It's All Great. Mostly | Bloomberg Surveillance 08/01/2023

>> PEOPLE ARE REACTING TO PIECES OF DATA THAT CONFIRM THOSE SOFT LANDING. >> THE MARKET IS BROADENING, MOVING INTO MORE VALUE ORIENTED PARTS. >> BIG TECH HAS DONE A LOT OF IMPRESSIVE LISTING. >> I THINK THE MARKET IS OVERVALUED. >> OUR PROSPECTS ARE GOOD, LONG RUN. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, AND LISA ABRAMOWICZ. JONATHAN: LIVE FROM NEW YORK CITY, GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO. I'M JONATHAN FERRO. TK TAKING A BREAK, EQUITY MARKET SOFT, DOWN A 30% ON THE S&P 500. THE BOWLS ON WALL STREET GETTING MORE BULLISH. NOW LOOKING FOR 4900 ON THE 400, THE PRICE TARGET SET AT THE END OF DECEMBER. HE WAS BULLISH AND RIGHT TO BE. HE RAISES HIS PRICE TARGET. CITY ARE LOOKING FOR 5000 BY THE MIDDLE OF NEXT YEAR. IT IS RECORD HIGH WATCH ON THE STREET. LISA: AND THE POTENTIAL FOR A 28% GAIN THIS YEAR, THE BIGGEST GOING BACK TO ONE TO 19. CAN WE GET THE START OF A NEW BULL MARKET GIVEN SOME OF THE INCREASING CREDIT CONTRACTION, THE SOFTENING IN ECONOMIC INDICATORS CHECK OUT COULD THIS BE THE START OF A NEW BULL MARKET AS MANY ARE CALLING FOR? JONATHAN: I LOVED WHAT SCOTT CRONIN HAD TO SAY. CLEARLY WE WERE CHASING THE TAPE. GROWING CONVICTION IN YEARS EARNINGS ACCELERATION IS A KEY POINT OF DIFFERENTIATION. HE IS LOOKING FOR EARNINGS TO ACCELERATE INTO 2024. LISA: A KEY UNDERPINNING FOR A LOT OF THESE, MORE BROADLY, IS THAT THE SOFTNESS WILL CAUSE THE FED TO PIVOT. IT WILL TURBOCHARGE THE RALLY WE HAVE SEEN, INCLUDING SOME OF THE EARNINGS. BORROWING COSTS WILL DROP. THIS IS THE BET THAT GETS PEOPLE TO BUY INTO EQUITIES AND THEN PEOPLE ARE SAYING IS THIS WHAT WE HEARD BEFORE? HOW DO WE GET CREDIT STANDARDS TO THIS DEGREE WITHOUT SOMETHING MORE SYSTEMIC? -- SUBSTANTIAL? JONATHAN: WE SAW IT IN THE LATEST REPORT YESTERDAY, DEMAND IS LATER, BUT IT STANDARDS TIGHTENING MORE. BUT IT IS NOT WHAT WE EXPECTED COMING OUT OF THE BANK THREE MONTHS AGO. WE THOUGHT IT WOULD BE DRASTIC AND IT HAS BEEN SLOW AND HAS CONTINUED AT A STEADY PACE. LISA: DOES IT MATTER IF IT IS SLOW AND STEADY VERSUS SUDDEN AND A BREAKING CREDIT CREATION? IN THE PAST IT HAS NOT MATTERED. EACH OF THE TIME SINCE THIS INDEX WAS CREATED, EVERY TIME I IN CREDIT CONDITIONS LIKE NOW HAS LED TO A RECESSION. SO IS THIS DIFFERENT? CAN YOU PUT A STRONG BET ON THIS TIME IS DIFFERENT? PEOPLE ARE SAYING YES. EVERYONE USED TO SAY THOSE ARE THE MOST DANGEROUS WORDS IN FINANCE. JONATHAN: FIVE MONTHS OF GAINS ON THE S&P 500, THEY CONTINUED TO JULY. THE EQUITY MARKET THIS MORNING, SOFTER, NEGATIVE DOWN ON THE S&P 500. LET'S CALL IT .25%. YIELDS UNCHANGED, GOING INTO A TON OF DATA LATER. 110 ON THE EURO. 0.2%. LISA: JORDAN ROCHESTER WILL SPEAK TO US LATER AND HAS AN INTERESTING CALL ON THE EURO. THE JOB OPENINGS WHICH PEOPLE SAY MIGHT NOT BE THAT REFLECTIVE OF WHERE WE ARE WITH JOB OPENINGS PER EACH EMPLOYEE, UNEMPLOYED AMERICAN. WE'RE LOOKING AT THE POTENTIAL FOR LOOSENING MARKET. WE ALSO GET ISI MANY FACTORY DATA WHICH YOU WILL LOOK AT CLOSELY, ESPECIALLY IN CHINA AND EUROPE, MANUFACTURING RECESSION ONGOING. 10:00 A.M., CHICAGO FED PRESIDENT AUSTAN GOOLSBEE. HE SOUNDED CLOSE TO DECLARING VICTORY. HE WAS SPEAKING AND SAID THE SOFT LIGHTING IS THE PATH THAT WOULD BE A TRIUMPH AND IS A POSSIBILITY, TALKING ABOUT NOT RAISING RATES. JONATHAN: I THOUGHT THAT WAS THE HEADLINE, SOMEONE HAS DOVISH AS AUSTAN GOOLSBEE HAS NOT MADE OF HIS MIND FOR SEPTEMBER. I GUESS IT IS SEPARATE. THEY WANT TO MAKE YOU BELIEVE THAT THE SEPTEMBER MEETING IS ALIVE IN THE DATA BETWEEN NOW AND THEN MATTERS. LISA: THAT IS THE POINT THAT GETS HAMMERED HOME. PEOPLE ARE LEADING TOWARD APOLLO'S BUT THE FED DOES NOT WANT TO GET THE SIGNAL. WHEN IT COMES TO HOW LONG A CONSUMER CAN KEEP SPENDING, UBER, MARRIOTT, JETBLUE AND NORWEGIAN CRUISE LINES. WE ALSO WILL GET STARBUCKS, PINTEREST. THAT YEAR TO DATE GAINS HAVE BEEN STANDING. OVER SHARES -- UBER SHARES BASICALLY DOUBLING. HOW LONG CAN PEOPLE STILL DO THE YELLOW -- YOLO? JONATHAN: UBER IS EXPENSIVE NOW. LISA: DOUBLE AT LEAST. HOW LONG ARE PEOPLE GOING TO ORDER THEIR SALADS AND GET IT DELIVERED? JONATHAN: YOU WILL SEE ME IN MIDTOWN FLAGGING A YELLOW CAB. LISA: BUT THE QUALITY IS DIFFERENT. IT IS DIFFERENT BECAUSE THE UBER DRIVERS ARE MORE DISTANT WISHING WITH RESPECT TO WHO THEY TAKE AND DON'T BECAUSE OF THE RATING SYSTEM AND THE YELLOW CABS DON'T. JONATHAN: YOU MEAN THE QUALITY OF THE UBER IS BETTER. LISA: AND THE STORIES -- JONATHAN: YOU HAVE A GOOD RATING, 5.0? LISA: NOT ANYMORE. 4.96. JONATHAN: SAME AS ME. YOU CAN FIND OUT A LOT ABOUT SOMEONE BASED ON WHAT THEIR RATING IS. JOINING US NOW, CIO OF -- WONDERFUL TO CATCH UP. WE GET THESE NOTES ON A DAILY BASIS AND THERE WAS A LINE FROM YOU THAT MADE ME LAUGH. WE CONTINUE TO OWN TECH AND INCLUSION STOCKS, BRACKETS, AND A LOT OF PEOPLE MIGHT FEEL LIKE THAT IF THEY HAVE BEEN IN TECH SO FAR YEAR TO DATE. THERE IS A FEELING THAT IT IS TIME TO GET AWAY FROM THE BIG WINNERS. WHAT ARE YOUR CORE HOLDINGS IN TECHNOLOGY IN THE UNITED STATES STILL? >> I OWN APPLE, GOOGLE, ADOBE, I HAVE A LOT. PRETTY MUCH MARKET WEIGHT, NONE OF THEM ARE CHEAP ANYMORE. THEY'RE ALL EXPENSIVE. I'M NOT PLANNING TO SELL THEM. THE BIGGEST MISTAKE I'VE MADE OVER THE LAST DECADE IS SELLING THESE STOCKS WHEN THEY HIT THREE TIMES EARNING. THEY MOVED HIGHER. YOU CAN SEE THE SCENARIOS, ELEVATED MULTIPLES. THE DOMINANT MARKET SHARES PRODUCING ABOVE AVERAGE GROWTH. FRESH MONEY COMING IN TODAY, I WOULD RATHER BE SELLING THEN BUYING THEM OUTRIGHT. JUST BETTING AGAINST A MASSIVE DOWNSIDE THAT WOULD CREATE A FORCED DISCIPLINE OF BUYING THEM ON A SELLOFF. THOSE OF STOCKS THAT ARE DRIVING MY PORTFOLIO. I'VE GOT A MARKET WEIGHT BUT THEY ARE EXPENSIVE. JONATHAN: THEY HAVE DONE WELL, DOUBLE-DIGIT GAINS ACROSS THE BOARD. I MENTIONED IT, THERE WAS ROTATING AWAY FROM WINNERS. BANKS HAD A WONDERFUL MONTH THROUGH JULY. WHAT WOULD FUND THE MOVE INTO ENERGY WHICH YOU ARE LOOKING FOR OUTPERFORMANCE FROM? PATRICK: JONATHAN: WE MAY HAVE LOST HIM. A GREAT YEAR. SOME OF THE CORE TECH HOLDINGS WE HAVE HAD YOUR TO DATE, AND ROTATING OUT OF SOME OF THE WINNERS IN EUROPE, I REMEMBER WHEN ALFIE CAME ON THIS PROGRAM. IF YOU HAVE BEEN INTACT, DO YOU WANT TO STAY WITH IT? I THINK THERE ARE SO MANY PEOPLE LIKE PATRICK WHO HAVE SOLD THOSE NAMES AND REGRETTED IT LATER GIVEN THE PERFORMANCE OF THE LAST 10 YEARS. LISA: THERE IS A FEELING OF ARBITRARINESS TO SOME OF THESE CALLS. EVERYONE IS WRITING MOMENTUM. EVEN LOOKING AT HIS COMMENTS IN HIS OWN NOTES, WE CONTINUE TO OWN TECH AND COMMUNICATION STOCKS. THANK GOD. THERE IS A FEELING THAT IT IS ALMOST UP TO LUCK OR GETTING A SENSE OF WHAT THE ZEITGEIST IS TO USE TOM'S WORD OR GO WITH THE FLOW AND LOOK FOR THE TEA LEAVES OF WENT TO GET OUT. THESE ARE THINGS PEOPLE ARE TALKING ABOUT AT A TIME WHEN SKEPTICS ARE GETTING SMALLER AND QUIETER, BUT THEY ARE SAYING IS THIS GOING TO SUSTAIN A RALLY? JONATHAN: I CAN'T BELIEVE IT IS AUGUST. TORE THROUGH JULY, TO TALK ABOUT THE MONTHLY GAINS, THE FIFTH MONTH OF GAINS ON THE S&P 500. 3% GAINED IN JULY. THE LONGEST STREAK ON THE S&P, SLIGHT OUTPERFORMANCE ON THE NASDAQ. IT CHANGED TOWARD THE END OF THE MONTH BUT THE NASDAQ OUTPERFORMANCE, IT WAS UP BY CLOSE TO 4%. WITH THE STANDOUT WINNERS, SMALL CAPS UP 6%. VANKE'S ON THE S&P 500 UP BY 10%. WE HAVE LEFT -- BANKS ON THE S&P 500 UP BY 10%. WE HAVE LEFT MARGIN MOVED ON QUICKLY. LISA: THE STORY THAT WILL COME TO THE FOUR IS OIL. THE BIGGEST GAIN GOING BACK TO JANUARY LAST YEAR IN TERMS OF MONTHLY BASIS. AT WHAT POINT DOES THE START TO BITE AS PEOPLE TALK ABOUT THE TIGHTNESS IN THE MARKET AND THE FACT IT MIGHT HAVE BEEN DISTORTED BY PEOPLE NOT WANTING TO OWN PHYSICAL OIL BECAUSE IT COST SOMETHING, OPPORTUNITY COST OF NOT PUTTING YOUR MONEY IN A MONEY MARKET FUND? JONATHAN: I AM PLEASED TO READ JOIN--REESTABLISH A CONNECTION WITH PATRICK. MY APOLOGIES FOR THE CONNECTION. IF YOU ARE NOT TRIMMING TECH, WHERE ARE YOU TRIMMING? PATRICK: I HAVE BEEN OVERWEIGHT OIL ALL YEAR, SO IT IS NOT BEEN A GOOD CALL FOR ME. BUT WITH MORE OIL CONSUMED TODAY THAN IN THE HISTORY OF THE WORLD, OIL COMPANIES DOWN AND PRODUCING THE BUYBACK SHARES, THE DIVIDENDS, THEY DON'T HAVE THE ISSUES OF THE PAST. AND OPEC SHOWING AN INCLINATION TO CUT THE WEAKNESS IN THE OIL PRICES, I THINK WE HAVE GOT OIL PRICES THAT WILL STAY AT THESE LEVELS. LISA: IS IT CONSISTENT TO SEE OIL PRICES CONTINUE TO RISE AND THE RALLY WE HAVE SEEN MORE BROADLY CONTINUE? IS THERE A REASON BEHIND SOME OF THE DECLINE IN OIL PRICES THAT HAVE FUELED THE SOFT LANDING STORY THAT IS UNDERPINNED THE GAINS IN THE OTHER SECTORS OF THE EQUITY MARKET? PATRICK: YOU PROBABLY HAVE A LITTLE BIT BETTER MARGINS ACROSS THE COMPANIES AND OIL PRICES HAVE SEEN A SELLOFF. BUT I DON'T THINK OIL PRICES ARE GOING TO CHANGE THE OUTLOOK. YOU CAN SEE A SPIKE IN OIL, DIVIDENDS WOULD AFFECT MARKETS IN OTHER SECTORS. BUT PRICES GRADUALLY MOVING HIGHER, STAYING STICKY AT THESE LEVELS. I DON'T THINK IT IS GOING TO STAY WITH OTHER SECTORS. LISA: HOW LONG CAN YOU RIDE MOMENTUM? PATRICK: I AM STICKING WITH THE MOMENTUM THAT I HAVE GOT AT THE PORTFOLIO. BUT THEY ARE NOT THE RIDICULOUS VALUATIONS BUT THEY'RE NOT CHEAP ANYMORE. IN MARCH, THEY WERE CREATING A 24 TIMES EARNINGS, BUT NOW WE ARE UP IN THE HIGH 40'S, HIGH 30'S. APPLE WITH 20 TIMES EARNINGS IN OCTOBER, IF THEY DO HAVE ANOTHER SIGNIFICANT RUNOFF, THE RULES ARE TO BE BOND VALUATION MEASURES. IT WON'T CUT COMPLETELY. BUT WE ARE RALLYING THESE STOCKS. WE WILL CONTINUE TO OWN THEM. JONATHAN: FEELS LIKE WE HAVE BEEN IN THAT FOR THE LAST FIVE MONTHS OR SOMETHING. THANKS FOR JUMPING ON THE PHONE AND MAKING THIS HAPPEN. PATRICK ARMSTRONG OF LORENA WEALTH -- LORENA WEALTH. THE PAST THREE OR FOUR MONTHS. LISA: EVEN WITH THE ARGUMENT IT HAS BEEN ALL MULTIPLE EXPANSION AND UNDERLYING REVENUE GROWTH, THE SAME ARGUMENT PEOPLE HAVE BEEN MAKING FOR A WHILE. INKS HAVE CONTINUED TO MELT UP WHICH IS WHY A NUMBER OF PEOPLE HAVE SAID WE ARE GOING TO GO WITH IT. WHY ARE YOU GOING TO FIGHT THIS? WE HEARD THIS YESTERDAY. LOOK AT THESE CHARTS, THEY LOOK GOOD. HOW CAN YOU SHORT THIS CHART? AND PEOPLE ARE SAYING FUNDAMENTALS AT SOME POINT WILL MATTER BUT NOT FOR A WHILE. JONATHAN: I HAVE GREAT RESPECT FOR THE TECHNICALS AND THOSE PEOPLE WHO CAN SAY BY THE CHART. IT DOESN'T MATTER WHAT IS ON IT. I'VE ALWAYS STRUGGLED. LISA: I HAVE IT I HAVE BEEN WRONG. I WILL ADMIT IT. WHEN I START TO OVERTHINK ALL OF THE DETAILS, THE POTENTIAL RISKS, I HAVE BEEN GETTING IT WRONG IN TERMS OF MY EXPECTATION OF WHAT IS GOING TO HAPPEN. DO YOU IGNORE YOUR INSTINCTS AND YOUR INNER SKEPTIC AND GO WITH THE FLOAT? AT WHAT POINT DOES THAT LEAD TO THE NEXT TURN IN THE CYCLE? JONATHAN: WHERE THE GAINS OF THE LAST DECADE HAVE BEEN. IGNORE YOUR DOUBTS. SHUT HER EYES AND KEEP BUYING. THIS YEAR A GREAT EXAMPLE OF THAT. WE TALK ABOUT ENERGY LATER. CAPITAL RETURNS FROM BP, SHELL, CHEVRON. WE WILL HAVE THE LEASE FROM -- ELISE FROM JP MORGAN. GOOD MORNING. >> THE MARKET IS BROADENING, MOVING INTO MORE VALUE-ORIENTED PARTS OF THE MARKET. THE NAMES THAT HAVE NOT BEEN BID UP ARE STARTING TO PARTICIPATE MORE. IT IS ABOUT AVOIDING THE EUPHORIA AND LOOKING AT THE FUNDAMENTALS. I THINK YOU'LL START TO COME DOWN OVER TIME. THIS IS A MARKET THAT IS FEELING LIKE A RECOVERY TRADE. IT IS PROBABLY NOT THE RECOVERY TRADE. JONATHAN: A GLOBAL MARKET STRATEGIST AT INVESCO, CREDIT TO THE PEOPLE WHO GOT THIS RIGHT. ANOTHER IS JOHN OF OPPENHEIMER, LOOKING AT CLOSE TO 5000 ON THE S&P 500. CITY LOOKING AT THAT BIDEN MADE TO YEAR, NEXT YEAR THEY ARE LOOKING AT AND EARNINGS GROWTH RESELLER A. MORE BULLISH IT SEEMS. THE EQUITY MARKET ON THE S&P 500, WE ARE NEGATIVE. WE ARE DOWN BY .3%, THE TENURE AT 3.96, A BIT WEAKER ON THE EURO SIDE OF THINGS. A QUICK LOOK AT THE POUND. THE POUND AGAINST THE U.S. DOLLAR, 1.28 11. LATER THIS MORNING WE WILL TALK ABOUT HOME PRICES IN THE U.K.. WE WILL SAVE THAT. THE BANK OF ENGLAND COMING UP LATER THIS WEEK, AND SOCGEN SAYING IT IS VULNERABLE IF THE BANK OF ENGLAND DOES NOT HIKE BY 50. IT WAS SPECULATION THAT THE NEXT -- NEXT MOVE WOULD BE 50. THAT IS DIED DOWN AND WE ARE LOOKING AT 25. LISA: YOU ARE SEEING SOME TO THE UPSIDE, AND MAINLAND EUROPE TWO. THERE IS CONCERN ABOUT HOW MUCH WAGES ARE INCREASING IN LONDON AND THE U.K. MORE BROADLY. AT WHAT POINT IS THIS A CREDIBILITY ISSUE? AT WHAT POINT DO MARKET START PUSHING BACK AGAINST HOW MUCH CONVICTION THESE CENTRAL BANKERS HAVE ABOUT FIGHTING INFLATION VERSUS TRYING TO AVOID SOME HARD LANDING? JONATHAN: BASED ON COMMUNICATION FROM THE ECB AND FEDERAL RESERVE, I DON'T THINK THEY HAVE CONVICTION. NONE OF THEM SEEM TO KNOW WHAT IS COMING IN SEPTEMBER. THEY CAN'T COMMIT TO SEPTEMBER. A DOVE ON THE FEDERAL RESERVE CAN'T COMMIT. NONE CAN COMMIT TO ANYTHING. LISA: MARKETS HAVE STOPPED CARING. PEOPLE SAY I AM SICK OF THIS CONVERSATION. THE DATA IS IN CHARGE. WE CAN INTERPRET THE DATA, THEY'RE GOING TO FOLLOW US. THERE ARE NO LONGER TRYING TO TAMP DOWN THE SPIRITS COMING UP. IT IS NO LONGER A CONCERN. THE FED AS A RISKY CASE DOES NOT SEEM TO BE IN THESE NODES THAT ARE UPGRADING THE FORECAST FOR S&P TARGETS. JONATHAN: ONE OF THEM -- THE CENTRAL BANK HATERS, THE HATERS OF CENTRAL-BANK ACTIVISM OF THE LAST 10 YEARS WANT THEM TO STAY AT FIVE AND GO AWAY, DISAPPEAR AND LET THINGS FUNCTION. JOINING US NOW, G10 FX STRATEGIST AT TOMORROW. -- NUMERAL -- NIMURA. A LOT OF COMMUNICATION ABOUT A TON OF NOTHING. WHAT IS IT? >> WE THINK THEY WILL DO 25. THE PROBLEM IS THE FIRST 2.5 BASIS POINTS PRICE FOR THE EVENINGZ. THAT WILL MOVE STERLING, IT IS NOT A 50-50 CHANCE OF THEM GOING FOR A 50 BASIS POINT HIKE BUT YOU SAW IT OVERNIGHT. WHEN IT IS AROUND EIGHT BASIS POINTS OR SO PRICED IN FOR A POTENTIAL HIKE AND THEY DON'T DELIVER, IT CAN SEE A BIG MOVE LOWER IN THE CURRENCY. THURSDAY WE COULD HAVE BANK OF ENGLAND DOING 25. IT IS TOO EARLY TO DECLARE A VICTORY LAP. WE THINK THERE WILL BE ANOTHER FEW HIKES, FIVE BASIS POINTS -- 75 BASIS POINTS FROM WHERE WE ARE, THIS YEAR. STERLING IS TRADING WELL, IT HAS COME ONE OF THE HIGHEST CARRY CURRENCIES IN THE G10. BUT ALL THAT WE FOLLOW, WHERE INFLATION IS GOING, IS SAYING IT IS GOING TO SLOW DOWN NOTICEABLY. THE GOOD SECT -- SECTOR IS REALLY SLOWING DOWN. THE PROBLEM WITH THE U.K. AND SERVICES INFLATION, INDICATORS SUGGESTED IT SHOULD'VE GONE DOWN SORTING A FEW MONTHS AGO AND IT DID NOT. THE LAST CPI PRINT WAS POSSIBLY THE PEAK OF SERVICE INFLATION IN THE U.K.. THAT IS WHY THE BANK OF ENGLAND MIGHT TAKE NOTE AND SAY THERE ARE EARLY SIGNS THAT POLICY IS WORKING TO SLOW DOWN THAT SECTOR. IT IS JUST ONE DATA POINT. WE NEED MORE CPI REPORTS UNTIL THE VICTORY LAP CAN BE DECLARED. JONATHAN: WE HAVE HAD A SIMILAR CONVERSATION OF WHETHER THE FEDERAL RESERVE IS SUFFICIENTLY RESTRICTIVE. CAN YOU DRAW THE CONCLUSION THAT THE BANK OF ENGLAND IS SUFFICIENTLY RESTRICTIVE? JORDAN: I THINK THEY ARE. WE ARE SEEING EVIDENCE ON THE SUPPLY SIDE ALL SAYING IT IS RESTRICTIVE. DEMAND IS SLOWING DOWN, RETAIL SALES, THESE INDICATORS NOWHERE NEAR WHERE THEY WERE LAST YEAR. BUT A LOT OF THE ANNOUNCEMENTS THAT GO INTO IT, IT JUST PROVES WRONG IN TERMS OF THE HARD DATA. THE PMI'S HAVE BEEN WEAK ON THE MANUFACTURING SECTOR BUT THE INDUSTRIAL PRODUCTION FEARS HAVE NOT BEEN AS WEAK. SOFT VERSUS HARD. IF YOU ARE LOOKING AT HARD DATA, REALIZED INFLATION, YOU ARE THE BANK OF ENGLAND SAYING WE NEED TO DO MORE. BUT IF YOU ARE LOOKING AT THE FORWARD-LOOKING INDICATORS, THEY SUGGEST WE ARE CLOSE TO BEING SUFFICIENTLY REDUCTIVE. LISA: THAT IS IN ENGLAND, JOHN WAS MENTIONING U.K. HOUSING PRICES. WE WILL TALK ABOUT THIS LATER IN EUROPE, THE EUROPEAN UNION, THERE IS QUESTION AROUND WHETHER THEY ARE SUFFICIENTLY RESTRICTIVE AT A TIME WHEN CORE INFLATION HAS EXCEEDED HEADLINE CPI, THE MOST GOING BACK TO 2021. AT A TIME WHEN YOU'RE STARTED TO HEAR MORE OF A DOVISH CONVERSATION FROM SOME MEMBERS. CAN YOU STILL GET BULLISH AND LONG EURO VERSUS DOLLAR IF YOU DO HAVE THAT SHIFT EVEN AMONG THE HAWKS? JORDAN: WE'VE HAD A SHIFT ALREADY. THAT IS KIND OF WHY IT HAS REFORMED TO WHERE WE ARE TODAY, BELOW ONE TIME. WE FELT LIKE THE EURO-DOLLAR MIGHT BREAK TO THE UPSIDE AND DOWNSIDE BUT THE PAIN HAS BEEN THIS RANGE WE HAVE HAD FOR MOST OF 2023. WE NEED A TREND. THE FALSE BREAKOUTS ARE MUTTON DRESSED AS LAMB. IT IS STRONG ENOUGH. WE WILL SEE THE DOLLAR WEAKNESS OR THE ECB PERHAPS DOES NOT NEED TO CUT RATES AT ALL NEXT YEAR, OR IF THEY DO, TOWARD Q4, IF WE GET THAT STORY, THE EURO-DOLLAR CAN BE SUPPORTED FROM THE GREAT ANGLE. THE PROBLEM AT THE MOMENT, EQUITIES ARE RALLYING. IT IS A REASON TO BUY EURO. WE ARE LOOKING FOR 114 BY SEPTEMBER. WHILE PRICES ARE PICKING BACK UP AND THE RATES MARKET IN THE HEB SPACE HAVE SOFTENED IN TERMS OF WHAT HAS PRICED THAT ECB BY YEAR-END. WE THINK THAT IS POSSIBLY THE LAST RATE HIKE BY THE ECB. THE LITTLE MARKET PRICING LEFT WILL BE DISAPPOINTED. WE ARE PRICING LESS THAN ONE RATE HIKE NOW. BUT THAT IS A DRAG ON THE EURO. IF EQUITIES GO TO 5000, LIKE YOUR PREVIOUS GUESTS WERE TALKING ABOUT, ONLY WEIGHS THE DOLLAR WEAKNESS IN THAT ENVIRONMENT. LISA: HOW DISRUPTIVE COULD HIGHER OIL PRICES BE GIVEN THE DISRUPTIONS AND COSTS ON CARRIERS ECHO -- CARRIERS? JORDAN: THAT IS MY BIGGEST HEADACHE. BEFORE THIS OIL PRICE RALLY, ENERGY WAS DOWN 40% YEAR ON YEAR. IF I HAD STATED THOSE LEVELS BEFORE THIS RALLY, IT WOULD HAVE DRAG DOWN YOU HAVE CPI. NOW WE HAVE SEEN RETAIL GASOLINE PRICES IN THE U.S. PICKED UP BY 5% OR THE END OF JULY AND IT COULD GO FURTHER. IF WE BREAK $19 A BARREL IN OIL, CENTRAL BANKERS WILL BE TOO CAUTIOUS AND THEY WILL SAY WE DON'T NEED TO DISCUSS ABOUT CUTTING RATES. WE NEED TO STAY HIGHER FOR LONGER OR EVEN SURPRISE FOR AN OVER HIKE THIS YEAR. THE FED NEEDS TO BE OUTDONE BUT IF WE GET OIL TO $90, 100, THAT IS A MIXTURE OF SUPPLY CONCERNS PROBABLY DUE TO DEMAND PICKING BACK UP IN A SURPRISING FASHION. IF YOU'VE CENTRAL BANKS HAVE TO TURN HAWKISH IN THE SECOND HALF OF THIS YEAR, WHICH WE DON'T EXPECT. WE THINK MOST CENTRAL BANKS ARE CLOSE TO THE END OF THE CYCLE. BUT IF WE GET 90 TO 100, A LOT OF THINGS WILL HAVE TO CHANGE IN THE NARRATIVES. JONATHAN: IS IT TOO EARLY FOR PREDICTIONS FOR NEXT SEASON? JORDAN: I THINK WE ARE NOW A TOP 10 CLUB. THAT IS A MASSIVE IMPROVEMENT OF WHERE WE WERE. JONATHAN: JORDAN, SETTLED TAKE AT GERARD. THE LEGEND AT LIVERPOOL. TK NOT HERE BECAUSE HE IS DOING WITH THE TRANSFER -- TAKING IT POORLY. I HAVE TO SAY, NOT BEING COVERED EXTENSIVELY AND IT SHOULD BE. WE ARE GOING TO ANNMARIE ABOUT IT LATER. GOVERNOR RON DESANTIS OF FLORIDA , HIS DECLARATION OF ECONOMIC INDEPENDENCE MIGHT BE SOME ECHOES REMINISCENT OF WHAT THE FORMER PRESIDENT SAID IN 2016 ON THE CAMPAIGN TRAIL. LISA: TALKING ABOUT THE FEDERAL RESERVE AND THE POTENTIAL INDEPENDENCE OR LACK OF IT. JONATHAN: ANNMARIE HORDERN HAS RATE OF THE DOCUMENT AND LISTEN TO THE SPEECH YESTERDAY. WE'LL CATCH UP WITH HER IN NEXT HOUR. JONATHAN: JUST ABOUT TO SQUEEZE OUT A SECOND OF GAINS ON THE S&P 500 IN YESTERDAY'S SESSION. THIS MORNING SLIGHTLY NEGATIVE, WE ARE SOFTER BY .2% ON THE S&P. NASDAQ DOWN BY .3. MONTHLY GAIN IN JULY, 5TH STREET MONTH OF GAINS ON THE S&P. AT MONTHLY WINNING STREAK, THE LONGEST GOING BACK TO 2021. IT HAS BEEN NEAT AND TIDY. THE BOND MARKET, WE LOOK LIKE THIS. TWO-YEAR, 10 YEAR, 30 YEAR. THE TWO YEAR YIELD, THE MONTHLY MOVE DOWN ABOUT A BASIS POINT. ONE OF THE SMALLEST MONTHLY MOVES OF THE YEAR SO FAR. THE TWO-YEAR BARELY TO THE THING AND MAYBE THAT IS WHY THERE IS ENTHUSIASM RETURNING. YOU GET THAT STABILITY AROUND RATES AND THE FED STARTS TO BACK AWAY ON TOP OF THE DATA AND SOME RESILIENCE. GOOD NEWS. LISA: THE STRATEGIC AMBIGUITY WE HAVE HEARD IT, IT MEAN STOP WORRYING. PEOPLE ARE NOT WORRIED ABOUT THE TAIL RISK THAT HAS BEEN ONE OF THE MAIN ONES OF THE YEAR, THE FED WILL KILL THIS. NOW, I THINK WE'RE GOOD. JONATHAN: 12 MONTHS AGO THEY HATED A RALLY. 12 MONTHS LATER, BARELY ON A RADAR. LISA: THEY'RE NOT GOING TO DROP ON THIS DOWN. PEOPLE ARE TAKING COMFORT. THEY'RE NOT ON THE RADAR IS THEY USED TO BE, EVEN AS CREDIT CONDITIONS ARE TIGHTENING AT A STEADY PACE. NOT A BREAK IN THE TRANSMISSION MECHANISM. WHEN DOES THAT START TO MATTER? JONATHAN: 10 YEAR IN AND AROUND 4%. DREADFUL DATA ON THE EURO THE PAST WEEK OR SO. 109.7 THREE, THE EURO-DOLLAR NEGATIVE, 0.2 PERCENT. UNDER SURVEILLANCE, THE LATEST IN FRACTURING DATA DISAPPOINTING AGAIN. FOLLOWING TO A SIX-MONTH LOW. AND BELOW THE LEVEL THAT MARKS THE DIFFERENCE BETWEEN EXPANSION AND CONTRACTION, THIS FOLLOWS WHAT CAME OUT EARLIER THIS WEEK. ALSO SHOWING A DECLINE IN CHINA'S FACTORY ACTIVITY LAST MONTH. BUT ECONOMY AT THE MOMENT CANNOT GET A BREAK. LISA: IT IS LED BY MANUFACTURING AND IT WILL ONLY GET UP MORE DIFFICULT FOR CHINA, WHICH IS WHAT PEOPLE ARE TALKING ABOUT IF COMMODITY PRICES CONTINUE TO RISE AS THEY HAVE GIVEN THE AMOUNT THEY HAVE TO CONSUME. THIS BIG QUESTION REMAINS. WHAT IS THE SUPPORT GOING TO BE LIKE FROM POLICY OFFICIALS? THEIR PLEDGED SUPPORT AND WE HAVE NOT GOTTEN THAT MANY DETAILS. THERE BEEN RATE CUTS AND THERE HAS NOT BEEN A FULL-FLEDGED RECOVERY TRADE FOR THE HOUSING MARKET. AT WHAT POINT CAN THEY STIMULATE THE ECONOMY WHILE MAINTAINING THE GOAL OF REDUCING LEVERAGE? JONATHAN: ARE WE AT THE POINT WHERE WE ARE STARTING TO SEE SOME FEATURES OF A RECESSION START TO GRIP, COMING DOWN AND MAKING IT EASIER FOR PEOPLE TO BUY NEW HOMES? BUT DO THEY WANT TO BUY ANOTHER PROPERTY OF? THAT IS WHERE WE ARE TRYING TO WORK OUT WHERE WE ARE AT THAT MOMENT IN CHINA. THE PROPERTY MARKET, THE VALUE OF NEW-HOME SALES BY THE 100 BIGGEST REAL ESTATE BUILDERS IN CHINA DOWN ABOUT ONE THIRD, 33% OR SO FROM A YEAR EARLIER. YOU'VE SEEN WHAT IS HAPPENED WITH DEVELOPERS AT THE DEBT AND EQUITY MARKETS IN CHINA IN THE PAST COUPLE OF DAYS. WE ARE HOLDING ON TO THIS STATEMENT FROM THE BUREAU FROM LAST WEEK. IT IS WHAT THEY DID NOT SAY THAT PEOPLE ARE ENTERTAINED BY. IT DID NOT HAVE THE REFERENCE TO THE MANTRA THAT HOMES ARE FOR LIVING AND RATHER THAN SPECULATION. WHAT WILL THEY ENCOURAGE THAT IN THE MARKET? LISA: ESPECIALLY WHILE DOUBLING DOWN ON THE COLD TO MOVE TO A MIDDLE-CLASS, MORE CONSUMPTION BASED SOCIETY AND LESS WITH THE TRAPPINGS OF THE PREVIOUS GROWTH CYCLE, WHICH WAS ABOUT INFLATING HOUSING PRICES AND INFRASTRUCTURE. JONATHAN: I WANTED TO TALK ABOUT THIS STORY GOING TO PAYROLLS ON FRIDAY. MORE JOB LOSSES, CVS PREPARING TO CUT ABOUT 5000 ROLES TO HELP REDUCE COSTS. THE WALL STREET JOURNAL REPORTING THAT MOST OF THE ROLES WILL BE IN CORPORATE POSITIONS. THE COMPANY DOES NOT EXPECT CUSTOMER ORIENTED ROLES IN STORES, PHARMACIES AND CLINICS TO BE AFFECTED. LIKE YELLOW YESTERDAY, IS THIS MORE ABOUT CVS AND THEIR INDUSTRY THEN MAYBE WHAT IS HAPPENING IN THE BROADER ECONOMY? LISA: CVS HAS BEEN A SPECIFIC STORY. THE LARGE DRUGSTORE CHAINS HAVE FACED SPECIFIC HEADWINDS. TO ME, THE TREND IS MIDDLE-MARKET, MIDDLE OFFICE TYPES OF WORKERS. THE CORPORATE OFFICE IS WHERE PEOPLE ARE GETTING CUT, NOT NECESSARILY THE FRONT LINES OF CONSUMER FACING EMPLOYEES. THIS HAS BEEN A THEME WE HAVE SEEN. IT HAS BEEN A WHITE-COLLAR RECESSION IN THE LABOR MARKET, NOT NECESSARILY A BLOOMER -- BLUE-COLLAR ONE OR PEOPLE AND SERVICE SECTORS. AT WHAT POINT DOES THAT SHOW UP IN THE DATA IN A MORE MATERIAL WAY IF THE PEOPLE IN THE CORPORATE WORLD ARE GETTING PAID MORE? THESE ARE INDEPENDENT THE LABOR MARKET. -- INDEPENDENT -- UNDERPINNING THE LABOR MARKET. JONATHAN: HOME PRICES IN THE U.K. FALLING AT THE FASTEST RATE SINCE 2009. THE NATIONWIDE BUILDING SOCIETY SAID PRICES FELL 3.8%, LESS THAN THE 4% ECONOMISTS WERE LOOKING FOR. THIS OF COURSE COMES AS THE BANK OF ENGLAND WAS SET TO HIKE INTEREST RATES LATER THIS WEEK. IT IS STARTING TO BITE. OR QUICKLY IN THE U.K. BECAUSE THE MORTGAGE MARKET IS SO DIFFERENT. STARTING TO BITE MORE QUICKLY VERSUS THE UNITED STATES. LISA: WHICH RAISES A QUESTION, OR NOT SEEING THE EFFECTS IN THE U.S., WHETHER IT IS DELAYED OR POSTPONED INDEFINITELY BECAUSE OF THE 30 YEAR LOCKTON MORTGAGES. IS THE U.K. A TEST CASE FOR SOME OF THE OTHER REGIONS WHERE RATES HAVE GONE UP SIGNIFICANTLY BUT THERE ARE LAG EFFECTS, OR IS IT MORE SPECIFIC BECAUSE OF HOW SOME OF THESE MORTGAGES ARE STRUCTURED? I DON'T KNOW THE ANSWER BUT IT IS SOMETHING A LOT OF PEOPLE ARE SAYING, JUST WAIT AND YOU WILL SEE THE SLOWDOWN. YOU WILL SEE PRICES OF HOMES COME DOWN. PEOPLE ARE NOT SAYING THAT BECAUSE THERE HAVE BEEN ALL OF THESE OFFSETS. IS THE U.K. A LEADING INDICATOR THAT THAT STILL HOLDS TRUE? EVENTUALLY. IT JUST WILL TAKE A WHILE. JONATHAN: IT IS TAKING A WHILE. MORTGAGE RATES ABOVE 6%. IF YOU TAKE THE EFFECTIVE RATE ON THE AVERAGE LOAN OF OUTSTANDING MORTGAGES RIGHT NOW, IT IS CLOSE TO 3%, UP FROM ABOUT TWO WHEN THEY STARTED HIKING. IT IS TAKING A WILD BUT IT IS HAPPENING. IF THE BANK OF ENGLAND STAYS AT THESE LEVELS, EVERYONE GOING FURTHER, MORE MORTGAGES COME OFF AND MORE PEOPLE HAVE TO START TAKING MORE FINANCING, THAT AVERAGE RATE IS GOING TO CREEP HIGHER AND HIGHER. LISA: IT COULD NOT JUST BE THE SLOPE UPWARD. THERE COULD BE A MOMENT, CATALYST OR FORCED SALE, WHERE THE PRICES COME DOWN MORE QUICKLY AND YOU START TO SEE A SUSTAINED INCREASE IN THE AVERAGE MORTGAGE RATE. THESE ARE THINGS PEOPLE ARE LOOKING OUT TO UNDERSTAND THE TRANSMISSION MECHANISM OF RAISING RATES, WHICH HAS NOT HAD THE IMPACT PEOPLE ARE EXPECTING. JONATHAN: THAT CONVERSATION OUT WITH SARAH, WONDERFUL TO HEAR FROM YOU. WELCOME TO THE PROGRAM. IS IT STARTING TO BITE IN A MORE MATERIAL WAY IN THE UNITED KINGDOM, THE TRANSMISSION FROM THE CENTRAL BANK INTO THE BROADER ECONOMY? >> I THINK IT IS STARTING TO BITE. BUT WE STILL HAVE TO WAIT FOR THE FULL IMPACT TO BE FELT. ONLY ABOUT ONE THIRD OF HOUSEHOLDS HAVE MORTGAGES. YOU ARE REALLY TARGETING A CERTAIN PART OF THE CONSUMER MARKET WITH THESE HIGHER INTEREST RATES. BUSINESSES ARE FACING HIGHER RATES AS WELL. SO FAR, THE DATA, THE SPENDING DATA FROM THE U.K. HAVE NOT BEEN AFFECTED AS BADLY AS MIGHT HAVE BEEN EXPECTED GIVEN THE SUSTAINED RISE MUSEUM. CONSUMER CONFIDENCE HAS FALLEN. WE WERE JUST STARTING TO SEE THE SIGNS OF WEAKNESS IN THE LABOR MARKET. I THINK THAT IS GOING TO BE THE ELEMENT THAT HAS TO CHANGE BEFORE WE SEE HIGHER INTEREST RATES STARTING TO HAVE A MATERIAL IMPACT ON CONSUMER SPENDING IN THE U.K. ECONOMY. LISA: JORDAN ROCHESTER WAS JUST ON AND HE THINKS THE BANK OF ENGLAND IS SUFFICIENTLY RESTRICTIVE AND MAY NOT HAVE TO HIKE AGAIN EVEN THOUGH WE ARE SEEING INFLATION AT A SUSTAINED PACE, LED BY THE SERVICES SECTORS. WHAT IS YOUR BELIEF? DO YOU THINK THEY ARE SUFFICIENTLY RESTRICTIVE OR THAT THEY HAVE NO CHOICE BUT TO MAKE INFLATION THEIR PRIORITY TO RESTORE THEIR CREDIBILITY? SARAH: THIS QUESTION ABOUT CREDIBILITY IS KEY. OF COURSE THEY HAVE RAISED RATES DRAMATICALLY OVER THE LAST 18 MONTHS OR SO. THE IMPACT OF THAT WILL NOT FULLY BE FELT FOR ANOTHER 6, 12, 18 MONTHS. IN THE FACE OF INFLATION, SO FAR FROM THE INFLATION TARGET, IT IS DIFFICULT FOR POLICYMAKERS HOLLY HALL. WE'RE GETTING HINTS OF THAT IN THE U.S. AND FROM THE EUROPEAN CENTRAL BANK. BUT FOR THE BANK OF ENGLAND, INFLATION IS STILL HIGH. IT IS COMING DOWN BUT THE DIFFERENCE IS WE ARE SEEING CLEAR WAGE PRESSURE, POTENTIALLY A WAGE PRICE SPIRAL STARTING TO BECOME EMBEDDED. POLICYMAKERS CAN'T AFFORD TO LET THAT GET A HOLD OF THE ECONOMY. WE THINK THEY WILL RAISE RATES, WHEN HE FIVE BASIS POINTS THIS WEEK. WE WOULD EXPECT ANOTHER COUPLE OF RATE HIKES AFTER THAT IN SEPTEMBER AND NOVEMBER BEFORE THEY CAN REALLY FEEL THEY HAVE DONE WHAT IS NECESSARY. LISA: DO YOU THINK INTEREST RATE RISES ARE NOT THAT EFFECTIVE GIVEN HOW CONSUMERS HAVE ADAPTED TO THE RATES GOING UP AND LOCKING IN LOW RATES FOR A LONG TIME? SARAH: IT IS DIFFERENT THIS TIME. IF WE GO BACK TO THE 90'S WHEN WE LAST HAD A DRAMATIC IMPACT ON THE HOUSING MARKET FROM HIGHER INTEREST RATES, IT IS A DIFFERENT SITUATION WHERE MANY MORTGAGE HOLDERS HAVE FIXED RATES. IT JUST MEANS THE IMPACT IS DELAYED AND THAT MAKES IT EVEN TOUGHER FOR POLICYMAKERS. AS PEOPLE ROLL OFF OF THEIR FIXED RETURNS, THEY HAVE THE CHOICE OF FIXING AT A HIGHER RATE OR TAKING A PUNT GOING FROM A VARIABLE RATE ON THE HOPE THAT RATES WILL NOT STAY HIGH FOR TOO LONG. I THINK THE IMPACT IS AS SIGNIFICANT, IT IS JUST SPREAD OVER A LONGER TIME PERIOD. I THINK THAT IS GOING TO BECOME MORE OF A FEATURE OF THE ECONOMY, PARTICULARLY NEXT YEAR. THERE IS A HIGH RISK OF THE ECONOMY GOING INTO A RECESSION AROUND THE TURN OF THIS YEAR AND NEXT YEAR. WE'VE GOT A NEGATIVE GDP FOR THE YEAR AS A WHOLE. LISA: WHEN YOU LOOK AT THE RECESSION NEXT ROTATIONS IN THE U.S., PEOPLE ARE SAYING THEY ARE NOT GOING TO HAPPEN. IN EUROPE, PEOPLE ARE ALREADY SEEING IT. GERMANY. ARE YOU MORE DISCOURAGED BY THE EXPECTATION IN EUROPE BASED ON WHAT WE ARE SEEING FROM GERMANY BUT ALSO THE ECONOMICS AND SURPRISES THAT HAVE BEEN DISAPPOINTING VERSUS THE UPSIDE SURPRISES IN THE U.S.? SARAH: IN EUROPE, THE SURVEY DATA --JONATHAN: I THINK WE LOST A CONNECTION WITH SARAH HEWIN OF STANDARD CHARTERED. THE THEME THIS MORNING. THINGS ARE NOT BREAKING IN THE MARKET, THAT IS THE THEME SO FAR. HOPEFULLY WE WORK OUT WHAT IS GOING ON. WE'LL CATCH UP WITH GINA. WE WILL TALK ABOUT FIXED INCOME AROUND 7:30, HOPEFULLY WITHOUT YOUR CONNECTION BREAKING. EARNINGS ACROSS THE TERMINAL, CATERPILLAR ON THE TOP AND BOTTOM LINE, SECOND QUARTER ESTIMATE, 4.54. 17.3 2 BILLION, THE ESTIMATE 16.39. AN UPSIDE SURPRISE. THE LOOK FOR THE THIRD QUARTER. SALES AND REVENUES HAVE BEEN LOWER THAN THE SECOND QUARTER. THE ADJUSTED OPERATING MARGIN WILL BE CLOSE TO THE TOP END OF THE RANGE. THERE IS A BEAT BUT I WOULD NOT SAY IT IS A RAISE. DOWN ABOUT .3% -- .75%. BASICALLY YOU ARE GETTING A SLOWDOWN IN THE THIRD QUARTER. SECOND QUARTER, WE HAVE TO TALK ABOUT WHERE WE HAVE BEEN BEFORE WE TALK ABOUT WHERE WE HAVE GOING -- WE'RE GOING. LISA: WE HAVE NOT SEEN A RECESSION GET AS DEEP AS MANY THOUGHT IN SOME OF THE AGRICULTURAL AREAS AND AREAS THAT THE CATERPILLAR DOES SPECIALIZE IN. IF YOU THINK ABOUT CONSTRUCTION AND HOW MUCH HOMEBUILDERS HAVE BEEN ACTIVE, YOU THINK ABOUT A LOT OF THE FARMING PRODUCTS AND ASPECTS THAT CATERPILLAR CATERS TO. GOING FORWARD, THIS IS IMPORTANT. AT WHAT POINT DO YOU SEE THE STEAM ROLL OVER JUST AS OTHER AREAS OF WEAKNESS COME INTO PLAY? IT IS WHY YOU ARE NOT SEEING A BIGGER GAIN BY SOME OF THOSE SHARES. JONATHAN: ONE POCKET THAT HAS DONE WELL HAS BEEN THE AIRLINES. DISCRETIONARY SPENDING HAS BEEN ROBUST, RESILIENT. ANYONE LIVING AT AN AIRPORT, STUCK IN ONE FOR A LONG TIME, THIS IS NOT A COMPLAINT. I THINK YOU'VE GOT A DECENT IDEA THAT THINGS ARE GOOD RIGHT NOW FOR THE AIRLINES IN AMERICA. YOU MINE FOR AN AIRLINE IS BASICALLY A MACE. WHAT YOU GET FROM JETBLUE IS IN LINE, SECOND QUARTER EPS, $.45, THE ESTIMATE 44. REVENUE FOR THE SECOND QUARTER, 2.6 ONE BILLION, THEY SEEM TO HAVE DONE A GOOD JOB. DEMAND HAS BEEN ROBUST AND HEALTHY, USING THE RIGHT WORDS BUT STOCKS ARE GETTING HAMMERED. LISA: I HAVE BEEN LOOKING FOR WHY AND I DON'T UNDERSTAND. WE REMAIN ON TRACK TO DELIVER A PROFITABLE YEAR. RECORD REVENUE PERFORMANCE, WHERE'S THE NEGATIVE? JONATHAN: THEY WANT A RAISE. LET'S SEE HOW THE STOCK EVOLVES THROUGH THE MORNING. DOWN ABOUT 7%. FROM NEW YORK CITY, GOOD MORNING. >> WE ARE SEEING STRONG GASOLINE AND JET FUEL DEMAND. PEOPLE ARE TRAVELING, SPENDING ON SERVICES AND ON THE DIESEL END OF THE SPECTRUM, WE SEE THAT AS BEING WEAKER THAN PEOPLE EXPECTED. CHINA IS STILL GROWING, 3% IN THE FIRST HALF OF THIS YEAR. WELL SHORT OF WHAT PEOPLE WOULD EXPECT FROM CHINA, FIVE TO 6%. JONATHAN: THE UNKNOWN FOR THE BACK HALF OF THIS YEAR, WHETHER THEY CAN DELIVER MORE OF A LIFT TO THE ECONOMY AND THE SECOND HALF OF 2023. MOVING TO THE DOWNSIDE IN A WAY THAT WAS NOT ANTICIPATED SIX, SEVEN MONTHS AGO WHEN WE STARTED TALKING ABOUT THE REOPENING. THAT WAS THE BP CEO. FUTURES LOOK LIKE THIS, NEGATIVE ON THE S&P, DOWN BY 0.2%. YIELDS HIGHER BICYCLE BASIS POINT. THE COMMODITY MARKET THEM A CRUDE JUST A LIFT OVER THE LAST MONTH. A STELLAR MONTH OF GAINS FOR CRUDE. WTI THIS MORNING, A ONE DOLLARS, 0.6%. LISA: THE BIGGEST MONTHLY GAIN GOING BACK TO JANUARY 2022. IF OIL PRICES REMAIN STABLE, THAT WOULD BE FINE BUT WE HEARD JORDAN ROCHESTER SAID THEY COULD TO GO -- THEY COULD GO 90 TO 100. THEY COULD RETHINK IT AGAIN. JONATHAN: DID THEY WANT TO TRADE THE CRUDE PRICES? LISA: YOU HAVE SAID THAT. ARE THEY BASICALLY RAISING RATES TO FIGHT OIL PRICES? JONATHAN: YOU AND I HAVE TALKED ABOUT THIS. THEY SHOULD NOT HAVE BEEN BUYING BONDS, THEY SHOULD'VE BOUGHT BARRELS OF OIL. THEY REALLY WANTED TO GET INFLATION UP AND THAT IS WHAT THEY CARED ABOUT, PRICES FOR THE SAKE OF HIGHER PRICES THAN THEY COULD'VE DONE THAT. LISA: THERE IS A QUESTION ABOUT HOW MUCH LOWER OIL PRICES HAS UNDERPINNED THE DECLINE, THEY DISINFLATION WE HAVE BEEN SEEING IN CERTAIN AREAS OF THE MARKET. BECAUSE OF THE BLEED THROUGH IN PRICING ACROSS THE BOARD OF HIGHER OIL PRICES OR LOWER PRICES. AIRLINES, SHIPPING THINGS. IF THAT STARTS TO TAKE UP, HOW MUCH IS THAT INFLUENCED THE INFLATION PICTURE IN A BROADER WAY THAN SIMPLY THE ENERGY PRICE INPUT? JONATHAN: CONSUMER EXPECTATIONS, ONE PRICE SHAPES THINGS ALMOST EXQUISITE WAY. MY FAVORITE INDICATOR FROM THE UNIVERSITY OF MICHIGAN WITH OUR INFLATION EXPECTATIONS, STRONGLY IT THAT CRUDE AND GASOLINE PRICES SHAPE THAT ALMOST EXCLUSIVELY. LISA: IF YOU CHART THE PRICE OF GASOLINE AND THE EXPECTATIONS FOR INFLATION FOR THE UNIVERSITY OF MICHIGAN SURVEY, --JONATHAN: I'M HOPING THEY CALL ME. OUR COLLEAGUES YESTERDAY, PEOPLE FAMILIAR TO THE MATTER SAY EXXON IS IN TALKS WITH TESLA, FORD AND VW AND OTHER AUTOMAKERS ABOUT SUPPLYING THEM WITH LITHIUM. JOINING US IS KEVIN, SENIOR AUTOMOBILES ANALYST AT BLOOMBERG INTELLIGENCE. AN OIL PRODUCER GOING INTO THE LITHIUM BUSINESS AND SUPPLYING THESE, WHAT DOES THIS LOOK LIKE GOING FORWARD? KEVIN: THIS IS WHAT WE HAVE BEEN FOR FIVE PLUS YEARS, YOU SAY ELECTRIC VEHICLE THINGS AND HOPE IT GETS YOU THE VALUATION. WE ARE STILL A LONG WAY FROM MINING LITHIUM, GETTING INTO THE MANUFACTURERS, BILLING THAT SUPPLY CHAIN. THERE IS A GROUP OF SUPPLIERS IN AUTO PARTS THAT ARE -- ANYTHING FROM ALL IN ON ELECTRIFICATION TO TRYING TO FIGURE OUT HOW THEY ARE RELEVANT IN THE FUTURE, TO TECHNOLOGY AGNOSTIC, MEANING IT DOES NOT MATTER WITH THE DRIVE TRAIN IS, TIRES, GLASS, SEATS. YOU HAVE THIS BUCKET OF SUPPLIERS THAT ARE TRYING TO FIGURE OUT HOW TO BE RELEVANT IN THE NEXT ITERATION OF THE AUTO INDUSTRY. JONATHAN: HOW DISCONNECTED ARE THINGS BETWEEN THE GOALS OF GOVERNMENT ACROSS EUROPE AND THE UNITED STATES AND THE INFRASTRUCTURE THAT CURRENTLY EXISTS? KEVIN: I THINK THERE IS A LOT OF ISSUES IN TERMS OF -- A LOT OF TIMES WE JUST HEAR ABOUT TAILPIPE VERSUS NO TAILPIPE. I TRIED TO GO BACK TO SHOVEL IN THE GROUND TO DISPOSAL OF THE BATTERY AT THE END AND REALLY THINK ABOUT THE ENTIRE VALUE CHAIN THE WHOLE WAY. THE INFRASTRUCTURE IS CERTAINLY AN ISSUE. BUT I THINK THERE IS MORE IN TERMS OF BACK FROM WHERE THAT MATERIALS ARE COMING FROM, WHERE THEIR PROCESS, WHAT THEY COST. THE VOLUME RELATIVE TO THE INTERNAL COMBUSTION TECHNOLOGY THAT EXISTS. THE ISSUE IS GETTING TO PROFIT PARITY BETWEEN THE TECHNOLOGIES, NOT NECESSARILY PRICE PARITY BECAUSE IF YOU HAVE ONE TECHNOLOGY THAT IS MORE PROFITABLE THAN THE OTHER, RIGHT NOW INTERNAL COMBUSTION, AUTOMAKERS WILL FOCUS ON THAT AND DO MORE AND DRIVE PROFITABILITY WITHOUT TECHNOLOGY, NOT THE UNPROFITABLE ONE. THAT IS WHY THE TRANSITION IS MESSY. ESPECIALLY IN THE U.S. WHERE WE HAVE A LITTLE LESS SUBSIDIES TO THE MANUFACTURER OR PENALTIES TO THE MANUFACTURER DRIVING CONSUMER DEMAND. LISA: DO CONSUMERS WANT ELECTRIC VEHICLES IS PEOPLE THOUGHT? I ASK THIS AFTER FORD MOVED AWAY FROM SOME OF THEIR HIGH PROJECTIONS OF HOW MANY ELECTRIC VEHICLES THEY WOULD HAVE ON THE ROAD. KEVIN: IT DOES NOT REALLY MATTER WHAT THE CONSUMER WANTS OR DOESN'T WANT. IF IT IS NOT PROBABLE -- PROFITABLE TO AN AUTOMAKER THEY ARE NOT QUITE TO BUILD IT. AND UNLESS THERE IS A PENALTY OR SUBSIDY YOU ARE GOING TO MOVE AT THE PACE OF PROFITABILITY. SO I THINK THERE IS A LITTLE TOO MUCH PUT TO WHAT THE CONSUMER WANTS VERSUS WHAT THE MANUFACTURER WANTS. DEALERS CAN'T SELL WHAT THEY DON'T GET FROM THE MANUFACTURERS. CONSUMERS CAN'T BUY WITH THE DO DON'T HAVE. AND LEFT TO ITS OWN DEVICES, PROFITABILITY, YOU ARE GOING TO GET SLOW MOVEMENT. SLOWER IN THE U.S. THAN IN EUROPE WHETHER PENALTIES ARE MORE SIGNIFICANT, OR IN CHINA WHETHER SUBSIDIES ARE MORE SIGNIFICANT. THAT IS THE WAY THIS MARKET HAS PLAYED OUT OVER THE PAST COUPLE OF YEARS. LISA: IS THE PHYSICALITY OF ELECTRIC VEHICLES THAT MUCH MORE EFFICIENT THAN COMBUSTIBLE ENGINES EVEN THE FACT THAT IT IS SO MUCH MORE COMPLICATED TO MIND THE LITHIUM AND GET THINGS TO THE FLOOR? IT IS EXPENSIVE, COMPLICATED AND ENTAILS A LOT OF MATERIALS. KEVIN: THAT IS A QUESTION WE NEED TO BE ASKING MORE. I DON'T HAVE AN ANSWER. BUT ANYTIME YOU BRING UP THE TWO SIDES OF THAT ARGUMENT, ONE SIDE SCIENCE IS RIGHT, THE OTHER SITES WRONG -- SITE IS WRONG AND BOTH SIDES ARE SAYING THE SAME THING, OUR SCIENCE PROVES THAT AND YOURS IS WRONG. I AGREE, I WANT TO GO FROM SHOVEL TO DISPOSAL AND UNDERSTAND HOW MUCH BETTER THIS REALLY IS. IF YOU COME TO THAT CONCLUSION, THAT THE NET BENEFIT IS THERE BUT NOT AS SIGNIFICANT AS PRICED INTO THE MARKET, IT BECOMES ABOUT CAPITALISM, NOT CLIMATE. JONATHAN: THE DEMAND, WHAT DOES IT LOOK LIKE AT THE MOMENT? WE HAVE SEEN PRICE CUTS FROM TESLA, FORD. WHAT IS THE DEMAND FOR EV'S AT THE MOMENT? KEVIN: THIS IS THE CYCLICALITY OF THE MARKET. WHEN YOU ARE SATURATED IN TERMS OF MARKET SHARE, THIS IS WHAT HAPPENS. YOU BUILD OR HAVE TOO MUCH CAPACITY, BUILD TOO MANY THINGS, HAVE TO FIGURE OUT HOW TO SELL THEM. AND THE DIFFERENCE WITH TESLA, THEY DON'T HAVE A FRANCHISE DEAL OR NETWORK. SO THEY ARE NOT CONNECTING -- COLLECTING THAT REVENUE. THEY'RE BUILDING THE COST OF GOODS ON THE VEHICLE BUT THEY'RE NOT ELECTING OR POKING THAT REVENUE UNTIL IT IS DELIVERED TO THE CONSUMER. WHERE A FRANCHISE DEALER BASE, IT IS A WORKING CAPITAL MANAGEMENT. BUT THOSE MANY FACTORS ARE BOOKING THAT REVENUE ON THE SALE TO THE DEALERSHIP. WHEN YOU LOOK AT RIVIAN OR LUCID WHO IS DELIVERING ABOUT 60% OF THEIR OUTPUT, YOU HAVE THIS INFLATED COST OF GOODS AND LOW REVENUE PER UNIT. IT MAKES YOU UNPROFITABLE AT THE GROSS LINE. THAT IS WHERE YOU GET PRICE CUTS. YOU HAVE TO KEEP THE PRODUCTION MOVING AND YOU HAVE TO GET PRODUCT IN THE HANDS OF CONSUMERS. WHEN THAT BACKS UP BECAUSE OF MACROENVIRONMENT, THIS IS WHAT YOU GET. YOU GET THE AUTO INDUSTRY LOOKING LIKE IT HAS LOOKED FOR 100 YEARS. JONATHAN: KEVIN OF BLOOMBERG INTELLIGENCE, ON EV'S IN AUTO MANUFACTURERS IN THE U.S.. IN THE NEXT HOUR ON BLOOMBERG TV AND RADIO, WE WILL CATCH UP WITH JP MORGAN GLOBAL WEALTH MANAGEMENT, WE'LL TALK ABOUT THE EQUITY MARKET AND WE WILL TALK WITH ANNMARIE HORDERN AND WASHINGTON, D.C.. I DECLARATION OF ECONOMIC INDEPENDENCE FROM THE GOVERNOR OF FLORIDA, RON DESANTIS, WE WIN, THEY LOSE. WE NEED TO TALK ABOUT WHO THEY ARE. A DECLARATION OF ECONOMIC INDEPENDENCE AND AN ECHO FROM THE FORMER PRESIDENT IN 2016. POLITICS ON THE MARKET, UPGRADES ON THE S&P 500, LOOKING FOR 5000 ON THE S&P BY THE MIDDLE OF NEXT YEAR, RECORD HIGH WATCH AND THEN OVER AT OPPENHEIMER, SAYING WE COULD HIT THE RECORD HIGH BEFORE THE YEAR IS OUT. LISA: BASICALLY IT'S 1% GAIN FOR 2023, SUPPOSED TO BE A TERRIBLE YEAR. JONATHAN: PLENTY OF EARNINGS AS WELL. SECOND QUARTER FOR UBER DROPPED, THE ESTIMATE, 9.34. MORE IN A MOMENT. YOUR EQUITY MARKET NEGATIVE TRYING TO RECOVER, ZERO POINT 16% ON THE S&P 500. >> IGNORING PARTS OF THE DATA THAT MAY BE POINTING TO A MORE SIGNIFICANT DECELERATION. >> THE MARKET IS BROADENING, MOVING INTO OTHER, MORE VALUE-ORIENTED PARTS OF THE MARKET. >> BIG TECH HAS DONE A LOT OF IMPRESSIVE LIFTING. >> I THINK THE MARKET IS IT OVERVALUED. >> OUR PROSPECTS ARE GOOD LONG RUN. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: GOOD MORNING, FOR OUR AUDIENCE WORLDWIDE, THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO. I'M JONATHAN FERRO. YOUR EQUITY MARKET ON THE S&P 500 TRYING TO RECOVER, SLIGHTLY NEGATIVE BY 0.15% ON EQUITY FUTURES, INTO THE OPENING BELL, AND TO CHEW ON, UPGRADES ON THE EQUITY MARKET FROM CITY AND OPPENHEIMER. ECONOMIC DATA OUT OF CHINA. DISAPPOINTING. DOWNSIDE SURPRISED ACROSS THE BOARD IN CHINA, MANUFACTURING AND CONTRACTION TERRITORY. EVEN IF THERE ARE SUBTLE BEATS, IT IS MOVING IN THE WRONG DIRECTION. LISA: COMING INTO THIS YEAR, THE BIGGEST POTENTIAL POSITIVE UPSIDE RISK TO MARKETS WAS A REOPENING OF THE CHINESE ECONOMY, RE-ACCELERATION FUELING GROWTH ALL AROUND. THE ECONOMY IN THE U.S. HAS BEEN BETTER THAN EXPECTED. IN EUROPE, BETTER THAN EXPECTED. CHINA CAME BACK ONLINE, REOPENED AND ARE THEY HEADING TOWARD DEFLATION? ARE THEY LOOKING AT IT LOST DECADE AKIN TO WHAT HAPPENED IN JAPAN TO STRUCTURAL SHIFT? A MASSIVE NARRATIVE CHANGE. JONATHAN: U.S. DOMINANCE IN THE EQUITY MARKET AND THE ECONOMY. GOING TO PAYROLLS FRIDAY, THINK ABOUT THIS. 200 K IS THE MEDIAN ESTIMATE IN OUR SURVEY FOR THE HEADLINE NUMBER. 3.5 PERCENT UNEMPLOYMENT, IN AND AROUND US ONCE AGAIN. THE ESTIMATE IN OUR SURVEY. THINK ABOUT 12 MONTHS AGO. PREDICTIONS FOR WHERE THE LABOR MARKET WILL BECOME A 4, 5. COULD THE ECONOMY STAND UP TO INTEREST RATES AT 5.5%? THE FEDERAL RESERVE FLIRTING WITH A BEAT ONCE OR TWICE AGAIN. LISA: PEOPLE ARE LOOKING AT HELP-WANTED SIGNS. I SEE THEM PARTICULARLY IN SERVICE SECTORS, EVEN COMPANIES TRYING TO CUT BACK ARE NOT CUTTING EMPLOYEES BECAUSE THEY ARE SO SCARRED BY WHAT HAPPENED DURING THE PANDEMIC. THEY DON'T WANT A DEARTH OF EMPLOYEES DURING THE RECOVERY. AT WHAT POINT CAN YOU SAY YES, INFLATION WILL KEEP COMING DOWN EVEN WITHOUT THE PAIN LAST YEAR AT JACKSON HOLE? WITHOUT THAT PAIN IN THE LABOR MARKET IN ANY INCHOATE? JONATHAN: IS THAT WHERE TOM IS TODAY, WHERE DID YOU SEE THEY HELP-WANTED SIGNS? LISA: GOING ON VACATION. EVERYBODY IS ON VACATION. THAT IS WHAT YOU DO. JONATHAN: IT GETS HOT AND YOU GO ON VACATION. LISA: MAYBE. IT'S MOVE ON. JONATHAN: MAYBE TK IS ON VACATION. HE GIVES ME HOW WHEN I'M GONE. HE NAMES THE PLACE. LISA: I GET PEOPLE SAYING WHERE YOU ON A CRUISE IN NORWICH ECHO PEOPLE ARE LIKE HOW IS ALWAYS? HOW WAS THE CRUISE? I WAS NOT ON A CRUISE. I WAS IN ALASKA. IT WAS LIKE A SIX HOUR -- IT WAS NOT A CRUISE. IT WAS A BOAT TOUR. JONATHAN: WHAT WAS THE AVERAGE AGE OF PEOPLE ON THE BOAT? LISA: ALL OF THE PLACE. JONATHAN: ON A CRUISE IT IS MUCH HIGHER. LISA: IT WAS EVERYTHING. JONATHAN: EQUITIES ON THE S&P 500, 0.15%. THE AVERAGE AGE IS LIKE 70 PLUS, IT IS A CRUISE. YOU ARE ON A BOAT AND THAT IS THE AVERAGE AGE, YOU ARE ON A CRUISE. IN THE BOND MARKET, YIELDS HIGHER BY A CIVIL BASIS POINT. LISA: 10:00 A.M. -- JOB OPENINGS EXPECTED TO COME DOWN, TOUCH, HOW MUCH IS THIS GOING TO INJURED -- INFLUENCE VIEWS? DO WE SEE THE ONGOING MANUFACTURING PRODUCTION -- RECESSION IN THE U.S., AKIN TO EUROPE AND CHINA CHECK OUT -- CHINA? 10 A CLOCK A.M., FED SPEAK INCLUDING AUSTAN GOOLSBEE. HE WAS TALKING TO YAHOO! FINANCE AND HE DID NOT COMMIT TO RAISING RATES IN SEPTEMBER. BUT IT SEEMS LIKE HE MIGHT ENTERTAIN IT EVEN THOUGH HE IS DOVISH. I THOUGHT IT WAS INTERESTING, HE SOUNDED LIKE HE WAS CALLING VICTORY, A SOFT LANDING IS THIS GOLDEN PATH THAT WOULD BE A TRIUMPH. IT IS A POSSIBILITY. DO WE START TO HEAR THIS TONE FROM AN INCREASING NUMBER OF FED OFFICIALS? JONATHAN: IF ONE OF THE BIGGEST DOVES ON THE COMMITTEE IS NOT WANT TO -- DOES NOT KNOW WHAT TO DO IN SEPTEMBER AND ONE OF THE BIGGEST HAWKS DOESN'T KNOW WHAT TO DO, IT SPEAKS TO THE MOMENT WE WERE AT. ZERO GUIDANCE FROM ANYONE. LISA: THAT IS THE ONLY TAKEAWAY. NOT GOING TO NECESSARILY SAY HE IS NOT DECIDED. HE IS PROBABLY LEANING AGAINST RAISING RATES IN SEPTEMBER. BUT HE'S NOT GOING TO GIVE ANY GUIDANCE BECAUSE HE DOES NOT HAVE TO. THEY'RE NOT TRYING TO DROP ON THE MARKET. THEIR EARNINGS CONTINUE WITH CONSUMER HEAVY BRANDS, UBER WHICH JUST,. MARRIOTT, JETBLUE ALL BEFORE THE MARKET, AND NORWEGIAN CRUISE LINES, WE WILL ASK THEM WHAT THEY AVERAGE AGE IS. I'M SURE IT IS NOT 70. ESPECIALLY DISNEY. MARRIOTT DID DROP, GIVEN THAT EVERYONE IS ON VACATION. 6.02 BILLION DOLLAR ESTIMATE. WE WERE COMING IN JUST SHY OF EXPECTATIONS, DRAGGED DOWN BY THE FREIGHT SERVICE. REVENUE DECLINING BECAUSE PEOPLE ARE NOT SHIPPING AS MUCH STUFF. THEY'RE NOT ORDERING AS MUCH OR AS MUCH. I'M LOOKING FOR STUFF LIKE THIS, COSTS ARE GOING UP TO GET DRIVERS BACK AND THAT IS MAYBE WHAT YOUR COSTS ARE GOING UP. JONATHAN: THE AVERAGE AGE OF EIGHT CRUISE PASSENGERS 47 YEARS OLD. I DID NOT KNOW THAT. JOINING US NOW, INVESTMENT STRATEGIST AT JP MORGAN GLOBAL WEALTH. DON'T LISTEN TO ME ABOUT CRUISES, THE STOCKS ARE DOING GREAT. GOOD TO SEE YOU. LET'S TALK ABOUT THE VIBE SHIFT. WERE NOT TALKING AT RECESSION, WHAT ARE WE TALKING ABOUT? >> WE CONCEDE THAT WE CAME INTO THIS YEAR PROBABLY TOO PESSIMISTIC ON THE MACRO FRONT. WHAT WE ARE SEEING IS THIS RESURGENCE OR PERSEVERANCE OF RESILIENCE IN THE U.S. ECONOMIC BACKDROP. THAT HAS BEEN DRIVEN BY A HANDFUL OF DIFFERENT DYNAMICS BUT IT SEEMS LIKE PEOPLE ARE DOWN MY FACE AND THE MUSIC AND TRYING TO FIGURE OUT WHERE WE GO. JONATHAN: EQUITY MARKETS DO THAT. PEOPLE JUMP ON BOARD AND NOW THEY ARE TRYING TO FIGURE OUT WHAT HAS LAGGED. BANKS HAD A GREAT MONTH IN JULY. DO YOU SEE REASON FOR THAT TO CONTINUE? ELYSE: WE DO. EVERYONE KNOWS IT HAS BEEN PREDOMINANTLY DRIVEN BY THE MEGA CAP COMPLEX THAT HAS BEEN FLYING ON THE WINGS OF ARTIFICIAL INTELLIGENCE. WE THINK IT CAN BROADEN OUT AND THAT IS WHY WE HAVE BEEN ENCOURAGING INVESTORS TO FOCUS ON THE OTHER 493 NAMES IN THE S&P 500, TAKEN TOGETHER, THEY ARE STILL TRADING AT EIGHT VALUATION BELOW THE 10 YEAR AVERAGE. LISA: WHAT MONEY WILL BE USED BY THESE? DO YOU RECOMMEND PEOPLE TAKE MONEY OUT OF MONEY MARKETS AND PUT THEM INTO THE OTHER SECTORS OF THE EQUITY MARKETS OR ARE USING YOU HAVE TO HAVE A BALANCE? HOW DOES THIS COME TO FOR IF YOU DON'T WANT PEOPLE TO NECESSARILY CASH OUT OF BIG TECH? ELYSE: CASH IS A GREAT PLACE TO START. YOU KNOW A LOT OF OUR CLIENTS ARE STILL HEAVILY OVERWEIGHT EXCESS CASH BASED ON CLIENT DATA THAT WE LOOKED TO FOR OUR MID LOOK -- MIDYEAR OUTLOOK EXERCISE. EVEN IN LIGHT IN THIS SHIFT THAT THE FED COULD POSSIBLY PULL OFF A SOFT LANDING, WE THINK THE REINVESTMENT RISK IS HERE. WE THINK THE FED COULD BE IN A PLACE TO GRADUALLY CUT INTEREST RATES AND WE WOULD PREFER THAT INVESTORS TAKE THAT EXCESS CASH, EXTENDED DURATION OR START REBUILDING THE EQUITY PORTFOLIO THEY WANT TO CARRY THROUGH THE NEXT CYCLE. LISA: DOES IT BOTHER YOU THAT YOU ARE LOOKING AT EARNINGS YIELDS ON THE S&P 500, THE LOWEST RELATIVE TO WHAT YOU ARE GETTING ON THE 10 YEAR TREASURY OWING BACK TO 2001? DOES THAT RAISE ALARM BELLS THAT VALUATIONS ARE OUT OF WHACK AND THAT BONDS LOOK BETTER THAN PEOPLE ARE MAKING ABOUT? ELYSE: WE CONTINUE TO LOVE CORE BONDS. IT DOES BOTHER ME A LITTLE. WE TAKE INTO ACCOUNT WHEN WE THINK THROUGH PORTFOLIO CONSTRUCTION. INVESTORS NEED TO BE MINDFUL OF GOALS BASED OR OUTCOME ORIENTED APPROACH. IF THAT MEANS CHOOSING COURT FIXED INCOME WITH YIELDS AT THESE ELEVATED LEVELS IS ENOUGH TO GET YOU TO YOUR LONG-TERM GOALS, BY ALL MEANS. BUT 10 YEAR PLUS TIME HORIZON, WE STILL SEE THE POTENTIAL FOR STOCKS TO ACT AS THAT ENGINE OF CAPITAL APPRECIATION AND PORTFOLIOS SO WE DON'T WANT TO SLEEP ON THE OPPORTUNITY. JONATHAN: WE STARTED BY TALKING ABOUT RESILIENCE. YOU WERE TALKING ABOUT RATE CUTS. ONE OF THE FACTORS BEHIND RESILIENCE OF THE YEAR THAT YOU THINK WILL EFFICIENT ENOUGH THAT THE FED IS CUTTING RATES IN EARLY 2024? NUI DID FIVE FACTORS AND WALK US THROUGH WHERE YOU SEE SIGNS OF WEAKNESS THAT WILL CONTINUE COMING THROUGH THAT WILL LEAD THE FED TO CUT RATES? ELYSE: IN TERMS OF WHAT HAS BEEN DRIVING TO RESILIENCE, START WITH THE CONSUMER. EXCESS SAVINGS WERE NOT DRAWN DOWN AS QUICKLY AS EVERYONE THOUGHT THEY MIGHT'VE BEEN. BUT WE DO SEE THAT TAPERING TO AN END OVER THE COURSE OF THIS YEAR. YOUR TO CONSIDER THAT BUSINESSES AND CONSUMERS HAVE BEEN RELATIVELY INSULATED FROM INTEREST RATE PRESSURES GIVEN THAT THEY LOCKED-IN LOWER LEVELS OF FINANCING AND YOU GOT THESE TAILWINDS COMING FROM THE FISCAL SPENDING FRONT RELATED TO THE MORE THAN $2 TRILLION WORTH OF INFRASTRUCTURE INVESTMENT YOUR MARCH TO BE DOLED OUT OVER THE NEXT 10 YEARS. THOSE ARE THE REASONS FOR RESILIENCE. YOU ADD WHAT WE HAVE BEEN SEEING IN THE LABOR MARKET, FAVORABLE TRENDS WHEN IT COMES TO LABOR FORCE PER DISSIPATION, BUT TO THE EXTENT THAT GROWTH CONTINUES TO SLOW, AND WE ARE STILL CALLING FOR FLAT TO SLIGHTLY NEGATIVE GROWTH IN THE FIRST AND SECOND QUARTERS OF NEXT YEAR, MAYBE YOU SEE A MODEST RISE IN THE UNAPPOINTED RATE. THAT I THINK CONTINUES TO URGE INVESTORS TO HEED CAUTION AND NOT GET TO OVER THEIR SKIS WHEN IT COMES TO ADDING RISK. LISA: HOW MUCH DOES THAT HINGE ON OIL PRICES STAYING WHERE THEY ARE AND INFLATION COMING DOWN? ELYSE: OIL PRICES ARE DEFINITELY ONE OF THE VARIABLES OR ACCEPTORS HERE. WE WILL BE CURIOUS TO SEE IF PRICES DO CONTINUE TO CONSOLIDATE HIGHER. WE ARE DOING THE WORK ON OUR OIL PRICE OUTLOOK. BUT THAT COULD CHANGE THE OUTLOOK FOR THE FED. WE KNOW JUST LOOKING AT THE PAST YEAR OF DATA, A YEAR AGO WHEN OIL PRICES HAD EXPLOITED -- EXPONENT HIGHER, CONSUMER CONFIDENCE WAS HITTING ALL-TIME LOWS. IF WE SEE THAT REAR ITS UGLY HEAD, IT COULD WEIGH ON THE OUTLOOK AND BRING A RESURGENCE OF BEARISH SENTIMENT. JONATHAN: BRENT CRUDE 85, THIS WAS GREAT. THINGS ARE COMING. ELYSE AUSENBAUGH OF JP MORGAN. THIS ROOM CAPITAL ECONOMICS YESTERDAY ON CREDIT CONDITIONS FOLLOWING THE OPINION SURVEY AMERICA, A SURVEY OF CREDIT CONDITIONS TO THE BROADER ECONOMY. SPEIGHT OPTIMISM SURROUNDING THE REAL ECONOMY PERFORMANCE OVER THE FIRST HALF OF THIS YEAR, HERE'S THE PUNCHLINE. CREDIT CONDITIONS HAVE ONLY EVER BEEN THIS TIGHT DURING OR IN THE RUN-UP TO RECESSION. LISA: THIS IS THE CASE. YOU HAVE TO SAY THE SAME IS DIFFERENT IF WE ARE NOT GOING TO GET A RECESSION BASED ON THE LEVEL OF CREDIT TIGHTENING WE HAVE GOTTEN. EVERY TIME OUT OF THE FOUR TIMES SINCE 1990 THIS INDEX WAS PUT INTO PLACE, THEY SPOKE WITH CONDITIONS TIGHTENING TO THIS EXTENT, EVERY TIME THERE WAS A RECESSION. JONATHAN: THAT HAS BEEN THE CALL FOR MOST OF THIS YEAR. WELCOME TO THE PROGRAM ON THE S&P 500, NEGATIVE BY 0.14%. IN THE BOND MARKET, YIELDS ARE HIGHER AT 3.9 749. TONS OF DATA THIS MORNING GOING INTO PAYROLLS ON FRIDAY. ISM MANY FACTORING WORTH A LOOK. DEEP INTO CONTRACTS RATE TERRITORY, I GUESS THE CONVERSATION WILL BE AROUND WHETHER CHINA CAN GET THINGS GOING AND DELIVER A MOVE WORLDWIDE. MANY FACTORING ACROSS EUROPE AS WELL, PRETTY TERRIBLE. LISA: WE'VE BEEN TALKING ABOUT HAPPENS WHEN WE SEE THE MANY FACTORING AND THE SERVICES EXPANSION. DOES MANUFACTURING START TO RECOVER AND MEET THE SERVICES MOMENTUM OR WHEEZY SERVICES COME DOWN AND MEET THE MANUFACTURING? WE HAVE SEEN A LITTLE SOFTENING OF THE SERVICE AS WE LOOK AT THAT LATER THIS WEEK. BUT MANUFACTURING STILL DEEP AT A TIME WHEN PEOPLE ARE SAYING START TO RECOVER, LET'S GO. WE SHOULD GET TO THE NEXT PART OF THE CYCLE. I WONDER HOW WELL YOU CAN GET THE DISSIDENTS. JONATHAN: BACK CONVERGENCE, JP MORGAN HAS SAID HE THINKS ULTIMATELY THEY COME DOWN TO MANUFACTURING. BUT WE WILL SAY. THE DATA IN THE U.S. HAS IMPROVED MORE RECENTLY. LISA: YOU HAVE SEEN HOMEBUILDERS TRY TO GET IN THERE. IT HAS BEEN THE SLEEPER SURPRISE OF THE YEAR AS WELL. JONATHAN: AMERICA'S JUST WEIRD. LISA: THAT IS YOUR PROFESSIONAL ASSESSMENT? JONATHAN: THAT IS MY PROFESSIONAL ASSESSMENT. LISA: A LOT OF PEOPLE WOULD AGREE. IT HAS BEEN UNEXPECTED. JONATHAN: IF YOU OWN IT IS FANTASTIC AND YOU HAVE THAT. THE DREAM. GO BACK IN TIME, MAYBE A YEAR AGO. LINING UP OUTSIDE OF FIRST REPUBLIC, GOING INSIDE. LISA: THEY PAY YOU TO BUY A HOME. JONATHAN: 2% MORTGAGE. THAT IS THE DREAM. >> ECONOMIC POLICY NEEDS TO BE FOCUSED ON MAKING THE COST OF LIVING MORE AFFORDABLE AND THE AMERICAN DREAM MORE ATTAINABLE FOR AMERICAN WORKING FAMILIES. IF YOU DON'T GET THAT RIGHT, YOU CANNOT BE SUCCESSFUL AS A COUNTRY. WE CANNOT ALLOW THE FAILED RULING CLASS IN THIS NATION TO DICTATE OUR NATION'S POLICIES. JONATHAN: REPUBLICAN PRESIDENTIAL CANDIDATE RON DESANTIS OF FLORIDA SPEAKING AT A CAMPAIGN EVENT IN NEW HAMPSHIRE IN THE LAST 24 HOURS, A DECLARATION OF ECONOMIC INDEPENDENCE, ECHOES OF WHAT WE HAVE HEARD ALL THOSE YEARS AGO IN 2016. FROM THE FORMER PRESIDENT. WHAT IS INTRIGUING, IF EACH -- IF HE STAYS HERE, PULLING REPUBLICANS, POTENTIAL VOTERS, THE NUMBER ONE ISSUE IS THE ECONOMY. SOCIAL ISSUES ARE UP THERE BUT NOWHERE NEAR HOW HIGH THE ECONOMY POLLS. YOU WONDER IF WE HEAR LESS ABOUT WOKE AND MORE ABOUT THIS KIND OF STUFF FROM THIS CANDIDATE. LISA: I DON'T KNOW IF THE ECONOMY ISSUES THE POPULATION IS WORRIED ABOUT ARE THE SAME THAT RON DESANTIS IS TALKING ABOUT GIVEN HIS EMPHASIS ON CHINA AND DECOUPLING, SAYING WE TAKE BACK CONTROL OF OUR ECONOMY FROM CHINA BECAUSE IF THAT IGNITES MORE INFLATION, PEOPLE MIGHT NOT BE ON BOARD. HOW DO YOU TIE-IN THE FOCUS ON ECONOMY WITH SOME OF THE GOALS? JONATHAN: PEOPLE ACROSS OUR NATION ARE COLLAPSING UNDER AN ECONOMY THAT NO LONGER WORKS FOR THE AMERICAN FAMILY. DOESN'T THAT SOUND LIKE CANDIDATE DONALD TRUMP IN 2016? LISA: IT HAS TO DO WITH REDUCING STUDENT LOAN DEBTS. ALL OF THOSE SPEAK TO A SIMILAR TONE WE HEARD IN 2020 AND TERMS OF COMING OUT OF TRYING TO CATER TO THE MOMENT OF THE ISSUE, STILL THE ECONOMY. JONATHAN: LET'S GET TO OUR CHIEF WASHINGTON CORRESPONDENT. THIS DID NOT GO UNNOTICED BY THE FORMER PRESIDENT. ANNMARIE: ABSOLUTELY NOT. AS HE CALLS RON DESANCTIMONIUS --YOU LOOK AT THE NATIONAL POLL RELEASED YESTERDAY. TRUMP HAS HIS OVERWHELMING SUPPORT BUT THE NUMBER AT THE MOMENT IS THE GOVERNOR OF FLORIDA. WHAT EVERY CANDIDATE WANTS ON THE REPUBLICAN FIELD IS TO GET TO THAT NUMBER TWO SPOT. YOU CAN GET TO THAT SPOT, INDIVIDUALS, FURTHER DOWN THE LINE. THERE WAS HER TO DROP OUT AND THROW SUPPORT TOWARD YOU. TRUMP UNDERSTANDS IT AND THAT IS WHY HE IS THROWING A LOT OF SHAME AT THE GOVERNOR. YOU HAVE THE NAIL ON THE HEAD WHEN YOU SAY THIS IS ALSO ABOUT A SHIFT AWAY FROM WOKE POLICIES WE HAVE BEEN HEARING FROM THE CURRENT GOVERNOR. NOR ABOUT ECONOMIC PLAN. WHAT DO YOU SAY ABOUT TAXES? REPUBLICAN TALKING POINTS WITH POPULATION. -- POPULISM. JONATHAN: WHERE'S THE MONEY GOING TO WHICH CAMPAIGN? ANNMARIE: A LOT OF DONORS ARE ON THE SIDELINES AT THE MOMENT. YOU SEE SOME DONORS PUTTING MONEY TOWARD GOING ON AD CAMPAIGNS ABOUT NOT ELECTING THE FORMER PRESIDENT, BUT WHERE THE MONEY IS GOING AT THIS MOMENT. A LOT OF MONEY IS WAITING ON THE SIDELINES. YOU WILL SEE THE INFLUX OF MONEY COMING THROUGH AFTER THEY DEBATE. BIG DONORS WANT TO SEE HOW THESE INDIVIDUALS ARE ON THE DEBATE STAGE AND IF IT MOVES THE NEEDLE IN THE POLLS. WE CAN ALSO POINT TO THE FACT THAT WHERE THE MONEY IS GOING FOR THE FORMER PRESIDENT, HE MAINTAINS A HUGE LEAD WHEN IT COMES TO SINGLE, INDIVIDUAL, LOW CAPITAL INNOVATIONS. THE TRUMP CAMPAIGN, A LOT OF THAT MONEY, THE BULK OF IT, $60 MILLION WORTH IS GOING TO 240 MILLION DOLLARS WORTH IS GOING TO HIS LEGAL FEES AND THE FEES OF HIS ASSOCIATES. POTENTIALLY THAT IS GOING TO BECOME MUCH HARDER AS HE FACES AN INDICTMENT WHICH WE COULD SEE AS SOON AS TODAY OR LATER THIS WEEK. LISA: I KEEP THINKING ABOUT THESE POLLS, THE ECONOMY, DEMOCRACY. THEY ARE HUGE ISSUES AND I DON'T KNOW WHAT THEY MEAN. ARE PEOPLE TALKING ABOUT INFLATION, ARE PEOPLE TALKING ABOUT WHAT IS GOING ON WITH WOKE CORPORATIONS? THAT IS ONE OF THE ISSUES. JONATHAN: BOTH SIDES THINK THE OTHER SIDE IS A THREAT TO DEMOCRACY. LISA: IT IS THE SAME WITH THE ECONOMY. BOTH WANT THEIR IDEOLOGY REPRESENTED. WHEN PEOPLE ARE TALKING ABOUT THAT, IS IT INFLATION, IDEOLOGY CORPORATIONS WHICH IS RESPECTS TO -- WITH RESPECT TO REPUBLICANS? ANNMARIE: WHEN YOU LOOK AT WHY REPUBLICANS WANT TO TALK ABOUT WOKE IDEOLOGY, THIS IS MORE SOCIAL THAN ECONOMIC. INFLATION HAS REMAINED TOP OF MIND OF AMERICAN VOTERS. IT IS STARTING TO COOL, BUT IT IS STILL AT THE HIGHER BASE LEVEL. THIS IS WHAT A LOT OF AMERICANS HAVE BEEN STRUGGLING WITH. WHEN YOU LOOK AT THE REMOTE --REMATCH BETWEEN BIDEN AND TRUMP, WITH THE POLL SHOWS IS THAT A LOT OF INDIVIDUALS ARE STARTING TO HAVE CONCERNS AS WELL AS WHAT BIDEN IS DOING WITH THE ECONOMY, ONLY THE BIGGEST ASPECT IS BECAUSE OF HIGHER INFLATION. THERE HAS BEEN WAGE GROWTH BUT IT HAS ECLIPSED WHAT IS GOING ON BECAUSE OF HIGHER INFLATION. WE ARE STILL EARLY DAYS, BUT IS STILL SUMMER 2023 AND WE HAVE UNTIL NOVEMBER 2024. THE ECONOMIC IMPACT ON VOTERS COULD CHANGE AND A LOT OF VOTERS DO VOTE WITH THEIR POCKETBOOKS. WHAT DOES THE ECONOMY SAY NEXT SUMMER AND NEXT FALL? THAT WILL START TO DICTATE WHERE PEOPLE ARE LEAVING. LISA: IT RAISES QUESTIONS ABOUT THE INDEPENDENCE, RON DESANTIS TALKING ABOUT REPLACING JAY POWELL, NOT SURE IF HE THINKS HE IS NOT RAISING RATES ENOUGH OR TOO FAR, HOW IS THAT IN TERMS OF WHETHER POLITICIANS WANT TO FIGHT INFLATION OR JOB GROWTH AND MOMENTUM? ANNMARIE: HE DOES NOT LIKE TO SEE A POLITICIZED FED. JAY POWELL WAS APPOINTED BY THE TRUMP ADMINISTRATION, A REPUBLICAN, AND KEPT IN THE JOB BY A DEMOCRAT. BUT HE WANTS TO SEE A FED THAT HAS A STRONG APPROACH WHEN IT COMES TO MAINTAINING A STABLE, STRONG U.S. DOLLAR. HE WOULD LIKELY WANT TO GET RID OF JEROME POWELL. HE DID NOT SAY IT DIRECTLY BUT THE NOD WAS THERE. THESE ARE GOING TO BECOME MORE IMPORTANT TOWARD THE DEBATE STAGE AS WELL. THESE ARE THE KIND OF ISSUES THAT THE DONOR CLASS WANTS TO HEAR ABOUT. ALL A LOT -- A LOT OF THE BIG MONEY IS ON THE SIDELINES AND THAT IS WHY YOU ARE CERTAIN TO SEE INDIVIDUALS START TO TALK ABOUT THAT. FORMER GOVERNOR CHRIS CHRISTIE STARTED TO TALK ABOUT THAT. THESE ARE THE TYPE OF QUESTIONS AND THE ANSWERS THAT DONORS WANT TO HEAR FROM. JONATHAN: THE BIG DEBATE AT MILWAUKEE ABOUT A MONTH AWAY, THANK YOU. THREE OR FOUR WEEKS AWAY. BETWEEN JACKSON HOLE AND THE FED GET TOGETHER, THE ANNUAL SYMPOSIUM, 20 42 THE 26TH OF AUGUST. IT WOULD BE ENTERTAINING IF YOU HAD REPUBLICAN CANDIDATES FOR THE PRESIDENCY, COMPLAINING ABOUT THE FEDERAL RESERVE ON THE STAGE AND THAT IN THE MIDDLE OF THAT SYMPOSIUM IN WYOMING. LISA: THEY'RE GOING TO GIVE YOU SOME SENSE OF WHAT THEY'RE NOT QUITE STOP ABOUT, PRAY MUCH ANYTHING. THEY'RE GOING TO SAY LOOK AROUND. THINGS LOOK GOOD. JONATHAN: IS SO MUCH EASIER ON THE OUTSIDE TO BASH THE ECONOMY WHEN YOU GET -- WHEN YOU'RE NOT IN POWER, THEN YOU GET IN POWER AND YOU NEED LOSER POLICY AND IT IS SO MUCH EASIER WHEN YOU'RE CALLING FOR TIGHTER BUDGET DEFICITS AND YOU GET INTO POWER AND WHAT YOU WANT TO DO. YOU CAN KEEP -- WHETHER YOU CAN KEEP THOSE CONVICTIONS FROM BEING ON THE OUTSIDE TO WEN YU ACQUIRE POWER, THAT IS THE REAL TEST. PEOPLE HAVE FAILED THAT TEST. LISA: THAT IS WHY PEOPLE WANT AN INDEPENDENT FEDERAL RESERVE, BANK OF ENGLAND, ECB. IF YOU ARE INFLUENCED BY THOSE CONFLICTING REAL-TIME INDICATORS AND DESIRES FOR GROWTH, UNEMPLOYMENT, YOU ARE NOT GOING TO END UP WITH A STABLE CURRENCY. YOU WILL HAVE ONE THAT LOOKS LIKE ERDOGAN AND TURKEY. JONATHAN: CRITICAL IS COMING OUT OF THE PANDEMIC. THEY WANT INEQUALITY -- THERE WERE SOME NOT-SO-SUBTLE HINTS THE CHAIRMAN OF THE FEDERAL RESERVE WAS INTERESTED IN DOING SOME OF THAT. LISA: THERE WERE ALSO ISSUES OF THE REELECTION. JONATHAN: EQUITIES ON THE S&P 500 SLIGHTLY SOFTER. NASDAQ DOWN .4%. THURSDAY, EARNINGS FROM APPLE AND AMAZON. DOWN ON THE RUSSELL, WHERE THE OUTPERFORMANCE WAS LAST MONTH. THROUGH JULY, THE RUSSELL UP 6%. BANK INDEX, PHENOMENAL STUFF IN THE EQUITY MARKET. WE THINK ABOUT SHIFTING PERFORMANCE AWAY FROM BIG CAP TECH TO THE LAGGERS. IN THE BOND MARKET, THREE YEAR, 10 YEAR -- TO HERE COME A 10 YEAR, 30 YEAR. THE 10 YEAR YIELD UP A COUPLE OF BASIS POINTS TO 3.98. LATER, ISM MANUFACTURING READ, JOB OPENINGS, LOOKING FOR THAT TOO FAR BACK TO SOMETHING LIKE 9.6 MILLION. LISA: THAT IS THE BELIEF. ANDREW OF CITI JUST SAID MANUFACTURING IMM -- FM HAS STABILIZED AND COULD MOVE BACK. WILL THEY SEE STRENGTH? THE CONVERGENCE OF SAN FRANCISCO MANUFACTURING COMING UP DIVIDE EXPECTATIONS. ENDED A SIGNIFICANT WAY, ESPECIALLY WHEN PEOPLE HAVE SHRUGGED OFF THE TAIL RISK OF A FED RAISING RATES FURTHER AND BUILDING AND THE CUTS THEY ARE EXPECTING YEAR. JONATHAN: THE EURO LOOKS LIKE THIS AGAINST THE DOLLAR. 1.0977. ECB OFFICIALS NOT COMMITTING TO ANYTHING OVER -- SINCE SEPTEMBER. LAGARDE WAS SPEAKING TO LE FIGARO AND GIVE US ABSOLUTELY NOTHING. WE MIGHT HIKE, WE MIGHT PAUSE. DOES THAT HELP? LISA: NO. IT DID NOT HELP. JONATHAN: MANUFACTURING DATA OUT OF CHINA DISAPPOINTING, SIX-MONTH LOW. AND BELOW THE LEVEL THAT MARKS THE DIFFERENCE BETWEEN EXPANSION AND CONTRACTION. AND WE HAVE THE OFFICIAL PMI OUT OF CHINA THIS WEEK, ALSO SHOWING 85. LISA: IT IS GOING TO ONLY INCREASE IN TERMS OF PRESSURE IN THE ECONOMY OF COMMODITY PRICES REMAIN HIGH. PEOPLE ARE WONDERING WHERE THE NOTE OF GROWTH WILL COME FROM? IT WAS SUPPOSED TO COME FROM THE CLASS SPENDING AND THE REOPENING, BUT CAN IT CONTINUE TO COME FROM THE CONSTRUCTION SECTOR AT A TIME WHEN THE GOVERNMENT DOES NOT WANT TO SUPPORT THAT? IT IS ALREADY OVERBUILT WHAT DID THEY GO TO, THAT? JONATHAN: BALANCE HE RECESSION. THEY PUSHING ON A STRING? WE ARE SEEING THAT THE AVERAGING TICK IN -- DE-AVERAGING KICK IN. PEOPLE DO NOT WANT AN EXTRA APARTMENT OR PART. LISA: COULD CHINA BE HEADED FOR THE LOST DECADE, AKIN TO WHAT WE SAW IN JAPAN? IS IT DEFLATION, THE AGING OF THE POPULATION, UNEMPLOYMENT AMONG THE USE, AND THE WAY THEY HAVE STIMULATED THEIR ECONOMY THE INTO SLOW GROWTH? JONATHAN: THIS COULD HAVE BEEN A CONVERSATION WE CLIPPED FROM 10 YEARS AGO THAT WE ARE REPLAYING RIGHT NOW. IT IS NOT, BY THE WAY. LISA: YOU COULD PROBABLY SAY THAT ABOUT A LOT OF THINGS. JONATHAN: PLENTY OF EARNINGS THIS MORNING, CATERPILLAR, SECOND QUARTER PROFIT, MACHINERY HELD UP WELL AGAINST EXPECTATIONS, DEFYING THE DOOM AND GLOOM. SEEN AS A BELLWETHER FOR THE ECONOMY, GIVEN THE CRITICAL ROLE CONSTRUCTION PLACE, IT IS HOLDING UP OK. SLIGHT MORNING, -- A SLIGHT WARNING ABOUT THE THIRD QUARTER NOT BEING AS THE SECOND. LISA: IF CATERPILLAR IS SEEING INCREDIBLE DEMAND FOR BUILDING, MINING, ENERGY, WHAT THIS THAT MEAN ABOUT THE PRICES OF ALL OF THESE THINGS, GIVEN THE DEMAND HAS BEEN SO MUCH HIGHER? THIS GOES TO THE QUESTION OF HOW DO WE SEE ONGOING DISINFLATION IF THE GOOD SIDE OF THE ECONOMY IS HANGING IN THERE MUCH BETTER THAN EXPECTED. THAT IS WHY I FIND CATERPILLAR AS A BELLWETHER FASCINATING. PEOPLE ARE LOOKING AT THE GOOD AND NOT THE MORE CONCERNING ELEMENTS THAT SPEAK TO INFLATION. JONATHAN: HOME PRICES ARE AT SESSION IN THE U.K. LISA: I DO NOT TALK ABOUT THE. I PURCHASED AND THEN WATCH THE PRICES GO DOWN, SO I AVOID IT. BUT PEOPLE DO TALK ABOUT IT, ALTHOUGH NOT AS MUCH IS IN THE U.K. JONATHAN: SPEND TIME ON ZILLOW? I AM AN ADDICT, LOOKING FOR DREAM HOUSES, HOUSES I CANNOT AFFORD, EVERYTHING. YOU DO NOT DO THAT? LISA: NO. JONATHAN: ON THE COAST WITH LEMON GROSS. SOMETHING I WILL NEVER HAVE, BUT THAT IS FINE. U.K. HOME PRICES FALLING AT THE FASTEST RATE SINCE 2009. THE NATIONWIDE BUILDING SOCIETY SAID PRICES FELL 3.8%. THE DROP IS THE BANK OF ENGLAND HIKES INTEREST -- IS SET TO HANK INTEREST RATE ONCE AGAIN. THEY ARE ALREADY AT 5% AND MAY WELL BE GOING HIGHER THURSDAY. THE TWO YEAR FIXED MORTGAGE RATE IS THROUGH 6%. WHAT MATTERS HERE IS THAT THE EFFECTIVE RATE IS CREEPING HIGHER, BUT NOT AS QUICK AS YOU MIGHT EXPECT. WE HAVE GONE FROM TWO TO CLOSE TO THREE FROM THE START OF THE HIKING CYCLE. LISA: IF I WERE CHANNELING TOM KEENE, MUCH OF THIS IS BREXIT? HOW MUCH IS LACK OF IMMIGRATION? HWO MUCH IS THE IDEA OF THE FINANCIAL CENTER OF MOVING TO OTHER REGIONS IN EUROPE? HOW MUCH IS THAT AFFECTING THIS IS MUCH AS RATES? JONATHAN: HOME PRICES IS NATURAL. YOU SEE THAT IN THE EFFECTIVE MORTGAGE RATE. THE FACT THAT WE ARE TALKING ABOUT A TWO-YEAR FIXED IN THE U.K. 30 YEAR MORTGAGES IN THE U.S. OF 2.5% OR 3%, NOT SURE THAT IS BREXIT. IT IS JUST THE STRUCTURE OF THE MORTGAGE MARKET. WE WOULD EXPECT THE BLEED THROUGH TO BE FASTER. LISA: AND THAT LATER. IT IS MORE IMMINENT BECAUSE OF THOSE MORTGAGES. JONATHAN: YOU EXPECT TO SEE MORE OF IT. THERE IS GOING TO BE SOME PAIN THERE IF THIS CONTINUES. FOR 4 MILLION ARE DUE TO REMORTGAGE THIS YEAR, REPRESENTING ABOUT ONE FIFTH OF ALL HOUSEHOLDS WITH MORTGAGES. THROUGH THE, AS THINGS PROGRESS AND MORE AND MORE PEOPLE HAVE TO SHIFT AWAY FROM WHERE THEY COULD GET DURING THE PANDEMIC FOR INTEREST RATES, IT IS GOING TO HURT. LISA: THIS IS WHY I DO NOT LOOK AT HOME PRICES. I FEAR THAT IF WE WERE ACTUALLY REFLECTIVE OF WHERE RATES REALLY WORK, THE PRICES WOULD GO DOWN SO MUCH. JONATHAN: WONDERFUL TO CATCH UP WITH YOU, SIR. I WANT TO START WITH CREDIT. THIS IS A LINE IN THE SAND FOR YOU. 400 BASIS POINTS, HIGH YIELD SPREADS. WE HAVE DROPPED LOW THAT LEVEL, QUITE COMFORTABLY, OVER THE LAST MONTH. WHAT DOES THAT TELL YOU? >> STARTING IN EARLY 2022, HIGH YIELD SPREADS WIDENED CONSIDERABLY, ALONG WITH BOTH THE INITIAL BIG INTEREST -- INCREASE IN INTEREST RATES AND EQUITIES. SINCE MID-TO-LATE APRIL, HIGH-HEELED CREDIT SPREADS IN THE U.S. HAVE BEEN HOLDING ABOVE 400 BASIS POINTS. HISTORICALLY, 400 BASIS POINTS IS KIND OF THE NATIONAL LINE -- MAGINOT LINE BETWEEN HEALTHY AND UNHEALTHY. TYPICALLY ABOVE 400 AND NOT SEE A LOT OF NEW ISSUANCE AND IT PASSES THROUGH MARKETS LIKE EQUITIES. HIGH YIELD SPREADS STATED ABOVE THE 400 BASIS POINTS MARK FROM APRIL UNTIL ROUGHLY ABOUT A MONTH AGO. FOR THE FIRST TIME SINCE THE INITIAL SELLOFF IN 2022, HIGH YIELD SPREADS HAVE HELD AT LEAST 100 BASIS POINTS, WHICH IS PARTICULARLY CONSTRUCTIVE FOR A LOT OF OTHER MARKETS AS WELL. LOWER VOLATILITY ON THAT HIGHER RISK ELEMENT OF THE CREDIT SPECTRUM SPEAKS TO GREATER STABILITY IN ALL SORTS OF THINGS SUCH AS EQUITIES AND CONFIRMS THE RECENT RALLY IN THE EQUITY MARKETS. LISA: WE WERE JUST TALKING ABOUT U.K. HOUSING PRICES AND HELP MUCH MORE SENSITIVE THEY ARE TO RATES. WE TALKED ABOUT HOW STICKY AND LOW RATES ARE IN THE U.S. WITH STU THE HOUSING MARKET. IT IS ALSO TRUE WHEN IT COMES TO CORPORATE FINANCING RATE SOME GREAT WORK SHOWS JUST HOW LOCKED-IN SOME OF THESE LOW RATES ARE FOR BOTH HIGH RISK AND LOW RISK COMPANIES ALIKE. HOW MUCH IS THAT BUFFERING THE VIEW OF DEFAULT IN A WAY THAT CHANGES IF RATES STAY HIGH FOR ANOTHER YEAR OR TWO? GUY: INTERESTING POINT. IN LATE 2020 INTO 2021, THERE WAS A HUGE REFINANCING WAIVED NOT JUST IN U.S. MORTGAGES BUT ALSO IN HIGH-YIELD REDDIT MARKETS. WE SAW ISSUERS SELLING YIELD DEALS AND USING THE PROCEEDS TO BUY OUT SHORT-TERM MATURITIES AND REDUCE OVERALL COUPON PAYMENTS. YOU LOOK AT THE U.S. HIGH-YIELD INDEX AND THERE IS ALMOST NO MATURITIES UNTIL ABOUT MID-2025, GIVE OR TAKE. AS A HIGH-YIELD COMPANY, IT IS HARD TO DEFAULT ON YOUR DEBT IF YOU DO NOT HAVE A DEBT MATURITY COMING DUE. THAT PUSHES OUT THE RISK OF DEFAULT INTO 2025 WHICH GIVEN CURRENT OUTLOOKS, COULD LOOK VERY DIFFERENT BY 2025, EITHER LOWER OR HIGHER, AND PROBABLY EN ROUTE TO RECOVERY AFTER A MILD RECESSION. SO THE NEXT ROUND OF REFINANCING DOES NOT HAVE TO TAKE PLACE UNTIL AFTER THAT. WE ANTICIPATE LOWER INTEREST RATES. LISA: DO YOU THINK PEOPLE ARE APPROPRIATELY PRICING AND RISK BASED ON THAT ASSESSMENT? GUY: I THINK WE ARE REASONABLY PRICING RISK FOR THE FUNDAMENTAL OUTLOOK. HIGH YIELD LEVERAGE IS A LOW COMPARED TO HISTORICAL AGGREGATE THERE HAS NOT BEEN IN EXCESS OF LEVERAGE. REFINANCING RISK IS LOW. THAT SAID, IF WE GET ANOTHER ECONOMIC RISK EMERGING LATE THIS YEAR OR EARLY NEXT YEAR, HIGH YIELD SPREADS ARE LIKELY TO DRIFT WIDER. JONATHAN: THANK YOU FOR THE UPDATE. HIGH YIELD SPREADS TYPE, AND EQUITY MARKET LOOKING OUT FOR ALL-TIME HIGHS. NOT EXPECTED TO BE HERE SIX MONTHS AGO. LISA: THAT IS THE UNDERSTATEMENT OF THE YEAR. PEOPLE EXPECTED THIS TO BE A BAD YEAR FOR RISK ASSETS AND IT HAS BEEN ANYTHING BUT. JONATHAN: THIS MORNING, DOWN ABOUT .33% ON THE S&P 500. LOOKING OUT FOR EARNINGS FROM APPLE ON THURSDAY AND DATA LATER THIS MORNING. JOB OPENINGS AND MANUFACTURING. EVERY MARKETS SLIGHTLY NEGATIVE, DOWN BY 0.31%. THE BOND MARKET, YIELDS HIGHER BY A COUPLE OF BASIS POINTS. LOOKING AHEAD TO ECONOMIC DATA, DANIEL PETERSON -- DANA PETERSON. LISA: I WANT TO UNDERSTAND HOW LONG PEOPLE CAN KEEP RAMBLING ON THINGS LIKE CRUISE LINES. I WAS LOOKING AT NORWEGIAN CRUISE. THEY BOOSTED THEIR FULL-YEAR ADJUSTED EARNINGS ESTIMATE, WHICH I GUESS IS A GOOD THING. PASSENGER CRUISE STAYS, 5.78 MILLION, UP YEAR-OVER-YEAR, IN LINE WITH EXPECTATIONS. BUT THERE SHARES ARE SAYING THAT -- THEIR SHARES ARE SIGNIFICANTLY LOWER, EVEN THOUGH THEY DID RAISE EXPECTATIONS. IT IS BEEN A THEME WE HAVE SEEN. WHEN PEOPLE REPORT, UPSIDE SURPRISES ARE REWARDED LESS AND DOWNSIDE SURPRISES ARE PUNISHED MORE. JONATHAN: ONE OF THE TOP 10 PERFORMING STOCKS ON THIS MARKET IS UP HERE TODAY. CARNIVAL IS UP 133%, ROYAL CARIBBEAN 121% THE GAINS OF THESE CRUISE LINES HAVE BEEN RIDICULOUS. LISA: ESPECIALLY AFTER BEING LEFT FOR DEAD AND INCURRING A LOT OF DEBT IN ORDER TO MAINTAIN THEIR SHIPS DURING THE PANDEMIC, WHICH WERE BASICALLY JUST PARKED. PEOPLE WERE SAYING, "HOW ARE THEY GOING TO PAY THIS BACK?" JONATHAN: I SAY WHO WANTS TO GO ON A BOAT AND BE STUCK WITH PEOPLE. I SAID THAT DURING THE PANDEMIC AND I SAY IT TODAY. THIS IS NOT AN EQUITY CALL, JUST A LIFESTYLE CALL. >> WHEN PEOPLE TALK ABOUT THIS ENVIRONMENT, IT MAKES ME THINK OF WHERE THE CHARACTER IS RUNNING ABOVE THE AD. AND THEY CRASH. IN THE KEYWORD IS UNCERTAINTY. THIS IS WHAT WE HAVE WITH OUR CLIENTS. WE ARE UNSURE HOW MARKETS WILL REACT. JONATHAN: A LOT OF HEAD SCRATCHING. THAT WAS THE MAN BRUCEY AND NO CATCHING UP WITH OUR TEAM IN LENDING -- IN LONDON. THERE IS ALWAYS UNCERTAINTY. A LOT OF PEOPLE HAVE CALLED THE FUTURE WRONG. LISA: THERE IS UNCERTAINTY ABOUT TRUSTING YOURSELF. EVERYONE'S ASSUMPTIONS HAVE BEEN WRONG AND THAT IS UPENDING CONFIDENCE IN THE C-SUITE. JONATHAN: YOU GOT A CHARACTER TURNING BEFORE IT. WHAT IS THAT? THAT WAS TRUE OF THE PANDEMIC AS WELL, ALL THAT STIMULUS SUSPENDING THE ECONOMY IN OUR WIND RING WAS -- IN THE AIR WHEN THERE WAS BASICALLY NO ECONOMIC ACTIVITY. WE HAVE BEEN TALKING ABOUT THAT FOR THREE YEARS. LISA: AND WHEN YOU BRING IT UP AND YOU ARE BEARISH, YOU GET HATE MAIL. PEOPLE SAY YOU HAVE BEEN WRONG. IT IS NOT COMING TO PASS. THEY BE THAT IS TRUE IN THIS ECONOMY HAS -- MAYBE THAT IS TRUE IN THIS ECONOMY HAS MORE STRENGTH THAN PREVIOUSLY BELIEVED. JONATHAN: SAYING THAT LINE WOULD MISCHARACTERIZE WHERE WE HAVE BEEN. WHAT WE DID WAS UNDER APPRECIATE THE LACK OF THAT STIMULUS, THE AMOUNT OF SAVINGS LEFT IN THE ECONOMY, THE REFINANCING THAT WAS DONE THROUGHOUT THE PANDEMIC, BOTH ON THE CORPORATE SIDE AND FOUR HOUSEHOLDS. IT MEANT THAT BASICALLY THIS ECONOMY HAS BECOME LESS EXPOSED TO HIGHER INTEREST RATES FROM THE FEDERAL RESERVE. SUSPENDING IT IN THIN AIR DOES NOT ACKNOWLEDGE THE FUNDAMENTALS OF THE ECONOMY SO FAR THIS YEAR. THE CONSENSUS GOT IT WRONG. THE ECONOMY HAS STOOD UP TO THESE INTEREST RATES BETTER THAN MOST THOUGHT. WE WERE TOO PREOCCUPIED WITH THE STOCK OF DEBT AND THAT THE PROFILE, CHARACTER, MATURITY OF THAT DEBT. LISA: AND THE INTELLIGENCE OF THE HOMEOWNER AND THE C-SUITE IN SAYING, IF WE CAN ISSUE 30 YEAR DEBT, WE WILL. DURING THE PANDEMIC, GUESS WHAT ALL THOSE COMPANIES AND INDIVIDUALS DID? THEY GOT THOSE LITTLE RATES FOR AS LONG AS POSSIBLE -- LOW RATES FOR AS LONG AS POSSIBLE. JONATHAN: THAT DOES NOT MEAN YOU SHOULD EXTRAPOLATE OVERCURRENT CONDITIONS OVER THE NEXT SEVERAL YEARS. JUST AN OBSERVATION. LISA: AND IT MITIGATES POTENTIAL RISK. JONATHAN: IN THE OIL MARKET, IT'S BEST MONTH SINCE WHEN? LISA: SINCE JANUARY OF 2022. JONATHAN: BRENT CRUDE 85. REGINA JOINS US. GREAT TO CATCH UP WITH YOU. WHAT IS UNDERPINNING THAT RALLY THROUGH JULY? CAN IT CONTINUE THROUGH AUGUST? REGINA: DEMAND CONTINUES TO OUTPACE SUPPLY. OPEC WAS, WITH ITS STRATEGIC CUTS AND THE STUDIES VOLUNTARY ONE MILLION BARRELS PER DAY THAT THEY INDICATED THEY WILL EXTEND TO SEPTEMBER HAS CREATED BUOYANCY IN THE CRUDE MARKET. RENT ABOVE 85, WTI ABOVE 80. DEMAND IS OUTPACING SUPPLY. SOME ANALYSTS ARE SAYING WE ARE ABLE TO GO BACK AND ANALYZE THE ACTUAL DEMAND FIGURES THAT JULY, GIVEN THAT IT WAS ONE OF THE HOTTEST MONTHS ON RECORD, AND WE STILL RELY ON FOSSIL FUELS TO DRIVE COOLING, THAT JULY OF 2023 WILL BE THE HIGHEST DEMAND FOR HYDROCARBONS EVER, OUTPACING AUGUST OF 2019. JONATHAN: WHERE IS THAT DEMAND COMING FROM, YOUR OF WITH THAT MASSIVE HEATWAVE, THE U.S., CHINA? REGINA: CHINA HAS NOT GIVEN US THE DEMAND UPTICK WE HAVE BEEN EXPECTING. IT IS ALWAYS CHINESE DEMAND WILL PICK UP IN THE NEXT FEW MONTHS. BUT THE THING THAT HAS CREATED THE ADDED DEMAND IS INDUSTRIAL ACTIVITY IS PICKING UP IN THE WESTERN MARKETS. SUPPLY CHAIN CHALLENGES, THE BOTTLENECKING, AND TRAVEL -- YOU ALL WERE TALKING ABOUT CRUISE PASSENGERS. THERE IS STILL TREMENDOUS BULLISHNESS IN THE CONSUMING POPULATION. WE CONTINUE TO CONSUME, TRAVEL, COMPANIES CONTINUE TO PRODUCE. THAT IS DRIVING RECORD DEMAND. ON TOP OF IT IS A HOT SUMMER AND IT TAKES A LOT TO DRIVE COOLING. LISA: AND IT IS INTERRUPTING SOME OF THE PROCESSING. A PIECE THIS MORNING WAS TALKING ABOUT HOW HOT WEATHER HAS REDUCED REFINING CAPABILITIES OF CERTAIN COMPANIES. YOU WERE ALSO SEEING SOME OF THOSE SHIPPING COSTS FOR NATURAL GAS RISING SUBSTANTIALLY IN EUROPE. HOW MUCH IS THIS FEELING A CALL THAT OIL PRICES WILL GO SUBSTANTIALLY HIGHER, EVEN NATURAL GAS IN EUROPE? REGINA: I AM NOT AS BULLISH AS THE CRISIS WILL CONTINUE TO GO HIGH. I DO THINK THAT SUPPLY CONTINUES TO MEET THE RECORD DEMAND WE ARE FACING AND WE WILL GET A PEEK GREAT. SUMMER TRAVEL -- HE RATE. SUMMER TRAVEL IN THE SUPPLY CONTINUES U.S. IS STARTING TO TAIL OFF. IN EUROPE ITIN EUROPE IT IS -- MOTOR GASOLINE AND REFINING PRODUCTS TO NOT MOVE AROUND THE WORLD AS WELL AS CRUDE DEBTS. THEY ARE VERY GEOGRAPHICALLY SPECIFIC. IN THE U.S., MOTOR GASOLINE INVENTORY STOCKS ARE AT THEIR LOWEST LEVEL SINCE 2015. REMARKABLE. LISA: HOW DO THEY REBUILD THAT WHEN THERE IS CONCERN ABOUT THE STRATEGIC PETROLEUM RESERVE IN THE U.S. AND A QUESTION ABOUT REBUILDING BAT AND A LACK OF REFINERIES IN THE U.S.? REGINA: THE REFINING INDUSTRY HAS RETRACTED SIGNIFICANTLY BUT IT IS MORE EFFICIENT THAN EVER. REFINERIES ARE STILL RUNNING. ROUGHLY 94% UTILIZATION IN JULY IS ABOUT AS HIGH AS THEY CAN GET IT, MAYBE 95% OR 96% BUT A YOU BASIS POINTS -- A FEW BASIS POINTS ABOVE WHERE THEY ARE CURRENTLY AT, BUT WE WILL SEE DEMAND FOR MOTOR GASOLINE RATIONALIZING AND REFINERIES WILL CATCH UP. WE WILL SEE A SHORT-TERM SPIKE IN GASOLINE PRICES, BUT CONSUMERS SEEM TO BE LESS REACTIVE TO THE PRICES AT THE PUMP. FORTINET PERCENT OF CONSUMERS SAY THEY ARE MODERATELY CONCERNED ABOUT THE HIGHER PRICE OF GASOLINE, DOWN FROM 79% -- LAST YEAR THIS TIME. JONATHAN: HOW DO YOU DIFFERENTIATE BETWEEN LESS PRICE SENSITIVITY AND PRICE IS JUST NOT BEING AS HIGH AS THEY WERE LAST YEAR? REGINA: FAIRPOINT, BUT I THINK BECAUSE OF THIS CONSUMPTION BOOM AND INFLATIONARY PRESSURE ACROSS A LOT OF ACTIVITIES -- WE HAVE SEEN PRICE SPIKES IN COMMODITIES LIKE EGGS, EXPERIENCES, RESTAURANT ACTIVITY, TRAVEL -- WE STILL SEE CONSUMPTION MOVING. THERE IS PERHAPS LESS PRICE SENSITIVITY OVERALL WITH THE CONSUMER BECOMING MORE IMMUNE TO INFLATIONARY IMPACTS. THAT WILL ONLY LAST FOR A CERTAIN PERIOD OF TIME, BUT WE ARE BENEFITING FROM LACK OF PRICE SENSITIVITY. JONATHAN: DO NOT TELL THE AIRLINES. THEY DO NOT NEED ENCOURAGING. LISA: YOU MEAN IN TERMS OF HOW MUCH THEY HAVE JACKED UP PRICES? JONATHAN: IT SEEMS LIKE IT IS FALLING OFF A CLIFF. LISA: WHAT IS YOUR VIEW ON THE LUNCHES? JONATHAN: YOU KNOW MY VIEW. I DO NOT GO. YOU MIGHT SEE ME THERE BUT RARELY. OFTEN, IN AIRPORTS, YOU ARE BETTER OFF GETTING A MEAL SOMEWHERE ELSE. I WILL GIVE YOU AN EXAMPLE, DELTA AT JFK. DELTEK IN THE LAST 12 MONTHS, THE LOUNGES HAVE BEEN -- LINES GOING AROUND THE CORNER. THIS IS NOT A CREDIT CARD. IT IS JUST MY NAME TAKE, BUT IT USED TO BE YOU GET A CREDIT CARD, SPEND A BIT OF MONEY, YOU CAN GET INTO ANY LOUNGE YOU LIKE WITH TOP-TIER STATUS. USUALLY, YOU ACQUIRE POINTS TO FLYING. NOW IT IS JUST SPENDING. LISA: HOWEVER, PEOPLE ARE TIERE D. I ALWAYS THINK OF AIRLINES BEING CLASS CONSCIOUS, WHERE PEOPLE ARE TIERED IN TERMS OF WHAT KIND OF MEDALLION YOU ARE. JONATHAN: THERE IS A CLASS SYSTEM TO EFFORT AND MILES FLOWN ON THE AIRLINE, NOT JUST SPENDING. I GO TO THE RESTAURANT AND GET DOUBLE POINTS WITH MY AIR ADVANTAGE CARD. YOU KNOW MY THOUGHTS ON THIS. I LOOK FORWARD TO CATCHING UP WITH ED BASTIAN. >> WE ARE GOING INTO A HIGHER NOMINAL GDP WORLD. >> THE FED PIVOTS, THAT IS WHEN THE NEW CYCLE EMERGES. >> THERE IS STILL RISK OUT THERE. >> THE TWO THINGS WE ARE WATCHING MOST CLOSELY ON THE ECONOMIC FRONT ARE PRODUCTIVITY AND OIL. >> I CAN STATE THAT WE WILL REMAIN RECESSION FREE THROUGH THE END OF THIS YEAR. JONATHAN: THE SMELL OF CAPITULATION, A LOT OF KETCHUP TRADE OUT THERE IS MORNING. LIVE FROM NEW YORK CITY. THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO. EQUITY MARKETS DOWN BY 3%. DOLLAR STRONGER AGAINST THE EURO, MORE SO AGAINST THE YEN AND STERLING WEARING INTO A BANK OF ENGLAND RATE DECISION LATER THIS WEEK. SET OUT TO PATRICK. IT SAYS, "AH!" ACROSS THE TOP OF THAT EMAIL. UPGRADE FROM CITI. KNEW PRICE TARGET THERE. LET'S CALL OUT SOMEBODY WHO GOT IT RIGHT. JOHN LOOKED FOR 4400, HIS YEAR END PRICE TARGET. HE WAS LOOKING FOR 4400. THIS UPGRADE HAS COME EARLY. HE SAYS, WE CAN HAVE MORE IN 2023. LISA: I LOOKED AT HIM AND SAID, ARE YOU WORRIED ABOUT THE RATE HIKING CYCLE, THE IDEA WE MIGHT GET A RECESSION? HE WAS LIKE, NO. SURE, YOU CAN ALWAYS BE WRONG, BUT YOU HAVE TO LOOK AT THE DYNAMICS OF THE ECONOMY. I THOUGHT, KNOWING WAY, BUT HE WAS RIGHT -- O NNO WAY, BUT HE WAS RIGHT. JONATHAN: LATER, WE WILL GET JOB OPENINGS IN AMERICA, JOLTS, EXPECTING THEM TO COME DOWN. AND MANUFACTURING LATER THIS MORNING. IT HAS BEEN SOFTER RECENTLY, STARTING TO STABILIZE. THAT CONVERSATION STARTED EARLIER THIS MORNING. AND MORE DATA OUT OF CHINA AND ANOTHER LEAD ON MANUFACTURING DISAPPOINTING. THE PBOC OUT WITH SOME HEADLINES MOMENTS AGO. WE SPENT A COUPLE OF MINUTES TRYING TO TRANSLATE THIS FOR YOU. THEY WILL GUIDE BANKS TO ADJUST EXISTING MORTGAGE RATES LOWER, REITERATING SUPPORT TO KEEP THE HOUSING MARKET IS SOMETHING THEY WANT TO SEE IMPROVED. LISA: THE LACK OF CLARITY COMES PARTLY BECAUSE OF A TRANSITION ISSUE BUT ALSO PARTLY BECAUSE THERE ARE CONCRETE STEPS BEING TAKEN THIS POSTURE OF EASING DOES NOT HAVE A LOT OF DETAILS. HOW MUCH DOES THAT ADD TO THAT? THIS IDEA THAT THEY ARE TRYING TO BACKSTOP THE HOUSING MARKET IN A WAY THAT DOES NOT INCLUDE READING WAITING IN PUMP THEY PLAN TO THROW THAT NEEDLE? JONATHAN: I DO NOT THINK ANYBODY WOULD DESCRIBE THIS AS AGGRESSIVE MONETARY POLICY OR PHYSICAL STIMULUS WHEN THEY -- FISCAL STIMULUS WHEN THEY SAY THEY WANT TO SUPPORT THE HEALTHY DEVELOPMENT OF THE PROPERTY MARKET IS INCREMENTAL STEP INTO THE HOPE IS THAT IT ADDS UP. LISA: SHRINKING THE POTENTIAL DOWN PAYMENT AND CUTTING RATES IS NOT GOING TO BE ENOUGH AT A TIME WHEN A LOT OF PEOPLE HAVE QUESTIONS ABOUT THE STATE OF THE ECONOMY. TO THE EXTENT THAT THIS CAN ACTUALLY SUPPORT ANYTHING REMAINS TO BE SEEN IN THE EQUITY MARKET PEOPLE SEEM EXCITED. JONATHAN: BEST WEEK OF THE YEAR FOR CHINESE EQUITIES. AND WE TOUCHED ON IT YESTERDAY, THE RATE CUTS ARE ARRIVING -- JELLY, PERHAPS RESULT LATER THIS WEEK. YOU GET STARTS OUT OF CHINA AND EQUITIES START TO LOOK BETTER. HAS THAT FAMILY CALL? LISA: IT HAS BEEN. AND WE USE CN INCREDIBLE RALLY AND AFFECTS WAS LOOKING AT SOUTH KOREA, THAILAND, SOME OF THE OTHER SOUTHEAST ASIAN NATIONS AFFECTED BY CONTRACTION IN CHINA. YOU ARE SEEING SOME EXPORT NUMBERS TO CHINA GO DOWN. AT WHAT POINT DOES THIS HAVE A BIT OF A CYCLE IN SOME OF THE AREAS THAT HAVE BENEFITED FROM OTHER ASPECTS? JONATHAN: -50.3% ON THE S&P, IT YIELDS A BIT HIGHER. TREASURY YIELDS HIGHER BY ABOUT THREE BASIS POINTS OR SO. DOLLAR SHOWING SOME STRENGTH AGAINST THE EURO. WE ARE NEGATIVE BY 0.2%. JOINING US NOW IS MICHAEL OR WORK -- MICHAEL OR WORK. WHEN YOU GET CAPITULATION, JUST ENGAGE ME IN THE CONVERSATION AROUND SENTIMENT. YOU GET NERVOUS WHEN YOU START TO SEE THAT JACOB MICHAEL: I WOULD NOT SAY I GET NERVOUS, BUT WHAT YOU ARE DEFINITELY SAYING -- SEEING IS PEOPLE REACTING TO RISE, TO A MARKET THAT HAS BEEN STRONGLY FIRST SEVEN ON SOME OF THE YEAR. THEY ARE QUESTIONING THEIR EXPECTATIONS COMING INTO THE YEAR. NIGHT NOTE LAST NIGHT, I TITLED IT TOO EARLY TO DECLARE VICTORY. WE STILL HAVE 4% INFLATION. ALTHOUGH THE SAID THEY BE CLOSE TO DONE TIGHTENING, MARKETS ACT AS IF IT WERE THE ACTUAL RATE HIKES THEMSELVES THAT THE HEADWIND. BUT IT IS LIVING WITH THOSE HIGHER INTEREST RATES, THAT HIGHER REAL ESTATE FUNDS RATE THAT WILL TIGHTENING THE ECONOMY THE LONGER THAT PERSISTS. YOU CANNOT CELEBRATE THE FED BEING DONE. NOW WE HAVE TO WORK WITH THE TIGHTEST ENVIRONMENT IN 15 YEARS. JONATHAN: AND WHEN DOES IT START TO BALANCE -- SIX MONTHS? 80 YEAR? TWO YEARS? MICHAEL: IT IS THE TRILLION DOLLAR QUESTION. THAT IS WHY -- BUT THEY WERE PRETTY WIDELY HELD AT THE START OF THE YEAR AND THE FED'S OWN FORECAST FOR GROWTH IS MUCH LOWER. THE FACT THE MATTER IS THEY DID NOT TIGHTEN POLICY ENOUGH TO SLOW INFLATION AT THE RATE THAT THEY WANTED. BECAUSE POLICY WAS NOT THERE TO BRING APPROPRIATE SLOWING, WE STILL HAVE AN ECONOMY THAT HAS BEEN GANGBUSTERS ALL YEAR, RAVAGING OVER 300,000 JOBS PER MONTH. WE ONLY NEED TO ADD ABOUT 80,000 TO KEEP THE UNEMPLOYMENT RATE FROM RISING. WE STILL HAVE LOW UNEMPLOYMENT. THE ECONOMY HASBRO OVER TO PRESENT THE FIRST CAP THE YEAR. WE HAVE NOT SLOWED BUT IT WILL STILL HAVE TO HAPPEN TO GET INFLATION DOWN. I DO NOT KNOW WHY EVERYONE IS CELEBRATING AT THIS POINT LISA: BUT MOMENTUM, WHY NOT JUMP ON THE FOMO TRAIN? ON THE ONE HAND, I WANT TO LAUGH, IS THAT REALLY WHAT YOU ARE SAYING? ON THE OTHER HAND, THEY HAVE BEEN RIGHT. THERE IS TOO MUCH ENERGY TO KEEP GOING UP TO FIGHT AGAINST IT. MICHAEL: THEY HAVE BEEN RIGHT, BUT FOR EVERYBODY WHO HAS BEEN RIGHT, HOW MANY PEOPLE SAID SEVEN STOCKS WOULD DRIVE 67% OF THE S&P 500 THIS YEAR? YES, WE HAVE ENOUGH MARKET, BUT IT IS NOT NECESSARILY A HEALTHY NO ONE WAS PREDICTING THE HAVE TRILLION DOLLAR COMPANIES RALLY 50% TO 200% IN SEVEN MONTHS. THEY HAVE BEEN RIGHT ON ONE MEASURE BUT GOT IN THE LONG WAY. THAT SHOULD URGE CAUTION. YOU CANNOT RELY ON THEM TO CARRY THE MARKET INDEFINITELY. LISA: WHAT WOULD YOU HAVE TO SEE IN TERMS OF IT BROADENING OUT? IT HEALTHIER KIND OF THAT WOULD MAKE YOU LEAN IN MORE TO THIS RALLY? MICHAEL: WE HAVE SEEN SOME POSITIVE SIGNS. I DO NOT WANT TO BE TOTALLY NEGATIVE, BUT IT SEEMED -- SEEM IN THE RUSSELL 2000 COME TO LIFE IN THE LAST FOUR MONTHS. WHAT WE ALL WANT TO SEE IS VALUED STOCKS. THEY ARE A BIG PORTION OF THIS MARKET. EVERY GROWTH RALLY SEEMS TO WIND UP. THOSE ARE THINGS YOU WANT TO SEE. I'VE SAID IT BEFORE. I AM A BIG FAN OF THE BANKS. I THINK THEIR PROBLEMS ARE BEHIND THEM AND THERE IS A MASSIVE OPPORTUNITY HERE, BUT WHILE IT SEEMS LIKE THEY AFTER THE WORST OF THEIR TROUBLES, THEY ARE NOT UP TO PAR WITH SOME OF THOSE BIG MOMENTUM NEEDS. THERE ARE MANY OPPORTUNITIES IN THIS MARKET, BECAUSE THE NARROW LEADERSHIP MADE SO MANY OTHER GROUPS LESS EXPENSIVE. THAT IS HOW PEOPLE SHOULD LOOK AT THIS MARKET. LISA: WHAT ABOUT BOND YIELDS? A LOT OF PEOPLE ARE BETTING ON THE FED CUTTING RATES NEXT YEAR, EVEN AS YOU DO SEE SUSTAINED PROFIT RECOVERY. DO YOU THINK THAT IS THE CASE? OR DO YOU THINK YIELDS COULD GO HIGHER AND PRESSURE THINGS THE LONGER THE FED KEEPS RATES ELEVATED? MICHAEL: THE FED HAS SAID THEY WANT TO KEEP RATES HIGHER FOR LONGER BUT THEY HAVE ALSO SENT THEY WILL CUT RATES AS INFLATION GOES DOWN. THERE WILL BE A POINT IN TIME, MAYBE LATE NEXT YEAR, THAT THEY WILL START REDUCING RATES, BUT REAL INTEREST RATE ADJUSTED FOR INFLATION ARE GOING TO BE HIGHER. WE HAVE HAD A NEGATIVE REAL INTEREST RATE ENVIRONMENT FOR THE PAST 15 YEARS. NOT WHAT THE FED IS THEORETICALLY SAYING THEY WILL DO IS GO BACK TO A POSITIVE REAL INTEREST RATE ENVIRONMENT AND MAINTAIN NOT GOING FORWARD. BASICALLY, HE SAID'S -- THE FED'S RATE CUTS BARELY KEEP UP WITH THE PACE AT WHICH INFLATION ACCELERATES OVER THE NEXT YEAR. WE STILL WANT TIGHTER MONETARY POLICY. JONATHAN: MICHAEL, THANK YOU. THE FEDERAL RESERVE'S DETERMINATION TO KEEP A POSITIVE REAL RATE, EVEN AS INFLATION COMES DOWN LISA: THIS IS ONE OF THE BIGGEST ASPECTS OF THE TIGHTENING POLICY, THIS QUESTION OF IF YOU HOLD IT THERE FOR LONG ENOUGH, ALL OF A SUDDEN REFINANCING LETTERS. THESE COMPANIES THAT HAVE LOCKED IN RATES WILL ACCEPT HIGHER RATES. JONATHAN: THERE IS CERTAINTY WHICH IS NOT EVERYWHERE. LISA: GUY WAS SAYING CERTAINTY FOR HIGHER YIELDS COMES IN 2025. IF WE GET THERE AND HAVE NOT BROUGHT RATE SUBSTANTIALLY LOWER, YOU COULD BE LOOKING AT SOME WEAKNESS. JONATHAN: EVEN IF THEY ARE THE MORE, THEY ARE HIGHER THAN WHAT SOME COMPANIES PAID ON THEIR DEATH. LISA: THAT IS MY POINT. ESPECIALLY IF THERE IS STRENGTH AND WE DO NOT GET A RECESSION, WHICH RAISES THE QUESTION OF WHEN YOU START PRICING THAT IN. PEOPLE SEEM TO BE SAYING WE KNOW CARE. THAT IS FAR OUT THERE AND THAT SEEMS TO BE WORKING. JONATHAN: ARE YOU DOING THAT? LISA: YEAH. HAPPY SUMMER. THAT IS HOW I ALWAYS WORK. JONATHAN: HEAD IN THE SAND? LISA: OPERATION BANK OF JAPAN? JONATHAN: COMMUNICATION FROM THE BOJ LATELY IS SLIGHTLY ODD. LISA: YESTERDAY, HE ACTUALLY GOT ANGRY. JONATHAN: BUT WE HAD DISAPPOINTMENTS. I REMEMBER CHAIRMAN POWELL, PRESIDENT LAGARDE, YOU MAKE MISTAKES. WELCOME TO THE PROGRAM. S&P 500 NEGATIVE ZERO POINT 3%. JOINING US IN ABOUT 18 MINUTES, DANA PETERSON. LOTS OF ECONOMIC DATA LATER. JOB OPENINGS IN THE ISM MANUFACTURING READ, ALL OF THAT LATER THIS MORNING. LISA: I AM CURIOUS TO SEE ISM MANUFACTURING, ESPECIALLY GIVEN WHAT ANDREW WAS SAYING, THAT HE THINKS WE COULD SEE A STABILIZATION AND DATE RE-ACCELERATION IN MANUFACTURING. MANUFACTURING NOT DRAGGING SERVICES BUT THE OTHER WAY AROUND, COMING UP TO JOIN THE SERVICES AS PEOPLE START TO DOUBLE DOWN, PARTICULARLY WITH HOUSING SECTORS AND OTHER AREAS THAT HAVE REVIVED. JONATHAN: NEXT, WE WILL CATCH UP WITH ELAINE BECKER OF TD ON THE AIRLINE INDUSTRY AND AIRPORT LOUNGES AND WHAT IS HAPPENING AT JFK JAN. WE GOT IN TOUCH WITH HER ABOUT 10 MINUTES. LISA: ALL I CAN SAY IS I LIKE THE LOUNGES. JONATHAN: I ENJOY THEM WHEN THEY ARE EMPTY AND QUIET, WHEN NO ONE ELSE IS THERE. FLY ALASKA. IT IS QUIET. JFK IS ONE OF THOSE AIRPORTS. LISA: IT IS ACTUALLY AN INTERESTING STORY. JONATHAN: FROM NEW YORK, THIS IS BLOOMBERG. >> THE AMERICAN CONSUMER HAS BEEN RESILIENT. OUR INDUSTRY IS VERY RESILIENT. WE ARE SEEING GROWTH IN THE MID SINGLE DIGITS, WHICH IS WHERE IT WAS PRE-COVET. WE ARE SEEING PRE-MEMORIZE ASIAN -- PREMIUMIZATION WITHIN THE CONSUMER. SUPER PREMIUM PRICE PRODUCTS ARE DRIVING GROWTH. JONATHAN: CEO OF A DISTILLERY. LISA: HEINEKEN DID NOT DO THAT WELL. THEY HAD DISAPPOINTING EARNINGS. WE ARE SEEING QUESTIONS AROUND BEER CONSUMPTION POST-PANDEMIC. JONATHAN: PEOPLE ARE NOT DRINK BEER ANYMORE? LISA: THEY DO JUST LAST. BUT SPIRITS ARE BACK IN. JONATHAN: THEY HARD TO GET THE YOUNGER GENERATION HOOKED ON HARM SELTZER. THEY ALWAYS SAY DRINK RESPONSIBLY. LISA: PART OF IT PROBABLY IS CRAFTED PEERS. THERE HAS BEEN A SHIFT TOWARD CRAFT. MAYBE I AM JUST SKEWED BY NEW YORK. BUT THE VERY THE QUESTIONS. JONATHAN: JETBLUE RIGHT NOW IS NEGATIVE BY 6% IN THE PREMARKET, SLASHED ITS FULL-YEAR PROFIT OUTLOOK. ADJUSTED EARNINGS WOULD BE FIVE CENTS TO $.40 A SHARE, COMPARED TO THE OUTLOOK OF $.70 TO ONE DOLLAR. THIS FROM JETBLUE EARLY THIS MORNING. THE NUMBERS THEMSELVES THIS MORNING WERE IN LINE FOR THE OUTLOOK DREADFUL. LISA: INTERESTING THAT THIS HIGHLIGHTS INTERNATIONAL TRAVEL OVER DOMESTIC AND GOES TO BUSINESS VERSUS FAMILIES. JETBLUE IS FAMILY CENTRIC, INVOCATION AIRWAY THAT FOCUSES ON ROUTES THAT FOSTER THAT TYPE OF TRAVEL. I WONDER HOW MUCH IT HIGHLIGHTS INTERNATIONAL TRIPS. JONATHAN: I HAVE ALWAYS SAID THAT I THOUGHT IT JETBLUE NEEDED A REBRAND. TOO MANY PEOPLE THINK IT IS THE SAME AS SPIRIT. PLEASE NOT DO THEMSELVES ANY FAVORS WITH THE ACQUISITION. PEOPLE SEE IT AS A LOW-END BUDGET CARRIER. I HAVE FLOWN A LOT WITH JETBLUE. TRANSATLANTIC ACROSS THIS COUNTRY TO CALIFORNIA, THEY HAVE A GREAT OFFERING ON JETBLUE FANTASTIC AIRLINE, I WOULD NOT CONSIDER IT A BUDGET, LOW-END AIRLINE, BUT PEOPLE WHO HAVE NOT FLOWN AT, I BELIEVE THEY THINK THAT IS WHAT IT IS. LISA: IT HAS GOOD RATES TO WARM PLACES. THAT IS THE REPUTATION I HAVE KNOWN IT HAS. BUT IT TRIES TO DISTINGUISH ITSELF AS A LOW-COST AIRLINE WHILE HAVING A MODICUM OF QUALITY. HARD NEEDLE TO THREAD FOR A LOT OF PEOPLE. JONATHAN: AND THEY ARE NOT RYANAIR. LISA: AND THEY ARE NOT FRONTIER. FRONTIER IS YOU PAY FOR THE AIR YOU BREATHE. JONATHAN: HELANE JOINS US NOW. LET'S TALK ABOUT AIRLINES AND THE DISTINCTION BETWEEN DOMESTIC AND INTERNATIONAL. HELANE: THE SITE HIT IT ON THE HEAD. WE ARE SEEING GOOD DEMAND IN THE NORTH ATLANTIC ESPECIALLY AND GOOD DEMAND IN THE U.S. DOMESTIC MARKET. WHAT WE HAVE BEEN THINKING IS THAT 2021 AND 2022 ARE ALL ABOUT U.S. DOMESTIC BECAUSE THERE WERE NOT IN A LOT OF PLACES TO GO INTERNATIONALLY. NOW THAT THE INTERNATIONAL MARKETS ARE OPEN AGAIN, PEOPLE ARE TRAVELING AGAIN. WE THINK THIS SUMMER IS ALL ABOUT EUROPE AND WILL BE ALL ABOUT ASIA, ESPECIALLY BECAUSE THE U.S. PASSPORT IS NOT GOING TO GET YOU AS FAR AS I GET SUED NOW. BEGINNING IN 2024, YOU WILL NEED A VISA TO GO TO EUROPE, TO THE U.K. YOU CAN DO IT ONLINE BUT IT WILL COST EXTRA. YOU WILL SEE THAT SHIFT AWAY FROM EUROPEAN COUNTRIES TO ASIAN COUNTRIES. JONATHAN: LET'S LOOK AT THE PLAYBOOK IN REGARDS TO THAT. DOES THAT REALLY HIT TRAVEL IN THAT WAY, GIVEN HOW EASY IT IS TO COMPLETELY THING? I USED TO HAVE TO DO THAT WHEN I CAME TO NEW YORK. LOOK MOVE THE DIAL AND VISITORS TO EUROPE? HELANE: I THINK A COMBINATION OF THAT AND SARAH'S HAS TURNED A LOT OF PEOPLE OFF THIS SUMMER. -- FARES HAVE TURNED A LOT OF PEOPLE OFF THIS SUMMER. AS ASIA REOPENS, IT IS LIKE, LET'S GO SOMEPLACE NEW. THAT IS THE TREND YOU WILL SEE, PROBABLY BEGINNING AFTER LABOR DAY THIS YEAR AND GOING INTO 2024 AND 2025. IT WILL PROBABLY BE 2025 BEFORE WE GET WHATEVER NORMAL IS GOING TO BE, THAT SINGLE DIGIT GROWTH THAT IS PROBABLY SUSTAINABLE. THE 10% OR 20% GROWTH IN THE INDUSTRY IS NOT SUSTAINABLE FOR A VARIETY OF REASONS. LISA: WE HAVE DONE YOUR OF, NOW LET'S DO A SHOT MAKES IT THINK WE ARE ALL JUST LIVING IN A HEARD MENTALITY. LOOKING AT VISAS TO EUROPE, THEY RANGE FROM IT LOOKS LIKE SEVEN EUROS TO 40 EUROS DEPENDING ON WHERE YOU ARE GOING, BUT I COULD BE GETTING THAT WRONG. HOW MUCH IS THIS IS DRIVEN BY BUSINESS VERSUS PERSONAL TRAVEL? HOW LONG WILL INDIVIDUALS AND FAMILIES PAY PRICES THAT SEEM STICKY AND HENRY PROPP -- AND HENRY PROPP -- UNRESPONSIVE TO DEMAND PRESSURE? HELANE: I HAVE BEEN TRYING TO FIGURE THAT OUT IT SEEMS TO ME WHEN I GO ON A PLANE AND I MAKE A RIGHT TURN THAT FAMILIES ARE MAKING A LEFT TURN. AM PICKING I PAID A LOT FOR MY TICKET, BUT IT 10 WEEKS AGO. HOW COME YOU ARE GOING THERE AND I AM NOT? I THINK THAT THERE IS GOING TO BE PUSHED BACK. PEOPLE WILL SAY, WE BOUGHT ALL OF OUR STUFF DURING THE PANDEMIC , DID ALL OF OUR TRAVELING AFTER THE PANDEMIC. NOW WE ARE GOING TO GET BACK TO A NORMAL LIFESTYLE OF WORKING. OVER TIME, AS WE GET FURTHER AND FURTHER AWAY FROM THE PANDEMIC, COMPANIES ARE GOING TO REQUIRE PEOPLE, EVEN IN A HYBRID ENVIRONMENT, TO COME TO THE OFFICE MORE OFTEN. THAT WILL NOT LEND ITSELF TO TRAVELING THURSDAY TO MONDAY. AND BUSINESS TRAVEL WILL SHIFT. YOU ARE LAUGHING. LISA: NOT EVIL, JUST THE IMAGE YOU PAINT OF EVERYBODY NOT WORKING PAYING THROUGH THE NOSE TO DO EUROPE. I AM JUST WONDERING HOW LONG CAN PEOPLE KEEP NOT WORKING AND SPENDING ALL THEIR MONEY? ANY SIGNS OF PUSHBACK ON THE PRICING YET? OR IS ANTICIPATION SIMPLY AN EXTRAPOLATION OF PURE LOGIC? HELANE: I THINK IT IS A COMBINATION OF BOTH. WE HAVE SEEN DOMESTIC PRICES DOWN ON A YEAR-OVER-YEAR BASIS FROM LEVELS THAT WERE NOT SUSTAINABLE. YOU ARE STILL ABOVE 2019 LEVELS BUT BELOW 2022 LEVELS. THAT IS POSITIVE. WHEN YOU THINK ABOUT SHIFTING DEMAND, AIRLINES CAN SHIFT THAT BY LOWERING TICKET PRICES. PEOPLE WILL RESPOND. THE LAST THING I WOULD POINT OUT IS IN TERMS OF VISITING FRIENDS AND RELATIVES, CHINA WAS CLOSED FOR YEARS. IT OPENED EARLIER THIS YEAR. YOU DO NOT SEE A LOT OF BUSINESS TRAVEL THERE, SOME. YOU DO NOT SEE A LOT OF LEISURE, BUT YOU DO SEE A LOT OF PEOPLE WHO CANNOT GET HOME FOR A COUPLE OF YEARS GOING HOME. THAT IS THE TREND. 6 TO 8 MONTHS OR A YEAR LATER, YOU SEE TOURISTS PICK UP BUT WE ARE SEEING PUSHBACK ON PRICING. EVERY TUESDAY, I GET FARE SALE OFFERINGS FROM A LOT OF THE AIRLINES -- JUST SIGN UP FOR THE EMAILS TO MONITOR DISCOUNTS. THE DISCOUNTS ARE DEEPER THAN SIX MONTHS AGO. WE ARE SEEING FROM PRESSURE ON PRICES. JONATHAN: 10 SECONDS, PICK A NAME, FAVORITE AIRLINE. WHICH STOCK? HELANE: WE ARE STILL ON UNITED. LOWER DOMESTIC, HIGHER INTERNATIONAL. JONATHAN: HELANE BECKER OF TD, THANK YOU. LISA: TALK ABOUT LUNCHES. I THINK THEY ARE DONE. JONATHAN: SO MANY PEOPLE LISTENING. LISA: IT IS A SMALL VIOLIN. JONATHAN: THE WHOLE EXPERIENCE IS DREADFUL. LISA: IT IS, BUT IT HAS GOTTEN A LITTLE BETTER ON THE EDGES. LISA: ABOUT AN HOUR BEFORE THE U.S. OPEN, THIS IS NEWBURGH SURVEILLANCE AREA A TOUCH OF WEAKNESS IN EQUITY MARKETS AFTER THE FIFTH STRAIGHT MONTHLY GAIN, LONGEST STREAK WENT BACK TO 2021 ON THE S&P 500. DOLLAR STRENGTH, YOUR WEAKNESS, 1.0956. 10 YEAR YIELDS A TOUCH HIGHER. CRUDE, I AM WATCHING CREATE, -- CRUDE, CURIOUS HOW LONG WE CAN KEEP THIS RALLY. A LITTLE SOFTER TODAY BUT WE HAVE SEEN THE BIGGEST MONTHLY GAIN GOING BACK TO A TIME WHEN PEOPLE TALK ABOUT THIS AS BEING ONE OF THE SIGNIFICANT UNDERPINNINGS OF THIS DISINFLATIONARY TREND BORN OUT OF THE GLOBAL ECONOMY. COMING UP IN ABOUT 90 MINUTES, WE ARE GOING TO GET A SLEW OF DATA, ISM MANUFACTURING, AS WELL AS JOLTS. MICHAEL MCKEE JOINING US. WHAT ARE YOU LOOKING FOR THAT YOU THINK WILL BE TELLING? WHAT MATTERS MORE, JOLTS OR ISM MANUFACTURING NUMBERS? MIKE: IT IS SHORT-TERM COMPRESSED CONTEXT. YOU WILL WANT TO LOOK AT JOLTS. THAT IS WHAT THE FED HAS BEEN LOOKING AT TO TELL THEM HOW TIGHT THE LABOR MARKET IS. WE ARE LOOKING AT THE DROP OF ABOUT 224,000 JOBS -- JOB OPENINGS. WHAT THEY REALLY MEAN IS THE JOBS TO UNEMPLOYED RATIO, WHICH IS 1.6 NOW. WE WILL SEE IF THAT GOES DOWN. IT IS STILL HIGHER THAN 121. WITH ISM, WE ARE STILL LOOKING AT CONTRACTION, BUT THE QUESTION WILL BE DOES IT IMPROVE? WHAT HAPPENS TO PRICES PAID AND EMPLOYMENT? WE HAVE SEEN THIS CONTRACTION, BUT IT IS NOT HER UNEMPLOYMENT MUCH IN MANUFACTURING. DOES THAT START TO HAPPEN? THOSE ARE THINGS THAT ARE GOING TO TELL US WHAT IS HAPPENING WITH THE LABOR MARKET, WHICH IS WHAT THE FED IS MOSTLY FOCUSED ON. LISA: I HAVE BEEN TALKING TO STRATEGISTS ABOUT HOW EVERYTHING IS AWESOME, THE U.S. ECONOMY IS DOING PHENOMENALLY. BUT ON THE CORNERS, A COUPLE OF PEOPLE SAY LOOK AT CREDIT CONTRAPTION. IT IS BEEN ONGOING. YESTERDAY, THE SENIOR LOAN OFFICER OPINION SURVEY CAME OUT AND CONFIRMED WHAT JAY POWELL SAID. THERE IS SIGNIFICANT CREDIT TIGHTENING AT THE BANKS. HOW SIGNIFICANT IS THAT IN TERMS OF PRESIDENT AND WHAT IT SAYS ABOUT RECESSION? MIKE: HARD TO SAY. WHILE THE FED HAS BEEN DOING SURVEYS OF BANK LENDING SINCE 1964, THE REAL DATA DOES NOT START UNTIL THE MID-1990'S. THAT PUTS US WITHIN THREE RECESSIONS AND DOES NOT GIVE AN INDICATION OF WHAT LEADS OR NOT. IN THE 2003 RECESSION, THANKS TIGHTENED A BIT AHEAD OF TIME, BUT THEN YOU GO TO THE GREAT FINANCIAL CRISIS. THEY DID NOT START TIGHTENING STANDARDS UNTIL WE WERE ALREADY IN RECESSION. BELOW STANDARDS WERE A REASON FOR THE RECESSION. HARD TO SAY WHETHER IT WILL CORRELATE DIRECTLY, BUT WE HAVE SEEN ESSENTIALLY WHAT THE FED IS LOOKING FOR, A TIGHTENING OF STANDARDS THAT IN ERIE SHOULD BRING DOWN DEMAND, NOTHING TERRIBLE, BUT IT SHOULD BRING IT DOWN. LISA: MAYBE THAT COULD CREATE THE SOFTNESS IN THE LABOR MARKET THAT CAN CREATE DISINFLATION THAT IS NOT TOO HARMFUL. THANK YOU FOR BEING WITH US. WE WILL FOLLOW UP THROUGHOUT THE DAY AND WE KEY EMPLOYMENT DATA ROUND OUT THE WEEK. WE ARE EXPECTING THE JOLTS REPORT IN ABOUT 90 MINUTES. DANA PETERSON SAYING HE JUNE JOLTS DATA WILL GIVE US A CLUE AS TO WHETHER COMPANIES ARE TAKING DOWN JOB ADS AND WORKERS HAVE SLOWED THE QUITTING TREND BOTH WILL BE IMPORTANT SIGNS THAT THE LABOR MARKET IS COOLING. IF WORKERS BELIEVE THERE ARE FEWER OPTIONS, THEY ARE LESS LIKELY TO WAIT. HOW MUCH EVIDENCE ARE YOU SEEING OF THIS KIND OF TREND? OF WORKERS GETTING LESS OF THE UPPERHAND WHEN IT COMES TO DEMANDING WAGE INCREASES AND WORKING FROM HOME? DANA: NOT MUCH THERE. WHEN WE LOOK AT THE HARD DATA, WE STILL SEE LOTS OF PEOPLE QUITTING. THAT IS WHY THE JOLTS DATA WILL BE SO IMPORTANT. THE KEY THING IS BUSINESSES ARE STILL HOLDING -- PORTING LABOR AND STILL HIRING. IF YOU ARE A WORKER AND YOU KNOW YOUR BOSS IS NOT GOING TO LET YOU KNOW BECAUSE THEY ARE AFRAID OF LOSING QUALITY TALENT OR THEY THINK THAT IF THERE IS A DOWNTURN, IT WILL BE SHORT AND SHALLOW, THEN YOU KNOW YOU HAVE JOB SECURITY. AND YOU WILL NOT MODERATE YOUR SPENDING. LISA: WE ARE NOT NECESSARILY EXPECTING A BIG SOFTENING IN THE LABOR MARKET. MAYBE SOME MODERATION BUT NOT SIGNIFICANTLY. CITIGROUP EXPECTS A RE-ACCELERATION IN ISM ANY FRACTURING DATA, ONE OF THE WEAKER SPOTS IN THE ECONOMY. IS THIS A BACKDROP FOR INFLATION CONTINUING TO COOL? OR DO YOU CHALLENGE THAT? DO YOU THINK THAT BECAUSE OF WHAT WE ARE SEEING IN THE REST OF THE ECONOMY, IT IS DIFFICULT TO SAY THAT? DANA: IT IS DIFFICULT TO SAY. CERTAINLY WHEN YOU LOOK AT MANUFACTURING, IT HAS BEEN IN RECESSION BECAUSE CONSUMERS ARE NO LONGER BUYING GOODS ONLY. NOW THEY CAN BUY SERVICES. WE HAVE BEEN TALKING A LOT ABOUT TRAVEL. CERTAINLY, THAT IS WHAT PEOPLE ARE DOING. IT IS HARD TO IMAGINE, AT LEAST IN THE SHORT RUN, THE MANUFACTURING SECTOR TURNING AROUND ANY TIME SOON, BUT WE HAVE TO PAY MORE ATTENTION TO SERVICES. THAT IS THE BIGGER PART OF EMPLOYMENT, BOLSTERED BY THE FACT THAT SOME INDUSTRIES HAVE NOT RECOUPED ALL THE PEOPLE HE LOST DURING THE PANDEMIC IN TERMS OF LAYOUTS AND COMPANIES ARE HOLDING ONTO LABOR. WITHOUT HOLDING ON, THEY ARE INCREASING WAGES AND BENEFITS, WHICH IS COSTLY AND FEEDS DIRECTLY THROUGH TO INFLATION. LISA: JOHN AND I WERE TALKING ABOUT CVS AND HELP THEY ARE ENGAGING IN ANOTHER ROUND OF LAYOFFS IN THEIR CORPORATE OFFICES. HOW MUCH HAS THIS CONTINUE TO BE A WHITE COLLAR RECESSION IN WAYS THAT ARE NOT FULLY REPRESENTED IN THE OVERALL DATA? THERE HAVE BEEN POCKETS THAT HAVE SEEN MORE SUBSTANTIAL LAYOFFS AND WEAKENING THAN EXPRESSED IN THE HEADLINE LEVEL? DANA: PEOPLE THINK IT IS A WHITE COLLAR RECESSION BECAUSE WHEN YOU LOOK AT WHO IS GETTING LET GO, IT IS PEOPLE INTACT AND FINANCE. BUT TECH AND FINANCE DID INCREDIBLY WELL DURING THE PANDEMIC, A LOT OF DEMAND FOR BOTH AND A LOT OF OVER HIRING IN BOTH SECTORS. NOW WE ARE SEEING RIGHTSIZING AND FINANCE AND TECHNOLOGY AND WE ARE SEEING SOME LAUGHS SPREAD TO OTHER AREAS, -- LAYOFFS SPREAD TO OTHER AREAS, BUT YOU ARE NOT SEEING BLUE-COLLAR WORKERS GO BECAUSE MOST DEMAND IS FOR IN-SERVICE -- IN PERSON SERVICES. THIS WAY IT SEEMS LIKE IT IS A WHITE COLLAR VERSUS BLUE-COLLAR RECESSION, BUT IT IS MORE ABOUT LABOR SHORTAGES VERSUS CANNOT. LISA: HOW MUCH HAVE WE CORRECTED LABOR SHORTAGES? DANA: THAT IS WHY THE JOLTS DATA ARE SO IMPORTANT. I LIKE TO LOOK AT IT EVEN THOUGH SOME HAVE ISSUES. YOU CAN LOOK AT HOW MANY JOB OPENINGS VERSUS HOW MUCH -- HOW MANY ARE BEING HIRED. YOU STILL HAVE TREMENDOUS VACANCIES ACROSS ALMOST EVERY INDUSTRY. ONLY SOME LIGHT CONSTRUCTION CAN GO IN AND OUT FROM MONTH TO MONTH, BUT ALMOST EVERY INDUSTRY IS SAYING WE HAVE OPENINGS AND ARE NOT FINDING THOSE PEOPLE WHEN WE ASKED CEOS WHAT THEY THINK, MANY ARE CONCERNED THEY WILL NOT FIND QUALIFIED WORKERS OVER THE NEXT YEAR. THAT IS FROM OUR Q2 SURVEY. WE WILL DEFINITELY SEE UPDATES IN OUR SURVEY COMING OUT THIS WEEK. LISA: DANA PETERSON, THANK YOU. WE WILL CATCH UP WITH YOU IS THAT DATA BECOMES CLEARER. EMPLOYMENT -- WORKING OUT WITH EARNINGS THIS MORNING. THEY PAID UP FOR DRIVERS AND SAID THEY DID INCREASE SPENDING IN ORDER TO ATTRACT 33% MORE DRIVERS IN ORDER TO CATER TO A RECORD AMOUNT OF RIDERSHIP. THIS HIGHLIGHTS THE INCREDIBLE DEMAND FOR DRIVERS FROM EVEN THE TIME WHEN PRICES ARE GOING UP TREMENDOUSLY. HOW LONG CAN THAT LAST? MANDEEP: UBER IS A CLEAR CATEGORY LEADER. ESPECIALLY WHEN IT COMES TO MOBILITY. ON THE DELIVERY SIDE, THEY ARE GROWING. IT IS NOT GREAT GROWTH AND BUSINESS IS DECLINING. EVERYTHING WHEN IT COMES TO UBER IS DRIVEN BY MOBILITY. RIGHT NOW, THERE IS THE SUMMARY SEASONALITY, WHICH IS HELPING. WE LOOK PAST THAT, GROWTH IS TAPERING OFF. SOME OF IT IS DRIVEN BY PRICING, SOME DRIVEN BY SHARED GAIN FROM LEFT. UBER'S CATEGORY-LEADING POSITION IS WHAT IS DRIVING THIS BUT I WORRY ABOUT MARKET GROWTH GOING FORWARD. LISA: THERE IS ALSO A QUESTION ABOUT CONSUMER PUSHBACK ON THE PRICING WE WERE TALKING ABOUT EMPLOYMENT AND HOW SOME OF THE DRIVERS ARE BEING LURED INTO WORKING FOR UBER. YOU ALSO SEE PRICES GOING UP TO PAD PROFITS. IS THERE PUSHBACK? MANDEEP: NUMBERS SUGGEST, GIVEN THE SUPPLY GROWTH, RIGHT NOW, NOT A LOT OF PUSHBACK. AS A PLATFORM, IT OFFERS YOU THE FLEXIBILITY TO WORK PART-TIME, DRAG YOUR INCOME, BUT THEY STILL THINK WHEN IT COMES TO RATES FOR A PLATFORM LIKE THIS, HAVING 20% PLUS TAKE RATES AND NOT BEING ABLE TO SHOW LEVERAGE IN YOUR BUSINESS IS WORRISOME. WE ARE AT A RUN RATE OF $35 BILLION HERE. YOU HAVE TO ASK YOURSELF AT WHAT RATE WILL THIS BUSINESS START EARNING SERIOUS FREE CASH THE? BUT RIGHT NOW, THE COUNT IS GOING UP. THE NUMBER IS HEALTHY BUT IT IS ALL DRIVEN BY MOBILITY IN THE END, YOU HAVE TO ASK YOURSELF IS THE DELIVERY BUSINESS REALLY COMPLEMENTARY? IS THE FREIGHT BUSINESS REALLY ADDITIVE TO THE BUSINESS? PROBABLY NOT. LISA: DOES THE WEAKNESS IN THE FREIGHT ASPECT POINT TO SOME OTHER SLOWDOWN -- WHETHER IT IS IN GENERAL WITH GOODS OR A BROADER CONSUMER DISCRETION, AT LEAST PULL BACK A BIT IN CERTAIN AREAS? MANDEEP: UBER IS NUMBER FIVE OR SIX WHEN IT COMES TO THE FREIGHT SIDE OF THE BUSINESS. AT LEAST ON THE MOBILITY SIDE, THEY ARE A CATEGORY LEADER WE HAVE SEEN THIS WITH OTHER TRANSPORT DATA. THEY ARE TRYING TO POSITION THEMSELVES AS A DIGITAL COMPANY. IT IS AN ASSET BUSINESS. IT DOES NOT REFLECT THAT. WE WAVING THE BUSINESS IS BEING RUN, INSURANCE COSTS, THAT IS A WILDCARD. AND THE EMERGENT LEVERAGE GOES DOWN. THAT IS WHERE THE SUSTAINABILITY OF FREE CASH FLOW OR HOW THIS BUSINESS GOES OVER TIME, IT COMES INTO QUESTION. YOU CAN HAVE SOME COST ITEMS SPIKE. LISA: WHICH IS A REASON WHY WE END UP WITH A SITUATION WHERE SOME ARE WONDERING WHETHER THE MOBILITY ASPECT WILL BE PURCHASED BY AN AUTO MANUFACTURERS WHO WILL END UP RUNNING IT AS AN AUTONOMOUS DRIVING FLEET. IF YOU'RE JUST RUNNING US, YOU SEE THE S&P LOWERED BY ABOUT 4%, 4595.25. WE ARE TALKING ABOUT MANDEEP SINGH. THURSDAY, AMAZON AND APPLE COMING OUT WITH BIG EARNINGS. WE SEE MASSIVE GAINS IN TECHNOLOGY COMPANIES. THE EARNINGS SEEM TO CONFIRM IT. DO YOU EXPECT THAT TO CONTINUE? OR DO YOU THINK THAT AS WITH UBER, THERE ARE SIGNS THIS IS NOT SUSTAINABLE? MANDEEP: THIS IS ALL DISCRETIONARY, PEOPLE UPGRADING THEIR PHONES OR NOT. MY SENSE IS RAISING FEES WILL SLOWDOWN THE RATE OF UPGRADES. YOU WILL SEE WHETHER HARDWARE DEMAND IS PICKING UP OR NOT. AND AMAZON SHOULD PARTICIPATE. THEY HAVE TAKEN ON GROWTH RATES. THAT IS SOMETHING TO WATCH OUT FOR IT. LISA: DO YOU THINK UNDER THE BIG AUTO MANUFACTURERS IS GOING TO BITE UBER? MANDEEP: IT IS TOO EARLY. UBER FIRST HAS TO DIVEST ITS FREIGHT BUSINESS AND WHAT THEY WILL DO WITH THE DELIVERY BUSINESS. STILL TOO EARLY FOR THAT AND WE HAVE NOT ANY SIGNS OF AUTONOMOUS DRIVING IN THE REAL BUSINESS. YOU WANT TO SEE THAT FIRST. LISA: THANK YOU FOR BEING WITH US AHEAD OF A BIG WEEK OF EARNINGS. UBER EARNINGS BETTER THAN EXPECTED ON THE PROFITABILITY SIDE. HOWEVER, IN THE FREIGHT ASPECT, A DECLINE IMMERSING ACROSS THE BOARD AS PACKAGES AND SHIPPING COME DOWN. RIGHT NOW, EVEN OF SOFTNESS IN MARKETS AS PEOPLE ANTICIPATE A SLEW OF DATA, INCLUDING MANUFACTURING, ACROSS THE WORLD. >> IT IS HARD TO DEFAULT ON YOUR DEBT IF YOU DO NOT HAVE A DEBT MATURITY COMING DUE. THAT PUSHES OUT RISK OF DEFAULT INTO 2025, BUT THE WORLD COULD LOOK DIFFERENT BY 2025, EITHER LOWER OR HIGHER INTEREST RATES AND PROBABLY ON THE VERGE OF A RECOVERY. LISA: LOCKED IN COSTS HAVE VENT ONE OF THE KEY BUFFERS TO WHAT OTHERWISE WOULD HAVE BEEN A LIKELY CREDIT CYCLE, BOTH WHEN IT COMES TO CORPORATIONS AND INDIVIDUALS IN AREAS LIKE HOUSING. THAT WAS GUY LEBAS. WE ARE LOOKING AT MARKETS A BIT SOFTER. WE HAVE BEEN TALKING ABOUT THE U.K. HOUSING MARKET AND HELP MUCH PRICES HAVE DECLINED. BUT THE U.S. HAS BEEN RESILIENT, DEFYING EXPECTATIONS. JOINING US NOW IS JONATHAN MILLER, PRESIDENT AND CEO OF MILLER SAMUEL, WHO HAS AN OVERVIEW OF HOUSING MARKETS AT A TIME WHERE IT HAS BEFUDDLED PRETTY MUCH EVERYONE. WHAT IS YOUR TAKE ON U.S. RESILIENCE? JONATHAN M.: IT IS THE DIFFERENCE BETWEEN VARIABLE AND FIXED RATES. MOST OF THE WORLD RELIES ON VARIABLE MORTGAGE RATES. IN THE U.S., PEOPLE ARE LOCKED IN. THE REASON WHY WE DO NOT HAVE A A LOT OF INVENTORY -- INVENTORY IS THE METRIC TO FOCUS ON -- THAT IS BECAUSE PEOPLE ARE WETTED TO THEIR LOW RISK -- WEDDED TO THEIR LOW RATES. LISA: U.S. HOMEOWNERS ARE NEARLY TWICE AS WILLING TO SELL THEIR MORTGAGE RATE IS 5% OR HIGHER. BUT YOU MEET THAT CRITERIA. JONATHAN M.: RIGHT. 80% ARE SITTING AND WAITING. THERE IS UNCERTAINTY. EVERYBODY IS EXPECTING A RECESSION. WE HAVE BEEN FORECASTING A RECESSION FOR 2 YEARS. WHEN CONSUMERS ARE IN CERTAIN THEY SIT AND WAIT. AND PEOPLE THAT MAKE ONE -- MAY WANT TO BUY, THEY HAVE TO SELL THEIR HOUSE TO DO IT, BUT THEY CANNOT FIND A HOUSE. INVENTORY IS EXTREMELY LOW. LISA: CAN YOU GIVE US A SENSE OF THE LAST TIME THAT INVENTORY WAS THIS LOW? JONATHAN M.: THERE HAS NOT BEEN. INVENTORY NOW IN FLORIDA IS 60% OF PRE-PANDEMIC LEVELS. MANY HOUSING MARKETS ARE LOOKING AT INVENTORY UP TO 50% LOWER THAN BEFORE THE PANDEMIC, POINT RATES REALLY DROPPED AND DEMAND SEARCHED -- SRUGED. I AM NOT SURE HOW -- HOW MUCH PEOPLE REALIZE HELP EXTENSIVE THIS WAS DURING THE PANDEMIC WITH RATES BEING SO LOW. LISA: WE SEE BUILDERS GOING NUTS RIGHT NOW BECAUSE THERE IS NO INVENTORY AND PEOPLE NEED A PLACE TO LIVE. IF RATES COME BACK DOWN, IF THERE IS A GLUT OF NEW HOUSING SUPPLY, COULD YOU SEE PRICES GO DOWN DRAMATICALLY WHEN THE DOOR IS ACTUALLY OPEN? JONATHAN M.: I THINK SO. THE WAY TO THINK OF INVENTORY COMING BACK IS IF RATES DROP SUBSTANTIALLY, THEY ARE IN THE HIGHEST 6%'S , BUT IF THEY ARE IN THE 5%'S, MAYBE WE TALKED ABOUT MORE SUPPLY COMING ON, BUT WE HAVE UNEMPLOYMENT AT 3.5%. IT SEEMS LIKE MORE RATE CUTS ARE IN STORE. THAT GOES IN THE OPPOSITE DIRECTION OF RATES FALLING. LISA: WE WERE TALKING ABOUT THE U.K. I WONDER IF THERE IS ANY COROLLARY TO WHAT WOULD HAPPEN IN THE U.S. IF THERE WERE VARIABLE RATES. WE SAW PRICES FALL FAST RATES GOING BACK TO 2009. IN THE U.K., THEY DO A VARIABLE-RATE WOULD THAT BE WHAT WE WOULD SEE IN THE U.S. IF WE WERE NOT SHIELDED A 30 YEAR MORTGAGE RATE? JONATHAN M.: ABSOLUTELY. THE IDEA IS THAT PEOPLE ARE LOCKED IN AND ABLE TO ENJOY A LOWER RATE WHILE PEOPLE HE KNEW TO THE MARKET CANNOT. THERE IS A PREMIUM FOR THAT. ONE PREMIUM IS TO SIT AND WAIT. IT IS A LUXURY. WE HAVE HOME-EQUITY AT SOME OF THE HIGHEST LEVELS IN HISTORY. THERE IS NO STRESS FOR PEOPLE HAVING TO SELL. THE ECONOMY IS GOOD. PEOPLE SIT AND WAIT. THIS ALL PROCESS IS GOING TO TAKE TIME -- WHOLE PROCESS IS GOING TO TAKE TIME, A FEW YEARS. LISA: SOME SAY THE HOUSING MARKET HAS BOTTOMED AND WE ARE SEEING A RECOVERY. IS THAT ACCURATE? JONATHAN M.: I THINK WHEN YOU REFERRED TO THAT, THE REFERENCE IS TO PRICING. PRICING HAS LEVELED OFF AND IS RISING IN SOME MARKET FROM PANDEMIC HIGHS, BUT SALES ACTIVITY IS STILL WOMEN OFF -- WAY OFF. THE RATE OF DESCENT HAS SLOWED. IT IS SOMEWHAT STABLE, BUT SALES ACTIVITY IS HELD BACK BECAUSE OF INVENTORY. INVENTORY IS HELD BACK BECAUSE OF HIGH RATES. HIGH RATES ARE HELD BACK BECAUSE OF LOW UNEMPLOYMENT. IT IS THIS DOMINO THING. LISA: YOU SPEAK TO A LOAD OF MORTGAGE BROKERS, I AM SURE, AND PEOPLE WHO WORK IN REAL ESTATE. WHAT IS THE MOOD LIKE? JONATHAN M.: OVER THE LAST YEAR, THERE HAS BEEN THIS SENTIMENT THAT RATES ARE GOING TO COME DOWN. I KEEP ASKING WITH UNEMPLOYMENT AT OR NEAR RECORD LOWS CONSISTENTLY, HOW CAN RATES BE CUT? MAYBE THEY WILL DRIFT LOWER IF THE FED STABILIZES FOR A WHILE. THAT IS REASONABLE TO EXPECT BUT NOT A SHARP DECLINE. THE ECONOMY IS STILL TOO STRONG ON THE UNEMPLOYMENT SITE. THE FED IS GOING TO HAVE TO KEEP USING THEIR BASEBALL BAT TO DAMAGE THE ECONOMY. LISA: IF WE STAYED AROUND 5.5% OR EVEN IF WE GO DOWN TO 5% FOR A FULL YEAR, WHAT DOES THAT DO TO INVENTORY AND THE MORTGAGE MARKET? JONATHAN M.: THAT WOULD BE GREAT TO GET THINGS GOING. RATES IN THE MID-5%'S WOULD PULL MORE PEOPLE INTO THE MARKET, NOT IN A PANIC FLOOD OF INVENTORY, BUT IT WOULD NORMALIZE. WE WOULD SEE TRANSACTIONS PICKUP. RIGHT NOW, BECAUSE OF THE LACK OF INVENTORY, WE ARE SEEING BIDDING WARS APPROACH 40% TO 50% OF LOCAL HOUSING MARKETS. MEANING SALES THAT CLOSE ABOVE THE LAST ASKING PRICE. THAT IS BECAUSE OF LACK OF SUPPLY. DEMAND IS STILL THERE, EVEN WITH HIGHER RATES. NEW YORK METRO IS A PRIME EXAMPLE. IN SOUTHERN CALIFORNIA IS ANOTHER WHERE WE ARE SEEING BIDDING WARS ON NEARLY HALF OF THE TRANSACTIONS. LISA: ANY SOFT PATCHES? JONATHAN M.: NOT REALLY. SOFT PATCH WOULD BE DEFINING IT BY PRICE. PRICING IS STABLE. IN TERMS OF ACTIVITY, SALES, THAT IS, CERTAINLY ALMOST EVERY ROCKET IS VERY SLOW. THAT ALMOST EVERY MARKET IS VERY SLOW. NO SUPPLY, NO SALES. LISA: IS THE SUNBELT STILL IS POPULAR AS IT USED TO BE? JONATHAN M.: I WOULD SAY IT IS "HOTTER" THAN OUTSIDE THE SUNBELT, BUT, YEAH, BUT NOT AS ROBUST AS IT WAS. BUT IN A LOT OF THE SUNBELT MARKETS, INVENTORY IS TIGHTER THAN IN SAVING THE NORTHEAST, WHERE INVENTORY, WHILE IT IS IN MANY MARKETS, 20% OFF OF PRE-PANDEMIC, IT IS NOT 60% OFF. LISA: JONATHAN MILLER, THANK YOU. FASCINATING TIMES FOR THE HOUSING MARKET. I LOOK FORWARD TO YOUR NEXT REPORT. COMING UP AT 12:45 PM, THE UBER CEO FOLLOWING EARNINGS THAT HAD A SURPRISE PROFIT RECORD NUMBER OF RIDERS TO ATTRACT MORE DRIVERS BUT WEAKNESS ON THE FREIGHT SITE. WE ARE SEEING IN MARKETS A BIT OF SOFTNESS AFTER THE LONGEST STREAK OF MONTHLY GAINS IN THE S&P 500 GOING BACK TO 2020 ONE, DEFYING EXPECTATIONS. UP ALMOST 20% YOUR TO DATE ON THE S&P 500. WE HAVE FROM OPPENHEIMER A PROJECTION OF A 28% GAIN. THIS CAN CONTINUE. WHAT WILL STOP IT? WHY FIGHT MOMENTUM? EURO SOFTER VERSUS THE DOLLAR, 1.0957. A TOUCH HIGHER IN THE YIELD SPACE. CRUDE A TOUCH SOFTER AFTER THE BIGGEST MONTHLY GAIN GOING BACK TO JANUARY 2022. THIS WAS BLOOMBERG SURVEILLANCE.

Channel: Bloomberg Television

Views: 41,445

Keywords: Jon Ferro, Lisa Abramowicz, Tom Keene

Id: mk5JPqcjwP0

Length: 146min 58sec (8818 seconds)

Published: Tue Aug 01 2023