Protesters withstood heavy rain in hong kong to march for an 11th straight weekend. Organizers say more than 1. 7 Million People took part across the city. The protests shut down major boulevards. Ekendsaken demonstrations were mostly peaceful. Global news 24 hours a day, onair, and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. David it is 1 00 in london, 1 00 in newon york, 6 00 in london, 1 00 a. M. In hong kong. From bloomberg World Headquarters in new york, here are the top stories from the bloomberg and around the world. All eyes on the bed. Fomc chair jay powell will kickoff the Kansas City Feds annual jackson hole Economic Policy symposium. Wall Street Apartments are not selling like hotcakes. We will tell you what is behind the slowdown. And its been a little more than a year since the sports world changed forever after the Supreme Court clear the way for states to legalize sports betting. We will truck talk to draftkings ceo jason robins about how the industry has changed since then. Taylor riggs is with us halfway into the trading day. We had seen a nice bounce and it is holding. Taylor continuing to follow through as we open up on a monday. Chipmakers catch my eye. A good sentiment of where we are in terms of trade. The huawei ban delayed another 90 days. Within that, there are some individual movers as well. Nvidia up more than 6 . Its best today again in two and a half years, after microsoft and Activision Blizzard said that they would use some of nvidias chips. Certainly, all of these stocks getting a big boost today. , as we know it, when the yield curve inverted thursday, we had a massive selloff on the s p 500. Friday and today, more covering back to where we are. A steepening of the yield curve again today. Recovering after the week that was. We still have a long ways to go, so we will see how this continues. Another big story we are watching is back within the bond market. We know the president said he wanted to cut 100 basis points on the short end. I wanted to look at the long end. We know the 30 year had dipped below 2 last week. Now back up above eight basis points, 2. 08. You are getting the curve steepening again as you get sentiment, global inflation growth expectations, perhaps better than the sentiment we saw last week. , im sure you are sick of hearing me talk about it, but at least the 30year is something that im continuing to follow. Vonnie that will never happen. Taylor riggs, thank you. Investors listening closely when Jerome Powell speaks at the Central Banks annual jackson hole symposium friday. Joining us for a preview is michael mckee, our International Policy correspondent. To the the general theme symposium, but we dont have an agenda. Mike challenges to Monetary Policy, which fits with the feds annual review of policy options, the way it conducts its framework. How specific that will get, how much it will get into the situation right now, unclear. The best opportunity for that is jay powells kickoff speech on friday morning. The question is not really for wall street what he will say, but how much, how much will they cut rates, what will he tell us . Vonnie there tends to be a raft of economic papers at the symposium. Usually one or two standout for a new idea, some sort of buzz that they engender. See, whathat we may people want to see . Obviously, it is a new world for the fed and other Central Banks with Interest Rates permanently low now, the zero lower bound as a constraint on what theyre able to do. Everybody is looking for how you conduct Monetary Policy going forward. It will be interesting to see what the academics have tasked, coming up with ideas. This is an economic conference, not a bunch of papers that are designed to be acted on, theoretical for the most part. They get a lot of discussion among the participants. Not sure you will see anything that will affect markets come out of the academic research, but it may inform the fed as it moves forward with its review, looks to have will do policy in the future. Vonnie we have heard some members talk about International Challenges in recent months. How much with the likes of the huawei story or china trade in form what participants are talking about this week . Mike definitely a sideline conference, it may go into jay powells speech, and people will be reacting to that. We will be speaking with fed officials, and everyone will be asking what they think about it. Fed, ing with the general, they know its a problem for the economy. The are slowing because of trade wars. But how much and how much is directly attributable to that, how much is psychology, businesses holding off, will it affect consumers . We saw Consumer Sentiment fall last week. A lot of theoretical but no hard answers at the moment. Vonnie im sure there will be lots of discussion about the president as well, although we may not hear much conversation about that. Thank you, michael mckee. For more insight into the feds thinking, we will speak to the former fed president Eric Rosengren later in the hour. Hong kong protesters heading to the streets for the 11th straight weekend. Months of demonstrations have led to violent confrontation between protesters and police, including a demonstration at the airport. Our guest from stratfor. Is in your sense that things are calmng, or is this the before the storm . We will have to wait a few weeks. Certain groups try to keep their protest more controlled, we didnt see the disruptions we saw in previous weeks. We areis not clear that out of the woods yet for hong kong or beijing. Vonnie what is the strategy on the part of the protesters . It looks like things were kicking up to a new level last week with the airport shutdowns, there. Rmish here or now we are calm again. Is this delivered on the part of the protesters . Rodger you have to be careful, there is no single protester group. Is organizing these more peaceful protests that can support within the population in hong kong, but then there are other student an independent leaders who have more radical aims, are more willing to carry out these types of disruptive activities. While there is communication between them, there is not always coordination between these different leaders in the movement. Vonnie what is your sense for how china is playing this out . Troops weree amassed on the other side of the border to hong kong. Are they still there, threatening still . Rodger over the weekend, the chinese put out another batch of videos to show how capable the Peoples Police are, crowd control, right control. Our understanding is the pap deployment is there in shenzhen, may be there through the october 1 anniversary of the founding of modern china. It looks like they will be there for a wild. Clearly, beijing wants to find a ,ay to not have to roll them in ideally, as we head back into the school year, as these for ats have been gone on long time. There is some sense in the reduction of the pace and scope, and in beijing can avoid rolling in the pap. Vonnie we are hearing more and more people leaving hong kong to go to places like taiwan, which is perhaps also under threat down the line, given the unrest. Seems like anybody can leave to work elsewhere as this is ongoing. Ow . T is carrie lams role n what does she do . Rodger she is in a very difficult position. From the point of many people in hong kong, she has not played this well, and frankly, from beijing as well. If the protest were a lot calmer, it would find an opportunity for beijing to find and easing out of carrie lam sometime in the nottoodistant future, but beijing cannot really do that in the media moment because they cannot be seen as giving in to protests and making such a large concession. There are some potential things she can do in regard to the investigations into the police, but it doesnt seem like she is willing to take any significant steps on her own. Vonnie what is the end game here, who makes the play . Is difficult again because there is no single element to the protest movement. There are some minor aspects that i think the broader protest movement has, that beijing could cede to. They could fully withdraw the exhibition bill. They could always take it back on at another time. Maybe take some action down the road against carrie lam. Those more radical protesters want to take some stronger action. For beijing, they have a longer term plan. You heard them announce again this weekend the plans for shenzhen, and this is about reducing theeadily necessity of hong kong as a unique entity. They know, over the long run, they will not be able to maintain this fiction of one country, two systems. Vonnie our thanks to rodger baker of stratfor. Coming up, wall Street Apartments are spending more time on the markets and selling below asking price. What is behind the slow down. This is bloomberg. Vonnie this is bloomberg markets. Im vonnie quinn. Apartments in manhattans financial district are not trading like blue chips on the nearby stock exchange. Are spending more time on the market and are often selling less than for asking price. So what is behind the real estate slow down in that particular area . Joining us is our managing editor for real estate. What is going on . We now, even if there was an exodus of dental jobs, overall they are up. Other companies moved into those places that were vacated. There was a time when it looked incredibly attractive for developers, and that is part of the problem. It went through two phases. After the moment when Financial Firms started moving out, the first phase was divergence. Looking at these beautiful, classic art deco buildings, turning them into apartments. That was 20 years ago. While, thenok for a developers came in and started putting up new buildings, some modeled after the old ones. After the moment when financial a lot of them the modern glass, steel structures. So the older ones looked less attractive, the people who were anticipating a lot of growth did not see it. At the same time, the nature of the neighborhood has changed a lot in terms of jobs. A lot of the people who may have atted to live there and work the office at jpmorgan are now going to midtown, Morgan Stanley going to times square. Vonnie what kind of median rents are we looking at, how many days on the market before these apartments sell or rent . Market i dont remember that number. I should have memorized that. Basically 24 glut oversupply, compared to the other neighborhoods. Said, the nature has changed in terms of the jobs, but it is still not the place where you have a bagel shop on every corner, as you might expect, whereas, if you cross the river to brooklyn, you can have a few more of those amenities. Vonnie it is crazy because you could literally move a few blocks and the trends are so different, and you are talking about a 10minute walk. In some areas, apartments have gone way down, other areas they are holding their own. Manhattan is generally up. Good news for these developers, others looking for a place to live, now its possible to live in manhattan. Have been constant around the city. I remember when i moved here almost 20 years ago. At the time, i moved to the upper east side, which was going through a transition at the time. Now it is considered one of the more affordable neighborhoods in new york city. At the time, it was considered one of the more expensive. Vonnie the good news out of this story, if you are a family, you can now consider living in manhattan, whereas before it was impossible. Rob urban, thank you. Great story on the bloomberg today. Still ahead, feeling lucky . Place your bets, your sports bets. We speak to draftkings ceo jason robins on the growing business of Online Sports betting. This is bloomberg. Vonnie this is bloomberg markets. Im vonnie quinn. Iskoff to football season weeks away, and avid fans of the sport are already feeling lucky, gearing up to place bets on their teams, legally now in seven states. Lets welcome draftkings ceo jason robins. Clarify, the industry is up and running a legal in seven states, but there are other states where it could be soon. All of this has happened quickly. Il recently, it was just where you could bet on sports. The Supreme Court lifted the ban and now theres been a flurry of activities. Several states have passed bills that are in the process of getting live operators to go. Live operators in these seven states, including new jersey. What areroducts the products draftkings is dropping for this nfl season . Jason we have a lot of products. On our daily fantasy product, we have two exciting Million Dollars top prize contests. Entryay, there is a 10 one, 2. 5 million prizes. 1 million. Is as long as you finish in the top 6200, youll get a prize. The cool thing is, somebody can watch the games, and then at the end of the night youll be a millionaire. Vonnie you were trying to raise 200 million but it didnt happen. What is the story with fund raising . Jason we ended up raising money last year, i dont know if we officially announced anything. We dont need money at the moment, but there are different opportunities, such as being able to launch in new states, which we think could be a good use for investor cap vonnie how much did you raise and who from . Jason we didnt announce it, so we shouldnt discuss it here and it is in the neighborhood that you discussed. Fanduel,ompetitors, have partnered with others you have not partnered with anybody. Jason we may or may not hatch ourselves to one partner. We think there are a lot of interesting things we can do with a variety of partners. We have announced a lot of partnerships. We had a big one with Penn National gaming that we released recently. A negation to gaming companies, sports Media Companies. We have had probably 50 different partners across sports leagues, teams, Media Companies over the past few years. You mean more like an acquisition. Vonnie exactly. Jason right now, we think it is best to focus on telling the number one product out there. We have the number one rated app. Sometimes when you are part of a bigger entity, it is harder. It is not really a focus for us. If something comes along, we will listen, but right now, we are just trying to provide a great experience for customers. A piecedisney does own of draftkings but doesnt really want to be in the business of almond gambling. How do you navigate that . Disney, i think, is a great partner to have because they have a tremendous amount of content assets, including of course espn, which everyone knows is a big brand, has a huge reach. I think this is a nice set up for both companies, where maybe there is some concern on their end of a directly going in with their own brand, licenses to launch these products. This way, they can do it with draftkings, which still gives them equity upside, but does not require them to directly enter themselves. At least that is my hope. Vonnie the idea now is there is a bit of a land grab going on. Some Companies Competing with in these states were gambling is about to go live. Where are you targeting . Jason you are right. It seems like everything is happening at once. The reality is with a statebystate setup, that gives us time to get up and running, go out and spend locally on marketing, reaching new customers in those states, also to have a conversation with partners as we see how things play out. It would be even crazier if it was all of a sudden the whole u. S. The statebystate thing is easier, but it does feel the way you described, a lot going on. Vonnie which are about to go live . We are hoping to launch pennsylvania, West Virginia, indiana, and iowa this football season. Our hope is to get all of them live. Vonnie and you work on legislation, you have helped to pass bills . Jason we dont directly work on the legislation that we provide input. We think we have a lot of experience, fantasy being one of the top players for Online Sports books. Hopefully, it is helpful to hear from us. Vonnie what kind of revenue are you targeting . Jason it is so dependent on new state launches, which is out of our control. We think by the time there is decent coverage across the u. S. , we will be a multibillion dollar company. Vonnie jason, thank you. Coming up in a few minutes, boston fed president Eric Rosengren sits down with an exclusive interview with Kathleen Hays in boston. You dont want to miss that one before the jackson hole symposium later this week. This is bloomberg. Ritika im ritika gupta with bloomberg first word news. The acting director of the federal bureau of prisons has been removed from his position. No reason was given for their reassignment but the move comes as the bureau faces increased scrutiny over the suicide of financier Jeffrey Epstein while he was in federal custody. The fbi and Justice DepartmentInspector General are investigating. He also led the agency when James Whitey Bulger was killed in federal prison in West Virginia in october. British Prime MinisterBoris Johnson is dismissing the notion of recalling Parliament Ali from it summer break. Over the weekend, leaked government documents warned of widespread food, water, and medications shortages, and boarded delays in the event of a no deal brexit. Johnson says the report is out of date and house of commons will return as planned on september 3. An iranian supertanker with 130 million worth of Light Crude Oil that the u. S. Suspects is tied to sanctioned organizations has left gibraltar. The vessel is heading east into the Mediterranean Sea with its next destination reported to be greece. The tanker had been detained for allegedly attempting to breach European Union sanctions on syria. The u. S. Embassy in jerusalem today was postponed as forced to postpone a conference after palestinian officials call for a boycott and threatened to organize protests. The embassy had organized a conference to bring together alumni of u. S. Educational and cultural programs, including dozens of palestinians from the gaza strip. The palestinian leadership views the conference as an attempt to circumvent its boycott of the u. S. Administration. Global news 24 hours a day, onair, and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Live from bloomberg World Headquarters in new york, im shery ahn. Amanda live in toronto, im amanda lang. Welcome to bloomberg markets. Coming up next, bloombergs Kathleen Hays will have an exclusive interview with boston fed president Eric Rosengren. With alets get started quick check on the major averages. Strong momentum across u. S. Stocks, another session of gains of more than 1 . The s p 500, every sector in the green, led higher bioenergy and tech. More positive sentiment when it comes to trade with secretary ross saying he will delay restrictions imposed on some Business Operations of chinas huawei. Also seeing the dow gaining 280 points. At one pointmp calling for 100 basis points of a rate cut, but markets barely reacted. Some pressure on the back end of the curve with the 10year yield standing at 1. 59. Lets go to boston where Kathleen Hays is standing by with an exclusive interview. Kathleen is in boston. Kathleen welcome our Bloomberg Television and Radio Audience to our boston bureau, steps away from the Federal Reserve bank of boston, make it all the easier and quicker for Eric Rosengren, president of the boston fed, to join me for an interview. Great to have you come especially at such an important time. We have gone through a couple weeks of such market volatility. Days before the conference in jackson hole. I want to go back to the last meeting, july 31. You dissented, citing low unemployment, and your questions about Financial Stability, some concerns. Your colleagues were looking at inflation and these global developments, as they call them, that could basically hurt the u. S. Economy. Explain your dissent to us. Eric you did a pretty good job of laying out the dissent. It was tied to the fact that Economic Conditions are still pretty good. 3. 7 unemployment is still a low rate. Inflation is a little bit low. The core measure is 1. 6 . If you take out some of the outliers using telestrating mean, it is closer to the 2 exactly at 2 . My own view was that we have to be careful not to ease too much when we dont have significant problems. So the focus is not to do something that affects the Exchange Rate or something that necessarily takes care of the world economy. We are supposed to focus on unemployment and inflation in the United States. I think we are in a pretty good spot right now. There are cost to using when you dont need to. Kathleen what are the costs . Eric one of the ways Monetary Policy works, you cause people to buy houses and cars earlier than they otherwise would. You choose to make an investment now because Interest Rates you think will be temporarily low, so you make expenditures you may not otherwise make. A second is, when the lower Interest Rates, we make the cost of debt lower. That means households and firms are likely to be leveraged. Righty get leveraged before we have more significant problems, they are in much worse shape. We have to think about the Financial Stability characteristics. It is thinking how much do we want households and firms to be leveraged going into when we have a significant downturn . Kathleen how concerned are you about a significant downturn . The signs from the global economy, signs from the bond market in particular, even signs from wall street banks that have cut their gdp forecast, and recession indicators suggest the risk is rising. Is it rising in your eyes . Eric many of those indicators are tied to Financial Markets. Lets start with what economists things is the likely outcome. One way to gauge that is to look at the bluechip forecast. We just came off of real gdp being a 2. 1 . The bluechip forecast for august had growth for the third and Fourth Quarter both at exactly 2 , roughly exactly same as second quarter. Clearly not a recession, continued growth at a moderate pace. They also have on a plumbing rate at exactly where we are right now, actually 0. 1 less in the bluechip forecast. Forecasters are not seeing a lot of weakness in the data. What has people focus on whether theill have a recession is combination of volatility in the stock market, we obviously had a big movement a week ago when we lost 800 points on the dow. But in subsequent days, we moved back up. If you look at the long bond, it is low, run 1. 6 . One of the reasons for that is the global weakness. But the cure for global weakness is for countries around the world to expand either with fiscal or Monetary Policy in their own countries, rather than just the United States to be doing the easing. Kathleen the concern now is uncertainties created by this ongoing trade war. August 1, one day after the fed cut the key rate, donald trump said, i am threatening to put on chinas exports to the u. S. On september 1. That is when we saw the stock market start to fall and get volatile, chinas currency, they let it weaken past seven to the dollar, another important signal. People are trying to be forwardlooking, unlike the bluechip indicators, people feel there is something afoot right now, that the United States cannot be immune from. That is the concern. That is my the majority on the fomc went for an insurance rate cut. Eric so how do you get 2 growth given the weakness in exports . The answer is consumption. Consumption is 70 of gdp. You will grow to 2 even if Everything Else is at zero. In the second quarter, that is pretty much what we found, consumption was strong. All the other components of gdp were week. When you look at the composition, i would argue that the forecasters are looking forward as well. They think the economy will grow at 2 . They are taking into account investmentxed i will be week. They think the consumer will continue to buy. That is a question. If the stock market becomes too volatile, if people become too concerned about global pressures, about trade, geopolitical concerns, then the consumer may not the as strong over the next couple of quarters, and thats a risk. I think this is a good time to sit, look closely at the data, ask if the consumer will continue to be consuming the way they have over the last couple of quarters. If that is so, im not nearly as worried about recession risk. If that does not occur, there will be nothing offsetting the weakness occurring in business ,ixed investment, net exports as a result of the global concerns. Kathleen as you look to the september meeting, you are a voting member. The question of cutting rates again, that is the question on the table. Are you watching the consumer closely, as something that would tilt you not toward waiting to see, but im on board, it is time to cut rates again . Certainly looking at what the consumer is doing. Consumer confidence was a little weaker, something im paying attention to. But the retail sales number was actually quite strong. If that continues, we will have enough consumption in the Third Quarter that it will actually bolster gdp. Im certainly going to Pay Attention to geopolitical concerns. Brexit is coming up in october, clearly problems in hong kong that could spill over in a broader sense to the international markets. Hong kong is one of the great global cities. We have to be concerned about how that gets resolved. Monti to be worried about that we cannot really be determining Monetary Policy too far in advance. Even the tariffs have been announced, but we are not sure that they will go into effect september 1. They have already staggered some of the imposition of the tariffs. We need to see what will happen and how the economy reacts. Kathleen lets look at market signals. People talk about bond market armageddon. 30year bond below 2 , back up above 2 . Nevertheless, the First Time Since they started issuing treasuries in 1977. Indicator, inverted for the First Time Since the financial crisis was in its infancy. Yield curves inverting around the world. How important is that a signal to you . For many people, it supports the idea that you cannot wait too long, you cannot wait for the data to show things are getting worse, because there are signals right now that maybe it is, and it is more prudent to act early rather than late. Eric it is an important signal, i Pay Attention to it, i want to understand why Financial Markets are pricing the way they are. The 10 year at one point at 1. 6 . The german tenyear is roughly at. 6. A big difference between the two. A lot of the reason why our long bond rate has gone down is because Global Conditions are weaker. Europe is weaker, asia is weaker. Part of that is trade, part of it is other factors. Are not a great exporting nation, china is. Germany is a great exporting nation. Italy is a great exporting nation, japan. All of those countries are dependent on their exports. Not that we dont have exports, but they are a relatively small percentage of gdp compared to other countries. If International Trade is slowing down, they will be disproportionately affected compared to us. Thatat becomes a weakness is Strong Enough that causes our economy to slow down, that is something i do want to react to. But the forecast are trying to take that all into account. I have a forecast similar to the private forecasters that we are likely to have a second half of the year closer to 2 growth. When we have low unemployment and low on inflation inflation. It may change but i dont see a lot of need to take action. Kathleen treasury yields are below the fed funds rate. Is that a signal that fed policy is too tight . Not that the fed got it wrong, but at the world has shifted around the fed, and in order to get the yield curve at a more normal shape, it makes sense to and have thatrate aligned more traditionally, as you would expect it to be, with a healthy economy. Is this a situation that is a bit of a strong signal about where policy is and where it should go . Eric the goal of Monetary Policy is not to get the yield curve right, but to get inflation and employment right. We have to be focused on our actual goals, which is keeping maximum employment and price stability. It is important to look at the yield curve and ask, is a telling us that the on a plumbing rate will go up dramatically . If you thought it was going to go up dramatically, and you thought that was likely to occur, then we should be easing. The question that i have is whether that actually will happen. There are other reasons for why the yield curve is low. Had a low Interest Rate environment globally like we do right now. In many policy countries is hampered by the fact that they have negative rates already. They have less tools to work with. Morely, we would be seeing fiscal expansion in those countries to offset the weakness. It will be more difficult for the United States to cause china and europe to grow more quickly. It is much more efficient for china and europe to expand their own economies. Kathleen if we are now in a low inflation, low growth yield world, what does that mean for fed policy . Does the fed have to look at its metrics differently . Is it possible that we will have low inflation, very low unemployment, and maybe not need to have the fed funds rate where it is . 2. 5 occurredo under certain conditions, and that doesnt want to rise in spite of low employment. It is globally, and if things are week over there, dont we import some of that disinflation, putting some question to how the framework is working . Eric the fed funds rate is roughly 2. 1 . Inflation is 2 . We basically have zero real rates right now. In my view, Monetary Policy is already accommodated. We already have a accommodative fiscal policy. I would argue wages are going up gradually. If you look at our early average warnings, they have both been trending up. I would say inflation, if you look at the dallas trimmed mean, has leveled off around 2 , which is where we want to be. Im expecting the last two Inflation Numbers expecting core pce to be converging toward 2 . That is exactly what the dallas trim mean is designed to do. It is saying roughly 2 right now. We need to be a focus what the goals of Monetary Policy are. We need to take into account the conditions and ask whether inflation and employment will go off track because of that. Ist is a possibility, which why we have to be focused on how bad the Global Conditions get. Just because other countries are we, if we are strong does not mean that we should be easing as well. One thing i want to share with the audience that they may not know about you, you have been president of the you have done007, serious Economic Research and Monetary Research for years, but you have also done a lot of work on Financial Regulation and banking. At the boston fed, your last job was bank supervision. You have handson supervision with how banks can become unstable. I say all this to ask you the question, is this your biggest concern about cutting rates more . Is it not so much about inflation getting too high, but somehow this will cause an excessive reach for yield, banks getting overleveraged and causing financial instability down the road . I am very concerned about financial instability and what a low interest environment entails. When you have corporation with much more leverage, whenever that economic downturn occurs, it will be more severe than it otherwise might be. Company that are highly leveraged our lefty to get into problems in a recession. They will have to lay off more quickly, make more dramatic changes in order to avoid bankruptcy. That is one of my big concerns, the lower Interest Rates are, the more you are encouraging people to take on debt. Is this the right stage of the cycle to encourage people to take on more debt . Kathleen if we have an beater inverted yield curve, even if it is flat inverted yield curve makes it tough for banks to make money. A recession hurts as well. Isnt that also a risk, as you look at the landscape when it comes to banks . Not have a worried for too much yield, but they will not make money, and that is one of the worst thing that can happen. Eric the worst thing that can happen to a bank is getting large loan losses. When i look at the risks banks are taking, one of my concerns is commercial real estate. We are in boston, you see lots of buildings, some are relatively new. There are new models of real estate that i think are reaching for yield behavior. When you look at shared office space, for example, that is an indication that the pricing of commercial real estate has gone quite rich. In the next economic downturn, we may see more losses in commercial real estate than we otherwise would. That is an example where low Interest Rates can encourage firms to take on more risk with commercial real estate, which in the next downturn, would cause problems for banks, loan losses. Usually they dont go bankrupt because the Profit Margins are low. They usually lose their capital because they have large loan losses. Kathleen central bankers talk ax, minimize your biggest risk. What is the biggest risk for the fed right now . ,s it that you cut rates again and you find that you didnt need it, and maybe more inflation, but its been below target for a long time. Or is the risk that you wait too long, and you wait to see the you getterialize, so the slowdown that turned into recession, which you are trying to avoid . Eric that gets back to an earlier point about Monetary Policy. The federal funds rate is already a just barely above 2 . When we have a next recession and we want to encourage people to spend more, it will be at a time when theyre pulling back, when firms are pulling back. There is very little risk in a recession for a reach for your behavior. Unemployment is at 3. 7 . We are at a different stage of the cycle. I think it is a risk to encourage people to take on too much risk at this time. You ton i want to ask clarify something about your dissent relative to the stock market. When you put on your list of stocks werehe time, almost at record highs, now down a bit. It seems like you are saying, stocks are fine, everything is fine. People are buying stocks, the are confident. Financial conditions are easy. Another way to look at it is what is happening to bond yields. The more bond yields fall, the more attractive stocks are, by definition. Some people are talking about the fact that the lower these yields get, as we have 16 trillion worth of negative bond yields around the world now, of course you are going to buy stocks. Is that one more issue that the fed has to address when you look at the signals from the market . Eric that is a Financial Stability concern. When you look at a stock rise, youre looking at the earnings over time and the discount rate. When we lowered the rate, the discount rate becomes lower. That does cause stock prices and other asset prices to go up. If you are worried about a recession, youre not very concerned about that risk because the fact that you are going to have much lower earnings and the recession means that you will be expecting stock prices to go down if you thought there was a high probability of recession. If you look at stock prices, about 2 off right now relative to where we were at the last fomc meeting. That is not a very big decline. You could have a 2 movement in a given day. We are still close to our alltime highs. Forecasters expect reasonable growth over the second half of the year. Bond rates are low but i think its reflective of the Global Conditions, which are weak. Im not saying there are not circumstances in which id be willing to ease, i just want to see evidence we are going into something that is more a slowdown, if im growing at 2 , not as worried about that. Kathleen i want to underscore what you said. Would say thatg you sent pretty positive on the economy, does not sound like you would be four rate cuts, but you said if you see the economy slowing, then you would be on that side of considering a rate cut, even at the september meeting. If the economy is slowing sufficiently and im worried about the on of lemon rate going up, there were be circumstances where i would want to ease. During the financial crisis, i was one of the most dovish members of the committee, encouraging us to do qe. My dissent was for easing. My first was at a time when we were lowering rates, i didnt think we were lowering quickly enough. It was a different circumstance, so i think we have to be data dependent. This is a time to be focused on the data, not to get a lot of forward guidance, but to be clear about what will change our rates. Kathleen how hard is it to the senate fomc meeting . Eric it is not easy. It is a consensus driven organization, and it should be. You should only dissent if you strongly disagree with where policy is going at the time. We have been listening to Kathleen Hays with boston fed president Eric Rosengren. , as theof the headlines dissenter at the last meeting, you might have expected rosengren to say that they he considers policies accommodative, that although the rest of the mold is weak and lowering, that the u. S. Needs to lower. Noting inversion is an important signal but not one that he thinks that they need to lower. Lets bring in michael mckee. You were listening. When you hear what he has to say, what jobs out to you as the most salient that the market will focus on. . Mike eric did not really say anything differently from the statement he made after the dissent. He does not sound like a man who is ready to go along with the rest of the fed and vote for another rate cut. Esther george also from the Kansas City Fed dissented last time. She has been much more hawkish than most, so she will probably dissent as well. Which raises the question with how far the fed goes, how quickly . Even if they have dissenters, once they get past another rate cut in september, does it make it harder to do december, or into 2020, if we dont see the economy really fall off . Rosengren made the point, 2 growth, unemployment at 3. 7 , a youion around 1. 7 him dont really have a problem in the traditional sense. Shery how much focus is there on the global risks . Kathleen kept pressing on the global risks. He even mentioned the hong kong unrest. How much is the fed looking outside . Mike markets are looking outside and that is driving the instability we have seen. The fed has to take that into account. Jay powell has been clear, he thinks we could import a slowdown, import problems into the u. S. , from other countries slowing. Rosengren sounded like he doesnt think it is the feds responsibility. If it has an impact on the economy, yes, we have to react. At the moment, he is not seeing it as a huge cause for problems here, so is not ready to vote for a rate cut on that basis. Amanda we heard a lot about deleveraging. Were you surprised to hear his concerns about the corporate leverage side, worried about Financial Stability . Mike not really. Jay powell has talked about that. It could lead to additional risk taking, and that is something the fed is concerned about. Shery thank you so much, mike mckee. What we can expect from the Federal Reserve as we head into the jackson hole meeting. That is all for now. From new york and toronto, this is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. 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