Transcripts For BLOOMBERG Bloomberg 20240703

Our top story this morning, President Biden touching. Down in israel. A single blast in a hospital in gaza killing hundreds and israel is letting hamas and hamas is blaming israel. The exposing explosion threatening to tip things over the edge. Pres. Biden based on what i have seen, it appears it was someone on the other team. There are a lot of people out there. We have to overcome a lot of things. Jon the stakes for this trip cannot be hired. How do you ensure aid gets to gaza and civilians are kept out of harms way . President biden has arrived here in tel aviv and he was greeted by Benjamin Netanyahu. This is a very different trip then joe biden planning to do for hours ago, this was a twolegged trip originally. First in tel aviv and the second in jordan. What can joe biden achieve . You can suppose you can show support for the israelis. Chuck schumer was here in this building a few days ago. We understand to client 2000 soldiers on high alert but the third bid, the diplomatic side, has been by the exposing in the hospital in northern gaza. That has been completely torn to pieces. Tom what are the ramifications for the president and the american contingent that the era part of the trip is canceled the arab part of the trip is canceled . Oliver i think it is huge. The fact that the rest of this in the arab world is incensed about this and even though President Biden, considers from what he had seen that this was not an israeli operation or affect that has not been totally clarified, this is another 500 people dead in a hospital that has been overburdened and for many people in the region, that is not the sticking point, that is nuanced that is not in front of their nine minds. Lisa we are Getting Better around is calling for an oil embargo against israel based on what we saw with the explosion, how much is this prickling percolating out . Oliver i think it has only gotten greater since what happened last night and it is the shutting down of that diplomatic channel and the conversations that would have been key. What can joe biden achieve . May be getting some of that aid will from the southern order of gaza getting that into gaza to pull some of the relief a little bit would be a diplomatic step forward but apart from that, it is hard to see and we will be watching your the press conference after he has met with israeli leadership but we understand some of the victims that encountered that attacks in southern israel so we will watch for that press conference, we dont know what time. Jon i went to pick up on sunday you suggested. Israel working to allow civilians to leave through the r aza rusting. It is unclear if it is for foreign nationals or foreign nationals. Oliver the jordanians said it is a redline. It will be a another part of this complicated problem. Puzzle. This is at the very heart of this issue and it is seen as a liquid fee territory and moving people from their homes into another country and that is not acceptable for many of these leaders. Tom does the president have a agenda for white house schedule when where we know when he leaves . Is this a structured trip as usual or are they making it up as they go . Oliver we get the sense that they are making it up as they go a little. This was supposed to be a longer trip that has a jordanian component but it has evaporated. You dont expect the president tuesday overnight in the region. As we have seen with Antony Blinken, the schedule has moved and has been fluid. Olaf scholz was here. We do not have that expectation but everything is on the table. Jon there is a growing presence in the Eastern Mediterranean, can you walk us through what we heard yesterday about the kinds of numbers the u. S. Has on standby . Oliver but we heard his 2000 troops on high alert and we have what we heard is 2000 troops on high alert. In terms of deterrence, this is going to be absolutely huge but it will provide military aid to israel and you hear every day, the iron dome taking rockets out of the supply and that has unlimited ammunition. There is the question of hezbollah, if they get involved, they have a unknown number of thousands of rockets stationed in southern lebanon deep underground and if they fire many of them, could overwhelm the system so this is the great fear of escalation in israel and this is the situation that has been made infinitely more complicated by the explosion at the hospital. Jon oli crook on the ground in tel aviv. The president of the United States could be speaking in the next few hours or so. The backandforth, trading accusations and hamas blaming israel, and israel pointing toward a video the pressure will be on israel to provide evidence on what they are suggesting an eight the next 24 hours will be immense suggesting in the next 24 hours will be immense. Tom what is interesting, is that phase praise Islamic Jihad is the phrase, Islamic Jihad. Lisa theres the question around how many proxy agents are there in the region that are being funded by iran and are connected and if there are different factions, there are feelings that there are more people involved. What is the trigger point for something that will viral into another frame of mind . You are seeing fears of that. Jon getting reports from afp, thank you for our team in brussels. Tom i think across Continental Europe and closer to israel, this will be a theme. This is in the u. S. As well. Maybe it is hidden and maybe it is out of the picture but i think all intelligence communities of every persuasion are hyper focused. It is falling into the markets. I am looking at the screen and with the president in tel aviv, there is new tension. Jon equities is self a little bit south. Wti crude 89. 23, up three percentage point. Points. Disturbing pictures in the last 24 hours and for much of the last 10 days. You look at the market, there is a belief that maybe this could stay localized and theres something that investors can ignore. Is that the wrong approach to be situation . It is a terrible human tragedy and from a market perspective, anytime you see rising and uncertain Geopolitical Uncertainty, that is better for markets. That is bad for markets. It is coming at, a vulnerable time. Where a for all that, i think it is ingredients of worry. The only nonnegative thing i can say about this is these high levels of uncertainty have become a new normal over the last couple years whether it is the ukraine invasion. I think the Market Reaction you are seeing, whether it is stocks not selling off or whether it is haven acids not rallying as much as people think, unfortunately, we just got used to these very high levels of uncertainty in the last few years. Lisa are you saying that because people have gotten too high levels of uncertainty, there is going to be a big asset repricing as a response . That is the scenario that has played out so far and i am not a geopolitical analyst and there is huge uncertainty. Things could get worse easily. That explains the situation so far. The one thing i would say, oil is the key worry point among assets. A little bit of context, this is ninth this is not the 1970s and the economies are 60 , 70 Less Energy Intensive than they were back then. It is a big deal. I am worried about it. I do think it will self correct. Every dollar you have hundred 90, everyone is trying to use less oil and the economies are different now than they were. Lisa Goldman Sachs said that markets are not accurately pressing some of the risk out there. A team at Goldman Sachs saying a prolonged period of deal Geopolitical Uncertainty coupled with is likely to trigger growth concerns. On the margins, are you taking off risk in life of the heightened risk scenario we have on the table . Ben i think we are in an environment where you need to be invested but reasonably cautious. GeoPolitical Risks are rising and that is not good. 90 oil, bond yields where they are, it is not good but we should be focusing on the bigger picture, which i think remains reasonably constructive in the Interest Rate cycle is coming to an end. The economies are almost as good as they are going to get. The earnings cycle is traffic troughing and you will get technical tailwinds from seasonality and investors are cautious and that is the ingredients on why the markets arent reacting more negatively. Jon ben later laidler. You can have a bank ceo turn around and tell you it is the most dangerous the world has been in decades and the very same thing ceo can lose their guidance and deliver better numbers. Lisa the idea that the emotion of the moment is incoherent with the coldhearted nature with the market trying to game out probabilities and we do have a level hanging over your head where you have such explosive types of scenarios in a key region, it takes its toll and that is what i am hearing from notes whether it is from Goldman Sachs strategists and bank of america. These are some of the things i am watching. Jon we will talk about goldman later in the hour. This bond market absolutely punishing. We were told that yields at the front end were pinned and they werent, but the 10 year up 11 basis points. Dear 10year, 4. 8280. The 10 year, 4. 8280. In the u. S. We see millions of Cyber Threats each year. That rate is increasing as more and more businesses move to the cloud. So, the question is. Cyber attack as cyber criminals expand their toolkit, we must expand as well. We need to rethink. Next level moments, need the next level network. [speaker continues in the background] the network with 24 7 builtin security. Chip . At t business. Based on your goals, whatever they may be. All that planning has paid off. Looks like you can make this work. We can make this work. And the feeling of confidence that comes from our advice . I can make this work. That seems to be universal. I can make this work. I can make this work. No wonder more than 9 out of 10 clients are likely to recommend us. Because advice worth listening to is advice worth talking about. Ameriprise financial. 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. Nearly everything has changed and want to make the argument that the president was going with a significant amount of political and moral capital for having taken a very unambiguous stance on the question of terrorism and israels right to defend itself, in preparing for this trip, you have the backdrop of a horrific event at the hospital in gaza. The trading blame doesnt change the fact that hundreds of people have been killed. Jon that was the former u. S. Ambassador to israel or balance of power, arguably the most difficult trip the president of the u. S. Has been on during his tenure in the white house. This line from Israel Defense forces. A failed iaf footage from the area around the hospital before and after the failed rocket launch that was posted on twitter. The pressure to work out what has happened here in the intensity of this trip, i cannot really convey how difficult this moment is for the president. It was hard enough to begin with 24 hours ago. Lisa especially with the protests that have been percolating out with the region in the region and beyond. They were dramatic in their is a question on whether the stances of egypt and saudi arabia are shifting based on statements they put out, taking a side and blaming israel. It raises the specter on how much harder it will be for President Biden to get some sort of cease fire, an agreement when lines are hardening. Tom i cannot go to a cease fire. We are miles away from that place and with the Israeli Military is going to decide to do here. Perhaps when the president leaves and beyond. I see a lot of this pharmacy of this policy of diplomacy going on. Jon the headlines are diplomacy is not taking place. One part israel, the second part in jordan and almost immediately after the blast, several people canceling the trip and that was the key part of the reason, the objective of making the trip to begin with. Tom for most of the americans not familiar with the geography, the west bank is east of the jordan river and what is so important is the analysis of israel is what should have happened, what should happen forward, and it centers around this west bank. That is buttressed against jordan. Jon negative by one third of 1 , no trauma in the equity market and s p 500 and lenny of trauma in the equity market and plenty of trauma in the equity market. We have a running in crude. Wti is getting closer to 90. Tom visit for the sophisticates this is for the sophisticates. That is really a team leaf of tea leaf of the tension out there. Leslie, i have to go to when your recent essays, everyone in your world is writing and thinking in looking back and forward. You look back and say america went off the watch in the labonte. What did we do wrong . There is a sense that with the withdrawal in afghanistan, as tough of that as tough as that was, america could focus their priorities are teasingly on china and that with checked by russias invasion of ukraine that brought america squarely back to the euro atlantic, with full force with nato. There has been a hope and a belief that this was a president that will finally execute on that intention of so Many American president s to reduce americas footprint in the middle east and to focus on the Strategic Priorities and number one with china and this has shown in spades that america is an essential power and we have had china at its 10 Year Anniversary of the belt and Road Initiative the belton Road Initiative. It is clear with President Bidens trip and ongoing diplomacy, this is difficult with the u. S. In the present and the past, they are complicated but it demonstrates that the u. S. Needs to stay engaged. Tom we were talking about the military exercise we believed to, and we do not have reports of that yet. Leslie vinjamuri, you borrow from in a postamerican world, what is a post hamas world what does a post hamas world look like . Leslie it is hard to imagine. That is an objective. We are off far off the cease fire and it is widely expected that when President Biden leaves the region, there will be a Ground Invasion. That will be very difficult in an context of urban warfare but that objective is to rule out hamas. We are looking at probably a devastating loss of life for palestinians on the ground and there is no Good Alternative and this is the real challenge. We note the pa has not demonstrated the ability to govern, can be a vacuum in israel and cannot take over gaza. There is nowhere for the palestinians to go and the problem is who governs in a gaza, if and when governs in gaza, if and when this crisis is brought to a close. That is where the strategic parity has got to be. Lisa how much more some diplomacy for President Biden based on some of the rhetoric out of the government of egypt, of saudi arabia, nations that previously might have been more amenable to working with President Biden . Leslie that is the great tragedy, there was the push to put together an agreement and relationship between saudi and israel and now governments across the region will be contending with profit with public pressure, grievances from palestinians who have been killed. That makes it more difficult, now only to engage on this question not only to engage on this question of a cease fire, putting together some sort of Regional Peace initiative. But to be seen in doing this in a context of a massive loss of civilian life and this is why we are seeing President Biden in public, behindthescenes, working back channels. There is an effort to get some resolution tabled at the un security council. I really strong push a really strong push and an uphill battle to have committed 30 humanitarian corridors. These are all tremendously difficult things to achieve even in the best of circumstances. Jon particularly unnerving yesterday evening to see the protests around across the middle east in expected places, lebanon to see them arrive in natos turkey, can you talk about the relationship between lebanon and turkey . Leslie it is difficult to square turkey as a vital partner to the u. S. And nato. When you talk about israel and palestine, the politics of different. Our different the politics are different. America is a supporter of israel and the close relationship has the effect of alienating people on the palestinian side and making that process prospect of bringing some of americas closest partners on board to work for what we are so far off that prospect for peace, the question is can there even be a significant effort to protect civilians, which is what the president is trying to articulate, but many people are trying to call for. It looks very difficult. Jon lags Leslie Vinjamuri of chatter mouse chatham house. To finally lose 80 pounds and keep it off with golo is amazing. Ive been maintaining. The weight is gone and its never coming back. With golo, ive not only kept off the weight but im happier, im healthier, and i have a new lease on life. Golo is the only thing that will let you lose weight and keep it off. Who loses 138 pounds in nine months . I did golos a lifestyle change and you make the change and it stays off. soft music after military service, you bring a lot back to civilian life. Leadership skills. Technical ability. And a drive to serve in new ways. Syracuse universitys Daniello Institute for veterans and military families has empowered more than 200,000 veterans to serve their communities and their careers. From professional certifications, to job training, to help navigating programs and services, we give veterans access to support from anywhere in the world. Jon equities doing ok this week. Up on monday and on tuesday unchanged on the s p 500 and this morning, 0. 4 on the s p, down 0. 5 on the nasdaq. Another big day on the bond market yesterday. This bond market absolutely punishing. You get comfortable of the front end of the curve and you say things like we are pinned here. The data brings you back in. Yields are lower by three basis points today. Lisa one person nailed it up barclays of barclays and saying people are misinterpreting the idea that the longer end of the curve is doing the work for them. Yesterday, that was the tone that we felt at the front end. Tom one person that we visited with at jackson hole had a blistering note out this morning. I am paraphrasing. He is looking for a they figured gdp and that has been keep it simple and we have a huge geopolitical prices on our hands. Jon we levered it yesterday, the economists cried session and it hasnt happened yet and they still cried recession and people stop believing it people stopped believing it. We will finish on the euro, against the dollar, in the currency market, 1. 0557. A look at crude, rally up 3 to 92. 62. On the surveillance, President Biden touching, israel hours after an explosion at a hospital in gaza killed hundreds and left the conflict at a delicate point. Saudi arabia and turkey and others condemning israel and joe biden saying he is outraged. I and we are sad and outraged by the explosion in gaza yesterday and based on what i have seen, it appears it was down by the other team and not you but there are a lot of people out there who are not sure. We have to overcome a lot. Jon it is the other side. Lisa this is an incredibly tricky moment and i have to say, last night was an insight an indictment of how quickly information moves and openly social media takes it to the other side before there is anything inconclusive anything conclusive. How further does this push President Biden away from the leaders of saudi arabia and qatar, who are trying to come to a agree me to an agreement. It seems like the figures have gotten wider. It is a powder cake keg. Tom i will say all of that is true but these were first conversations with people with a legacy of dealing with the Palestine Authority or the three shades of palestine there is. One of the great problems here, we always bring out back to biblical times, the world the war will be short. And you put a timeline on the exercise in israel now in the gaza strip . The diplomacy is out front, verbal, visible but i am not sure what the efficacy is other than that thing up diplomacy, keep talking. Jon duration, breadth, i have no idea. As the weight for the new gop house bureaus on, there are holdouts for jim jordan. Another vote scheduled for 11 00 a. M. Eastern but some republicans are suggesting that jordans campaign is heading in the wrong direction. Terry haynes turned around and said anyone because of problems abroad, they are wrong. Lisa at 11 a. M. Today, what happens if jim jordan gets fewer yes votes than he got yesterday . This is a real possibility because our number of representatives who voted for him yesterday say they will switch their vote to know. Who is on the table as a potential successor to put their name up to be pilloried and shot down . Tom a centrist republican who name escapes me, he said he cannot fathom the gentleman from ohio trying to find a middle ground with republicans or a middle ground with the house of representatives under some form of domestic or international crisis. That was a nuance of why is this happening, particularly for the International Audience . Jon escalation abroad, dysfunction at home and the third story speaks to both. We have a bond market issue, a major issue, treasuries yesterday tumbling, twoyear yields, 17 year highs following the jump in retail sales leaving leading to increased speculation that the fed will have to come back to the game. Year to date, this was meant to be the year of the bond. Two year, up 75 basis points this year and 10 year up almost 100 basis points and 30 year up 98 basis point this year. Lisa something that two people said, there are a lot of people that believe in the bond story and they are being forced to sell on the margins as people realize the losses. What happens if you get actual withdrawals in response to some of the losses in the bond portfolios and some people even believe in the long term, yields going lower and forced to sell within the weakness admitted amid up on strike a bond strike . Jon it is getting more expensive. Paul tom the bloomberg the bloombergtom tom the bloomberg total return index we are waving effect because of high inflation. I went to the website and i looked and you have 7. 9x percent mortgages in the refinance rate for mortgages is over 8 . Wow was my response. Jon it is so expensive. Tom we are back. Forget about the 2006, 2007 analysis, you can take this back prevolker. Jon go to bank of america earnings and look at the origination of loans and mortgages and look at the Credit Rating of the average borrower. They are lending to people with super high Credit Ratings. Can you get access to that price to begin with . Tom access to capital and when i say the paul whelan silence, that is what we are talking about, if there is a silence to those with the immortal credit. You will go to the Global Global kindness of Capital Economics global we will go to the global economist at Capital Economics. How does it affect your economics . How have you adapted to your adapter your excel spreadsheets to the war adapted your excel spreadsheets to the war . Those of the things we are considering. We have not changed our commodity forecast price at the moment and we expected oil and gas prices to remain higher through the year and we are focused on the potential implications for inflation elsewhere. Tom brent crude of 3 . I noticed that statistic and jon ferro mentioned it and he is looking it as a as a kensington real estate and that is 6. 7 inflation in the u. K. , are other Central Banks, will they see those statistics and will they have to go longer or even higher because of persistent inflation . That is the real concern for the u. K. And a bit of the a disappointment. The encouraging point from the u. K. Perspective is that the labor market does seem to be loosening a bit and that is a key for the u. K. , the extreme strengths of wage growth which seems to be coming off a bit. Her other Central Banks, that inflation rate is not so high. Less cause for concern in the economies. The rise in bond yields that we have seen, it is doing some of the work for them so if anything, that would make them less inclined to hike further. Lisa the idea of a higher borrowing costs around the growth, how much does that train the ability that strain the ability for governments is that plausible without another leg higher in borrowing costs . Jennifer currency policy plans, i think are plausible because they are priced in for the market to some extent but certainly, the high levels of borrowing costs are going to limit the government ability to provide further support and we are expecting them in the future to consolidate to stop some extent. Lisa what are you looking at. Give a sense on how closely tied we have bloomberg coming out and saying if the oil prices have searched, you can see the oil Global Economy to into a recession. How much are you adjusting your parameters in light of recent developments . Jennifer we expected oil prices to remain relatively high to the end of this year and gas as well but we are keeping a close eye of the situation and that is what you need to see for those kinds of 150 per barrel you are talking about, high levels and yes, if that were to happen, we would need to revise our forecasts significantly and it may be that Central Banks in developed markets would need to hike further for fears that this affects core inflation and session risk intensifies. Tom one final question, what we have is a inflation adjusted euros that is tangible. How does a tangible will yield full into your gdp forecast for any divination. On the consumption side and particularly on the Business Investment side . Jennifer but we are looking at is the past room of these yields into effect of borrowing costs. We know the past year has been relatively slow partly because of a shift to more longterm debt particularly in Mortgage Markets in the developed economies so the effects of the policy tightening that we have dealt have not been felt by the average households in particular. We are looking to the extent on which that is positive in the future and financial conditions have tightened dramatically and lending coming off new lending and effective Interest Rates are starting to rise. We are maybe half of the way through feeling the effect of the policy tightening so we are looking at the remaining have to the extent that affects consumer spending. Jon jennifer mckeown. A story worth monitoring. This comes from a french language belgian newspaper. Accordingly, we have seen several of these headlines over the past few days. Tom belgium is a tinderbox of europe in terms of terrorism. It is part of where we are and i am confident we will see some of this in america as well. The ocean does not protect us. Jon a superfluid situation on the ground in israel where the president of the u. S. Is alongside with Benjamin Netanyahu. Any comments that come out of this meeting, if we get a briefing, we will bring headlines. Coming up, someone of jp securities. Morgan stanley, the final bank out of the gate. With tesla and netlist netflix on deck. With features down futures down, this is bloomberg. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. 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. im sam morrison. My brother max recommended you. So my best friend sophie says youve been a huge help. At ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. Our neighbors, the garcias, love working with you. Because the advice we give is personalized, hey, john reese, jr. Hows your father doing . To help reach your goals with confidence. My sister has told me so much about you. Thats why its more than advice worth listening to. Its advice worth talking about. Ameriprise financial. Frankly, the fed has won the battle of the American Consumer and they are slowing down and the question is, what happens next, we cannot predict but this is a 4 trillion base. It is hard to move around so once it slows this level, it will not kick right back up. Jon the bank of america ceo speaking with david westin yesterday and the retail numbers suggested the consumer boom continues. Brian moynihan is talking about a slowdown of his customers. This bank of america still the bank of americans . Lisa based on the pico scores they have, no. There is a larger question of him saying yes, the consumers are slowing but the question is to what . We are dealing with elevated spending levels. Are you going back to a higher or a lower high rather than the normal numbers of the past . Jon healthy but slowing. Can we give a shout out to barclays, came on this program instead perhaps the markets have it wrong. Based on the price action we saw yesterday following retail sales, i would say barclays and maybe pick up picked up on the sense of what is around the corner the scent of what is around the corner. Tom the fact is the markets are in charge and the market spoke with a vengeance yesterday. One thing i would point out as we go into Morgan Stanley analysis, i have seen a number of market cap studies in the grave unspoken is how jp morgan quietly quarterly to quarterly extends its lead. It is not fair to say it is them and everyone else but the tendencies are there. Jon bow performance speaks for itself. The outperformance speaks for itself. Session lows by 0. 5 yields are on trade are unchanged. Positive by 3 . Plenty of Bank Earnings including the regionals. Tom those are really important, the regionals are key and as we heard from tom michaud, the 90 is making up a part of a five pie. Devin ryan joins for a brief. Why does Morgan Stanley have such a book value, price to book value differential over Goldman Sachs . What is the distinction . Devin good morning. It is really the Wealth Management business. Typically, investment banks and Balance Sheet best event straight on book value and Wealth Managers trade on earnings so Morgan Stanley has a much bigger Wealth Management business. The big question is going to come back to what is going on with Net Interest Income within Wealth Management because that has been a tailwind for Morgan Stanley and we may see backflip. That is where everyone is focused. Tom they are not charles schwab, right . They are a different nii from charles schwab. Devin different and similar and it is driven by the customers in the Wealth Management unit does sweep cash to Morgan Stanleys make. Similar to schwab. That has been good but the negative side that they are losing some of the low cost deposit. That is going to higheryielding options like money markets and cds. That has been the story but Morgan Stanley has seen a huge tailwind to the tune of 2 billion the last couple years because Interest Rates have moved higher, earning more on the asset side of the occasion equation. Tom i usually dont go to the soap opera side of it but sonali basak insists i asked, is jamie is james gorman going to make a suggestion announcement succession announcement . Devin i dont think that is coming today. James gorman has done a fantastic job and they have a deep bench and we are, but with the direction it may go but you have to give him credit for how he has navigated the company. Lisa usually the regional banks are inside no to the Bank Earnings and this time, i am more interested in the regional banks and they seem to be doing just fine. We got data this data that interest margins came in below expectations and shares are tumbling. How much will regional banks tell the story as big banks cater to a increase we select wealthy group of individuals increasingly select wealthy group of individuals . Devin it is creating a lot of uncertainty with funding with deposit bases and to the extent the fed has done or Interest Rates move back down. That will be settling for the broader banking industry. Rates are higher and put pressure on funding into your point on Net Interest Income so that is where the pushpull is. We are focused on it. The macro is much more relevant right now than these individual companies and that is driving the story. Lisa to build on that, how much do the big banks on wall street tell the story that we are going to see some of the Smaller Banks . How much is the divergence from clouding any micro signal from big Bank Earnings that we used to get . Devin the big banks have a diverse business and areas like Wealth Management with Morgan Stanley less of a story for more Interest Rate driven firms. As rates remain this big question to the extent that we stay higher for longer, that creates pressures and the flipside, in our opinion, a lot of that money would have moved, the yields seeking money out of the Banking System are out of the brokerage system have already moved. If you have money, you likely would have moved it so we are dealing with the same issues we have been talking about for the last year but they are less intense. The question is do we have another step function higher in Interest Rates. You are talking about that this morning. That becomes another potential risk and you can take it to the other side is a if we are stabilizing, the whole system stabilizes but the uncertainty for Financial Investors is the biggest thing. Tom very quickly, everybody wants to do what Morgan Stanley is doing and i never see it in my life, Everyone Wants to be in Wealth Management. It has to be some form of zerosum where only some selected people win. Who is losing now . Devin there are about 300,000 Financial Advisors in the u. S. Today and 300,000 Financial Advisors in the u. S. 20 years ago so it is not a new secular growth. It is really zerosum and not to companies, there is always net share losers and particularly, some of the larger firms in Morgan Stanley and Morgan Stanley has been a winner and there is a big shift to independence of Financial Advisors leaving some of the wire houses and running their own book in business. That is why you see such tremendous growth in those firms so there is movement going around but it is zerosum so Morgan Stanley has been a winner of the firms and it is a scale name. Game. Tom devin ryan jon devin ryan of j jmp securities. Lets try to listen in. [indiscernible] tom that closeddoor meeting with Prime Minister Benjamin Netanyahu and the president of the u. S. Set to commence any moment in the president is in israel and he will not going to jordan for the summit with arab leaders including in egypt and jordan. We were hoping for comments. Tom the symbolism is shocking. For those of you in bloomberg radio, here is the president speaking. En masse seeks to maximize hamas seeks to maximize sibling casualties civilian casualties. Every day, they perpetrate a double war crime, targeting our civilians while hiding behind their civilians. And and betting themselves in the civilian publishing and using them as human shields. We have seen the cost of this the resilience has taken the rest of us by surprise. We are seeing their drag from higher prices weighing on consumers ability to spend as we move forward. We read far too much into recent fed speak that implied that the higher rates may have done some of the heavy lifting. That is proving not to be enough. It feels like we are in a Everything Everywhere all at once market. Jon live from new york city, good morning good morning, for audience worldwide, this is bloomberg surveillance on tv and radio. Our top story this morning, President Biden touching down in israel, his trip unraveling before you it started. A single blast at a hospital in gaza. Tensions are a boiling point. The president said he is outraged. Pres. Biden i am deeply saddened and outraged by the explosion at the hospital in gaza yesterday and based on what i have seen, it appears it was done by the other team, not you. There are a lot of people out there not sure. We have to overcome a lot of things. Jon the state of this the stakes of this trip cannot be hired. To ensure ai how to ensure aid into gaza. You have outlined a lot of that main issues in the fine line joe biden needs to walk in of different trip than what he was planning for yesterday and initially this was a twolegged trip and one in tel aviv where we were supposed to hear emphasizing deterrence and right behind me, it is probably just brightness and that is the Mediterranean Sea where the u. S. Has sent two carrier groups to deter any spillover and of course as we speak joe biden is in biz building one floor below meeting with netanyahu to discuss the next possible actions but the part we lost to the trip was the trip in jordan where he was supposed to meet with the president of egypt and the king of jordan and someone who presides over the west bank. That diplomacy was supposed to be a key part of the trip and it will no longer happen. Tom comments by mr. Netanyahu and comments by mr. Biden. It was brief. What will they talk about . Are they briefing the u. S. On a war to come . Oliver i think that will probably be part. Of the discussion of and the focus has been over the last 14 hours where you had the blast over the hospital at northern guys but in is the newsline arriving here, saying it seems that joe biden believes it is not the israelis was possible for it but there is more credence to the idea that the idf has saying that this was a malfunctioning of a rocket in gaza. That will be part of the discussion but we have been talking about this ground incursion, all of these euphemisms of what will come next from gaza for is really forces and this will be front and foremost in peace discussions, particularly when last week Antony Blinken made it clear that they have israels back and the full support of the u. S. But the how of how israel goes about dismantling hamas will be critical. Lisa overnight, over the past 14 hours, we have seen protests around the world including in the west bank and jordan, how much is the feeling on the ground among officials that are spiraling at this moment versus some of the imagery we have seen . Do people sense that how much do people sense that that you are speaking with . Oliver you wake up this morning with the headlines that we saw overnight and what happened in northern gaza, you feel it immediately around everybody. People waking up and talking about the latest things that have happened, it sends a shudde r down the spine of everyone. According to the palestinian authority, if the reports are accurate, that is 500 additional dead at the hospital and if you want to get to the nuance of whose fault it is, to a certain degree, that will be a lot of into some actors that will be irrelevant to some actors. This makes it difficult particularly when the diplomatic side of this trip has been basically blown to pieces by the explosion we had this morning in gaza. Jon oli crook on the ground in tel aviv. Stacy if. Stay safe. A uncomfortable tension hanging your that region. Maria, several reports indicating there are several attack rats at several airports across the continent, what is the latest . This speaks to some of the tension we have seen play out and the situation in france was at a total of six airports have been suspended, because of obama friend and that is being investigated and you have to factor the situation that took place here in brussels, two days ago, a man who shot two people on the streets and you go to friday where a teacher was stabbed in french. France. I go back to the words of president macron who said the Terror Threat has increased over the past few days and the warning that europe should not import tensions. Is talking about the situation between israel and hamas. But a bigger original religious component. When you speak to officials, they stated they are worried and they pay extreme attention to National Security and terror that may play out. Lisa over that initial days from the attack from by hamas we have seen participants come out in critical tones about israel. How much is that support waning or how solid is it at a time of a product a product fraught tension across the region . Maria it speaks to the different dynamics and sensitivity across european countries. There was an emergency eating by european leaders, they stand with israel when it comes to the terrorist attacks that took place. The head of the commission repeated it is hamas that unleashed the terror. The issue has to do with the people of palestine and the level of humanitarian aid that will be provided to specifically gaza and you have countries that safe you need to let in that humanitarian aid. For the europeans, they said issue at hand is that you have a military operation that is taking place in a place that is densely populated and the people need to get out. It is important to stress that the key in the European Union is egypt and the problem i am being told, the egyptians are concerned about opening corridors into the country because they fear they will get an incredible amount of people and this is going to be not going to be a permanent shortterm situation but a permanent situation. Tom all of this is symbolism. For those of you on bloomberg radio, the president and mr. Netanyahu met. Mr. Netanyahu had only israeli flags over his shoulder. How along from where you how alone is israel right now . Maria it is a difficult question because you go back to the different sensitivities that play into this issue. The bigger part, the European Union still says israel was attacked unprovoked and they have every right to go after hamas but it really is about the people of palestine and the response when it comes to civilians, if you look if you listen to all of schultz, he was there yesterday and he points to the idea that germany has a moral duty i am thinking of the irish, the belgians, and even the spanish who do say there is a level of collective punishment that it is not acceptable. You have to factor the idea that for europe, this is a fine mind because on the one hand, they want to be seen as supporting israel but they also cpr the country that aspires to the great they also see they are the country that aspires to the great democratic values. On the one hand, you have to support netanyahu, but push for a humanitarian resolution. Jon we saw a series of process corrupting across the middle east in lebanon and turkey. How on the edge, how tense is it . Maria it is a very good question because i have to say the language that i have gotten from officials and diplomats now, it is the most severe i have heard in a week. Ever since this started, they say this is a region that is a breaking and boiling point. You have to factor that president erdogan speaks to different audiences. He and nato is a different person than the one that speaks to the turkish people. It is our a religious component to this and the top european diplomat said that is an issue that needs to be calm to down. This should not be played as a interreligious conflict at this point in your does not want to be and in europe does not want to be thrown into this debate with the feel uncomfortable. Jon as we look to the middle east and the 10 situation on the ground in israel, the president of the u. S. In a bilateral meeting with his team with Prime Minister Benjamin Netanyahu and his defense cabinet. The objectives of this trip, the objectives havent changed. One, how do you prevent this conflict becoming a broader issue that ingles the whole region, two, how do you protect civilians on the ground . How do you keep them out of harms way . It was meant to be a two part trip, one to israel and the second part to jordan. As soon as we got news of the blast, of the hospital explosion in gaza. The second part of the trip was going to was blown to pieces. Lisa have the facts of the ground will ahead of the planning of the trips moved ahead of the planning of this trip . Have you have the powder keg we dont know the answers. Maria the diplomatic jon the diplomatic challenges get harder. If you are joining us, heres the price action, we are negative, session lows, down by 0. 4 on the s p. Yields are lower by a single basis point. Yesterday, some big moves higher at the front end of the curve. The twoyear at 5. 20. Breaking the Federal Reserve in the conversation and if the Federal Reserve was to entertain that, they get plenty of opportunity. Plenty of fed speak. Lisa we get a whole host of additional fed speak including chris wallace, waller, affiliate fed president , and that is all today a fairly philly fed president and that is all today. Tom that is a billy joel moment. Jon you have the escalation abroad in the dysfunction at home and you have a stash and you have a bond market that will stabilize. At home and you have a bond market that will not stabilize. Tom this core stability is rising inflation in yield, the adults we have on the show within this turmoil, this cacophony, go back to to borrow a simple phrase, the cost of capital of doing business as a household in a truly Small Business and doing business with procter gamble, with their earnings to date, the real yield changes everything. Lisa yesterday, we have yields touching the highest levels going back to 2006, what this what does that tell you about the moment we are in and the potential new outlook people may have to reckon with . Maria jon katie jon our guest of Deutsche Bank of next. Up next. This cabinet came together and standing strong, standing united and i want you to know, you are not alone. Youre not alone. As an as empathized earlier, we will continue to have israels back as you work to defend your people. Jon President Biden speaking moments ago in tel aviv along with Benjamin Netanyahu. The president s diplomatic efforts getting that much higher over the blast that killed hundreds at hospital in gaza. Tom the blank able blame game will continue. We dont need to go into them right now and i think people early in the morning have identified the horror of this and the blame game. I dont know how that payment going that blame game fits into the beachfront hotel. Jon that meeting on going when we get headlines from it and perhaps a reason. If you are joining us, equities negative on the s p 500 and down here by 0. 4 on the s p. Yields coming in a couple basis point, 4. 81. 89 handle on wti crude. On brent, up by 2. 6 . Tom we mentioned yield through the morning. We will focus on the markets here we will continue to focus on the marketeer but i will look at currency as a litmus paper. I am watching the team at the imf meetings is wither em. I am looking at the tea leaves to see how their currencies play out. Jon we are negative by 0. 2 , Dollar Strength out there at the moment. Tom watching dollaryen. We will call this stability. He is the senior prank Senior Vice President of stability at Deutsche Bank. What an urge to go to cash right now or go to 5. Xx money market fund, describe how you total Deutsche Bank world dont go how you tell the Deutsche Bank world, dont go to cash. The story with earnings is a simple story, they bottomed in the Fourth Quarter of last year and we have so far, what we have gotten is better than our constructive view. Tom i looked at World War Two and you do this on the bloomberg, you look from pro harbor pearl harbor to vjj this is not an analog to that but the emotion is still there, how do you continue your emotions when you are asset allocating with bond prices down and yield up. . Binky the s p 500 and the market is controlling his emotions and the reason is, it understands pretty well what happened the last time around which is not very long ago,. 5 years ago when russia and ukraine started in the market sold off and we were down 8 . That happens to be almost exactly the typical playbook for geoPolitical Risks and events. Given that the markets all this not very markets saw this not very long ago, it is not jon arguably in some ways, little bit more insulated relative to the 70s given where crude reduction is in america currently. The concern is americas ability to support the wars and there was a headline from our team at bloomberg that the headline is at 130 100 billion in a ukraine in a ukraine. In ukraine. Binky it still can. The rise in Interest Rates which is not high, but what everyone looks at is the projection Going Forward and that is what you should focus on. It has become a talking point so it is a good starting point for discussing the fiscal sustainability of the u. S. So far, when Interest Rates were so low, no one was talking about the deficit. Lisa you talked about the conditioning of the russian invasion of ukraine, the conditioning of the recession nieces recessionistas that were wrong. This that make this market more onevote to actual pullback more vulnerable to an actual pullback . Binky chair, i would focus on breaking up here, i would focus on breaking the positioning. There is rulesbased and everyone else, who we called the discretionary equity investors. In july, they raise their positioning for the first time in more than a year. It is a formal pressure fomo pressure. It is sitting in the range it has been in since april, may of last year which is a little bit underweight. One point five years, there is plenty of concerns one point five years, there are plenty of concerns 1. 5 years, there are plenty of concerns. We were in a middle of back already so that is why a pullback already so that is why positioning went down. But history will tell you what history will tell you it is a big move down. Lisa how much have you change any aspect of the view the past two weeks . As we have seen a complete change in the yield regime and a complete shift and potential geopolitical tensions and a potential geopolitical tensions shift in potential geopolitical tensions . Lisa i would argue binky i would argue it is a restraining factor on the upside. The view is based on what is happening with the fundamentals and i would say so far, the data actually reinforces the view rather than anything else. I am looking at chadha, take the combination of all the work at Deutsche Bank and the immovable force was the morning segment, but idea, there is a pile of money out there to support the bid across most if not all asset classes, is that true that you and i have never seen the trillion dollar pot of money that has to find a warm place to go . Binky i dont think the equity Market Performance or resilience is really coming from that. I think it is simply, the economy is playing out. You look at yesterdays data where you have is very strong response but you have this very strong response in the bond market but if you look at the dale data, retail sales is a nominal bails want to do that, the picture changes completely. Once you do that, the picture changes completely. The pandemic for reasons that we all know caused spending to go up and came down a little bit and went sideways for a wild but for the last nine months to one year, including yesterdays data point, there is nothing that to see, we are growing in the middle of the trend channel. Surprise is people are looking for things to fall. It is a year now and i think it is the expectations that are low rather than jon youre actually mark on the s p big your equity market negative on the s p. Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. Based on your goals, whatever they may be. All that planning has paid off. Looks like you can make this work. We can make this work. And the feeling of confidence that comes from our advice . I can make this work. That seems to be universal. I can make this work. I can make this work. No wonder more than 9 out of 10 clients are likely to recommend us. Because advice worth listening to is advice worth talking about. Ameriprise financial. The power goes out and we still have wifi 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. Jonathan equities pulling back. Negative across the board on the s p by 0. 4 . Nasdaq 100 down by 0. 5 . The resilience in the equity market phenomenal in the face of this in the bond market. Get comfortable at the front end of the curve. Yesterday yields higher. How many years has it been since we have seen yields this high . Lisa going back to 2006. Jonathan cycle highs only two year, five year. 30 youre getting closer to 5 . Tom i would say with the geopolitics of the moment, the president and Prime Minister, you have to frame out 20 beat move out to 5 , not out of the question based on this. Jonathan lets turn to foreignexchange. In the fx market, on the euro, 1. 0561. Were negative on the currency pair. On surveillance, the Bank Earnings from Morgan Stanley, Third Quarter Wealth Management net revenue 6. 4 zero billion dollars. The estimate 6. 5. Net revenue numbers short of expectation. Wealth management business is the one to watch. You have excels in trading revenue coming in higher than expected. Really capitalizing from the volatility youre seeing in broader fixed income currency commodity markets. Morgan stanley working hard to grow the business. Equity sales comes in at 2. 5 billion dollars, above expectations. This has been a dictionary ra extraordinary race on wall street. That was government into the lead once again puts Goldman Sachs into the lead once again. You see them fighting to take share among the biggest additional clients, by leading with her Balance Sheet and where Morgan Stanley seems to be more risk off. Lisa Morgan Stanley 30 corporations for credit losses are the opposite of the other banks. Came in bigger than expected versus one to 20 expected. 120 expected. Sonali Morgan Stanley has largely written loans on their books including that of x, formerly known as twitter, beyond that, it is still a small number here youre looking at. It is not the worrisome part. The Wealth Management net revenue miss is a bigger deal if youre in the market immediately start to react to it. Morgan stanley from a price perspective was among the most expensive of banks. Most other banks trading below their book value even the largest banks. Jp morgan the only one trading at a more expensive level. Jp morgans wealth manager was able to rake in the money. What is happening amongst Client Sentiment that is getting spooked by the markets . Tom the real issue with the classic manhattan focus, is all about deals, who is number one. I do not think james government gives a damn about being number one or number two. Return on common equity which im going to casually say is double fortress Goldman Sachs. Are we to shift here where i be is not as important as it used to be and the fact it about persistent cash flows . Sonali i think it is too early because Investment Banking has among the biggest return on equity. Were in a down market. Why is it such a Good Business for banks . All you really paying for the banker as long as youre not spending too much try to link your Balance Sheet out for the risky leverage loans. It is a down market. He had the banker saying it is going to come back. It is Wishful Thinking in an era we are looking at tensions around the world. There are questions about whether they can make money on this business for the next year or so. They think it will come back. To your point, the things driving the returns, and they are not the only one, jp morgan, bank of america, Morgan Stanley all doubledigit returns on equity in this environment. Lisa how much are we seeing a divergence between Money Centers from Goldman Sachs and Morgan Stanley that both ms. Net interest income, as well as, Morgan Stanley saying total deposits came in below previous expectations in the market . How much is this highlight the gift of free deposits for the largest Money Centers . Sonali if our free deposits a gift here easy bankamerica getting punished for ticket deposits and pound them into treasuries at two high valuation. Fastforward to today and they are sitting on it and this opportunity because investors are concerned about. Why get 2 we get more than that. It is what you do with the deposits that is the real question. This Balance Sheet management. It is getting complicated. Jonathan the numbers for Third Quarter Wealth Management, net revenue 6. 4 billion. The estimate 6. 58. Tom maybe legacy as they go through a Succession Process at Morgan Stanley. Joining us with that case of perspective and the shifts in global wall street gerard cassidy. To rephrase my question to the sonali, let me go to you to say, i am sensing a new global wall street. They really want persistent cash flows. Is james gorman showing the future to the other banks . Gerard i think you are really onto something. You got to give james gorman credit. He is really changed Morgan Stanley from where it was in 2009 when it was heavily reliant on trading and Investment Banking, diversified into the Wealth Management or retail brokerage business. As well as asset management. It comes down to consistency of earnings or consistency of cash flow. That is what Goldman Sachs try to do with their expansion into the Consumer Banking this is which is failed miserably. They are exiting that now. They want the model like jp morgan which is diversified revenue or Morgan Stanley which is less diversified the jp morgan, but more diversified than where it was in 2009. Jonathan as jp morgan versus everyone else. Jp morgan year to date of 10 . Everyone else down. What separates what is happening at jp morgan on the rest . Is it just First Republic . Gerard it is part of it but performance of jp morgan before requiring first public was better than the fact and what you have here is flight to quality. Everyone knows jp morgan where the big premier u. S. Global banks. It is dimmer stated that with very good results, strong leadership under jamie dimon, and a Senior Management team. Every time we go out to institutional investors, scar tissue from march and may is very thick. People are underweight the banks. We talked to them they tell us underweight the banks, but did not want jp morgan is owned around the road. Lisa are we going to say this was the year jp morgan consolidated its heft at the expense of Smaller Banks . Gerard i would say, what jp morgan has done has shown the diversity of revenue and very focused management by jamie dimon in your team really demonstrated strong numbers. We talk a moment ago, tom mentioned return on equity, if you look at the consumer for banking business, for bank of america, the Consumer Banking business earning close to 40 return on equity. As we all know, that is incredibly that is what is driving it. Jp morgan one of the leaders in Consumer Banking and bank of america. Lisa they are the leading players at a time when they can be selective for the top rated consumers. This is something we pointed out according to sonali basak yesterday. This morning, but were not talking about, citizens financial missing on Net Interest Income. Ally financial missing on Net Interest Margin also having fewer auto originations than thought. How much is this story dividing even further between the biggest banks and regionals that are still in a world of hurt . Gerard it is a good point because some of them have been picked out amongst the big regional banks. Citizens the only one missed today. You look at others come there in line to slightly better, but youre right about certain banks have missed and it has to do with about the deposits, banks with the noninterestbearing deposits are going to do very well in this higher rate environment because those deposits do not pay any interest. But they did not move either. People need operational accounts. As well as companies. That money is gold. I that money is gold in environment like today. Jonathan when i read the comments from Brian Moynihan in the interview, i was surprised because he talked about the consumer slow down. Retail sales look great yesterday. Big upside surprise. Mike america bus comes out and says that achieved what they want to achieve. Is that consumer slow down for bankamerica or is that a broader story for the economy . Gerard good point. The crosscurrents today, it is always easy to say wings are more challenging than 10 years ago or during the financial crisis. The crosscurrents today is pretty strong. We are hearing from some folks that the consumer is slowing down but you see retail sales number and it was impressive. Look at the real gdp number, the current estimate for real gdp this quarter, it is over 5 , it is crazy. I would say, does not bank of america, i would say bright money response to my question on the call, he was pointing out he thinks its going to stay around this level. The highest spending one year ago was unusually strong for them. I say now is around 4 , should trough out at these levels, but still positive growth. Jonathan had they been more selective about the clients they serve . These Credit Scores, these customers are so high. Who are they serving in this country . Really small slice of the economy . Gerard i think they are serving guys like you jonathan. The higherquality credit. Jonathan how is your Credit Rating . Tom 242. Gerard youre bringing up really good point and i recommend, i know youre busy, but look at their deck bank of america where they can pay themselves to 2000 nine diprete different company, the risk and you put your thumb on it, highest scores consumer as well as corporates. Jonathan good to catch up. If youre just joining us, welcome to the program. S p 500 negative by 0. 4 diprete that was a stand out for a few of us yesterday to see the Credit Scores are the Customer Base of bank of america. For anyone who does not check credit score, maybe as closely as some of us do, that is very high. Sonali im starting to do analysis on this because the average american does not have a credit score nearly as high as bankamericas posting of its customers eddie look at the next generation, millennials and generation below, it is even worse. Many do not even have 700 credit score so it begs the question, who is getting a loan and the types of loans. It is worse if you try to get a car or home equity line of credit. Lisa just a place for perspective, fica realities and escort range from 300850. The average across the board for bankamerica customers is close to 800. That is the average. Near perfect. Jonathan lets say you had a blowout summer. You drive down from 800 for a couple of months. A couple months of overspending. I checked it track it very carefully. I get a monthly update. A view of my spending activity. Discipline. Whether i am allowed to be a customer of bla, apparently bofa apparently. If youre just joining us, welcome. Equity market is negative. Write down about half percent on the s p. Crude is rallying short of 90 wti. If i have to choose a camp, i expect there will be a bit more tightening by the fed. So probably an additional rate increase this year. What is as important, more important is the path of policy over the course of the next 12 to 18 months. Jonathan mark carney has been named chairman of bloomberg board of directors. Equity market on the s p 500 negative by 0. 4 . Yields lower by couple of basis points. Crude with a rally here 88. 64. Tom im getting up to speed. Hes a big supporter of everton. Hes a former governor of the bank of england. How does he react to 6. 7 inflation . I was in the news flow. Im sorry to the people of united kingdom, 6. 7 inflation is not secondtier. Jonathan it depends on what is driving it. You can look through it if you believe it is really transitory. We found out this verse the of inflation is not. I said carney was an interesting one. Slightly competitive on the news combatitive on the news conferences. Tom lets go around the table. Oliver crook is at the hotel with the president and promise there. Prime minister in tel aviv. There is a debate if inflation is just and adjusted yields will have an effect on the economy. Jonathan lisa was talking about nominal euros, 17 year highs. Ive said this a few times. You get comfortable with parts of the bond market. You get punished. We were getting comfortable with the front end. Steve major was talking about maybe the feds ability is all at the long end. It starts to speak to the idea maybe we can bring the Federal Reserve back to the conversation. Perhaps not november, it may be further down the line at the december. What we have heard from fed officials the last 24 hours is a willingness to wait. They believe they have time. We see more data going into december, maybe they come back here. Chairman powell tomorrow with a bit less than, lets see chair has to say. Tom price down, yield up. Lisa im looking at it is not just of, down from this volatility and inability to frame out what the catalyst going to be any given day. Tom lets go to winnie cisar. Expert on the disorder premises. How is this order in fixed income world . Winnie it is definitely challenging. It is getting for Portfolio Managers called outside. People hiding in the front end. Thats been a good trade if you are an Investment Grade portfolio manager. The big question is when do i inflate, extend duration, and every time people have tried to do it, it is been the world trade. Where in the camp you start by Building Three barbell ing. This could be a longer term view and you have to look through the choppy noise in the near term. Jonathan the fed look like they were out of the game. Will the data bring them back in . Winnie i do not think so. I think the fed will try to be patient especially with real violence where they are so long as we can see u. S. Inflation trend lower which is our expectation. While data has been stronger than we would have anticipated, there is something for everything. You can find some encouraging signs in terms of slow down, apparel purchases, technology purchases, even a jobs report had a little bit of something for everyone in terms of average Hourly Earnings trading lower. Lisa it seems there is irony baked into the market where corporations have gotten, have current fiscal discipline and getting awarded for it same time u. S. Government moving in the opposite direction, but lies of the Government Debt more than corporations. How tricky is that making it for Credit Investors at a time where they benchmark to full faith and credit u. S. Which is suddenly full faith and less faith maybe in the credit . Winnie it is really tricky. You can make the bull case for Corporate Credit we are trading at negative spreads to sovereigns. I do not think that would happen anytime in the near future but there is the view that Corporate America had a tremendous boom during the pandemic were earnings were stronger than anticipated and borrowing costs absolutely rockbottom into help prepare and humanize Balance Sheet. That is not last forever. There is maturities, there is rolling over of refinancing that needs to happen. It takes longer for that bite to hit Balance Sheets. Lisa all these things are the fundamentals. Go back to this idea of the potential for sales should people get caught outside. How much are there enough core bond for Portfolio Managers going to see outflows after such losses that would be forced to sell regattas of what the fundamental seem to pick jacob winnie i think what youre going to see it would happen in 2022. Corporate bond portfolios while they have been challenged lately are doing well better than they did all of last year. There is a strong dedicated institutional by your base prickly in long end of the curve that is constantly injecting cash into markets. We have fully funded pension funds. That is going to be a benefit. We see long and new deals in ig market do well as of late. That gives me hope they are still the structural bid for duration in fixed income. Tom our listeners who are retirees have been destroyed in the bond market. Do they recover by shifting to equities . Do they recover by shifting to crypto . Manchester united shares . How do you recover from a three year train wreck . Winnie i think there has been a lot of recovering, buying tbills, putting cash in money market funds. A look at the absolute balances in money market, it is amazing. Tom can that be stabilize and break the buck . Destabilize and break thebuck . Winnie i do not think so. Jonathan at the long and in sovereign debt markets from treasuries to gilts and elsewhere, we have seen losses of Something Like 50 percentage points, looking at some guilds, issued in 2020, 30 year that matures in 2050 trading in the 30s. We are trying to work out whether we realize the pain associated with those losses. Have we . Winnie i would like to think we have. When we look at the street forecast 10 year treasury yields about 5 is not the base case for most people. Weve all been surprised by how much higher and higher yields continue to go. At some point there is the reality of the interplay between is this money good . Im going to get payback in 2050 . If so, we should all be buying that to the year treasury trading at 47. I have not been able to find it but i would be buying it. Jonathan look at the curve. The 20 is doing its own think. Lisa and there is a 20 year option today. Tom finally, news we can use. Jonathan why would you have a 20 year option when it is price . Lisa they have to because they already came to the schedule and if abandon it it will cost more disruption. Tom lisa, only to the ear, can you shake up the market at this afternoon . Likely 30 year. Lisa the army is yes, it can come even though it is not very liquid tenor. I would argue watch this change everything in markets, not disruption in the middle east, not financial good news at any of the banks, it is going to be ultimately about bond market dysfunction. Tom did you see how her voice changes . Jonathan if you look at the curve, three years and out to 30s, the highest year and the curve is the 20 year maturity. Just back down to the 30 year it drops back down to the 30 year. It is kind of bizarre. Lisa it is basically what people are charging without being up to move it without any regular predict ability. Jonathan winnie, it is good to see you. Coming up on this program, talk about the latest on the ground in israel. Jon lieber weighing in. The president of the United States alongside the Prime Minister Benjamin Netanyahu, the latest on the ground with bloombergs oliver crook makeup shortly. Going into that, we have crude rally 2. 3 . 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 . The free ride equity markets enjoyed the last 15 years it seems to have come to an end. I think the fed sent the message home we are getting higher for longer. The market is in a daily tugofwar with policymakers around the path of rates. What about the impact from zero to 5. 25 . This is bloomberg surveillance with tom keene, lisa abramowicz, and jonathan ferro. Jonathan live from new york city, good morning. Alongside tom keene and lisa abramowicz, i am jonathan ferro. Our top story this morning President Biden in israel. Diplomatic effort upended by a single blast at a hospital in gaza. Israel blaming the attack on e Islamic Jihad group. America wants investigation. Outreach by the explosion at the hospital in gaza yesterday. Based on what i have seen, it is it appears as though it was done by the other team, not you. But theres a lot of people out there not sure. Left overcome a lot of things. Jonathan the stakes of the trip cannot be hired. How to prevent discomfort from engulfing the region and ensure civilians stay out of harms way. Our Team Coverage starts right now with Bloomberg Oliver crook. Good morning. Oliver you just put it in very good terms in terms of the stakes here but also the difficulty for President Biden who told us he is going to come to that region, come to israel, come to jordan and now the entire trip has been thrown into the air. What we knew originally was this blast at the hospital is legally changed President Biden can achieve to give his support to israel as all delegates from u. S. Has done this far, continue to deter with the naval fleet that u. S. Sent to the east mediterranean, but the third part and probably the most critical part of the trip where he was supposed to go to jordan to meet with the leaders in egypt, west bank, and jordan to discuss deescalation, discuss many issues from hostages to aid, that has been completely thrown off the rails about this explosion overnight. Tom an unfair but the question of the moment. Sitting to the president s right was secretary of state, a shuttle the policy dead on this wednesday morning . Oliver you have to imagine how it to be bleak and feels after six days of going from country to country Antony Blinken fills are going to country to country, you feel very mixed feelings about what is going on. He was it was him who laid the groundwork for this very delicate trip into jordan. That has been completely derailed. This at the center of this. We have jake sullivan, entire cabinet as israel meeting with the president , but we do not have the table are some of the people you really neat at the table to have meaningful progress in what is a conflict that is only escalating. Lisa there was a part of the parts to the trip. Question about humanitarian aid to palestinians who are still stuck in gaza. What is this is a people have whether the provisions will be allowed in and will get water, food, medical supplies that are running out . Oliver this is something we have been talking about for the last few days and there seems to be stop and starts and rhetoric saying israel will create conditions under which the aid can come in. As you will know, there are literally hundreds of tons of eight sitting on the gaza egypt border that cannot move right now. This is going to be if theres any win for President Biden is finding a way to get some of the aid in. To buy an olive branch out for what is a dire situation on the ground. Limited water, electricity and internet in gaza. Tom oliver crook, thank you so much. What are your thoughts here . Living through this, it is truly history being made. Jonathan it was difficult and it got that much harder overnight. They want to stand by their ally, israel, and it gets much more difficult as work through the facts and clarity on the situation that is difficult to get clarity on the. Very difficult. Tom the changes in the media. The immediacy of the energy of what we seal social media, what we are seeing with all the modern technology for different conflict, different war. With wonderful perspective on this is jon lieber. His work with the senator from kentucky for years on the hill. I want to go back to your classroom years ago. You and i lived, you and i studied 1967 and 1973. This is totally different. And yet, are we fighting the last war . Jon l. this conflict has been raging for decades. The difference right now is that israel is targeting hamas in gaza and trying to wipe out governorship. It is an enemy does not have planes come it is not have these really is really this vince force has been attacking these lands and it is really difficult to get after him off that way. That when the Big Questions is whether or not there will be a Ground Invasion anytime soon. I suspect one of the things biden is in the middle east trying to hold off on is the Ground Invasion because of the risk of these horrible atrocities that happened against civilians in times of war. That has to be one of bidens main objectives in addition to try to stabilize the region generally make sure most immorally iran stays out of this. Jonathan we know what israels objective is, wipe out hamas. Lets talk about how difficult that is to achieve. Where is the leadership of hamas . Where is the fines and where does the financing of the mosque comes from . Hamas come from . Jon l. time is shown when going after these terrorist organization, even when you go successively take out the head of the organization, there other leaders who will rise up. U. S. Has been targeting hamas and missing networks for decades. Do Money Laundering efforts, going after their ability to defendant Financial Transactions is in crypto. It is unlikely to me, even if israelis are successful, the threat and the board is going to go away because of the fact theres so much history and anger here. Getting rid of hamas probably means someone else comes up. Lisa especially given the protest and anger. Thats been fiery rhetoric out of iran threatening some fullscale invasion of israel if there is any kind of ground escalation into gaza. How can you read between the lines to understand how much resolve their is by iran to get more intimately involved to order has bala troops to come in from the north . Jon l. that is when the Big Questions in this war right now. Does the war expand to israels southern border northern border . U. S. And israel has gone out of their way to say we dont think iran was directly involved in the attacks against israel that occurred last weekend. Of course, iran at the opposite is, financing hebollah. Inside u. S. Goal is to keep iranians out of it. It is not mean you will not see over a longer period of time a shadow war that is risleys conduct gives iran that may not mean direct Armed Conflict but could me cyberattacks visually targeted defense. So far iran given no indication it wants to be involved but it is sending strong warnings israelis escalate, he could get involved and that what makes a situation such a powder keg. Lisa john and time reporting out how little we actually know, how difficult it is to ascertain with any clarity the facts on the ground in a fastmoving war with a lot of people of varying dependency giving information. How much has the landscape shifted the past 12 to 18 hours given the protest, outrage, statements from egyptian and saudi arabia leaders . Jon l. the bombing at the hospital a major event in the course of the short war so far but theres a lot of ambiguity about who did it, how many people were killed and is difficult to ascertain the facts because there is no not a lot of independent media on the ground. It is not like a lot of present investigator can get into gaza to figure out what happened. Some photographic evidence that came out this morning suggests it is not as large as initially said. I think the key point here with israel launching attacks on civilian populated areas, if it is not this hospital attacked him it would have been something else. It was only a matter of time before anger at the Israeli Defense forces spilled over into the arab streets and lead to some blowback on israel because of the nature of the operations. We have a certain information environment and a very deadly military environment and that is the battle of the narrative is going to be really difficult for any one side to win. Jonathan going through this major monster determines u. S. Has been building up in Eastern Mediterranean is condition to aircraft carriers. A report yesterday u. S. Also sending a task force aboard warships. How meaningful is that . Jon l. militarily nobody can defeat the u. S. , the most powerful army that has ever existed. Vast, limited resources. There are some questionable ability they have to fight to support ukrainian effort and support the israelis but i think the real question, if im one of the regional players are looking at getting involved in this conflict, does u. S. Have political will to get involved in such a conflict . It is difficult to see the u. S. Committing troops on the ground here. But they obviously, so far, supporting the israelis and i think what this really is a show enforcement to deter any action so there is no question there were to be any additional strikes beyond gaza, the u. S. Could get involved and when this decisively. Jonathan good to get your perspective. Jon lieber of Eurasia Group on the Current Situation on the ground as israel and across the middle east. If you are just joining us, welcome to the program. See commodities, a bit of a rally. 88 dollars on wti crude. On the s p we are down by 0. 6 . Yields going nowhere. Four the bond market has been going somewhere. I think we have a fold in what the president might ask congress for free at the white house, 100 billion for ukraine, israel, and the border. Lisa i saw those figures and i was wondering, is there going to be clinical will to finance this and it really highlights the difficulty of having a massive budget deficit at a time when there are a lot of concerns in the world where we are actually on the wane when it comes to an economic cycle. How does that challenge u. S. Ability to spend that money . Wish there going to do. But how much our yields going to go up . Tom you mentioned mr. Haynes earlier. There is something here for everybody. They have political literacy. Is that you and see. Thats how you get the necessary those at a completely fractured house. Jonathan needing this house is going to go for that spending do you think this house is going to go for that spending . Tom i think they will say theyre going to put enough in here you cannot say no. It is a double negative. They cannot say no. Lisa are they going to be able to have a vote . Jim jordan was not down. Knocked down they have another vote going on today. Jonathan he said if you think the cause of going of, when such a speaker come and also go down, will get a government shutdown. Youre wrong. The deadline november 17. On the economy, stephen stanley. The conversations with eight minutes away. From new york, this is bloomberg. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. This cabinet came together and standing strong, standing united, and i want you to know, youre not alone. Youre not alone. I emphasized earlier we will continue to add have israels back as you work to defend your people. Jonathan President Biden speaking in tel aviv alongside Prime Minister win, Benjamin Netanyahu stemi shoulder to shoulder to the israel people. Equity futures on s p 831 . A third of one percent. 88 dollars on wti. Looking at bonds, major moves. This morning, why can going nowhere. We will see if that changes. Member this conversation, when bad things happen, in emerging markets, you sell the sovereign debt of those prospective nations. When bad things happen in that you by those bonds. Is that changing . Tom that is the debate right now. That was a heated debate at the Monetary Fund meetings. We had the same conversation i believe it was april and other institutional meetings of the concern that the brief with all the news flow including in Eastern Mediterranean daniel joins us diana amoa joins us. So good to talk to you, but particularly off the paper on jackson hole. How bad is it . Mexico stellar performer even there for you peso of lehigh is a weaker 8 . Diana i think what is happening is the dollar has there has been a huge amount of upside surprises from the u. S. Economy perspective. That is giving a bit of the dollar. Additionally, you have geopolitics and people are buying dollars as a safe having. The combination of those two taking off some of the shining in emerging markets currencies we have seen up until the summer. Tom stan fischer wrote that Little Red Book everyone was forced to read. Are we anywhere near the its abilities of a given crisis in ecuador, a crisis in mexico, or South East Asia . What is a level of instability you perceive . Diana much less than during covid because i think a lot of the vulnerabilities addressed during that period, the insolvent economies are really talking to the imf and im sure you had a lot of that in morocco. Tom do not ask about argentina. Diana i am ready to support economies so imf ready to support the economy so we do not think the next two years we are to see anything. Broadly speaking, i think em should be able to muddle through. Jonathan where is this headed . We speak to emerging market nations think about what is taking place in america . From the preaching they have heard about how they should manage their finances. Where are they saying in . Diana they have lost the handle on fiscal is the u. S. It feels like whatever is lets spend some more. Youve lost your price since the buyer. We had the uae dow supporting this, and other markets qe now the markets have to figure out how much premium you have Going Forward. Tom he sees quality reserves in em. Lisa what is causing mean at a time give treasury yield going up and away . I want to put a bull on that point, are you saying we have seen the reaction function to weakness. we have seen the reaction function that may have searched for safe havens and treasuries no longer get that bid in reliable way . Diana they got the bid we had geopolitical headwinds a couple weeks ago. Despite that, as soon as we had a bit of stability, markets were quick to unload the treasuries. Whatever hearing . Another 100 billion potentially going to be spent to support these economies and markets seem to not have the appetite. Lisa do you think the pain will be reserved to u. S. Government debt market or u. S. Catches the cool, rest world catches a flu . Diana i think there are two big elephants in the room. U. S. And boj were sovereign debt issues have been a concern. But more of a slow burning concern for a while. While these play out, think they will tend to take everything with them, but it is the speed of the mood that matters and we have an aggressive move in treasuries. Going forward we say it treasuries can go from 4. 55. 5 but will not see that happening in six week period, think markets can handle that. Jonathan where can we hide . Diana emerging markets. Youre getting paid to do the work. E. M. Highyield north of 10 . It looks like an interesting space. That said it is not a onesizefitsall. Tom mentioned argentina. We have cases like that that look vulnerable. I think this is a period where if you do your bottom up security analysis and you know the stories you are buying well, theres a lot of opportunities in emerging markets. Jonathan what about turkey . Fascinating leadership shift taking place. Diana we had the same outcome in the elections but it is a totally different leadership. They have embraced orthodox policies. Markets are responding well to that. We have rate hikes and commitment to fight inflation which is refreshing to see. Lisa talk about evolving markets and i have to think about what is going on in the middle east and wonder how close you are following this as a potential not only humanitarian and question around what is going to happen, but what this means for the ability to invest in some of these nations. Diana it is clearly a sad turn of events. We are following it very closely. I think what the big concern is beyond humanitarian cost of lives is what does this actually mean for the region, stability within the broader region. Are we going to see spillover effects in middle east, other countries going to get pulled into this . You have markets repricing. You see cds move quite high because markets are signing a premium that you could see spillover risk coming in. I think probably speaking beyond the middle east, oil prices the next big one because you have potential supplyside shock that could make money terry policy much of your Going Forward if Monetary Policy going up. Jonathan brick. Also shanghai is still in the 90s on brent right now. Brent crude still into 90s. Tom im looking at 30 year bond and had to say 20 day chart here. It is just real simple. Jonathan two year yield yesterday through 5. 20 come up by 11 basis points on the session. Phenomenal move. This morning two your about unchanged, 5. 1947. A lot to discuss the next hour on bloomberg tv. The lineup looks like this for the open. Mike schumacher of wells fargo. We catch up with mike in a moment. Nadia lovell from ubs. Then it is on to tech. Lisa how much does that set the tone if you continue to see the strength so many are expecting . How much is it going to be a negative . Go back to the irony, geoPolitical Risk not a concern for equities. The concern of a slow down actually good for equities. Upside beats, it is over. Jonathan bond yields do not believe matter yesterday either. S p just about unchanged. A lot of fed speak still to come. Chairman powell talking tomorrow. From new york, this is bloomberg. U stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. 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Oh, and all on the most reliable 5g mobile network nationwide. Wireless that works for you. Its not just possible. Tom bloomberg surveillance and we welcome all of you worldwide. We are waiting for comments from the president. We have reports he may make comments in tel aviv in meets with Benjamin Netanyahu. Oliver crook in tel aviv. Lucy if you will get reports through the morning we will see if we get reports to the morning. Right now, look understand mike mckee will go into a great length on housing. I have to go refinance my home at 10 . Michael good luck to you. You may want to get a new home. We did see an increase in new homes starts compared with what we had seen the month before. 7 up, lower than anticipated, 7. 8 . But better than 11. 8 in the month of august. Building permits down 4. 4 . After 6. 9 rise a month before. We see the Housing Starts number has been revised to 12. 5 for august. It is maybe more significant gain than it would definition initially would have initially appear. Multiple unit of 383,000. It looks like strength in both areas at this point. Tom, youre not going to get a good Mortgage Rate but you will get attention from your mortgage banker because earlier today Mortgage Applications fell to a 28 year low. Tom we have been looking at Credit Ratings. Im talking at 285. Lisa i do not think they go that low. Fico scores. Not seeing much of reaction in markets. Youre not seeing a Mortgage Applications anywhere near come anything we have seen the past three decades. There is a question of whether this is a broken market and indicative of trying to feel some of demand would supply that is not getting unleashed because nobody is taking out a mortgage. Nobody is trying to move and nobody feels the mobility. How much does it make it difficult to read anything into the data . Michael it is hard to read a lot into the data except it appears builders have some confidence they can sell homes because they are the only market in town. Theres just no inventory is existence homes because who wants to sell their 3 mortgage for 10 mortgage. At this point, the market is broken. But to the extent household formation demands new housing, youre going to see some strength there. That turns down, you have tom stay there. We are thrilled to bring you someone of immense acuity on the algebraic equation. Stephen stanley. We are talking beforehand, want to go to the 8 solution at which is 30 year mortgage 7. 9x whatever it is and you said it is about refinance and enjoying 8 refinance rate. Can america refinance now and do things . Stephen it is certainly if you own a home, youre not likely to be refinancing anytime soon because rates are higher than they have been in a long time. The good news is a lot of people are locked in at 3 or 4 on their mortgages and they are not feeling the pain people are feeling the pain raisi the markets now or the people who are in the markets now. Tom do you feel this the needed policy solution or do we let the market play out . Stephen i would say if you pan out to look at the Housing Market very broadly, the main issue for many years and continues to be the main issue is a imbalance between supply and demand. There is not enough supply in the market. Clearly, higher Mortgage Rates will hit demand and i think at least temporarily helped to bring that market into better balance but when we think about where were going to be two years or three years, i think the big issue Public Policy issue with regard to housing is still going to be one of ensuring adequate supply. Lisa thats meant concerned about how much the right Monetary Policy have been given people a lot in at 3 raise. The one entity that has felt the increase in rates probably the most directly is u. S. Government. How much further do you see longerterm yields rising, especially in light of the defense spending we have heard been proposed by President Biden . Stephen i think one of the most overrated influences on Interest Rates and treasury market has always been the budget. People always talk about rates are going to go up to the deficits and it really happens. I think were in and it rare ly happens but i think were in a moment where he starts to enter the psyche of investors and i do not see nearterm solutions. Getting a small increment of fiscal austerity in the spring tied to the debt ceiling agreement was like pulling teeth. We are still trying to implement that. That has not been easy easier but i do not think we are going to see anything else on the fiscal front until after the election. Lisa lack of fiscal austerity. How does it translate into a yield call or change view on how far yields can rise . Stephen i think you have investors to always viewed the treasury market as the gold standard. The ultimate quality market in fixed income. I still say that is the case. But i think people are maybe less enthusiastic. It does i think translate into higher longerterm yields. Tom one more question. What is your new confidence in calling a q4 gdp statistic . Jobs shocked. Retail shocked. Phillies shocked. It is all there. Stephen we have seen zigzagging. We will get a strong quarter, it would border, strong quarter, we quarter. Q3 was a strong quarter. After yesterdays number it looks like it could be as high as 5 . Tom youre saying the quarter q3 is a fiver . Stephen it could be. Tom do you agree michael the folks in atlanta say 5. 4. Which sets you up for a higher starting point for the Fourth Quarter it looks like spending has been strong in recent months. Tom but at least it would point out, you have been wrong for three years. Michael they said at least youre not a weatherman. Tom speaking of events, mr. Weston will speak to chairman powell tomorrow. What is the question you would ask . Michael it has to be asked, what you do next . When you raise rates higher for longer, how long is longer . The justice thin in september, 12 member stop said they thought we will have another rate increase this year. Since that meeting 12 of them have said maybe we do not need it. We have all these very strong Economic Data points. How do they square that with what theyre going to do in november 1 . Do they push into december and still raise rates and for how long . Tom were going to go back to tel aviv. Oliver crook is at the hotel overlooking the mediterranean with two sets of u. S. Navy fleet in the distance. What is the president at the new in tel aviv . Oliver he arrived here this morning and he met with netanyahu who greeted him very warmly and is happy to see the president saying the only thing better than having a friend like you is having a friend like you here in israel and he came straight to the hotel where he held bilateral meetings after the current that, the president is in current Cabinet Meeting with the wider delegation of israeli officials and after that he will meet with some of the victims and family of the victims of the attack from last saturday in the south of israel and expect to hear from the president as weve heard from him sporadically throughout the morning. Lisa what is the scene in potential protests and how the israeli authorities are thinking about how to proceed to not ignite more if more furor . Oliver i think this is the very difficult question. I think this is one of the questions by wanted to come and help within the region biden wanted to come and help within the region to diffuse. The second part of the trip has been counsel after the explosion at the hospital in northern gaza. That makes the task harder for the president. He will show his support for israel. He was her deterrence but the third part, nomadic part is going to be missing from the president s missing diplomatic part is going to be missing from the president s mi ssion. Tom there has to be a process to determine how the hospital was destroyed. Are you said with all the press there, what is the process going to look like . Oliver i can tell you it is going to be a very complex process and it is important to not jump to conclusions. Early on the, egypt and many of the arab nations blame israel for the bombing saying it was from their bombardments. Netanyahu said it was not their target and overnight we have had Israeli Defense force coming out and putting out what they say is evidence but also phone recording evidence that this was not the doing, that this was impact a product of Islamic Jihadist fired from gaza misfired and fell back on the territory so i think theyll be going through all the evidence and there was enough evidence apparently for President Biden is a he believes the israelis and this is not there doing that he believes it is not be israelis and it is not there doing. Lisa we keep trying to struggle with how to fold what we do every day, markets into a story that has deep indication socially and from an economic perspective. It is unclear and the lack of information, fog of war it makes it much more uncertain and difficult to report on and i think we are all coming from a place of great ability. Tom a lift in 10 year yield and we are bunched up against new highs. The equity markets, s p futures 19 percentage. Lisa i want to get your sins, we did hear a couple of references by fed officials yesterday what we are seeing get your sense, we did hear a couple of references by fed officials yesterday to what we are seeing in the middle east. Stephen the initial reaction i think is want to state we have uncertainty and maybe we are supposed to be patient, let that play out but as you say, limitations are not clear. The past the fed always looked at an increase in oil prices as a drag on the economy. Inflation was always low and now it is not the case. Tom we have time for one more question. Lisa mentioned the elite banks are over silly banks are over. And now is about the top line which about nominal gdp. Youre giving me a five number four q3. Add on inflation, are we completely misjudging the corporate enthusiasm for revenues . Stephen in general, we will see how the Third Quarter plays out but corporations pretty easily exceeded expectations consistently. I think the consumer remains resilient. You have seen there are certainly reasons to be weary Going Forward but for now as long as the labor market is strong, i think that bodes well for the consumer and in turn for Corporate America. Tom stephen stanley, thank you so much. Stephen stanley of santander capital markets. Coming up, this is vital. Your brief on brent crude 91. Yields lifts in the last 20 minutes. 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. What do you see on the horizon . Styles and textures. 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. Oil is the key three point worry point. I think it ultimately self corrects. I think our economies are different now than they were 20 years ago. Lisa everyone trying to grapple with how to understand that your Political Risk in terms of markets. Largely looking past it. Global Market Strategist earlier in the market, youre not seen that much action for the bond space. You see yields hovering near the highest levels they have been going back 2007, 2006. Even though the s p lower by have a percent and you can see a bit of Dollar Strength. It is the 10 year yield at 4. 87 . Near the highest going back to 2007. Tom it is called the benchmark. It makes the 20 year auction not a tom keene small, laughable item. Im wrong. You are right. Lisa were going to get to crude in imminent. Want to go over the Bank Earnings. We talked about Morgan Stanley and how their net revenue came in light. Those shares lower by 3. 5 . I want to point to some of the regionals. They are struggling. They are not reporting the same kind of solid results we saw from fortress diamond. Citizen financial came in with Net Interest Income below estimates. Net interest margin below estimates. Ally Financial Reporting a greater degree of souring loans. I financial down 2. 8 and regionals may be the real story. Tom bkx index has a pe under 8. Lisa we have been talking about does bank of america represent mainstream america . Questionable with a fico score o f 798. The explosions, the situation in the middle east, joining us now is will kennedy. Want to get your sense of what people see the oil market are looking at to understand how to play in front of a unclear story . Will fraud and unclear is right fraught and unclear is right. There is no particular reason your flow should be disrupted or go higher from here although there is scenarios where things become more drastic and that is what is making people slightly twitchy. The extreme scenarios irans involvement in broader conflict and it is why some of the headlines a date iran said they would embargo is really and oil imports got the market going. If a rhetorical device, iran imports is really orioles at is it is not just fundamentally important piece of news. The increase gets the market excited. Tom 1967 and 1973 Something Like one to 40 miles from the southern edge of gaza. Into egypt, spilled into egypt down to the suez canal. In any of this, the suez canal at risk . Will i do not think that is fundamental concern for oil traders but i think shipping is a concern in more extreme scenarios. The place people worry about, the gap of the place which the persian gulf enjoys the indian ocean from which all be exports from southern iraq from iran to saudi arabia, they all go through this pinch point over which iran has a big amount control. The most extreme scenario people worry about, the scenario that would send oil pass one to 50 is that 150 dollars is if shipping got impeded. It is not likely but it is the extreme case, the worst Case Scenario people think about as the situation develops. Tom will kennedy, if i look at oil, is your entire team, particularly the team in the trenches, are you framing out a path to 100, are you able to do it with the Geopolitical Uncertainty . Will think the main scenario we stay in 85 to 90 range. This whole most scenarios is not significant disruption to oil flows and things carry on pretty much as they are and concern but there is binary scenario, extreme but unlikely scenario and one interesting thing we have seen is some activity in the Options Market where people are buying coal of 100. So it is people buying protection against those and unlikely severe scenario. Tom will kennedy, state with us. The president of the United States speaking to people, First Responders and people who are directly associated with the hoarder in the Eastern Mediterranean. Lisa this comes after a reported meeting between president and the war cabinet including Benjamin Netanyahu, big question about what the focus given diplomacy has really put on pause, if not shattered. Due to some of the reactions overnight. President biden going around and meeting with some of those in israel in show support he is the miss. Tom it is a diplomatic issue. I find fundamental the immediacy of the new war. The immediacy the film is in real time. The optionality in real time. Lisa theres a question of any escalation which is what people in the market have been watching. I am curious. Will kennedy with us and im curious from your vantage point. How you interpret some of the iranian rhetoric saying theyre going to call for an israeli embargo on oil, talking about potential for escalation . How are people in your industry reading through this to understand what is real, financially disruptive, and what is not . Will then the commerce from iran today at work rhetoric. I did not think they will have much realworld impact. Iran israel imports over 230,000 a day. It gets oil from countries mostly in the soviet union. The background matters here. As the situation deteriorates, as iran words becomes more severe, think that were recent traders, they have to think about worstCase Scenarios. Thats the background. Theyre looking for any signs from iran. Tom thank you for the oil brief from you and your team. The president of United States, the filmic we have right now, in a meeting with people, First Responders we are told and victims. Typical joe biden moment but heartfelt. I would say the world awaits comes from the president. I do not know if you will see that today. We had to with the Prime Minister. Lisa given the diplomatic efforts seem to have been in shortterm torpedoed. There is focus on how to get humanitarian aid to those in gaza. The discussions President Biden was saying it is the how they do say matters in terms of how is rochus about this. What are they doing . Who is the main obstacle to getting aid to the gazans on the border trying to find food and water and medical supplies . Tom i wonder about the military brief away from this. There is still the presumption of some form. I have to be careful here. Ground, air, see offensive upon the gaza strip. Somewhat governed by hamas. It has been that way for a number of years. The military seems to have taken a backseat today to the diplomatic discussions. Lisa theres very little i cant really draw conclusion from say four how emotional this is even some of the victims and families of the victims include people whose kids and family members were kidnapped and being held hostage, just showing how difficult this moment really is. Tom we are going to leave you with the date at which is moving as we see images on the radio, images with blue and white flowers, president of the United States meeting with the people of israel. Yields move. 30 year bond 4. 97 percent. 10 year yield of three basis points. Futures negative 22. Good morning. adventurous music be ready for any market with a liquid etf. Get in and out with dia. jennifer the reason why golo customers have such long term success is because we focus on real foods in the right balance be ready for any market with a liquid etf. So you get the results you want. When i tell people how easy it was for me to lose weight on golo, they dont believe me. They dont believe i can eat real food and lose this much weight. The release supplement makes losing weight easy. Release sets you up for successful weight loss because it supports your blood sugar levels between meals so you arent hungry or fatigued. 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An explosion at a hospital in