Transcripts For BLOOMBERG Bloomberg 20240703

For our audience worldwide, this is bloomberg surveillance. Alongside tom keene and Lisa Abramowicz, im jonathan ferro. The s p is positive by 0. 2 . It felt like we were on the brink of a full Ground Invasion all we can. Tom im using the Live Services of all the different news sites and it just migrates forward, waiting. Waiting for what . You could see the politicians. I think the most interesting, jacking near to keep their options open. Jonathan we intended to follow this war through the weekend. Rockets fired at tel aviv and some in israel as well. Back channel talks between the United States and iran. Lisa there is a feeling of a frantic diplomatic relation, the idea of iran, who does not have any formal relation with the u. S. Having back channel talks, also having back channel talks in some capacity with israel. Nobody wants this to percolate out of control. And yet the pressure keeps building and no one can come to any resolution at a time where there are hostages, strikes and people dying. Tom i thought the most salient thing was the director giving a statement on the gaza strip and israel. She said all we have to watch is the price of oil. Is that really where we are this morning . Jonathan thats been contained, purely from an investors perspective. Will this conflict remain localized . Tom we talked about this. Then up to lebanon, it was a fractured sunday. Lisa to your point about oil prices, a lot of notes over the weekend were saying absolutely geopolitical risk is not being priced anywhere into the markets. How does the market price in something where there are so many variables and there is such frantic efforts to prevent the worst Case Scenario . Thats the nervousness you feel under the hood. Jonathan lets whip through the price section of the s p 500. Positive hereby 0. 1 . In the bond market, another move. We have to get used to this now. Brahm moving eight basis points higher. Lisa that was my conclusion, i said look, its bouncing the other way. Just to give you a sense, i think there are 14 speeches. I believe seven individual fed speakers, cap i fed chair jay powell at the thursday economic club. We will hear from Patrick Harker , Raphael Bostic and lori logan. Morgan stanley and netflix and tesla on wednesday. It is all going to come down to the game of who is winning, Goldman Sachs or Morgan Stanley. Morgan stanley has lost less than Goldman Sachs. This might be really important, also housing starts. Tom i think the retail sales is an important frame. Is it recession or something above recession . What i know noticed is the strategists how much of that comes from an American Consumer . Jonathan lets talk about what wasnt discussed. Why werent they talking about the bond market . Whats been taking place in treasuries. I heard it once. That was basically it. Tom joyce chang saved the day. They have a food court. I call it the Student Union. Its no different from the Student Union when we were hung over juniors, trying to get energy for the 10 00 a. M. You are in there and there is nobody talking about the bond market. Everybody is glued to their phones, looking at the bond market. It doesnt make sense. This happened at davos. There is something always unspoken. People were riveted by the tensions by the war in the eastern mediterranean. You could feel that in the airspace. The bond market was a huge unspoken. Jonathan its great to have you back. Joining us now is joyce. Lets talk about that bond market. From a specific angle, does this budget deficit curtail americas ability to respond and support military escalation on multiple fronts . When you are running wartime deficits before the major escalation, it does make it more challenging. Prioritization will take place as well. Maybe cutbacks on domestic spending. The real question is can the bond market handle it and what does it mean for global rates . It comes down to the spillover effect and the crowning out. The crowning out of other credit markets. The treasury market will always be funded. Higher rates, no less. But it will take money away from somewhere else. Lisa there is this question, it will take money from somewhere else. Are you talking about that on an investment thesis or a fiscal thesis . We are rendering wondering if this will curtail the ability of the u. S. To intervene with geopolitics globally. What you are saying is the answer is probably know, what does that disrupt in the market that people are not counting on . We have had a large increase of shortterm funding to get us back to where we needed to be back in early june. Now, we have to term out the debt. As we are terming out the debt, we will see a combination of warranty bills. This will start to get the corporate sector for housing. Lisa we saw a right aid for chapter 11 bankruptcy we saw rite aid file for chapter 11 bankruptcy. Is this the beginning of a cascade of something larger in the corporate space, as the physical space deals with its own demons . I think its going to expose the have and havenots with access to liquidity in the Capital Market place. I think it is the beginning. The average tenure rate is somewhere around 3. 2. We got the tenure back to 3. 2, which is where we were in 2011. We have not made a lot of progress. We will see the fed higher for longer, lets say the rates are between 4. 5 and 5 4. 5 and five. Tom on the desert of morocco, thats what we were talking about. The 10 year real yield. I think the real yield will stay higher and elevated. Its also having this poll effect on the dollar as well as term premium. There is multiple channels working here. We have global rates in general rising as well. Look at last week, the quality been at the the fact it is taking place at a time of large deficits means he needs to stay high. Tom whats is that due to the American Economy . What does that do to the American Economy . Its the cost of the capital. If that is what exposes companies who cant make service at an interest cost jonathan is the fed part of the game anymore . It seems like they are taking a back seat over the last week. Our view is they are probably done. It will try to stretch the debate into early 2024 where they could hang the risk and hike inflation if it were to get out of control. I think they are probably done. And they will have to shift their focus from all about hikes but more about the neutral rate. What is neutral . They will have to make that case clear. They are not going to go back to zero rates. They are not going to go back to zero rates. Jonathan we are all important to the conversation. If you had a question what would it be . George have seen Sharon Powell pick and choose certain indicators he prefers. As a super course tilt him . Does that force them to keep going . Lisa a lot of people are wondering how fragile the market is as people face geopolitical risk. How fragile is the market at a time where nobody can price in how a conflict will escalate which seems to be right now kept under control by frantic discussions and barely kept at control at that. George this whole year has been a market on its toes and on edge. Heading into a time of year where liquidity is less. It has been eight choppy market. That is what people are nervous about. Tom is a value in studying a fiveyear duration . George that is a great point. I think the sweet spot, probably is the fiveyear part of the curve. That is where you will have a comfort. It doesnt mean you wont have losses but over time you will make up for it. Good input is of inflation. Tom what happens to the disinflationistas . George that is not completely on the back burner. We are probably going to see slowdown because of the hikes and contraction of credit and impact we will see disinflationary pressures but not back to the levels where it would warrant zero rate policy. Jonathan thank you. Chairman powell coming up and retail sales. As lisa mentioned we are going into the quiet period for the Federal Reserves next decision. Here is some of the fed speak through wednesday. Tom could you do that again . Jonathan how much are they going to speak for the week . It is nuts. I think that is just that there is too much fed speak and that is all there is to it. I thought mary daly was just lets out. Are they comparing notes . Lisa of any complains that they speak too much and then they listen and parse through what they say on the guys that they can hear something we didnt. On the one hand you can speak say they speak too much and they are looking for guidance. Jonathan that is the rest of the week. Go back to what mary daly said to lisa a couple of weeks back, i think the conversation set the tone for the broader conversation is will the bond market do the work for us. A lot of people assume november is off the table. If chairman powell wants to change that he could. Lisa when has the ruffled feathers when he didnt need to. Tom you have no idea. I feel so old right now. Lisa is that a rem song . Tom william joel. Lisa oh, william joel. Jonathan from new york city, this is bloomberg. Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Would you support Israeli Occupation of gaza at this point . Pres. Biden i think it would be a big mistake. What happened in gaza is hamas dont represent all of the palestinian people. I think that it would be a mistake to occupy gaza again. Jonathan the president of the United States speaking over the weekend. The president of the United States considering a trip to israel. Note decisions about whether to travel to israel have been made. I have been in a vacuum here and everyone is stumbling around. The adjustment for me is the options people are having against the blunt instruments of war and the different choices they can make. Jonathan at his shuttle diplomacy between countries that dont necessarily speak to each other. And for iran no former diplomatic channels. But the back channels. Tom looking at what the angle on iran is a choice set. I dont think it is a choice set for america. They are focused on hostages, the territory of the gaza strip two times the size of washington, d. C. And everyone is playing to a domestic audience. I dont think enough is said. Jonathan the s p 500 shaping up positive by 0. 14 on the s p. On the fx markets, slightly stronger against a weaker dollar. Tom italy norman is also weaned out of a phd program and truly one of the worlds experts on terrorism. What an honor to speak to you. How is this terrorism narrow stridency of hamas, how is it different this time . Julie this is a very different tactic than we saw from hamas last weekend. The response is expected to be very different in scale can tactic and operation. And also the end goal of eliminating, i think is going to be a difficult endgame. It will be technically difficult. Hamas has regional dispersal and they represent a certain type of resistance. A lot of israels choices in the next few days will have traumatic implications as we see casualties rise and whatnot, that will galvanize what much of what hamas goals have been and i think many will step in. It is a difficult needle to thread. That is white you see President Biden considering a trip there and avoid a longerterm security risk. Tom beyond hunger strikes, the movement and every day resistance. You are as close to an expert on this as you can get. How do you perceive a military exercise from north to south in gaza . Julie as it is an extremely difficult place to live and carry out a military operation. You see the evacuation and movement upwards of one Million People to the north and south. There is nowhere for people to go at this point. Even if the operation stays in the north, a difficult humanitarian situation throughout the stretch and likely devastation of infrastructure that makes an endgame difficult to foresee. We hear President Biden speaking about trying to preclude a possible occupation in gaza. It is difficult to see what it looks like after this. Most of the civilians there will not have anywhere to go and it is going to be very likely a very difficult situation for anyone stepping into that space. Lisa it has been difficult to understand what is going on in view of back Panel Discussions and misinformation intentionally being put out from a number of different sides. We heard conflicting reports what have you gleaned over the weekend . Julie there has been a lot of misinformation and all of us should be careful and double checking the sources. Iran has much closer ties with hezbollah to the northern border of israel than even to hamas. It is the question of if they would activate has full and open a northern front, that would change the contours of this war and make it a much more regional conflict. Secretary of state blinken has been run through the error but world to try to deter iran or hussle or proxies from further escalating this but that is not a given and that is one reason again why the conversations will keep continuing that there is operation on the ground but what can we see do simultaneously to try to deter other actors. Lisa it is a tragedy and we are seeing it unfold, with people fleeing the north. I am curious if we are hearing there are 100 trucks backed up ready to deliver humanitarian aid to gaza who have gone south why are they not being let through . Julie my understanding on this is israel wants to check the trucks coming through for security reasons and they will not give a guarantee some of the trucks would not potentially be immune far targeting and whatnot. That is where the impasse seems to be. There is a lot of aid waiting on the other side of the border waiting to come in and people waiting to come out. I think where about a blinken and biden conversations will be to negotiate that passage. Tom if you look at the present day at horror and you look at a history of the arrows people or a piece to end all peace, are we jan the chain in linkage out of world war ii . Are we on to something new here . Julie i think we are and this has been coming for a while. This is a broader regional question. The uprising in the arab spring we saw 10 years ago many people thought that was new and what we are seeing is a resetting and the sin the context of steps forward and steps back. There was many sing this attack as being a spoiler which it has been. There have been shifts in this region and i think this work will be definitive of where the region goes after this. Jonathan thank you. A new pool at cnn add up israels expected Ground Invasion of gaza most american respondents say the israeli governments response is fully justified 50 , a total of 21 said they were sure. 8 said it is just not fight at all. What are the controversial stories on college campuses, support from israel and you look at the poll from cnn and that speaks to support from americans to israel of the events taking place. Annmarie hordern is in washington, look forward to catching up. From new york city, features positive by 0. 16 . From new york, this is bloomberg. You got this. Lets go. Gobble gobble. Ive seen bigger legs on a turkey rude. Who are you . Im an investor in a fund that helps advance innovative sports tech like this Smart Fitness mirror. Im also mr. 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Before golo, i was hungry all the time and constantly thinking about food. After taking release, that stopped. With release, i didnt feel that hunger that comes with dieting. Which made the golo plan really easy to stick to. Since starting golo and release, i have dropped seven pant sizes and ive kept it off. Golo is real, our customers are real, and our Success Stories are real. Why not give it a try . Jonathan new trading week, equity market on the s p 500, slightly positive through much of the morning, up 0. 16 after squeezing out a second week of gains last week. Looking ahead to a big week around the corner, bank of up later this week. Netflix and tesla as well. Tom earnings started out good. Great coverage here. Thank you to ken leon for his wisdom. Dont have a strong opinion on this other than earnings will prop up the market with a vix of 19. 09. The jp morgan results we got, some people have most dangerous time in the world in a long time but a boost in the outlook. Net Interest Income is better and reserves lower than people thought they would. Lisa there minting money in an era of uncertainty and suddenly people dont seem to be demanding to be made interest paid interest as much as the banks are earning from what they can charge. How long it will last is the key question and whether it is indicative of the broader world is unclear. Tom about 45 gazillion precovid has turned into 65. We were in marrakech and a Student Union and i heard you talking about it. Jonathan they are trying to hide much money they are making. I think the whole earnings season will be, is this. Jonathan 10 year last week almost 20 basis points lower, 30 year, up 10 basis points. Five of 10 year yields growing and then lower. P pai ppi and cpi came in hotter, payrolls and jobs looks jobless claims, it seems the fed has backed away from this. The front end under moved. Lisa is the only thing that has any stability. Longerterm we dont understand inflation, your politics, understand how much pressure at higher rates will actually impose on fiscal authorities in terms of borrowing. Jonathan yields up this morning. The euro against the dollar, eurodollar positive by 0. 2 . U. S. Secretary of state Antony Blinken returning to israel after meeting with arab leaders. Israel defense either sing 199 people have been taking taken hostage and they are evacuating residents. The northern gaza strip, 608,000 people have already left for the south. Lisa and left to go where . They have nowhere to go and they are left trying to find clean water and food as time is running out. This is a powder keg. It is not just in this region but globally you are seeing so tensions spring up around the world. There is a difference between government officials and what stance they are taking and the groundswell of reports and that is crating an unstable situation. Tom creating an unstable situation. Tom video is just shocking. The horrific twitter videos in my feed i went back and this goes back to a guy named Marshall Mcluhan in the fist fights in my parents dining room about the media. The media presentation worldwide is front and center. Jonathan witnessing intense diplomacy over the last week so. President biden and olaf scholz weighing trips to israel. In an interview, the president says, we have the capacity to do this and we have an obligation to and if we dont, who does . That is the question you are asking in the bond market, after they have the capacity to deal with this . Lisa especially because there have been calls to cut borrowing costs and more funding to ukraine and now you add into this, there was a cnn poll and Washington Post poll that came out for overwhelming support in the United States is to support israel and continue to fund any kind of defense. You saw two warships being placed in the vicinity to prevent iran and more likely hezbollah to going into the region. Jonathan lets finish on the, Joseph Manchester united falling in the prearchitect or italian investors withdrew their bid for the team. An initial stake of 25 in the club and more than 6. 1 billion dollars. At stock is lower because ultimately what a lot of investors wanted to see was a full take at a price. That will not happen. Tom list history of success of a set of owners clubs . Castle is the way i perceive it is a success. Can teams run the set of owners in the premier league . Jonathan has liverpool had a lot of success . I would say they have. Arsenal had success as well. Tom they have multiple owners . Jonathan based on their investment, north of 6 billion. Im not sure how much the glazers want it but the qataris walking away. Tom we will continue to discuss this. On the market, Liz Ann Saunders from charles schwab. I have spx in a corrective state down roughly 10 early in a bear market or a bull market . Liz ann when you think about bear markets and analysis of one year off the low and how that compares to past eras. Even the ugly bear markets like 2002 and 2000 722 thousand nine had multiple cycles within them to the extent you are using the simple definition about 20 . I agree trying to make sense of the nuanced definitions but you have multiple moves. It is too soon to say whether we are truly out of the woods. It doesnt look like a typical major market low given by the performance of the s p and no participation by the banks at all, minuscule participation by small caps. There are a lot of checkmarks against the market, not to mention that only 2 of the s p is trading at a one year high. There are a lot of checks against the market and that doesnt necessarily mean it has to retest. Tom you are way too young to remember nifty 50 like i am but is it the sonders 5010 . Lisa it is hard to prom without the magnificent seven who represent 30 of the index right now. That is relative to less than 20 in earnings weight. Earnings season will be key to see whether we narrow that gap between the cap weight and earnings weight. Having a small handful of stocks dominate the s p or nasdaq is not uncommon. It is when you have the rest of the index of dramatically underperforming, whether you look at it on a percentage of stocks above a certain moving averages or a percentage of stocks beaten the Overall Index for period of time. What wouldnt bother me even if we continue to see a bit of a selloff driven by some of the larger cap names as you simply start to see better participation. That was happening last october, a positive diversions because the index coming down courtesy of those big stocks putting downward pressure but you started to see much more improved participation from point down. That would be a little bit of convergence and we are not seeing that. Lisa two weeks ago we have been wouldve been folks would have been focused on earnings and now this existential question is hanging over at all, especially of the events of the past week and that is how vulnerable is the equity market to an oil shock or some other kind of shock . How much time have you in a focused on that given what we are seeing unfold in the middle east . Liz ann unfortunately we are all at the mercy of the day today day today news. Im not sure it says much about where the conflict goes from here we are all at the mercy of the news but it is hard not to think about the early 1970s and the 50 years back to 1973 and the fact that when you started to see the geopolitical pressure associated with the rise in oil it was happening at a time when inflation was already bubbling up and the economy was weakening. There are times you get a surge in oil prices were if you have more strength in the economy and not a lot of inflation pressure you dont see the theater. And fortunately where we unfortunately where we sit right now, if you were to add an oil shock into the mix, it would not be a good thing. Lisa how much are you responding to client questions about that or are saying we dont know and we will take things as they go . Liz ann i have been getting many more question events at questions client events about that and interest costs and fiscal situation and political dysfunction than we are about the conflict, possibly because they know our perspective on where the conflict goes from here is percent most other geopolitical strategists as if we are not one. It is my the domestic concerns, the rise in Interest Rates and what it means for our fiscal health. That seems to be top of mind by our investors. Jonathan thank you very much to liz ann sonders. Eight 13. 2 Million Barrels a day of production in this country and all i have heard from a lot of people is on the budget and the ability of this country to respond across multiple fronts. Tom Tobias Adrian has had fiscal sustainability and that was percolating except i would not say it was just u. S. Abhisit , domestic issue, it is worldwide. Lisa the dysfunction adds to the feeling of uncertainty and we may get some sort of vote this week on jim jordan who basically is is bid for speaker is dead in the water. There was some talk on the democratic side of Hakeem Jeffries bringing some bipartisanship to the house. The fact that we are discussing that and not some of the bigger issues that are suddenly driving the conversation in the investment world gives you a sense of where we are. Tom it i take your point. This percolating on a monday morning of the middle ground gets together like what happened. Jonathan and supports the democrat. That is a big ask, isnt it . Tom historically it is. This is not parliament. Jonathan you would prefer that, wouldnt you . 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. sometimes, all the tenacity and grit in the world. Cant overcome the boundaries we face. so Morgan Stanley is partnering with the Womens Tennis Association to remove them. because this game is for everyone. we are seeing tightening of financial conditions that has never happened before your it our mission is to return inflation to 2 and we will and it is happening as we speak. What is what is troubling is the median growth and inflation has come down the job is not done yet. Jonathan the job is not done yet, Christine Lagarde speaking in marrakech at the annual meeting with tom keene moderating. Tom it was fun and a huge audience and massive participation. There is always a surprise. Everything is set up and there were 47 people helping the. It is like an entourage of phds that no more than me. They all come in and say what they want to do which has nothing to do with the panel. We get out and i open and the managing and i open up and they meant and i go to lagarde and it felt like an ecb press conference. I start in on Economic Growth and she says no, Monetary Policy. I am sitting there asking how much trouble she would get herself in. Jonathan harvey talked about the bond market. We were there in the spring, that frustrated me. They seem to be having conversations divorced from what is taking waste in the world and front and center is bond market volatility in the treasury rk. It was touched on briefly and we are from the starting to price some fiscal premium, risk premium in places like treasuries. Tom for the World Economic outlook, you say they are financing in investment. To give us perspective is william lee at the Milken Institute and serious tours of duty with the imf. Why does the bond market matter to people like you . William the bond market is the key. One thing we should be concerned about is that even though the imf delegates were not concerned about the bond market but the Federal Reserve is concerned if they let them do Monetary Policy. Tom chang at jp chase Jp Morgan Chase said it would have big effect on e. M. , do you agree that the future of the pacific rim and broader africa is affected by Jerome Powell . William you got it would when the dollar is strong it takes capital from the rest of the world. The United States is where productivity is highest and innovation is the greatest and you can justify why it is that people want to invest. To suck out more capital from emerging markets that need it is a problem. Jonathan when the Federal Reserve alludes to the market they are willing to let the bond market do the work for them, it is a very specific part of the market. Can you talk to me about shifting the emphasis away from shortterm rates to longterm rates in fixed income . William short rates will influence long rates and it is how it influences the long rate that allows the economists to try to forecast what will happen. It is longterm Interest Rates that affect the valuation of equities. It is critical. We are seeing a rise in the term premium and also in some sense a lack of credibility on the part of the fed and the fact that the fiveyear inflation rates on the 10 year horizon are starting to rise. People dont believe the fed is going to take seriously its 2 target of inflation targeting. Jonathan without a firm solid understanding underpinning the move higher in rates . William it is a consequence of letting the data determined what i will be doing. Allowing the data or Monetary Policy is the biggest mistake you can have her the fed has always been objective driven and had policy targeted whether it is intermediate targeting like money or Interest Rates or longterm but right now to say i am going to let the data determined what i am going to do and i wont know what im going to do until i see the data is nuts. When the bond markets are unanchored, it will do whatever it feels like. It will go up one week and down another week. Lisa that is what we have been seeing over the past few weeks. I am curious of some of the w hys. We were talking to someone at p jim and he said is due to lack of buyers in china, japan and asia. Do you think that is underpinning why you have had an unanchored longerterm bond yield . William a lot of capital flows are pricesensitive because they are strategic. China is at the heart of all this era i just got back from a month in asia, singapore and taiwan and everyone has china on their mind. So where should i park my money taking it outside of china. People are being strategic and saying, let me start to use the political tensions the u. S. And china are having by saying lets add more content. Mexico is becoming a haven for strategic capital. Mexico is a Strategic Partner is a report my colleague just put out and it is worth reading because it tells you imports from mexico have now exceeded the level of imports from china. That is how important finding alternatives is right now and determining capital flows. Lisa you are talking about going into places that might have china deemphasize, what about china as a buyer of u. S. Treasuries and other investors as potentially seeing u. S. Government debt as an option . William fine is not much in a position to do much as a source of growth for the world except for the fact that it has continued surplus in terms of buying up treasuries. China is going out of its way and going to other areas to reduce the dominance of the dollar. It is not going to be behind the buying of treasuries going forward. Jonathan wonderful to get your perspective on the latest of the deficit, bond market, fed policy and china. The latest mr. Kaiser at citigroup, macro data, fomc, thirdquarter earnings are supportive, the flows picture is solid. Looking for an etf that tracks the nasdaq 100. That is where he is bullish. Tom i will call this an outlier. I read every word of the kaiser report flat out bullish, flat out pushing against the gloom out there but selective. That is what we were talking to with liz ann sonders. I dont think you by the etf on the Dow Jones Industrial average. I dont think that is a wise. Jonathan lets go through it piece by piece, payrolls solid, jobless claims low, jp morgan boosting outlook to year end and the Federal Reserve, i am willing to step in and spoil the party. This was the problem over at evercore per talking friday, the outlook into year end is ok and jan that is like the unknown. Lisa which is why Stuart Kaiser and others are saying we cant see it and you cant see it, look at what you have right now because it is looking good here and so many people got caught up being an inflationista and now people are looking to feet in front of them rather than trying to look more than 10. Tom there are people of the l3 or full years and looking at the pullback by stewart there are people looking back three or four years and looking at the pullback by stewart kaiser. There are people saying i have to participate, what is the intelligent wait to do it . Jonathan what else should you be in . What is the alternative . Tom institutionally 86040 portfolio but im not sure what the 40 is. Jonathan yields higher, again on a 10 year i ate basis points 10 year by eight basis points. The bond market absolutely crazy in terms of the intraday movements. The fx, euro stronger, weaker. Equities firm by. 25 . Will head to israel and catch up with annemarie in washington, d. C. And with jay polaski, constructive on the outlook. Live from new york city this morning, with equities pushing higher, good morning. What do you see on the horizon . 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. Hi, im katie, ive lost 110 pounds on golo in just over a year. Golo is different than other programs i had been on because i was specifically looking for something that helped with insulin resistance. I had had conversations with my physician indicating that that was probably an issue that i was facing and making it more difficult for me to sustain weight loss. Golo has been more sustainable. I can fit it into family life, i can make meals that the whole family will enjoy. It just works in everyday life as a mom. Fiscal policy is out of control. When we see the fed raised Interest Rates, the economy tends to evolve at a similar level. For the bond market, it is really what happens in investment that is critical. Treasuries will trade more in line with fundamentals over time. This may be the beginning of a secular bear market. This is bloomberg surveillance with tom keene, jonathan ferro, and Lisa Abramowicz. Jonathan live from new york city this morning, good morning. For our audience worldwide, this is bloomberg surveillance on tv and radio. Your equity market positive year by zero. 3 on the s p. Two weeks of gains. Can we make it three . They felt like we were on the brink of escalation saturday into monday morning. Tom our world of economics pushed aside by the geopolitics. In this hour, i believe he will go to Annmarie Hordern, and in line jonathan a Ground Invasion lisa and tony blinken trying to have every channel conversations with everyone in the region to gauge where they stand, how to prevent some sort of escalation. One thing i felt over the weekend i couldnt tear myself away from it, as everyone feels the same the lack of clarity was shocking to me. As time went on, there was this fog of uncertainty and misinformation put over everything. I started to feel like we will only note it in retrospect. Jonathan lets build on that. The lack of clarity around one specific issue hostages. This is a really important topic. It felt like, over the whole weekend, we were on this brink of this Ground Invasion by israel into gaza. It did not happen. There was a sense, based on several reports, and there is conflicting reporting, whether it was the hostage situation slowing things down. Lisa there was some discussion about qatar and possibly egypt negotiating some sort of hostage release, that hamas was asking for palestinian prisoners being released in counterbalance pa there was also discussion about trying to avoid killing hostages as they went into gaza city. All of this is in the fog of back channel discussions as everyone works frantically to try to avoid a larger confrontation. I cannot express how emotional it is for everyone in the region. Tom to jons point, its horse before cart. To me, the hostage discussion right now is the horse. I could be off the mark on that, but i just think it is front and center within all the different parties and the narratives going on right now. Jonathan secretary blinken back in israel right now. There is the possibility of the president , along with insular or like chancellor scholz, making the trip to israel. There are no formal diplomatic arrangements for the iranians to speak with the United States. They have back channels. Jake sullivan is adjusting and telling us that used them to warn off iran from escalating the conflict. Lisa two Aircraft Carriers in the region also sends a strong message. There is this feeling of we see you, we get you, we are not going to accuse you formally of having workers treated these attacks, but please do not encourage hezbollah, right to the north of israel, to get involved. You have seen a titfortat kind of escalation, but not to the degree of more full ground incursion on the northern border, but that is really what people are trying to prevent. Jonathan dont is a word we have heard repeatedly from this president. Your equity market looks like this positive by a quarter of 1 on the s p. Yield higher by a basis point on the 10 year. The volatility in this bond market, intraday price action on real. 30 year yield up for basis point. Lisa whether this is doing the work for the fed or not, we will know all about it. We have a lot of fed speak this week. Capped off with the fed chair jay powell thursday our own david westin. We will also hear from john williams, Raphael Bostic dallas fed president lori logan. I feel like i am listing people at some sort of religious event. We will hear from them. Earnings, bank of america and Goldman Sachs tuesday, Morgan Stanley, netflix, tesla tuesday. A lot of people focusing on the horse race between Goldman Sachs and Morgan Stanley. Others on the tech earnings. How much will theqs the qs outperform . And how much more does the consumer have to spend, which the base book we will get jobless claims that will not suggest weakening. Jonathan the editors we have heard from regional fed speak or suggest there is a slowdown, that they are yearly in that hearing from people in their districts telling them that is a slowdown in this economy. The problem is payroll has knocked it out of the park. Jobless claims are still incredibly low. And we will see what we get from retail sales tomorrow. Tom maybe lagging indicators and all that paid i will let our guest explain that to us. But it is the same store it was 6, 8 months ago. 6, 8 months ago, we were sure there was a recession. Now it is just silence paid let ring and handsome jay pelosky. Jonathan is that what were calling him . I love that. Possible founder of tpw. Together, we are about to have a serious discussion. Jamie dimon says this may be the most dangerous time the world has seen in decades. If you park the rhetoric and focus on the numbers, this is what we have got. A record quarter of net Interest Income. Reserve for loan losses coming in better than expected. Why follow the rhetoric or the numbers out of these banks on wall street . Do i follow the rhetoric or the numbers out of these banks on wall street . Jay rate to be with you. Thanks for the compliment, i do not get the at home, let alone anywhere else. It is great you picked that example, because that was one of my examples i wanted to use. That shows the gap between superficial, first Level Analysis and something deeper. The superficial first level is taking jamie dimon, one of the most respected bankers in the country, if not the most respected right now, at his word when he says things are as bad and scary as they have been in decades pa the second level of analysis is the actual returns of the bank, which were stellar. I focused on one of the points you touched on, which is the release of reserves. If things were bad, banks build up reserves when making money. Banks printed a ton of money. Between the three, net profit was up 34 year on year. That is a perfect environment to increase reserves in case you are worried about in this horrible environment. What did jpmorgan actually do . They actually released reserves, because they over reserved six months ago. Six months ago, seven months ago was svb and bigtime bank concerns. That is not the case anymore. I think there is a tremendous gap between all that is going on , which you led to in the prelude between the three view chatting, and the actual reality underneath. So you can be very scared and very worried if you just read the headlines, but if you look beneath the surface, things are actually, i would argue, getting better. Tom the single paragraph in your note, that you are simply out of the bond market, is confirmed by the bloomberg total return index. It is on the precipice of making new laws on a price basis. We are back to a 2016 bond market. What happens to the stock market if we get christ pirce down higher yields on that aggregate index . Jay that is really the big pension right now between assets. 6040 worked like a charm over the 20102020 period. Massive bond market for a decade, now we are having the reserve. We heard about the coming bond market several years ago. We have been out of treasuries for the last two years in our mobile multiasset portfolio, even though our benchmark is 40 fixed income. We have an in credit, we continue to be in high yield in the United States, for example, continue to be in emerging market debt, local currency and corporate. To me, the issue is the carpet the market priced in priced out, excuse me, the recession call. The bond market was a big believer in recession, way more than the equity market. When that story got knocked out by jay powell a month or so ago, when the fed doubled their growth estimates for this year, significantly raised growth estimates for next year, took out two rate cuts for 2024, the bond market had to reprice its b, and has done so. As long as nothing breaks during that repricing, then we are ok. I would argue we are much closer to the end of that repricing then we are to the beginning. Real rates are high, 10 year real yields are up 2. 5 . Historically, that is quite high. Inflation is coming down significantly. We think it will continue to do so. So as i mentioned, contemplating bonds is an interesting opportunity. They rally very aggressively. But between 450 and 475 on the 10 year, it kind of makes sense to me in the environment that i think we are going into, which is continued solid, decent Economic Growth in the United States into 2024 and beyond. Lisa then is it time to transfer out of corporate debt, especially as we just heard from George Kunkel this light from George Goncalves and go back into treasuries . Jay i do not think so, personally at this moment. I do not by the default story. That is not really being supported by broad data. You can cherry pick individual names, but the reality is defaults are quite low. There is no indication they will pick up dramatically, particularly if the economy will be ok. The big issue is refinancing, and that and highyield in the u. S. Does not come for two or three years. In our view, where we want to be, we think the Global Economy is picking up speed. We are in the early stages of a manufacturing recovery around the world. Earnings next year in the u. S. Forecast to be up 12 . Equity markets should be fine in that environment. We want to be in commodities for that strong growth opportunity. We like emerging markets. We like china, as we talked about on the show before. That is where we see more opportunity than switching into u. S. Treasuries. I do not think theres a lot of downside from here, by also do not think there is a lot of upside, and there are better opportunities upside, riskreward basis elsewhere than u. S. Treasuries. Jonathan maturity mountain. I will use that. Handsome jay pelosky will that catch on . Tom it is. It is a substantial idea. Jonathan nice. The s p positive by 0. 2 . Yield a whole lot higher by nine basis points. 4. 70 on the 10 year. Further on the curve, 30 year up by 10 basis points. Lisa so we can close either 4. 80 or potentially at 4. 50. We do not know. That is basically the ride we have been on. The why behind it is unclear. Yield have gone down in light of a better than expected Economic Data and it has gone up in light of worse than expect it data. Tom when we shift from a yield analysis or a spread analysis, and it is like, oops, price, you look or benchmarks. This is just on a price basis. It is down 21 from june of 2020 come along that three yearish period, it is down 7. 3 per year. Operative word for us and fancy people in marrakech never. Never seen it. Jonathan this bond market has kurt this financial sector. Has hurt this financial sector. Next on this program, on the ground in israel, bloombergs oliver crook. And we will catch up with Annmarie Hordern live in d. C. , next. Get help reaching your goals with j. P. Morgan wealth plan, a digital money coach in the chase mobile® app. Use it to set and track your goals, big and small. And see how changes you make today. Could help put them within reach. From your first big move to retiring poolside and the other goals along the way. Wealth plan can help get you there. J. P. Morgan wealth management. We need congress to act, and the president has made clear he will go to congress with a package of a funding for ukraine as well as continued support for israel. You can expect intensive gauge meant with congress this very week as we work on such a package and seek to secure bipartisan support for it. Jonathan that was Jake Sullivan on cbs, speaking of intensive engagement with congress this very week. We had an intensive weekend of diplomacy. Secretary blinken back in israel after spending the point in riyadh at one point gave the big takeaway with Jake Sullivan, this quote right here we have means of communicating privately with iran, and we have availed ourselves of those means over the past few days to make clear privately that which we have said publicly. As we know what they have said publicly is dont, wanrin warning off iran of escalatory moves. Tom there has got to be all sorts of other stories, many covert, going on. I do not think we are fully informed. I wonder, are people like mr. Sullivan fully informed on what is really going on on the ground . Tom officials are trying to discern a lot of details, including how many hostages were actually still being kept in gaza. Now the number is Something Like 199, according to latest reports. How this is featuring into discussions with iran, especially since a lot of those people are nationals of other countries as well. Jonathan if youre just joining us, welcome. On the equity market and the s p, positive by a quarter of 1 . Equities drifting a little higher, newly divorced from what we are talking about in regards to what is taking place in the middle east. Yields up higher. The 10 year at 4. 70. Tom Annmarie Hordern is in washington, our chief washington correspondent, and oliver crook is in tel aviv this morning. Translate us away from nine news sources, all the tv, the blur of the news. What did you observe in tel aviv this weekend . Oliver well, it is very, very quiet here. Amid a war going on in the south at some of the skirmishes going on in the north, in tel aviv, there is a sort of very eerie calm. Our beer is in a very active part of town kid i was here just seven months ago. There are tons of people out on the streets, generally. It is really quiet. Life has come back a little bit today, but most of the businesses are closed. That is great despondency in the streets. People in tel aviv are not accustomed to going to a bond shelters, like we have done todays for a few days. Jonathan if he is have been on the brink of a full Ground Invasion. What is preventing that from happening anytime soon . Oliver the question is, again, what kind of invasion are we talking about . Is it everyone rolling in, is it Tactical Operations . We understand there were some Tactical Operations in gaza as early as friday, but as we know, hundreds of thousands of troops amassed at the border the thing the Israeli Defense forces confirmed is the next step will have a ground component. Air, sea, ground. The question is when . With all of these leaders coming, potentially scholz tomor row, biden, is that haldol for a period of time . Friday, the message from the israelis as we have not decided yet officially to move in. Jonathan we have had a weekend full of diplomacy. Secretary blinken in riyadh, back in israel. Talk to us and explain to us what has come out of that weekend full of intense lunacy. Annmarie the first thing is secretary blinken, after he left cairo, they seem to be an understanding they would open the rafah border crossing. That will be important for american palestinians trying to get out, palestinians trying to get out of harms way, as the israelis have told them to move away from gaza city and towards the egyptian border. And also humanitarian aid that the uns as is waiting on convoys on the egyptian side to come in. The issue is, even though it seems there is a diplomatic push to this, the rafah border has yet to open. That seemed to be key in secretary blinkens discussion. Now he is back in israel on the same day we have reports that benjamin netanyahu, over a phone call over the weekend, invited President Biden to actually come to israel to show his support. Blinken decided to stay in the region. I would say there is this potential of the president of the United States going to israel. First and foremost, this would be a huge show of support to the israeli people. It would also deter this conflict. , potentially, from expanding it would be a huge it would be a huge deterrence to iran or hezbollah if the president of the nine states shows up in tel aviv. It would also actually why the u. S. Is sending a second Aircraft Carrier to the eastern mediterranean. Lisa those Aircraft Carriers going over to the mediterranean, do we have a sense of what the red lines are for when the u. S. Will get involved, when they will actually start to deploy troops and hardware that they have put floating on the sea . Annmarie admiral kirby said there is no reason right now for there to be u. S. Boots on the ground. The Israeli Defense forces have the capabilities, they have the u. S. Backing and supplies they need. But these two Aircraft Carriers really are just a massive show of force, and you have the eastern med now, once the uss eisenhower arrives there, completely armed to the teeth. This is huge turns to iran or any other actors that may want to get involved this is huge deterrence to iran or any other actors that may want to get involved. Tom as to how i do not have a clue about the Israeli Military. Who are they listening to now . Who gives the Israeli Military guidance on this monday . Oliver it will be this wartime cabinet that has been assembled by benjamin netanyahu, over which he presides, which is brought back the israeli political spectrum, the Huge Division that has come back and coalesced in this wartime. Most of the government posts are in jerusalem here the Defense Ministry is in tel aviv right behind me. That is where the orders are going to be coming from. The Defense Forces will make their own sort of assessment in terms of how to execute, but it will come down from that wartime cabinet. Jonathan lets finish on this one. Israel was criticized by many for the 24 hour warning they had given. You touched on the humanitarian corridors, water, illiteracy, fuel pier 1 is the latest . Annmarie the u. N. Is out with their update that these supplies are quickly windowing, and that is not really a lot left when it comes to israelis. There some there does seem to be clean water in some areas turned on by the israelis for palestinians living in gaza, but this is a dire humanitarian situation, that individuals in gaza are experiencing, as they tried to flee. Some of them are even being blockaded by hamas. If we learned anything from the 2014 conflict, it is hamas also will use humans as shields. They will store their weapons or have their headquarters in places like hospitals or schools. Jonathan is egypt cooperating at the southern border . Annmarie it is very challenging right now. Egypt definitely wants a lot of aid from the United States, but egypt also is saying, if we let a lot of palestinians in gaza into egypt, what does this mean for the future . How are we supposed to look after these people . They are under tremendous amount of pressure to get this rafah border open. At the moment, though, we are not seeing a lot of movement, even though this is at the highest levels. President sisi sat down with her secretary blinken over the weekend. Jonathan tremendous reporting. Olie crook, stay safe there. Plenty of diplomacy taking place , and the president might be getting ready to make a visit to israel. Tom and on the southern border, it is important to say that is one conduit, one gate, if you will, where there can be an exit. The eight, i believe, right now is closed. To me, the major theme morocco was in the place of the egyptians with this. It is a chaotic society, with the demographics they want usaid as a bargaining chip. Lisa they also are concerned about certain factions within their own population and how they will respond and what they might influenced by, should some of the people from gaza head into their nation. Jonathan much more on the story throughout this morning. Coming up, sonja marten of dz bank. This is bloomberg. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Nice footwork. Its possible. 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. Jonathan squeezing out a second week of gains on the s p 500, coming into a new week, equity markets elevated by 0. 3 . The nasdaq up by 0. 06 . The russell up by three quarters of 1 . What a move in the bond market last week. Even with a single day, remember there was one day last week where the 30 year rose almost 20 basis points. Even with that, the 30 year was lower by more than 20 over the week. Get your head around that. The tenure lower than lower last week by almost 20 basis points. Keeping up the speed with this is absolutely insane. 4. 70 on the 10 year, 4. 86 on the 30. Lisa i stopped trying to come up with reasons for it. It is such a hard thing to predict. Which raises the question, do we really understand what is behind this . If we dont, how can fed officials lean on this and say it is not necessarily dysfunctional as doing the work for them . If we do not know why it is happening . Jonathan the two year last week was essentially unchanged, even with ppi coming and hotter and the cbi coming in a little harder as well. Even with Economic Data coming in, just a touch stronger, there is a belief this fed will be unmoved in november. Tom the parlor game is open to the data. We have had some very important data. The jobs report was ok. The inflation data, as we got retail sales tomorrow i believe, fine. The different narratives, the dow with a 5 10 year yield jonathan one more opportunity tom if david westin can crowbar it out of him. Chairman powell, which way with the 5 yield . Jonathan get the price target from chair powell. Looking forward to it. David westin sitting down with a chairman of the Federal Reserve this thursday. We will take you to that here on bloomberg tv and radio. Israel announcing another safe corridor in the gaza strip as it tells palestinians to move south had of a ground assault. Convoys are ready at rafah crossing, although it remains unclear when or if it will open. Gaza no supplies or power allowed in. Lisa we talked about the uncertainty behind some of the negotiations. We heard a lot about rafah and the crossing and how egypt is no go shading negotiating with the u. S. And israel while also letting nationals from the u. S. And elsewhere out of gaza. It is tricky, though, because how does egypt justify letting a select number of residents out because they have relationships with other countries without integrating their population who are protesting that there has not been more humanitarian aid even . Tom i am im sure, for the Israeli Military, what is the narrative they are listening to right now get i do not think that has been made clear. Lisa if you talk to anyone in israel, people are very united. Theyre very clear, especially given how many people were killed, how they were killed, how many people were objected abducted. There is a clarity among israelis about what they want to do. Tom the website does not matter but it is an acclaimed global newspaper, and there were 8 or 9 narratives lined up collegially because these are the 8 or 9 narratives at the moment. I do not think the Israeli Military has 8 or 9 narratives. Jonathan domestic support, head of this expected Ground Invasion of gaza, most respondents to this poll, americans, said the Israeli Militarys response to the hamas attacks was only 8 said it was not justified at all. All through the weekend, there has been talk about controversial stories on campuses at american colleges. A lack of support for israel. That poll does not speak to the at all. Tom no, the poll does not talk the narratives you are seeing out there. Clearly, in the last 24 hours, but even 48 hours that we have been waiting for on a monday, who knows . Do i care what the secretary of state is doing right now versus what is the Israeli Military thinking . I do not know the answer. Jonathan escalation abroad. At home, House Democrats looking for Bipartisan Solutions to find a speaker. Hakeem jeffries saying there have been informal conversations. When we get back to washington, it is important to begin to formalize those conversations. Democrats have refused to vote for a republican speaker after Kevin Mccarthy was ousted earlier this month. Final story, the u. S. Looking to further restrict chinas access to advanced chip technology. We are reporting measures will close loopholes and they get harder for Chinese Companies to get chips needed for ai. The Biden Administration expected to make the announcement early this week. We are getting a lot done all at the same time. Lisa we are getting a lot done, raising questions about timing. When i read this, i wondered if this had been in the works for a long time. They were asked to be a little bit harder with respect to some of those restrictions, whether this came out now or whether the timing is inconvenient at a time where it does muddy the waters of diplomacy. How do you keep things from spiraling out of control in the middle east, this does not necessarily help the cause. At the same time, it is after the phone and china showing they can develop their own chip technology. Jonathan if you went through the week ahead guidance for the white house, it went as follows the president will travel to colorado to visit cs wind, the largest wind manufacturer in the world. This just in, it will be rescheduled. The latest on the president s movement, head of a q. Week, but also in the context of a report we put out earlier on today indicating that there is a consideration at the white house for the president to make a visit to israel. It is up to you whether you draw a line between the two stories. I will just give you the news. He was going to colorado, today it has been postponed. Tom it is very fluid. All we have left is 9 basis points up on the 10 year yield. There i say it is a thermometer where we are now. This is a joy, because this is what we do at surveillance, we go deeper. The stereotype is Deutsche Bank and maybe commerzbank is a banking in germany. Anybody who is a student of it, like adam hosing, would say that is not quite true. You will love this. Dz bank is really important in germany. Sonja marten joins us, the fx and monetary head of dz bank in germany. Wonderful and welltimed to have you on. How dealing what is clearly a slowdown of economic might in germany to a weaker euro . Sonja well, it is somewhat surprising. We have seen a lot of very weak data for some time now. There is very much clarity that the euro zone is struggling, and i think the data we will see this with will only confirm that. Yet we have seen we have some eurodollar falling. That is a combination of two factors. We have seen softness in the euro zone, but i also think this is a dollars story. We have seen people become increasingly optimistic on the u. S. Almost recession fears of gone out the window. I think it has been the driving force in currency at the moment. Tom i was scheduled to speak to what are the pricing issues of the bundes bank as a look at the economy slowdown in europe . Sonja Everything Else being equal, a softer euro is not exactly bad news. In fact, we might welcome somewhat softer currency in this general global environment, because we still are very much in germany and exports nation, so we will benefit from a weaker currency. At the same time, with weaker currency comes potentially more inflation, and that is of course something we do not want to have right now. We want to come back to the ecb target. So this is a exposition, weaker currency but not too weak, or else we have an inflation problem again. Lisa how much are we hearing of ecb members following what the fed is saying the bond market is doing the work for us, so we do not have to raise rates that much further . Sonja it is interesting, the way the fed has phrased this, because, in a way, by saying the markets do the job for us, what youre really saying is we do not have to hike rates more, they do not the state for us long, and that could end up depressing rates again. A bit of an odd way to phrase it for them. This is not something we have heard very much about in the euro zone. The ecb has not really spoken about anything in that kind, the markets do the job for us that has not really happened here. The big discussion in europe and the ecb is this division between the hawks and the doves, the question is we no longer see any need to hike rates further, but we need to talk about other measures. We need to talk about ptt investments, etc. Lisa a lot of people were talking about when the market will reflect the angst in the middle east. There is not necessarily a clear readthrough, unless oil starts to get involved. Just how honorable is the euro . Just how vulnerable is the euro . Sonja its always odd, that when something is happening and the market takes a jaded view. It really is kind of bizarre. But that is evidently what is happening. As long as oil is involved, than the bigger impact if oil does get involved, this will be a big problem. We have just come out of a high, high inflation era, and we are going back to hopefully more normal inflation rates, and the last thing we need on the inflation and growth front is a surge or lasting surge in oil pir price, because that will be detrimental. Jonathan taking the temperature for the potential of broader escalation in the region. Crude right now 90. 65. Sonja marten of dz bank. The president had been due to travel to colorado to visit the largest wind turbine when you factor in the world. The latest from the white house, the president s trip to colorado is postponed. It will be rescheduled. The president will remain at the white house to participate in National Security meetings. Tom it is going to be that in real time as well. Also to the diplomacy of what he can affect is in talking with allies. Less talking with israel and talking with there are intractable issues that israel will do unilaterally, but the real question is what does he do in dialogue allies, such as mr. Scholz of germany. Jonathan welcome if youre just joining us. At 87. 58. The team here at bloomberg reporting the president is considering a trip to israel. This line is important, though. According to two people familiar with the internal discussions, note decision about whether to travel to israel has yet been made. That was our latest reporting. Indications this morning, that trip to colorado postponed, postponed because the white house will remain the president will remain at the white house to participate in National Security meetings. Lisa the security for a trip like that has to be shocking. I was reading stories about how the tel aviv airport remains open at a time when they are fending off certain types of attacks. The question ive, on a broader level, is we do not know what is holding back the Ground Invasion. As you said, we do not know the state of the hostages, we do not know how many of them are americans, and we do not know the red lines that either iran, hezbollah, or the hamas militants could cross before the u. S. Gets involved, before other nations in the region get involved. Tom this is our modern, our new war can you imagine lbj slipping away to vietnam . Jonathan is it a distraction . Is that the kind of security distraction that country needs at the moment, which will fall under consideration i am sure . Coming up next, Erika Najarian of ubs. An everchanging landscape comes with challenges. From our vantage point, we see opportunities. As a topten real estate manager, we harness the power of a 360 perspective, delivering local insights and global expertise across public and private equity and debt. Our experienced team and vast network uncover compelling opportunities giving our clients an exclusive advantage. Principal asset management. Actively invested. Operationally, this was a good quarter, both on a consumer and commercial lending. One scenario that has not been talked about with the fed with a rate because is, with rates staying high and if the banks can hold the line in terms of deposit costs, they can enjoy a net interest ruth. Growth. Jonathan jpmorgan has been enjoying that growth. That was ken leon. Let me update you on the president s movements. He had been due to travel to colorado to visit the largest wind tower manufacturer in the world. The latest from the white house, the president s trip to colorado is postponed. It will be rescheduled. The president will remain at the white house to participate in National Security meetings. Our reporting here at bloomberg is the president is weighing a trip to israel. No decision, according to two people familiar with the internal discussions. Tom it has not been made, but to lisas delicate point, do we need a distraction with this . It is not something for me to spout about, but certainly it will be part of the zeitgeist over the next 12 hours. Jonathan there are two simple options. Distraction, one, and two, talk about a display of support, for the president of the United States to israel at this point. Lisa and a lot of people saying that tony blinken and his words and the Aircraft Carrier support has been readily heartening for those in israel. There has been a question of how this complement complicates other diplomatic negotiations as well. A lot of governments in the middle east are not in alignment with the majority of their populations, which are increasingly having protests. Tom a weekend of really intense diplomacy. If you are just joining us, equity market looks like this. S p 500 positive by 0. 4 . The next couple of days four earnings shaping up as follows bank of america just around the corner. That is a big one to watch. That stock absolutely hammered, down Something Like 20 yeartodate. Goldman sachs coming up tomorrow. Then it is on to Morgan Stanley on wednesday. Tom i am fascinated by what mr. Moynihan does to provide fixed income price clarity across his giant enormous platform. One outcome is to say wait for next quarter. Maybe it will not be visible here, but it will be visible in the 90 day report hence. Jonathan this report from j. P. Morgan not bad tom it is terribly they were struggling. Joyce chang showed up on stage with a cast on her ankle, tripped over a construction block on park avenue. Jonathan youre making that up tom i would never do that. [laughter] lisa why are we doing this . Jonathan no idea. Tom joining us to save the show, Erika Najarian. She is not wearing a cast on one of her ankles right now erika how do you know . [laughter] tom i look at where we are right now, and we are down 48 from the nirvana we did in 2022, 2021. We only have 20 to go to covid lows. What do they do to turn the ship around . Erika it is pretty simple. They have to disprove the negative, which is that higher rates is only bad for banks or only bad for banks. As you can see in the Earnings Results so far, that is not actually the case. A lot of the banks have the raw material to make more money in a higher Interest Rate environment, which is a good deposit base. But what we have seen with the three Bank Failures is the dark sides to hire rates. What happens when you are offsides and rates go up higher than you think . What the market needs to see is you are not seeing massive capital losses, you are seeing deposit stability, and net Interest Income progress in the right direction. Jonathan correct tom correct me if i am wrong, but the word is synergy. Can they not cut anymore . Will they choose which divisions to participate in in 2024, or will it just be cut 4 , lets go . Erika i think that may not be the right question to ask, unless it is someone like citigroup, who has a very specific expense cutting plan. Keep in mind that these things are making a lot of money right now. They are making a lot more net Interest Income than they did last year. Trading has been resilient. Investment banking has been cyclically depressed but could pounce back. A lot of these banks understand you cannot necessarily cut your way to glory. While we think they will be mindful of expenses next year, the question is how do they think about revenue resilience next year . How do they maintain deposit costs at a certain level if the fed does pause in order to enjoy fixed asset repricing . I think the question is more about keeping operating costs at a lower growth rate than revenue growth, rather than outright expense cuts at this point. Tom interesting. Lisa they are making bank, lets be honest. If they are doing so well and they have surprise to the upside , and they are not putting as much to the side to cover loan losses as many people expected, why arent the shares doing better . Erika because a lot of investors are still really fearful of what could he the consequence of higher rates and the rapid increase in rates, which is a recession. At the end of the day, a lot of these banks are making bank from a revenue perspective, but a lot of investors are fearful that we will see higher audit losses, whether it is on the commercial real estate books, corporate books, or the consumer weakening. Right now, the evaluations seem cheap, because a lot of investors are essentially saying i will wait to understand the complexion of the downturn before i step in and call these stocks in extensive. Lisa how much are you getting pushback, how much are you recommending to investors to buy certain bank stocks and make the argument they are undervalued because of uncertainty but they are increasingly acting like utilities because of how much capital they have put aside and how regulated they have become . Erika i think the reality is the banks are in a bit of a trading range at this point. You brought up two points. One is macro, one is regulation. Near term, reducing that the rubber band has stretched a little too far and they are at the low end of their trading range and they are little too in extensive relative to the earnings power today. That being said, you bring up a good point that not only is the economy really tamping down what their multiples could be, but also you have a lot of new rules coming down the pipeline. That being said, i like to describe the new rules in terms of what is coming down the pipeline as tough but not nearly as Game Changing as it was coming out of the financial crisis. If, for money centered banks, the regulatory landscape went from 0 to 10, its going from 10 to 12, and for regional banks, may from 8 to 11. 5. Either way, i am recommending to investors take advantage of these prices at the low end of the trading range, but valuations will not be able to rerate to normal levels until we get more certainty, more clarity on what the economy looks like in the next 12 months. Jonathan good to hear from you again. Erika najarian of ubs, going into Bank Earnings tomorrow and wednesday. The question for us can this administration, this white house, this country afford an escalation on two fronts worldwide . Peter tchir will join us in about 10 minutes time. The president said this to 60 minutes. We are the United States, the most powerful nation in the world in history. Went on to say we can take care of both of these and still maintain our Overall International defense. Janet yellen, the treasury secretary, was asked the very same question about eight british broadcaster, sky news. She said america can certainly afford to stand with israel and support israels military needs, and we can also and must support ukraine in its struggle against russia. Tom in american history, has always been asked. This is true of all of american history. What is interesting is yellen was incredibly visible at marrakech she is in luxembourg at the finance ministers meeting i believe this morning. The key thing for janet yellen is an american exceptionalism. We really stick out for growth, that we can afford these two war platforms. Jonathan peter tchir on that story, up next. From new york, this is bloomberg. 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. Hi, im jason. Ive lost 228 pounds on golo. So when my doctor told me i needed weight loss surgery, styles and textures. 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. The reason why people, including ourselves, have been to bearish on the market, we have seen a slowdown coming and it has not manifested. Some areas are starting to look like a rolling recovery. The fed is going to be a very muted player, whenever that deceleration in the economy arrives. Until we hit a recession, we will probably not see a definitive Macro Economic narrative driving the market. Good morning, john turturro, Lisa Abramowicz at tom keene on radio, television across the nation and worldwide. Peter tchir will be with us in a moment. Brent crude on the geopolitics, the war on the eastern mediterranean. Jon right, 90 point 90. 68 on brent crude. When a bank ceo turned around and says this may be the most dangerous time the world has seen in decades, and the very same bank records and Network Record quarter Interest Rate tom maybe even in america, better than good real gdp against these two forms on the break as we begin this hour talking about how you have two more platforms and the president focused on National Security. Jon that is the International Story and lets talk about the domestic one. Retail shares come up tomorrow, tons of that speak. Tons of fed speak. Less opportunity for the Federal Reserve to indicate what they may want to do on the first of november. Tom i guess chairman powell state duma no harm. Which fed speaker has your closest attention . Lisa do they just leaning into this message, it is doing the work force and the more it bounces around, the more we can step back and not raise again and either way, i dont know how much we will get some definitive statement from him other than his balance of risks now. Tom your thoughts here as we go into a monday midday in israel, your thoughts on the news . Lisa it is a fog. It is unclear why there hasnt been an escalation the way israel promised in terms of the Ground Invasion, it is unclear whether iran and the discussions they had with the u. S. Were successful. What is clear is that there is a feeling of high tensions and that this could potentially explode into a broader conflict that a lot of people would like to see avoided. Tom the markets trade on a 10 year real yield elevated to six basis points. 2. 34 shows the costs bear of capitalism. Jon for the strategy the treasury we have seen, the equity market was up last week for the second week of gains. Yields lower by almost 20 basis points. More on that on a 30 year less week, the 10 year up by nine basis points. Tom 1. 4952 o dollar yen3 1. 4953 on dollar yen. Usually popular guess and i dont me popular in terms of fun , i means insight and intellect, peter tchir peter tchir joins us. How has your narrative changed in 10 days . Peter it has been a very sensitive issue and we think it is playing out right now as it should, israel will eventually secure their border and they will make sure it is safe for the citizens and they will do it in a such a way that it does not escalate the conflict beyond relatively small borders. Israel has the capacity to eliminate cash eliminate the threat and they said they would but it is positive that they are doing this cautiously to minimize civilian casualties and the two risks that are priced in his deescalation of iran. It seems like we are taking channels to keep the threat low or something spurs the change in sentiment in saudi arabia. We are watching back carefully and thats probably the main reason israel is being cautious. Jon do you believe america has the capacity to support peter we have been under funding parts of the military so we will be stress retched stretched. It looks like we will help israel in terms of refilling be ironed down weapons iron dome weapons. Lisa when it comes to refilling the supplies, it takes money. Is there an appetite to refill the fence spending . How does that factor into your calculus at a time where a lot of people are not fully understanding some of the gyrations at the long end of the yield curve . Peter the unified message we get is that in terms of National Security issues, d. C. Is bipartisan and smart, you do not get to sit on these highlevel National Security committees unless you demonstrated intelligence and bipartisanship. I am comfortable where we have these real threats, we will do the right thing so there will be spending and it will be well done and it is necessary and we have to reinstate our influence. Lisa you game out what is priced in and what is not, you said earlier some sort of escalation with iran is not being priced into the market, how would it be priced . How do you see it percolating out in the market should there be some sort of expansion in the region with either irans proxy fighters or the nation itself . Peter you will see oil above 100 and it wouldnt just be a shortterm spike. Futures will build at a much higher price for two years and that will give us comfort on recent strikes spikes. If we really are going to impose shakes sanctions on iran and if they will disrupt oil flow, that would have a much more serious impact in the bond market can shake off what is currently going on and that will probably push yields higher and we will face much Higher Oil Prices for longer. Tom with an economics finance in investment, you are a student of history. Amid war is a general rule, what the stoxx do . Peter i think they get volatile and they are fluctuating when there is a lot of uncertainty about when the path has come through, we generally rally. There was the initial fear factor and there are people saying this is what it looks like and how it is controlled and this is what we do about it. The condition was light coming into this so i am not surprised if we can get a nice rally if he maintained the status quo. Tom i look at the catharsis required and i will let someone else smarted the meat determine if we have bond catharsis but we can certainly say we have not seen equity catharsis. Is that required . Peter we saw so much equity catharsis last time allowed around last year so i am asher how much catharsis is left. It is hard to be super bullish. Unless something happens in the middle east. Lisa what are you hoping to hear from fed speakers . Do you think they are that important with such heightened security as we get the last asp for a quiet period last gasp before a quiet period . Peter we have been talking about how important real yields are. We are hearing more stories of companies that were borrowing at 17 70 i think they will quaza let this play out they will clause and they will pause and let this play out. Tom i am assuming you are not 100 in cash so what do you buy . Peter i like bondspeter . We got to 480. Same on the stoxx, it is that range and as we push towards 4500, you want to reduce risk on the s p and when you get below, you want to be adding so it is a traders market. My ever hedges are buying bonds on treasuries, if you get this geopolitical escalation, although oil would go higher, the back end will price to up a true flight to safety trade . Jon if there is a voice you are following, whos is it . Peter there is not one particular voice. We have 16 generals and admirals retired for talking to people across the u. S. And world, trying to distill information we get and that is what we are trying to look for these take most pattern on the radar. It is tricky but we are trying to manage it well. Jon peter tchir, thanks for being with us. To update you on the movements, the latest from the white house, the president trip to colorado was scheduled today and postponed. The president will remain at the white house to participate in National Security meetings. Plenty of movement in this bond market over the last couple weeks. We saw yields higher, last week, finally lower on the 10year and 30 year. On the 10 year, up by eight basis points. 4. 6956. 87. 88 on wti. The s p positive by 0. 25 . Norman powell on thursday. One person of Macro Policy Perspectives at 8 30. Tom i want to get lisa, she mentioned 14 fed speakers and julia should be one of them and the answer is how do they message this with more and they have to say they have less confidence in their guesstimates. Lisa the idea of certainty being a policy is where we are at and what peter tchir said is interesting and it is something we heard from someone else, treasuries is still a haven trade and it is unclear if we are seeing that play into this but there is if there is uncertainty, and some point, bind will come in. Have . . We seen that . Have we seen that . Jon would you like to go to the fed speak for the next couple days . Lisa i would be dying to. Jon beige book. That gets you through wednesday and through wednesday and you go on to jefferson powell. Stick bostick, into the quiet. Period. It will be in the beige book. Facing the prospect of escalation it internationally, your equity market positive by 0. 25 on the s p. From new york, good morning. sfx stone wheel crafting the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . Safest to the israeli people, we have your back we save this to be israeli people, we have your back. We and our country will stand by you during these difficult times and i along with my colleagues here will lead the effort in the u. S. Senate to provide israel with the support required to fully defend itself from this monstrous attack. Jon the Senate Majority leader speaking in tel aviv. Welcome to the program, the s p 500 is positive on the s p, inching higher by a quarter of 1 . The nasdaq doing ok, even with a move lower on apple. Just a bit softer this morning, down by Something Like 8 10 of 1 . Apples new iphone 15 selling far worse in china. Shares of the device down 4. 5 compared with the iphone 14 over the first 17 days after release and this according to market track Counterpoint Research and there estimates provided to us. The stock is down three quarters of 1 . Tom that article out of our asian platform, not mark gurman and i. T. Not him and he is authoritative on all things apple. It is a discrete statement. Jon if it is real, it is the reality of things, is that because of Consumer Spending in china or competition . Tom our christian competition was in the article. This is the same angst six crises ago on apple. The shares jon scarlet we have tom we have a ways to go and we will do this with terence haynes, he has been a huge bout value on how inside the beltway is amending to what he calls geopolitical risk in half a halfcentury high. It is a sobering statement. I dont know where to begin. I guess i will begin with the immediacy of a president considering going to israel. Lbj did not do that with vietnam. What is new about this new prosecution of war . There is a lot of personal diplomacy involved here and one of the things the white house was considering almost certainly is the president s presence in israel might help that to happen and there is that on the one side and on the others, the president was interviewed on 60 minutes from a thursday taping and we were told by cvs how tired he seemed in on the other hand, you have to understand the president needs to conserve is energies. Tom from where you sit, does the president have a support of some form of our legislative branch for our things so fractured, it is the executive branch alone . The difficulty is one of the things biden wants to do is send a combined aid package for israel and ukraine mbappe fractures on the fractions in both parties that i talk about frequently and number one, and makes it more difficult and secondly, you will see a rare Public Prosecution of the administrations middle east and iran strategy when someone is in front of the senate for a confirmation hearing and his nomination is in peril. We will have a full throated discussion and debate about this in public which is rare but probably good for the American Public and biden. Lisa how much do some of these fights threatened the u. S. Ability to adequately respond . Terry less than is bandied about by newfound experts on policy and procedure. The pro tempore speeder speaker can use whatever powers of that are necessary other speakers and there is a choice by both parties be made, until a new speaker is established, they dont want to test that but if we had a mercy, a need to provide aid to ukraine or activate our war powers, almost certainly, the house would be able to do that quickly. I would not worry about that. Lisa we have been talking about the u. S. Will probably cue spending and there is a lot of appetite in bc for restraint at a time of a number of different conflicts and concerns domestically, how much are we seeing a doubling down on that with expect to Additional International aid and restocking and piling of weapons in the u. S . Terry you will get a israel and ukraine aid package and that will probably take another couple months. The markets, i think i have set on this program, the failsafe is the end of the calendar year is because that is when the regular defense spending and defense authorization, legislation finishes. Until you get to that point, there is no real forcing event that requires anybody to make a decision whether it be on domestic spending or eight packages. Tom to the war in the house of representatives, i am trying to find a history and a lot there and i cannot get there, the democrats will maybe help out senses republicans. What is their key ask . Terry they havent said. What they are saying is we could bed together with the temporary speaker to expand some of those powers. The difficulty is republicans want to come together around a speaker. Mchenry thinks of his role as purely ministerial until the time comes to elect a new figure and as i told marcus, what ends up happening, jordan doesnt make it and the best compromised candidate will be arrived at and that is probably mchenry. Something he does not want but will probably get thrust upon him. Jon last sunday, waking up monday morning to the massacre in israel, there was a sense that we could address the dysfunction in washington, perhaps we could you said those people are wrong. On the shutdown, and in any way or form, does that red blue states reduce the likelihood of a Government Shutdown given the aid that these countries need . Terry the eight packages will be hotly debated. We will make some accommodations but in the white house, they have said this, initially, there are a lot of things they can do without needing additional, formal congressional legislation , tickly on israel, we already have two carrier groups. Those eight packages will go through those aid packages will go through but the imperative hasnt changed in washington and what you will see is the house stumble through another week. Before coming with a compromise candidate. Jon terry haines pangaea policy. Tom he is well attuned. Whatever you think of his angle, there is, the world compromised the word compromised. How point quaint. Jon tons of fed speak and we will do that with jim caron of Morgan Stanley, david bianco. To get you prepared for the Bank Earnings over the next 40 48 hours, Jason Goldberg from barclays. Tom i am really attuned to the Conference Calls and do they say we need to wait another 90 days to really understand market to Market Dynamics versus bond price jon for tickly for the likes of bank of america where there seems to be a big focus in the market. From new york city this is bloomberg. captivating music the first law of thermodynamics states that energy cannot be created or destroyed. but it can be passed on to the next generation. explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. The power goes out and we still have wifi its possible. To do our homework. And thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. Tom equities and bonds and currencies and commodities and the commodity of note is oil. Brent crude has to lift over 90 a barrel. Lisa it comes after fridays move on bretts, of 5. 7 . People feeling out the situation, titfortat going on rhetoric that is hard to understand, parsing through some of the chest dumping thumping, how far are to permit our diplomatic efforts getting . We dont know. Tom Annmarie Hordern and the team will give us the latest. I have the vix under 19 so it is a more constructive volatility index, 18. 85. I am watching the real yield, not as real as it was a few moments ago. 2. 7 gives you a sense of the character of the market. Theres nothing weak in the analysis of mike mckee, our Bloomberg International economics and policy responded and he and i watched the jets big victory for the news flow and what we are seeing and we are trying to get a pulse of the American Economy that seems resilient. Will bca resilient retail report will bca resilient will we see a resilient retail report tomorrow . Michael we will see a solid retail report, slower than it has been but americans have been spelling spending learning money. While the headline goes down 4. 6 from 1. 9, the number of employees go up. The workweek lengthened so there is a mixed picture even though the headline for empire manufacturing, the new york state area, is not great, the underlying detail suggests there is resilience. Lisa as we ask again this morning, why the long end of the yield curve has experienced a spike upward, how much is this due to inflationary pressures pressures that might have been underestimated in terms of stickiness. What are you seeing with the amount of savings americans have left over . Michael we keep hearing consumers have spent out most of their pandemic savings except for those up the higher end. Americans seem willing to spend what they earn and they are still learning a little bit more than inflation so it could keep us going. Lisa you may have noticed a couple that speaker speaking, i personally enjoy hearing the nuances they come out with. What do you think will be most interesting to learn . What is the unknown they can illuminate at a time of myriad unknowns . Michael it is something they want eliminated they will not illuminate. The question out there for everyone is not so much whether they raise weights under the raise rates another point or not but how long will they keep rates higher . How long will they have to go and i dont think anyone will say that because they do not know but the highlight, on thursday, jay powell sitting with david westin. Tom lets stop the shelf right now. How did we get here . I get the idea of one of the 12 districts of the fed, you have to see the rotary in fargo or here and there but how we get to this frenzy of communication how did we get to this frenzy of medication . Communication . Michael they spoke into the rotary in fargo so they need to go speak to the rotary in williston. Tom did we use to Pay Attention to this when you were covering author burns . [laughter] michael you didnt see fed officials be very much especially governors and 90 see all of this fed speak with all of the Financial News media covers so it becomes a big thing and we hadnt had that before and we were always there for the speeches of the more recover, the more it becomes a but the more we cover it, the more it becomes a teacher. Saturday is a great holiday, the start of the fed blackout period. They are trying to get in before the deadline. Tom thank you for that brief on Economic Data. Julia coronado, president and founder of Macro Policy Perspectives joins us. I dont know where to begin between fed speak and the rest of it, how do you define your view of hire for longer . Julia that is where we are in this is the face of policy we are in so we are slowly moving away from do we need to raise rates another time or not to how long do we need to hold here and that in and of itself is applying pressure and i would attribute some of the last jump in real yields to the realization or the capitulation to hire for longer. That will in turn take its toll on the u. S. Economy. We have another leg of tiny coming through and that of tightening coming through and i think that is what we heard from fed speak, baden expect the jump off longerterm jump the jump off longerterm yields. Hold their fire at least until december and see how things play out but the threat of another hike will remain with us as long as we approach inflation saw so far above their target . Lisa i love your insight what is your view on how this is framed in your mind . Julia ultimately, this was a policy choice and they made a decision starting with the bernanke fed to prevent pivot a lot of fed speak, Forward Guidance on rates all of this transparency was a reaction to the sent that the American Public had no idea what the fed did. They were incredibly powerful and i think there was a sense, even before the Global Financial crisis but particularly after, the fed owes it to the American Public to be as transparent as possible and what that means is what feels like at times, a cacophony of voices but i think that is better the in the alternative of the secret temple making these powerful decisions over our lives. Lisa there is a question about the ability for the fed to remain independent politically and i say this at a time where they always say they are for fiscal deficit is getting vigor and bigger and one of the big instruments to keep yields low has been the Balance Sheet. There was discussion about the potential for the fed to deploy the Balance Sheet do yield curve control. If there is this feeling of uncontrollable action at the long end, do you see that as something that politically they could afford to do . Julia i think the bar is high to doing Something Like that. Based on what we are see hearing from fed officials, they are quite commission committed to running the Balance Sheet for down. I think the fed is uncomfortable with this earnings position they are in and while they are not panicking, i think they are committed to bringing that bounce she down that Balance Sheet down. They have shown a great reluctance to turn to small tweaks to Balance Sheet policy that they could implement to address concerns about banking liquidity or the yield curve. I think the bar is high. Tom i am fascinated by their constraints, their lack of degrees of freedom because of a he test a new hire real rate regime because of a new higher will rate real rate regime. Do they have less wiggle room . Julia they do probably because we are approaching their inflation target from above and not below and that is a constraint that ties their hands and if we have a wobble in the economy. They will b a large, they will be a lot slower to turn to easing i think we have a lot of inflation news in the last few months but we are not there yet. Tom lagarde comes out of the panel i did in morocco and says fight for us, we will get back to 2 , amateurs like me read that as 2. 0, this april like you read that as 2. 0 does a pro like you read that as 2. 9 . Julia i think we need to be well under 3 before the fed were to consider pivoting on policy towards actually easing. We think that is possible especially of rent start cooling. It didnt during the last cpi but i think i dont think they will back off quickly. We havent heard anything chair powell decisively has bedded down any notion they would contemplate a higher inflation target decisively and unequivocally so i dont think that is on the front burner anytime soon. Tom thank you so much, Macro Policy Perspectives in advance of david westins conversation with the chairman of the Federal Reserve, look for that thursday, brent crude, 91. 24. Equities lift, futures of 20. What are you looking at . Lisa i am watching brent crude and watching the pingpong action in the bond market at the long end and the 10 year and the 30 year and how much they have bouncing in the new normal. It makes a different test a big difference and i wonder at one point, someone up Deutsche Bank someone of mazzulla same you could you basically have corporations that cannot really survive in the same way and write eight is the rite aid is the tip of the iceberg. Tom maybe it is the mother of all somebodys. All zombies. This real yield at 2. 3 i find to be extraordinary. Futures up 20. Lisa we are looking forward to a conversation with David Stephen major to a discussion you have been having about christ down, it is not just a yield issue. This is going to be the question, are we seeing the bond rules capitulate bond bulls capitulate in a year of bearishness . Tom what i would say that is so important is steve major looksse yield curve, he does not just partition it. He looks at the emotion and that gets into catharsis when you get to a lower yield. Lisa and trying to understand why we havent seen it yet and one of the bigger questions is of everything we are hearing about the middle east and we have heard guest after guest saying the market, it is a market that looks past the human tragedy and suffering and how this this affect me right now, people are not seeing it if there is an escalation that you will see the flight to safety and that will be expressed in treasury. Tom i will take is simply down to brent crude here at the 91 level and you say how does that advance to something of angst of all World Leaders and the answer is suez can now canal. To me, that is the single geopolitical issue that folds into our worlds. Lisa and unknowns at this point given the flexibility to respond to that given where we are fiscally and where the appetite is. Tom please stay with us, stephen major of hong kong and hsbc will join us. This is bloomberg on radio and on television, 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. Market says there is over one third pop probability that one of the two meetings is live. I hope it is not and i say that because not only are they worried about the lag affects but i think there is a danger of trying to get to 2 to quickly. Lisa you parse through how to understand the inflationary environment at a time where the fed is determined to get down to 2 and we can see her get trying to grapple with this and you are seeing a pinned expectation on the front end of 5 and the fluctuation continuing at the long end with 10year yield up seven basis points, after we have seen a incredible amount of volatility. Tom in looking at the move index and all i can say, intelligent, we are not to the massive catharsis of 0709. We are right there. On this move moving average, i am like give pause. Lisa you are not seeing as much action in assets perceived as riskier. We did talk about apple earlier and how an independent report not that much, down. 5 off the idea that maybe smartphone sales, the latest addition in china, are not selling as quickly as previously. Still shares down after stellantis shares down, the strikes are ongoing and still ongoing for the auto manufacturers which i think is important to keep mentioning after we heard from shawn fain. Tom thank you for bringing this up because there is other news we are focused on. We are focused on the president change in schedule, he was colorado bound and he said he will stay at the white house and look at the mess we are in but there are other stores. We are committed to keeping up to touch with the. Lisa to build on the geopolitical story and i want to end with shell shares with a record high and this comes up on the heels of expectations of oil to increase and a renewed focus on oil and not moving away and will we keep hearing that more and more . Tom really interesting in morocco to see the imf not distance themselves but to see them move away from that and what is great about this is our next guest, i said, what do you think he said i am not coming on until the tots are in first place. Ed congratulations lisa congratulations. I am glad to speak with you. We are at a time of incredible bond bear market and you have been bullish. How can you reaffirm that at a time where we dont understand why the selloff has been so severe . There has been a capitulation so there will be people like me and people with skin in the game, people who are long with bond to had to have to cut their position and that could be for Risk Management considerations and that could be because clients are taking their money out and having to respond to that. There is evidence of capitulation in the way the term premium moved. It is the back end where the action is and i think there is a lot more safety in the front end. You can see twos are behaving differently. For the first time this year, twos become say. If the fed is done, your desk the fed is done money will creep up and that is why people are leaving the back end along. Lisa i want to go to the whole capitulation story. You said there are signs of capitulation, who is selling so aggressively at a time where there is there is a buyer strike . Steve the truth is, you never know to afterwards. The bond market is fairly sophisticated but you do not know the buyers until after it happened and you can see the supply coming because it is published. You dont know who the gaming of who will buy. The official sector overseas is not sponsoring the market as it was before, the private sector isnt picking up enough so it has to be said inside here. 70 of treasuries are held in the u. S. It is probably not the banks, real money has taken long positions and maybe be dust maybe readjusting. Has to go to retails investors and those in equities and big investors in the multiasset base. That is where the marginal buyers. Tom the great fear is what i call the chris whalen science. Chris whalen and in the bond market, you try to do something and on the other end of the phone, whether it is the 18th or 20th century, there is silence. Probably near that . R. O. E. Near the are we near that . Steve the evidence is in the options. It gets to the point where the value is too obvious. You mention really yields several times. Really yields will real yields several times. The inflation piece is locked. When real yield is about the i am not saying it is free money, you look back in six months and he should be happy with the investment you made today. Tom 700 pages of the imf, the blue book and the green book and the redbook and one person said she would print a copy for me so i can read it. One i read is fiscal instability, liquidity and solvency. This steve major ha does steve major have to quiddity and solvency issues have liquidity and solvency issues . What about liquidity . Steve this is the price of getting stuff done. That is what liquidity is. When the market is illiquid, it is more difficult to get big trade that. Done. There is a liquidity issue because the banks arent prepared to hold big inventory. The pretty and risk liquidity and risk premium tend to hold together so if we have a risk premium that is what is happening right now and i look at this and i say you have record move in the term premium even back to 2013 the context is important. 2013 and the context is important. You have a to your bear market going to a three year bear market. The term premium flipped. You really are entering a good level of yield. Lisa given the fact you think we are at a good level of yield, how do you lean into the front end and not the back end . Why dont you go all in on the 10 year . Steve investors want to buy bonds for the first time, who are rather shy, can creep into the two years of the money Market Product and they will not lose a lot of money, if any. You are safe in the twos. You creep up to threes. I going to look back in six months and think the yield has fallen 100 paces. Lisa where is it going . Steve our forecast is 3. 5 and we are running out of weeks and months. 325 to be the right number in six months 3. 5 could be the right number in six m onths. It is the same as was ham will do well. One final question. One person says the modeling on the 2. 5 inflation adjusted yield and that took me back. Take your nominal low revealed call and squeeze it in a new call. Steve if there is one thing that has come through, inflation targeting is credible. For me, it is about real yield, 2. 5 is way above trend. Therefore we can take 100 basis points off that. A fairer level for the real yield would be 1. 5 and that the 2. 5 . That would still be about 100 over the fed people are saying that the real rate needs to be hired, it is priced as a lot higher. Tom steven major joining us. Tonight, please stay tuned, all of our reporting from washington, balance of power with representative stevens of michigan. adventurous music be ready for any market with a liquid etf. Get in and out with dia. 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. Jonathan live from new york city this morning, your equity market posited by 0. 5 . The countdown to the open starts right now. 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, President Biden considering a visit to israel as the u. S. Finds chinas access to chips and investors mulling corporate earnings. Ot