Putting Jeremy Corban in as their leader. Looking forft and radical economic changes there. The dax in germany is 15 points lower now, just under. 2 . Everybody watching the dollar. The dollar index is lower this morning by just. 1 . The u. S. Trade weighted dollar is something we need to teac kep an eye on. The fiveyear going for 1. 5 percent once you rounded off. The twoyear is at 71 basis points. Topping the list of things were watching today, volatility. The vix fell. Volatility lower this morning despite the fed ahead. Congress is back trying to find a way not to shut down the government in two weeks. Last shutdown hit the economy hard. China, more weak economic data. Credit is growing there. Tom sees may be tiny green shoot out there . Tom yes. A little bit of a green shoot. What an ugly win for the Denver Broncos. That was terrible. We enjoyed the mets, and still managed to pull things out. Wonderful worda for our sponsors and then i will pull up a chart. Bloomberg surveillance is brought to you by our resident tax advisory. Your business needs. For out and sign up insights. Over here and i want to look at the support on the chinese index. This is an important chart. You mention this earlier. This breakdown of key support of chinese index. Let me put that out as we do on the terminal right now. Of expectback story the unexpected, whether it is International Relations or markets. Given the way china is, it will probably be october 17 before we have any idea about what is going on in china. That is their next gdp report. Bring in our guest. We can act confused but he cannot. There is so much to think about if you are the fed open Market Committee but even more on wall Street Investment committee. Mike, i am thinking from thursday afternoon, it is all about strategy. For the next four days for you, it is all about. Got to just survive until 2 00 in the afternoon. Sure. These are range bound. A bear and get a bear and get across and they bowl and get a crush. If you look at some of the moves, they seem to happen with a with little rhyme or reason. The market pivots around. Technicals are very much in play. Tom i think it is important to look of a terminal. The dow here to date, 8 . The s p 500, 8 . Did you know the nasdaq composite is actually green on the screen your today . I never would have guessed that. 12 months trailing. The world is coming to an end 3. 3 . It is terrible. We are not even close to a correction. That is part of the issue with the fed. Should they be reacting to help you . The fed, as we all know, has pretty aggressive policies over the last several years. One of the things that has been a clear beneficiary, equities. The fed is not supposed to care so much about equities but of course they will take whatever works. It would be easy to dismiss that they will not care about equities but ultimately come i think they really do. One of the questions going into this week and a possible hike here is how much will they look into the Rearview Mirror and see the vix and Global Equities selloff in a strong way and how much they actually care about it. The key question in my . Ind is, have they fallen because everyone is starting to discount a real slow down or recession ahead. Or is it because everyone is starting to discount the fact that money was not will not be as cheap. How much of this is real . I think it is more former than the latter. Gross shares are deflating. Ust like last fall the convergence of that with a , you know, it is adding factors up to help get a risk off. But i definitely think it is more the fact that centralbank policy here and abroad can be aggressive and consistently so. Whether the Global Growth picture will fall in spite of those policy responses is a huge question haunting risk assets. What did we do before we had the vix . Did we measure volatility and related to our centralbank 10 years ago . The vix started around 1990. Caredow, how much the fed about realized volatility in the the 1970 passes and 1980s, i am not sure how much they did. Yellen has the vix index on one screen and the move which measures volatility on another screen. Tom really, you think janet yellen can i do a shameless plug . Vix index . Would you agree with that . She probably does. I will send it out on the radio plus at. It is basically the vix for bonds. Tom what does this mean for the market . Just stand aside or use it as opportunity for capital . I do not think the world is coming to an end and i do not take we necessarily need an amazing amount of fantastic economic angst to happen to keep equity prices in this environment, even against a rate hike. I think the case is on that you have Central Banks around the world and to a certain degree, fiscal policy makers the extraordinarily preemptive on making sure we do not get into a deflationary spiral. Tom and the fed can push against that . Exactly. That is where the rubber will meet the road. One thing i have been arguing is the qe coming out of japan and europe right now, it is a lot bigger than what qe3 was at its peak. That is on. For all of the world passes problems, that helps suppress our treasury yields. If you look at where the twoyear and the 10 year have months, the last few volatility and equity markets have been really boring. You have to distinguish because fx is really where, as the prior guest was suggesting, it is really where a lot of diversions and centralbank policy and Economic Conditions are express these days. Tom do you express a stronger dollar . Do you think there will be a stronger dollar because there are weaker currencies . There has been paired in my mind, when you think about, are we going to get to one to one with the euro, i would probably say no. All theire fed, for lack of direct discussion on the dollar. We welcome all of you on Bloomberg Television and Bloomberg Radio worldwide. Days weexciting set of have got for you this week. We will have special fed coverage. That thursday. Michael mckee, are you going to be in washington . Michael on thursday, yes. Tom good morning, everyone. So much is going on in International Relations and economic as we go to the fed day thursday. Top headlines, in the red this morning, down 1. 9 . The longest rally since june. This is after week Chinese Industrial production week concerns over an economic slowdown in the worldss Largest Consumer of copper. Copperhead finish higher in four straight sessions. Coppers nexts move, the chief Market Strategist joins us from the cme. There has been some recovery over the course of september in copper. What happened to make it fall off this morning . You make a great point when you talk about chinese data affecting copper. That has been the story not only since the devaluation but also since mid2014 when you saw some out of large chinese solar giant hitting copper at 7. 5 at that point. The largest purchaser of copper is china. If the weakness comes in any a veryhan 7 , there is high correlation to copper prices and what chinas gdp looks like. To talk to you about the supply. We have reports coming out that tighter supply has actually been happening. Supply in chinese warehouse is not monitored by exchanges dropped. Looking ahead, how do you think this will prop up rises of copper . It will do that much. What you could see in a weird yout of fundamentals, if hear people talk about the feds relationship to copper, there is correlation. Rse the room for that tightening could prop copper up. The correlation is not broken down. It is a total Global Commodities story. The only support that gives to copper is copper is an Energy Intensive industry. It is much more important where copper supply goes. Broadly used industrial metal. It will be a supply and demand story. Thanks, bob iaccino. Us live from mobile, alabama, the location of the new factory at 9 00 a. M. Eastern on Bloomberg Television and radio. Good morning. Tom good morning, everyone. On television and radio worldwide, we say good morning to all of you. Brought to you by invesco. Ay hello to alternatives it is a core part of modern portfolios. Learn more at invesco. Com. Joining us live in the studio for todays call, here is bill maloney. Good morning. Markets reversed to the early gains. Now trading lower by. 9 . Dow futures now negative. Crude futures little changed. On the u. S. Economic front, no major reports schedules. Holdings 6. 5 billion include me debt. Luding shares are down as much as 46 premarket. She goes in talks with pe firms. A key upgrades and downgrades this morning. Barclays, alexi on. Cut equal weight. Goldman sachs, with a price target of 50. I am bill maloney. Tom thank you. Bloomberg terminal. Michael a brief correction here. Malcolm will be the new Prime Minister there. Im reading more analysis. Probably means we lose the the best named finance minister in the world. We are 10 days away or so. Michael this is your official program for finance, economics, politics, and hockey. Tom it was great to see a great goalie for the new york rangers to futures are mixed here. Valley nonvolatile this morning. Michael with us. We continue our discussion. How should our listeners use the vix . Asymmetric and only when there is a lot of fear out there is it valued. Transfer the way your family or your friends in your neighborhood should use this . It is a little more nuanced. What i like to look at is when , how thingsurbulent have turned. What often happens when you get a big volatility spike, the vix curve is normally upwardly slow. In other words, the futures are higher than the spot market. That is often a good signal for a market bottom. What has been interesting since we started the volatility, the vix curve did get inverted but the vix futures really stayed elevated and still really are. A rot a lot of times even on upmarket days, the vix futures were continuing to climb higher. It is very different than what we had last october, where the vix converted an eight or nine days later, went back to its normal self. Time, it is a very different condition. Enjoyed losing money betting on a fed meeting. Everyone seems to enjoy that moment. Want to be anot las vegas bookie on this one. Tom the only way to learn this is to enjoy losing. Could you imagine how that would move . Youreke the nfl when watching the broncos this week. All the advertisements for the fantasy leagues. A smart note from Bloomberg Intelligence here, you asked the question of what you can do without the vix. He says you can realize volatility. They track almost exactly. Michael, once the fed does or does not do whatever it is going to do, you have to start worrying about things like earnings. Uprd quarter is coming pretty soon, earnings. They are not supposed to be very good. Then you look at projections for the First Quarter. Fourth quarter, they start to really improve. If the fed is discounting 12 months ahead because they are trying to forecast when Monetary Policy will hit, what is American Business telling them . On the economic front, i think what is happening this year domestically is were seeing a little did of a replay last year. In gdp. Le q1 you saw that in earnings. The q2 print that got revise two came ino, what really pretty strong, i think things will be on track. If you look at the overall complexion of Economic Statistics domestically, it has been pretty good. If that continues and we can pull off a decent gdp through the end of the year, my guess is the Earnings Growth will track that. We will be able to basically beat analyst expectations. In other words, we will get to 119 on the s p 500 for the year on earnings. That basically means 5 year on year Earnings Growth. Over the last three or four years in theory should be enough to keep the markets upward trajectory. Tom we will run out of time. Mike, thank you so much. What a morning. Absolutely extraordinary what weise seen International Relations. Stay with us on television and radio. Bloomberg surveillance. Michael you are looking at live pictures of new york city on this monday morning. Headlines. O the top there will be a new Prime Minister in australia. The former cabinet minister will become australias sixth later in eight years. He defeated the Prime Minister and the ballot of liberal lawmakers. He condemned tony abbotts economy. Wildfire. Peopleldfire has killed and hundreds of phones and businesses. Several thousand people have had to flee their homes. Google hired an Auto Industry executive to head up its unit. He worked for ford. Self driving cars have already logged more than one million miles. Those are your top headlines. Waiting, waiting, waiting. S p futures down just a little bit, verily in the red. Yields have been down as well for a while, waiting or janet yellen to see what she will do thursday. The euro is also unchanged. Chinamex crude found otherwise unchanged. Lets get back to tom and mike in the radio studio. Tom good morning, everyone. Thrilled you are with us this morning. John herman join will join us here in moments. Up with bloomberg surveillance this morning. Looking at a 5050 scenario. You note a change. Definitely a change. A global recession starting in 2016 led by china is the Global Economic teams main scenario. Timelyelihood of it policy response seems to be diminishing. Tom the meetings in peru, we need to define what a recession is third it is not negative gdp. It. Eed to really explain classes it is basically 3. 5 gdp worldwide, which is considered a global recession. Rate, thatt implications for the rest of the world. Tom that brings on an effect here. We say good morning to all of you. So beneficial about the fed. What i would do. Try to get smarter and of course, stunning news out of britain and what we see out of australia. What did you work on this in terms of this crazy American Economy . I tried to gain some perspective on what is the shape of the american cycle this decade. We are in the sweet spot. We have low rates, consumer risk appetites are finally starting to turn around a little bit. When you try to get perspective and look at it over the course of the entire decade and beyond, you see we have a struggling labor force, a horrible demographic and we cannot get an immigration policy done here. Structural unemployment, and other things. This there is a track on spirit we have the worst recovery since the 1950s in Consumer Spending and Residential Construction and business spending on equipment, on exports, government spending. Across the board. Tom steve roach has spoken about this. With the consumer, is the theory of a dampened american spirit t you have, i am a happy guy. Tom i know that. The idea of a new america, has is any event shared with the Federal Reserve . The fed has been really slow to pick up on longerterm macro themes. On, structure their guns look, if we do not have an inflation we want to see, we are not moving or they may not have anticipated the movements of the economy but at the end, they were focus on inflation. Things. Pick i think the thing is, we have marketbased measures of inflation. That inflation headline is 0 and core is 1 . Significantly below the fed target. Here we go. You read the story that rich miller wrote today about what Stanley Fischer said a couple of years ago as the head of the bank of israel. He reiterated in jackson hole. What inflation is today does not matter. A year from now matters. When you look at the last 12 months, you have oil prices falling. That is going to drop out. We have also had Steady Service sector. Even if you had a normalization and even if it is flattened out and the effects watch out, we have basically very flat under cpi measure and other measures, a very contained inflation. Laser forecast 12 years from now . Looking past that, in america, the largest fraction of people working are 850 and older. Savers, not spenders. They are saving for retirement. Up that. Not ramping they are deleveraging. You have an economy growing kind of what it is doing. This year, i think we come close to 2. 5. Next year, i think we and up around 2. 5, maybe a touch better. You end up in that kind of the world. How much inflation do you get in a world like that . Give me your numbers. What is potential growth . Force, thethe labor working age population is only only growing 60 basis points. My view, when you get six years away from now, it will be flat to slightly negative. My view on potential is 1. 5 on potential. Of arguingosition the feds point of view. Low of potential growth, it does not take as much to get inflation. 12 months from now, what is your inflation number number . They take little day trips and they go to restaurants. Give me a number on inflation. We have surplus. You get no inflation. Tom very quickly, where is inflation . I think it will stay low. Before the stuff in china started happening, it is three rate hikes, the First Quarter of 2017 before the crazy stuff happened in china. Than two. Wrist more tom that is a wild statement. Talk about only three what three rate hikes way out. No Economic Indicators today. They would be brought to you by commonwealth financial network. When it is time to change the conversation talk about the deal are ready to listen. Commonwealth. Com. We are going to get retail sales before the fed meets. That is something to look for tomorrow at 8. 30. That will be an important last way to point. Tom you heard john talked about a more subdued number. Brendan we will take a second for a morning mustread. Wrotesor from po