Tom good morning, everyone. Bloomberg surveillance. And keep her being with us on Bloomberg Radio and bloomberg television. Thisan important our is an important hour. Will join us later, carmen and Vincent Reinhart. Morning,at we see this the only thing that matters. Dollar out to new weakness. Jonathan dxy taking out the lows of early september. That is the dollar index, heavily weighted towards this goal currency. The eurodollar nicely through 1. 19. Another monday with a cyclical tilt. Small caps outperform big tech, largely off of some positive vaccine news. Haddownside surprises weve in the Economic Data over the last week, we need to Pay Attention to that. Im excited to hear what david has to say about that. Tom lets frame that right now. I look at the 55year forwards. The answer is ive got disinflation in the united kingdom, a little bit of a rolling over of disinflation trend in the united states, and is some noland right now. Kind of the wrong upside surprise. That is the labor market still, with a lot of slack and a lot of work to do. Tom we mentioned earlier the biden adminstration transitioning over to a slow down q1 and the recession word floating around. I dont want to overplay that too much. We are going to talk to rosenberg hear about the linkage of yield, Interest Rates, and all of that. Give us the brief this morning. How tight is that spread of credit debt versus full faith and credit . Lisa if you look at Investment Grade credit, you are looking at the tightest spread since august, getting close to the tightest of the year. Investors are more willing to lend to companies, even riskier ones, if they believe there is a vaccine that will bring the economy back to some sort of normal. We debate what that is, but faster growth ahead. When you talk about this inflationary trends and low yields, with treasuries having their best week last week since august, is the question of what is the consequent of all of this debt on markets and growth going forward. That will be a drag on growth. How does that factor into inflation . David how about the idea tom how about the idea of stimulus . What do you see in your reading . Jonathan if you want to negotiate, youve got to negotiate clearly with an objective to get a deal. Otherwise, what is the point . You cant ask someone to put aside their differences and negotiate on your terms. Thats not how it worked. If this is going to be a Republican Senate be on january, you have to deal with a Republican Senate, and this Republican Senate doesnt want a deal beyond 500 billion. If you know this economy needs fiscal stimulus, 500 billion is the number to get it done quickly. Tom a lot of talk this weekend about 2020. I thought politico had a particularly good article about all of the difficulties republicans face two years out. For years atrg, merrill lynch, held the high ground on price target change. He was absolutely brilliant and hugely read, moving on to good work in canada and now rosenberg research, their chief economist and strategist. Toid rosenberg, i want you filter disinflation into what yield does. Is it just about demand for paper, price up forcing yields down . David look, i think theres a whole variety of things that go into bond yield determination. The expectations on the fed and real rates, inflation expectations. I am in the camp that thinks we are probably in a range. I am amazed of people who think the 10year is going to go back to 2 . I dont think that is going to happen. Think there is still going to be globally a downward pull on treasury yields because i think inflation expectations, given the size of the outlook, are going to come down over time. If you take a look at the world, take a look at the average aaa yield, it is barely above zero. In the u. S. , youve got at least in the0 basis points, so land of the blind, the one id king. Oneeyed man is jonathan it is about the postcovid world and defining what is normal. Many people seem to think that postcovid with a vaccine, treasury yields have no business south of 1 . Are you pushing back against that . David i am pushing back against that. What is your expectation of what the fed is going to be doing . Forecast of the 10 year yield has to be some expectation of what shortterm is going to be doing over a certain horizon. The fed has already told you that they are not going to start to raise rates into inflation gets above 2 , and for us to return to full employment. That is going to take a long time as well. On top of that, there is no doubt we are going to get a couple of quarters of pentup demand once the vaccine is broadly distributed. That is going to happen. We are going to get a couple of quarters of pentup demand, and then what does the world postcovid look like after that . Fromver got the inflation 2009 to 2019, despite all the stimulus, despite the fed. The reality is that the same thing, the fundamental secular developments, have nothing to do with covid, that brought us to low Interest Rates and low growth. Age and demographics, how has that changed . You are going to have the reinhardts on. I hope they will talk about how this massive how these massive covid deaths are going to be a constraint for years to come. How do you get inflation out of that . 30d yields may go up 25, basis points, and then come right back down again because the same fundamental is fundamental forces that brought us down in the last cycle are going to be the same forces that drive yields back down toward zero in the next number of years. Lisa this is fascinating to me, at a time when a growing number of strategists expect the Federal Reserve to increase their long dated bond purchases if they are meeting left long dated bond purchases at their meeting next month. Thathould the fed be doing if you are right and yields are going to remain low because the economy is just not going to grow that quickly . David that is just another form of what they used to call operation twist. Is going what the fed to go that route that quickly. It is on its 10 year treasury note yield that has broken out in a range, really in the top end of the range in terms of the stock market that has gone up from the lows. That is basically the threat that will always be there. If bond yields become unhinged, the fed will come in hard and becauseerterm yields that would be a form of Financial Market tightening that was cause Mortgage Rates to go up. It would then detract from the positives in the economy, which has been housing. I think that is an ongoing threat, just to know that the fed can come in. It is like you were talking about credit spreads before. Existsowing that threat is what has caused investors comfort to go in and add on risk in corporate credit. It is very similar at the long end of the curve, where you might be comfortable taking on Duration Risk knowing that the fed can do this at any point in time. Whether they do it or not, who knows . But that is still out there. That helps out the long end of the curve. Tom you mentioned the reinhardts, and we are thrilled they are with us later in the hour. Pretty gloomy assessment. You are not a gloomy guy. If you equity markets do get reinhardt caution and gloom . Look, we had the worst recession since the 1930s. Ofhad a onemonth drawdown 35 in the stock market, and then we bounced right back. Ton you go back on, data april back on, data, the markets already started to rally. I think that mantra of dont fight the fed, there is no alternative, all these things i used to roll my eyes at, it seems to have worked in terms of creating confidence in sentiment. It is a confidence letter market, a sentiment led market. When we take a look at the pe multiple on 2022 estimates, it is 18. I remember when i started, and 18 multiple and trailing would have been unbelievably expensive. In 18 multiple on twoyear forward earnings, the market is still cheap area that is the mentality of the marketplace. You have the fed saying we will pump the system with liquidity, and so long as you have this belief that the vaccines will return us to the old normal, which is not my view, than the stock market may well continue to surprise on the upside. I am not bullish on the market, but that is the narrative that won the day over the past 6, 7 months. Jonathan the old, old normal a few crises ago. Fantastic to have you with us on the program. David rosenberg there of rosenberg research. Last week, we talked about an equity Market Pricing in this story of hope. Point n rosenbergs twod rosenberg point, thisergs market may look like the same market for a while. Tom right now, the emotion is on this horrific pandemic, but it could really go for quite some time. Jonathan up next on this program, isaac built and ski isaac boltanksy, Compass Point research. This is bloomberg. Ritika with the first word news, im ritika gupta. Another Promising Development in the fight to end the coronavirus pandemic. A vaccine developed by the university of oxford and astrazeneca prevented a majority of people in a large trial from getting the disease. It stopped an average of 70 from falling ill. That is below the high bar set by pfizer, turner, but effectiveness did rise to above 90 for one of two testing regimes. Joe biden plans to name longterm advisor Anthony Blinken secretary of state. He served as National Security advisor and deputy secretary of state. Jake sullivan is likely to be named National Security advisor. In the u. K. , chancellor of the exchequer rishi sunak says he will increase spending this week, trying to shore up the economy in the midst of a resurgence of coronavirus. The focus of the spending would be on the pandemic. Plans to assemble key components for Google Service at the factory. Its facility was unveiled too much fanfare in 2018, but it succumbed to delays and switched directions several times after local officials cut subsidies. 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. Im ritika gupta. This is bloomberg. Timefrankly do think it is well, it is past time to start a transition, to at least cooperate with the transition. I would rather have a president that has more than one day to prepare, should joe biden end up winning this. End upn should he winning this. That was the diplomatic way of approaching this. From new york and london this morning, good morning. Alongside tom keene and Lisa Abramowicz, im Jonathan Ferro. Heres the price action this monday morning. We advance the cyclical tilt once again on a monday off the positive vaccine news, this time from astrazeneca and oxford university. You will hear about that more from Prime Minister boris johnson. Eurodollar 1. 19. In the equity market, up 19, collet 20. Theres a lift in treasury yields, up about three basis points in about an hour and 30 minutes. We get pmi in the united states. What is it looking at given the downside to prices weve had so far . Tom im not a fan of pmi data, but i do take your point that right now, pmi data is important. Right now, Isaac Boltansky with us. You heard the senator from minnesota trying to manage the story forward. , if we were to have meetings of a biden adminstration transitioning, and republicans in the senate, what moves the needle are disaffected republicans. Are they out there. Isaac i think that there are undoubtedly republicans who truly believe that the president should avail himself fully of the legal system in front of him. Is i believe the reality right now, the president is seeking salvation through litigation, and theyre just has been no sign whatsoever that any of those attempts will shift the outcome in a single state, let alone the entire electoral college. But we have seen over the weekend is a slow but steady stream of republicans saying either that the president elect should begin getting these security briefings, or just out right that president elect biden won the election. Lisa there seems to be a little uncertainty about whether there seems to be little uncertainty about whether joe biden will become the president come but there is a question about cooperation to get any sort of deal done not only in the lameduck session, but also come january. How much has joe bidens theform been threatened by complete dissonance from washington, d. C. Over who even won the election at this point . D. C. Ac isaac isaac d. C. s people and process, which makes this transition period so important. It is about getting the people in place. Right now we have a process due to the General Services administration, the federal agencies that has responsibility for effectively starting the transition process, not certifying bidens victory yet. There are really nittygritty things here that impact this. First and foremost is you are struggling to get some of the fbi background checks done on some of these people, so the big picture for me is this is slowing what needed to be an exceptionally seamless transition, given that we are facing a Global Pandemic and economic suffering. So i have to ask myself the question, how much will washington trip on its shoelaces . Because it is not just this transition. It is also secretary mnuchins decision with the senate. Jonathan i think at this moment, it is probably the longest transition in a long time the hardest transition in a long time. We are about to go a massive vaccination effort, and i wonder what that looks like. When you speak to people in washington, have you got clarity on what that looks like or needs to happen between now and january 20 to make that as soon as possible as smooth as possible . Isaac there is undoubtedly optimism regarding what is going on on the vaccine front. We have seen now three different kinds about the science and the has driven that, but distributing these vaccines in a timely and efficient manner is going to be a herculean effort, even when you have all parts of washington rolling together, and right now we dont. Parts of washington simply arent rowing at all, and i am itply concerned about how will actually impact the role of the vaccine. There needs to be more clarity and more concrete steps in getting personnel in place and ramped. Tom i am looking for a catalyst to get off the needle here. Article ond a great the senate race of 2022. Let me cut to the gentleman from ohio. Is portman somebody who is going to unilaterally say to mcconnell, enough, lets go . Or does he not have the power to do that . It is almost concerning to be talking about 2022, but those races in the senate will drive what i believe will be majority mcconnells thinking. He wants to be the majority leader for the remainder of his term. Tom we are running out of time. Is it going to be december thinking . Isaac i think there is going to be a brief period of legislating. You are going at progress on tops of cabinet positions, i. E. Brief window for legislating on fiscal stimulus, maybe even ero, but ultimately the fiscal hawks return, dead l ock returns. Jonathan is that popular with the electric . Is fiscal conservative and popular with the electorate . Popular . Conservatism im i think you see isaac think you see the overall shift hawks return, as long as we can get a narrow, targeted fiscal stimulus done, he was targeted fiscal stimulus done, it is easier to fall into that fiscal hawk branch. Jonathan thank you. The echo of coming out of the last crisis is pretty loud, thinking about what the future might hold here in the coming months and years with a split government on the fiscal front. Tom weve had times where this is broken. People have gone through and protested, really railed against the majority, and i wonder, how does that happen this time around . Not only a majority in the senate, the house, and mr. Biden setting his tone, i think the uncertainties here are way more because we are all fascinated by the transition. Jonathan jonathan i agree, but dont you think this pandemic has changed the conversation . Tom absolutely. Jonathan 500 billion dollars is now considered conservative. Tom and i keep going back to hospitalizations. Those numbers are grim. No other way to look at it. Jonathan coming up, world bank. Hief economist that is coming up shortly here on bloomberg, live on bloomberg tv and radio. This is bloomberg surveillance. Businesses today are looking to tomorrow. Adapting. Innovating. Setting the course. But new ways of working demand a new type of network. One thats more than just fast. You need flexibility to work from anywhere. And manage from everywhere. Advanced technology. With serious security. And reliable coverage, nationwide. Forwardthinking enterprises, deserve forwardthinking solutions. And thats what we deliver. So bounce forward, with comcast business. Jonathan live on bloomberg tv and radio, this is bloomberg surveillance. A little bit of cyclical appetite, little bit of vaccine optimism. The equity market has a lift. Up i20. By 20. Cine up the russell outperforms. The rustle up. 9 . Here is the bond market story. A downside surprise on retail sales. Upside surprise on jobless claims. Yields lower. This morning we push higher. What are the limits of these moves . That is a question for us going forward. Given the amount of debt, our tolerance for higher Interest Rates, how much of that has been reduced . By three basis points on the 10 year. Key levels and key data to keep in mind. August 26 was the postpandemic high in the oil market. We are within one dollar of that in wti, 42. 85. August 31 was the low for the dollar index, we took out that level this morning. 1. 19, just through short of that at. 18 98. The pound advancing as well. And go dollar weakness back to levels of summer. Can we hold them . Can we push through . Liftno question about the with brent pushing through. This is a joy. We have always prided ourselves in bringing you the best in economics. In the summer, when everyone writes the best in economics can be 1, 2, five essays, books and articles. This year was easy. Carmen reinhart and Vincent Reinhart wrote a Tour De Force for F