Is It Time for Goldman's CEO to Go? | Bloomberg Surveillance 08/14/2023
>> I THINK THE INFLATION DYNAMICS HAVE SHIFTED SLIGHTLY IN THE U.S. >> WE DON'T SEE ANY POSSIBILITY FOR THE FED TO CUT RATES UNTIL NEXT YEAR. >> IT IS CLEAR THAT THE FUTURE IS GOING TO BE DIFFERENT THAN THE PAST. FOR SURE, HIGHER RATES FOR LONGER.
>> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: LIVE IN NEW YORK CITY, GOOD MORNING GOOD MORNING. THIS IS BLOOMBERG SURVEILLANCE ON TV AND RADIO. ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ, I AM JONATHAN FERRO.
THE S&P 500 POSITIVE BY 0.22%. TOMORROW MORNING, RETAIL SALES, THURSDAY FROM WALMART. HOW MANY TIMES HAVE WE DONE THIS FROM AUGUST? TALKING ABOUT CHINA. CHINA THE HEADLINE ONCE AGAIN. TOM: IT STARTS AND ENDS IN CHINA WITH A SET OF NEWS. WHAT IS INTERESTING TO ME IS IT IS NOT ONE STORY.
YOU HAVE TO GET BRIEFED ON THIS TO GET UP TO SPEED ON THREE, 4, 5 STORIES. CHINESE EQUITIES IN THE TANK, IRON OR SOMEWHAT IN THE TANK. A LOT OF MOVING PARTS GOING ON IN CHINA AND THAT COMES BACK TO JACKSON HOLE. JONATHAN: ONE CHINESE DEVELOPER, COUNTRY GARDEN HOLDINGS SEEKING TO EXTEND FOR THE FIRST TIME EVER. AWAY FROM THAT WE HAVE A WEALTH MANAGER MISSING PAYMENTS. THIS IS STARTING TO MOUNT IN A
BIGGER WAY. LISA: WHICH BEGS THE QUESTION OF WHEN THIS BECOMES FINANCIAL CONTAGION IN CHINA. WHY ARE WE NOT SEEING MORE TRICKLE OUT AFFECTS? IS THAT WHAT WE ARE SEEING IN GERMANY OR PARTS OF EUROPE? A LOT OF U.S. COMPANIES ARE RATIONING BACK EXPECTATIONS FOR GROWTH IN CHINA. BEYOND THAT, WHERE DO YOU SEE THE CONTAGION? TOM: I SEE IT IN THE TERMINAL. NEW YEN WEAKNESS.
THE CHINESE YUAN IS RIGHT BACK TO RECENT WEAKNESS AS WELL. I SEE IT IN THE 30 YEAR BANKRATE MORTGAGE. MANY DIFFERENT MORTGAGE RATES, 7.53%. YOU CAN AROUND THAT UP TO 8% BUT I AM NOT THERE YET.
JONATHAN: YOU SEE STRESS IN THE BOND MARKET, IN TREASURIES. 30 BASIS POINTS HIGHER IN THREE WEEKS. LISA, I'M WITH YOU. EIGHT YEARS AGO, YOU GET HEADLINES LIKE THIS FROM CHINA. THE LAST THREE WEEKS, LIFE ABOVE 4%, CAN WE SUSTAIN LIFE ABOVE 4% ON THE 10 YEAR? LISA: A GREAT QUESTION, ESPECIALLY IN LIGHT OF WEAKNESS WE FEEL COMING FROM CHINA AND THE SURPRISING RESILIENCE OF THE U.S. CONSUMER.
IT IS AN INTERESTING DICHOTOMY. CHINESE DATA POINTING TO ALL OF THIS WEAKNESS AND THEN WE ALSO SEE THE CONSUMER AND WHAT THE U.S. CONSUMER KEEPS DOING WHICH IS SPEND SPEND SPEND. JONATHAN: LOOK AT WHAT IS HAPPENING WITH CRUDE. EVERY SINGLE MORNING, DEFLATION, DISINFLATION. CRUDE IS UP MORE THAN 20% OFF OF THE JUNE LOWS. TOM: BRING IT BACK TO MY 201 K, WHAT DO YOU DO IF YOU ARE IN STOCKS AND YOU ARE LISTENING TO ALL OF THIS TALK ABOUT MACRO BATTLE? I'M NOT SURE. LISA:
WHAT A LOT OF PEOPLE ARE DOING IS DIVERSIFYING, THEY ARE GOING INTO COMMODITIES. HOW LONG CAN YOU CONTINUE TO GO TO SOME OF THESE AREAS IF CHINA ENDS UP BEING THE MAJOR MACRO STORY? JONATHAN: FOR THE FIRST TIME WE DON'T GET A QUIET SUMMER. JACKSON HOLE ABOUT 10 DAYS AWAY. THE FUTURE IS GOING TO BE DIFFERENT TO THE PAST. TOM: SHOULD I GO HIKING IN JACKSON HOLE? JONATHAN: YOU SHOULD GO HIKING NEXT WEEK. LISA GOES HIKING. LISA WENT CANOEING NEXT -- LAST YEAR AT JACKSON HOLE. LISA: I'VE GOT BIG PLANS THIS YEAR. JONATHAN: DO YOU? TOM:
IF YOU GO HIKING IN WYOMING, THERE ARE SNAKES RIGHT? LISA: SNAKES, ELK. JONATHAN: YOU ARE MORE CONCERNED ABOUT THE SNAKES? TOM: WE ARE STAYING IN LIKE A MOTEL 6. LISA: WE ARE NOT SAYING IN A MOTEL 6. DO YOU THINK THE SNAKE IS GOING TO GET INTO YOUR ROOM? TOM: WHEN I WALK INTO THE ROOM, I CHECKED UNDER THE BED TO SEE IF THERE ARE SNAKES. JONATHAN: LET'S GET TO THE PRICE ACTION.
EQUITY FUTURES ONLY S&P 500 UP BY 0.2%. FIRST BACK-TO-BACK WEEKLY LOSS ON THE NASDAQ 100 OF THE YEAR SO FAR. THE FIRST BACK TO BACK WEEKLY LOSSES FOR THE YEAR SO FAR. AS WELL AS THE S&P 500. THE YIELDS ABOVE 4% ON A CLOSING BASIS. ABOVE 4% ON A CLOSING BASIS FOR
A NINTH CONSECUTIVE SESSION. LISA, GOING BACK OVER TIME, IT IS RARE TO SEE THAT. LISA: ESPECIALLY WHEN A LOT OF PEOPLE ARE ARGUING WE WILL GO BACK TO A LOW-INFLATION MOMENT. YOU GOT GOLDMAN SACHS CALLING FOR RATE CUTS IN THE SECOND QUARTER. AS FAR AS TODAY, IT IS LIGHT AHEAD OF A WEEK NOMINATED BY RETAIL SALES BUT I AM FOCUSED ON CHINA.
BULLARD WAS ONE OF THE MOST NOMINAL VOICES, HE WAS A HAWK. ARE THEY HAWKS LEFT? WHAT DOES A HAWK ON THE FED RIGHT NOW MEAN AT A TIME WHEN THEY ARE LOOKING FOR A SOFT LANDING? -- TALKING ABOUT THE INFLATION REDUCTION ACT AND WHAT THIS COULD DO FOR THE U.S. ECONOMY. I'M CURIOUS TO SEE WHAT SHE SAYS ABOUT CHINA. 10:00 P.M., CHINA IS RELEASING
JULY ECONOMIC DATA, INCLUDING INDUSTRIAL PRODUCTION AND JOBLESS INFORMATION. THIS COMES AT A TIME WHEN BROADER MARKETS HAVE LARGELY SHRUGGED OFF CHINA. CAN THEY CONTINUE TO? AT WHAT POINT DOES THE DATA SUPERSEDE THE CALM OF A SOFT LANDING IN THE U.S.? JONATHAN: WE HAVE TO TALK ABOUT CHINA, TALK ABOUT RETAIL SALES AND TALK ABOUT THE DEVELOPMENTS IN THIS BOND MARKET. LET'S KICK IT OFF WITH BEN LABELER -- BEEN LAIDLER. LET'S TALK ABOUT THIS BOND MARKET.
LIFE ABOVE 4% ON A 10 YEAR, CAN IT BE SUSTAINED AND WHAT DOES IT MEAN FOR YOUR EQUITY MARKET? BEN: I THINK IT CAN BE SUSTAINED. 2% REAL YIELD. YOU GO BACK ABOUT 15 YEARS TO SEE THEM BE REASONABLY SUSTAINABLE. 4% U.S. GDP NOW COSTS. I THINK THIS IS PRETTY MUCH THE TALK AND I WOULD BE LEANING AGAINST THIS. I THINK INFLATIONARY FORCES ARE STILL OUT THERE. WE'VE HAD THIS HEADLINES LAST WEEK OF THIS TONE UP IN INFLATION BUT I HAVE BEEN LEANING AGAINST THIS. I THINK LONG-DURATION ASSETS ARE THE PLACE TO BE. TOM:
THE WALL STREET JOURNAL HAD A WONDERFUL ARTICLE LOOKING AT FIVE RETIREES, EACH OF THEM WITH $5 MILLION. THE CONSTANT THEME OF THESE FIVE DIFFERENT FAMILIES WAS THEY BOUGHT ATTACK, THEY OWNED TECH, THEY STAYED WITH TECH. YOU SAY TECH IS NOT GOING TO TANK AND THAT IT HAS MORE IN THE TANK. HOW DO YOU LOOK AT TECH AND SAY THEY HAVE LEGS TO CONTINUE? BEN: BECAUSE OF THE EARNINGS SEASON WE JUST SAW. WHERE DID THE GROWTH COME FROM? IT CAME FROM ALL OF THESE TECH HEAVY SECTORS. THESE ARE SECULAR GROWTH SECTORS, WHICH ARE SEEING TOPLINE GROWTH BUT YOU ARE BEGINNING TO SEE THAT COME TOGETHER.
TO THE EXTENT THAT U.S. EQUITIES GET LET OUT OF THIS EARNINGS TROUGH, I THINK IT IS TECH THAT IS GOING TO LEAD. THAT WILL TAKE THE CEILING OFF VALUATIONS YOU'VE HAD PUT ON OVER THE LAST MONTH OR SO. LISA: YOU'VE SEEN A 10 YEAR YIELD ABOVE 4% FOR NINE CONSECUTIVE SESSIONS. AT ONE POINT -- AT WHAT POINT DO YOU START TO -- AND THAT MAKES YOU REASSESS YOUR WHOLE CALL WHEN IT COMES TO THE EQUITY SPACE? BEN: OBVIOUSLY THE FUNDAMENTALS ACTUALLY CHANGE. I DON'T THINK THEY HAVE.
A LOT OF THIS BOND YIELDS MOVE IS TECHNICAL. CHANGES WE HAVE SEEN OF JAPAN, I LOOK AT FUNDAMENTAL GROWTH INDICATORS AND THEY HAVE NOT CHANGED THAT MUCH. THESE NUMBERS, THE 4% AND THE 2% REAL YIELDS, THESE ARE REALLY TOP OF THE RANGES. I WOULD BE VERY SURPRISED IF WE
COULD BREAK THROUGH THAT. I'M HAPPY TO TAKE A MOVE SIDEWAYS FROM HERE BUT I THINK THE BIG INCOMING DIRECTION IS DOWN AND THAT GIVES ME CONFIDENCE ALONG WITH THE EARNINGS INTAKE. LISA: YOU SAY IT SEEMS REALLY TECHNICAL IN NATURE AND GET IT HAS BEEN ACCOMPANIED WITH SEVEN STRAIGHT WEEKS OF GAINS ON THE CRUDE LEVEL.
WE HAVE SEEN A REAL RALLY INTO, ODDITIES MORE BROADLY -- INTO COMMODITIES MORE BROADLY. HOW DO YOU SORT OF PAIR THIS WITH THE IDEA OF CHINA SLOWING? HOW DO YOU LOOK AT THE COMMODITY SPACE AND SAY THE YIELD MOVE HAS BEEN TECHNICAL? BEN: IT HASN'T COMPLETELY BEEN TECHNICAL BUT THERE ARE TWO CLEAR AND PRESENT DANGERS FOR U.S. MARKETS. OIL IS THE SECOND ONE. THE 70% RISE IN GAS PRICES IS A DOUBLE NEGATIVE. IT TAKES ABOUT 00 BILLION OUT OF CONSUMER SPENDING. IT WILL START PUSHING UP
INFLATION EXPECTATIONS. I THINK ULTIMATELY IT IS SELF-CORRECTING. THE HIGHER OIL PRICES GO, THE MORE PEOPLE WILL WORRY ABOUT GROWTH AND INTEREST RATES AND THAT WILL COOL THE DEMAND SIDE. CHINA IS A BIG DEAL IN OIL MARKETS, BUT IT IS ONLY GROWING 16%. IT IS A MUCH BIGGER DEAL IN
INDUSTRIAL METALS. THAT IS WHERE YOU CAN SEE THE WEAKNESS. WE ARE RIGHT TO WORRY A LITTLE BIT ABOUT OIL BUT I DO THINK IT IS SELF-CORRECTING. A LOT OF THE RALLY YOU HAVE SEEN HAS BEEN TIGHTNESS ON THE SUPPLY SIDE. I THINK DEMAND WEAKNESS WILL FOLLOW IF BRENT STAYS ABOVE 85 FOR LONG. TOM: YOU'RE A CLAIM IS LATE 2018, YOU HAD COURAGE TO LOOK OUT 18 MONTHS.
HOW DO YOU LOOK OUT 18 MONTHS FROM HERE? BEN: LOOKING TO 2024, WHAT IS GOING TO BE HAPPENING? I THINK WE WILL GET DIGITAL EARNINGS GROWTH. I THINK THE FED WILL CUT INTEREST RATES AND THOSE ARE THE ONLY TWO WAYS TO MAKE MONEY IN MARKETS. WE ARE GOING TO HAVE A 15% SWELL AND EARNINGS OVER THE NEXT 18 MONTHS. JONATHAN: YOU MAKE IT SOUND SO EASY, BEEN
LAIDLER OF ETORO. GREAT TALK TO YOU. -- GREAT TO TALK TO YOU. TOM: I GIVE THE JOURNAL REALLY GREAT MARKS, THEY HAVE MADE A COMMITMENT TO TALKING TO PEOPLE OF ALL DIFFERENT SOCIOECONOMIC OUTLOOKS ABOUT RETIREMENT.
SOME OF IT IS NOT PRETTY. THERE IS A HUGE PART OF AMERICA THAT IS STRUGGLING. THESE FIVE FAMILIES ARE NOT STRUGGLING. ONE GUY WHOSE WIFE DIED THREE WEEKS AFTER HE RETIRED. THE ONE THING I SAW WAS THAT AT SOME POINT, THEY ALL DECIDED TO JUST BUY NAME THE TECH STOCK AND IGNORE IT. JONATHAN: THAT WASN'T MY FAVORITE STORY.
MY FAVORITE WAS THE SCARY MATH BEHIND THE TREASURY MARKET. I CAN SHARE SOME OF THE ARTICLE WITH YOU RIGHT NOW. HIGHLIGHTING THE CBO'S FORECAST, THAT MAYBE IT IS TOO OPTIMISTIC. IT ENVISIONS THE NET INTEREST RATE PAID ON THE DEBT IS NEAR -- IS BARELY 3%. LISA, SOME OF THIS IS QUITE WORRYING WHEN YOU START TO LOOK AT IT.
JUST HOW MUCH THE INTEREST PAYMENTS -- NONDEFENSE SPENDING IN THE YEARS TO COME, IT IS PRETTY AMAZING. LISA: PETER READ THIS AND PUT UP A NOTE TALKING ABOUT THIS ARTICLE AND ON THE ONE HAND HE SAID IT SEEMS A BIT EXTREME TO US AND YET THE DETAILS AREN'T WRONG. YOU READ THROUGH IT AND IT IS CONCERNING AND HE SAYS HE HAD TO THINK ABOUT HIS LONGER-TERM BOND YIELD CALL. AT WHAT POINT DO PEOPLE REASSESS HOW LONG THEY CAN SHRUG OFF FUNDAMENTALS THAT THEY HAVE BEEN ABLE TO SHRUG OFF ARE SO MANY YEARS AND SAY THIS TIME IT IS DIFFERENT WITH INCREASINGLY DISPARATE MARKETS? JONATHAN: IT GOES TO THE QUESTION I SHARED WITH BEN LAIDLER, CAN WE SUSTAIN LIFE ABOVE 4%? WHO DOES IT HURT FIRST, THE SOVEREIGN OR THE CORPORATES? THE SOVEREIGN WHICH MAY EXPERIENCE A SQUEEZE AS WELL? LISA: THEY ARE SOMEWHAT INTERRELATED BUT I WOULD ARGUE SOME PEOPLE ARE SAYING IT IS THE SOVEREIGN MORE THAN THE CORPORATE. GOING INTO A GOOGLE BOMB, YOU WILL PUBLIC GET YOUR MONEY BACK. THE U.S. COULD BE SUBJECT TO ALL SORTS OF POLITICAL SHENANIGANS.
YOU'LL GET YOUR MONEY BACK BUT YOU COULD GET MUCKED UP IN SOME SORT OF GOVERNMENT SHUTDOWN. JONATHAN: SEBASTIAN PAGE FROM T. ROWE PRICE IS COMING UP. >> I THINK THIS IS ALL KIND OF NONSENSICAL THEATER. I'VE MADE THAT CLEAR TO THE RNC AS WELL. WAY BACK EVEN BEFORE I ENTERED THIS RACE, I THOUGHT THE PLEDGE WAS A BAD IDEA. DONALD TRUMP IS NOW PLAYING THAT GAME BUT THAT IS WHAT HE DOES.
I WOULD NOT BE THE LEAST BIT SURPRISED IF SOMETIME AROUND SUNDAY OR MONDAY OF NEXT WEEK, THAT HE SIGNS THE PLEDGE AND HE SHOWS UP ON THE STAGE ON WEDNESDAY. JONATHAN: THE FIRST DEBATE IS NEXT WEDNESDAY, THAT WAS CHRIS CHRISTIE, REPUBLICAN PRESIDENT CANDIDATE ON ABC OVER THE WEEKEND. WILL THE FORMER PRESIDENT BE ON THAT STAGE IN MILWAUKEE? FROM NEW YORK CITY THIS MORNING, GETTING THE WEEK STARTED WITH THE EQUITY MARKETS SHAPING UP AS FOLLOWS ON THE S&P 500. TWO WEEKS OF LOSSES ON THE S&P. CONCERNS IN CHINA ONCE AGAIN. MISSED PAYMENTS, ALL OF THAT KIND OF BAD STUFF. YIELDS UNCHANGED ON THE FOUR, 15, 81 -- YIELDS UNCHANGED, 4.1 581. TOM:
I SIMPLY WANT TO GO BACK TO THINGS THAT ARE BUTTRESSED RIGHT UP AGAINST RESISTANCE DEPENDING A WHAT THE CHART IS AN ONE OF THOSE IS THE 10 YEAR REAL YIELD. WE COME BACK TO AN INFLATION AROUND 1.78%, THAT IS NOT TO BE IGNORED. JONATHAN: YOU WANT TO TALK ABOUT TENSION?
DID YOU READ THAT MAGAZINE ARTICLE THAT -- GOT INTO OVER THE WEEKEND? LET ME SHARE THE HEADLINE. IS DAVID SOLOMON TOO BIG A JERK TO RUN GOLDEN SOCK -- GOLDMAN SACHS? WHEN WAS THE LAST TIME YOU SAW ANYTHING LIKE THAT? TOM: THAT IS THE CORRECT POINT. THIS BROKE ON FRIDAY. THIS IS A HUGE DEAL WITHIN NEW YORK AND WITHIN AMERICAN WALL STREET. IT IS A COMBINATION OF A NEW YORK TIMES ARTICLE, BUSINESS INSIDER WRITING ABOUT HIS ALMA MATER AND SOME STUDENTS WERE UPSET AND THEN THE BOMBSHELL AND THE REPORTER FOR THE NEW YORK MAGAZINE, NOT NEW YORK TIMES IS REALLY RESPECTED.
I THINK IT IS THE HEART OF THE MATTER. THIS IS NOT SOME JOURNALIST RUNNING AROUND TRYING TO MAKE HEADLINES. SHE IS THE REAL DEAL. LISA: YOU DON'T WRITE AN ARTICLE LIKE THIS UNLESS A LOT OF PEOPLE ARE UNHAPPY WITH THE LEADER OF THE COMPANY. THAT IS THE BOTTOM LINE AND I THINK WHAT YOU HAVE TO WONDER IS AT WHAT POINT DOES THE ISSUE BECOME A BIGGER PROBLEM? TOM: JON AND I ARE JUST TV AND RADIO ANIMALS BUT YOU ARE THE REAL DEAL FROM PRINT. THERE WASN'T ALL THAT MUCH NEW IN THE NEW YORK MAGAZINE ARTICLE BUT IT WAS THE LANGUAGE THAT WAS PLACED INTO SORT OF A FUNKY MAGAZINE VERSUS SOMETHING SERIOUS LIKE BLOOMBERG NEWS OR NEW YORK TIMES. THE LANGUAGE WAS SHOCKING. JONATHAN: IT WAS SCATHING.
LET'S DO THE SPORT ANALOGY. IF THIS WAS A U.S. SPORTS TEAM RIGHT NOW, WE WOULD TALK ABOUT A MANAGER THAT HAS LOST A LOT. TOM: BUT WE WON'T GO THERE. JONATHAN: MIKE MAYO OF WELLS FARGO IS QUOTED IN THIS ARTICLE AND HE BASICALLY SAYS I'VE CALLED FOR MINIATURES TO LEAVE IN THE PAST, FOR CEOS TO LEAVE. HE HAS NOT MADE THIS CALL THAT TIME AROUND. THIS FEEL SO PERSONAL WITHIN THE BANK. AWAY FROM THE PERFORMANCE OF
THE QUARTERLY NUMBERS, THIS FEELS VERY PERSONAL WITHIN THE BANK. THAT WAS A LOT OF PEOPLE'S TAKE AWAY. TOM: YOU WONDER WHERE THIS IS GOING, INTO THE WEEKEND AND THE WEEK. HOW DO YOU STAGGER INTO
SEPTEMBER WITH THIS CLOUD? THE CLOUD AROUND MORGAN STANLEY IS WHO IS GOING TO REPLACE DURBIN? THIS IS A WHOLE OTHER SCALE. WHAT WE ARE GOING TO DO NOW IS MIGRATE. BRAMO IS OUR STATE FAIR EXPERT. SHE WAS IN IOWA AT 11:00 THIS MORNING, THE MILKING DEMONSTRATION.
THE MILKING PARLOR, NORTH SIDE OF THE CATTLE BARN. THEY SHOWED UP THIS WEEKEND TO DO THE POLITICS OF IOWA, SELECTED REPUBLICANS. WE GO ALL STATE FAIR WITH THE DIRECTOR OF POLICY RESEARCH AT BT IG. ARE THEY KISSING BABIES OUT THERE? WHAT ARE THEY DOING BESIDES GAZING AT THE CATTLE AND KISSING BABIES? WHAT ARE THE REPUBLICANS DOING? >> THEY ARE BEGINNING WHAT IS GOING TO BE A LONG AND UGLY FIGHT. A LOT OF THIS IS QUAINT, IT IS
GREAT TO SEE A PERSON RUNNING FOR PRESIDENT FLIPPING A HAMBURGER. A LOT OF THIS IS GOOD OLD-SCHOOL RETAIL POLITICS BUT UNDERNEATH THE SURFACE, THERE IS A LOT OF DISDAIN AND A LOT OF UNCERTAINTY OVER HOW THE NEXT FEW MONTHS ARE GOING TO GO. WE HAVE A DEBATE NEXT WEEK FOR REPUBLICANS AND WE DON'T EVEN KNOW IF WE ARE GOING TO HAVE THE LEADER IN THE POLLS, THE FORMER PRESIDENT PARTICIPATING. I THINK IT IS PLAIN AND CUTE AND SOMETIMES NICE BUT IF YOU PEEL THE ONION ON YOUR HOTDOG, YOU REALIZE IT IS GOING TO BE UGLY. TOM: YOU HAVE THE FABRIC OF THE MIDWEST WITH YOU. IS THE REPUBLICAN FOREVER CHANGED BY FORMER PRESIDENT TRUMP? ISAAC: I WILL TELL YOU THIS.
I HAVE A FUN JOB. I GET TO TALK TO DEMOCRATS AND REPUBLICANS. WHAT I FIND INTERESTING IS THAT BOTH DEMOCRATS AND REPUBLICANS ARE LARGELY UNHAPPY WITH THE CANDIDATE WHO IS LEADING IN THE POLLS FOR THEM. DONALD TRUMP IS THE PRESUMPTIVE NOMINEE AT THIS MOMENT. HE IS LEADING IN THE POLLS BY A WIDE MARGIN.
PRESIDENT BIDEN IS THE PRESUMPTIVE NOMINEE, LARGELY UNCHALLENGED EXCEPT FOR ONE CHALLENGE WHICH HAS NOT SHOWN ANY RUNNING ROOM IN THE POLLS. WHAT I'VE NOTICED IS A FRUSTRATION WITH THE LEADING CANDIDATES, THAT PERHAPS CAN LEAD TO A CHANGE IN SENTIMENT OVER TIME. IT IS HARD TO BRIDGE THAT DIVIDE BETWEEN WHAT SOME PARTY MEMBERS HOPE AND THE NUMBERS ON THE GROUND. DONALD TRUMP IS GOING TO GET 30 PLUS PERCENT OF THE REPUBLICAN PARTY IN A PRIMARY RACE AND MATTER WHAT HE DOES.
WHEN YOU HAVE THIS MANY WIN -- WINNER TAKE ALL PRIMARY STATES, HE IS THE NOMINEE UNTIL SOMEONE PROVES TO ME THAT IT WILL BE SOMEONE ELSE. LISA: I WAS WRITING A STORY -- READING A STORY OVER THE WEEKEND ABOUT THE DYNAMIC -- ABOUT THE INDICTMENT AFFECT. EVERY INDICTMENT THAT COMES OUT FOR PRESIDENT TRUMP BASICALLY BOOST HIS POPULARITY BECAUSE IT KEEPS HIM IN THE VIEW OF POTENTIAL VOTERS.
HOW LONG DOES THE INDICTMENT AFFECT LAST? ISAAC: THAT IS ONE THAT WE ARE ALL WATCHING. WANT TO COME FROM GEORGIA AND THERE ARE CONVERSATIONS SUGGESTING THE GRAND JURY WILL HEAR FROM FOLKS THIS WEEK, WITH AN INDICTMENT AS EARLY AS THE END OF THIS WEEK OR NEXT WEEK. I'VE GOT TO TELL YOU, WE'VE HEARD THIS PHRASE TIME AND TIME AGAIN, TEFLON DON. THAT HAS PROVEN TO BE ONE OF THE TRUEST WAYS OF THINKING ABOUT THIS FORMER PRESIDENT. HIS SUPPORTERS SIMPLY DON'T CARE AND AT TIMES IT GIVES THEM MORE FUEL. FOR THE AVERAGE VOTER AT THE MARGIN, IT IS NOT GOING TO CHANGE THEIR OPINION OF HIM.
IF HE IS CHARGED WITH RICO VIOLATIONS IN GEORGIA, PERHAPS THAT GIVES HIM EVEN MORE FUEL TO FIGHT BACK AGAINST THE DARK STATE, THE FORCES THAT ARE TRYING TO STOP HIM AND HURT YOU. IT GIVES HIM THE TALKING POINT THAT HE WANTS. I CONTINUE TO VIEW THESE INDICTMENTS PRIMARILY AS POLITICAL FODDER THAT I THINK WILL GIVE HIM MORE FUEL ON THE CAMPAIGN TRAIL. JONATHAN:
KEEP US UP TO SPEED. NEW YORK IS ABOUT FALSIFYING BUSINESS RECORDS. SECRET DOCUMENTS, FLORIDA. WASHINGTON IS JANUARY 6. WHAT IS GEORGIA? ISAAC: GEORGIA COULD BE ABOUT THEIR STATE-LEVEL RICO STATUTE. THAT WOULD ALLOW THE FULTON COUNTY DA TO PURSUE CHARGES RELATING TO THE FORMER PRESIDENT SUPPOSEDLY PRESSURING STATE OFFICIALS TO FALSIFY OR OVERTURN THE ELECTION RESULTS AT THE STATE LEVEL. THAT WAS REALLY INTERESTING BECAUSE IT ISN'T A FEDERAL CHARGE, IT IS A STATE CHARGE.
EVEN IF A REPUBLICAN IS IN THE WHITE HOUSE IN JANUARY 2025, YOU COULD NOT SWEEP IT UNDER THE RUG. THAT ONE HAS SOME UNIQUE POWERS. GEORGIA HAS BEEN A LITTLE BIT MORE WILLING TO OPEN UP THEIR COURTROOMS TO CAMERAS THAN NEW YORK OR EVEN THE FED. THAT IS ALSO OF INTEREST. JONATHAN: THANK YOU SIR. ISAAC BOLTANSKY OF BTIG. I'M SURE I AM NOT THE ONLY ONE LOSING TRACK OF THIS. TOM:
I THINK THE NATION, EVEN THE SUPPORTERS ARE JUST BENUMBED BY THE WHOLE THING. TO BE A POLITE, THIS IS NOT NORMAL AND I YEARN FOR THE WAY THE BRITISH DO IT. CAN WE DO THIS IN SIX WEEKS? JONATHAN: FIRST DEBATE, A WEEK AWAY. WE KEEP ASKING, IS THE FORMER
PRESIDENT GOING TO SHOW UP? LISA: WE KNOW THE CURRENT PRESIDENT IS GOING TO SHOW UP TO MILWAUKEE TOMORROW. THERE IS A QUESTION, HOW LONG COULD PEOPLE BE NUMB AND A LARGER QUESTION, ARE PEOPLE EQUALLY NUMB ON BOTH SIDES OF THE AISLE, TO ISSUES ON BOTH SIDES OF THE AISLE? HAS IT JUST BECOME THIS IS THE NEW STATUS QUO? TOM: I CAN'T KEEP UP. JONATHAN: MARIA HAS TAKEN HOLD. FROM NEW YORK CITY, THIS IS BLOOMBERG. JONATHAN: TWO WEEKS OF LOSSES IN THE S&P 500. GOOD MORNING, GETTING YOUR WEEK STARTED ON BLOOMBERG TV AND BLOOMBERG RADIO. EQUITY FUTURES POSITIVE BY 0.2%.
THE NASDAQ TRYING TO BALANCE. THE FIRST BACK-TO-BACK WEEKLY LOSS OF THE S&P 500. ALL EYES ON THE TREASURY MARKET ON THE 10 YEAR, LIFE ABOVE 4%. CAN IT BE SUSTAINED? A MOVE OF 30 BASIS POINTS HIGHER OVER THE PREVIOUS THREE WEEKS. 4.15 ON THE 10 YEAR. LET'S FINISH IN THE FOREIGN EXCHANGE MARKET.
THE EURO SHAPING UP AS FOLLOWS, UNCHANGED AS WELL. THAT IS A SNOOZER OF A CURRENCY PAIR. YOU CAN GUESS WHERE THAT IS EVERY SINGLE DAY. LISA: IT WAS 1.10 FOR A COUPLE WEEKS AND NOW IT IS 1.09. JONATHAN: THE ECP DECISION ABOUT A MONTH AWAY. CHINA'S BANKING REGULATOR
SETTING UP A TASK FORCE TO EXAMINE A TOP PRIVATE WEALTH MANAGEMENT FIRM IN BEIJING, THAT MISSED PAYMENTS ON MULTIPLE HIGH-YIELD INVESTMENTS. THEY MANAGE MORE THAN 00 BILLION OF ASSETS. MISSED PAYMENTS, TAKE YOUR PICK, THERE IS A LOT GOING ON THIS MORNING IN CHINA. TOM: 100 BILLION DOLLARS, WHATEVER, BUT FAR MORE IMPORTANT IS THE WHAT IS THE SO WHAT? THE SO WHAT IS A WEEK YOU WANT BUT ALSO PACIFIC RIM INSTABILITY -- IS A WEAK YUAN, BUT ALSO PACIFIC RIM INSTABILITY. ALL OF A SUDDEN, THESE THINGS IN CHINA MATTER. LISA: THE CURRENCY POTENTIAL TRANSMISSION MECHANISM BUT ALSO THIS TRANSMISSION MECHANISM OF AT WHAT POINT DOES THIS BECOME A FINANCIAL CONTAGION ISSUE HINGING ON THE MARKET MARCH 8 -- HINGING ON THE MORTGAGE MARKET? WAS PROPERTY IN CHINA, WHEN DOES THIS SNOWBALL GIVEN HOW MUCH LEVERAGE THEY HAVE AND HOW MANY PROBLEMS ARE PERCOLATING TO THE SURFACE AND THE AUTHORITIES DON'T HAVE THE POWER OR THE WILL TO COUNTERACT IT. JONATHAN: LOOK AT TESLA CUTTING PRICES
AGAIN. I KNOW THIS IS A SEPARATE EV STORY BUT SALES OF TESLA AND CHINA ARE NOT GREAT RECENTLY. LISA: YOU SEE ONE U.S. BASED COMPANY AFTER ANOTHER TALKING ABOUT BRINGING DOWN ESTIMATES FOR SALES IN CHINA. WHY WOULD TESLA BE ANY
DIFFERENT? THERE ISN'T THE SAME WILL TO SPEND. YOU CAN SEE A LOT OF CHINESE CONSUMERS ARE SAVING, HOARDING MONEY AND WHY? JONATHAN: LET'S TURN TO THE NEXT STORY. U.S. STEEL REJECTING A TAKEOVER BID FROM RIVAL CLEVELAND CLIFFS, INSTEAD OPTING TO BEGIN A REVIEW OF ITS STRATEGIC OPTIONS, CALLING THE OFFER QUOTE, UNREASONABLE. WE WILL HAVE A CONVERSATION BETWEEN -- WITH THE MAN BEHIND THE UNREASONABLE OFFER, THE CEO OF CLEVELAND CLIFFS LATER ON. LISA: WHAT DO THEY HAVE TO PROPOSE INSTEAD? ISN'T SCALE REALLY IMPORTANT? WHAT DO THEY HAVE TO DO TO GET U.S. STEEL?
JONATHAN: WHAT HAPPENS WITH ANTITRUST ISSUES? IS THIS SOMETHING THEY ALLOW? LISA: EVIDENTLY IF IT IS NOT TECH, THEY DON'T MIND. AT WHAT POINT DOES A DOMINANCE OF SIZE AT A TIME IN THE U.S. IS TRYING TO BECOME AN INDUSTRIAL BEHEMOTH MATTER MORE, AND TERMS OF INDUSTRIAL POLICY? JONATHAN: LOOK OUT FOR THAT CONVERSATION LATER THIS MORNING. TOM: THOSE OF US OF AN OLDER PERSUASION ARE LIKE OK, THEY HAVE MADE 4% PER YEAR, THE PAST TWO YEARS AND 3% PER YEAR THE LAST 20 YEARS. WILL SOMEBODY JUST PUT X OUT OF ITS MISERY? WHY ARE WE DOING THIS. JONATHAN: IT HAS NOT BEEN LOST, THE
TICKET YOU JUST REFERENCED. X WOULD BECOME AVAILABLE IF CLEVELAND CLIFFS. TOM: I JUST FELL INTO THAT. SOMETIMES I GET LUCKY AND STUMBLE INTO BRILLIANCE.
X WOULD GO TO ELON. JONATHAN: IF HE WANTED IT. WE WILL MENTION THAT LATER. AS FOR TAKING THE HIGH GROUND. MARK ZUCKERBERG LOOKS LIKE AN ADULT. TOM:
SOMEWHAT SAY EVERYONE LOOKS LIKE AN ADULT. JONATHAN: YOU HAVE GONE THERE. TOM: WE WILL GO TO A SERIOUS STORY. THIS IS HEARTBREAKING. JONATHAN: THE DEATH TOLL FROM WILDFIRES IN HAWAII APPROACHING 100, MAKING IT THE DEADLIEST IN THE UNITED STATES IN MORE THAN 100 YEARS. OFFICIALS EXPECTING THE DEATH TOLL TO CLIMB FURTHER.
A SEARCH-AND-RESCUE EFFORT CONTINUES. TOM: THIS WAS DRY TO BEGIN WITH AND I AM REALLY INTERESTED IN THE ANALYSIS ON THIS HEARTBREAK. ABOUT WHAT THE NEW DRY IS, WHAT IS THE NEW DRY IN THE MEDITERRANEAN OR SPAIN? WHAT IS THE NEW DRY IN WESTERN MAUI AND HOW DO WE HAVE TO CHANGE HOW WE LIVE? JONATHAN: NOW ISN'T THE RIGHT TIME FOR POINT SCORING.
DOWN THE ROAD, THE INEVITABLE CONVERSATION IS GOING TO HAPPEN. COULDN'T HAVE BEEN AVOIDED AND WHAT WAS MISSED? LISA: SHOULD THEY HAVE SOUND OF THE ALARMS SOONER? -- SHOULD THEY HAVE SOUNDED THE ALARM SOONER? ALL OF THESE QUESTIONS. THE KEY CONCERN IS HOW DO YOU REBUILD CONSIDERING THIS EFFORT IS GOING TO COST INCREDIBLE AMOUNTS OF MONEY AND IT IS GOING TO BE A LONG TIME BEFORE THEY CAN INVITE TOURISTS BACK? TOM: I BEAT MY AMATEUR TAKE ON THIS. IT IS BASICALLY A MANUFACTURED TOURISM. THERE IS A GREG NORMAN GOLF COURSE AT THE TOP OF LANAI AND IT IS VERY GREEN AND VERY WATERED. WHAT IS THE ONE, MANALE BAY? THIS IS A BIT AWAY FROM MAUI AS WELL.
IT IS PRETTY DRY WITH GREEN GOLF COURSES. WHAT DO YOU DO WITH THE NATURAL TERRAIN AND CLIMATE CHANGE VERSUS BRINGING IN A LOT OF WATER? YOU ARE GETTING WAY DOWN THE ROAD FROM THE IMMEDIATE TRAGEDY. JONATHAN: THAT IS THE INFORMATION I HAVE.
TOM: WE ARE MIGRATING NOW TO AN IMPORTANT CONVERSATION OF THE DAY ON FOREIGN-EXCHANGE. ELSA LING KNOWS -- ALSO LOOK KNOWS -- ELSA LIGNOS, HEAD OF GLOBAL FX ENERGY. YOU ARE THE ONLY ONE IN EUROPE WORKING, WHAT IS YOUR BIGGEST MYSTERY RIGHT NOW, FORWARD IN FOREIGN-EXCHANGE? ELSA: YOU TOUCHED ON IT EARLIER AT THE TOP OF THE HOUR. THE UNCERTAINTY OF WHAT IS GOING ON IN CHINA, TRYING TO UNDERSTAND THE REALITY ON THE GROUND WHEN THERE HAS BEEN A MOVE AWAY FROM SHARING INFORMATION, THE UNDERLYING GDP DATA, THE BREAKDOWN OF COMPONENTS JUST ISN'T THERE. ON TOP OF THAT, WE DON'T HAVE THE VISIBILITY ONTO THESE TROUBLED DEVELOPERS. TOM: DOES CHINA BRING IN INSTABILITY?
I WAS TALKING ABOUT EURO-YEN. DOLLAR-YEN BACK UP TOWARDS $ 1.50. CAN YOU SEE THAT STABILITY GIVEN THE EVENTS IN CHINA? ELSA: IT IS THE MIDDLE OF AUGUST, A LOT OF INVESTORS WE SPEAK TO HAVE JUST SHUT UP SHOP, PARTICULARLY IF THEY HAVE HAD A GOOD SUMMER SO FAR STOP THEY ARE NOT SEEING THE OPPORTUNITIES OUT THERE.
YOU HAVE FX VERY MUCH IN THE TIGHT RANGE. AND EVEN WHEN WE DO ATTEMPT TO GET RATE CUTS AS WE DID EARLIER IN JULY, IT JUST DOES NOT SEEM TO FOLLOW THROUGH AND I THINK PEOPLE ARE STRUGGLING WITH THAT DYNAMIC AT THE MOMENT. LISA: IF EVERYONE IS BASICALLY ON THE BEACH RIGHT NOW, DOES THAT MEAN WHEN EVERYONE COMES BACK, YOU START TO SEE MORE CONCERN ABOUT THE POTENTIAL FOR CONTAGION FROM CHINA AND ALL OF THE POTENTIAL AND FINANCIAL INSTABILITY IN CERTAIN SECTORS? ELSA: I THINK WE NEED TO SEE A BIT MORE INFORMATION. THE FACT THAT YOU ARE SEEING DEVELOPERS MISSING INTEREST PAYMENTS ON THEIR BONDS HAS PEOPLE CONCERNED BUT MORE THAN ANYTHING, WE'VE BEEN IN THIS SITUATION AND I COULD GO BACK 10 YEARS WHEN PEOPLE WERE PANICKING ABOUT THE BIG CHINA CLIFF AND GROWTH WAS GOING TO COLLAPSE. MARKETS ARE JUST NATURALLY
RELUCTANT TO BELIEVE THAT THIS TIME IT COULD BE HAPPENING FOR REAL. WHAT I THINK WE ARE MISSING IN ORDER TO GET BIGGER TRENDS IS A BIT OF GLOBAL DIVERSIONS. THE MOMENT -- AT THE MOMENT, IT FEELS LIKE A LOT OF THEMES ARE AFFECTING A LOT OF COUNTRIES IN SIMILAR FASHION. WHETHER IT IS THE ECB OR THE FED, THEY ALL SEEM TO BE IN SIMILAR POSITIONS. WE NEED TO BREAK DOWN AND DIVERGE. LISA:
ARE WE SEEING THAT IN THE ACTUAL DATA? FOR EXAMPLE, THE U.S. AND EUROPE, GERMANY IN PARTICULAR. WE ARE SEEING THAT DIVERGENCE, JUST NOT WHEN IT COMES TO A CURRENCY THAT SEEMS TO HAVE FLATLINED BECAUSE EVERYONE IS ON VACATION. ELSA: THAT IS A GREAT QUESTION. EVEN MORE SO THAN THE CURRENCY, WHAT I FIND PERPLEXING IS IF YOU LOOK AHEAD AT EXPECTATIONS, THERE IS STILL THIS WIDESPREAD CONSENSUS THAT THE EURO AREA IS GOING TO OUTPERFORM THE U.S. AND CYCLICALLY THAT DOES NOT ADD UP. YES THE FED HAS DELIVERED MORE
TIGHTENING BUT THE U.S. ALSO DELIVERED MORE FISCAL STIMULUS AND THE TIGHTENING DELIVERED BY THE U.S. -- FOR THE LOCAL REALITIES ON THE GROUND. I DO THINK EVENTUALLY WE WILL GET THE UNEXPECTED BREAK LOWER IN EURO-DOLLAR. I JUST THINK WE MAY NEED TO WAIT FOR THE AUTUMN FOR THAT TO START TAKING HOLD. TOM:
THERE ARE A NUMBER OF WAYS TO LOOK AT THE FICTION KNOWN AS THE RUSSIAN RUBLE, DOLLAR RUBLE AND ALSO A BASKET OF RUBLE. I'M GOING TO GO TO THE HEADLINE DRAMA OF DOLLAR AS COMPARED TO RUSSIAN RUBLE, THROUGH 100. I DID A LAW OF REGRESSION BACK 20 YEARS. WHAT DO I MAKE OF THE NEWLY WEAKENED RUBLE? WHAT DOES IT SIGNAL GIVEN THE LAW -- GIVEN THE LACK OF INFORMATION THAT WE HAVE? ELSA: IT IS VERY CLEAR THAT BUSINESS IS A WAR OF ATTRITION THAT PUTS RUSSIA IN A WE CAN STATE VIS-A-VIS THE REST OF THE WORLD.
IT RELIES ON FOREIGN CURRENCY, HARD CURRENCY IN ORDER TO BUY, WHETHER IT IS MILITARY GOODS OR SO ON. IT RELIES ON HELP FROM PARTNERS, HIGH OIL PRICES AND WE HAVE SEEN OIL TRYING TO BREAK HIGHER BUT IT IS NOT FOLLOWING THROUGH. I THINK IN TERMS OF THAT WAR OF ATTRITION, IT DOES PUT RUSSIA IN A WEAKER SPOT.
IT IS A HIGHLY CONTROLLED CURRENCY. TOM: BUT IT IS UNRAVELING. HOW DO THEY RESPOND TO IT OR DOES NO ONE CARE? ELSA: I DON'T THINK THERE IS A RESPONSE AS SUCH. IT IS A VERY DIFFERENT ECONOMY TO EVEN SAY THE TURKISH LIRA, WHERE TURKEY IS AN ECONOMY THAT IS DEPENDENT ON ACCOUNT -- DEPENDENT ON COMMODITY IMPORTS. THERE WILL ALWAYS BE SOME HARD CURRENCY COMING IN, AND SO IN THAT SENSE, THE CURRENCY, THE RUBLE IS LESS OF A SIGNAL FOR THE UNDERLYING STRENGTH OR STATE OF THE RUSSIAN ECONOMY. JONATHAN: ELSA LIGNOS OF RBC, THANK YOU.
-- THROWING IN THE TOWEL ON THE LONG EURO CALL. GOES FOR A RANGE OF REASONS AS TO WHY HE SHOULD BE LONG FOR THE EURO BUT ULTIMATELY, THINGS HAVE BEEN CONTAINED? THERE IS SOME CONCERN OF WHAT IS HAPPENING IN CHINA AND WHAT IS DEVELOPING IN THE DEVELOPING MARKET AND LOOKING INTO SUMMER AND WINTER. TOM: THERE ARE A LOT OF DIFFERENT STORIES HERE. THE BOTTOM LINE HERE IS YOU'VE GOT TO GET A BELIEF, A SET UP A VIEW OUT 18 MONTHS AND IT IS DIFFICULT TO DO THAT RIGHT NOW.
I THINK THAT JOB IS VERY DIFFICULT. JONATHAN: LISA HAS BROUGHT THIS UP A FEW TIMES. SEVEN MONTHS AGO I'M SITTING IN LONDON, JUST RIDICULOUS CONVICTION AROUND THE ECB HIKING MORE THAN THE FEDERAL RESERVE IN 2023. GOING INTO SEPTEMBER, WHAT
HAPPENS AFTER SEPTEMBER, A COMPLETE LACK OF CONVICTION. THAT IS THE DIFFERENCE BETWEEN NOW AND THEN. LISA: WHICH IS ALSO THE DIFFERENCE WITH THE ECONOMIC PICTURE WHICH IS MUCH WEAKER. ELSA LIGNOS JOINING WITH JORDAN ROCHESTER, SEEING A WEAKER SIDE OF THE EURODOLLAR BECAUSE THERE IS NOT THE SAME STRENGTH.
THEY DIDN'T HAVE THE SAME STIMULUS THAT THE U.S. HAD AND GET THEY RAISE RATES ALMOST THE SAME AMOUNT. IF YOU LOOK AT WHAT THEY ARE DOING, IT IS MORE TIGHTENING EVEN SOME OF THE TRANSMISSION MECHANISMS. JONATHAN: CHINA IS MUCH WEAKER THAN WE THOUGHT IT WOULD BE. EUROPE IS AS WELL. TOM: BALANCE SHEET IS WEAKER.
IT IS NOT ABOUT FLOWS AND INCOME. NOT MOMENTS AGO BUT IN THE LAST COUPLE OF HOURS, THE YEN PRINTS UP .45. JONATHAN: ARE YOU EMOTIONAL? TOM: VERY EMOTIONAL. JONATHAN: FROM NEW YORK CITY, THIS IS
BLOOMBERG. >> WE DON'T SEE ANY POSSIBILITY FOR THE FED TO BE CUTTING RATES UNTIL NEXT YEAR, AND THAT IS EVEN UNDER A FAIRLY BENIGN SCENARIO. THEY REALLY WANT TO SEE A TREND IN THE HEADLINE FIGURE. IT IS MOVING IN THAT DIRECTION BUT WE HAVE A LONG WAY TO GO. JONATHAN: THAT WAS DANIEL MORRIS OF BNP PARIBAS.
AS WE START TO THINK ABOUT JACKSON HOLE, THE FEDERAL RESERVE. GOING INTO THAT, YOUR EQUITY MARK ON THE S&P 500, THE SCORES AS FOLLOWS. POSITIVE FIRE THIRD OF PERCENT ON THE S&P. NO REAL DRAMA THIS SIDE -- THIS MORNING, STATESIDE. THE U.S.
10 YEAR, 4.15, AN INTERESTING LEVEL. ABOUT FIVE BASIS POINTS AWAY. TOM: ARE WE BEYOND THE BANKING CRISIS? THAT WAS A SECONDARY DEBATE THIS WEEKEND. LISA: I LIKE THAT YOU SAY THAT WAS THE SECONDARY DEBATE BECAUSE A LOT OF PEOPLE INCLUDING MORGAN STANLEY ANALYSTS WERE COMING OUT AND SAYING WE CAN'T REALLY SAY IT IS OVER, ESPECIALLY WITH THE MOODY'S DOWNGRADE. ESTIMATE TO THINK IS THIS THE NEW THING IS TO JUST TURN UP THE VOLUME TO USE YOUR LANGUAGE ON CERTAIN ISSUES AND THEN PEOPLE SUDDENLY HAVE TO CARE ABOUT THEM AGAIN? JONATHAN: THREE ISSUES, FUNDING COSTS, CAPITAL, COMMERCIAL RISK. -- COMMERCIAL REAL ESTATE IS GOING TO LINGER.
FOR THE FORESEEABLE FUTURE. LISA: THIS IS THE REASON WHY YOU WILL HAVE SOME OF THESE NAMES BLEED LOWER. NO ONE IS TALKING ABOUT A CRISIS SO CAN YIELD STAY AT THIS LEVEL AND IF THAT IS THE CASE, IS THIS A SOFT LANDING? TOM: ARE WE AT THE PRICE FOR YOU DON'T DO A CONVENTIONAL YIELD ANALYSIS? IF I HAVE A MORTGAGE RATE AT 7.53%, PRICE ADJUSTS, THE
AMOUNT YOU COULD SPEND ON A HOUSE ADJUSTS. LISA: THAT HASN'T HAPPENED. TOM: IT HASN'T HAPPENED. I WONDER IN COMMERCIAL REAL ESTATE WHEN DOES THIS GIVEAWAY -- GIVE WAY? JONATHAN: WHEN THE REFINANCING STARTS, 2025, ANOTHER YEAR OR SO.
BUT FOR RESIDENTIAL, FOR PEOPLE AT HOME, SITTING IN HOUSES, THIS MARKET IS FROZEN. THEY ARE NOT GOING TO SELL AND PEOPLE CAN'T BUY WITH RATES AT SEVEN OR -- 7% OR 8%. YOU KNOW HOW I FEEL ABOUT IT. THEY CALLED IT MORTGAGE ENVY AT THE END OF THE ARTICLE. LISA: YOU WERE INSPIRATION FOR THE NEW YORK TIMES ARTICLE. TOM: ON THEIR LITTLE FRENCH TABLES THEY HAVE AT 64TH STREET.
WHAT I DID THIS WEEKEND WAS SIMPLE, I'M STARTING TO LEARN THE MAP OF GERMANY. YOU GO NORTH TO BREMEN. I'M REALLY IGNORANT ON THIS. AUGUST 18, FRIDAY. WERNER BREMEN PLAYS BARON KANE. I'M WONDERING ABOUT -- AND I SAID WE HAVE TO BOOK SOMEONE. SO WE DID. JONATHAN:
DOES OUR NEXT GUEST KNOW THAT YOU ARE TALKING ABOUT HIM? TOM: HIS TEAM GOT RELEGATED AND THAT IS WHY CARSTEN BRZESKI AND IS WITH US -- CARSTEN BRZESKI IS WITH US. LIMIT CUT TO THE CHASE BEFORE WE GET TO SERIOUS -- LET ME CUT TO THE CHASE BEFORE WE GET TO THE SERIOUS ING WORK. DOES HE HAVE HIS WORK CUT OUT FOR HIM? CARSTEN: NO, BUT THE BAD THING IS, HE ACTUALLY LOST THE VERY FIRST MATCH ON SATURDAY AND THAT WAS THE SUPER CUP. SO IT WAS NOT A GOOD START FOR MIAMI. TOM: I'M GOING TO TEAR UP. AMY IS SO GOOD TO BRING THIS.
I CAN'T GO FORWARD. I CAN'T TALK. LISA: I'M NOT GOING TO TALK ABOUT THE BUNDESLIGA. I AM CURIOUS WHAT THEY WERE TALKING ABOUT WITH EXPECTED DIVERGENCE AND WE BEEN TALKING ABOUT THAT FOR A WHILE. WHEN WILL THEY PLAY OUT? ARE WE SEEING MARKET DIVERGENCES WITH THE ECONOMIES OF THE U.S., OF EUROPE AND OF CHINA? CARSTEN: OF COURSE WE DO SEE THEM BECAUSE EVERYONE FEARS THIS SOFT LANDING, HARD LANDING BUT IT HASN'T HAPPENED SO FAR. WITH EUROPE THERE IS STILL A COUPLE OF PEOPLE INCLUDING THE ECB, BECAUSE HERE WE HAVE THE PROBLEM OF NOT ONLY CYCLICAL HEADWIND BUT ALSO STRUCTURAL TRANSITION.
MY BEST BET CURRENTLY IS THAT EUROPE IS IN FOR A LONGER STAGNATION LIKE MY FAVORITE SOCCER CLUB. CHINA, A THIRD ONE IS CLEARLY ALSO IN THIS VERY LONG SOFT PATCH. THERE IS GLOBAL DIVERSIONS. I THINK THE VERY FIRST TIME FOR A LONG WHILE THAT WE ARE WITNESSING THIS BIG DIVERSIONS. LISA:
HAVE WE FULLY APPRECIATED HOW MUCH OF THE WEAKNESS WE ARE SEEING IN CHINA IS BLEEDING OVER INTO EUROPEAN ECONOMICS? CARSTEN: NOT ENTIRELY. PLUS WE HAVE NOT FULLY FACTORED IN THE FACT THAT CHINA NO LONGER PLAYS THE SAME ROLE FOR EUROPE AS IT DID IN THE PAST, ESPECIALLY FOR GERMANY. CHINA WAS ALMOST IN A SYMBIOTIC RELATIONSHIP WITH THE GERMAN ECONOMY. THERE WAS A BIG NEED FOR GERMAN PRODUCTS. THIS TIME AROUND, LOOKING AT
THE EXPORT DATA AND THE FACT THAT CHINA IS ABLE TO PRODUCE THE SAME PRODUCTS THESE DAYS AS GERMANY OR OTHER EUROPEAN MANUFACTURERS. CHINA IS NO LONGER PLAYING THE SAME ROLE AS IT DID IN THE PAST. AT THE SAME TIME, WITH THIS WEAKENING DOMESTIC ECONOMY IN CHINA, EUROPE WILL NOT SOLVE THEIR EXPORTS. TOM: WHAT I WAS MOST FOCUSED ON THIS
WEEKEND WAS FOREIGN DIRECT INVESTMENT AND THE HEADLINES ARE IN. THE DEARTH OF FOREIGN DIRECT INVESTMENT INTO CHINA. WHAT DO YOU PRESUME WILL BE FBI BETWEEN EUROPE AND AMERICA -- FDI BETWEEN EUROPE AND AMERICA OR EUROPE AND CHINA? CARSTEN: BETWEEN THE U.S. AND EUROPE, IT IS CLEARLY TURNING TO A NET POSITIVE FOR THE U.S. WE HAVE BEEN SEEING A TREND OF
FDI'S COMING INTO EUROPE AND DECLINING BUT AT THE SAME TIME THERE IS THE INFLATION REDUCTION ACT IN THE U.S.. WHEN YOU LOOK AT THE U.S.-CHINA AND ALSO EUROPE-CHINA, YOU WILL SEE A REDUCTION IN BOTH U.S. AND EUROPEAN FDI'S GOING INTO
CHINA SIMPLY DUE TO THE GEOPOLITICAL SITUATION. TOM: CRITICALLY HERE, CAN YOU GET ON BOARD WITH THE IMF'S FIVE-YEAR LETHARGY, THE LACK OF GLOBAL TRADE, JUST A DAMPENING OF THE ECONOMY, OUT TO 2028? CAN YOU GET ON BOARD WITH THAT? CARSTEN: I CAN DEFINITELY GET ON BOARD WITH THAT BECAUSE THIS IS PRETTY MUCH THE REALITY. YOU DON'T CALL THIS THE END OF GLOBALIZATION BUT WE SHOULD CALL THIS THE END OF GLOBALIZATION AS WE KNEW IT. GLOBAL TRADE IS CLEARLY SLOWING DOWN.
WE WILL SEE MORE REGIONAL TRADE POPPING UP, BUT WITH GLOBAL TRADE SLOWING DOWN, MUCH MORE SLUGGISH, IT IS OBVIOUS THAT THE COUNTRIES THAT BENEFITED THE MOST IN THE PAST FROM GLOBAL TRADE -- AND WE HAVE A COUPLE EUROPEANS, I'M LIVING IN ONE OF THOSE -- THEY WILL BE HIT THE HARDEST FROM THIS END OF GLOBALIZATION AS WE KNEW IT. JONATHAN: CARSTEN, THE GERMAN MODEL, WHAT IS LEFT OF IT? HOW DO THEY CHANGE? CARSTEN: THERE IS NOT A LOT LEFT OF IT, OTHER THAN I AM CURRENTLY BUYING ENGLISH PLANES TO GET TO THE BUNDESLIGA. I REALLY THINK -- AND NOT EVERYONE HAS REALIZED IT YET IN GERMAN POLITICS -- THIS BUSINESS MODEL HAS COME TO AN END, A BUSINESS MODEL THAT WAS HIGHLY DEPENDENT ON EXPORT GROWTH AND ALSO IMPORTING LOW-ENERGY.
WITH THIS NEW WORLD, WE WILL SEE A RESTRUCTURING OF THE GERMAN BUSINESS MODEL. OF COURSE YOU HAVE TWO NARRATIVES. ONE WHERE YOU THINK OK, MAYBE GERMAN INDUSTRY CAN STILL EMBRACE NEW TECHNOLOGIES, SUSTAINABILITY, RENEWABLES AND KIND OF RISE AGAIN AFTER A COUPLE OF YEARS. THE OTHER WOULD BE A GLOBAL ECONOMY THAT IS MOVING MORE TOWARDS SERVICES. TO TELL YOU THE TRUTH, THE GERMAN ECONOMY IS DEFINITELY NOT STRONG WHEN IT COMES TO SERVICES. JONATHAN:
CARSTEN, THANK YOU ON THE NEXT ACT FOR GERMANY AND EUROPE. CARSTEN BRZESKI, GLOBAL HEAD OF MACRO RESEARCH AT ING. OUTSOURCE ENERGY SECURITY TO RUSSIA, OUTSOURCED ECONOMIC SECURITY TO CHINA, IT IS ALMOST A FAIL ACROSS THE BOARD. TOM:
WHAT I OBSERVED FROM CARSTEN BRZESKI, AND I'M LEARNING A LOT ABOUT THIS. HE SAID BYRON KANE WOULD NOT BE RELEGATED THIS YEAR, WHICH I THINK IS AN IMPORTANT PIECE OF INFORMATION. IT IS A HEADLINE. THE OTHER THING I SAY -- SEE. LISA WAS THE -- YOU WERE THE FIRST WHEN I HEARD THAT SAID WHAT DOES THIS SAY ABOUT THE 14X YEAR HERITAGE OF ANGELA MERKEL? YOU'RE THE FIRST ONE I'VE HEARD TALK ABOUT THAT AND THAT IS GOING TO BE A SOURCE OF SERIOUS ACADEMIC ANALYSIS OVER THE NEXT DECADE. JONATHAN: ULTIMATELY, TOO MANY PEOPLE GOT TOO COZY WITH THE CHANCELLOR IN GERMANY AND THERE IS A LOT OF BLOWBACK AND WE ARE STILL FEELING IT TODAY. SEBASTIEN PAGE, OF T. ROWE PRICE UP NEXT. >> I THINK THE INFLATION DYNAMICS HAVE SHIFTED SLIGHTLY IN THE U.S.
>> WE DO NOT SEE ANY POSSIBILITY FOR THE FED TO CUT RATES UNTIL NEXT YEAR. >> THERE ARE LOGS OF MONETARY POLICY THAT WILL VERY SLOWLY BUT SURELY SLOW DOWN THE ECONOMY. >> WE NEED TO STICK TO OUR WORK THAT TELLS US A RECESSION IS LIKELY TO UNFOLD. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM FARROW -- TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: THIS IS BLOOMBERG SURVEILLANCE ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ, I AM JONATHAN FERRO. WE HAVE TALKED A LOT ABOUT THIS WEEK DOMINATED BY RETAIL RESULTS , ALL OF THAT THURSDAY.
RETAIL SALES TOMORROW MORNING. THE FEDERAL RESERVE ANNUAL GET-TOGETHER IS A WEEK AWAY. TOM: WE ARE STANDING THERE ON THE SPLIT RAIL FENCE AND WHERE THEY COME DOWN THE LINE. THEY WILL ALL BE THERE. YOU'VE GOT TO SEE IT TO BELIEVE IT, WE WILL BRING YOU FULL COVERAGE WITH TEAM COVERAGE OF THE WAVE. POWELL IS GOING TO POINT OUT THERE WAS A 150 JAPANESE YEN, MOMENTS AGO 145. THE WEAKER YEN IS A PROXY.
JONATHAN: WHY CC OVER AT THE BOJ, DID YOU LIKE THAT? YES. IN CHINA, REAL FINANCIAL TURBULENCE COMING TO THE SURFACE. JUST A LITTLE MORE OVER THE WEEKEND. LISA: THERE IS AN INTERESTING
TENSION, THERE IS WEAKNESS IN CHINA THAT HAS CONTAGION. WITH EVERYONE IS EXPECTING TO BE THE RESILIENT U.S. CONSUMER. RETAIL SHELLS -- SALES EXPECTED TO SHOW SPENDING, SO WHICH WINS? THIS GOES TO THE BATTLE UNDERPINNING THE YIELD SPACE.
CAN YIELDS KEEP RISING WITH THE OVERHANG OF POTENTIAL CONTAGION FROM CHINA AND WEAKNESS OVERSEAS? TOM: PRICE ANALYSIS, AT SOME POINT YOU LOOK AT A YIELD ANALYSIS, THE PRICE COMES DOWN ENOUGH WHERE IT IS LIKE I AM LOSING MONEY. HOW CLOSE ARE WE TO THAT I AM LOSING MONEY? YOU CAN QUANTIFY ANYWAY YOU WANT. JONATHAN: A LOT OF PEOPLE HAVE LOST MONEY. TOM: A THREE YEAR BOND BEAR MARKET, IS THAT WHAT WE ARE TALKING ABOUT? JONATHAN: I DO NOT KNOW, BUT WE SHOULD HIGHLIGHT SOME MOVES FROM THE LAST FEW WEEKS. CRUDE IS WORTH HIGHLIGHTING, THE OTHERS IN THE BOND MARKET. YIELDS UP BY 30 BASIS POINTS IN THREE WEEKS. LISA, YOU ASK FIVE DIFFERENT PEOPLE WHAT IS BEHIND THE BOND MARKET MOVE INTO THEY WILL GIVE YOU FIVE DIFFERENT REASONS. LISA:
SOME PEOPLE DISMISSING IT AS A TECHNICAL BLIP THAT DOES NOT MAKE A LOT OF SENSE, THAN OTHER PEOPLE SAYING NO, THIS IS THE KEY RISK FOR THE FEDERAL RESERVE. THEY STAY ON HOLD, THEY ARE COMPLACENT WITH SOME SORT OF SOFT LANDING. INFLATION STARTS TO ACCELERATE, WE HAVE HEARD THAT FROM A HOST OF PEOPLE. AT WHAT POINT DO WE SEE THE DATA TO EDIFY THAT KIND OF IDEA? PROBABLY WHAT IT IS TOO LATE FOR THE FED TO RESPOND. JONATHAN: EQUITY FUTURES ABOUT POSITIVE BY A QUARTER OF 1% ON THE S&P 500, THE MOVE ABOVE 4% ON A 10 YEAR YIELD. 10 YEAR YIELD FOR 15. LISA: TODAY IS QUIET AHEAD OF A BIG WEEK FOR RETAIL SALES IN PARTICULAR.
JAMES BULLARD IS LEAVING HIS ROLE AS THE ST. LOUIS FED PRESIDENT AND BECOMING THE DEAN OF PURDUE UNIVERSITY'S BUSINESS SCHOOL. HE HAS BEEN SUCH A LOUD AND SOMETIMES CONTRARIAN VOICE AND HAS BEEN HAWKISH OF LATE, WHO ARE THE HAWKS REMAINING? 5:00 P.M., JANET YELLEN IS DEPLOYED TO VEGAS TO TALK ABOUT THE INFLATION REDUCTION ACT WHICH IS A BIG DRUMBEAT THIS WEEK FROM THE BIDEN ADMINISTRATION. HE HEADS TO MILWAUKEE TOMORROW.
10:00 P.M., CHINA IS RELEASING A SLEW OF ECONOMIC DATA. RETAIL SALES, JOBLESS DATA. HOW MUCH DO WE SEE THE ONGOING WEAKENING AND HOW DOES IT PLAY OUT THROUGH THE MARKETS? WHEN DOES IT START TO HAVE A MORE CONTAGION EFFECT? TOM: THAT IS THE FIRST THING I LOOKED AT THIS MORNING, THEY ARE MOVING. THERE IS NO OTHER WAY TO PUT IT. ONE OF THE GREAT THINGS THIS WEEKEND WAS THE DETROIT TIGERS WERE AT FENWAY, 35,000 PEOPLE STAND UP AND APPLAUD FOR 10 MINUTES. BULLARD -- THE ONLY REASON YOU GO TO SEE BULLARD'S TO GO TO THE CARDINALS WITH HIM. IS HE GOING TO BE THERE TONIGHT?
ARE THEY GOING TO STAND UP FOR 10 MINUTES FOR BULLARD? I LOVE BUSTING HIS CHOPS ABOUT IT. DON'T SAY THAT, PEOPLE THINK WE ACTUALLY HAVE BOX SEATS. JONATHAN: SEBASTIEN PAGE JOINS US NOW, YOU CAN BE ONE OF THE FIVE THIS MORNING. WHAT IS BEHIND THE BOND MARKET MOVE? SEBASTIEN: HIGHER INFLATION EXPECTATIONS. WE ARE ALL SEEING INFLATION
COMING DOWN, BUT WHEN I LOOK AT MY ONE YEAR BREAKEVENS THIS MORNING ON MY BLOOMBERG, IC 1.56%. TO ME, THAT IS TOO LOW. IF I THINK OF THE RISK TO INFLATION, IT IS NOT TO THE DOWNSIDE, IT IS TO THE UPSIDE. JONATHAN, YOU NAILED THE REASON. IT IS COMMODITIES, OIL PRICES BEING UP 20%. YOU NEED ENERGY TO PRODUCE GOODS AND SERVICES. SOMETIMES, WE UNDERESTIMATE THE IMPACT ON EVEN CORE INFLATION OF HIGHER ENERGY PRICES. I AM NOT SAYING INFLATION IS COMING BACK TO LEVELS WE HAVE SEEN A YEAR AGO, A YEAR AND A YEAR-AND-A-HALF AGO.
THE RISK AS TO THE UPSIDE, THAT IS WHAT THE BOND MARKET IS STARTING TO SMELL. TOM: FOR RADIO, THIS IS A BLOOMBERG TOTAL RETURN CHART. THIS IS THE ALL IN CHART. THE BOTTOM LINE HERE AS WE ARE ABOUT READY TO BREAK DOWN A NEW PRICE WEAKNESS OFF THE CARNAGE OF TWO OR THREE YEARS AGO. I DO NOT KNOW WHAT TO SAY ABOUT PRICE DOWN. IF WE GET THE BOND MARKET TO BREAK DOWN TO LOWER PRICES, WHAT DOES THAT DO TO EQUITIES? SEBASTIEN: IT IS ALWAYS A RISK TO EQUITIES, BECAUSE YOU ARE REVALUING. YEAR-TO-DATE EQUITIES HAVE RALLIED ON THE PRICE EARNINGS RATIO ON THE VALUATION AND THAT IS SENSITIVE TO RATES. EARNINGS ARE SOFT, DOWN 7%
YEAR-OVER-YEAR. IT IS A RISK TO EQUITIES. THIS IS NOT THE TIME TO PANIC ABOUT DURATION. IF ANYTHING, NOW YOU HAVE A BETTER ENTRY POINT.
FIXED INCOME PORTFOLIOS, WE HAVE ADDED DURATION THIS YEAR. IT IS A "HEDGE" AGAINST A REAL GROWTH SHOCK. THE MOST ANTICIPATED RECESSION IN HISTORY IS BECOMING THE MOST ELATED, BUT THERE IS PRESSURE BUILDING IN THE SYSTEM.
WE ARE NOT PANICKING ABOUT DURATION RIGHT NOW. WE HAVE DURATION AND WE ARE PARING IT WITH CREDIT. I CALL THIS THE MAGIC BARBELL, GETTING 9% TOTAL YIELD OUT OF HIGH YIELD. I LIKE MY FIXED INCOME FACTORS TO BE DIVERSIFIED, AND NINE YOU GET PAID FOR THE PROTECTION OF TREASURIES. IT WILL NOT PROTECT YOU FOR AN
INFLATION STOCK, BUT INFLATION PRESSURES. YOU TO STEP BACK AND LOOK AT WHAT IS THE GREATER RISK RIGHT NOW? LISA: HOLD ON A SECOND, LET ME MAKE SURE I UNDERSTAND. YOU ARE SEEING THE RISK WITH INFLATION IS AN UPSIDE SURPRISE, YOU CAN WE ACCELERATE.
YOU ARE LEANING INTO DURATION BECAUSE IT IS NOT INFLATION SHOCK, JUST A GRIND HIGHER. WHAT IS THE DIFFERENCE? SEBASTIEN: WE ARE USING DURATION AS A HEDGE TO A GROWTH SHOCK. TO ME, THE RISK TO INFLATION IS 3, 6 MONTHS, IT STARTS PEAKING BACK UP. AT THE END OF THE DAY IF YOU TAKE A 62 MONTH HORIZON, YOU WANT SOME HEDGES IN YOUR PORTFOLIO. WHERE DO YOU GET THE HEDGES? YOU GET THEM A LITTLE CHEAPER THAN YOU HAVE IN THE PAST. IT
IS NUANCED. JUST DIVERSIFYING THE DIFFERENT RISK FACTORS. LISA: ONE THING YOU TALKED ABOUT WAS COMMODITIES PRESSURE TO FUEL REAL INFLATION. THIS COMES AS WE LOOK AT CHINA AND THE POTENTIAL THREATS, RISKS TO GROWTH. IF THERE IS A REVERSAL IN OIL PRICES AND THAT COMES WITH A LOT OF WEAKNESS, HOW DO YOU REARRANGE IN A TIMER YOU PREFER HIGH YIELD OVER EQUITY? SOME BARBELL APPROACH TO BEING MORE CONSERVATIVE KIND OF ASSET ALLOCATOR? SEBASTIEN: LOOK AT THE SPREAD FOR HIGH YIELD. IT IS NOT PARTICULARLY ATTRACT. IF YOU ADJUSTED FOR FORECASTED DEFAULT RISKS, IT IS NOT BAD.
I REALLY CARE ABOUT THE TOTAL YIELD. THE COMPARISON WITH THE EARNINGS YIELD IS ADVANTAGEOUS, 80TH, 90TH PERCENTILE IN FAVOR OF HIGH-YIELD BONDS. I AM GETTING 9% AT OF HIGH-YIELD BONDS GLOBALLY AND THE EARNINGS YIELD IS DOWN TO 5% ON STOCKS. THAT SPREAD IS REALLY ADVANTAGEOUS. WE ARE NOT FORECASTING A REALLY HARD LANDING WAVE OF DEFAULTS, EVEN IF THINGS SLOW DOWN IN CHINA, WHICH THEY ARE.
WE ALWAYS INVESTED IN STOCKS, WE ARE CLOSE TO NEUTRAL RIGHT NOW. IF WE ARE GOING TO ADD TO THE PORTFOLIO, MIGHT AS WELL DO IT WITH HIGH-YIELD. TOM: I CANNOT SAY ENOUGH ABOUT THIS, REALLY SOPHISTICATED EFFORT. DO I WANT TO BE DIVERSIFIED OR DO I WANT TO BE MORE ACUTELY FOCUSED? SEBASTIEN: I THINK DIVERSIFICATION REMAINS CRITICALLY IMPORTANT WHEN YOU ARE GOING THROUGH A REGIME SHIFT, WHICH IS WHAT WE ARE GOING THROUGH. YOU'VE TALKED ABOUT THIS ON THE SHOW, GRAVITY IS BACK IN FINANCIAL MARKETS. WE HAVE A TON OF CASH IN THE SIDELINES. YOU DO NOT WANT TO GO ALL THE
WAY TO CASH AND MISS THE UPSIDE OF STOCKS IN THE LONG RUN. I DO NOT THINK YOU WANT TO GO ALL THE WAY TO STOCKS RIGHT NOW. THERE ARE OTHER OPPORTUNITIES. THINK ABOUT VALUATIONS, THE
TECH SECTOR IS TRADING AT A PRICE EARNINGS RATIO OF 30. LET US SAY YOU MISSED THE RALLY, DO YOU WANT TO CHASE THE MOMENTUM OR WAIT TO BUY THE DIP? YOU HAVE A THIRD OPTION, WHICH SPEAKS TO DIVERSIFICATION, GET IN PARTS OF THE MARKET THAT HAVE NOT PARTICIPATED, QUALITY SMALL CAPS PRICE RATIO OF 13. THAT IS HARD RECESSION LEVEL. WE MENTION HIGH-YIELD BONDS YIELDS AT 9%, SO THE ENERGY SECTOR TRADING AT 12. THERE ARE WAYS TO GET IN THE MARKET WHERE YOU ARE NOT JUST CHASING THE MOMENTUM. I CALL THIS THE THIRD OPTION. YOU CHASE THE MOMENTUM, WAIT FOR THE DIP, OR TAKE A DIVERSIFIED APPROACH TO YOUR QUESTION AND GET IN PARTS OF THE MARKET THAT HAVE NOT PARTICIPATED.
HIGHER YIELD INTO HIGH-YIELD BOND SPACE. THERE OPPORTUNITIES TO GET IN AND DIVERSIFIED. JONATHAN: ALWAYS ENJOY YOUR INSIGHT, SEBASTIEN PAGE.
WELCOME TO THIS PROGRAM AND GOOD MORNING, EQUITY MARKET WE ARE POSITIVE BY 0.2%. THE TWO BIGGEST STORIES IN FINANCIAL MARKETS RIGHT NOW, THE COMMODITY MARKET AND BOND MARKET. SEBASTIEN PAGE CONNECTING BOTH. 10 YEAR AT 415, 30 BASIS POINT MOVE ON THE 10 YEAR YIELD. A BIG RALLY IN CRUDE, OFF THE LOWS FROM THE MIDDLE OF JUNE. LISA: THIS IS BEEN A SLEEPER ISSUE. I SAW THE PRICE OF GASOLINE,
YOU HAVE TO START TO REALIZE WE HAVE RESET BACK TO PLACES WHERE PEOPLE STARTED TO PUSH BACK AND GET CONCERNED. WE ARE NOT TALKING ABOUT IT BECAUSE OF RESILIENCE, BUT AT WHAT POINT DOES THAT START TO HAMPER CONSUMER DISCRETIONARY BUYING POWER? DOES IT CAUSE PRICES TO GO UP? I AM THINKING OF AIRLINE TICKETS, PEOPLE ARE TALKING ABOUT PRICES COMING DOWN. CAN THEY CONTINUE TO GO DOWN IF YOU SEE PRICES WHERE THEY ARE? TOM: AIRLINE EXPERTS ARE SEEING JET FUEL INTO THIS IF WE BREAK OUT INTO $90 BRENT CRUDE. WHAT I WOULD SUGGEST, MOVE UP IN GASOLINE, A GALLON OF GAS, IT WILL AFFECT THE DIALOGUE OF JEROME POWELL. THAT HAS GOT TO. IT DOESN'T MATTER IN WASHINGTON, A GALLON OF GAS MATTERS. JONATHAN: WILL HE BE ON THE SAME PAGE AS
SEBASTIEN PAGE? SEEMS UNLIKELY. THERE IS A FEELING THEY EMBRACE IT A LITTLE BIT. LISA: I AM EXPECTING TO HEAR SOMETHING MORE DOVISH, THE IDEA OF WE NEED TO SEE WHERE WE ARE, WE ARE SUFFICIENTLY RESTRICT THE , ALL THESE TYPES OF COMMENTS. JONATHAN: I THINK INFLATION IS BOTTOMING. >> IF THE IOWA STATE FAIR -- I HAVE NO RIGHT TO OVERTURN THE ELECTION. THERE IS ALMOST NO IDEA MORE UN-AMERICAN THAN THE IDEA ANYONE PERSON COULD CHOOSE WHICH VOTES TO ACCOUNT FOR PRESIDENT OF THE UNITED STATES.
THE AMERICAN PEOPLE KNOW, AS I HEARD FROM DOZENS OF PEOPLE AT THE IOWA STATE FAIR, THE AMERICAN PEOPLE KNOW THE PRESIDENCY BELONGS TO THEM AND THEM ALONE. NO ONE PERSON HAS EVER HAD THE AUTHORITY OR EVER SHOULD UNDER OUR SYSTEM. JONATHAN: THAT WAS MIKE PENCE ON NBC, MAINTAINING THAT PRESIDENT TRUMP ASKED HIM TO HELP OVERTURN THE 2020 PRESIDENTIAL ELECTION. QUITE A WEEK AHEAD FOR YOU ON THE ECONOMIC SOCIETY, RETAIL SALES TOMORROW MORNING, PLENTY OF EARNINGS. THURSDAY, YOU WILL HEAR FROM WALMART. THIS MORNING, EQUITIES ARE
DOING OK. A GRIND HIGHER ON THE S&P 500 AFTER A COUPLE WEEKS OF LOSSES. YIELDS HAVE BEEN HIGHER THE LAST MONTH OR SO, JUST ABOUT UNCHANGED THIS MORNING. TOM: THE BOND MARKET, WE'VE BEEN TALKING YIELD AND PRICE. LISA KNOWS THIS CHART, THIS AGGREGATES AND ALL THE BILLS AND BONDS AND BETWEEN THE NOTES THAT ARE OUT THERE. IT IS SIMPLE. ON PRICE, BACK TO 2001, WE HAD
THIS HORRIFIC BOND BEAR MARKET, THEN WE HAD SOME STASIS. THE MAXIMUM STRESS IF WE ROLLOVER AND REVISIT THE PRICE LOWS ON BONDS. I DO NOT THINK THAT IS IN THE MARKET RIGHT NOW. LISA: THERE'S A DISTINCTION BETWEEN PEOPLE LOOKING AT THE 401(K)S, STATEMENTS INTO SAYING MY BONDS ARE LOSING A LOT OF VALUE VERSUS WE JUST HEARD FROM SEBASTIEN PAGE, YIELDS ARE HIGH, THEY LOOK GOOD, IT IS A GREAT ENTRY POINT.
THAT DIVERGENCE IS UNCLEAR IN TERMS OF LOWS. TOM: BLOOMBERG SPEAKING WITH BILL GROSS ON FRIDAY ABOUT SOME OF THE HISTORY OF THE GREAT MODERATION. SPEAKING OF MODERATE, ECONOMIC POLICY RESEARCH DIRECTOR WHO WAS ON FIRE LAST WEEK, HAD TO DRAG HER BACK HERE THIS MORNING TO? BUT WHERE WE ARE. IS THE DEBT DEBATE THE SAME OLD SAME OLD YOU HAVE HEARD FOR YEARS, OR IS THERE SOMETHING NEW ABOUT THE WORRY OF OUR DEBT AND DEFICIT? >> I HAD A REALLY INTERESTING CONVERSATION WITH SOME SENIOR COUNSEL ON THE HILL LATE LAST WEEK THAT I WOULD SHARE WITH YOU ALL. THE CONVERSATION AROUND THE
DEBT AND GOVERNMENT THAT DOWN -- SHUT DOWN IN FEDERAL SPENDING SAID BEEN WITH US SINCE THE REPUBLICANS CAME INTO CONTROL OF THE HOUSE, THAT IS GREAT. YOU WANT TO SEE THE CONVERSATION. BUT THE TENSION THAT WE SEE BETWEEN A SMALL FACTION OF HOUSE REPUBLICANS AND THE MODERATE OR MIDDLE GROUND OF THE HOUSE CAUCUS AND SENATE IS SO FAR APART THE DIALOGUE ON THE HILL NOW IS NOT ABOUT REDUCING FEDERAL SPENDING AS A WAY TO GET OVER THE IMPASSE WE WILL FACE OF THE END OF SEPTEMBER. IT IS ABOUT?
WHO CAN WE IMPEACH? CAN WE GET MONEY FOR THE BORDER? IT IS A DIALOGUE THAT IS REALLY IMPORTANT FOR YOUR EXACT QUESTION, BECAUSE IT IS NOT ABOUT THE DEBT OR DEFICIT SPENDING. IT IS ABOUT WHATEVER THEY GET FROM A POLITICAL PERSPECTIVE. TOM: IF THERE ARE TWO LEAVES OUT THERE, LIKE SOMETHING AT A STATE FAIR OR SOMETHING LIKE THE VOTE IN OHIO LAST WEEK WE TALKED ABOUT, IS THERE A POINT WHERE THE MIDDLE GROUND OF THE TWO PARTIES PUT THE EXTREMES IN THEIR PLACE AND WE MOVE FORWARD TO SOME KIND OF TRUE POLITICAL DISCOURSE? HENRIETTA: I DO NOT THINK WE WILL SEE THAT UNTIL WE GET INTO GENERAL ELECTION AND OF DONALD TRUMP IS AT THE TOP OF THE TICKET ON THE REPUBLICAN SIDE, THE OPPORTUNITY FOR DEMOCRATS TO EXPRESS THE EXTREMISM OF THE RIGHT WHEN IT COMES TO ABORTION AND THE INABILITY TO MOVE BEYOND THAT MEANS AT LEAST FOR THE NEXT SIX TO EIGHT MONTHS, WE ARE GOING TO BE IN THIS HYPER-PARTISAN CHAOS. THE ISSUE OF ABORTION IS SO
TELLING. IT MOVES NOT JUST DEMOCRATIC VOTERS TO GET OUT, BUT THE PENDULUM SWING THAT WE SEE FROM REPUBLICAN VOTERS JUST FOR EXAMPLE IN ARIZONA IS A FOUR PERCENTAGE POINT SWING OF THE VOTER BASE. FROM 2016 WHEN THEY ELECTED TRUMP TO 2020 WHEN THEY ELECTED BIDEN AND THE 2020 TWO MIDTERMS, THAT IS ABORTION. IT HAS MOVED THE NEEDLE SO SUBSTANTIALLY THAT IN TIGHT MARGIN STATES LIKE ARIZONA, PENNSYLVANIA, GEORGIA AND NEVADA , THE MARGIN IS SO RAZOR THIN BUT THE PENDULUM SWING YOU ARE SUGGESTING AS THEY TURN FROM PARTISAN POLITICS TOWARD THE MODERATE CENTER IS THE TELL. THAT IS WHERE YOU SEE THE SHIFT FROM PUBLIC AND VOTERS, INDEPENDENT VOTERS, 70% OF WHOM BELIEVE ABORTION SHOULD BE LEGALIZED. THIS IS A VOTER ISSUE THAT HAS TREMENDOUS IMPACT IN RED STATES AND BLUE, OHIO WOULD BE A PERFECT EXAMPLE. JONATHAN:
FIRST DEBATE NINE DAYS AWAY, LET US SET THE STAGE. WHO IS ON IT? HENRIETTA: I DO NOT KNOW TRUMP WILL BE ON IT. BASED ON HOW HE IS TREATING THE INDICTMENTS, HE WANTS TO BE CENTER STAGE. LOOKS A LITTLE BIT LIKE YOU SHOULD BE THERE.
IF I WAS ON HIS CAMPAIGN, I WOULD RECOMMEND NOT TO GO. HIS NEXT CLOSEST COMPETITOR IS THE ONE TO BE, RON DESANTIS. HE IS 15% IN THE POLLS, WHICH MAKES THEM FAR AND AWAY THE FRONT RUNNER. EVERYONE ELSE IS LOCKED IN THE
LOW SINGLE DIGITS. STAY HOME IF YOU CAN AVOID THE SPOTLIGHT, LET RON DESANTIS TAKE THE LAST COUPLE OF HITS. THE POTENTIAL FOR THE GAVIN NEWSOM RON DESANTIS DEBATE NOVEMBER 8 COULD BE CANCELED IF THIS CANNOT BE PULLED OFF IS SOMETHING THAT IS IMPORTANT TO WATCH. IT REALLY OPENS THE DOOR FOR ANOTHER CANDIDATE THAT MAY BE IS NOT IN THE RACE RIGHT NOW TO JUMP IN. LISA:
WHEN YOU TALK ABOUT TRUMP BEING THE CONVENTIONAL CANDIDATE, HE IS NOT. HE PROBABLY IS NOT LISTENING TO CONVENTIONAL ADVICE AT A TIME WHERE HE STOPPED BY THE IOWA STATE FAIR AND BROKE WITH CONVENTION PRETTY DIRECTLY. HE WAS NOT SUPPOSED TO BE THERE. HE DID THIS TO LAMBASTE HIS OPPONENT, RON DESANTIS. PEOPLE APPLAUDED HIM AND BOOED RON DESANTIS. HOW LONG CAN THIS WORK? WERE PEOPLE DO NOT NEED DONALD TRUMP TO FLIP BURGERS AND HOLD BABIES AND GO AROUND AND SHAKE HANDS? HE CAN SWOOP IN FOR AN HOUR, GIVE A SPEECH AND FLY OFF AND EVERYONE SAYS WE LIKE HE IS UNCONVENTIONAL. HENRIETTA:
IT IS A TV SHOW AND HE IS AN EXPERT AT IT. THE BOOING GETS MORE STORIES THAN THE ACTUAL CANDIDATES, MIKE PENCE, CHRIS CHRISTIE OR RON DESANTIS. THE PLAYBOOK WORKS. KEEP DOING IT. JONATHAN:
DOES WRAPPING M&M WORK -- EMINEM WORK? HENRIETTA: NO. I DO NOT GET A LOT OF CREDENCE. JONATHAN: DOING PRETTY WELL AND SOME OF THE POLLS, RAMASWAMY DID A FANTASTIC TRADITION OF THAT IF YOU MISSED IT. LISA: AT ONE POINT -- WHAT POINT WITH THIS BE THE PLAYBOOK? MORE PRESS IS BETTER, DO WE STAY WITH THAT KIND OF NARRATIVE? IF THAT IS THE CASE, WHO COULD GO UP AGAINST THE EXPERT IN REALITY TELEVISION? LISA: I -- TOM: I ASKED THIS QUESTION LAST WEEK.
IS THE VOTING ABOUT THE ECONOMY STUPID, OR IS IT SIMPLY ONE BIG CULTURE WAR DEBATE? I DO NOT KNOW THE ANSWER. MY EVIDENCE IS DAY-TO-DAY CULTURE WARS CELLS CABLE TV TIME. JONATHAN: THE POLLS NUMBER ONE ISSUE, THE ECONOMY. THE CULTURAL STUFF, HOW HAS THAT WORKED OUT FOR THE GOVERNOR OF FLORIDA WHO RAN HARD INTO THE ISSUE DOES NOT GAIN TRACTION? WE HAVE SEEN HIM LEAN INTO ECONOMICS.
TOM: SUNAK AND LABOUR, DO THEY HAVE A CULTURE WAR DEBATE? JONATHAN: IT IS A WESTERN PHENOMENON. LISA SAID IS MORE PRESS GREAT FOR WHATEVER CANDIDATE THAT MIGHT BE? I WOULD SAY NOT ALL PRESS IS GREAT, SOME SCATHING ARTICLES GOING INTO THE WEEKEND ON THE GOLDMAN SACHS CEO, EIGHT: 15 EASTERN, ABOUT 45 MINUTES FROM NOW, WE WILL CATCH UP WITH MIKE MAYO WELLS FARGO, THAT CONVERSATION IS AROUND THE CORNER ON A GUY THAT IS HOLDING ONTO GOLDMAN SACHS IN THE FACE OF CRITICAL ARTICLES INTO THE WEEKEND. TOM: I WILL ALWAYS BACK MIKE MAYO, HE HAS BEEN FIRED FOR SECURITY ANALYSIS INDEPENDENCE. HE IS SOMEONE WHO SPEAKS HIS MIND, FACT-BASED. NOT JUST ANOTHER CONVERSATION,
THIS IS THE RIGHT GUY AT THE RIGHT TIME IN THE FUTURE OF THE FIRM. JONATHAN: YOUR EQUITY MARKET RIGHT NOW POSITIVE BY 0.2% AS WE KICK OFF A BRAND-NEW TRADING WEEK WITH EQUITIES PUSHING HIGHER STATESIDE, GOOD MORNING. JONATHAN: LOOKING TO BOUNCE BACK THIS MORNING, GOOD MORNING TO YOU.
EQUITY FUTURES POSITIVE BY 0.2%, NASDAQ UP BY 0.3. ON THE MONTH SO FAR IN THE LAST COUPLE WEEKS OF AUGUST, NASDAQ 100 DOWN CLOSE TO 5%. ON TRACK FOR THE WORST MONTH OF THE YEAR SO FAR ON THE NASDAQ, A BIT OF WEAKNESS CREEPING IN. INTO THE BOND MARKET, YIELDS HIGHER BY 30 BASIS POINTS OVER THE LAST THREE WEEKS. WE HAVE NOT HAD A WEEKLY DECLINE IN YIELDS FOR MORE THAN A MONTH FOR THE 10 YEAR. THE POST FAILURE HIGH IS ABOUT 420, WE ARE ABOUT FIVE BASIS POINTS AWAY FROM THAT ON THE 10 YEAR.
MULTIYEAR HIGHS, LET US CALL IT THE CYCLE HI, WE WERE THROUGH 430 3, 434, SOMETHING LIKE THAT BACK IN OCTOBER. THOSE LEVELS OFF THE BACK OF A BIG MOVE IN THE COMMODITY MARKET. FOREIGN EXCHANGE NEXT MONTH, 14TH OF SEPTEMBER, ECB DECISION JUST AROUND THE CORNER. THEN WHAT? DO THEY HIKE? FOR THE FEDERAL RESERVE, DO THEY HIKE? LISA: WHAT IS THE CONSEQUENCE IF EVERYONE IS GAMED OUT AT A TIME WHERE THE ECB IS STRUGGLING WITH GREATER DEGREES OF WEAKNESS WHILE STILL PERSISTING CORE INFLATION, ESPECIALLY IN LIGHT OF HIGHER NATURAL GAS PRICES. ? JONATHAN: NATURAL GRASS -- GAS, CRUDE, PICKING UP. SURVEILLANCE THIS MORNING, CHINA SHOWING MORE SIGNS OF STRESS FOR THE PROPERTY MARKET. THE DEVELOPER IS ASKING TO
STRETCH OUT A BOND PAYMENT DUE SEPTEMBER 2 OVER THE NEXT THREE YEARS. YET TO COMMENT ON BLOOMBERG REPORTING, BUT AN INDICATION ACROSS A RANGE OF BUSINESSES ABOUT REWORKING THE DEBT AND THE FOCUS IS AROUND ONE PART OF THE ECONOMY, THE PROPERTY MARKET. LISA: WHICH HAS A LOT OF TENTACLES, WE FOUND THAT WITH PRIVATE WEALTH MANAGER WHO IS NOT ABLE TO MAKE PAYMENTS ON ALL OF THE PRODUCTS, THAT WAS THE OTHER NEWS THAT CAME TO LIGHT. HOW MUCH DO WE SEE THIS PLAYED OUT? THE TASK FORCE, IS IT SUFFICIENT? OFFICIAL SAY WE CAN THINK ABOUT IT, WE WILL LOOK AT IT. CAN THEY COME WITH SOME SORT OF STIMULUS PACKAGE, OR ARE THEY DONE AT A TIME WHERE THEY DO NOT WANT TO REINFLATE THE BUBBLE? TOM: A SINGLE SENTENCE HERE, THIS IS FROM THE VAST COMPENDIUM OF WIKIPEDIA, AFTER HIS RESIGNATION, YANG KEPT THE ROLE OF SPECIAL ADVISOR TO THE CAYMAN ISLANDS COMPANY.
THIS IS NOT JUST A CHINESE STORY LIKE ALIBABA AND THE REST, THIS IS A WESTERNIZATION OF THEIR FINANCE AND ARE THERE RULES USING INSTITUTIONS IN THE CAYMAN ISLANDS AMONG OTHER THINGS. THAT IS WHY SCRUTINY NEEDS TO BE IN PLACE. JONATHAN: WE DO NOT KNOW HOW FAR THE TENTACLES STRETCH OUT OR WHAT THEY TOUCH. WE SEEM TO BE TALKING ABOUT IT EVERY SINGLE DAY AT THE MOMENT. ANOTHER STORY, GOLDMAN SACHS EXPECTING THE FED TO CUT RATES IN Q2 NEXT YEAR.
THE CUTS AND OUR FORECAST ARE DRIVEN BY THE DESIRE TO NORMALIZE THE FUNDS RATE FROM A RESTRICTED LEVEL. ONCE INFLATION IS CLOSER TO TARGET, WE ARE PENCILING AND 25 BASIS POINTS OF CUTS PER QUARTER, BUT WE ARE UNCERTAIN ABOUT THE PACE. BANK OF AMERICA HAS PUSHED THE RATE HIKE CALL FROM SEPTEMBER TO NOVEMBER AND SEES THE CUTS STARTING. TOM: HE IS CAREFUL WITH HIS LANGUAGE, PENCILING IS THE KEY PHRASE. PENCILING IN, OUT, THERE IS A LOT OF OF THIS AND THAT.
I WOULD SUGGEST EVERY MARKET ECONOMIST AND STRATEGIST IS AS DATA-DEPENDENT AS ANY GIVEN GOVERNOR OR PRESIDENT. JONATHAN: JOHN WILLIAMS OF THE NEW YORK FED PENCIL TO SOMETHING INTO THE NEW YORK TIMES, HIS POINT WAS VERY INTUITIVE. INFLATION IS GOING TO COME DOWN, NOMINAL RATES STAY STEADY, REAL RATES INCREASE. TO MAKE SURE REAL RATES ARE CONSISTENT AND DO NOT BECOME MOR
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