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'Bloomberg Surveillance Simulcast' Full Show 8/08/2022

'Bloomberg Surveillance Simulcast' Full Show 8/08/2022
We're expecting an eventual slowdown but it's not here yet. We're not seeing the economy going over a cliff and this is exactly the time that the Fed needs to be moving quickly. We can see areas of the economy where they're very successful in areas where they need to continue. They have to keep on raising rates. I just think we have to be careful about the level of rates that we get to. There is this path to a soft landing. I don't see why people think it's such a such an elusive thing. This is

Bloomberg

Surveillance

with Tom Keene Jonathan Ferro and Lisa Abramowicz. Good morning everyone. Jonathan Ferro. Lisa Abramowicz. Tom Keene. On radio. On television. It's a Monday. It's two days before CPI Wednesday. We're going to beat you to death through that all weekend. Kailey Leinz in for Jonathan Ferrell. He's off for one day atolls for one day. Lisa what an extraordinary weekend legislation in Washington. Greg Valliere fell off his chair. It really was a game changer for a lot of people both with respect to some of the proposals and also just what it does heading into the midterms especially as I was driving down the highway and I saw that gas prices in some places under four dollars a gallon after being up to five dollars you pair that with a legislative win and suddenly people are gaming out potentially a different outlook. Output from this midterm election cycle after a bang up job report. Then what it's really about Lisa is the...
bloomberg surveillance simulcast full show 8 08 2022
analysis of top line inflation gas coming down or core inflation. Let's be clear the

Bloomberg

survey lifts core inflation. This is the big conundrum right now. You have on one hand that headline CPI that's going to roll over and those gas prices that are coming down. How much is that fuel consumer sentiment. On the other hand that core because it is sticky. What does that mean about how far the Fed has to go. You know on Friday we got this jobs report. Everyone's cheering the fact that it looks unlikely that we're going to have a recession. People are not counting in a Volcker sized Federal Reserve which could be also the result. A lot of their publishing over the weekend. And it's good to start with. David sorry. He'll be with us in a moment with his optimism on participating in ownership of stocks. Kelly an open question to you with your weekend reading. Where's the focus. Bonds or stocks. That's a really good question Tom. I think primarily a lot of the action has been in the bond market in recent days. Yes you've had the stock rally that really is continuing in a fashion today that it didn't necessarily on Friday. But the bond market has been absolutely confounding Tom as I look at a yield curve and voted by 41 basis points on the Tues 10 spreads. Obviously you have a repricing in the short end as there is an expectation a greater expectation that the Fed is going to move 75 basis points in September. September is still a long way...
bloomberg surveillance simulcast full show 8 08 2022
away. We have a lot of data before the CPI on Wednesday. One of the more crucial. Yeah. Well said. I really really agree with that. That folks were miles away from a belief on September and certainly into the November meeting as well. I'm due to the data check right now. Kelly help me out here. I'm going to go to prison missus number the twos 10 spread. And I'm sorry Kelly. It's extraordinary. Negative 42 basis points. The call of the summer from a strategist at T.D. Securities and that rapid inversion. You know I loved one of someone said warp speed inversion is what we're seeing now. I think it has been Emmons coin. Kelly what do you see in the data. Yeah. Well the yield curve most inverted since the year 2000 Tom is certainly remarkable. What's interesting is you're starting to see a build resilience

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ing up in the equity market futures in positive territory by nine and a half points this morning. How much can not stick realistically Tom if we are talking about a Federal Reserve that is going to be more hawkish and that pivot that the equity market has been expecting isn't necessarily going to come soon. And of course interesting you're seeing yields actually moving a bit lower on the day were sub 280 on the tenure. Peter Scheer the Slater folks it'll be must watch for global Wall Street as well. The governor you don't know the Fed Governor Michele Bowman who's the community bank governor maybe less visible in the others...
bloomberg surveillance simulcast full show 8 08 2022
but nevertheless important she is in search of unambiguous and this evidence that inflation is going down. We start with an ambiguous Monday brief. So. Well I'll give you an unambiguous morning tidbit. I came in this morning and I looked at what to expect today and I said I'm going to do a Tom Keene. It is going to be the week at the beginning of the week on Wednesday. So let's start there. Wednesday we get us to ISE CPI and this really will be the issue of course CPI. How do you know that. Oh thanks. I know you're gonna mock me for it later but what you can see is bouncing around bouncing around surge up. And we're a lot higher than we have been historically in terms of the consumer price index. If you start to see that core continue to tick up how much does that indicate that the Federal Reserve has so much more to do and really has to fight this sort of roving inflation that is sticky and goes well beyond some of the transitory issues of gas and food. Thursday we get the U.S. to lie. People die. And the reason why this is particularly compelling is these are the prices at factories and manufacturers pay. How much does that continue to climb and climb at an exceeding pace than CPI. This goes into the whole. Issue of Morgan Stanley's Mike Wilson saying you're going to see profit margins crimped you are seeing these prices increase at a faster pace than consumer prices that cannot continue for that much longer without at least seeing profit margins...
squeezed or a continuation of CPI. And on Friday we gained sentiment. It should improve especially considering the fact that gas prices have gone down and the University of Michigan's sentiment survey tends to reflect that aspect. However just to give you a sense of where we are we have been at the lowest consumer confidence in history and data going back to the 1970s. How much can we revive and what does this really tell us about where the sentiment is going at a time when people are concerned about inevitability. It was easier for those of you on radio. It's an oscillating chart back 40 years. And men we plunge here in consumer sentiment Lisa. And it really speaks to the two Americas out there of being up. Jobs report 560000 plus formed with revisions. And this has been the issue. You have two Americas where you have the people on the upper end continuing to spend the consumer discretionary companies that cater to are doing just fine. And then you have people who are paycheck to paycheck with a real paycheck that is shrinking at a rapid pace. How do they deal with the outlook right now of this roving inflation moving from zone to zone. Futures up twelve the VIX under a solid 22. That's impressive. Twenty one point eight zero. Let me go to the draw up that we're seeing right now. Let's frame it out. David Sabi loaded the boat in the bottom and the middle of June I should say with a draw up of 13 percent aspects of Dow a little less up 10 percent. And the...
NASDAQ sorry resurge up 19 percent says all there is. He is the great optimist in the Midwest. David Sabi joins us within Quora. David you've always been in the market. You believe you have to participate in American equities to prosper. Are you

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y invested now or sort of a sour or be halfway invested more than halfway. Tom I didn't load up the boat in mid-June but I simply thought valuations more attractive sentiment was very bearish. Those are usually very good signs when you talk to companies anecdotally whether it's in a conference or on an earnings call. I thought the tone of the message was better than what Wall Street was pricing the stock and companies thought the same thing that their valuation was was attractive and it was a good time to be a net buyer. But it didn't load the boat. But I'm more

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y invested today. The theme over the weekend research David which goes to your work is that if inflation comes down that assumes nominal GDP comes down and the fuel portion the inflation portion of corporate revenues becomes a little less. Is that something to study and be afraid of. No. I think the main point you should study is that it seems like the magic line is 4 percent for inflation. When inflation rates are less than 4 percent stocks are your best hedge against inflation in the long term when inflation is about 4 percent. It's problematic. We need to get there. The Fed needs to still do more. Disinflation is and always will be simply a...
monetary event. All the stimulus that the Fed and the fiscal authorities put in the Fed needs to do more work. I think the stock market all embrace it and we'll still get nearly double digit returns over the next two years. David you talked a little bit in some of your research about how to treat the legislation that was passed over the weekend by Senate Democrats. How much does that change the landscape when it comes to companies buying back their shares when it comes to tax policy and issues that move beyond monetary aspects. Lisa it it's simply in policy terms gets a letter grade D maybe a letter grade F. I own 32 stocks in the mutual fund. I co manage. I'm buying these companies because I think they're good allocators of capital with the cash flow they generate. Take two names as an example to criticize the share repurchase tax. Mary ISE in Windham are growing their rooms. That means they're hiring people to build those rooms. They're growing the dividend and they're buying back shares and they're deciding how to allocate that capital best in the interest of the shareholder. And to begin to tax share repurchases I think is simply misguided because you're hurting the investors like policemen firemen laborers that I manage money for. It's simply bad policy. But could the Inflation Reduction Act actually reduce inflation David or you don't buy that. No I don't. I think I think it's got to be where the Federal Reserve...
continues to do what they're doing. They're behind the curve still. Inflation is ISE is still by far our biggest problem. It's a tax on consumer purchasing power. I don't know how this bill gets inflation under control other than if it does be the lever that ultimately tips us into a recession. Maybe that reduces inflation on the margin but it's got to start and end with the Federal Reserve and the money supply really just. You just crush it at this morning David. Is it. Is it a bill that can be harmless. And that is just political legislation before the midterm elections. I don't think harmless Tom. I think I think on the margin it hurts our ability to grow and compete. We've already stimulated the economy nearly 40 percent since March of 2020 with the monetary and fiscal stimulus. Why spend even more. Why tax even more. U.S. tax rates are now less competitive to our foreign competition. I don't think that's the solution. If we want to think about good profit growth good job growth and it's

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ing up in good returns for for investors in the equity market. David sorry. Thank you so much for the brief for the encore this morning. We didn't even get to mid-cap small cap which is his wheelhouse. We'll do that another time. You'll. I look at the markets here and the silence here of a middle of August in the heat of New York. And that is how many people including me missed the mid-June lift in equities. Yeah. What do islands is...
pregnant. 13 percent gain for the S&P since the low that we saw in June. It has been an incredible rally that has been relatively silent because nobody believes it. Right. How many people actually are going to believe it after it continues to be sustained versus continue to push back and say people need to continue to reduce their earnings profits their profit margins. And that has been the tone from Wall Street now at least for now. We've got to see here we didn't even mention oil here nicely under that hundred and twenty four dollar level. How about American oil 88 26 per barrel down 75 cents. That's interesting to see that really tilt towards 80 dollars this week would be a huge surprise. Gold under 18 under Dow Jones 1794 in the seven o'clock hour. Peter Scheer stay with us on radio and television. This is

Bloomberg

. Keeping you up to date on news from around the world with the first word on marriage could get to. The Senate has passed a landmark tax climate and health care bill giving President Biden a victory on his domestic agenda. Still the measure is a shadow of the 10 trillion dollar plan that Progressive had hoped for more than a year ago. The bill now goes to the House where the Democratic majority is expected to pass it on Friday. And a surprise change at the top of the private equity giant Carlyle Group CEO Kaesong Lee has stepped down. Lee's five year employment contract was due to expire at the end of the year.

Bloomberg

's learned...
that Lee and Carlyle's board had clashed over the contract in recent discussions at the firm's co-founder. Bill Conway will step in as interim CEO. Hong Kong has reduced the amount of time travelers entering the city must spend in hotel quarantine from seven days to three. That is greater than they expected. Easing Abbott's strict travel curbs. But Hong Kong is still an outlier in a world that's mostly reverted to pre pandemic movement. And the trade surplus in China hit another record in July going over 100 billion dollars. Exports rose a better than expected 18 percent from a year ago. That's good news for the world's second largest economy. Still economists warn that the export surge probably won't last forever. And Softbank has reported a record twenty three point four billion dollar quarterly loss. The sell off in global tech stocks continued to hammer its vision fund portfolio of investments such as Uber. Meanwhile Softbank has begun talks to sell its assets manager Fortress Investment Group Global News 24 hours a day on air and on

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Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries and which could get 10. This has been back. The Inflation Reduction Act this Senate Democratic majority has achieved what countless others have come to Washington promising to do but ultimately failed to deliver. And I am really confident that the Inflation Reduction Act will endure as one of the...
defining feats of the 21st century. He is the senator from Brooklyn. Chuck Schumer there of course Senate majority leader taking a victory lap after a marathon night for

Bloomberg

Disclosure. Are Steve Dennis falling asleep on Capitol Hill during the all nighter. Someone that knows an all nighter. Well that could be Jack Fitzpatrick. Let's get right to it with Kailey Leinz and Lisa Abramowicz this morning. Jeff Fitzpatrick knows all nighters from Memorial Union at Arizona State University where he pulled off a few of those. Jack let's just start with the basic idea. Is this any way to run a country. Why are we doing something so childish. Is all nighters to pass important legislation. If you ask senators even the ones who take advantage of that process the whole vote a rama process is not something anybody specifically came up with as a good idea. It's something they all kind of hate. But now that it's part of the process they they use it. It does speak to you know this goes through the whole budget reconciliation arcane procedure of there are certain things they can pass in the Senate with a simple majority. It's based on a 1974 law that wasn't really made for that purpose but it's been repurposed for that. And so when you see them do dozens of amendment votes kind of to torture each other in an all nighter it is it really is a sign of the way the Senate rules have been twisted over the years. And it's not something anybody really endorses....
It's just how it is. So let's talk about what's in the bill a corporate minimum tax. There also is a tax a 1 percent tax on share buybacks. There is also the ability for Medicare to negotiate for drug prices as well as electric car credits. A whole host of different things the Democrats are saying are some of the biggest efforts to tackle global warming that we have done to date. What about what's not in any more color into why Christian cinema removed the carried interest tax. Because that seemed to be a big sticking point. That was I don't know if I'd call it a big sticking point but that's one where she kind of jammed her colleagues and that was where the last minute negotiations were. And they just agreed to take it out at a certain point. Those conversations got to the point where she was pushing back and that did not raise a lot of revenue. There was not a lot of open debate about the merits of that measure on its own. But it was a measure that if a bill that raises more than 700 billion dollars in revenue over the next decade that was responsible for about 14 billion. So it didn't it wasn't something that was a make or break issue for someone like Senator Manchin who wanted some deficit reduction. And ultimately anyone could have sort of vetoed this bill when you have a 50 50 Senate. So when Senator and Senator Cinema said that's one thing she wanted out. Ultimately people agreed just to get this across the finish line. If you...
were listening earlier to David Sauerbrey he was on a money manager who is coming out and basically railing against certain components of this bill in particular some of the excess taxes that are going to be charged to companies. What's the rebuttal by Democrats and why this will not reduce momentum heading into so many people think is a recession. You know for one the Democrats face a pretty tough challenge of facing worries of a recession but also inflation. Senator Manchin pushed them as hard as he could towards something that would reduce the deficit in the name of inflation reduction. Now is it going to have that much of an impact on inflation either way. No there's not really any reason to believe that. But they had the deficit conversation. And honestly I think if you hear what President Biden says he typically says look if you're on Wall Street you're you're doing fairly well under this administration. Democrats have been talking about increasing taxes on corporations and the highest earners for a long time. They didn't even get everything they wanted. But you should not be shocked that a Democratic administration Democratic Senate did manage something to increase corporate taxes to some extent. Well it may not be a Democratic Senate for much longer. At least that is the thinking heading into the midterms in November Jack. Does this bill change anything about that calculus. I'm skeptical this is going to change that much. The economic...
effects of a bill like this are not something that hits immediately. You know the priorities that Democrats were going for in climate spending. Kind of thing is a much longer term issue. You're you're seeing the polls

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that voters are concerned about the state of the economy right now. How inflation has affected them. This this doesn't do that much in the short term. It could be a long term major accomplishment that the Biden administration ends up being very proud of. Big picture but in a matter of months between now and the midterms this is not the kind of thing that would have a massive effect. Jack go further than where Kelly was there on the first Tuesday of November. If the Republicans take the House if the Republicans eke out a 50 50 V.P. or whatever majority of the Senate. Can they reverse parts or all of this legislation. It would be very difficult to reverse this. I mean talking about a tax bill you where the Republicans won the trifecta. They want to win the House Senate and White House and then use the same budget procedure to get their own legislation across the floor which we've seen is very difficult if they win in the midterms House and or Senate. A lot of that effect is going to be they're going to have the committees they can investigate the oversight kind of stuff that you see from Congress but they would have a very difficult time reversing this without the president. You get a nap get the

surveillance

snap today. Jets Fitzpatrick...
was Steve Jones. Dennis I should say working through the weekend on this important legislation. You know Lisa I think it folds into the bond market. And to be honest. Wall Street shrugs aside these kinds of legislation. In fairness if you take a look at where this bill is versus the build back better originally it's about a tenth of the size give or take depending on what headline number you want to look at. And a lot of people are looking at underneath the hood and saying OK it has some provisions that will actually move the needle perhaps in certain industries. But overall isn't that significant. Terry Haynes came out with something over the weekend basically saying that you know this isn't gonna exactly shake the world even though Democrats want to basically advertise it as such. Still things getting done in Washington is remarkable at a time when this didn't it was not on the on the radar for a lot of people. In part of the radar is the job formation. Politics is always about jobs and Caylee. Still in shock over what we observed Friday with the revisions. A half a million jobs created. What a machine. Absolutely a blowout report. And it wasn't just about the strength of the labor market. Tom on the non-farm payrolls figure wage growth also coming in ahead of expectations. And that in particular may be even more important to the Federal Reserve. Are we going to start looking at wage gains and maybe be more important than just the headline CPI figure....
Fifty two percent odds Kailey Leinz don't

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up tomorrow. Lisa's announced the week doesn't start till Wednesday. Maybe. Stay with us folks. You got a briefing on the way to Wednesday. You can do that. Joyce Chiang Chair J.P. Morgan Research. This is

Bloomberg

.

Bloomberg

Surveillance

to say good morning to you Lisa Abramowicz and Tom Keene John Farrow off tomorrow I believe he's on Hall's one day horse for John Farrell. Kelly lines up with us this morning. Lisa let's look at the markets. Your futures up 12 Dow futures up 85. The VIX a solid under twenty two to twenty one point seven. Lisa what do you see in the bond space. Honestly just the quiescence is really amazing off the highs that we saw on Friday for the two year yield which is what I'm watching three point two percent there. You do see a bit in across the board as people reassess how far the Fed is willing to go. Also dollar weakness which I think is fascinating at a time when the Fed is going to have to move quickly. How much is this a global pivot to perhaps an aversion to recession talk or perhaps U.S. avoiding the worst case scenario. Lisa and Kelly want to talk about the short term here folks of course to get to inflation on Wednesday and then on to the Fed meeting September 1. I'm going to talk about the long term and I can do that with Joyce Chiang chair of Global Research J.P. Morgan who I really don't like because she put out a seven page special with a giant Phil Swagel...
Mike Parolee helping out John Laws and the rest of J.P. Morgan on the fiscal state of the country. Joyce I've got to read every word of this report. And it's a path out to 2052. Nobody's talking about this except you. How ugly is it for the nation in our fiscal policy out 30 years. It's looking pretty ugly Tom. I mean we're looking at debt levels that are going to a record level. We're at close to 100 percent going to one hundred and seventy percent. One hundred and eighty eight percent. And if you take a look at our view that 10 year Treasury yields are at five and a half percent by the end of the decade. You're well north of 200 percent of GDP on the debt level. And this is going to raise real questions about fiscal sustainability and the debt trajectory. If we see interest rates continue to rise because the CIO on a 10 year view is using all three point eight percent for their treasury yields. You know Tom we've got three point thirty five percent by the end of the year. You know you've got a great set on this call. The only one that looks tan and rested by the way is for Rolly. And we know you know he's leading the cushy life. Let's start with the tanned and rested for Rollie. Do we have the productivity and spirit of this economy. The little growth rate of Joe Stiglitz to grow ourselves out of this conundrum. Well you've got to look at productivity for the first half of the year and it was as Mike says atrocious nearly 7...
per cent decline and we're looking at pretty poor productivity ahead. So you take any metric any metric you know. Larry Summers Jason Furman and you look 10 years out and on our view you're at something that looks really unsustainable. And I think this is a conversation that's going to start right now because the real conversation is still on. Where are we at in the cycle and what kind of landing is isn't a hard landing or soft. Yes. We're awaiting an eminent recession but we've got to look at what potential growth is going forward. And we have only one and a half percent going forward. All right. Joyce that's exactly why I wanted to go. If we could put this moment into the trajectory of 30 years. What would it look like. Would it be a pivot point to add more debt ahead of the tsunami or would it be a pivot point to some sort of higher inflationary regime because of the geopolitical backdrop and the reissuing that you're seeing by a lot of companies. Well look there's the rich shoring the globalization but there's also just poor demographics that we're talking about here. And that's kind of a trend that we're seeing in Europe and China as well. But it's taking potential growth down. And we put that along with what we see as labor productivity which is too optimistic in the congressional budget line. And that really is a key reason why we think the potential growth the productivity is going to be lower going forward. You...
know on top of that we do see rising Treasury yields that are on the rise. So you take a look at just where we are with the primary deficit and you're going up to levels that really do point to debt sustainability. When we look at the debt service and this is you take a look and yes it's going to just you know really with the health care spending that's going to go up because of the demographics. And this is one reason why a lot of people have the confidence to go into longer term treasuries because they say there is no way that this nation given all the debt can allow yields to climb for a persistent level because of that debt sustainability before getting into the theory of that. I want to go to the moment that we're in because we're getting a lot of gloom out of Wall Street. A lot of the analytic notes are basically saying people are way too optimistic. The rally doesn't really count. It's a bear market rally. And then you could see it continue to bleed up the rally gaining steam. What makes for this huge divergence between the tone among the top Wall Street analysts and the tone among traders in the trenches. Well we've seen bear market rallies in March and then the market sold off again. And that's the question where are we right now. Look it's just clear that the Fed has a lot more work to do. And I think we're all looking at what's going to come out on Wednesday with the CPI numbers. Now for only has the forecast at eight...
point seven percent. I mean that's still going to keep the set on high alert. And we have 75 basis points in our forecast for what the Senate has to do. And still 25 basis points in November December. But a terminal rate which we were talking you know three and a quarter now we think could go up to three and three quarters percent before we really see inflation concerns come down. Now it's not the typical inflation it's the structural inflation. So it's the wage growth but also rent inflation which we have sort of north of 7 percent. Wage growth is still worth a 5 percent. So that's what we're focused on in the coming days. A soft landing I think is going to be difficult. Immaculate disinflation scenario. I think it's going to be very difficult to see that play out well. And obviously we'll be watching the inflation data on Wednesday but we'll be viewing it through the lens of the jobs report we got on Friday which

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ed an incredibly strong labor market still an escalating wage pressures in the economy. Yet that strong jobs report runs in contrast to some softer data we have seen in other parts. And I'm just wondering if you can glean a consistent message from the economic data we are seeing now. We have come into this you know this part of the cycle with excess savings and that's actually been a real cushion across developed markets and also also in emerging markets. But that excess savings is being going to weigh down. So on the...
third quarter of the year we have just 1 percent growth for the U.S. That's what we're looking at. But you've had very strong wage growth. The labor market being very strong. Also consumers holding it because of this excess savings that they come into the cycle with. But you're going to work through some of that by the end of the year. So I think we also to look at what's happening outside of the United States and where we've got Europe numbers sliding. China's Rufus disappointed on the stimulus. And on top of that remember the E lose in the month of August are on very very poor liquidity. I mean we're heading into some of the worst liquidity months where liquidity is really amplified positively and negatively. So we're at a point in the cycle right now where there's a release of no imminent recession. But I just think that the liquidity also will emphasize these moves. We could see you see a very choppy markets on the head. Well Joyce you mentioned China and obviously we consider it from an economic standpoint but there's geopolitical risk to consider as well as we see continued drills happening in and around Taiwan. How do you view just the tension between the U.S. and China potential decoupling further of the world's two largest economies and what that ultimately is going to mean for the trajectory of the global economy moving forward. Look when we think about decoupling we have to think about what's desirable and...
undesirable. And you really have to separate the global manufacturing hub from some of these issues which are much more about national security and critical infrastructure. But that's pretty tricky. And that's what U.S. Taiwan is

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ing us when we look at just the concerns about the supply chain because we have so much of the supply chain really that does move through the Taiwan Straits. And when we look at this and revisit what the precedents are nineteen ninety five ninety six when you had these kinds of tensions you had a financial market sell off but not that much impact to the real economy. Now the economies are much more integrated between Taiwan's dependency on Hong Kong and China trade and also the global supply chain. So I think that this is a tricky moment. I'm not so sure that you're going to see these military exercises come to a halt as quickly as people are you know hoping will occur. George I want to go back to your wonderful fiscal essay. Folks you can get that from J.P. Morgan is just a really tour de force with Phil Swagel of CBO Joyce. A simple question for our listeners on radio. Are viewers on TV. Is the United States becoming like France. Look what we're doing is really going to affect future generations if there isn't some attention that's paid to the fiscal and reject debt trajectory we were working at. Debt servicing costs that are going to double here and record levels of debt that we've never seen before. So...
simply this fiscal outlook is unsustainable. So you could compare it to. Perhaps you could compare it to Japan on the debt ratios. But I think that it is really a moment where you have to look at what needs to be done particularly if we see treasury yields continue to rise because all of this very been where we were at zero Treasury yields. But you really can see how this actually can change by the course of a decade. We're not talking 50 years. Josh Chang thank you so much. A tour de force for J.P. Morgan as always is well at least I haven't done the work on the H 15 series which is like from Volcker to now on a

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faith and credit and pick a duration. But you're wonder where the yield breaks where we break higher and persistently higher. I've gotten old waiting for that moment. This is the issue. So many people are talking about a Fed funds rate at 4 percent. Even some Fed officials we're talking about persistently high inflation over the next few years and people are getting more and more conviction to go into long term treasuries sending yields lower. Exactly. Because of what Joyce Chang just said if this nation is facing such massive debts it cannot sustain Treasury yields at 4 percent 5 percent 6 percent because the carrying costs become onerous. And this really is underpinning some of that conviction. The only conviction that you're seeing right now in markets would be that they would clear the market and improve the fiscal stance. And that...
would come. I mean clearly one of the great great surprises of the last I'd say 18 months. Witness California is in New York state frankly is burgeoning. Tax revenues have surprised all. Yeah that's true. And of course there'll be changes to tax policy coming off if assuming that the bill passed in the Senate over the weekend does get passed in the House. But of course it is a much more muted change in the tax policy than was originally envisioned by the Biden administration. Yet that 1 percent tax on share buybacks could have implications for this equity market. Well David sorry go to that. We'll get a lot of different opinions on that across all of

Bloomberg

here on the share buyback derby. Maybe Mr. Cook of Cupertino will weigh in on that as well. All right. So just possibly the way and we'll see you Mark Gurman reporting on Apple. They're going to soiree in September. Lisa demands by seven new things from Apple trying to get a road trip to Cupertino. Yeah yeah yeah. We need that. Eighty eight dollars tech. Always Emily Chang. This is

Bloomberg

. Good morning. Keeping you up to date with news from around the world with the first word answers you could get at President Biden and his party finally gotten the win. They've been waiting for the Senate passed the Democrats Landmark's tax climate and health care bill. The House is expected to pass the measure on Friday. Here's a slimmed down version of the ten trillion dollar plan progressives...
had sought more than a year ago. Now the question is whether it can give Democrats a boost going into November's congressional elections. San Francisco Fed President Mary Daly suggested a half percentage point increase isn't locked in at the next policy meeting. Daly told CBS News the central bank is far from done in bringing down inflation as strong jobs report on Friday bolstered support for another 75 basis point rate hike by the Fed. China's signal that not tree activity around Taiwan was continuing past those drills announced in the wake of House Speaker Nancy Pelosi's visit. The Chinese military says it conducted anti submarine and naval strike exercises today. The recent maneuvers near Taiwan has been the most provocative in decades. The United Nations Atomic Safety Agency has warned there's a real risk of a nuclear plant disaster in Ukraine. Hours after that warning Ukrainian officials said that Russian forces shelled the area around Europe's largest nuclear power plant. Ukraine says Russia shells landed near spent nuclear fuel. Moscow blamed Ukraine for the incident. And Warren Buffet bought the dip in the second quarter. His Berkshire Hathaway jumped on the market slump and was a net buyer of equities approaching three point eight billion dollars in purchases that made only a slight dent in its cash. Paul Berkshire had a hundred five point four billion dollars at the end of June. Hardly moving from the one hundred six billion at the end of...
the first quarter. Global news 24 hours a day on air and on

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Quicktake by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm rich could get to this has been back. We are far from done yet. That's the promise to the American people we are far from gone. We're committed to bringing inflation down and we'll continue to work until that job is

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y done. Some chap this weekend married Daley. They're making a splash with the San Francisco Fed. She's one of the truly great stories in American economics and she's been very visible here as we shift from forward guidance to data dependency. Lisa how do you think we're doing on that data dependency. I thought it was a very Guyton see like weekend. That's what I was going to say. We shift from forward guidance to forward guidance. That's just a little bit different. And under the guise of data dependency at what point are we really looking at data and which data. Exactly. Yeah. It's gonna be interesting to see. We welcome all of you. John Farrell off for the day. I got notice at Naples Airport and AP in Italy. Lisa they've got selected delays. So maybe as one day hauls will be a little longer to see. We'll we find that care

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y here from Capri to Naples and back to New York League. Kailey Leinz pulling the short straw and joining this morning right now. Lisa was really talking this up as being of great great interest in Reedus and joins...
us. She's chief analyst at Energy Aspects. Lisa why did you bring in Amrita Sen here on the microeconomics of that gallon of gas descending. Yes. So it's been shocking right. It's been 50 some odd days straight of gasoline prices going down and the real trigger lower for oil prices. Voice This U.S. report that

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ed the gasoline demand was even lower this summer than going back to the 2020 doldrums of the pandemic era. And so I read a number of notes and read over the weekend saying this number it doesn't make sense. Does it make sense to you. No and we don't think the numbers accurately representing what gasoline demand is in the US. So just a couple of things right. We've already had summer. We've talked about this before. It's just low liquidity. Producer hedging is going on as well. So you are going to get very kind of sharp movements in prices and you always always get selloffs in August. So that's the backdrop against which we are operating. And to your point then we get some of these gasoline prints then that starts or just proves to people who believe that we are already in a recession or we must be in a recession. But if you look at these numbers care

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y the deal on a weekly basis is coming out saying that you know two weeks or three weeks ago that number was also very very poor. Made a bit of an improvement two weeks ago. And then last week was a big dip. But then a couple of things on that. If you look at vehicle Miles...
traveled the June data point which is the final data point actually

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s that vehicle Miles traveled is up versus 20 19. If you look at ethanol about 10 percent is blended into gasoline. And if you gross the ethanol number up from the weekly numbers you actually see that gasoline demand is about 9 million barrels per day not eight point six. Like the EIA is saying there's a whole host of factors I can talk you through but two of those are the most compelling ones where we have proven data as to why these weekly numbers are not accurate. Mark Gurman Merida what's the implication here. We've seen gasoline prices in the US fall for 54 consecutive days. It's unheard of in terms of the trajectory we're seeing oil prices now solidly below ninety dollars a barrel untreated on the night Max. Where should oil prices be based on what you're seeing in the raw data. So the recent gasoline prices have come off as much more on the supply side. We have had petrochemical weakness particularly in Asia because China continues to be in and out of lockdowns. That's allowed a lot of naphtha in particular to be available to be blended into gasoline. So it's not a demand problem. It's a supply problem. But in terms of where should prices be. I think in the near term we can continue to weaken. We've got seasonally refinery maintenance coming up. This is always a weak period for crude. I'm not expecting to see a sudden increase in prices but come the...
winter particularly if after November we've first of November the SPRO stops. First of December the Russia or European embargo on Russian crude starts as well. You've got the China Party Congress which should allow we believe at least some easing in Covid restrictions. The market is going to tighten up very very quickly. So we still maintain our forecast of over 120 dollars by our end. Wow wow wow. And we don't want to talk about demand. We spend all our time on supply side looking at first and second to routers and gaming out something tangible we can put our hands on or at least believe we can. We can't do that with demand. Just for example Saudi Arabia. Actually look at the dynamics of second derivatives of oil and gas demand. Yes absolutely and I think demand which is precisely to your point because it's so much harder. They do spend a lot of time back as a whole particularly Saudi Arabia. That's one of the big reasons why the increase in the group's production was just phenomenal 100000 barrels per day. The uncertainty is just too much for them to come and add a big amount of oil. Imagine if we are really going into a recession again. Not that we believe so. Then they would have to take that oil back. Well Amrita what is a big amount of oil that OPEC plus could realistically produce. I mean how much spare capacity actually is there. Or that this is the other thing that they actually acknowledge right. That the group really outside the JCC...
there isn't a lot of spare capacity. And I also really want to highlight the difference between spare capacity and such capacity. A lot of our conversations with member countries will say yeah sure we can increase by 3 400000 barrels per day for four to six weeks offered that we would actually have to take off fields down for maintenance. That is not spare capacity. Spare capacity something that can be brought on in 30 days and sustained. Right. That's something you do on a very short term basis but actually doesn't allow you to meet. Let's say Libya goes off line but if you can only bring that oil up on for four weeks then that doesn't solve the problem. And I think that's one of the big reasons why Prince Abdulaziz in particular has been very cautious about adding barrels back because if you can't sustain it then you lose control of the upside. I'm reading to price so much. Greatly appreciate it. This morning greatly greatly appreciate. Amrita Sen with energy aspects today. You know Kelly I look at this game over oil and it's just so profound how it falls into the inflation call on Wednesday. Yeah. The headline at least. And you're also seeing it with food prices. You had food prices coming down according to the U.N. index the biggest drop in July we've seen in years. We're now back to levels seen in January. So at the gas pump at the grocery store in theory those things are easing. Then it becomes about core and that's...
stickier inflation. And we expect that that core metric is going to keep coming in hot. That's what the Federal Reserve is going to have to take a look at her to stop right now. I'm

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Surveillance

and is something that we love to do which is drive for the intellectual component of silence. Ted Love is a Global Blood Therapeutics Suzanne of the acclaimed Haverford Foot program and Martin Molecular Biology I believe through Yale Medicine. And he and Djibouti this morning were taken out by Pfizer Lisa. This is one of the companies working as hard as they can on something new and modern. Only 100 years old is our understanding of sickle cell anemia. Now sort of generalized. It's sickle cell disease is extraordinary. Take a 400 500 employees. But Lisa this is a huge deal for molecular biology and it's a six year dose of 50 dollars and 50 cents per share a four and a half billion dollars transaction. And it is a big deal when it comes to microbiology. It's also a big deal because it's one of a slew of transactions particularly in the health care industry that we have seen and are continuing to see. CBS also potentially a bidding for signify health expanding into a home health care. Just so much going on at a time when the deals market is pretty much shut free. That June silence that you're talking about earlier stock pops off a distress or bottom up in the 60 level as well. Futures of 21 Dow futures up 139. The VIX solid under 22. This is...

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. Stay with us. We're expecting an eventual slowdown but it's not here yet. We're not seeing the economy going over a cliff and this is exactly the time that the Fed needs to be moving quickly. We can see areas of the economy where they're very successful in areas where they need to continue. They have to keep on raising rates. I just think we have to be careful about the level of rates that we get to. There is this path to a soft landing. I don't see why people think it's such a such an elusive thing. This is

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Surveillance

with Tom Keene Jonathan Ferro and Lisa Abramowicz. Good morning everyone. Jonathan Ferro Lisa Abramowicz Tom Keene on radio and television. It is merger Monday Ferro missing all the excitement. Lines in for John failed today at least we believe is stuck in an airport somewhere in Italy. Lisa I'm sorry rip up the script. Forget about inflation. It's merger Monday. It's fascinating to see all of these deals being unleashed. Whirlpool paying three billion dollars in cash for Amazon's waste disposal arm. That's the latest we've also heard from Pfizer. We're also hearing about a CBS deal. So many deals after the quiet of the previous months. We had seen capital markets freeze up. They're opening up in force with the rebound that we've seen in stocks and the rebound that we've seen in bonds small transactions. And you know I really got to say you know I look at it in the media as...
it's a waste disposal business. Baloney. Come on Lisa. This is what's in your sink. They're selling and sink greater emphasis. Get rid of this dog. I've got to quiet series at home. You know eats up the olive pits. But the bottom line is this is again bolt on opportunity transactions. And here's the message Lisa. Corporations are adjusting whether it's Pfizer or Whirlpool. Hold on a I. You live in New York City and you have a garbage disposal. I mean honestly this is a whole other situation. I mean honestly that it's own experience because normally whenever I go to air BND they have a garbage disposal. I get very excited. Look this is interesting. It is coming at a time where you do have a real ambivalence especially by CEOs and wants to come with the inflation with the macro considering the fact that they have all of that uncertainty and they're still using the cash for these acquisitions as a pretty powerful statement. I should finish that thought Don at one hundred eighth mayor of New York know that I've got quite a series and sinker reader that I put in installed myself. It leaks. Let's remind on to where we are right now on inflation. And part of the animal spirit of this merger Monday is nominal GDP where it is the spirit there and good corporate earnings. Well part of the animal spirits in this market in this equity market Tom also have to do with the notion that the Fed is going to pivot eventually. But we saw a bit of a change...
forming in that idea on Friday when we got that blowout payrolls report went now pricing in about 80 percent odds of another 75 basis point hike come September which yes is a long way away. But the data we get on CPI on Wednesday could be extremely formative in that decision. Louder. Kelly come on. You're the font of wisdom here. You on this deal last night at 2 p.m. Seattle Washington four thousand four hundred people Alva La. They provide sales tax management here on merger Monday and Vista Equity buying that company for 90 350 a share in cash. So that makes it what Lisa. Four deals were announced and that we either have announced or rumors of this morning which is you know pretty typical for a merger Monday. But this is an anomaly. Inflation

2022

. Let's get back on the rails right now. We've got futures up 20 Dow futures up 137. And the VIX with that move 10 big figures from thirty two and a twenty to twenty one point five six on the VIX right now. So a nice move here. The percentage move on the Nasdaq 100 gets my attention up almost seven tenths of a percent in the yield space. The headline for me is Continued Inversion. The pros writing about this over the weekend a negative 43 basis points. Oil. Thank you Amrita Sen reaffirming one hundred and twenty dollars. Brent crude right now. Brent south of that by a modest twenty dollars. Lisa what do you have. Yeah and I got to say this morning has actually been fascinating because Joyce Chang coming out and talking...
about the overhang of debt and how that's going to send yields potentially lower over the long term because that will crimp growth and it on the sustain a lower yield to no to be functional. And he said Wednesday we get a sense of how high the inflation is right now and what the Fed may have to do to curtail it. We get U.S. July CPI. We will be looking at the headline number. The expectation based on the survey is eight point seven down from nine point one percent. That trajectory is good. How much it's coming down. It's still a pretty heady number at eight point seven. Core inflation though. How much does that continue to rise. Is it stripping out energy stripping out food. How much do you get a stick your feel as you got rents increasing and you've got medical costs increasing. You do have the roving inflation moving to those areas. Thursday we get a sense of what's going on with the prices that factory factory and factories and manufacturers are paying. Yet U.S. July PPE Eye which has climbed to record heights and climbed far beyond where we are seeing consumer prices. How much does this bleed into the Mike Wilson view of things that you see margins compressed and continually compressed and that people are behind Tom in how much they're expecting. And this to me. I think it's one big thing. Well that's really important folks to see a bear come out like Mike Wilson and really intelligently reframe caution here. Savita Subramanian of Bank of...
America the same way. Lisa moments ago John stole office who's absolutely nailed this. Ali says further legs to go in a great bull market stall office of course over it up cold. And both sides are digging in their heels. The bulls and the bears and saying everybody you guys are missing the boat. And this is really a faith based. Yeah. Friday how much is the faith getting people through that they will be able to have jobs and that they will be able to fill their tanks with the University of Michigan August Consumer Sentiment Survey. Does that confirm the feeling that we're seeing certainly in other anecdotal data that people are feeling a little better. Speaking of missing the boat a good time to segueing over to Peter Shery Ahn head of macro strategy at Academy Securities Academy is in Annapolis. And of course is a Wall Street shop with a huge military band. Peter I would be remiss if I didn't speak to you of your board's esteemed public service and their thoughts on what we're seeing on the Pacific Rim and Taiwan. Has that affected your call across the broad market. Yeah. Something we're very focused on we have 17 retired generals and admirals who serve as our geopolitical intelligence group and about 50 percent of the company or background. So first it's very near and dear to our hearts. But I think we are looking at the escalation of what China is doing and it doesn't necessarily turn into something military but it plays on this theme that...
we've been seeing China separate from the rest of the world become much more inward looking. And China is going to continue to develop relationships with autocratic nations at the expense of dealing with the West. Peter how much do you buy into this rally that we've seen a 13 percent gain in the S&P since that mid-June low. How much do you view this as wishful thinking at a time of so much geopolitical and inflationary uncertainty. Who I would say I think it's very wishful thinking having said that with VIX down at twenty two I'd like the idea of just buying calls and plants coming into the end of the summer. There is so little liquidity either side could get traction it feels right now. Again the bulls are getting traction especially after we survive Friday. But to me the inventory overhang that remains a big concern. And I'm just a little bit suspicious about how good the job data was on Friday. Suspicious in that it's not going to turn out to be that strong once we get the revisions. Peter. Yeah there's already right now over the last four months you've had this big disconnect between the establishment survey which is the headline number and then the household survey which goes into the unemployment rate there about one point eight million at one point eight million jobs different over the last four months which is a pretty big thing. So if the household started to confirm what we're seeing the establishment that would mean that the...
unemployment rate is probably much much lower which puts pressure on the Fed or we're going to get some revisions. And I suspect this could be more revisions to the establishment. And I'll post a little bit light more in line with other anecdotal evidence on jobs. Does that mean you're more in line with the Fed pivot narrative. Yes I think the Fed is going to have to pivot. I think the Fed's already gone too far. I think you're seeing inflation roll over. I think you see supply chains fix themselves. But it's the fact that the consumer looks like they're trying to buy things on discount that you're seeing margin pressure. I think all those are actually going to be relatively. I don't know that we get to the point of being deflationary. Right. I think by the end of this year we're not talking about inflation anymore. Peter it's inside baseball Monday. That's what you do when the Padres are swept by the Dodgers. So we're going there. Peter I think I just heard you say you want to do a college transaction because we may go long and we may go short. You and I remember long ago when you do like a six option trade and Peter Scheer would do an iron condor or something like that. Can you be creative in options now or do you eat it all up and premium. You eat some of it and premium. But again as you mentioned is all the way back to 22. So this is pretty low given the day to day losing. So I think you can trade your way out of it....
Pete how much is a Fed pivot going to be positive for equities versus negative. I think it's going to turn up being more negative at first. I think the realization that the market hasn't hit as the Fed is going to be pivoting because they've pushed too far. So I'm definitely not in the soft landing camp. I think we pushed too far. I think we're seeing the consumer roll over. I think you're seeing inventories build. So when people realize that we're going to have to pivot first we actually. Yes we do. We rally. I think that's the stage we've been in. But then the reality is going to hit like well we have to be very careful what our future earnings are going to look like. And it's very encouraging to see this kind of merger Monday because you're seeing companies going to accept new valuations. And I think we're a long way from being done especially on the High Flyers where they do want to get paid X the buyers are Y and we've got to sort themselves out. And I think unfortunately it's going to be closer to why the lower prices might come to fruition. Peter Shear thank you so much. Greatly appreciate it. With Academy Securities or particularly the update and their thoughts on what's going on in the Pacific Rim. Lisa. No surprise here. It's a president that maybe wants to drive the victory lap forward. This is a president. Of course Covid free I believe. Two negative tests Lisa. Yeah I remember when I heard that in...
January I think it was. And you know you get one and you're like okay now what. And then you get two and you feel a lot better. In Delaware we may hear from the president in the 8:00 hour. Yeah he's leaving Delaware at around eight thirty a.m. He is at his beach house in Rehoboth. And he's going to be flying to Kentucky to visit some of the flood victims there. How much does he really talk up the victory of a bill. It hasn't yet. He's got test. He has to talk about that. How much is he also talk about gas prices. Because that perhaps is going to affect things more than anything else when it comes to the midterm elections considering how quickly they've come down. I mean it's really dramatic Tom. It really is. But where does the level where the nation gets comfort both Republicans and Democrats. Kelly you know listen I well mainly said the state in Fargo where she drove 50 miles for a quart of milk. But other than that listen I don't even get on a car any more. Kelly you're live in this dream. I mean we got to get back under three hours before you got a sigh of relief right. Oh well things are looking better. Three dollars might be a little ambitious time. I will say I just bought a car last week. So I will be filling up my tank more. Yeah I moved to the transformation from Manhattan to Brooklyn. Yeah but the thing is she got you. She got the BMW with the slope seat where you know I can't sit up in it. I mean you know it's like a...
sport. You know a lot of cars Tom Keene fits into probably thinks there's like three Marines three and the whole marriage to. Stay with us. This is

Bloomberg

. Keeping you up to date with news from around the world with the first word I'm rich. CAC said the Senate has passed a landmark tax climate and health care bill giving President Biden a victory on his domestic agenda. Still the measure is a shadow of the 10 trillion dollar plan that progressives had hoped for more than a year ago. The bill now goes to the Senate to the House excuse me where the Democratic majority is expected to pass it on Friday. A surprise change at the top. A private equity giant Carlyle Group CEO Kaesong Lee has stepped down. Lee's five year employment contract was due to expire at the end of the year. The bugs learned that Lee and Carlisle's board have clashed over the contract in recent discussions. The firm's co-founder Bill Conway will step in as interim CEO. Hong Kong has reduced the amount of time travellers entering the city must spend in hotel quarantine from seven days to three. That's a greater than expected easing of its strict travel curbs. But Hong Kong is still an outlier in a world that's mostly reverted to pre pandemic movement. And Pfizer's agreed to buy global blood therapeutics in a deal valued at about five point four billion dollars. That will get Pfizer one of the few approved treatments for sickle cell disease. The disorder affects 20 million...
people including many who Aflac and Softbank has reported a record twenty three point four billion dollar quarterly loss. The sell off in global tech stocks continued to hammer its vision fund portfolio of investments such as Uber. Meanwhile Softbank has begun to talks to sell its asset manager Fortress Investment Group Company 24 hours a day on air and on

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Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. And which could get to. This is

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. Debating government is currently trying to manufacture a crisis over a practice that has been ongoing for decades. It's really up to Beijing to decide if their rejuvenation. If China's rejuvenation will evolve with international respect or with international condemnation. Important words from a representative of Taiwan then on Face the Nation on CBS this weekend. And of course we're continuing to monitor that story. I believe in the current scheduled to be with us from Hong Kong here in a bit at least an important adjustment. Thank you. Have a blast leading our oil coverage for this where Mr. Curry adjusts at Goldman Sachs. Yeah and then we've seen that pretty steadily although still seeing upside down the line. But what we are seeing is people reducing their short term targets because of how much we've seen. The declines really gains steam despite the tight supplies that we keep talking about. Tom Keene. Yeah we see that right now. Let me give you...
those numbers here. Goldman Sachs from a 135 down to one 18. But for next year they sustained at 125 in M. And with energy aspects really giving us the same message here moments ago always with the same messages. Jack Fitzpatrick of

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government. Jack I spent a good part of the weekend looking into some of the mathematics of the great surprise and that is a Latino the Hispanic vote which is shifted Democrat to Republican. I happened to pick an area I know the geography well of. Thank you to Boulder and see you for that. And that is Pueblo Colorado east of Colorado Springs. It is thunderous how the Republicans have taken the Latino vote in selected geographies. How does that change Washington in November. It definitely plays into the expectations of one in November. It helps Republicans in the midterms. It also I think in the big picture aside from picking some interesting races here and there makes Republicans feel a lot better about the presidential their chances in the next presidential race. Florida especially you know it's the Hispanic voters of America are not a monolith. If you're talking about a major swing state that has not been quite as swinging lately looking at Florida. There are Cuban Americans there who are particularly conservative the people who have been really open to Republicans arguments about Democrats leaning socialist as Republicans would call it. It probably is an even bigger factor looking to 2024 than in the midterms. But we have seen...
it play up in the midterms and in primaries. I mean Greg Jarreau who scarily expert on this has just been phenomenal. Wasserman of course owns the high ground. And I thought Mike Allen of DAX this weekend really had an extended note on this. Isn't it enough to decide the Senate in November Jack. It's very difficult to say. I agree. There's such there's so many factors playing into the Senate you know. I think one overriding factor that we still don't know exactly how it's going to play out in Senate races is actually the response to the Supreme Court's Dobbs decision. And we don't know how much that's going to maybe outweigh other concerns. I'm not sure exactly how much the shifting expectations of how Hispanic voters will play specifically in Senate races. But in the long term it's something Republicans have to be happy about. It's just these midterms are tough to pin down seeing the struggles of the president and his popularity. But meanwhile growing enthusiasm among Democrats especially up in the Dobbs ruling we still really don't know what the main story is going to be of the midterms. Obviously Republicans feel better than Democrats. But there are there are kind of conflicting narratives right now. I'll give you another narrative that's conflicting and it could be a potential driver and that's gas prices. We've been talking about it all year but particularly today as we get a 50 fifth straight perhaps if...
we get there continuing of the streak decline in gasoline prices in the United States. Is that enough. Tom this question earlier is that enough to get gasoline prices down to on average four dollars a gallon for that to make people feel better enough to give Biden a reprieve on inflation. I would be skeptical that that's good enough so that people would be overall feeling really good about the economy. It's better for gas prices to be going down than up obviously. And to have an extended streak is a nice thing but they're not particularly low. And still if you just generally look at polling on how people feel about the state of the economy and how Biden has handled the economy it's fairly negative there. There's reason to believe it gets better potentially from here until November. But that's not long enough to anticipate that it absolutely is going to turn around right now. Overall the economy and voters can lump all of these together and the economy is a net negative for Democrats right now. OK so if it's not long enough to essentially turn around the economic trajectory in the way Americans are feeling about it is it long enough for any other kind of legislative victory for the Biden administration and the Democrats. Or is what we saw passed over the weekend really going to be the extent of it. This one would be a big one that the Biden administration would campaign on this bill that just passed the Senate. I don't know if that again has an...
economic effect in the near term that turns things around for them from now until the midterms. It's it's not an easy path for Democrats from here to the midterms but this bill as well as the chip's bill that the president supposed to sign into law tomorrow. The fact that they got those in the span of a week and a half is a big deal for Democrats more of a long term issue than something that flips the switch for them immediately ahead of the midterms. But those really are going to be two of their main accomplishments that they'll campaign on as well as the infrastructure bill that happened earlier. Jack thank you so much for the brief particularly there on Latino voting as we move out to November rather. And on to 2000 24 at least I've been waiting for this ad is published moments ago by NBER. You know them as the recession gauges but also terrific research opportunity for all interested in economics. Moments ago Lisa David Blanchflower of Dartmouth with Alex Bryson and Jaxon Sperling publish an updated working paper on not unemployment in America Lisa but under employment. Blanchflower is heated that we get our analysis wrong and particularly in the linkage of wage inflation. Does he basically talk about a slack that we're perhaps not tracking in the market. And that's why the labor market isn't as robust as people are saying. That's has been his argument for a long time and why he thinks the Fed is making a mistake by going too far too...
fast by hiking it off. It is a partition versus a homogenous study in his partition is part time people that want to be

full

time people. Blanchflower would say that's definitive and a lot more of America than anybody wants to look at when they bundle in all the studies course. Part of the bang up job report we saw a few days ago features a big team they advance. This is

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. Good morning.

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Surveillance

on a Monday before inflation was a huge huge data point Wednesday some would say bigger than the jobs report that we saw on Friday and look what that did. John Farrell off at least today. We unsure sure. Where he's going to be tomorrow. I believe he's stuck at the Naples Airport off of Capri but delays and all that Kailey Leinz in today at least right now futures up 16 up 18. Moments ago the VIX went under 22. Gets my attention. And I do want to mention something we've been remiss on in the last 90 minutes and that is dollar dynamics with a huge resiliency to the dollar off the jobs report a churning today with a 1 of 6 level on VIX while Euro 1 to 1 93 and yen 134 78. Just to look at the major peers I should know Turkish lira holding it 18 lira per dollar seventeen point nine six Turkish lira. I think that was enough of the aggregate data about I think I can I actually offer up a little bit of a fact check here. John is gonna be stuck in Caffrey all week is going to be permanent effect that we have the privilege of having Caylee with us for the...
whole week unless she runs away but because he's thinking oh my goodness you know if John comes back from Korea which he will not. So Tom just to give that little clarification. I thought he was on house for one day. Yeah that's an American zone was like two weeks ago. He's your pin. All right. Let's move on. Let's take a look at some of the stocks we've been talking all morning how it is merger Monday which is fascinating because it hasn't been merger Monday for quite a while. Let's look at some of the merger. CBS Health is talking about buying signify as they expand into home health care and you can see signify shares popping more than 16 percent ahead of the open CBS shares. A little change down about a quarter of a percent. Nothing to write home about. And really the Emmerson story is that Whirlpool is going to buy this company those shares up a little more than 1 percent. That's not the story. The story is a Tom Keene has a garbage disposal unit in his apartment in New York City. So I'm going to bring all of my cucumber peels for your apartment and we can get a waiver on that. Yeah I will. I will try. Also in the news very much today is that bill that was passed by the Senate now heading to the House. We could see that Tesla and Revere and both benefiting from some of the potential electric vehicle credits. Tesla shares up one point six percent revision which has been completely hammered. I mean take a look at those shares....
They've been absolutely decimated. Up one point four percent a pretty nominal move considering how much they've been tanked and global. What their picks. Tom you were talking about this earlier. It really is a fascinating deal. Pfizer planning to buy this company that has some groundbreaking sickle cell anemia treatments at a time when a lot of people are looking to the new advancements in the pharmaceutical industry. Post Covid. Interesting to see that right now. And fixed income are going to drive to Mark Cuban ahead of U.S. rate strategy at Bank of America global research. This is a timely update on where we are and where we're heading. Mark let me go with the general question here. In your research this weekend in your writing what is the distinction of the Bank of America view. So the Bank of America view has been very cautious on the outlook expecting to see a slowdown in the labor market and ultimately see that weigh on consumer spending and business spending. However the data that we got on Friday was incredibly strong a lot stronger than we and consensus were anticipating really much stronger than anybody on the street since that's been anticipated. And it does question how quickly we're going to ultimately see that slowdown. If the labor market is indeed this resilient and this links into severe Superman's work in the equity market is. Well Mark there's a wide gap between those looking for 4 percent up Fed outcome and let's call it a...
two and a half to 3 percent Fed outcome. How do our listeners and viewers actually play this massive diversion in outlook. Yeah well just like the Fed unfortunately I think that investors have to be very data dependent. Right now what the data is

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ing us in the US is that we're not seeing enough of a slowdown yet for the Fed yet to call it quits. So the Fed as they've signaled they're going to keep raising interest rates. We now think 50 in September. Another 50 in November. And then 25 in December before they're finished. That's 125 basis points of additional hikes this year. It seems like the market is anticipating something similar but the question is how long can the Fed sustain these elevated rates. The market is certainly skeptical. Pricing and cuts in the second half of next year. And we think that's right. We also question how sustainable these elevated levels of short term interest rates will be. And that's one of the reasons why you're seeing the curve so inverted. It seems like the curve certainly agrees with this notion that the Fed may be able to raise rates today but that's going to mean a slowdown tomorrow. And it's not going to be sustained. The Fed's going to have to be cutting at some point in order to prevent the economy from slowing too much. Mark I'm glad you mentioned inversion. I have the yield curve in front of me right now and I'm looking at more than 42 basis points. That is how much higher the...
two year yield is in the 10 year yield. Typically this portends recession usually within as soon as nine months. Where do you see this basically as a predictor of some sort of downturn. How long do we have. Does the depth of the yield curve inversion signify some sort of significant downturn or the magnitude there. So it certainly signals that the Fed is not going to be able to sustain the level of short term interest rates that the market is currently implying that we think is clear and unambiguous. As you note inversions typically precede recessions but not always. There's a great phrase in the bond market something like the yield curve is predicted 10 out of the last five recessions or something to that effect. So it's not always the case but it does tend to be a pretty good indicator that things will slow down. And what it is clearly indicating is that the Fed will not be able to sustain the very elevated level of short term interest rates for all that long. And we certainly agree with that. Recession or not we can debate the if a view is that we do think we're headed into one. But regardless the yield curve is certainly indicating that the Fed won't be able to sustain these levels for all that long. I'm kind of confused. I got to say I'm trying to put together this idea that you think that the numbers were too high for the jobs report and that they've got to come down. You think the Fed's going to pivot next year. What's going to make...
them pivot if we're seeing CPI potentially even at eight point seven percent which is the consensus which is still so far above that 2 percent level. Yeah. So we think that look the labor market right now is very strong. Inflation is very high. But importantly what's going to get the Fed to pivot is that both of those are going to come down. We do believe that the Fed will be successful at generating a slowdown in the labor market. We do believe that the tightening of financial conditions that we have already seen is likely causing certainly employers to rethink cap ex employers to rethink hiring plans. We do think that that's going to manifest itself over time. It's also going to weigh on the consumer and that's going to help bring down both the the elevated inflation that we see today. And it's going to allow for the labor market to ease to some extent. But look those are two core tenants of our views. And if we're wrong then the overall level of rates has to be higher in the economy. But we think we will indeed see that slowdown. We don't think it's going to be all that far away. That's what's ultimately going to allow then the Fed to pause and ultimately shift to rate cuts later next year. OK. So until we get to that point where we have some clarity as to whether or not the Fed has accomplished what it set out to do Mark how much volatility can we expect to continue seeing in the bond market. Because it has been dramatic to say...
the least. I know it's been exhausting. It's been an exhausting 20 22 I think for everybody really in financial markets and especially in the bond market. But we do expect that as the Fed sees some signs that the economy is slowing. We think that you're going to see interest rate volatility start to moderate at least peak and then ultimately decline. The fixed income market really moved in that direction a bit after the July FOMC meeting where Powell indicated that they're probably going to move slower once they're above their perceived level of nominal neutral. We still think that the Fed is biased to do that. Having a Fed that ultimately slows down even if it means 50 basis point rate increases in September or maybe November that will help decrease overall volatility until there is more clarity on the overall economic outlook. Look it's not unusual to see elevated economic volatility to see real really mixed messages from the data. When you read this part of a cycle where you're near the end of a broad expansion and we do think that as again we see clearer signs that the acceleration is upon us the Fed is going to be able to signal that they will begin to slow things down and ultimately that will lower implied volatility and realize volatility in the fixed income. OK so if overall movement will be subdued what trajectory is it going to be from here Mark if you're talking about getting to three and a half to three to three quarters percent by...
year end where does that put the 10 year. Yes. So for our 10 year forecasts look we think that they're going to end the year right around here. We've been at The View that tends to end the year at two point seventy five percent and that the curve is going to probably run the risk of becoming even more inverted at least in the near term. Again as the Fed signals that they really want to move rates higher in order to slow the economy and then they'll ultimately get the outcome that they want. And that's going to mean that they're going to be cutting that higher probably into 2024. So tends we think are going to be somewhat stuck around these levels. And we've been encouraging clients to lean long duration because there will be a slowdown coming. The Fed will be successful and that's just going to limit how high tensions can ultimately move. Well let me ask you a historic question around that. I'm looking at acceleration of inversion Mark that harkens back to June of 1980. If we get the speed of inversion you're talking about is Powell like Volker. So look Powell wants to be like Volcker and that he wants to ensure price stability. He doesn't necessarily want to engineer as sharp of an economic slowdown as well as Volcker needed in order to get that. But he's going to do what it takes in order to see inflation moderate. Now the good thing is that the market and surveys of consumers generally suggest that the Fed is still credible. I...
mean look at the tips market. Tips market is not pricing in any type of concern about runaway inflation today. Right. We'll get another update in the Amish survey on Friday. The most recent reading on that suggested that you know five year five year forward inflation was also expected to be somewhat limited. And because of that because the Fed is seen as so credible that really does help them likely not have to go to the same extremes that Volcker did. But I think Paul would very much appreciate the comparison of him to Volcker if it does mean that he's got those inflation fighting credentials. Mark thanks for the update. Mark Gurman. It was the Bank of America global research there with a real caution I would say across equities and bonds as well. Futures up 18 Dow futures up 116. VIX churning here with a 21 level that gets my attention as well. And yes in the yield space. Wow three point to three percent. The two year yield on Washington. Libby Cantrell in the 30 moment. This is

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. Keeping you up to date with news from around the world with the first word on risky gut check President Biden and his party finally got the win they've been waiting for. The Senate passed the Democrat's landmark tax climate and health care bill. The House is expected to pass the measure on Friday. It's a slimmed down version of the ten trillion dollar plan progressives have sought more than a year ago. Now the question is whether it can give Democrats a boost going...
into November's congressional elections. Join us. Doing all that military activity around Taiwan was continuing past those drills announced in the wake of House Speaker Nancy Pelosi's visit. The Chinese military says it conducted anti submarine and naval strike exercises today. The recent maneuvers near Taiwan have been the most provocative in decades and Egypt has mediated an end to three days of violence between Israel and Islamic Jihad. The fighting left 44 people dead in the Gaza Strip and it sent thousands of Israelis into shelters to avoid almost a thousand rockets fired into Israel. The confrontation began last week when Israel killed an Islamic Jihad leader. Well well well. By Anderson Electric's waste disposal business and a three billion dollar transaction in the business known as In Sync. And Rita makes garbage disposal products instant hot water taps and water filters. Whirlpool said last month that demand for appliances has dipped and would likely remain suppressed this year. Warren Buffett bought the dip in the second quarter. His Berkshire Hathaway jumped on the market slump and was a net buyer of equities reporting three point eight dollars billion in purchases that made only a slight dent in its cash fall. Berkshire had one hundred five point four billion dollars at the end of June hardly moving from the one hundred six billion at the end of the first quarter. Global news 24 hours a day on air and on

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seven hundred journalists and analysts in 120 countries which could get to. This is payback. The differences between Taiwan and the mainland need to be resolved peace

full

y. And what we've seen China do over the last few years is move away from a peaceful resolution of differences to doing so coercively and potentially force

full

y. Secretary of State Anthony Blinken there on a tour of China. He's been very very forceful. It's been interesting to see including a first meeting with Mr. Marcos Junior in the Philippines. Certainly an historic moment to see a Marco's take the leadership of the Philippines after many many years. Right now on China and Lisa read more on China this week. And I was more focused on the tots and and you know how they did with South Hampton and your garbage disposal. Yeah. What was amazing Lisa was Ferro was at the game. And you know he texted me from the Marmite box on his way to comprehend. You know I you a ticket somehow. My my box. Is it the Marmite box. So it's good to see that. Four to one is the tots. Take it out. So Lisa why don't you lead off with Mr. Curran in Hong Kong here on the disruption in China. Also we've been talking a lot about what's going on with the Taiwan airstrikes or not. The airstrikes the these sorties being operated to send a warning shot as retaliation for Nancy Pelosi's visit to Taiwan and end occur. And of course our Asian correspondent for all things economics. The more interesting aspect...
over the weekend to me was the trade balance data which suggested a record trade surplus for China even though imports from the U.S. are falling. What gives. Why does this sort of represent strength at a time when all other signs point to weakness in China. So you're right Lisa. It was a surprise. No a bumper figure for Chinese exports like you mentioned some of it is being put down to the post lock down rebound still underway. So we know that you know supply chains have been improving. Factories came back online and central. So someone's been put down to that. There's also talk of solid demand like in Southeast Asia for example in other parts of the region. But none the less it doesn't quite gel with the indicators we're getting into in the forward indicators for example in the PMI ISE some of the analysts I think was Pantheon today making the point that actually some of could be down to China's energy exports and flagging the overall number. But regardless of how you slice and dice it a lot of people are saying nonetheless that the merchandise good story out of China will cool off into the second half of this year and probably cool off quite sharply reflecting inventories globally reflecting interest rates and inflation globally. So you know a big surprise in the China export story some devil in the detail. But I don't think anybody really expects it to remain as strong as we head into the back end of this year. Yeah the pantheon data...
highlighting that the that China is exporting a lot of oil goods to Europe and to Japan and other Asian nations. America net importer of Russian oil allegedly and they could be expert in their fine goods and taking the arbitrage. All that aside there is a question about whether the CCP will move away from zero Covid after November. This is something Joyce Chang was talking about as well as some readers said in terms of increasing demand for oil and increasing some of the uncertainty later in the year. How much is Hong Kong a template for that versus an outlier as they move to curb some of the quarantine requirements. Well it is a big question Lisa. So we did have movement under quarantine restrictions in Hong Kong say it's been cut back now to three days in a hotel and then four days of self-monitoring with some conditions attached effectively now. So on a headline basis you'd say that's clearly a positive for Hong Kong and will help mobility help residents on the ground here. But nonetheless as though it's still you know quarantining for three days and the rest of the world much of the rest of the world has moved on. Much of the rest of the world's financial centers have moved on. There is a debate over how come this is happening how from China and allowing Hong Kong to go this way are they using Hong Kong as something of a petri dish. Well we do know that from the top down and president she came here a few weeks ago. He did make the point that Hong Kong...
has some wriggle room on this under the so-called one country two systems. So perhaps there is the authorities here are using wriggle room but there is a view to China's also watching cozy what happens here as a model for their own eventual exit. And a completely unfair question does China have a doctor found Chee. I mean who's you know Butch CASSIDY and the Sundance Kid. Who are those guys who's actually making Covid policy in China. They do have their own prominent scientists to have the head of their own disease agency just like the U.S. and others do Tom said. And some of these both present and former officials are quite high profile on China's social media. But of course the big debate with China is OK you've got the science and the health aspect to it. But how much of an ocean TV has been driven by the politics and the politics being that China has reaped big dividends. A public health dividend and an economic dividend out of Covid 0 on this year at least this year has been a big testament. But at the same time they're at a point now where if they do let it go we'll say the way the western world. So to speak is gone. Then obviously they will face a pretty big disruptive eggs a wave. And of course the risk of fatalities that go with that. But above all we all know the story which is the big Congress the most important political event in decades. The group call it that's due to go ahead at some point later this year maybe November....
Obviously the authorities don't want a public health disaster ahead of that. So I think that's to your transit point to be made. The scientists are there. They do have their say. But the ultimate driver of this at the moment I do think seems to be more politics than anything else. Well and we know that the pandemic isn't the only political problem for Xi Jinping. There's also turmoil in the property sector and how much more stimulus and supportive measures can realistically expect before that Congress considering that that is the situation that looks like it's just rapidly deteriorating every single day. It does seem that it will be somewhat tempered. I mean the statements we've heard from the poll appear on other official commentary is making the point that the government is willing to tolerate some economic pain as long as they can keep things somewhat stable. So you know put a floor under the housing sector which as you say isn't evidently clear enough to have done that yet. But they're trying to put a floor in that sector put a floor under consumer sentiment keep things ticking over. Economists talking about maybe 4 percent the growth rate. Obviously that's much lower than it has been and will be well below the government's target which is unusual. But nonetheless though it stops the economy falling into a hole for not getting signals are narrative of the old growth model that people talk about in China whereby the government comes...
along and puts a lot of money into the economy just spends left and right maybe on infrastructure in particular in the way it has done in the past. That particular cycle doesn't feel like it's it doesn't feel like it is coming to town trying to manage or trying to navigate and are trying not to fall further into a debt chop. That is a problem for China's economy. And thank you so much for the brief for your late evening and occur in with us here from Hong Kong. Lisa in all the reading of the weekend and as you dive into a week in particularly with inflation reports on Wednesday there can be one sentence that sticks out. This is in Peter Boockvar over Bleakly Advisory and this is on the BBC Lisa. And this is the head of Jet Blue Robin Hayes saying I now need to over hire. To me that is a fascinating sentence. Yes. About the labor economy to come in wage dynamics basically speaking to the great resignation talking about attrition talking about how in order to have the qualified people that they need to be able to keep their planes operating so you don't get stuck on the tarmac heading to Atlanta instead of Puerto Rico that you need to have an over or a filled bench of potential people. And you're seeing this across the board. How much are people companies going to avoid firing in the downturn in order to get this whole trade. Mr Hayes says to over hire. Absolutely fascinating. That quote just stopped me in my tracks. Thank you Peter Bouckaert for that....
Futures advance up 18 has become up 24. Well I guess it's a bull market. This is

Bloomberg

. Good morning. It's important to recognize that when you're in bear markets they don't go straight down. They have ratchet. This valley could continue to follow a bit longer. But we chase that and the markets seem to be more convinced that inflation is close to a peak. Core inflation that really represents how tight the domestic economy is is still rising. I think inflation is going to slow organically. This is

Bloomberg

Surveillance

with Tom Keene Jonathan Ferro and Lisa Abramowicz. It is merger Monday ahead of CPI Wednesday and University of Michigan Friday from New York City for an audience worldwide. Good morning. This is

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Surveillance

Tom Keene Jonathan Ferro Lisa Abramowicz John Farrell out all week not just today and Kelly Lyons very much. We are grateful to have her in the studio all week not just today and Tom Keene where I am struck by as the stubbornness of this rally. Despite the while I listen to you. It sounds like the gloom from Bram folks. You know what it is. Let's look at it now. The persistency of the rally is remarkable. Off of June 16th P X is now up 14 percent off the futures this morning since July 1 up 10 percent in the first few days of August. Even we had on one point two percent. I'm sorry Lisa. Futures up 23. Yes. Or you all out of triple leverage all cash. No U.S. Open. Wall of worry is having legitimacy beyond September...
beyond October beyond November when we start to assess the Fed pivot. We start to assess whether the labor market can retain the strength to see ambiguity on the Jackson Hole. And the ambiguity is framed by the Fed parlor game which is what a terminal rate of two and a half two point seventy five three percent. And way out. Anna Wong of

Bloomberg

Economics out of the five ish four point seventy five percent. I mean the gamesmanship here Lisa into Q4. We've never seen. Yeah. Especially at a time when oil prices have been swinging so wildly. And I got to say Kaylie that has been one of the most under told stories of the past few weeks with this rally. The idea that oil went from well above 100 dollars a barrel no matter which way you slice it Brent or WTI to below ninety dollars now heading even lower on the nine max. How much do we see that fueling this perception of rolling off in inflation. Well the headline yeah absolutely. And same with food prices which have come down substantially as well. Then it becomes about core in those sticky price pressures that the Fed is going to have to contend with because what started as just gas and groceries has broadened out in this economy. That is something that the Fed continually is saying we're not done yet in trying to fight. We are going to continue to push to get inflation lower raises a question of the market has it wrong if the Fed just has some kind of communication problem. But the yield curve inverted by 43 basis...
points right now on Tuesday. Tom what did you make of him. Read a sign basically saying that by the end of this year we're going to end up with still that one hundred twenty dollars a barrel and that you're going to get the roll off of the SPDR. You're going to get China back on line because they're going to get rid of the zero Covid to some degree or at least soften it and suddenly the scene changes. Let's take a moment early Elise because I think this is really important here. Reaffirms who. Jeff Curry with 120 ish call for 2023 as well at Goldman Sachs. The arch recall of those that look for higher oil prices is on the demand side. It's not the romance of what's Saudi Arabia doing in Russia. You know of. It's about demand and particularly emerging market demand. Covid will and China will do better in some way and that will bring on oil demand. That's the core of their thesis. Well and we're looking right now to see how that plays out at this persistent moment of gains. And just going through some of the gains in time you were talking about it earlier. We are seeing it continue to mount heading into the open with the Nasdaq up seven tenths of a percent. The S&P doing a little less good but still up at nearly six tenths of a percent on this merger Monday which you really have to get into. Just really deepening our understanding of Tom Keene garbage disposal that he owns and Amazon's purchase by Whirlpool. We are seeing the 10...
year continue to go down. And Tom you've been talking about this two point seven nine percent at a time where the two year well above 12 percent that curve inversion feeding some of that now for a single most important data point. Before we get to Matt broadly Lisa is 43 basis points. Let me define that right now for those removed from global Wall Street. The difference in yield between the two year and the 10 year which is point four three percentage points is Lisa knows you move the decimal point over. She did this years ago in Chicago constitutional law. Lisa help me move. Guy Johnson NYSE over hundreds and it's 43 basis points is what Randy Kroszner would say. Yeah well we're looking at right now is a little bit less than half a percentage point. That is the wall shake. When you walked in the Booth School years ago did did the walls shake. I'm not sure where to go with that Tom. I don't really recall. But I will say we do have someone who can recall that yield curve and give us some insight into how low it can go and how negative how inverted and what the meaning behind it is. Matt Burrell who covers all things writes all things fixed income head of North America investment grade and senior portfolio manager at INVESCO. And Matt how much are you looking at this yield curve and getting a little uncomfortable with its inversion given the optimism that you're seeing in earnings and in certainly the credit space as well as stocks. Good morning Lee said...
it's been it's been really interesting time for rates and it's always funny me when our when our traders refer to days like today as seeing a more more curve flattening. And I'm saying well is it actually flattening or are we just more inverting. Because at this point when you're when you're already negative you're actually not flat and you're going to get even more negative. So when I look at the rates curve it's telling you that over the year period time the Fed has got more work to do but longer period time people believe the Fed is going to get things done and you're going to see the 10 year treasuries kind of stay anchored around this high 2s anytime we get to 3 percent. We feel like it's a good period to be buying the overall economy. Still actually doing pretty good. The numbers you saw on Friday were good. And the big question right now is always is good. Good. And I think absolutely right. Right now for the Fed to the credit market good is good. And we did not want to see jobs falling off a cliff. We didn't want to see the economy falling apart. And we got a really good number Friday which makes us still actually pretty good about things. So what gives people conviction that we're to get back down to 2 percent so quickly which is what you're seeing in Fed funds futures and what you're seeing at least in interest rate swaps down the line. How much do you have conviction that they will do that without crashing...
the economy. Basically the underpinnings of why credit is holding in and rallying to such a huge degree. So we're seeing some interesting things particularly from corporations that you would normally expect them to just start pulling back right now start cutting jobs stop investing. But we're actually seeing corporations invest cap ex in certain particular places. Right. It's going up. So you're seeing spending on inventory management you're seeing spending on supply chain you're seeing spending on renewables and batteries and things like that. So there's a lot of different ways that companies are spending money which which is good because otherwise you would start to feel as if like this inflation was just going to be just a complete a very difficult time for them to overcome. But they're spending money to get down costs. And once this eventually takes place that's going to flow through. It's going to be good for the longer term for overall inflation. And we do feel like the Fed is going to be aggressive. They're going to be ahead of this. The economy is going to slow but it's not going to slow so much that you're just going to see demand for her clip. You're going to see more of the supply get more back in balance with overall demand. On the subject of supply what are your expectations for issuance as we move through the rest of the year. Matt. So corporate issuance has been really really strong and investment grade...
over the last month or so it's been basically nonexistent high yield just last week. On Thursday we had the big metal deal. Yes that's a great market. The first time that they issued formation 10 billion dollars was over 30 billion dollars in demand. So you get a new name high a highly rated name did very very well from a demand standpoint. The high yield market. The supply the high yield market is off about 70 percent year to date. So it's been basically close. We didn't see two deals at the end of last week chartered another one. So maybe we're starting to see things thaw out there. There is enough demand now I believe to start seeing deals come in your market on the investment grade side of things. It's been mainly the banks. The banks continue to come and really have been flooding the market which is providing some interesting value. It's a bit of a bit of a value trap all year long because they keep issuing more. But overall I would say at some point the banks are going to run out of having issues having to issue and you should start to see credit spreads. They're firm up. OK. And final question just as we kind of talk about a Fed that you say is going to continue to be aggressive the specter of a recession coming down the line is that going to bring defaults this cycle or do you think the risk of that is relatively low given the position of strength we were coming from. So I think we're we're not going to be seeing significant...
falls. We're really not going to see any downgrades probably tell them to the early part of 2023. And that comes back to my statement of earlier. Good is good. You know companies don't default because there's too much employment. That just doesn't happen. So we're in a period of time where yes it's not Goldilocks prefer to see wage inflation be a little less. But as corporations are investing as corporations are hiring that's not going to lead to defaults. Now if energy were to completely fall over you know they've been on the story but we wanted a much better spot in energy than we were back in 2015 and 2018 as well. Matt Brill thank you so much. I greatly appreciate that this morning. A member barrels with Invesco. Thank you again Lisa. This is below the headlines but it's really important for the Apple community. Our Mark Gurman owns the high ground on reporting the tone and he has an absolute tour de force in his message which has gone viral this morning. In technology Lisa just to the cut to the chase of the two brats I mean children at the Abram house the new I watch is scheduled for September OK. I think that's the news you and I need to know if they're watching us. Just need it right now. You know I watch a September and there's AOS I. But in here Lisa is something really important. Germond got all his radar up on a thing called stage manager. This is a mystery. Stage manager is a huge mystery in the Apple Q3 Q4 and this...
is a software compendium that is to be polite problematic. That's the first I've heard of it. Stage manager. Maybe it'll be a

surveillance

stage manager. Highway. He doesn't mince words. He says this thing is challenged. They're struggling. Well this is the question right. How much is some of these softening we've seen in certain sales that Apple has produced. How much is that driven by certain models that haven't been as popular vs. a secular slowdown in those purchases. They've held up really well. They beat expectations. But that sale in China where they cut prices on certain products was really noteworthy for that very question. So how much for future products going to be able to be the homerun that previous ones do a day to check here. You know Oil s 88 27 and West Texas Intermediate we need the equity market green on the screen. Brando's gone long futures up 24 Dow futures up 151. We've got a seven tenths of a percent up move on. NASDAQ went under the VIX twenty one point forty nine. This is

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. Stay with us. Keeping you up to date with news from around the world with the password. I'm Jessica Gupta. The Senate has passed a landmark tax climate and health care bill giving President Biden a victory on his domestic agenda. Still the measure is a shadow of the 10 trillion dollar plan that progressives had hoped for more than a year ago. The bill now goes to the House where the Democratic majority is expected to pass it on...
Friday. A surprise change at the top of private equity giant Carlyle Group. CEO Kaesong Lee has stepped down. Lee's five year employment contract was due to expire at the end of the year.

Bloomberg

learned that Lee and Carl ISE board had clashed over the contract in recent discussions. The firm's co-founder Bill Conway will step in as interim CEO. Hong Kong has reduced the amount of time travelers entering the city must spend in hotel quarantine from seven days to three. That's a greater than expected easing of its strict travel curbs. But Hong Kong is still an outlier in a world that's mostly reverted to pre pandemic movement. Pfizer has agreed to buy global blood therapeutics in a deal valued at about five point four billion dollars. That would give Pfizer one of the few approved treatments for sickle cell disease. The disorder affects 20 million people globally including many Whirlpool Rabbi Emmerson Electric's waste disposal business and a three billion dollar transaction. The business known as incinerator makes garbage disposal products. Instant hot water taps are moved to filters. Whirlpool said last month that demand for appliances has dipped and would likely remain suppressed through this year. Global news 24 hours a day on air and on

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Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries and which could get 10. This is Quebec. Now when we're seeing wage inflation unambiguously after...
this. No accelerating at this number after the ECI after the Atlanta Fed. We have by every reasonable measure of core inflation inflation running somewhere plus or minus 5 percent. The path from 9 percent down to the mystery of a 2 percent. When Lawrence Summers the former treasury secretary of the United States president of Harvard I should mention as well a modest acquaintance with economics and talking there about the glide path and what do we do. Pick your number 5 percent or 6 percent etc.. Lisa Abramowicz. Tom Keene. Jonathan Ferro off today. I guess to the end of the week I thought it was just a one day hauls. What do I know. Kailey Leinz with us is well in right now. We're going to recalibrate into the Wednesday inflation report with Dana Peterson. She's chief economist at the Conference Board with all of the ability of the Conference Board to look at a different set of data out there. And I want to go. Dana I know Lisa's really focused on a job for economy but I want to go to your call for restrictions by the Fed after Jackson Hole. Are we going to calibrate for September 1 after Jackson Hole. Do we just need to get to Wyoming before we can look to the Fed meeting. Well Wyoming certainly is beautiful but I think that the Fed is certainly data dependent. We're going to get several more readings on inflation. Another jobs report certainly update us on on GDP. And I think the Fed is going to be looking at all of these indicators to determine whether or...
not it needs to go another 75 basis points or 50 basis points. But I think whatever it is the Fed is going to continue to raise interest rates to really around inflation. Let's do the math here. If it's 175 beat move ers 250 beat moves which is a stick I get it. But what's the. So what. Whether it's one move or two moves is a precursor to restriction. Does it matter. Well I think you know just getting above 3 percent on the Fed funds rate that's restriction. And you know we can sit around and argue about it. But I think the fact we don't do that in

surveillance

. The Fed's been raising rates this aggressively this quickly. You know it certainly is going to feel restrictive. We're already seeing that

show

up in the GDP data. Dana do you buy the data that we get. On Friday we heard Peter Shear. I just earlier saying that the data doesn't seem to cohere with some of the granular on the ground specific inputs. So do you think that it's going to get revised a lot lower it is going to give a less rosy picture of the labor market. Well I mean it's. I mean how much can you revise down. That was an astounding number over file. More than half a million jobs added in July. That would be a huge downward vision. And whatever their visions are they're probably going to be minor. What the labor market is telling us is that we still have a very strong labor market. Many people are seeing their wages rise. Many people are being hired especially...
those in-person services that struggle to find workers. It's really it's really astounding what we're seeing. And I don't think that the numbers are lying to us. So let's talk about what we heard from Peter Boockvar which I thought was really fascinating that Tom brought up that people are over hiring and companies are scarred by what happened post pandemic when they fired a lot of people and then had to bring on staff that just was not there. How much is that going to be a persistent theme throughout whatever happens this next cycle. We think that labor shortages are here to stay. A lot of its demographic. You have more people retiring from the labor market than you do young people available to refill those jobs. We also have very strict immigration policies in the U.S. that makes it very difficult to find labor from outside of the country. And still you have many people who were challenged with childcare issues. Many people don't want to work two in three jobs. That's why they're trying to find higher wage jobs. We think that this is just going to be an issue even beyond what we're thinking is going to be a brief recession in the U.S.. OK so what does that mean for how persistent upward pressure on wages is likely to be. Well certainly if inflation continues to be elevated and the Fed struggles to get back down to the 2 percent inflation target we think that there's probably the potential for a wage price spiral already if you match...
up the PCC deflator with the ECI. They're both moving together. And that's really a challenge that the Fed is trying to prevent from happening with its actions. But obviously its actions have a lagged effect. It takes a while for us to see the real impact of it as evidenced by how strong the payrolls report was on Friday. So can the Fed act quickly enough that they are actually going to be able to lasso that and get that under control. Or are we going to be looking at a situation where this actually does end up eventually out of the Federal Reserve's hands. Well I think the Fed is acting as quickly as it can. I mean other than raising rates every month I'm certainly at every meeting since March. They've addressed they've raised interest rates. And I think the Fed's doing what it can. But as you said monetary policy comes with a lag effect. First you're going to see the effects on things like mortgage rates and the housing market and then consumer spending and then inflation. And so it's going to take some time. But I you know we feel that the Fed can probably do its job and get things done in terms of bringing out inflation. Dani Burger do it. Oh yea. Does any measurement of housing rent or ownership get in the way of their plan. I mean how can housing be such a crisis so expensive so persistent that it just gets in the way of their best outcomes. Well Shirley housing is a huge driver of inflation right now for consumers in the U.S. and...
certainly as long as home prices the valuations of new and existing homes continue to rise. That's going to

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up in the 0 yard and rents with a lag of course. And so that really does present the challenge for the Fed. Dan I got to leave it there. Dana Petersen thank you so much. Greatly appreciate it. Where the conference board least Liz I featured this last week. To me it's a single single single biggest issue. It's not about the haves and the have nots. It's about both. It's about where do you put your you know your bedroom where do you put your living room. Where are you going to live. And it's a national crisis. We saw prices of homes climb substantially. They're starting to cool off. But there's a lag effect for how long it takes for that chick out to rents. And the more unaffordable house prices have gotten especially with mortgage rates where they are the more people want to rent which is the reason why they can continue getting pushed up further and further before reaching that breaking point. You're seeing that not just in places like New York City but all around the country. I mean Kelly I'm looking at the bank rate right here and I guess it's come in. But I'm sorry we were at 4 percent in February up to 6 percent and we've pulled back mightily to five point six percent. That doesn't get it done. Yeah and it's still significantly higher than if you were looking to buy a house six months ago. It comes...
back to the affordability problem. And as we have that conversation with Dana about wages people demanding higher wages. People aren't earning enough to keep up with inflation even with the wage gains we are seeing. And at what point obviously are starting to see that

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ing up in housing data. But what point does that start

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ing up in everything else people just not being as tolerant for the higher prices that they're facing. I'm sorry it's a round number. The Nasdaq is up a hundred points. Thirteen 13000 solid Dow points. It's not like the Dow Jones Industrial Average. How much is the Dow up Tom. It's up. The Dow is up 141. But I mean I'm sorry if I'm not in it. It's a bull market. This is

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a bull market. Lisa Abramowicz with us to give us team coverage here with Nasdaq futures not a taxable site. Sorry Lisa it's a melt off. Ferro would say it's a melt up. You're you're British. British accent Oh my. OK. You can write in about his Marmite references in British accent. But yes I would say it's a BOVESPA. It's a up. I would say that this is a persistent increase in terms of valuations despite all the gloom. Mike Wilson but also Goldman Sachs analysts coming out and saying that profit margins are going to get squeezed. So you're seeing the S&P up extensive cents per cent NASDAQ of eight cents at present even with two year yields climbing so significantly and climbing so...
significantly. Ryan your yields Kailey Leinz Joe Weisenthal e-mails and he goes hey stupid West Texas under 88. I mean that gets your attention. Eighty seven is not eighty eight dollars a barrel. Absolutely does especially when you see gas prices coming down in the United States for what 50 days now. Tom obviously that politically helps the Biden administration. The question is how sustainable is it. When we had people telling us earlier that oil is going to go back up to 120 dollars a barrel because supply is still so constrained. That's the question. Futures up twenty six. It's always an important conversation with Libby Cantrell head of public policy strategy at PIMCO. But this morning after historic legislation it's really critical as well. We're through. Libby Cantrell could join us here at our world headquarters. Libby I want to cut to the chase. How do you put in to process the legislation of thousands of pages. Well that's a good question. And fortunately Washington is quite quite expert at doing that. Most bills do tend to be hundreds if not thousands of pages. But I think that what what this sort of underscores how quickly this bill was able to come together to be to be passed by the Senate. We both passed by the House later this week and then promptly signed into law is that many of these ideas have actually been percolating in Washington for years. Take the drug prices in terms of allowing Medicare to negotiate drug prices with pharma. That is...
a concept that literally has been percolating as I was on the Hill back in 2003. So in some ways many of these ideas again have already been taxed. We're able to put into two legislation immediately though. The big question of course was just to get that fit that unity that unanimity among those 50 senators on the question I asked Jack Fitzpatrick. Can the Republicans take it away if they win the House and the Senate. Can they take it away. It will be very difficult. And I think what you've seen even with the Trump tax cuts is it's very difficult to take things away to take benefits away particularly on something like the drug pricing for for Medicare. That's something that pulls incredibly well. More than 80 percent of Americans support that provision. Older people tend to vote as a particularly for that difficult to take away. And then on the climate piece and you know as a reminder 400 billion dollars of your tax incentives for production and for consumption on this sort of the clean energy. Right. All of that you know pretty difficult to take away as well. And most of those last for 10 years. So I looked at the Medicare Medicaid combination for federal budget. Thank you Robert Jamison for helping out of Washington and not on a 65 and LBJ but roughly Nixon. We've gone from 1 percent of GDP are really approaching 6 percent of GDP for those two programs. I did not know that. That's really fascinating and a reason why this has been such a big issue....
And of course I looked at the pharmaceutical company's shares ahead of the open thinking that they'd be tanking because they were going to get less income from Medicare. They are not Libby which raises a question about what the tangible effect on investment will be from this bill. If even you know you had David Sour be on earlier decrying some of the concerns about the taxes on buybacks share repurchases as well as that minimum corporate tax imposed. Is there a corporate in a read through that is not getting priced in or is this not as significant a move in terms of crimping profits as some would say. Is it Lisa on your on your point about the pharma companies. And they actually got a little bit of a lifeline over the weekend because one of the bigger provisions that would have that was in the bill that would have required that pharmaceutical companies negotiate with private insurers on on the pharma price has actually got stripped out of the bill because of some parliamentary mumbo jumbo didn't qualify for the so-called reconciliation bill. So that's maybe why you're actually seeing a little bit of support in those in those names this morning. But overall I don't think we should overstate the impact of this bill. I think invariably there will be winners and losers losers like the pharmaceutical industry because some of those provisions obviously. Still as still still persisted at technology some of the companies some of the companies that have been...
able to take advantage of this sort of book income. Corporate tax rate as an arbitrage will also be losers. And then you know big winners obviously renewable which is renewables which are really priced in. So I think sort of the macro impact or even the sector impact has likely been pretty much priced in here. But overall and sort of my world the political impact I don't think has actually been priced in. I think this is a a huge boon for Democrats who really needed it. Right. The price of gas Joe Biden's disapproval ratings the generic ballot all have been major headwinds for the Democrats going into the midterms. And here they are. Here they are able to go in at sort of the 11th hour and really campaign on the fact that they can govern and they can get a big piece of their agenda that they campaigned on in 2020 through which was the climate piece. So Libby what is the market read through in terms of if the Democrats keep the Senate. If the Democrats don't lose as much of the House which seems to be the feeling that's increasingly getting speculated upon. Yes. So I think at least the conventional wisdom that the Democrats will lose the House is probably right. If you look at history right since World War Two the party in power has lost an average of 25 seats in the House. So does it. Past is prologue. Democrats face an uphill battle but the margins there do count. You know I think our view is that they could lose maybe as little as few as 10 seats or as many...
as 50 seats sort of depending on voter enthusiasm. What's actually happening in sort of October an end to the build up of November. And that margin does matter because in the long term because that means they lose fewer seats then they're going to be able to more likely recapture the House in 2024. On the Senate though and we've been saying this for a while it's much more of a jump ball. The Senate tends to not be as much of a national election because of course only a third of the Senate seats are up for re-election. Republicans have actually had more difficult map this this cycle. And some of the candidates that are running on the Republican ticket in battleground states like Georgia and Pennsylvania maybe even Ohio are less are sort of less experienced more green and as a result maybe have less of a chance to win even when the national mood is really much more supportive for Republicans. So I think bottom line here is the House is likely loss for Democrats at least at this point. But the margin does matter. The Senate much more of a jump ball. Lastly in terms of the sort of the policy implications though as long as Republicans take back just one chamber that means that Biden's legislative agenda for the next two years is likely you know dead or at least on ice for for a bit. There's still some chance of bipartisan legislation around tech and some other areas but probably on ice. So that really is for the market's perspective what people will be...
really focused on. But again for folks like me are focusing a little bit on the longer term and sort of the read through for 2024 in particular. Well Libby you mentioned voter enthusiasm a moment ago. I'm wondering if there is a lesson to be learned from Kansas and the abortion vote there the turnout that we saw. Is there an underestimation of the galvanizing effect that some of the social issues like abortion may actually have on voters approaching the midterm beyond just kind of the macro economic environment. Yeah. Again and this is again another piece of good news that the Democrats have had over the last several weeks of course. Voter turnout in Kansas much higher than expected. That ballot initiative lost by almost 20 points. Now there are some idiosyncrasies that I think are maybe difficult to extrapolate extrapolate from Kansas sort of nationally. But I think it is you know I think that for Democrats there. Their big takeaway is that this is a galvanized now and galvanizing issue. Now one important distinction of course is that was a particular issue that was on the ballot versus just knows because the midterm elections which are more general more candidates are on the ballot quickly. And this is completely unfair but it's unfair. Monday here is well we have this ginormous legislation. Is this the window for President Biden to say he's a one term president. I highly doubt he will do that. Yeah I mean theory theoretically. Sure. I think he will not do that...
especially before the midterms. But Tom it's a good point in that he will likely have to decide whether he really is going to run for 2024. Shortly thereafter. Remember that in the debates start in June of next year. So we actually need to have a pretty good idea. Be like the British were pharaoh to come back if you mean that British republic. Lisa come on. The British like to get it done sooner. Trust and all that and live is to press. Me with debate you know the debate started June. Yes. Well. Yeah. Twenty nineteen. Ready. How many people will be on stage. Who know. Two people. Look I think that if think President Biden does not win that we are going to see a very kind of open and potentially messy and rock s primary on the Democratic side. And the same thing on Republican last time wasn't right. Exactly. I think that will be the last time I was just on one side. Right. So come on. The British stewards. I know. But it's also a parliamentary system Tom. You know that. I mean this is what parliament already knows. A lot of thing really likes. Yeah. I don't know. Thank you Elizabeth. Appreciate that. It's not. No it's not a it's a parliamentary system. So you want a road trip to London. What. Are you serious. HARLOW Fairer parliamentary situation in Myanmar. Let's go to mama. Let's go to them. I'm saying let's go to the mermaid. Let's go to the market. I'm sorry Lisa. The biggest story today is a negative 44. Beeps inversion...
on the 2s 10. I mean it's screaming screaming the way it's going towards 50 basis points. We've just gone straight through prayer miseries. Call for 40 basis point inversion and you've seen that two year yield continue to climb and that 10 year old continue to go lower at least at a relative basis. So we're talking about that. Coming up on the Open with Michael Cushman global fixed income CIO at Morgan Stanley. We also have a host of other guests including Stuart Kizer leaving to go to your other program. It's John Farrow's. I'm writing A Monkey's Off in Capri. Airbus being the open. Yeah. Wonderful. Kailey Leinz and Tom Keene and Remo as well. Stay with us. Keeping you up to date with news from around the world with the first word answers you get to President Biden and his party finally got the win. They've been waiting for the Senate passed the Democrats landmark tax climate and health care bill. The House is expected to pass the measure on Friday. It's a slimmed down version at the 10 trillion dollar plan that progressives had sought more than a year ago. Now the question is whether it can give Democrats a boost going into November's congressional elections. China signal that military activity around Taiwan was continuing past those drills announced in the wake of House Speaker Nancy Pelosi's visit. The Chinese military says it conducted anti submarine and naval strike exercises today. The recent maneuvers near Taiwan...
have been the most provocative in decades. And Russia has told diplomats it's ready to welcome international monitors into a Ukrainian nuclear power plant that came under attack last week. United Nations atomic inspectors have said there's a very real risk of a nuclear disaster at the plant. Ukraine still believes there are around 500 Russian soldiers in and around the site. And the biggest U.S. meat companies getting hit by inflation. That's hurting sales of beef and chicken. Tyson Foods reported quarterly earnings that missed estimates. The company says higher prices are leading shoppers to trade down to cheaper cuts and to limit visits to restaurants. And Softbank CEO Masayoshi Son is promising there will be widespread cost cutting after a record twenty three point four billion dollar loss. The Tokyo based company lost the vast amounts of that money in its Vision Fund investment arm which marked down the value of holdings such as DO Rush and Kupang. So Frank has also lost more than six billion dollars because of the weak. Again globally is 24 hours a day on and on.

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Quicktake powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm sure you could get to this has been back. Yes headline inflation will be falling primarily because energy prices coming down but core inflation that really represents how tight the domestic economy is is still rising. And don't think we've reached the peak in that. Ellen...
Zentner Fascinating. With Morgan Stanley dovetailing the caution of Mike Wilson and her measurement of the American economy not destroyed but everyone with pause Friday for a jobs report. Lisa we haven't talked enough about that right now. I mean I'm sorry 500 whatever thousand was a whilst she me Caylee. I'm sorry. I clearly I'm just frazzled here this morning. Ferrell one day trip and I'm just fallen apart. Caylee 500000 plus is a wow statistic. It was it blew past expectations. You also had wage growth that came in higher than expected. Tom that is a strong labor market that in theory gives the Federal Reserve clearance to be as aggressive as it says it is going to be to get inflation down. Making the read we get on Wednesday and CPI core in particular all the more crucial. I don't even know why we're here today time or tomorrow. We should just come in on Wednesday. I think it's been interesting. And again a little merger Monday theme going on as well as people see a frozen social look at a set of smaller transactions right now a bigger transaction. And I mean a larger transaction has been the amount. Well let's stop right now. We've got the president here at Robert after Covid where he and Dr. Biden are getting on Marine One and they will go up Delaware Bay and they will move from Rehoboth up to Dover Air Force Base for a somber trip to Kentucky. All the challenges that they've seen in Kentucky and flooding here. Maybe Senator...
McConnell there after this important legislation will greet the president off to see for that as well. The president on Marine One in Delaware right now not on Marine One but someone looking at the strong dollar that can afford Marine One. Star Meyer head of research and effect strategy at HSBC. And I will not mince words HSBC with absolute leadership on strong dollar and resilient dollar in the last number of years. When does the dollar give it up. Not yet. Not yet. And it's interesting. It's there's been a few times hasn't there were where people have tried to call peak inflation peak economy right. That's right. And you know they got it wrong on Friday. They might get it wrong again this Wednesday around U.S. CPI. But everything we're hearing from the Fed is be patient. We want to see the numbers on inflation. We need them to come down. And so yeah I think they're calling it early. Lisa Kelly's got some important questions here. But you know what I would really want to focus on is the effect of this resilient dollar on E HSBC out of Hong Kong has a huge view of E. How does EMI survive a resilient or even stronger dollar. This is a really tricky environment for GM because you've got that strong dollar you've got a Fed tightening and you've also got a global economic slowdown. You know a lot of the time in the past we've seen the Fed tighten its economic strength not into global economic weakness. So this is a really...
problematic mix for emerging market currency. You can't find a couple of local winners but as a universe it's a you know that's a very tricky environment for them. Lisa Kelly to me this is why Damian says are so important right now. I mean I really can't say enough about it. Yeah. His work over at

Bloomberg

Intelligence is definitely crucial coverage at this moment Tom. Lisa Kailey Leinz am enjoying my new name. Daria when we talk about the dollar is it so much dollar strength or weakness of everything else. That is the backbone of your call. It's a really good call. Yeah well it feels like it's all about the dollar doesn't it. Every conversation we have about currencies with the odd exception Bank of England creeps and the ECB creeps in. But we always come back to the Fed. We come back to non-farm as we come back to U.S. CPI. So to that extent I think the dollar is at the core of the effects call. The second thing and I think this is something people are making mistake about is the dollar is at the core the cold. That doesn't mean the U.S. economy of itself is at the core of the core because we have to think about what's happening to economic growth outside of the U.S. what's happening to real incomes outside of the U.S. and is that global slowdown that is supporting the dollar despite the fact that the U.S. economy is slowing as well. And that's the mistake dollar bears for making. They've been saying hey the U.S. economy is...
going to slow. The Fed are gonna have to slow the dollar's going to slow. But the reality is the dollar does well when the global economy is under pressure. Well of course one of those economies under pressure is really the eurozone and the U.K. as well. You mentioned the BSE and the ECB. Realistically any hikes from those central banks. Can they be supportive of the currency if they're hiking into substantial weakness. Well answer the first question is yes. I think we will get more hikes. I think they recognize that have to do something to bring inflation lower but does not translate in the traditional way to currency policy. I'd say no because as he as you point out they're doing it into economic weakness. But actually like about the Bank of England frankly those I think they've kind of come clean. And saying look if we want to get inflation lower are likely side effect of that is an unpleasant one is going to be a prolonged recession. Everyone else in G10 is telling us hey we're going to navigate inflation lower. We're going to do with the soft landing. Please don't worry. I mean maybe that's the right thing to say but that's it. You know ever since a narrow path but everyone's forecasting they're going to land this narrow path. So you know I think kudos to Bank of England to my to my mind for for coming clean. It's not going to help starting a course. Right. But I think it sets up expectations perhaps more realistically....
Yeah. At least they're being honest. So we've obviously already seen parity on euro dollar. Do you think realistically we could see it on the table. Right. I don't think we'll get quite that low. I mean much as I'd love to because I'm paid in dollars and I've got kids in the U.K. but it's not going to quite plant that generously for me. You know the dollar is overvalued or at least it's rich against a number of currencies. Euro I think you know we can go sub parity 95 cents without that valuation. Elastic band being particularly unpleasant. But to talk about parity against cable that would be a big stretch. I mean maybe 115 116 is plausible but I don't think we'll go a great deal further. Not far. You know some some calamity. The difference in this conversation is we're freely floating back to the crises of the 90s except the one is not. Is renminbi freely floating within its band or is it fixed within its band. It's a teenager and let me explain. You've got a teenage daughter. So you know quick works by taking notes. Daria you know China wants to have a

full

y free floating currency a liberalized internationalized currency. But and so like a teenage you want to let to get out in the world and experience the world. But if it misbehaves if you leave when if they misbehave they will grounded you know and that's what that's what happened. So if you get the currency market to their mind misbehaving then they massage...
then then dodge and then the ground the currency. I would say for the most part renminbi of late has been kind of left to its own devices. Yes. And behaving and. And it's been important cause it has been a somewhat helpful anchor in the Asia context at least. But you know I think maybe we expect a little bit more of the Chinese economy. Remember three months ago a lot of talk about a second half acceleration policy led. And that's kind of is it just the. I mean where do you and HSBC very quickly are. Where do you and HSBC frame where China not gets escape velocity but at least moves the vector around on GDP growth. Well I think it's happening in a small way already but it's less kind of big scale than people might have anticipated. It's very targeted at easing. And so we're not kind of getting that big

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piece of. Right. OK here's the big stimulus. And from of course we're not getting that but we are getting this continual erosion of growth expectations elsewhere in the globe. So net net everything's kind of I mean is like tracking lower. Kelly Lisa John. I mean the Mandarin I mean in Hong Kong with the age of HSBC team this could work right in Hong Kong. I think that could be the dream team. The dream team. Steve Major Darryl Mayor the rest here at the Mandarin and Harper Lee Kelly. I think it works you know. All right. Road trip road transport some captain's bar. We got that right there Amara. Thank you so much. With HSBC futures...
advance up 27. Good morning.