUT WE HAVE STILL NO CLEAR
DECISION ON WHAT THEY'RE DOING ON WHAT WOULD BE A SMALLER
AMOUNT OF TRUMP ERA TARIFFS, CONSUMER GOODS LIKE BICYCLES,
SWEATERS, ETC. BECAUSE THEIR NUMBER ONE
CONCERN IS INFLATION. MANY ON THE -- ON THE ECONOMIC
SIDE SAY THAT IS YOUR NUMBER ONE CONCERN.
THIS IS SOMETHING YOU COULD DO. IT WON'T BE A LOT OF PRESSURE,
BUT IT COULD EASE SOME OF THAT PRESSURE. THE TRADES ARE DUSTY TRADE -- THE TRADE CA= -- THE TRADE CZAR
AND OTHERS SAYING THAT LEAVES US WITH LESS OPTIONS IN THE
FUTURE. MAYBE SOME NEWS ON THAT FRONT
SOON. . JONATHAN: THANK YOU. DO YOUR POINT, THE TENSION WITH
SPEAKER PELOSI AND PRESIDENT XI, THAT'S THE OLDEST IN THE
PLAYBOOK, ISN'T IT? LISA: HOW MUCH IS THIS GOING TO
BENEFIT VERSUS BACKFIRE? MARK MILLEY, THE CHIEF OF THE
ARMED FORCES FOR THE UNITED STATES, CAME OUT TO OUR CHINESE
OFFICIALS. HOW MUCH IS THIS AGGRAVATING
SOME OF THE TENSIONS THAT EXIST? THEY ARE GOING TO BE VERY
DIFFICULT GIVEN THE CONFLICT ALREADY HAPPENING WITH RESPECT
TO RUSSIA'S INVASION OF UKRAINE. JONATHAN:
TK, WHAT DO YOU MAKE OF THIS? TOM:
EVERYTHING IS ABOUT THE PARTY CONGRESS.
ABSOLUTELY DEFINITIVE ON THIS. WE ARE COMPLETELY FIXATED ON
THE PERMANENCE OF BEIJING. THE CHINESE AREN'T. JONATHAN:
THE VULNERABILITY OF PRESIDENT XI THAT COMES UP AGAIN AND
AGAIN. TOM: WAY BELOW THE RADAR. IT IS SOMETHING WE HAVE TO BE
AWARE OF. I DON'T HAVE ANY STRONG FEELING
ON TAIWAN OTHER THAN IT HAS BEEN THERE SINCE MY CHILDHOOD.
THE WHOLE DEBATE ABOUT IT. BUT I THINK THE REAL FOCUS
POINT HAS TO BE ON WATCHING CHINA.
WE HAVE GIVEN UP DOING THAT BECAUSE WE BELIEVE THERE A
PERMANENCE TO PRESIDENT XI. I DON'T BUY IT FOR A MINUTE.
JONATHAN: COLLIN MARTIN WILL WEIGH IN ON
SOME OF THESE THINGS FROM THE SCHWAB CENTER OF FINANCIAL
RESEARCH. AHEAD OF THAT, FUTURES UP 0.6%
ON THE S&P 500. YOU SENSE A THEME HERE.
CRUDE, A LIFT AT 1.2%. TOM: DO I EXTEND OUT TO TRIPLE
LEVERAGED ALL-CASH? I'M NOT THERE. LISA:
HOW ARE YOU THE ACME OF OPTIMISM, QUADRUPLE LEVERAGED
CASH? YOU'RE GOING TO TELL US IT IS
ALL ABOUT CASH FLOW AT THESE COMPANIES. JONATHAN: ARE YOU SAYING THAT TOM'S
POSITION AND IS YOU -- TOM: JON, GOOGLE. COME ON.
A GAZILLION DOLLARS OF FREE CASH FLOW. OVER DOUBLE NOW. JONATHAN:
SO ACCEPTING THAT INTEREST EARNINGS RAISING THIS WEEK.
A GOOD WEEK AHEAD FOR EARNINGS, 20% OF THE S&P 500 REPORTING
ACROSS FIVE NAMES. FUTURES THIS MORNING UP HALF OF
1% FOR THE S&P. THE NASDAQ, UP HALF OF 1% ALSO.
A BIG WEEK OF GAINS LAST WEEK, THE BIGGEST COMING BACK TO JUNE
ABOUT A MONTH AGO. IN THE BOND MARKET, WE TALKED
ABOUT THIS ALL MORNING, THE GROWING TENSION BETWEEN WEAK
ECONOMIC DATA AND A HAWKISH FEDERAL RESERVE.
IS THAT DESIRABLE OR UNDESIRABLE?
JOBLESS CLAIMS PLANNING FOR THREE STRAIGHT WEEKS, REALLY,
REALLY WEAK LAST WEEK. RUTH YIELDS LOWER AT THE FRONT
END BY 25 BASIS POINTS. MONDAY, UP BY THREE BASIS
POINTS. THE CURVE JUST GETTING INTO BIT
STEEPER. THE EURO, MORE HAWKISH CENTRAL
BANKS AS WELL. GERMAN BUSINESS COMPANIES,
TERRIBLE. YET WE STILL HAVE ONE POINT TO
MAKE THIS MORNING, ANOTHER BIG MOVE.
HOW MUCH WEAKNESS IS THE ECB? TOM:
I AM GLAD THEY ARE TALKING IT UP AND I GUESS THAT KEEPS IT
GOING FORWARD, BUT I THINK AS WE SAID THROUGH THE MORNING, IT
IS 20, 30, 40 YEARS. THIS IS DIFFERENT IN 1994.
THEY GOT TO WAIT FOR THE DATA. JONATHAN:
WHICH DATA ARE THE DEPENDENT ON? TOM:
POLITICALLY, GAS AND ALL THAT. I THINK IT IS A MUCH MORE
GDP-SENSITIVE ANALYSIS IN EUROPE THEN IT IS HERE.
JONATHAN: JUST A LITTLE BIT STRONGER.
LET'S GET SOME SINGLE LANES WITH LISA. LISA:
WE CAN TALK ABOUT HOW TO APPLY FOR A KITCHEN RENOVATION.
WHAT I AM LOOKING AT TODAY ARE A SLEW OF THE BIG TECH NAMES
BEING REPORTED. APPLE SHARES UP, ALPHABET,
GOOGLE UP. NOT MASSIVE. BUT I AM REALLY LOOKING FOR
THIS WEEK IS HOW MUCH OF THE EARNINGS HAVE BEEN PRICED IN. AMONG THE BIG TECH, HOW MUCH
ARE WE TALKING ABOUT DESIRABILITY OF THE IPHONE
REGARDLESS OF THE ECONOMIC CYCLE? REGARDLESS OF ANY PRICE
INCREASES? HOW MUCH DOES THAT MEAN WITH
CHINA CUTTING PRICES AND INDICATING SOMETHING BROADER?
ALSO, WE ARE GOING TO HEAR FROM A NUMBER OF ECONOMY PRODUCERS.
HOW MUCH DO WE SEE THE INCREASE IN THE PRICES OF IRON ORE
INCREASE IN DEMAND PAIRED WITH THE SLOW DOWN THAT WE ARE
SEEING IN CHINA, REALLY COME TO A HEAD WITH SOME SORT OF
FORECAST? IN THIS AREA, THOSE UP 3.3%
TODAY AHEAD OF THE OPEN. EXXON AND CHEVRON REPORTING ON
FRIDAY AN ISSUE AS WE WERE TALKING ABOUT EARLIER, TOM.
CONSIDERING THAT THE PRESIDENT HAS TALKED ABOUT PRICE GOUGING,
HOW MUCH DO THEY REPRESENT THAT GREEDINESS AND PROFITABILITY IN
A TIME WHEN THEY ALREADY HAD SEVERAL YEARS UP, DESPITE THE
FACT THAT CRUDE IS DOWN AT THE LOWEST LEVEL GOING BACK TO
FEBRUARY? TOM: THANKS, LISA. IS GOING TO BE INTERESTING TO
SEE. RIGHT NOW WITH THE BLOOMBERG
INDEX, THE CORPORATE INDEX, THE IG INDEX DOWN 13%, IT IS A GOOD
TIME TO CATCH UP WITH INCOME STRATEGIST FOR FINANCIAL
RESEARCH. COLIN, TO CUT TO THE CHASE, I'M
OPENING THE ENVELOPE, 3, 4, 5 MONTHS, EVEN A YEAR DOWN IN MY
BOND PORTFOLIO. HOW DO I BEGIN TO RECOVER?
COLIN: WELL, YOU NEED TIME, UNFORTUNATELY.
THAT IS THE ONE THING WE ARE TELLING OUR CLIENTS.
THE GOOD THING ABOUT BONDS IS THAT THE PRICES SHOULD RECOVER.
THAT DOESN'T NECESSARILY HELP IF YOU ARE IN A BOND ETF, AND
THAT IS THE MOST CHALLENGING ASPECT, BECAUSE THOSE PRICES
DON'T NECESSARILY NEED TO RUN, AND THEY MIGHT NOT RECOVER
ANYTIME SOON. THAT IS THE CHALLENGING PART OF
WHAT WE ARE TRYING TO TELL OUR CLIENTS.
COMING INTO THIS YEAR, WE COULD SUGGEST A SLIGHTLY LOWER MARK.
IMPORTANTLY, THOSE RETURNS ARE STILL DOWN.
THE GOOD NEWS, YIELDS ARE PRETTY HIGH RIGHT NOW. THIS IS AN OPPORTUNITY AND
FRANKLY, WE KNOW THAT THERE ARE STILL A LOT OF CLIENTS, NONE OF
INVESTORS. TOM: WHERE IN THE CONTINUUM FROM
APPLE IS HALF A PERCENT YIELD? LET'S SAY, FOR EXAMPLE, NOT
TAKING PART IN THE ENERGY BILL? WHERE IS THE BEST VALUE? COLLIN:
WE DO PREFER INVESTMENT-GREAT OVER HIGH-YIELD RIGHT NOW. WE ARE CAUTIOUS ON THE JUNKY
ISSUES OUT THERE, ESPECIALLY ANYONE DISTRESSED RIGHT NOW.
WHAT WE ARE SEEING IN THE EARNINGS REPORTS IS THE
EARNINGS ARE PRETTY DISAPPOINTING.
WE ARE SEEING COSTS EVERYWHERE RISE WHETHER IT IS LABOR COSTS,
INTEREST COST, OR BORROWING COSTS.
ALL OF THOSE THINGS ARE GOING TO EAT INTO CORPORATE PROFIT
AND THE DEMAND IS STRONG RIGHT NOW. THE VALUE PROPAGATION RIGHT
NOW, BACK BELOW 5%. GIVEN ALL THE ECONOMIC RISK FOR
CORPORATE PROFITS, WE WOULD RATHER WAIT FOR SPREADS TO MOVE
UP A LITTLE BIT OR YIELDS TO MOVE UP A LITTLE BIT FOR WE ARE
MORE EXCITED ABOUT THE HIGH-YIELD BONDS. LISA:
WE ARE WATCHING THE BIGGEST MONTHLY RALLY TO APRIL AND MAY
OF 2020 WHEN THE FED UNLEASHED ITS BAZOOKA.
HOW MUCH IS THIS A SIGNAL TO THE RALLY OF SOMETHING THAT IS
GIVING THE STOCK MARKET CONFIDENCE VERSUS HIGH DEGREE
OF NOISE TAKING YIELDS BECAUSE THEY HAVEN'T SEEN IT IN SO LONG?
COLLIN: I THINK IT COULD BE THE LATTER. EVEN IN THE RISK IS JUST A
HIGH NUMBER. THE PAST MONTH OR SO, WE SAW
EXPECTATIONS SURGE ABOUT HOW HIGH THEY WERE GOING TO SPITE,
AND HE DID COME DOWN. THEY WOULDN'T NECESSARILY NEED
TO HIKE AS MUCH. BUT WE ARE JUST SOME CONCERN
FOR THOSE RISKS THAT I MENTIONED BEFORE. THE BOND, WE DON'T THINK WE ARE
GOING TO 2008-2009 LEVELS. THE UPSIDE TO 200 300 BASIS
POINTS IS LIKELY TO US. WE WOULD BE KIND OF ON THE
SIDELINES RIGHT NOW WAITING FOR A BETTER OPPORTUNITY. LISA: IT DOESN'T SOUND LIKE YOU'RE
PARTICULARLY ALARMED, ESPECIALLY WHEN YOU SAID IT
DRAWS A DISTINCTION FOR 2008 AND 2009.
BRUCE CASHMAN OF JP MORGAN SAID HE IS ALSO LOOKING FOR AREAS OF
LEVERAGE BUT NOT SEEING THEM NECESSARILY IN CREDIT MARKETS.
ARE THERE ANY AREAS IN THE DEBT COMPLEX THAT ARE DIFFERENT,
THAT MIGHT HAVE THE NOSE IF SOMETHING COULD BE MORE
CONTAGIOUS AND MORE DIFFICULT? COLLIN:
YOU KNOW, WE ARE REALLY NOT SEEING THAT TOO MUCH HERE.
IT IS MORE NEGATIVE. WE EXPECT GROWTH TO CONTINUE TO
SLOW, AND WE TALK ABOUT CONTAGION, DEPTH OF THE
RECESSION. WE ALL THINK IT IS GOING TO BE
THAT BAD. WE THINK IS GOING TO BE MORE
MILD AND SHOULD RESULT IN NOT THE END OF HER SCENARIOS OR GET
OUT OF EVERY TYPE OF INVESTING. AND AGAIN, THE MAIN POINT, WE
DO THINK IT SHOULD PRESENT OPPORTUNITIES LATER THIS YEAR.
JONATHAN: COLLIN MARTIN, SCHWAB CENTER FOR
FINANCIAL RESEARCH. ALL THREE OF THEM SAID THEY
THINK WE SEE THE HIGHEST OF THE 10 YEAR THIS YEAR. THAT WAS IT, CLOSE TO 3.50.
ALL THREE OF THEM SAID THAT WE HAVE NOT SEEN THE HIGH-YIELD,
PUSHING BACK AGAINST THAT 100 BASIS POINTS OVER THE LAST
MONTH OR SO. LISA: IF YOU THINK ABOUT IT
LOGICALLY, IF YOU THINK ABOUT THE CREDIT SPREAD REPRESENTING
THE RISK, WHY WOULD IT BE CONTRACTING LESS RISK HEADING
INTO A RECESSION, A WEAKENING ECONOMY?
THAT DOESN'T MAKE A LOT OF LOGICAL SENSE.
EDIFYING WHAT THEY ARE TALKING ABOUT, THAT WOULD BE THE REASON
TO PUSH BACK. THAT SAID, IF THE FED HAS
CUTTING RATES NEXT YEAR, HOW MUCH OF THE REVERSAL DO THEY
GIVE TO COMPANIES THAT ARE ALREADY WELL-FINANCED INTO
PERPETUITY? JONATHAN: YOU COULD MAKE A CALL ON HOW
MUCH DAMAGE IS DONE IN BETWEEN THE ECONOMY AND WHAT THE
STORIES WILL LOOK LIKE. TOM: I WOULD LOOK AT THE DAMAGE DONE
IN BOND PORTFOLIOS. YOU AND I HAVE BEEN TALKING
ABOUT THIS FROM DAY ONE, BLOOMBERG TOTAL RETURN INDEX.
I JUST LOOKED AT ONE HEALTH CARE NAME DOWN 22%. THIS IS A TRIPLE, BUT IT IS A
REALLY HIGH-QUALITY NAME, 22%. NOW IT IS DOWN ONLY 13%.
IT TAKES FIVE YEARS OF THE PRESENT YIELD TO MAKEUP WHAT
YOU SEE. GRANTED, THAT CAN HAPPEN
SHORTER, BUT THE BOND-BEAR MARKET WE ARE IN RIGHT NOW IS
ABSOLUTELY REAL. ABSOLUTELY ORIGINAL. JONATHAN:
ON THE SAME PAGE. THE CENTRAL BANK IS SPEAKING A
LOT THIS MORNING. THE GOVERNING COUNCIL.
WE WILL KNOW FRAGMENTATION WHEN WE SEE IT.
THAT IS HELPFUL, ISN'T IT? TOM: GREAT. YOU KNOW SO WELL. THE PROJECT SYNDICATE.
I WILL PUT IT OUT AGAIN, FOLKS. HE JUST SIMPLY WALKS THROUGH
THE FOOLISHNESS OF IT. AND HE DOES IT WITH RESPECT.
HE IS NOT BAD MOUTHING ANYBODY. JONATHAN:
THE MOST EFFECTIVE YOU NEVER HAVE TO USE. THEY CLEANING CARPET TOOL THEY
DON'T EVER WANT TO HAVE TO USE. TOM: I'M SORRY, THESE GUYS ARE JUST
SHAKING THEIR HEADS. JONATHAN: FUTURES UP HALF OF 1% ON THE
S&P AND THE NASDAQ. YOU KNOW IT WHEN YOU SEE IT.
FRAGMENTATION. LISA. FRAGMENTATION.
YOU MISSED A GREAT ONE LAST WEEK, YOU WOULD BE DID. LISA:
I LIKE THAT. JONATHAN:
ARE YOU JUST A LITTLE BIT JEALOUS THAT YOU WERE NOT
WATCHING THAT MEETING? LISA: OH, YEAH. JONATHAN:
THIS IS BLOOMBERG. >> KEEPING YOU UP-TO-DATE WITH
NEWS FROM AROUND THE WORLD WITH THE FIRST WORD NEWS, THE
FEDERAL RESERVE WILL PROBABLY CUT MUCH MORE PAIN ON THE
ECONOMY TO GET INFLATION UNDER CONTROL AFTER RAISING RATES IN
JUNE. POLICYMAKERS ARE EXPECTED THIS
WEEK TO IMPROVE ANOTHER 75 BASIS POINT HIKE AND THEY ARE
LIKELY TO SIGNAL THEIR INTENTION TO KEEP MOVING HIGHER
IN THOSE MONTH AHEAD. NOW, A RUSSIAN CRUISE MISSILE
STRIKE ON THE PORT OF ODESSA HAVE PASSED A COMMITMENT TO THE
AGREEMENT ON UKRAINIAN GRAIN EXPORTS. THEY ALSO SAY SHIPMENT CORRIDORS
-- RUSSIA SAYS THE MISSILE ATTACK TARGETED UKRAINIAN
MILITARY INFRASTRUCTURE. HONG KONG REPORTEDLY PLANS TO
REDUCE QUARANTINE FOR ARRIVALS. ACCORDING TO LOCAL MEDIA, ONE
PROPOSAL CALLS FOR FIVE DAYS OF HOTEL QUARANTINE.
AFTER THAT, TRAVELERS WOULD BE ISSUED THE YELLOW HEALTH CODE
WHICH WOULD PROHIBIT THEM FROM ENTERING HIGH-RISK AREAS. THE INVESTMENT BANKS ARE
STARTING A GLOBAL BLOCKCHAIN DEAL.
THE COMPANY IS BEGINNING ITS EFFORTS IN THE MIDDLE OF THE
SO-CALLED CRYPTO WINTER. MEANWHILE, THE PRICE OF BITCOIN
HAS PLUNGED TO LESS THAN ONE THIRD OF ITS RECORD HIGH OF
MORE THAN 68 PER $1000. GLOBAL NEWS 24 HOURS A DAY ON
AIR AND ON BLOOMBERG QUICKTAKE. POWERED BY MORE THAN 2700
JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. >> I THINK INFLATION IS GOING
TO STAY. SOME IS GOING TO GET WORSE.
THE BIG QUESTION IS, ARE WE IN A RECESSION OR NOT? YOU NEVER KNOW, YOU NEED TO
PREPARE FOR MACRO ECONOMIC SCENARIOS. JONATHAN:
GOOD MORNING, FUTURES LOOK LIKE THIS. OFF THE BACK OF THE WEAKER
GAINS WE HAD LAST WEEK, YIELDS HIGHER BY SIX BASIS POINTS.
THE CURVE, A BIT STEEPER TODAY, AT THE LONG END.
EURO-DOLLAR, POSITIVE A QUARTER OF 1%. EARLY IN THE WEEK, STAY OUT OF
THE HEAT. REALLY GOOD BOOK. HOPEFULLY, YOU GET MORE
CONDUCTIVITY ON THE FED LATER THIS WEEK. TOM:
I REALLY CAN'T SAY ENOUGH ABOUT THAT.
STAY COOL OUT THERE, FOLKS. RIGHT NOW, THE TEMPERATURE IN
CHINA IS FREEZING. LISA: RURAL CHINA, THAT HAS BEEN A
TRADE-OFF THAT HAS BEEN IN THE BOND MARKET.
IF YOU ARE LOOKING FOR YIELDS, WHERE DO YOU INVEST IN THE BOND
MARKET? IS THAT THE U.S. MARKET, WHERE YOU DO HAVE
EXTREMELY HAWKISH FEDERAL RESERVE AND REALLY TAKE
ADVANTAGE OF THOSE INTEREST RATES? WE ARE LOOKING AT THE U.S.-CHINA YIELD DIFFERENTIAL,
WHEN THE LINE GOES UP. IT GOES OVER THAT ZERO POINT
LINE. YOU DO SEE THAT THERE IS THIS
EXTRA FOR U.S. TREASURIES RELATIVE TO CHINA.
WHEN IT DROPS DOWN, IT IS THE OPPOSITE, AND RIGHT NOW, IT IS
HOVERING AT ZERO. WE ARE TALKING ABOUT THIS IN
THE STATE AT A TIME WHEN PEOPLE ARE HESITANT TO INVEST IN
CHINESE BONDS. DO YOU STAY WITH THE U.S.
AND PERHAPS LOWER YIELDS? TOM:
RIGHT NOW, THE BLOOMBERG SHEET ASIA ECONOMICS CORRESPONDENT,
AND A LOT OF THINGS TO TALK ABOUT. I WANT TO GET OUT FRONT IN JULY
TOWARDS THE PARTY CONGRESS BELIEVED TO BE NOVEMBER. THIS IS THE 20TH, AND THE GREAT
DISTINCTION SEEMS TO BE WHAT WILL HAPPEN WITH PRESIDENT GEE,
AND THE SYMBOLISM OF A GENERAL SECRETARY OR PERHAPS BEING A
CHAIRMAN AS MAO WAS IN 1982. TELL US ABOUT A PARTY CONGRESS
IN WHAT THEY DO WITH THEIR FEARLESS LEADER. >> EVERY FIVE YEARS, MEMBERS OF
THE COMMERCE PARTY COME TOGETHER . THEN, THEY PUSH FORWARD FOR THE
NEXT FIVE YEARS AHEAD. NORMALLY, IT WAS EXPECTED THAT
IT WOULD HAVE MARKED THE END OF PRESIDENT XI'S TERM. HE WON'T BE JUST GETTING THAT
THIRD TERM, IT WILL BE THE LANGUAGE GETTING CODIFIED AS
WELL WHICH WILL BASICALLY BE CAN STATING AND AS CHINA'S
SOVEREIGN RULER. CERTAINLY, IT WON'T BE JUST A
NEW TERM, IT WILL BE ENSHRINING A PLACE IN THE FUTURE OF WHERE
CHINA IS GOING UNDER THIS NEW ERA. SO WILL BE A SHOW OF STRENGTH
QUITE UNPRECEDENTED IN RECENT TIMES. TOM:
IS THERE AN URGENCY TO GET TO NOVEMBER? >> YOU WOULD HAVE TO SAY THERE
IS. AS YOU KNOW CHINA, IS ALWAYS
HARD TO GAUGE WHAT IS GOING ON WITH PUBLIC OPINION. OMICRON HAS REALLY TESTED THE
COVID ZERO STRATEGY. WE HAVE THE ONGOING --. OPEN-SOURCE SOCIAL MEDIA, AND
OF COURSE, THE GEOPOLITICAL BACKDROP, LOTS OF TENSION WITH
THE U.S. AND EUROPE. I WOULD SAY YES, THE
AUTHORITIES ARE QUITE KEEN TO GET STABILIZING AND ON THE
ECONOMY FRONT, THE ABILITY TO LEAVE CONGRESS ON A GOOD BASE. I WOULD SAY
THEY DON'T WANT A WIDESPREAD PUBLIC HEALTH DISASTER, EITHER,
SO THAT IS WORTH THINKING ABOUT. LISA:
GIVEN THE FACT THAT HOUSING IS A HUGE PORTION OF CHINESE
ECONOMY, HOW MUCH IS THIS CONGRESS BELIEVED TO SUPPORT
THE HOUSING MARKET CONSIDERING IT HAS BEEN CRASHING OR THERE
HAVE BEEN ISSUES WITH THE DEVELOPMENT SECTOR, BUT ALSO
REDUCED WITH THE LEVERAGE THAT WOULD PUT THE ECONOMY, AND
LARGE PART, THROUGH THE HOUSING SECTOR. >> THE THREE RED LINES, LAST
YEAR WHEN THE ECONOMY WAS GOING WELL, THE LEVERAGE AND THE
RISK-TAKING, BUT OF COURSE, EASY OPEN TO REGULATIONS. WE ARE SEEING AUTHORITIES MOVE
NOW WITH A LOAN THAT MIGHT BE COMING TO INJECT MONEY TO
REINSTATE DEVELOPERS AND COMPANIES.
OF COURSE, OTHER MEASURES ARE BEING TAKEN WITH A WINDOW OF
FORGIVENESS, AN UNUSUAL FEATURE OF CHINA'S MARKET. THE AUTHORITIES ARE MOVING ON
WHAT IS HAPPENING IN THE SECTOR, AND TO YOUR POINT, THEY
REALLY WANT TO TRY TO PUT THAT UNDER CONGRESS. LISA:
DO YOU THINK PEOPLE ARE OVERESTIMATING OR
UNDERESTIMATING HOW MUCH DEMAND HAS SLOWED DOWN IN CHINA WITH
BASIC COMMODITIES, ESPECIALLY WHEN ONE OF THE FACTORS HAS
TAKEN SOME OF THE HEAT FROM THESE GAINS WE HAVE SEEN IN
PRICES? >> IT IS TOUGH TO CALL.
THERE ARE THOSE WHO SAY CHINA IS TURNING A CORNER, AND OTHERS
SAYING LOOK, THINGS ARE STILL PRETTY BAD ON THE GROUND. I THINK IT IS HARD TO GAUGE,
BUT WHAT I WOULD SAY IS THE HOLE IN THE DEMAND FEELS VERY
REAL. JONATHAN: THANK YOU. ALWAYS GREAT TO CATCH UP WITH
YOU. LISA, IF YOU'RE GOING TO DELIVER 3% GDP GROWTH ANY
COUNTRY LIKE CHINA, THAT IS GOING TO COME WITH PROBLEMS. WE
ARE TALKING ABOUT THOSE PROBLEMS. LISA:
AND HOW MUCH WE PAY THAT INTO SOME OF THE SLOWDOWNS WE'VE
SEEN FOR GAS AND OIL PRICES, BUT ALSO WITH RESPECT TO IRON
ORE, ABSOLUTELY SURGED. 4.0% IS THE MEDIAN ESTIMATE SO
FAR. TOM: MAYBE A LITTLE BIT UNDER THAT,
5.8%. THAT IS WHERE EVERY DISCUSSION
STARTS. JONATHAN: WHEN DO YOU HEAR THIS?
$89 OFF. FROM NEW YORK CITY, THIS IS
BLOOMBERG. >> WHAT THE FEDERAL RESERVE
WANTS TO SEE IS THAT THERE IS A TREND THAT IS DOWN IN NATION. >> REALLY UNDERSTAND THAT THERE
IS NOTHING THAT CAN DAMAGE THEIR CREDIBILITY MORE THAN
SUSTAINED INFLATION. >> POSSIBILITIES THAT THE
WESTERN WORLD ARE GOING TO NEED MORE TO BRING INFLATION BACK. >> BROUGHT ENVIRONMENT. >> STARTING TO SLOW DOWN MORE
MATERIALLY THEN MAYBE WHAT THE MARKETS ARE THINKING. ANNOUNCER:
THIS IS BLOOMBERG SURVEILLANCE WITH JOHN PAYNE, JONATHAN
ERLAND LISA ABRAMOWICZ. TOM: GOOD MORNING, EVERYONE. BACK TOGETHER AGAIN, WITH YOU
ON TELEVISION AND RADIO. AFTER THAT FED MEETING, AN
IMPORTANT MEASUREMENT OF GDP. BENJI -- WITHIN THE GDP REPORT,
A MEASURE OF INFLATION. FROM -1.5% UP TO 8%.
THE SURVEY, 7.9%. THAT IS TROUBLE. JONATHAN: IT IS BECAUSE OF SEPTEMBER,
TOM, WILL THAT BE THE LAST 70 FIVE POINT BASIS HIKE IN THIS
CYCLE? BEFORE YOU GET TO SEPTEMBER 23,
THAT IF THE NEXT FED MEETING AFTER THIS ONE.
YOU GOT TWO LATER MARKET REPORTS, TOM.
ON THE LATTER POINT, WILL BE START TO SEE SOME WEAKNESS
AFTER THREE WEEKS OF SEEING JOBLESS CLAIMS IN AMERICA START
TO ENTIRE? TOM: AS WE SAY IN THE MORNING, WE
ARE AS DATA-DEPENDENT AS WE HAVE EVER BEEN.
REALLY, WORLDWIDE AS WELL. I JUST DON'T SEE HOW THE STORY
CHANGES. LET'S SAY IT COMES DOWN TO 7%
INFLATION. THAT IS MILES OF WORK TO BE
DONE. JONATHAN: BEGS THE QUESTION, HOW MUCH
DAMAGE NEEDS TO BE DONE TO GDP? THIS CAN BE THE SECOND
CONSECUTIVE AND AMERICA. YOU WILL GET A TON OF PUSHBACK
ABOUT WHETHER IT IS A REAL RECESSION OR NOT BASED ON WHAT
IS HAPPENING WITH THE LABOR MARKET.
TO YOUR POINT, THE FED HAS GOT MORE WORK TO DO, HASN'T IT?
THAT MEANS FOUR. NOT TWO, NOT THREE. TOM: MAYBE A NASCENT RECOVERY IN
CHINA. WE ARE STILL PANDEMIC-ADJUSTED,
ARE WE? LISA: WE ARE WHEN IT COMES TO THE
INFLATION WE ARE LOOKING AT. ABOUT ONE THIRD IF YOU TAKE A
LOOK AT THE STUDIES PRESENTED TO THE ECB IN THE PAST FEW
WEEKS. HOW MUCH IS THIS THE FED VIEW
VERSUS A FED THAT IS NOT LOOKING FOR NUANCE.
IT IS FOR INFLATION. IT IS STILL WORRIED ABOUT THE
PICTURE OF HAVING TO DEAL WITH INFLATION AND THEN THEY GET IT
DOWN FAR ENOUGH AND THEY EASE OFF.
WHAT HAPPENS IF THEY LOSE ALL CREDIBILITY? TOM:
CAN YOU TELL ME WHAT YOU'VE SEEN IN THE CREDIT MARKETS?
WHAT IS HAPPENING IN THE DYNAMICS OF CREDIT? >> HONESTLY, WE'VE BEEN LOOKING
AT A RALLY, THAT HAS BEEN DRAMATIC.
AT SEEMS TO BE THE THEME. LAST WEEK WAS AN INCREDIBLE
RALLY. IT IS POISED TO BE THE BEST
MONTH FOR RISKIER CREDIT IN THE UNITED STATES GOING BACK TO
MARCH, APRIL, MAY OF 2020 WHEN THE FED WAS REALLY STEPPING OUT
WITH THEIR SURVIVAL PROGRAMS. HOW MUCH ARE WE HEARING ABOUT
EARLIER VERSUS SOMETHING THAT IS MORE SUSTAINABLE, GIVEN THE
PROFILE OF THESE COMPANIES THAT HAVE FINANCING FOR YEARS TO
COME? TOM: SHE SEEMS TO BE THE ONE, BUT IT
IS ABSOLUTELY AMAZING HOW STRATEGIST NOT EVEN
MICRO-ADJUSTING, BUT JUST TRYING TO KEEP UP WITH THE
GASTIMATES IN THE NEWS FLOW. JONATHAN:
IT IS A BIG WEEK FOR EARNINGS. THOSE BIG TECH COMPANIES MAKE
UP 20% OF THE S&P, 40% OF THE NASDAQ 100.
THAT IS WHERE YOU GET A REALLY CLEAN READ ON WHAT IS HAPPENING.
THAT IS READ GET A CLEAN READ OF WHAT IS HAPPENING WITH THE
CONSUMER. THEY'D MULTINATIONALS, A
TRANSLATION FROM FOUR THE BACK TO THE U.S..
FORMERLY, MAYBE SOME INSIGHT INTO WHAT HAS BEEN HAPPENING IN
CHINA AS WELL. TOM: THE CHINA QUESTION IS REALLY
OPEN. JOHN, TO ME, THE DATA POINT OF
THE LAST 72 HOURS, THIS GOES BACK FOR YOUR CONSIDERATION OF
WHAT JOHN DID ON THE REAL YIELD FRIDAY WHICH WAS BREATHTAKING.
THE REAL YIELD REALLY CAME IN LAST WEEK FROM 0.3. JONATHAN:
HOW DO YOU SAY THAT WITH A STRAIGHT FACE? TOM: IS A POSITIVE NUMBER, BUT I'M
SORRY, IT MAKES SOME HEADWAY. JONATHAN:
WE STARTED TO SEE THE INTENDED CONSEQUENCES OF FED POLICY, TOM.
THEY WANTED TO SEE A SLOWDOWN IN HOUSING.
THEY WANTED TO SEE JOB OPENINGS COME DOWN AS EVIDENCE OF DEMAND
MAY BE, JUST SOFTENING A LITTLE BIT.
WHAT THEY DON'T WANT TO SEE IS THE CONTROL.
WILL WE BE CONFRONTED WITH A WALL OF ECONOMIC DATA MUCH MORE
QUICKLY THAN THEY ARE ANTICIPATING? TOM:
THE BLOOMBERG SURVEILLANCE TEAM SEEMS COOL, CALM AND COLLECTED.
LET ME TELL YOU, FOLKS, IS EXTRAORDINARY.
THE INTERNS HAVE REALLY SAVED US THIS WEEK.
I CAN'T SAY ENOUGH, WHEN DOES THE FED MEAT, WEDNESDAY?
I CAN'T EVEN SAY ENOUGH ABOUT THE QUALITY OF WHAT THE FED
SHOWS. YOU'RE GOING TO LOVE IT. STARTING STRONG HERE,
FIXED-INCOME STRATEGY, BANK OF AMERICA PRIVATE BANK AS WELL.
HOW CLOSE ARE WE TO THIS STRANGE WORD SINCE TIME BEGAN?
RESTRICTED? I'VE GOT A COMMENT ABOUT
GENERATIONAL DNA. HOW CLOSE ARE WE TO RESTRICTIVE.
>> GETTING CLOSER, DEFINITELY GETTING CLOSER. ANOTHER MONTH OF EXPECTATIONS
ON WEDNESDAY. THEN THE NEXT MEETING THIS YEAR
WILL BE TO RESTRICTIVE TERRITORY.
JONATHAN ACTUALLY HIT THE NAIL ON THE HEAD EARLIER.
THE FED POLICY IS WORKING AS EXPECTED. AND WHILE WE ARE NOT ACTUALLY
SEEING A DECREASE IN INFLATION, AS YOU POINTED OUT, WE ARE
SEEING ALL OF THE LEADING ECONOMIC INDICATORS LIKE
JOBLESS CLAIMS HIGHER, CONSUMER CONFIDENCE DOWN, YIELD CURVES
DOWN FROM FLATTENING TO INVERTING. ALL OF THIS TELLS YOU IS THE
ACTUAL CONFIDENCE THAT INFLATION WILL COME DOWN.
THE MARKET HAS BEEN LONG AFRAID BY INFLATION NUMBERS FOR OVER A
YEAR NOW. BUT YOU ARE DEFINITELY IN THE
SENSE THAT THE MARKET SENSES A SLOWDOWN, PARTICULARLY ON THE
HOUSING MARKET. ALL THE DATA IS COMING IN,
TELLING YOU THAT INFLATION, WHICH IS A LAGGING INDICATOR OF
WHAT HAPPENS, THE FED IS GOING TO HAVE TO STAY THROUGH THE
POLICY. BUT IT WILL BE RESTRICTED BY
THE END OF THE YEAR. JONATHAN: WOULD YOU THINK THAT WEAKER
ECONOMIC DATA BECOMES UNDESIRABLY WEEK?
WHAT WOULD YOU LOOK FOR IT? JONATHAN: -- MATT:
SO, WE THINK WE HAVE GOT A WHILE TO GO.
WE ARE STILL 3.6% UNEMPLOYMENT. OUR FORECAST IS ON BANK OF
AMERICA SECURITIES FOR A MILD RECESSION.
UNEMPLOYMENT RATE REALLY UP TO 4.6 OR SO OVER THE NEXT YEAR.
THE FED IS GOING TO BE ABLE TO DEAL WITH NEGATIVE ECONOMIC
DATA. MOVING INTO THE MID TO HIGH 4%,
EVEN 5%. UNLESS YOU ACTUALLY SEE THE
WHITES OF THE INFLATION SIZE,-- OF THE INFLATION' EYES,, WE
THINK THEY ARE GOING TO TOLERATE A FAIR AMOUNT OF
ECONOMIC WEAKNESS. WE DO THINK THAT FAIRMOUNT OF
THE TO HANDLE SIGNIFICANTLY HIGHER EMPLOYMENT -- BECAUSE
AGAIN, THERE IS A VERY LONG WAY TO GO FROM 9.1%. LISA:
I WAS JUST GOING TO SAY THAT THIS IS THE REASON WHY PEOPLE
ARE SAYING THAT PERHAPS WE'VE SEEN THE PEAK IN THE 10 YEAR
YIELDS, BECAUSE WHAT WE WOULD HAVE TO SEE IN THE LABOR
MARKET, IN THE ECONOMY TO ACHIEVE WHAT THE FED IS LOOKING
FOR IS SUBSTANTIVE AND WOULD LEAD TO MUCH LOWER GROWTH GOING
FORWARD. DEAL AGREED THAT WE ARE ONLY
GOING LOWER FOR THOSE IDEAS? MATT:
WE HAD THIS CONVERSATION LAST TIME. THAT LOW TO MID 3% RANGE.
THE CLOSE WE LOOK AT WHERE THE YIELD CURVE FLATTENING FROM 160
BASIS POINTS, AND WE SAW FUTURE FED RATES IN 2023.
THAT HAS NOT CHANGED. WE STILL BELIEVE WE ARE IN A
CONSOLIDATION RANGE AND FUTURE FED CUTS ARE GOING TO INCREASE.
THAT FOUR PRICED IN ACTIVE ACTUALLY HIT THE PEAK NEXT YEAR.
SO IT IS ABSOLUTELY THE CASE, IS ABSOLUTELY POSSIBLE THAT WE
HAVE SEEN THE HIGH IN 10 YEAR RATES.
WE WOULD NEVER SAY ANYTHING WITH CERTAINTY BECAUSE THERE
ARE STILL A CHANCE THAT THE FED IS BEHIND THE CURVE ON
INFLATION. AND IF THE 1970'S IS ANY
EXAMPLE FOR US, COMING INTO THE 70'S, CORE INFLATION WAS ABOUT
1.5%. THERE WAS A SPY FOR GOT TO ABOUT 3.5%.
ANOTHER SPIKE, OVER 4.5%. THEY RAISE THE RATES THREE
TIMES IN 1980. YOU ONLY GET CORE INFLATION
BACK TO 4% FOR THE REST OF THE 1980'S.
WE NEVER GOT BACK TO 1.5% LEVEL. FOR PERCENT CORE INFLATION FOR
THE 80'S. THAT IS JUST AN EXAMPLE LIKE
GETTING INFLATION BACK TO WHERE YOU STARTED CAN BE QUITE
DIFFICULT. IF THAT IS THE CASE, THEN THE
FED MIGHT HAVE TO DO WITH THE MARKET EXPECTS.
THE MARKET SAYS ABOUT 3.5%. WE ARE JUMPING AT 4%. JONATHAN: THANK YOU. LISA, THAT IS ONE MORE NAME FOR
THE LONG LIST OF NAMES I'VE GOT NOW.
THE HIGHER THE YIELD FOR THE CYCLE FOR THE YEAR. LISA:
A LOT OF IT HAS TO DO WITH THE IDEA THAT THE FED IS GOING TO
GET WHAT IT WANTS, WHICH IS MUCH LOWER GROWTH, AND THEN
THEY ARE GOING TO BE ABLE TO START CUTTING RATES AS
INFLATION DOES GO LOWER AND FOR THREATS THAT REALLY IS THE TYPE
OF 1980'S INFLATION THAT SO MANY PEOPLE DON'T THINK. TOM:
I LOOKED AT IT THREE TIMES THIS WEEKEND.
WAY UNDER STANDARD DEVIATION. IT IS ABOUT AS CONSISTENT AS MY
OPTIMISM. JONATHAN: ONCE AGAIN, WHAT IS HAPPENING
WITH THE TRIPLE SEAS. LISA: PEOPLE JUST PILING IN.
THE BIGGEST IN 20 MONTHS. UNREAL.
FUTURES OF HALF OF 1% THIS MORNING.
GOOD MORNING TO YOU ALL FROM NEW YORK. THIS IS BLOOMBERG. >> KEEPING YOU UP-TO-DATE WITH
NEWS FROM AROUND THE WORLD, FOR THE FIRST WORD NEWS, TREASURY
SECRETARY JANET YELLEN DOES NOT SEE ANY SIGN THAT THE U.S.
ECONOMY IS IN A RECESSION. SHE HAS TOLD NBC THAT THE U.S.
IS LIKE THE SISI -- LIKELY TO SEE SOME SLOWING OF JOB
CREATION BUT SAID THAT IS NOT A RECESSION. NOW THE EUROPEAN CENTRAL BANKS
MADE INCREASES IN INTEREST RATES .
THE GOVERNING COUNCIL MEMBER HAS SAID THAT THE LATE INCREASE
IN SEPTEMBER ALSO NEEDS TO BE QUITE SIGNIFICANT.
THE ECB HAS TRIED TO REDUCE INFLATION THAT IS ALREADY MORE
THAN FOUR TIMES ITS TARGET. PLUS IN THE U.K., THE NEXT
PRIME MINISTER WILL INTRODUCE LOW TAX INVESTMENTS TO SPUR
ECONOMIC GROWTH. THE FOREIGN SECRETARY IS LEADING THE POLLS WHERE SHE IS
CRACKING DOWN ON CHINA'S -- IN THE U.K.
HE CALLED ON THE BIGGEST LONG-TERM THREAT TO BRITAIN.
AN EXCLUSIVE TODAY, THE INVESTMENT BANKS FOUNDED BY --
IS STARTING A BRIDGE FOR --. THE COMPANY WAS BEGINNING ITS
EFFORT IN THE MIDST OF THE SO-CALLED CRYPTO WINTER.
FUNDING IN THE INDUSTRY HAS TUMBLED.
MEANWHILE, IT IS LESS THAN ONE THIRDS OF THE RECORD HIGH OF
MORE THAN 68 PER $1000. GLOBAL NEWS 24 HOURS A DAY ON
AIR AND ON BLOOMBERG QUICKTAKE. POWERED BY MORE THAN 2700
JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. THIS IS BLOOMBERG. >> THE RIGHT THING TO DO AT
THIS POINT IN TIME IS ACTUALLY POSITION YOURSELF FOR A LITTLE
BIT OF PATIENCE IN YOUR PORTFOLIOS AND PERHAPS TAKE
ADVANTAGE OF THE HIGHER RELATIVE RATES THAT WE ARE
SEEING IN THE ROUND AND. JONATHAN:
LOOKING AHEAD TO THE FED DECISION AND A TON OF TECH
EARNINGS. A LIST AND TREASURY YIELDS AS
WELL, DATA HAVE SIX BASIS POINT ON A 10 YEAR.
THE COURT OF THE MONTH SO FAR EASILY.
THIS YEARS INFLATION HAS PEAK AS LAST USE INFLATION IS
TRANSITORY. TOM: THAT IS A DYNAMIC PRICE AND OF
COURSE SOMETHING THAT IS AFFECTING ALL OF OUR LISTENERS
AND VIEWERS AS WELL. THAT IS WHY THIS CONVERSATION
IS CRITICAL. HE IS FLAT OUT THE BEST CROSS
RATE STRATEGIST IN THE WORLD. HE JOINS US NOW WITH STANDARD
CHARTERED. STEVE, YOUR VIEW IS AN OUTLIER. WE GO TO 3.0% AND THEN WE STAY
THERE FOR SOMETHING LIKE FIVE OR EVEN SIX QUARTERS. IF WE GET A STEPHEN ENGLANDER
OUTCOME WAY BELOW THE GLOOM THAT IS OUT THERE, WHAT DOES
THAT DO THE SERVITUDE, THE BELIEF IN A RESILIENT AND
STRONG DOLLAR? >> I THINK THAT THE MARKET IS
WAITING TO SEE CLEAR SIGNS OF A RECESSION.
THE SIGNS ARE POWERFUL, BUT NOT DEFINITIVE YET, AND THEY ARE
WAITING TO SEE SOME KIND OF INFLATION COMING OFF. THEY WILL SAY LOOK, WE ARE
GOING TO WAIT AND SEE WHERE INFLATION GOES. TOM:
WHAT SIZE OF BIG FIGURE MOVE DOES THAT MEAN FOR THE DOLLAR?
ARE YOU LOOKING FOR FIVE OR 10 BIG FIGURES LIKE EURO STRENGTH
OFF OF THE 3.0% IN U.S. CALL? >> MOSTLY. YES, MOSTLY IN 2023. IN 2022, THERE IS STILL SOME
RISKS THAT THE PROPHETS LOOK WEAK AND THAT THE EQUITIES COME
OFF. WE ARE STILL NOT SURE WHAT IS
GOING TO HAPPEN IN EUROPE. THE RISK IS GOING TO BE HARDER
THAN THE MARKET THINKS OVER THE LAST WEEK. BUT 2023I THING WILL BE A WEAK
DOLLAR YEAR. LISA: 5%-10% IS NOT NECESSARILY
10%-20% OBVIOUSLY, BUT THIS IS A BIG DIFFERENTIAL WHEN IT
COMES TO THE RISK ASSET ON THE HEELS OF THAT.
WHAT WOULD BE THE DRIVER HERE? IS IT THE EURO STRENGTH, OR THE
DOLLAR WEAKNESS IN THE FACE OF MORE OPTIMISTIC SENTIMENT? >> I THINK THE KEY THING IS TO
GET SOME EVIDENCE THAT INFLATION IS COMING DOWN. NOT DEFENDING SOME OF THE
PESSIMISM, WHAT WE'VE SEEN IS THAT WAGES ARE LAGGING, SO
THERE IS NO LABOR MARKET PUSHING DOWN INFLATION, WE ARE
LIKELY TO SEE SOME OF DEMAND DESTRUCTION LEADING TO PRICE
CALLS AND ENERGY PRICES EVEN IN THINGS LIKE CARS AND USE OF
OTHER GOODS. I DON'T KNOW THAT THIS
INFLATION IS GOING TO BE PERMANENT, BUT THE OUTLOOK OVER
THE NEXT YEAR IS ACTUALLY PRETTY GOOD.
ONCE THE MARKET SEES THAT, IT IS A RISK ON MARKET. TOM:
STEVE, IT IS INCREDIBLY LONELY. HELP ME HERE.
WE ARE OUT OF 4% AT CITIGROUP. THERE IS A HUGE, HUGE
DIFFERENTIAL. WHAT DO YOU SAY TO PEOPLE THAT
ARE CONVINCED IT IS JUST GOING TO KEEP GOING AND GOING?
WHAT WOULD BE THE DAMAGE TO THE PORTFOLIOS, STEVE? STEVE: A VERY FAMOUS ECONOMIST ONCE
SAID EVERYBODY HAS A PLAN UNTIL THEY GET PUNCHED IN THE FACE.
RIGHT NOW, WE HAVEN'T SEEN THE DOWNSIDE ON THE ECONOMY.
LABOR MARKETS LOOK OK. WE THINK THAT THAT PICKUP IS
COMING. AND WHEN IT COMES, THE PRESSURES ON THE FED ARE GOING
TO BE DIFFERENT, AND THE FED ITSELF RESPONDING TO THE SHIFT
IN THE POLITICAL CLIMATE. IT MEANS THAT DEMAND PROMOTES
SUPPLY AND EVERY MODEL THEY HAVE TELLS THEM THAT THAT MEANS
INFLATION COMES DOWN A LITTLE BIT QUICKER AND A LITTLE BIT
SLOWER. BUT IT MEANS THAT THEY SORT OF
GOT THEMSELVES ON THE TRACK THAT THEY WANT TO BE.
HAVING GOTTEN ON THAT TRACK, WHY KEEP PUSHING IT? IF YOU HAVE THE CENTRAL BANKS,
IT IS NOT WHAT THE MUTUAL RATE OF INTEREST IS BECAUSE THEY
DON'T HAVE A CLUE. THE BIG UNCERTAINTY IS HOW FAST
THE ECONOMY IS RESPONDING TO THE TIGHTENING OF MONETARY
CONDITIONS, HOW FAST INFLATION IS GOING TO RESPOND TO THAT. LISA:
GIVEN THAT WE DON'T HAVE ANY GOOD MODELS FOR THIS, CAN YOU
GIVE US A SENSE STRATEGIZING ABOUT MARKETS?
HOW UNCERTAIN THE SCENARIO IS, HOW MUCH OF A LACK OF A
CONVICTION YOU HAVE OVER A TIME WHEN THE DOLLAR HAS REALLY BEEN
ONE OF THE MOST DIFFICULT PARTS TO GET RIGHT? STEVE:
IT CERTAINLY HAS BEEN DIFFICULT TO GET RIGHT, BUT RIGHT NOW,
EVERYBODY HAS THE DOLLAR. THE MARKET IS VERY LONG AT THIS
STAGE. I THINK THAT WHAT YOU ARE
SEEING IS NOT EVIDENCE THAT THE U.S.
ECONOMY IS BETTER IN SOME WAYS THAN EVERYBODY ELSE.
WHAT YOU ARE SEEING IS INDICATION THAT THE WORLD IS
SUCH A SCARY PLACE THAT THE ONLY ASSETS YOU WANT TO HOLD IS
DOLLARS. I THINK ONCE THOSE FEARS
RECEDE, THE DOLLAR IS VERY VULNERABLE.
AT ONE POINT, THEY THOUGHT IT MIGHT BE A 2022 STORY BEFORE
THE RUSSIAN INVASION, BUT THEY SEE TERRIBLE WORLD CONTINUING
TO KEEP GOING. JONATHAN: AWESOME TO GET YOUR VIEW ON
THINGS. OVER THE WEEKEND, ERIC ROBERTSON PUTTING OUT THIS NOTE.
TOM: THIS IS WHAT SURVEILLANCE IS
ALL ABOUT, THIS IS DIVERGENT OPINION. TO HAVE THE 3.0 AND THE OTHERS
-- NOT OTHERS, BUT SOME STRATEGISTS OUT WITH 100 BASIS
POINTS UP TO FOUR PRESENT OR EVEN HIGHER, THIS IS
FASCINATING. JONATHAN: TELL US HOW QUICKLY DOES
INFLATION COME DOWN? TOM:
THAT IS THE MECHANISM THAT IS IN PROCESS TO WATCH.
BUT YES, WRAPPED AROUND IT IS HOW QUICKLY DOES THE ECONOMY
SLOW WHEN THE CENTRAL BANK ADJUSTS? JONATHAN:
THIS THURSDAY WE GET GDP. BANK OF AMERICA TV, DEUTSCHE
BANK, ALL LOOKING FOR A SECOND CONSECUTIVE QUARTER OF NEGATIVE
GROWTH. JONATHAN: LISA SO FIRED UP ABOUT
PINTEREST THIS MONDAY. FUTURES POSITIVE .4% ON THE S&P.
BIG WEEK AHEAD FOR FED EARNINGS -- TECH EARNINGS.
75 BASIS HIKE EXPECTED. WHAT WILL IT MEAN FOR SEPTEMBER?
EURO HIGHER BY SEVEN BASIS POINTS. BUREAU SHOWING STRENGTH.
A LITTLE BIT OF WEAKNESS. TOM:
RIGHT NOW, THIS IS PERFECT AND THANK YOU TO OUR GREAT-LOOKING
TEAM FOR DOING THIS AS WE HAVE TALKED TO OTHERS.
MOMENTS AGO, A STUNNING CONVERSATION WITH STEPHEN
ENGLANDER OF STANDARD CHARTERED. WE FIND SOMEONE TO TALK TO WITH
SOME PERSPECTIVE. EDWARD BARELY DESCRIBES HIS
YEARS OF WORK AND WE ARE THRILLED HE COULD GIVE US A
MOMENT OF TIME HERE IN A MOST UNCERTAIN SUMMER. THE GREAT GAP IS STEPHEN
ENGLANDER SAYING THE FED WILL STOP AT 3.0%.
OTHERS OUT AT 4% OR DARE I SAY EVEN 4.5%. WHAT A DIVIDE. EXPLAIN THE DEBATE OF THAT
DIVIDE AND WHERE YOU FIT INTO IT. EDWARD: I GUESS I'M IN THE RANGE OF
3%-THREE POINT -- 3.25%. I AGREE WITH THE ECONOMIST.
THE QUANTITATIVE TIGHTENING MEANS THE REDUCTION OF THE FED
BALANCE SHEET HAS A TIGHTENING IMPACT.
IT IS AN EQUIVALENT OF A RATE HIKE.
THE FED HAS NOT REALLY PRODUCED ANY ESTIMATE OF THAT.
I WOULD SAY IT IS AT LEAST 50 BASIS POINTS FROM QUANTITATIVE
TIGHTENING AND THEN THERE IS A STRONG DOLLAR SINCE THE
BEGINNING OF THE YEAR. I THINK THAT IS AT LEAST 50
BASIS POINTS. THERE IS A TREMENDOUS AMOUNT OF
TIGHTENING ALREADY GOING ON FROM THESE TWO DEVELOPMENTS. I'M NOT CONVINCED WE ARE GOING
TO SEE 4% OR HIGHER. TOM: ARE THESE RATE INCREASES
NONLINEAR? WE HAD AN ORIGINAL ONE OF 75
BASIS POINTS AND NOW ANOTHER ONE.
THIS ONE HAS A LOT MORE WALLET THAN THE SYSTEM. EDWARD:
IT DOES, BUT THE FINANCIAL MARKETS ARE NOT GOING TO BE
SURPRISED BY 75 BASIS POINTS AT THIS ONE OR THE NEXT ONE.
I THINK IT IS PRETTY WELL ANTICIPATED. IT IS VERY IMPORTANT TO LOOK AT
WE ARE CONSTANTLY FOCUSING ON THE FED FUNDS RATE.
WE HAVE TO FOCUS ALSO PARTICULARLY ON THE MORTGAGE
RATE. I THINK THAT IS WHERE THE TIGHTENING REALLY HAS BEEN
EXTRAORDINARY. WE HAVE SEEN THIS BASICALLY
DOUBLING OF THE SPREAD FROM THE MORTGAGE RATE AND THE 10 YEAR
BOND YIELD. THAT HAS KINDA PUT THE BRAKES
ON ANYTHING HOUSING RELATED. WE ARE SEEING THAT NOT JUST IN
HOUSING ACTIVITY, WE ARE ALSO SEEING THAT IN HOUSING RELATED
RETAIL SALES. I THINK THAT IS WHERE THE FED
HAS ALREADY ACCOMPLISH WHAT THEY WANTED TO ACCOMPLISH WHICH
WAS TO PUT A LID OR AT LEAST BRING SOME OF THE DEMAND THAT
HAS CONTRIBUTED TO INFLATION. LISA:
A LOT OF THIS IS SUPPLY-SIDE DRIVEN AND IT IS NOT TRICKLING
IN YET TO LOWER INFLATION. WE HAVE NOT NECESSARILY SEEN
PEAK INFLATION BECAUSE WE HAVE NOT NECESSARILY SEEN A DROP OFF
IN ANY MATERIAL WAY. HOW MUCH DOES THIS FACTOR INTO
YOUR BELIEFS OF A SOFT LANDING OR CHALLENGE IT? EDWARD:
YOU MAILED IT. THAT IS REALLY THE ISSUE. IF INFLATION REMAINS
PERSISTENT, PROTRACTED, OBVIOUSLY, FOLKS WHO ARE SAYING
THE FED IS GOING TO HAVE TO KIND OF DO A -- ARE GOING TO BE
CORRECT. I THINK THERE ARE ALREADY SOME
SIGNS AND I AM MARVELOUSLY REACHING FOR WHATEVER I CAN
FIND, BUT I AM LOOKING AT THE REGIONAL BUSINESS SURVEYS IN
BOTH NEW YORK AND PHILADELPHIA FOR JULY, SO THEY ARE VERY
CURRENT, SHOWING PRICES PAID AND PRICES RECEIVED INDEXES ARE
IN FACT STARTING TO MODERATE AS EITHER INDEXES FOR SUPPLY CHAIN
DISRUPTIONS LIKE BACKLOG OF ORDERS AND SO ON. LISA:
BUT THERE ARE ALSO OTHER SURVEYS THAT SHOW A LOT OF
COMPANIES DO EXPECT SUPPLY CHAIN DISRUPTIONS TO CONTINUE
FOR THE YEARS TO COME. BASICALLY, ALL OF THIS, TRYING
TO PUT IT TOGETHER. YOU CAME ON THE SHOW AND SAID
YOU STILL BELIEVE IN THE STRENGTH OF THE U.S. ECONOMY.
HAVE YOU SHIFTED AT ALL? EDWARD: NOT REALLY.
I THINK CLEARLY, WE ARE GOING TO HAVE A NEGATIVE REAL GDP
NUMBER. AS YOU KNOW, THAT IS REALLY NOT
AN OFFICIAL RECESSION. I THINK IT IS A MILD RECESSION
AT BEST. AT BEST, A MIDCYCLE SLOW CONSISTENT WITH WHAT WE
HAD IN THE MID-1980'S AND MID-2010S.
WE HAVE SEEN THIS BEFORE. IF THE CONSUMERS IN GOOD SHAPE,
CORPORATIONS ARE IN GOOD SHAPE. I DON'T SEE A HARD LANDING. TOM:
HOW IS THE EQUITY MARKET LINKED TO THIS PARTICULARLY WHERE YOU
AND STEVE ENGLANDER ARE. EDWARD:
IT IS NEVER EASY TO PICK UP BOTTOM IN THE STOCK MARKETS,
BUT I'M WHEN TO GIVE IT A TRY. I THINK ON JUNE 16, WHEN WE
THOUGHT DOWN TO -- ON A CLOSING BASIS, WHICH WAS 3000 POINTS
HIGHER THAN THE INTRADAY LOW WE HAD IN 2009, I THINK THAT WAS
THE BOTTOM AND A COINCIDENCE WITH THAT IS WE HAVE SEEN
COMMODITY PRICING IS COMING DOWN AND A SLOWING IN THE
ECONOMY WHICH I THINK WILL HELP TO MODERATE INFLATION.
THE REAL QUESTION IS GOING TO BE THE EARNINGS SEASON AND SO
FAR, THE EARNINGS SEASON IS GOING REASONABLY WELL.
IT HAS NOT REALLY TRASHED THE STOCK MARKET.
THEY ALL LOOK QUITE WELL. TOM: I HAVE THAT AT 10:22 ON JUNE 16.
WE TALK HERE ABOUT WHAT A CHAIRMAN WILL DO WITH THE FED.
WHAT WE LOOK FOR IN THE CROSS CONFERENCE?
HE HAS GOT TO COME OUT AND FRAME WHAT HE DOES AFTER A
PRESUMED 75 PEAKS. HOW DOES HE DO THAT? EDWARD:
I THINK HE HAS DEFINED HIS INNER VOLKER. I THINK WE ARE GOING TO FIND
THE WORD INFLATION APPEARS NUMEROUS TIMES AND HE WILL MAKE
IT VERY CLEAR THIS IS THE FED'S PRIORITY NOW. QUITE A SHIFT FROM WHAT WE SAW
BEFORE FOLLOWING THE INITIAL PANDEMIC OF FACT IN AUGUST OF
2020. THE FED CHANGED THE PRIORITIES
AND MADE IT CLEAR BRINGING THE UNEMPLOYMENT RATE DOWN WAS THE
NUMBER ONE PRIORITY. POWELL IS THE GREAT PIVOT OR
AND HIS PIVOTING TOWARD THE NOTION OF THE FED HAS TO DO
WHATEVER IT TAKES TO BRING INFLATION DOWN. LISA: I LOVE IT.
FANTASTIC. WAYS TO COLOR THE MOMENT WE ARE
IN. HOW MUCH DO YOU VIEW THE 60/40
STILL BEING VIABLE IF WE HAVE SEEN THE BOTTOM IN THE S&P BUT
ALSO ARE LOOKING AT SOMEONE WHO IS FINDING THEIR INNER VOLKER
HEADING THE FED? EDWARD:
YOU TALKING ABOUT A BOND EQUITY PORTFOLIO? I THINK IN LINE WITH THIS
SCENARIO IS MINE, I THINK 3% IS THE RIGHT RATE FOR THE BOND
MARKET. 3% IS BACK TO NORMAL.
THAT IS A PRETTY GOOD RETURN. THAT IS ONE OF THE REASONS WE
HAVE SEEN VALUATION MULTIPLES COME DOWN SO HARD IN THE STOCK
MARKET. BUT THEY HAVE COME DOWN AND
THEY ARE KIND OF FAIR VALUE AS LONG AS WE DON'T HAVE A HARD
RECESSION. IF WE DO, YOU WANT TO BE 60 IN
BONDS AND MAYBE 40 IN EQUITY. JONATHAN:
CAN THE BOND VIGILANTES IN EUROPE MAKE A COMEBACK OR WILL
TPI STOP THAT FROM HAPPENING? >> I THINK THE ECB IS GOING TO
GIVE THE BEST TRY TO AVOID -- AND SUPPORT ITALY, FOR EXAMPLE.
I THINK THEY HAVE COME BACK AND IT IS A BIG CHALLENGE. JONATHAN:
YOUR WORLD OF BOND VIGILANTES. HOW MANY YEARS AGO WAS THAT?
TOM: IT WAS A LONG TIME AGO WHEN THERE WAS NOT A BEAR MARKET
LIKE THIS. THAT WAS A WALK IN THE PARK
COMPARED TO WHERE WE ARE NOW. JONATHAN:
IN MANY WAYS, THE WEEK BEGINS TOMORROW, NOT TODAY WHEN WE GET
EARNINGS FROM HER SOFT AND ALPHABET.
LISA WENT THROUGH ALL OF THE ECONOMIC DATA WE GET THROUGH
THIS WEEK AS WELL. TOM: WE ARE TRYING TO MAKE MONDAY
EVENTFUL AS WELL. I THINK WITH OUT QUESTION, THE
CONVERSATION THIS MORNING WAS STEPHEN ENGLANDER.
HOW MANY PEOPLE DISAGREED IN THE GAME?
THE ANSWER IS SEVEN OUT OF 10? JONATHAN:
IT LOOKS PRETTY DIVIDED DOWN THE MIDDLE. OTHERS LOOKED AT IT AND SAID I
SEE EVIDENCE OF THIS BEING STICKIER. LISA:
THIS IS THE TOUGHEST MARKET I CAN IMAGINE.
THE FACTORING INTO THE SUPPLY-SIDE CONSTRAINTS, IT IS
MANY DIFFERENT AREAS OF THE SUPPLY-SIDE MARKET.
THE IDEA THAT IT IS NOT JUST CHINA AND SUPPLY CHAIN
DISRUPTIONS. IT IS SHIPPING LINES AND VERY
HUMID AND DISPARATE. HOW DO YOU CONNECT ALL OF THESE
DOGS AND GET AN ECONOMIC PICTURE?
THAT IS WHY I THINK EARNINGS WILL BE THE MOST INTERESTING.
HOW MUCH DO WE SEE THAT ROLLING OVER AS AN INDICATION OF
SOMETHING THAT PERHAPS IS DEFLATING IN THIS INFLATION
BUBBLING DUST BUBBLE? TOM:
I JUST LOOKED AT AUGUST 10, WE DON'T HAVE A YEAR-OVER-YEAR CPI
CORY ETC. STEADY YET, BUT IT IS AMAZING
HOW THE MONTH OVER MONTH FIRST LOOK REALLY COMES DOWN. JONATHAN:
ARE YOU LOOKING FOR A PAUSE OR LISA: SOMETHING? LISA:LOOKING
FOR A ROAD TRIP. TOM: FOR OUR VIEWERS AND LISTENERS,
WHAT IS A DIFFERENCE BETWEEN 7% INFLATION AND MINE PERCENT?
JONATHAN: WHAT IS THE DIFFERENCE FOR THIS
FED? COMING UP, WE CHECK IN WITH MICHAEL KUSHNER AND TALK WITH
AND MELODY OF OFFSPRING. AND PETER COMING UP AS WELL.
WHY HE THINKS WE COULD GET THE RECESSION SOONER AND WHY IT
COULD BE DEEPER AND MORE UGLIER THAN PEOPLE EXPECT.
THAT IS AT 9:30. BRAMA WILL MAKE SOME NOTES AND
DOUBLE DOWN. GREAT TO HAVE YOU BACK. LISA: IT IS GREAT TO BE BACK.
HEAD OF A BIG WEEK STATESIDE. THIS IS BLOOMBERG. LE ANN:
AFTER RAISING RATES IN JUNE BY THE MOST SINCE 1994.
POLICYMAKERS ARE EXPECTED THIS WEEK TO APPRAISE ANOTHER 75
BASIS POINT HIKE AND ARE LIKELY TO SIGNAL THEIR INTENTION TO
KEEP MOVING HIGHER IN THOSE MONTHS AHEAD. THE U.S.
SAYS A RUSSIAN CRUISE MISSILE STRIKE ON THE PORT OF ODETTA --
ODESSA -- THE DEAL WAS SIGNED AFTER
MONTHS OF TALK. RUSSIA SAYS THE MISSILE ATTACK
TARGETED UKRAINIAN INFRASTRUCTURE.
TESLA HAS INCREASED ITS CAPITAL EXPENDITURE PLAN.
THAT IS ACCORDING TO ITS LATEST QUARTERLY REPORT.
THE REPORT ALSO DISCLOSED DETAILS ABOUT ANOTHER PROBLEM
ABOUT TAKING TESLA PRIVATE. THE COMPANY HAS SAID IT IS
COOPERATING. IT IS A BIG WIN FOR INTEL AND
WASHINGTON'S GOAL OF INCREASING SEMICONDUCTOR PRODUCTION AT
HOME. INTEL HAS SECURED ONE OF THE
BIGGEST CUSTOMERS YET FOR ITS CHIPMAKING UNITS AND WILL MAKE
CHIPS FOR THE TIME. GLOBAL NEWS 24 HOURS A DAY ON
AIR AND ON BLOOMBERGQUINT TAKE, POWERED BY MORE THAN THREE 700
JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES.
I AM LEIGH-ANN GERRANS. THIS IS BLOOMBERG. >> THIS IS NOT AN ECONOMY IN
RECESSION BUT INFLATION IS WAY TOO HIGH.
THE FED IS CHARGED WITH PUTTING IN PLACE POLICIES THAT WILL
BRING INFLATION DOWN. I EXPECT THEM TO BE SUCCESSFUL.
TOM: THE SECRETARY-TREASURER OF THE
UNITED STATES JARED -- JANET YELLEN SPEAKING THE MESSAGE ON
NBC THIS SUNDAY. LISA ABRAMOWICZ AND I ARE
THRILLED TO GIVE YOU A DIFFERENT VIEW.
IT HAS BEEN AN INTELLECTUALLY INTERESTING MONDAY AT
SURVEILLANCE. WE HAVE HAD SOME OPTIMISM OUT
THERE, A LOT OF MEASURED VIEWS OF A MEASURED RECESSION. I HAVE TALKED ABOUT THE RIGOR
THIS WEEKEND AND LOOKING AT TPI, WHICH HE THINKS IS
COMPLETE BOLLY AS WELL. WHAT WAS IT LIKE WHEN HE WALKED
INTO HIS OFFICE AT YALE UNIVERSITY DECADES AGO? >> HE WAS THE ONE WHO HIRED ME,
SO HE HAS BEEN A GREAT INTELLECTUAL FRIEND.
AND MOSTLY RIGHT. TOM:
YOU TWO HAVE AN OLD WORLDVIEW. WHAT IS THE OLD WORLDVIEW OF
THIS RECESSION, THIS SLOWDOWN WE ARE IN WHERE MAYBE IT IS A
MEGA THREAT, THIS NEW WORLD, IT IS ALL GOING TO BE FINE? >> THE CONSENSUS IS THAT A HARD
LANDING AS OPPOSED TO SOFT LANDING. SHORT, SHALLOW, MILD,
GARDEN-VARIETY. I BEG TO DISAGREE. DEBT RATIOS ARE HISTORICALLY
HIGH, 420%. LOTS OF ZOMBIE CORPORATIONS. DURING THE 70'S, EXPECTATIONS
WERE LOW. THIS TIME, WE HAVE STAGFLATION
NEGATIVE. IN THE PREVIOUS RECESSION, THIS
TIME AROUND, GOING INTO RECESSION BY TIGHTENING
MONETARY POLICY. TOM: OUT OF THEIR COVID DISASTER,
CAN CHINA COME TO THE RESCUE IF WE SEE SURGING ASIAN GROWTH?
TOM: IF CHINA WERE TO GO FASTER,
THAT WOULD HELP. THE POLICIES ARE ALL AGAINST
ECONOMIC GROWTH. THE BACKLASH AGAINST THE
PRIVATE SECTOR, TECH SECTOR AND SO ON. THEY'RE DOWN TO HAVE LOW ECONOMIC GROWTH, DEBT RATIOS. LISA:
A LOT OF PEOPLE LOOK AT THE LACK OF LEVERAGE AKIN TO WHAT
WE SAW LEADING UP TO THE 2008 CRASH. WHAT ARE THESE NOTES OF
LEVERAGE THAT COULD CAUSE WHAT YOU'RE LOOKING FOR? NOURIEL:
THERE IS LEVERAGE IN THE CORPORATE SECTOR. IT IS THROUGH THE BANKS NOW.
THERE HAS BEEN A RISE SIGNIFICANTLY IN THE DEBT AND
LEVERAGE OF THE FINANCIAL SYSTEM.
THOSE SPREADS ARE ALREADY WIDENING. I WOULD SAY CORPORATE FIRST,
THEN SHADOW BANKS. MANY SOVEREIGNS ARE IN TROUBLE
AND LOW INCOME IS FRAGILE. THE HOUSING SECTOR IS DIVIDED.
LISA: IN THE PAST, THE FINANCIAL SECTOR HAS LED. IS THIS TIME DIFFERENT?
ARE WE GOING TO SEE THE ECONOMIC DOWNTURN BEFORE THE
MARKETS WAKE UP TO THE REALITY THAT YOU ARE TALKING ABOUT AND
START TO RESPOND? NOURIEL: YES, THE ECONOMIC DOWNTURN THIS
TIME AROUND IS GOING TO LEAD TO SEVERE DEBT AND STRESS.
YOU'RE GOING TO SEE PARTS OF THE CORPORATE SECTOR GOING BACK.
THE TRIGGER FOR THE FINANCIAL DISTRESS IS GOING TO BE A
RECESSION. LISA:
IN THIS STAGFLATION, DO YOU BELIEVE AGAINST HAVE SAID THAT
WE SEE THE PEAK IN 10 YEAR YIELDS? NOURIEL:
NO, I EXPECT INFLATION IS GOING TO REMAIN PERSISTENTLY HIGH
MEDIUM TURN FORCES GOING TO LEAD TO STAGFLATION OVER TIME. AGING OF POPULATIONS.
RESTRICTION TO MIGRATION. GLOBAL CLIMATE CHANGE, CYBER
WARFARE. PANDEMICS. PEOPLE ARE NOT THINKING IN THE
MEDIUM-TERM. IN THE MEDIUM-TERM, ICY MEDIUM
TERM SHOCK. TOM: WE ARE GOING TO CONTINUE THIS
ON RADIO BUT I HAVE TO ASK ONE THING FOR THOSE WORLDWIDE THAT
REALLY LISTEN. HAVE YOU EVER BEEN THIS GLOOMY
BEFORE OR IS IT A DIFFERENT GLOOMY? NOURIEL:
IT IS A DIFFERENT GLOOMY. I WAS GLOOMY RIGHT BEFORE THE
GLOBAL FINANCIAL CRISIS. TOM: WE SAT IN DAVOS OVER A BEVERAGE
AND YOU ABSOLUTELY NAILED THAT. THAT IS WHY PEOPLE ARE
LISTENING NOW. NOURIEL: IN SOME SENSE NOW, IT IS WORSE.
THERE WAS A DEBT CRISIS IN LATIN AMERICA. I THINK THIS TIME AROUND, YOU
HAVE A STAGFLATION RATE. IT COULD BE WORSE. TOM:
WE ARE GOING TO CONTINUE ON RADIO.
AN IMPORTANT BOOK COMING OUT. IT IS THE KIND OF BOOK WHERE IF
YOU ARE AN OPTIMIST AND YOU FIND OUT DISAGREE, YOU STILL
HAVE TO READ THE BOOK TO FREMONT YOUR THOUGHTS.
LISA, WHAT IS GREAT IS NOURIEL JUST SOLD THE MOVIE RIGHTS.
LISA: HE ALWAYS MAKES ME SOUND ROSY.
AT THE SAME TIME, THERE IS A LOT OF LEGITIMATE ARGUMENTATION
SIMPLY BECAUSE WE ARE SEEING A SEA CHANGE. WITH RESPECT TO SUPPLY-CHAIN
DISRUPTIONS OR DEGLOBALIZATION OR WHATEVER YOU WANT TO CALL
IT, THERE ARE BIG CHANGES HAPPENING AND HOW DE FACTO
THESE OUT INTO A NEW ENVIRONMENT? TOM:
AND WHAT IS SO IMPORTANT ABOUT THIS, THEY ARE ALL OUT OF THE
YALE COMPLEX OVER THE YEARS, BUT THEY ARE VERY BALANCED SHE
CENTRIC VERSUS INCOME STATE SOLUTIONS.
THIS IS A REALLY INFORMATIVE MONDAY.
I THOUGHT IT WAS GOING TO BE A SNOOZE FEST. SOME REALLY
INTERESTING STUFF TO THINK ABOUT.
DIVING INTO THE WEEK AND THE WEEK IS TO WEDNESDAY AND AN
IMPORTANT MEETING. WE WILL DO OUR SPECIAL COVERAGE
IN THE AFTERNOON AS WELL. STAY WITH US. THIS IS BLOOMBERG.
