Transcripts For BLOOMBERG Bloomberg 20240703

This week alone up 33 basis points. Tom this week alone, history made. I think you will see over the weekend, how do we go back. Maybe we go back to 1870. The summation of four weeks of moving his history making. Jonathan need to look at the curve as well how things involved evolved. Lisa that to me is what i looked at, the fact that it moved to the opposite direction of what people thought. The long and would move down to the front and the front and would move down to the long end and you would get a flat or lower curve. Yesterday fed jay powell said it does not seem to be inflation, it is something else. It doesnt seem like we are overly restrictive. There seems to be a fear in his not only in their control. That is sort of a people are pricing into the market but still theres a chance of another rate hike. I do not know whether that matters. You saw the yields go higher after that speech. Jonathan policy is not too tight. Tom yeah, it is getting restrictive. We look at the numbers 23 discipline points decimal points. 2. Jonathan this equity market has struggled this week to be clear. A twoweek winning streak on the s p. Lets go through the price action together, crude going to a second week of gains. Wti crude up 1. 45 . Lisa the fed speaker today includes Patrick Harker at 9 00 a. M. , cleveland fed president loretta mester. I wonder if they create this idea perhaps we are not overly perspective. 12 00 p. M. , this is going to be contentious. President biden is meeting with charles michel. The second u. S. Eu summit since President Biden took office. This comes at a time with incredible divisions within these allies, i am curious how that dovetails into some of the work conversations. In terms of earnings, i am interested in Regional Bankers that i am and some of the big banks. We hear from some of the bigger names that have had trouble. Bank of california, which required pac west. We deal with comerica, huntington and a whole host of others. Does this give a clearer reader on the u. S. Economy than anything you saw in the u. S. Economy . Tom you are right. This is a huge deal. What is interesting to me is i want to go the first week of february, that is going to be smart. Jonathan bank of america is not the bank of america. Right . Lisa they do not cater to the average american. They basically have free money that they could use for other things. That is not a luxury that a lot of the rituals have. Have appeared jonathan the jonathan the president addressing the nation. They both want to annihilate neighboring democracy. Jonathan a 15 minute Oval Office Address for a formal request that congress provides 100 billion in resources. John, that is right. That is the big news in israel as well. The request for a bite and we understand 100 billion must biden we understand will hundred Million Dollars 100 million. 60 million is for ukraine. 14 billion four is really. 10 billion for humanitarian aid. We hear him about cautioning israel, how they proceed in this mentioning 9 11. Also mentioning the palestinian come just because hamas has forced this attack does not forfeit the palestinians to live freely and live without danger. 14 days within this into this and the aid is still not crossed. Tom we talked to a streaming screaming eagle yesterday. What are the military people telling you, the media in tel aviv . The mood music we should sit on a friday is also a day that hamas has called for another day for rach across the islamic world. Last week we saw thousands took to the streets. Overnight we have more strikes in gaza, more strikes in lebanon. We had the israelis you back with the United States intersecting cruise missiles. Theres a small matter of a country that sits between israel, that is saudi arabia, which is where our attention turns over the weekend. Are there will be a piece summit held in cairo. The comforts of saudi arabia will be in attendance, so to the the conference of saudi arabia will be in attendance. The diplomacy that failed earlier in the week with biden. Lisa we have a better understanding of either has not been some ground invasion. Whether there is a feeling of israel trying to have some restraint not to claim some of these fires. Oliver this is a difficult question to answer. Bloomberg has done interesting reporting on this overnight. What have we heard from the israelis . Yesterday, the defense minister spoke to his troops. He said, very soon you will see what gaza looks from the inside. However, the rhetoric around what this military encouragement will take has shifted. How much influence has the United States had in terms of shaping that and digitally delaying it. Our reporting, we understand that the u. S. Is involved in these discussions than it ever has in the past and reducing civilian casualties but also the question of, what next. After hamas conversation, the United States is still very much in the conversation. Jonathan great work. We will catch up with you a little later this morning. The u. S. And a euro are still pushing to open humanitarian aid into the territory. What do see, the border between egypt and gaza still closed. Lisa it was supposed to be open this morning. There was an agreement with u. N. Officials going to be trucks and making sure everything was ok on everybody sides. What is the holdup . We do not understand who is the main obstacle at this point. Jonathan the usada military bases in iran and syria increasing the under attack u. S. Military bases in iran and syria increasing the under attack. Tom getting out front in a war that is believed to come as soon as this weekend. It is the august of august oddest sequence. Jonathan talk to me about the president s of the United States and whether he can keep his party together. Wendy i think you made a strong speech last night. He reverted to a lot of the things we have seen from other president s when there is conflict. America stands for particular things, principles and we also have experience with direct terror attacks. We also made some mistakes. I think that is one of the important lines in the speech. We got as angry as er for 9 11, we went in and we made mistakes. We earned we got as angry as you are for 9 11, we went in and we made mistakes. We urge you to not make mistakes. Tom we were weaned on greg pak on 12 00 high, we are so removed from any framework of war we have with this cabletv war. You have a huge perspective on this. How do we handle a cabletv war of the medianews, media headlines immediate news, immediate headlines, immediate imagery . Wendy that was not very long. It was also the first one that was visual, televised live all the time. We do fill removed from this content in america. Any onsite domestic terrorism that comes from any support from israel or to many civilian deaths in gaza. This is going to hit home. This will fit the American People in some way shape or form. President biden is trying to prepare the American People, the idea we have to stick with our allies and we do not want to make the same mistakes. This has made the world dangers and would not only need to be in high alert dangerous and would not only need to be on high alert. Wendy this is purely regional concern in the state of michigan. Most of all a swing state in 2024. They have a large arab population, palestinian population. The congressman from that area is palestinian, that is the state he needs to win. He cant have a Party Working with him. A year from now this is a real problem for him so he has to tread carefully. If the civilian death in gaza goes sky high, it does create a problem. This is a almost 85yearold man, he is doing what he needs to be what he thinks needs to be done today and the next day. He is not like any other president looking ahead to election concerns. He is really someone to deal with the crisis today. That makes them hard to predict because it is nothing like loosing before. Him hard to predict because it is nothing like we have seen before. Jonathan blaming israel for the blessed of the hospital earlier this week. Wendy blaming israel for the bombing of the hospital earlier this week. What do you make of that . Wendy we are learning now, it is likely not to come from israel and may be the death count is lower. It is still a horrific death count. She is going to continue to do this. This creates domestic problems within the Democratic Party. The republicans in the Jewish Community have been in line. Now the house in disarray, no speaker and unable to pass this aid package for israel, democrats have a opportunity to regain some other momentum with the Jewish Community that have been more supportive of republicans. These tweets in this congresswoman may grow throw a wrench in that kind of effort. Jonathan thank you for the update. Tk, that tweet is still up. The responsible party for the blast is not israel. Yet, a tweet is still up from a sitting congresswoman in the United States blaming israel, an ally of the United States. Makes sense enough for you . Tom the scale of the size of her audience. Look at Pure Research a new jersey. It is a little audience. Jonathan alex fraser of blackrock of this market. Equities negative 3. 0 . This is bloomberg. captivating music the first law of thermodynamics states that energy cannot be created or destroyed. but it can be passed on to the next generation. explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. We have seen rates moving up and down a lot. I think we need to let this play out and watch it. Does it feel like policy is too tight right now . I would have to say no. A typical bed cycle would leave you have five or 6 . This is a typical fed cycle would leave you at five or 6 . My guess is, it would be somewhere in the middle. The committee is proceeding carefully. Jonathan the Federal Reserve jerome powell, we are proceeding carefully. From new york city morning, good morning. 1 on the s p. Tom we mentioned this before. You look at equities, bonds, commodities, it would be a lot of analysis. We will talk about that later. Brent popping through to a 93 93 level. Every single weekend we analyze this work bloomberg does best. We can analyze it, losses. Jonathan i am with you on the losses. We are talking about losses of Something Like 50 . In some jurisdictions and countries more than that. Tom lisa, what they express do yesterday . Why . Lisa companies are in better shape. Yesterday you seen higher still subdued based on where people thought yields are. Tom i looked at it. It hasnt moved. Lisa if you actually try to do that, you are not going to get any. Tom the answer is, i was shocked. Highyield hasnt moved out. Lisa corporations are in better shape. We are going to look to israel and Eastern Mediterranean and. Also Pay Attention to the markets. Jonathan tom brian, i have got eight ways to go on the bond market. Look at a price and tell me what the damage is that has been brought to . Brian this has been a challenge. This is supposed to be a year which the bond market was going to be better than it was last year. Last year was one of the worst years we have seen in the bond market youre one of the biggest concern is inflation expectations. The question Going Forward, how strong is this economy . Does it warrant yields above 5 . I still believe we are likely to see lag effects slowdown, which would suggestively be to near stabling and starting to to near stabling and starting to come lower. Tom invesco has a rich portfolio of different types of fixed income, including loans and leverage loans. Are there shadows out there that invesco sees things like leverage and fixed income that we cant observe but you know it is there . Brian the fundamentals in the Corporate Bond markets are quite reasonable to the conversation you were just having. I just tried the bramwell o function. You look at corporate debt to profitability, we are not a troublesome levels. The cfos were paying attention. Generally at that lowering borrowing cost. It does not seem to be a fundamental issue in the credit markets. What it is is a reset in yields that is driving valuations lower. Lisa where is the haven . Do assess traditionally thought of risky servo better havens serve better havens than the u. S. National debt . Brian i do not think we will have National Challenges in the u. S. Government. There is clearly a reset with regards to what will the world be. Ultimately, the longer end will start to moderate. There are some other mixed factors where the growth looks a little positive. I would expect the long great to to come in. They are hiding in at money markets. It is nice to get five and a half percent without doing anything. You have been happy with any type of reset. At some point, if the Federal Reserve has two easy, which the market expects next year, you would want to go out to further maturity and look to those Corporate Bonds. I do not think enough are paying attention for the fundamental strength of the Municipal Bond market after all of the support for the federal government following the government. Lisa we seem to see signs were people reach that for point, where people start to think of reinvestment in a way. This weekly sting outflows for money market accounts and inflows to u. S. Government bond funds. Brian i think we should be nearing the inflection point. Speaking to investors, what i am hearing, particularly from the Financial Advisor committee community, they would like somebody to help their clients to move off of money markets. They understand historically when you invert a yield curve 2006, you are better off going further out. It is a hard thing to explain right now to the individual investor who maybe have their own Bank Deposits and just wants to cancel a shortterm 5 . Tom you have new cash deployed coming to you by cash or equities . Brian it depends on what you are looking to accomplish. I would buy equities. I think they will move directionally in the same way. You start to see the weaker Economic Data or the more moderate Economic Data then you are likely to see the peak rate environment merge. When we look at an environment where we already had peak inflation, you get peak rates, peak tightening, historically that creates a nice place for both stocks and bonds. Jonathan that is what he is looking for. Tom i do not really want i just looked at one of the major bond funds. This is a vanguard product. Everybody grandma everybodys grandma owns it. You made some income along the way, your opening the envelope. John tucker has a 201 k and he has looked at the damage. In retail you are getting hammered. Jonathan we are getting conflicting information. Bank of america is talking about a consumer slowdown. Lizzie latest on look at the latest on Consumer Discretionary spending. Netflix hike in prices. Tesla, the cut in prices. Lisa there are all of these different cycles that are playing out and putting it together is challenging. Economist there was a monthly survey that came out today showed economist are boosting their growth expectations. They are reducing a chance of recession. They are talking about an annualized three and a half percent of gdp growth in the u. S. For the Third Quarter. We are talking about accelerating. Tom some people are talking a five handle on that. They have percent. All adults are talking 5 adults are talking 5 . Jonathan i called at the threemonth rolling recession. Just a threemonth rolling recession. Tom a two and 20 pa yout. If youre trying to get a view of the whole organizational Financial Health and youre trying to do that through multiple systems, that makes it very, very cumbersome. Its not just tech, its not just people. Its how they Work Together to provide that experience to the customer. As a finance organization that is what you want to do. Jonathan heading towards a week of losses on the s p. We are negative a third of the s p. We are down 0. 4 of 1 . Lisa if netflix is represented it seems like the fundamentals are pretty good. Jonathan ryan leavitt is talking about planning the recovery to the recession. Did you notice that in the last 10 minutes . Tom i got upset yesterday. We never seen this. We had guests that have narratives that is about rationalizing the great moderation. Available evidence, the great moderation is over, even though chairman powell spoke against that yesterday. Lisa i had people some slack because they come on the show and come up with a narrative and they have a range of abilities that the model is tied to. This is my since. It is a very difficult moment to come up with a narrative. Youre not going to be right. Even if you get the narrative right, you are going to get the market wrong. People need to adapt and adjust. Corporate america adapts and adjusts. Let me just tell you. I am feeling a little frustrated to some of these price moves that are not understood. Jonathan it is difficult to describe a narrative to what has taken place to the bond market. This week cycle highs across the curve. 10year getting there. 499 20 on the 10year. Tom do you believe we have a 250 yesterday with all of the hoopla . Jonathan lets finish on crude. Up by a little bit more than 1 . Getting back towards 94. Tom the moving average study of what it was well over 100. It is an approximation. 111 is the feeling of Higher Oil Prices we had a couple of years ago. Jonathan israel striking targets in israel and lebanon as the israel hamas war continues. This comes as intercepted missiles. Just last night President Biden making the case for more funding for israel and ukraines efforts. Why does this matter to america . Hamas and pollutant represent different threats. They shared this in common. They both want to completely annihilate neighboring democracies. Completely annihilate it. Jonathan the president is about to make the case to congress to deliver 100 billion resources to support. Ukraine, russia, the southern border and taiwan as well. Tom everybodys vote about what they care about. We had a congresswoman coming from the midwest today. I am interested in the emotion this weekend, particularly yesterday. It is their war. Mr. Biden is trying to say it is everyones war. The europeans, the same message. I think there is a lot of people out there singing, wait a minute , this is our war. Open to debate. Lisa see the u. S. Warships. There is a question of the u. S. Is already involved, what should the role be. Tom not to do civics 101 or geography 101, missiles from human is something that pays attention to. Doesnt matter where those muscles are going, to the north of missiles are going to, the north of yemen is something that they Pay Attention to. Jonathan the House Speaker House Republicans. Jordan saying this, i am still running for speaker. I plan to go to the floor and win this race. Lisa this is probably going to be fun. He is losing votes as this goes on. Theres increasing hardening tensions within the party. There is a larger question appearing the whole bite in enter speech yesterday with this confusion. He is not going to get anyone pass the hundred Million Dollars billion dollars. They cannot get anyone to before. How does he play this . Jonathan ubs preparing for the latest. 3000 jobs would be made redundant as it makes its takeover of the banks. Still making through what could be a messy fallout for this combination. Lisa how do they keep people without really with some more ill boost given these rounds of cuts and this feeling this is going to be cut out dragged out for a while. Tom i am going to go a separate story. About the flagship Credit Suisse fund. People jetting around the world and all of that. It is marked down 9 . The news now that we are talking on surveillance. If Credit Suisse is marketing down 9 , the Third Quarter is Global Property correction accelerates where we accelerate in january. Jonathan do not worry about it. We will get to the next guests. Lets talk about markets. We are going to proceed carefully. It is priced at two or three basis points. Powell wants to be careful. I think it is going to take december to move december off the sidelines at this point. The message was, we want to see continued evidence of above trend growth. That means at least one it, if not tomorrow above 200,000. If not 200,000. Tom it is not a side story. Dollaryen, help us get to the weekend on this. Is that a trigger for japanese institutional action . Eric it has been about levels and volatility. Working 150 and accelerating and a short space of time, that has rocked the doj in the past. Last time and back in early october it was probably more rate checking, less interventions. It clearly made a line in the sand. They are worried about the level. Tom i bring it up because of the Credit Suisse story. All of a sudden, japan is effected by Eastern Mediterranean offense events. Japan is affected by a global bond market route. Erik there is circularity here. To the extent that the boj will tend to rather than the finance will tend to. You do have this circularity which is the problem. Lisa there seems to be a question about how much of the market is actually appreciating some of the events transpiring in the middle east. There have been big investors come out and say the market is pricing the risk of escalation and percolating and certain corners. What is your view . Erik a question of timing. We go in last week worried about a ground invasion. That did not occur as quickly as we thought. It seems like this weekend is a little more likely. The question here, what is the scope of conflict that needs to bring this to the floor for the market. I think it was interesting that a fed and jay powell actually mentioned this in his speech yesterday. I have not heard that in a while. I think that is may be one reason why you havent seen a further selloff in the back of the comments yesterday. The fed is clearly being cautious. Lisa what are you looking for to understand when it escalates to a level that people have to price in more aggressively. Erik you certainly need to see large actors being brought in. The big question is to what extent. At what point is iran drawn into this is a big focus. I am not going to make a call on that. Looking back in the fundamentals and what is driving the bond market, what extent is there going to be a impact on growth. That is meant to be impact driving this selloff in the bond market. Until that changes, it is hard to see a sustained rally. Jonathan i imagine this Federal Reserve is quite nervous, nervous about the fact going into the Fourth Quarter with the prospect the data continues to improve. Reluctant to reengage with the heightened cycle. Would you imagine what they have to do . Talking about this with j. P. Morgan yesterday. That means they have to go further because the data keeps surprising to the upside. Between now and december to slowdown in this economy because they have a massive problem and december if they do not see one. Lisa the type of the rate hikes, is that much more damaging to the rate hike . Dead to me is the biggest risk for them than the slowdown they are hoping. Tom we will be holding a meeting for 20 people on the 14th floor. Penciling out our outlook for 2024. Can you imagine those meetings . Jonathan you rewrite them in march. That is kind of how it works. Tom maybe we just wrong, those tales from the pandemic including the fiscal stimulus. The majority of people, including tom keene have been wrong this year. It is october and we are supposed to recalibrate . Jonathan how reluctant will they be . Will they be dragged into this kicking and screaming they need to hike again . Erik it is going to be a pretty challenging point for them if we are still facing down 200,000 plus by december. I grew up playing hockey. One of the things i was taught is follow where the puck is going. I think that is where powell is focused. Some of those early and leading indicators rather than consumer strength tells you where the puck is. That is why they are so cautious. The continuing claims continuing to rise. It is not a beall endall indicator. I think the momentum is starting to show slow. Jonathan things are slowing down, the chairman alluded to that. The connection between the payroll growth and the connection growth which would have been in previous cycles. Perhaps they could take some comfort to that. Lisa it is not inflationary growth, can we deal with that. It is the dream. Is it correct and do they have to deal with it later on. Sanctions up next. Obile® app. Use it to set and track your goals, big and small. And see how changes you make today. Could help put them within reach. From your first big move to retiring poolside and the other goals along the way. Wealth plan can help get you there. J. P. Morgan Wealth Management. 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 . 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. I am going to send congress an urgent budget request to find Americas National security needs, to support our parties including israel and ukraine. It is a smart investment that is going to pay American Security and diffidence for generations. Dividends for generations. Jonathan the president of the United States laying the groundwork for 100 billion of resources from congress. Welcome to the program. Your s p negative a third of 1 . If youre just tuning in, really close to 5 . Tom backing away from where we were a couple of hours ago. Mr. Lately driven by news. In telik it is completely driven by news. In tel aviv other than the human missiles taken out by the u. S. Jonathan humanitarian issues as well that is going to become a bigger problem as well. The link between egypt and gaza still close. Lisa i just wanted to understand why it has not opened, what the holdup is, how quickly people are running out of water. I am reading reports and wondering our people are going to actually start to starve. Jonathan northern gaza is much more urbanized and affluent then the fields of southern gaza. Tom that is even more to bring the humanitarian effort in. Right now we are going to get a brief on this. What would have been with this war is try to speak to experts. He is an expert in the idea that the sanctions. Thank you so much for coming in brief this morning. Are they entities that you can sanction . Their nonstate actors largely. It is not that people are wearing uniforms in directories of officials. You are really left to try and identify people that may have a connection that may be supporting them. There are countries that are trying to provide Supplemental Data to banks and Payment Companies to make sure you are rooting out any hamas related payments. Tom if we save the money comes from iran, fine. Is it a matt damon movie, how does the money move to support their military efforts . Dan one point the u. S. Government started talking about a last few weeks the last few weeks, it is moving a bunch of different ways. Its physical cash and as a whole bunch of different ways to find the effort. It has been an interesting two years if you look at what is happening, obviously with the crisis in ukraine, the sanctions on russia and trying to pull some russian oil off the market to an extent. The u. S. Certainly wasnt as focused in the enforcement of iranian to keep some oil in the market. Iranian tensions are increasing. The next few months you will see Venezuelan Oil, the dirtiest oil come back into the market. Maybe at maybe not at the same scale you need. This administration has done a good job of doing the calculus of not cutting off its nose despite its face, especially when you look at energy prices, the most tangible reality of impact of these events. Jonathan this does not fill strategic in the longterm. This does not feel that way at all. You have two conflicts in the moment. You have ukraine and israel. The response to ukraine is to drain the multidecade slows. As you alluded to it, now what we do in venezuela . When you think about the longterm in the white house based on the fact of Energy Issues . Dan yet russias invasion of ukraine that is drifting into the second year. You have u. S. China issues that continue. The of the crisis in the middle east with the attack on israel. And the associated response. All of these are connected. The energy market, who is buying what from where and how to manage the expectations. Lisa do you think the u. S. Is unwillingness to pull the old prices higher. Dan if you look at what opecplus is trying to announced to try to limit some supplies to keep prices intentionally high, it is a balancing act. We know that china has become a larger purchaser of iranian oil. There has been no consequence to that. I do think it is all part there is a broader calculus that they are trying to look at. All of these conflicts hang together. Lisa one of the confusions of trying to come up with a narrative is that what you feel and the narrative that makes sense to the emotion doesnt translate on the ground with the flows of money. Yesterday i was reading a wall street journal article talking about a lot of the money hamas god was from humanitarian aid to, from the u. S. And israel gave got was from humanitarian aid to from the u. S. And israel gave. Dan we saw this challenge or afghanistan were aid misappropriated by the taliban. That is the real threat when you are dealing with nonstate actors that have every desire to try to seize upon western aid. This is what youd end up see income of the siphoning off of aid, it is critical. The nonstate actors scenario, you may not have clearly that some of the actors underground are really friends for hamas. Tom you mentioned a really key phrase, drifting into another year. This is not 73. It is not 67 for israel. I would completely misjudging the shortterm which is the beginning of the war. You have seen a lot attention with rishi sunak. Dan i think theres every desire to look for a proportionate response. It is tough to balance the on the ground dynamics of this. Every attempt to try to a further significant attack to further drawer reports from israel. It is hard to separate that emotional response to not over escalating something that draws iran into a broader roar in war. Jonathan what is the appropriate response to this . Dan you know i cant answer this. It is tough. You seen thousands of People Killed on the gaza side that are not all hamas. Making sure this does not drift into a larger middle eastern conflict however this comes about. Jonathan good to see you. Really difficult conversation. Tk, this stuff is so complex. Tom the complexity is there and has been there since history. The humanitarian immediacy of this weekend, this is not the same. It is a media war. A completely different formula for the politicians. There i say for the military as well. Every war has been by propaganda. Lisa when we look back at this war, how do we pair propaganda without it becoming the catalyst for eight wire conflict a wire conflict. Jonathan lisa this is what people are talking about, what does the truth matter if the people will not care what the truth is in they will go to the narrative that works best to deal with their population. 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Very close to 5 on the 10 year yield. 499. 20 and the equity market. The stock market heading towards a week of losses. The bond market weaker. Tom we have a gentleman from black rock coming to talk about that. It is a bear market. Jonathan have we fully realize the pain associated with the losses. Tom no. I think lisa has done a great job in this. I look at every real estate transaction. Theres much more to come. I go to the Credit Suisse article where they markdown their flagship real estate 9 . Lisa john, to your question, have we realized losses . No. We havent had institutions move away from bonds. How many days, months, years we heard people come out and say 60 40 has been torpedoed. We have seen this. This will be the third Consecutive Year of bond losses, which has never happened in history. At what point do you start saying, when does that dynamic change . Tom lets let it go and look at this. Heres what i would say, behold the asheville rationalization is market to market. Not a single pro has told me that is valid analysis. If your portfolio is on 15 years, that is a 7, 8, 9 you did point. Jonathan there is still two and a half months. It still could work. Couldnt it . I am not sure if you could reverse that quickly unless that happens with the financial markets. Visit the substitute for the timing of the fed in november. Lisa he also said that it doesnt seem like the policy is overly tight, overly restrictive. It does not seem like it is hammering the economy in a certain way. Yes, on the margins this might do something. This is wishywashy. Tom what are they datadependent four, the october job research arent what they are dependent for on what apple does or microsoft does in 10 days . This hire for longer thing, all of this is meant to be redefined. Jonathan until something breaks. Something did break earlier this year. Pulling back on the equities we are negative couple of tenths of 1 . Tensions in the middle east simmering the last couple of weeks. Crude oil up 1. 4 . Lisa cleveland fed president at 12 15 p. M. What im looking at is a chance of a rate hike at the november 1 meeting. I think theyre going to lean into any uncertainty at the moment. 12 00 p. M. , President Biden is meeting with european council. Curious to hear how they discuss some of the potential tariff battles between u. S. And eu. More importantly explaining how close these allies are. Today, i am interested to understand the Regional Banks. You said something did break. Here it is. Were going to see the bank of california reporting. Western alliance which has been under a lot of pressure. These have not climbed off the mat. How much do we see the pain that we see the anecdotes. 2 in the earnings of some of these banks. Jonathan listen to the target for 2024 with revenue growth. The stock is up 2. 7 . Tom the answer here is simple, you have doubledigit nominal gdp field running through revenues at what is what is absolutely stunning to me is this fraser total Network Volumes up 7 . That is just a bloom report. Boom reports. Jonathan the chief executive saying demand for Premium Products remains high. These elite cards he paid five or 600. Lisa you know where this is going. Entrance to the sky lounge for delta. This is how you get in. Everybodys going to keep bleeding into this. This is the future. Tom i know we have got to go. Into this earnings season the great estimation is the inflation overlay, gdp overlay, high nominal gdp revenues were better than expected. Jonathan alex fraser joins us here. Lets start. I know you and your team put out a note about the shifts we have witnessed in the Global Economy and the markets as well. This regime, how different is this regime going to be two years and decades gone by . Alex definitely. We are pretty clear. We have seen the and of the great moderation. That reflects a geopolitical environment, macroenvironment. The markets are beginning to catch up with some of that. For example, the geopolitical environment has changed fundamentally. Even if we cannot spot the triggers ahead, they are included in the middle east. We know that over the next 10 years, the average supply shock facing the Global Economy as a result of that is going to be negative. In the same way the last 20 years it was positive. Central banks are going to find themselves fighting inflation much more often. Tom it is not appropriate for you to discuss the executive dynamics and the performance dynamics of blackrock. You can advise on a bond rout that every portfolio of blackrock, they are also. How do you advise your team of the stability or instability of the bond system . Alex we saw two things needing to happen. As we go into this regime where Central Banks are going to be fighting inflation more often. Another one is the repricing of the term premium. Those things are beginning to happen. We reached a level where we think we have become more neutral. Still over strategic horizons, we remain underweight because they are still not that much term premium. This is an environment where you have got weaker trend growth, high level of policy rates. The fiscal. Lisa are you saying we can get to a three and a half percent and be a more accurate term structure for the economy as you see it . Alex one of the longer terms we could go higher from here as the term premium gets reestablished. As of term premium gets reestablished, that is not bad news for equities. What a strange, policy rates, future expectations of policy rates have been repriced. We have not seen the equity markets respond to that decisively. Lisa does that mean to you, returns Going Forward are necessarily going to be reduced, the stocks are going to have higher multiples and growth of higher counterweight to inflation. Alex you listed both of them. Even if it is a challenging environment, it is a challenging environment for broader risk asset. They are all big mega forces changing the way our economy works. Tom i am absolutely fascinating on a broader view. Would the great moderation over as you stated, with the great moderation over as you stated, are we going to have a reset of frankly generations multiple generations . Do we need to start thinking of a bond reset to a higher required return for Pension Investments . Alex i do not know if it is a higher required return, but we are having a reset to an actual return environment. We see eels remaining close to these levels over the longterm we see yields remaining close to these levels over the longterm. They are going to be fighting on average these negative supply shocks. Returns are going to be higher once we get through this adjustment. We are seeing that now in the bond market. We are going to be to see higher returns in the equity market and other markets as well. When you and the team used that term, how many years are that . Alex five years and out. We see over the next 12 months, the risk of the long in more balanced. We still see the term premium grinding higher. Jonathan when you see higher for longer, you are actually thinking high for maybe the next five years. Alex as people focused on reaching the peak, the market has shifted its attention to, where does the future look like. We think that is a lot higher than we were prepandemic, partly because of fiscal, partly because of Central Banks are going to be on average facing supply shocks where they are constantly needing to push down on inflation, which means holding rates tight. Jonathan thank you. Alex fraser from blackrock. The latest from them. If youre just joining us, welcome to the program. When we talk about high for longer, lets talk about with the longer means. They are talking about may be over the next five years. Get used to this. Lisa another layer of uncertainty. That doesnt necessarily mean in his eyes that stocks are going to underperform. There isnt a natural correlation to bond selling off and actually creating a headwind given how high yields go for stocks. Artificial intelligence and other trends. Tom that was the composition of the week. That was really sobering. It will be a percolation like Credit Suisse marking down Global Real Estate 9 . 20, 30, 40 different ways. His idea of longer. That is how we put it out there. That was a really important discussion. Jonathan he was absolutely fantastic. In some ways he speaks to the geopolitical tension as well. The president of the United States about to make a formal request for 100 billion for resources to help ukraine and israel. From new york, this is blorg. Hey david. Connect with an advisor to create your personalized plan. Lets find the right investments for your goals okay, great. J. P. Morgan Wealth Management. Was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com i know these conflicts can seem far away. Why does this matter to america . How loss inputs and represent different threats but share this in common, they want to annihilate a neighboring democracy. Jonathan the president of the United States in a rare address late the groundwork for a formal 100 billion dollars to provide resources to ukraine and israel. The s p pulling back just a touch all morning. Yields up about six basis points. We are back in the 90s. 90. 60. Tom we have not talked about this. On the sudden we are at the 90 level. The question simply is, how do you get to 100 and what does it take . It is certainly news on the war which will drive that. I think we need to watch it over the weekend. It is not about getting to monday, it is about getting to friday evening. Jonathan remember, the saudi cuts. I believe they are monthly. Tom there is going to be some kind of arab meeting in cairo. Those are the kind of meetings that this gets sorted out, which is the elephant in the room, what will the saudis to. Jonathan it is up a little more than 3 so far. Tom annemarie horton joins us now as we stagger through friday and into the weekend. I want to play off a cnn poll that was done. I am sure you reviewed it. There is a single sentence that got my attention. Over the last decade, israel support of democrats israels support of democrats has a gif drifted or changed away. After the president s speech discussed his party in their support for him. Annemarie over the decade were we have seen democrats become more critical and skeptical of israel. It was this year or you do see democrats within america, their sympathies lie with the palestinian people. The appellate the president has been over the two weeks making the case. This is something he is deeply affected by about the right for israel to defend itself and how it is in the National Security interest of the United States to make sure they are supporting israel in their right to defend itself. This is something the president holds dear since he was a child. He talked about in a number of the speeches the fact that he could bring his children to view concentration camps. This is something that he personally is affected by and he wanted to make the case by the American People yesterday. Tom the administration, who is the number one phone call to . Annmarie i think they are talking to everyone. Right now is the present danger to our men and women in iraq, airbases from general pat talked about they are coming under increased fire. Theres a lot of uptick in drone activity. Yesterday, the destroyer in the red sea intercepted missiles and drones that were headed to israel. This is going to be front and center for this administration and the pentagon as we go into the weekend. Jonathan you nailed it. The president had a purpose. Lets talk about the purpose. A formal request. 100 billion dollars in resources. How does that happen without a speaker of the house . How is this going to work for the next few days and weeks . Annmarie if he asked individuals who actually drafted the language of what a pro tem speaker does, they would say the speaker has the time to put something on the floor, especially when it has to deal with emergency situations. The Republican Party is chaotic. We just do not know how they want to proceed. Jim jordan is saying he is going to go to the floor for a third vote. Potentially will get an update on whether or not he thinks he has a better chance. It does not look like he has those votes. Once again, groundhog day and washington dc and it is paralysis on the house of representatives. It makes the president s much more difficult. By and large, you do see bipartisan support when it comes to supporting israel, the president is casting a wide net. He is including partners in the indo pacific. Clearly, he was talking about china and taiwan. There is going to be money for the southern border. One there is a speaker or they give a little nudge to Patrick Mchenry, the pro tem to put this on the floor, there will be votes. Lisa i am sure President Biden does not mind that much from a visual perspective. I am wondering with jim jordan, why is he running again if it is very unclear whether he has the vote . Annmarie this is an individual that fiercely does not like to lose. It is almost ingrained in him that he does not like to lose. You know, no one really i think at this moment is a clear win for the American Party to get to 217. One republican i heard, mr. Joyce say, no one in this party can even agree on the time of the day. You can see how fractured his party is right now. Congressman jordan just things third times the charm. The issue is, this is starting to get a little bit violent and the rhetoric in the rhetoric. Don bacon has come out and saying his wife has gotten threatening text messages. I listen to a voicemail that cnn put out that was a disturbing and chilling of what potentially some of these allies, individuals in jordans office are saying to congressmen and women and their families who oppose jim jordan. I am not sure if that bullying is going to work. We will see at 10 00 a. M. Lisa congressmen have come out and says it actually wishes them in the wrong direction. Does this make it more are more likely that there will be speaker of the house supported by these bipartisan type of character . I think the republicans are going to exhaust all of their measures and you are going to see wheeling and dealing on the democratic side to get someone in place. Yesterday, we thought they were going to expand the powers of Patrick Mchenry. When you when the republicans came out of the conference early the morning, it was very clear the majority of the party did not want to go in the room. It is really unclear the path forward. There is that potential that we can see almost powersharing within the house of representatives. If there is a more moderate republican that goes for the speakership. In about one years time the individual will be up for reelection. Jonathan thank you. Annmarie down and washington on the latest regarding the president s addressed to the nation. 100 billion. You are talking about multiple causes. Israel and ukraine. If you can get the support for israel, do you have the same consensus on the train at the moment, particularly on the republican side. I do not think you do. I am not sure how easy this will be. A poll showing mr. Trump doing better than good and some key states as well. Do you do a harmonic spending. Do you go to 200 . Lisa the fact that there is no speaker of the house. Yes, they need the aid. Theyre not going to get it for a long time based on the dysfunction and washington dc. Pressuring some of the bipartisan members who do support both causes. That to me is what we have to understand with the timing. Jonathan you get pushed back to the israeli aid from the democratic side on the fringe of the party as well. It is really difficult right now. Tom i will suggest the british phrase, they will be overcome by events. What a bond market move so far this week. From new york, this is bloomberg. 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. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Jonathan we are on the longest daily losing streak in about a month. Three days on the nasdaq. Down another. 2 . Lets see if we make it day four. Nasdaq down a quarter of 1 . Development in the bond market. Cycle highs to the week. 4. 9350 on the 10year. Within a basis point, one basis point a 5 a little earlier on a 10year maturity. 4. 99 . Even with the basis point move we are comfortably above 5 this morning. Speaking to the move we have seen higher in the yield this week. Lisa we are at levels we have not gamed out. Bill dudley would say Something Like yields we get to this point and everyone would write these dramatic headlines. Then shrug it off and say that is not plausible. The Biggest Surprise is not that rates have gotten here but you have not seen a commensurate selloff in risk assets to pair that. This comes with strength and ongoing strength and resilience. Tom you guys are dead on here. A deck from apollo. The default cycle started. That is something lisa has been following. Garbage like auto dealing with these has gotten ugly in the last month or two. Lisa we are still not going to 20072008 levels. Tom that is the question in terms of default. I dont know. I dont know what to do with that. I was walking down the corridor and there is bill dudley walking at me. And can be stopped for a moment and say you make the right call and is not because the reason why. He is genius of the year. Jonathan i always reflect on the conference i did for bloomberg back in the summer of 2021. Two panelists. One was bill and the other was mohammed. They were talking about maybe inflation is in transitory. Mohammed was pushing the year of two way risk. This could will be the real deal. The inflation problem the fed has to respond to aggressively. Remember the backdrop here. The fed is still doing q. Week for the next 9 qe for the next nine months. Bill talks about how far fed funds might have to go. He talks up a five handle. Im listening. We were doing it virtually could because it was postpandemic. This is how far back this was. 5 . No chance. Something will break. Lisa you will see these rash of defaults he says is coming but its sort of on the margin. It has not become an existential risk. Jonathan lets get to the commodity market story. Crude and brent pushing higher. Up by 1. 4 on the session. 90. 60. Under surveillance this morning the u. S. Sending forces to the middle east, including fighter jets as tensions flare in the israelhamas war. Minor injuries reported after a u. S. Base was targeted by drones yesterday. A destroyer intercepted three missiles launched from who fee militants in yemen believed to be heading in the direction of israel. The risk is that this becomes a broader conflict and maybe even perhaps, and we all hope it doesnt happen, the u. S. Gets pulled in. Lisa the frantic diplomacy we have seen highlights that. I thought it was interesting that rishi sunak met with the saudi arabia leaders the u. S. President could not. All those meetings had to be canceled after the explosion at the hospital. This highlights how concerned everybody is in the broader conflagration but nobody has understood how to put the genie back in the bottle, especially given the anger. Jonathan if there is a sense of urgency in washington, jim jordan continuing his bid to become the next speaker of the house. Jordan expected to hold a News Conference at the top of the hour with the third vote set for 10 00 a. M. A measure to make Patrick Mchenry the pro tem speaker has failed. Tom i would watch mr. Jeffries into the weekend. Legitimate from the Democratic Party from new york city, congress and jeffries is going to be front and center here. Lets assume its a debacle. Predictable right now. It is a debacle. What do you do to get to get the monday or the sunday talk shows . Listen to the democrats. Jonathan the story is off the radar at the moment. General motors and the United Auto Workers making a tentative deal to end the labor strike. The two sides are moving closer but having disputes over pay and pensions. Shawn fain expected to give another update later this morning. We will get there at 10 00 a. M. Lisa its interesting that its off the radar given how long its gone on and how much it potentially could reduce the supply of cars. What does that do . Increase prices when people are worried about inflation. This really does highlight how all these micro factors continue to go on as people worry about these exalted us risks. The reason people still see strength in inflation and wage pressures this really represents. Jonathan uaw still feels they have leverage. What was it . Sub 200 on claims. Tom it was stunning. Continuing claims. They have to get back to work because they have to compete with the cyber truck. Jonathan deliveries are coming out. Tom right now we are going to give you a terrific brief on this bond debacle. She has lived it. Deborah cunningham joins us. Global liquidity markets cio. Deborah, i will not mince words. All my radars are up. My lesson on radar is to go to trust in liquidity. Into the weekend is their trust in the system . Is there liquidity within the system . Deborah there are both at this point, tom. As lisa was mentioning, this economy has a huge mosaic of factors that are inputs to what is happening in the overall market. What the strength in the economy is. What the yield curves are doing. Currencies. All those things. The liquidity markets and liquidity in the broader markets seems to still be resilient at half strength going into the weekend. Lisa we were talking earlier. At what point do we reach a Tipping Point where the investors who have hoarded cash in 5 yielding funds start to say we actually are worried about locking in some of the pricing risk on the longer end of the curve . Have you seen that on the margins . Deborah we challenge ourselves with that every single day. Should we get longer . Should we go into other products . Should our advice to be going into and some longer yields . We think the beginning of the process has started to occur. We have started to see some pickup from a bond flow perspective. Not en masse yet. I think it is because we finally have a bond market we saw the statistics that are 10year, 30 year, twoyear approaching 5 . The bond market reconciled with the fed speak out there for the last year higher for longer is truthful. It is what is happening. Dont expect something different. Lisa what do you make of the fact we are not seeing some sort of race towards bonds at 5 yields at a time of great geopolitical concern . At a time when people are looking for haven trades to protect against possible unrest . Does that send a pretty powerful and deeper signal to you . Deborah it sends the signal we are still not sure if inflation is reigned into the point where the fed is comfortable in maintaining a yield that is for an extended period of time without going higher. Chair powell and other fed speak is leaning in that direction, but we dont see i dont think what we are seeing from inflationary perspective is 100 confirming that. You were mentioning the auto strikes. That can be a negative from inflationary perspective, both from Wage Inflation and from vehicle inflation. We dont know how that is going to impact us. You have issues from the conflict in the middle east. What does that do from an Oil Inflation and Energy Perspective . There are so many unknowns from inflationary standpoint that i think people will continue to be tentative until some of the fog and the picture starts to clear. Tom friday in federated lands means the giant of teaching about fixed income dynamics. Lets do it right now. The conceit into the end of the year is marked to market. We are not mark to market and we will hold it until maturity. Baloney. It is just baloney. If ive got a 10year piece, how far out as my breakpoint where things fall apart where the idea of the conceit of holding it forever falls to pieces . Deborah it depends on what the coupon is on that 10year piece. If it is a 5 coupon you just bought recently or 4. 5 , it is probably not that lengthy of a holding period. If it is something you bought a year or two ago and has yields that are a several hundred basis points below that, you are not breaking even at any point in the near term. I think from a bond investor perspective it is hard to get off yield. Yield has been what has ruled the roost in bond land forever. Total return is very, very impactful and these to be considered as well. Tom this is incredibly important so lets go again to fred fus. The idea of switching from a yield mindset to a price mindset. How will that affect institutional bond by side buy side . Deborah i think you will see resistance of that. As the resistance starts to fade you will see people lumping backend to the back into the bond market. What the Downside Risk with yields about 5 is much less than the Downside Risks when yields were at 3 . Coupon clipping from that part of the total return should help get you through some of the price risk you still may experience. You have to have a timeframe that is longer than three to six months. You need to be thinking about something that is more in years for that type of thought process. Jonathan deborah, thank you. Deborah cunningham there. Time to adapt to what has taken place in the last couple of years. Tom i went through a couple of bond debacles way back that were kid stuff compared to this. You just heard a massive jaded pro and the gentleman from blackrock moments ago, his bank of england expands. You are getting a snapshot. Did you see how Deborah Cunningham was not stammering but choosing her words carefully . Jonathan locked in. Tom the shift from yield to price is really rare in the last 20 years. Jonathan there is one security i keep bringing up and in 2050. A 30 having your guilt issued in the summer of 30your guilt issued in the 30. It is trading in the 30s. I had a coupon. 625. Tom its when tottenham wins the premier league. Jonathan probably in 2050. Welcome to the program. Hello, daniel leavy. Tom somebody tweeted out today. Try to take a moment of joy. They went and looked at our Christian Corner interview. They are in austin. They are in austin this weekend. Jonathan i saw that. Tom explain to our american audience here. I dont have a clue. It is a track you dont like. You like these modern jonathan i dont like miami. I will work out what to think about vegas. Im trying to bite my tongue a little bit here. I dont like any of it. I like the traditional tracks with a lot of heritage. Your monacos, hungary, monza, italy, silverstone and the u. K. That is my preference. Tom thats about all the light chat we can have. The events have been exhausting. We have to go back to the bond market. Lisa that sounds like a better vacation. It goes around. Jonathan shes married to christian horner. Lisa ill do the tour. Jonathan if i won the lottery without debt i would do the tour. Lisa i could do be your cohost so we could do the show their. There. Jonathan i would retire, call and see what theyre up to from monaco. Tom are you going to vegas vegas . Lisa how many lotto tickets have you bought recently . Jonathan im not a gambler. Lisa but if you did . J. P. Morgan Wealth Management knows its easy to get lost in investment research. Get help with j. P morgan personal advisors. Hey, david ready to get started . Work with advisors who create a plan with you, and help you find the right investments. So great getting to know you, lets take a look at your new investment plan. Ok, great this should have you moving in the right direction. Thanks jen. Get ongoing advice; and manage your investments in the chase mobile app. When america experienced the hell of 9 11 we were enraged as well. We got justice but we made mistakes. I asked the government of israel not to be blinded by rage. Jonathan President Joe Biden and an address to the nation trying to find a bit of balance with those comments. Welcome to the program. S p 500 pulling back by a quarter of 1 . Yields lower by four basis points. Crude rallying all week, up for a second consecutive week. Back in the 90s on wti. 90. 60. Tom interesting to see the news flow we will be. Talking to oliver crook, not sure i understand the news flow into the weekend in israel. I think it is completely unknown. Jonathan i go back to something i said a few times. We are it feels like something has changed. Very intense diplomacy. Weve had leader after leader visiting israel. It feels like the timeline has been pushed out somewhat. Lisa theres a question around what the objectives are and what things will look like in gaza after this whole explosion and tensions and. End. There are questions of how much we are dragging other regions into the conflict. It is becoming a real issue and a real threat. Tom we begin with a really delicate conversation with a gentlelady from michigans. Haley stevens is a democrat from michigan. Its also a michigan that shows the immigrant demographic and makeup of america. Good morning and thank you for being with us. The Arab Community coming from 19471948 is dearborn, michigan. You dont represent that but you have to live with the umoja and is michigan right now homogenous michigan right now. How is the support for the president . Rep. Stevens i would be able to tell you more if i was not trapped in washington waiting to vote for a speaker. I think people are heartbroken about what has taken place in the middle east. They are heartbroken over the terrorist attack on israel. Certainly our Muslim Community is feeling as the president said the unfortunate reminders of what took place, the targeted violence that took place towards their community in the wake of 9 11. This is a moment just as our president that last night to show compassion. To really talk about who we are as americans. That we are a welcoming place of diversity. We do celebrate our Jewish Community in michigan who is hurting right now and tell them to be proud of who they are and we celebrate and recognize our arab and Muslim Community in michigan and tell them to be proud of who they are. All are welcome in this country. Tom the shift, and michigan as a person perfect crucible of this, support of the Democratic Party for israel which is ebbed away. That tension outside of detroit is an image of a small piece of the american debate right now. How will you represent that debate in the house if and when you finally get a house that is organized . Rep. Stevens i have been very clear about standing by democracy. What we heard from the president last night, needing to support ukraine, needing to support israel, certainly armenia is on our minds as well with autocratic attacks coming from azerbaijan. I sit on the select committee on competitiveness with the chinese commonest party. It is very clear to me that this marker in time is about democracy versus autocracy. Im not calling for war but i am saying free markets, Capital Markets and open democratic societies need to continue to lead the free world. If we do not stand i our allies, if we do not stand by our only democracy in the middle east and find a path to peace, that is where we need to go. That is where im going to vote. That is where im going to support. Im going to continue to be there at the same time for all of my constituents. I have been clear about my views on supporting democracy, on supporting israel, as well as ukraine at this time. Lisa do you think your fellow congresswoman from michigan Rashida Tlaib is showing that compassion and helping the cause . Rep. Stevens im not here to talk about my other colleagues. You are asking me about my position and where i plan to vote as a member of congress. Our michigan delegation is small, it is mighty, and we worked together on a multitude of issues. I dont agree with all of my colleagues on their issues but i will say that i am planning to support the president s call for support for ukraine and support for israel. I was just in israel in august. I was looking at on the gaza strip. I was hearing about how 20,000 people come in daily to work in israel. How all people want is peace and we need to find those pathways. We have a modern president in joe biden with a vision for the future and a vision for a path to supporting our allies in finding peace. That is where i will be focused. Lisa a lot of people wonder how quickly congress can act because of some of the dysfunction and the factor is not a speaker right now. A question of Patrick Mchenry potentially getting bipartisan votes to be at the helm. Would you vote for Patrick Mchenry . Rep. Stevens im going to vote along the lines of how we get out of this in a bipartisan way. Right now im on the problem solvers caucus. Certainly our discussions are private at this time. I think empowering Hakeem Jeffries put forward yesterday and without the republicans are with us. A temporary speaker pro tem to get us out of this mess. I will say the day that Kevin Mccarthy respond resigned as speaker, i said we might be at a National Security crisis. This is a threat to our country. On saturday, we woke up to the devastating news of the terrorist attack on israel. We are feeling the tensions back at home. We are feeling the wary. The house cannot shut down. We are over two weeks of this mess right now. I want to get out of it. We cannot see our government shutdown. The funding has got a deadline less than a month from now. That would be catastrophic. Whatever it takes. Mr. Jordan appears stubborn and intent on moving forward when he clearly does not have the support, bipartisan support or the support he needs within his caucus. What we have seen this entire term, this has been going on since way earlier than Kevin Mccarthys being pushed out as speaker. Republicans are not in agreement with each other. Republicans are blocking republicans from passing republican legislation. We are in shared government. We have a democrat as president who is known for being bipartisan. We have a small majority in the senate. Chuck schumer is doing the work. We have to get our acts together and the adults need to leave right now. Jonathan how are you going to work in a bipartisan manner if youre unwilling to address the division in your own party . Rep. Stevens i dont know about what division you are talking about. Jonathan i will give the quote. Rashida tilly. Israel just bombed the baptist hospital, killing 500 palestinians just like that. It is different to what you think, isnt it . Rep. Stevens we are talking about the speaker and we are talking about 212 people voting for jonathan thats not what im talking about. You said you were willing to address the division in your party. Why is that tweet still up . Rep. Stevens that is one voice. I dont control another member of congress. I have been clear about where i stand. We can see the votes time and time again. 400 plus members in this very body voting to support israel, voting to support the iron dome. Those are my positions. I can sit here and try to argue with jim jordan, argue with matt gaetz, argue with the people who have different viewpoints that represent a very small minority. Look. The intelligence is out there about what happened with the hospital. Im listening to israel. Im listening to the u. S. Intelligence. So is my democratic leader. Jonathan your democratic colleague is not listening to it. Based on that she is not and you have nothing to say about it which is pretty amazing. Rep. Stevens i just said my position, sir. Jonathan have you spoken to your democratic colleague . Rep. Stevens our leadership has spoken and our president spoke last night. I dont understand what we are debating here. Jonathan haley stevens, thank you for being with us. Congresswoman from michigan. Tom this is the debate. To the congressman congresswomans credit there is a tradition you dont criticize other congresspeople. Thats an ironclad agreement across parties that go back well in excess of 200 years. With that said, it is michigan thats a crucible of these demographics. Jonathan live from new york city your equity market is slightly negative. From new york, this is bloomberg. Fresh, warm hot dogs when im not selling hot dogs, i invest in a fund that advances innovations like robotics. Fresh, warm hot dogs, straight out of my torso one for you, one for you. Oh, youre a messy one. Cool, right . So cool. Anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. Hot dogs fresh, warm hot dogs before investing carefully read and consider Fund Investment objectives, risks, charges, expenses and more in prospectus at invesco. Com. After military service,s, you bring a lot backpenses 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. People are looking for safety alternatives. Fonts now yield something. They offer real value. The further yields rise the greater the slowdown can be deeper. It is not broad enough yet that its falling off a cliff. We could keep up a sustainable pace that looks like a little better than we were before the pandemic. This is bloomberg surveillance with tom keene, Jonathan Ferro and Lisa Abramowicz. Tom good morning. Jonathan ferro, Lisa Abramowicz and tom keene on radio and television. An exhausting week and an extraordinary friday. We welcome all of you on economics, finance, International Relations in a fractured mediterranean. Lisa, we are all exhausted. We have to start with the bond market. Its been a huge theme through out the morning. Yields stay up sustained and prices are down. Lisa the idea of post2007 highs has lost its punch. We are numb to the idea of this measurable climb higher and measurable climb higher. Do we basically have this sudden skepticism that we can get back to anything close to what we used to know . The idea that you can like into longerterm bonds because at some point you will like the the of 5 . Tom the question to do with your diminished wealth. You have an important guest coming up here on multiasset translated linkage between equities and bonds. I want to get to the international in a minute. We have been devoid this morning on the equity markets. There is American Express. Some form of clarion signal no one is paying attention to. Lisa record revenues. We are talking about record profits. People coming and paying for the luxury of whether it is going to a sky club or the other perks American Express offers. What this highlights is that the wellheeled individuals are not hurting. You can see that again and again. American express shares not doing much in premarket trading. These numbers are really stunning given how much he already had baked into the shares. Third quarter earnings per share, 3. 30. Tom i will look forward and say doubledigit plan. Im overdoing it. 10 was a model plan but 7 core growth. These are numbers that come from a sprightly economy. That is in this horrific bond news flow. Horrific news we see out of the Eastern Mediterranean. Im sorry. The american gdb statistic is solid. Lisa heres is where things get confusing in the crisis world Mohamed Elerian and others have written about. People expect defaults to pick up and suddenly the whole world collapses. You are seeing the bad loan chargeoffs increasing. They are making so much money on the other side that they offset that. This highlights where we are. There are people struggling and people not paying bills and companies that are default thing. That is not torpedoing the broader economy the way it has traditionally. Tom to channel batmans friend marty fritzen. We will not quote it now. I cant to anything with my bowtie today. On radio it looks terrible. The default cycle has started. Discuss. Lisa it has started but how far will he go . Defaults started with bankruptcy filings rising and defaults rise over the coming quarters. Middlemarket companies. This goes to what you talked about extensively. How much does the lower tier of players, whether it is smaller businesses or less wealthy households are going to have a completely different reality than the rest of america . How much do we see that divergence widen out . Tom away from the Eastern Mediterranean. Mr. Jordan of ohio is speaking right now with flags assembled behind him. It is simple. Help me here. I cant keep count. The third vote today . Lisa he said originally he waffled and he with their his support behind Patrick Mchenry. No, he will not give up. This is with accusations of threatening voicemails. Tom a terrific sum tonight on a three hour version of balance of power. We will tackle the data check now. Oil elevated off missile strikes from yemen moving some vicinity north towards israel or other points. Brent crude giving me some 94 love. We come back to a 93 handle. 93. 43. The bond market. The real yield is where i never imagined a 250 walking in the door this warning. 247 right now. I have never framed a 247 modern 10your real yield. Lisa this is the inflationadjusted yield and it speaks to what jay powell said yesterday with david westin when he said what is driving longerterm yields are higher. He did not really give you any kind of conclusive answer. He said it does not seem to be driven by rising inflation expectations. It has risen by something else. Rising deficits, rising uncertainty about the demand bid at a time when you have places in japan and china pulling back. Tom global wall street watches for things below the narrative. Credit suisse. It is not the ubs rationalizations and layoffs. The major fund, the Real Estate Fund has dropped. They repriced it negative. Thats my fault. Not accurate. They repriced it . It is like a tesla price cut down 9 . Lisa prices lower but not necessarily for selling but that is the key. When do we see realization of the losses at a time when people are seeing paper losses mount . Tom the vix, 20. 91. With experience and a wonderful clarity of note, erik knutzen joins us this morning. Multiasset class cio. Hes been there longer than 10 years and joins us again amid this. What does the bond debacle mean for stocks . Erik good morning. Always a pleasure to join you, especially when being followed by both batman. This is a time for humility in multiasset investing. There is such a diversions between shortterm economic information, including earnings which are coming in quite nicely. Shortterm gdp growth affectations, on employment, Consumer Behavior reflected in the amex earnings with much higher Interest Rates. Much higher stickier inflation. Crises around the world and in washington, etc. This highlights a time where we dont want to make big beta bets and terms of big market exposure moves. We want to be what we call long the strong. Focused on quality with equities and fixed income and private markets, real estate. There are interesting opportunities as real estate gets repriced. That is where we see interesting opportunities right now. Lisa there was a question raised about how much of these repriced assets are for sale. When you try to buy things at a discount, can you find them . Erik there is still a goodsized bid in private markets when you look to engage in this activity. The pricing where markets sell are becoming more interesting. The average secondary pricing is . 90 on the dollar. Real estate is even more attractive. For our clients who can lock up capital in longerterm investments we think the ability to provide liquidity right now, whether in private credit or secondaries, where you can solve problems for distressed investors is one of the interesting opportunities right now in this quite confusing overall environment. Lisa this is an interesting trend. The new distressed debt bed is not to wait for a Company Filing for backup seat. Go to the cfo and say you have to refinancing two years and youll have a problem on your hand if rates are at this level. Lets figure ahead to extend your maturities, add protections and you can give us secured assets and change around some of the structures. How much is that extending this cycle far beyond what people expected in terms of the effects of Monetary Policy . Erik it is one of the aspects. As banks have pulled back and we have seen information indicating banks are tightening lending activity, a lot of that is moving to the private markets where private Market Investors dont have mark to market. They can take longerterm time horizons. Theres a lot of Additional Capital that can help buffer some of these impacts. The other thing going on is if you give Corporate Management i year to prepare for the most predicted recession they can actually mitigate a fair amount of the impact of the impending recession. Normally when you see the kind of decline of growth we have seen from last year to this year, that would have been down 10 to 20 . Now you see earnings surprisingly or perhaps not bouncing in the short term. Our focus is on companies that can whether an environment of slowing Economic Growth and higher Interest Rates. Tom is that big tech . Whatever the number is, what were doing is bedding out our comfort out two years, three years, five years. Are we going to get run over doing that . Erik certainly, some of the big cap names are fully valued. Some of those companies are extort nearly most are extraordinary in terms of their operations. They have debt levels that are low. They are experiencing an improvement in financial conditions as Interest Rates rise. We dont want to ignore those companies but we need to be sensitive to valuation. Where we are trying where we see opportunities down the spectrum but away from the broad index exposures, lets say the russell 2000, and finding high quality companies. Same is true of the fixed income side. We like bonds and the two to seven year maturity range. From corset corporates to asset packs. Tom erik knutzen. Look at that, lisa. I did not see this number of morning. It was buried. Are we beginning to talk about this inversion completely disinversion completely . Lisa this sort of disinversion is not what people want to see in terms of the protestant to the economic facet pretesent to economic success. That has been one of the biggest challenges. How do you parse the human tragedy going on in the middle east with domestic strength . How do you pair ideas of people looking at whether teal leaves are at a time when there are bigger tail risks on either side . Tom last night there was a missile attack from human. Yemen. From folks getting to monday we have the humanitarian discussion in place, the diplomatic discussion is in place. We dont have the military discussion in place. Oliver was quite good on this from tel aviv. That is the mystery on this friday afternoon. Lisa the other mistry for people in the market right now is oil and where prices go, especially in light of this tension around irans fingerprints and no direct accusations at how much that is behindthescenes what could boil over into more material ways. Tom Jonathan Ferro has been out front on this. The idea im saying is look beyond the great financial crisis. The United Kingdom 30yearold guild pricing right now back to a summer of 1998. That is absolutely extraordinary. The yield the highest in london since 1998. Coming up, a piercing essay, then. John bolton on the Eastern Mediterranean. I will send the congress an urgent budget request to fund Americas National security needs to support our critical partners, including israel and ukraine. Its a smart investment that will pay dividends for American Security for generations. Tom from another generation perhaps, the president of the United States speaking to the nation last evening. We advanced that discussion this morning. I thought the conversation with stevens of michigan was extraordinary. She is of the president s party and the balances of a fractious Democratic Party was evident to say the least. Lisa both parties are very fractured. Tom brilliant. Lisa how much the u. S. Has the capacity to get people to agree on some of these key measures the president was trying to get people to coalesce around last night. That is one of the main challenges hes dealing with, both in his party as well as within the Republican Party. Tom annmarie sending me a survey from gallup. Im sorry. It shows the tilt and the nation, not so much towards a palestinian temperament but away from the certitude of an israeli mood. Lisa it basically said that the net sympathy for israel had gone below 50 among democrats. This is what the tension is underpinning some of these debates. Tom we thank congresswoman stevens for a tense interview. Greg valliere,s note in the morning is a must read. It is not a layup and a fractured congress. We heard the gentle and from ohio speak moments ago gentlemen from ohio speak moments ago. We heard tension from the democrat stevens of michigan. What is the process to deliver 100 billion to three or four projects . Greg it could take a while, tom. I think the case for aid to israel and ukraine is selfevident. Apparently that is not a view shared by a lot of people on capitol hill. The problem is things are so dysfunctional in the house without a House Speaker it could take weeks before israel and ukraine get more assistance. I think the signal that we will be sending is not a very good one. Tom howard baker could get together with tip oneill, just one example. Is there any ability to get the center tendency to meet in the middle aisle . Greg i think eventually that will happen. Eventually the center will hold. Mitch mcconnell will play a role in this. There are people in both parties who feel strongly we have to spend more money on both of these horrible conflicts. It will get dragged out. The next deadline i look at is november 17 when we have to get a bunch of if they dont get a budget they will have to do another extension past christmas into late winter. If we have to wait that long for aid to israel, thats very troubling in my opinion. Lisa we are talking about a new level of dysfunction some people have pointed out. Annmarie talked about threats they got violent to some of the center tendency republicans who are not voting for jim jordan. Is there a precedent for this type of thing. Greg in the civil war they were very emotional. Its in the country very emotional. L periods. It is cringe inducing to see this kind of dysfunction. Our foreign allies and adversaries have to be looking at the u. S. Thinking we are starting to go off the rails. Lisa how much do you think this is actually one of the drumbeats that has led up to multiple nodes of conflict permeating in many places . The idea there is increasing fracture around the governments in the u. S. And israel with the Prime Minister being incredibly controversial. Im thinking about other places as well. Greg i think it makes a lot of countries around the world less inclined to wholeheartedly support us. Thinking how dependable is the u. S. Is what we are seeing in the house going to be standard behavior . I think we are going down a very risky path. Lisa we are anticipating something from meeting between the European Commission and the European Union president , as well as President Biden today. How closely are you watching that understand just how close this connection is even with some of the disagreements over trade and steel . Greg i think they will say all the expected things. They will try to paper over their differences. I think privately they will be a real candor saying the u. S. Has to be concerned about the way we are perceived right now. Tom we have john bolton coming up. Always controversial. Hes been a magnet for debate and controversy in america. In an essay he centers away from the trauma of gaza, the immediacy of gaza towards a triangulation of gaza, west bank and the northern border of israel and alludes to irans ring of fire. What is the debate in washington over what to do about iran . I dont observe one. Greg i think it has started. The wall street journals weaken publication, which is great, a must read, talked about the need for regime change in iran. You are starting to hear people talk about that. That is very risky. I think there is a growing feeling that the iranians are the provocateurs to a certain extent for hezbollah and hamas. Tom that did not work out in baghdad a few decades ago. It seems like yesterday for you and me. We dont prosecute regime change very well, do we . Greg no, that perhaps that is the lesson not learned. I guarantee in your interview with bolton, if you ask him about the possibility or the need for regime change he will advocate. It advocate it. Tom what ambassador bolton is doing, hes trying to get beyond the shock of the immediacy of gaza. What do we reformulate with iran three months from now, sixmonth month for now, five years from now . Lisa regime change is a bit dramatic at a time when a lot of people are wondering where the actual people stand. A lot of people have been protesting the iranian administration. Im curious how much oil plays into this and the unwillingness of the u. S. To go after iran. We were speaking with Dan Tannenbaum this morning. He says that is a key reason why the u. S. Has not taken a harder line. Is that your view as well . Greg i think that is a factor. Another big factor is how fragile support is if he was got even more involved with naval cruisers and a lot more weapons for israel. I think a lot of u. S. Voters, especially young people are lukewarm at best towards getting involved in this. Lisa how much did President Bidens speech hearken to a different time and speak to a different audience than the mainstream that will be voting in the upcoming election . Greg i kept thinking one thing. Lyndon johnson back in the late 1960s who made a case to confront vietnam, north vietnam. It did not succeed. He failed politically and we have another big primary a year away. Maybe 14 month away up in new hampshire. If Robert Kennedy does well, if joe biden does not do well, there will be speculation that the war is an albatross for the democrats and might warrant a look at whether biden should stay on the ticket. Tom greg valliere, thank you so much. My head is spinning. What we have seen in the last two weeks dovetailed into the financial markets. I will suggest we are already challenged before these military events, these tragic events. It is just amazing on this friday to wonder where we will be. Get me to monday or how about a week from friday. Get me to the jobs report on early november. Lisa im thinking in real time but we have seen a number of examples of how there has been seat changes in the status quo that were used to understand. U. S. Treasuries as a haven asset. Thats week that seems to have been challenged. As the Democratic Party being stalwart as real supporters. We have seen that challenged. We have seen global unity at a time of incredible fractious nest fractiousness. There are all these basic tenets that are being challenged on a regular basis that were brought to the fore this week, which is why its been a particularly confusing soup. Tom we have the market adjustment of this. The market action. Futures deteriorating in the last couple of minutes. Futures down 20. Dollar strength as you would expect moments away from a 150 japanese yen. A pacific rim measurement there. Massive this inversion over the week disinversion over the week. We are only points away from the twos and the 10s having the same year. Meera pandit of jp morgan. We do that next. Use it to set and track your goals, big and small. And see how changes you make today. Could help put them within reach. From your first big move to retiring poolside and the other goals along the way. Wealth plan can help get you there. J. P. Morgan Wealth Management. So, youve got the power of xfinity at home. Now take it outside with xfinity mobile. Like speed . Its the Fastest Mobile Service around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. All on the most reliable 5g network nationwide. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com. Tom bloomberg surveillance. Jonathan ferro on assignment getting ready for austin, formula one. He has the gulfstream this weekend. Maybe he will pop down to austin. Did i hear a rumor that doman from cambridge will be with gentlemen from cambridge will be with jon . Lisa he will struggle to borrow and finance it. I want to say we are seeing 30year treasury yields climb to the highest levels, post 2007 height. Elsewhere as well. U. K. , bond yields to the highest since 1998. Tom we are back to 2007. I dont know if it is the third week of august before or after. I will guess it is on the spot. Good morning, david malpass. Or back to 1998. August of 1988 is how i would lisa this is the theme of the drumbeat. Deteriorating as people assess borrowing and a strong u. S. Economy. Tom interesting to say we will continue here on what you need to do to think friday into this great bond debacle. First, you demand. Get herman. Lisa we made a deal about big Bank Earnings. This particular earnings season it is the Smaller Banks that matter are giggly more. We get a slew of that matter arguably more. Herman chan, we have a slew of Bank Earnings. We hear from one of the more troubled of the banks, western alliance. What are we learning . Herman there is some optimism that may be net interest margins have bottomed or will bottom of the Fourth Quarter. That is positive as Interest Rates stabilize, at least on the short end. On the other hand, banks are still feeling the fallout of higher Interest Rates and the repercussions of march and april. Repercussions meeting tougher regulations that is driving less lending across the Regional Bank space. You are seeing loan growth decline. Deposits are stabilized but they are paying for those deposits to stabilize the funding base. Lisa theres a question that jon is good at highlighting. Is bank of america truly the bank of america . Or the bank of higher both individuals and better capitalized companies to immunize potential risk . The banks of america, are they showing distress we are hearing about in the beige book . Herman its interesting. Asset quality has been fairly stable. You are seeing some weakness in areas like commercial real estate. That is starting to pop up but nothing to really drive loan losses at this moment. Devil be the story for next year and the year after. Tom the s p Regional Bank index, the kre down 48 from a spiky peak. Its almost back to covid lows. The question of Credit Suisse today marking down the real estate portfolio 9 . How do these people actually markdown a busted Office Complex . Herman right. Not a lot of price discovery as your question is alluding to. That is something the banks are trying to work through. They are increasing their allowance for the office and other areas that are tougher to figure out at this point. We are talking about a percent to 9 reserve against these Office Commercial real estate projects. Thats a healthy number compared the underwriting has been fairly conservative. It does seem like the banks are protected against losses but there is still a lot of uncertainty. Tom herman chan, thank you for the read this morning. I think we will be speaking with mr. Chan in the coming months. Im in triple leverage all cash. It really has worked out. I have a two and 20 pay outgoing. On the only one. It is brutal. Lisa it is brutal for some people. There is strength underlying a lot of this. We are talking about weakness in the shares as some of these banks yet resilience and deposits underscores the challenge to understand the bond market moves. Meera pandit at jp morgan has been covering this and discussing this and trying to understand the relationship between bonds and what do you make of the relative resilience and equities this week. The moves we are seeing in bond yields. The weakening we are seeing around the margins as herman was talking about. Meera 5 yields are a bit of a ceiling. I think that is where we are with 5 rates. The challenge is not necessarily where yields are, because growth is so strong. 18 month ago, two years ago if i told you in the fall of 2023 policy rates would be about 5 but Economic Growth is tracking about 5 we would not know what to make of it. If you link the Stronger Economic activity with earnings being well supported by that, you are seeing some well supported equity markets for now. The challenge is as we look forward to 12 Earnings Growth expected, thats pretty lofty. Maybe we will see something close to 6 or 7 . If the economy slows and some of the headwinds that are challenging consumers continue to materialize that will challenge expectations for profits. That could be a bigger challenge for the equity markets Going Forward. Lisa are you getting clarity from the Companies Reporting earnings . Are you getting a since they have a vision Going Forward of what corporate outlooks will be next year . Meera its mixed. Its been forecast great to forecast a recession for 18 months. They had 18 months to prepare from an expense and headcount standpoint to bolster where they are getting the revenue and assess their consumer segments. On the other hand we dont know necessarily hunt next year will play out. The Bank Earnings were very telling. Usually what you will hear is here is how we are thinking about recession risk. What we heard from here is how we are thinking about the big existential macro risks from geopolitics to federal finances. It was interesting to hear them a little less focused on what does 2024 do as opposed to what is ere we area era we are entering. Tom are they going to cash . Are they running . Are they buying doubloons . Meera its been challenging to have multiple down years for the bond market. I think people need to reconsider their fixed income allocations. Tom i want to know on a friday morning the calls you are having. They are swearing at bob michele, etc. What are they actually doing with these bond losses . Writing them out . Meera some of that but a lot of clients are not positioned heavily in longduration yet. A lot of people were waiting for the entry point and deploying selectively. There is a barbell and fixed income allocations we see a lot of short duration. People feel ok about the equity market given how will it has done. In terms of diversification you will see people asking a lot of questions about alternatives and where to supplement the outcomes. Tom you say short duration. Is that five years, seven . Where is short duration besides three months . Meera people have been thinking around the twoyear. Intermediate is really five to seven. People have not been thinking about beyond that for the time being. Tom you are the worst. We are guilty of this because we are caught in a 30year bond. Lisa and nobody is buying. Erased a great point reset it is telling the Corporate Executives are talking about macro risks rather than concern for a softer demand in our sector of the business. Dynamism as far as the eye can see. Is there a binary outcome where you get bonds underperforming at stocks outperforming . Either that or you have stocks underperforming and bonds outperforming . It is one of the other based on the idea the only thing that can drive bonds yield lower is a full recession. Meera it seems like a binary outcome of this point. From an investor standpoint its helpful how we construct portfolios being diversified between stocks and bonds and how they typically operate. As much as people say diversification is falling apart, we had an inflation spike and the fed hikes. The fed is moving from power to finesse on the rate hiking cycle and getting towards the finish line. That dynamic will be less prevalent in the new year. It will be a bit of a tugofwar and that is what what youre seeing now. Challenge and the bond market and success in the equity market. Lisa how much is the new hedge, oil . There is this feeling that whatever happens oil prices and it will equities seem to be the big winner of this year. Are you leaning into that . Meera we are leaning into the energy side of that trait. What we are seeing from a profit standpoint it is helping Energy Companies and there are some structural underpinnings of this in terms of underinvestment in the capex and the supply factors we are seeing within the energy space within the u. S. And globally. If we look more broadly, i would point to something chair powell era. Are we heading to more supply shocks . Is this the pandemic aftershock or a new structural era . Tom i love in your note you have a single sentence about companies. You go back to a book none of you have read. We are going back to securities analysis, our weight . Pick a stock. Meera look at earnings so far. A small number of banks report, a small number of Tech Companies and diversion outcomes. It is what companys are doing specifically to manage their hedges. Tom do you see how she finessed the diversion outcome of banks. She just finessed that perfectly. Lisa you are going to try to make her uncomfortable. I will not let you have that sort of fall. I dont get to go there and put her on the spot was nothing she cannot answer or speak to. Tom i sought on twitter. We will not get meera into this or she will be in the timeout chair. The answer is the singular message of this week of Bank Earnings is whether they planned it or not they continued dominance of one bank in america over the next five or six. Lisa the bigger trend will be one of the legacies of this. Itof of this period. The bigger the company the more power they have to adjust to inflation and to economies of scale. N a p in a period of transition the big are getting bigger. Those with Pricing Power are those that are able to go around and trim things here and there and produce. Tom i would say there is a fancy word for this, which under stress is a 10your real rate of 2. 5 . The haves are getting haveier and the havenots are not. Lisa bringing this back to herman chan, why we have not seen more consolidation. Tom teasing of november and into q4 with the Regional Banks. Its been a more typical tape of the last when he minutes. Futures at 13. Lisa its been a more difficult tape and bond yields climbing to post 2007 highs on the u. S. On the longest end. Who is selling and he was buying . Is this something that is mass liquidation summer on the margins . Frankly, the peoples bank of china. Tom do we get full disinversion by the middle of next week . There is maybe a theory the stress in the system is not the inversion down as pria talked about. Lisa jp morgan. Tom you disinvert. The speed is something i have never seen before. Lisa it was clear that jay powell did not have a read on it either. It is not harsh. It is just reality. Nobody knows exactly how much of each factor is driving the bond yields rising and how sticky this is. That is the core thing. Yes, all these things are factors. Bigger deficit, buyers pulling back, the question around inflation and growth. How much of each of them is a factor . Tom you alone disinverted. Disinversion of the twoten spread. The brain fails on a friday. Yen. 149. 95. A fiery essay the telegraph. John bolton, former National Security advisor. Welcome to ameriprise. 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. I think the American People are thirsty for change. I think they are hungry for leadership. And frankly, thank you white house cannot provide it. They know the senate will not lead. They are looking for House Republicans to step up and lead and make change of these important issues. Lisa jim jordan of ohio earlier this hour talking about his additional bids for becoming the House Speaker. A fractious time in washington, d. C. A fractious times you geopolitically. There is a real angst setting in about the lack of cohesion in washington, d. C. At a time of incredible uncertainty geopolitically and fiscally for the United States. Tom a number of conversations. Greg valliere, a congresswoman from michigan as well. It is one thing to hear the people inside the beltway and the tone of their voices is a little bit different. Lisa it is troubling to come to some sort of resolution and be able to pass some sort of package at a time where the house does not have a speaker. I want to run you through was going on in markets. You are seeing a softening in the tape. Bond yields climbing. Off the earlier highs you are seeing a 10year yields just close to where they closed yesterday near 4. 99 . 4. 97 . Just a touch slower this morning. S p futures hanging in there but that is the story only down. 3 at a time where oil prices are climbing and bond yields are surging to the highest since 2007. Tom it seems ages ago we counted in days were Team Surveillance said we are going to speak to people with experience. We had a screaming eagle. The 101st airborne with us yesterday. We had a marine from fallujah with us a few days ago. Now on the political front we have someone controversial, opinionated. Whether you agree or disagree with john bolton, three his telegraph article which sets up the region and iran as we look at a fractured Eastern Mediterranean. Hes a former United States ambassador to the united nations, former National Security advisor and a fractious relationship with president trump. Ambassador bolton, thank you for joining greenberg today. I will not mince words. You go back to an internship with spiro agnew. How is this different from 1967 and 1973 . Amb. Bolton i think in washington we really are suffering from an acute lack of leadership. By a lot of people who forget that they were sent here not to represent themselves but to represent the country. You remember back in the British Parliament in world war ii when the labour leader got up and said he was there to speak for the labor leader who was not around. A conservative mp said speaker england. We need people in washington speaking for americans. Sadly, they are not. Tom to look back to the 2020 vision, how did we get here within the administration you served and recently, the Trump Administration . Do we have these people and difficult events because we were off the watch one in three and five years ago . Amb. Bolton i think we have failed to see what is happening in the middle east coherently for close to 20 years now. I think at the rid of it, the principal threat to peace and security today and for some years back has been iran. In the current circumstance they are the ones who armed and trained and equipped and financed hamas. They have done the same with Palestinian Islamic jihad and hezbollah. The same with the syrian military. Yesterday they demonstrated they have done with the huthi rebels in yemen. A cruiser destroyed drones heading towards israel. They would not have two rocks to rub together if it was not for what iran has given them. Iran is the essential factor here and the president s address, which was fine, did not address that crucial point. How can you have a strategy if you dont know what the main threat is . Lisa who is more vulnerable right now, iran or israel . Amb. Bolton at the moment it is israel but i think israel is perfectly equipped to deal with this on their own. I hope they have not lost this fear they once had which is they will defend themselves. They can do it alone. They can use weapons but they dont expect anybody else to come and fight their battles for them. Nor do they expect to take direction from anybody else either. I think there is something in the argument that the bearhug President Biden gave netanyahu was not just affection but an effort to insert himself into israeli decisionmaker. I would rather have netanyahu making the decisions than biden. If you face the threat with the moss and the real threat from iran you can live with it for a long time until you die from it. That is why i think the government of israel and even more than that perhaps the people of israel intend to see the hamas threat eliminated in the gaza strip. Lisa a lot of people are saying one of the big sticking points for the u. S. Going aggressively after iran right now is it would cause an even bigger conflagration and putting that genie back in the bottle is difficult. You have a population in iran that actually supports the United States and israel to a large degree and does not necessarily agree with the government positions. Number three, oil prices would search. That would be a problem for the Global Economy. How important is the third factor to take into consideration . Amb. Bolton the concern the white house has for Rising Oil Prices is in the United States. They are worried about november of next year. That is why they signed this atrocious agreement with venezuela to pretend he will have free elections and to allow u. S. Sanctions on the export of Venezuelan Oil to disappear. I think they are desperate not to have a wheel prices go up. The easy weight is to allow more Oil Production in the United States but they dont want to do that because if the Oil Industry Got stronger it would be hearted to dismantle further green agenda. For their green agenda. Do you want to deal with the threat from iran or do you want to pretend it does not exist . The administration has gone out of its way to pretend it does not exist, including its chief iran negotiator being says having his security clearance suspended in april by the state departments Diplomatic Security bureau. The chief negotiator under security investigation. It is unbelievable. Tom my book of the year is the loom of time, which stretches from morocco to persia. The answer here is we have to carve out a relationship with friends within the middle east. How do we prosecute a new strategy with suni saudi arabia versus shia iran which you considered to be the major threat . Amb. Bolton the threat is the regime in iran. I dont have any quarrel with the iranian people. One reason iran took this opportunity now and coincidentally the 50th anniversary of the yom kippur war is they were worried the strategic closeness between the gulf arab states and israel might be reaching a point where they could no longer affec effect it. It was a critical moment to act. I think things were moving in the right direction. In fact, if you ask the gulf arabs, they had greater faith in israels Strategic Vision of the region than they do with the United States. Tom one final question. What is the new isolationism of america . We want to run from this from margaret we want to run from this to a great extent. Are we isolationist as we wait this work . War . Amb. Bolton not yet but there are two factors causing it. One is donald trump. For many years our politicians have not treated our citizens like adults and told them what the threats are we face in the world. If you talk to the citizens like they are adults they will understand the threat and do what we have always done as americans, find ways to defend ourselves. If you like the world does not matter and suddenly find it does, it is no wonder people are surprised if their leaders have been negligent. Tom john bolton, thank you for joining bloomberg surveillance. Former National Security advisor. This is a dose of real politicking. Mr. Bolton is very controversial but the idea here of blinken doing shuttle diplomacy, what is our diplomacy . What is our theory right now forward in terms of realpolitik versus a different approach that bolton was critical of . Lisa one of the biggest problems is the confusion between parsing out the regime from the civilians. How do you separate out a leader or a group, whether it is hamas or the iranians from populations that are comprised of innocent civilians . Tom continuing covers through the day. Look for balance of power this evening. In the next hour, the 30your british bond is back to 1998 levels. Mohamed elerian recalls that. This is bloomberg surveillance. 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. J. P. Morgan Wealth Management knows its easy to get lost in investment research. Get help with j. P morgan personal advisors. Hey, david ready to get started . Work with advisors who create a plan with you, and help you find the right investments. So great getting to know you, lets take a look at your new investment plan. Ok, great this should have you moving in the right direction. Thanks jen. 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