Quarter of 1 . The backdrop to this is the Republican National convention that kicks off today. We are going to have more on that later on today. Ags investments will be joining us. I want to stick with the president and politics. We know the virus is related. Yesterday, President Trump making an announcement on a has to tracking of convalescent plasma treatment. Listen to what he said yesterday. Pres. Trump through this study, over 100,000 americans have already enrolled to receive this treatment. It is proven true tease to reduce mortality by 35 . Joining us is tobias levkovich. Thank you for joining us. How should the market price of vaccine and a treatment differently . I think the market is looking for both, in many respects. In other words, vaccines that are being discussed are more about protecting the person from getting the infection, but not transmitting the infection. On the other hand, therapeutics are treating the actual infection. We need a mixture of both results in order to protect the general citizenry. Guy what do you make of what has driven things today . I am trying to get my arms around an understanding of what exactly the drivers are. Everyone tells me it is vaccine news. All of the news on the vaccine front are perceived as positives in the market. Are suffering from underperforming. As stocks go up, bond managers have to participate, otherwise their careers might be at risk. They are jumping in in a more discerning passion. This is not necessarily risk on trade. Small caps are lagging. Names receiveute this as a more defensive because they benefit from the environment we are in in terms of work from home. While we are moving back towards normalcy, we probably cant get there fully until people feel protected. That goes back to vaccines and therapeutics. I have two bass i have to ask about your ear and targets, down 15 from where we are trading now. That makes you one of the most paris most bearish when there are not a lot of bears left. How have you held out . Good question. We are surprised by the strength of the market. We thought there was risk back in january, opportunity in march. The extent to which to put what i call red lightless support. Relentless support. We are waiting to hear mr. Powells comments from jackson hole. Guy sticking with the targets and positioning, we will get to jackson hole in a minute. Short bets on the s npr at a 10 plus year low. What do you make of positioning . We track something in our model which captures interest. Premiums are on the run. Il prices, money market funds we are at levels we have not seen since 20012002. Pullback inity of a the market in the next 12 months. The only time it did not work was in 1999 when the market kept coming kept going up in a bubble phenomena. Bubble, stocksa trading at ludicrous valuations. More you have much Impressive Companies in dominant market positions. It is not the same, but there is the sense that the fed has got my back, dont worry, we can take risk. Clearly, this market is betting the fed is going to keep on keeping on. What does it need to hear from jackson hole . There is a lot of discussion about what they might here. There have been articles talking about the fed moving from a 2 target to a 2 on average through the life of the cycle. If that is the case, Interest Rates can stay low even if inflation goes beyond 2 . We are not on the cusp of that, but in theory we could go to 3 or more before the fed has to act, if they go to the 2 average. We will hear what they have to say. It is an ongoing study they have been looking for over a year. It is not just about covid, it is about how do we fend off the potential for more the potential for more to various things like deflation . More nefarious things like dictation guy will rates stay low forever . [laughter] forever is an incredibly long time and well beyond our lives. Behink the fed will probably staying with a low Interest Rate before a while until we get the economy back. We still have 13 Million People who have lost jobs since january. There is still a large segment of the population that still needs to get back to work. Speaking of low rates, lets talk about treasury yields. 62 basis points on the 10 year, does that mean you have to be in equities to get any semblance of yield . There is no alternative there are alternatives. One can look at, it seems scary but, commercial real estate. You can be looking at distressed bonds, other places to generate return private equity. You dont just have to by public equity. Lets talk about the 10 year 0. 6ish. Tting year at when you look at the breakevens on the same 10 year yield, in this case from an inflation expectation, they have gone from the same 0. 5 to go about 1. 5 . There is a divergence we have not seen it well over five years. 2012nk the last time was when 10 year treasury yields used to move in tandem, but are now divergent. Which is interesting again in terms of what expectations are suggesting. This sounds counterintuitive. I want to focus in not individual stocks, but a broad theme. Stockock split does split deliver higher prices . [laughter] i do not understand it entirely as an investment because today you can go on discount brokerage trading sites and by fractional shares. Split ifuy the stock you like. I am less inclined to believe it matters that much. These are psychological issues for some people and i think a lot of professionals look at it as we are talking about Tech Companies, so i want to ask about tech. How do you classify it . Defense, offense, both . What do you do with it . There are two ways to think about it. If you look at the tech sector there, internet retailing and maybe entertainment, they are about 45 of the s p 500. The difference is valuation. 2003, you had this very sharp decline in markets led by the dotcoms imploding. You might see some pullback as there has been incredible concentration in these growth names. I think that is the difference. The defensiveness of secular growth is the way people perceive it. We do not need the economy to carry these companies as they gain market share. In that sense, you look at ecommerce versus a faster demise of brick and Mortar Retail as all of us almost forced to buying things online. Thatthat if experience tends to be positive. Not every experience works out, but it is one of the reasons these are seen as defensive. What valuation do they lose their defensive characteristic and become more aggressive . So far, the market has not said this is the area they are worried about yet. Guy we have more upgrades for apple today. We believe it there. We always appreciate your time. Up, the u. S. Gulf coast faces back to back storms. More next with researcher chuck watson. Bloomberg. Kailey are ready tolicans formally nominate President Trump for reelection. A scaled down convention will kick off in North Carolina. Trump is cherry laying trump is trailing joe biden in National Polls and under intense pressure to turn it around. President trump is expected to speak on each of the four nights of the convention. Dozen former republican lawmakers are throwing their support behind joe biden. Todayden Campaign Said that 27 former lawmakers including jeff flake of arizona and john warner of virginia have joined republicans for biden. That is a National Effort to enlist disenchanted gop support behind the democratic nominee. They have frequently clashed with trump whilst in the senate. Secretary of state mike pompeo says other countries will join the uae and normalize relations with israel. He made the remarks alongside Benjamin Netanyahu whilst on a medic trip to israel. Visit theslated to uae and bahrain. More than half of offshore Oil Production is already shut residents from texas to florida are bracing for severe weather. Rushing storm marco is toward landfall in louisiana, and the larger storm laura is itsing concern because of potential to strengthen into a hurricane as it crosses warm waters. 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. Guy lets carry on that subject, this trouble storms. Chuck met think you for your time. You have to look at it as three separate pieces. The first is the actual damage on shore, it really depends a lot on laura. Marco is disintegrating, not likely to have that bad an effect other than the rain on shore can make laura worse. Things like flooding, and sometimes when the ground gets saturated, trees that could normally hold up to wind fall over. That causes extra damage that can cause costs to go up. The biggest thing we look at, oil and gas infrastructure. Not worried about offshore infrastructure. Remember, we are on the 15th anniversary of katrina. 2005, it cleared a lot of deadwood out of the offshore facilities. , weaker designs were either destroyed or shut down. New or designs are better, a bit more robust. Stronglaura gets above a catch to into the cat three cat four territory, offshore infrastructure should be ok. The thing i am watching our refineries. The current laura track takes it over lake charles where there is about 11 of u. S. Refinery capacity. Kailey kailey what i am stuck not just talking about one storm, we are talking about two storms in close proximity. Is there any precedent for this . These are a bit stronger, but it turns out if you are hit by a tropical system of some kind, you have a one in four chance, 25 chance of being hit by at least hurricane that same year. Close, butly not so those who lived in florida in 2004 well remember getting three storms crisscrossing the state. The fourth storm ivan hit the panhandle. It is unusual to have two this close in time, but if you think about the currents of the upper atmosphere that push storms, they tend to up. You get storms moving along similar tracks. You is why historically have a decent chance of getting at least two tropical like systems. These are more intense and closer in time then we have seen before, but that is random chance. We are seeinghing laura move west northwest, do we have any idea at this point about where it is going to make landfall . What does the cone look like . Right now, the forecast models are fairly tight on laura, which is a big relief. This weekend, things were all over the place. They are looking at the upper gulf coast area between northern texas, between houston and the mississippi delta, it is focused right now. The current track has it making landfall south of lake charles, louisiana. That is rich territory. Something like half of our refinery capacity is on the texaslouisiana coast. Or as storm in baytown, far south as houston is not out of the picture. Right now it is focused on lake charles. Kailey give us a dollar figure. What kind of damage are we talking about . On the current track, it looks like about 3 billion to 5 billion. Right nowity forecast is where a lot of uncertainty is. The global models, the one you hear about all the time, the european models, those are keeping it as a catch one hurricane, maybe a low catch two. , two ofcialized models the better ones are showing it getting over those warm gulf waters and going all the way up into cap three territory cat three territory. That is going to have a huge impact. If it is a catch one, you are over 1 billion. Three, the exact landfall location becomes critical. It could easily go up into 20 billion if it gets to cat three. Three guy what does the rest of the season look like . This is a much larger spread. This weekend was pretty frustrating for forecasting, especially for economic estimates. The economic estimates this weekend went from 500 million to Something Like 40 billion. It has been a nightmare. , one of of the season the things is there is not too much correlation between the total season damage number and the number of storms. Storms get a lot of fish that stay offshore and dont cause damage. Marcon get scares like which became a hurricane and then at the last minute disintegrated into not much more than a tropical storm. Were just talking about marco, we would already be bored. Of course it is exceptional because laura is behind it which does have potential. We are only in august. The heart of the season only started in the last few days. We have got a long way to go. Conditions are favorable across the atlantic. I would not be surprised if we get a couple of more storms and more storms in. I want to mention one thing, these numbers are about 20 lower than what we would normally see because i am jokingly calling it the covid discount. Particularly Small Business activity is already so depressed , so a lot of people that would have been temporarily put out of work and hurt by the storms are on unemployment already. In that sense, these storms arent so much of an impact as they might have been. Guy you have got to find silverlining. Chuck, thank you very much. This is bloomberg. Kailey leon cooperman joining a chorus of investors sounding the alarm on asset created by stimulus. He spoke to tom keene earlier today. They have created a speculate of bubble, in my opinion. I have to admit i am uncomfortable at the present time. Not because of the virus, that is a factor, i am uncomfortable on the of the focus amount of debt being created. Who pays for the party when the party is over . Birthdayated our 244th. It took us 244 years to go from zero National Data to 21 trillion. [indiscernible] i think that is going to be a problem down the road. They have created a real speculative environment. Give me some statistics, apple announced a four for one split july 30. Volumeday average call at that time was seven under calls. Calls 721,000 apple createday, three times the average and 20 days and their stock is up 17 since the announcement of the split. Tesla announced a five for one split august 11. Same thing. Their stock is up 49 since the split was announced. Last my check, if somebody gave me five singles for five dollar bill committee did not create wealth. [laughter] that was the old calculation. This is the new calculation when you have got a big component of robinhood investors, that is one theory. What is riskier . Highflying stocks or bonds . No question that bonds present the return free risk. That is what works in favor of the stock market. What i have not fully appreciated is what a general Interest Rate environment does for stocks. I was focused on the fact we have had zero Interest Rates in japan and europe and there stocks are five or six points below the United States market. I think global Interest Rates are indicative of a problem economy. We have had artificial support to the economy since 2008. 13 years. I dot that as being not look at that as being positive. Talking a little earlier on today, he has got a different robinhoode kind of stocks and what is happening in terms of the big tech names, which he sees as being more fully valued but still presenting opportunity. Plenty more coming up. We are going to discuss the ongoing market rally. He ongoing market rally. Guy from london, i am guy johnson. Alix steel is off this week. This is bloomberg markets. President trump en route to North Carolina to intend the rnc. To attend the Republican National convention. The majority of the convention will be held virtually, however delegates are meeting in North Carolina to nominate trump and pens for a second term. Joining us is kevin cirilli. How does the rnc differ to the dnc . Kevin in terms of ideology they are worlds apart. In terms of stylistic performative nature, we are going to have to see. In terms of who is speaking tonight, tim scott, a republican from South Carolina who has been given a prime time speaking role at the 10 00 eastern hour. He is the only africanamerican senator in the republican party. Kempso inherence the jack conservatism. He will likely be speaking about his remarkable biography and about how he believes it was conservative economic principles that helped allow him to utilize the american dream. Beyond that, there will also be members of the first family including donald trump, jr. Who will speak tonight. Members of the first family will be speaking all weekend. From a Foreign Policy perspective, mike pompeo will speak from israel. As willbe speaking, senator joni ernst from iowa who has a tough reelection fight in november. Kailey the president watched the dnc all week, made it very clear he was not happy with their speeches, promised more live speeches from the rnc. Aside from pomp and circumstance, what can we expect in terms of policy . When youre talking about the economy, i was struck because over the weekend the wall street journal released a poll in which the president is iniling nominate Biden National polls and insignificant swing states like pennsylvania. Here still has President Trump leading on the economy. They are going to hammer home that point. They are going to talk the pet theyre going to talk about the tax proposal and of balancing act between reopening the economy as well as trying to medical vaccinations into the marketplace. Yesterday the president announcing the fda has utilized eua to get convalescent plasma more readily available. Disposal,ol at their he says, for them to deploy against covid19. President , thehe party move beyond of the base . Atin i think if you look the suburbs, that is going to be a crucial battleground for republicans in order for them to make inroads. Not just at the president ial level, but also the house. They have got to win swing states in the suburbs. With on sources i talk the reelection campaign, they are going to hammer home the notion of law order. They are going to talk about law order. They feel that can help them with suburban women and workingclass voters who have been looking at the unrest over the past months across cities and whatnot, and they feel that law order is a theme they could potentially make inroads with different constituencies. Kailey also possibly cracking out on china. What kind of rhetoric can we expect around china . Kevin rep kevin republicans want to have the china debate all day. Tiktok, of tencent and or you look at it in terms of the state department encouraging colleges, universities, union workers, union labor groups to divest from china, this is something that is going to be a broader conversation between here and election day. It is going to come up in the debates. It is something both joe biden and President Trump agree on. But, how they want to combat china, they are worlds apart. I think you will hear on china from President Trump, as well as secretary pompeo. Youre going to hear a lot about that in terms of Foreign Policy this week based upon the conversations i am having in washington. It we are going to leave there, thank you very much kevin cirilli. Bloombergs chief washington correspondent. I want to update you on a piece of news here, the berlin hospital that is treating alexi novelli is saying the latest batch of tests being conducted to show poisoning. Was on a flight. There is question as to why he has been moved to germany, there it has been confirmed he has been poisoned. We will see if we get more on this as we continue throughout the afternoon. Lets get back to the rnc. Where joined by greg valliere. Last week at the dnc, democrats spent the entire four days going after the president on his handling of the virus, the economy, failures of leadership. How does he fight back . Greg i think he fights back primarily by going after bidens agenda. Going after bidens mental acuity is not going to work. Biden was sharp last thursday. The agenda is another story. I think the republicans will go after the tax hikes. Corporate, social security, capital gains, wall street transactions, the list goes on. I think that is where the democrats may be vulnerable. Guy as you suggest, maybe that is the way the president should attack biden. The question is, will he . Do you think he stays on script . Greg that is a good point. Trump sometimes does not stay on script. If he starts to try to go after qanon, talk about his relatives, he could ruin a good news day. I think that is important. If he stays on script and talks about bidens agenda, urban violence, he would do well. One other point, i think trump needs to tell people what he would do. I have not heard a lot from trump on what his agenda is for the next four years. Kailey who is the president actually trying to speak to . Cbs released a poll that found the majority of republicans think the economy is ok and they approve of the way his administration has handled the virus. His base is still behind him, who is he trying to reach . Greg obviously his base will follow him no matter what. And three isr 1, 2 collegeeducated women. That is the key constituency he has to win over. His numbers with collegeeducated women are tolerable. I think he are terrible. To be stridently right wing does not do him anything, he has already got those voters. Guy what about china . Greg he is going to rafter biden and maybe bidens son over there deals with china. He is going to be harsh, no doubt in my mind. Kailey what about the senate . Has the market properly considered the effects of a blue wave . Greg i do not think so. It looks like the republicans could lose four and the democrats could lose one. If it is a net of three and biden wins, the president wins the tie. Maybe republicans will lose more, we will see. A biden victories in the markets, but a blue wave where democrats have everything, a think that is not in the markets. Guy how close you think this is going to be . We are still a long way out. What is your sense on where the polls go . All, you have to take the polls seriously one week from today. We will have both conventions outoftheway. The first debate is september 29. Before then, the polls will tighten. I think after the debate, they could tighten more. Right now, biden leads by maybe 8 points. In early october, it will be four points, five points. If it is that close, states like california and new york will have landslides for biden. If it is that close, you will have to take out three or four points from new york, then it is really close and it boils down to a handful of states. Florida, michigan, pennsylvania, wisconsin and arizona. Kailey we know the economy is going to factor in. I want to ask you want stimulus, are we going to get another package before the election . For trump to win, he has got to have a robust economy. To have a robust economy, we need another stimulus bill. I do not think he has pushed hard enough for it. Even pelosi, who spent all of her time on the post office, but republicans in particular need a stimulus bill and i think they will get one. I am curious about the post office issue. Was that a red herring . Most peopleine why like the post office, they still find stimulus a more important issue. Greg i fully agree. The anecdotal evidence is mounting. Individuals across this country are beginning to hurt. Evictions are continuing. Trump did not stop evictions. People are going to start worrying about bankruptcy and finance. They spent all of this time on the post office. The post office has enough money right now to handle the election. I think it is imperative on congress to get a stimulus bill done soon because people are hurting. Guy they certainly are. We appreciate your time. Thank you for sharing it with us. Weve got plenty more coverage coming up of the Republican National convention. A. M. P. M. New york, 3 00 tuesday in london. Next, more about apple. The stock split has everyone talking. This is bloomberg. Guy an exclusive interview with chris rondeau. This is bloomberg. Kailey live from new york with guy johnson in london, this is bloomberg markets. Tensions between u. S. And china seem to be easing. Scarlet is digging in. Tech shares are helping lead gains here in the u. S. And overnight in asia. Look at the train to take etf, it seemed to have pickup. Highst closing at session in hong kong after bloomberg reported that white house officials are making clear to apple and other Tech Companies that the ban on tencents messaging app will not be as tight as feared. Some of the biggest Institutional Investors are swapping the u. S. Shares for the hong kong shares to avoid potential u. S. Sanctions. If you look at the performance of some of these big tech names this year, is the undisputed winner. Goldman adding it to its superfast list after revenue growth. Tencent recovering quite a bit since the white houses initial announcement on we chat. Alibaba feeling the heat from domestic confrontation domestic competition. As much as the s p 500 has had this monster rally, you look at the china csi 300, it has done better it is trailing 11 percentage points. Analysts are worried increased tensions are not priced into chinese stocks. Investors should think portfolio hedges. One way may be too short alibaba, baidu and tencent. Guy thanks indeed. From a chinese point of view, lets stay with the tech sector and look at it from an apple point of view. The firstbecome company with valuations of more than 2 trillion. Isle, as we also know planning a four for one stock split to make it shares more accessible. Is that reason to buy stock . Welcome shanna Cross Shannon cross. People are scratching their heads, they cant figure out why a stock split would drive higher share price. I have heard numerous people talking about this, what is your take . Got to supplyve and demand and when you have a lower price i understand the fundamentals, but when you have a lower acquisition price, one of the things apple is looking at is that it is more accessible to a grandmother wanting to buy a share for her grandson. That type of shareholders incredibly sticky, something that apple is definitely looking for. Plus, they like the idea of an egalitarian move. Understanding that multiples have expanded here because you have not had a significant in the underlying fundamentals. Kailey lets pick up on multiples, it is trading at its highest premium since back in 2007. How much growth is already priced into the stock . What is going to be the catalyst . Apple, it is not just it is other leading tech names that have done very well. People are looking out a couple of years. It used to be people would say, what are they doing next quarter . Now they are saying, what are these companies doing in two or three years . Given covid and the challenges we have, it is hard to call a quarter because of shutdowns. People are looking for companies that have a defensible position and a strong market share, recurring revenue from a services standpoint. Youre seeing the Services Business come in strong for apple. It is less what they are baking isthe near term, and more, this a company that will continue to be a leader in 2023, 2024 . Can you value apple that far out . It, theyveok at got about 1 billion in their devices. You have a Strong Recurring Revenue base. Are not think people necessarily on the sell side. My peers are trying to figure out where the stock is going to be in four years, but people on the buy side are trying to figure out what companies do i think are still going to be leaders, get through this and come out on top and gain shares . I think apple is one of those. If you look at what apple has been able to do with some of , you installment plans return your phone and it goes in and is sold as a used phone and that increases their install base. The next person that buys a phone buys a new one. They have built a strong engine. Throw on top all of the services they are doing on the fact that these Services Businesses continuing to grow, i think that is interesting. I will say that Consumer Electronics has definitely benefited from the stimulus. Guest,ack to your last stimulus payments are important programs are important to keep the consumer out buying. Kailey back to school as a factor as well. A lot of people need ipads to teach kids at home. What happens when they get that new iphone . What kind of drivers that going to be . A think apple has looked at it as almost evolutionary rather than revolutionary in terms of 5g. There will obviously be people who want to buy the latest and greatest phone, but i think the 5g refresh and what we are going to see from apple and some other competitors is youre going to timethe blip, but over transition over. You have got to get 5g coverage out there and you have got to have the service capabilities. Thinksomething where i the nearterm iphone will do well, but it is going to be a longerterm tailwind, especially when you think about what sort of install base apple has developed. Cs andcontinues to sell ma ipads to people who are new to apple, which is remarkable. Kailey we have to leave it there. Shannon cross come across Research Managing Director and ceo. This is bloomberg. Ritika time for the Bloomberg Business flash. The biggest stories in the news right now. Theng is working to boost safety of its troubled 737 max. The company is lee using technology borrowed from space vehicles that can provide data. Regulators have tentatively accepted boeings sweeping redesign of the plane without the new technology, meaning that max could be approved to fly again as soon as this fall. Modelare signs teslas three can be as exceptional in the used market as it has been in the new world. It takes a while to see how well a car performs on the used market. , analysts say the sedans are retaining much more of their value than small luxury vehicles, and selling quickly once owners list them for sale. Kailey thank you. Time for futures in focus. Joining us is Bloomberg Intelligence commodities strategist. Not just one but two storms are about to hit the gulf coast. A lot of production and refining, yet futures are up 0. 5 . Why . Destructionsthese disruptions are only short terms. The last time we had a big pump and oil was a year ago, the attack on saudi arabias assets. Look what happened there, it would to negative. This is a very negative scenario for crude oil in the Bigger Picture because it is balanced in a bear market. It is dependent on the stock market for just sustaining above 40. If the stock market rolls over, expect crude to drop at double velocity. Guy lets talk a little bit about inventories. Of differentber factors swirling around crude. If we do get outages, give us a sense of the relationship between those outages and the amount of inventory we currently have. That is a good point. Some of the highest ever come of the spi was tipped off, we have the same thing in china. In almosts are high all forms of energy and the market is optimistic about demand, almost a perfect storm for normalization which means lower prices. The storm is not helping boost markets. Crude oil this showing divergent weakness. As you can tell, a bit of a bear on crude oil. Kailey lets talk about gold, losing some of its gains from earlier. What is it going to do as we have the jackson hole inflation conversation . When we look at gold, is good for gold. There is a quiet week, not much going on. Remember, it is a still above the alltime highs. Gold is a consolidating bull market and it is going to get more qe. That is positive. At some point when the stock market starts to show weakness, that will be the next level. I think gold is a winwin situation. Morer stocks are creating demand for diversification. As the market declines, that is good for gold. Right now, consolidating gains and could stay here a while. The next big move for gold should be higher. Guy thanks for your input. We appreciate it. What have we got coming up in the next hour . We are going to return to the issue driving markets today, the virus and vaccines. That conversation, interesting to where we are right now as the markets continue. This is bloomberg. [inaudible] [laughter][applause][inaudible] [laughter][applause]oh my gosh guy from london, i am guy johnson with kailey leinz new york. Down toow counting you the european lets talk about what is going on here in europe. We are basically in virus anxiety mode. We are seeing case counts climb. We are seeing italy has just had its worst day. We are watching what is happening with the stock market. The two things seem to be unrelated now. Basically, we have a stock market that is absolutely on a tear. Then you have this issue as well about what is going on with the vaccine. The president of the United States indicating that we may see the oxford vaccine, which is being produced by astrazeneca, getting a fast track. After zeneca sang today it has not discussed emerge astrazeneca saying today it has not discussed emergency