Transcripts For BLOOMBERG Whatd You Miss 20170703

The dow gaining to a record high, but not holding on. The sector groups are performing well today, you can see there are for Industry Groups lower and seven higher. Energy and financials leading the way. Financials expending extending their advance. This is after the big u. S. Banks pass the stress test and got approval to return cash through dividends and buybacks. Plenty of things for investors to like about financials, including rising bond yields as well. Terms of Actual Company specific news, quite a few developments on the m a front. Online personal finance Company Getting taken over by red ventures for 14 a share, and allcash deal. Eq to getting a boost up by 2 took a 12 partners stake in the company. It wants to separate its operations incentivizing bryce energy. And carmakers coming out with news today, elon musk indicating through twitter that the model three sedan is ahead of schedule and will probably come in on schedule. Company hasr the missed to so many deadlines when it came to its production of its electric vehicles. Are higher, now trending down about 2. 5 . The biggest ford rally since january after june sales declined, but less than one analyst expected. Overall ona lift betterthanexpected sales. In the bond market here right now, treasuries as you mentioned to trading low. We got yields of some three to. Ace 34 basis points that one point the fiveyear touching 193, thats the highest been since may 11. With a bit of a forecast increase in june, manufacturing the highest level since august 2014. Some of the data matching some of the rhetoric point we see from the global bank. I want to give you look at whats going on, im looking at the year 25 into 10. The twoyear in the fiveyear is the blue line, the white line is the fiveyear to 10 year charge. Overare treating steeper the last several sessions. Unless we start to see traders ramping up their hikes, its the question if this deepening holds, the curve is already in line with model productions for september of 2018. As you can see based on where we were in december of 2016, a long way to go is the peak in this chart. But its been trending higher. Scarlet the bank really depends on what happens. Lets move on to commodities. We are starting with the biggest mover, not necessarily the most sending games to a fouryear high revising some serious supply concerns because the Weather Forecast of a drought expanding across the northern reaches of the great plains, thats one reason by josh wise spring rate spring wheat isnt rallying. Farmers planted less than expected. So overall by 3 , the lowest level this year at eckstein 11 16. 11. Money managers have been positioning themselves against silver, boosting the short position in silver futures and options to the highest level since mid2015 and crude oil was higher for the eighth straight day, the longest winning streak in three years. Todays catalyst was an excited drop in u. S. Oil rigs. An unexpected drop in u. S. Oil rigs. You put your head in your hands on those. And currency land, we do the dollar index higher, short position trimming as well and weve got yields a touch high. I want to touch on what we are seeing in the dollaryen, 113 and . 37. We did see the japanese bid earlier in the session on the news that Prime Minister abes ruling party suffered a local election defeat in tokyo and reservist reversed some of the gains you can see at. 9 higher dollar versus the end. We want to point out what we are seeing in sterling versus the dollar as well, the u. K. Manufacturing pmi hitting this morning. Given what we are seeing in oil, i want to give you a quick look the dollar stronger across the board, but the relative strength we are seeing in oil is limiting the losses in the Canadian Dollar and the norwegian kroner across the g10. In the dollar ruble as well, the dollar ruble, the ruble specifically having its worst month since 2015 last month. Relative to the dollar. Not only oil going on there. The sanctions we see additionally heading from the u. S. Government. How shes for the ruble ouchies for the ruble. Something for britain for p utin. Now to the numbers. He joins us from the bureau in london, thank you for joining us. The number of things going on in the markets. Not only the shift we saw. From Central Banks, as they take a more hawkish tone. Are the markets prepared, given where asset prices lie at this stage . I dont think they are. Leading two guns five days simultaneous bubbles. The largest bubble in government bonds is in europe with inflation is close to 2 and ppi inflation is close to 3 . In the largest mobile inequities is in the u. S. Markets on the s p, for example, where priceearnings multiples are in excess of 30 times adjusted. In terms of valuations, the market is moving. Lets start with bonds. About how there is usually a call before the storm. When it comes to the selloff we saw in bonds led by european government bonds, that began last week, is that the storm, or was that a precursor to a bigger storm . Mr. Filia i think is the precursor. I dont know if this time around will eventually bust into something bigger than it actually has done. But it could very well be. The 10 year treasuries could continue its ascent and we could see the yield going closer to 2. 8 or 3 , which are the levels it looked like it was pointing to back in march. And then failed. I think we could see that type of movement. The cents. A guide in whenever the past weve seen treasury volatility before, subsequently weve seen that movement in rates very big, close to 100 points. S time around, the race the rate only moved to 20 points. You can see a Bigger Movement from here. Scarlet what would be the catalyst . Mr. Filia bubble of valuations. Near in terms of yield where they should be. Europe andy true in in japan. Look at the case in europe, where the current gdp growth with expectations pointing to a level for boom which are be in excess of a 40 basis points. You look at the fiveyear bubble , these5 points, clearly valuations have nothing to do with fundamentals. They have to do with qualitative easing and centralbank flows. Through peak qe at the moment, Central Banks around the world are printing 300 billion euros every month for 3. 7 trillion euros for year. At some point, they told us they want to exit quantitative easing in this global tapering will eventually allow arms closer to their valuations. Around the fact that these transitions may be denying been mine benign. Is where we are less positive and we dont see gdp coming down the strong as it should be to justify rising rates. Investors have gotten into a habit of assuming whenever anything gets tough or we see come some kind of shakedown from the central bank and sells to try and cool everything down and say we are still going to backstop the markets in the policy we are continuing to play. We saw that with a misinterpretation of what the market did with mario draghi last week, the ecb came out in the market still wants to push the euro higher. I guess there in all those things in mind, how do you make money in the second half of this year . What are the traits to be in given all the risks you talked about . Willilia the central bank try to talk down risk, as part of the job to boost confidence. Its not surprising what they are trying to do. Everything is the market may become more pricing into Market Action is the fact they are running into capacity issues. The Balance Sheet of the ecb is 40 of gdp and the ecb already bonds, German Government bonds as they can. The average maturity of their bonds needs to be shrunk for years now. They are running into capacity issues at the same time germany is experiencing deflation, the 2 inflation and ppi at 3 . The negative real rate the germans have are very prohibitive. Its understandable they put pressure on the ecb for them to exit from quantitative easing. The benefit to the equity markets i think should not be overvalued and the markets should remember how much of the valuation is due to be, at the time in which qe is leaving the door. For the rest of the year, were short equities for quite a decent size. We short bonds of the same time. Equities on the s p. Thank you very much for that. Francesco filia. Very much. Scarlet coming up, we sing a look at risk areas in the Energy Sector for the second half of the year. Thats when Oil Prices Rally for the eighth straight day. From new york, this is bloomberg. Mark im mark crumpton, time for first word news. Angela merkellor is avoiding deeper divisions and Economic Policy and says they should seek what they call winwin solutions. Chancellor merkel was hoping to reach consensus on policies such as trade rules and climate. The u. K. Is dropping its bravado over brexit. Prime minister theresa mays government is taking ciliatory governments conciliatory statements. Chancellor of exchequer will tell Business Leaders are concerns over the split will not be dismissed. He has remained the main cheerleader for business really brexit. Iraqi forces say hundreds of civilians are fleeing muzzle mosul. Civilians have suffered water and Food Shortages for months. Iraqi forces launched the operation to retake muzzle in midjune, the neighborhood is islamic states last stand and iraqi Officials Say they will declare victory within days, but islamic states attempt to distract back using female suicide bombers. At least 15 people were killed in the latest assaults around iraq. Has a formal response to the Saudi Led Coalition that cut poetic and transport links. Of supportingtar terrorism and made 13 demands, including shutting down the Al Jazeera Television network. No word on whether qatar will agree. The u. S. Secretarygeneral Antonio Guterres says achieving Sustainable Development goals by 2030 under United Nations plan will hinge on following the paris climate agreement. Speaking in lisbon today, he said despite the decision by the united rates to abandon the accords, there is optimism and renewed commitment by other nations, including china and india, to meet Climate Change goals. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im mark crumpton. This is bloomberg. Julia whatd you miss . They extended the deadline to exceed to their demands and they have hours to comply with the coalitions 13 points. We have a report from dubai. In the hours before the deadline, Saudi Press Agency deadline. A 24 hour the decision was made after request came in from the america weight, have been acting as mediators, the kuwaitis. Since according to the local news agency there. We understand now the Qatari Foreign minister has arrived in kuwait to hand over the letter. We do not know at this point is the content of the letter. What we are also not sure about is what kind of scenarios are on the table if the demands are not met. If there is no resolution, what kind of escalation could we see . Receive exposure from the Gulf Corporation counsel for guitar . For qatar . The Foreign Affairs minister says with them as needed, the alternative is difficult to resolve. He is welcoming the 48 hour extension and stocks have been rebounding in early trade, the pressure remains on the 12 months forward. Bloomberg tv, dubai. Scarlet whatd you miss . Oil is up for any of straight day. How does that says that for the rest of 2017 . s bring in tina davis gina davis. Bloomberg gon the btv 6100, the blue bars indicate the recount and is difficult to see, but there was a slight dropoff last week. Hard to see. Linet a closer look at the s oil prices. Ever so slightly, there has been a decline. It looks like thats reinforcing the rallying oil prices. Is this the right way to interpret the recent gains weve seen in oil . Recs does not make a huge trend, but it is encouraging to the market. For anyet is looking excuse to run you out of your market entered a few weeks ago. This, coupled with a real dropoff in the rate of shorts from hedge funds this past week. It seems like whatever down move was affecting the markets, everyone is trying to find some glimmers of hope these days. Speaking of a glimmer of hope, i plotted the bci versus the chinese small and mediumsize firm pmi. Scarlet is going to pronounce it for me. Ive plotted these and its quite interesting how there is a relationship here i just wonder whether we should be looking at the demand side of it more, looking at whats going on in china anymore perceived accurate gain of whats going on in terms of the chinese economy to gauge one of the other drivers of oil at this moment. It is a valid point . Article had a nice written by Jason Shanker and his argument was stopped worrying about the supply side, we should be looking at is demand, specifically this pmi gauge. His argument and you can see it in the numbers that just came out yesterday is when its about 50, thats great for oil markets in will see that reverberate through the oil market for the following month. With any commodity, its supply and demand i think one of his arguments being the market as an overly focused on his inventory numbers we have been hammering home have been too high. Scarlet tina davis, managing editor for commodities and energy in the americas. Coming up, we talk about the Federal Reserve and Central Banks. From new york. This is bloomberg. Thelet its time to Bloomberg Business flash, a look of the biggest business stories in that is right now. The mergers of ges oil and gas business with baker hughes closed today, second only incisive schlumberger. The new Company Trades of the taker bht on wednesday. On wednesday. Barclays executives will leave not guilty to fraud charges. On 432uit focuses million paid to the cutter investment Qatar Investment authority. And that is your business flash update. Whatd you miss . Releases today with eyes and meditation coming out and we look ahead to data point later this week, including fed minutes on wednesday. Here with the data is matt boesler. The takeaway was largely positive when you look at todays data, todays economic data. Matt especially with the eyes manufacturing report we got today, very strong data. A lot about take in the percentage of u. S. Manufacturers who are reporting that orders are expanding and im writing this chart which shows exactly that. The white line shows percentage of u. S. Manufacturers that are reporting an uptick in new orders. Scarlet 3. 5 . Matt the blue line shows the percentage of u. S. Manufacturers supporting an uptick in inventories. The fact that this gap is widening points to the notion that we are really wanting running down the existence stock of inventories. That has widened to the widest since 2010. We are burning through inventories right now in a way that was suggested that if this continues going forward, we should see an uptick in production as manufacturers look to replenish the stocks. Thats a really good sign for the economy. What about all the russian side . On the Construction Side . Theres a bit of a concern on some of the nonResidential Construction. Residential is holding up pretty well. Not quite as forwardlooking, but its an interest in story, from my perspective covering the Federal Reserve. One of the things the fed has been worried about is conditions in commercial real estate. Marshall line shows Real Estate Construction spending has actually slowed to the slowest growth rate in four years. If you were worried about that, its coming off a little bit. Maybe thats not as much of a Financial Stability concern at this point. Wheres the red line shows Residential Construction spending, the monthly numbers were little weeks today but on a yearoveryear basis, they are Still Holding up pretty well, which is good, because we are dealing with a shortage in housing, in the Housing Market right now. To the extent that we can continue to build houses and work on alleviating that shortage, maybe it means perhaps lower prices where the rent has been pretty high. You could argue thats a sweet, the Consumer Holding up pretty well if we look at the residential side, some less concerning signals for the fed on the nonresidential. Matt exactly right. You put it all together and its really interesting, over the last several days weve seen a real uptick in the probability the fed will raise rates at home in december, but also now in september 2, starting to come back. The blue line shows the probability of a rate hike in december, which you can see is up to 40 today, which is the most in three months. Pretty much close to even odds of this point. In september, that white line is getting a bit of an uptick. I think that points to the fact that we have three more jobs report between now and the september meeting. If we get three strong reports, bigger we are talking about a hike in september and december. Scarlet do wednesdays fed minutes matter . Things have changed so much. Matt i think they do. They got shockingly weak inflation data on the day of that fed announcement, so wasnt clear how much they had a chance to digest that. Scarlet memos are, thank you so much matt oser, thank you so much. This bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Mark im mark crumpton, time for first word news. In france, president Emmanuel Macron is promising to prevent terrorist attacks will without pity. To lifttoday he wants the state of emergency thats been in place since 2015. He also plans to toughen preventative measures aimed at fighting islamic extremism and other threats. Poland wants assurances from washington that President Trump from President Trump that u. S. And nato troops warming on the ground as long as russia remains a threat to national security. That is according to the associated press, citing polands foreign minister. Former soviet bloc nations are concerned about increased Russian Military activity near their borders. In germany, at least 18 people were killed when a bus carrying Senior Citizens rammed into a truck and burst into flames. Police say another 30 people were injured. The accident happened in bavaria near the border with the czech republic. Jersey, state parks and beaches are closed as a fourth. F july approaches promoting governor Chris Christie in the democratic controlled legislature cant agree on a budget, and that led to nonessential services being shut down. Still, christie and his family spent part of sunday relaxing at one of the beaches he had closed. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im mark, this is bloomberg. Scarlet lets get a recap of todays Market Action. Stocks on the whole were mixed, but we did see a rally in energy and bank names that helps left the dow to a record high. At least during the day. Technologies continued to see weakness, you have the nasdaq off by 15 , the nasdaq actually extending recently because its closed down for the fifth time in six days. The thing we should mention here volume there is very low given it was i have to have trading and a lot of people werent around. Whatd you miss . Be wrestlingmp may with challenges abroad, but on twitter he is body slamming cnn, literally. Yesterday, he posted a picture of himself body slamming a person who is head been replaced by cspan cnns logo. We are joined by bloombergs chief washington correspondent, kevin cirilli, in our washington bureau. I dont even know where to start with this. Kevin neither do i, julia. Julia at one point, he tweeted it his use of twitter is not president ial, but modern president ial. Sure did ask what people are saying, i can probably guess. Kevin i look to my phone to see just how many retweets it has 3003000 retweets, 490,000 likes. Its one of the president s most like tweets and most retweeted tweets ever. What does that mean . It means this is essentially the president digging into his base and make them feel he is playing to the base, they think he is going to solidify the base around this. This is essentially the same type of repackaged rhetoric i heard on the campaign trail in states like arizona, michigan, wisconsin, pennsylvania. They feel that he is antiestablishment candidate. This, whether we like it or not, is what conservative populism looks like in 2017. Antiestablishment. This is just illustrating or underscoring that fact. How to bring in the cnn statement in response, they said let me just pull up that statement. Day when its a sad the president of the United States encourages violence against reporters instead of preparing for his overseas trip, his first meeting with Vladimir Putin dealing with north korea and working on his health care bill. Hes involved in juvenile behavior far below the dignity of his office. We will be doing our jobs, he should start doing his. Scarlet that last line is pretty intense. Mistake, as make no a journalist i do like to inject myself into the stories uncovering, but many people do not trust the media, they dont trust media institutions and they also dont trust Financial Institutions or religious institutions, government institutions. But he is president now i think the question becomes as a leader , whether or not he wants to try to restore faith in institutions or continue to make people question their faith. All of that aside, regardless of your opinion, how does this affect policy . Senator Lisa Murkowski and susan collins, moderate centrist republicans who were against Mitch Mcconnells health care proposal, these are senators the president needs in order to pass some type of legislative victory on health care reform, they came out against this and the sources i talked with on capitol hill within the Republican Party, within the Republican Party are rolling their eyes at this, incredibly frustrated. They feel this takes away from their ability to get through an agenda that they campaigned on not just for two years, but for eight years. Scarlet final question, i wonder why is donald trump so fixated on cnn . Theyre arguably more news organizations that are more strident than cnn msnbc, huffington post, the new yorker magazine. Putng the campaign, cnn was a pretty strong effort and try to make sure they had a lot of protrump voices, including corey lewandowski. Kevin absolutely. Donald trump feels like he is at his best when he has a foil. I can remember being in the press pit on Councils Campaign rallies countless Campaign Rallies and he would ask everyone to turn around and bo o. Its a very striking moment because of the rhetoric and the tone, but it was just a few weeks ago when we were all having the conversation after the congressional baseball game and even the president himself stood at the white house and called for unity and said the country would be better for it. Dont know if its a sign of the times, but again, this is what conservative populism looks like in 2017. Julia kevin cirilli, chief washington correspondent. Bias is an inherent against donald trump. Was arational Perspective Media does have the slant against him, but the question is what the appropriate way to fight back against that . Finding the balance is a tough one. Scarlet it makes it a difficult road of old when he approaches g20 as well. Thats going to be out there in the zeitgeist. Julia a challenging backdrop. Scarlet the g20 meetings in hamburg may be anything but smooth as President Trump meets with world leaders, including russian president Vladimir Putin and german chancellor Angela Merkel. Earlier today, david westin spoke with nicholas burns, the former ambassador who talked about what path trump should be pursuing this friday. David a visit to poland and the reset it, yet never he needs to have a reset with his relationship with Angela Merkel. The true meaning is with Vladimir Putin. Nicholas the European Union recently reaffirmed economic sanctions against russia for its invasion of crimea and annexation of crimea. I think its important that President Trump reaffirm american sanctions. Theres been doubts about that over the last year or so secondly, theres the issue of russian interference in the american elections. Our Intelligence Community is 100 sure that russia launched a major cyber attack to try to get into the databases of 21 american states. Our president needs to push back and tell putin that is acceptable. Theres a bill in the senate, 97to vote in favor of the bill to put additional American Economic sanctions on russia over this interference, and the Trump Administration is trying to water it down or even stop it altogether. I think of the president goes into these meetings and is in strong on these two issues of ukraine and interference in the american elections, its a bad way to start with a cynical and brutal politician like putin. Hallmarks of the effective form policy is consistency over time. Man, its all trump as candidate and then has been pretty consistent in not really wanted to go after the russians. Can you really do what you suggest without a lot of people saying hes changed his mind again . Nicholas the problem is hes boxed in russia. Senate republicans do not support a lifting of the sanctions against ukraine and Senate Republicans do support additional sanctions on russia over the interference our election. He has lost his own party on capitol hill. He has no support from democrats. If you look at Public Opinion polls, the American People want a serious policy towards russia. I dont think the President Trump can afford to be consistently week on russia, and thats when he has been my any standard of measurement as a candidate, and is president over the last six months. Without a series of awkward meetings and a series of successful meetings primarily with counterparts in the middle east. What we actually learned about policy, trade relationships, economic relationships with any of those countries he has spoken to without the first five or six months . Nicholas its a really good question. What we learned is that President Trump prioritizes economic and trade issues over military or languages. Hes been very dismissive of the European Union and of germany because he sees me as an economic competitor. He talks about the trade imbalance between germany and the United States. He did the same thing with a south korean president in the reservoir last week. He is someone up with all his eggs in that economic basket. Thats what makes the summit meeting in hamburg particularly interesting. And of course, you havent really signaled a strategy on trade. We know hes against the big multilateral trade frameworks like the proposed u. S. Eu trade agreement that president obama has been negotiating. Many have come forward, and the europeans are expecting this, with a plan for the next year to two on how hes going to approach them on trade. Angela merkel teams reminding him that the European Union conducts trade negotiations as a whole. All 20 countries together. The idea bilateral trade agreements with the europeans will let that happen. Burns, withholas the Kennedy School earlier today on bloomberg daybreak americas. Money manager bill miller making a comeback. Find out how to strategy of taking underdogs has helped put it back on top once again. From new york, this is bloomberg. Best knownll miller for beating the s p 500 for 15 years, then stumbled during the financial crisis and has stumbled to make a comeback, but he is now on a roll again. His Miller Opportunity trust was number one for the year among its peers. Joining us with the look at his Winning Strategy is Bloomberg News reporter charles stein. Give us a sense of why dont miller has had such a strong run and what kind of picked as you look at an focus on here . Charles theres been some things that dont miller has liked for a long time. He was and airlines where before warren buffett, and they had a great year. He liked big banks like jpmorgan and bank of america, and theyve come back. He needed a few welltimed text often beatendown retailers like rh, the old Restoration Hardware and wayfarer, the Online Furniture retailer. You put it all together and is up almost 50 yearoveryear. Scarlet its a bit like he chose value over growth. Is definitely value guy, though he is in value guy. Yearsed amazon for many and was an early supporter of amazon. That did not fit into most Value Investors portfolios. Julia its interesting you brought in the amazon affect. There are a number of these names, including Restoration Hardware, the people are talking about is potential acquisition targets. I just wonder how replicable the returns are, given they have been so popular in just a small number of stocks. Charles hes had quite a few that have worked. Who hasler is a guy been up and has been down, but he is somebody with great conviction and sticks by the stocks he likes. Its really worked for him. Its worth pointing out over the past five years, hes also had the bestperforming mutual funds. Thats nothing to seize that. Julia good point. He makes interesting point about valuations as well, he says that the overall direction of the market is up until we reach a point of extreme euphoria and we are away from that point. Thats in contrast to what a number of people are telling us now. We are using the bubble word. In a definite minority. Everybody i talk to seems to think stocks are very stretched, but he really focuses on this notion of euphoria, the people really have to start to love stocks before you should start to hate them. There is still a lot of skepticism, and i think he sees it as a plus for stocks. Scarlet give us some more context here, because its him and his investing earner so now the macklemore who Work Together to pick these kind of companies, right . Charles exactly right. They been together quite a long time. To me the most interesting thing about bill miller is i once wrote a story about him and my lead was Something Like bill miller is never average. The 50thr in percentile. Hes either at the very bottom or the very top. When we been through periods where macro has driven the market 2008, 2011, he really struggled, but he doesnt give up, he sticks with it as long as the economy has been good in the market has been good, which, of course, it has, eventually seems to be redeemed. Scarlet hes a man of many convictions. Bloombergs trolleys time, thank ,ou so much Charlie Stein thanks for joining us. The boston pops fireworks spectacular starts tomorrow at 8 00 p. M. We have alix steel, and carol massar to bring you the timehonored event right here on bloomberg. Its going to be a festival. Julia a spectacular. Mohamed elerian spoke to Bloomberg Television earlier today. See what he thinks is the most and port in fact are moving markets and his take on the new normal of high stocks and bonds. From new york, this is bloomberg. Julia whats driving the bull market and the unusually high correlation between ages and bonded. According to mohamed elerian, its not strong fundamentals. He spoke to bloomberg daybreak americas earlier today. Liquidity has been critical. We enter the are hoping that policies and global relations would take is higher on risk assets. Policies have generally disappointed, due to what happened on the political side, and the global reflation is not as strong as hoped for. It is there, but not as strong. Ultimately, it has been again about liquidity, and liquidity is meant not just that investors have done really great, but even diversified investment having beingtoo much of by invested in bonds, so liquidity continues to be the main driver of markets around the world. Ask you outlay six different points, and. 3 is something i want to pick up on. Market drivers of changed, but the critical sustainability handle has remained elusive. Talk about what you mean by that how critical it is. Mohamed liquidity can take you higher for a while, but you need continuous influx of liquidity. And thats hard to achieve. Especially of Central Banks have been indeterminate of liquidity injections. What investors need over the longterm to make their gain sustainable is validation. And where does that validation come from . Economic and corporate fundamentals. Look for how economic and corporate fundamentals are doing, and unless we get a policy response on progrowth measures, thats going to be hard to achieve. Focus on fundamentals, ultimately, thats what validates asset prices. David on corporate fundamentals, according to your views, one of the sources of liquidity are increased profits. Companies make money, as you well know, by selling things and making profit off of them. Isnt that an indication that there is some positive growth going on . Although theres a lot liquidity in the marketplace, we havent a getting more liberal with monetary policy. If anything, its tightened and yet companies are making more money. Yes, and that speaks to this phenomenon which is profit as a share of gdp has gone up to record levels. Now, theres a limit to how much you can squeeze the labor share. We are starting to see the political consequences of squeezing the labor share too much. The big question is, can profits continue at this level of gdp . If they can come and companies will continue to generate cash, and some of that will make it back into the marketplace to share buybacks and through high dividends. The politics of very high profits is starting to get complicated. David when i get complicated, doesnt that mean you have to pay the workers more, and if anything, youre better off because you had Consumer Spending going up . Mohamed thats what you really want to see, thats what improves fundamentals. Is a lot of leakage from the consumer side. When companies do more buybacks, higher dividends, that immediately goes into the marketplace. The transmission channel through the economics, through higher wages is better long term, but theres more leakage shortterm. Away from economic and policy fundamentally touched on, lets talk about other markets signals are is something you discussed, and it may be confusing for many people. If you were long risk evidence on whats happening in the bond market of the same time, typically, historically, that wouldnt have made a lot of sense. Thus become what you guys have called in the past to the new normal. That bonds and equities can also outperform. Thats confusing still for many people. Make sense of it. Mohamed clements for investors is how much money did i make, andvolatile with my path, one of the correlation of different Asset Classes . Returns, low volatility unusual correlations. One of the unusual correlations as what you just mentioned equities did really well and bond yields did come down during the first six months. We started the year at 244 for the 10 year and ended at 230. That shouldnt happen, according to traditional analysis. Why did it happen . Is liquidity, not fundamental to the driven market to this with a lot of liquidity answering the money market, especially from the bank of japan and the ecb. Over the last week, we heard from several central bankers, some might say was orchestrated one introduced them to weigh risks to financial markets. Do you thats going to evolve more . Been we can break down the socalled new normal in the markets at least, the counterintuitive move of bonds higher, equities higher . That correlation can break down. Mohamed we had signals that point out Central Banks getting more worried about Financial Stability. I dont think its orchestrated or coordinated, i prefer the word that i learned from my former pimco colleague andrew goal, its correlated. Because we are seeing the same thing. I think that investors are underestimating right now the evolution and centralbank policy response. They will not remain the markets best friend forever. They are evolving something that is different, but they are doing it in a very carefully measured way. Julia that was mohamed elerian. Bloomberg view columnist speaking is to us earlier today. Scarlet what you need to gear up for tomorrows Global Trading day. From new york, this is bloomberg. Julia dont miss this, big meetings i had in the g20 summit later this week. Chinas president xi jinping will meet with russian president Vladimir Putin in moscow tomorrow and then german chancellor Angela Merkel in berlin on wednesday. Scarlet should be exciting. Fed minutes come out wednesday at 2 00 p. M. Eastern, and make sure to tune in tomorrow on july 4 prehistoric boston pops fireworks spectacular, live. Alix steel, carol massar, and matt miller will bring in the carol welcome to Bloomberg Businessweek. Oliver we profile . 10 global ambitions. Carol and the world according to elon musk. Carol