A whole bunch of other smart people set lower for longer. That is the message this morning. Futures up 19 but to me, the story is the bond market. As you know, those huge negative and persistent real yields. A range of assets and securities, it is interesting to see dollaryen breakdown. Still, equities are firmer on the day, futures up by 6 10 of 1 . We do this going into a battle down in washington, d. C. As long as it is just about size, we will have an agreement. These negotiations are now about thats great, but that means there is a timeline and i dont believe we have the luxury of a timeline because in the state of ,he economy, the unemployment the economic dynamics dont give you a comfortable august. Dont. Incentive to say we not negotiating until you negotiate. Right now, looks like new market is not picking up on it. There are some real nuances, maybe start off gold. Treasury yields down a basis point. Weve broken out of that sticky range for 0. 58 . The lows very much insight now. Comfortably up three quarters of 1 and it is that weaker dollar that people anticipated that is starting to materialize. Negative yields starting to bite. Gold, that is not relegated. A much, muchn stronger price. Weve got a market that is extraordinary and industry. The chief strategist of mystery joined us and what is great about Alicia Levine is academic behind trying to gain and guess the way forward. Thanks so much for joining john and me this morning. Do you buy the marginal share this morning . Yeah, but i think you dont buy it in tech. The message from the last couple of weeks is really interesting. 5 , and thewn over rest of the s p was actually up 5 , suggesting a broadening of the market and moving away from those parabolalike stocks that we have all talked about. I dont mean to interrupt, but this is so important. Do you rebalance by selling tech or do you put new cash to work . I think you have to sell a little tech. I think that the growth stock ant remain a core holding in overall Portfolio Allocation because going forward, growth will not be strong, it will be lower. That tends to outperform. If you look at it on a chart you dont suggest future gains in the near term. A forward common after the has not been matching with the stock prices have done. People just shaving. Not really dumping, but shaving, and that makes sense. You sell the winners and you reallocate. When is the last time you enter someone without meaning to interrupt them . When did that last happen . Nixon was president. Maybe lbj. Its ok, im a new yorker. I know, you can handle it. Im not worried about you at all. The rotation away from tech, lets continue this conversation. Out,talk about rotating asia, china, europe, much more so. Is there an argument to stay u. S. Based . Rest of the, the world is recovering faster than the u. S. Production inhe china, we saw it in the data coming out of china in the last week and we saw it coming out of europe. So the rest of the world is recovering faster. Valuations tend to be higher in the u. S. And i think you definitely have to have an allocation to europe but the softer dollar does argue for a cyclical tier in the u. S. Dollar is helping these Multinational Companies and Multinational Companies are exposed. U. S. ,ve to stay in the but i think asia is great and i think europe looks like a nice trading here. Will continue this conversation. Is the weaker dollar a symptom of the foreign influence or a driver of them . Matt is a really great technical question, thank you. I think it is a symptom and it lets gotom because back to first basis. The path of the recovery is going to track the path of the virus. Is that theve seen has economicirus activity flattening. Its not happening in other regions of the world. Therefore, they are recovering faster. Thursday, the claims data went in the wrong direction for the first time in 16 weeks, so we going to start feeling it here. I think the softer dollar is a reflection of that, not to mention yields are so low, it is that negative yield we were talking about all morning long. I think that the weaker dollar is a symptom. Is Dividend Growth a proxy for yield right now . Yes. Yes. Look, its interesting. Only 62 companies in the s p had actually cut dividends. I would have thought that would be more. Its interesting that they havent and part of that is due to the support from the fed supporting all those Different Levels of bonds here. Creating a situation where to have enough capital to pay dividends. The number of companies that , i find dividends really interesting, i would not have expected that three months ago. Alicia, what you think people actually do with their money . Im fascinated when i talk to you, about what the actual action is of people. What is the action right now . Defensive,on is very and thats why we remain cautiously bullish on this market. Positioning is defensive, the money market bonds,nvestmentgrade and that is really where the incremental trade is coming from. People are nervous to buy into this market. And as long as you still have that going on, it is a contrarian view, so therefore you have support under the market. Let me ask a stupid question. People are still buying stocks, they are just not going into tech in the same way. The last couple weeks was a cautionary sign that valuations do matter, ultimately and we have to take some of the excess out of it. Were seeing buying in equities, it is just the incremental trade still is bonds, gold, and fixed income. In two and i are separate cubicles. I hope to keep it that way. I can see that. Long chart ona amazon with some fancy moving mathematical averages. Come on. Iszon, all it has done fallen back to a very comfortable support. Its not a direction, it is almost like a pause. Dip in can you buy the the tech stock . Im asking. Jon where is the dip on the nasdaq over the last couple of weeks . We are still up near alltime highs. Im just trying to impress alicia with my math and all i see is amazon is backed with support. Alicia right. It is 12 off the high. Again, that is not a bad entry point for any stock after your 10 to 12 off the high. Thats fine. We dont think these stocks are rolling over, we just think some of the excess has to come out of it and charting is a great way to figure interest point. As ive said before, parabolas dont make for great technical charts. Jon always enjoy catching up with you. Are you throwing the shade . Jon i appreciate your tolerance for a certain someone who has a bowtie. For you throwing me some parabolic shade . I love one she is on, we talk. Jon we will hear from amazon, apple, and facebook. Good morning, lets get to the price action this morning. This monday, we are flying out of the gate. Lets get a quick feel for how things are building up this monday, it actually really, really interesting to see the bond yields come lower. Gold starts to break out and the effects market is capturing a weaker dollar once again. We are up a tense of 1 on a single currency. That, a bit of fuel for german business at a high since 2018. Incidentally, eurodollar highest since 2018. This is bloomberg surveillance. Mitch mcconnell today unveiled the latest republican Coronavirus Relief package you the white house plans to cut the weekly 600 unemployment boost to about . 70 70 of prepandemic wages. Health officials around the world are getting a reminder of how tough it is to permanently stamp out the coronavirus. China report of the most cases since midmarch and spain is scrambling to stay ahead of new outbreaks. Have takenhorities over the u. S. Consulate following its closure. That is the latest development in the deterioration of relations between the countries. This week, Jerome Powell is expected to reinforce his message that Interest Rates will stay near zero for a long while. The last time they met in early june, the count of coronavirus cases has stabilized with states like texas, florida, and california having yet to see the surges that have afflicted them since then. Americas Biggest Tech Companies have gone on a buying spree. Haveumber of acquisitions come at the fastest pace since 2015. That is despite steppedup scrutiny under the trump administration. Critics say the tech giants are beefing up their power. Global news 24 hours a day on air and quicktake on twitter. Powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Workers and americans understand the concept that you shouldnt be paid more to stay home than to work. Thats a fair thing is to replace wages and it just wouldnt be fair to use taxpayer dollars to pay more people to sit home than they would get working and get a job. Steve mnuchin on the fiscal backs of the merging in the United States. Tom, this is the debate. Philosophically, i did it. In the economy where the unemployed vastly exceed the jobs open, it is not an argument you can make right now that this is holding back supply. More broadly we have an economic issue and we have to offset the shock to income somehow, someway. But a percent of income idea is a brilliant idea and works beautifully at 7 income idea. The numbers change, it is clearly fairer. I believe it is operationally not possible. An in the u k, we have done program, 80 of your previous wage for a certain amount of months. In the United States if you want to do this, you have to roll it out across all the different state offices and to do that, weve seen even with a 600 enhance unemployment benefit, weve seen even that processing problems. Can you imagine the processing issues they would have with something more complex like this . Tom balance of power at 12 noon. This is going to be ongoing through the day and at bloomberg Washington Team to give you the flavor that we get on tuesday of this week and then maybe the republicans in some form have agreement. Gold, michael does really, really smart multiple access charts of the story behind a given theory. What is the story behind gold . Im starting to feel insecure about my multiple accuracies and my charts. The key thing for gold is it is just getting exciting now. We are really taking into new markets, and we have to use a little bit of caution on a 50 week basis. It is a little bit overbought. This market is breaking out, it is a new bull market, maybe consolidate. S, does that change your analysis from one million years zero when you are doing it for Alexander Hamilton . Mike couldnt afford to see the play, but i loved the book. It is so much easier to get exposure to gold. 20 or 30 basis points, you dont have to go to the equities. Yes, it is much more easy to get into gold. We are seeing probably a flood of investors. Ferro doesnt know the kruger end if it hit him over the head, but does that mean it is just as easy to get out of gold . Mike it is, but gold has a little more enduring boom market. Free money, every central bank in the gold just world just printing money. There is no competition for gold right now. Theyi can save the record, all got sold a long, long time ago and we dont have them anymore. Im sure that is a story for a lot of people. Tom a question on gold, it is a very british thing. Jon that is my plan to do. In 2011, we saw this story play out. We are seeing a play out again. Why is it different this time . Mike 2011, if you look at the crisis, gold rallied about three times. It is just a continuation, the way i see it. You have to go back to 2011 the last time gold was above the average. This one looks more enduring. When do we have any idea when Central Banks will start hiking again . We dont. And we said repeatedly on this program for a long time, the argument against gold was a lack of yield. Where do you go for yield right now . I just look at that long bond, and i only see a gravitate toward zero. Now, if we just get a little bit more weakness in the dollar, that is for gold. This is probably the one commodity that i unfortunately ignore the most, nat gas. , what are the dynamics of natural gas forward . Mike massive supply despite rapidly decreasing demand. The key thing to remember is rapidly increasing technologies. Creating that supply, most notably in the u. S. , that is a key reason for deflation. , we might spike, but there is just too much supply. Tom is copper affected by the chinau. S. Dynamic . Mike to me, copper is one of the most vulnerable commodities right now. To me, shortterm, a little that supplyconstraint, but overall it is a bear market. Jon how do i know when the gold is it when i start to see those commercials every day . Mike someday will we get near the nadar which is not even on the radar. Jon great to catch up with you, sir. Remember those commercials from 2010, do you think we start recycling those . Out the kids got the pliers and they are trying to get the two out. Jon this is great. He wrote the following on twitter. We all know when tom starts v,lking nonsense with ferrtot he has already given up on the Boston Red Sox season. Have you already given up . Strange to have the third week of april in july. It is absolutely dead on. Is theut of body to know first week of april or whatever, i dont like this. Jon youve got to stick with it. You are just going to have to get used to it. Tom jon when do they start again . Jon i think september. Should we get some price action . We shape up as follows, equity futures with a nice list. We advanced 17 points in the bond market. Treasury yields just down to become lower by a basis point of 10. Foreign exchange getting all the attention over the last week with eurodollar breaking through. I would say take a look at dollarsyen. Sneaking up on you. Tom dont mean to interrupt, wiss explodes, that is a strong euro. Jon coming up, the chief economist for the week ahead for the fed decision coming later this week as well. 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 tv and radio. Lisa abramowicz back with us tomorrow. Alongside tom keene im Jonathan Ferro. The cash open just round the corner. Equity futures drifting higher. There is the big fx move. 8 , 1. 1749. Ut you have to go back to 2018. Remember the happy talk of early 2018 about synchronized Global Growth before the trade war kicked off . We are approaching those kind of levels on eurodollar. At Deutsche Bank is out 1. 20 among others. Andee the support on dollar how that will change the resilient dollar quote. Hsbc, ion bloom and wonder what he will publish. Think bloom at hsbc would stick with it. He getting knowledge you can get the restart rotation into currencies like the euro and elsewhere. The debate from hsbc, the argument against a weaker dollar call is it is a broadbased structural shift away from the u. S. Dollar over a long period of time, not just a short move of last month or so. Tom no question. Is euro swissie has gone strong euro, week swissie. That is a segue to a swiss bank, Credit Suisse has a wonderful James Sweeney was brilliant a few years ago, saying the disinflation and deflation bloom of europe of few years ago was off the mark. He joins us with a different view. Our Services Going to cave in and joint goods as disinflationary items . James right now services have joint goods with the collapse and activity driven by the shutdown. Now we are rebounding because there is some activity turning back on. Rebound,ok beyond the the fears should be toward given anflation uncertain path for unemployment and the potential for unemployment deep into 2021. Tom how have you adjusted your gdp for the United States of america . Give us a view out 12 months or even the end of this year . James the rebound is formidable. When you turn the lights off and turn the lights back on it does crazy things to the data. We are seeing an incremental slow down in the u. S. Because of increasing infections in the summer, but we are still forecasting a strong doubledigit increase in q3 gdp. We have to remember is the level activity is going to be well below trend. We have gdp contracting 5 this year. You have a big hole to fill . Tom the trio mcconnell, mnuchin, and meadows. What is the american . Nemployment rate all it now it is over 20 . James that is a fake number because is telling you how many hourly workers are getting zero hours during shutdown. I think the real number is closer to 10 than 5 . In six months, even if there is a vaccine, if the real number is still closer to 10 than 5 , that has real implications for the fed and for growth and for inflation pressure. Jonathan lets talk about inflation pressure. We will be below capacity for an extended period of time. There is a conversation drifting into inflation, away from disinflation. From your perspective, why . Populars actually a conversation among equity investors, not so much among debt investors, but the view is m2 money supply in the u. S. Is up 3 trillion, bank credit is up just under 1 trillion. Treasury debt is up 3 trillion. The fed Balance Sheet is similar. Surely this is inflationary down the road, not so surely, it is possible. It depends on expectations later on. It depends on whether the fed responds to incipient inflationary pressures. A lot of good things have to happen for us to get there. Be onk the focus needs to that european situation i have been not expecting for a long time. The odds that inflation get stuck at a lower level are elevated at the moment and i think the fed will be focusing on that and we will see policy actions over the next six months that confirm that fear. Michael we can talk jonathan we can talk about the policy action in a moment. The relationship between Monetary Policy and inflation, how tight has that relationship in . James poor. Not a good relationship. ,ith Interest Rates so low bonds are not necessarily a break attractive alternative to cash in the bank. If cash is being created and deposits are being created, i may not want to put those in fixed income securities, i may not want to take the risk of equities, and so the deposits do not go anywhere. In the short run it is nice the stimulus has gotten cash flow, especially lower income cash constrained workers so they can pay their bills, but the idea that this money will circulate at a high rate and grow aggregate demand in a way that will quickly be inflationary seems farfetched to me. ,om if youre just joining us James Sweeney with us of Credit Suisse, their chief economist, lots of good conversation centering on washington and our fiscal policy along with markets. Futures now up 13. All of that is fine, but if i get a James Sweeney economy, what does the 4 trillion in debt due to it. I do not understand the dovetail a newgy nominal gdp and overlay of 4 trillion of debt. James that is what is happening with the dollar. There are fears about the fiscal path of the u. S. Longerterm. It is driving a narrative of longerterm inflation, positive for gold and breakevens and all of these ends. There is a very important pump to get over, that is the disinflationary pressure of the high unemployment. I would say also that without high for purchases, you are likely to see a decent slowdown in bank credit and money supply growth over the next 12 to 18 months. If your argument is based on those things, your argument may fall apart. Tom who booked him . We do not do this much gloom on a monday. How are the people at Credit Suisse to your cautious view . The bond guys and equity guys are different. How are each of them reacting to the scenario . James a lot of the bond guys agree with it on the equity side. The Investment Committee recently went from overweight Global Equities to neutral, and part of it is based on the fears as we get into the autumn. Neutral is not underway. , but assets are doing ok looking forward i think expect returns to come down. Jonathan this is the jonathan well, that you will pay a premium for growth. Tom that is the conversation we had earlier with Alisha Levine of bny mellon went the other way and said you have to go away from growth. These are huge tensions, all of them secondary to what we see in washington. Jonathan lets talk about the fed. They meet in 40 hours. It sounds like you are positioning, thinking about the next move. Governor brainard stimulated this conversation when she said it will move from stabilization to accommodation, everyone on wall street was like what was the last few months about if not accommodation . I think the last few months were about emergency measures responding to the cash flow crisis through the shutdown and trying to ensure market functioning. If anything they have over insured market functioning. I think going forward, it is where does the Unemployment Rate settle, what does the growth and inflation look like three to six months from now . Most of us think activity will be running at a low level so you will need more help from the fed. You may be pulling back some of these emergency measures, but in the short run i think the fed may signal that until unemployment and inflation are at exceptional levels, some kind of substantial stimulus will be in place. In the background, it is yield curve control as the next bazooka to be fired at a time when youre in severe Market Growth stress. That is the option. Arent we in yield curve control right now . I am looking at the 10 year of. 58 . How do you control a number that low in america . James the fact that the market is behaving as if it is already implemented serves the feds objective. That is a good thing. What you to do want what you do not want this to think they will never do this so yield curve start to steepen and yields move in a way that suggests tightening of financial conditions. At some point, they made to formalize this thing, but at the moment risk assets are doing ok and yields are doing exactly what they need them to do. Jonathan great to catch up with you. Send our best of the team at Credit Suisse. James sweeney. Credit suisse took a blow torch to a credit market that was freezing. The next move, we have to pay more attention to, not found in the snark, there was a view that the last few months was about stabilization and not accommodation. The fed is signaling something. There is a transition in play. I do not know whether wednesday is too early, whether you have to wait to see what Forward Guidance looks like, whether they formalize the low for longer and slowly drift toward yield curve control. The threat is the reason the yield to the upside is somewhat capped. James ive never heard James Sweeney that cautious tom i have never heard James Sweeney that cautious. You know where we were in february and march and we never imagined a july like this. Why we think we are different right now . How do we imagine november right now . I cannot. James a lifetime of jonathan a lifetime away. On this monday morning, the euro through 1. 17. ,. 58 . Lower 1900, 1933, off the highs of the session, still lofty levels. Up 1. 65 this monday morning. Good morning. This is bloomberg. Ritika with the first word news, i am ritika gupta. Today Mitch Mcconnell is expected to release a 1 trillion Coronavirus Relief package. That sets the stage for talks of House Democrats who passed their relief bill a couple of months ago. The republican proposal what extent supplemental Unemployment Benefits at a lower level and also provide another round of 1200 direct stimulus checks. White house Economic Advisor larry kudlow insist the u. S. Economy is still set for a Third Quarter recovery. N the byaid on cn research will have a limited impact on the rebound. He is expecting a 20 growth rate in the second half of the year. Shares of moderna are rising. The virus enters at stage three testing. 20,000 people are involved in the federal government just gave mode garnet a second ward. Than 950ceived more million and developmental money. Spain and two British Airlines are blasting Boris Johnsons virus quarantine. The British Government ordered a two we quarantine for travelers from spain, the uks top tourist destination. British airways called it another blow to vacationers. Fans of the largest cryptocurrency have called it digital gold 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. Am ritika gupta this is bloomberg. The Senate Majority has assembled a framework for cares two. The administration has requested additional time to review the fine details. We will be laying down this proposal early next week. We have an agreement in principle on the shape of the package. Jonathan senator Mitch Mcconnell, the Senate Majority leader. We expect the big reveal to happened at 4 30 eastern time in washington, d. C. Lisa abramowicz back with us tomorrow. This is bloomberg surveillance. I will step away and just a minute to catch up with Jared Woodard on the big trades playing out in this market. Gold, euro, breaking out, the dollar breaking down. Lookingh Jared Woodard, at what people are doing with their money, that will be most interesting. Right now after what we heard from senator mcconnell, the mystery of what we have seen today from disarray and the republican partys reality of what it means for the funding of our transportation. That could be dfw in dallas, they could be airlines coasttocoast, amtrak even, or the mta. Pat foy joins us right now. Theare listening to dialogue in washington. On the desperation meter, how badly do you need federal help after the shortfall you are seeing . Patrick on the desperation index, we are facing a fiscal tsunami, which has left our infrastructure intact, but demolished 40 of our revenues. We exhausted the last of the cares dollars we got several months ago. That was about 3. 9 billion in funding. We need an additional 3. 9 billion, and these are shocking numbers, to get us through the remainder of the deer. I Revenue Sources come from our customers, and the remaining half of our revenues comes from subsidies which are economically sensitive. You get a feel tom you get a feeling washington, including the gentleman residing on fifth avenue, are saying new york, dropdead . Patrick i hope not. I think we will find out in the weeks to come. States and cities around the country are in desperate need of funding. I am here to talk about the mta, and the mta is in desperate need of funding. The mta is not a massive transit agency, it is the circulatory system of new york City Regional economy. Not funding the mta will thwart economic recovery and job creation all over new york. Give us a sense of the scope and scale. I give you major credit for showing the decline in ridership numbers right up front on your website. Give our viewers and listeners worldwide a sense of the Geographic Reach of the mta. It is not the five boroughs, is it . Patrick it is beyond. Subways and buses, new york city, five boroughs, Long Island Railroad goes out to suffolk county. Metronorth covers westchester as well as parts of connecticut and we have some operations west of hudson. In a typical day prepandemic, we will carry well over 8 million passengers. Prepandemic subway riders averaged 5. 5 million. Right now 1. 2 million. That is up substantially from the pandemic, but a fraction of the numbers we would carry on all of those agencies. Tom my anecdotal evidence is simple. I was thunderstruck out empty new york city was this weekend. I have honestly never seen it in my time at bloomberg. You are living with this with the empty Office Buildings in midtown and all of these other stories. If you get that aid, what you do with that, or you have to begin thinking about firing thousands of people . Willck here is what we do. I am cautiously optimistic we will get the funding because it is in the interest of the nation to fund the mta and help bolster new york citys economic recovery. That is in the national interest. The pandemic is an international and National Challenge and requires a national solution. Optimisticusly washington will do the right thing. Without funding, for the rest of the year, that is what we are talking about. The decline in revenues has been that precipitous. We will have to consider things like wage freezes, like service reduction, like headcount reduction, to languor deferring the capital plan. We have historic capital plan. We have put that on pauls. One of us on pause. None of us wants to replay the 1970s and 1980s. Tom we have some breaking news so i will have to let you go. We will monitor this carefully. The mta a huge reach. Patrick foyes chairman and ceo of the mta. There is a number of breaking stories right now. Keeprprise, google will their employees home until summer, that from dow jones. We are seeing this in different shades. Day today. Some are doing part, some are doing all, the way the headline reads is all employees home until summer. Far more important and timely for washington is once again a member of Public Service has the virus. You know robert obrien, our National Security advisor, the gentleman who replaced mr. Bolton. Mr. Obrien announces he has the coronavirus. Just as importantly, you wonder how that will fold into who has been with him over the last number of days. I want to set up the markets as we go to Jonathan Ferro in the open. I am thrilled paul sweeney will be with me on bloomberg radio. 13, they were up 17 earlier. , dow jones 26 390. Fixed 26. 36. The vix. In the bond market it is not as grim as it was an hour and a half ago, but nevertheless compressed yields with the. 58 on the 10 year yield. I would note the inflationadjusted yield, extraordinary. Yield. E. 92 on the real oil has done nothing. 19. 58 and ounce. It is down 10 from where it was two hours ago. Gold up 33 per ounce. An extraordinary statement. Twitter with a great chart overlaying the real yield of the 10 year in gold. It is amazing the lockstep field we have heard from so many people. We have a busy day for bloomberg. Lots on politics. Look for david westin and balance of power. We will have perspective on the grocery industry adapting to this pandemic. Stay with us through the morning. This is bloomberg. From new york city for our viewers worldwide, good morning, good morning. The countdown to the open starts right now. We begin with the big issue. Republican struggling to agree with each other, now looking to find agreement with democrats. Negotiations getting in washington with those cotillion dollars separating both plans and disagreement over Unemployment Benefits. Steven mnuchin stressing the importance of the entire package. All of these different pieces have to work together, whether it is the Paycheck Protection Program or the direct payments we sent or the money to schools, all of this works together. Ui is a component of the Overall Economic package, with everybody wants the same thing, which is lets get kids back to school where it is safe and lets gets workers back to their jobs. Jonathan nancy pelosi making it clear where democrats with a major divide, saying what we just keep it simple, Unemployment Benefits and the enhancement