Crew touching 95 a barrel. 4. 6427 is the new cycle high. Tom this thursday is more tumultuous than monday through wednesday. An equity pop at the back end and we are short covered. And the optimist will be here with us in a little bit. You have to reset and recalibrate. There was a moment yesterday and let me get out the surveillance mouse and tell you that we had a 2. 30 10 year real yields. I did not frame that six months ago. Jonathan the equity market is kind of a snooze. Bond market huge moves. Fx one point four briefly against the dollar. The dollaryen getting closer to 150. Lisa that is exactly the right observation. Why are stocks so subtle and why are they not responding to the markets. Is there just simply a paralysis, or this is forced selling for funds that do not have a big position. At this point are we looking at some unraveling that is gaining steam that nobody wants to get in the way of. Tom i am going to when mike mckeen gives us the gdp blah blah blah, but there is a massive multiple set of revisions to our economy, and it is not probable, but possible that 8 31 this morning Jerome Powell and the team down in washington go hoops. Jonathan crisis ok but not as good as we thought it was . Tom yes. Lisa will tell us in the brief, but this thing at 8 30, it is a tough tell, it will turn the market trauma into what we see it 8 30. Jonathan and then if claims come in around 200 k, 201 the previous week. Lisa if we keep getting this lack of response, if the labor markets keep staying strong with all of the wage pressure in the headlines and beyond, how much does this keep this feeling that rates will be higher for longer and, if anything, the fed is underestimating what it needs to do. Jonathan they are higher again this morning. Equity futures just turning positive in the last 10 minutes. Posited by 0. 1 . There is the move in crude. Pulling back after briefly be breaching 95. There is your move in the bond market. Right now. 460 282. Higher off of the session and the cycle. Lisa the highest going back since 2007. At one point people said that they are buyers and at one point they are stepping back. I take your point about jobless claims which is your most important Economic Data of the day and we also get the Second Quarter and we might get an upward revision. Initial jobless claims, if they keep coming in nowhere spill nowheresville, they have basically flatlined over the past two years in particular, how much do we get this feeling that this economy is stronger than what many people expected. We were asking about fed speakers, we have four of them. We have the chicago fed president , lisa cook and tom barkin with Michael Mckee. This is going to be really interesting, not only tom barkin, but 4 00 p. M. , jay powell will be hosting a town hall with educators at a time where it is curious his response to what the market moves have been. We are going to talk about his education policy, but we will be curious about how he weighs in. Tom bring in those beautiful places again. Steve was on fire, and he really got emotional and said that Jerome Powell is not alan greenspan. Basically he alluded, not to put words in his mouth, that Jerome Powell does not have control over the debate. He was wound up and i told the team to get a video block on that so you could steal it for your other property. But, there is a debate here about the dynamics. I make jokes about it but you are right, the fed speaker. Jonathan something on my side that was implied about the forecast, explain that again. Lisa i would also say that steve went on to say at the composition right now of the fed does not give the market confidence that they have the conviction to get inflation back down to 2 . Nike earnings and blackberry and maybe we will get a sense of what the ski season will look like. Making nike earnings will be key as Consumer Discretionary shares, falling 10 . So how much do we start to see some of the weakness play through that. That was pretty recently. Jonathan you bought some new sneakers . Lisa a year ago. Tom you need a backup pair. Lisa i know. I am always interested in what they do because there was not as much now last year so how they get through that. And then he gets crowded so do you end up with package deals or not . Tom youre going to throw euroseas your skis over . Lisa as long as they do not crash into me, you are good. Jonathan the chief investment strategist of of and heimer joins us. 4900 on the s p 500 year end, can you tell us how much of a challenge that you see from the bond market currently . I will must say that in the near term there is a challenge in terms of perception, but it is not really uncommon when you go through the type of transition we are going through, and the seasonality involved in the month, you have to consider that you will question how are we doing with that . We had a 4400 target that last december people thought was very high that was in june or july of this year. And that is when we addressed and moved our target higher. At the end of the at the end of the day, it is the end of free money and we think this is a good thing. Bond issuers have to pay for the privilege of borrowing money and buyers get something in return. It puts hl, and i think that is what a that is what we are seeing. That money is prime to lobby the fed to begin to go into an extended pause or cut rates. Instead of going through this gauntlet that they have to run through to get close to them. Tom we are staggering into october. September did not exist and it went fast. My theme for the year is the great zombie rollup. You just alluded to it. Money because something and the zombies will go up get rolled up or go out of business. How do you play that on a sector basis . Do you buy the zombies or people removed from the bay from the debate . John the people removed from that debate because my mandate is more conservative in the sense that it is in dividend stocks that grow faster than peers. On a global basis the industries that we use are the most speculative, but the more traditional indices that they are used. We think that there is a tremendous appetite for distressed assets, and you have to figure the distressed buyers usually in crises that we have experienced over the last 40 years never really satisfy the appetite for distressed coming out of it, because usually the fed can make mistakes. But the basic mandate of the fed really defines the fact that they will be successful. Tom but, bank of america long ago when you were with robert there. He used to trip over the value line once a month which focuses on the floor. You trip over that puppy as you did that securities analysis. What are you actually studying in this bond and fx turmoil . John what we are really studying is the cause, looking at the effect, and recognizing from what we see is that the fed has been remarketed remarkably sensitive to the outcome of its practice of its mandate to the underlying economy. And then it has been helped out by all of the fiscal stimulus with the bridge over troubled waters and a fed funds hike cycle process. And then technology, advanced logistics and things that help companies, the Good Companies whether the tough storms better than they could in a primitive era. Most certainly, we look at the Economic Data and we see slowing quite evident, but not surprising. And yet we do not see the economy falling off a cliff. Lisa as your is your bullet bullish view on stocks predicated by the events of last year . John it is based on the fact that the fed is getting closer to the end of this cycle meaning an extended pause to get some assurance that Jerome Powell does not have to be worried about being recognized as another arthur burns. That is pretty evident in his thinking. He wants his legacy to be a good one. He will probably get cuts towards the end of next year, mostly because he would expect that the fed would have been more successful than not about curbing inflation and putting it in check and bring it down some, and there is one more hike to the end of this year and then maybe next year or even two. Jonathan 4900 on the s p, given the potential for a hike for next for this year and intentionally two next year . John we publish weekly in our report two tables that show the performance of the market for maximum drawdown and a variety of things, whether it is the fed funds rate or the cbi and it is all listed and our clients can look at that and discuss it with their advisors. What we have found with my experiences that stocks actually go up when Interest Rates are higher. And as far as i can remember during the. When during the period when paul was there and everybody thought the fed would fail. Everybody thinks the fed will sail until it wasnt. The stocks were going up while you still had coupons available anywhere from 11 to 12 . Jonathan are you the official oppenheimer cheerleader . Tom this is a theory that no one believes. I made does dumb decisions at this time. You heard it 47 times without a drink in my hand and 142 with a drink in my hand. Companies adjust. Jonathan john, thank you. Company is companies adjusting but can stocks and valuations adjust . Tom for a chosen few we got way ahead. We look at spx to a negative statistic yesterday afternoon. What i loved was the bridge over 12 over troubled waters. That is a good allusion for the stress that people face. When you are down and out and on the street, when you are toxic groove. Jonathan that is yours. Lisa the lyrics. Tom when the toxic groove fall so hard on you. Lisa there is a real question about the liquidity backdrop, about where the money will come from to juice the stocks at higher levels. Ok, that is what people say about what is it mean . If you can park it and get 5 or almost 5 . If you can do that what is the point of taking a moonshot risk on Companies Facing a lot of headwind. Tom the most important thing this week is mike wilson going i am not cash. Wilson is in the market while he is cautious. Jonathan he is the chief equity strategists. Tom that is amazing. Jonathan greg is running is next. Were you up all night watching the debates, is is what this was . The latest on the debates up next. Bidennomics have failed. Autoworkers are feeling it and families are struggling. We need a new approach to trying to china, we will have real hard power to deter their positions. We will have economic independence. We need to deliver Economic Growth and unlock american energy. Rail, and burn coal and embrace nuclear energy. Put people back to work. Jonathan governor mike pence santos on the gop governor residential debate stage. We will bring some more from nikki haley as well. Again after the gop debate writing this , trump is still the alltime favorite and it is unlikely that they will be a late entry. Could trump also win the general election . We do not rule it out. Democrats in this town are worried. Tom the Washington Post, that is great. They are watching this. Did you watch last night . Jonathan no. Lisa it was too late for me. Tom michael nearly after two hours of debate it is clear that dog is wearing the largest American Flag pin. That is the analysis from the very calm confident michael. We will get worse analysis from greg, the chief u. S. Policy strategist at agf of investments. In his blistering love note for all of you this morning is that it was cringe inducing. Expand on the moment last night. Greg good morning, sorry i have phone problems. It was cringe inducing. It was a two hour of nonstop espresso. I had several cups of coffee trying to stay awake. Tom if it is a gop debate, what percentage of the american voting public . 15 or dare i say 30 . Greg i think they are speaking to nikki haley, and i think they are speaking to ron desantis. They had pretty good nights and they had to have pretty good nights. I think it is a little too early to write them off. I think haley is an outstanding debater. Lisa what is interesting is that everyone assumes that donald trump is the winner by not showing up at a time when there is a lot of questions around his viability as a candidate. You say the democrats should be worried. Why are democrats the ones most worried after the debate . Greg the polls show a dead heat between donald trump and joe biden. There was one infamous pole a few days ago in the Washington Post which showed biden trailing by 10. No one believed it but the polls are showing a dead heat. If you think about what all of trump has been through, 93 indictments, this race is a tie . That is not a good story for the democrats. Lisa let us talk about what the former president was doing in michigan when he spoke with a nonunion auto Manufacturing Parts Company talking about the need for fossil fuels, a similar theme to what we heard. What how much will this be one of the hallmarks of the republican platform, basically antigreen platform . Greg it is a big deal. First of all michigan has 16 electoral votes which is important. I do think that being against all of the new stuff is probably a good place to be in a state like michigan. Tom this is nixonkennedy and no one holding a dogs ears up. This is a process and in the process people will drop out. I see no incentive on an ego basis for people to drop out. What is the incentive to get off the debate stage . Greg a lot of them would like to be players and have their own talkshows and things like that. I will make you guys a wager. The first major candidate to drop out will be mike pence. He had an awful night with no energy. I think he could be out by thanksgiving. Tom that is a side prediction. Are all of these people running for Cabinet Office . Is scott of the carolinas running to be secretary of commerce or secretary of treasury or whatever . Greg sure. To be uncynical for a minute, i think they have a message that they want to discuss or scott did on race last night and i thought he was eloquent. They want to stick around for a while. The key will be running out of money. Hence is almost pence is almost out of money and others have enough to get through the end of the year. I think you will see a lot of big contributors not giving much more. Lisa three months ago people would say wait we do not know what this race would be. It could be somebody very different than former President Trump and President Biden. Some people were talking about Glenn Youngkin or california Governor Newsom coming into the seer, why do you think that the train is leaving the station or anything other than a bidentrump matchup . Greg filing deadlines. A lot of states have filing deadlines by late october and early november. I do think the train is leaving the station for Glenn Youngkin and gavin newsom. I think theyll have to wait for another four years. Lisa what did you make of the negative feelings towards a shut down. The antipathy toward the right wingers who are trying to shut down the government as soon as saturday night . Greg we are now entering one of the Great Washington games which is the blame game, who gets blamed . And mccarthy all of a sudden has decided to blame biden, the should and it the senate and the democrats and that will be his theme. Jonathan i want to finish up on nikki haley and a lot of people think she did a tremendous job in that debate aced on the reviews i have seen. If you look at the polls taking on the current President Joe Biden she does tremendously well. What could she do at the primary level to make sure that she is it for next year . Greg i think you hit on it, her argument is that she can win the general election, and i think she could do well. She is outstanding debateer and i think she will be in the race for quite a while. Jonathan thank you for your view. Greg from agf investments. Rounds two of the gop and it lacked the buzz of the previous debate. Aside from the performance of nikki haley but based on the polls that you see on the national level, greg had put out the argument for her going forward. Tom the thing i detest and i got one observation that is important, but the thing i detest is the right tv does this litmus test voting thing where they will bring up a topic and they want you on record. It is cringe inducing. I have a question for you. He said something important, these people run out of money. In the United Kingdom and the beautiful short contained ballet jonathan it is not the same issue. The way that elections are financed here are completely different and completely foreign to those who follow british elections. Tom i will pick york, i do not know what it is up north in a really important borrow borough or whatever you call them, it does not run out of money. Jonathan this leadership race would go quickly. Tom we are so flawed on this. Jonathan what would change it . Tom senator mccain and others tried to change it and got crushed in court, that is the short answer. They tried. Lisa i think that right now the most interesting take away is as much noise as we keep hearing whether it is the shutdown or political bath backandforth or the arguments in both stories, the dollar is preeminent. People still view the nation as the worlds main economy. You say all of these things and yet here we are. It does not seem to have jeopardized the nations standing which is the question, at what point is there a Vigilante Movement to force change because it is not there. Jonathan you have the luxury of being reckless on certain issues, you do when it comes to shut down and debt ceiling debate. We know what the reaction is and it is by treasury it is by the u. S. Government u. S. Dollar. Did you see Governor Newsom speaking again . Those two should have a show talking about crude production and energy independence. The gop are coming after the energy story of the democrats and the president. Look at where energy is currently in america and you can say it is because of this lighthizer despite it. We have crude production pushing 13 Million Barrels a day. Coming up, the chief economist of pantheon, the equity market totally unchanged with a little bit of a snooze and maybe that is welcome news. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Jonathan our next guest teeing up his own interview on twitter saying talking macro and newcastles glorious victory. We will talk about newcastle in a minute just for you. On the s p 500 and nasdaq, we are positive about it at the close with a decent rally. The nasdaq also closing positive and only slightly negative. Headline after headline in the bond market, let us get to it. Here is your 10year. 4. 64. 4. 6365. Four point 4. 75 for the 30 year. I remember hearing repeatedly around the banking stress that that was that you have seen the cycle highs and here we are through those levels. Tom on a normal basis three numbers lining up and what matters is the comparison and we have disinversion. You have gone from 100. Think of that, deep inversion and now up to 49 basis points. Up four today. Most rpos pros will tell you does inversion brings does the bill instability. Jonathan if we thought if we sat around this table and thought about where it had come from, the dark the jargon you have heard from was the front end will rally because the fed will start cutting Interest Rates. It is the long end sounding off the tenant 30 year. If you want to draw a line to what is happening. You have not seen massive changes. Can you really say with that we have had a change in tone from the Federal Reserve . You have to go back to the treasury refunding announcement later in the summer which sparked the drama at the long end. Whether you believe that should be driving the price action, just to join the dots, that is where they go. Lisa the idea of quantitative tightening where you have seen 1 trillion run off the past year or so. You could come to the steeper issue. Since the fed statement this market is losing faith that this market has the conviction to inflict pain to bring inflation down to 2 and every upside surprise just add steam. You are not seeing a term premium but an inflation premium built into the bond market. Tom look out for that conversation. She has thought similar to the kind of thoughts that lisa laid out. I want to finish on foreign exchange, the dollar the strongest and the brief and the euro briefly 1. 04. You can flip it around, the dollar is a little weaker after all of the strength. But what a hike over the dollar. Tom the nuance is the euro is weaker and the yen is stable. Every day there is some nuance as the pros triangulate. Jonathan 1. 06. Oil stockpiles of major u. S. Storage hubs dropping to critical level and pushing the price closer to 100 a barrel. Inventory in oklahoma falling below 22 Million Barrels, the lowest since july and close to operational minimums. This is what we were talking about yesterday, the tension of supply and inventory bringing life into this rally. Lisa i want to go to that interview. She also said that people are underestimating how inelastic prices are. I think that was fascinating. Because of the lack of supply and the fact that people are going back to the office and things are coming from a low base of necessary travel, prices will stay higher for longer. We are hearing that on the edges from others. So at what point does not become a real feature for the fed and Central Banks . Tom that micro, the pacific rim is going back to the office postcovid. Indonesia. Jonathan they made that point as well. More on that later. The Government Shutdown, we have to go there. A lastminute deal looking unlikely as lawmakers struggle to find common ground. A bipartisan stopgap measure agreed to in the senate still has to make its way through the republicancontrolled house where steve were speaker Kevin Mccarthy could be ousted over a vote. What on earth is happening . Lisa why does Kevin Mccarthy want that job . What power does he have . Tom people asked that question. Lisa people are saying he has zero leverage negotiating with the president because he does not have the party behind him. What party does he have to act like a leader he cannot bring people together or have the ability to face off with democratic leadership. I do not know how this will end without a without something to force his hand. Jonathan annemarie will answer that later. Former President Donald Trump skipping the debate and instead speaking to union members. He says that the push for ev will lead to the assassination of the Automobile Industry ansi jobs lost to china. Tom i will point out to the International Audience he had a difficult day and selected courts in new york city. I do not prepared i do not pretend to be an expert but what they are saying of the myriad cases he had that yesterday was a difficult day for him and his family. Jonathan china really on the ev battlefront, a big deal. Tom i learned a lot of london advanced on evs about china. Jonathan particularly for the e. U. , the inability to compete directly with these chinese manufacturers. It will purse it will purse push them to increase tariffs. Lisa the idea of backpedaling on certain targets when you get to ev adoption, how different is it for these auto manufacturers to minute to maneuver with policy that changes daytoday and at what point is consistency needed . Tom one of the most important thing about our guests and we treasure people like ian is that we follow them when they go. John was going to do remote with en last night from the east stands overlooking melbourne and gallagher and gallows gate stan. Where newcastle did not do quite an upset but a giant win. And they had possession 32 of the time and they still beat man city. We go to a man who knows english football. Jonathan this is why youre here, we are going to memphis mentioned newcastle united. How great was the atmosphere . Ian it was marvelous. The first half was tense and dull, but the second half was glorious. Jonathan let us talk about this bond market. We have talked to billy in times after the slow down the corner. The u. S. Consumer that is about to break. And i look at jobless claims around 200 k and unemployment south of 4 . Where is it . Ian if we have a Government Shutdown we will not see in that at all because a report will not appear. Looking at the realtime stuff, there have been a couple of interesting developments of the last eight weeks. There has been an enormous serve surge in student loan payments but people have started paying them earlier and already we see a big drop off and things like restaurant demand, Hotel Occupancy rates, auto sales, we will see the First Quarterly decline in auto sales for over a year. None of this stuff is a coincidence. 40 Million People have to find three mantra dollars a month 300 dollars a month to make low repayments. I wonder whether there is a turning point happening which is not visible in some of the official hard data but in some of the realtime stuff. If that is the case and q4 will be interesting. You have the uaw strike, the shutdown, the student loan chaos, it is very messy. Tom this goes to the pantheon commitment to china analysis, you made it clear that we underestimate the industrial job in china. Frame out the surprise jump in chinas economy. Ian a jump might be pushing it but the industrial profits numbers appear to have turned around and came across the board with better revenue numbers and pricing numbers. I would describe manufacturing as a solid floor, and that is not just the china story but also in the data outside of china, the u. S. Industrial numbers have stabilized but i would not say there is a meaningful recovery but certainly a degree of stability. A lot of the economy is disappointing, but they are growing. They will grow 4 or so this year. Not the 5 they wants, but they will not be one million miles away. Part of it is stabilization and a rebound in profits. The news is not terrible and a lot of new session a lot of talk about evergrande and country garden. At least on the industrial side which is a bigger part of their economy than in the u. S. And europe. It looks like some element of stability is creeping in. Tom let us bring the newest to 8 30 this morning, there is gdp, some of this long macro when we go to gdi which is another way to calculate the spirit of the american economy. Many people are looking for a markdown in gdp, are you . Ian there might be a little one but i am more expecting a big upgrade to the income numbers. There are a lot of changes. What is happening is that once every five year comprehensive additions for the national council. A huge change which will take time to sift through. The biggest single change that they will make looks to me is to start including Interest Payments from the fed as a part of private Sector Income to financial institutions. And because they have soared over the last few quarters with the feds raising rates that has been uncounted income to the private sector which might be why the gdi numbers have been week relative to gdp. That gap prompted a lot of people to argue that the economy is weaker than it looks but it will probably be resolved in the other direction with the gdi coming up in the gdp not doing much, at least i hope so. They are making dozens of changes and it can upset each other. If the economy were as weak as the numbers, we would not be seeing jobless claims at 200 or 220 or 200,000 among the payrolls or 3. 5 unemployment. I think the story of hidden weakness is probably wrong. Lisa if that is a case what makes you think that the Fourth Quarter will be a quarter of weakness . Ian the Fourth Quarter has the weird things, it has a strike, shutdown and start a student loan payments. These are all one time things but they can make a meaningful difference. The student loan story, this is 40 million adults having to divert 300 a month from spending at restaurants, travel and fun things into making loan repayments which they have not had to do since the start of the pandemic. It is an adjustment that will take a few months to play through. You have to remember that we are hitting the lagged effect of the more rapid tightening of the fet of the fed. It takes a long time for its actions to work through. Everyone is impatient. I only work rule of thumb six quarters see the full effect on growth. All we have seen so far is the impact of the initial timing six quarters ago when they started raising rates. There is a lot more to come which is making me nervous about next year. Markets have been focused on the upsides in the summer of this year and markets are not convinced about disinflation in the u. S. I think those stories both change next year and i am expecting a week growth advisement weak growth environment and sustained changes. Jonathan when you say things like that we have not seen it yet, where have we not seen it where you expect to see it in the next six months . Ian well, we have seen the start, the inflation of two or three months is not enough. My guess is that in six months. Jonathan i am really against the clock, but a lot of people say that we have seen inflation come down because the supply side improves. Where do you see fit hikes coming through the economy to break down demand. What is spiking the economy . Ian wage growth is slowing. The quit rate is back to where it was. The labor market is rebalancing and normalizing. That drives Core Services inflation. Jonathan thank you for the update and congratulations on a win as well. Coming up next, have you heard about the iphone 15 . It heats up too much. Too hot to handle. Dan ives joins us next. This is bloomberg. If youre trying to get a view of the whole organizational Financial Health and youre trying to do that through multiple systems, that makes it very, very cumbersome. Its not just tech, its not just people. Its how they Work Together to provide that experience to the customer. As a finance organization that is what you want to do. What do you see on the horizon . As a finance organization uncertainty . Or opportunity. Whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined Risk Management are needed most. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. My highest conviction is that we will start seeing some of the big tech continue to selloff, not because there is something bad happening but simply valuation adjusts after longerterm Interest Rates. I would say holding on. Jonathan a difficult few months of big tech. We have sunglasses for her for our next guest with dan ives saying bill is saying this the view of tech stops talks that clouds, Cyber Security will create a spring bird of growth into 2024 that is currently being underappreciated by the street. Dan ives. Tom out on the web the iphone is getting really hot when using it even for a short while. The date july 4, 2007. This is happened before. The man with titanium clothes. Dan ives joins us. The latest upper, omg it is hot. Never they bring out a new phone the shop the software is screwed up and it is not news. Dan this is not a surprise to apple. They knew this would happen. There will be some Software Updates that come out over the next week and it is typical cupertino. They will fix it and if you look at the demand for this iphone, it continues to be much better than expected. Tom is there any danger to the public with this exploding or on an airplane . Or the gloom out there . Dan not at all. If you look at some of the ones at that have tested this in terms of stress testing there is nothing like that. It overheats in some instances and i believe that this bug and this fix that they will come out with will be resolved. Tom so if john is buying a new iphone he can go in safe. Dan and he will be able to watch premier league and do everything that he loves to do. Lisa all of those other things. Jonathan you just said something. You said that demand will be better than expected. In fact you implied that it is better than expected. And you tell me about what was inspect what was expected and how you engage with current demand . Dan in terms of iphone deliveries we are still ahead with iphone 14 and it is extending. If you look last year you basically get a shortage of iphones. You combine about 10 million incremental units that we have from an inventory perspective, we are tracking so far based on our estimate 10 to 12 ahead. Jonathan how do you make a distinction between scarcity that is massaged by the company that produces this particular handset and scarcity driven by demand. Doesnt apple play this game . There is a big lead time and it is a delay. Isnt that the whole Marketing Strategy . Dan it is a rubiks cube and that is why we spend so much time in asia trying to understand what incremental units have actually been produced, what the demand looks like relative to the supply chain. I think right now we are running probably 3 million to 4 Million Units ahead relative to where iphones will shape out. Also asp in china continues to go up because of the probe. That is really the story. The asp despite doomsday views, you are basically seeing iphone demand going into the holidays. Lisa how much is apple eating the lunch of everybody else in terms of a market that is shrinking or in stasis . Dan china has gained about 300 pips in market share. And even despite huawei continuing to gain share because way way, if you hauwei, if you buy that phone is it is like buying an iphone 12. It is the best smartphone in the world by miles at this point. Lisa which raises a question which is maybe apple is the cleanest shirt and a dirty hamper, the overall backdrop is souring in a way that is more meaningful and we saw that from mike and some of the expectation seem to be more negative than people expected. Where do Interest Rates have to stay to keep your bold thesis afloat without the macro group macro gloom getting in the way . Dan it is a macro backdrop causing White Knuckles and what i see from investors in their daily pieces, my view is that going into this next year i believe that the fed will cut, at least from a backdrop perspective, i am more macro and micro obsessed in terms of how we have done it. As a look at growth in tech, it will be the biggest growth that we have seen. A lot of the bears have called 10 of the last two downturns, but we see apple at alltime high. October is upon us and institutions are behind. Insiders Share Ownership off of the bloomberg, apple 66 and microsoft, 75 . They are under owned at the end of the year. Do you get a massive short squeeze from 170 out to the 240 target . Dan our view is that this stock will have a two in front of it. I think earnings season for tech will cause a major shift. Tom what does a big institution do . They are under owned in this dog. They have to buy it in the year end. Dan it is a gift, a golden buying opportunity and institutions that i talked to continue. It is a groundhog day situation. New york city drivers are bearish and at the end of the year we look back and this was an opportunity going into what i view as a mini super cycle especially as everyone is positioned in big tech. Jonathan is china groundhog day situation . Is that new . Dan if you look at china, and you worry about the government ban and everything and you see the line and chinese consumers that are actually lining up to buy iphones. When i look at china, 10 politician and 90 ceo, that is the heart and lungs of the story. I view that as it is the big bad wolf and it is always the fear. At least the bark will be worse than the bite. Lisa i just want to end broadening out to where the macro fears are, the idea that we are seeing more strengths that will cause more profit margin compression leading to a lack of investment. How much does that delay or what that delay the thesis of growing profits to new record highs as a lot of Companies Invest in artificial intelligence. Dan it would, and that is where we spent all of our time around the world trying to understand where demand trends are. I believe we will sit here with cloud numbers from microsoft, amazon and google that beat expectations. We see the opposite playing out, and that will be the surprise earnings season. That is the biggest fear. But what we see fundamentally is the opposite playing out despite some of the macro fears. Jonathan and some businesses giving double digit Revenue Growth and apple not delivering growth at all. Two very different stories. Dan when you look at cloud and ai. We sit here year from now with a reaccelerated growth story not just on iphone but Services Going through a doubledigit growth. Apple is one where the bears, for years have gotten it wrong saying that the best days are in the rearview mirror. They continue to underestimate the golden story. Jonathan slightly unfair because they have been right. The company got growth when it comes to the iphone. Dan i will say that they have been right conceptually but wrong on the stock and valuation because i view right now that this is a pause from a Growth Perspective in what has really been a multiyear upgrade cycle that has gone on. Tom i did not mean to interrupt because it has been a failure of a stock. Tenure analyzed return 29 . Jonathan it was backed up by tons of growth. The point in question is that growth is not there anymore. And im not here to make a judgment. I am here to make an observation about the last 12 years. Tom the income statement from single digit Revenue Growth is historic. It is like we have never seen it. Dan this is the apple silicon chip store and now they control the system. Tom is the nanotechnology, is that the cause of them being hot . Dan i believe it is more titanium in terms . Tom i just busted you. Do you have the new iphone . Dan it is coming this week. Jonathan it is on delay. Dan it is on delay because of demand because ferro beat everyone. Jonathan it is good to see you. Good morning, the futures are just about a little bit in change. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. If i told you something extends your life span, improves your sleep, makes you more empathetic, and reduces stress and cognitive decline, you would think it was a miracle drug. But im talking about reading. Reading every day does all those things and more, which is why i started my book club, read with jenna. So start a reading streak, even if its just a few minutes every day, on the way to work, your lunch break, before you go to bed. Every little bit helps. The more you know. Its an amazing thing when you show generosity of spirit to someone. And you want people to be saved and to have a better life, then you dont stop. The idea that we have saved five Million Peoples lives, its overwhelming. Its everything. People are clamoring to buy bonds. I think it is too early. I think you have to be valuation sensitive in this market. I dont think you want to reenter a bear market in equities. There is a lot that is getting built in that is momentum right now. This is bloomberg surveillance. Jonathan so much feedback on dan eyess shirt this morning. This is bloomberg surveillance on tv and radio, alongside tom keene and lisa abramowicz, im Jonathan Ferro. We are up by. 1 on the s p. On a 30 year, 95 crude weekly on wti. In the last day or so we have dxy and highs we have not seen for at least 12 months. Tom a blended Major Trading currency. About 54 euro. Jon, i would emphasize on a thursday with massive Economic Data what i would emphasize is the equity market with a vix of 18. 1 8 , removed from the turmoil in bonds and fx. Jonathan big turmoil. Away from equities. We have talked about this already. Stocks have been a bit of a snooze. It is noteworthy, but based on what you are seeing in treasuries, yields you have not seen for 16 years, the dollar index, highs we have not seen since the back end of last year, eurodollar briefly 1. 04. It is more than notable. Lisa which to me raises a question. Is this the market saying that the economy has weighed in and a can handle rates at these levels . That this is manageable if this is the new normal . Companies will adapt and adjust . Everything will be great and you will continue to earn profits in an inflationary environment . At what point is that break . That really remains to be seen. Jonathan do multiples have to adapt and adjust to this new universe in the bond market . Lisa people have been saying that would happen for a long time. You have multiples that continue to expand. You have house prices that are reaching record highs. You are trying to make sense of it from a fundamental basis and not doing a good job of it. Tom Housing Affordability really breaking through to new ugliness as well. 30 year mortgage, 723 . What stan fischer would do is take the percentage move of the percent from the beginning of 2000 two the Mortgage Rate is up 146 from a threelevel, to a near eightlevel. Jonathan that is the price. Tom that is a tangible asset. I sent a note to our brian this morning. That is where i think the sweat is. Jonathan i think you know where im going next. That is the price. Lisa, who is paying it . Lisa that is the problem. When you talk about lag effects, and we talked about that with ian shepherdson. At what point are we going to see the lag effects . Where in the market do we see that come through . It is unclear. Now a lot of people have 30 year mortgages locked in, but at some point and we are seeing this with corporations they are having to borrow a new. Tom our most important equity interview of the day, these people are in the market with enthusiasm, even given all lisa that turmoil. Lisa with enthusiasm . Lets see. Being in the market is one thing. This is not a go to cash moment for people as much as, what is the right price to pay check out what is the carnage we are seeing in Consumer Discretionary . What about some of the underperformance in the areas outside of tech . Is that a buying opportunity or warning signal . Jonathan futures just about positive by. 1 . In the bond market, yields higher by four basis points. A new cycle high. The high of the session, 4. 646a just above where we are at 4. 6 447. It is remarkable to see, crude, if you missed it, 95 briefly earlier today. Lisa the toxic brew. What we are looking at today is Economic Data. Secondquarter gdp. It is the third revision that will be coming out. One importantly, the initial jobless claims. Much we end up seeing this ongoing stasis when it comes to people newly unemployed. Today we get fed speak of four. We get Austan Goolsbee at 9 00 p. M. 3 30 pm, richmond fed president tom barkin with Michael Mckee. And if 4 00 p. M. Jay powell talks to educators. Want to hear less about his education policy, more about what he thinks about these recent moves in the market. Whether he thinks things are getting unmoored or whether he is happy because this might get them to their goal sooner than expected. After the bell, earnings. Tom blackberry is still in business . Lisa its not the same company. Tom did they have great seats at the form . The form the forum is not there anymore. Jonathan head of Asset Allocation for voya investment, barbara, good morning to you. True on stocks. What has changed for you . Barbara earlier this year we felt sentiment was oversold. We felt a big underappreciated story had been how much the u. S. Is going to outperform the rest of the world. At the beginning of this year everyone was cheering for europe, was cheering for the emerging markets. We did not lean into it. We leaned into u. S. Equities and had been overweight equities for the lions share of this year. In the late june we started to take deposition down and we are back down to neutral. In part because we think the markets are in deadlock. Deadlock because bond yields are at multidecade highs. And equities are feeling the heat of it. Tom you are being too humble. You killed her. Just shut up and buy america and by bluechip. Absolutely killed it. Within the framework of amending and adjusting, because you have to justify your existence, i get that. But you are doing it in a bull market. Like wilson could be right at morgan stanley. Lisa we are definitely the first. We think this is a continued up lag upleg. The fed is talking tough at this point on the market realizes that. We do think inflation is rolling over. We think there are lead indicators that show wages are rolling over as well. In those things should be able to alleviate some of the higher for longer and the fed should be able to be cutting rates sometime in 2024. The market is going to feel that out. Lisa how exactly are you going neutral . What are you selling and what are you buying in order to readjust . Barbara we are kind of getting more and more overweight. We are continuing to sell down our international position. We think that the bond yields we are being offered at this point are very attractive. We bought some highyield. Yields are currently at 9 . That is a very attractive real yield. We do not think the market has necessarily picked it up. A lot of people are focusing on going into cash at this point. When a market funds have gotten over 1 trillion this year. We think the big by is buying bonds at the expense of equities. But we think once bond yields have peaked the more inflation data we get it should be able to start peeking out, and that will be a relief for equities. Lisa there has been a lot of data surprising to the upside. Including home prices. These metrics that are pointing to inflation having a risk of surging back up, which is what we are hearing from fed officials, aside from job earning what would make you nervous that you have underestimated the Inflationary Pressure . Barbara the thing we are thinking about is the equivalent rent. All of our lead indicators on rent are rolling over significantly and meaningfully. If there was an upside surprise it would probably be to the wage data more so than anything else. But we do think there is a lot of indicators that are pointing to inflation continuing to come down in a meaningful way. Tom jon, i want him i want to emphasize again, equities will rip again. That is cfa level four. Jonathan let me lean on a question we have already asked this week. 95 crude. Does that give you more confidence to buy energy or sell discretionary . Barbara i would say it is a pinch at the pump. You are seeing 5. 50 here in new york. It is definitely a tax on the consumer. If anything, it makes me think that probably away from discretionary and toward energy. Our models are not telling us to buy energy at this point. Jonathan if you go across discretionary on the s p 500, such a broad complex of companies. Any companies you think we should pull back rolling into . Barbara if i had to buy anything i would probably stay away from that and move toward buying some of the endowed Technology Stocks and communication services. Tom dan was just on. You are better dressed. But out for the day for dan nyes. Do you share that optimism . They have been beaten down and you buy them off of Free Cash Flow analysis . Barbara i think your points on apple are really well taken. They have a lot of cash flow operation, a lot of leverage. I am topdown global macro, so im not buying individual stocks, but i think the tech sector has taken a big eating. As bond yields start to roll a would have to go to Companies Like that. Tom the gloom crew has said margins will give way. If you make singledigit growth it is down the income state you continue sit continue to see free cash for. Jonathan it is still a cash machine. There has to be a question about that. Should you be trading at 28 times earnings . Tom i am at a multiple of 24, i believe it is, which is not the cash machine as apple is. Jonathan that is the question we have asked when it comes to tech. Now you have this bond market move during shouldnt that take down some of that valuation story . Barbara it depends of companies have to rollover their debt. Companies are generating big Free Cash Flow. If they have their debt termed out, which likely they did in 2002, 2 thousand 8, 2020, corporate cfos have learned a lot of lessons over the last 20 years. That Free Cash Flows going to keep coming through. Jonathan Barbara Reinhard of voya investment. Come to the program. Welcome to the program. Briefly 95 on wti. The bond market on levels we have not seen going back to the back end of last year. On the euro, briefly 1. 04. Dollaryen getting closer to 1. 50. We pull back on crude at 93. 45. If you are just tuning in, welcome to the program. Equity futures totally unchanged. Coming up later, congressman bryan steil, the republican from wisconsin. Lisa, drumroll on your favorite story shutdown politics in washington. Lisa we all love it. Everyone is so excited. There is a question about how we get anything done in washington and leadership, especially what the backdrop of this causing hiccups. We heard this could actually be the one threat to the goldilocks, fantastic landing everyone is expecting. Tom he is on the lower left corner of wisconsin between chicago and milwaukee. I wonder how the shutdown chat is playing in his district . Jonathan do you think there is any chat about that . Tom they are just a bunch of buffoons and they are going to fix it next number of days. That is what they are going to say. They will get it fixed. Lisa i think it is probably a bigger discussion about what is going on in michigan. That is going to be a bigger part of the discussion right now than the political circus down in washington, d. C. Jonathan the the latest from uaw, it is the repeat deadline. Friday with a news conference, Facebook Live event at 10 00 a. M. On friday. Tom, you dont make progress, they dont feel like youre coming to the table in the same way. They feel good about ford. Lisa they do. It was that whole thing about shutting down a plan. We dont know, but for ford is sort of the golden child right now with uaw. Jonathan they are happy with ford, relative to stellantis and gm. Tom im paying 5. 83 premium for the bentley. 5. 83. It is on the edge of regular. Jonathan last week straight up i didnt have to request it, no one said anything, petrol. Lisa when in london. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. You are negotiating a contract, you are on ticket lines, but it doesnt make a difference what you are going to get, because in two years youre all going to be out of business. What they are doing to the Auto Industry throughout the country is absolutely horrible and ridiculous. I side with the auto workers of america and with those who want to make America Great again, and i always will. Jonathan former President Donald Trump skipping the Republican Debate. Instead of addressing the striking autoworkers in michigan. He was the elephant in the durf those competing to take the top place competing, really struggling to take this former president down. Tom we had a guy with a megaphone and one without a microphone, and i guess that is the michigan ballet. Particularly for an International Audience, there is a select group of trump legal matters to be collegial. One of them hit abruptly yesterday afternoon. In my amateur take is that it was a bombshell for him and his family in new york. It was not about election or the drama, it was about the Family Business in new york. I wonder if that was a distracted donald trump in michigan. Jonathan still, you look at the polling, take evelyn on the stage yesterday evening and based on a lot of poles even those guys all pulled together do not have a bigger share than the man himself, the former president. Lisa this is why we heard from craig he was the big warning yesterday, because they were not able to set the oxygen out of his run. Even though he was flattering traditions by not showing up yet again to the second debate. Jonathan amazing to see. More light and a moment. We will catch up with annemarie. Equities totally unchanged on the s p 500. Crew briefly at 95. New cycle highs in the bond market. Yields up again three basis points. Your new high for the postpandemic cycle is 4. 6468. Tom it is a bond yield the markets are in turmoil. Wage growth has eased up a little bit and we will see the union impact. Right now joining us our washington correspondent, Annmarie Hordern. I was remiss yesterday in not mentioning your highimpact interview with mr. Trooper fell, a senator from alabama. Mr. Tuberville, a senator from alabama. This guy appears to be against the military, against any norms of grace in washington. Who is this guy and why did you light up the beltway media with this interview . Annmarie this was an interview two evenings ago, and the background of this is that senator Tommy Turberville has this blockade on tory nominees. But they did file cloture, were able to get through three generals, the most important being the air force general who is now the chairman of the joint chiefs of staff. Joe asked him why he did not vote and he said, listen, i like cq, charles brown. I like this general, but he talked about a lot of things like race and wanted to talk about race in our military. And then he said youre looking for the best of the best to do whatever. We are not looking for social justice groups. We do not want to destroy our military from within. Let me tell you something. Our military is not an equal Opportunity Employer go this is employer. U. S. History shows that actually the u. S. Military is an equal Opportunity Employer. Harry truman in the 1940s had an executive order to desegregate the military and talk about it being an equal Opportunity Employer. We did have a rebuttal moments later won South Carolina congressman James Clyburn joined us, and he said tommy to prevail said he has never said this publicly but said he is the worst of the worst and people around him ought to be ashamed of their senator. Tom one other question. Annmarie hordern, this is a football coach from auburn university, period. He is an espn color analyst. Where in gods name is the senator from kentucky . Annmarie when it comes to senator Mitch Mcconnell, senator Mitch Mcconnell clearly i think would like to get these nominees through. The issue is, in the senate one single individual can uphold votes. This is how the senate works. All of a sudden people become kings. Not even president s, kings. There is a way, though, that these nominees can get forward. The issue is you would have to file cloture and vote on each single nominee. If you look at a recent memo from congress that would take 700 hours, meaning because there is more than 300 nominees meaning they need to work 24 7 for more than a month. Do you see that senate doing that . And tommy to prevail, he used to say there is not a readiness impact, the individuals i talked to at the dod and Foreign Policy world say the issue is not readiness at this moment, but what are you sending a message to the downstream, to individuals upandcoming, to attract the best talent . Who could potentially go work in the private sector, who could work for the defense apparatus, lockheed martin, etc. . What you are saying to them is, maybe it is time to get out. Because the political nature of what is happening in washington is toxic. Lisa right now a lot of the focus is on the Industrial Complex on the former President Trump, who was in michigan overnight. What has been the reception generally with workers in that region who are nonunionized versus unionized . Did it matter that he was catering to nonunion workers after the union did not invite him to the picket line . Annmarie they did not invite him to the picket line. There were also questioning why he has showed up. John thain has come out and said, we are striking sean fain has come out and said we are striking against the billionaire class that trump represents. Sean fain was not going to come within a mile of the former president. What trump is trying to get to hear is the rankandfile, luke ellis workingclass americans. We have to just remember how important michigan is. Was able to flip michigan in 2016. He won michigan against former senator, former secretary of state Hillary Clinton by 10,704 votes. That is not a lot of votes. If individuals voted for the green party if individuals who voted for the green party voted for her she would have won michigan. Trump is trying to strike a chord with these individuals and also blaming the Biden Administration for this strike and he is talking about what he calls an ev glut this administration is funding, and he is trying to fear margaret these workers, that they will no longer having a fear margaret these workers, that they will no longer have a job. Jonathan did mention the debates overnight. What does that tell you . Annmarie i know. It just feels like there was really not a lot of movement on the debate. It was underwhelming in the sense that no one really broke out yet again last night. You had these seven candidates on stage. There is a lot to dissect with what happened last night. He did seem more sharp elbows, especially from senator tim scott. It seemed like he really showed up and had something to say. And you did see Chris Christie go after former President Donald Trump. We knew that was going to happen. But also ron desantis going after him, saying he is michigan act missing in action. Were seeing these candidates start to attack the front runner they are running against, that is the former president. Jonathan were people saying, you know what, we need to figure this out by then, this group needs to cut it down to one by x date. What is that date . Annmarie i think it has to be by january. I would say we need to remember there is an important election coming up in virginia. And there are still lots of whispers that governor Glenn Youngkin, depending on how good of a night he has, and potentially flipping virginia red he is putting a ton of time and effort into these seats in virginia in this offseason election. Their local elections. If he has a good night there is that potential that he could jump in. And that is really the dark horse candidate. Jonathan thank you. Can forward to balance of power with joe mathieu and kailey leinz contributing. Over at apollo, we get tons of questions on the bond market. The question at the moment you get is, why are yields higher . Japan exiting. Yield curve control. Fewer dollars for channel china to recycle. The u. S. Budget. The last stock of tbills and the treasurys intentions to increase auction sizes. Take your pick. Amanda lynam from blackrock next. Jonathan if i told you where the bond market this morning you probably wouldnt guess that the equity market looked like this. Unchanged. Equities going absolutely nowhere. On the s p 500, down about. 2 . On the nasdaq you probably would not guess what is happening here, in the bond market, the 10 year this morning having a little look at 4. 65. The thirtyyear is that 4. 75 right now. Tom thats going to be the theme for us right now. The teen year real yield, im going to go to four digits, 2. 2971. Never for one breath in 2023 did i think that would happen. Jonathan the whole curve just shifting higher this morning. Lisa do you think that torsos love reignited this from apollo . You want a list of reasons, take your pick. There was a story i thought was interesting about t. Rowe price outright shorting treasuries. Particularly 10year and 30 year treasuries. At what point and we have been grappling with this, demanding our guest to answer this at what point does this disrupted the risk trade . That seems to be at least stable. Jonathan i keep going back to the same framing question. A reflection of the resilience or a source of instability . Based on what we are seeing in Consumer Discretionary more recently you are starting to lean toward the latter. Lisa it feels like a transition moment. It is a messy moment to extrapolate out some kind of trendline, because people talk about the granular changes. And i see it anecdotally. I hear about it. I see it physically in my own life, the things you choose or not choose, like ski trips, like eating out. Jonathan isnt the fed just extrapolating out Current Conditions through next year . Lisa yeah, that was sort of their goldilocks projections. Jonathan im pleased we are still no clear on that one a week or so later. Foreign exchange, dollar index, strongest point of the year so far. The euro, one. 04. Dollaryen really close to 1. 50. Higher this session, 149. 63. Tom, at what point is the boj waking up in the morning and saying, enough of that, we are done . Tom listen to stephen englander. He refused to draw the line on it. The answer is, we dont know. I will state categorically Research Shows second, third, fourth interventions have less impact. They are going to have to spend more ammo. Jonathan the dollar dominance over the last few months. Just a little bit of weakness in g10. No clear winners from the second Republican Debate last night. The candidates sparring over the economy, immigration, and china. Shots were taken at former President Trump, who had been focused on the uaw strike. Trump skipped the debate to speak at a tried auto parts factory. Its put your hand up if you agree with. Tom what are come from . Jonathan didnt Governor Desantis say we are not children . Tom i dont think they did it again because i didnt watch it. Let Annmarie Hordern report on it. Where is any substance . How do you say . Substantive . Im never going to debate. Help me here. [laughter] jonathan hands up if we should go to the next story . [laughter] tom this makes Nixon Kennedy look like poetry. Jonathan another threat coming from the uaw. John thain saying more workers will walk sean payne saying more workers will walk off the job. The fight over pension, retirement plans, no doubt about that. Reportedly the latest Sticking Point between labor and the big three, we talked about the big three and maybe ford. Ford is maybe the special child right now, doing better than the other two. Lisa however, they have come under the ire of potentially closing an ev Battery Manufacturing Company that came under fire for some of his chinese investments. Their questions around i. How much ammunition does the uaw have to continue these strikes . To continue paying workers out of work . And also what are they looking for . What is the endpoint and how much has been turbocharged by President Biden . Tom where are we on 32 hours . Jonathan the president basically endorsed the 40 pay raise ask, which is interesting. Lisa even though they went down to 36 previously. Jonathan what is it now . Is it 40 again . Lisa that is the question. Did President Biden bring it back up to 40 percent . At what point is really that the tipping issue, or is it something more substantive . Jonathan i have to squeeze this in. The iphone and iphone promax, complaining the devices are getting too hot. Apple says the devices can get hot. X words pointing to the power used by the new chip and the titanium case as possible explanations. Dan saying you can get this fixed in one Software Update and everyone can move on. Tom it has happened before. Mark gurman is the expert on this, but the first thing i thought of is im certain there has been warm and hot issues before, and nyes is the expert. Jonathan are you getting this . Tom i dont know yet. Now im not so sure. Jonathan what changed your mind . The heat, the titanium . Tom i was just like, i can take a break. Jonathan im done. Unless they break it with that Software Update, brammo. [laughter] tom right now without question for global wall street our interview of the day on bonds, notes, and bills. Amanda lynam in accounting economics from villanova, Macro Credit Research at blackrock with a tour of duty at Goldman Sachs and other places. What is the level of sweat at blackrock . Or all of the windows locked and you are policing . Amanda i think we are all navigating and good morning, thank you for having me. We are all navigating what is a very Dynamic Market that is keeping us on our toes for sure. I think for Corporate Credit investors what we have been focused on is this higher cost of capital environment we are seeing it day by day flow through the Corporate Credit market. For Corporate Credit fixed rate investors the headwind has been on the riskfree rate. Havent seen much pricing in credit spreads, and that has been a notable feature of the third quarter, and probably something that will continue into the Fourth Quarter. Jonathan it is still happening just a little bit. When you look within high yield the moment, where do you see the greater pain being inflicted . Amanda we are seeing a really surprising dynamic where high quality is lacking. And the lower quality really parts of the market are leading. If you just take the three broad buckets of leverage loans, highyield bonds, and asked him bonds, leverage loans are in the weakest position because they have been contending with his higher roaming cost for the last higher borrowing cost for the last several quarters. We do not think that is sustainable over the long term. Do not view fixed rate Corporate Credit as immune from these headwinds either. I do think there will be some more differentiation. Going forward but we have characterized in our outlook is that it is going to be about dispersion as opposed to widespread market disruption. When we are dealing with potential headwinds to margins wages, commodity costs, potentially slowing Economic Growth, higher borrowing costs, we think that will result in differentiation as opposed to this rising tide lifts all boats macro. Lisa at what point will we feel the rates that the fed has inflicted on the market and that we are seeing priced into the riskfree rate . Do we see that wave of refinancing were companies actually start paying 9 rates as opposed to the 3 rates they locked in a couple of years ago . Amanda we are seeing it in the Leveraged Loan Market already. For the fixed rate borrowers we are starting to see that come through. I have been pleasantly surprised about the highyield markets ability to weather the wave of september issuance. Do think that will continue. That maturity wall will need to be addressed. But we think that will continue. Lisa im curious about where this money is coming from. Is this coming from another pool, like treasuries . Where is this coming from stock investors . Amanda we have done some surveys across Institutional Investors and there is a growing interest to deploy capital into fixed income, largely due to the repricing in yields. We are also seeing increased interest in areas like private credit as well. I do think there is a decent amount of cash on the sidelines. In many instances these are credits these investors know well, and if they are seeing them come to the primary market on sale that could be an attractive opportunity to deploy capital, if it is a credit you know well, you are comfortable with the risk, and you are comfortable with that companys ability to navigate through this higher cost of capital environment. As we discussed, there will be winners and losers, and we are already seeing that in terms of defaults. If you have a capital structure that is overleveraged and perhaps formed in a low rate environment of 2021, even early 2020 those need to be rightsized. There will be some real differentiation there. Tom i think your note is dead on about cost of capital. There could be 47 other tea leaves to look at as well. If i look at an elevated, shocking real rate where we are, i intuitively understand tangible assets like real estate are effective immediately. How does this news sustain real rate how does this new real rate of fact bonds, and bills . Amanda one of the Key Takeaways we are discussing is the bar for transactions is probably going to be higher. If you are a corporate and you are thinking of doing an m a transaction, the higher real rate may make you think, this is not as attractive as an opportunity. Going forward for real estate, and even for private equity and sponsorrelated transactions, we need increased clarity on the macro. We dont necessarily need a good macro. For corporates that are thinking of transacting i think if we can get comfortable that we are at the end of the policy cycle that will give them some clarity to move forward. To your point, the higher cost of capital will probably skew those transactions towards the acquirers who do not need to rely on the aggressive funding to get them done. These are cashrich pharma, tech, companies with strong financing. Going to see a mixed shift in terms of the skewing of the activity we see going forward. Jonathan if we can get comfortable . Are you feeling comfortable . Amanda we were bracing for a higher for longer environment with a higher cost of capital, but the repricing we have seen has been so swift it is hard to feel comfortable we are at the end of it. It is a really challenging dynamic to navigate. Jonathan every time i wrap up a conversation with you it is a clinic. Amanda lynam with blackrock. Thank you very much. If you are just joining the program, welcome. Lets check out the price action. Equity futures turning lower with this move in the bond market. Yields up four basis points. Stocks negative by. 2 . I have just read the most amazing note by steve major. Absolutely fascinating stuff. I think i have maybe 90 seconds to explain this. Why bonds are not potatoes. Lisa love this. Jonathan the intuitive view that supply means lower prices highyield misses prior conditions. Elasticity of demand and the fact that bonds are different from potatoes. In normal times there are sophisticated Financial Products easily exchanged for cash. And you might make an argument he is alluding to this that the higher the debt, the lower the Growth Profile. He says these are not normal times. A key difference today compared with previous cycles is that we cannot assume that bonds roll down the curve. This only applies when the curve is upwardslipping from left to right, which is not the case in treasuries. This is what he has to say on term premium. Rising term premium is occurring because investors are being asked to receive bonds for less yield and offered in the money markets, and at a time when budget deficits are increasing without a recession. That part at the end, really important. Tom it folds into the reasons that torsten had for where we are right now. I cannot say enough that there is an appoint that there is a point in the amanda lynam space where we go from analysis where people go, it is the price of the bond . What is the price of the note and bill . I dont think were there yet. Jonathan the long bond, we talked about one of those thirtyyear issues from a couple of years ago, . 30 on the dollar. Tom im talking about the anaconda copper, 12 year piece. Excuse me, can we move this . What is the price . Jonathan from new york, this is bloomberg. I have a radical idea for the republican party. We need to win elections. And part of how we win elections is reaching the next generation of Young Americans where they are. This is infuriating, because tiktok is one of the most dangerous social media apps we could have. Every time i hear you i feel a little bit dumber for what you say. Putin is just because putin is an evil dictator does not mean ukraine is good. This is a country that has and opposition parties. We are driving russia excuse me. I forgot you like china. Jonathan are they done yet . Nikki haley, vivek ramaswamy, sparring last night at the gop debates. Just amazing to follow some of that. On china, on tiktok, and viveks appearance on that app. Tom we are so lucky our bedtime is 6 00 p. M. At 5 30 you are trying to figure out the first baseball game you can see, what inning. Im embarrassed as a citizen about that. It is just not good. Jonathan do you see lots of that elsewhere . Isnt this a isnt this what you would expect in the primary season . Tom there was a decorum to it. I dont even know who to blame. Jonathan i get the impression that is lost. I sat down with gordon brown, the former british prime minister. That decorum is gone. I dont know where that is anymore. Tom no, i really dont know what to say. Should we go to an expert on this . I think we should go to an expert on this. Lost between the potential of a chicago cubs Milwaukee Brewers layoff, is a guy caught in the middle. Bryan steil. He is the republican from wisconsin, and he joins us today. We are talking about civics 101. How do you respond as a grizzled pro to a debate like that . A debate that just seems so juvenile . Rep. Steil i think we have to ask ourselves the question at the end of the day, did viewers walk away informed about the most important policy issues of the day . I dont know that that format is leading to that. We have so many serious challenges from the physical standpoint, to Foreign Policy, and this seems to be a conversation built for twitter clicks. Tom we have a president and former president enjoyed detroit. Wisconsin is sort of northwest detroit, or maybe detroit is southeast wisconsin. We will let you decide that. Your thoughts on the political input of these two president s into the uaw process . Rep. Steil i was born and raised in wisconsin where we had a uaw General Motors plant that would ultimately leave around 2010. I understand what these workers are feeling right now, who are on the picket lines. Ultimately workers across the country are feeling that their wages have not kept up with inflation. So they are fighting for more money. Politically i think this is the right move to go and actually have a conversation with men and women working day in and day out. I think at the end of the day the breadandbutter issue, the fact that wages are well below inflation, the average family is bending over 700 a month more today than there were 2. 5 years ago for the same things. Ultimately it will punish democrats. Lisa as we talk about wages there is a question about whether 800 thousand government workers will get paid come monday, given the fact there is likely to be a shutdown. You think it is appropriate for them not to get paid in order to have some of the political wrangling worked out . Rep. Steil there is nothing positive that comes out of a shutdown. It hurts the American People and the credibility of our government. We are working to hopefully avoid that. Thats going to be a challenge, but hopefully cooler heads prevail by saturday night. There is nothing right with people, americans working who are not getting paid for that work. Lisa what people are saying is, is that there seems to be an impasse and that Kevin Mccarthy is not doing his job very well as the leader of a very fractured group. Do you get the sense that he is frustrated . That he regrets taking this job . Rep. Steil i think we are all frustrated. I think he has done a good job trying to wrangle everyone together to move us forward. The senate also is in dire straits. They have not moved their funding bills either. The entire system of spending in washington is completely broken and needs a complete rewrite. We are also here 48 hours away. What do we do . We really need to come together to pass a clean stopgap measure while you work out the details of these important spending bills. Lisa i want to push back a little bit, because you said that the senate has their own problems. Mitch mcconnell is working together with the democrats to come up with something. They are passing through certain measures. It is not just about this being a both sides of the aisle. Is there a fundamental issue with the house . It really is a house issue led by some of the fractures in the republican party. Rep. Steil i would offer to you that there is a few members on the republican side in the house that probably get a lot more media attention, but as we look at the Appropriations Bills moving forward, the senate as maybe further behind than the house. Neither are doing a good job. The underlying system in which we are working on spending in d. C. , completely broken. Tom congressman, would Ronald Reagan recognize your party . It seems like the nation we know this will has moved conservative over the last 20, 30, there i say 40 years as well. Where would Ronald Reagan fit into your model your modern gop . Rep. Steil i think we are a centerright country and i think Ronald Reagan would able to leave this fall. Many of our loudest policymakers are no longer speaking in the aspirational towns that Ronald Reagan did. If we return as conservatives and talk about how we are going to produce opportunity tom i dont mean to interrupt, but you nailed it. Absolutely nailed it. Why cant your gop leadership insist on that aspirational tone . Rep. Steil the Broader Media environment, twitter and others, seem to like the confrontation. As we saw on the debate stage last night, there are not enough programs like yours that have substances conversations about the policy issues of the day. Tom you have mr. Trump, who invented a gop of grievance. It is a grievance party, which is anathema to janesville, wisconsin. How do you go from a grievance gop back toward something new that is that aspiration of the gop, back to 1860 . Rep. Steil i can tell you when i am at home in wisconsin people are still optimistic, leave our best days are ahead, recognize we have serious and substantive challenges. What i think we need is a leader of the party who talks about how we are going to move forward in a difficult period of time. Jonathan congressman, thank you. Congressman bryan steil there. Thank you very much for joining us on the latest. As the clock is ticking toward the potential shutdown later on this week. Getting closer to that deadline. Tom that was brilliant. That is a guy who is doing gop 101. Whether you agree with him or not. We get on the plane and we do flyby, you know . Maybe we wander into ohare for 25 minutes, but a sickly we are guilty of missing congressman styles congressman steils country. This party has shifted to a grievance structure dominated by a unique southern cast, witness annmaries interview with the senator from alabama. Their heads are spinning over what has become of their party. Lisa it is not a flyover state. It is congressman steil. My family is from wisconsin and i will say that it it has always been a hotbed of political thought in a lot of different ways. Tom yes lisa there is a real question here about what which path is going to when out. It is one of the eight states that will determine the selection. It raises this question, how do you get candidates that can appeal in this bifurcated, very specific type of culture in each state . I dont know the answer to it, but when we are looking at some real issues that are kind of getting bifurcated off in favor of some others. Tom you nailed the wisconsin of 50, 70, 80 years ago, where there was an intelligent, civil debate where people could agree to disagree. Now it is just tv moments where a guy like congressman lisa steil. Tom i got it right that time. Where he seems almost removed. He seems almost removed from the debate. Jonathan you should just get rambo to fill in the sentences for you. Lisa and then say i did great. Jonathan october 16, we will catch him in a couple of mondays time on this bond market after big moves. Anneke descends i was going to be joining us shortly Monica Dicenso is going to be joining us shortly. Equities turning lower. Dollar showing a little bit of weakness after dominating and showing strength recently. And in the bond market, new cycle highs. Yields up by three basis points. Just below session highs. We are at 4. 64 on a u. S. 10 year. Whod had a little look at 95. It is back down to about 93. From new york city this morning, good morning. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Im sam morrison. My brother max recommended you. So my best friend sophie says youve been a huge help. At ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. Our neighbors, the garcias, love working with you. Because the advice we give is personalized, hey, john reese, jr. Hows your father doing . To help reach your goals with confidence. My sister has told me so much about you. Thats why its more than advice worth listening to. Its advice worth talking about. Ameriprise financial. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. We think that inflation is going to crket has told us its not convinced we have seen the worst part of the business cycle. The world is not growing nearly as fast as we expected. The consumer is already stretched. They are trying to maintain their level of spending. The risk for a recession is in 2024. This is bloomberg surveillance. Tom good morning, everyone. Bonds central, thank you for joining us. Where will we be at 2 p. M. When the equity market explodes . Its unchanged right now, the news is bonds and fx, everyone adjusts. Jonathan i can tell you where we are, we just had a cycle height on the 10 year. The sub the story over the past few months is yields up and off the back of that, its dollars stronger in the dollar index is at the highs of the year in the last few minutes. Dollaryen, stronger dollar with high yields and Energy Market rallies and equities, dazed and confused. Tom 102 per barrel on wti. Germany speaks in harmony when they look at cpi. It rises 4. 3 . The estimate was higher but those are the disinflationary tea leaves that our salvation for all. Tom thats a big downsize surprise in germany. They do a lot of the yearoveryear stuff in europe but look at month over month. We are in a better place in europe. The euro is not in a better place in the Growth Profile is not in a better place. The ecb faces a tough test to get inflation down without causing more damage. Lisa is special because europe is not in the u. S. Is because they have different economies. In spain, inflation rose overnight so germany is seeing the disinflation and but its not a year uniform story across the region. It looks unsustainable for a region that was seeing no inflation. Tom we saw the percolation of a short squeeze in equities yesterday. Equities popped at 2 p. M. Yesterday, red and green on the screen but today, the focus, you have to micro analyze the bond space. Thats dovetailed with theft fx. These are little tea leaves you have to look at. Tom the next couple of weeks is getting away from hopes and dreams and forecast projections and we can look at data again. Claims later this morning and we will see if they climb. Then its on to payrolls next week in its earnings season middle of october. Tom we have to stop the show. We are 27 minutes away from not a normal gdp report. Michael mckee will be expert on this. This is gdp which is what we know, gdi which is what we flunked freshman year in economics and they are dovetailing wrapped around what the fed is doing in a hybrid and i are Interest Rate environment. With the revisions that go back to when jefferson was president , we will have a whole movable feast at 8 30 a. M. Today. Tom do i care about the revisions . Lisa if they are revised to the upside, then it feeds into the fears people have of two good data, that the economy is accelerating. This market is getting exhausting because it so hard to understand whats underpinning the move higher. People are trying to explain it but it feels like a self perpetuating kind of thing that goes beyond the data and the discussions to just momentum. Tom my data check bank rate 30 mure mortgage over 7. 8 . Thats a new level of a higher Mortgage Rate nudging toward 8 . Tom jonathan the move weve seen in the bond market and treasuries, the bulk has been on the long end. If you are looking for steepness, you wouldnt have look for that. We thought the fed would be cutting Interest Rates and we thought we would be in recession but thats not where we are. To see the 10 year moved by as much as it has, its a range of stories. Look at the 10 year benchmark in japan, 75 basis points which was unthinkable a few months ago. Tom i will go to amanda lynum. That was unimaginable on the 10 year. Jonathan going through the price action, equities, slightly positive i not even 0. 1 with yields a little bit higher and the 10 year 4. 65, up i a basis point now. Tom what a joy to read a note from j. P. Morgan. You just frame it out oldschool and you have a base case middle of 2024, up 14 . No one believes you this morning. How do you get there . Is based on our view i think there is still challenges ahead but we have seen a lot of sectors and Companies Moving through an earnings recession and when you apply is similar multiple to the forward earnings we expect, thats how we get there. I dont want to pretend there is no riskier because there is. What weve seen in the last few days has been choppy and challenging and people are nervous. On the bear case, we are looking at 7 downside that there is significantly more upside and i find that interesting in equities. The next few weeks, its anybodys guess as we head into earnings. Jonathan can you identify was driving the bond market. The move at the long end has been font test phenomenal. The tenure guilt yield is up by 14 basis points. Its very hard to understand this. When we had a lot of people who had take gains on those positions and take those positions off. People are assuming it cools. You listen to the rate bets and they had equity hedges. I havent seen people take off equity hedges. They are still worried about a lag affect from what the fed has done. Still a little bearish on equities as we move into year end and people betting that may be rates have moved far enough for the near term. Lisa is there any evidence in blaming hedge funds . There were warnings from different politicians that that could cause the unraveling of the treasury market. How much is that behind things . It feels like a lot of it right now. When i look at where clients are position, they are still sitting on a ton of cash so people are not moving in and out of the market with that kind of velocity. Its a time where there is not a lot of data and let them out of that is a lot of new so you have these swings d amplifying the fed. Lisa do you think equities are saying the bond market has any validity right now . Doesnt make sense that we are seeing stasis in stocks even as bonds go haywire . Someone will be right. Equities will be more optimistic on my side of the world. Everyone was very bearish at the beginning of the year and they were wrong. There was a rally and you are happy on the s p 500 but during the summer, everybody was to bullish so we are coming down a bit. What i struggle with is what do you do . You want to stay invested and you dont want to sit in cash. Even though you can have a bear view, doesnt mean you sit in cash, you tweak your exposure and balance risk and a more thoughtful way in equities are the only game in town that people need to have more balance. Jonathan you mentioned energy, is that something you like based on crude at the moment . I dont know where crude will go but we talked internally if 100 per barrel can sustain. I think there is a good case for that. If you can sustain and have a bearish level of 60 or 70, thats a case or energy equities. I think these companies were different are different than 10 years ago. They are managing capital a little better so there are pockets you could invest in but a few years ago, everybody thought energy is over. If you can have investments in esg, you still need oil nearterm and these companies are in better positions especially if oil is near 95. Jonathan is there a preference for u. S. Based Energy Companies versus europe . The european ones return a fair amount of capital and if you look at the european market, many funds have not and investing into energy for many reasons. Some of them are not allowed to select trees a dislocation and you have a valuation gap that looks pretty attractive on energy. Tom j. P. Morgan listens to client so what are your clients saying about the efficacy of cash . You mentioned this in your research note. In the trauma we are in now, its an important time to listen to what people are fearful of. What are they afraid of . Everyone anchors to the volatility of the recessions we last went through, covid was severe and maybe not representative of what this next cycle will end like so thats the fear. People dont want to feel that again and they want to sit in cash. Even if youre making 5 , what is your real return on that cash . Its not as interesting as they might think. People just sit in cash, you miss the end of the cycle in the beginning of the next. The market will look ahead and it will not feel good. The biggest conversation i have is to stay invested but tweak the balance without cash. Tom you were legendary in entertainment securities in annapolis. What does disney do . I dont want to get you in trouble. I dont speak to specific stocks because im in a different role now. Its a fascinating story watch. I believe in the power of strong brands and there is no brand in my opinion like disney around the world. Im excited to watch where this goes. Its tough to watch the terminal with the Writers Strike that is starting to move behind us. There is a lot of levers there and they have amazing content and amazing parks and amazing brand. Its how to figure out how to get that all in place. Tom you can and nor that j. P. Morgan general counsel. We will take that out of the tape. Jonathan monica, thank you. Welcome to the program, your equity is about 8. 8 0. 8 . A slew of Economic Data, jobless claims, gdp revisions and watch for that. Exxon at the close, alltime highs of the close yesterday. Lisa there seems to be of feel that oil prices could go substantially higher and not just because the supply and demand dynamic but because it hasnt adjusted to inflation. That is suddenly coming close that 100 today is not the same as 100 10 years ago. Tom im fascinated by that. I think you are correct but i wonder what 105 or 110 is like. I should be in the timeout chair. Im not going to apologize to monica. I have a huge bias to blended strategists who are in the trenches of the individual Stock Securities analysis. Whether its accounting work at price waterhouse, i dont remember which one it was before that. The answer is legit auditing, legit security analysis. You go with a humility into the parlor game of guessing where we will be in six months. Jonathan energy is up by more than 4 and Consumer Discretionary is down by 7 . Consumer discretionary year to date had is up for the year. We will see what happens year and given the headwinds everyone is talking about for the u. S. Consumer. We will play what is going on in congress next. Personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. I have a radical idea for the republican party. We need to win elections and part of how we win elections is reaching the next generation of Young Americans where they are. This is infuriating because tiktok is one of the most dangerous social media apps we could have and once youve got every time i hear you, i feel a little dumber because of what you say. Just because putin is an evil dictator does not mean ukraine is good. This is a country that has band opposition parties, 11 of them. A win for russia is a win for china. Jonathan nikki haley and the gop debate. We will pick up on that in a moment. Lots of data in 10 minutes. We will get jobless claims, gdp revisions, going into it, equities are doing ok on the s p 500. Positive by 0. 6 . In the bond market, yields are a little higher, 462 on the 10 year. Look over to europe and was taking place. Germany even with a soft inflation print, the german tenure bund, the yield is up eight basis points. In the u. K. , its up by more than 10 so you are stern to see these moves in europe track these moves in the United States, a soft backdrop for bonds. Tom thats the change. It brilliantly captures the angst out there about it slipping away. I was in this surveillance nap yesterday and its just bluff. The fact is, it slipped away yesterday. Will we see that again today off of this 8 30 a. M. Data . Jonathan even with the soft print in germany, its not lending itself to supporting the bond market in any way. Lisa that goes to the fundamental question weve been asking all morning and all week, which is what is driving this . Why are bond yields going so much higher on the long end . What is the durable ask best aspect of this. Do you say i dont care . Tom what we will see at 8 30 a. M. , you could see it on the bloomberg terminal moments ago, 2. 38 on the real yield. Jonathan are we restrictive here . Tom based on the Bloomberg Financial conditions index. We gone from accommodative standard deviation down to zero. We are restrictive in many ways. Jonathan the bundesbank president spoke a few moments ago speaking about a soft landing. If the base case is the hiking cycle could end with a soft landing, i would like to read the transcript for this interview. A soft landing in europe . Theyve already had a big downturn . Lisa how do you call a recession in germany a soft landing . Are we redefining a soft landing . Jonathan making it up as they go along. Tom stay with us on radio and television. Michael mckee will be with us in 10 minutes on a key gdp report. Revisions go back many years. I remember this it was collegial of Lamar Alexander, patrick buchanan, fire at the time, bob dornan of california, steve forbes editor of Forbes Magazine it was a debate at Arizona State in 1996 unlike what we saw last night. Henrietta treyz is with us now. They analyze geo tv gop debates. How did we get here in your study of Political Science . Headed we get from a collegial debate of Lamar Alexander and steve forbes to what we witnessed last night . That is a fantastic question. Think the real problem is you have a bunch of candidates who know they have no chance to move ahead in the polls. I felt there was a lot of frustration in the debate last night. Members like senator tim scott who should have enough facial recognition by now was still trying to explain his life story as we heard from others. Candidates are trying to tell voters who they are still an altogether, if they combine forces into one big candidate, they would still only be a 30 in the polls. I think their frustration is that they cant break through the trump cloud. I think thats was driving a lot of the instability and they definitely went offtrack last night. Tom is the trump cloud effectively the shutdown due to this weekend . Absolutely, when you look at the 45 members of the Freedom Caucus, 10 of whom are driving this shut down right now, the sense i get from staff on capitol hill is that this is effectively mccarthy versus trump. Mccarthy will lose that fight every single time. Trump is basically saying if you shut down the government, its akin to what he said during a debate or during a townhall presentation during the debt ceiling debate. He said im not president now, i dont care what you do, shut the government down and they are saying we will do that. He conflates it with the department of justice which will and his indictment proceedings. Many on the hill believe donald trump is the arbeiter of whether the freedom carcass can vote to keep the government open and if thats so, they will never vote for acr or an appropriations package and they will never vote to keep the government open. Lisa if the government shuts down comes the former president bear the blame in the publics eyes . I dont think in the publics eyes . The public disproportionally blames republicans but trump ranks third in polling on that. Beneath that is everybody. You heard that from Chris Christie last night and i dont think it was an unfair criticism. Everyone is to blame in this but republicans in particular, mccarthy and his lack of ability to call a spade a spade and recognize you will never get the votes from those Freedom Caucus members and move forward in the way democracy is designed with a democratic majority in the senate, passed legislation, that is your job. It is the job function at the basest level. Mccarthy is refusing to make that choice so far. I believe there is a window of time to debate that choice tonight, tomorrow and saturday. 72 hours and d. C. Is a lifetime and thats what we are heading into. As one elegant client but yesterday, we are at the crest of the wave now and i think thats accurate. Lisa what are the chances of Kevin Mccarthy being the House Speaker in a month . I think they are high because the motion to vacate is bogus. I dont think they have the votes to reject the speaker. I have constantly been communication with democratic staff were more than willing to hold their new to hold their nose and vote for the motion. The Freedom Caucus does not have enough votes to eject mccarthy so i would love to see them see the motion to vacate and hit the floor and fail. Tom one thing that is cool here, we always look at our guests and we know they are so smart and we look at the libraries. I think when we have to guess the beastie boys in her library, she has credit. A shes got thed rock thing going now. Its an audiobook as well. Weve got to have her back. Jonathan you have the right to reply. Thank you as always. Whenever she comes on, i get great feedback. Get her on more. In the next hour, David Leibowitz of jp morgan and all spring and the franklin templeton, some real expertise on the bond market and this bond market going in the direction to high yields. When i asked the question at 9 30 a. M. Eastern time if were restrictive, you listen to what she has to say on that because it might not be what you think. Tom this is fabulous. I cant wait to listen to what you do with george boring who is in the trenches of price down in the bond market. We are there, price down. Maybe this yield analysis is baloney. Price down is what it is. Lisa i love reviewer comments and one viewer says whats driving bond yields . He said more sellers than buyers. Tom which goes to price. Lisa he said sometimes its really that simple. This time around its probably more of a buyers strike than selling of duration. Jonathan its hard to argue with some of that. Michael mckee will sit with us in just a moment. Tons of Economic Data including possible revisions to gdp and jobless claims as well. Thats next, from new york, this is bloomberg. I dont want you to move. Im gonna miss you so much. You realize well have internet waiting for us at the new place, right . Oh, we know. We just like making a scene. Transferring your services has never been easier. Get connected on the day of your move with the xfinity app. Can i sleep over at your new place . Can katie sleep over tonight . Sure, honey this generation is so dramatic move with the xfinity 10g network. Hi, im jason. Ive lost 228 pounds on golo. So when my doctor told me i needed weight loss surgery, i knew i had to make a change. Golos helped me transition to a healthier, sustainable lifestyle. Im so surprised just how crazy my metabolism has fired up. I have a trust in golo cause i know it works. Golo isnt like every other program out there, and im living proof of it. announcer change your life at golo. Com. Thats golo. Com. Its an amazing thing when you show generosity of spirit to someone. And you want people to be saved and to have a better life, then you dont stop. We have been able to reach over 100 Million People impacted and affected, and at risk of hiv. The rocket fund takes all of the work that were doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. The idea that we have saved five Million Peoples lives, its overwhelming. Its everything. Tom bloomberg surveillance, Jonathan Ferro on assignment. Georgeborey will join him and met lulzzetti will join us as well as Michael Mckee. Lisa what is the bigger Downside Risk to markets right now . What is the Downside Risk to bonds with yields up further . Is it the potential for downside surprises . Its the idea being revised upward is maybe we are underestimating to strengthen the economy. Tom Michael Mckee will talk about that but he is waiting for the print on our gross domestic product. Mike we just got the revision and it is very big. Gdp goes from 2. 1 to 2. 1 for personal consumption was revised down. We will look at the overall data to see were any other moves mightve come from but thats not particular good news for the economy. This is such old data, doesnt matter at this point. The initial jobless claims number is kind of fascinating. 204,000 is up from 202,000 last week. This is the week you would have thought you might have seen some autoworkers on the unemployment rolls because if you are on strike, you are not eligible but if your plan to shut down because some people are on strike, then you do get eligibility. Apparently, we didnt see any real filing there. 1,670,000 filing claims which is little changed. The labor market stays tight and i would be surprised if we get jobless claims next week because the government may be shut down. If we get government jobs claims tom you are the one guy at bloomberg that gets to take off . Mike im considered accepted and essential. I have to convince them that doesnt mean i cant be paid. Tom there you go. Mike in the government, you cant be paid. Tom weve got some easing at 463 on the 10 year yield. Where having a little bit of a lift in the equity markets. Maybe thats the headline here on revisions, so what . Lisa there is a fear you could get revised to the upside and suddenly there is more strength and momentum behind the growth in the upside surprises. We didnt see that in the revisions. We did see that potentially but just incrementally on the jobless claims. You are seeing markets basically the worst Case Scenario for them didnt materialize so maybe you are seeing a bit of a pause. Tom three basis points on the 10 year. When more insight from Michael Mckee . Mike profits in the gdp report includes notches Public Companies but private companies as well. They were revised upward by 17. 5 million so maybe American Companies are making more money in the Second Quarter than we thought. I dont know that has a lot of relevance for today but it does seem interesting. I will see if i can find the date, the revisions you have been looking for and see if there is any kind of interesting news in that. Tom we will give you more on this in the next hour. We will do revisions back to woodrow wilson. This afternoon, Michael Mckee has a conversation, why isbarkin different . Mike because he comes at it from a business perspective and he spent a lot of time in Corporate Board rooms. He brings the business expertise to the fed. Tom look for that today with Michael Mckee. Joining us is Matt Luzzetti from deutsche bank. Im going to. 1 , i got nominal gdp in the vicinity of under 4 . Is that the new trend where the animal spirit goes away . Its certainly some slowing in the gdp deflator numbers. As i look at the data, its important getting a full sense of the revisions takes time. When you look at what the revisions were to q2, core pc was under. I think thats really important. The big downward revision to Consumer Spending which is surprising is we know there was a big pickup during the summer months but ive been highlighting credit card spending which slowed materially throughout september. As you look at whats been happening in markets and you see Consumer Discretionary stocks coming off of it, weve been concerned about the headwinds facing the consumer and i think we are seeing it in the High Frequency data but you are still in this fuzzy time where its just to giveback from the strong summer months or a new trend. Lisa will the jobless claims come in at a consistently lower rate . Labor demand is coming down materially and that is leaning toward a labor market that is no longer extraordinarily tight but it looks historically tight. At the same time, there is not many layoffs taking place. Thats true in the jolts data and how people perceive their job opportunities. The key question will be if the consumer does slow as we continue to anticipate these headwinds, can that story remain true and can you continue have a strong labor market . Lisa when you talk about a fuzzy period of time we dont know we are not in a self soft landing until it no longer is. Is there historical corollary where there is a time of slowing Consumer Spending but a very robust labor market . Is that something that can be a persistent feature of an economy for prolonged time . We are coming out of this unusual period where we are prone to say everything is unusual. The labor market is typically nonlinear so its often the case that things generally look ok until you have a shock. If the unemployed rate rises by 50 basis points, then you have a recession. I dont know if there is that much thats unusual here. From the lag effects of Monetary Policy of it not hitting as much, did it not tighten or hit as much because we had latent school stimulus in the system . Thats our view but there is a lot of uncertainty whether thats the correct view. Tom right now a data check. Green on the screen, up 0. 3 and the vix comes in sprightly from an 18 level two 17. 94. The announcement of jobless claims were quite good. There was a constructive leveling rescission revision. Lets stagger over to Michael Mckee for more insight. What you got . Mike we have the revisions here and it solves one of the mysteries are brings us closer to an answer of why gross thomistic income has been lower than gross to mystic product. It is because grows to mystic product was over measured. Right now, the government says gdp from the Fourth Quarter of 2019 to the Second Quarter of 2020 was down 17. 5 . Thats up 0. 7 but with the expansion starting again from 2020 through the First Quarter of 2023, gdp was up 5. 6 which is 0. 2 lower than it had been originally estimated. Those numbers are in a little bit more agreement. Tom does this allow the fed to change course . Does it allow them to change tone . I dont think so. We are at 3. 8 and the atlanta fed is close to 5 and you see the jobless claims data, the realtime evidence we have in terms of what happens with the labor market and the growth data so far for q3 all fits within maintaining this hawkish bias that the threat of another rate hike is out there. We dont think they deliver on it but thats the stigma of that story. Lisa we dont understand why the lag effects didnt happen earlier we dont understand a lot about this economy. What is your compass, especially at a time when we night we might not be getting data from the government because of a shutdown. What is the most important data your tracking . Is it jobless claims or Something Else intangible . Where youre not getting the key data, you have to rot rely on other data sets. Its all about the consumer and all about the labor market. Weve done research in the past which exists continuing jobless claims are a good indicator of recession but they are not telling you right now we are in a recession. I think that remains the key data point. For the consumer, its this card spending data that gives you a weekly view on how things all are evolving. There is tricking us and it but if you smooth through what we look at over four weeks, it has slowed materially of of the back half of august into september. Lisa could you see a sharp spike upward and the Unemployment Rate or is that still unclear . If we have a slowdown where growth goes into negative territory in the consumer begins to contract with how much labor demand has come down, i wouldnt be surprised to see the Unemployment Rate move higher. Timing when that happens is difficult. Lisa in this fuzzy time, what will the fed do if they get data . Mike they will look at whatever data they have an there is a lot of private sector data out there although it will not be as accurate. Adp is out and we all talk about it when it comes out. It doesnt match up with what happens with nonfarm payrolls. But the fed gets the adp data and creates its own conclusions from that. We dont know if their own indexes better but it might give us some answers about jobs. The interesting thing will be how long this last week of the september data is all in. If they can put it out, the fed can have it. Then the fed has to fly blind and put up from their own data sources. Tom we look at the data sources and equities give way here, up nicely off of these data points. Dow futures are up 51 and the vix is above 18. In the yield space, 463, down two of 4. 60 as people digest the revisions and digest down we went in the pandemic and it was not worsen and we came back and it wasnt as good. I think i analyze that correctly. The twoyear spread is pretty much unchanged as well. The 10 year real yield, 2. 28 , thats a well statistic. The Standard Poors 500 is up 0. 1 . Lisa the focus has been some of the tumult in the bond space. From your perspective, i would love to know whether you think stocks are completely ignoring bonds. Do the bond yields make sense economically based on your forecast . When i take a step back, what has been unusual in the rates market was it has been how much rate cuts have been priced. You never see that happen when you are in the midst of a rate hiking cycle. That part has been unusual. We are getting back to more normal environments from a rate cutting perspective as the fed led to this higher for longer but what we are seeing is it filtered through to the higher yields. Its beginning to shake some of the risk market nuc equities down for some of the cyclical sectors. Its beginning to tighten financial conditions from the fed. We have this view the fed will be cutting rates material next year. I think a precondition for that was that the market didnt price it because by the market not pricing it, you get really yields higher and financial conditions tighter and it makes the higher likely for higher likelihood that the fed will do that. I think we are sufficiently restrictive in the fed will not raise rates again. Tom lisa looks at the five year real yield instead of the 10 year which is coming in tighter. Maybe there is some elasticity here and a sensitivity to the american economy. 2. 29 on the 10 year real yield, extraordinary. Futures up three in the 10 year yield 4. 64 and watching a higher yield that will make for an eventful day and year. Stay with us, bloomberg surveillance. That advances innovations like robotics. Fresh, warm hot dogs, straight out of my torso one for you, one for you. Oh, youre a messy one. Cool, right . So cool. Anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. Hot dogs fresh, warm hot dogs before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Lisa u. S. Consumer spending rising of the weakest pace over a year thats probably the headline for the revisions. Jonathan ferro is preparing for 9 00 a. M. We are seeing a bit of a pop on data that didnt surprise to the upside. We could say it just really annoys people. Tom it continues, 4. 66 on the 10 year yield. These are markets moving off of the measured comments we heard from Michael Mckee. Lisa thats as good an explanation as any because its hard to understand the dynamic behind some of these yield moves moving out to new highs. Here are specific names i find interesting. The earnings reports are starting to trickle out including carmax that came out earlier today. If you want to know where you are seeing the effective higher rates, carmax is a fantastic candidate because you are seeing people not by as many cars because auto loans are expensive. Thats weighing on the used car business and you are seeing it in a material way with those shares lower by 12 . This granularity speaks volumes about where the pressure points are for the consumer. Tom i think of freight and other measurements. We also talked about the focus on credit cards. The consumer was tepid. Lisa which is the reason why some of these earnings are so interesting. Accenture is another company also coming out this morning with a lower than expected fiscal 2024 sales growth outlook. Heavily punished even though it wasnt that significant of a menace, 5. 1 decline in those shares and macron came out with earnings yesterday that also disappointed. You can see a similar kind of moving the shares, lower by 3 at a time when we were talking about apple strength but cell are not showing that kind of strength. Tom the market is on the move. The two year yield is buttressed against new highs. I have a new height in the 10 year yield and the 10 year real yield. I cannot even frame the amber screen of a 2. 31 10 year yield. Thats not in my ability to think 90 days ago. Lisa it looks like a moonshot in terms of the pace of move. Does this bond move make sense . Doesnt make sense for yields to be at this level . Jerry weissman has been covering this for decades. You have watched this market transform. Does this bond move make sense to you right now . It only makes sense if you take the recent guidance from the Central Banks literally. If you dont do that, then they dont make sense. Central banks were hiking around the world until recently. Some of them still are like the fed, but they shifted their guidance recently to talking about stopping the tightening cycle. What they didnt do was shift from that to talk about flexibility in 2024. They adopted a Transition Area guidance which is this higher for longer. I think the fed have been trying to guide the market toward having the market think that rates will stay high for long. If you believe this is the case, then yes, the 10 year at 4. 6 makes sense. We know the fed can pivot often and often it does and if we see the economy weaken which we believe will happen, then in retrospect, these 10 year yields will not make sense. Lisa we are reaching new post cycle highs. This is amazing to watch, 4. 67 and climbing. We cannot we dont have a crystal ball and cant see into the future but when you look at the market action, is it coherent that stocks are hanging in there . Is it coherent with a 4. 67 10 year yield . You would think multiples would be lower especially for the growth stocks. I agree they should be. What the market is losing sight of is that there will be a recession and i think the trigger for lower stocks will be exactly lower earnings estimates that come out of the slow we anticipate happening over the next few months. When that happens, you will see the reconversions which is long overdue. Tom you have profound experience going back to the David Malpass team. Synthesizing ecobabble into what we are actually going to do in the market. How do you like the economic myths into positioning for 2024 . You infer from what lisa said that there is this huge divergence in valuations between bonds and stocks. Its evident if you track earnings in bond yields. There has been a correspondence but in the last few months, there has not. If you are a relative value trader, thats the divergence you look at. Implicit in her question was that there is a divergence in valuation. I want to take advantage of that as a traitor and sell stocks and buy bonds. I like the 10 year at 4. 6 and i dont like stocks. Tom maybe we have an audience that isnt that sophisticated and they have retirement plans and cant set up a hedge. How do people in the real world act . Cash looks good. If you can get five point 4 this year and a time deposit or certificate deposit at your local the edge a local bank, take it. Take some assets out of the stock market and gain some peace of mind. They are above inflation. Tom why dont we frame 6 like the money market funds . Lisa i dont understand this move. I dont understand that this is for selling or a strike by buyers or is this bond vigilantes . Is it something thats a fundamental reset we are seeing because thats not what im feeling. Im not feeling conviction by anyone saying i have a new view. The move in bond yields to the 4 level was a fundamental repricing of the bond market. We have evidence these days that there were structural reasons to believe the last mile them placement reduction will be very tough. The fed needs to keep rates well above 02 get back there indefinitely but what doesnt make sense is the new guidance. The idea you can look forward that far into the future into 2024 and the next few years and believe you are not going to get back down to your target by then and Inflationary Pressures will be too high to do that seems as if it is sticking your neck out too far for the fed. I would rather they have adopted a more flexible outlook for the medium to longterm. Let the bond market reprice of its own volition on the view that the fed will be flexible and more data dependent on a longterm basis. If that were to have happen, the bond yield would have settled somewhere above 4 but not the big ratcheting up we have seen in the last few days. Tom real dynamics we see in the 10year gilts in the u. K. A nice leg up in the gilt market. Is chairman bowel is chairman powell doing a correlated bond move or is it discrete to the United States . It is correlated but in the firtash in the last few days, you have seen this high for long narrative emerge from the other Central Banks. Maybe they have to file the fed with regard to their own narrative. Christine lagarde gave a speech before the European Parliament a few days ago. She also mentioned higher for longer and weve seen the chief economist at the doe mention higher for longer as well. They are all picking up on this. Lisa are we seeing something break in markets now . I think we could see something break like when you see this kind of volatility. Its the concentration of risks that will cause something to break. You just dont know whos swimming naked until the tide goes out use the old figurative analogy. The presumption here is that there is something out there that will break. We dont know what it will be. Could it be micro, yes, but it could also be macro. It could be the regional banks again with their holdings on commercial real estate. That could break up the bond move causes a massive repricing. Tom thats where i am looking, commercial real estate. Weve heard about cost of capital from blackrock today as well. A brilliant guest at an important time as markets unravel. Ive got 5. 14 to year yield which is up a basis point, maybe not leading out the curve is where you see price down and yield up by 4. 67 on the 10 year. Coming up today on Bloomberg Television and radio, an important conversation with Vice President mike pence. Thats in the 1 00 hour and then the economic conversation of the day, barkin of richmond. Michael mckee mckee will be in conversation with tom barkin. Stay with us, this is bloomberg. se fue la luz pero todavia tenemos wifi para hacer las tareas. ¿y eso es algo bueno . Wifi y estudiar. Buenisimo. Wifi y pedir una pizza online seria buenisimo. Presentamos storm ready wifi. Solo de xfinity. Ahora puedes mantener una conexion confiable durante apagones, con datos celulares ilimitados y bateria de respaldo de hasta 4 horas para mantenerte conectado. Obtenlo solo con xfinity. El hogar del 10g network. Enterate mas hoy. Hi, im jason and ive lost 202 pounds on golo. So the first time i ever seen a golo advertisement, i said, yeah, whatever. Theres no way this works like this. And threw it to the side. A couple weeks later, i seen it again after getting not so pleasant news from my physician. I was 424 pounds, and my doctor was recommending weight loss surgery. To avoid the surgery, i had to make a change. So i decided to go with golo and its changed my life. When i first started golo and taking release, my cravings, they went away. And i was so surprised. You feel that your body is working and functioning the way it should be and you feel energized. Golo has improved my life in so many ways. Im able to stand and actually make dinner. Im able to clean my house. Im able to do just simple tasks that a lot of people call simple, but when youre extremely heavy theyre not so simple. Golo is real and when you take release and follow the plan, it works. Jonathan live from new york city, good morning. Equities a little negative, down by 0. 2 on the s p. The countdown to the open starts now. Announcer everything you need to get set for the start of u. S. Trading, this is bloomberg the open with Jonathan Ferro. Jonathan live from new york, coming up, a crudest crew rally stifling inflation concerns. And lastminute shutdown deal looking unlikely. We begin with the big issue, 95 crude