>> IT IS NICE A PRICE WE ARE
PULLING BACK. >> THERE ARE SIGNS OF THE
ECONOMY COMING THROUGH. >> YOU WANT TO SEE INFLATION
SLOW CREDIBLY AND SUSTAINABLY. >> UNTIL RECESSION STARTS TO
MATERIALIZE, WE CAN EXPECT HIGH RATES FOR A PERIOD OF TIME.
ANNOUNCER: THIS IS "BLOOMBERG SURVEILLANCE"
WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. JONATHAN:
LIVE FROM NEW YORK CITY, GOOD MORNING. THIS IS "BLOOMBERG
SURVEILLANCE." YOUR EQUITY MARKET ON THE S&P
500 FIRMER BY A THIRD OF PERCENT.
THE JOBS NUMBER ONE HOUR 30 MINUTES AWAY. TK, WELCOME BACK. TOM: IT IS GOOD TO BE HERE.
IT IS JOBS DAY. I'M READY TO GO. I HAD MY WHEATIES. JONATHAN:
IS THAT A SERIAL? TOM: IT IS A CEREAL. LISA HAD FRUIT LOOPS. LISA: LUCKY CHARMS. JONATHAN:
THEY SHOULD COME WITH A HEALTH WARNING.
LET'S TALK ABOUT AMAZON AND APPLE.
APPLE MEETING EXPECTATIONS AFTER THE CLOSE. AMAZON IS HIGHER BY 9% IN THE
PREMARKET, BEATING A RAISE FROM AMAZON. EVERCORE TAKING THE PRICE
TARGET FROM 150 TO 190. TOM:
AMAZON WITH THE PANDEMIC AND SECOND-GUESSING ABOUT THERE IS
A NATIONAL CRISIS, WE DELIVERED THE BOXES, WE NEED TO DIED IN
AND TO WHAT WE NEED TO DO. THEY DID. BAEZA WENT TO RUN THE
WASHINGTON POST AND THE NEW GUY CAME IN.
THE NEW GUY IS THE FIRST REAL GLIMPSE OF POST-COVID AMAZON.
JONATHAN: EVERCORE CALLING THIS QUARTER
AND UNLOCK FOR THE STOCK. AS OF THE STOCK NEEDED IT GIVEN
THE DOUBLE-DIGIT GAINS WE HAVE HAD SO FAR. LISA: THAT IS THE REASON WHY IT IS
BOLSTERING THE OVERALL INDEX RETURNS EVEN THOUGH APPLE IS
MORE SOGGY AND LOSING IS $3 TRILLION MONIKER I'M LOOKING AT
THEM CUT 27,000 PEOPLE AS WELL AS INCREASE SOME OF THE REVENUE
AND THIS IS WHAT I THINK IS GETTING PEOPLE EXCITED. TOM:
I AGREE WITH THAT. AND IT IS NOT JUST COVID. WHILE I WAS ILL I SPENT TIME
READING ABOUT THE CLOUD AND A LOT OF THIS AMAZON AND GOOGLE
AND MICROSOFT IS THE CLOUD BOOM AND YOU SAW WITH AMAZON NUMBERS
YESTERDAY. JONATHAN: YOU DID NOT SEE IT WITH
MICROSOFT. THERE WERE WORRIES ABOUT THE
FORECASTS AND HE SAW IT FROM AMAZON, THE DIFFERENCE BETWEEN
THE TWO THERE. IF YOU CHECK OUT THE TREASURY
MARKET, IT IS FIVE 45. EVERY SINGLE DAY THE YIELDS
HIGHER. 10 YEAR YIELD AT 419. TOM: YOU HAVE COVERED IT. WHAT STRUCK ME WAS ALL OF THE
DIFFERENT SPREADS THAT REALLY HAVE NOT BROKEN DOWN EXCEPT
THREE-MONTH 10 YEAR. THE T-BILLS COMPARED TO THE
NOTE. LISA: THE 10-YEAR IS THE WANT TO KEEP
WATCHING. IT IS THE BENCHMARK. IT HAS BEEN SO CONSISTENT AND
WORKING OUT AT A TIME WHERE WE ARE NOT JUST TALKING ABOUT MORE
SUPPLY BUT WE ARE ALSO TALKING ABOUT A BALANCE SHEET THAT HAS
BEEN STEADILY BY THE FEDERAL RESERVE.
WHO ARE THE BUYERS GOING TO BE? TOM: IMMEDIATELY HE'S LOOKING AT
6000 SQUARE FEET. THE ANSWER IS I AM SORRY, THE
30 YEAR MORTGAGE RATE BROKE OUT TO A NEW HIGH YESTERDAY. 7.39%. THAT IS A BIG KIND OF NUMBER. JONATHAN:
WE CAN TALK ABOUT NEW YORK SUBURBS LATER.
FUTURES ON THE S&P POSITIVE. ON THE S&P BUILDING A LOSING
STREAK COMING OFF THE BACK OF A THREE DAY LOSING STREAK GOING
INTO FRIDAY. LISA: THE MAIN EVENT 8:30 A.M.,
NONFARM PAYROLLS. WE HAVE THIS NEW DATA DEPENDENT
SUPPOSEDLY AND WERE LOOKING AT THE UNEMPLOYMENT RATE.
I'M WATCHING THE AVERAGE HOURLY EARNINGS AND WHERE THEY COME IN.
IS THIS ENOUGH? IS THIS WHAT THE FED NEEDS TO
SEE BECAUSE IT IS STILL HIGHER THAN IT WAS BEFORE THE
PRE-PANDEMIC DISRUPTION. SAUDI ARABIA AND RUSSIA HAVING
AN ALL-NIGHT REVIEW OF THE OIL MARKET CONDITIONS.
THEY'RE DISCUSSING WITH OPEC-PLUS NATIONS.
IT IS INTERESTING BECAUSE OF YESTERDAY'S ONGOING, OR
PROLONGING OF THE ONE MILLION BARREL A DAY CUT THAT SAUDI ARABIA IS DOING -- ONE BILLION
BARREL A DAY CUT THAT SIDE OF ARABIA IS DOING.
-- SAUDI ARABIA IS DOING. I THINK IT IS INTERESTING. WE DO SEE A BIT OF RESURGENCE
IN CERTAIN POCKETS AND I DO HAVE A HANDLE ON THAT AND THEY
ARE HINGED THERE, THE TRADE LINES AND OTHER THINGS YOU'RE
LOOKING. TOM: THIS BASICALLY AN APPLE PLAY?
LISA: THAT A LOT OF TRAINS AND CLASSIC INDUSTRIALS. TOM: WE INTERVIEWED HIM ONCE.
I GAVE WONDERFUL INTERVIEWS. THE WONDERFUL WOMAN FROM DOJ WHO WROTE SNOWFLAKE AND -- WAS
NOT HAPPY ABOUT SOME OF THE QUESTIONS I ASKED HER. JONATHAN:
THAT IS NICE THAT IS ON THE RECORD. TELL US MORE.
BUT MAYBE YOU HAVE TOLD US ENOUGH. STEVEN WIETING, JOINS US NOW.
8:30 A.M. IS WHERE WE HAVE TO START
PAYROLLS IN AMERICA. WHAT ARE YOU AND THE TEAM
LOOKING FOR? STEVEN: I THINK WE HAVE A REASONABLE
CONSENSUS AROUND A 200,000. JOBLESS CLAIMS HAVE STAYED LOW,
THE POSSIBILITY OF A STRONGER REPORT IS THERE.
I THINK WHAT WE NEED TO SEE IS WHETHER OR NOT A SLOWDOWN IS
INTACT, AND WHETHER OR NOT THE GAINS WE HAVE SEEN IN THE LABOR
FORCE CAN PERSIST WHILE WE HAVE A SLOWDOWN.
THAT WOULD BE THE IMMACULATE STORY BUT WHAT IS GOING ON IN
THE BOND MARKET, NOT PRICING A COLLAPSE IN THE ECONOMY.
INVOLVES HOW YOUR YIELDS -- HIGHER YIELDS.
WE MENTIONED THE BOND MARKET SELLING ALL.
THIS KEEP IN MIND THE FEDERAL RESERVE IS AT THE TOP OF THE
FUNDS RATE AT 5.5 LOOKING FORWARD.
THINK IT IS UNLIKELY THIS PERIOD IN WHICH LABOR MARKET IS
OUTPERFORMED THE ECONOMY, WE HAVE BEEN IN A SLOWDOWN
COMPARED TO 2021 FOR FIVE QUARTERS, THE LABOR MARKET IS
NOT GOING TO CONTINUE TO GALLOP AHEAD.
WE THINK OF BE PRODUCTIVITY GAINS AT A SLOWER GAIN FOR
LABOR MARKET COMPARED TO THE ECONOMY. JONATHAN:
HOW IS THAT CONSISTENT WITH THIS STATEMENT WE HAVE SEEN IN
THE YIELD CURVE? IF YOU TAKE OUT TODAY'S PRICE
ACTION AND CHOP OUT THE YIELD CURVE, TWO YEAR YIELD HAS MOVED
A SINGLE BASIS POINT, THE 10 YEAR OF MORE THAN 20 ON THE
WEEK. WHAT EXPLAINS THAT, HOW THE
YIELD CURVE HAS EVOLVED? STEVEN: THERE ARE SEVERAL FACTORS
INCLUDING JAPAN CONTRIBUTING TO SOME GLOBAL TIGHTENING.
A VERY BIG CONTRIBUTOR TO THE GLOBAL YIELD ENVIRONMENT.
IT IS SCARING EVERYBODY A BIT. I THINK THE BOND MARKET
DECIDING TO THE VALUE. WE HAVE TO REMEMBER THE 10 YEAR
YIELD HAS ANTICIPATED FED RATE CUTS. WE THINK WE WILL GET THEM.
THE FED ON FORECASTS FOR 2025 FOR EXAMPLE. THE YIELD CURVE HAS ALWAYS
FLATTENED WITH THE TIGHTENING CYCLE.
IT IS ALWAYS STATEMENT IN A FED EASING CYCLE.
-- STEEPENED IN A FED EASING CYCLE. IF WE ARE GETTING THROUGH THIS
POINT WHICH THE FED IS SIMPLY DONE TIGHTENING, IS NOT AS GOOD
FOR THE LONG END OF THE BOND MARKET AND THE SHORT END
PRIVATELY SUSTAINABLY FUND RATE FOR THE -- TOM:
THERE IS THOUSAND PEOPLE HAVE NEVER SEEN THIS YIELD
ENVIRONMENT AND THE BASIC BELIEF IS A FINANCIAL SYSTEM
WHERE GOING TO DIE WITH HIGHER YIELDS.
YOU AND I LIVE THE HIGHER YIELDS DECADES AGO.
EXPLAIN HOW WE ARE ALL NOT GOING TO DIE WITH A 4.5% 10
YEAR YIELD. STEVEN: THE HOUSING MARKET COMING TO
GRIPS AT BASE LEVEL OF DEMAND, YOU MENTIONED AT RATES, IT IS GOING TO HURT, BUT THE HOUSING
MARKET -- IT IS REALLY BE CHANGE IN INTEREST RATES, THE
IMPULSE TO NOT DOWN THE HOUSING MARKET.
WE HAVE GOTTEN USED TO THIS. WHERE WE CAME FROM IN 2020
WHERE IT 10 YEAR YIELD AT 0.5%, THAT WAS AN ABERRATION.
WE HAVE NEVER BELIEVED WE ARE GOING TO A 1980 14% YIELD, WE
DO NOT HAVE DECADES OF INFLATION AND EASING MONETARY
POLICY BEHIND US. WE HAD THIS PERIOD OF COVID AND
25% MONEY SUPPLY BACK IN 2020. IT IS NOT THERE NOW.
MY SUPPLIES CONTRACTING. -- THE MONEY SUPPLY IS
CONTRACTING. THE FED IS AT 5.5%. I THINK WE'RE GOING TO FIND
THESE YIELDS IS ABOUT AS GOOD AS WERE GOING TO GET. LISA: DO YOU PILE INTO LONG BONDS NOW?
YOU PARE SOME OF YOUR HOLDINGS IN EQUITIES AS YOU TRY TO
UNDERSTAND WHERE WE ARE HEADED AND CAPTURED THE YIELD? STEVEN: WE DID A QUITE A BIT OF THIS IN
THE LAST YEAR OR SO, AND WE ARE NOT ADDING TO FIX INCOME
HOLDINGS. WE ARE OVERWEIGHT AT THESE
YIELD LEVELS. WE THINK THEY WILL BE VERY
SOLID HOLDINGS FOR THE NEXT FEW YEARS. BUT THERE'S NOT A LOT OF
ABILITY HERE FOR US TO THINK THE LONG END OF THE BOND MARKET
OUTPERFORMANCE. THE YIELD CURVE STEEPENING
TREND IS ALREADY ANTICIPATING THE FED RATE CUTS.
THE SWEET SPOT, IF YOU AVERAGE OUT DIFFERENT MATURITIES, WE
THINK IS AROUND FIVE YEARS, AND THERE YOU HAVE LIMITED DURATION
AND SOMETIMES YOU WANT DURATION FOR A PART OF YOUR PORTFOLIO,
BUT YOU HAVE A LOT OF YIELD COMPARED TO WHAT RATES WILL BE
SUSTAINABLY THE NEXT FIVE YEARS. YOU COULD GET ACROSS INVESTMENT
GRADE SECURITIES. YOU COULD BUILD A PORTFOLIO AT
6% YIELD ACROSS DIFFERENT TYPES OF CREDIT QUALITY, STILL
INVESTMENT GRADE, OR GET 5% FOR THE NEXT SIX MONTHS AND THAT IS
A DIFFERENT STORY. WE THINK IN THE END YOU WILL
WANT MORE DURATION IN TREASURY BILLS BUT WE ARE NOT TAKING
MASSIVE BET ON THE LONG END OF THE BOND MARKET COLLAPSING.
JONATHAN: WHAT DID YOU LEARN FROM APPLE
AND SLOWING SALES? WHAT ARE YOU SICK AWAY FROM A
REPORT LIKE THAT? -- WHAT DO YOU TAKE AWAY FROM A
REPORT LIKE THAT? STEVEN: IS IDIOSYNCRATIC FOR THIS ISSUE.
THE MAIN ISSUE HERE, INVESTORS HAVE THE COMPARTMENTALIZE, YOU
HAVE HIGH-VALUE, BUT INCREDIBLY STRONG DURABLE EXCITING
INNOVATION IN AMERICAN TECH STOCKS BUT FOR US, WEALTH
BUILDING PORTFOLIO SHOULD BE MORE THAN 30% OF YOUR TOTAL
EQUITY PORTFOLIO CROSS TMT. THAT IS WHERE WE ARE NOW.
YOU THINK ABOUT THE REST OF THE WORLD EQUITY MARKETS, WHICH ARE
TRADING CHEAP, HOLD YOUR TECH, BUT WE THINK THEIR
OPPORTUNITIES ESPECIALLY OUTSIDE OF THE U.S.
AND IT IS SMALLER GROWTH STOCKS IN U.S.
THOSE ARE THINGS WERE ADDING BELOW AVERAGE VALUATIONS.
JONATHAN: THANK YOU. GOING INTO PAYROLLS, THE NUMBER
WE ARE LOOKING FOR, THE ESTIMATE 200,000.
ON UNEMPLOYMENT LOOKING AROUND 3.5% EXPECTED TO STAY RATES ON
OUR SURVEY AT 3.6%. APPLE AT THE MOMENT DOWN BY
1.9%. THE TAKE AWAY FROM APPLE OVERNIGHT SLOWING SALES GROWTH,
DISAPPOINTING RELATIVE TO EXPECTATIONS. LISA:
EVEN THOUGH THEY HAD BETTER-THAN-EXPECTED QUARTER
WHEN IT COMES TO CHINA. THERE TALKING ABOUT OPTIMISM
AND INDIA. HOW MUCH IS THIS THE GLOBAL
SMARTPHONE MARKET THAT IS CONTRACTING?
WE SAW THE FROM QUALCOMM SIGNIFICANTLY.
THEY CANNOT GET OUT FROM UNDER IT EVEN AS THEY CONSOLIDATE
MARKET SHARE. TOM: I WAS SURPRISED NO ONE
MENTIONED THIS IS Q3. THIS IS Q3.
THIS THE QUARTER SUPPOSED TO SLOW DOWN BECAUSE THEY HAVE A
JUNE AND THEY ROLL OUT THE SEPTEMBER. IS A NEW TOY.
HERE'S A NEW PRODUCT. STEVEN WIETING SAYS HERE IS THE
FACT, THEIR OF 8% BETWEEN LOUSY JUNE QUARTER AND WHEN THEY
LAUNCH THE NEXT TOY. 8% TO HERE TO SEPTEMBER IS THE
AVERAGE OVER THE YEARS. JONATHAN:
I'VE NEVER BEEN TO ONE OF THE LAUNCHES. TOM:
I DO NOT HAVE A BLACK TURTLENECK SO I CANNOT GO. >> THIS IS A VERY SAD DAY FOR
AMERICA. IT WAS ALSO VERY SAD SEEING THE
FAILED AND DECAY AND ALL OF THE BROKEN BUILDINGS AND WALLS AND
THE GRAFFITI IN WASHINGTON DC. THIS IS NOT THE PLACE I LEFT.
IT IS A VERY SAD TO SEE IT. THIS A PERSECUTION OF A
POLITICAL OPPONENT. JONATHAN: THAT IS THE VIEW OF THE FORMER
PRESIDENT TRUMP AFTER APPEARING IN WASHINGTON DC IN FEDERAL
COURT. PAYROLLS AROUND THE CORNER.
YOU KNOW THE ESTIMATE, 200,000. THE PRICE ACTION LOOKS LIKE
THIS. ON S&P 500, EQUITY FUTURES
SLIGHTLY POSITIVE BY A 31%. THREE DATE LOSING STREAK INTO
FRIDAY AND TRYING TO BOUNCE. TRYING TO HELP THE BALANCE IS
AMAZON WHICH IS UP CLOSE TO 9%. IN THE BOND MARKET, YIELDS,
HIGHER BY A COUPLE OF BASIS POINTS. 419. PICK YOUR POISON.
THE DATA, PROBABLY NOT. THE DOWNGRADE, A SHRUG OF THE
SHOULDERS BY MOST PEOPLE. THE TREASURY SUPPLY?
THAT IS THE REAL STORY COMING OUT OF THE TREASURY. TOM: THAT IS THE REAL STORY.
THE INTEREST EXPENSE OF THE FEDERAL GOVERNMENT IS SOMETHING
AS WELL. THIS A LOOK AT THEIR. I WOULD FOCUS ON, YOU GO TO BDM SCREEN ON THE TERMINAL, RAW
-- ROUND IT UP TO 6%. THE BOTTOM LINE IS WE ARE NOT
YET TO THE CUSP OF ROUNDING UP BUT WE GET CLOSE.
LET'S TURN TO POLITICS. THE POLITICS OF THE U.S.
OF AMERICA. WE DO THIS SO MUCH FOR
INTERNATIONAL AUDIENCE. WENDY SCHILLER HAS ADVISORS
WITH BROWN UNIVERSITY ALFRED TAUBMAN CENTER FOR AMERICAN
POLITICS AND . WE HAVE FEW MONTHS OF
INDICTMENTS CREATED WHAT IS THE DIFFERENCE -- WE HAVE
CUMULATIVE INDICTMENTS. THERE HAVE BEEN THREE AND THERE
COULD BE FOUR COME WHAT IS THE DIFFERENCE, THE DISTINCTION?
WENDY: IT APPEARS OF THE AUDIENCE.
FOR TRUMP SUPPORTERS, VERY LOYAL PEOPLE, THIS IS EMBOLDENS
THEM, KEEPS THEM MORE LOYAL. THEIR TEAM IS LOSING AND
THEY'RE GOING TO BE ON THAT TEAM AND ANOTHER IS GOING TO
SHAKE THEM. THEY GET MORE EMBOLDENED BUT IT
CONTINUES TO TURN OFF INDEPENDENT VOTERS WHO WERE THE
SWING VOTERS IN THE KEY STATES FORMER PRESIDENT TRUMP LOSS IN
2020. THE AUDIENCE THAT GETS DISGUSTED BY THREE INDICTMENTS
THE AUDIENCE WAS LEAVING ANYWAY. THEY ARE NOT GOING BACK TO
TRUMP BY THE TRUMP BASE IS MORE EMBOLDENED AND WANTS TO DEFEND
THEIR PRESIDENT. WE WILL SEE THE DONATIONS KEEP
COMING IN, SMART MONEY DONATIONS HE IS USING TO PAY
HIS DEFENSE FUNDS, THAT COULD BE MORE EXPENSIVE.
DOES THE MONEY KEEP FLOWING IN? TOM: I FIND FASCINATING THE
ZEITGEIST THE LAST 24 HOURS. THERE WAS ONE IDEA OF HOW SMALL
THE TRUMP AUDIENCE IS YET VERY LOYAL.
WHAT ARE THE OTHER REPUBLICANS DOING? ARE THEY WAITING? ARE REPUBLIC IS MOVING TO
INDEPENDENTS? ARE THEY MOVING TO A RELATIVE
CONSERVATIVE LIKE BIDEN? WHAT ARE THE REPUBLICANS DOING
NOW THAT I HAVE HAD IT -- HAVE HAD IT OVER THE INDICTMENTS?
WENDY: THEY ARE HOLDING THEIR BREATH
AND THINK AND WHAT DO I DO. REPUBLICANS ARE REALLY GOOD
ABOUT COMING HOME TO THE PARTY NOMINEE.
THE EXCEPTION WAS 2020 BUT TYPICALLY EVEN WHEN THERE IS A
LIKE IN 2016, REPUBLICANS COME HOME TO THE NOMINEE AND THEY
GET OUT AND VOTE IN PRESIDENTIAL ELECTIONS.
THE QUESTION IS WILL ANYBODY INCLUDING DESANTIS COME UP A
CHALLENGE TO PRESIDENT ENOUGH TO WORTH INVESTING IN SOMEBODY
ELSE WITH THE MONEY OR WITH YOUR VOTE SIX MONTHS FROM NOW.
I THINK THAT IS A STANCE RIGHT NOW.
IS THIS PERSON GOING TO MAKE IT? HOUSE REPUBLICANS ARE WITH
TRUMP BUT THE ACTUAL RANK-AND-FILE WE HAVE TO WAIT
TO SEE FOR SIX MONTHS. THE ROTC THIS MEANT BE THE
NOMINEE AGAIN AND KB PRESIDENT AGAIN -- THE REALITY THIS
PERSON COULD BE THE NOMINEE AND COULD BE PRESIDENT AGAIN. LISA:
SHE SAYS SHE DOES NOT THINK DONALD TRUMP WILL BE THE
NOMINEE IN THE END AND ESSENTIALLY PEOPLE WILL MOVE
AWAY FROM HIM AS IT BECOMES CLEAR HE WILL NOT WIN THE
GENERAL ELECTION. FROM YOUR VANTAGE POINT, WHAT
IS THE TIPPING POINT AND WHO IS THE LIKELY PERSON TO EMERGE
WHEN YESTERDAY WE WERE TALKING ABOUT TIM SCOTT AND HOW HE HAS
BECOME THE WALL STREET DARLING, AT LEAST WHEN IT COMES TO
FUNDRAISING? WENDY: ELAINE HAS BEEN IN POLITICS FOR
A LONG TIME AND IT KNOWS WHAT SHE IS HAPPY ABOUT IT.
I HAVE SHIFTED. I THOUGHT HE WOULD NOT GET THE
NOMINATION AND I DID NOT SEE AND THE DOOR TO VOTE IN THE
PRIMARIES TO GET -- DO KNOCK HIM OFF OF HIS PARISH.
C THE -- WE HAVE TO SEE THE IOWA POLLS. WE HAVE TO SEE IF YOU CAN GET
ANY MOMENTUM EVEN IF HE IS LOSING TO TRUMP, DESANTIS,
MOMENTUM WOULD REIGNITE HIS CAMPAIGN THEN IT BECOMES THE
OBVIOUS OPTION BUT HE HAS RELIABILITIES.
I'M NOT SURE THE LIKABILITY FACTOR FOR DESANTIS GET HIM
OVER THE TOP AND DEFEATS TRUMP IN THE PRIMARY. LISA:
I THINK ABOUT THE ENTIRE PAGE FOR PRESIDENT BIDEN TO RUN
AGAIN THAT HE IS THE ONLY DEMOCRATIC CANDIDATE WHO COULD
WIN AGAINST TRUMP. SET AT A TIME WHEN GRASSROOTS
FUNDRAISING IS LACKLUSTER BREED HE'S NOT GETTING SMALL
DONATIONS THAT INDICATE A HEALTHY POPULAR CAMPAIGN AND
POPULARITY RATINGS HAVE FLAGGED. AS IT LOOK LESS LIKELY HE CAN
WIN REELECTION -- DOES IT LOOK LESS LIKE THE EQUIPMENT
REELECTION IF HE IS GETS ANYONE OTHER THAN TRUMP? WENDY:
WE LOOK AT THE ECONOMY WHICH AT THE MOMENT SEEMS TO BE SETTLING
DOWN. THE DOOM AND GLOOM AND I PREDICTION SEEMS TO BE
DIMINISHING. INFLATION IS UNDER CONTROL WHEN
YOU'RE FROM NOW AND VOTERS ARE GOING TO SAY, THINGS ARE PRETTY
GOOD. EGGS ARE PRETTY STABLE. IF TRUMP IS THE NOMINEE --
THINGS ARE PRETTY STABLE. JONATHAN:
WENDY SCHILLER, THANK YOU. ON THE INDICTMENT WE HAVE SEEN
SO FAR THIS WEEK. THE DRAMA GOES ON. TOM:
IT IS THE OVERLAY. IT IS UNPRECEDENTED 1, 2, 3 AND
WHATEVER WE SEE OUT OF GEORGIA. FOR INTERNATIONAL AUDIENCE, WE
HAVE NEVER BEEN HERE. I CAN THINK OF SCANDALS OVER
THE YEARS. ONE ISOLATED THING. ALL OF WATERGATE WHICH ARE
MEMBER. -- WHICH I REMEMBER. THERE IS NO COMPARISON TO WHAT
WE HAVE RIGHT NOW. JONATHAN: WE JUST WENT THROUGH THE 1, 2,
3. WE ARE TALKING FLORIDA, WASHINGTON, NEW YORK. TOM:
GEORGIA I BELIEVE WOULD BE FOUR. I THINK THE NATURE OF IT IS
SOMETHING THAT IS TRULY UNPRECEDENTED. JONATHAN:
ONE THINK WE HAVE TO FOCUS ON IS THE TREASURY SUPPLY STORY. IT GOT FUEL EARLIER THIS WEEK
THAT THE TREASURY HAD TO COME OUT AND LIFT THE ESTIMATE FOR
ISSUANCE IN THIS QUARTER FROM'S 733 TO ONE TRILLION.
WHAT OTHERS ARE TRYING TO FIGURE OUT IS THIS SELF EASY,
WE KNOW INTEREST COST ARE OF, SOMETHING ELSE HAPPENING HERE?
TOM: I THINK IT IS VALID AND WHAT I
WILL POINT OUT IS THE IDEA OF SUDDENLY. I'M NOT SAYING WE ARE ADDICTS
AND A LEAP, BUT YOU HAVE A SET OF MOVING PARTS THAT COULD
CHANGE RAPIDLY WHERE SUDDENLY IS AUGUST OR END OF THE FISCAL
YEAR. JONATHAN: THE BOND MARKET WELCOME.
CLOSE TO 420 ON THE 10 YEAR. LISA: IT IS BEEN A SLOW GRIND.
THEN SUDDENLY REALLY REACHED A LEVEL WITH THE PINCHED
ANNOUNCEMENT THAT CRYSTALLIZE A LOT OF THINGS IN PEOPLE'S MIND
THAT GOT THE ATTENTION OF RISK MARKETS.
IT KEEPS CLIMBING EVEN ADMIT THIS. ROMANY BUYERS ARE NOT COMING IN
YET. JONATHAN: WHICH HAS TURNED THE STORY UP.
EQUITY FUTURES ON THE S&P POSITIVE BY A THIRD OF 1%.
ON THE U.S. ECONOMY, THE JOB REPORT STILL
TO GO. SARAH HOUSE OF WELLS FARGO
COMING UP NEXT. JONATHAN:
PAYROLLS TWO HOURS AWAY. ON THE S&P 500, ON THE NASDAQ,
AND -- I THINK WE HAVE A COUNTDOWN CLOCK.
ON THE NASDAQ, POSITIVE BY HALF OF 1%.
APPLE IS DOWN IN THE PREMARKET. IN THE BOND MARKET, OFF OF THE
BACK OF THE THREE-DAY LOSING STREAK IN THE EQUITY MARKET, IT
IS BEEN FIVE DAYS OF IT, YIELDS UP, UP. ON THE TWO YEAR UP BY FOUR
BASIS POINTS. THIS IS COME AT THE LONG AND,
ALMOST EXCLUSIVELY WITH HIGHER BY MORE THAN 20 THE 10 YEAR.
TOM: THE REAL YIELD HAS GONE FROM
150 TO 181. YOU ARE CORRECT THAT ALL OF
THIS IS OUT PAST 10 YEARS. 10 YEAR IS TWO BEEPS?
HARDLY ANYTHING. JONATHAN:
THE SUPPLY STORY FROM THE TREASURY EARLIER THIS WEEK.
WE'LL TALK MORE ON THAT LATER. A RARE PIECE OF DECENT DATA OUT
OF GERMANY. AN UPSIDE SURPRISE ON FACTORY
ORDERS. THE EURO AGAINST THE DOLLAR
10945. THE CURRENCY PAIR ABOUT UNCHANGED.
COMING DOWN TO THE PAYROLLS REPORT AT 8:30 A.M.
EASTERN TIME. A RANGE OF VIEWS ON THE STREET.
CITI AT THE HIGH END AT 290. JP MORGAN LOOKING FOR WAS 75.
THE RANGE IS PRETTY TIGHT. I THINK IT IS 150 FOR THE
BROADER SURVEY WE CONDUCTED AT BLOOMBERG. TOM:
I AGREE WITH LISA IT IS ABOUT WAGE NUMBERS.
IF YOU DO HAVE THE NEW STICKY INFLATION, IF WE DO NOT GET AT
3.5, WERE AT -- 4% ON THE WAY SCRIPT IS NOT GET IT DONE.
JONATHAN: UNITED WORKER UNION ASKING FOR
A 40% PAY RISE OVER THE NEXT FOUR YEARS FOR THE CHOICE
AUTOMAKER. THE REQUEST COMING AS CONTRACT
DISCUSSIONS WITH GM, FORD, SO LANCES ARE UNDERWAY.
THE CURRENT LABOR CONTRACT EXPIRING NEXT MONTH. LISA: UAW CALLED IT AN AUDACIOUS LIST
OF DEMANDS CREATED THEY'RE TALKING ABOUT THEY WANT A 40%
RAISE BECAUSE IT'S WITH THE EXECUTIVE HAD GOTTEN.
IF THE CHIEF EXECUTIVE OFFICER COULD GET THE RAISE, THEY COULD
CREATE TO PUT THIS IN HOURLY NUMBERS, THE AVERAGE WAGE FOR
THE TOP WAGE ABOUT $32 PER HOUR. THERE BEEN 23% INCREASES SINCE 2008 -- THERE HAVE 2 3%
INCREASES SINCE 2019. TOM: TWO QUICK OBSERVATIONS, TAKE 29
MILLION AND COMPARE THAT TO 67,008 YEAR AT $32 PER HOUR. THAT IS FUNCTIONALLY DIFFERENT FROM MR. SLOAN'S GM OR -- THIS
IS A HUGE DIFFERENCE IN EQUITY, CASH COMPENSATION TO EXECUTIVES
VERSUS ANY KIND OF UNION NUMBER. I LOOK AT THE RETURN LABOR
POWER OF THE INTERVIEW WE DID. I CANNOT MEMBER IF I DID IT
WITH JOHN FOR LISA WITH THE TEAMSTERS.
THIS IS TEAMSTERS INFLUENCE HERE. FORGET ABOUT THE HOLLYWOOD
STUFF, THIS IS REAL. PEOPLE USED TO GET SHOT AT OVER
THIS STUFF IN MICHIGAN. JONATHAN: IN EUROPE AS WELL.
I THINK THE HOLLYWOOD STORY IS PRETTY REAL AS WELL. BE A, BRITISH AIRWAYS 13.1% THE
PAY RISE CREATE ANOTHER DEAL FOR YOU OVER AN 18 MONTH PERIOD
THAT IS GOING TO BE A BONUS OF ONE ALL PAYMENT OF 1000 POUND
AS WELL. TOM: I CANNOT GET A SEAT BACK FROM
THE ATLANTIC. THAT IS THE REALITY. JONATHAN:
DO NOT GET ME STARTED. TOM:
THEY CAN GET YOU TO YOUR THEY CANNOT DO YOU HOME. JONATHAN: WE TO GET AN UPGRADE WITH BA
POINTS AND THE CAESAR NOT AVAILABLE. LISA:
ON POINTS, USE THEM NOW BECAUSE THERE SERIOUS INFLATION SO THEY
ARE WORK LESS LATER ON THE. THEY ARE TRYING TO WRAP IT IN.
CARRY ON. JONATHAN:
AMAZON SHARES UP IN THE PREMARKET.
NICE MOVE IN EARLY TRADING. IT IS A BEAT AND IT RATES FROM
THEM. THE CONCERN WE HAD ABOUT CLOUD
REVENUE GROWTH FOR MICROSOFT YOU DO NOT SEEM TO HAVE AT
AMAZON. LET'S SIT ON APPLE FOR A BEAT.
THE GOOD NEWS THERE THERE IS NOT MUCH.
THIRD STRAIGHT QUARTER OF THE CLIMBING SKILLS, -- DECLINING
SALES. RAISING IS CONCERNED THAT
WORRIES ABOUT U.S. UPGRADE CYCLE IS COMING TO HOLD
THAT ALL-TIME LOW AND LIKELY TO RESULT IN WEEK REVENUE IN U.S.,
THAT WAS THE BULLISH THESIS, OF GRACE READY TO GO AND LET'S
FOCUS ON THE UPGRADE RIGHT NOW. TOM:
EVERY ONE -- 12 MONTHS LIKE CLOCKWORK. WITH THEY SHOW UP? WE DO NOT KNOW IF THEY WILL
SHOW UP? S ALE APPLE. WE ARE GOING TO ADVANCE FORWARD
ON THIS JOBS REPORT FOR YOU TO SARAH HOUSE HAS BEEN WONDERFUL.
SENIOR ECONOMIST AT WELLS FARGO'S AND JOYCE'S THIS
MORNING. BENEATH HEADLINE DATA AT 8:30
A.M., WHAT IS THE FIRST THING YOU WILL LOOK FOR? SARAH:
WILL KEEP A CLOSE EYE ON THE HEADLINE, NOT JUST HIRING, BUT
ALSO LABOR FORCE PARTICIPATION. I'M GOING TO BE LOOKING AT SOME
OF THE LESS KNOWN SIDES OF THINGS MAY BE SHOWING CRACKS IN
THE FOUNDATION OF THE LABOR MARKET. PERMANENT JOB LOSERS. THOSE INCREASE ABOUT 20% THE
PAST YEAR ABOUT THEIR HUNDRED THOUSAND WORKERS WHICH DOES NOT
SOUND LIKE A LOT, BUT THAT IS ON PAR WITH WHAT WE SAW BETWEEN
LATE 2006 AND SUMMER OF 2007 BEFORE THINGS STARTED TO
UNRAVEL IN JOBS MARKET. TOM: ARE WE BEYOND THE PANDEMIC?
CAN YOU STUDY THIS. GOING BACK TO LATE BETWEEN 19?
-- 2019? SARAH: NO, I THINK WE STILL SEE
LINGERING EFFECTS OF THE PANDEMIC.
EVERYTHING FROM THE RATE OF HIRING TO THE LABOR SUPPLY.
THEY'RE STILL INDUSTRIES LIKE LEISURE AND HOSPITALITY, THE
GOVERNMENT THAT HAVE SCOPE FOR CATCH UP SO THOSE INDUSTRIES
HAVE EMPLOYMENT BACK TO WHERE IT WAS SO I THINK IT IS GOING
TO HELP BOLSTER PAYROLL GROWTH OVER THE NEXT FEW MONTHS EVEN
AS WE HAVE SEEN A MAN FOR WORKERS COMP -- HAVE SEEN
DEMAND FOR WORKERS COME DOWN. WE'RE SO SEEING EFFECTS OF THE
PANDEMIC WITH THE WAGE DYNAMIC AS WELL. JONATHAN:
YIELDS ARE UP AGAIN THIS MORNING.
IT IS NOT ABOUT THE DATA THIS WEEK FOR MANY PEOPLE.
IT IS ABOUT TREASURY SUPPLY. FROM YOUR STANDPOINT, IS FISCAL
POLICY IN CONFLICT WITH MONETARY POLICY IN AMERICA?
SARAH: I THINK WE ARE SEEING THE EFFECTS OF THE FISCAL SUPPORT
WE SAW THE PAST FEW YEARS. IT IS RAINING SO YES, YOU HAVE
SOME SUPPORT -- WANING SO YES YOU HAVE SOME SUPPORT FLOWING
THROUGH THE ECONOMY BUT THE RATE OF CHANGE IS BEGINNING TO
WORK MORE IN CONCERT WITH MONETARY POLICY.
BUT NOT AS AGGRESSIVELY AS WHAT WE ARE SEEING AS HE POLICY
SPEAR. JONATHAN: WHAT IS BEHIND THE ADDITIONAL
SUPPLY OF TAX RECEIPTS ARE DOWN. THERE ARE PEOPLE ASKING WHETHER
THIS IS STEALTH EASING COMING OUT OF TREASURY. SARAH:
I THINK IT MIGHT ALSO BE A PART OF TRYING TO REBUILD THE CASH
BALANCE IN TREASURY GENERAL ACCOUNT FOLLOWING THE DEBT
CEILING SO I THINK THAT COULD BE A PART OF IT. LISA:
PEOPLE ARE SPECULATING THAT IT IS UNLIKELY U.S.
GOVERNMENT WILL GET THERE FISCAL DUCKS IN A ROW.
AT WHAT POINT DOES BECOME A RISK TO THE ECONOMY IF YIELDS
REMAIN AT THE LEVELS THEY ARE? SARAH:
I THINK WE WILL REALLY START TO SEE IT AND SEE SOME MORE FOCUS
ON WHAT HAPPENS IN NET INTEREST EXPENSE.
IT IS NOT SOMETHING WE HAVE HAD TO THINK ABOUT FOR YEARS EVEN
WITH THE DEFICITS GIVEN THE LOW RATE ENVIRONMENT BUT WITH WHERE
RATES ARE TODAY AND WHERE THEY ARE LIKELY TO STAY, THAT IS
GOING TO BECOME AN INCREASING PROBLEM.
WHERE THAT'S STARTS TO PLAY OUT IS HOW IT SQUEEZES OUT OTHER
TYPES A MORE PRODUCTIVE SPITTING IN THE ECONOMY. LISA:
WHICH TO BRING THIS BACK TO THE LABOR MARKET AND HOW LONG THEY
CAN CONTINUE TO SUSTAIN SOME THE SPENDING WHICH IS FUELED
GAINS EVEN AS HIGH YOUR RATES WERE SUPPOSED TO END UP
CRIMPING GROWTH. WHAT DO YOU SEE ON THE SURFACE
SIDE ESPECIALLY AFTER THE ISM SERVICE YESTERDAY THAT SHOWED A
HEADLINE NUMBER SOFTENING A WHAT COMPONENT OF HOW MUCH
PEOPLE ARE PAID ROSE EXPERTLY. -- ROSE UNEXPECTEDLY. SARAH:
I THINK RACING AND INFLATIONARY PRESSURES COMING FROM LABOR
MARKET. YOU'RE STARTING TO SEE IT COOL
DOWN BUT WHEN YOU LOOK AT ACROSS A RANGE YOU ARE STILL IN
CONVERSATION GROWTH NORTH OF 4%. WE DID GET STRONGER
PRODUCTIVITY NUMBERS YESTERDAY, EVEN WITH SOME IMPROVEMENT IN
RECENT TREND, THAT IS NOT GOING TO GET BACK TO 2% INFLATION ON
A SUSTAINED BASIS. IT IS GOING TO GET US CLOSER AS
WE SEE THE WAGE GAINS COME DOWN BUT NOW WE ARE SEEING THE
INFLATIONARY PRESSURE FROM THE LABOR MARKET REMAINS TOO STRONG
TO BE CONSISTENT WITH THE FED 2% GOAL. LISA:
WE'VE HEARD FROM DIFFERENT PEOPLE THE PAST COUPLE OF WEEKS
THEY THINK THE FED WILL MOVE TO AN EXPLICIT OR IMPLICIT 3%
TARGET OR 2.5% TARGET. THEY'RE GOING TO SAY IT IS NOT
WORTH PUTTING A DENT IN THE LABOR MARKET AND BRINGING THE
WAGES DOWN IN ORDER TO GET TO THE 2% TARGET.
DO YOU AGREE WITH THEM? SARAH: OVER THE MEDIUM TERM, LET'S
CALL IT ANOTHER YEAR OR TWO, I THINK THAT IS BRIGHTLY RIGHT. I THINK THE FED CAN LIVE WITH
2.5% INFLATION AFTER ALL WE HAVE BEEN PUT THROUGH THE LAST
FEW YEARS BUT I THINK FOR THE LONG-TERM TARGET, I DO NOT
THINK THAT CHANGES. I THINK WHERE YOU END UP WITH
IS POLICY IS GOING TO BE ON MORE RESTRICTIVE, MAYBE A BIT
ABOVE THAT ONCE YOU GET PAST THE WORST OF THE RECESSION
FEARS THAT YOU STILL GET DOWNWARD PRESSURE TO GET BACK
TO 2% OVER TIME. TOM: TO THE HERITAGE OF WELLS FARGO
AND IDEA OF JAY BRYSON'S WORK, YOU ALWAYS HAD A UNIQUE TAKE ON THE AMERICAN LABOR ECONOMY, ARE
WE RECOGNIZING? -- REUNIONING? ARE WE REUNIONIZING? SARAH:
I WOULD NOT GO THAT FAR TO SAY, BUT WHAT WE HAVE SEEN A
REFLECTION OF THE STILL INCREDIBLY TIGHT A JOBS MARKET
AND ALL THE UNION ACTIVITY WE HAVE SEEN WITH THE TERMS OF
HEATED NEGOTIATIONS AND PICK UP IN ACTUAL STRIKES AN NUMBERS OF
WORKERS OUT OF WORK BECAUSE OF THE WORK STOPPAGES.
IT IS ALSO A REFLECTION OF THE EXTRAORDINARY INFLATION
ENVIRONMENT WE HAVE SEEN. IF YOU LOOK AT THE UNEMPLOYMENT
COST NUMBERS, UNION COMPENSATION HAS LAGGED OUT OF
NONUNION AS THE CONTRACTS WERE BEFORE WE SAW INFLATION SHOOT
HIGHER. I THINK TO SOME EXTENT IT IS A
LITTLE BIT MORE CATCH UP RATHER THAN A SIGNAL WE GET ANOTHER
LEG HIGHER IN TERMS OF WAGE GROWTH.
IT DOES SUGGEST IS GOING TO KEEP THE WAGE PRESSURES
ELEVATED AND MAKE IT HARD TO GET BACK TO 2% INFLATION ANY
TIME SOON ON A SUSTAINED BASIS. JONATHAN:
SARAH HOUSE THERE OF WELLS FARGO. THANK YOU.
THE MEDIAN ESTIMATE 200 K. MEMBER IN 1970'S, UNION
MEMBERSHIP WAS CLOSE TO A QUARTER.
IT IS DOWN DRAMATICALLY SINCE THEN. I'VE ASKED THE QUESTION.
CAN YOU IMAGINE HOW WORSE INFLATION WOULD BE IF UNION
MEMBERSHIP WAS CONSISTENT WITH THE 70'S? TOM:
VERY EUROPEAN LIKE AND THE BIG DIFFERENCE WHERE A SCRIPT NOW AND WHERE GERMANY IS -- EUROPE
IS RIGHT NOW AND WHERE GERMANY IS, IN AMERICA YOU TAKE ON A
PUBLIC SERVICE UNIONS AND LOOK AT THE PRIVATE SECTOR AND THAT
IS WHERE IT IS -- THE ANSWER TO MY QUESTION TO SARAH IS THE
IDEA OF IS THERE AN EBB AND FLOW HERE. WHAT GETS MY ATTENTION IT CAN
POSSIBLY BE RE-UNIONINZING. JONATHAN:
WE ARE HEARING MORE ABOUT IT. COMING UP, TOM FORTE ON TECH
EARNINGS. THEY ARE UNIONIZING. WHO IS LEADING THE UNION? TOM:
IT IS 15 PEOPLE. JONATHAN: I WILL GET THEM TOGETHER. LISA:
YOU'RE GOING TO BE THE LEADER? JONATHAN: YEAH. >> PEOPLE ARE EMPLOYED.
THEY HAD MONEY -- THEY HAVE MONEY. THEY ARE SPENDING MONEY. >> HAS ALWAYS BEEN THE BATTLE
BETWEEN THE CONSUMER AND THE FED AND THE CONSUMER HAS PUSH
THE -- ONE THE BOTTLE BACK A BIT. THE RISK GOES TO OVER TIGHTENING AND SLOWING DOWN THE
CONSUMER TOO MUCH AND WE WOULD HAVE A RECESSION. JONATHAN: WHEN MY FAVORITE THINGS HE
REFERS TO THE RESEARCH OF HIS TEAM WE TALKED ABOUT THE
ECONOMY -- REFERS TO THE RESEARCH OF HIS TEAM WHEN HE
TALKS ABOUT THE ECONOMY. TOM: HE WAS HERE FOR THE INTERVIEW.
HE WAS OVER THERE OFF-CAMERA AND I THINK BRIAN IS GOING TO
FALL APART. RETIRING. JONATHAN: WHAT A GENERATION OF ECONOMISTS.
IT IS AMAZING. YOU GO THROUGH IT NAME BY NAME.
QUITE A LEGACY ETHAN HARRIS IS LEAVING THE -- LEAVING BEHIND
AT WALL STREET. LET'S TOUCH BASE WITH THE PRICE
ACTION. EQUITY FUTURES ARE JUST ABOUT
POSITIVE BY 0.3% CREATED TWO NAMES I WANT TO LOOK AT,
AMAZON, APPLE. AMAZON UP. APPLE A LITTLE BIT LOWER BY
1.8%. AMAZON DOING THE HEAVY LIFTING FOR THE NASDAQ WITH A RALLY --
TINY RALLY. TOM: LET'S GO TO APPLE.
SOMEBODY THAT NAILED THIS, DAN IVES GOES ON -- WERE TALKING
ABOUT FRUIT LOOPS. IT IT'S A TORQUE WAS SHORT ON
THE. HE IS THE SUPER BOWL ON APPLE. TOM FORTE, SENIOR RESEARCH
ANALYST HAS A NEUTRAL. HE IS MEASURED.
HE SEES THE OPTIMISM BUT YOU ARE TALKING ABOUT THIS WE'RE
TALKING ABOUT DOES BARBIE HAVE LEGS WEEKS IN AND THE IDEA IS
APPLE MYSTERY AS YOU ARE GOING TO GO FROM THE IPHONE X AND
SPRING UP TO THE IPHONE 15, I DO NOT KNOW. JONATHAN: FOR THE KIDS LISTENING,
BARBIE STILL HAS LEGS. IT IS GOOD TO CATCH UP.
INSIGHTFUL COMMENTS YOU HAD ON APPLE, YOU THINK MAYBE THE
STOCK HAD GONE TOO FAR. WE ARE DOWN THIS MORNING BY
1.8%. YOU ARE AWARE OF THE BULLISH
THESIS. THE UPGRADE CYCLE, PEOPLE
SITTING ON OLD PHONES. THEY'RE GOING TO UPGRADE INVITE
NEW ONES. WHERE IS THE UPGRADE RIGHT NOW
GOING INTO THE NEW LAUNCH OF NEW PRODUCTS IN ONE MONTH OR SO?
TOM: THE MOST CONCERNING STATISTIC
FROM YESTERDAY WAS CONSUMERS ARE ALREADY PAYING FOR THEIR
APPLE PRODUCT ON AN INSTALLMENT BASIS.
THE LOW HANGING FRUIT HAS BEEN PICKED TO THE EXTENT THAT THAT
WAS THE OPPORTUNITY FOR APPLE TO GET YOU TO GO FROM BUYING
YOUR IPHONE, OR HAVING YOUR IPHONE FULLY SUBSIDIZED BY THE
CARRIER, TO NOW HAVING THE CONSUMER PAY IT ON INSTALLMENT
BASIS WITH NO INTEREST. I AM CONCERNED THE CARRIERS ARE
GOING TO SUBSIDIZE TO LESSER DEGREE THAN THE 13 OR 14 WITH
THE 15. COMMENTS ON THE IPHONE ARE
CONCERNING AND I THINK WEIGHING THE STOCK. TOM: THE BOTTOM-LINE IS IT IS THE
-- IT IS AN UGLY JUNE, UGLY JULY. IT HAPPENS EVERY YEAR. BY WAY BE DIFFERENT THIS TIME?
TOM: THEY JUST TOLD US THE SEPTEMBER
QUARTER WHERE THEY ARE GOING TO TELL US ABOUT THIS NEW
WONDERFUL IPHONE. IS GOING TO HAVE NEGATIVE
REVENUE GROWTH. WHILE THE IPHONE WILL HAVE AN
IMPROVEMENT FROM NEGATIVE 2.4% IT WILL LIKELY BE NEGATIVE AS
WELL. YES THEY WILL BE TOUTING EVERY
NEW FEATURE ON THE IPHONE AND FINANCIAL IMPACT IS PRETTY
DISAPPOINTING. TOM: HOW FAR OUT DO YOU GO WHERE
SERVICES CATCHES UP AND ADVANCES AND OVERCOMES IPHONE
DYNAMICS? IS IT A THREE YEAR OUTLOOK OUT?
HOW FAR OUT AS A MAGIC POINT WHERE SERVICES BECOME IMPORTANT?
TOM: PROBABLY FIVE YEARS. WE THINK RELATIVE GROWTH RATE
OF SERVICES TO EVERYTHING ELSE BUT IF YOU LOOK AT THE QUARTER,
I PHONES WERE DOWN, I PASS, LAPTOPS WERE DOWN, SERVICES WAS
UP. THAT IS GREAT NEWS. I DO BELIEVE APPLE AS A SERVICE
IS A REAL POSSIBILITY. HE PAID $200 A MONTH AND GET
THE LATEST AND GREATEST IPHONE. YOU PROBABLY COULD APPLE TV
OTHER THINGS AND YOU'RE NOT THINKING ABOUT YOUR PAIN $2000
FOR THE NEW IPHONE -- YOU ARE PAYING $2000 FOR THE NEW IPHONE.
I THINK THAT IS OPPORTUNITY LONG-TERM BUT MAGNETICALLY I
THINK -- MATHEMATICALLY I THINK IT IS FIVE YEARS OUT. LISA:
YOU DID DECREASE YOUR PRICE TARGET FOR APPLE BUT YOU
INCREASE YOUR PRICE TARGET FOR AMAZON ARE THAT THEY DELIVERED
BETTER-THAN-EXPECTED RESULTS. SUDDENLY EVERYONE IS HERALDING
ANDY AS THE HERO OF WALL STREET. HOW LONG CAN THIS BE THE CASE
FOR HIM TO KEEP CUTTING AND BEATING ON THE TOP AND BOTTOM
LINE? TOM: MY BEST ANSWER IS 12 MONTHS.
THEY JUST HAD THEIR GOOD JUNE QUARTER.
THERE OUTLOOK FOR THE SEPTEMBER QUARTER.
I'M CONCERNED REALITY SETS IN AT SOME POINT AND TO THE EXTENT
THE COST CUTS ARE MAKING THEM LESS CUSTOMER CENTRIC THAT IS
GOING TO SLOW PRICE CONVENE SELECTIONS I THINK THE NEXT OF
MUCH THEY ARE GOOD. THEY WANT -- NEXT YEAR I AM
CONCERNED. LISA: SOME MIGHT ARGUE THE CLOUD
BUSINESS WILL TAKE OVER ALL. IT SHOWS SIGNS OF PICKING BACK
UP. THERE'LL BE QUESTIONS WHETHER
IT IS GAINING MARKET SHARE VERSUS MICROSOFT, AZURE.
HOW LONG CAN THAT BE THE MAIN AFLAC BARRIER FOR THE COMPANY?
IT IS ENOUGH TO OFFSET WHAT YOU SEE DOWN THE LINE ON THE
CUSTOMER SERVICE SIDE? TOM: THE ANSWER IS NOT LONG ENOUGH. WE ARE SHARING A 12.2% GROWTH
RATE COMPARED TO A 15.8% GROWTH RATE REPORTED MARCH QUARTER
THOUGH IT IS BETTER THAN A 10.8 IN APRIL.
THAT IS A SLOWEST GROWTH RATE SINCE AWS LAUNCH IN 2006.
ANDY JACKSON IS BRAGGING ABOUT DOUBLE-DIGIT GROWTH AS IF IT IS
NOT GOING TO BE SUSTAINED. I LIKE DOUBLE-DIGIT GROWTH FOR
ONE OF THE MOST IMPORTANT PROFIT CENTERS IS PROBLEMATIC
ESPECIALLY GIVEN THE CURRENT STATE OF AN E-COMMERCE BUSINESS.
AMAZON COLLECTIVELY ME SOMETHING LIKE 3.4 BILLION FOR
COMMITTAL BASIS POINT OR PERCENTAGE POINT REVENUE GROWTH.
THEY'RE GOING TO NEED ADVERTISING.
THEY'RE GOING TO NEED VIDEO. THEY'RE GOING TO NEED HEALTH
CARE. THEY'RE GOING TO BE SOMETHING
ELSE TO TAKE THE BATON FROM AWS LONG-TERM. JONATHAN:
TO DESCRIBE HOW SERVICE ON THE E-COMMERCE SITE HAS
DETERIORATED LAST YEAR? TOM: THE BEST EXAMPLE IS ANECDOTAL.
I HAD A DEFECTIVE SMOKE ALARM I PURCHASED ON AMAZON.
NOT THAT LONG AGO IT WOULD SAY WE ARE SORRY IT IS DEFECTIVE WE
WILL SEND YOU A REPLACEMENT. BUT THE ONLY ON YOUR PORCH AND
UPS TO PICK IT UP FOR FREE. NOW THEY WANT $7.99 FOR YOU PS
TO PICK IT UP OR GO TO WHOLE FOODS TO RETURN IT.
THAT IS ONE EXAMPLE. WHAT WAS GOING TO HAPPEN I WANT
TO START THINKING MORE ABOUT GOING TO TARGET, GOING TO
WALMART, TO OTHER RETAILERS. I THINK THAT IS HUGELY
CONCERNING FOR AMAZON AND SOMETHING I MONITORING CLOSELY .
JONATHAN: IT IS ANECDOTAL BUT I HAVE THE
SAME THING FROM SO MANY PEOPLE. I HAVE A CONSPIRACY THEORY
ABOUT WHOLE FOOD SHOPPING. THEY ALWAYS SAY WATER IS NOT
AVAILABLE BUT IT IS AND I KNOW IT IS AVAILABLE. LISA:
WHAT ARE YOU TALKING ABOUT? JONATHAN:
YOU ORDER WATER WITH YOUR FOOD AND A TURNAROUND EVERY FRIDAY
MORNING, THEY SAY THE WATER, THE BOTTLED WATER IS NOT
AVAILABLE. ALWAYS WONDERED IS IT THE WAY
READ THEY PERTAINING IT IS A WAY THAT OUR WAY -- ARE THEY
PRETENDING BECAUSE OF THE WAIT. TOM:
YOU KNOW WHAT THE PROBLEM IS, BANANAS.
I'VE GIVEN UP ORDERING BANANAS. JONATHAN:
ARE THEY SAYING IT IS NOT THERE? TOM:
NO, IF I PICK THEM, YOU CANNOT DO FRUIT BECAUSE THEY DO NOT
PICK THE RIGHT FRUIT. JONATHAN: THIS IS GOOD. THIS IS IMPORTANT.
I'M AGREEING. TOM: IT IS ANECDOTAL. [LAUGHTER]
JONATHAN: BOTTLED WATER. I KNOW WHAT I WAS GOING TO SAY,
DRINK OUT OF THE TAP. TOM: IN WHOLE FOODS, WE DELIVER YOU
-- WE DELIVER COMPANY BUT DO NOT SUBSTITUTE. JONATHAN:
I WAS RAISED WITH AN ITALIAN FATHER WHO REFUSE TO NOT DRINK
TAP WATER BECAUSE YOU CANNOT DRINK IT.
WE DRINK BOTTLED WATER. IT IS CULTURAL. LISA: TAP WATER IS AWESOME HERE.
JONATHAN: EXCITED TO COME BACK FROM YOUR
FOR TAP WATER -- FROM EUROPE FOR TAP WATER. LISA:
IT IS REALLY GOOD. >> IT IS NOT A SURPRISE WE ARE
PULLING BACK. >> THERE ARE SIGNS OF WEAKNESS
COMING THROUGH. >> INVESTORS ARE SAYING WE WILL
WAIT TO SEE HOW FAR YIELDS RISE. >> WHAT YOU WANT TO SEE IS
INFLATION SLOW SUSTAINABLY. >> WE CAN EXPECT HIGH RATES. >> THIS IS "BLOOMBERG
SURVEILLANCE" WITH TOM KEENE, JONATHAN FERRO,
AND LISA ABRAMOWICZ. JONATHAN: THIS IS BLOOMBERG SURVEILLANCE
ON PAYROLLS FRIDAY ALONGSIDE TOM KEENE IT LISA ABRAMOWICZ I
AM JONATHAN FERRO. THE JOBS NUMBER 90 MINUTES AWAY.
WE ARE LOOKING FOR 200,000. YIELDS UP THIS WEEK. TOM:
A LITTLE UNDER THE WEATHER AND DECIDED TO COME IN FOR THE
SUPER BOWL. 13 TIMES A YEAR WE GET THE
SUPER BOWL WITH JOBS DAY. IT IS A BIG DEAL IN THE
BACKDROP OF WHAT BONDS HAVE WROUGHT OVER THE PAST WEEK.
THE BOND MOVEMENTS ARE NOT GAME CHANGING BUT THEY GIVE YOU
SOMETHING IN THE SUMMER TO TALK ABOUT TO GET TO Q4 OF THIS YEAR.
JONATHAN: HAS NOT BEEN A QUIET AUGUST SO
FAR. YIELDS UP EVERY SINGLE DAY THIS
WEEK. YIELDS UP VIA BASIS POINT. LISA:
I AM GLAD YOU POINTED TO THE 10 YEAR AND THAT IS THE REASON I
AM CURIOUS TO SEE WHETHER THE JOBS DATA MOVES THE NEEDLE FOR
THE 10 YEAR. AT A CERTAIN POINT THIS IS NOT
ABOUT THE FED, THIS IS ABOUT THE TREASURY ISSUING MORE DEBT
AND THE BANK OF JAPAN MOVING AWAY FROM SOMETHING THAT HAS
UNDERPINNED EVALUATIONS AND 70 DEVELOPED MARKET WORLDS.
AT WHAT POINT DOES THE FED LOSE CONTROL OVER THE NARRATIVE AND
GET THE SENSE IN THE MARKET THEY ARE NOT GOING TO RESPOND
TO ANY STRENGTH THAT IF IT COMES IN YOU GET DETERIORATION,
YOU GET A FEELING LONGER TERM WILL BE INFLATION. TOM:
I DO NOT AGREE IT IS THIS MACRO STUFF.
THE MACRO STUFF IS TANGIBLE. LOOK WHAT FITCH DID.
FITCH AND THEN WE SAID WE ARE BANANA REPUBLIC.
MICHAEL GAPEN WAS NOT ADVISING BRIAN MONAHAN ON WHAT TO SAY ON
THE ECONOMY. HE PUT OUT A GREAT CHART OF A
DISTRIBUTION OF THE INFLATION OUTCOMES THAT ARE THERE.
WHAT HAS REALLY HAPPENED IS WE ARE NOT GOING TO GO TO 2%. IT MAY BE 3% OR 4% STICKINESS
IS THE REAL DEBATE INTO THIS JOBS REPORT. JONATHAN:
APPLE IN THE PREMARKET -2%. AMAZON POSITIVE CLOSE TO 9%.
APPLE IN LINE WITH EXPECTATIONS. SOFTER ON IPHONE SALES.
AMAZON UP CLOSE 9%. THERE WERE CONCERNS ABOUT CLOUD
REVENUE. YOU DID NOT SEE THAT OF AMAZON
OVERNIGHT. LISA: ON ANY LEVEL. WHAT YOU SAW OUR JOB CUTS AND
INCREASED PROFITS. THE QUESTION IS HOW LONG CAN IT
LAST AND AT WHAT POINT IN PEOPLE KEEP PROJECTING THIS
TYPE OF GROWTH AT A TIME WHERE THERE ARE HEADWINDS AND A LOT
OF COMPETITION? THAT IS IMPORTANT, ESPECIALLY
IN LIGHT OF WHAT WE KEEP HEARING, THAT THE CONSUMER
CANNOT KEEP THIS UP FOREVER. THEY HAVE MANAGED TO LONGER
THAN PEOPLE BOUGHT. JONATHAN: THE EQUITY -- S&P FUTURES
POSITIVE .2%. LISA: WHAT WE ARE LOOKING AT IS THE
CHANGE IN U.S. NONFARM PAYROLLS FOR JULY, THE
UNEMPLOYMENT RATE. 200,000 IS THE EXPECTED NUMBER.
I AM WATCHING THE AVERAGE HOURLY WAGES.
HOW MUCH DO THEY CONTINUE TO APPLY AND HOW MUCH DOES IT
DECELERATE FROM WHAT WE HAVE SEEN RECENTLY?
IF WE GET DOWN TO 4.2%, IS THAT ENOUGH TO SUSTAINABLY SAY WE
ARE HAPPY WITH THIS, WE ARE STILL GOING TO REMAIN ON HOLD
OR CUT RATES IN THE NEAR FUTURE. TODAY ON THE OIL FRONT, SAUDI
ARABIA AND RUSSIA ARE ARE HOLDING AN ONLINE REVIEW OF
THEIR MARKET CONDITIONS AND OPEC-PLUS NATIONS WILL WEIGH IN.
HOW LONG CAN WE SEE AN INCREASE IN OIL PRICES BEFORE IT BECOMES
THE MAIN STORY BECAUSE IT HAS BEEN SIX STRAIGHT WEEKS OF OIL
GAINS AND IT HAS YET TO BE GAINING SOME FEELING OF
MOMENTUM IN TERMS OF MAINTAINING PRODUCTION CUTS.
SATURDAY WE GET THE WORD FROM WARREN BUFFETT, BERKSHIRE
HATHAWAY REPORTS EARNINGS. CURIOUS WHAT HE HAS TO SAY
ABOUT THE INDUSTRIAL PRODUCTION COMPLEX IN THE U.S.
GIVEN HE IS SO HEAVILY INVESTED IN THEM AND OF COURSE APPLE.
TOM: IS THIS THE OMAHA THING? THIS WEEKEND ARE WE GOING TO DO
THAT? JONATHAN: THAT IS TOMORROW? LISA:
TOMORROW IS THE EARNINGS. THEY ALREADY HAD THE ANNUAL GET
TOGETHER. TOM: HE HAS NEVER INVITED ME OUT.
LISA: WE COVERED THE FULL CULT AND
HOW YOU FELT ABOUT IT. JONATHAN: FULL CULT.
YOUR WORDS, NOT LINE -- NOT MINE. [LAUGHTER]
SARAH HUNT JOINS US. WE HAVE HAD THE TECH EARNINGS.
TO THE TECH EARNINGS JUSTIFY THE DOUBLE-DIGIT GAINS WE HAVE
SEEN? SARAH: I THINK SO FAR THEY MAY HAVE.
THE QUESTION IS ABOUT WHAT IS COMING NEXT.
IT IS ALL ABOUT THE OUTLOOK. IF YOU LOOK BACK AT THE WAY
AMAZON HAS PERFORMED VERSUS MICROSOFT OR APPLE IT NOT
PERFORMING AS WELL. IT IS NOT A HUGE SURPRISE THAT
APPLE IS HAVING A LITTLE BIT OF A GIVEBACK ON UNIT SALES
BECAUSE YOU HAD HUGE EXTRA SALES DURING THE PANDEMIC.
THE THING FOR APPLE IS THAT GIVES THEM A BIGGER INSTALL
BASE. THEY ARE ADDING THAT. THE QUESTION WILL BE WHAT
HAPPENS GOING FORWARD. THAT IS WHERE IT WILL BE TRICKY.
JONATHAN: EVERY TIME YOU GET THESE
EARNINGS WE LOOK FOR MACRO SIGNAL.
CAN YOU TELL ME IF THE IPHONE IS A STAPLER DISCRETIONARY ITEM.
IS THERE A BROADER ECONOMIC SIGNAL I CAN TAKE AWAY? SARAH: BECAUSE OF THE PANDEMIC THAT IS
A MORE DIFFICULT QUESTION TO ANSWER.
IN A NORMAL ENVIRONMENT WHERE YOU WOULD NOT HAD EVERYBODY
STAYING AT HOME AND SAYING EVERY KID NEEDS AN IPAD BECAUSE
THEY ARE HOME ALL DAY, I THINK THAT CHANGED THE MATH.
I DO NOT KNOW YOU CAN HAVE A HUGE READ INTO THAT EXCEPT
PEACEABLE -- EXCEPT PEOPLE POSSIBLY OVERBOUGHT.
I HAD TO WAIT FOR MY IPAD. EVERYBODY WANTED ONE.
THE FACT THEY ARE SEEING A LOT OF SWITCHING IS POSITIVE FOR
THE UPGRADE CYCLE. I'M NOT SURE THAT IS A HUGE
MACRO TAKEAWAY GIVEN HOW SO MANY OF THE PANDEMIC STOCKS HAD
A STRONGER SLOW DOWN POST-PANDEMIC.
THAT IS NOT A HUGE SURPRISE. TOM: MR. BUFFET, 40% OF HIS
BERKSHIRE HATHAWAY IS APPLE. THAT HAS BEEN BACK TO 2016.
CARRIED THAT OVER TO OUR LISTENERS AND VIEWERS.
DO WE LIGHTEN UP ON TECH WE JUST ASSUME THEY KEEP GROWING
AS MR. BUFFET HAS ENJOYED SEEING APPLE GROW? SARAH:
I THINK THEY KEEP GROWING LONGER-TERM.
LAST YEAR THE TECH STOCKS GOT HIT VERY HARD AND SOME OF THOSE
THINGS BECOME STAPLES. IS YOUR IPHONE THE
DISCRETIONARY ITEM OR IS IT SOMETHING YOU HAVE TO HAVE WITH
YOU? WHEN YOU LEAVE THE HOUSE DOES
IT FEEL LIKE I CANNOT LIVE WITHOUT MY PHONE?
I'M NOT SURE THAT FALLS INTO A CONSUMER STAPLE AS OPPOSED TO A
DISCRETIONARY ITEM. THE QUESTION IS CAN I KEEP
SEEING BETTER PERFORMANCE ON THESE STOCKS?
I AM NOT SURE HOW MUCH OF THE EARNINGS GROWTH WILL COME THE
WAY PEOPLE EXPECT. I'M NOT SURE IF THAT IS ABOUT
TECHNOLOGY OR THE ENTIRE MARKET. LISA:
WE ARE HAVING THIS CONVERSATION AT A TIME YIELDS ARE RISING TO
THE HIGHEST LEVEL SINCE NOVEMBER BUT PUSHING UP TO THE
HIGHEST LEVELS WE HAVE SEEN IN A LONG TIME AND I WONDER HOW
MUCH THAT CHANGES THE CONVERSATION, HOW MUCH THAT
CHANGES YOUR THESIS IN TERMS OF VALUATION AND WHERE THAT IS
PLACED IN THE EQUITY MARKET? SARAH:
THIS IS ONE OF THE THINGS WE'VE BEEN SAYING ALL ALONG.
IT IS HARD FOR ME TO BELIEVE THE FED WILL CUT AS FAST AS
PEOPLE EXPECT THEM TO. WE EXPECTED RATES TO STAY
HIGHER FOR LONGER. THE QUESTION ABOUT CUTTING
RATES SO QUICKLY. I'M NOT SURE WE GET TO 2% SO
QUICKLY. YOU MAY SEE INFLATION START TO
RISE BECAUSE OIL PRICES ARE ON THE MOVE AND FOOD PRICES ARE
HIGHER. IT IS DIFFICULT TO SEE RATES
GOING DOWN IN THE WAY THEY DID IN THE LAST 15 YEARS.
THERE WAS AN ARTICLE ON BLOOMBERG ABOUT HOW THE STOCK
MARKET CAN RISE, EVEN THE RATES ARE GOING HIGHER.
MULTIPLES CAN CONTINUE TO EXPAND.
YOU'RE NOT SEEING THE TRADE-OFF BETWEEN TECH AND RATES THE WAY
YOU DID LAST YEAR. YOU'RE NOT SEEING THAT RIGHT
NOW BECAUSE TECH HAS COME THROUGH WITH GOOD EARNINGS AND
THEY HAVE SO MUCH CASH THEY ARE EARNING MONEY.
THAT IDEA THAT TECH IS GOING TO BE IN TROUBLE BECAUSE RATES ARE
GOING HIGHER IS DIFFICULT ON THE MEGA TECH SIDE TO SEE.
I THINK THAT WILL DEPEND ON HOW WE SEE NEXT YEAR.
I THINK RATES WILL BE HIGHER THAN PEOPLE WANT THEM TO BE FOR
LONGER THAN PEOPLE EXPECT. JONATHAN:
IT MATTERS WHY THEY ARE HIGHER. IF THEY ARE HIGHER BECAUSE THE
DATA HAS BEEN BETTER YOU CAN MAKE THE ARGUMENT IT SHOULD BE
GOOD FOR RISK ASSETS. IF YIELDS ARE HIGHER BECAUSE
TREASURY IS CROWDING OUT THE BOND MARKET, ISN'T THAT WORSE
FOR RISK ASSETS? SARAH: ABSOLUTELY.
YOU USED TO GREAT PHRASE EARLIER. THE VOLUME TURNED UP ON
SOMETHING THAT WAS ALREADY THERE. NO ONE WAS TALKING ABOUT TREASURY HAVING A BIG ISSUANCE
UNTIL -- THE EXPENSE FOR THE U.S. GOVERNMENT IS MUCH HIGHER.
THEY DID NOT TRIM OUT THERE DEBT.
THAT WILL BE A BIG ISSUE GOING FORWARD.
I DON'T DISAGREE THAT HIGHER RATES, BECAUSE THE BACKDROP IS
NOT SO GOOD BECAUSE YOU HAVE MORE RISK BECAUSE I'M ISSUING
SO MUCH DEBT, IT IS NOT GOOD BECAUSE HIGHER RATES ARE BETTER
AND WE WANT TO CONTINUE TO SLOW THINGS DOWN.
I'M NOT SURE HOW THAT PLAYS OUT BUT I DO NOT THINK RATES WILL
COME DOWN AS FAST AS PEOPLE WANT THEM TO. JONATHAN:
ENERGY IS TURNING AROUND. THE SAUDIS ARE SAYING THEY
MIGHT DO THAT FOR LONGER. I IMAGINE YOU ARE FEELING MORE
COMFORTABLE WITH THE CALL OVER THE LAST WEEKS.
WALK US THROUGH WHY. SARAH: THERE WAS A LOT MORE SUPPLY
THAN ANYBODY EXPECTED. BETWEEN US CONTINUING TO
RELEASE FROM THE SPR THIS YEAR, NOT BUYING ANYTHING BACK, AND
OTHER COUNTRIES RELEASING OIL AS WELL AS SO MUCH RUSSIAN OIL
ON THE MARKET THAT PEOPLE DO NOT EXPECT A LEVEL TO BE THERE.
THAT KEPT PRICES LOWER FOR LONGER THAN YOU HAVE THIS BACK
AND FORTH BETWEEN IF THERE WILL BE A RECESSION LET THE DEMAND
GO DOWN. THE SHIFT INTO IT WILL BE A
SOFT LANDING AND NOT A RECESSION HELPS A LITTLE BIT.
DEMAND HAS PICKED UP. THE SUPPLY HAS NOT PICKED UP.
YOU'RE STARTING TO SEE WITH NORWEGIAN NATIONAL GAS, THE
ENTIRE COMPLEX HAS PICKED UP. WITH ENERGY IT IS DIFFICULT.
THE SWINGS ARE BIG AND LAST LONGER THAN YOU THINK THEY
SHOULD. WE TOOK SOME PAIN ALONG THE WAY.
JONATHAN: YOU WANT TO TAKE A JOBS GUEST
BEFORE YOU GO? PICK A NUMBER? SARAH: 97. JONATHAN: THEIR EGO. JUST -- THERE YOU GO.
JUST SHORT OF CONSENSUS. SARAH HUNT, GOOD TO SEE YOU.
THE ESTIMATE IN THE SURVEY AT THE MOMENT IS 200,000.
EQUITY FUTURES HIGHER .14%. LISA, IN THE COMMODITY MARKET,
CRUDE $81.79. BRENT AROUND $85. LISA:
JUST ADDING TO THIS FEELING THAT THE PHYSICAL CRUDE MARKET
IS NOT ENOUGH TO KEEP SUPPLY AND DEMAND AT THIS LEVEL.
SAUDI ARABIA SAYING THEY WILL CONTINUE THE ONE MILLION BARREL
PER DAY CUT IN SEPTEMBER. THIS IS WHAT THEY ARE DOING.
MEANWHILE, RUSSIA IS BASICALLY, THERE ARE SIGNS IT IS MAKING
GOOD ON THE PROMISES IT MADE IT OPEC-PLUS TO NOT SUPPLY AS MUCH.
PUT THIS TOGETHER WITH THE FACT THAT NOBODY STOPPED TRAVELING
AND IT LEADS TO A BULLISH PROPOSITION. TOM:
I AGREE WITH A BULLISH PROPOSITION AND I AGREE THAT
EVERY RESEARCH ARTICLE TALKED ABOUT DEMAND ANALYSIS.
SARAH HUNT JUST TALKED ABOUT IT NICELY.
I WENT TO COPPER AND SINCE I HAVE NOT BEEN HERE FOR A COUPLE
DAYS I LOOKED AT LME COPPER BECAUSE IT IS REAL COPPER. LONDON LME COPPER, THE BOTTOM
LINE IS A COPPER RECOVERY OFF THE SUMMER OF LAST YEAR AND
THAT IS ABOUT THIS GLOBAL DEMAND AND THIS IS AN
UNDERCURRENT THAT IS THERE WHICH IS HOW JEFF CURRIE AND
OTHERS GET TO AN ELEVATED BRENT CRUDE PRICE. JONATHAN:'S FOR THAT.
STORY OF THE WEEK, DOMESTIC, NOT GREAT. LISA: CUTTING PRICES.
THAT IS SOMETHING PEOPLE ARE NOT TALKING ABOUT.
I WANT TO KEEP ENJOYING THE FACT THAT THEY ARE CUTTING
PRICES. JONATHAN: IT IS A SECRET.
THEY ARE STILL REALLY HIGH. >> THIS WAS NEVER SUPPOSED TO
HAPPEN IN AMERICA. THIS IS THE PERSECUTION OF THE
PERSON THAT IS LEADING BY SUBSTANTIAL NUMBERS IN THE
REPUBLICAN PRIMARY AND LEADING BY A LOT.
WHEN YOU CAN'T BEAT HIM YOU PERSECUTE HIM OR YOU PROSECUTE
HIM. WE CANNOT LET THIS HAPPEN IN
AMERICA. JONATHAN: THAT WAS THE FORMER AFTER
APPEARING IN COURT. I JUST WANT TO WORK AWAY
THROUGH THE PRICE ACTION GOING INTO PAYROLLS WITH EQUITY
FUTURES ON THE S&P 500 POSITIVE AFTER A THREE-DAY LOSING STREAK
ON THE S&P. THE THANKFUL NEWS CAME FROM THE
LIKES OF AMAZON. THAT STOCK IS UP IN THE
PREMARKET BY 8.5% OFF THE BACK OF A BEAT AND A RAISE.
THE DISAPPOINTING NEWS CAME FROM APPLE, WE ARE DOWN 2.3%
THIS MORNING, JUST SHORT OF ESTIMATES AND THAT STOCK A
LITTLE WEAKER IN THE LAST 10 MINUTES.
WE TALKED ABOUT THE AIRLINES AND WHAT IS HAPPENING IN
AMERICA AND ABROAD. IF YOU'RE INTERNATIONAL, GREAT.
YOU'VE HEARD THAT FROM SOME OF THE BIG PLAYERS.
IF YOU'RE DOMESTIC YOU'RE NOT HEARING THE SAME THING FROM
JETBLUE, WHICH HAD TO CUT ITS OUTLOOK FROM SOUTHWEST. I
ENCOURAGE YOU TO CHECK IT OUT ON THE TERMINAL OR AT
BLOOMBERG.COM. THIS QUOTE FROM AN ANALYST AT
JP MORGAN AND THE INVESTMENT BANK -- IF YOU CATERED A
PREMIUM, IF YOU CANNOT BANK ON LOYALTY AND IF YOU DO NOT FLY
INTERNATIONALLY, IF YOU DO NOT CATERED A PREMIUM THIS YEAR'S
THIRD QUARTER IS LIKELY TO DISAPPOINT.
JETBLUE SOUTHWEST IN THE MIX ON THAT FRONT IN ALL OF THE WRONG
WAYS. LISA: IT RAISES A LOT OF QUESTIONS.
HAS PEOPLE'S DESIRE TO TRAVEL AND GET OUT IN THE WORLD ENDED
OR ARE WE LOOKING AT SOMETHING THAT PEOPLE PULLING BACK ON
DISCRETIONARY SPENDING. FAMILIES AND OTHER PEOPLE THAT
DO NOT HAVE THE INCOMES THE HIGHER BRACKET DOES THAT IS
GOING TO BE ONE OF THE KEY MACRO QUESTIONS. TOM:
I LOOKED AT THE ATLANTA GDP NUMBER WHICH MOVES.
IT IS LIKE A 3.6% STATISTIC. IT IS A BOOM ECONOMY STATISTIC.
I HAVE TROUBLE WITH THIS WORRY ABOUT THE AMERICAN ECONOMY WHEN WE ARE CLEARLY 2% OR 3%.
IT IS A SOLID ECONOMY. JONATHAN: I'M NOT SAYING IT IS NOT.
I'M JUST TRYING TO LOBBY FOR LOWER TICKETS FOR AIRLINE
PRICES. THAT IS ALL THIS SEGMENT WAS
ABOUT. THAT IS ALL. NOTHING ELSE. TOM:
WENDY BENJAMIN WAS TAKING NOTES ON THIS.
TRULY A POLITICAL ANIMAL. I WANT TO TALK TO YOU ABOUT THE
REPUBLICAN PARTY THAT IS LISTENING TO THE FORMER
PRESIDENT AND SAYING WHAT NOW. LET ME FOCUS ON A GENTLEMAN
FROM FLORIDA WHO IS NOT THE GOVERNOR.
HE HAS FOUR CHILDREN, HE HAS BILLS TO PAY.
HIS NAME IS MARCO RUBIO. INTERESTING CHILDHOOD.
SENATOR SINCE 2011. WHAT DOES A REPUBLICAN LIKE
MARCO RUBIO MAKE OF THIS MOMENT? WHAT DO THOSE REPUBLICANS DO?
WENDY: RIGHT NOW THEY ARE STANDING
FIRMLY BEHIND DONALD TRUMP, EVEN THE PEOPLE WHO WANT TO
WREST THE REPUBLICAN PRESIDENTIAL NOMINATION FROM
HIM ARE SAYING SUPPORTIVE THINGS.
I WILL PARDON HIM WHEN I BECOME PRESIDENT.
THIS IS A POLITICALLY MOTIVATED THING. WHAT ABOUT HUNTER BIDEN?
I SAW A POLL FROM CNN. 70% OF REPUBLICANS, NOT PRIMARY
VOTERS, ALL REPUBLICANS, THINK JOE BIDEN WAS NOT LEGITIMATELY
ELECTED. THAT IS THE BACKDROP OF THIS
TRIAL. TOM: YOU AND I REMEMBER THE DAY WHEN
CALIFORNIA REGISTERED REPUBLICANS CLICKED 29% AND
THERE WAS THIS UPROAR AND PEOPLE SAID THE REPUBLICANS ARE
EXTINCT. HOW SMALL IS THE REPUBLICAN
PARTY NOW? WE HAVE TO REMIND OURSELVES
THAT PRESIDENT TRUMP GOT X MILLION MORE VOTES THE SECOND
TIME AROUND THAN THE FIRST TIME AROUND.
HOW SMALL IS THE MAGA PARTY PART OF THE PARTY?
IS IT 50% OF AMERICA? IS IT 18%? WENDY:
I WOULD HAVE TO GUESS BUT I WOULD THINK THE MAGA PART OF
THE PARTY IS ABOUT 30%. THAT IS THE PART OF THE PARTY
THAT WILL VOTE FOR DONALD TRUMP IF HE SHOT SOMEONE ON FIFTH
AVENUE. THAT IS THE HEART OF THE TRUMP
SUPPORT. THEN YOU HAVE THE NEXT LEVEL OF
INSTITUTIONAL REPUBLICANS WHO ARE SO AFRAID OF LOSING THAT
30% THAT THEY CONTINUE TO SUPPORT TRUMP COME AND NOW
YOU'RE UP TO A MAJORITY OF THE REPUBLICAN PARTY. TOM:
THIS IS CRITICAL. THE MATH IS APPLICABLE.
IF THE REPUBLICANS ARE 50% OF THE PUBLIC, AND IT IS 30% OF
THE PARTY, THAT IS 15% OF THE COUNTRY IS SUPPORTING PRESIDENT
TRUMP. LISA: WHICH IS THE REASON WHY PEOPLE
THINK IF HE IS ELECTED AS THE NOMINEE FOR THE REPUBLICAN
PARTY IT WILL BE A SHOE IN FOR BIDEN TO BECOME PRESIDENT OR
NOT, AND THAT IS THE KEY QUESTION.
HOW CLOSE OF A RACE WITH THIS BE. REUTERS PUT OUT A POLL WHERE
THEY SAID FORMER HALF OF REPUBLICANS WOULD NOT VOTE FOR
TRUMP IF YOU WERE CONVICTED OF REPUBLICAN. 52% WERE NOT FOR HIM -- WOULD
NOT VOTE FOR HIM IF YOU WERE CONVICTED.
AT WHAT POINT DOES THE REPUBLICAN LEADERSHIP TAKE
NOTICE OF THIS AND START TO PUSH IN OTHER DIRECTIONS? WENDY:
NOT YET. THAT POLL ALSO SAYS 48% WOULD
VOTE FOR HIM IF YOU WERE IN PRISON.
THAT SHOWS THE DEPTH OF THE SUPPORT HE HAS AGAINST A
PRESIDENT WHO, WHILE NORMAL IN THE POLITICAL SENSE OF THINGS,
IS DEEPLY UNPOPULAR RIGHT NOW FOR ECONOMIC REASONS YOU TALK
ABOUT, FOR ALL OF THE OTHER THINGS GOING ON, FOR THE
SUSPICIONS ABOUT HIS SON, WHICH MAY OR MAY NOT BE TRUE.
TRUMP WILL BE RUNNING AGAINST A PRESIDENT THAT PEOPLE ARE NOT
ENTHUSIASTIC ABOUT SEEING REELECTED.
I THINK WE SHOULD DEFINITELY NOT , AS PRESIDENT OBAMA SAID
THE OTHER DAY, UNDERESTIMATE THE POWER OF TRUMP. JONATHAN:
IT IS WONDERFUL TO WAKE UP EARLY WITH WENDY BENJAMIN SENT.
THIS IS WHY YOU DO NOT TAKE DAYS OFF IN THIS BUSINESS. TOM: LOOK AT ME. THREE DAYS OFF.
JONATHAN: I'M ONLY SAYING THIS BECAUSE I
KNOW AMH IS NOT WATCHING. HE IS OFF.
SHE IS ON VACATION SO WE GET THE PRIVILEGE OF CATCHING UP
WITH WENDY. TOM: DAVID WESTIN IS AN ASPEN.
AMH IS IN VALE. LISA: SHE WENT BACK TO NORWAY?
JONATHAN: THE FJORDS? [LAUGHTER] SIR WOLF OF MORGAN STANLEY --
SARAH WOLFE OF MORGAN STANLEY IS COMING UP SHORTLY.
SHE HAS WRITTEN ON WHAT COULD HAPPEN WITH STUDENT LOAN
REPAYMENTS. HOPEFULLY WE CAN START THE
CONVERSATION THERE BUT YOU ARE IN CHARGE OF THAT IN ABOUT FIVE
MINUTES. TOM: IS GREAT. WITH ELLEN ZENTNER, THIS IS A
BIG DEAL. THEY ARE LOOKING AT A LOT OF
THE THEMES WRAPPED CONVENTIONAL ECONOMIC ANALYSIS. JONATHAN:
EQUITIES POSITIVE ON THE S&P. A LOT OF YOU REACHING FOR THE
BOND MARKET. YIELDS ARE UP FOR A FIFTH
CONSECUTIVE SESSION ON A 10 YEAR TREASURY, HIGHER BY A
SINGLE BASIS POINT. NEW HIGHS FOR 2023 ON THE 10
YEAR YIELD. IF YOU WANT THE POST-PANDEMIC
CYCLE HI THAT WAS IN OCTOBER. BACK IN OCTOBER WE WENT THROUGH
4.3% ON A 10 YEAR MATURITY. IT IS HOW WE ARE DOING IT THAT
I THINK IS INTRIGUING. IT IS OFF THE BACK OF TREASURY
SUPPLY, NOT JUST BETTER ECONOMIC DATA AND THE THREAT OF
A FEDERAL RESERVE GOING PARTNER. YOU MADE THIS POINT.
YOU ARE UP AT THE FRONT END TODAY, BUT THROUGH THURSDAY
THERE WERE ONLY HIRED BY A SINGLE BASIS POINT.
THIS CURVE WAS STEEPER AND THE MOVE HAS BEEN OF THE LONG END
OF THE CURVE. IT HAS NOT BEEN AT THE FRONT
END. LISA: WHICH IS THE REASON THE
CONVERSATION SHIFTS TO THE RISK PREMIUM AND ALSO WHETHER THE
FED WILL TRULY BRING INFLATION DOWN TO 2%. JONATHAN:
THE JOBS REPORT ONE HOUR AWAY. JONATHAN: AUGUST IS NEVER QUIET.
YOU WANTED TO BE QUIET AND IT IS NOT QUIET.
EQUITIES JUST ABOUT POSITIVE, ROLLING OVER IN THE LAST HOUR
OR SO, POSITIVE .1% ON THE S&P. THE NASDAQ 100 UP 1%.
AMAZON DOING WELL, APPLE NOT SO MUCH.
LET'S CUT UP THIS YIELD CURVE AND GO TO THE 10 YEAR MATURITY.
THAT TENURE COME EVERY SINGLE DAY THIS WEEK, NOW AT FRIDAY,
YIELDS HIGHER BY A SINGLE BASIS POINT TO 4.18.
UP MORE THAN 20 BASIS POINTS ON THE WEEK SO FAR.
QUITE A LIFT IN THIS BOND MARKET.
I WANT TO FINISH ON THE EURO. A RARE PIECE OF GOOD NEWS OUT
OF GERMANY. FACTORY ORDERS MUCH BETTER THAN
EXPECTED. FACTORY ORDERS HAVE BEEN
VOLATILE BUT WE WILL TAKE IT BASED ON WHAT THE DATA HAS BEEN
IN GERMANY OVER THE LAST NINE MONTHS. THE EURO AGAINST THE DOLLAR 1.0
942. AT 8:30 THE JOBS REPORT, THE
ESTIMATE LOOKS LIKE THIS, 200,000.
290,000 AT CITIGROUP, J.P. MORGAN AT 175, AND MORGAN
STANLEY, 190,000. ALL OF THAT STILL AHEAD. LISA:
A LOT OF PEOPLE WILL BE FOCUSING ON THE UNDERPINNINGS,
THE WAGE FACTOR, HOW MUCH PEOPLE ARE STARTING TO LOSE
SOME OF THAT POWER IN THE WAGE NEGOTIATIONS WE WERE TALKING
ABOUT EARLIER THIS MORNING. WHAT I'M CURIOUS ABOUT IS WHAT
IF THE MARKET DOES NOT RESPOND? WHAT IF THE MARKET IS LOOKING
AT THIS AND SAYING WE CANNOT DRAW SERIOUS CONCLUSIONS, WE
WILL GO BACK TO THE TREASURY STORY AND BYPASS THIS.
THAT WILL BE THE TAIL WE SEE. TOM:
I WOULD LIKEN IT TO THE GDP AT THE GAS OF 2023 WHICH IS DOOM
AND GLOOM ON RECESSION AND THE IDEA OF A VIBRANCY OF GDP,
VIBRANCY OF GOOD JOBS GROWTH, GRANTED IF WE GET A THREE-MONTH
MOVING AVERAGE OF 170,000 I WILL CHANGE MY TUNE.
I LOOK AT THE ECI WHICH IS WAGES AND BENEFITS OF DOOM AND
GLOOM. IT IS ROLLED OVER EVER SO SLIGHTLY.
ON A TREND BASIS IT IS MILES FROM NORMAL. LISA: LISA MENTIONED -- JONATHAN:
LISA MENTIONED TWO THEMES. THIS STORY.
UNITED AUTO WORKERS UNION ASKING FOR 40% PAY RAISE FROM
THE AUTOMAKERS OUT OF DETROIT. THE REQUEST COMING AS CONTRACT
DISCUSSIONS CONTINUE WITH GM, FORD, AND STILL IN TEST. THE
CURRENT DEAL EXPIRES NEXT MONTH. WE HAVE CUT THIS CLOSE ON A FEW
OCCASIONS, INCLUDING THAT ONE WITH UPS MORE RECENTLY.
YOU WONDER HOW FAR THESE GUYS ARE WILLING TO GO. LISA:
AND YOU WONDER IF THE UPS NEGOTIATIONS IN BOLD THE UNION
TO GO AFTER OTHER COUNTRIES. -- OTHER COMPANIES.
WE TALKED ABOUT AMAZON. I WONDER HOW MUCH THEY'RE GOING
TO START GOING AFTER EVERYONE BECAUSE AT THIS POINT THERE IS
A SHORTAGE OF WORKERS. JONATHAN: IF YOU WRITE AMAZON YOU'RE
THINKING I WANT A SLICE OF THIS. THE STOCK IS UP 8% THIS
MORNING, CALL AT 9% NOW. THE STOCK IS HIGHER AFTER THE
COMPANY REPORTED BETTER RESULTS. THE E-COMMERCE BUSINESS DOING
OK. CLOUD REVENUE GROWTH AT MICROSOFT DISAPPOINTING.
DO NOT SEE THAT AT AMAZON. APPLE IS LOWER 2.5% THIS
MORNING . I AM WITH YOU. WE BEAT UP ON THIS COMPANY
ABOUT THE UPGRADE CYCLE, THEN WE GET A NEW PHONE EVERYONE
BUYS IT. EVERYONE WILL ASK THE SAME
QUESTION. IS IT DIFFERENT THIS TIME? TOM: FIFTH AVENUE WITH THE GIANT
LARRY HAVERTY ON APPLE AND THEY WERE GOING TO DIE EIGHT YEARS
AGO. IT IS THE SAME THING. CAN I ALSO TELL YOU WHAT IS
MOVING THE NEEDLE ON GDP? TAYLOR. TAYLOR JUST ROCKED $100,000
BONUS CHECKS TO EACH OF HER TRUCK DRIVERS.
IT IS LIKE $50 MILLION IN TOTAL BONUSES.
WE HAVE HAD SOME MISTAKES THIS MORNING BECAUSE OUR CONTROL
ROOM, THERE ARE 30 PEOPLE AND THEY'RE ALL ON THE COMPUTER
TRYING TO GET INDIANAPOLIS, NOVEMBER 20 WE HAVE FOUR
TICKETS. -- NOVEMBER 2024 TICKETS.
TAYLOR'S WILL MOVE THE AMERICANS JOB MARKET -- TAYLOR
SWIFT WILL MOVE THE AMERICAN JOB MARKET. JONATHAN:
WASN'T THERE A SCANDINAVIAN COUNTRY WHO TRIED TO BRAIN --
OR TRIED TO BLAME PRICE PRESSURE ON TAYLOR SWIFT? LISA:
AND BEYONCE. THERE WAS ANOTHER COUNTRY
TALKING ABOUT BEYONCE TICKETS CAUSING A SURGEON INFLATIONS.
JONATHAN: WE ARE GETTING AN ODD FROM OUR
GUEST ALONGSIDE OF US WHO HAS DONE THE RESEARCH AND MORGAN
STANLEY. TOM: WE MIGRATE OFF OF THAT TO SARAH
WOLFE, SENIOR ECONOMIST IN CHARGE OF TAYLOR SWIFT
ECONOMICS AT MORGAN STANLEY. WHERE IS GDP? THE JOKE IS MS. SWIFT IS MOVING
THE NEEDLE ON GDP. FORGET ABOUT THAT.
WE HAVE BEEN SO WRONG ABOUT GDP. IS THIS A 3% GDP AMERICA? SARAH:
I DO NOT THINK IT IS A 3%. WE ARE TRACKING CLOSER TO 1.5%.
WHAT IS INTERESTING IS WHERE WE ARE SEEING THE STRENGTH.
CONSUMER SPENDING IS COMING DOWN, EQUIPMENT IS COMING DOWN,
HOUSING HAS BEEN WEEK. WHERE HAS THE STRENGTH BEEN?
MANUFACTURING ACTIVITY. THAT TIES INTO ONSHORE AGAIN
NEAR ASSURING AND THE INFRASTRUCTURE BILL.
TYPICALLY STRUCTURES ARE INTEREST SENSITIVE COMPONENT TO
THE ECONOMY. THEY ARE UP 94%. TOM:
LISA WANTS TO GET TO THE JOBS REPORT.
54 MINUTES AND SIX SECONDS ON THE OFFICIAL CLOCK.
I WANT TO TALK TO YOU ABOUT THE NEW BIDEN STIMULUS.
DOES MORGAN STANLEY LOOK AT OUR MANUFACTURING AS NOTHING MORE
THAN A FEDERAL STIMULUS? SARAH: WHAT IS INTERESTING IS IF YOU
TRACK THE OUTLAYS TO GOVERNMENT AGENCIES THAT WOULD BE
BENEFICIARIES FROM THE INFRASTRUCTURE BILL IT DOES NOT
LOOK LIKE OUTLAYS HAVE RAMPED UP QUITE YET.
WHAT IS DRIVING THE MANUFACTURING ACTIVITY COULD BE
THE SUBSIDIES THAT ARE GOING OUT. IT IS PRIVATE BUSINESSES
GETTING AHEAD OF IT OR TAKING ADVANTAGES.
THIS MEANS THERE IS MORE HEADWIND AHEAD OF US THAT WILL
CONTRIBUTE TO GROWTH AND JOBS. WE TOOK UP OUR GDP FORECAST
ABOUT 90 BASIS POINTS TO REFLECT THE STRONGER INVESTMENT
IN STATE AND LOCAL ACTIVITY. JONATHAN:
IS THIS STEALTH STIMULUS WORKING IN CONFLICT WITH THE
FEDERAL RESERVE? SARAH: WE DO NOT THINK IT IS
NECESSARILY IN CONFLICT. IF YOU LOOK AT INTEREST
SENSITIVE COMPONENTS OF THE ECONOMY, CONSUMPTION, HOUSING,
ALL OF THAT IS RESPONDING TO HIGHER INTEREST RATES AND WE
THINK IN THE BACK HALF OF THE YEAR GROWTH WILL FALL BELOW
POTENTIAL, EVEN WITH STRONGER MANUFACTURING ACTIVITY. LISA:
GIVEN ALL OF THESE LONGER-TERM HORIZONS, WHERE DOES TODAY'S
JOBS REPORT FIT IN? SARAH: THE JOBS REPORT SEEMS TO BE
GETTING LESS ATTENTION THAN IT TYPICALLY DOES BECAUSE WE HAVE
TWO JOBS REPORT AND TWO INFLATION REPORTS BETWEEN JULY
AND SEPTEMBER SO THERE IS MORE DATA.
I SAW YOU POSTED THE RANGE OF ESTIMATES AHEAD OF TIME AND IT
IS WIDE. THERE A COUPLE OF THINGS WE'RE
LOOKING AT IN THE JOBS REPORT. ARE WE STILL SEEING THE SLOWING
AND THE SERVICES SIDE OF THE ECONOMY THAT IS REFLECTING THE
SHORTAGES ARE BEING FILLED, WEAKER SERVICES SPENDING, AND
THEN THERE IS A LOT OF TECHNICAL QUIRKS TO LOOK FOR IN
TODAY'S PAYROLL DATA BECAUSE THERE IS WEIRD SEASONALITY IS
THAT COULD CAUSE BIG SWINGS ON PRIVATE AND PUBLIC. LISA: YOU SAY THERE ARE TWO REPORTS
BEFORE THE FED MEETING AND PEOPLE ARE DEEMPHASIZING WHAT
WE WILL GET IN SAYING THEY WILL LOOK THROUGH THE NOISE.
WE DO GET JACKSON HOLE BETWEEN NOW AND THEN AND A LOT OF
PEOPLE ARE WONDERING WHETHER JAY POWELL WILL SPEAK TO SOME SORT OF ACCEPTANCE OF HIGHER
INFLATION OR ACCEPTANCE THEY WANT THE LABOR MARKET TO REMAIN
STRONG IT AWAY THEIR 2022 SPEECH DID NOT GIVE.
ARE YOU LOOKING FOR SOME SORT OF SIGNAL OF A SHIFT IN THESIS
BY THE FED? SARAH: I THINK WE WILL START TO SEE A
SHIFT AWAY FROM THE TIGHTENING BIAS TOWARDS A MORE NEUTRAL
BIAS. I DO NOT THINK JAY POWELL WILL
GO THE EXTRA MILE AND SAY HE'S OK WITH HIGHER INFLATION.
THEY STILL HAVE A TARGET TO HIT. HE WILL ACKNOWLEDGE THEY MADE
MORE PROGRESS. HE SAID IN JULY THE RISKS ARE
MORE BALANCED OF DOING TOO MUCH VERSUS TOO LITTLE, SORORITY A
SHIFT AWAY FROM THE TIGHTENING. I DO NOT THINK HE WILL EVER SAY
ANYTHING ABOUT CHANGING THEIR TARGET TO 3%. JONATHAN:
I THINK YOU SHOULD SKIP IT. HE HAS NOTHING TO SAY.
HE STILL NEEDS ANOTHER CPI REPORT.
HE NEEDS ANOTHER PAYROLLS REPORT.
WE ALL WANT TO HEAR FROM THE CHAIRMAN OF THE FED.
I WOULD CONSIDER SKIPPING IT. TOM: DOES HE CUT IT DOWN TO FOUR
MINUTES? JONATHAN: AND SAY WHAT. HE HAD SOMETHING TO SAY LAST
TIME AROUND. HE HAD A MESSAGE TO DELIVER.
I DO NOT THINK HE HAS GOT ONE. DID THAT SOUND LIKE A MAN WHO
WANTED TO DELIVER A SPEECH? LISA: MAYBE HE WILL SAY WE WILL
EXCEPT 3% INFLATION, THAT IS IT. TOM: HE CUTS IT DOWN TO FOUR MINUTES, THEN WE ALL GO TO THE
PIONEER GRILL AND HAVE CHIPPED BEEF ON TOAST AND THEN ELLEN
ZENTNER SHOWS UP AND STARTS FLYFISHING IN JACKSON LAKE.
JONATHAN: THAT IS A NICE GET TOGETHER.
TOM: THAT IS WHAT CHAIRMAN POWELL
WANTS. JONATHAN: FROM HIS PERSPECTIVE I DO NOT
SEE HE HAS ANYTHING TO SAY. DID NOT HEAR MUCH IN THE NEWS
CONFERENCE LAST WEEK. DOES THAT SOUND LIKE A MAN WHO
WANTS TO GO OVER TO WYOMING AND DELIVER A SPEECH? SARAH:
I THINK THE TRENDS MATTER. WE ARE ONLY GETTING ONE JOBS
REPORT BEFORE AUGUST BUT THE TRENDS ARE MOVING IN THE RIGHT
DIRECTION. THERE IS SOMETHING TO SAY IN
THE PROGRESS AND SOMETHING TO SAY ON THE FACT THAT THE STAFF
IS NO LONGER FORECASTING A RECESSION. TOM:
YOUR FORECAST IS BELOW 3% GDP. LISA: 1.4%. TOM:
THAT IS TERRIBLE. A LOT OF PEOPLE WOULD SAY THAT
IS A NATIONAL RECESSION. HOW DO YOU HAVE AN ATLANTA GDP
NUMBER THAT IS DOING SO GREAT? SARAH:
THEY ARE DOING A NOW CASTING METHOD.
IF YOU'RE PULLING IN THE DATA THAT IS COMING IN -- TOM:
YOU ARE BELOW 2%? SARAH: WE ARE BELOW 2%. JONATHAN:
SARAH WOLFE ON MORGAN STANLEY. DID NOT GET TO A LOT OF THE
THINGS WE WANTED TO TALK ABOUT. IF YOU ARE THE CHAIRMAN OF THE
FEDERAL RESERVE, I'M WITH YOU, IF HE GETS UP TO JACKSON HOLE
AND SAYS SOMETHING EMPHATIC ABOUT HOW WE'VE MADE PROGRESS
AND HE THINKS WILL GET A SOFT LANDING, THAT IS HUGE.
AS A POLICYMAKER, RULE NUMBER ONE, DO NO HARM.
IF YOU KNOW THERE IS A DEBATE THAT INFLATION MAY
RE-ACCELERATE, YOU WANT TO GO OUT THERE WITH CONVICTION AND
MAKE SOME CALL ABOUT BEING DONE? I WOULD NOT DO THAT. LISA:
DID SOMEONE HAVE TO ASK THING -- DID SOMEONE HAVE TO ASK HIM
THAT YOU SAID LAST YEAR YOU SAID INFLATION HAD TO GET DOWN
QUICKLY -- IS GETTING TO 2025 QUICKLY? JONATHAN:
I HAVE QUESTIONS TOO. CHAIRMAN POWELL, IF YOU WANT TO
SIT DOWN WITH SOMEONE, THAT WOULD BE GREAT.
I KNOW YOU LOVE 60 MINUTES AND NOT INTERVIEWS.
EQUITY FUTURES -- WELCOME TO THE PROGRAM.
WE ARE POSITIVE 0.07%. JEFF ROSENBERG WILL JOIN US
FROM BLACK ROCK AT 8:30. PAYROLLS JUST AROUND THE CORNER.
TOM: PAYROLLS AROUND THE CORNER BUT
FAR MORE IS THIS BOND DYNAMIC. I WILL BE LOOKING AT 10-15
SPREADS. THE P1 TO TALK TO MR. ROSENBERG
ABOUT IS BILL VERSUS NOTE. THREE-MONTH T-BILL DYNAMIC.
IT TAKES OUT THE TWO YEAR YIELD WHICH WAS A LOT.
THAT IS THE SPREAD THAT HAS REALLY MOVED. JONATHAN: APPLE IS LOWER IN THE
PREMARKET. NADIA LEVEL COMING UP.
LOOKING FORWARD TO THIS. LISA: ESPECIALLY AS WE PART OUT -- AS
WE PARSE OUT THE DATA IN THIS NEWLY DEPENDENT WORLD.
ARE WE TALKING ABOUT DATA? NO ONE IS TALKING ABOUT IT.
AT ONE POINT YOU COULD SHRUG IT OFF AND STAYED IS BECAUSE THE
FEDERAL GET OTHER DATA. THAT HAS NOT BEEN THE STORY.
PEOPLE SAYING WE WILL STICK TO OUR GUNS, AND BECAUSE THE FED
IS MOVING TO A NEUTRAL STANCE THAT IS TACIT ACKNOWLEDGMENT
THAT INFLATION WILL REMAIN HIGHER FOR LONGER.
THAT IS THE STORY OF THE WEEK IN ADDITION TO THE FINANCING.
JONATHAN: THE INTERVIEW I REALLY WANT TO
SEE IS MICHAEL MCKEE, CHAIRMAN POWELL.
A SPECIAL ON BLOOMBERG TV. 30 MINUTES. LISA: SOFT LIGHTING.
JONATHAN: YOU CAN BE IN CHARGE OF THE
LIGHTING. I WANT TO SEE THAT. WE HAVE BEEN STARVED A REAL
INTERVIEWS WITH THE FED CHAIRMAN. >> AMAZON NEED SOMETHING LIKE
$3.4 BILLION FOR A PERCENTAGE POINT REVENUE GROWTH.
THEY WILL NEED ADVERTISING, THEY WILL NEED VIDEO, THEY WILL
NEED HEALTH CARE, THEY WILL NEED SOMETHING ELSE TO TAKE THE
BATON OVER THE LONG TERM. JONATHAN: AMAZON UP 8.6%. EQUITY FUTURES UNCHANGED IN THE
LAST SECOND, JUST ROLLING OVER TO UNCHANGED GOING INTO
PAYROLLS. 43 MINUTES AWAY. YIELDS UNCHANGED ON THE 10 YEAR.
JUST A LITTLE LIFT FOR A FIFTH CONSECUTIVE SESSION. TOM:
THIS WAS A REALLY GOOD CONVERSATION WITH SARAH WOLFE
FROM MORGAN STANLEY. THIS WAS A SMART CONVERSATION.
THE WORD THAT IS OUT THERE IN THE SUMMER IS AMBIGUITY, WHICH
WE CAN LOOK AT DIFFERENT WAYS. THE AMBIGUOUS NATURE OF THE
JOBS REPORT, IT CANNOT BE UNDERSTATED. IT IS A BIG DEAL. JONATHAN:
WE ARE STILL TALKING ABOUT 200,000. TOM: PRE-2007 BELOW 150 WAS A
PRETTY MULTI-NUMBER. I SAW RUN RATES BELOW 100,000.
WE ARE NOWHERE NEAR THAT. I WOULD TAKE THE MOVING AVERAGE
OF NONFARM PAYROLLS. JONATHAN: THINGS HAVE SLOWED DOWN.
THEY WANTED TO MAKE PROGRESS ON JOB OPENINGS. LOWEST SINCE 2021.
THAT WOULD IMPLY WE ARE TAKING HEAT OUT OF THE LABOR MARKET. 3.6%, ASK THE ECONOMIST, IS
THAT CONSISTENT WITH GETTING INFLATION DOWN TO 2%. LISA:
THE PROBLEM IS INFLATION HAS TO BE COMING DOWN. THIS IS A FACT.
EVERYONE KNEW THAT IT WOULD AND THIS IS WHERE EVERYONE WAS
TALKING ABOUT THE LAST MILE. WHERE IS WILLINGNESS TO DO THAT?
HOW DO WE UNDERSTAND THIS DATA IN TERMS OF PACE?
IS IT ENOUGH FOR THE FED TO HAVE FULL CONVICTION THEY WILL
GET TO WHERE THEY WANT TO BE? JONATHAN: FUTURES UNCHANGED.
AMAZON UP 8.5%. TOM:
RIGHT NOW BUT NON-TECH PART OF AMAZON, THE CARDBOARD BOXES
OUTSIDE OUR DOOR. SENIOR U.S. RETAIL ANALYST FOR BLOOMBERG
INTELLIGENCE, THAT BARELY DESCRIBES THE GRANULARITY SHE
LOOKS AT WHETHER IT IS TARGET THIS OR HOME DEPOT.
WITH THIS EARNINGS REPORT, IS IT A VICTORY LAP FOR AMAZON
THAT THEY SALVAGED THE CARDBOARD BOX PART OF THE
BUSINESS? >> IT ABSOLUTELY IS.
THE RESULTS WERE IMPRESSIVE, THE GROWTH WAS STRONG, NOT ONLY
WAS THE GROWTH STRONG BUT THEY WERE ABLE TO DRIVE BETTER
MARGINS. ALL AROUND THEY HAVE PROVEN
THEY CAN GET STALE, THEY CAN GET SAME-DAY DELIVERY AND SAVE COSTS WHILE DOING IT . TOM: THE AMOUNT OF CARDBOARD BOXES,
CAN YOU TAKE THAT OUT AND COMBINE THAT WITH THE PRIME
PROGRAM? HOW FAR OUT DO YOU GO WHEN YOU
EXTRAPOLATE THAT BUSINESS? POONAM:
THE BUSINESS FOR AMAZON IS $650 BILLION AND WE SET -- WE SEE
THAT GROWING TO $1 TRILLION IN 2026.
THERE IS PLENTY OF OPPORTUNITY FOR AMAZON TO CONTINUE TO SHIP
THOSE CARDBOARD'S AND DRIVE MEANINGFUL GAINS TO ITS
MARKETPLACE. THAT WILL BE DRIVEN BY SELLERS. WE EXPECT THE GROWTH TO OUTPACE
AS MORE BUSINESSES LOOK TO AMAZON TO CAPTURE SHARE FROM
THEIR 200 MILLION PLUS PRIME MEMBERS TO DRIVE THEIR
BUSINESSES HIGHER WHICH IN RETURN WILL DRIVE THE AMAZON
MARKETPLACE. LISA: THAT IS THE BEDSIDE.
THE BAD SIDE IS APPLE WHEN IT COMES TO A MARKET PERFORMANCE
THAT SEEMS TO BE OFFSET. YOU HAVE THIS QUESTION AROUND
IPHONE SALES AND THE LARGER SMARTPHONE CYCLE, BUT ON THE
FLIPSIDE SERVICES HAD A RECORD NUMBER OF SUBSCRIBERS. HOW MUCH CAN THAT FUEL EARNINGS
IN THE WAY THAT HAS REAL TAILWINDS? POONAM: WHEN PEOPLE TALK ABOUT THE
IPHONE BUSINESS THEY NEED TO GO BACK AND LOOK AT THE NEXT
QUARTER. WE BELIEVE THE IPHONE 15 WILL
BE A BIG DRIVER TO IPHONE SALES AND WILL BE A DIFFERENT STORY
NEXT QUARTER THAN THIS QUARTER. LISA: YOU THINK IT WILL BE
REBOUNDING? WHAT IS THE SENSE YOU HAVE IN
TERMS OF THE WHY BEHIND THE DRIVER'S AND THE SLOW DOWN IN
THE SMARTPHONE CYCLE? IS IT THAT THE UPGRADES ARE NOT
ENOUGH TO PROD THEM TO MOVE TOWARDS THAT OR IS IT SOMETHING
WE HAVE TALKED ON THE SHOW BEFORE ABOUT THESE
PAY-AS-YOU-GO TYPE OF MODELS, THAT THERE IS LESS APPETITE TO
GIVE PEOPLE THAT CREDIT TO PAY IN INSTALLMENTS? POONAM:
I THINK IT IS A COMBINATION. THERE'VE NOT BEEN AS MUCH
MEANINGFUL UPGRADES TO RECENT IPHONES BUT I THINK THE 15 WE
ARE EXPECTING A SIZABLE CHANGE THAT WILL DRAW MORE USERS TO
UPGRADE THEIR PHONE. DISCRETIONARY SPENDING HAS
SLOWED THIS YEAR. YOU CONTINUE TO HEAR THAT EVEN
FROM AMAZON WHERE THE FOCUS IS ON VALUE.
THAT COULD BE PART OF THE STORY AS WELL. TOM:
HOW IS RETAIL IN GENERAL DOING? BRIAN MOYNIHAN TALKING TO DAVID
WESTIN ABOUT THE STRENGTH OF THE AMERICAN CONSUMER.
PLAY ECONOMIST. WHAT DO YOU THINK? POONAM:
I THINK THE CONSUMER STILL HAS THE APPETITE TO SPEND.
WE ARE SEEING THE NEED TRADE-OFFS FOR EXPERIENCES AND
THEY ARE STILL TRAVELING BUT THEY ARE MINDFUL IN HOW THEY
ARE BUYING GOODS OR WHERE THEY ARE BUYING GOODS.
WE ARE SEEING COMPANIES LIKE AMAZON DO WELL BECAUSE THEY
HAVE THE VALUE AND CONVENIENCE PROPOSITION, BUT THEN WE HAVE
COMPANIES LIKE REVOLVER WHERE THEY ARE CITING THE HIRING IS
SLOWING DOWN AS WELL. IT IS A MIXED BAG ACROSS RETAIL.
IT SOUNDS LIKE THERE IS MONEY BUT THEY'RE MAKING TRADE-OFFS.
THAT IS BEEN A STORY WE HAVE HAD FOR QUITE SOME TIME. TOM:
DOES BACK-TO-SCHOOL MATTER ANYMORE?
DOES IT MATTER FOR AMAZON? IT MUST MATTER FOR APPLE
BECAUSE EVERYONE HAS TO GO REFRESH THE AIRPODS THINGS.
DOES BACK-TO-SCHOOL MATTER? POONAM: IT IS THE SECOND LARGEST
SELLING SEASON OF THE YEAR BEHIND EMMA’'S -- BEHIND THE
HOLIDAYS AND FOR AMAZON IT MATTERS.
AMAZON TALKED ABOUT GOING BACK TO BASICS AND THE FOCUS ON
VALUE. THEY WANTED TO SEE THE PURCHASES COMING, WHETHER
CLOTHING OR SUPPLIES OR ELECTRONICS, THOSE ARE KEY
AREAS, AND THE SHARE AMAZON WILL GRAB FOR BACK-TO-SCHOOL
WILL BE AN INDICATOR ON HOW THINGS BUILD INTO THE THIRD AND
FOURTH QUARTER. JONATHAN: THANK YOU.
POONAM GOYAL BLOOMBERG INTELLIGENCE.
THE CLOUD SIDE OF THE COMPANY DOING BETTER THAN WHAT WE HEARD
FROM MICROSOFT. THE STOCK IS HIGHER.
LET'S TALK ABOUT PRICING ON AMAZON.
FOR A LOT OF US COME AND I WILL TALK ABOUT MYSELF BECAUSE WHY
NOT, FOR ME IS ABOUT CONVENIENCE, IT IS NOT ABOUT
PRICE. MY EXPERIENCE, AND TOM FOLEY
WAS TALKING ABOUT THE SAME THING.
THE SERVICE IS NOT GREAT, YOU CAN FIND BETTER PRICES.
YOU HAVE THE APP ON YOUR PHONE, THEY HAVE GREAT LOGISTICS SET
UP. YOU KNOW YOU CAN GET IT TOMORROW.
TALK ABOUT BUYING A BOOK, I WATCHED GLADIATOR AND I AM
BUYING MARCUS REALLY US -- MARCUS AURELIUS, MEDITATIONS.
TOM: ARE YOU READING IN ENGLISH OR
GREEK? JONATHAN: TRANSLATION. [LAUGHTER] LISA:
THEIR COMPETITORS THAT HAVE SEEN WHAT AMAZON DOES, YOU'RE
TALKING ABOUT WALMART. AT WHAT POINT DOES THAT BECAUSE
-- DOES THAT BECOME COMPETITIVE BECAUSE OF THE LACK OF
CONVENIENCE OF THE RETURN POLICY? TOM:
I WILL GO TO THE SHORT TERM OF THE MARKET AND FINANCIAL
TELEVISION AND RADIO. THE ANSWER IS PROS, WHAT THEY
DO IS THEY LOOK AT THE ADDRESSABLE MARKET, THE
POTENTIAL MARKET OF WHAT YOU ARE TALKING ABOUT.
IN CASE AFTER CASE, THE ADDRESSABLE MARKET SEEMS TO BE
MUCH LARGER THAN THE CAUTIOUS CREW, THE FEAR CREW OF 18
MONTHS OUT. IF YOU LOOK OUT THREE YEARS OR
FIVE YEARS, WHERE IS THE CLOUD. WHERE'S APPLE SERVICES?
HOW MAY CARDBOARD BOXES ARE GOING TO BE IN THE DOORWAY AT
HOME? I AM SORRY. WE ARE AT COVID LEVEL.
THE CARDBOARD BOXES I SEE NOW ARE AT COVID LEVEL. LISA:
BUT WHERE THEY FROM? ARE THEY ALL AMAZON? JONATHAN:
THAT IS A REALLY GOOD QUESTION. TOM: MANY ARE FROM CHEWY.
JONATHAN: VERY ANECDOTAL AND PERSONAL,
THIS CONVERSATION. [LAUGHTER] TOM:
I DON'T SEE A LOT OF WALMART BOXES. JONATHAN: IPHONES.
HAVE NOT UPGRADED FOR YEARS. NO INTENTION OF DOING SO.
UNLESS THE IPHONE 15 START SINGING AND DANCING. [LAUGHTER] >> THE FED WAS FIGHTING THE WAR
ON INFLATION. >> MAYBE WE CANNOT COMPLETELY
DISCOUNT THE RISK OF ANOTHER INTEREST RATE HIKE. >> FINANCIAL CONDITIONS ARE
TIGHTENING. >> THE FED HAS BEEN REMARKABLY
GOOD. >> FROM OUR POINT OF VIEW, THIS
IS A CORRECTION AS OPPOSED TO AN END OF THE RUN. >> THIS IS BLOOMBERG
SURVEILLANCE WITH TIME KEYING, JONATHAN FARRELL -- WITH TOM
KEAN, JONATHAN FARRELL. >> THIS IS BLOOMBERG
SURVEILLANCE. WE ARE HERE WITH LISA
ABRAMOWITZ. YOUR MARKET JUST ABOUT POSITIVE
ON THE S&P. 30 MINUTES AWAY FROM THE JOBS
REPORT. >> GOT THE PLAGUE A LITTLE BIT.
GETTING OVER IT. >> I HAVE THE HANG IV -- THE
TANG IV GOING. THIS IS AN IMPORTANT JOBS
REPORT. IT IS TWO PARTS. IT TAKES THE THREE MONTH MOVING
AVERAGE. IT IS A TREND. WHAT DO WE DO IF WE BREAK
200,000? THE PREVIOUS NUMBER 209,000.
TO LOOK AT UNEMPLOYMENT BRIEFLY. THAT'S EXPECTED TO COME IN LINE
THEN WE TURN TO AVERAGE HOURLY EARNINGS. >> THE EXPECTATION WILL BE THEY
WILL COME DOWN ON AN ANNUALIZED BASIS, WHICH SOUNDS LIKE MAKING -- THINGS SEEM TO BE GOING IN
THE RIGHT DIRECTION. UNLESS THERE'S SOMETHING
COMPLETELY OUT OF THE NORM. OUR PEOPLE SHRUGGING IT OFF AND
SAYING WE HAVE TO WAIT AND SAY IT'S TOO SOON LIKE THE FED SO
EVERYONE IS GOING WITH THEIR CONVICTION? >> SARAH WOLF MADE THE POINT
THAT THE ISSUE WE HAVE BETWEEN THE LAST AND NEXT FED MEETING
AS YOU HAVE TWO AND TWO MORE CPI PRINTS.
THEY PROBABLY CARRY MORE WEIGHT THAN WHAT YOU'RE GETTING OUT OF
THE LABOR MARKET. CAN YOU ACHIEVE THAT SOFT
LANDING, MEANING CAN YOU KEEP THE LABOR MARKET WHERE IT IS
WITHOUT CHANGING MUCH, AND SEEING UNEMPLOYMENT GO TOO
HIGH, AND GET THAT INFLATIONARY PROGRESS WE HAVE SEEN. IF WE GET THOSE PRINTS THEN
PERHAPS. >> THEY WILL PAY LIP SERVICE TO
THE DUAL MANDATE BUT THERE IS NO DUAL MANDATE.
IT IS ALL ABOUT INFLATION. IT IS SIMPLE AS THAT.
IT IS STICKY. WE ARE NOT SAYING STICKING OUT
BECAUSE WE ARE USED TO 4%. I WAS ON A SABBATICAL HERE AND I'M LOOKING AT 4.93, 4.18, 4.28
ON THE 2, 10, 30 MATRIX. >> THE TENURE UP BY MORE THAN
20 BASIS POINTS UP TODAY FOR A FIFTH CONSECUTIVE SESSION.
EQUITIES ADVANCING BY 1/10 OF 1%. HE RETIRED BY A SINGLE BASIS POINT ALMOST -- YOU RETIRED BY
A SINGLE BASIS POINT ALMOST. 26 MINUTES AWAY.
JOINING US, A SENIOR U.S. EQUITY STRATEGIST AT UBS.
WONDERFUL TO CATCH UP WITH YOU GOING INTO THE PAYROLLS REPORT.
GETTING CLOSER TO PAYROLLS. LET ME START WITH THIS QUESTION.
YOU SAID THE HIKING CYCLE ENDED LAST WEEK.
ARE YOU SAYING THIS JOBS REPORT WON'T CHANGE A THING IN 20
MINUTES? >> YEAH. WE ARE ALL ON DATA WATCH.
THERE IS SOME VOLATILITY IN ESTIMATES IN THE MARKET.
POWELL GAVE US THE PLAYBOOK. WE EXPECT THAT THE JOB NUMBERS
WILL COME IN UNDER 200. WE ALSO EXPECT TO SEE PROGRESS
IN TERMS OF WAGE GROWTH. WE SAW THAT LAST WEEK.
STILL A LITTLE BIT MORE ROOM TO GO TO THREE -- TO 3.5%. FOR CPI, IT'S INCREASING TO
3.2%. WE ARE LOOKING AT ABOUT 20 BASIS POINTS.
WE ARE ON THEM PATH TO GET TO LOWER INFLATION BY THE END OF
THE YEAR. WE ARE LOOKING AT HEADLINES
COMING DOWN TO ABOUT 3%. WE THINK THAT WILL GIVE THE FED
ROOM. AT LEAST WE KNOW -- WE THINK
THE BAR IS HIGHER FOR A RAISE IN SEPTEMBER. >> UNFAIR OF ME TO ASK BUT WHAT
KIND OF JOBS NUMBER TODAY WOULD REINTRODUCE THE RISK THAT YOU
ARE WRONG/ --YOU ARE WRONG? >> IF YOU SEE A JOB NUMBER
CLOSE TO 300,000, THEN WE COULD BE WRONG, OR IF YOU SEE A JOB
NUMBER SUGGESTING THE LABOR MARKET IS ROLLING OVER, THAT
CAN LEAD TO A FASTER CUT. >> THEY CAME ACROSS AS MORE
AGGRESSIVE THAN I INTENDED. WHAT I REALLY MEANT -- CAN WE
GO AGAIN? >> GO. >> WHAT KIND OF JOBS NUMBER
WOULD REINTRODUCE THE RISK THE FED HAS TO HIKE INTEREST RATES
AGAIN? >> GOOD.
LET'S SAVE THE INTERVIEW. IF WE GET A SHOCK OFF, WHATEVER
THE TREND RATE IS, WHATEVER THE VECTOR RATE IS, LET ME GO TO
THE SHOCK NUMBER UNDER 200,000. WHERE WOULD IT BE GIVEN
STANDARD OF ERROR? WHAT WOULD BE THE SHOCK
STATISTIC THAT WOULD MAKE EVERYONE WAKE UP? >> IN TERMS OF IF YOU SEE THE
JOB MARKET IS SLOWING TO 100,000 THEN WE HAVE SEEN A LOT
OF GROWTH OPTIMISM THAT WE WILL BE CONCERNED ABOUT WHAT THAT
MEANS FOR CORPORATE EARNINGS IN THE ECONOMY.
ARE WE HEADING TOWARDS A RECESSION OR A SOFT LANDING? >> WHAT IS IMPORTANT IS THAT IS THAT 100,000 STATISTIC VERSUS
WHAT DAVID KELLY A J.P. MORGAN WAS TALKING ABOUT, WHICH
IS WHEN DO WE GET TO A NEGATIVE NONFARM PAYROLL STATISTIC?
IN MY RIGHT NOBODY IS CALLING FOR THAT? >> NOBODY IS.
THE DATE DOES NOT SUGGEST THAT -- THE DATA DOES NOT SUGGEST
THAT. ANOTHER QUESTION IS WHY ANYONE
WILL CARE. THEY WILL SHRUG IT OFF AND PLUG
IT INTO THEIR DATA SET AND SEE HOW IT GOES, WHICH RAISES THIS
PARADOX. IN THIS PARADIGM, WHERE THEY
ARE NOT GIVING ANY FORWARD GUIDANCE, DOES THE DATA STILL
MATTER OR IS IT BASICALLY PEOPLE KEEPING ON WITH THEIR
CONVICTIONS GOING FORWARD UNLESS THERE IS SOME MASSIVE
SURPRISE. >> I THINK THAT IS FAIR,
ABSOLUTELY, IN TERMS OF THEIR POSITIONING IN THE MARKET.
IT POINTS TO A SOFT LANDING SO IF YOU DON'T HAVE A SURPRISE
THAN THIS MARKET IS PROBABLY ARRANGED. IN OUR VIEW, THE OPTIMISM HAS
CAUGHT UP WITH THE CORPORATE EARNINGS, SO WE SEE A VALUATION
EXTENDED QUITE A BIT, SO WE THINK THAT MAKES THE MARKET
MORE VULNERABLE TO SHOCKS AND DISAPPOINTMENT.
YOU SAW THAT PLAY OUT A LITTLE BIT THIS WEEK. SO WE THINK AT SOME POINT THE
BATON HAS TO BE PASTOR EARNINGS AND THE OUTLOOK -- HAS TO BE
PASSED TO EARNINGS AND THE OUTLOOK FOR THAT REMAINS
SUBDUED. WE THINK IT'S CAPPED AS A
RESULT OF THE OUTLOOK. WE ARE LOOKING AT SOME
OSCILLATION WITHIN A 10% BAND. WE THINK VOLATILITY WILL PICK
UP NEAR-TERM. >> A STRANGE THING HAPPENED ON
THE WAY TO HIGHER RATES AND WE WERE TALKING ABOUT THIS
EARLIER, THAT WHEN YOU HAVE TECH COMPANIES THAT ARE
SUPPOSED TO BE SO INTEREST RATE SENSITIVE, THEY HAVE A LOT OF
CASH AND CAN PUT THAT IN T BILLS AND MAKE MONEY OFF THAT.
IT ENDS UP BEING A BENEFIT TO THEM THAT WAS UNEXPECTED IN A
WAY THAT'S BOOSTED THEIR VALUATIONS.
AT WHAT POINT DO YOU SAY STOCKS CAN DO BETTER AND CAN ACTUALLY
INCREASE EVEN ON MULTIPLES, EVEN IF EARNINGS HAVE A COUPLE
QUARTERS OF SAGAS, BUT THEN PICK BACK UP -- OF SOGGINESS,
BUT THEN PICK BACK UP? >> YOU ALREADY HAVE THAT
OPTIMISM PRICED IN TO THE MARKET SO SAP TO PICK UP TO
JUSTIFY THESE HIGH VALUATIONS. IT IS THE HOPE THAT SOME OF
THESE COMPANIES GROW INTO THAT. YOU SAW SOME DISAPPOINTMENT IN
THE EARNINGS OUTLOOK AND COMPANIES ARE BEING PUNISHED.
YOU SAW THAT PLAY OUT TODAY IN THE MARKET.
THE REALITY IS IT SHOULD NOT BE SURPRISING THAT A LARGER
COMPANY HAS BEEN SHOWING WEAKNESS. THE I.T.
BUDGET ENVIRONMENT STILL REMAINS PRETTY CHALLENGING. SO WE DO THINK SOMETHING HAS TO
HAPPEN AND WE ARE STARTING TO SEE THAT PLAY OUT. >> JUST BEFORE YOU GO, FAVORITE
SECTOR? WHAT IS IT? >> ENERGY. >> IS IT REALLY?
DO YOU LIKE THE RALLY? >> WE UPGRADED ENERGY IN JUNE
AND SINCE THEN IT'S BEEN THE NUMBER ONE PERFORMING SECTOR.
WE THINK PRICES ARE GOING TO GET TO $90 IN THE NEXT FEW
MONTHS WITH AN OVERSHOOT TO THE UPSIDE.
WE ARE LOOKING AT A DEFICIT. THAT COULD INCREASE OF SAUDI
ARABIA CONTINUES TO IMPLEMENT THESE CUTS. >> ONLY JUNE. GOOD CALL.
THANK YOU. WE ARE STARTING TO SEE THAT
BROADENING OUT OF THIS RALLY. >> NUMBER ONE THING I AM
WATCHING AS THE DEMAND-SIDE. JEFF CURRY HAD A NOTE ON THIS.
J.P. MORGAN HAS A FOUNDATIONAL ISSUE
THAT THERE WILL BE DEMAND THAT WILL SUPPORT OIL.
IT'S BEEN ROUGH AT MORRIS AND CITIGROUP IT'S LIKE A GENIUS
BUT THE BOTTOM LINE IS EVERYONE IS FOCUSING ON SUPPLY.
THE THREE OF US SHOULD BE IN VIENNA. FORGET ABOUT IT.
IT'S ABOUT DEMAND. >> SURVEILLANCE CORRECTION? YOU MENTIONED THE BOOK YOU ARE
READING AND I SAID GREEK OR ENGLISH? LINDSAY SAID YOU ARE OUT OF
YOUR MIND. >> I WAS NEVER SMART ENOUGH TO
STUDY LATIN. DID YOU? >> NO. I FEEL THE LESSER FOR IT.
THE OFFSPRING DID. >> YOU FEEL LESSER FOR IT? >> I WISH I HAD LATIN AT
GUNPOINT. >> THAT WOULD BE ON BRAND FOR
YOU. >> ICE HOCKEY. >> TRUE. FOOTBALL.
WELCOME TO THE PROGRAM. S&P 500 POSITIVE BY 0.1%.
THE JOBS REPORT 18 MINUTES AWAY, A LITTLE BIT LESS NOW,
LOOKING FOR 200,000, THE MEDIAN ESTIMATE IN OUR SURVEY.
200,000 BASICALLY IN-LINE WITH THE PREVIOUS NUMBER OF 2.9.
THE UNEMPLOYMENT RATE EXPECTED TO COME IN AT 3.6%.
THE PREVIOUS NUMBER 3.6%. WAGE GROWTH MONTH OVER MONTH
LOOKING FOR .3%, YEAR-OVER-YEAR FOUR -- YEAR-OVER-YEAR .42%. >> IT IS KIND OF LIKE GOING TO
THE DOCTOR AND GETTING A BLOOD TEST AND YOU CHECK OFF NORMAL,
NORMAL, NORMAL, AND AS LONG AS SOMETHING IS NOT ABNORMAL YOU
KEEP GOING. THAT IS LIKE WHAT THIS DATA
POINT IS. SORT OF AS LONG AS IT'S WITHIN
THE RANGE EVERYONE IS EXPECTING, WE CHECK IT OUT THE
LISTING KEEP GOING WITH OUR DAY. IT WON'T MATERIALLY SHIFT WITH
SOME SORT OF SUBTLE UPSIDE OR DOWNSIDE SURPRISE. >> YOU NEED SOME VITAMIN D.
VITAMIN. >> "VITAMIN." >> I'M ON BOARD. >> WHAT ABOUT ALUMINUM? >> THE WHISPER NUMBER IS
223,000. LIKE NICKY TIME HE HAD A LOOK
THIS UP -- MIKE MCKEE SHOWED ME HOW TO LOOK THIS UP. >> JUST A TOUCH HIGHER. >> THAT'S A TOUCH? 23,000? >> KIND OF. >> WILL THAT REALLY MOVE THE
NEEDLE? >> JEFF ROSENBERG OF BLACKROCK
COMING UP SHORTLY. IT IS 60 MINUTES AWAY. >> THE PAYROLL SLOWED. I THINK WHAT WE REALLY NEED TO
SEE IS WHETHER OR NOT THE SLOWDOWN IS INTACT AND WHETHER
THE GAINS WE HAVE SEEN IN THE LABOR FORCE PERSIST WHILE WE
HAVE THE SLOWDOWN. >> THE JOBS REPORT MOMENTS AWAY.
THE NUMBER WE ARE LOOKING FOR, REPEATEDLY, 200,000.
THAT NUMBER DROPS AT 8:13. IT LOOKS LIKE THIS IN THE S&P.
THREE-DAY LOSING STREAK THURSDAY INTO FRIDAY. A FIFTH CONSECUTIVE SESSION,
YIELDS UP BY A BASIS POINT OR TWO, TO JUST SHORT OF .420,
HIGHS OF THE EUROPE BY MORE THAN 20 -- OF THE YEAR UP BY
MORE THAN 20. >> THE 30 YEAR, 4.28%, GETS YOU
OUT -- THERE'S A POINT WHERE THIS IS NOT SMOOTH.
YOU CAN USE A CLICHE. WHATEVER. THERE'S A POINT WHERE THIS
COLLECTS TO A HIGHER RATE. I'M NOT SURE THEY ARE THERE YET
BUT OUT THERE SOMEWHERE IS OOPS. >> WE FELT THAT WAY FOR THE
BEST PART OF 12 MONTHS. >> KEEP PUSHING IT OUT.
I WONDER WHEN THAT WILL BE. 12 MINUTES TO GO, WE DIVE IN. JEFFREY ROSENBERG JOINING US,
FORMER GOVERNOR OF THE FED, TRULY OUR ARCH FINANCIAL
ECONOMIST. I WANT TO GO TO THE ALGEBRAIC EQUATION OF THE GDP
THAT UNDER MEN'S HOUR LABOR ECONOMY.
THERE'S A LOT OF FOCUS ON THE INVESTMENT ACROSS AMERICA.
HIS INVESTMENT ACROSS AMERICA CREATING JOBS -- IS INVESTMENT
ACROSS AMERICA CREATING JOBS AND IS THAT NOTHING MORE THAN
GOVERNMENT STIMULUS? >> THAT IS THE KEY TO THE
LONG-TERM GROWTH, LONG-TERM JOB GROWTH, INVESTMENT, BECAUSE
WITHOUT INVESTMENT, THE CAPITAL GOODS, TECHNOLOGY FOR PEOPLE TO
WORK WITH, YOU ARE NOT GOING TO HAVE HIGH EMPLOYMENT,
PRODUCTIVITY GROWTH, OVERALL ECONOMIC GROWTH.
SO THIS CRUCIAL. AS THE HURDLE RATES GET HIGHER
AS THE FED RAISES RATES AND ALSO AS INFLATION COMES DOWN SO
THE REAL RATE OF INFLATION GOES UP, THAT MAY PUT A CRIMP IN
INVESTMENT GOING FORWARD. >> I WANT TO GIVE YOU A SOCIETAL
VIEW. WHAT IS THE THREE MONTH MOVING
AVERAGE NON-FARM PAYROLL STATISTIC WHERE YOU CAN SAY
THERE'S A SOCIETAL ANGST? IS IT 170, UNDER 100,000?
WHAT STATISTIC BEGINS TO SIGNIFY LABOR PAIN? >> I THINK IT IS NOT JUST THAT
PIECE. IT'S A COMBINATION OF THINGS.
IT IS LABOR FORCE PARTICIPATION. WE HAVE SEEN FOR PRIME WORKERS
THEY MOVE BUT OLDER WORKERS NOT QUITE WHERE IT WAS BEFORE. IT'S NOT JUST ABOUT THE JOB AT
HOW MUCH YOU ARE MAKING WHEN YOU HAVE THE JOB.
ARE YOU ABLE TO AFFORD TO PUT FOOD ON THE TABLE FOR YOUR
FAMILY? YOU CAN BE WORKING HARD BUT IF
YOUR REAL WAGES GOING DOWN IT DOES NOT MATTER WHETHER THERE
ARE MORE JOBS BECAUSE THEY ARE NOT PAYING ENOUGH, SO YOU HAVE
TO MAKE SURE YOU GET THE BALANCE RIGHT WITH JOBS THAT
ARE GENERATING REAL WAGE GROWTH AND THAT THERE ARE ENOUGH JOBS
THAT HOUSEHOLDS CAN AFFORD TO PUT THEIR FAMILIES -- IN WITH
THEIR FAMILIES WELL. >> TOM BROUGHT THIS UP ABOUT
THE DUAL MANDATE. IT SEEMS LIKE FOR A WHILE,
CERTAINLY DURING JACKSON HOLE, THERE WAS ONE MANDATE AND IT
WAS GETTING INFLATION LOWER. NOW WE ARE LOOKING AT WHAT
COULD BE A DUAL MANDATE, WHERE THEY ARE SAYING WE HAVE THE
POSSIBILITY OF A SOFT LANDING AND DO NOT WANT TO KILL IT.
HOW IMPORTANT IS THAT TO THEM TO PRESERVE THIS KIND OF
STRENGTH WE CONTINUE TO SEE AS LONG AS INFLATION KEEPS COMING
DOWN EVEN IF NOT THE 2%? >> I THINK YOU ARE EXACTLY
RIGHT. THEY HAVE THIS GIFT. I DON'T THINK ANYONE A YEAR AGO
AT THE FED OR ANYONE ELSE THOUGHT THAT.
WE COULD HAVE THIS IMMACULATE DISINFLATION WITH INFLATION
COMING DOWN SIGNIFICANTLY. THAT IS NOT WHAT OUR
TRADITIONAL MODELS WOULD SAY. WE SEEM TO BE MOVING IN THAT
DIRECTION BUT I STILL DON'T THINK WE ARE 100% SURE OF THAT
BUT THERE'S MORE EVIDENCE AND THE FED WOULD LIKE TO PRESERVE
THAT. THE IDEAL IS TO HAVE CONTINUED
JOB GROWTH AT A SUSTAINABLE LEVEL WITH GOOD WAGE GROWTH.
WE ARE STARTING TO SEE REAL WAGE GROWTH.
INFLATION HAS COME DOWN SIGNIFICANTLY.
WAGE GROWTH IS NOW ABOVE THAT. THEY WILL HAVE TO PROBABLY COME
DOWN A LITTLE BIT TO MAKE SURE WE DON'T HAVE INFLATION
PERSIST. WE ARE GETTING INTO A BETTER SITUATION THAN WE WERE
BEFORE. >> GIVEN THE FACT THAT THERE IS
THIS EMPHASIS ON TRYING TO GET THE HOPE OF THE SOFT LANDING,
HOW MUCH ARE YOU LOOKING FOR SOME SORT OF TACIT ADMISSION BY
THE FED THAT IT'S NOT IMPORTANT TO GET INFLATION DOWN TO 2% IN
THE NEAR TERM OVER THE NEXT FEW YEARS? >> THEY ARE NOT GOING TO
SUGGEST THAT IN ANY WAY. THEIR VIEW IS THAT BOTH IN THE
INTERMEDIATE AND LONGER RUN, IF YOU HAVE HIGH INFLATION, YOU
ARE NOT GOING TO HAVE PEOPLE HAVE STRONG WAGE GROWTH.
YOU ARE NOT GOING TO HAVE A STRONG ECONOMY.
THAT'S ULTIMATELY WHAT THEY WANT.
SO I THINK THEY'RE GOING TO CONTINUE TO SAY OUR KEY MISSION
AND PRIORITY NOW IS TO MAKE SURE WE GET TOWARDS OUR TARGET.
THEN THE QUESTION WILL BE, ONCE THEY GET CLOSE ENOUGH, WE WILL
START TO PIVOT ONCE THEY SEE INFLATION IS ON A SUSTAINABLE
PATH TO ITS 2% GOAL. THAT IS NOT A WELL-DEFINED
CONCEPT. WE WILL SEE HOW THAT PLAYS OUT
OVER THE NEXT YEAR. >> STAY CLOSE.
THE JOBS REPORT SEVEN MINUTES AWAY.
WE WILL BREAK THE JOBS REPORT IN SIX OR SEVEN MINUTES.
WE WILL GET TO MIKE MCKEE. JEFF ROSENBERG OF BLACKROCK
COMING UP. FOR YOU, WHAT IS THE FOCUS
TODAY? >> I THINK WE WILL BE LOOKING
AT THREE THINGS, THE OVERALL JOB CREATION, THE NUMBER AND
THE FRACTION, INFLATION, DOES IT RISE AT ALL, BECAUSE THE FED
MATHEMATICALLY WILL HAVE TO LOWER THEIR TARGET FOR
UNEMPLOYMENT AT THE END OF THE YEAR, AND AVERAGE HOURLY
EARNINGS. THIS IT CONTINUE THE MOVEMENT
DOWN TOWARDS A SUSTAINABLE LEVEL?
IF YOU GET THAT THE FED WILL BE RELATIVELY HAPPY. >> YOU GET THE FEELING THE NEXT
WEEK'S CPI REPORT IS MORE IMPORTANT. >> I THINK SO IN TERMS OF
MOMENTUM. DO WE STILL SEE PROGRESS ON
INFLATION. I KNOW SARAH WOLF WAS TELLING
YOU EARLIER, AND I AGREED, THERE ARE TWO JOBS REPORTS, PCI
REPORTS, SO YOU GET LESS ATTENTION ON THE NUMBER TODAY
AND NEXT WEEK, BUT WHEN WE GET TO SEPTEMBER THERE WILL BE
LASER FOCUS ON IT, BECAUSE THAT WILL BE DETERMINATIVE.
THEY WANT TO SEE A TREND, NOT JUST A DATA POINT. >> ARE YOU WORRIED ABOUT
LIFEGUARDS? IS THIS A GOOD DATA POINT WHERE
THERE ARE LOTS OF NUANCES? >> THERE IS A SHORTAGE OF
LIFEGUARDS. YOU CANNOT FIND PEOPLE TO WORK.
CITIES ARE REPORTING THEY CANNOT OPEN MUNICIPAL POOLS
BECAUSE THERE AREN'T ENOUGH LIFEGUARDS.
I THINK AT THIS POINT WE ARE LOOKING AT A STILL TIGHT LABOR
MARKET AND THE QUESTION IS DOES THAT CONTINUE TO PRODUCE
INFLATION OR DO WE GET THAT GOLDILOCKS SCENARIO THAT GIVES
US A SOFT LANDING? >> SO MUCH OF THIS HIRING HAS
BEEN IN THE SERVICES SECTOR. DO YOU EXPECT THAT TO CONTINUE
TO DEMONSTRATE THAT TYPE OF INCREASE AND ACCELERATION AT A
TIME WHEN THE ISM WE GOT YESTERDAY WAS MORE SUBDUED? >> YOU CANNOT SAY NEVER GIVEN
THE WAY THE ECONOMY HAS DEVELOPED OVER THE LAST TWO
YEARS, BUT YOU HAVE TO THINK SERVICES ARE GOING TO CONTINUE.
EVEN THE ISM NUMBER YESTERDAY IS TELLING US SERVICES ARE
STILL HIRING AND LOOKING FOR PEOPLE WHEREAS MANUFACTURING,
THERE ARE A LOT OF MIXED MESSAGES ABOUT WHETHER WE WILL
SEE A DECLINE IN MANUFACTURING JOBS BECAUSE WE HAVE SEEN
SLOWING IN MANUFACTURING BUT ALL THIS CONSTRUCTION WERE
GOING ON. IT IS HARD TO TELL. THE ODDS ARE WE WILL SEE AGAIN
IN SERVICES TODAY AND MAYBE A DECLINE IN MANUFACTURING. >> ANY FED SPEAK AFTER THIS? >> SURPRISINGLY, YOU SHOULD ASK
-- SURPRISING YOU SHOULD ASK. DAVID WESTON WILL BE TALKING
WITH GOOLSBY. YOU ONE FED REACTION?
WE HAVE IT FOR YOU. >> THE JOBS REPORT COMING UP
NEXT. EQUITY FUTURES ON THE S&P JUST
ABOUT POSITIVE. THE NUMBER WE ARE LOOKING FOR,
200,000. THAT NUMBER ON REPEAT THIS
MORNING. THAT'S THE NUMBER WE ARE
LOOKING FOR. >> YOUR JOBS REPORT SECOND'S
AWAY. WALL STREET WANTS THIS TO BE A
TOTAL SNOOZE. WE WILL SEE. YIELDS HIGHER FOR A FIST
CONSECUTIVE DAY BY BASIS POINTS. THE JOBS REPORT ESTIMATE
200,000, THE NUMBER WITH MIKE MCKEE. >> GOOD MORNING. IT'S A SNOOZER.
187,000. THAT'S A SURPRISE BECAUSE IT
COMES IN LOWER THAN ANTICIPATED AND LOWER THAN THE INITIAL READ.
PRIVATE PAYROLLS UP 172. THAT IS DOWN FROM THE FORECAST
OF 180. IT WAS ONLY 149 LAST TIME BUT
INTERESTING BECAUSE THE ADP NUMBER WAS SO STRONG AND THIS
COMPARES WITH THAT. 49,000 JOBS LESS IN THE
REVISIONS OVER THE LAST TWO MONTHS SO THAT IS GOING TO BE A
SHORTAGE OF JOBS THAT WILL HELP THE NARRATIVE THAT THE LABOR
MARKET IS SLOWING DOWN. UNEMPLOYMENT 3.5%.
FALLS FROM 3.6%. I WILL GUESS THAT HAS TO DO
WITH THE LABOR FORCE. AVERAGE HOURLY EARNINGS COME IN
STRONG, .4% MORE THAN ANTICIPATED, LEADS THE
YEAR-OVER-YEAR NUMBER AT 4.4%, AND AVERAGE WEEKLY HOURS DROP
BY .1%, SO MAYBE THAT IS A SIGN THE ECONOMY IS SLOWING.
LABOR FORCE PARTICIPATION UNCHANGED AT 62.6. THE YOUTH -- THE
UNDEREMPLOYMENT RATE 6.7 PERCENT.
THE PRIOR MONTH OF JULY WAS REVISED DOWN TO 185 FROM 209.
SO THAT WILL BE THE WEAKEST IN SOME TIME. THE CHANGE IN PRIVATE PAYROLLS
REVISED DOWN. >> I WOULD SAY THERE'S A
TUG-OF-WAR, A COMPETITION BETWEEN A DOWNSIDE SURPRISE ON
PAYROLLS WITH A REDUCTION IN HOURS WORKED COMPETING WITH
STILL HOT WAGE GROWTH THAT COMES IN JUST A LITTLE BIT
HOTTER THAN EXPECTED AT .4%. THIS IS HOW THE EQUITY MARKET
RESPONDS. EQUITIES UP BY 2.5 -- BY .25%. NOW FINALLY ONE BASIS POINTS OF
489 IN THE DOLLAR A TOUCH WEAKER AGAINST A STRONGER EURO.
EURO-DOLLAR POSITIVE BY .2%. CAN YOU FRAME THAT MORE FOR US?
IT'S A DOWNSIDE TO PRICE ON PAYROLLS BUT WAGES COME IN
HOTTER AND UNEMPLOYMENT DROPS TO 3.5%. >> THIS IS WHY THE FED IS GOING
TO HOLD OFF AND NOT LOOK AT ONE DATA POINT BECAUSE WE HAVE SEEN
SOME NUMBERS THAT SUGGEST MAYBE THE LABOR MARKET IS GETTING
LOOSER, BUT YOU LOOK AT THE UNEMPLOYMENT RATE AND YOU ARE
LOOKING AT A PROBLEM FOR THE FED, BECAUSE OF THAT IS WHAT IS
DRIVING UP WAGES OR KEEPING THEM HIGHER, THEY WILL NOT MAKE
THE PROGRESS THEY WANT. THEY ARE LOOKING AT THIS AS THE
LABOR MARKET LOOSENS. IT'S EASIER TO FIND WORKERS AND
THEN WE DON'T HAVE TO PAY THEM AS MUCH.
IT DOESN'T LOOK LIKE MUCH HAS CHANGED OVER THE PAST MONTH. >> BEGETS ME BACK TO Q4 OF 2019.
IF I TAKE OUT THE GYRATIONS OF 2020, ALL OF A SUDDEN, WITH THE
REVISION, 209 IS THE REVISION. WE ARE GETTING A FEEL LIKE
PRE-COVID. DO YOU LOOK AT THIS AS THE
FIRST PRE-COVID JOBS REPORT EQUIVALENCY? >> THAT'S AN INTERESTING POINT,
TOM, BECAUSE PRE-COVID -- 187 THOUSAND JOBS IS STILL A STRONG
REPORT. WE WOULD SAY THAT IF WE WERE
LOOKING AT IT IN JULY 2019. BECAUSE OF THE PANDEMIC
DISTORTIONS, EVERYTHING OUT BLOWN UP, SO WE THINK THIS IS
THE WEAKEST SINCE THE PANDEMIC, THE WEAKEST FIRST PRINT, BUT
STILL REASONABLY STRONG. >> WELL SAID.
THE KNEE-JERK REACTION OFF THE BACK OF THE PAYROLLS REPORT
WORTH LOOKING AT. THE EQUITY MARKET JUST ELEVATED
BY .1%. WE WILL CONTINUE THE CONVERSATION THE NEXT HOUR ON
BLOOMBERG TV SO LOOK OUT FOR THIS. WE WILL BE JOINED. MICAH COLLINS OF PHM AND OTHERS
IN THE -- OTHERS AND A BIT OF APPLE. >> TWO YEAR YIELD UP FOUR BASIS
POINTS. YOU WONDER IF WE GET TO VISIT
5% WITH THE JUMBLE WE SEE. THE FORMER GOVERNOR OF THE FED
AND JEFF ROSENBERG JOIN US. WE LOOK BACK TO PRE-COVID.
ARE WE BEYOND COVID? IS THIS A JOBS REPORT THE
BEGINS TO FEEL LIKE Q4 2019? >> I THINK THAT IS RIGHT. THIS IS STILL A PRETTY STRONG
REPORT IF YOU PUT IT INTO A BIGGER PICTURE CONTEXT OF HOW
MUCH GROWTH OF JOBS WE HAVE HAD, AN UNEMPLOYMENT RATE NEAR
50 YEAR LOWS. I THINK THE HAWKS WILL FOCUS IN
ON THE WAGE GROWTH. THAT WILL BE THE CONCERN FOR
THEM BECAUSE THE THING THAT'S GOING TO MAKE INFLATION PERSIST
AND BE DIFFICULT TO BRING DOWN IN A SUSTAINABLE WAY WILL BE
EMPLOYMENT COSTS. SO I THINK THAT'S GOING TO BE
THE THING THAT WILL FOCUS ON AND THEY WILL ARGUE THE LABOR
MARKET IS STRONG. WE WILL NEED TO MOVE MORE,
FORCE. WE WILL HAVE THE DOVES WHO WILL
TAKE THE OTHER SIDE BUT THERE'S ENOUGH HERE FOR THEM TO SAY WE
HAVE TO BE VIGILANT. AS YOU HAVE ALL SAID, MORE DATA
TO COME OUT. >> HOW MANY HAWKS ARE LEFT?
WILL THEY BE THE RELEGATED MEMBERS IN THE CORNER LIKE
EVERYBODY ELSE SAID BUT WE ARE SEEING THE NUMBER COME DOWN AND
THAT'S A GOOD THING? >> EVERYONE WANTS TO SEE
OVERALL INFLATION COME DOWN AND THAT IS GOOD.
EVERYBODY WANTS TO SEE GOOD WAGE GROWTH. THE KEY CHALLENGE IS -- THE
INFLATION RATE HAS COME DOWN SUBSTANTIALLY, WAGE GROWTH IS
STILL PERSISTING AT THE RATE IT WAS, AND UNLESS WE GET A BOOM
IN PRODUCTIVITY, AND WE DID GET A PRODUCTIVITY NUMBER, UNLESS
WE SEE THAT PERSIST, IT WILL BE HARD TO MAKE THE PIECES FIT TOGETHER, BUT MAYBE WE --
CHATGPT AND AI WILL ALLOW US TO HAVE THIS PRODUCTIVITY BOOM,
ALLOW REAL WAGES TO BE GROWING, AND WE CAN BRING INFLATION DOWN.
THAT'S THE TRUE GOLDILOCKS SCENARIO. >> WE SAY GOODBYE WHEN THE
PROFESSOR MENTIONS AI. THANK YOU FOR JOINING US EACH
AND EVERY JOBS THAT. GREATLY APPRECIATE THAT. WE CONTINUE WITH JEFFREY
ROSENBERG OF BLACK ROCK. I DON'T KNOW WHICH WAY THIS IS
GOING TO CUT. WE TALKED TO STEVE MAJOR OF
HSBC AND THERE'S THIS WHOLE IDEA OF WE HAD THIS MOVE AND
WHICH WAY DOES IT CUT? ARE YOU BETTING ON A DIRECTION
AND THE YIELD MARKET PARTICULARLY OFF A QUIESCENCE
JOBS REPORT? >> I THINK WHEN YOU LOOK AT
THIS REPORT, THERE ARE SOME MIXED COMMENTS, AS JOHN WAS TALKING ABOUT, BETWEEN THE
WAGES, BUT THE HEADLINE IS A STORY OF GRADUAL LAB
OR MARKET NORMALIZATION AND GRADUAL LABOR MARKET
NORMALIZATION CONTINUES THE MARKET EXPECTATION THAT THE
HIKE OF THE LAST MEETING WAS THE LAST HIKE.
THAT IS A BIG CHANGE IN THE YIELD MARKET OUTLOOK, THAT WE
ARE SEEING THE EFFECTS OF NORMALIZATION IN THE LABOR
MARKET. YES, WAGES WILL FOLLOW. MAYBE NIOT.
THAT REMAINS THE UNCERTAINTY. THE BROADER REPORTS SHOW A
GRADUAL SLOWING AND WAGE INFLATION.
THAT FEEDS INTO THIS NARRATIVE THAT IT CAN BE DONE.
FOR THE YIELD OUTLOOK, IT'S ABOUT THE SHAPE OF THE CURVE.
WE SAW THE STEEPENING. I THINK THAT NEEDS TO BE THE
MESSAGE THAT IS OUR MAIN FOCUS. >> IN YOUR BROAD MANDATE, WHICH
SPREAD GIVES YOU THE MOST INFORMATION.
WHICH COMPARISON OF TWO YIELDS GIVES YOU THE MOST INFORMATION? >> YOU KNOW, YOU CAN LOOK AT
LOTS OF DIFFERENT MEASURES. WE TEND TO LIKE THE FIVE YEAR
FORWARD. IT'S A NICE MEASURE. IT CAPTURES BOTH THE LEVEL AND
THE SHAPE OF THE CURVE AND ITS MOVING.
WE HAVE SEEN A SIGNIFICANT MOVE THIS WEEK AND FOR GOOD REASON.
THE BACK END OF THE CURVE IS DEFINITELY A BIT MORE
CHALLENGED WHEN YOU LOOK AT HISTORIC LEVELS OF FIVE-YEAR,
FIVE YEAR FORWARD. WE LOOK AT THE 2-10 SPREAD.
I THINK THAT IS WHERE THE MARKET PRICING IS A LITTLE BIT
VULNERABLE. WHEN WE LOOK AT ALL THE
INFORMATION THAT WE SAW COME OUT THIS WEEK, AND AWAY FROM
THE MONETARY POLICY FOCUS, IT'S ABOUT FISCAL POLICY.
WE HAD THE REFUNDING ANNOUNCEMENT.
YOU SEE A VERY COMPRESSED TERM PREMIUM BOTH IN REAL AND
INFLATIONARY SPACE AND THAT IS I THINK THE VULNERABLE HE WE
ARE LOOKING. >> I HAVE TO GO BACK TO
SOMETHING YOU ARE SAYING. PEOPLE ARE BASICALLY ASSUMING
THE FED IS DONE. THEY ARE NOT GOING TO RAISE
RATES MORE INTO THAT IS WHAT YOU ARE SEEING TODAY.
THE MOVE YOU ARE SEEING IS AT THE TENURE YIELD ONCE AGAIN
REACHING 4.2%, THE HIGHEST LEVELS GOING BACK TO NOVEMBER.
THIS IS THE KEY QUESTION. IS THE FED GOING TO TAKE THEIR
FOOT OFF THE BRAKE AT A TIME WHEN WE ARE STILL SEEING WAGES
GO UP? IS THAT THE ASSUMPTION OF MARKETS LOOKING AT A FED
COMFORTABLE WITH 3% INFLATION OVER A LONGER PERIOD OF TIME,
NOT NEEDING TO GET DOWN TO 2% TOO QUICKLY. >> WHAT DOES TAKING THE FOOT
OFF THE BRAKE MEAN? DOES IT MEAN NOT DOING ANOTHER HIKE THAT THEY SIGNALED LAST
MEETING OR DOESN'T MEAN LEAVING RATES UNCHANGED -- OR DOES IT
MEAN LEAVING RATES UNCHANGED OR DOESN'T MEAN -- OR DOES IT MEAN
THEY ARE LOWERING INTEREST RATES? HOW MUCH INFLATION DECLINED YOU
NEED TO SEE BEFORE THE FED HAS TO START CUTTING RATES?
BECAUSE AS INFLATION DECLINES AND THE FED STAYS PAT, REAL
INTEREST RATES, THE REAL FED FUNDS RATE, WHICH IS THE
TRANSITION MECHANISM FOR MONETARY POLICY, BEGINS TO
INCREASE, SO HOW MUCH ACTUAL BREAKING DOES THE FED TOLERATE,
NOT BY THEIR ACTION BUT BY FURTHER DECLINES?
THAT WILL BE THE METRIC POWELL IS TELLING YOU ABOUT IN THE
CONFERENCE LAST WEEK. THAT WAS THE STORY, THAT, AS
INFLATION COMES DOWN, THEIR POLICY GETS TIGHTER, AND
WILLING WILL THEY BE TO SEE THAT? THIS IS PREDICATED ON THE
EXPECTATION THAT WE WILL CONTINUE TO SEE FURTHER
DECLINES IN EXPECTATION AND THAT CHANGES THE STORY.
THAT IS THE NATURAL BREAKING THAT OCCURS. >> IT SEEMS LIKE THERE'S BEEN A
NARRATIVE SHIFT OVER THE PAST COUPLE OF WEEKS WHERE HIGHER
FOR LONGER IS MORE ACCEPTABLE AS WELL AS A SOFT LANDING TYPE
OF SCENARIO. HOW MUCH DO YOU LEAN INTO THIS
AS WELL AS AN EXPECTATION OF YIELDS BEING HIGHER FOR LONGER? >> PART OF THE PROBLEM WITH
ADJUSTING TOO MUCH IS THAT THE MARKET PRICING FOR SO MANY
RISKY ASSETS IS ALREADY THERE, SO WHEN YOU LOOK AT IS THERE A
LOT OF OPPORTUNITY IN CREDIT MARKETS FOR THE SOFT LANDING
BEING REALIZED, YOU SEE THAT YOU ARE PRICING IN IN MANY
CASES EXPECTATION LEVELS. THE HIGH-YIELD BOND MARKET HAS
BEEN ON A TIGHTENING TEAR. IT HAS NEVER REALLY REFLECTED
THE SAME DEGREE OF RECESSION FEARS, RECESSION PROBABILITIES,
THAT YOU SEE, SAY, THE CONSENSUS ECONOMICS PROFESSION
NOW MOVING AWAY FROM, PUSHING DOWN RECESSION PROBABILITIES.
YOU NEVER HAD THAT PRICED INTO THE CREDIT MARKET.
THIS HUGE DISCONNECT BETWEEN THE CREDIT INDICATIONS IN THE
SURVEYS. THERE IS AN OPPORTUNITY.
IT IS ABOUT CARRIE RATHER THAN PRICE APPRECIATION BECAUSE A
LOT OF THAT ALREADY HAPPENED OFF NOVEMBER LOS. >> THANK YOU WITH THAT.
ARE YOU WITH ME THAT WE WANT TO GO DOWN?
WE COME BACK WITH A LITTLE BIT. IT'S A FRACTIONAL LIFT BUT IS
GENUINE. COLLECTS THE TUG-OF-WAR BETWEEN
THE HEADLINE RATE BELOW EXPECTATION AND THE WAGE NUMBER
THAT CAME IN STRONGER-THAN-EXPECTED AND WHAT
I FEEL IN MARKETS IS THE WAGES IS ACTUALLY WINNING OUT,
DRIVING DOWN AN INDEX THAT POPPED, PUSHING UP YIELDS.
TO ME, THIS IS THE THEME. YOU HAVE THAT INFLATIONARY
PRESSURE EVEN IF ON A HEADLINE NUMBER YOU ARE SEEING THAT
NORMALIZATION. >> I'M GOING TO LOOK AT THE
REAL YIELD AT 1.80%, 1.81%, WHICH IS HIGHER THAN WHAT WE
SAW TWO OR THREE WEEKS AGO AS WELL.
DIVING INTO THE DATA, LOOKING OVER HERE, IT'S LIKE IN FOURTH
GRADE WHEN YOU LOOK AT THE SMART GUY AND SAY WHAT'S HE
LOOKING AT. 18 COLUMNS WITH 75 ROWS OF DATA.
WHAT IS THE NUMBER ON THE SCREEN THAT MATTERS? >> AS LONG AS I CAN STILL READ
THAT TINY PRINT. I AM NOT OLD YET.
THE NUMBERS THAT MATTER TODAY ARE THE UNEMPLOYMENT RATE AND
HOURLY EARNINGS NUMBERS AND THE UNEMPLOYED RATE COMES ABOUT BECAUSE WE HAD 268,000
ADDITIONAL WORKERS IN THE HOUSEHOLD SURVEY AND THEY
COUNTED NEGATIVE 116,000 THAT LOST EMPLOYMENT DURING THE
MONTH. THAT PUTS IT DOWN TO 3.5%.
WHEN YOU LOOK FOR THE OVERALL LIST OF JOBS, TWO THINGS STAND
OUT. ONE IS THAT THE CHANGES ARE SMALL FOR MOST CATEGORIES.
THEY ARE EITHER PLUS 100 OR 1000 OR DOWN 1000 AS OPPOSED TO
GAINING TENS AND 20'S. I DON'T SEE LIFEGUARDS BUT
THAT'S PROBABLY UNDER AMUSEMENT PARKS AND WE CAN LOOK AT THAT.
THE OTHER THING IS THAT THE BIGGEST JOB LOSING CATEGORY IS
AT MANAGEMENT OF COMPANIES AND ENTERPRISES.
THIS HAS BEEN A STORY, THAT COMPANIES ARE HOLDING ONTO
THEIR LOWER SKILLED LABORERS BECAUSE THEY ARE AFRAID THEY
CANNOT FIND THEM ANYMORE AND THEY HAVE BEEN RIGHTSIZING OR
RATIONALIZING THEIR EXPENSES BY GETTING RID OF LAYERS OF
MANAGEMENT. >> MIKE MCKEE WILL INTERPRET
THIS THROUGH THE 9:00 HOUR ON RADIO AND TELEVISION.
ON THIS JOBS DAY WITH ALWAYS SEE IN THE MARKET, FUTURES
FRACTIONALLY UP, WITHOUT QUESTION THE CONVERSATION IS
HAVING THE COURAGE TO BE IN THIS MARKET. I CANNOT SAY ENOUGH ABOUT OUR
GUEST'S PRESCIENCE ACROSS MANY DECADES. REAFFIRM, ED, HOW A BULL ACTS
AND MOVES FORWARD GIVEN THE MANY FEARS THAT ARE OUT THERE. >> WELL, I HAVE BEEN THINKING
THAT WE HAVE BEEN IN A RECESSION SINCE EARLY LAST
YEAR, AS WE DISCUSSED BEFORE. IT'S JUST A REALLY RECESSION.
NOW WE ARE IN A RULING RECOVERY AND INCREASINGLY THE MARKETS
HAVE DISCOUNTED THAT AND THE SO-CALLED GODOT RECESSION STILL
HAS NOT SHOWED UP, BUT WITH REGARDS TO THE MARKET, MY YEAR
END TARGET WOULD BE 4500, AND WE GOT THERE A FEW DAYS AGO, SO
I'M THINKING I'M NOT GOING TO RAISE MY TARGET TO 4600.
I'M GOING TO KEEP IT THERE. I THINK IT'S GOING TO TURN OUT
THAT THE EXPECTATIONS AT THE BEGINNING OF THE YEAR WAS WE
WOULD HAVE A LOUSY FIRST HALF OF THE YEAR AND A GOOD SECOND
HALF OF THE YEAR FOR THE MARKET. I THINK IS GOING TO BE THE
REVERSE OF THAT. I THINK WE HAD A GOOD FIRST
HALF. I THINK THE SECOND HALF IS GOING TO BE CHALLENGING.
I DON'T GUESS GOING TO BE A BIG DOWNER. SEPTEMBER IS COMING AND THAT
OBVIOUSLY COULD CREATE SOME PROBLEMS BUT
BY YEAR END I THINK WE WILL BE AT 4600. >> HOW MUCH ARE YOU BUYING IN
TO THIS IDEA THAT WE WILL SEE HIGHER RATES FOR LONGER,
PARTICULARLY DURATION, TENURE NOTES, 30 YOUR NOTES? >> I THOUGHT ON SHORT-TERM
RATES THAT THE FED WAS CLEAR WHAT THEY WANTED TO DO AND I
TOOK THEM AT THEIR WORD. THERE'S ALWAYS SKEPTICISM AND A
FEELING THE FED WILL NOT GET IT RIGHT, BUT THEY HAVE BEEN
SAYING THEY WANT TO GET THE SHORT-TERM RATE TO A
RESTRICTIVE LEVEL AND I THINK IT'S THERE AT 5.25%.
I DON'T THINK THEY HAVE TO DO ANY MORE.
WHAT IS INTERESTING IS MY FRIENDS SEEM TO BE SADDLING UP.
I THOUGHT WE WOULD HOLD AROUND 4% BUT WE ARE BACK AT THE
NOVEMBER HIGH OF 4.2%. SO IT'S LOOKING A LITTLE DICEY
ON THE BOND SIDE. SUDDENLY WE HAVE TO TAKE INTO
CONSIDERATION THAT WHILE THE FIXED RATING AGENCIES
DOWNGRADED THE U.S. GOVERNMENT DEBT WAS SORT OF THE
EVENT THAT FOCUSED EVERYBODY BACK ON THE DEFICIT, THE FACT
OF THE MATTER IS WE HAVE ALL KNOWN THE DEFICIT IS A PROBLEM.
WE KNOW FISCAL POLICY IS PROFLIGATE.
IT IS JUST THE MARKET CARES ABOUT IT NOW.
SO IF THE MARKET CARES, I HAVE TO CARE ABOUT IT. >> WINDOWS THE HIGH RATE
STRUCTURE AT THE LONG END THREATEN YOUR BULL THESIS? >> I THINK IT ALREADY HAS DONE
ITS DAMAGE IN ONE AREA WHERE THE RULING RECESSION HAS IT AND
THAT IS IN HOUSING. THE HOUSING MARKET IS HOLDING
UP PRETTY WELL AT LEAST IN TERMS OF THE PRICES. THE ISSUE IS THE CONSUMER WILL
-- THE CONSUMER. WILL HIRE LONG-TERM RATES
KNOCKED DOWN THE CONSUMER? I DON'T THINK SO AT THIS POINT.
IT DEPENDS ON A CERTAIN AMOUNT OF CONSUMER DEBT BUT THE KEY IS
EMPLOYMENT AND WAGES. EMPLOYMENT CAN ALWAYS BE
REVISED ONE WAY OR ANOTHER. WE KNOW THE WAGE NUMBER AT 4.4%
WELL EXCEEDED -- LET'S MAKE A 0.4%, BECAUSE WE ARE GOING
MONTH-TO-MONTH, SO AT 0.4 PERCENT IT EXCEEDED THE CPI.
REAL WAGES ARE INCREASING. CONSUMERS HAVE A LOT OF WEALTH
IN THEIR HOUSES. THE BABY BOOMERS HAVE A LOT OF
WEALTH. THEY ARE RETIRING AND SPENDING
IT. ALL IN ALL, I'M NOT SURE HOW AN
INCREASE IN THE BONNIE YIELD KNOCKS THE CONSUMER DOWN -- THE
BOND YIELD KNOCKS THE CONSUMER DOWN UNLESS WE GET SOME SORT OF
BANKING CRISIS EVENT AGAIN THAT IS A RESULT OF THAT. >> JUST QUICKLY, HOW MUCH ARE
YOU THINKING THE FED HAS GONE ENOUGH EVEN IF WE ARE SEEING
THIS STICKY INFLATION AND WAGE PRESSURES? >> WELL, IT LOOKS STICKY BUT I
THINK THE PRODUCTIVITY NUMBERS ARE STARTING TO COME THROUGH.
WE HAD A REMARKABLE INCREASE IN PRODUCTIVITY, SO REMARKABLE
THAT EVEN A BULL LIKE MYSELF DID NOT QUITE BELIEVE IT.
IT INDICATED EMPLOYMENT WAS FLAT .
I THINK PRODUCTIVITY MAY COME BACK AND WE MAY SEE WAGES
RISING FASTER THAN PRICES. >> LONG AGO AND FAR AWAY,
FRIDAY EVENING, LOU RUCK KAISER WOULD SIT WITH YOU ON THE COUCH
AND SAY, WHAT'S IT LOOK LIKE LONG-TERM?
MODERN-DAY LONG-TERM IS NINE MONTHS. MAYBE IT'S A YEAR, ED. FOR THE MERE MORTALS WATCHING
AND LISTENING, WHERE LONG-TERM IS THREE OR FIVE YEARS, FRAME
OUT THE GROWTH YOU SEE IN REVENUE OF OUR EQUITIES?
IT SEEMS TO BE PRETTY DOWN -- PRETTY DARN GOOD, 6%, 4%,
WHATEVER. GIVE US A THREE-YEAR PERSPECTIVE. >> I LIKE TO DO DECADE
PERSPECTIVES AND THIS DECADE I THINK STARTED OUT WITH ALL
SORTS OF PROBLEMS. AT THE VERY BEGINNING OF THE DECADE, WE
STARTED TALKING ABOUT THE POSSIBILITY OF THE ROARING
2020S WITH PRODUCTIVITY MAKING A BIG COMEBACK AND THAT LOOKED
DELUSIONAL FOR THE PAST COUPLE YEARS BUT IT'S LOOKING LIKE IT
MIGHT BE A REASONABLE WAY TO THINK ABOUT THE REST OF THE
DECADE. ROBOTICS, AUTOMATION, LOTS OF
TECHNOLOGIES THAT ARE GOING TO BOOST PRODUCTIVITY. FROM A REVENUES PERSPECTIVE,
THEY TEND TO INCREASE ALONG WITH NOMINAL GDP.
IF WE GET A PRODUCTIVITY BOOST, THERE'S NO REASON WHY REVENUES
CAN'T GROW 5% TO 8%. >> SHOULD WE FEAR THE
CONCENTRATION OF 7, 8, 9, 10 MEGA NAMES?
HOW SHOULD WE INTERPRET THE DURABILITY OF WHAT WE SEE FROM
THESE NAMES? >> WELL, FIRST AND FOREMOST, I
PERSONALLY TRY NOT TO GET TOO EMOTIONAL ABOUT THE MARKETS.
IT'S EASY TO SAY AND HARD TO DO. I GO ON THE SAME ROLLER COASTER
AS EVERYBODY ELSE. IF YOU TRY TO CONTROL YOUR
EMOTIONS, YOU HAVE TO DEAL WITH THE FACTS. THE FACT IS WE HAVE GOT EIGHT
COMPANIES THAT ACCOUNT FOR 27% OF THE MARKET CAP OF THE S&P
500 AND THEY ARE GREAT COMPANIES, AS AMAZON
DEMONSTRATED, WITH THIS LATEST EARNINGS REPORT.
THEY WILL CONTINUE TO HAVE AN OUTSIZE IMPACT ON THE MARKET
CAPITALIZATION. WE HAVE TO ACCEPT P.E.
HIS HIGHER. >> THANK YOU SO MUCH. HE RECONFIRMS 4600 SPX. SO I GUESS HE'S SAYING TAKE A
NAP IN AUGUST AND COME BACK IN JANUARY.
I LOOK AT THE BOND MARKET AND I WANT TO REFRAME THIS.
I DON'T THINK WE HAVE TALKED ENOUGH ABOUT IT.
THREE DAYS OF THE PLAGUE. WHEN I LEFT, I WAS -- LEFT, THE
REAL YIELD WAS SOMETHING ELSE. THE 10 YEAR INFLATION-ADJUSTED
YIELD IS UP WHERE OLIVER GUESTS SAY IS A TENSION POINT -- WHERE
ALL OF OUR GUESTS SAY IS A TENSION POINT. >> COMING AT A TIME WHERE THERE
IS CONCERN ABOUT THE FISCAL PROFILE OF A NATION AND SEEING
THE DEBT DEFICIT INCREASE. ITS RAISING SOME REAL QUESTIONS.
THEN YOU PUT IN AN EMPLOYMENT REPORT.
HOW DO YOU PARSE IT THROUGH AND FIGURE OUT WHICH NARRATIVE
THREAD IS MOST IMPORTANT? IT IS BATTLE OF THE NARRATIVES. >> THAT IS ALWAYS THE CASE.
BUT TO YOUR REALLY IMPORTANT POINT, YOU HAVE TO WEIGHT A
NARRATIVE THAT IS YOUR BELIEF IN YOUR RETIREMENT PLAN, NOT
THIS BABBLE THAT WE DO ALL DAY, BUT WHAT IS MY NARRATIVE THAT
MATTERS? THAT IS THE KEY THING NOW. >> I CANNOT ANSWER THE QUESTION.
IRA JERSEY CAN, CHIEF RATE STRATEGIST FOR BLOOMBERG
INTELLIGENCE. HE'S PROBABLY LISTENING AND
THROWING UP HIS HANDS AND SAYING IT'S ALL ABOUT JAPAN.
I DON'T KNOW. WHAT IS DRIVING THE MARKET?
BECAUSE YOU ARE SEEING SOME MIXED REACTIONS ON THE HEELS OF
THAT REPORT. >> I THINK THE BOND MARKET
SELLOFF THIS WEEK OUGHT TO SET EVERYONE UP FOR AN OK REPORT
THAT WE RECEIVED THIS MORNING. THE WAY I READ THE EMPLOYMENT
REPORT WAS MORE MIXED. EVEN THOUGH WAGES ARE GROWING,
HOURS WORKED WAS LOWER. YOU HAVE HAD A MODERATION IN
THE AMOUNT OF JOB GROWTH AND THE MIX OF JOBS CONTINUES TO BE
SKEWED TOWARD THE LOWER END OF THE SPECTRUM WITH LOSSES IN
INFORMATION TECHNOLOGY. YOU HAD INCREASED EMPLOYMENT
ELSEWHERE. FOR THE MARKET, AND TO TOM'S
REAL YIELD POINT, MOST OF THE MOVE THIS WEEK, AND WE HAVE
SEEN A DECENT SIZED MOVE, HAS BEEN IN REAL YIELDS, NOT
INFLATION EXPECTATIONS, SO THE MARKET IS MORE WORRIED ABOUT
HOW MUCH SUPPLY THERE'S GOING TO BE. WE HAVE BIGGER AUCTIONS NEXT
WEEK PLUS SOME OF THE GLOBAL INTEREST RATE MOVES BEING DONE
BY THE BANK OF JAPAN AND THE YIELD CURVE CONTROL.
EUROPEAN CENTRAL BANKS CONTINUING TO BE HAWKISH.
SO IT'S A MIX OF ALL THOSE THINGS.
I JUST BROUGHT THE REAL YIELD UP TO MORE RESTRICTIVE LEVELS. >> CAN IT STAY?
THAT IS THE KEY QUESTION. WE ARE LOOKING AT A TWO YEAR
FLAT ON THE DAY, 10 YEAR YIELDS LOWER ON THE DAY, TRYING TO
COME UP WITH A NARRATIVE, AND IT WILL BE RENDERED OBSOLETE
WITHIN THE HOUR. HOW MUCH ARE WE LOOKING AT THE
POSSIBILITY THESE HIGHER RATES COULD REALLY STAY FOR LONGER
GIVEN WHAT ED WAS TALKING ABOUT, AN INCREASE IN
PRODUCTIVITY GIVING HIGHER WAGES AND A FULLY EMPLOYED
LABOR FORCE? >> THAT IS ONE OF THE THINGS WE
ARE LOOKING AT NOW, LISA, AND WE WILL TALK ABOUT THIS NEXT
WEEK. WHAT HAPPENS IF THE FED STAYS
ON HOLD NOT FOR THE NEXT SIX MONTHS BUT FOR THE NEXT 18
MONTHS? BECAUSE THAT WILL SHIFT THE
YIELD CURVE. YOU WILL SEE SOME MORE STEEPING
OF THE YIELD CURVE, STILL INVERTED, BUT LESS THAN NOW.
SIGNALING THAT THE FED CAN STAY ON HOLD.
THE WAY THAT I VIEW IT, THE FEDERAL RESERVE HAS TWO
MANDATES, AND INTEL ONE OR BOTH OF THEM IS COMPLETELY OUT OF
WHACK, THEY ARE GOING TO STAY ON HOLD NEAR CURRENT LEVELS, SO
YOU ARE TALKING ABOUT NEEDING JOB LOSSES AS ONE NECESSARY
CONDITION AND THE OTHER IS FOR INFLATION TO CONTINUE TO COME
DOWN MODESTLY, WHICH PRESUMABLY IT WOULD IF WE SAW JOB LOSSES.
UNTIL THOSE CONDITIONS ARE MET, THE FED WILL BE ON HOLD, AND
THAT MIGHT BE ANOTHER YEAR, 1.5 YEARS.
THE PROBLEM WITH A SOFT LANDING AS THE FED WILL BE ON HOLD
FOREVER. >> IRA, QUICKLY HERE.
ON THE REAL YIELD, WHICH WILL BE MY FOCUS OVER THE WEEKEND AND NEXT WEEK, I GOT A 1.78,
1.80 ALL OF A SUDDEN. I'M IN A RANGE WHERE MOST OF
OUR GUESTS SAY THAT IS IT. THAT IS IT IN 2006, 2.05%.
WHAT ARE THE IMPLICATIONS IF WE GET REAL YIELD CONVEXITY OVER
THE NEXT YEAR THAT LIFTS IT OVER 2%? >> IF YOU GET SIGNIFICANTLY
ABOVE 2% IN 10 YEAR YIELDS AND I THINK THAT WILL END UP BEING
A SIGN THE MARKET IS NOT CONVINCED THE FEDERAL
GOVERNMENT CAN REDUCE THE SIZE OF THE DEFICIT ANYTIME SOON
AND, YOU KNOW, A BIG REASON WE HAVE HAD THIS MOVE IN REAL
YIELDS, I THINK, IS SUPPLY PRESSURES.
WE ARE GETTING MORE SUPPLY NEXT WEEK, $3 BILLION MORE IN 10 YEARS, $2 BILLION MORE IN FIVE
YEARS. SOME OF THAT IS STRUCTURAL.
BUT HOW DO YOU GET INVESTORS WHO ARE LOOKING FOR PRICE
RETURN TO GET IT BACK INTO THE MARKET WHEN IT SEEMS LIKE THE
POLICIES ARE JUST GOING TO REMAIN RESTRICTIVE FOR A WHILE? >> IRA JERSEY, THANK YOU.
APPRECIATE IT. BLOOMBERG INTELLIGENCE ON THE
REAL YIELD. KATIE GREIFIELD WILL BE ON.
I DON'T KNOW WHAT TO MAKE OF IT. I GET IT IS AUGUST. WE ARE NOT
ASLEEP. WE WILL CONTINUE. WE WILL HAVE A SPRIGHTLY RADIO
DISCUSSION AS WELL. WHAT DO YOU MAKE OF THIS? >> I THINK OTHER PEOPLE ARE
JUST AS CONFUSED AS YOU ARE AND YOU SEE THAT IN THE
OSCILLATIONS OF THE MARKET. NO ONE KNOWS WHAT TO MAKE OF
THIS BECAUSE IT PAINTS CONFLICTING PICTURES OF A LABOR
MARKET ADJUSTING TO A NEW NORMAL MAYBE AT A TIME WHEN
EVERYONE IS FOLLOWING THEIR GUT. >> CORPORATIONS WILL ADAPT TO
4%. THEY WILL ADAPT JUST AS THEY DID IN 2005 AND FOR THAT MATTER
1995. THIS HAS BEEN A JOY. IN THE 10:00 HOUR, SPEAKING OF
JOY, THE GENTLEMAN FROM MILTON ECONOMY. GOOD MORNING.
