We get prices down and yields up across bond. I dont know how long it can last, given the fact that we still are getting signs that there are going to be layoffs, and thinking in particular of delta coming out overnight and saying they may have to lay off nearly 2000 pilots after the september period. Ive got to say, still a lot of headwinds out there. Tom i agree. The partition of america is extraordinary. We just spoke to the congressman from the court could from the fourth Congressional District of arkansas. He made clear the economy is really good and sets up the inequalities and differences you see between democrats and republicans. Of course, our convention coverage. One quick point before we get to the complete data check, futures up 15. You looked at the brief for the morning. Lisa Consumer Confidence for there hasof august, been greater resilience than in coronavirus cases. After that, we get a tale of two markets. Roadforce. Has given a into the Consumer Confidence. As you mentioned, day to of the Republican National convention. Melania trump expected to try to humanize President Trump, perhaps taking a bit of a different tone than what we. Eard last night tom we will see. A number of other voices on day two of the Republican Convention. On the dow futures, we will get to that any moment. All in all. R i dont want to make too much of that. I would mention turkish lira, 7. 39, backup nicely. Mr. Erdogan speaking of his disappointment in economic matters in the way people are pushing around this turkish economy. Gold not part of the story. Right now we want to get started with Stuart Kaiser of ubs. He is head of equity derivatives. Stuart kaiser, i want to look at the. , in that is brilliant the vix that we quote is 22. 37, but the future view is very fearful, and is a much higher number of about a 28 level. Is that unusual . Art it is unusual. Theres a couple of things that go into that. To beonomic risk is going part of it. If you look ahead of previous elections, that gap between spot vix and the october futures normally is somewhere around 1. 5 to two points, and now it is more like 3. 5. That gives you perspective in how much uncertainty is priced into the election right now. Tom should the vix be lower right now . Should the vix be at 19 or 18 even . Debate thecould exact number, but it probably should be a bit lower. U. S. Volatility is at a particularly large premium to but the market has been realizing, so how much the market has been moving, we could assign that to a lot of reasons. Picture, u. S. Implied volatility is higher relative to baseline market moves than the rest of the world, so you could argue you could be a few points lower from here. I think youre just going to have trouble finding people willing to sell at that level. Tom some breaking news, best buy in with better comp sales. What i love about this, operating in eight nm environment is the quote as they look at lisa that is optimistic. Tom it is. It is really remarkable what we are doing, however behaviors change in pandemic america. Lisa it turns out having a big box with stuff and it is actually helpful, which brings us to how people are positioned right now in the markets. One thing people have been focused on is the short positioning inequities and how that has come down dramatically with yet another bear in the market, throwing in the towel. What do you see in terms of positioning and the amount of bearishness currently priced into markets . Stuart generally speaking, the trade for the last two years was to be in a relatively safe portfolio. I think the starting point was not an overly aggressive type of equity exposure, so to me it is not too surprising to see people not hedging as much as you might expect just because they dont own what you would consider a risky asset. If you look at how downside is priced into derivatives markets, it is not particularly out of line right now, and not to extended. That should be a good corollary to short interest. It is maybe not what you might expect even the level of uncertainty that most investors fear. I think that links back to the fact that the type of stocks they own are not the riskiest stocks. They own these high dividend yield stocks that dont require demand for hedging that way it would if they were all in on the cyclical trade. Really important point, especially as you talk about the uncertainty. They are not providing guidance at best buy, falling in line with a lot of companies saying we cant predict the future right now. Without that visibility, just betting on a dividend payment, what exactly are stock investors buying right now . Are they simply buying the hope that the Federal Reserve will keep rates low indefinitely for the foreseeable future . Stuart theres a lot of optimism priced in. To the fed, to the election, to vaccine outcomes. I dont want to say it is consensus, but a lot of investors are expecting relatively good outcomes on all three of those fronts. In that sense, you are buying hope to some degree, but if you were to look at the standard deviation of earnings estimates, those are still very wide, and that is just because of what you cited, that we are not getting guidance from companies, so analysts dont have a really good idea of where these earnings are going to be. The range of outcomes is wider than it has been, which leads to more uncertainty. All of those things are linked together, but if you ask mia, i think theres a pretty high bar for the fed and for vaccine news because i think people are pricing pretty good outcomes on all three big drivers. Tom Stuart Kaiser of ubs with us. What is the short squeeze story . You get that supercharged feeling. Is there the shorts out there to squeeze this, to drive us higher in equities . Stuart the short data doesnt show that there is a huge squeeze out there. I think the squeeze might be more kept on the sideline, getting squeezed into the market. People that have been hesitant or cautious to dip their towing to to dipthere their toe in. Maybe it is more than a more of a cash squeeze than a short squeeze. You may have people capitulating on their caution. That is equally as important. It is still cash flowing into the market and still a new buyer to put Prices Higher potential he. Lisa we have some bears that are capitulating. Ome bowls also some bulls also capitulating. Do you see that as a potential for a nearterm shock . Stuart we definitely see higher rates as a risk to the market. Even though youve had a move in rates recently, inflation excitations have also risen, and typically equities respond very favorable, so the inflation is kinda balanced out to move higher in yields. We think Inflation Expectations, 10 year breakevens are pretty fully priced at this point, so additional upside from here in rates would be a little more of a tightening and would probably be a risk to equities, so particularly real yields around the 10 year space, that would be an event that equities would have to deal with. We dealt with a little bout of it in august fairly well. If we got another piece of it, it could be a bit of a risk. Some people are looking at good vaccine news as potential driver of that. If you had a credible u. S. Vaccine announced and it looked like it was going to be widely distributed, that could put upward pressure on growth expectations and rates, and at the index level, that could be a little bit of a sell the fact event. That is your kind of rotation scenario. Tom we will steal from anybody, but we always give credit when we steal, effective immediately. It is the acclaimed kaiser cash squeeze. I like that. [laughter] stuart please no. The nexte that is tuition check. Stuart kaiser of ubs, thank you so much for joining us today. Lisa, you ok . Lisa im fine, but how many guests have to leave this show saying, please no, tom. [laughter] tom great to have these folks on derivatives. To get real challenge them to speak basic english as well. Joins us, regina mayor from kpmg. We will look at some thing that doesnt get looked at that much, oil. This is bloomberg. Ritika with the first word news, im ritika gupta. President trump and speakers at the Republican National convention that a positive spin on his handling of the coronavirus pandemic. The president thanked frontline responders and said the virus is going to be fading. Others warned what would happen if joe biden is elected. Theres more work to do, but there is a light at the end of the tunnel. Job gains are outpacing what the socalled experts expected, but bidens radical leftwing policies would stop our economic recovery cold. Hes already talking about shutting the country down again. Its madness. Speakers procession of democratscombat the portrayal of the president as incompetent. Areasis one of the rare of cooperation between the Worlds Largest economies. Still, china is far behind its promises to increase purchases of american farm, energy, and manufactured goods. In germany, chancellor Angela Merkel is demanding full transparency from vladimir atins government over russian opposition politician, likely poisoned last week. The kremlin hasnt responded. Filednaire jack ma has for what could be a recordbreaking ipo in hong kong and shanghai. The 2. 1 trillion dollars raised by saudi aramco. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Gupta. Ika this is bloomberg. Only live in a world that wants you to believe in the bad news racially, economically, and culturally pulled revenues. In much of the democratic party, it is now fashionable to say that america is racist. That is a lie. America is not a racist country. Tom some of the comments last night at the Republican National convention. The first night a very different look and feel than what we saw from the democrats in terms of the technology and usage of it. The senator from South Carolina and former u. S. Ambassador to the United Nations nikki haley speaking. Right now, kevin cirilli, our chief washington correspondent. Do you detect that night after night, the Republican Convention will be the same . Is there a consistency here . Or was that a oneoff theme last night and we will move on to other themes over the last three days . Kevin i think this evenings theme is going to be much more focused on Foreign Policy, with secretary of state mike pompeos speech coming this evening. Another notable speech, first lady melania trump. I think last night, what you saw were first and foremost, a shot at the 2024 republican president ial primary. What you saw last night was senator tim scott really talk about diversity through the lens of conservative ideology and nikki haley, former u. S. Ambassador, speaking in a much more calming tone that quite honestly would lay particularly suburbssome of those that the Reelection Campaign has fought so hard to make up round on. A shrinkings to be Republican Party. Is there any angst out there over the popular vote portion that they command now, or is it strictly about establishing ll rowboat establishing an electoral vote victory . Kevin i think that is a good point. The Electoral College is how you win an election in the united states. Result of that, President Trump lost the popular vote to Hillary Clinton by several million votes in 2016. Thatuld like to see happen. Lisa from a pulling perspective, how are both conventions playing with actual voters at this point . Kevin if you look at the nbc walleet journal l where thenal pol president is trailing, it would suggest that biden got a bump his runningming mate. On the issue of the handling of the pandemic, voters disapproved of President Trump. But on the issue of who is best suited to handle the economy, President Trump leads by 10 , so it is that dueling narrative that the republicans want to see addressed in the days ahead. Lisa one of the main narratives i heard last night was democratic cities being overrun with crime and defunding the police, that narrative really being hit hard. How well does that play for the Republican Party in general . Kevin according to my reporting, you look at what they pollsying at the internal , that the issue of law and order is going to play particularly well. , youhe second point here heard this from senator tim scott, talking about school choice. When i talked to sources on the president s Reelection Campaign, they say families are staring down the reality of whether or not their kids can go back to School School choice is something they back to school. School choice is something they feel will help to make inroads. Tom a delicate question, and this comes from the credibility and earned credibility of kevin cirilli, with miles and miles on the campaign trail across this nation. There was last night one of the speakers who alluded to the ofsident as the bodyguard western civilization. Can you translate that . Kevin it is globalism versus nationalism, and it speaks to a certain portion of the president s base, but they are speaking in very broad terms. This is someone who a certain faction of the Republican Party say is a nationalist versus globalism. Tom it harkens back to what steve bannon was talking about months ago. How would you presume the democrats will respond to those tones, those illusions that were heard last night . Toin i put that question congresswoman Sheila Jackson lee , the chairwoman of the subcommittee on Cyber Intelligence and the deputy whip of the democratic caucus. What she said is it is an issue of western alliances, restoring western alliances versus the go it alone. She consistently says that a Biden Administration would favor multilateral conversations not just on the economy and Foreign Policy versus a unilateral approach from President Trump. Tom ive heard this from a great number of people, multilateralism or bilateral is him that we have seen from President Trump erie it will secretary pompeo underscore that today in his speech . Kevin i think what he is going to make the case on is on israel, the president s support for israel and taking a tougher stance against the communist party in china, but i also think they have pushed back on the notion that they havent been able to get allies on board in areas of agreement. If you look for example on the building of a 5g network that moves away from china, they would be able to have success on that front. Comekevin cirilli with us our chief washington correspondent. Of theck on night two Republican National convention. I find it absolutely fascinating how far we have come from any of last convention and all of the emotion. The kennedys while retiring. It is amazing where we have come years. Ars, 12 years, 16 lisa this is a unique moment on many levels, not only because of the coronavirus, but definitely a shift in the american spirit in certain ways. I will say the backdrop to me is very interesting. Mike pompeo going to be speaking later, at the same time we are getting news that the u. S. And china seem to be more on the same page with a trade agreement than previously expected. You seem skeptical. At the same time, it seems to be a dampening of some of the tensions. Tom as we said at the opening of the hour, we have certainly seen it in the markets, a huge distinction today folks, the bond market with the stock market. Yields are higher, 30 year bond out four basis points, 10 year build out 10 year yield out three basis points as well. Tonight, the rnc convention. Coming up, Mark Mccormick will join us Toronto Dominion bank on Foreign Exchange. Part of that is a weaker turkish lira today. Part of that is the mystery of the dollar, decidedly not idiosyncratic. Idiosyncratic. Hike Simon Pagenaud takes the lead at the indy 500 coming to the green flag, racing at daytona. Theyre off. In the kentucky derby. Rory mcllroy is a two time champion at east lake. He scores stanley cup champions touchdown only mahomes. The big events are back and xfinity is your home for the return of live sports. Tom bloomberg surveillance. Good morning, everyone. Here andt yields looking at the nominal yield Inflation Expectations down to the real yield, it is substantialat 0. 01 negative yield, how do you expect chairman powell will address that in his speech . Lisa i think the key aspect will be how he looks at inflation, how the fed is going to measure inflation, but their inflation goes are going to be looking ahead. To your point, the idea that we are seeing yields get a lift, yet remaining near record lows well below negative one present tells you something, tells you about how much the fed is picking yields lower, and frankly how much real prices right now are not reflecting Inflation Expectations. With the best buy earnings winnerssaw earlier, the and losers within the american economy, ive never seen at this starkly. Has the idea that best i no visibility into the future is some thing we are hearing more and more, which raises questions about the amount of debt some of these companies are raising because of said policies, because of keeping rates so low. The idea of we dont know. We are going to have so much more debt that our growth is going to be that much slower. I expect the fed to address that at some level on thursday. Tom we do a great job of getting into conversati