The regime changes that are out there in our medicine, the pandemic, as with about the american economy. James bullard of st. Louis will join us here in a moment. What we would really like to do is talk about the regime changes that we see right now in the market. To me, it is a very correlated list up off of the navarro uproar of 14 hours ago. Jonathan what a move overnight, whipsawed by Peter Navarro, who set the u. S. China trade agreement is over. The president of the United States, his boss, coming out and correcting him. The confusion on that issue is massive over the last couple of weeks. I think john boltons book over the last week or so has made things a little more interesting as well. It. No question about i know lisa is almost 2 3 of the way through the book. One question which you are an expert on commode is the great distinction between larry kudlow and Peter Navarro . Jonathan Lawrence Kudlow seems to have the president s thoughts very much in mind. He is speaking for the president quite often, and he doesnt want to speak out of line, so he will avoid questions to the script. Peter navarro goes off on his own script sometimes, nothing that is why a lot of people find it confusing. Is he speaking for the president speaking for himself . I got the feeling overnight that for fox news, he was very much speaking for himself. Tom we talk about a theme this hour, the shades of regime by jim a phrase made up bullard, but the regime change in the bond market to me is extraordinary. The separation of fully priced, full facing credit versus the barrage of Investment Grade and particularly highheeled, that cap is extraordinary, isnt it . Lisa it has been collapsing. Im glad you brought this up. You have apple borrowing for five years at less than one percent, and you have American Airlines offering up a 12 to bond to borrow money a 12 coupon to borrow money. Is this showing discretion . Is this healthy indent markets . Or does it show that companies that would already be bankrupt are able to borrow it all . Companies that are usually that would usually be bankrupt are able to get attention right now. Am what lawyer says perspective driven institution can buy a 12 piece of paper . Lisa if you are going to get yield and you are actually going to get that 12 cent, it is a great time to do that because where else are you going to get that yield . The problem is it is secured by gates and airport lines. It is not necessarily that concrete. What is the air industry going to look like in a year or two years . This is fiveyear paper. What is the risk . Lisa our people getting compensated with this coupon that makes it even more difficult for airlines to survive . Tom i want to lay out what we are going to be doing here on bloomberg surveillance. We have dr. Bullard, of course. Then jon will go on television with the open with some important conversations. John prince of bridgewater will be with jon ferro tomorrow, the interview of the week for those thing at the zero bound. Someone that has to put up with a zero bound is yana barton with eaton vance of boston. Of course, they are notorious over the years for wonderful Municipal Bond work, but she works more in the growth enus iness or the lack of growth in the equity market. You are focused on things that have fallen by the wayside. What are you looking at right now that has fallen by the wayside . Yana great to be with you. I think you have correctly noted that the market, while being down 2. 5 , there are a lot of companies down significant more. The average stock is underperforming the broader market, and that is what we are focused on. Growth continues to be in limited supply. If you are investing for the longterm, there is a time to focus on communication services, consumer and Health Care Companies that have lacked the market that have lagged the market. Jonathan we have seen the cyclical rotation fade over the last few we read what do you make of that . Yana i think it just highlights the fragility of the market and any headlines driving what could be perceived as a longterm trend. I think we can all agree that much of the economic and social thealcy is predicated on vaccine, or belief that there will be a vaccine. While that is probably at least months away, i think this is the time to really focus on secular growth for the longterm, and perhaps tactically sniffing out opportunities that could be cyclical. All equities are cyclical to a certain extent, so i think again, health care, if i may flagged that area of the market, while outperforming the s p 500, it has mostly done that on the backs of biotech and life science names, and there are a dozen plus other companies have lagged. As an area we think plays into the that is an area we think plays into the rally. People reache almost immediately for mecca cap road in america. Where should they be looking . Theres plenty of growth, and while there is supply globally, you focus on areas of the market that are enabling the next wave of adoption, whether it is Cloud Computing and security that needs to be there, or infrastructure when you think about health care. We are talking about the whole system for companies that have lagged because of the burden on the hospitals as it relates to elective procedures that have been pretty much nonexistent. That is where you are looking for growth. Ingerterm, they do remain Information Technology consumer services. On a cap weighted asus, and looks like everything is up, but Consumer Discretionary with the help of amazon is the bestperforming sector but an average stock within the space is downs 20 . Hitumers are being hardest within the hotels and that sort of market, so those are the things we would Pay Attention to. Abouti take your point the underperforming stocks. ofver, we have seen 97 s p 500 stocks trade above their moving average. That is the most extreme at least in a decade. Thatome this is not a sign other people are doing the same thing you are without the evidence to show that we are growth in those names . Yana that is a fair point. I would remind everyone that they decline we saw was three times the norm. We have seen the s p 500 declined during that week in excess of 34 . Recovery, albeit uneven, is coming from very low levels. What is nice to see is more than half of the companies are outperforming the s p 500, again on an equal weighted asus that speaks equal weighted basis. That speaks to the health of the market. That is also a good sign. Tom wonderful. Yana barton with eaton vance. This will be must watch, must listen for global wall street, jon ferro with bob prince. What is so different is the dampening bob prince predicted is here with a vengeance in central bank policy, but that doesnt mean it is here in the actual market pricing, does it . Unprecedenteds an policy regime, and i think that is something we will be discussing tomorrow. I will tell you where their thinking is of the moment. Theres clearly a duration mix clearly ahere is duration mismatch of this particular shock, which could go on for 18 months. Income. Kers cannot set it can offset spending. With confidence, the actors who receive that supports a start to spend. That is really import. This is the most important point for me. An economy operating below capacity, absolutely critical, and not given enough thought right now. What americanout airlines has got to pay up for 12 your paper. Here is an Airline Business seeing sequential improvement off of a really low base. This is a severely impaired industry. The companies within it are taking on more debt. Borrowing costs are going up, not down. Leverage is increasing. Earnings has collapsed. In secular growth, are you trying to extend that into 2021, 2022 . It is the aftershocks from the big shock that i still dont think we have fully realized. Tom we have seen this voiced by mr. Dalio, and of course by mr. Prince. What this comes down to is the Economic Data still matters, including in the fusilli in the thursday jobless claims numbers. Where does that go, given this mismatch we see in policy versus cover . Versus recovery . Lisa jon said it really well with respect to the secondorder effect. I wonder how much we will see the bankruptcy pick up eventually. How much has the fed and congress been able to prevent defaults, or are they just prolonging the cycle . Jonathan equity futures are up 31 on the s p 500, advancing 1 . To get a flavor of the Market Action this morning, tom talking about how intuitive things are right now. Treasuries, up to basis points on tens. An important conversation coming up here on bloomberg surveillance. 8 30 eastern, worldwide on bloomberg tv and Bloomberg Radio , the st. Louis fed president jim bullard, coming up on bloomberg surveillance. Ritika with the first word news, im ritika gupta. President trump combed markets rattled about trump calmed markets rattled about comments about the u. S. China phase i trade agreement. Peter navarro told fox news that parts of the trade deal were over. He set the comments were taken wildly out of context. Mike pence is warning that more young people around the country are testing positive for the coronavirus. He made the remarks in a governors. Call with abbott saysor greg cases are rising at what he calls and on acceptable rate. Hotels, pubs, restaurants and theaters will be allowed to reopen in the u. K. From july 4. Was cut in half to one meter. The u. S. Seeks an indefinite armed embargo on iran over its dropped United Nations resolution. Diplomats say the u. S. Has shared the proposal with members of the security council. It was part of the 2015 Nuclear Agreement that the u. S. Has abandoned. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. V inu will also see a big terms of the economy going up for the next few months because it has been closed. Not all things go up equally, and it will take quite a while before we sync up and get back to 2019 levels. Jonathan Steve Schwarzman of blackstone on the sharper coverage you could see for a couple of months, and then the long road to a recovery that many people are expecting. From new york city, good morning to you all. Alongside tom keene, im Jonathan Ferro, together with lisa abramowicz. Counting you down to the opening bell, with equity futures up 33 points on the s p 500, a little more than 1 . The story overnight, trade confusing. Peter navarro making it sound like the phase i trade agreement was finished. The president of the United States back against that, saying it was fully intact. Layer on top, the president reportedly in the last 24 hours moving towards getting more checks into the hands of american, possibly in the 30 days. We still have no consensus on that from this white house yet in the bond market, treasury yields are higher. The curve is steeper by one on on tens. Tn eurodollar steeper by 0. 1 . Schwartzmans comments were more of the square root shape we have heard about. Right now, someone washington loves to hate. What is known in washington is you get a quick read, a little paragraph, a quick snippet of the gas about their, and the acclaimed Christopher Krueger of cowen goes the other way. He writes super Detailed Research notes on a friday that you swear at because you will note because you know you will spend an hour reading the. I loved your research on unemployment dynamics in the swing states. To me, that is absolutely fascinating, and speaks right to fulcrum right of the of the swing states. What do you see in those swing states right now . Christopher we saw those six key states in the rust belt and that are going to determine who is the president next year. All trump one those states in 2016 by a little more than 415,000 votes, and there have almost been 9 million unemployment claims there. Chris, what is the pandemic overlay on the history of 2016 . How does the pandemic for been to those six key swing states the pandemic fold into those six key swing states . Chris it is not just the unemployment numbers here. You also have enormous death tolls here. Seen,ou have also particularly in a state like florida, which is an absolute state that trump cannot afford to lose, you are seeing joe biden above with the 538 aggregate poll numbers outside of the margin a rare margin of error. You are seeing that vital 65 and older cohort breaking against trump toward the Vice President. I think you have to extrapolate that that is a direct result of the pandemic, and sadly, those death totals. Lisa how much does the employment issue suck the oxygen away from trade issues, which were so important in 2016, and will likely be very much on the forefront heading into november . Caucuses werea less than 150 days ago, and the president was gearing up for a Reelection Campaign based on prosperity and security with the china phase i trade deal as an essential linchpin to that reelection that was going to be issued via the maga rallies. I think the phase i trade deal you mentioned has become a political vulnerability for the president. I think the president , the former Vice President are going to attempt to use china as the ultimate bipartisan foil here. You have a very Hawkish Congress , with hong kong is probably the next big catalyst. Reports as well that the new National Security law might be implement it as early as july, not september, so i think the china narrative is certainly going to stay with us through the and longer. Lisa it will stay with us. The question is what the tenor of it will be and what the focus will be. Theres the question about culpability. The senate is holding a hearing about that later today. There is a question about tech supremacy, and about increasing protectionism we have seen. That certainly was a major driver in 2016. How much is that still a major driver, given him of the policies put in place over the last four years . Chris i think it has really gone, to paraphrase quote spinal tap, paraphrase spinal it has really gone to an 11. You had the consensus that they were a strategic competitor, and you saw that with high tech, specifically with 5g. You will see that later this month with new export controls. You saw that with huawei, and you saw that on some of the human rights issues. But now with the pen to make, you have folks like tom cotton that with the pandemic, you have folks like tom cotton now with the pandemic, you have folks like tom cotton and josh holly that really, across the board. And when you look at Vice President id, Vice President biden, so much else was going on , Vice President biden referred thei as a thug in democratic primary. Chinaats tend to look at more through the lens of human rights. Krueger, chris great to catch up with you there. Not the language that the former Vice President used when he was the Vice President. Tom no. Theres no question about that. What i was thinking is that any guess we have that sites spinal tap definitely gets to come back. Jonathan i think lisa was happy with that reference, too. [laughter] we will get you some price action ahead of the opening bell, up by a little more than 1 . Your equity market shifts higher. In the bond market, treasury yields up. The curve is steeper as well. Your 10 year yield in the treasury market up a basis point to 0. 70 . 30 year advancing by three points. The pmis delivering a bit of an upside surprise, in the 40s, some 50s. Still in contraction, but they are getting less bad. The dollar is weaker against all of g10. Up next on this program, st. Louis president jim bullard come live worldwide on bloomberg tv and Bloomberg Radio. Alongside tom keene, im Jonathan Ferro, together with lisa abramowicz. This is bloomberg surveillance. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Jonathan from new york city, this is bloomberg surveillance. We are live on Bloomberg Radio alongside tom keene together with lisa abramowicz, im Jonathan Ferro counting you down to the opening bell. 1 on theow more than s p 500. Risk appetite improvement. Treasury yields higher at the long end. Up a basis point or two. On the 30 year up three basis points. The two year the elephant in the room. Just 19 basis points. Year, and original policy. Time flies when youre rooting for the st. Louis cardinals. It has been 12 years since jim bullard has held court in st. Louis. It has been an extraordinary set of opinions by mr. Bullard over those 12 years. Landmark was his discussion of regime change and what that means for the fed. What can be said of any other ,resident, every other governor and the various and sundry chairman, nobody nailed the dot plot like jim bullard. What you see now in the lousy dot plot is right where jim bullard thought we would be with real worries of disinflation and deflation. Jim bullard joins us. The president of the st. Louis fed. Are we so messed up right now that we are finally going to shift to the targeting of nominal gdp instead of a real gdp analysis . Pres. Bullard ive been an advocate of nominal gdp cousin,g and its close price level targeting. The committee is still formulating about its framework review. Hopefully we will get some statement on that sometime during the rest of this year. It is up to the chairman to drive that process. Years ago a landmark paper was written in the greenspan fed about the toolkits available. What does the bullard and the fed toolkit look like now . It seems like youve exhausted and awful lot of useful tools. Therebullard i expect are other things we can still do. We have deployed a lot of good tools. The policy response has been quite good, both on the Monetary Policy side, the liquidity programs, plus a good response from the political side to get Fiscal Relief to those disrupted by the pandemic. , given the of this nature of the shop and the ck, it has allsho gone pretty well. Think july 1 is a good checkpoint, because ive long advocated the main impact will be the Second Quarter of 2020 and Third Quarter will be the opposite of the first quarter. ,irst quarter is a big decline Third Quarter will be a big increase as many businesses come back online in a way that keeps the pandemic under control. Committees are thinking a little bit more about Forward Guidance. I caught up with president master and president williams and yield curve control was a bigger part of the conversation. Can you talk about how you would characterize yield curve control from your perspective . Is that a dashers as a link boulder where you cap yields at the end . Pres. Bullard u. S. Had yield curve control during world war ii and after the war the exit from the yield curve control was difficult. It ended in tears. I think that is one of the main concerns about going in this direction. Japan has done yield curve control. One of the things they wanted to get out of the quantitative easing program. They have scale that back dramatically by targeting yields directly. I think theyre a lot more questions than answers around yield curve control right now. Jonathan what you think the optimal approach to Forward Guidance is . Pres. Bullard we are giving great Forward Guidance right now and there is no problem with where we are today. We are projecting low rates. Policy rates far out into the future. Longerterm yields are quite low. Global yields are quite low. We have the advantage in the Current Situation that we already build up credibility for low rates and commitments to low rates through to the last crisis. , coming outcrisis 2012,t in 2010, 2011, markets were expecting yields would go higher at any moment in the committee tried to fight back against that and keep yields low by promising low rates further into the future. In the end, we build up a lot of credibility that we meant it that we would keep rates low. This time we have a lot of credibility on this issue and i think we are in great shape for right now because of the credit we build up last time around. Lisa the market is definitely buying rates will remain low for a long time. In 2015 you raise the issue of asset bubbles that will, on leaving rates so low for so long. Giving how much corporate debt issuance we have seen, what is different now . Pres. Bullard bubbles are always an issue. I want to keep my eye on it. I am not seeing things on the same magnitude of what happened in the late 1990s, the dot com bubble that blew up on us and the much more serious housing bubble in the mid to thousands that blew up and turned into a global crisis. I am not seeing anything like that. We do watch it closely. I understand companies are taking on debt. Driven that is liquidity to get through the pandemic. They are drawing on lines of credit and other sources to make sure they can survive and thrive at a time of low revenue for their business. So far so good. No negativeere consequences to keeping rates at zero for the indefinite future . Pres. Bullard there is always inflation risk out there, but we have not had an inflation problem in the u. S. Or globally since longer than most of us can remember. It has been a year. The problem has been on the low deflationhe threat of. On that score, i think we are also avoiding that risk. I see breakevens moving backup in recent weeks, which seems to suggest the committee retains credibility around its 2 inflation target, even though we miss that target somewhat to the low side. It has not been as good as we wanted. We have kept it relatively close and i think well be able to do it this time as well. Jonathan it is not the presence of bubbles that gets my attention. It is the absence of creative disruption. I want to ask you an important question. Why the fed seem to have lost confidence in the transformational power of capitalism . Pres. Bullard you will have to talk to others. I have not lost faith in the transformational powers of capitalism. What you are seeing today is a tremendous adjustment by so many businesses to unwelcome developments where you had this disease descend upon us. We have learned a lot about it in the last 90 days. We are figuring out how to run businesses, deliver goods and services in all kinds of knupps and crannies around the economy in ways that keep everybody ,ealthy, keep the workers safe and still keep Household Incomes up and keep people employed. I think we can be successful. There are a few businesses where the pandemic is really throwing and they havell to hustle in order to think about how they can deliver their products, but most businesses, i think they will be up and running in the second half of the year. Jonathan i appreciate the motives of the Federal Reserve to do what the committee has done over the last couple of months. We do need to talk about the consequences. Once you introduce the price incentive into the credit market , you are interfering in the transformational powers of capitalism, you are stopping the money flowing away from bad businesses to good ones. Do not appreciate that . Pres. Bullard i do. The key question is bad businesses. What you mean by bad businesses . If they were viable and successful before the pandemic came, most of those will continue to be viable and ahead,ful in the world where we have to deal with the disease. There may be a few that do not manage to make that transition. I dont know. The demand for those products is still there. I would say for most firms they want to maintain liquidity during the crisis and they will be able to get back up and changes to howme they deliver goods and services right now. You. We welcome all of our extended conversation with jim bullard on our simulcast on Bloomberg Television and Bloomberg Radio. He is the president of the st. Louis fed and has been exceptionally acute in his research over his 12 years at advancing the argument of the moment. The argument of the moment is yield curve control. What i find so distorted here is the fed will make an action, the fed will make a statement, there will be a speech, therell be some form of announcement, and you know better than anyone the market will react to that. Can the markets adapt to yield curve control and use any benefit, diminish any benefit . Pres. Bullard i do not think markets would undo what the fed is trying to do. T is an equilibrium we enforce that equilibrium trying to be more transparent about the debates and ideas going on around the committee and analysis. Theres a lot of giveandtake between markets and policymakers , much different than it 1980s, been in the when we barely said anything. Transparency is useful. We are wrestling with these ideas just like everyone else. I think it helps inform the equilibrium to be as transparent as possible. Tom extremely well said. We had dr. Williams of the new york fed and governor brainard, and they have made some comments on the efficacy of yield cap. You and others more circumspect. If we do yield curve control and we distribute that out the yield curve, and i do not know what year a month you will extended out to, do we set ourselves up to be more vulnerable to any given exhaustion is shock exogenous shock . Pres. Bullard i am not sure about that. It depends how you interpret the japanese experience of the last few years, a few other countries that have tried this in the modern era. Right now there are more questions than answers about iss and i do not think this a pending thing for the committee because we are already expecting rates to be low for quite a while. I am not sure you need to put caps in anything else. Have the low expected rates you desire for the situation. What does yield curve control mean to retirees and savers in the st. Louis district . Pres. Bullard the longstanding thinkingwe should be about the correct Interest Rates a lot of the popular discussion seems to assume lower rates are better. You want to get to the equilibrium rate that makes sense for the current environment. The current environment is one of very low rates all around the world, and that is the world we are living in. People have adjusted to that. It has been around since 2008, 2009. Jonathan president bullard, a lot of questions on the bloomberg terminal that many want to ask, including mr. Gapin at barclays who recognizes what a lot of people pointed out on the dot plot while the longterm dot was still 250. Why wasnt that adjusted, and you expect it will be . Pres. Bullard as you remember, i do not put in a longterm dot. I am the only guy who does not do it. Im a rebel, maybe without a cause. I do not think we know enough to put out the longterm dot. It infects expectations and thinking in markets. It is also the object for which there is the most uncertainty. I would prefer not to put down some kind of gas about where we will be 10 years some kind of guess about where we will be 10 years from now. And talk about Monetary Policy, which is two years, possibly three years. I am the wrong guy to talk about the long dot. Lisa you are the right person to talk about inflation and you said the fed does retain its credibility around a 2 inflation goal. Are we measuring inflation right or should we be taking into account asset price inflation, the inflation housing costs, the inflation and medical and education costs, and even food . Pres. Bullard great question. Measurement issues around inflation are very serious. ,t has been studied extensively but to get into the issues about how to construct the price index , it gets very hairy very fast. One thing i would mention on this measurement issue for right now is that during the Second Quarter, you have a lot of good that were not traded in the normal volumes they wouldve been, where volumes went to zero. What you do with those in the price index . They are weighted by shares of expenditure. The share of expenditure went to zero, are you not going to count those prices . You have markets that shut down completely in that environment. I think there are fascinating issues in the last few months about how to interpret inflation numbers. If you look at Something Like the dallas fed, which throws out the most extreme operations, still right around 2 . That is probably informing Market Expectations about where they think we will end up with inflation. Lisa theres a question about good inflation and bad inflation. A lot of people looking at the fact that wages are not increasing as quickly as these necessary costs everybody faces on a regular basis. Are you seeing more bad inflation then good inflation, especially as there is a protectionist shift and people do bring supply chains back home . We were Getting Better wage growth before the pandemic. During the pandemic, obviously weve asked people to stay at home, invest in the national health, we have asked businesses to temporarily shut down to invest in the national health. Received relief from the federal government for their efforts to slow down the economy. Wages for to measure income houses and businesses during this time period. We have to wait for the dust to settle. The third will be a transition quarter. I think most businesses will get and be closeunning to the kind of production they had previous to the pandemic, and then a few businesses will struggle more than that. So far, so good. Rightk we are doing all given the nature and size of the shop. One other and size of the shock. One other thing i want to mention pure i think from a Public Policy point of view we should not be emphasizing vaccines and therapeutics. I hope they have them. God bless the people working on it. They are doing great work. These are tough scientific problems, and that affects expectations and how people behave. What we should tell people instead is we will have to manage the disease, we will have to manage the risk that is out there. It is unpleasant, but there is a new mortality risk and businesses have to adapt, households have to adapt. Everyone is doing that. We know that and we see that. We should not promise there is a pot of gold at the end of the rainbow. Lisa that is exactly where i wanted to go. This idea we have a long road ahead of us. There is a question about how Resilient BankBalance Sheets are to deal with this. It is something at the forefront of peoples minds ahead of the stress test results coming out by the Federal Reserve later this week. Would you support having banks curve Dividend Payments in order to shore up their Balance Sheets further ahead of ever ahead of whatever secondary effects we can expect from the pandemic . Pres. Bullard this is a decision for the board of governors. It is separate from the open market committee, which i am on your it is not really my purview. I would comment that i think markets have probably already price this in. Is the europeans have ended Dividend Payments. Markets expect Something Like that to happen in the u. S. , but it is up to the governors how they want to look at that. We have the stress test results coming up shortly. I think that will inform how the governors want to go on this going forward. Tom jim bullard, thank you so much. Very generous to be with us for this extended conversation. James bullard is the president of the st. Louis fed. Now we need to turn to someone with a wonderful perspective on this. This is what i love about bloomberg surveillance. We can go from the acuity of jim bullard to the acuity of Michael Mckee. I thought there were is extraordinary moments in that conversation, none more than jim bullards comments that there is a debate at the fed over yield curve control when in times past maybe that wouldve been less so. Color the debate over yield curve control. Michael i think you have to define the word raging. At the fed they do not rage. It is a bunch of academics talking about the theories involve. They are trying to decide whether it is necessary, because of you look at fed funds futures and the futures curve for treasuries, it does not show any sign we will see any kind of increase in rates anytime soon. You may get back up if we start to see more economic activity. Then they have to decide, do they need to use that to push down on rates . The argument is if you are using yield curve control it could be cheaper because you do not have to spend a lot of money once youve promised to spend all the money in the world. The market will not challenge you. The other argument is we do not need to go in that heavy at this point. Thecan use qe to adjust curve. It will be a gametime decision where they see where the yield curve goes. Tom i will agree it will be a gametime decision. I like that idea. What i find fascinating is the comparison the country so different in america. How does the central bank manipulate yield curve control with the complexities and diversities of our financial system, and how open and sophisticated the u. S. Economy is. It is not japan, is it . Michael it is not japan but it is japan in the sense both United States and japan can print their own currency. Europe would have a tougher time. They can print their own currency but they have many different bond markets. Here the fed can going to the basement and crank up the printing press. I am speaking metaphorically. And they can promise they will spend as much money as possible to buy the bonds necessary to push down on whatever tenor they decide to. The market does not challenge because the fed can remain solvent longer than you can, to paraphrase the old phrase. It can work. The question is do you really want to do that at this point, or need to . Struck by the idea that the fed seems to see the rest balance of keeping rates low and more bond purchases as skewed in their favor. I did not hear much Downside Risk in what president bullard had to say about keeping rates low for the indefinite future or from expending the Balance Sheet as we heard yesterday when we were talking about this. There does not seem to be that feeling theres any rest. Is that the consensus . That the fed has ammunition to keep going without any detriment to markets for the future . Michael i do not think without any detriment. Even jay powell has that at point it is a problem, but they do not see a problem at any point in the near future. Inflation is not showing any signs of rising drip at this point they are looking at the equity market and saying they are not too bad. A questiont will be about what is too much. The fed has never been able to figure that out. The philosophy is we will clean up the bubble after it burst. If they step in to try to keep the equity markets from going too high, then maybe they clampdown on the economy, and they would rather take the risk on the economy side. Tom we have to let you go. , theual when you come on markets lift to stratospheric levels. We will let Michael Mckee go today. Futures up 32. Dow futures up to 91. 30. 29. An extraordinary day. A bid for the markets off the navarro shop. A real surprise in the left. The navarro shock. Lisa there is such a model given the trade tensions and the virus. It is all able to be pushed away by the fed stimulus and liquidity in the hope for additional congressional bailout money. I am struck by the wall of money fighting the wall of worry and winning. Tom i love that idea. That is clearly what we have seen, particularly in fixed incomes. We will say thank you to jim bullard for the generous time. Informed toe you more conversations this afternoon. David rubenstein in conversation with the treasury secretary of the United States, mr. Mnuchin. That will be more than interesting. Leading this hour, markets elevated nicely, and we will get you to the market open across radio and television in 30 minutes. This is bloomberg. Good morning. From new york city for audience worldwide, good morning, good morning. The countdown to the open starts right now. Equity futures positive after rocky session overnight. We begin with the big issue. All it took was a long question and a short answer to rattle the equity market. Do you think the president he obviously wanted to hang onto this trade deal as much as possible, and he wanted them to make good on the promises, because there has been progress on the trade deal. Given everything that has happened, is that over . Is over. Yes. Jonathan it is over, except it is not good the president of the United States quickly coming out after that interview and saying the china trade deal is fully intact. Hopefully they will continue to live up to the terms of the agreement. Adding to the gains you see on the screen, with equity futures up 30 points