China's Surprise Rate Cut | Bloomberg Surveillance 08/15/2023

>> THERE IS STILL WIDESPREAD CONCERN THAT THAT EURO AREAS CAN OUTPERFORM -- OUTPERFORM THE U.S.. >> THAT MUST REMAIN A GAZILLION -- RESILIENT. >> IF I THINK OF THE RISK, IT IS NOT TO THE DOWNSIDE, IT IS TO THE UPSIDE. >> ALL OF THEM HAVE TO BE MOVING IN THE SAME DIRECTION. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: CHINA DETERMINED TO MAKE THIS INTERESTING. GOOD MORNING. FOR OUR AUDIENCE WORLDWIDE, THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO. I'M JONATHAN FERRO. YOUR EQUITY MARKET ON THE S&P 500 IS SLIGHTLY NEGATIVE. A LINEUP LOOKING AHEAD, RETAIL SALES AROUND THE CORNER. HOME DEPOT DROPPING ACROSS THE BLOOMBERG. RESULTS FROM WALMART ON THURSDAY. THIS MORNING WE BEGAN IN CHINA. RATE CUTS, AND THE GREAT--DATA NOT GREAT. LISA: IT HAS TO DO WITH RETAIL SALES, INDUSTRIAL PRODUCTION, THEY SCRAPPED THE YOUTH UNEMPLOYMENT METRIC. HE WAS NOT EXACTLY ENCOURAGING. NOW THE QUESTION IS ARE THEY PREPARING A BIG ENOUGH STIMULUS TO STAVE OFF WEAKNESS THAT IS MUCH DEEPER THAN PEOPLE EXPECTED? JONATHAN: YOU HAVE ALLUDED TO THE BIG QUESTION, WHAT IS NEXT? A CONVERSATION FROM STANDARD CHARTERED, IT HAS BEEN AGGRESSIVE. IT IS UNLIKELY TO BE THE LAST MEASURE. WHAT IS NEXT? LISA: CITIGROUP ANALYSTS HAVE SAID THEY ARE NOT SEEING REAL POLICY REFORMS THAT COULD AVOID A JAPANIFICATION OF CHINA. THIS IS NO BAZOOKA. IT IS CLEAR THEY HAVE NOT PREPARED SOME THING MORE COMPREHENSIVE SO WHERE IS THE APPETITE TO DO SOMETHING THAT COULD SALVAGE THE ECONOMY FROM DECELERATING MASSIVELY? JONATHAN: WOULD YOU LIKE THE OFFICIAL REASON FOR YOUTH UNEMPLOYMENT FROM THE NATIONAL BUREAU OF STATISTICS? THEY SAID THE LABOR STATISTICS NEED QUOTE MORE OPTIMIZATION, AND RESEARCH NEEDS TO BE DONE ON WHETHER STUDENTS LOOKING FOR A JOB BEFORE GRADUATION. BUT WE KNOW IT WAS ACCELERATED EVEN THOUGH THERE IS NO STATISTIC. LISA: AND THEY HAD TO LOOK AT HOW WE CAN MASSAGE THE NUMBERS TO DISPLAY THEM IN A BETTER WAY, IT HAS A COUNTERPRODUCTIVE RESULT. WHAT HIGHLIGHTS IS THEY ARE LOSING CONTROL OF THE MESSAGE. THEY'RE TRYING TO SAY LOOK, THIS NEEDS TO BE SOMETHING THAT IS NOT VIEWED AS NEGATIVE. SUDDENLY PEOPLE ARE REAL STEPPING -- REASSESSING DEEPER WEAKNESS. JONATHAN: NUMBERS FROM HOME DEPOT DROPPING. SNEAK PEEK OF SOME NUMBERS. SECOND QUARTER SALES, LESS BAD THAN EXPECTED, DOWN 2%. THE ESTIMATE -4.1%. IN THE MIX, A 5 BILLION BUYBACK. WE ARE UP HERE BY 0.6%. LISA: EVEN IF YOUR COMPANY IS SHOWING DECELERATION, THEY DELIVER A BUYBACK, A SHAREHOLDER FROM THE ACTION. SHARES UP A LITTLE, NOT GREAT. HOME DEPOT, SEPARATE FROM THE REST OF THE EARNINGS WE ARE EXPECTING, WHETHER IT IS TARGET TOMORROW OR WALMART ON THURSDAY AS YOU MENTIONED. IT IS LESS ABOUT THE HOUSING MARKET, WHICH IS A QUESTION MARK AND MORE ABOUT WHAT THE RETAIL IS DOING WHEN THEY GO TO THIS DOOR. THE HOUSING SIDE, HOME REPAIRS IS A SEPARATE STORY. JONATHAN: HAS HELD UP SO WELL. LAST YEAR IT WAS PRICING POWER, THE CEO AT HOME DEPOT, CONTINUED PRESSURE IN BIG-TICKET CATEGORIES. CAN WE READ INTO THAT? LISA: PEOPLE BROUGHT FORWARD ALL OF THEIR PURCHASES OF WASHING MACHINES AND DISHWASHERS DURING THE PANDEMIC AND NOW ALL OF A SUDDEN THEY HAVE A GREATER NUMBER THAN THEY HAVE TO SELL. I WONDER IF WE WILL BE TALKING ABOUT AMAZON PRIME DAY AND HOW TO DISTILL. TO ME IT IS AMAZON'S WORLD WE ARE LIVING IN. THAT IS WHAT WE WILL TALK ABOUT IN 2.5 HOURS. JONATHAN: RETAIL SALES JUST AROUND THE CORNER, HOME DEPOT IN FRONT OF US. TARGET TOMORROW AND WARMER THURSDAY. THE S&P 500 DOWN 0.5 PERCENT, YIELDS HIGHER ON THE 10 YEAR BY THREE BASIS POINTS. WAS NOT ON OUR RADAR BECAUSE THERE IS SO MUCH GOING ON BUT IT SHOULD BE. THE DOMINANT STORY OF THE LAST WEEK OR SO, THE LAST MONTHS, THROUGH 4.20 ON THE TENURE. LISA: NOT ONLY OUR 10 YEAR YIELDS AT THE HIGHEST, BUT INFLATION-ADJUSTED 10 YEAR YIELDS AT THE HIGHEST LEVELS GOING BACK TO 2009 WHICH RAISES A QUESTION OF AT WHAT POINT THE PRESSURE ON EQUITIES STARTS TO GAIN STEAM IN A MATERIAL WAY. JONATHAN: DOES THE FED HAVE TO BACK AWAY? LISA: WE ARE SEEING SOME RESECTION. THAT IS THE STORY WE'VE BEEN HEARING, THINGS ARE GETTING MORE RESTRICTIVE. THIS RETAIL SALES COMING UP. WE ALSO GET EMPIRE MADE FRACTURING, WHICH COULD BE INTERESTING BECAUSE IT IS THE FIRST READ ON AUGUST MADE FRACTURING PEOPLE LOOK AT. HOME DEPOT IS THE FIRST OF THE ORDERS ON THE RETAIL SECTOR AHEAD OF TARGET. AND WALMART. HOW DISTORTED ARE THE RETAILERS THAT ARE TIED TO THE HOUSING MARKET? WE GET THE LATEST READ ON THE HOUSING MARKET. WITH HOMEBUILDER SENTIMENT COMING OUT AT A TIME WHERE 30 YEAR MORTGAGE RATES, 7.5%, THE HIGHEST GOING BACK MORE THAN A DECADE. YOU HAVE TO WONDER HOW LONG PEOPLE CAN KEEP BUYING HOMES AT A TIME WHEN IT IS PROHIBITIVELY EXPENSIVE. HOMEBUILDERS FEEL GOOD BECAUSE THERE ARE NO OTHER HOMES AVAILABLE FOR SALE. BUT AT WHAT POINT IS THIS BITE? JONATHAN: YOU TAKE OUT THE MORTGAGE, YOU BUY A HOUSE FOR THE ALMOST THE SAME PRICE THE GUY NEXT DOOR BOUGHT IT FOR AND THEN YOUR MORTGAGE IS 7.5% AND THE GUY NEXT DOOR IS AT THREE. LISA: I HAVE DONE THE COMPILATIONS, NOT BECAUSE I WAS TRYING TO -- MY POINT WAS YOU CAN SEE A MATERIAL LIKE $4000 DIFFERENCE A MONTH. JONATHAN: THE TIDY MERCEDES AND YOU'RE STRUGGLING TO GET AROUND ON A BIKE. LISA: MORTGAGE ENVY. AT 11:00 A.M., THE MINNEAPOLIS FED PRESIDENT IS SPEAKING. JONATHAN: WE BLAME HIM FOR KEEPING RATES SO LOW FOR SO LONG. LISA: HE HAS A SUPER HAWK TRYING TO MAKE UP FOR IT. JONATHAN: HE IS THE REASON RATES ARE SO HARD FOR SO LONG. IT'S JOINING US NOW IS PORTFOLIO MANAGER AND PARTNER AT ADVISORS CAPITAL MANAGEMENT. CHINA IS A STORY, THE U.S. CONSUMERS THE OTHER. ARE YOU EXPECTING FURTHER SIGNS OF RESILIENCE IN NUMBERS FROM HOME DEPOT, TARGET LATER THIS WEEK, WALMART AFTER? >> IT IS NO MYSTERY, THE CONSUMER IS STRONG. LOOK AT THE DATA ON REAL DISPOSABLE INCOME AND YOU SEE IT HAS BEEN RISING FOR THE LAST SEVERAL MONTHS. THAT IS ADJUSTED FOR INFLATION ENTERED IS BECAUSE THERE ARE MORE PEOPLE EMPLOYED, WAGES HAVE KEPT GROWING WHILE INFLATION HAS SLOWED DOWN. THERE IS MORE MONEY ON IN HOUSEHOLD POCKETS AND REAL PURCHASING POWER. THAT IS WHY WE WERE CONTINUING TO SEE STRONG NUMBERS. RETAIL SALES GROWTH HAS SLOWED DRAMATICALLY. OF IT IS GOING TO CONTINUE TO SLOW, BARELY ABOVE ZERO IN TERMS OF YEAR-OVER-YEAR GROWTH. THAT TELLS ME SOMETHING ABOUT HOW THE CONSUMERS ARE LIKELY TO PERCEIVE THROUGH THE REST OF THIS PERIOD WITH THE ADJUSTMENT OF HIGH INFLATION. EVEN WITH HIGH INTEREST AND HIGH MORTGAGE RATES, THE HOUSING WERE -- FROM -- HOUSING MARKET REMAINS STRONG. 'S JONATHAN: DO YOU EXPECT THIS THREE-MONTH RECESSION ROLLING FORECAST TO GET PUSHED OUT EVERY MONTH? JOANNE: YEAH. WE KEEP DOING IT OURSELVES AND OUR FORECAST. HAVE ALWAYS LOOKED AT THE RESILIENCE OF THE CONSUMER AS THE REASON IT WILL CONTINUE TO GET PUSHED OUT. UNLESS SOMETHING DRAMATIC BREAKS, LIKE COMMERCIAL REAL ESTATE HAVING A CONTAGION EFFECT AS THAT CONTINUES TO FACE LOW OCCUPANCY AND HIGH INTEREST RATES AND RESTRUCTURING. UNLESS SOMETHING BREAKS, THAT STRENGTH IN THE CONSUMER, THE CONTINUED STRENGTH IN THE REAL INCOME THEY HAVE TO WORK WITH, IT DOES SUSTAIN THE U.S. ECONOMY FOR A WHILE. CHINA COULD BE A PROBLEM. LISA: IS CHINA SEEING A REAL SLOWDOWN IN GROWTH? JOANNE: IT IS NOT AS DRAMATIC -- NOT DRAMATIC ENOUGH FOR IT TO BREAK THE U.S. ECONOMY. IT IS IMPORTANT FOR SOME SECTORS AND THAT IS WHY YOU WANT TO BE JUDICIOUS ABOUT WHERE YOU INVEST MATERIALS -- MATERIALS, FOR EXAMPLE IS GOING TO SUFFER MORE. WE ARE SEEING THE CHINA CONSUMER LIKE IN THE U.S. SWITCHED TO TRAVEL SERVICES AND AWAY FROM GOODS. THE GOVERNMENT, LOCAL AND FEDERAL LEVEL, IN CHINA STRUGGLING WITH BUDGETS HAVING OVERSPENT. REALLY PULLING BACK ON SOME OF THE INFRASTRUCTURE INVESTMENTS. THE REAL ESTATE PROBLEM MUCH MORE SEVERE. IT IS REALLY WHERE IN THE ECONOMY ARE THE VULNERABILITY IS AND HOW THAT NEEDS TO GUIDE INVESTMENTS. LISA: THE ROLE OF CHINA ON INFLATION. IF THOUGH SLOWDOWN EXACERBATES THE INFLATION PROBLEMS OR PROLONGS THEM, I THINK IT IS NOTABLE THAT EVEN DURING A TIME OF CONCERN AROUND CHINA GROWTH, THERE IS A CONTINUED SELLOFF AND TREASURIES. WHAT IS THE SIGNAL? JOANNE: THIS OFTEN TREASURY HAS A COUPLE OF OTHER DRIVERS AS OPPOSED TO CHINA. IT IS THE TREASURY NEEDING TO RESTOCK ITS COFFERS AFTER THE POLITICAL DEBACLE OF RAISING THE DEBT CEILING. IT IS ALSO THE RECOGNITION IN THE MARKET THAT IT IS GOING TO STAY HIGHER FOR LONGER FOR THE FED TO NAIL REDUCTION AND INFLATION DOWN TO THE 2% TARGET. THE TALE OF THAT GOAL IS GOING TO BE LONG AND THEY ARE COMING TO REALIZE THAT. JONATHAN: IT IS AMAZING HOW FEW PEOPLE HAVE CHANGE THEIR OPINION ON THE TREASURY MARKET. STEVE MAJOR OF HSBC ON THE SELLOFF, FOR OUR AUDIENCE, HE IS A BOND BROUGHT. UP 10 YEAR YIELD AT THE TOP OF THE RANGE, PROPELLED BY A NARRATIVE THAT INCLUDES A SURGING BOND SUPPLY, A CREDIT DOWNGRADE AND A TWEAK TO THE BOJ WHY SISI. -- TO THE BOJ. THERE ARE SO FEW PEOPLE WHO BELIEVE WE CAN SUSTAIN LIFE ABOVE 4%. LISA: HE IS NOT ALONE. WE'VE SEEN A FROM JP MORGAN, WESTERN ASSET MANAGEMENT. HOW MUCH IS THAT BAKED INTO A MARKET AND WHO WAS ON THE OTHER SIDE, WHO IS PUSHING AGAINST THEM AND CAUSING THIS TO RISE TO THE HIGHEST LEVELS IN DECADES? JONATHAN: CAN WE SUSTAIN LIFE ABOVE 4% ON THE 10 YEAR? WHY IS THAT SO DIFFICULT? JOANNE: PEOPLE ARE RECOGNIZING A NEW REALITY. WE HAVE BEEN HERE BEFORE. WE HAVE SEEN HIGHER REAL INTEREST RATES IN THE PAST, JUST NOT THE PAST 20 YEARS. WHAT IS IT ABOUT THIS REALITY THAT COULD CAUSE THE INTEREST TO REMAIN ABOVE 4% OF THE 10 YEAR HORIZON? IT COULD BE HIGHER GOVERNMENT DEFICITS, NOT JUST IN THE U.S. BUT AROUND THE WORLD, IN THE WAKE OF THE COST IT TOOK TO GET THROUGH THE PANDEMIC. ALL OF THE GOVERNMENT OUTLAYS DROVE UP GOVERNMENT SPENDING AND IN THE U.S. FOR EXAMPLE, THE NEED FOR REBUILDING OUR INFRASTRUCTURE. WHICH HAD BEEN NEGLECTED FOR DECADES. THESE PRESSURES ON THE GOVERNMENT BUDGET, ALL OF THOSE ENTITLEMENT PROGRAMS WITH AN AGING POPULATION. HIGHER DEFICITS COULD LEAD TO HIGHER REAL INTEREST RATES PERSISTENTLY. AND THEN 2% INFLATION, YOU STILL HAVE THE 10 YEAR AT 3.5, 4%. WE HAVE TO LIVE WITH THAT. LISA: THE BANK OF AMERICA FUND MANAGER RESEARCH CAME OUT AND SHOWS PEOPLE ARE THE LEAST BEARISH GOING BACK TO FEBRUARY 22 WITH CASH ALLOCATIONS PLUNGING TO 4.8%. HAVE YOU DEPLOYED CASH AND SAID THIS IS THE NEW NORMAL AND THE ECONOMY IS SUSTAINING IT? LET'S GO TO HOMEBUILDERS, OTHER SECTORS THAT YOU LIKE AND GET OUT OF CASH? JOANNE: WE HAVE BEEN MOSTLY FULLY INVESTED. IF WE HAVE CASHED IT IS BECAUSE WE WANT TO BE OPTIMUM -- OPPORTUNISTIC. IN TERMS OF THE MIX OF EQUITIES, MORE GENERALLY YOUR QUESTION, WE HAVE NOT CHANGED OUR ALLOCATION. DO THINK FOR CERTAIN CLIENTS, CERTAIN TYPES, WE HAVE BEEN ABLE TO TAKE ADVANTAGE OF THE HIGH INTEREST RATES TO SHORE UP THE STABILITY OF THE PORTFOLIOS AND THE MARKET MULTIPLE IS TELLING YOU THAT INVESTORS HAVE BECOME MORE OPTIMISTIC. PERHAPS A LITTLE BIT OF A FEAR OF MISSING OUT AS THE MARKET HAS GONE UP FROM THE LAST SEVERAL MONTHS. BUT WE DO SEE THE MARKET, NOT NECESSARILY TRADING ABOVE THE HISTORICAL AVERAGE. AT THIS POINT YOU HAVE TO BE SELECTIVE. THERE ARE OPPORTUNITIES, ATTRACTIVE STOCKS TRADING BELOW 15 TIMES THAT YOU CAN ADD TO CLIENT PORTFOLIOS TO GENERATE INCOME, TO ACT AS A BUFFER. IF THE MARKET PULLS BACK, AT LEAST YOU GET THAT INCOME. IT IS A TIME TO BE CAREFUL ABOUT WHERE TO GO. WE TEND TO BE MORE VALUE TILTED PARTICULARLY FOR CLIENTS THAT ARE LIVING ON THEIR PORTFOLIOS IN RETIREMENT. JONATHAN: THANK YOU, JOANNE FEENEY OF ADVISORS CAPITAL MANAGEMENT. THE STOCK IS BARELY POSITIVE IN THE PREMARKET, .2%. IN MAY, THEY CUT THEIR GUIDANCE SO THEY HAVE BEEN AT A LOW BAR. THE QUOTE FROM THE CEO. THERE WAS STRENGTH IN CATEGORIES ASSOCIATED WITH SMALLER PROJECTS, WE DID SEE CONTINUED PRESSURE IN CERTAIN TICKET DISCRETIONARY CATEGORIES. LISA: HOW MUCH IS SUPPLY AND DEMAND? THEY BOOSTED SUPPLY AND NOW DEMAND IS FALLING OFF. JONATHAN: HOME DEPOT UNCHANGED, THE LATEST ON CHINA NEXT. FROM NEW YORK CITY, GOOD MORNING. >> WE DON'T WANT TO BE ENEMIES. IF WE CAN BE FRIENDS. AND CHINA CAN ENJOY DEMOCRACY JUST LIKE US AS LONG AS -- OUR DOOR IS ALWAYS OPEN. WE ARE WAITING TO COOPERATE WITH EACH OTHER. JONATHAN: THE VICE PRESIDENT OF TAIWAN SPEAKING WITH TENSIONS WITH MAINLAND CHINA IN A SERIES OF EXCLUSIVE INTERVIEWS WITH BLOOMBERG BUSINESSWEEK. WE WILL TALK ABOUT THE ECONOMIC DATA OUT OF CHINA. RESPONSE INCREMENTAL, CHINA'S CENTRAL BANK UNEXPECTEDLY REDUCED A KEY INTEREST RATE BY THE MOST SINCE 2020. THE SCORES LOOK LIKE THIS. STATESIDE, EQUITY STILL NEGATIVE ON THE S&P 500. WE ARE DOWN BY 0.5% IN THE SESSION LOWS. THE TREASURY SELLOFF CONTINUES. YIELDS ARE HIGHER BY FOUR BASIS POINTS. 4.23 ON THE 10 YEAR, NEW HIGH FOR 2023 AND GETTING CLOSER TO THE CYCLE HIGH, BACK IN OCTOBER. LISA: IT IS IMPORTANT THAT YOU ARE SEEING BONDS SELLOFF AT A TIME OF RISK AVERSION. IT IS GLOBAL RISK AVERSION AND WHAT DOES THIS MEAN ABOUT THE RESPONSE FUNCTION? THE INVERSE RELATIONSHIP OF BONDS AND STOCKS AT A TIME WHEN PEOPLE ARE CONCERNED ABOUT A SLOWDOWN IN GROWTH? PEOPLE ARE STILL WORRIED ABOUT INFLATION AND BONDS ARE NOT THE HAVEN THEY HAVE BEEN. JONATHAN: THIS DECISION CAME BEFORE THE DATA SO NO SURPRISE IT WAS TERRIBLE. THE NATIONAL BUREAU OF STATISTICS SAYS DOMESTIC DEMAND REMAINS INSUFFICIENT. THE ECONOMY RECOVERY FOUNDATION NEEDS TO BE STRENGTHENED. WE HAVE DONE THIS REPEATEDLY, THIS IS NOT WHERE WE THOUGHT WE WERE GOING TO BE AT THE START OF THE YEAR. CHINA WAS MEANT TO BE THE BRIGHT SPOT IN THE ECONOMY, REOPENING. THE REOPENING TRADE, THAT IS ABOUT FIVE MINUTES AT THE BACK END OF LAST YEAR. HERE WE ARE TALKING ABOUT RATE CUTS AND THE PROSPECT OF MORE STIMULUS. LISA: WHEN THE ECONOMY REOPENS, IT WAS NOT READY TO SURGE BACK. THERE ARE PROBLEMS THEY WERE NOT ABLE TO ADDRESS TO KEEP GROWTH AT THE HIGH LEVELS PEOPLE PREVIOUSLY EXPECTED. AND THERE IS NOT A WILLINGNESS TO DO THAT. WITH DISAPPOINTING POLICY PROJECTIONS, THERE IS NOT SOME THING TO DEAL WITH, LEVERAGE AND STIMULATE GROWTH. JONATHAN: LET'S START WITH THE HEAD OF CHINA RESEARCH. LET'S START WITH THE RATE CUT. BIG BY CHINA STANDARDS, BUT WASN'T BIG ENOUGH? >> I THINK NO. THERE IS DEFLATION IN CHINA SO REAL RATES HAVE GONE UP. THIS RATE CUT WAS AN EFFORT. PARTIALLY TO OFFSET THAT. WHAT I THINK WE WILL NEED TO SEE CONSIDERABLY MORE ACROSS DIFFERENT AREAS OF POLICY FOR CHINA TO GET THE RECOVERY TO FIRM FOOTING. WILL NEED MORE COMING ON FISCAL GIVEN THE DEMAND COMING FROM OTHER PARTS OF THE ECONOMY. WE WILL NEED TO SEE MORE MEASURES TO STABILIZE PROPERTY GIVEN THIS MORNING AND THE SIGNS. WE'LL SEE MORE FOLLOW-THROUGH ON THE EFFORTS TO BOOST LONG-TERM CONFIDENCE FROM THE PRIVATE SECTOR AND THE FOREIGN BUSINESS COMMUNITY IN CHINA. JONATHAN: IF I PLENTY OF MOMENTS SO MUCH OF THIS OVER THE LAST DECADE. OFTEN, PEOPLE WHO COME ON THIS PROGRAM WILL GIVE THE POLICYMAKER IN CHINA AND THE BENEFIT OF THE DOUBT. THAT HAS BEEN THE RIGHT VIEW TIME AGAIN. THEY CAN SORT THINGS OUT IN IT TIMELY MANNER. DO YOU SENSE THAT THIS MOMENT IS DIFFERENT? MICHAEL: I THINK IT IS DIFFERENT IN THE SENSE THAT THERE IS SUCH AN ACCUMULATION OF DIFFERENT PROBLEMS AND CHALLENGES FACING THE ECONOMY. YOU'VE GOT THE CONTINUED FALLOUT OF A VERY DEEP READ PAINFUL -- GET VERY DEEP PAINFUL RESTRUCTURING THAT WILL CONTINUE FOR A LONG TIME AND DEPRIVE THE ECONOMY OF CRITICAL DRIVER OF DEMAND. YOU'VE GOT THE ONSET OF A LOT OF STRUCTURAL CHALLENGES, INCLUDING DEMOGRAPHICS, WHICH SLOW THE COUNTRY'S GROWTH RATE. YOU GOT THIS INTERESTING POLITICAL OVERLAY IN TERMS OF HOW SECURE THE PRIVATE SECTOR IS FEELING IN TODAY'S CHINA AND THE BACKDROP OF GEOPOLITICAL TENSIONS AND DECOUPLING, WHICH I THINK IS ALSO UNDERMINING THE CONFIDENCE OF THE PRIVATE SECTOR IN CHINA. IT IS REALLY THAT CONFLUENCE OF PRESSURES SET ASIDE AND AGAINST A POLICY-SETTING THAT REMAINS CONSERVATIVE, WHERE MANY IN CHINA ARE MAKING THE CASE. IT IS PERSUASIVE, THAT POLICY NEEDS TO BE CONSIDERABLY BOLDER AT THIS POINT. LISA: I WANT TO BUILD ON THE LAST POINT YOU MADE ABOUT THE DECOUPLING. HOW MUCH IS THAT NOT JUST FROM A CONFIDENCE LEVEL BUT FROM A BUSINESS LEVEL OF BUSINESS AND MANUFACTURING MOVING OUT OF MAINLAND CHINA BEHIND SOME OF THE WEAKNESS THAT HAS BEEN UNEXPECTED FOR ANALYSTS? MICHAEL: IT IS HARD TO SAY. IT IS A FACTOR. IT IS SHOWING UP. I DON'T THINK IT IS THE KEY MACRO FACTOR. FOR EXPORTS, THE STORY IS SLOWING GROWTH AND THE GLOBAL ECONOMY. AND THE EVENTS ECONOMIES. I DON'T THINK DECOUPLING IS HAVING A REAL BITE YET AT THE EXPORT SECTOR. BUT IT IS THERE AND I THINK IT IS THE LONGER TERM TREND THAT IS -- AND THE PROSPECT OF FURTHER DECOUPLING, WHICH IS HITTING THE PRIVATE SECTOR. YOU SEE IT IN FAIRLY MEET -- FAIRLY WEAK MANUFACTURING IN CHINA. I THINK IT IS THE OUTLOOK THAT IS PROBABLY MORE OF A CONCERN AT THIS POINT THAN THE PRESENT IMPACT ON THE DATA. LISA: ARE THE OTHER POLICIES YOU MENTIONED INDIRECT COUNTERBALANCE TO WHAT XI JINPING AND HIS MINISTRATION WANTS TO DO IN TERMS OF REBALANCING THE ECONOMY, HAVING INNOVATION? 'S OF THE POLICY MEASURES HE WOULD HAVE TO TAKE OR GROWTH WOULD GO AGAINST THE THEORIES HE IS ESPOUSING? MICHAEL: A GOOD POINT. I THINK THERE IS A FUNDAMENTAL TENSION BETWEEN A LOT OF THESE POLICY GOALS. I THINK THE LEADERSHIP WOULD LIKE TO SEE A RAPID TRANSITION OUT OF WHAT THEY CONSIDER OLD GROWTH DRIVERS LIKE PROPERTY INTO NEW ONES LIKE LUXURY VEHICLES AND ADVANCED MANUFACTURING. BUT UNLESS YOU HAVE THE POLICIES THAT WOULD SUPPORT SOURCES OF DEMAND, CONSUMPTION, IT IS HARD TO SEE HOW THIS ALL FITS TOGETHER IN TERMS OF THE DEMAND THAT IS NECESSARY TO KEEP IT COMING, PARTICULARLY WITH EXPORTS SLIDING. THAT IS PERHAPS THE BIGGEST DISCONNECT, WHERE ARE THE SOURCES OF DEMAND GOING TO COME FROM? YOU GOT TENSION BETWEEN PRESIDENT XI JINPING'S POLITICAL AGENDA, WHICH HAS CONTINUED TO EMPHASIZE THE DOMINANT ROLE OF THE PARTY AND A FAIRLY ASSERTIVE FOREIGN POLICY. WHAT THAT MEANS, SO IT CAN BE NECESSARY TO REASSURE THE PRIVATE SECTOR THAT THEY HAVE A PLACE IN THE CHINESE ECONOMY AND THAT GEOPOLITICAL TENSIONS ARE NOT GOING TO DERAIL THIS GROWTH STORY. JONATHAN: A FINAL WORD, NEVER MIND THE GEOPOLITICS, LET'S TALK ABOUT THE TENSIONS DOMESTICALLY. YOUTH ON EMPLOYMENT, JUST BECAUSE YOU STOP ABORTING IT DOESN'T MEAN IT GOES AWAY. WHAT ARE THEY GOING TO DO TO ADDRESS IT? MICHAEL: THEY ARE TAKING STEPS INCLUDING HAVING LOCAL GOVERNMENT OFFICIALS DO THEIR BEST TO FIND OPPORTUNITIES FOR COLLEGE GRADUATES IN OTHER YOUTH. THEY ARE TREATING IT MAINLY AS A STRUCTURAL PROBLEM, WHICH IS NOT COMPLETELY WRONG. BUT I THINK IT IS A REFLECTION OF HOW WEAK DEMAND IS. THIS IS NOT AN ECONOMY THAT IS RUNNING HOT ENOUGH TO CREATE THOSE JOBS. THAT IS A PROBLEM AND IT IS GOING TO TAKE MORE POLICY EFFORTS TO GET THAT MOVING. JONATHAN: PRESIDENT BIDEN WOULD HAVE LOVED THAT, JUST TO SPEND -- SUSPEND CPI REPORTS. LISA: AND ASK LOCAL OFFICIALS TO GO OUT THERE, FIND A JOB FOR YOUR NEIGHBOR AND THEIR NEIGHBOR. JONATHAN: WE NEED TO OPTIMIZE THE CPI REPORT. MICHAEL, THANK YOU. THE LATEST DATA OUT OF CHINA. IT'S UNEMPLOYMENT IS A BIG PROBLEM. IT DOES NOT GO AWAY BECAUSE YOU STOP ABORTING IT. LISA: ESPECIALLY IF YOU ARE TRYING TO BUILD UP A TEAM OF PEOPLE WHO CAN COMPETE ON A GLOBAL LEVEL WHAT IT COMES TO TECHNOLOGY AND ARTIFICIAL INTELLIGENCE. IT BECOMES A PROBLEM IF YOU DON'T FEEL YOU'VE GOT THAT MOBILITY IN THE NATION. THIS GOES TO THE CONTRADICTION WITHIN SOME OF THE GOALS. HOW DO YOU MOVE FROM THE OLD INTO THE NEW WITHOUT THE JOBS TO SUPPORT YOUNG PEOPLE WHO WHAT AMBITION? JONATHAN: THAT IS THE LATEST ON CHINA AND HERE'S THE MARKET. RECESSION LOWS ON THE S&P 500, BREAKING DOWN MORE ON THE S&P. NEGATIVE BY 0.6%. THE SELLOFF CONTINUES AT THE LONG END, THE 10-YEAR IS HIGHER BY FOUR BASIS POINTS. 4.23 ON THE 10 YEAR AND THE DOLLAR HAS BEEN STRONGER. WEAK AGAINST THE EURO THIS MORNING BUT CERTAINLY GOING AGAINST THE GRAIN IN THE FX MARKET. THESE ARE: THIS HAS TO DO WITH PEOPLE EXPECTING RATE CUTS MIGHT NOT HAPPEN AS QUICKLY AS THOUGHT. JONATHAN: JORDAN OF TOMORROW ON THE FOREIGN EXCHANGE MARKET JOINING US NEXT. THIS IS BLOOMBERG. JONATHAN: YOUR EQUITY MARKET SESSION LOWS, 30 DAYS ON THE S&P 500, YOUR SNEAK PEEK OF THINGS NOW. -0.6% ON THE S&P. TODAY THE BEST DAY OF THE MONTH ON THE NASDAQ, SNAPPING BACK BY 0.6 5%. HOME DEPOT OK, NOTHING BAD. A VERY LOW BAR, THE STOCK POSITIVE BY 0.3 PERCENT. THE BUYBACK IN THE MIX AS WELL. SOME CHALLENGES FOR BIG TICKET ITEMS, WE WILL HEAR FROM TARGET TOMORROW AND WALMART THURSDAY. IF WE GET TO THE BOND MARKET, HERE'S THE MOVE. 10 CONSECUTIVE SESSIONS OF 10 YEAR YIELDS CLOSING ABOUT 4%. WE MIGHT DO THAT TODAY. THE PENCE WILL BE GET ON RETAIL SALES ABOUT TWO HOURS. A MAJOR MOVE AND A MAJOR BREAKDOWN. GNOMES ARE HIGHER BY ANOTHER FOUR BASIS POINTS ON THE 10 YEAR. KATHLEEN: LISA: -- LISA: IT IS NOTABLE THAT THERE HAS BEEN A SHIFT THAT NOT ONLY ARE PEOPLE PRICING OUT SUBSTANTIAL RATES -- THEY'RE PRICING OUT RATE CUTS. THAT HAS TO CHANGE THE CONVERSATION IN TERMS OF VALUATIONS. IT IS A BIGGER DEAL THAN SAYING THE FED IS GOING TO RAISE RATES TO A PLACE WHERE IT IS GOING TO BREAK THINGS AND SOMETHING WILL COLLAPSE AND THEY ARE GOING TO CUT RATES TO RADICALLY. THIS IS SAYING THAT RATES ARE GOING TO STAY AROUND 5%. THAT IS A NEW NORMAL THAT PEOPLE HAVE NOT FULLY REASSESSED. JONATHAN: THE TWO-YEAR IS SCREAMING AT. WE TALK ABOUT THE TENS BECAUSE THAT IS WHERE THE BIGGER MOVE HAS BEEN. IN A TWO YEAR YIELD IS CLOSE TO 5% ALL OVER. HE SAID: YOU HAVE TO WONDER WHY THE WE HAVE SEEN -- NOT SEEN A BIGGER RESET AND HOW LONG MARKETS CAN SHRUG OFF THE CONCERN ABOUT LONGER HIGH RATES IN THE U.S.. CHINA NOT HAVING A GOOD TIME RIGHT NOW. CONCERNS GLOBALLY ABOUT WHAT HAPPENS WITH FURTHER RATE HIKES IN EUROPE. YOU PUT THIS TOGETHER AND YOU START TO WONDER IF THIS IS GOING TO BE A TUMULT JOIST COUPLE OF MONTHS. JONATHAN:, THAT IS WHAT IT HAS BEEN SO FAR. A SQUEEZE ON DOLLAR BEARS. FX MARKET, BIT OF A CHANGE. A BREAK FOR THEM. THE EURO ATTACHED STRONGER. STERLING STRONGER AS WELL. THE POUND AGAINST THE U.S. DOLLAR, RECORD WAGE GROWTH. THEY MIGHT HAVE TO COME BACK IN OVER THE BANK OF ENGLAND AND HIKE ALL OVER AGAIN. LISA: 7.8 -- 7.8% WAGE GROWTH WITHOUT BONUSES. WAS EXPECTED TO BE 7.4%. WERE TALKING AT THE END OF THE CYCLE, ASKING QUESTIONS, THE LAST BANK OF ENGLAND MEETING. PEOPLE WERE LIKE THEY SHOULD HIKE ONE MORE TIME FOR COSMETIC REASONS BUT OTHER THAN THAT THEY DON'T NEED TO. AT WHAT POINT DOES THE START TO BITE? JONATHAN: THE MORTGAGE PAIN IN THE U.K., WE HAVE COVERED THIS SEVERAL TIMES THE DIFFERENCE IN THE STRUCTURE OF THE MORTGAGE MARKET AND THE U.K. COMPARED TO THE UNITED STATES. YOU CAN LOCK THEM IN FOR 30 YEARS, 2% LUCKY YEAR. IN THE U.K. THERE WILL BE A LOT OF PEOPLE THAT HAVE TO COME INTO THIS MARKET IN THE NEXT YEAR OR SO. AND IT IS GOING TO HURT. BUT IT IS GOING TO REALLY HURT. LISA: IT RAISES A QUESTION, I HAVE THOUGHT A LOT ABOUT THIS. IF WE HAVE SEEN THE RATE HIKES WE HAVE SEEN SO FAR AND THEY HAVE NOT MADE A MATERIAL DIFFERENCE, DOES THAT MEAN THEY DON'T WORK? THIS IT MEAN THE LONG INVARIABLE LAGS ARE NOT GOING TO BRING DOWN INFLATION IN THE CORRECT WAY? IS NOT GOING TO AFFECT WAGES. WHAT OTHER TOOLS TO THE CENTRAL BANKS HAVE TO DEPLOY TO REIN IN INFLATION? JONATHAN: BILL DUDLEY, FORMER PRESIDENT OF THE NEW YORK FED WROTE A PIECE ABOUT THIS, MAYBE WE ARE SEEING THE IMPACT ALREADY. THAT IS THE DEADLY QUESTION. NEIL. WOULD HAVE SOME -- NEIL WOULD HAVE SOME SIMPLE THEY. PERHAPS THEY GO LONGER AND WAIT. LISA: IN THE U.S. WE HAVE 30 YEAR ORCHESTRATES. IN THE U.K., THERE IS A MORE DIRECT BLEED THROUGH, THE FACT THAT YOU ARE STILL SEEING WAGE GROWTH AT AN ELEVATED LEVEL RAISES QUESTIONS ABOUT WHETHER THESE RATE HIKES HAVE HAD THE IMPACT PEOPLE WERE EXPECTING. JONATHAN: STERLING IS STRONGER, THE POUND AGAINST THE U.S. DOLLAR, CHINA UNEXPECTEDLY CUTTING THE RATE ON THE ONE YEAR LOANS SINCE 2020 AS ECONOMIC ACTIVITY CONTINUES TO WEAKEN. WE HEARD FROM JANET YELLEN ON CHINA, CALLING THE SLOWDOWN EIGHT RISK FACTOR FOR THE U.S. ECONOMY. HOW BIG A RISK FACTOR IS IT? LISA: EVERYONE WE TALKED TO KEEP SAYING IT IS NOT THAT BIG. JOANNE FEENEY SAID THAT IS NOT DRAMATIC ENOUGH. AT WHAT POINT DO WE START TO SAY THESE ECONOMIES HAVE DECOUPLED MORE THAN PEOPLE PREVIOUSLY EXPECTED? THERE ARE SOME CORPORATIONS THAT HAVE A LOT OF SALES IN CHINA. TESLA. APPLE. AND WHAT THAT COULD DO COULD BE SUBSTANTIAL. JONATHAN: IS THIS DRAMATIC ENOUGH? DONALD TRUMP INDICTMENT IN ATLANTA, EFFORTS TO OVERTURN THE 2020 ELECTION DEFEAT IN GEORGIA. IN A STATEMENT, TRUMP'S LAWYERS CALLING THE INDICTMENT SHOCKING AND ABSURD. GOT NEW YORK, FLORIDA, WASHINGTON AND NOW GEORGIA. LISA: AND PEOPLE WILL BE PAYING ATTENTION TO THIS ONE NOT ONLY BECAUSE OF THE PHONE CALLS AND ALLEGATIONS AND THE NUMBER OF PEOPLE WHO ARE ROPED INTO IT. TRUMP AS WELL AS 18 OF HIS ASSOCIATES. BUT IT IS GOING TO BE TELEVISED. YOU CAN IMAGINE THE CIRCUS. IT IS BELIEVED TO BE TELEVISED. PREVIOUS ONES HAVE BEEN TELEVISED. THEY ALLOW THINGS TO BE TELEVISED IN THIS COURT FOR PUBLIC INTEREST. PEOPLE ARE EXPECTING IT TO BE TELEVISED. AT WHAT POINT DO WE SAY OK, ALL PRESS IS GOOD PRESS, IS IT? IN A COURTROOM IF YOU HAVE THE AIRTIME IS THAT A POSITIVE THING FOR TRUMP? JONATHAN: THERE'S A LOT OF PUBLIC INTEREST IN THAT AND THIS. THE ELECTRIC FUTURE IN DOUBT, MORE THAN BILLION OF THE COMPANY'S VALUE. THE SUPPLIER OF POWER TO ROUGHLY 95% OF THE STATES POWER UNDER SCRUTINY AFTER THE DEADLY MAUI WILDFIRE. THIS COMPANY IS UNDER PAINFUL SCRUTINY, THE STOCK GETTING HAMMERED OVER THE LAST COUPLE OF DAYS. LISA: WHY WOULD ANY STOCK OWNER WANT TO OWN THIS WHEN THEY DON'T UNDERSTAND THE LIABILITY? THAT IS THE COMMENTARY WE HAVE BEEN HEARING. THE LIKELIHOOD THEY WILL GO BANKRUPT, PEOPLE WERE SAYING IS PRETTY HIGH. CONSIDERING THAT IT WAS A MASSIVE AMOUNT OF DAMAGE. JONATHAN: HEARTBREAKING. MUCH MORE LATER IN THE PROGRAM. JOINING US, G10 FX STRATEGIST AT NOMURA. LET'S START IN THE U.K. AND THE BANK OF ENGLAND, RECORD WAGE GROWTH. ARE WE BRING THEM BACK IN FOR MORE RATE HIKES TO COME? CLICKS THAT WAGE NUMBER WILL MAKE THE BANK OF ENGLAND THINK ABOUT RAISING RATES. WE THINK IT WILL BE TWO MORE RATE HIKES THIS YEAR. WE THOUGHT THERE WAS ENOUGH DATA TO TELL THEM YOU SHOULD KEEP HIKING MORE. THE RISKS ARE WE GET A WEAKER CCI. PERHAPS NEXT MONTH. AND THE RISK IS JUST ONE HIKE RATHER THAN TWO. THE IDEA OF TWO, MAYBE THREE, WOULD REQUIRE READ CELEBRATION. IT'S I ALWAYS THINK THE LABOR MARKET IS THE MOST LAGGED INDICATOR TRACK AS A CENTRAL BANKER. DOC TWO YEARS AGO, THE ECB AND BANK OF ENGLAND WERE POINTING OUT WEEK REASONS NOT TO RAISE RATES. IT WAS RIDICULOUS, YOU MISS ALL OF THE ENERGY AND COMMODITIES INFLATION THAT WAS COMING. WE HAVE TO MAKE UP FOR LOST TIME WITH THESE RATE HIKES LATE IN THAT CYCLE. STRONG WAGES, FANTASTIC WORKERS. DIFFICULT FOR THE BANK OF ENGLAND. IT'S JONATHAN:'S STERLING POSITIVE OR NEGATIVE? JORDAN: THE REACTION. STERLING TRIED TO RALLY AND THEN IT IS PRETTY MUCH FLAT ON THE DAY. IF THE BANK OF ENGLAND IS 25 BASIS POINTS AS WE EXPECT, IT WOULD NOT MOVE THE NEEDLE. WHAT IS INTERESTING IS IF WE GET NEWS ON GROWTH, WE HAVE STARTED TO SEE THAT IN CHINA, WE ARE HAVING DISMAL SURVEYS OUT OF THE U.K. WHEN IT COMES TO PRICE PRESSURES. THEY ARE TURNING LOWER. MAYBE WE WILL GET A SENSE OF WHETHER WE WILL GET THE EXTRA 50, 225'S IN A ROW. WE SET: HOW MUCH IS THE WEAKNESS WE ARE SEEING IN CHINA BLEEDING NOT ONLY TO THE U.K. BUT EUROPE AND THE EURO? >> THERE HAS BEEN DECOUPLING. THE RISK ON IN THE U.S. MARKET, THE MOVE IN U.S. YIELDS. YET IF YOU WERE TO USE THE USUAL FRAMEWORKS, WHEN CHINA SLOWS DOWN, IT IS USUALLY RISK OFF AND DOVISH AND LEADS TO DOLLAR STRENGTH. THIS IS WHAT WE ARE SEEING. THE GETS TO 750 PERHAPS. THE SORT OF MOVE WE ARE LOOKING FOR. WHERE DOING IN THE BASKET FORMAT. BUT IT IS NOT LEADING TO MASSIVE EURODOLLAR WEAKNESS WHICH IS ODD. IT USED TO BE IF THEY MOVED LIKE THIS, YOU HAVE TO BE SHORT A EURO. THE REASON IS BECAUSE OF DECOUPLING. EQUITIES ARE RALLYING IN THE U.S. OVER THE PAST FEW MONTHS. LISA: CAN IT LAST? I NOTICED YOU ABANDONED THE CALL RECENTLY AND YOU SAID I SEE IT BEING WEAKER FROM HERE. WHAT TRIGGERS THAT IF NOT THE BAD DATA OUT OF CHINA? THE CONCERN AROUND THE INABILITY TO STIMULATE? JORDAN: THERE ARE THREE PILLARS TO CONSIDER. EQUITIES, RATES AND ODDITIES. I WAS LEANING ON THE EQUITY PILLAR, THE RALLY WE HAD HAD OVER THE PAST FEW MONTHS WAS ONE OF THE REASONS HAD THAT CALL. WE ARE STILL LOOKING FOR THIS PART YEAR END BUT IN THE SHORT-TERM, I SEE THE OTHER TWO PILLARS RE-DOMINATING. RATES MARKET SAYS IT SHOULD BE 105. THAT IS NOT GOOD WHERE WE ARE AT CURRENT LEVELS. WITH COMMODITIES WE HAVE HAD HIGHER OIL PRICES. NATURAL GAS, ONE OF THE BIGGEST IMPORTS FOR THE ENERGY SUPPLY CRISIS, HAS PERKED UP. IT HAS MADE ME MORE NERVOUS, WATCHING IT MOVE THE WAY IT IS, DEFAULT RISKS BUILDING ON -- IN CHINA. IN THE SHORT TERM, GIVEN WE HAVE VERY LITTLE DATA UNTIL WE GET THE NEXT CPI AND REPORTS, WE'VE GOT JACKSON HOLE PUT IN THE SHORT-TERM, THEY ARE NOT CATALYST ENOUGH TO BOOST EURO. I'M SURPRISED EURO WAS NOT ON 111 HANDLE AFTER THE CPI REPORT. DISAPPOINTMENTS WITH THE REACTION TO THE MARKET AND GOING FORWARD OVER THE NEXT TWO WEEKS, ONLY JACKSON HOLE TO TALK ABOUT. THAT IS NOT A REASON TO BE LONG ON THE EURO-DOLLAR. BUT WE ARE TAKE LONG EURO'S IS NO WAY AND STERLING. JONATHAN: THAT SMELLS LIKE EUROZONE STAGFLATION. IS THAT WHAT IT IS? JORDAN: INFLATION IS GOING TO COME DOWN. QUITE QUICKLY ACCORDING TO THE SURVEY. THE CONCERNS WERE MORE LAST YEAR'S STORY. THE GROWTH NUMBERS THIS MORNING WERE DISAPPOINTING. I THOUGHT MAYBE WE START TO SEE POSITIVE EUROPEAN DATA SURPRISES. THEY WERE SO WEAK THAT MAYBE THEY IMPROVE ULTIMATELY. THE SURVEY SUGGESTS IT HAS BEEN A WEEK OUTLOOK FOR EUROPEAN GROWTH. I'M NOT SURE WHERE THE NEXT STIMULUS IS GOING TO COME FROM. THE FEDS ARE NOT CUTTING RATES UNTIL NEXT YEAR. THE ECB IS NOT WANT TO BE TALKING ABOUT CUTTING RATES UNTIL NEXT YEAR, OCTOBER OR NOVEMBER TIME. CHINA IS NOT DOING A BIG FISCAL STIMULUS SO FAR. IT MAKES IT HARD FOR ME TO SEE WHY SURVEYS AND GROSS SURVEYS SHOULD PICK UP. A BIT LIKE STAGFLATION BUT HOPEFULLY INFLATION COMES DOWN. JONATHAN: DO YOU THINK LAGARDE IS DONE? JORDAN: WE DO. WE THINK THE DATA OVER THE NEXT HE MONTHS WILL DEVELOP IN A WAY THAT WILL JUSTIFY A NO MORE RATE HIKES. THE ECB AND THE FED HAVE INTRODUCED THE SKIP CONCEPT AND HOPEFULLY BY THE TIME WE GET MORE DATA REPORTS, THAT WILL SAY WE DON'T NEED TO HIKE AT ALL. THE BANK OF ENGLAND IS IN A PLACE WHERE THEY DON'T GIVE THAT STRONG FORWARD GUIDANCE ABOUT SKIPPING OR NOT. HOPEFULLY WE SEE THAT BUILD UP AS A NARRATIVE FOR THE U.K. IN THE NEXT FEW MONTHS. JONATHAN: A BIRTHDAY PRESENT FOR YOU, WE ARE NOT MUCH TO TALK ABOUT ASTON VILLA. WE MIGHT TALK ABOUT THE SCORE OVER THE WEEKEND. JORDAN: CHEERS. JONATHAN: HE IS GONE. 5-1. ABSOLUTELY BETTER. CRUSHED. LISA: YOUR BIRTHDAY PRESENT, HE IS GOING TO GO HOME FEELING WARM AND FUZZY. JONATHAN: NOTHING WARM AND FUZZY ABOUT THE EURO ZONE RIGHT NOW. RATES HAVE BEEN HIKE AGGRESSIVELY, MORE SO THAN WE THOUGHT THEY WOULD BE 18 MONTHS AGO. AND THEN A SLOWDOWN WITH THE BIGGEST TRADE PARTNER, CHINA. CHINA CAN'T RESPOND TO IT IN A WAY THAT THE EURO WOULD LIKE THEM TO. THE QUESTION JORDAN HAS ASKED IS SUPER IMPORTANT. WHERE DOES THE CIRCUIT BREAKER COME FROM ON THE POLICY SIDE? AGGRESSIVE, A BIG MOVE FOR THEM. NOT ENOUGH AS INSUFFICIENT. WHERE DOES IT COME FROM, WHO ELSE IN WHAT NEXT? LISA: THE U.S., MAYBE. CITIGROUP ANALYSTS HAVE TALKED ABOUT THE LOST DECADE FOR CHINA AND THE READTHROUGH FOR EUROPE IS STARK CONSIDERING HOW CONNECTED THOSE ECONOMIES ARE. IF THAT IS THE CASE, WHY IS IT NOT PRICED IN MORE? JONATHAN: WHAT IS IN IT WEAKER? LISA: RIGHT. AND WHY ARE PEOPLE STILL SEEING STRENGTH? I DON'T UNDERSTAND THE MARKET MOVES COMPLETELY BECAUSE PEOPLE ARE SEEING ONGOING INFLATION, WEAKNESS IN EUROPE BUT ONGOING STRENGTH IN THE U.S.. JONATHAN: AND TREASURIES ARE SELLING OFF. WE HAVE DONE THIS OVER THE LAST COUPLE OF DAYS. TYPICALLY WHEN USED TO WAKE UP TO THESE HEADLINES, 2015, 16, CONCERNS WERE PROMINENT. YOU WAKE UP ON MORNINGS LIKE THIS AND THE TREASURY COULD RALLY HARD. THAT IS NOT HAPPENING NOW. LISA: THE STORY OF DECOUPLING HAS UNDERPINNED THE FEELING THAT THIS WILL BE INFLATIONARY FOR THE U.S., NOT DISTILLATION AREA. JONATHAN: 10 YEAR YIELD HIGHER, EQUITY MARKETS SLIGHTLY NEGATIVE. LIVE FROM NEW YORK, THIS IS BLOOMBERG. >> HOUSING SHOULD BE REPRICED AND THE FACT THAT IT IS NOT IS NOT A SIGN OF HEALTH. IT IS A SIGN OF DYSFUNCTION. I THINK THAT IS SOMETHING THAT COULD COME BACK TO BITE US IN TERMS OF WE BEGIN TO GENERATE MOMENTUM IN THE ECONOMY AND ALL OF A SUDDEN, PEOPLE NEED TO MOVE FOR WORK OR WHEN THEY HAVE RETIRED, THEY WANT TO SELL THEIR HOUSE AND SWITCHED TO A DIFFERENT ONE. THERE ARE NO TRADE DOWNS ANYMORE. JONATHAN: THE HOUSING MARKET IN AMERICA LOOKING MORE FROZEN BY THE DAY. DREW, THE CHIEF MARKET STRATEGIST AT MIDLIFE--METLIFE DEAD ON. NO ONE WANTS TO SELL THEIR HOUSE IF THEY HAVE A 2% MORTGAGE EDGE OR BUY A HOUSE THAT THEY HAVE TO TAKE AN 8% MORTGAGE. WHY IS THAT GOING TO CHANGE ANYTIME SOON? LISA: SEE HOMEBUILDERS SKYROCKET. WARREN BUFFETT REVEALING HE IS GOING ALL THE WAY ON THE HOMEBUILDERS. TO BUILD HOMES BECAUSE THERE ARE NONE AVAILABLE AND THEN THEY EXTENDED FINANCING THAT IS LOWER THAN A 7.5% MORTGAGE RATE AND IT HAS OFFSET SOME OF THE LACK OF INVENTORY. NOT TO BE CATASTROPHIC, BUT MY MIND GOES TO WHAT DOES THIS MEAN ABOUT SUPPLY LATER ON DOWN THE LINE? I GO THERE, WE WILL BE OVERSUPPLIED WHEN WE UNFREEZE THE MARKET. RATES ARE DOWN, NOT QUITE ZERO. JONATHAN: BUT IT IS NOT DESPITE HIGH INTEREST RATES, IT IS BECAUSE OF HIGH INTEREST RATES. LISA: THAT IS WEIRD. DOES THIS MEAN THE MARKET SELLS OFF WHEN THEY CUT RATES? IS THAT WHERE WE ARE HEADING? JONATHAN: IT IS BIZARRE. EQUITY FUTURES NEGATIVE BITE 0.6%. THE DATA OUT OF CHINA OVERNIGHT, TERRIBLE. SHORTLY BEFORE DROPPED, CHINA CUT INTEREST RATES BY THE MOST SINCE 2020. IN THE BOND MARKET, IF YOU ARE CONCERNED ABOUT SLOW DOWN GLOBAL GROWTH CONCERNS, WE ARE SEEING YIELDS LOWER, WE'RE ANNOUNCING THAT. IT IS THE WEATHER IN THE TREASURY MARKET OVER THE LAST MONTH? 10 YEAR YIELDS ARE HIGHER. OVER THE PREVIOUS THREE WEEKS, 30 BASIS POINTS. THIS WEEK AGAIN, ON THE 10 YEAR AT 4.2326. HOME DEPOT, A RELATIVE UPSIDE SURPRISE RELATIVE TO DOWNBEAT EXPECTATIONS. A SHARE BUYBACK SCHEME IN THE MIX. THE STOCK IS LOWER BY 0.3%. IN MAY PEOPLE REMEMBER THEY CUT THEIR OUTLOOK. THINGS HAVE NOT BEEN GREAT FOR THIS NAME. LISA: HAVE YOU DONE A DO-IT-YOURSELF OBJECT? -- PROJECT? JONATHAN: NO. LISA: I'M NOT SHOCKED. YOU DON'T EVEN HANG PICTURES? JONATHAN: I HAVE A LOT OF THINGS TO SAY ABOUT HOME DEPOT. BUT IF YOU ASK ME ABOUT DRILLING AND HANGING THINGS, I'M NOT THAT GUY. LISA: I HAVE A LOT OF FRIENDS MAKING THEIR HOMES BETTER BECAUSE THEY'RE NOT MOVING AROUND. THEY DID LOCK IN A MORTGAGE, AT 3.5%, NOT THAT YOU HAVE ANY FEARS JONATHAN: THIS IS THE DYNAMIC -- FEARS -- JONATHAN: THAT IS THE DYNAMIC. ARE YOU THINK YOU HAVE FRIENDS THAT DO? LISA: I HANG MY OWN PICTURES. I HAVE PEOPLE WHO ARE RENOVATING. JONATHAN: A HOMEBUILDERS ANALYST OR BLOOMBERG INTELLIGENCE, CAN WE START WITH HOME DEPOT? WHAT IF YOU LEARN THE NUMBERS? DREW: HOME DEPOT HAD A MODEST BEAT, SALES DOWN 2%. EXPECTATIONS, A DECLINE OF ABOUT 4%. THIS IS IN LINE WITH WHAT WE WERE EXPECTING. THERE HAS BEEN NOISE WITH LUMBAR AND WEATHER. THE KEY TAKEAWAY IS THEY HAVE REAFFIRMED THE FOUR-YEAR GUIDANCE, CALLING FOR A DECLINE OF TWO TO 5%, WHICH INCLUDES THE DROP OF THE HOME IMPROVEMENT MARKET FALLING FIVE TO 10%. THEY REAFFIRMED THIS AT THE INVESTOR DAY A COUPLE OF MONTHS AGO. NOT A LOT OF NEWS FROM THIS RELEASE. THEY DID CONFIRM THERE IS CAUTION AMONG CONSUMERS AND THE BIG-TICKET DISCRETIONARY PROJECTS ARE UNDER PRESSURE. JONATHAN: ONE OF THE STORIES ON THE EQUITY MARKET HAS BEEN THIS RALLY IN THE HOMEBUILDERS. WERE TALKING ABOUT HOW FROZEN THIS HOUSING MARKET IS IN AMERICA. CAN YOU PUT NUMBERS ON IT, HOW FROZEN ARE THINGS? DREW: IF YOU LOOK AT THE EXISTING HOME MARKET, SALES ARE DOWN MORE THAN 30% FROM PEAK. I LOOKED AT THE 30 YEAR MORTGAGE RATE BEFORE THEY CAME ON -- I CAME ON THIS MORNING AND WE ARE AT 7.25%. THAT IS STARTLING. TO GIVE PERSPECTIVE OF HOW OUT OF WHACK RATES AND PRICES SEEM, HOME PRICES WOULD HAVE TO FALL AROUND 35% IN ORDER FOR MONTHLY PAYMENTS RELATIVE TO INCOMES TO FALL BACK TO TREND LEVELS. WE DON'T THINK THAT IS GOING TO HAPPEN. MAIN REASON IS BECAUSE THE MARKET IS FROZEN. THERE IS NO INVENTORY IN THE EXISTING HOME MARKET AND THAT HAS PUT THE BUILDERS IN A UNIQUE SITUATION. THEY HAVE BEEN ABLE TO BRING NEW PRODUCT TO MARKET AND HELP CUSTOMERS MAKE MONTHLY PAYMENTS WORK BY OFFERING RATE BUYDOWNS. THEY HAVE BEEN IN THE SWEET SPOT WITH HIGHER RATES, WHICH IS SOMETHING WE DID NOT REALLY EXPECT COMING INTO THIS YEAR. LISA: I START THINKING, DOES THIS MEAN THAT WHEN THE FED CUTS RATES, OR IF THEY HAVE, THEY WILL HOLD THEM HERE FOR A LONG TIME? MOST PEOPLE EXPECT THOSE RATES TO GO DOWN. HOMEBUILDERS WILL SELLOFF, THAT WILL REDUCE SOME OF THE PROPOSITION THEY OFFER AT A TIME WHERE USER TO SEE MORE LOOSENING IN THE HOUSING MARKET. DREW: IT IS AN INTERESTING QUESTION. THEY ARE UNIQUELY POSITIONED BECAUSE WE THINK THEY CAN BENEFIT IN THE CURRENT MARKET WHERE THEY ARE BUYING RATES DOWN TO 5.5. BUT IF THEY FALL BACK TO 5.5 PERCENT NATURALLY, YOU HAVE EXPANDED THE BUYER POOL SO IT INCREASES MOBILITY. EVEN IN THAT ENVIRONMENT, WE THINK BUILDERS CAN DO WELL. THE BIGGEST RISK, WE'RE NOT SEEING IT NOW, YOU GET MORE STRESS IN THE LABOR MARKET AND UNEMPLOYMENT STARTS A SPIKE. THAT IS WHERE YOU WOULD SEE PRESSURES ON HOME PRICES AND MORE SUPPLY COMING TO MARKET BECAUSE THERE IS FORCED SELLING ACTIVITY. THAT IS SOMETHING WE HAVE NOT HAD TO THIS POINT. LISA: HOMEBUILDERS HAVE BEEN IN A SWEET SPOT BECAUSE LUMBER PRICES HAVE COME IN. FROM HOME DEPOT EARNINGS, THAT HAS BEEN A HEADWIND AT A PROBLEM. THEY'VE SEEN MARGINS COME IN WITH SOME OF THEIR SUPPLIES AND SALES INCREASE NOT ABLE TO BE PASSED ALONG. HOW MUCH IS THAT ONE OF THE VARIABLES THAT CAN BACK UP A HOMEBUILDER OR NOT IF YOU START TO LABOR PRICES GO BACK UP? DREW: RIGHT NOW, PROFITABILITY FOR BUILDERS IN TERMS OF GROSS MARGIN HAS BENEFITED FROM THE FALL IN LOVE OR PRICES. WE EXPECT THAT TO CONTINUE. STARTED TO TAKE BACK HIGHER AND MUCH--THAT COULD ADD PRESSURE. IN SUMMING TO WATCH. AS YOU WOULD EXPECT, LUMBER IS THE BIGGEST COMPONENT OF A HOUSE. LISA: WHEN DO YOU EXPECT MORTGAGE RATES, YOU MENTIONED 7.5% IF YOU LOOK AT BANKRATE, WHEN WILL THAT TRICKLE INTO EVALUATIONS? OR RE-SYNC BECAUSE OF THE TERM STRUCTURE IT WILL NOT HAVE THE RAMIFICATIONS ANYONE EXPECTED? DREW: IT IS AN INTERESTING DYNAMIC BUT HAS TAKEN SHAPE. I THINK THE REASON HIGHER RATES ARE NOT HAVING AN IMPACT ON HOME PRICES AND THE VALUATION OF HOUSES IS BECAUSE THERE IS NO SUPPLY. IN ORDER FOR PRICE TO SEE A DRAMATIC DECLINE, YOU WOULD HAVE TO HAVE THE FORCED SELLING ACTIVITY WHICH WOULD BE ASSOCIATED WITH AN ECONOMIC RECESSION AND RISING UNEMPLOYMENT. WE'VE GOT WELL-HEELED OR WORSE, WE HAVE NOT SEEN EXOTIC LOANS OF THIS CYCLE. WE HAVE GOOD BORROWERS LOCKED INTO LOW FIXED RATES. THERE IS NO REASON FOR THEM TO BE FORCED TO SELL ABSENT A BROADER ECONOMIC RECESSION. JONATHAN: CAN YOU GIVE ME THAT NUMBER AGAIN FOR THOSE THAT MISSED IT? WHAT DO HOUSING PRICES NEED TO FALL BACK -- FALL BACK TO THE BACK TO TREND REPAYMENT LEVELS? DREW: IN THE EXISTING MARKET, ABOUT 35% FOR THE MONTHLY PAYMENT TO FALL BACK. JONATHAN: 35%. DREW READING OF BLOOMBERG INTELLIGENCE. RECESSION IS WHAT UNLOCKS THIS. RECESSION BECAUSE YOU GET THE SELLING AND YOU GET THE FEDERAL RESERVE THAT IS ARGUABLY GOING TO REDUCE INTEREST RATES. UNTIL THEN, WE ARE LOCKED UP AND FROZEN. LISA: WHICH MEANS PEOPLE ARE LESS MOBILE AND THEY NOT ABLE TO AFFORD HOMES. WHICH MEANS PEOPLE ARE MOVING BACK IN WITH HER PARENTS. ALL OF THESE THINGS. I'M TRYING TO WRAP MY HEAD AROUND THIS IDEA THAT WE WERE EXPECTING THAT 35% DROP AND IT DID NOT HAPPEN. YOU ARE SEEING PRICES INCREASE DRAMATICALLY BECAUSE OF LACK OF SUPPLY. I AM TRYING TO WRAP MY HEAD AROUND WHAT THAT MEANS ABOUT THE EFFICACY OF MONETARY POLICY. JONATHAN: DO THEY HAVE TO STAY HERE FOR LONGER OR GO EVEN FURTHER? LISA: I THINK STAYING FOR LONGER IS AN ARGUABLY MORE DESTRUCTIVE TO THE ECONOMY IN A CERTAIN WAY THAN RAISING SO HIGH THAT SUMMING BRAKES AND HAVING TO CUT. IF YOU START TO KEEP RATES AT 5% FOR A LONGER PERIOD OF TIME, AT SOME POINT YOU HAVE TO REFINANCE. JONATHAN: CERTAINLY MORE DESTRUCTIVE FOR THE COMPANIES THAT WILL REFINANCE. DAN GREEN OF SOLACE ALTERNATIVE ASSET MANAGEMENT JOINING US SHORTLY. THE COVER THAT CONVERSATION IN ABOUT FIVE MINUTES. TONS TO TALK ABOUT IN THE EQUITY AND BOND MARKET. THE EQUITY MARKET NOW, NEGATIVE BY 0.6% ON THE S&P. RATE CUTS IN CHINA, AWFUL ECONOMIC DATA, SO BAD THEY ARE NOT GOING TO REPORT WHAT IS HAPPENING WITH YOUTH ON EMPLOYMENT. THE OFFICIAL REASON IS WE NEED TO OPTIMIZE THE REPORT. LISA: WHAT DOES THAT MEAN? JONATHAN: THEY ARE WORRIED ABOUT PEOPLE LEAVING OR JUST ABOUT TO GRADUATE BEING REGISTERED AS BEING UNEMPLOYED. LISA: OPTIMIZE, THOUGH. I'M JUST THINKING, IS THIS SPEAK FORT LEE WAS LOAN? JONATHAN: IT JUST NEEDS TO BE LOWER. >> THERE IS STILL WIDESPREAD CONSENSUS THAT THE EURO AREA IS GOING TO OUTPERFORM THE U.S. AND THAT DOES NOT SEEM TO ADD UP. >> THE CONSUMER REMAINS RESILIENT. >> IF I THINK OF THE RISKS TO INFLATION, IT NOT TO THE DOWNSIDE, IT IS TO THE UPSIDE. >> FOR THE GLOBAL ECONOMY TO BE DOING WELL, THE BOATS HAVE TO BE MOVING IN THE SAME DIRECTION. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. >> IT IS ONE OF THOSE MOMENTS, YOU WAKE UP EVERY MORNING ASKING ONE QUESTION, WHAT HAPPENED IN CHINA? GOOD MORNING. FOR OUR AUDIENCE WORLDWIDE, THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO. I'M JONATHAN FERRO. HER EQUITY MARKET NEGATIVE 0.6%. TO ANSWER THE QUESTION, RATE CUTS HAPPENED IN CHINA. LISA: I THOUGHT YOU WERE GOING TO SAY MORNING WHERE YOU WAKE UP AND WONDER WHAT IS HAPPENING? WE ARE LOOKING AT THE DEEPEST RATE CUT IN CHINA SINCE 2020, RIGHT BEFORE RELEASING DATA THAT WAS WORSE THAN EXPECTED, SHOWING A DECELERATION AND LACK OF GROWTH IN THE WORLD SECOND-BIGGEST ECONOMY. THE QUESTION GOES TO WHAT CAN THEY DO TO REVIVE GROWTH? EVERYONE KEEP SAYING WE ARE NOT SURE THEY HAVE A WILL OR THE POWER TO DO THAT. JONATHAN: WE WENT THROUGH COMMENTARY IN THE PREVIOUS HOUR. THE COVER HAS BEEN AGGRESSIVE. SOCGEN, THIS IS UNLIKELY TO BE THE LAST MEASURE. WHAT DOES IT MEAN FOR THE EQUITY MARKET? JP MORGAN AND THE INVESTMENT BANK, -- WE STAY UNEXCITED BY CHINA EXPOSURE, DESPITE PERIODIC BOUNCES ON THE BACK OF STIMULUS, HOPING NEWS WILL CONTINUE FADING THIS. DOES IT STILL HOLD? LISA: HE WAS RIGHT. EVEN THOUGH THERE WAS STIMULUS, THAT WOULD BE A CATALYST FOR TO RESPOND MOVE, BUT THE HANG SENG IS DOWN 1%. YOU STILL SAW THE SELLOFF IN CHINA AT A TIME WHEN IT IS CLEAR THAT FINALLY THE GOVERNMENT IS WILLING TO DO SOME STIMULUS. THE IMPLICATION IS IT IS NOT GOING TO BE ENOUGH AND THERE ARE DISSONANCES BETWEEN THE GOALS FROM THE COMMONEST PARTY AND TRYING TO DEMONSTRATE GREAT MEANINGFUL GROWTH. JONATHAN: TWO STORIES, ONE IS CHINA AND ONE IS THE U.S. RETAIL SALES. BIG FOCUS ON THE CONSUMER, RETAIL EARNINGS. YOU WILL HEAR FROM TARGET AND WALMART. YOU'VE ALREADY HEARD FROM HOME DEPOT. BACKDROP IN THE MARKET AS WE WAIT FOR THE DATA THIS MORNING, TREASURIES ARE SELLING OFF. 10 YEAR YIELD IS HIGHER BY ANOTHER THREE OR FOUR BASIS POINTS. THE 10 YEAR YIELD AT 4.23, NEW HIGHS FOR NEXT YEAR -- FOR THIS YEAR. LISA: WHEN YOU LOOK AT THE INFLATION WOULD -- INFLATION-ADJUSTED RATE ON THE 10 YEAR, IT IS THE HIGHEST GOING BACK TO 2009. RETAIL SALES PLAYS INTO THIS, AMERICANS ARE GOING TO SPEND. THAT IS WHAT THEY DO. HOW LONG CAN THEY KEEP DOING IT? IS AT THE AMAZON PRIME AFFECT? HOW MANY TIMES ARE WE GOING TO HEAR THAT THIS IS JUST AMAZON, EVERYONE BOUGHT THINGS? JONATHAN: THEY DID. LISA: WHAT THEY KEEP HAVING TO BUY IT DESPITE PEOPLE SAYING THEY WOULD RUN OUT OF MONEY FROM THEIR SAVINGS BY EARLIER THIS YEAR. JONATHAN: EQUITIES A SOFTER, NEGATIVE BY 0.6% ON THE S&P. I HAVE MENTIONED A BOND MARKET MOVE, YIELDS HIGHER BY THREE BASIS POINTS, 4.2227. THE DOLLAR HAS BEEN STRONGER. WEAKER AGAINST THE EURO. ONE .0 932. LISA: INTERESTING CONSIDERING CHINA. 8:30 A.M. IS THE U.S. RESALES NUMBER. EXPECTATION FOR A RE-EXHILARATION. EVERYONE WILL BE TALKING ABOUT AMAZON PRIME. HOME DEPOT SHARES BOUNCING ABOUT AFTER DELIVERING WITH EXPECTATIONS. ELATED TO HOME DEPOT, THE NHP HOUSING MARKET INDEX, A HOMEBUILDER SENTIMENT, HOW LONG CAN THEY REMAIN IN THE SWEET SPOT WHEN MORTGAGE RATES OF 7.5%? THIS IS BEEN A STORY THAT KEEPS GIVING AND THE BIGGEST SURPRISE HAS BEEN -- IT IS FULL OF SURPRISES THIS YEAR. JONATHAN: UPSIDE SURPRISES. LISA: NO KASHKARI WILL SPEAK AT 11 CLOCK A.M. ABOUT THE INTEREST RATE. I'M CURIOUS WHETHER HE GIVES ANY TEA LEAVES FOR JACKSON HOLE IN TERMS OF HOW THE PARADIGM IS GOING TO SHIFT. ARE THEY GOING TO BE LOOKING AT HOLDING RATES HIGHER FOR LONGER? IS THAT MORE EFFECTIVE THAN GOING FURTHER? JONATHAN: HE CAP RATES TOO LOW FOR TOO LONG, THE MORTGAGE RATE IS FROZEN. LISA: YOU WILL BE THE MAN WHO YELLS AT A CLOUD. JONATHAN: JOINING US, GOOD MORNING. CAN WE PARK CHINA AND FOCUS ON WHAT IS HAPPENING IN THE BOND MARKET? 4.23 ON THE 10-YEAR. WHAT YOU BELIEVE IS THE DOMINANT FACTOR UNDERPINNING THE MOVE OVER THE LAST MONTH? ? I DON'T KNOW IF I CAN DISAGGREGATE THE DOMINANT FACTOR BUT IT IS THE SUPPLY, THE PRESUMED STICKINESS OF THE FED FUNDS RATE. THE IDEA THAT INFLATION IS NOT GOING IMMEDIATELY BACK TO 2%. ALL THAT PLAYS INTO IT. IF I HAD TO PICK ONE DOMINANT FACTOR, IT WILL PROBABLY BE THE SUPPLY STORY. ANOTHER EXAMPLE OF A DOMINANT THEME IN MY RESTING LIFE, WHEN YOU THINKS OF THE PRICE END, IT IS NOT. YOU THE ISSUANCE WAS COMING, WE KNOW THE BUDGET DEFICIT IS OUT OF CONTROL. THE HEADLINE ON THE REFUNDING AUCTIONS GOING UP IN SIZE AND EVERYBODY WAKES UP TO THE REALITY THAT HAS BEEN TRUE FOR MANY OF US FOR A LONG TIME. JONATHAN: WHAT IS BEHIND IT SHOULD MATTER FOR WHAT WE INVEST AFTER. IF IT IS ABOUT BETTER ECONOMIC DATA, YOU CAN ARGUE RISK ASSETS WILL BE OK. WHAT DOES IT MEAN FOR CREDIT, RISK ASSET -- RISK APPETITE MORE BROADLY? DAN: FOR MANY OF US, CERTAINLY PEOPLE OLDER THAN US, THEY HAVE BEEN WRESTLING WITH THIS ISSUE SINCE THE COMMISSION 20 YEARS AGO. WE HAVE BEEN TOLD WE ARE AT THE EDGE OF THE FISCAL CLIFF, ETC.. THERE IS A WHITE NOISE CHARACTERISTIC TO THIS DISCUSSION. IT IS STILL THE CASE. IT IS HARD TO INVEST, WHETHER HOME DEPOT, PICK YOUR STOCK HERE. WITH ANY IDEA THAT INVESTORS WILL WAKE UP AND DEEMED U.S. GREECE TO USE THE ANALOGY. IT IS HARD TO ASSUME THAT WILL HAPPEN IN THE IMMEDIATE TIMEFRAME. BUT IF IT HAPPENED TOMORROW, EVERYBODY WOULD GO, OBVIOUSLY. THAT IS THE DICHOTOMY ON THESE BIG MACRO ISSUES. WHETHER IT IS A DEFICIT OR SOCIAL SECURITY OR UNFUNDED LIABILITIES. LISA: HOW LONG BEFORE SOMEONE HE SAYS THE U.S. IS THE NEW GREECE? DAN: IF YOU'RE ON TWITTER FOR MORE THAN 30 SECONDS, THE U.S. HAS BEEN GREECE FOR 20 YEARS. LISA: WHICH RAISES THE QUESTION ABOUT THE WHITE NOISE. THE COMPLACENCY ABOUT WHAT IS PRESTON. YOU SAID WHAT WAS THE ADAGE THAT WHENEVER IT IS PRICED IN, IT IS NOT. WE WOKE UP TO CHINA AND DISBELIEF IN EASING AND MORE EASING DOWN THE PIKE. COUNTERINTUITIVE REACTION IN MARKETS WITH PEOPLE SHRUGGING IT OFF. SEEMING TO SAY THIS IS DIFFERENT. THEY WON'T BE ABLE TO STIMULATE THIS -- THEIR WAY OUT OF THIS. TO THINK THAT IS ACCURATE PRICING? >> IT IS TRUE, WE HAVE KNOWN FOR QUITE SOME TIME THAT CHINA IS WEAK. THE MACRO DATA HAS CORROBORATED THAT AND THE COMPANIES THAT INVEST, LARGE AMOUNTS IN CHINA, STARBUCKS, ETC., HAVE CORROBORATED THE IDEA THAT CHINA HAS BEEN WEAK FOR SOME TIME. I THINK IT IS CORRECTED TO VIEW THE ANNOUNCEMENT AS A SYMPTOM RATHER THAN A CAUSE. IT IS THE EFFECT OF EIGHT WEEK REBOUND FROM THE COVID RECOVERY. YOU MENTIONED MAYBE THEY DON'T HAVE ENOUGH WHEREWITHAL OR ABILITY TO RESCUE THE ECONOMY THIS TIME. THIS IS ULTIMATELY WHAT A LOT OF PEOPLE HAVE BELIEVED FOR MANY YEARS, WHICH IS ULTIMATELY STATE-CONTROLLED, CENTRALIZED PLANNED ECONOMIES OVER TIME DON'T PERFORM AS WELL AS FREE-MARKET ECONOMIES. AND YOU DON'T HAVE QUITE THE ABILITY TO SELF REGULATE, SELF IMPROVE ALONG THE LIKES OF THE UNITED STATES OR WESTERN EUROPE. LISA: CAN THE U.S. KEEP DOING WELL OF CHINA DOES NOT ECHO DAN: FOR SURE. CAN IT GO UP IF APPLE GOES DOWN? THAT HAS BEEN A DEBATE FOR 15 OR 20 YEARS AND IS NO LESS FALSE TODAY THAN IT HAS BEEN THE ENTIRE TIME. I THINK CHINA IS A LARGE CONSUMER. WE ARE A LARGE CONSUMER OF THEIR GOODS. THEY HAVE BEEN AN EXPORTER OF DEFLATION -- INFLATION AND THE BIG STORY WE KNOW SO WELL IS IN THE PROCESS OF SHIFTING. BUT AT THE END OF THE DAY, THE U.S. HAS NEVER GONE INTO A RECESSION. -- DECEMBER 5, BECAUSE OF SOMETHING THAT IS HAPPENED AT SERGEANT SLADE. HE SAID: TWO TAILED TO WHERE WE STARTED THE CONVERSATION. WE ARE SEEING YIELDS MOVE HIGHER, EVEN WITH CONCERN THAT SHOULD BE A RISK OFF KIND OF FIELD WHICH WOULD TAKE YIELDS LOWER. WHAT DOES THAT DO TO SOME OF THE REAL ESTATE AND OTHER TERM STRUCTURES THAT HAVE AVOIDED THE TRUE PAIN RELATED TO HIGHER RATES? IT MIGHT FEEL MORE THE LONGER THIS GRINDS OUT? DAN: WE TALKED WITH US LAST TIME AND IT HAS BEEN A THEME FOR MINE FOR SOME TIME. SORRY THIS MORNING SAYS FED OFFICIALS ARE SHIFTING FROM HOW HIGH TO HOW LONG? THIS IS AN THEN WE BEEN TALKING ABOUT FOR NINE MONTHS NOW, WHETHER YOU GOT 5.5 OR 5.75, IT IS LESS CONSEQUENTIAL THAN HOW LONG YOU LEAVE RATES AT THAT LEVEL. FROM MY STANDPOINT AND THE EQUITY AND CREDIT MARKETS, THE LONGER YOU LEAVE RATES, MORE REFINANCING RISK YOU INTRODUCE TO THE BOND MARKET. WE KNOW THE HIGH-YIELD MARKET YIELDS AND CALL IT A .5%. WITH THE COUPON IS 6.5. THERE ARE 200 BASIS POINTS OF SPREAD AS THE BOND STARTS MATURE OVER THE NEXT YEARS. THERE IS ROUGHLY 2 TRILLION WORTH OF IGN HIGH-YIELD LOANS SET TO RESET AT PRESUMABLY -- NOT LOANS, BUT IGN HIGH-YIELD. THE LONGER YOU LEAVE RATES, THE MORE REFINANCING RISK YOU INTRODUCE FOR EQUITY IN THE CREDIT MARKETS. ANYONE IN THE REAL ESTATE MARKET WOULD ECHO A SIMILAR THEME, WHICH FROM THE REAL ESTATE MARKET, THE LONGER YOU LEAVE RATES UP THERE, THE MORE HARD IT IS TO -- WE KNOW IN PARTS OF OFFICES IN REAL TROUBLE, I'VE IMAGINED MANY VIEWERS KNOW SIX MONTHS FROM NOW, IF RATES ARE STILL FIVE PLUS PERCENT, WE WILL HAVE A DIFFERENT CONVERSATION THE NOW. JONATHAN: I AM SHOCKED ESTATE MOGULS DON'T WANT THIS. EVERY TIME I SEE THOSE. IT'S FINISHED THERE, SOMEONE LIKE YOU, WHEN DO YOU START TO WORRY ABOUT THAT? WE UNDERSTAND THE MATURITY PROFILES OF CERTAIN COMPANIES AND WHEN THAT WALL IS GOING TO HIT. LET'S SAY IT IS OUT THERE, THE END OF 24 AND STARTED 25. WHEN YOU START TO BACK AWAY FROM CREDITS? DAN: THE PROBLEM YOU WRESTLE WITH AS AN ASSET MANAGER AND FUND MANAGER IS WHEN I ADVISE OUR CEO AND CIO AND SAY THIS WHAT WE SHOULD THINK, THERE IS A CATALYST COMPONENT. TO BORROW A PHRASE FROM EARLIER, IN THE DISCUSSION, WHITE NOISE. TWO OVER SIMPLE FIVE THE COMPLICATION -- CONVERSATION, TOUCH ON SOMETHING ABOUT THE CONSUMER, AT THE END OF THE DAY THIS IS ABOUT THE LABOR MARKET. IF THE ON A PLANET RATE STAYS IN THE MID-THREES AND WAGES ARE DOING FINE, PRICES CONTINUE TO FALL, THE ECONOMY SHOULD UNBALANCE WELL. THAT IS SEPARATE FROM THE RATE CONVERSATION BUT IT IS HARD TO MAKE THE CASE THAT THINGS WILL GET WORSE IF THE LABOR MARKET STAYS WHERE IT IS. JONATHAN: THANKS FOR BEING HERE, DAN FROM SOLIS ALTERNATIVE ASSET MANAGEMENT. ON CHINA, U.S. RETAIL, THIS BOND MARKET, GETTING TRICKIER BY THE DAY. LISA: I KEEP THINKING ABOUT WHAT HE SAID. IT IS ALL WHITE NOISE UNTIL IT IS IN. UNTIL THE LABOR MARKET CRACKS. WHEN DOES IT BECOME MORE ? JONATHAN: PRETTY DEPRESSING. ON BRENT. WE ARE GOING TO CATCH UP WITH BOB DOYLE -- BOB DOLL. RETAIL SALES AND ABOUT ONE HOUR 20 MINUTES. LISA: SOME PEOPLE ARE SAYING THEY WILL SERVE FALLING OFF A CLIFF. NOW PEOPLE ARE SAYING IT IS AMAZON PRIME DAY. EVERYONE BOUGHT ALL OF THE DEALS. I WHAT POINT DO WE THROW IN THE TOWEL AND REALIZE CONSUMERS ARE GOING TO GET BUYING? JONATHAN: YOU HAVE SEEN SUBTLE SIGNS ON THE DOMESTIC FRONT FROM EARNINGS. THE DOMESTIC THOSE GUEST AIRLINES FLAGGING SOFTENING DEMAND AND DROPPING FARES. I HAVE NOT WITNESSED THAT. THEY ARE COMING DOWN DOMESTICALLY. LISA: HOW MUCH OF IT IS THIS BALL OF MONEY GOING FROM ONE AREA TO ANOTHER? IT WENT TO SERVICES AND PEOPLE ARE SICK OF FLYING AROUND AND IT IS GOING TO GO BACK TO ANOTHER PART OF THE ECONOMY. MAYBE BACK-TO-SCHOOL SUPPLIES. JUST THEORETICALLY. PEOPLE ARE WAITING FOR THE STUDENT LOAN REPAYMENTS TO CRIMP SOME OF THE DYNAMISM THE U.S. CONSUMER HAS. BUT DO YOU KNOW THAT 45% OF BORROWERS SAY THEY ARE NOT GOING TO REPAY, THEY'RE GOING TO JUST BE IN DEFAULT FOR THE FIRST YEAR? DON'T HAVE TO GET REPAID ANYWAY. THIS IS CREDIT CARD. JONATHAN: I WISH WE HAD MORE TIME. DAN HAS THINGS TO SAY AND HE HAS TIMES -- HE HASN'T GOT TIME. LIVE FROM NEW YORK CITY, GOOD MORNING. ♪ >> EVERY INDIVIDUAL CHARGE IN THE INDICTMENT IS CHARGED WITH ONE COUNT OF VIOLATING GEORGE'S RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS, TO ACCOMPLISH THE LEGAL GOAL OF ALLOWING DONALD J TRUMP TO SEIZE THE PRESIDENTIAL TERM OF OFFICE BEGINNING ON JANUARY 20, 21. JONATHAN: THE DISTRICT ATTORNEY OF FULTON COUNTY, LAYING OUT THE INDICTMENT AGAINST DONALD TRUMP AND 18 OTHERS OVER EFFORTS TO OVERTURN THE PRESIDENTIAL ELECTION IN THE STATE. TRUMP'S ATTORNEYS CALLING THE CHARGES QUOTE SHOCKING AND ABSURD. WE ARE LOSING COUNT THE--OF THE AMOUNT OF CASES. LISA: A LOT OF PEOPLE ARE LOOKING AT THIS BECAUSE IT IS A STATE CASE. EVEN IF TRUMP DOES BECOME PRESIDENT, HE CANNOT ABSOLVE HIMSELF OR PARDON HIMSELF AND THAT IS ONE THING PEOPLE ARE LOOKING AT. I'M WATCHING TO SEE WHETHER IT WILL BE TELEVISED AND IF THAT IS A GOOD OR BAD THING FOR THE FORMER PRESIDENT'S CANDIDATURE -- CAMPAIGN. JONATHAN: WILLOUGHBY ON THE STAGE? I ASK EVERY DAY. LISA: PEOPLE DON'T KNOW. CHRIS CHRISTIE SAYING HE WILL. THAT IS WHAT HE WANTS. BUT HIS ADVISERS I'M SURE ARE SAYING DON'T GO. JONATHAN: THERE WAS A 2% CHANCE, 1% WAS HIS EGO. THERE WE GO. THAT IS ONE BIG STORY. ANOTHER IS CHINA. ALLOW ME TO GO TO SOME OF THE PRICE ACTION. EQUITIES LOWER BY 0.6% ON THE S&P 500. IN THE TREASURY MARKET, IF YOU HAVE BEEN FOLLOWING IT, AS YOU WERE MEANS ONE THING. 4.2287. YIELDS A BITE FOR BASIS POINTS. CONCERNS ABOUT WHAT IS HAPPENING IN CHINA. THE DATA WAS NOT GREAT. WE HAD THE BIGGEST RATE CUT GOING BACK TO 2020 A STRONG SUGGESTION. THERE NEEDS BE MORE THAN THAT. LISA: BEARING OUT AND CREAM MARKETS WHERE YOU SEE CHINESE EQUITIES SELLING OFF DESPITE THE MOVE FOR SUPPORT. THIS POINTS TO THIS FEELING THAT THEY NEED TO DO MORE AND THEY ARE UNWILLING TO DO THAT IN ANY MEASURES THEY HAVE LAID OUT SO FAR. IT IS NOT A BAZOOKA AS ONE COMMENTATOR SAID. JONATHAN: IT IS TELLING THAT MARKETS HAVE NOT RESPONDED POSITIVELY. YOU MIGHT EXPECT A RALLY IN THE EQUITY MARKET, A RALLY IN TREASURIES, ABA COPPER OR BASE METALS PICKING UP. LISA: PEOPLE ARE NOT GOING OUT AND BUYING. HOW DO YOU DEAL WITH THAT IF PEOPLE DON'T FEEL OPTIMISTIC ENOUGH TO GO OUT THERE AND SPEND? THAT IS WHAT YOU'VE SEEN IN THE BEHAVIOR OF THE REOPENING OF CHINA AND IT GOES TO THE ROOF -- YOUTH ON PLUMMET RATE, WHERE THEY DON'T SEE THEY WILL GET JOBS. ALTHOUGH WE DON'T KNOW. JONATHAN: THERE OPTIMIZING IT. DO YOU WANT THE FULL QUOTE ON THE OPTIMIZATION? "THE NATIONAL BUREAU STATISTICS -- THE NATIONAL BUREAU STATISTICS SAYS THEY NEED "FURTHER OPTIMIZATION," AND WHETHER STUDENTS LOOKING FOR A JOB BEFORE GRADUATION SHOULD BE COUNTED IN THE LABOR STATISTICS. LISA: DOES ANYONE READ THIS AND SAY THIS IS GOOD NEWS, WE WILL JUST ASSUME THE BEST? OR IS IT JUST THEY ARE TRYING TO FIGURE OUT HOW TO GET THE MESSAGE CORRECT FOR THE NEXT READ? WHAT DOES THIS DO FOR THE CREDIBILITY THAT THEY DON'T NECESSARILY HAVE DEVELOPED IN MARKETS WITH RESPECT TO THE INTEGRITY OF THEIR DATA? IT IS NOT NECESSARILY AFFECT THINGS MUCH. JONATHAN: IT IS NOT FOR US, IT IS VERY DOMESTIC CONSUMPTION. YOU HAVE TO IMAGINE. LISA: I WONDER. JONATHAN: LET'S CATCH UP WITH WENDY AND WASHINGTON, D.C.. WONDERFUL TO CATCH UP. SOME OF THE LEGAL ISSUES IN NEW YORK, WASHINGTON, D.C., FLORIDA. TALK ABOUT GEORGIA AND WHAT IS DIFFERENT ABOUT THIS CASE. WHEN DATE: AS LISA SAID, IT IS VERY -- WENDY: FIRST, IF HE WERE ELECTED HE--IF YOU WERE INDICTED HE COULD NOT PARDON HIMSELF. THE OTHER THING THAT IS DIFFERENT ABOUT THIS CASE IS THE SIZE AND SCOPE. JUST BY THE NUMBERS, IT IS A 98 PAGE INDICTMENT WITH 41 CRIMINAL COUNTS AGAINST 19 PEOPLE. THIS IS NOT JUST DONALD TRUMP AND A BUNCH OF CO-CONSPIRATORS AS WE SAW FROM THE CASE IN D.C.. THIS IS RUDY GIULIANI, HIS OTHER LAWYERS, THE FORMER WHITE HOUSE CHIEF OF STAFF. WHAT IS IMPORTANT IS WE KNOW THAT THEY DID THESE THINGS. WE WERE DOING DAILY STORIES ABOUT THE ATTEMPTS TO OVERTURN THE ELECTION. THE BIG QUESTION FOR ALL OF THESE PROSECUTORS IS TO CONVINCE THE JURY THAT THESE ARE CRIMES. LISA: WHEN WILL THIS MATTER IN TERMS OF POPULARITY RATINGS OF DONALD TRUMP? THIS IS BEEN A BOOST TO HIS POPULARITY IF ANYTHING. WILL CONTINUE TO BE? WENDY: WE WILL HAVE TO SEE HOW THIS PLAYS OUT ONCE IT IS PASSED THEY PROSECUTORS ACCUSING HIM OF CRIMES. ONCE WE GET INTO THE DISCOVERY AND WE START SEEING THE EVIDENCE PILE UP, ONCE JURIES START REACTING TO IT AND IT IS ON TRIAL, THERE MAY BE SOME DIMINUTION OF HIS POPULARITY AND THERE ALREADY HAS BEEN AMONG MODERATE REPUBLICANS, INDEPENDENT VOTERS AND EVERY DEMOCRAT. BUT I THINK PERHAPS, AND I'VE BEEN SAYING THINGS LIKE THIS SINCE 2015 SO WHO KNOWS IF I'M RIGHT, AT SOME POINT PEOPLE WILL SEE TRUMP FOR WHO HE IS. LISA: THERE'S A QUESTION GOING FORWARD ABOUT WHAT THE OTHER CANDIDATES TO BECOME THE REPUBLICAN NOMINEE ARE GOING TO SAY ABOUT THESE CASES. ORIGINALLY, THEY RALLIED BEHIND THE FORMER PRESIDENT. ARE THEY STILL? WENDY: YES. I DON'T UNDERSTAND THE CAMPAIGN STRATEGY, BUT ALONE THE AUTHORITY OR WHETHER THEY ARE RIGHT OR WRONG. THE THICK RUMMY SAW ME CAME OUT I THINK OVERNIGHT AND SAID I WOULD WRITE THE BRIEF MYSELF TELLING THEM TO OVERTURN THIS. AT RON DESANTIS AND THE OTHERS ARE TALKING ABOUT THE WEAPONIZATION OF THE QUOTE UNQUOTE BIDEN JUSTICE DEPARTMENT AND ALL THAT. THEN THERE IS THE WHAT ABOUT HUNTER BIDEN REACTION. I DON'T UNDERSTAND HOW YOU RUN AGAINST SOMEONE WHILE DEFENDING THEM. IT IS ODD BUT MAYBE THAT IS THE WAY THEY THINK THEY WILL BECOME MORE POPULAR WITH PRIMARY VOTERS. BUT IT IS NOT HAPPENING. IT WILL BE INTERESTING TO WATCH THE DEBATE EVEN IF HE DOES NOT SHOW UP. IF IT BECOMES A ISN'T TRUMP GREAT, WE ALL AGREED DEBATE. JONATHAN: THE FORMER VICE PRESIDENT IS NOT GOING TO SAY THAT, ANOTHER, GOVERNOR CHRISTIE. IS THAT HELPING OR HURTING THEM? WENDY: COMBINED, THEY HAVE ABOUT EIGHT OR 9% SO I DON'T KNOW. THEY BECOME MORE POPULAR WITH INDEPENDENT, SUBURBAN, DEMOCRATIC VOTERS FOR STANDING UP TO WHAT THEY BELIEVE WERE CRIMES HAPPENING. BUT IT IS NOT HELPING THEM WITH THEIR REPUBLICAN PRIMARY VOTERS. RIGHT NOW, THE BIGGEST COMPETITORS TO DONALD TRUMP ARE -- AND DISTANT SECOND AND THIRD, RON DESANTIS AND VICK RAMASWAMY. THEY ARE DEFENDING HIM. JONATHAN: WENDY IN WASHINGTON, D.C., A WEEK AWAY FROM THE FIRST DEBATE FROM REPUBLICANS, HOSTED BY FOX NEWS. HOW DO YOU BEAT THE FORMER PRESIDENT IF AT THE SAME TIME YOU ARE DEFENDING HIM? LISA: THIS IS THE QUESTION AND NO ONE HAS AN ANSWER. NO ONE IS EFFECTIVELY TAKING A STANCE ONE WAY OR ANOTHER. THE PEOPLE WHO GO AGAINST HIM ARE LOSING POPULARITY. THE PEOPLE WHO DON'T ARE FORCED INTO A POSITION WHERE THEY ARE BASICALLY BACKING HIM AND HE IS THEIR OPPONENT. HOW DO YOU NAVIGATE THIS? IT HAS BEEN A QUAGMIRE. JONATHAN: I HEARD THAT RAMASWAMY SAYING HE WOULD TAKE COUNSEL FROM THE FORMER PRESIDENT IF THEY WERE -- IF YOU WOULD TO MAKE IT TO THE WHITE HOUSE. THEY ARE BASICALLY SAYING WE SUPPORT HIM BUT I AM A BETTER CANDIDATE FROM HIM. LISA: HOW HAVE WE PRICED THIS IN? I DON'T MEAN TO JUST GO BACK TO MARKETS BECAUSE IT IS EASIER. JONATHAN: I DON'T KNOW HOW YOU PRICE THIS END. WE SAY: BUT HOW DO YOU FIGURE OUT WHERE THIS IS GOING WHEN YOU HAVE LEGALLY FRAUGHT CANDIDATES FACING AN ELECTION CYCLE AT A TIME WHEN WE ARE WORRIED ABOUT THE DEBT OR GEO LEGAL TENSIONS? HOW DO YOU PRICE IN THE POTENTIAL FOR REAL UNREST? I AM THINKING THROUGH WHAT THE RAMIFICATIONS COULD BE GOING DOWN. IS IT WHITE NOISE AS DAN GREENHOUSE SAYS? JONATHAN: ONE OF THEM WAS A GOVERNANCE ISSUE. IF YOU'VE GOT WORRIES ABOUT GOVERNANCE AND INSTITUTIONAL CREDIBILITY IN WASHINGTON, D.C., THERE'S A REASON TO BE CONCERNED ABOUT THE TREASURY MARKET AS WELL. LISA: ESPECIALLY WHEN THERE DOES SEEM TO BE POLITICAL POTENTIAL TURMOIL. WE HEARD THAT FROM OTHERS. JONATHAN: THE NOISE IS ALMOST IMPOSSIBLE IN WASHINGTON AND NOW IS ONE OF THOSE TIMES. JONATHAN: 60 MINUTES AWAY FROM U.S. RETAIL SALES DATA. EQUITIES ON THE S&P 500 NEGATIVE. IT WE ARE DOWN BY HALF OF 1% ON THE S&P. YESTERDAY WAS THE BEST DAY FOR THE NASDAQ 100 OF THE MONTH SO FAR SO WE SNAPPED BACK DOWN THIS MORNING OFF THE BACK OF CONCERNS ALL OVER AGAIN OVER IN CHINA AND HIGH YIELDS IN THE MIX AS WELL. THE 10 YEAR YIELD IS HIGH ONCE AGAIN IN THE BOND MARKET. LET'S CALL IT 4.23. THIS IS A NEW HIGH FOR 2023. THE HIGHS OF THE CYCLE GO BACK TO OCTOBER. WE ARE GETTING CLOSER AND CLOSER ON A 10 NEAR. I LIKE THE TWO-YEAR TOO. ALL THE RATE CUTS HAPPENING NEXT YEAR -- YOUR TWO-YEAR I THINK WE CAN CALL THAT 5%. LISA: THERE IS A STORY UNDERPINNING THIS THAT THE FED WILL KEEP RATES HIGHER FOR LONGER, AND IT IS NOT GOING TO BRING INFLATION DOWN MEANINGFULLY TO GET THOSE YIELDS IN OR AT LEAST THE TERM PREMIUM WILL BE HIGHER GOING FORWARD FOR SOME REASON. YOU PUT THAT TOGETHER AND WHAT DOES THAT DO TO THE REST OF THE RISK COMPLEX? MAYBE IT IS ALL WHITE NOISE. JONATHAN: WE NEED TO IDENTIFY THE DOMINO EFFECT BEHIND IT. IS IT THE YIELD CURVE CONFUSION OVER AT THE BOJ? IS IT SOMETHING HAPPENING WITH THE ECONOMIC DATA? TAKE YOUR PICK. IS IT THE DOWNGRADE? I THINK ULTIMATELY MOST PEOPLE SHRUG THEIR SHOULDERS AT THE DOWNGRADE. LISA: ADD TO THAT THE LIKES OF J.P. MORGAN OF WESTERN ASSET MANAGEMENT OF HSBC RECONFIRMING THE BUY DURATION CALL. WHERE ARE THEY? IF THERE ARE SO MANY BUYERS OUT THERE WHY HAVE YOU NOT SEEN THE INSTITUTIONS STEP IN IN A MEANINGFUL WAY? JONATHAN: CONSENSUS VIEW IS IT IS DIFFICULT TO SUSTAIN LIFE ABOVE 4% ON THE U.S. 10 YEAR. WE HAVE HAD 10 CONSECUTIVE DAYS NEAR OR ABOVE 4%. THE EURO AT THE MOMENT IS JUST A LITTLE STRONGER AGAINST THE DOLLAR. JORDAN ROHR CHESTER WAS TALKING 1.16 ON THE 10 YEAR. THE ECB HAS TO DO LESS. A ROCK AND A HARD PLACE FOR CHRISTINE LAGARDE. LISA: THIS FACT TH WE ARE SEEING -- THE FACT THAT WE ARE SEEING EURO STRENGTH ON A DAY LIKE TODAY WHEN THE EUROPEAN ECONOMY IS SO CONNECTED TO CHINA IS AHEAD SCRATCHER. THERE IS NOT THE SAME KIND OF GROWTH INFLATION HAPPENING IN CHINA. JONATHAN: CHINA'S CENTRAL BANK IS EXPECTED TO CUT RATES ON ITS ONE-YEAR LOANS F THE MOST SINCE 2020. I THINK THAT COMMENT RIGHT THERE IS QUITE INTERESTING. HOW MUCH OF A RISK FACTOR IS IT? DAN SOLIS WAS WITH US -- DAN GREENHOUSE OF SOLIS. I LOVE THAT NEW NAME, THEN SOLIS. LISA: MARKETS AGREE WITH HIM. A LOT OF OTHER PEOPLE WHO HAVE COME ON ALSO AGREE WITH HIM, CONSIDERING THE FACT THAT STOCKS HAVE HELD ON. HOW MUCH OF THE ECONOMY THEY ARE DECELERATING IS PERHAPS A LITTLE BIT DEEPER THAN PEOPLE HAD EXPECTED. IT IS NOT GOING TO MATERIALLY DIMINISH THE INFLATION OR GROWTH PROJECTIONS THAT THE U.S. HAS. ARE WE DEALING WITH T DECOUPLING? JONATHAN: DONALD TRUMP INDICTED IN ATLANTA OVER EFFORTS TO OVERTURN HIS 2020 ELECTION DEFEAT IN GEORGIA. IT IS THE FOURTH CRIMINAL CASE BROUGHT AGAINST THE FORMER PRESIDENT. IN A STATEMENT TRUMP'S LAWYERS CALLING THE INDICTMENT "SHOCKING AND ABSURD." LISA: IT WILL BE HIGHLY POLITICIZED. IT IS A DIFFICULT ONE TO TALK ABOUT BECAUSE THERE WERE PEOPLE ON BOTH SIDES WHO THINK THAT THIS IS EITHER A LONG TIME COMING OR EVIDENCE OF THE WITCH HUNT THAT DONALD TRUMP TALKS ABOUT. YOU HAVE BOTH OF THOSE POLES AND THEY ARE NOT GETTING CLOSER TO EACH OTHER. HOW DOES THIS SHAKEOUT HEADING INTO AN ALEXION WHERE TRUMP IS -- AN ELECTION WHERE TRUMP IS THE FRONTRUNNER? JONATHAN: HOME DEPOT'S STOCK IS DOWN 0.2%. YOU WILL HEAR FROM WALMART ON THURSDAY. WE WILL GET THAT RETAIL SALES PRINT FOR AMERICA. LISA: WILL PEOPLE LOOK PAST IT? HOW MANY TIMES HAVE WE GOT AN ECONOMIC DATA PRINT AND PEOPLE SAY "IT IS DISTORTED BECAUSE OF THIS, THIS, AND THIS." I FEEL LIKE WE WILL HAVE THAT KIND OF DISCUSSION AFTER THIS ONE TOO. JONATHAN: THIS IS KIND OF IT FOR CHAIRMAN POWELL. IS HE DELIVERING A SPEECH? LISA: I HAVE NOT SEEN CONFIRMATION, BUT WE ARE EXPECTING. HIM TO DELIVER THEY SEE THE NEUTRAL RATE NOW. THE QUESTION IS NOT WHETHER THEY WILL RAISE RATES ANOTHER 25 BASIS POINTS BUT WILL THEY SEE IT TERMINAL -- JONATHAN: T.K. IS TAKING A BREAK THIS MORNING. LET'S TALK ABOUT THIS. HOW RESILIENT IS THIS U.S. CONSUMER? >> I THINK WE WILL SEE SOME CONFIRMATION IN THE DATA IN 55 MINUTES WITH THE RETAIL SALES TELLING US HOW WELDED THE CONSUMER DO DURING AMAZON PRIME DAY, HOW STRONG IS CONSUMER SPENDING ON GOODS, WHICH HAS BEEN THERE ARE REALLY SURPRISING NUMBER THIS YEAR WE AT GOODS HAS BEEN STRONG. I THINK THAT IS RELATED TO THE FACT THAT THE LABOR MARKET IN THE U.S. HAS HELD UP PRETTY WELL EVEN THOUGH IN THE LAST COUPLE OF REPORTS WE HAVE SEEN EMPLOYMENT GROWTH SLOWING, AGGREGATE INCOME STARTED GROWING AND WE HAVE INFLATION SLOWING WHICH IS HELPING WITH HOUSEHOLD DISPOSABLE INCOMES. WHEN I LOOK AT THE NEXT THREE TO SIX MONTHS I SEE SOME HEADWINDS FOR THE U.S. CONSUMER FOR SURE. SOME OF THAT IS THE EXCESS SAVINGS BUFFER THAT WAS BUILT DURING THE PANDEMIC WILL BE DEPLETED BY YEAR END. SOME OF IT HAS TO DO WITH THE RESUMPTION OF STUDENT DEBT REPAYMENTS LATER THIS YEAR, BUT NEVERTHELESS I THINK THERE IS ENOUGH SUPPORT FROM THE LABOR MARKET TO PREVENT THE U.S. CONSUMER FROM -- WE NO THEIR BALANCE SHEET IS FAIRLY HEALTHY. EVEN THOUGH CREDIT CARD BALANCES HAVE INCREASED THEY ARE INCREASING FROM LOW LEVELS AND WE KNOW THE U.S. CONSUMER STILL HAS ROOM TO LEVERAGE IN ORDER TO SMOOTH CONSUMPTION. LISA: WE WERE TALKING ABOUT A ROLLING BALL OF MONEY AND THIS WEIRD BEHAVIOR AFTER THE PANDEMIC WHERE EVERYONE RUSHED OUT AND HAD A YOU ONLY LIVE ONCE MOMENT. THEN THERE WAS A QUESTION. WHEN WILL THEY SAY "ENOUGH WITH TRAVELING," AND MOVE SOMEWHERE ELSE? ARE THEY STARTING TO SHIFT THEIR DISCRETIONARY SPENDING TO ANOTHER AREA? LISA: IF YOU WANTED -- BLERINA: IF YOU WANTED TO LOOK FOR SIGNS OF TOUGHNESS IN THE TRAVEL AND HOSPITALITY SECTOR, YOU COULD POINT TO THE RECENT WEAKENING IN AIRFARE PRICES. THAT COULD BE A SIGNAL THAT DEMAND IS NOT AS STRONG AS IT USED TO BE. AT THIS POINT IN THE BUSINESS CYCLE I DON'T THINK THEY WERE VERY MANY OTHER AREAS WHERE THE CONSUMER COULD GO BACK AND SPEND IN FORCE, ESPECIALLY ON BIG-TICKET ITEMS SUCH AS ELECTRONICS AND HOUSEHOLD ITEMS, THEY DID SPEND ALREADY DURING THE PANDEMIC AND WE HAVE A HOUSING MARKET THAT EVEN THOUGH IT HAS STABILIZED RECENTLY, WE ARE NOT SEEING THE SAME VOLUME OF HOMES BEING BUILT AND HOUSES BEING SOLD, SO THAT MEANS THE PIPELINE OF PURCHASES SHOULD BE LOWER AS WELL. LISA: IF YOU PUT THIS ALL TOGETHER, IT SOUNDS LIKE THE CONSUMER IS HANGING IN THERE. THERE MIGHT BE LESS BUT WE ARE LOOKING AT A SCENARIO WHERE THAT WILL NOT BE WHAT BREAKS THE ECONOMY. IS THAT WHAT YOU ARE SAYING? BLERINA: I THINK SO. WE NEED TO LOOK AT WHAT WILL CAUSE THE UNEMPLOYMENT RATE TO INCREASE. WE NEED SOMETHING TO BE IN THE PIPELINE IN THE PRIVATE SECTOR, IN THE CORPORATE SECTOR, AND HERE I THINK THE CONVERSATION YOU ARE HAVING ABOUT HOW LONG WILL INTEREST RATES BE RESTRICTIVE IS VERY IMPORTANT. WE NEED TO LOOK AT THE CORPORATE SECTOR, THEIR BALANCE SHEET, AND HOW LONG CAN THEY SUSTAIN THIS SERVICE BEFORE PROFIT MARGINS REALLY GET SQUEEZED, BECAUSE ONCE THAT HAPPENS THAT WILL BE THE TIME WHEN THEY WILL NOT BE ABLE TO AFFORD LABOR ANYMORE. THEY WILL START FIRING AND THAT WILL BE THE TRIGGER FOR THE U.S. HOUSEHOLDS. JONATHAN: LISA AND I WERE TALKING ABOUT THE PROSPECT OF CHAIRMAN POWELL SPEAKING NEXT WEEK. MOST PEOPLE EXPECT IT TO HAPPEN. WHAT DO YOU THINK THE FOCUS WILL BE? BLERINA: I THINK YOU WILL RECOGNIZE SOME OF THE PROGRESS WE HAVE MADE ON INFLATION TO DATE AND IN THE LAST COUPLE OF REPORTS THERE WERE SIGNS FOR OPTIMISM. THERE ARE REASONS TO BE CONCERNED ABOUT HOW SUSTAINED THE DECELERATION IN INFLATION WILL BE BECAUSE A LOT OF THAT HAS COME FROM USED-CAR PROCESSES. WE ARE NOT GETTING AN UNEQUIVOCAL WEAKNESS IN INFLATION MESSAGE BECAUSE THE PCE MEASURE HAS BEEN STICKIER. WE EXPECT THE DATA FOR JULY TO BE STRONGER THAN THE CPI DATA SO I THINK HE WILL BE BALANCED AND NOT RULE OUT THE FACT THAT THEY MAY NEED TO DO ANOTHER INTEREST RATE INCREASE THIS YEAR. FOR SOME THAT IS BEYOND THE POINT BUT I THINK THIS IS VERY IMPORTANT BECAUSE WE ARE NOT CERTAIN THAT THE LAST HIKE IS BEHIND US SO I THINK IT IS PREMATURE THEN FOR MEMBERS TO GO OUT AND TALK ABOUT CUTTING INTEREST RATES AND HOW MUCH AND HOW SOON WE WILL NEED TO CUT INTEREST RATES NEXT YEAR SO I THINK IT WILL COME DOWN TO POWELL TO BE ON MESSAGE, TO BE BALANCED ABOUT THE PROGRESS DONE SO FAR, AND ABOUT THE WORK THAT IS STILL AHEAD OF US AND LEAVE IT TO THE DATA TO DO THE HEAVY LIFTING. OF COURSE IF INFLATION DECELERATES MUCH FASTER THAN THERE MAY BE ROOM TO EASE MONETARY POLICY IN 2024, BUT IT IS TOO SOON TO START PLANNING FOR THAT YET. JONATHAN: THANK YOU. THE U.S. DATA, MORE OF THAT LATER THIS MORNING. LESS OF THAT, MORE DATA. U.S. RETAIL SALES -- EQUITIES ARE DOWN. U.S. RETAIL SALES, THE FOCUS CITIBANK, BANK OF AMERICA. THERE MAY BE -- LISA: THAT IS WHAT WE HAVE SEEN IN THE DATA. PEOPLE ARE LOOKING AT THE CORE INFLATION. YOU START TO SEE PEOPLE TALKING ABOUT HOUSING BOTTOMING OUT, RENTS STARTING TO PICK UP IN CERTAIN PLACES. IT POINTS TO THAT STRENGTH THE JIM BIANCO SPOKE ABOUT. JONATHAN: COMING UP, LINZIE, CHIEF ECONOMIST. LISA: -- JONATHAN: T.K. WHATEVER ASKED ME TO SAY IT, THEN I WOULD HAVE BUTCHERED IT. HOPEFULLY, WE WILL SEE HIM LATER THIS WEEK. WE WILL TALK WITH HIM ABOUT THE FX MARKET. RECORD VICE GROWTH IN THE U.K.. FOR THOSE OF YOU LOOKING TO GET ON THE HOUSING MARKET, MAY BE THE BOE COMES BACK WITH MORE. LISA: THAT IS WITHOUT BONUSES! THAT IS SHOCKING COMPARED TO THE EXPECTATION OF 7.4%. THEY SHOULD STOP ASKING FOR WAGE INCREASES. JONATHAN: THE POUND ISN'T WORKING EITHER. >> THE ADMINISTRATION REMAINS COMMITTED TO TAKING ACTIONS TO LOWER PRICES FOR AMERICANS WHERE WE CAN AND WE CONTINUE TO MONITOR DEVELOPMENTS ABROAD THAT COULD AFFECT PRICES AND GROWTH. JONATHAN: JANET YELLEN MENTIONING ON TRYING NOT A BIGGER RISK FACTOR FOR THE U.S. ECONOMY. JONATHAN: IT IS GOING TO AFFECT SOME COMPANIES MORE THAN OTHERS. LISA: I'M THINKING OF APPLE. I'M THINKING OF TESLA. THE BIG INDUSTRIALS AS WELL, CATERPILLAR, OTHERS, THEY'RE RATCHETING DOWN THERE SALES EXPECTATIONS IN CHINA. WE ARE DOWN 7% THREE YIELDS ARE HIGHER BY FOUR BASIS POINTS. WE TALKED A LOT ABOUT THE ECONOMIC DATA STILL TO COME. GEOFF YU JOINS US NOW. WONDERFUL TO GET YOU ON THE PROGRAM WITH US, PARTICULARLY FROM THE U.K. WHERE WE CAN START IN LONDON WITH RECORD WAGE GROWTH. HOW SUPPLY CONSTRAINED IS THIS MARKET GOING FORWARD FROM HERE? >> I DON'T THINK THINGS WILL GET EASIER ANY TIME. IF YOU LOOK AT THE JOB CREATION OVER THE LAST THREE MONTHS OR SO THESE ARE VERY STRONG GAINS. SOME OF THE SERVICES SECTORS IN TERMS OF OUTRIGHT WAGE GROWTH, THAT HAS GROWTH BUT OTHER AREAS OF THE ECONOMY ARE STILL GOING STRONG, SO GOVERNOR BAILEY IS GOING TO WATCH HIS LANGUAGE VERY CAREFULLY IN TERMS OF NOT ASKING FOR WAGE INCREASES. JONATHAN: WE ARE TALKING ABOUT THINGS LIKE SOFT LANDINGS GETTING INFLATION DOWN TO 2% WITHOUT A RECESSION. DO YOU THINK THE BANK OF ENGLAND HAS THAT LUXURY? GEOFF: MY VIEW IS THAT THEY SHOULD HAVE DONE 50 BASIS POINTS SO YOU FRONTLOAD ALL OF THAT EASING NOW. TODAY'S DATA JUSTIFIES THAT. THEY WILL HAVE TO KEEP GOING IN 25 INCREMENTS UNTIL WE GET A THEIR PATH. LISA: HOW DIFFERENT IS THE SITUATION IN THE U.K. WHERE YOU ARE FORESEEING FUTURE RATE HIKES AND THE ECB WHEN SOME PEOPLE ARE GAMING OUT THE END OF THE RATE HIKES OVER THERE ESPECIALLY IN LIGHT OF WHAT WE ARE SEEING WITH CHINA? GEOFF: THE SPEECH FROM MADAME LAGARDE, AND SHE MEANT SOMETHING ABOUT THE EURO ZONE MARKET. I THINK YOU CAN APPLY THAT TO THE U.K. YOU'RE SEEING A LOT OF WAGE GROWTH, FROM A LOT OF NON-PRODUCTIVE SECTORS. YOU GET THAT STAGFLATION IN THE U.K. AND THAT WILL NOT HELP ANYTIME SOON. IN THE EURO ZONE THEY WILL CONTINUE TO PRINT AWFUL, PROBABLY BELOW 40. THAT HAS A MORE DISINFLATIONARY TRACK. THE EURO ZONE GET TO A SOFT LANDING BUT THEY WILL HAVE TO LOOK CLOSELY AT THE MANUFACTURING SECTOR, NOT ONLY IN THE SHORT TERM BUT IN THE MEDIUM TO LONGER TERM AS WELL. LISA: THIS IS REALLY IMPORTANT. W HAVEE BEEN HEARING FROM THE LIKES OF KIDDE JUKES WHO SAYS HE IS SURPRISED THE EURO ISN'T WEAKER. YOU ARE SAYING THE DISINFLATION FROM CHINA COULD ENABLE THE SOFT LANDING IN EUROPE THAT A LOT OF PEOPLE THOUGHT WAS LOOKING LESS LIKELY THAN IN THE U.S.. GEOFF: WHAT YOU HAVE IS WITH MANUFACTURING JOBS, THESE ARE HIGHER VALUE ADDED JOBS. THE. WILL SEE HI VAL -- THE MULTIPLIER COMES THROUGH. YOU WILL SEE THE HIGHER VALUE-ADDED JOBS COME THROUGH. THAT GLIDE PATH IS IN PLACE AND TREND GROWTH IS LOWER IN THE EURO ZONE AS WELL. IN THE MEDIUM TO LONGER TERM ONCE WE GET INFLATION BACK TO TARGET,? WHERE IS THEIR STRATEGY I THINK THAT IS 10 YEAR CONVERSATION THAT NEEDS TO HAPPEN RIGHT NOW. JONATHAN: LET'S TALK ABOUT THE GROWTH STRATEGY OUT OF CHINA RIGHT NOW. THEY CALL THE CUT AGGRESSIVE. MOST PEOPLE ASSUME THIS WAS INSUFFICIENT. IF THERE IS MORE TO COME WHAT IS THERE TO COME? GEOFF: SHALL WE HAVE A CONVERSATION ABOUT QUANTITATIVE EASING FROM THE PEOPLE'S BANK OF CHINA, WHAT IF YOU GET QUANTITATIVE EASING OUT OF CHINA TO THE EXTENT THAT IT CAN OFFSET SOME OF THE BALANCE SHEET CONTRACTION? THAT CHANGES GLOBAL LIQUIDITY DYNAMICS MATERIALLY. THERE ARE LEGAL CONSTRAINEDS AROUND THIS -- CONSTRAINTS AROUND THIS. IT IS DOABLE. I'M NOT SAYING THAT IS NOT MY BASE CASE BUT ALL OPTIONS NEED TO BE ON THE TABLE RIGHT NOW IN CONCERT WITH MONETARY. THAT IS NEEDED FROM CHINA RIGHT NOW. IT IS GETTING QUITE LATE IN THE YEAR SO WE EXPECT MORE BUT THE LATER THEY PUT IN TERMS OF POLICY, THE STRONGER IT IS GOING TO HAVE TO BE. DO BELIEVE THINGS ARE THAT BAD AT THE MOMENT OVER THERE? GEOFF: IF YOU GO BACK TO THE PREVIOUS PREMIER, HER INDEX IS AVAILABLE ON BLOOMBERG. LOAN GROWTH WAS PART OF THAT, POWER GENERATION, FREIG YOU ARE NOTH SEEING THE SEASONALT RECOVERY WE ANTICIPATED IN, THE PAST. DO YOU WANT TO WAIT UNTIL THINGS ARE THAT BAD AND FIND OUT IT IS TOO LATE BECAUSE HE WILL ALWAYS HAVE TO PLAY CATCH-UP. IT IS ALREADY QUITE LATE IN. YOU HAVE TO FRONTLOAD THE -- IT IS ALREADY QUITE LATE IN THE YEAR. LISA: A LOT OF PEOPLE ARE SAYING THE FACT THAT THE COMMUNIST PARTY HAS NOT DONE MORE INDICATES A LACK OF WILLINGNESS TO GO AS FAR AS YOU WERE TALKING ABOUT,, SOME MASSIVE QUANTITATIVE EASING PROGRAM. DO YOU THINK IT IS PREMATURE TO WRITE OFF SOMETHING MORE SUBSTANTIAL? GEOFF: ANY QE PROGRAM, IT IS EASY TO DRAW AN PREVALENCE WITH WHAT HAPPENED IN 2009. THE TRANSMISSION OF QE AND THEN YOU LOWER REAL RATES, CHINA NEEDS TO LOWER REAL RATES RIGHT NOW. THAT IMPORTS SOME INFLATION. THE MINISTRY OF FINANCE IS WORRIED AND THE PBOC IS WORRIED ABOUT A DEAD ISSUE BUILDING 10 YEARS FROM NOW BUT THEY NEED TO DO SOMETHING DIFFERENT TO 2009. THEY HAVE SET THE RIGHT THINGS OVER THE -- SAID THE RIGHT THINGS OVER THE LAST FEW MONTHS, BUT THEY NEED TO DO WHATEVER THEY CAN TO GET REAL RATES DOWN. JONATHAN: QUITE A MOMENT TODAY. DOLLARS CNH THROUGH 730. THAT CURRENCY PAIR IS WEAKER. LISA: GEOFF IS SAYING THAT MIGHT IMPORT SOME INFLATION. IT POINTS TO HOW STRANGE THIS MOMENT IS WITH SUCH A FRACTURING OF THE MAJOR GLOBAL ECONOMIES AND CHINA FACING DEFLATION, OR DISINFLATION IN A MAJOR WAY. THIS WAS AN ENGINE OF GROWTH FOR SO MANY YEARS. JONATHAN: THE U.S. WOULD LIKE TO IMPORT SOME DISINFLATION TOO. LISA: I THINK YOU ASKED TO THE RIGHT QUESTION. HOW DIVORCED IS THE U.S. ECONOMY FROM CHINA? WHERE IS THE INTERCONNECTEDNESS, NOT ONLY OF EUROPE AND CHINA, BUT ALSO THE U.S.? JONATHAN: THERE ARE TWO WAYS OF FRAMING THE QUESTION AND YOU ONLY HAVE TO CHANGE A COUPLE OF WORDS FOR IT TO HAVE A VERY DIFFERENT ANSWER. HOW DIVORCED IS THE U.S. ECONOMY? HOW DIVORCED ARE THE U.S. MARKETS? WE ARE LESS DEPENDENT ON IMPORTS OF CHINESE GOODS. WE CAN SEE THAT IN THE DATA. LISA: IF YOU THINK ABOUT THE REAL ESTATE MARKET, HOW MANY CHINESE INVESTORS CAME INTO U.S. REAL ESTATE TO BUY UP BUILDINGS THAT MAY NOT BE THERE TO THE SAME DEGREE. HOW MUCH OF THAT IS UNDERPINNING THE MOVE IN YIELDS? JONATHAN: THE CONVERSATION CONTINUES WITH BOB DOLE. HE JOINS US IN THE STUDIO IN ABOUT FIVE MINUTES TIME. THIS IS BLOOMBERG. ♪ >> WHAT WE REALLY NEED IN ORDER FOR SOME OF US TO MATERIALIZE IS TO SEE MONETARY POLICY THAT IS A LITTLE MORE RESTRICTIVE. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE LISA ABRAMOWICZ. JONATHAN: RETAIL SALES IN AMERICA ARE 30 MINUTES AWAY. GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO ALONGSIDE LISA ABRAMOWICZ ON JONATHAN FERRO. SESSION LOWS ARE DOWN 0.7% MORE WEEK DATA OUT OF CHINA RATE CUT FOR THE CHINESE CENTRAL BANK IN THE CUT INSUFFICIENT -- THERE IS A REAL CONCERN ABOUT WHAT IS DEVELOPING IN THE WORLD'S SECOND LARGEST ECONOMY. LISA: INABILITY OR UNWILLINGNESS. THAT IS THE KEY QUESTION A LOT OF PEOPLE HAVE. THE FACT THAT THERE HAS NOT BEEN A MOVE TO DATE THAT WOULD COMPREHENSIVELY TARGET THE SOURCE OF THE WEAKNESS, WHICH IS CONSUMERS ARE NOT SPENDING IN THE HOUSING MARKET NEEDS TO BE CORRECTED HAS LEFT PEOPLE THINKING MAYBE IT IS NOT COMING THIS TIME. STATESIDE OUR FOCUS SHIFTS. WE ARE 20 MINUTES AWAY FROM RETAIL SALES IN AMERICA. THIS IS AGAINST THE BACKDROP WHERE YIELDS ARE HIGHER THE FEDERAL RESERVE IS ENGAGING IN THIS HAPPY TALK ABOUT A SOFT LANDING AND RATE CUTS NEXT YEAR AND HERE WE ARE ON THE LONG END OF THE TREASURY MARKETS SELLING OFF OF THE LAST MONTH. THE HIGHEST OF THE YEAR GOING BACK POTENTIALLY TO BEFORE THE PANDEMIC BEFORE THE FINANCIAL CRISIS IF YOU TAKE A LOOK JUST A FEW MORE BASIS POINTS AWAY FROM THE HIGH PARTICULAR CYCLE. WE ARE LOOKING AT A TIME WHERE PEOPLE ARE THINKING THE FED WILL HOLD THE RATES HIGHER FOR LONGER. THE SUBTLE SHIFT OF NOT CUTTING RATES NEXT YEAR IS A GAME CHANGER FARMING INVESTMENT THESES. LET'S GO THROUGH CANADA TOGETHER. RETAIL SALES IN ABOUT 28 MINUTES. TOMORROW EARNINGS FROM TARGET AND ON THURSDAY NUMBERS FROM WALMART. IN BETWEEN WE GET THE FEDERAL RESERVE MINUTES. ARE THE FED MINUTES OF PLATFORM FOR? THE HAWKS OR DOVES THAT HAS SHIFTED SINCE THE LAST JACKSON HOLE MEETING. LISA: THERE IS A FEELING OF LEANING INTO THE HOPE OF A SOFT LANDING NOT WANTING TO DISRUPTED TO END WHAT ARE THEY WAITING FOR THIS IS THE QUESTION WE HAVE TO ASK WHICH IS HOW LONG DO THEY HAVE BEFORE THEY MISSED THE BOAT IN TERMS OF? BEING SUFFICIENTLY RESTRICTIVE WHERE IS THE BALANCE OF RISK IN TERMS OF WHERE DOES INFLATION GO IF EVERY ACCELERATE SURFEIT WILL COME DOWN REALLY DRAMATICALLY. IS THERE A WINDOW TO DEAL WITH THIS BEFORE IT BECOMES EMBEDDED? LISA: WELL SAID. JONATHAN: I'M THINKING AT THE SAME TIME I AM SAYING IT OF THE U.K. BECAUSE WAGE GROWTH IN THE U.K. TODAY WAS PHENOMENAL. SEVEN HANDLE. IT IS AMAZING. WE ARE TALKING ABOUT THE BANK OF AWAY AND THEY HAVE WAGE GROWTH OF 7% IN THE UNITED KINGDOM. LISA: THE ODD CONFLUENCE OF THINGS YESTERDAY THE FED PUT OUT THEIR INFLATION EXPECTATIONS SURVEY SHOWED THEM COMING DOWN. YOU SAW THE UNIVERSITY OF MICHIGAN SENTIMENT SURVEY, INFLATION EXPECTATIONS ARE CONTAINED FOR NOW BUT IF PEOPLE KEEP ADDING WAGE INCREASES IF THEY KEEP SPENDING IF THEY KEEP SEEING STRENGTH AT WHAT POINT DOES IT NORMALIZE SOME OF THE PRICE INSTABILITY WE HAVE GOTTEN YOU STILL? JONATHAN: THE UNIVERSITY OF MICHIGAN WILL TALK ALL ABOUT IT. THE S&P DEEPLY NEGATIVE. IN THE BOND MARKET YIELDS ARE HIGH BY FOUR BASIS POINTS. WE TALKED A LOT ABOUT THAT 4.23 LEVEL. CRUDE IS STILL ABOVE 80. LISA: A RISK FACTOR CONSIDERING THAT WAS ONE OF THE TAILWINDS FOR THE EUROPEAN REGION BUT ALSO THE U.S.. IS THERE THE AMMUNITION TO FIGHT IT? CRUDE IT'S ONE OF THE BIG STORIES. HOW MANY PEOPLE HAVE COME ON INTO SAID THAT IS THE STORY THEY ARE LEANING INTO? THAT IS THE SECTOR THAT WILL DO WELL. WHAT DOES THAT MEAN FOR INFLATION? JONATHAN: WEJONATHAN: ARE TALKING ABOUT A RATE SLOW DOWN IN CHINA. LISA: HOW MUCH OF IT IS SUPPLY THE FACT THAT SAUDI ARABIA IS CUTTING? JONATHAN: THEIR HUMMER? THEY ARE EXPENSIVE. LISA:LISA: HAVE YOU LOOKED INTO IT? JONATHAN: THE EV VERSION COSTS A LOT OF MONEY. LISA: SO DOES THE NON-EV. JONATHAN: LET'S TALK ABOUT MARKETS. BOB, GOOD MORNING. LET'S TALK ABOUT RETAIL SALES. WILL WE SEE THAT RESILIENCE IN THIS U.S. ECONOMY IN THE DATA WE ARE SAID TO SEE IN THIS HOUR? BOB: YOU PUT A LOT OF GOOD THINGS ON THE TABLE. A SOFT LANDING IS LIKE PUTTING THREAD THROUGH A NEEDLE. THE CONSUMER EVENTUALLY WILL COME TO THEIR EARNINGS. WE ALWAYS SEE AT THE, LOW-END WE SEE IT WITH CREDIT EXTENSION. WAGE GROWTH IS STRONG. HOW LONG WILL IT STAY STRONG? THAT HAS FIELD THE CONSUMER AND IT HAS FUELED OUR ECONOMY AND THIS THING HAS KEPT ON GOING DESPITE ALL THE THINGS IN THE BACKGROUND THAT YOU JUST PUT ON THE TABLE INCLUDING THE LAGGED EFFECTS. WE HAVE NOT FELT ALL OF THAT YET. JONATHAN: IT WILL HAPPEN EVENTUALLY. ARE WE SEEING SIGNS OF IT NOW? ANOTHER WAY MIGHT BE TO SEE IT IN THE OFFICIAL DATA AT THE BOTTOM OF THE HOUR. ACROSS THOSE THREE THINGS CREDIT, DATA AND EARNINGS ARE YOU SEEING A SLOWDOWN? BOB: NOT REALLY. IT IS ALL LEAD INDICATORS. THE COINCIDENT INDICATORS ARE POSITIVE. IT IS GOING TO TAKE SOME MORE TIME TO GO THERE. WE HAVE BEEN SINCE THE FIRST OF THE YEAR SAYING RECESSION STARTS SOMETIME BETWEEN LABOR DAY AND THE END OF THE YEAR. WE ARE STILL STICKING WITH IT. WE THINK IT IS A MILD RECESSION. LISA: WHERE DOES THAT RECESSION COME FROM IF YOU DO SEE THE STRENGTH AND CONSUMERS? A LOT OF PEOPLE HAVE POINTED TO THE STUDENT LOAN ISSUE. I WAS READING THIS SURVEY BY CREDIT KARMA AND IT WAS SHOWING 45% OF STUDENT LOAN BORROWERS SAY THEY WILL NOT REPAY. THEY WILL BE DELINQUENT FOR 12 MONTHS BECAUSE THEY ARE NOT GOING TO GET PENALIZED FOR BEING DELINQUENT FOR 12 MONTHS. ARE WE BASICALLY GETTING A SELF STIMULUS ONGOING THAT WILL REMAIN IN PLACE FOR A WHILE? BOB: IT HAS BEEN THE STORY AND IT HAS LASTED LONGER THAN MANY PEOPLE THOUGHT AND IT IS STILL NOT FINISHED BUT EVENTUALLY CONSUMERS WILL COME TO THE REALIZATION THAT THINGS, ARE A LOT MORE EXPENSIVE INFLATION IS STILL A PROBLEM, YOU HAVE NO SAVINGS AT THE LOWER END OF THE CONSUMER BRACKET, THAT IS A PROBLEM, THEY WILL HAVE TO RETURN SOME OR FIND A SECOND JOB. LISA: WHAT IS THE DEFENSIVE PLAY AT A TIME WHEN A LOT OF THE STRONGEST COMPANIES HAVE INCREDIBLY HIGH MULTIPLES? YOU ARE LOOKING AT BOND YIELDS THAT ARE NOT GIVING A CONSISTENT MESSAGE. BOB: WITHIN THE EQUITY MARKET YOU TRY TO FOCUS ON COMPANIES WITH HIGHER EARNINGS PRICKED ABILITY HIGHER EARNINGS PERSISTENCE AND ARE NOT SELLING AT CRAZY PRICES. THAT IS NOT A WHOLE LOT OF PLACES. I HAVE NOT GIVEN UP ON TECH, BUT I WANT TO TAKE CARE WHAT PE I AM PAYING FOR MY STOCKS. VISA AND MASTERCARD ARE TWO NAMES I STILL LIKE. THEY HAVE GOTTEN MORE EXPENSIVE. I COME BACK TO EARNINGS PERSISTENCE AND CASH FLOW GENERATION. JONATHAN: WALMART LATER THIS WEEK, TARGET TOMORROW, HAVE THEY STILL GOT THEIR PRICING POWER? DO THOSE MARGINS GET EATEN AWAY AT? BOB: WE WILL SEE, SOME OF THAT NOW THOSE MARGINS GET EATEN AWAY. COMPANIES CAN ONLY RAISE PRICES SO FAR AND YOU ARE ALREADY SEEING CUSTOMERS BEGIN TO MAKE NOISE AND BALK AND STOP BUYING SOME THINGS. IT WILL NOT BE EVERYTHING BUT SLOWLY AND SURELY YOU TAKE THE EDGE OFF -- WE HAVE TO OPERATE ON EIGHT CYLINDERS TO KEEP THE THING WHERE IT IS NOW, AND IF WE BACK OFF TO SIX THAT WILL DISAPPOINT A LOT OF PEOPLE. JONATHAN: FORGET TECH. CRUISE LINES AIRLINES,, ARE WE AT THAT POINT WHERE WE HAVE REACHED CONSUMER PRICE INTOLERANCE. LISA: AS -- BOB: PEOPLE ARE FLYING AROUND. YOU GO ON AN AIRPLANE AND EVERY SEAT IS TAKEN. WE WILL GET THERE. LISA: WHAT WILL GET US THERE? PEOPLE HAVE BEEN SAYING THE CONSUMER WILL EVENTUALLY PUSH BACK, AND THEY HAVEN'T. THESE ARE THE KIND OF INCREASES THAT YOU ARE SEEING. BOB: WE HAD 15 MONTHS IN A ROW OF BETTER THAN EXPECTED MONTHLY EMPLOYMENT NUMBERS. THE LAST TWO MONTHS HAVE BEEN BELOW EXPECTATIONS SO THERE ARE CRACKS BEGINNING TO DEVELOP. I DON'T WANT TO COME ACROSS AS THE ECONOMY IS TANKING. I'M JUST CAUTIOUS. IF THE PE WERE 14, DIFFERENT STORY BUT THE PEAKED COUPLE WEEKS AGO I, TOOK A PEEK AT MY SCREEN, 24 TIMES EARNINGS. LISA: WHAT IS THE BALLAST? IS IT CASH? IS IT GOING INTO DURATION? BOB:BOB: HAVING SOME CASH IN YOUR PORTFOLIO IS NOT A STUPID IDEA. LISA: HAVE YOU BEEN INCREASING IT? BOB: WE COUNSEL WHERE WE CAN, HAVE BEEN BRINGING OUR CASH EXPOSURE UP. BONDS OWNS SOME BOND I'M NOT SURE WE HAVE SEEN HIGH-YIELDS YET BUT I WOULD RATHER START NIBBLING AT 4.25 VAN 4.5 WHERE WE WERE. JONATHAN: I HEARD THE SAME THING FROM LISA SHALETT OVER AT MORGAN STANLEY. DO THINK WE FACE RATE CUTS ON THE HORIZON? LISA: THAT WILL -- BOB: THAT WILL HAPPEN AT SOME POINT. 18 MONTHS AGO 1.5% 10 YEAR TREASURY WAS A BAD DEAL. 4.20 5% I WILL THINK ABOUT IT. JONATHAN: IT IS UNTHINKABLE. IT WAS NOT THAT LONG AGO. BOB: IT HAPPENED FAST. JONATHAN: BOB IS GOING TO SEE YOU. THIS SELLOFF HAS HAPPENED QUICKLY. WE THOUGHT WE HAD SEEN THE HIGHS BACK IN OCTOBER. THERE WAS A FEELING WE HAD SEEN THE POST SVB HIS AND HERE WE ARE DOING IT ALL OVER AGAIN. LISA: IT MAKES ME A LITTLE SAD THAT YOU CANNOT BUY THE ACTUAL BOND AND GET THE CERTIFICATE AND SHOW YOUR KIDS AND SAY THIS IS A BOND END WHEN IT COMES TO YOU -- JONATHAN: IS THAT WHAT YOU WOULD LIKE TO DO? LISA: KIND OF. MY GRANDFATHER DID THAT, AND I REMEMBER WHEN THEY CAME DUE. JONATHAN: THE 'BRAMO KIDS ARE LEARNING ABOUT BONDS ALREADY. LISA: THEY HAVE BEEN LEARNING ABOUT IT SINCE KINDERGARTEN. SINCE THEY WERE JONATHAN: -- IF YOU'RE JUST TUNING IN WELCOME. ON THE S&P 500 NOW NEGATIVE 0.7 -- 0.17%. LISA: MY SON IS TAKING AN INVESTMENT CLASS THIS WEEK. I DO WHAT THEY'RE TO BE CONFLICT OF INTEREST AND SO I WANT HIM TO DO IT VIRTUALLY. JONATHAN: YOU DOESN'T HAVE TO TELL YOU WHAT HE IS INVESTING IN. LISA: HE SAID TO ME "MOM, I THINK THE FED SHOULD JUST HOLD." JONATHAN: HOW OLD IS THIS ONE? LISA: HE IS 14. JONATHAN: 14 END OF YOU ON THE FED. THAT IS AWESOME. DID YOU TELL HIM HE IS VERY CONSENSUS? LISA: YES. JONATHAN: HE MIGHT BE UPSET ABOUT THAT. LISA: I TOLD HIM THE EXTREMES ON EITHER SIDE. JONATHAN: YOU CAN TEACH THEM ABOUT QE AND WHY THEY KILLED CAPITALISM AT A LATER DATE. LISA: IF YOU DON'T WANT TO BE MY CHILD IS ESSENTIALLY WHAT YOU ARE LEARNING TODAY. MY HOUSEHOLD IS INCREDIBLY NERDY. JONATHAN: 17 MINUTES AWAY RETAIL SALES DATA IN AMERICA. GOING INTO JACKSON HOLE NEXT WEEK IT IS ONLY A WEEK OR SO AWAY MOST PEOPLE ARE EXPECTING CHAIRMAN POWELL TO SAY SOMETHING ABOUT SOMETHING WE JUST DON'T KNOW WHAT THAT SOMETHING IS. LISA: WE ARE EXPECTING HIM TO TALK AT A LOT OF PEOPLE ARE SAYING THAT THE BEST CASE SCENARIO FOR HIM IS JUST TO SAY AS LITTLE AS POSSIBLE. JONATHAN: I AGREE. I AM ON THAT PAGE. ENTERTAINING RATE CUTS BECAUSE YOU WANT TO KEEP REAL RATES STUDY, YOU DON'T WANT -- YOU SEND A SIGNAL DOING THAT. LISA: IF YOU INTO THE MARKET ACTION SAYING THE MARKET HAS IT ABOUT RIGHT THAT WE WILL NOT CUT RATES COULD HAVE AN IMPACT ON RISK ASSETS. JONATHAN: JACKSON HOLE, A WEEK AWAY. >> THE INDICTMENT ALLEGES THAT RATHER THAN ABIDE BY GEORGIA'S LEGAL PROCESS FOR ELECTION CHALLENGES, THE DEFENDANTS ENGAGED IN A CRIMINAL RACKETEERING ENTERPRISE TO OVERTURN GEORGIA'S PRESIDENTIAL ELECTION RESULTS. I AM GIVING THE DEFENDANTS THE OPPORTUNITY TO VOLUNTARILY SURRENDER NO LATER THAN NOON ON FRIDAY, THE 25TH DAY OF AUGUST. JONATHAN: THAT IS ABOUT 10 DAYS AWAY. THAT WAS THE DISTRICT ATTORNEY OF FULTON COUNTY GEORGIA LAYING DOWN THE INDICTMENT AGAINST FORMER PRESIDENT DONALD TRUMP AND 18 OTHERS OVER THE EFFORTS TO OVERTURN THE RESULTS OF THE 2020 ELECTION IN THE STATE. TRUMP'S ATTORNEYS CALLED THE CHARGES BOTH SHOCKING AND ABSURD. LISA: AT A TIME WHEN PEOPLE ARE WONDERING HOW THIS WILL PLAY INTO THE ELECTION JUST A NOTE, THIS COULD BE THE FIRST TRIAL TO BE TELEVISED AND IT IS IMPORTANT AT A TIME WHEN TELEVISED EVENTS HAVE BENEFITED DONALD TRUMP IN THE POLLS. WE HAVE BEEN TALKING ABOUT HOW PRESS IS OFTEN GOOD IN TERMS OF FACIAL RECOGNITION AND WHETHER THAT WILL CONTINUE WILL BE AN INTERESTING QUESTION. JONATHAN: WE CAN ALL AGREE IT IS IN THE PUBLIC INTEREST TO SEE SOME OF THIS. LISA: IN GEORGIA THEY HAVE A RULE ALLOWING TELEVISION, TELEVISED ASIAN OF SOME OF THESE COURT CASES AND PEOPLE ARE SPECULATING THAT THIS MIGHT BE THE FIRST TO BE TELEVISED IN THIS WAY. JONATHAN: WE HAVE HAD BOB DOLL. ON HIS WAY OUT OF THE STUDIO HE SAID 42 HUNDRED BEFORE 4600 ON THE S&P 500. RIGHT NOW EQUITIES ARE WEAKER. WE ARE ABOUT 12 MINUTES AWAY FROM RETAIL SALES IN AMERICA. EQUITY FUTURES ARE NEGATIVE BY 0.65% JUST ABOUTS OFF. SESSION LOW A LOT OF TENSION IN THE BOND MARKET. TREASURIES ARE DOWN REAL TIME BY FOUR BASIS POINTS. LISA: THIS TO ME IS THE STORY OF THE PAST FEW WEEKS. THE GRIND HIGHER AND WHAT IS BEHIND IT. YOU ASK FIVE PEOPLE YOU LOOK AT FIVE DIFFERENT ANSWERS BUT THE BOTTOM LINE IS FOR PEOPLE WHO SAY THEY ARE LEANING INTO DURATION IT IS NOT AFFECTING THE DURATION IN TERMS OF PRICE AND YIELD. JONATHAN: LOCK IT IN. BOB TALKED ABOUT LOCKING IT IN. I SAW THE SAME IN A NOTE OVER AT MORGAN STANLEY. THAT ONE YEAR TB A FEELS -- T-BILL FEELS GOOD RIGHT NOW ABOUT WHAT IF YOU HAVE MISSED THE OPPORTUNITY TO LOCK SOME OF THIS IN? LISA: WE HAVE HEARD THAT FROM MORGAN STANLEY, JP MORGAN WESTERN ASSET MANAGEMENT, A WHOLE HOST OF OTHERS INCLUDING HSBC THIS MORNING. WE HEAR THIS WE ARE THE VAST BUYERS. JONATHAN: RETAIL SALES 11 MINUTES AWAY. IT JOINING US NOW ON THE LATEST DEVELOPMENTS IN GEORGIA TERRY HAYNES. IT IS WONDERFUL TO CATCH UP WITH YOU. ALWAYS WONDERFUL OUR CONVERSATIONS TOGETHER. WE HAVE GOT CASE IS NOW IN NEW YORK, WASHINGTON, DC, FLORIDA. HOW DO YOU RANK THOSE IN TERMS OF IMPORTANCE? TERRY: I THINK IT IS FAR TOO EARLY TO TELL FOR ONE REASON THAT YOU AND LISA WERE JUST TALKING ABOUT WHICH IS THE TIMING OF THE CASES. THERE IS A LOT OF WAYS YOU CAN SLICE THESE THINGS FEDERAL VERSUS STATE RACKETEERING VERSUS CONSPIRATORS ALL KIND OF THINGS. I WOULD RANK THEM IN ORDER OF HOW THEY ARE ACTUALLY GOING TO COME TO TRIAL. TO SOME EXTENT IT MATTERS GREATLY WHETHER THEY ARE TELEVISED OR NOT. WHETHER PEOPLE SEE WHAT IS GOING ON AND WHY THEY WILL HAVE MORE OF AN OPPORTUNITY TO MAKE UP THEIR MINDS ON EDGE. LISA: WHY IS THE TELL OF HIS ASIAN OF THIS IMPORTANT? YOU SAID TO MAKE UP THEIR MINDS BUT WHAT DO YOU THINK THE OUTCOME WILL BE OF HAVING IT VERY MUCH IN THE PUBLIC EYE? TERRY: THERE IS AN IMMEDIACY TO TELEVISION, FRANKLY. WE HAVE SEEN THAT OVER THE PAST 6070 YEARS IN TERMS OF HOW PEOPLE PERCEIVE -- 60, 70 YEARS IN TERMS OF HOW PEOPLE PERCEIVE AND PICK CANDIDATES. THERE IS A DEBATE IN THE COUNTRY ABOUT WHETHER THIS IS POLITICIZED PROSECUTION OR WHETHER THERE IS SOMETHING HERE. THERE WILL BE AN AWFUL LOT OF PRESSURE ON THE FULTON COUNTY D.A. TO SHOW THAT THESE CHARGES ARE REAL AND THEY ARE NOT THE KIND OF STANDARD SPLASH THAT RESCUERS DO. TRUST GATORS TEND TO GO IN FRONT OF GRAND JURY'S PARTICULARLY YOU GO BROAD AND DO GET THE MAXIMUM YOU CAN FROM THE GRAND JURY. DID SHE OVERSTEP? DID SHE HAVE EVIDENCE? THE OTHER SIDE HAS A GREAT DEAL TO SAY ABOUT HOW TO INTERPRET THE EVIDENCE. THIS WILL BE ON A PRETTY BIG STAGE AND EVEN MORE SO IF IT IS THE FIRST ONE. LISA: THERE IS A REAL QUESTION AROUND THE DIFFERENT POLES OF THE POLITICAL SPHERE AND HOW PEOPLE WILL RESPOND TO COURT CASES THAT MANY OF AMERICANS HAVE ALREADY DECIDED ABOUT TO OF WHAT I HAS HAPPENED YET. WHAT DO YOU THINK THE OUTCOME WILL BE TO SOME CONCLUSION OF THE TRIAL IF THERE IS A CONVICTION? I'M TRYING TO PLAY OUT THE POLITICAL RISKS ON A SOCIAL LEVEL. >> FIRSTLY I HAVE SAID THIS TO YOU ALL BEFORE I THINK THERE WAS GREATER UNCERTAINTY AROUND THE 2024 PRESIDENTIAL ELECTION BECAUSE YOU HAVE INCREASED RISK FOR UNCERTAINTY AROUND TRUMP AND BIDEN. AROUND TRUMP YOU HAVE A SITUATION WHERE THERE IS A CONVICTION. MY INSTINCT IS WHAT HAPPENS IS IT ACCELERATES THIS DEATH BY A THOUSAND PAPER CUTS PROCESS WHERE PEOPLE SAY REGARDLESS OF TRUMP POLICIES, REGARDLESS OF WHATEVER MOVEMENTS, ANTI-ESTABLISHMENT MOVEMENT THAT EXISTS, HERE I WOULD BE BETTER OFF WITH ANOTHER CANDIDATE, SO I TEND TO THINK THAT THE MORE THE PROSECUTIONS START LANDING HOME, THE MORE AT THE REPUBLICAN ELECTORATE TURNS ELSEWHERE. LISA: RIGHT NOW, TERRY AS YOU GAME OUT THAT POLITICAL RISK AND TALK TO DIFFERENT CLIENTS WHAT ARE YOU TELLING THEM TO PREPARE FOR? WHAT IS THE WAY IT WILL MANIFEST ITSELF IF WE ARE NOT FOCUSED AS MUCH ON DEBT REDUCTION ARE SOME OF THE TANGIBLES OF FISCAL GOVERNANCE? TERRY: I SAY A COUPLE OF THINGS. ONE IS THAT THE FIRST ACTION IN THE PRESIDENTIAL PRIMARY PROCESS IS FIVE MONTHS FROM TODAY. I THINK IT IS FIVE MONTHS FROM TODAY. THAT IS A VERY LONG TIME IN POLITICS. THERE ARE EXAMPLES ALL OVER THE BOARD OF HOW SOMEONE WHO IS LEADING IN THE POLLS TODAY DID NOT WIN DIFFERENT PRIMARY CHALLENGES. NUMBER ONE, THERE IS THAT. NUMBER TWO, KEEP YOUR EYE ON THE PANOPLY OF THINGS GOING ON IN WASHINGTON. NOT JUST THE TRUMP MATTER OR BIDEN MATTER. IN THE NEXT FIVE MONTHS YOU HAVE A SHUTDOWN LIKELIHOOD, GOVERNMENT SHUTDOWN LIKELIHOOD AT 60%. YOU HAVE PROBABLY NO MEANINGFUL ACTION ON DEBT AND THE, FISCAL WHICH MARKETS ARE INCREASINGLY INTERESTED IN AND YOU HAVE EVERYTHING FROM THE CHINA ECONOMY TO THE UKRAINIAN RUSSIA MATTER. STANDARDS AND ALL THE WAY DOWN TO JON'S FAVORITE TOPIC, UFOS. WE HAVE A SITUATION WHERE THERE IS AN AWFUL LOT OF RISK COMING OUT OF WASHINGTON ON A VARIETY OF FRONTS ALL AT ONCE AND IT BEHOOVES INVESTORS TO PAY ATTENTION TO ALL, OF IT NOT JUST THIS PARTICULAR BREAD AND CIRCUS. JONATHAN: HOW DID YOU KNOW THAT? HOW REAL IS THIS DOWN NDC WHEN YOU WATCH THESE HEARINGS? -- DOWN IN D.C. WHEN YOU WATCH THESE HEARINGS? TERRY: UFO'S? ANYONE WHO WATCHES WASHINGTON WITH REGULARITY DOES BELIEVE THAT THERE IS SOMETHING OUT THERE THAT IS AFFECTING THINGS THAT IS NOT US. JONATHAN: [LAUGHTER] LISA: [LAUGHTER] TERRY: I THINK THERE IS A LOT OF CIRCUMSTANTIAL EVIDENCE ON THE UFO MATTERS. THEY WILL HAVE TO GET TO THE NEXT STEP TO START CONVINCING PEOPLE. JONATHAN: TERRY HAYNES OF INDIA POLICY. FASCINATING TO WATCH. LISA: EVERYBODY KNOWS. JONATHAN: I HAVE PROBABLY SAID IT ON AIR. LOVE IS STRONG. I AM INCREASINGLY AWARE AND INTERESTED IN -- LISA: ON ODD LOTS PAUL KRUGMAN WAS ON THERE TALKING ABOUT UFOS. JONATHAN: WHAT DID HE SAY? LISA: HE SAID ALIEN INVASIONS ARE INFLATIONARY. JONATHAN: SO WE CAN EXPECT THEM TO BE DEFLATIONARY? LISA: HARSH. HE JUST WROTE A COLUMN ABOUT HOW HE IS TALKING ABOUT HOW HE HAS GOTTEN THINGS WRONG. ALL I CAN SAY IS THE FACT THAT WE ARE TALKING ABOUT UFOS MORE THAN DEBT REDUCTION -- JONATHAN: INDULGE ME. JUST 60 SECONDS. LISA: PEOPLE SEE UNIDENTIFIED FLYING OBJECTS ALL THE TIME. JONATHAN: I KNOW. LISA: BUT YOU THINK THEY'RE A GREEN CREATURES INSIDE? TOM: NO ONE SAID ANYTHING ABOUT THAT. JONATHAN: U.S. RETAIL SALES THAT DATA SECOND AWAY. THE SCORES LOOK LIKE THIS ON THE S&P 500. THE SESSION LOW DOWN ABOUT 0.6 PERCENT IN THE BOND MARKET 10 SECONDS AWAY FROM THE DATA TREASURIES ARE SELLING OFF ONCE AGAIN. 4 IS THE YIELD. ON THE U.S.23 DATA IS JUST ABOUT TO DROP ACROSS THE BLOOMBERG. WE WILL DO THIS THREE DIFFERENT WAYS. TAIL SALES UPSIDE SURPRISE ACROSS THE BOARD HERE 0.7% AND ESTIMATE OF 0.4%. YOU CAN STRIP OUT GAS, NUMBERS LOOK LIKE THIS. IF YOU LOOK AT THE CONTROL GROUP THAT NUMBER GOES INTO GDP. THERE IS AN UPSIDE SURPRISE AS WELL. IT IS AN UPSIDE SURPRISE ACROSS THE BOARD HERE FOR U.S. RETAIL SALES. IN THE BOND MARKET YIELDS ARE UP BY SEVEN BASIS POINTS ON A 10 YEAR TO 1026. GETTING VERY CLOSE TO A CYCLE HIGH AND THE EQUITY MARKET BREAKING DOWN THE SESSION LOWS. THAT IS AN UPSIDE SURPRISE. LISA: AT A TIME WHEN PEOPLE WERE EXPECTING THERE TO BE A LITTLE BIT OF BITE WITH PEOPLE NOT NECESSARILY HAVING THE SAVINGS. I'M WATCHING THE TWO YEAR YIELD CLIMBED PAST 2%. THE LENGTH OF THAT IS REALLY WHAT IS GETTING MY ATTENTION IN THE CURRENCY SPACE. THAT EURO STRENGTH FADES AND WE CAN SEE 108 POINT NINE. THE DOLLAR REALLY BECOMES ASCENDANT. IT IS LIKE -- THE EURO IS NEGATIVE ON THE SESSION RIGHT NOW. IT WAS POSITIVE AT THE BREAK BRIEFLY. THIS IS THE LAST BIG DATA POINT BEFORE JACKSON HOLE NEXT WEEK. THE CONSUMER BASED ON RETAIL SALES WE CAN BREAK DOWN WHAT IS HAPPENING BELOW THE SURFACE STILL LOOKING PRETTY RESILIENT. INFLATION IS BOTTOMING HERE AND MAY WELL PICK UP THROUGH THE YEAR END THIS BOND MARKET IS NOT SMELLING THE END OF A RATE HIKE INSIGHT IS IT? LISA: IF IT IS SEEING THE END OF THE ACTUAL HIKING CYCLE IT IS THE CONSTANCY OF A RATE HELD AT THAT LEVEL NOT NECESSARILY RATE CUTS. IT IS NOT JUST THE UPSIDE SURPRISE. IT IS THE NATURE OF THE UPSIDE SURPRISE. THE CONTROL GROUP YOU POINTED TO, WHICH GOES TO GDP WENT UP MONTH OVER MONTH. THEY WERE UP FROM 0.5% THE PREVIOUS MONTH WHICH WAS REVISED TO LOWER. THIS IS A MASSIVE UPSIDE SURPRISE ESPECIALLY MONTH OVER MONTH DURING A TIME WHEN CONSUMERS WERE SUPPOSED TO BE RUNNING OUT OF GAS. JONATHAN: UPSIDE SURPRISE 0.7 PERCENT HEADLINE RETAIL SALES FOR THE MONTH OF JULY. THAT IS MONTH OVER MONTH. THE NUMBER WE WERE LOOKING FOR IN THE SURVEY 0.4. STRIP OUT ORDERS AND GAS, AND THE CONTROL GROUP THE SO-CALLED CONTROL GROUP NUMBER THAT GOES INTO GDP 1% AGAINST AND 0.5. THE TWO-YEAR THROUGH -- THE FX MARKET IS STRONGER ON THE DOLLAR, A WEAKER EURO. COMING UP AMANDA LYNAM OF BLACKROCK, MICHAEL CUSHMAN OF MORGAN STANLEY, TONY DWYER. ALL OF THAT STILL TO COME ON BLOOMBERG TV. LISA: FASCINATING CONVERSATIONS AT A TIME WHEN IT SEEMS LIKE EVERYONE IS LOOKING FOR THE POTENTIAL OF SOME KIND OF SEA CHANGE, SOME KIND OF SHIFT FOR THE EQUITY MARKET AS WE WORK THROUGH SOME OF THESE NUMBERS YOU HAVE TO WORRY AT WHAT POINT DOES THE CONSUMERS STOP FUELING ECONOMIC RECOVERY THAT HAS LASTED LONGER AND HAS BEEN MORE ROBUST THAN ALMOST ANYONE EXPECTED. LINDSAY P ACCESS -- LINDSEY PIEGZAS JOINS US. WHAT IS YOUR VIEW ON WHY WE SAW SUCH A BIG UPSIDE SURPRISE ON RETAIL SALES? >> THIS WAS A STRONGER THAN EXPECTED REPORT AND NO DOUBT THIS WILL BE USED OPTIMISM THAT BECAUSE OF THE RESILIENCE OF THE CONSUMER WE CAN ACHIEVE THAT SOFT LANDING BUT I WOULD PUSH BACK A LITTLE BIT IN THE SENSE THAT WE DON'T NEED TO PUT TOO MUCH FOCUS ON ONE MONTH'S NUMBERS. WE HAVE SEEN VOLATILITY IN TERMS OF NUMBERS MONTH-TO-MONTH. WHILE THIS WAS A WELCOME STEP IN THE RIGHT DIRECTION, CONSUMERS ARE INCREASINGLY SHIFTING THE GOODS AND SERVICES IN THEIR BASKET ON A MONTH-TO-MONTH BASIS, SOMETHING WE DO AS CONSUMERS WHEN WE ARE INCREASINGLY CONCERNED ABOUT OUR FINANCIAL FOOTING. WHILE THIS IS LEADING THE EXPECTATIONS FOR THE MARKET, I WOULD NOT NECESSARILY SAY THAT THIS IS A TREND THAT CAN CONTINUE TO RISE ESPECIALLY, AGAINST THE BACKDROP OF SOME OF THESE FACTORS THAT PROVE ARTIFICIAL SUPPORT, DRAWING DOWN SAVINGS, LAST SPUTTERING OF STATE AND LOCAL STIMULUS. WE SEE HARDSHIP WITHDRAWALS FROM 401(K)S UP ON A YEAR-OVER-YEAR BASIS. WHILE THIS WILL PROVIDE A TEMPORARY SUPPORT THIS IS NOT AN INDEFINITE SUPPORT TO THE CONSUMER. LISA: WHERE DOES THIS FIT INTO YOUR VIEW THAT THE FED HAD A LOT MORE WORK TO DO AND THEY HAD TO GET TO A LEVEL THAT NO ONE WAS GAMING OUT OR VERY FEW? >> THIS WILL MAKE THE FED'S JOB MORE DIFFICULT BECAUSE THE LONGER IT TAKES FOR THE LABOR MARKET FOR THE CONSUMER TO RESPOND EARLIER POLICY TIGHTENING THE MORE AGGRESSIVE THE RESPONSE FROM THE FED MUST BE, THUS ENSURING AN EVENTUAL DOWNTURN SO THE NOTION THE CONSUMER HAS CONTINUED TO BE RESILIENT, SUPPORTING A SOFT LANDING, THAT WILL MEAN THE FED NEEDS TO BE MORE AGGRESSIVE, RAISING RATES HIGHER IN KEEPING RATES HIGHER FOR LONGER THAN INVESTORS HAD ANTICIPATED SUGGESTING THAT THE DOWNTURN EVENTUALLY WILL COME AS MORE OF A DOWNTURN THAN PEOPLE EXPECTED LISA: LISA: LISA: YOU SAID TO THING IT'S HIGHER AND KEEP THEM THERE FOR LONGER. SOME PEOPLE ARE GETTING TO THINK WHAT IF THE FED IS DONE WITH HOW HIGH THEY ARE GOING TO RAISE RATES? THEY'RE GOING TO KEEP THEM THERE FOR LONGER AND THAT IS WHAT WE ARE SEEING PRICED INTO THE MARKET GRADUALLY WITH SOME OF THE YOUNGER TERM EXPECTATIONS FOR FED FUNDS RATES. AT WHAT POINT DOES THAT CAUSE MORE DAMAGE IN YOUR VIEW? >> IT WILL CAUSE MORE DAMAGE. THE MORE PRESSURE ON THE FED TO RESPOND. IF WE CONTINUE TO SEE THIS RESILIENCE, IF WE CONTINUE TO SEE THIRD-QUARTER GDP SURPASS EARLIER EXPECTATIONS , THE FED DOES NOT NECESSARILY NEED TO RAISE RATES INDEFINITELY, WE HAVE LONG CONCEDED THAT WILL BE 6% OR ABOVE, THE FED WILL LIKELY BE FORCED TO KEEP US AT THAT ELEVATED LEVEL FOR SOME TIME. RATE CUTS ARE NOT IN THEIR BEST CASE SCENARIO BUT EVEN 2024 REMAINS A SIZABLE? IF WE ARE NOT ABLE TO SEE THAT INTENDED RESULT. IT WILL RESULT IN A SLOWER LEVEL OF ACTIVITY. THEY ARE PUSHING HARD AGAINST TIGHTER MONETARY POLICY. TOM: WE ARE SEEING -- LISA: WE'RE JUST SEEING THE RAMIFICATIONS OF RETAIL SALES NUMBERS COMING IN HIGHER THAN EXPECTED. THE CONTROL GROUP WHICH DOES FACTOR INTO THE U.S. GROSS DOMESTIC PRODUCT FACTOR CAME IN AT 1%. WE ARE SEEING TWO YEAR YIELDS SURGE PAST 5%. 10 YEAR YIELDS AND 30 YEAR YIELDS ARE REACHING THE HIGHEST LEVEL SINCE OCTOBER CLIMBING UP. WE ARE SEEING 30 YEAR YIELDS 40.32%. I WANT TO GET YOUR SENSE OF WHAT COULD POTENTIALLY HALT THIS SPENDING. YOU SAID IT CAN'T PERSIST. SOME PEOPLE HAVE POINTED TO THE STUDENT LOAN REPAYMENTS THAT WILL START IN OCTOBER. YOU GIVE CREDENCE TO THIS SORT OF IDEA THAT WE COULD SEE SOME TIGHTENING AND FISCAL TIGHTENING ON THAT FRONT GOING FORWARD. >> THERE ARE A NUMBER OF FACTORS. DO EVEN WITH THIS MONTHLY INCREASE BEATING EXPECTATIONS AND WE LOOK AT THE LONGER TERM MOMENTUM IT IS CLEAR CONSUMERS ARE BEGINNING TO SLOW THEIR ACTIVITY. WE ARE TALKING ABOUT BOUNCING AROUND SO WELL POSITIVE THE CONSUMER HAS CLEARLY PULLED BACK AND THESE OTHER FACTORS MONTHLY PAYMENT LOANS ADDITIONAL HOUSING PAYMENTS COMING ONLINE THIS IS GOING TO COMPOUND THE PRESSURE ON THE CONSUMER. THERE ARE SOME TEMPORARY SUPPORTS THAT WE ARE STILL TAPPING INTO. THERE IS STILL A SPUTTERING OF STATE AND LOCAL STIMULUS. CONSUMERS ARE TURNING TO 401(K)S CONSUMERS ARE RACKING UP CREDIT CARD DEBT AND WITH THE RELATIVE HEALTH OF YOUR BALANCE SHEET THERE IS STILL SOME WIGGLE ROOM FOR THE CONSUMER TO EXPAND THAT BALANCE SHEET SO I'M CERTAINLY NOT SUGGESTING THAT THE CONSUMER WILL IMMEDIATELY FOLLOW FOR CLIFF BUT WHAT WE ARE SEEING IS THESE INDEFINITE SUPPORTS BEGINNING TO WANE, PUTTING ADDITIONAL PRESSURE ON THE CONSUMER AS WE HEAD INTO THE SECOND HALF OF THE YEAR. LISA: WHAT YOU EXPECTED JAY POWELL TO SAY EVEN ALL OF THIS. ONE OF THE BIGGEST QUESTIONS CONSUMERS HAVE IS HOW LONG AND THAT IS WHAT CHAIR POWELL WILL FOCUS ON NOT NECESSARILY HOW HIGH BECAUSE THE COMMITTEE IS OF ONE MIND THAT WE ARE NEARING THAT TERMINAL LEVEL. WE ARE UP NEAR THAT SUFFICIENTLY RESTRICTIVE LEVEL. HOW LONG WILL THE FED NEED TO KEEP RATES AT THAT ELEVATED LEVEL? HE WILL ALSO TALK ABOUT THE CONTEXT OF INFLATION AGAINST MONETARY POLICY . THE SLOWING THE ECONOMY AGAIN THERE ARE A LOT OF QUESTIONS INVESTORS ARE GOING TO BE LISTENING FOR THAT I WILL BE LISTENING FOR IN TERMS OF HOW TO GAUGE THE FED'S MINDSET . LISA: TRYING TO SEE LONG IT CAN HANG ON, JUST TO TAKE A LOOK AT THE MARKET REACTION IT IS AS YOU WOULD EXPECT TRYING TO GAME OUT HOW HIGH THE FED HAS TO HIKE RATES IS SO IMPORTANTLY FOR HOW LONG? THAT SEEMS TO BE THE THEME ACROSS THE BOARD. WATCHING THE DOLLAR SPACED BECAUSE THAT IS BEEN ONE OF THE BIG SURPRISES THAT THERE WAS DOLLAR WEAKNESS VERSUS THE EURO EVEN IN LIGHT OF WHAT WE SAW OVER IN CHINA WE NOW SEE THAT REASSERT ITSELF. IT ACTUALLY HAS REVERSED AFTER THE KNEE-JERK RESPONSE WHERE NOW IT IS 109.17 WE GOT EMPIRE MANUFACTURING DATA FOR THE MONTH OF AUGUST AND IT CAME WITH THE DOWNSIDES A PRIZE OF -19 SO THERE IS THIS QUESTION AROUND WHETHER WE ARE SEEING A BIFURCATED READ AND NOT A CLEAR ONE IN TERMS OF REAL-TIME ACTIVITY. WE ARE SEEING A DECLINE IN THE EQUITY MARKET THAT IS DEEPENING AFTER THAT RETAIL SALES SURPRISE TO THE UPSIDE DOWN ABOUT 6/10 OF 1% FOR THE S&P 44 77. WE ARE DISCUSSING WHAT THE RAMIFICATIONS ARE WITH RESPECT TO CHINA GIVEN THAT WE HEARD FROM THE TREASURY SECRETARY THAT THERE WAS SOME IMPLICATION FOR THE U.S. ECONOMY SO STILL WITH US IS LINDSEY PIEGZA . HOW INTERTWINED ARE THE TWO ECONOMIES? >> VERY. WE HAVE TO KEEP IN MIND WHAT IS HAPPENING ON THE INTERNATIONAL STAGE AS WE SEE ONE OF OUR LARGEST PARTNERS SUFFER WEAKNESS IN TERMS OF THE ECONOMY. WILL THIS NECESSARILY TRANSLATE INTO DISINFLATIONARY PRESSURES. IT WILL HELP COMPOUND SOME OF THE DISINFLATIONARY PRESSURES. FOR MONETARY POLICY WHAT WE ARE STRUGGLING WITH IS THE DEMAND SIDE OF THE INFLATION EQUATION AND THAT IS WHAT THE FED WILL BE FOCUSING ON. THAT IS WHAT THEIR FOCUS IN TERMS OF INFLATION. IS THANK YOU FOR BEING WITH US. JANET YELLEN SPEAKING ABOUT THE DIFFERENT PROGRAMS THAT PRESIDENT BIDEN HAS PUT OUT THERE BUT ALSO SAYING CHINA'S SLOWDOWN IS A RISK FACTOR FOR THE U.S. ECONOMY. IT OTHERS ARE TALKING ABOUT SOME KIND OF DECOUPLING AND WHETHER IT WILL HAVE A MARKET READ THROUGH WHAT I WILL LOOK LIKE HOW THAT IS FACTORING INTO YIELDS. COMING UP SHIFTING GEARS, WILLIAM COWAN IS JOINING US AUTHOR OF MONEY AND POWER. AFTER SOME CONTROVERSY OVER THE CEO PERCOLATING INTO THE DAY'S PAGES. THIS IS BLOOMBERG. >> IF DAVID SUB WERE TO BE FIRED TODAY THE STOCK WOULD GO DOWN BUT I TALKED TO INVESTORS THEY ARE NOT SAYING GET RID OF DAVID SOLOMON. THEY ARE ASKING DOES THE MEDIA IMPACT THEIR PERFORMANCE? I WOULD SAY NO SO FAR. HAVING SAID THAT IT SOLOMON HAS TO EARN HIS JOB EVERY DAY. I CAN GO BACK IN THREE OR SIX MONTHS. LISA: THAT IS MIKE MAYO HEAD OF RESEARCH AT WELLS FARGO. HE IS TALKING AFTER IN NEW YORK MAGAZINE ARTICLE TITLED "IS DAVID SOLOMON TOO BIG OF A JERK TO RUN GOLDMAN SACHS?" THERE HAS BEEN A NUMBER OF DEPARTURES. SOME SAY IT IS WITHIN NORMAL RANGE. SOME SAYING IT COMES TO THE BIG QUESTION MARK. IT JOINING US IS SONALI BASAK. WHAT IS THE LATEST IN TERMS OF HOW GOLDMAN IS RESPONDING TO THIS AND HOW THEY ARE SETTING IT UP GIVEN CLEAR INTERNAL DISSENT? >> THIS IDEA THAT PERFORMANCE HAS NOT BEEN IMPACTED, THIS YEAR IS A TOUGH YEAR FOR GOLDMAN BUT R.O.E. HAS BEEN THE WORST IT HAS BEEN IN YEARS AND WE ARE SMACK DAB TODAY IN THE CENTER OF THE THIRD QUARTER. THIS IS A PIVOTAL MOMENT IN TERMS OF WHAT GOLDMAN WOULD POST AT THE END OF THIS QUARTER. THEY HAVE TO FINISH THEIR CONSUMER STRATEGY EXITS, THEY HAVE, GREEN SKY THEY HAVE BALANCE REDUCTIONS TO GET THROUGH. THIS IS WHEN IT IS BEING PUT TO TEST MOST. LISA: WHY ARE PEOPLE SO FASCINATED WITH GOLDMAN SACHS IN PARTICULAR? >> THEY ARE THE BIGGEST. GOLDMAN SACHS HAS CHANGED A LOT. THIS WAS A CLOSELY HELD PARTNERSHIP AND WHEN DAVID SOLOMON CAME IN THE PROMISE WAS TO BE MORE SHAREHOLDER FRIENDLY. WHAT HAPPENED WAS WITH THE PERSONALITY TRAITS HE HAS HAD THERE HAS BEEN A LOT OF FRICTION . THAT TENSION IS NOW COMING INTO THE SPOTLIGHT. ARE THOSE ANOTHER SET OF ARTICLES BECAUSE WE HAVE SEEN A LOT OF DISCONTENT OVER THE YEARS OR IS IT SOMETHING WHERE THE RUBBER HITS THE ROAD AND STARTS TO IMPACT GOLDMAN'S PERFORMANCE MOVING FORWARD AND THIS YEAR IS A BIG YEAR TO REALLY SET THAT MARK. LISA: WHERE IS GROWTH GOING TO COME FROM IF IT IS NOT GOING TO COME FROM CONSUMER BANKING AND WHEN IT IS A TIME FOR GETTING OTHER DEALS DONE AND OTHER INVESTMENT BANKING ACTIVITIES? >> THEY'RE PUTTING THEIR MONEY IN ASSET AND WEALTH MANAGEMENT. THAT BUSINESS IS WHERE SOME OF THE BALANCE SHEET REDUCTION IS HAPPENING NOW SO YOU SAW THINGS LIKE A MASSIVE WRITE-DOWN ON REAL ESTATE WHEN THEY HAD TO SELL ASSETS AND REALLY EXIT SOME POSITIONS. YOU ALSO SEE THEM STILL FIGHTING PRETTY HARD IN TRADING. THEY HAVE BEEN BEATING MORGAN STANLEY IN EQUITIES TRAINING FOR A COUPLE QUARTERS IN A ROW THERE. THEY ARE STILL LAGGING BEHIND JP MORGAN THEY UP, ON HIGH-YIELD BOND UNDERWRITING THEY ARE DOWN IN INVESTMENT GRADE. THIS IS A PIVOTAL YEAR FOR GOLDMAN BECAUSE IT IS DAVID SOLOMON' YEARS TO SHOW WHETHER THIS IS A LOT OF NOISE OR WHETHER IT IS IMPACTING THE CORE BUSINESS LINES THEY'RE TRYING TO PROVE ARE THE FUTURE OF THE BANK. LISA: WHEN THAT CHANGES PERHAPS HIS MIND WILL CHANGE. A QUEUE FOR BEING WITH US. SOMEONE WHO HAS WRITTEN ABOUT GOLDMAN SACHS. JOINING US NOW WILLIAM, WHAT IS YOUR TAKE ON THE ARTICLE IN THE NEW YORK MAGAZINE AND SOME OF THE ARTICLES PERCOLATING THAT REALLY CHALLENGE DAVID SOLOMON'S LEADERSHIP? >> THE NEW YORK MAGAZINE ARTICLE, LISA WAS PARTICULARLY PERSONAL AND POINTED. HAVING WRITTEN A BOOK ABOUT GOLDMAN SACHS, I HAVE READ MANY, MANY ARTICLES OVER THE YEARS ABOUT GOLDMAN. GOLDMAN IS ALWAYS A FOCAL POINT OF THE MEDIA'S ATTENTION. IT HAS BECOME INCREASINGLY MORE OF A FOCAL POINT UNDER DAVID SOLOMON'S LEADERSHIP. HE IS DISENGAGED FROM THE MEDIA WHICH IS A STRATEGY I DON'T REALLY RECOMMEND THAT HE DO, BUT HE SEEMS TO BE DOING IT, AND SOME OF THE REASON YOU ARE GETTING SOME OF THESE NEGATIVE ARTICLES IS HE DOES NOT ENGAGE WITH THE MEDIA, WHICH I THINK HE WOULD BE BETTER OFF DOING, BUT THE NEW YORK MAGAZINE ARTICLE IN PARTICULAR WAS VERY POINTED, VERY PERSONAL, VERY MEAN-SPIRITED. GOLDMAN IS PUSHING BACK VERY HARD AGAINST IT. IT MAKES THE NEW YORK TIMES ARTICLE THAT CAME AT THE SAME DAY AN AFTERTHOUGHT, EVEN THOUGH IT DID CONTAIN THAT BIT OF NEWS THAT SUPPOSEDLY LLOYD BLANKFEIN CALLED UP DAVID SOLOMON THE PREVIOUS CEO AND ASKED HIM IF HE COULD BE HELPFUL, THAT HE HAD LOST $50 MILLION ON HIS GOLDMAN SACHS STOCK AND WAS WILLING TO RETURN IF DAVID WOULD BE WILLING TO HAVE HIM AND OF COURSE HE SAID NO. LISA: AT WHAT POINT DOES THE INCREASE IN BAD PUBLICITY AND THIS PUBLIC AIRING OF GRIEVANCES THAT MIGHT BE PERCOLATING UP IN THE INTERNAL RANKS CREATE A CHALLENGE RUNNING A FIRM. AT WHAT POINT DOES EXECUTIVE LEADERSHIP NEED TO HAVE THE ROOM? >> SONALI IS RIGHT AND MIKE MAYO IS RIGHT. AS LONG AS THE STOCK HOLDS UP, WHICH IT HAS BASICALLY, IT IS OFF ITS ALL-TIME HIGHS BUT IT HAS BASICALLY HELD UP PRETTY WELL, IT IS UP TO THE BOARD AT THIS POINT. THE BOARD HAS BEEN SILENT WHICH IS SHOCKING TO ME . IT WOULD BE SMART I THINK FOR THE BOARD TO COME OUT IN SUPPORT OF DAVID IF IN FACT THEY DO SUPPORT HIM. HE IS IN THIS WEIRD LIMBO. I KNOW FROM MY INTERNAL CONVERSATIONS WITH PEOPLE AT GOLDMAN THAT THE THE BOARD IS NOT RATTLED BY THIS. THEY HAVE NOT COME OUT OF ANY KIND OF PUBLIC SUPPORT. LISA: WHAT IS THE RESPONSE INTERNALLY WHEN YOU HAVE SOME OF THESE CONVERSATIONS? IS IT SURPRISE? WHAT IS THE SORT OF FEELING THAT YOU GET? >> I THINK THERE WERE SOME BASIC LEVEL OF UNDERSTANDING THAT DAVID HAS BECOME A BIT OF A LIGHTNING ROD END IS SOMEWHAT OF A CONTROVERSIAL FIGURE AND IS SORT OF A HARD-DRIVING CEO TAKE NO PRISONERS TYPE, WHICH IS FRANKLY WAY GOLDMAN SACHS IS ALL ABOUT. THEY ARE VERY SUPPORTIVE OF DAVID AT THE HIGHEST LEVEL, AS YOU WOULD EXPECT THEM TO BE. ESPECIALLY BECAUSE OF THE BONUSES IN 2022 THE LOSSES IN THE CONSUMER SECTOR THERE TRYING TO PUT BEHIND THEM IT IS ALL ABOUT THE BONUSES THEY WERE DOWN IN 2022, BUT YOU NEED TO LOOK AT IT OVER A TWO-YEAR PERIOD. '21 WAS A HUGE YEAR FOR BONUSES. YOU PUT THEM TOGETHER AND PEOPLE ARE STILL MAKING A LOT OF MONEY. THEY ARE DEFENSIVE AND SUPPORTIVE. THEY KNOW THEY ARE IN A BATTLE. BOARD SHOULD REALLY PUT AN END TO THIS BY COMING OUT AND SAYING THEY SUPPORT DAVID OR THAT THEY DON'T. LISA: THANK YOU SO MUCH FOR BEING WITH US. WILLIAM COWAN, LONGTIME FINANCIAL CORRESPONDENT AND WRITER IN MANY CAPACITIES. IF YOU ARE JUST TUNING IN WE ARE SEEING MARKETS ON THE MOVE FOLLOWING AN UPSIDE SURPRISE TO RETAIL SALES COMING IN. CONTROL GROUP THAT GOES UP INTO GDP, WE HAVE SEEN THE DECLINE, AND HOLD AT 7/10 OF A DECLINE. YIELDS ARE HIGHER. THIS IS WHAT HAS BEEN GAINING EVERYONE'S ATTENTION. AT THE HIGHEST LEVELS GOING BACK TO 2009 WE ARE NOW SEEING THE EURO CONTINUED TO GAIN AGAINST THE DOLLAR WHICH IS IRONIC GIVEN SOME OF THE CONCERNS OVER IN CHINA AND THIS FEELING THAT WITH BETTER THAN EXPECTED DATA IN THE U.S. YOU SHOULD GET THE STRONGER DOLLAR -- THE EURO STRONGER ACTUALLY AFTER BRIEFLY DROPPING BELOW THE ONE .09 -- THE 1.09 HANDLE. OIL PRICES, WHICH HAD CLIMBED AND STAYED ABOVE $80 A BARREL STILL SLIGHTLY LOWER ON THE NEWS OF WHAT WE HEARD FROM CHINA. COMING UP TOMORROW NIKOLAI TENGION THE, NOR JUST BANK CEO ON HOW TO ARRANGE IN A WORLD WHERE THERE IS A FEELING THAT YOU CANNOT DIVORCE YOURSELF FROM A SENSE OF HIGHER RATES AND SLOWER GROWTH. WE ARE ALSO LOOKING FORWARD TO TARGET TOMORROW AND WALMART ON THURSDAY, THE LATEST READ IN CONSUMERS. FROM NEW YORK THIS IS BLOOMBERG. ♪

Channel: Bloomberg Television

Views: 46,969

Keywords: Jon Ferro, Lisa Abramowicz, Tom Keene

Id: bHLCIwDp1D8

Length: 147min 10sec (8830 seconds)

Published: Tue Aug 15 2023