Theseard some of questions wrapped around the surging equity markets that we saw yesterday. Jon is going to do the data in a bit. We saw a pullback in the data this morning. Butee it in bonds as well, a most interesting day all in all. You centered your data checks on the mystery of the u. S. Dollar. We are going to address that in a bit, but it is still a remarkably resilient u. S. Dollar. Jonathan and a hugely divisive debate at the moment about geographical bias. A lot of people focused on that word divergence. What is the reopening we can depend on . Is it not the United States . That is the question that has come up continually. For this recovery, the reopening, it will be bumpy and we will see a lot of evidence of that today in australia. At theu mentioned this top of the last hour. To see melbourne on official relocked down, that was sobering. Of about 5ity Million People and a daily infection rate pushing 200. It is a different approach. It is about the science, yet the policy response is different in every jurisdiction about what it takes to lock down these economies again. , we are seeing the social impact on economics. Nationwide,olating the huge debate is how we get kids back to school in eight or nine or 10 weeks. It is a mystery as part of this economy. Lisa it is a mystery, and one that President Trump has only added to by saying we need this to happen. Teachers are starting to push back. President trump is going to speak at a forum on this issue at 3 00 p. M. Mayor de blasio in new york city also saying he wants to reopen schools, but how . How many times a week . That give working parents the ability to get back to work . Not to mention how do you keep everyone healthy . Tom for all of you worldwide and across america, what lisa alludes to is the battle that mayor de blasio and Governor Cuomo about the idea of how do you do it school to school . The decisionmaking and powers ls across this nation as they deal with this pandemic and all of it coming back to the economy and we are going to focus on the dollar. We have been remiss on that over the last number of days. Jordan rochester with us. He writes acute notes usually about sterling. A point where jordan was brexit, brexit, brexit, but right now he is focused on this great mystery of 2019, which was the resiliency of the dollar. Jordan rochester, can the dollar finally give way and weekend weaken . Jordan it can. I was a dollar bull for a long time, and it was a few factors driving that. When it comes to the dollar, you can talk about so many different topics, but really boils down to do you think u. S. Growth will outperform the rest of the world. You know that simple variable. You know where the dollar is going to go. What is different about this crisis is we have had an extraordinary response from europe compared to the last crisis a decade ago. Also, the policies they have used as well. These sort of drop retention schemes, which are much more widespread in the u. K. Compared to the u. S. , it should mean that when we do reopen, which we are, we have a snapback where you have everybody back at work to some degree at least. It is much faster. In the u. S. , it is a sluggish recovery. You see people having to look for jobs. It will be an improvement in the drops market as the economy reopens. At the same time, it will not be a snapback that the government and the euro area has tried to construct. For that reason, we have a more optimistic outlook in the euro area this year into the next. That is before all the other things going on, such as the second wave, lockdowns taking place. Then there is the u. S. As well. Before i get into that, u. S. Growth underperforms and the dollar weakens. Jonathan sometimes it is simple. Show me where global Risk Appetite is and i will show you the direction of the dollar. Youre asking me to imagine a world where the u. S. Stumbles and risk remains elevated elsewhere. Is that really a world you can imagine. Can imagine . Jordan it is possible. It is not normal. It iss circumstance, possible that the u. S. Still grows but not as fast as everywhere else. There will be a bounce back in american growth. It will be less than elsewhere. Lets talk about the other factors driving this. Because you have a rise in cases in the u. S. , it is clear a rise in cases leads to less Economic Activity. Folks are worried about going to the restaurant, the bar. We are already seeing that play out in certain areas. Even in this early stage in the u. S. In this quarter, the u. S. Is struggling with covid19 cases. When we get to august, we will talk about joe biden. We will talk about higher taxes in the u. S. Au will have Market Pricing less optimistic view on u. S. Assets versus the rest of the world. Jonathan show me where to push through that dollar weakness in a world where no one wants stronger currency. You are seeing it play out already. You are seeing europe start to go higher. Will squarecymakers the circle. It is ok if your currency appreciates for good reasons. In the past, we had episodes where we were dealing with inflation in the euro zone, but we had a strong currency. That was one of the tricky issues, but i think policymakers globally will be happy if they are able to reopen their economies without covid19 picking up too strongly, successfully reopen without too much damage to the labor market. If they can get those two things done is a good success rate. With a good success rate. Lisa one of the bull cases he mentioned for the euro zone was their supplemental income to people who had lost their jobs or work as a result of the coronavirus. Yet you have economists from a number of people saying this is only going to perpetuate zombie jobs and lead to a lack of productivity in the region and a slower recovery going forward, especially because some of these programs may not be reupped. If they are, it will cause a huge deficit in the region. What is your counterargument . Jordan there are some points that are valid. That needs to at some point come to an end. No question is how many jobs longer exist. Those workers currently on that Job Retention scheme, they are not getting that full salary. They want to go to work. Looking for jobs elsewhere. What it is doing is providing that Social Security buffer in the meantime to allow those workers to find new jobs at a pace that is better for them rather than rushing. It is never going to be forever. As thepoint is, as long governments do not try to pay it back quickly, recovery should be ok. Inlong as we avoid austerity the same way we saw in 2010, 2000 11, things should be better for the euro zone, that are for global growth. As long as governments do not follow that old playing, the recovery should remain intact. Away from eurodollar, which is the best way to express dollar weakness . Jordan we are looking at risk on proxies. We have the likes of long euroyen. Ould usually talk about but emerging markets might be the better play here, such as what is going on with china and chinese equities. Guys in china are saying do not argue against it. We see inaying what china is much more fiscal stimulus. Do not fight the bull rally we are seeing in china. Jordan rochester, always great to catch up with you. The dollar has been phenomenal, aussiet 20 as we get currency strength. It has stalled. What i find fascinating is the new narrative for dollar weakness. Typically, in a world of improving Risk Appetite, the dollar is weaker. In a world where the u. S. Starts to stumble, can we imagine a world where Risk Appetite elsewhere . Tom we have to see if the u. S. Will stumble. We will have to see with the equity market does. That is the first chart i looked at this morning, australias compared to the u. S. Dollar. You are right. A breakthrough of Australian Dollar strength would be something. Nobody is looking for that right now to look to see what that does is well. Jonathan just a little bit south of . 70 at the moment. Coming up on this program, after a phenomenal rally stateside for big tech names, record highs on microsoft, amazon, and apple. Conversation just around the corner. From new york city, a beautiful morning this tuesday morning. This is bloomberg. Beijing has reported zero new coronavirus cases for the first time in 26 days. It is a sign that a resurgence is now under control instead of an across the board lockdown. Beijing deployed targeted measures, testing more than 11 Million People. Fauci says any Coronavirus Vaccine would be limited and how it would provide action. That a a videoconference shot would offer a degree of protection but is likely to be finite. He expects an answer by early 2021 as to whether any of the more than 140 vaccines being developed would be safe and effective. The u. S. Government Paycheck Protection Program helps companies linked to President Trump and other politicians. That is according to data for almost 4. 9 million of the loans. Treasury secretary Steven Mnuchin initially refused to disclose the names of the companies. Bank have deutsche kept momentum going in the Second Quarter. The ceo told bloomberg the value is just where he wanted to be. Early to judge, but i can say one thing. That makes me confident that we are in line or even ahead of our internal plan, which we gave ourselves precovid. That makes me comfortable and and 2022. For 2020 ritika there could be a slowdown in the second half. 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. I amberould go to to get cooped up. This is bloomberg. Rg. There is a gathering storm. The furlough programs are amazing to watch and how significant the program is in the u. K. And how that has buffer the impact of this medical crisis. The technicals and all the markets that the fed has been supporting our fantastic. If you peel back and look at these fundamentals, the recovery is uneven. We have a make sure rebound or sustainable recovery. On then weighing in uneven recovery, a sentiment a lot of people share right now. The bounce we are seeing is not the recovery, but it is just around the corner. Alongside tom keene. In your equity market, after big monday gains, we give some of it up on the s p 500. We take a little weight of the benchmark stateside. Call 822 negative on the s p, down 0. 7 percent. Amazon up 65 , microsoft up 34 , just huge gains and really resilient names that many people have fled to at a time of real tension in the Global Economy. Tom we really want to focus on this today and we do so with a set of guests with a different view. Was with us recently. We brought him back. He is the kind of guy looking at all the minutia around the story. The excel spreadsheets of these stocks, do the numbers justify the enthusiasm . Tom f. thank you for that wonderful intro. The answer is yes. We view covid19 as a multiyear event and the new normal is more visual. During the throes of covid, there is a lot more digital. When we exit covid, there will be more digital than when covid started. With excel spreadsheets, you verify the run we have had in the stock. I wonder how much this situation, this debate between both versus value informs your overall course. How do you work those things out . Basis, on a single name we look at stocks on a discounted cash flow. Our goal is to try to determine a longterm margin for a company and determine the cash flow and discount the cash flow. The goal is to see the forest and individual trees so we look at individual names on a discounted cash flow basis. About thes talk individual trees. Amazon i get. It has remained the behemoth amid the virus disruption. Acebook, google, perhaps little less obvious given the reliance on advertising spending. Where are you seeing potential overvaluation within the tech ,ector, even potentially tesla as we look at the bottom line and differentiation between these behemoths . You made a lot of excellent distinctions there. The one i look at in particular is ecommerce versus Digital Advertising. If you look at the Digital Advertising market or advertising in general, there is more economic incentive. ,ven in the highgrowth area think of where roku is benefiting. You are looking for an industry low doubledigit next year. When we started the year, expectations were north of 20 growth. Ecommerce, by way of comparison, you are seeing the whole category. 40 nitration online and historically a 20 penetration online and i think there is more and i do think Digital Advertising like facebook and google are more challenged. Tom what you said there moments ago is important. This goes back to the Irving Fisher in the 1950s. I take your point that you are looking at discounted cash flow. The miracle of microsoft, apple, amazon, and the others has to outxe the terminal value out x number of years. What is the time duration of that terminal value calculation . I do not think it is a textbook amount. Perhaps there is some dominance that the terminal value is now 10 or 15 years. Tom f. we are modeling 10 years out. We thinkhe reason stocks in general have done so well is we are in the middle of a low Interest Rate environment. Rate, i do not want to say it is historic lows, but it is a low number. 10 years from now, can amazon still grow as a company at a 50 rate . Right 15 rate . Right now the answer looks to be yes. Tom this is critical. First, you are out 10 years and not seven years. Fundoes a sovereign wealth how does Warren Buffett deal with that . Should Warren Buffett be acquiring amazon right now with his terminal value of 10 or 15 or 20 years . Yes. even Warren Buffett should be buying shares of amazon if he has a 10 year outlook. If you think about what we are going through, what we are experiencing now and how this is just accelerating the transition to digital, you think about ecommerce historically as a low doubledigit percentage of total retail sales. What if that moves to 20 . Not overnight, but in short order. I think over a tenyear period the large numbers set in for amazon, microsoft, and others. As you grow any bigger sales pace, growth moderates over time. I think this transition to digital caused by covid19 is sustainable and significant. Ofathan tom forte on some the bullish themes behind a huge rally behind tech names in the United States of america. It has led to more capitulation on the south side. It all centers around a higher multiple because of this massive policy effort we have seen worldwide. Tom i will go with that, but there is more going on. You take Charles Kantor at neuberger berman. You take what you just heard , and these are revolutionary conversations. Is at 5000 on amazon. They are doing different mathematics because of the growth of those companies. It is historically unique. It is not nifty 50. Jonathan i totally agree. Lisa, we have discussed it many times. In a world of low growth, you pay up for that growth and these are the big winners. The theme of this downturn is the strong get stronger, the week at weaker. Lisa which are the strongest within tack . Will we see the weaker among the tech names get penalized . Aboutrte was talking google and facebook and how their model was more challenged. Does this get justified but the underlying fundamentals . Jonathan a question for later. Equity futures down 23 on the s p. We are 0. 7 . Next, a conversation you do not want to miss. From new york city this morning, good morning to you all alongside tom keene with we set bremen at with lisa. This is bloomberg. Jonathan taking some weight off the s p this morning, just as multiplied just a small decline. Alongside tom keene and lisa abramowicz, i am jonathan ferro. 7 10 of 1 . Conversation will continue on bloomberg tv and radio. 10 year yield sticky, almost going nowhere, down a single basis point. Data,ene, light on the claims coming out this thursday, ppi friday stateside. The debate on how to go about getting the best read on this economy. Read on only the best the economy but the best read on the International Economy into the political season in the United States. You do that by reading, which means you read paul donovan. He has been with the union bank. F switzerland, ubs it goes back decades and decades. Hasthan ferro, paul donovan rocked forward that research with great acuity over the last number of years. Jonathan and we are lucky to have them on the program with us. Fantastic to speak with you. The best way to get a realtime read on an economy right now . Way is to use a very broad way of a broad range of data and accept a lot of the data we know there will be large swathes of price literally being made up. Of evidence isd even more unreliable than it normally is because who in their right mind is filling in a survey in these circumstances. Use very broad data but be aware of limitations in the data and expect what will be doing is finding the direction, finding the trend. What we are not doing is any kind of precision in the economic numbers. To make broad statements about where the economy is heading, we cannot afford to pretend we have precision and what we are looking at. Jonathan one thing the administration has said is look at the mobility data. That is what we are looking at. The mobility data is actually fantastic and it is useful. We are very aware of the limitations when we compare geographic areas. Here in the u. K. , i do not go to lots of u. K. Sales were done a lot before the crisis. Now we are doing a third of retail sales are more online. That does not show up in the mobility data. A country like italy with a far lower Online Retail sector, you are august the get more mobility in terms of the shops. I have been working from home since march so i am not traveling. Almost 45 of the u. K. Economy can work from home. Only a little over one third of the German Economy can work from home. You are seeing these differences already come through. Use the data sensibly. Tom there is no greater mystery than china. This goes back to Jonathan Anderson and even before that. What are we not observing in china right now . What are you writing about, i do not want that. What i want to know is what am i missing on the china Political Economic experiment now . Paul china is interesting in a number of ways. First, the accelerated demand is there, but china is putting a lot of emphasis on domestic demand story and that will be the story as we going to 2021. They are not looking for the full recovery. We may see structural shifts and those supply chains. The thing the domestic demand pattern, china is different from your. From europe. In europe and the states the consumers leading from the front because the consumers coming out of lockdown flush with cash and spending it. Because of their Social Security system, you did not have that so much. I will go to the supply chain bounce. Chain between china and the u. S. There are other nations as well. Are we going to see supply chains leak out to 15 other countries . Run, a lot ofong supply chains will come back to the United States. We know last year when President Trump starts imposing trade , companieserything cannot shift their supply chains. They were stuck with them because you cannot shift the supply chain overnight. It is very well saying this will force production back home. It did not. Companies had to pay the tax. Over time, i think we will see a solution to coming back home and it will vary, but essentially those sectors where you can waste and where those are the areas you will see localization of production happening quickly. I think that is accelerated by the pandemic. Lisa we are speaking with paul donovan, chief global economist at ubs. A big question, what do shutdowns due to the economy. Australias secondlargest largest city enters a six week shutdown in order to combat the virus. Based on history and what we see in china, our official shutdowns that lead to a dramatic contraction in cases better for the economy in the mediumterm or worse for the economy in order to give people confidence that the viral counts are down enough to go out and shop . Paul you hit the nail on the head with that confidence thing. The virus has very little economic impact. It is fear of the virus by policymakers and fear of the virus by the general population, that is what does the damage. You need to make a judgment about what is going to be required to contain fear of the virus. When we look at a country like australia, which had relatively low instances of the virus, i think if you get stuff like this there is a risk. In the United States, it seems to me the fear level now is lower than it was two or three months ago, even though it seems deteriorating in terms of number of cases. People are not as afraid as the past. Control of fear is the key thing. That is part cultural and it will vary from country to country. Lisa this is fascinating. Bounce in theng a sunbelt in the United States you are saying it may not lead to the same kind of slow down in Economic Activity as it did in the initial stages of the pandemic because people are not that afraid. Is that correct . Paul overtime a degree of complacency comes inn. People learn how to adapt. This is always underestimated. Always underestimate the resilience and flexibility of people. That is the good news. Is peoplee seeing more used to social distancing, changing their behavior, that was a huge shock. , we get it is there some degree of adapted economic mobility, even with a higher caseload, that seems where we are going. Jonathan from everything you , is the recovery is there a recovery you think is more durable than most . The data tonot have make that sort of a judgment, different economies have different experience with the virus and the reaction to the virus. I think there is perhaps a more significant question. In my view, the virus is accelerating. The virus is accelerating longterm social changes underway, the fourth industrial revolution. A better position for structural changes are going to over competitors over the course of the next few years. That is where we have to be looking. In the near term, i do not think we can make that judgment with any degree of conviction. Jonathan appreciate your honesty this morning. A fantastic conversation with paul donovan, global chief economist at ubs. Weighing in on this economy, it is terrifically difficult to get a read on. Tom i think we forget the numbers. A global slowdown. Gdp, thatout u. S. 4 is a huge number, that level coming down over the 12 month period. These numbers, i think we get numbed where it is like a statistic. The answer is these are profound shifts mr. Donovan is talking about right now. Agree weonathan i have become desensitized to large numbers. It speaks to how difficult it is to make that divergence call right now. Tom yes. Lisa the on the ground data. Has been a very difficult time to get a read on things, especially because of the psychology aspect. Fear has been a huge driver of Economic Activity. Jonathan i think that was tom giving a compliment but just bearing it. That is what tom tending to do. Heret let too many people tom was happy with something i mightve said. Down after a terrific rally to start off last monday. This is bloomberg surveillance. The president of the see fed she signs signs Economic Activity is leveling off. Theres been a pickup in coronavirus cases in the u. S. Recently. Afterpresident showing symptoms of the disease. He has been seen mingling with supporters not wearing a mask. To enforce them new security law in hong kong. She will be more closely supervised by officials who have come up to the party ranks on the mainland. The cake deal with your the u. K. Deal with the European Union is not the only one british negotiators worry about. All expire when the u. K. Lives the eu at the end of the year. Among the countries in that group, canada, japan, and turkey as well as deals with australia and new zealand. 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. I am ritika gupta. This is bloomberg. The challenges these businesses face are traumatically different at that does not seem to be reflected in stock prices, which is part of the psychological driver of equity returns. It is not necessarily to do with analysis, but very much to do with psychology and does that make me bearish . Yes it does. A bearish jonathan view this morning. Good morning from new york. Equity peters down 22. Alongside tom keene together with lisa abramowicz. Divergence,entify we will do that with kathy jones of Charles Schwab joining us next hour on bloomberg tv. Tom interesting. Delinkedmarket really from the equity market. We could have a two our conversation with our next guest, edward morse from citigroup. Known for global macro views on hydrocarbons and commodities in general. Today we have to rip up the script. We have edward morse of is about and what it is what mr. Buffett did yesterday. And downstreamam with the hummer h2 full of the latest flavor of gasoline, and then there is midstream where mr. Buffett looked at pipelines of opinion. Tell us about the midstream value play. Are there many more dominions to be played . Edward there are. We are in a distressed and asment at the moment you look forward american production of oil and gas will grow. As it grows, those that have the capacity to move it to where it is needed will get the throughput boost and that will increase the value of those properties depending on where they are. Is a sappy play we think. On the sappy play pipeline industry or the natural gas universe . Edward the natural gas has been beaten up in a different way from the oil side. We have another thing that happened yesterday, namely court deciding that Dakota Access pipeline had to be shot on august 5. That could create an opportunity for an extreme play. If you cannot get out from the get out someave to other way. There are other dislocations other than the ones on the east coast. Coast problem market problem related to the southeast in part to learn where natural gas is no longer seen as the for thetal choice electricity industry. Looking atector is growth on the end you side on the end use side. The increase in renewables will come at the expense of natural gas. There is plenty that will go through in the meantime. Tom started the conversation aptly talking about the difference between upstream ,nd midstream and downstream notwithstanding his discussion of my hummer usage. There is a discussion of whether Warren Buffetts play and the occidental investment he made earlier this year is a bit that the selloff in fossil fuels has gone too far, too fast. Do you think that view holds merit, that we can see further upside in the fossil fuel complex given how beaten up it has gotten . Edward we think so. If you look at the data, the biggest runup has been in drilling activity has collapsed. Over 680 rates at the beginning of the year to 200 right now. Cruz passed from 300 ews passed from 300 to well under 100. We will see we are probably at the bottom right now. Given where prices are and where we expect them to go, we will see a pickup of drilling activity and completion activity and that will be the case in both oil and gas. Wille gas side the pickup be driven we saw prices getting down to the 1. 70 range for gas to above 1. 80 very quickly because of summer weather. In terms of where the gas market is now, i think about where it will be next year. Doublewill be probably by the Second Quarter of next year. Inflection point. Maybe buying assets at a distressed level is a wise move. Looking at in terms of transactional analysis, it would be consolidation ahead and that consolidation coming at a lag. Very likely on the horizon by the First Quarter next year. Tom of final question. If there is an inflection point, that means the price and flex as well. Not out one year about two or three years, do you see where do you see brent crude settling at . Is it substantially higher . Edward sure. Lets look at the short to mediumterm horizon. Just looking at curtailment in haveal spending, where we had u. S. Production slide and canadian production slide is the Global Economy recovers, we are looking at brent 50 and above by the end of the year and we will by the end of 2021 how how durable that would be is in open question. If you look at the pure economics of drilling activity in the world, the world ought to be able to sustain not much more than 35 to 50 a barrel on a longterm sustainable basis. At that price level, the world can produce a lot of oil out of shale, let alone out of conventional. As we get over the short term crunch, we think brent goes to 60 by the end of next year. Tom interesting. Edward morse of citigroup, head of their commodities research. Most timely, project leon what mr. Buffett did yesterday. A little bit of a tough data check two hours ago. 232. Tures recovering from the angst we had. We have been talking about international economics, the guesstimates and the mystery of forecasts. One of the themes is the oecd. Look for that in the 10 00 hour. That will be a timely conversation. It has been a most interesting day. We thank our team for interesting conversations on the equity markets. This is bloomberg. Good morning. Jonathan from new york city for audience worldwide, good morning, good morning. Countdown to the open starts right now. We begin with the big issue. Lifting street his year end target to 2900 and multiple a higher 2021 eps forecast is likely given the feds aggressive assets. Support risk complicating the debate for Market Participants looking to tilt away from the United States and towards the rest of the world. With growth back on top, lets bring in kailey leinz. Good morning. Kailey good morning. Very easy to make the argument that the fed i